-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P0M/vFiEem/i92f6xfiCpFzddwSQDT1DGL1INNIInHWJ21bOgwSA+Jd7o9vj0rED 8cvFWUJw9vj/rhWY4RJtag== 0001104659-09-016050.txt : 20090310 0001104659-09-016050.hdr.sgml : 20090310 20090310154156 ACCESSION NUMBER: 0001104659-09-016050 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20090304 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20090310 DATE AS OF CHANGE: 20090310 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: 0128 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09338 FILM NUMBER: 09669385 BUSINESS ADDRESS: STREET 1: 8000 BENT BRANCH DR STREET 2: ******** CITY: IRVING STATE: TX ZIP: 75063 BUSINESS PHONE: (972)409-1300 MAIL ADDRESS: STREET 1: PO BOX 619566 CITY: DFW STATE: TX ZIP: 75261-9566 8-K 1 a09-7316_18k.htm CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

 


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported):  March 4, 2009

 

MICHAELS STORES, INC.
(Exact Name of Registrant as Specified in Charter)

 

Delaware
(State or Other Jurisdiction
of Incorporation)

 

001-09338
(Commission
File Number)

 

75-1943604
(IRS Employer
Identification No.)

 

8000 Bent Branch Drive

Irving, Texas  75063

 (Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code: (972) 409-1300

 


 

            Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨                        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨                        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02.              Results of Operations and Financial Condition.

The information contained in this Item 2.02 and Exhibit 99.1 attached hereto is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.  Furthermore, the information contained in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.

On March 10, 2009, Michaels Stores, Inc. (the “Company”) issued a press release announcing, among other things, its financial results for the fiscal year and fiscal quarter ended January 31, 2009.  A copy of the press release is attached hereto as Exhibit 99.1.

Item 5.02               Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements with Certain Officers

 

On March 4, 2009, Mr. Brian C. Cornell informed the Company that he would be resigning as the Chief Executive Officer of the Company.  Mr. Cornell’s resignation will be effective as of April 2, 2009, on the terms set forth in his employment agreement.

 

On March 9, 2009, the Company announced that it had appointed Mr. John B. Menzer as the new Chief Executive Officer of the Company.  Mr. Menzer will commence his employment with the Company no later than April 15, 2009.

 

Prior to joining the Company, Mr. Menzer (age 57) served as Vice Chairman and Chief Administrative Officer of Wal-Mart Stores, Inc. from September 2005 to March 2008, Executive Vice President, President and Chief Executive Officer of Wal-Mart International from June 1999 to September 2005 and Executive Vice President and Chief Financial Officer of Wal-Mart Stores Inc. from September 1995 to June 1999.  Mr. Menzer serves as a director of Emerson Electric Co.

 

The Company and Mr. Menzer have entered into an employment agreement dated as of the 6th day of March, 2009.  Pursuant to the agreement, Mr. Menzer will receive a base annual salary of $1,000,000, subject to increase by the Board of Directors.  Mr. Menzer will be eligible to earn an annual incentive bonus at a target of 100% of his annual base salary, and a maximum bonus potential of 200% of base salary, based on performance criteria established by the Board of Directors for each fiscal year during his employment.  Upon commencement of employment, Mr. Menzer will receive a restricted stock grant of 1,000,000 shares of Company common stock; 500,000 of such shares will vest conditionally in four installments upon the later of (i) the second through fifth anniversaries of the date of grant and (ii) the date on which the fair market valuation of one (1) share of Company common stock exceeds a certain threshold and 500,000 of such shares will vest pro rata on the second through fifth anniversaries of the date of grant (the vesting of 133,000 shares would accelerate in the event of Mr. Menzer’s death or upon certain events of Mr. Menzer’s termination in the first two years following the date of grant).  Upon commencement of employment, Mr. Menzer will also receive an option to purchase 2,000,000 shares of Company common stock with exercise prices equal to or greater than fair market value on the date of grant. The option shares will vest pro rata on each of the first five anniversaries of the date of grant.

 

Pursuant to the Agreement, if Mr. Menzer’s employment is terminated by the Company without cause or by Mr. Menzer for good reason, then, for the two year period following the date of termination, he would be entitled to receive a severance benefit equal to (i) his base salary at the rate in effect on the date of termination, (ii) the amount of his annual target bonus for the year of termination and (iii) continued medical benefits.

 

No arrangement or understanding exists between Mr. Menzer and any other person pursuant to which Mr. Menzer was selected as an officer of the Company.

 

There is no family relationship between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer of the Company and Mr. Menzer.  In addition, except for execution of the agreement, since the beginning of the Company’s last fiscal year, there has been no transaction (or series of transactions), and there is no currently proposed transaction (or series of transactions), to which the Company was or is to be a party, in which the amount involved exceeds $120,000 and in which Mr. Menzer or any member of his immediate family had or will have a direct or indirect material interest.

 

On March 9, 2009, the Company issued a press release relating to the above matters. A copy of the press release is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Item 9.01.              Financial Statements and Exhibits.

(d)           Exhibits.

 

Exhibit
Number

 


Description

 

 

 

 

 

99.1

 

Press release issued by Michaels Stores, Inc., dated March 10, 2009, announcing financial results.

 

99.2

 

Press release issued by Michaels Stores, Inc., dated March 9, 2009, announcing resignation and appointment.

 

2



 

SIGNATURE

 

                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 hereunto duly authorized.

 

 

 

MICHAELS STORES, INC.

 

 

 

 

 

 

By:

/s/ Elaine D. Crowley

 

 

Elaine D. Crowley

 

 

Executive Vice President-Chief Financial Officer

 

 

 

 

Date:  March 10, 2009

 



 

INDEX TO EXHIBITS

 

Exhibit
Number

 


Description

 

 

 

99.1

 

Press release issued by Michaels Stores, Inc., dated March 10, 2009, announcing financial results.

99.2

 

Press release issued by Michaels Stores, Inc., dated March 9, 2009, announcing resignation and appointment.

 


EX-99.1 2 a09-7316_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

 

NEWS RELEASE

FOR IMMEDIATE RELEASE

Elaine D. Crowley

Chief Financial Officer

(972) 409-1581

 

 

Thomas Melito

Director – Treasury

(972) 409-1527

 

Michaels Stores, Inc. Reports Fiscal 2008 Fourth Quarter and Full Year Operating Results

 

IRVING, Texas — March 10, 2009 — Michaels Stores, Inc. (the “Company”) today reported net income for the year ended January 31, 2009, of $4 million compared to a net loss of $32 million for fiscal 2007. Fourth quarter net income improved $21 million to $74 million compared to a net income of $53 million for the corresponding period of the prior year.

 

Net sales for the fourth quarter decreased 2.5% to $1.268 billion from $1.301 billion last year with same-store sales declining 5.6%. Net sales for the year were $3.817 billion, a decrease of 1.2% from $3.862 billion for the same period last year. Same-store sales for the year decreased 4.6% from fiscal 2007.

 

Brian C. Cornell, Chief Executive Officer, said, “Our focus during the fourth quarter was on driving sales and maximizing gross margin dollars while effectively clearing through our seasonal merchandise.  Consumers responded to the value message, particularly during the month of December where we saw improving traffic trends.  Sales of higher ticket, more discretionary categories such as seasonal and home décor declined while sales in our core arts and craft businesses were more resilient.”

 

Mr. Cornell noted, “In the current environment, we are focused on managing all aspects of the business, including expenses, capital expenditures, cash and liquidity very conservatively.  We will strive to maximize sales by appealing to our customer through the value messaging introduced last year and through the introduction of compelling new merchandise throughout the year.”

 

“Michaels is built on a strong foundation, and has great potential to build its market leadership position in the arts and crafts segment. We are making the right decisions and have the right initiatives underway to make our business even better and to successfully navigate through today’s economic challenges. I believe that John Menzer, who will succeed me as CEO, will lead Michaels to new heights,” concluded Mr. Cornell.

 

Operating Results

 

The 5.6% decline in same-store sales for the quarter was the result of a 5.0% decrease in average ticket, and a 0.6% decrease in transactions. For the year, the 4.6% decline in same-store sales was due to a 2.5% decrease in average ticket and a 2.1% decrease in transactions. Canadian currency translation adversely affected same-store sales for the fourth quarter by approximately 170 basis points and approximately 20 basis points for fiscal 2008.

 

The Company’s gross margin rate, inclusive of occupancy costs, was 36.3% for both the quarter and fiscal year, decreasing 370 basis points in the fourth quarter and 200 basis points for the year. The decline in the gross margin rate was driven primarily by a 260 basis point decline in merchandise margin for the quarter and 110 basis points for the year combined with a deleveraging in occupancy costs. The decrease in the Company’s merchandise margin rate was principally due to increased promotional activity as we sought to sell through holiday merchandise.

 

8000 BENT BRANCH DRIVE · IRVING, TEXAS 75063

(972) 409-1300

 



 

Selling, general, and administrative expense in the fourth quarter increased $2 million to $295 million and, as a percent of sales, increased 80 basis points to 23.3% versus the prior year period due primarily to increased advertising expense and store personnel costs.  Year-to-date selling, general and administrative expense increased $9 million, to $1.060 billion. As a percent to sales, selling, general and administrative expense increased 60 basis points to 27.8% of sales from 27.2% for the same period last year, resulting primarily from deleveraging advertising and payroll costs, partially offset by lower bonus expense.

 

Operating income decreased approximately $39 million to $161 million, or to 12.6% of sales, in the fourth quarter of fiscal 2008 from $200 million, or 15.4% of sales in the fourth quarter of fiscal 2007. Fiscal 2008 operating income was $304 million, or 8.0% of sales, versus $354 million, or 9.2% of sales, for fiscal 2007.

 

Interest expense was lower by $22 million for the quarter and $76 million for the fiscal year, due to a lower average interest rate on our floating rate debt.

 

The current year tax benefit includes the effect of the favorable settlement of outstanding tax issues.

 

Adjusted EBITDA for the fourth quarter of fiscal 2008 was $207 million, or 16.3% of sales, versus $266 million, or 20.4% of sales, for the same period last year. Fiscal 2008 Adjusted EBITDA was $489 million, or 12.8% of sales, versus $587 million, or 15.2% of sales, for fiscal 2007. Reconciliations of GAAP measures to non-GAAP Adjusted EBITDA presented herein are included at the end of this press release.

 

Balance Sheet and Cash Flow

 

Year end debt levels totaled $3.928 billion, down approximately $255 million from third quarter ending balance and up $65 million from prior year. During the quarter, the Company made a $5.9 million amortization payment on its Senior Secured Term Loan.  At the end of fiscal 2008, the Company had $33 million in cash and over $550 million of availability under its revolving credit facility. As of March 9, 2009, availability under the credit facility was approximately $594 million.

 

Average inventory per Michaels store at the end of fiscal 2008, inclusive of distribution centers, was $849,000, up 2.3% from last year’s balance of $830,000, in part due to timing of inventory resets scheduled for early fiscal 2009.

 

Capital spending for the year, totaled $85 million versus $100 million for the same period last year. Nearly $57 million of this year’s spend is attributable to real estate activities, such as new, relocated, existing and remodeled stores, with the remainder being attributable to strategic initiatives and maintenance requirements. In light of the current economic environment, the Company currently plans capital expenditures for fiscal 2009 to be approximately $50 million with real estate activity to be significantly reduced by scaling back the new store opening program and focusing on the best opportunities available in the marketplace.

 

During fiscal 2008, the Company opened 51 new stores, relocated 11 stores, remodeled 20, and closed five Michaels stores. In addition, the Company relocated one and closed five Aaron Brothers stores during this period.

 

The Company will host a conference call at 4:00 p.m. central time today, hosted by Chief Executive Officer, Brian Cornell and Executive Vice President and Chief Financial Officer, Elaine Crowley. Those who wish to participate in the call may do so by dialing 973-935-8513, conference ID# 9430848. Any interested party will also have the 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 15 minutes early to register and download any necessary audio software. For

 



 

those who cannot listen to the live broadcast, a recording will be available for 30 days after the date of the event. Recordings may be accessed at www.michaels.com or by phone at 800-642-1687, PIN #9430848.

 

Michaels Stores, Inc. is North America’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 March 9, 2009, the Company owns and operates 1,015 Michaels stores in 49 states and Canada, and 161 Aaron Brothers stores.

 

This news release may contain forward-looking statements that reflect our plans, estimates, and beliefs. Any statements contained herein (including, but not limited to, statements to the effect that the Company or its management “anticipates,” “plans,” “estimates,” “expects,” “believes,” and other similar expressions) that are not statements of historical fact should be considered forward-looking statements and should be read in conjunction with our consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended February 2, 2008 and in our Quarterly Reports on Form 10-Q for the quarter ended May 3, 2008, August 2, 2008, and November 1, 2008.  Specific examples of forward-looking statements include, but are not limited to, forecasts of same-store sales growth, operating income, and forecasts of other financial performance. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control, that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to: the impact on our results of operations, cash flows and financial condition if the worldwide economic downturn continues or deteriorates further;  risks related to our substantial indebtedness; our debt agreements contain restrictions that limit our flexibility in operating our business; our growth depends on our ability to open new stores; our success will depend on how well we manage our business; we may fail to optimize or adequately maintain our perpetual inventory and automated replenishment systems; improvements to our supply chain may not be fully successful; changes in customer demands could materially adversely affect our sales, operating results, and cash flow; unexpected or unfavorable consumer responses to our promotional or merchandising programs could materially adversely affect our sales, operating results, and cash flow; changes in newspaper subscription rates may result in reduced exposure to our circular advertisements; changes in consumer confidence could result in a reduction in consumer spending on items perceived to be discretionary; failure to adequately maintain the security of our electronic and other confidential information could materially adversely affect our financial condition and operating results; our suppliers may fail us; our reliance on foreign suppliers increases our risk of obtaining adequate, timely, and cost-effective product supplies; product recalls and/or product liability may adversely impact our operations and merchandise offerings; significant increases in inflation or commodity prices such as petroleum, natural gas, electricity, steel and paper may adversely affect our costs, including cost of merchandise; our information systems may prove inadequate; a weak fourth quarter would materially adversely affect our operating results; competition could negatively impact our operations; the interests of our controlling stockholders may conflict with the interests of our creditors; government or consumer concerns about product safety and recalls or changes to laws could harm our reputation or financial position; the adoption of the  Employee Free Choice Act could impact our business;   and other factors as set forth in the our prior filings with the Securities and Exchange Commission, including those set forth under Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 2, 2008.  We intend these forward-looking statements to speak only as of the time of this release and do 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).

 



 

Michaels Stores, Inc.

Supplemental Disclosures Regarding Non-GAAP Financial Information

 

The following table sets forth the Company’s Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”).  The Company defines EBITDA as net income before interest, income taxes, discontinued operations, goodwill impairment, depreciation and amortization. Additionally, the table presents Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”).  The Company defines Adjusted EBITDA as EBITDA adjusted for certain defined amounts that are added to or subtracted from EBITDA in accordance with the Company’s credit agreements (collectively, the “Adjustments”). The Adjustments are described in further detail in the footnotes to the table below.

 

The Company has presented EBITDA and Adjusted EBITDA in this press release to provide investors with additional information to evaluate our operating performance and our ability to service our debt.  The Company uses EBITDA, among other things, to evaluate operating performance, to plan and forecast future periods’ operating performance, and as an incentive compensation target for certain management personnel. The Company uses Adjusted EBITDA in its assessment to make restricted payments, as defined within its Senior Secured term loan which was executed on October 31, 2006.  Contained in that agreement are limitations on the Company’s ability to make restricted payments, with the eligibility to make such payments partly dependent upon Adjusted EBITDA.

 

As EBITDA and Adjusted EBITDA are not measures of operating performance or liquidity calculated in accordance with U.S. GAAP, these measures should not be considered in isolation of, or as a substitute for, net income, as an indicator of operating performance, or net cash provided by operating activities as an indicator of liquidity.  Our computation of EBITDA and Adjusted EBITDA may differ from similarly titled measures used by other companies. As EBITDA and Adjusted EBITDA exclude certain financial information compared with net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded. The table below shows a reconciliation of EBITDA and Adjusted EBITDA to net earnings and net cash provided by operating activities.

 



 

Michaels Stores, Inc.

Consolidated Statements of Operations

(In millions)

(Unaudited)

 

Subject to reclassification

 

 

 

Quarter Ended

 

Year Ended

 

 

 

January 31,

 

February 2,

 

January 31,

 

February 2,

 

 

 

2009

 

2008

 

2009

 

2008

 

Net sales

 

$

1,268

 

$

1,301

 

$

3,817

 

$

3,862

 

Cost of sales and occupancy expense

 

808

 

781

 

2,431

 

2,383

 

Gross profit

 

460

 

520

 

1,386

 

1,479

 

Selling, general, and administrative expense

 

295

 

293

 

1,060

 

1,051

 

Transaction expenses

 

 

 

 

29

 

Goodwill impairment

 

 

22

 

 

22

 

Related party expenses

 

4

 

5

 

16

 

17

 

Store pre-opening costs

 

 

 

6

 

6

 

Operating income

 

161

 

200

 

304

 

354

 

Interest expense

 

71

 

93

 

302

 

378

 

Other (income) and expense, net

 

1

 

3

 

4

 

(7

)

Income (loss) before income taxes and discontinued operations

 

89

 

104

 

(2

)

(17

)

Provision (benefit) for income taxes

 

15

 

48

 

(6

)

5

 

Income (loss) before discontinued operations

 

74

 

56

 

4

 

(22

)

Discontinued operations loss, net of income tax

 

 

(3

)

 

(10

)

Net income (loss)

 

$

74

 

$

53

 

$

4

 

$

(32

)

 



 

Michaels Stores, Inc.

Consolidated Balance Sheets

(In millions, except share and per share amounts)

(Unaudited)

 

Subject to reclassification

 

 

 

January 31,

 

February 2,

 

 

 

2009

 

2008

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and equivalents

 

$

33

 

$

29

 

Merchandise inventories

 

900

 

845

 

Prepaid expenses and other

 

73

 

70

 

Deferred income taxes

 

41

 

31

 

Income tax receivable

 

2

 

5

 

Total current assets

 

1,049

 

980

 

Property and equipment, at cost

 

1,214

 

1,155

 

Less accumulated depreciation

 

(832

)

(722

)

 

 

382

 

433

 

Goodwill

 

94

 

94

 

Debt issuance costs, net of accumulated amortization of $39 at January 31, 2009 and $22 at February 2, 2008

 

86

 

103

 

Deferred income taxes and other assets

 

14

 

4

 

 

 

194

 

201

 

Total assets

 

$

1,625

 

$

1,614

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

231

 

$

221

 

Accrued liabilities and other

 

275

 

332

 

Current portion of long-term debt

 

172

 

122

 

Income taxes payable

 

2

 

 

Current liabilities - discontinued operations

 

1

 

4

 

Total current liabilities

 

681

 

679

 

Long-term debt

 

3,756

 

3,741

 

Deferred income taxes

 

 

4

 

Other long-term liabilities

 

74

 

80

 

Long-term liabilities - discontinued operations

 

1

 

2

 

Total long-term liabilities

 

3,831

 

3,827

 

 

 

4,512

 

4,506

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

Common Stock, $0.10 par value, 220,000,000 shares authorized;

 

 

 

 

 

118,376,402 shares issued and outstanding at January 31, 2009;

 

 

 

 

 

118,421,069 shares issued and outstanding at February 2, 2008

 

12

 

12

 

Additional paid-in capital

 

19

 

12

 

Accumulated deficit

 

(2,923

)

(2,926

)

Accumulated other comprehensive income

 

5

 

10

 

Total stockholders’ deficit

 

(2,887

)

(2,892

)

Total liabilities and stockholders’ deficit

 

$

1,625

 

$

1,614

 

 



 

Michaels Stores, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

 

Subject to reclassification

 

 

 

Fiscal Year

 

 

 

2008

 

2007

 

Operating activities:

 

 

 

 

 

Net income (loss)

 

$

4

 

$

(32

)

Adjustments:

 

 

 

 

 

Depreciation and amortization

 

129

 

125

 

Share-based compensation

 

8

 

6

 

Impairment of discontinued operations

 

 

6

 

Goodwill impairment

 

 

22

 

Deferred financing costs amortization

 

17

 

17

 

Other

 

 

(1

)

Accretion of subordinated discount notes

 

39

 

35

 

Changes in assets and liabilities:

 

 

 

 

 

Merchandise inventories

 

(67

)

3

 

Prepaid expenses and other

 

3

 

3

 

Deferred income taxes and other

 

(24

)

(19

)

Accounts payable

 

5

 

23

 

Accrued interest

 

(40

)

38

 

Accrued liabilities and other

 

(4

)

8

 

Income taxes payable

 

5

 

21

 

Other long-term liabilities

 

(7

)

13

 

Net cash provided by operating activities

 

68

 

268

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Additions to property and equipment

 

(85

)

(100

)

Net cash used in investing activities

 

(85

)

(100

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Borrowings on asset-based revolving credit facility

 

923

 

919

 

Payments on asset-based revolving credit facility

 

(870

)

(1,029

)

Repayments on senior secured term loan facility

 

(24

)

(24

)

Equity investment of Management

 

 

8

 

Repurchase of new Common Stock

 

(2

)

(1

)

Payment of capital leases

 

(4

)

(7

)

Change in cash overdraft

 

 

(37

)

Other

 

(2

)

2

 

Net cash provided by (used in) financing activities

 

21

 

(169

)

 

 

 

 

 

 

Net increase (decrease) in cash and equivalents

 

4

 

(1

)

Cash and equivalents at beginning of period

 

29

 

30

 

Cash and equivalents at end of period

 

$

33

 

$

29

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

Cash paid for interest

 

$

285

 

$

288

 

Cash paid for income taxes

 

$

15

 

$

22

 

 



 

Michaels Stores, Inc.

Summary of Operating Data

(Unaudited)

 

The following table sets forth the percentage relationship to net sales of each line item of our unaudited consolidated statements of operations: (Schedule may not foot due to rounding)

 

 

 

Quarter Ended

 

Year Ended

 

 

 

January 31,

 

February 2,

 

January 31,

 

February 2,

 

 

 

2009

 

2008

 

2009

 

2008

 

Net sales

 

100.0

%

100.0

%

100.0

%

100.0

%

Cost of sales and occupancy expense

 

63.7

 

60.0

 

63.7

 

61.7

 

Gross profit

 

36.3

 

40.0

 

36.3

 

38.3

 

Selling, general, and administrative expense

 

23.3

 

22.5

 

27.8

 

27.2

 

Transaction expenses

 

 

 

 

0.7

 

Goodwill Impairment

 

 

1.7

 

 

0.5

 

Related party expenses

 

0.3

 

0.4

 

0.4

 

0.5

 

Store pre-opening costs

 

0.1

 

 

0.1

 

0.2

 

Operating income

 

12.6

 

15.4

 

8.0

 

9.2

 

Interest expense

 

5.6

 

7.1

 

7.9

 

9.8

 

Other (income) and expense, net

 

 

0.2

 

0.1

 

(0.2

)

Loss before income taxes and discontinued operations

 

7.0

 

8.1

 

 

(0.4

)

Income tax expense (benefit)

 

1.2

 

3.7

 

(0.1

)

0.1

 

Loss before discontinued operations

 

5.8

 

4.4

 

0.1

 

(0.5

)

Discontinued operations loss, net of income tax

 

 

(0.2

)

 

(0.3

)

Net loss

 

5.8

%

4.2

%

0.1

%

(0.8

)%

 

The following table sets forth certain of our unaudited operating data:

 

 

 

Quarter Ended

 

Year Ended

 

 

 

January 31,

 

February 2,

 

January 31,

 

February 2,

 

 

 

2009

 

2008

 

2009

 

2008

 

Michaels stores:

 

 

 

 

 

 

 

 

 

Retail stores open at beginning of period

 

1,013

 

961

 

963

 

921

 

Retail stores opened during the period

 

1

 

2

 

51

 

45

 

Retail stores opened (relocations) during the period

 

2

 

 

11

 

11

 

Retail stores closed during the period

 

(5

)

 

(5

)

(3

)

Retail stores closed (relocations) during the period

 

(2

)

 

(11

)

(11

)

Retail stores open at end of period

 

1,009

 

963

 

1,009

 

963

 

 

 

 

 

 

 

 

 

 

 

Aaron Brothers stores:

 

 

 

 

 

 

 

 

 

Retail stores open at beginning of period

 

163

 

167

 

166

 

166

 

Retail stores opened during the period

 

 

 

 

2

 

Retail stores opened (relocations) during the period

 

 

 

1

 

 

Retail stores closed during the period

 

(2

)

(1

)

(5

)

(2

)

Retail stores closed (relocations) during the period

 

 

 

(1

)

 

Retail stores open at end of period

 

161

 

166

 

161

 

166

 

 

 

 

 

 

 

 

 

 

 

Total store count at end of period

 

1,170

 

1,129

 

1,170

 

1,129

 

 

 

 

 

 

 

 

 

 

 

Other operating data:

 

 

 

 

 

 

 

 

 

Average inventory per Michaels store (1)

 

$

849

 

$

830

 

$

849

 

$

830

 

Comparable store sales decrease (2)

 

(5.6

)%

(3.4

)%

(4.6

)%

(0.7

)%

 



 

Michaels Stores, Inc.

Footnotes to Financial and Operating Data Tables

(Unaudited)

 

(1)

Average inventory per Michaels store calculation excludes Aaron Brothers.

 

 

(2)

Comparable store sales (decrease) increase represents the (decrease) increase in net sales for stores open the same number of months in the indicated period and the comparable period of the previous year, including stores that were relocated or expanded during either period. A store is deemed to become comparable in its 14th month of operation in order to eliminate grand opening sales distortions. A store temporarily closed more than 2 weeks due to a catastrophic event is not considered comparable during the month it closed. If a store is closed longer than 2 weeks but less than 2 months, it becomes comparable in the month in which it reopens, subject to a mid-month convention. A store closed longer than 2 months becomes comparable in its 14th month of operation after its reopening.

 



 

Michaels Stores, Inc.

Reconciliation of Adjusted EBITDA

(in millions)

 

 

 

Quarter

 

Quarter

 

 

 

 

 

 

 

ended

 

ended

 

 

 

 

 

 

 

January 31, 2009

 

February 2, 2008

 

Fiscal 2008

 

Fiscal 2007

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

$

234

 

$

349

 

$

68

 

$

268

 

Depreciation and amortization

 

(35

)

(31

)

(129

)

(125

)

Share-based compensation

 

(2

)

(2

)

(8

)

(6

)

Deferred financing cost amortization

 

(4

)

(4

)

(17

)

(17

)

Accretion of subordinated discount notes

 

(10

)

(10

)

(39

)

(35

)

Impairment of discontinued operations

 

 

 

 

(6

)

Goodwill impairment

 

 

(22

)

 

(22

)

Other

 

 

 

 

1

 

Changes in assets and liabilities

 

(109

)

(227

)

129

 

(90

)

Net income (loss)

 

74

 

53

 

4

 

(32

)

Interest expense

 

71

 

93

 

302

 

378

 

Interest income

 

 

 

 

(1

)

Income tax (benefit) provision

 

15

 

48

 

(6

)

5

 

Depreciation and amortization

 

35

 

31

 

129

 

125

 

Goodwill impairment

 

 

22

 

 

22

 

Discontinued operations

 

 

3

 

 

10

 

EBITDA

 

195

 

250

 

429

 

507

 

Adjustments:

 

 

 

 

 

 

 

 

 

Share-based compensation

 

2

 

2

 

8

 

6

 

Strategic alternatives and other legal

 

 

 

 

31

 

Sponsor Fees

 

3

 

4

 

14

 

14

 

Termination expense

 

2

 

4

 

15

 

7

 

Pre-opening costs

 

 

 

6

 

6

 

Multi-year initiatives (1)

 

1

 

 

3

 

8

 

Foreign currency translation gains/losses

 

1

 

4

 

5

 

(7

)

Store closing costs

 

1

 

 

3

 

4

 

Other (2)

 

2

 

2

 

6

 

11

 

Adjusted EBITDA

 

$

207

 

$

266

 

$

489

 

$

587

 

 


(1) Multi-year initiatives relate to our Centralia distribution center and store remodel costs.

(2) Other adjustments relate to items such as the moving & relocation expenses, franchise taxes, legal settlements and public company costs.

 


EX-99.2 3 a09-7316_1ex99d2.htm EX-99.2

Exhibit 99.2

 

 

NEWS RELEASE

Elaine Crowley

FOR IMMEDIATE RELEASE

Chief Financial Officer

 

(972) 409-1581

 

 

 

Thomas Melito

 

Director — Treasury

 

(972) 409-1527

 

Michaels Stores, Inc. Names John B. Menzer, Former Wal-Mart Executive, as New CEO

 

IRVING, Texas — March 9, 2009 — Michaels Stores, Inc., 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, today announced that John B. Menzer, a highly accomplished retail industry executive with previous experience in the arts and crafts category, has been appointed the company’s new Chief Executive Officer.  Menzer most recently served as Vice Chairman and Chief Administrative Officer of Wal-Mart Stores, Inc. and previously as President and CEO of Wal-Mart International.  Simultaneously, the company announced that Brian C. Cornell has resigned his position as Michaels Stores Chief Executive Officer to take a position at another retailer.  Following a transition period, the leadership changes are expected to take place in early April, but no later than April 15, 2009.

 

“I am excited to be joining Michaels, an outstanding company that has great potential to expand its position as the market leader in the arts and crafts industry,” said Menzer, who was a senior executive in the arts and crafts industry for 10 years prior to joining Wal-Mart.  “I look forward to joining a best-in-class leadership team and helping take our company to the next level.”

 

Menzer was one of the key architects of Wal-Mart’s extraordinary growth and global expansion, during a 12-year tenure that began as the company’s chief financial officer.  Prior to joining Wal-Mart, Menzer served as President of Ben Franklin Retail Stores, an arts and crafts / general merchandise wholesaler and retailer.  Menzer currently serves on the Board of Directors of Emerson Electric Co.

 

“We are very pleased to welcome John Menzer to Michaels, and back to the arts and crafts industry,” said Michael Chae of The Blackstone Group and Matt Levin of Bain Capital in a joint statement.  “John is a world-class retail executive who has been instrumental in driving significant growth in the businesses he has been responsible for, and is an outstanding leader with a proven track record.  We are grateful to Brian Cornell for his significant contributions to Michaels during his tenure, and especially for helping to nurture and build a world class management team that we are confident will be great partners with John in the next phase of Michaels’ expansion.”  Bain Capital and The Blackstone Group are leading private equity firms that together control Michaels Stores.

 

“I have thoroughly enjoyed my time at Michaels, especially getting to work with such a talented team that I believe will continue to lead the company to new heights,” said Cornell, who has accepted a position as Chief Executive Officer of Sam’s Club.  “I am extremely proud to have led this organization and proud of the progress we have made together.”

 

8000 BENT BRANCH DRIVE · IRVING, TEXAS 75063

(972) 409-1300

 



 

Michaels Stores, Inc. is North America’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 March 9, 2009, the Company owns and operates 1,014 Michaels stores in 49 states and Canada, and 163 Aaron Brothers stores.

 

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

 


GRAPHIC 4 g73161mqi001.gif GRAPHIC begin 644 g73161mqi001.gif M1TE&.#EAQ@!'`'<`,2'^&E-O9G1W87)E.B!-:6-R;W-O9G0@3V9F:6-E`"'Y M!`$`````+`0`"@"X`#4`@`````````+_A(^I&+$/HYRTVHM5<[GOW87B2);: MUY@2FJH&R[GRO,(T`X-EWMY/[,OT4+X/3B?B(8.O)7/B--YZ1RI&Z2Q*G]!H MUO0%;*]9XM/,K0&;5E6[*ORB@_/T;\W&[]YP2U@\IL5G=R#W%W*8YS>HR%1' M>'3'Z#'9J*87Z1@(F7E2>9%8&`J(V2GX>1:V.3)*6BKZ"IN*.HO9N@AZN.JI M>=L+X=L5F[#+1E$,%DPW2%OA6XPLNZ#,RPG,1QT1O!MM[#DL;'UMVWP,3JR* M:EC^+3Z=?N[,OMKM714OB?][1Z;-3MI.GIYLIMQ)>Y<+'B4\S_21^2?HFK,\ M`_^5H470G$-T_Z%8!.3(D0J03=0"-TQ?C!7(@2"2AFL>!14+<.?2L`R22FU;;5$+M5%OMH56:>W3@OZLX+2),&&* MC""V'>66X/W5W(IW"DU$O^I["E/<'TKEJ5(==)QW\A7IG3X./,P M(^NH%X_$O.3KZ3'CW.LMS$%WTW*#W]X8V?IWV\_K;U6XSB3&K\8O;=$\K]A; M2>4#F6^-2846;.<@H]IM<2BX7`W757814_4`U0J#Y+WT4&M0M9068*Z@(V"# M5PGF8&Y[+.1A=>3P5@A9=W$'XE[-&1?+ABXH=]]DP;W867["6=5(?-NA1`*" M56&ATG`ASH568GWH8J)]=ERDWFA0$N,/2UCQ@)Q@:_XW:)1R(KHCH(F69XVC ;AS+Z*(&&]G>GCI46)BFFF79:J::!;FI!`0`[ ` end GRAPHIC 5 g73161mo01i001.gif GRAPHIC begin 644 g73161mo01i001.gif M1TE&.#EAR`!%`'<`,2'^&E-O9G1W87)E.B!-:6-R;W-O9G0@3V9F:6-E`"'Y M!`$`````+`D`"@"X`#4`@`````````+_A(^I&+$/HYRTVHM5<[GOW87B2);: MUY@2FJH&R[GRO,(T`X-EWMY/[,OT4+X/3B?B(8.O)7/B--YZ1RI&Z2Q*G]!H MUO0%;*]9XM/,K0&;5E6[*ORB@_/T;\W&[]YP2U@\IL5G=R#W%W*8YS>HR%1' M>'3'Z#'9J*87Z1@(F7E2>9%8&`J(V2GX>1:V.3)*6BKZ"IN*.HO9N@AZN.JI M>=L+X=L5F[#+1E$,%DPW2%OA6XPLNZ#,RPG,1QT1O!MM[#DL;'UMVWP,3JR* M:EC^+3Z=?N[,OMKM714OB?][1Z;-3MI.GIYLIMQ)>Y<+'B4\S_21^2?HFK,\ M`_^5H470G$-T_Z%8!.3(D0J03=0"-TQ?C!7(@2"2AFL>!14+<.?2L`R22FU;;5$+M5%OMH56:>W3@OZLX+2),&&* MC""V'>66X/W5W(IW"DU$O^I["E/<'TKEJ5(==)QW\A7IG3X./,P M(^NH%X_$O.3KZ3'CW.LMS$%WTW*#W]X8V?IWV\_K;U6XSB3&K\8O;=$\K]A; M2>4#F6^-2846;.<@H]IM<2BX7`W757814_4`U0J#Y+WT4&M0M9068*Z@(V"# M5PGF8&Y[+.1A=>3P5@A9=W$'XE[-&1?+ABXH=]]DP;W867["6=5(?-NA1`*" M56&ATG`ASH568GWH8J)]=ERDWFA0$N,/2UCQ@)Q@:_XW:)1R(KHCH(F69XVC ;AS+Z*(&&]G>GCI46)BFFF79:J::!;FI!`0`[ ` end
-----END PRIVACY-ENHANCED MESSAGE-----