Segments and Geographic Information

12 Months Ended

Feb. 02, 2013

Segments and Geographic Information

Segments and Geographic Information

Note 13. Segments and Geographic Information

We consider our Michaels—U.S., Michaels—Canada, Aaron Brothers and ScrapHD to be our operating segments for purposes of determining reportable segments based on the criteria of ASC 280, Segment Reporting. We determined that our Michaels—U.S., Michaels—Canada, Aaron Brothers operating segments have similar economic characteristics and meet the aggregation criteria set forth in ASC 280. Therefore, we combine those operating segments into one reporting segment. As of February 2, 2013, the ScrapHD operating segment was immaterial to the financial statements as a whole. Accordingly, we will report in two reportable segments if Net sales, Operating income or loss, or Total assets of the ScrapHD operating segment exceeds 10% of the consolidated amounts.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in Note 1.

Our sales and assets by country are as follows:

	Fiscal Year
	2012		2011		2010
	(In millions)
Net Sales:
United States	$	3,989	$	3,825	$	3,673
Canada	419		385		358
Consolidated Total	$	4,408	$	4,210	$	4,031
Total Assets (Restated):
United States	$	1,446	$	1,744	$	1,699
Canada	109		94		81
Consolidated Total	$	1,555	$	1,838	$	1,780

We present assets based on their physical, geographic location. Certain assets located in the U.S. are also used to support our Canadian operations, but we do not allocate these assets to Canada.

Our Consolidated Net sales by major product categories are as follows:

	Fiscal Year
	2012		2011		2010
General and children’s crafts	$	2,082	$	1,908	$	1,791
Home décor and seasonal	890		837		805
Framing	836		804		794
Scrapbooking	600		661		641
	$	4,408	$	4,210	$	4,031

Our chief operating decision makers evaluate historical operating performance and plan and forecast future periods’ operating performance based on earnings before interest, income taxes, depreciation, amortization and refinancing costs and losses on early extinguishments of debt (“EBITDA (excluding refinancing costs and losses on early extinguishments of debt)”). We believe EBITDA (excluding refinancing costs and losses on early extinguishments of debt) represents the financial measure that most closely reflects the operating effectiveness of factors over which management has control. As such, an element of base incentive compensation targets for certain management personnel is based on EBITDA (excluding refinancing costs and losses on early extinguishments of debt). A reconciliation of EBITDA (excluding refinancing costs and losses on early extinguishments of debt) to Net income is presented below.

	Fiscal Year
	2012		2011		2010
	Restated		Restated
Net income	$	200	$	157	$	103
Interest expense	245		254		276
Refinancing costs and losses on early extinguishments of debt	33		18		53
Provision for income taxes	115		100		46
Depreciation and amortization	97		101		103
EBITDA (excluding refinancing costs and losses on early extinguishments of debt)	$	690	$	630	$	581