Segments and Geographic Information

6 Months Ended

Aug. 03, 2013

Segments and Geographic Information

Segments and Geographic Information

Note 9.   Segments and Geographic Information

We consider our Michaels — U.S., Michaels — Canada, Aaron Brothers and online scrapbooking business operations 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, and 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.  During the second quarter of 2013, the online scrapbooking business was discontinued; as an operating segment, it is immaterial to the financial statements as a whole.

Our sales and assets by country are as follows:

	Quarter Ended				Six Months Ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
	(in millions)
Net Sales:
United States	$	819	$	812	$	1,717	$	1,703
Canada	85		80		180		167
Consolidated Total	$	904	$	892	$	1,897	$	1,870

	August 3, 2013		February 2, 2013		July 28, 2012
	(in millions)
	(Restated)		(Restated)		(Restated)
Total Assets:
United States	$	1,522	$	1,446	$	1,586
Canada	123		109		117
Consolidated Total	$	1,645	$	1,555	$	1,703

Our chief operating decision makers evaluate historical operating performance, plan and forecast future periods’ operating performance based on earnings before interest, income taxes, depreciation, amortization, and refinancing costs and losses on early extinguishment of debt (“EBITDA (excluding refinancing costs and losses on early extinguishment of debt)”). We believe EBITDA (excluding refinancing costs and losses on early extinguishment of debt) represents the financial measure that more 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 are based on EBITDA (excluding refinancing costs and losses on early extinguishment of debt). A reconciliation of EBITDA (excluding refinancing costs and losses on early extinguishment of debt) to Net income is presented below.

	Quarter Ended				Six Months Ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
	(Restated)				(Restated)
	(in millions)
Net income	$	17	$	9	$	63	$	60
Interest expense	45		61		92		127
Refinancing costs and losses on early extinguishments of debt	—		—		7		—
Provision for income taxes	8		6		36		34
Depreciation and amortization	25		22		50		46
EBITDA (excluding refinancing costs and losses on early extinguishments of debt)	$	95	$	98	$	248	$	267