Segments and Geographic Information

12 Months Ended

Feb. 01, 2014

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, 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. The ScrapHD operating segment, which has been discontinued, is immaterial to the financial statements as a whole.

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
	2013		2012		2011
	(In millions)
Net Sales:
United States	$	4,132	$	3,989	$	3,825
Canada	438		419		385
Consolidated Total	$	4,570	$	4,408	$	4,210
Total Assets:
United States	$	1,678	$	1,446	$	1,744
Canada	123		109		94
Consolidated Total	$	1,801	$	1,555	$	1,838

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
	2013		2012		2011
	(In millions)
General crafts	$	2,371	$	2,220	$	2,108
Home décor and seasonal	898		890		837
Framing	862		836		804
Scrapbooking	439		462		461
	$	4,570	$	4,408	$	4,210

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
	2013		2012		2011
	(In millions)
Net income	$	264	$	200	$	157
Interest expense	183		245		254
Refinancing costs and losses on early extinguishments of debt	14		33		18
Provision for income taxes	148		115		100
Depreciation and amortization	106		97		101
EBITDA (excluding refinancing costs and losses on early extinguishments of debt)	$	715	$	690	$	630