Claire's Stores, Inc. Reports Fiscal 2012 Third Quarter Results
CHICAGO, Nov. 29, 2012 /PRNewswire/ -- Claire's Stores,
Inc. (the "Company") is one of the world's leading specialty
retailers of fashionable jewelry and accessories at affordable
prices for young women, teens, tweens and kids. The Company today
reported its financial results for the fiscal 2012 third quarter,
which ended October 27,
2012.
Third Quarter Results
The Company reported net sales of $363.4
million for the fiscal 2012 third quarter, an increase of
$7.4 million, or 2.1%, compared to
the 2011 third quarter. The increase was attributable to new
store sales and an increase in same store sales, partially offset
by the effect of store closures and foreign currency translation
effect of our non-U.S. store sales. Net sales would have
increased 4.4% excluding the impact from foreign currency exchange
rate changes.
Consolidated same store sales increased 2.4% in the 2012 third
quarter, with North America same
store sales increasing 2.0%, and Europe same store sales increasing 3.2%.
Our 2012 fourth quarter consolidated quarter to date same store
sales performance is in the positive mid-single digits. We
compute same store sales on a local currency basis, which
eliminates any impact from changes in foreign currency exchange
rates.
Gross profit percentage decreased 90 basis points to 50.6%
during the fiscal 2012 third quarter compared to 51.5% during the
comparable prior year quarter. The decrease in gross profit
percentage consisted of a 110 basis point decrease in merchandise
margin, partially offset by a 20 basis point decrease in occupancy
rate. The decrease in merchandise margin resulted primarily
from an increase in markdowns and lower initial markups. The
decrease in occupancy rate resulted primarily from the leveraging
effect of an increase in same store
sales.
Selling, general and administrative expenses decreased
$2.2 million, or 1.8%, compared to
the fiscal 2011 third quarter. As a percentage of net sales,
selling, general and administrative expenses decreased 130 basis
points compared to the prior year (120 basis points decrease
excluding the effect of foreign currency exchange rate
changes). Selling, general and administrative expenses would
have increased $0.8 million excluding
the effect of foreign currency exchange rate changes.
Adjusted EBITDA in the fiscal 2012 third quarter was
$65.7 million compared to
$62.6 million in the fiscal 2011
third quarter. Adjusted EBITDA would have been $67.4 million excluding the effect of foreign
currency exchange rate changes. The Company defines Adjusted
EBITDA as earnings before provision for income taxes, gain (loss)
on early debt extinguishment, net interest expense, and
depreciation and amortization. Adjusted EBITDA excludes
severance, management fees, the impact of transaction-related costs
and other non-recurring or non-cash expenses, and normalizing
occupancy costs for certain rent-related adjustments. Net
loss for the 2012 third quarter was $13.7
million. A reconciliation of net loss to Adjusted
EBITDA is attached.
At October 27, 2012, cash and cash
equivalents were $62.7 million, and
there were no borrowings against the Company's recently amended
$115 million Revolving Credit
Facility. In the 2012 third quarter, we paid in full
$664.6 million of indebtedness under
the Company's senior secured term loan with the net proceeds from
issuing additional Senior Secured First Lien Notes together with
cash on hand. In addition, the Company replaced its existing
senior secured revolving credit facility with the amended and
restated $115 million five-year
senior secured revolving credit facility.
The fiscal 2012 third quarter cash balance decrease of
$67.8 million consisted of a positive
impact of $65.7 million of Adjusted
EBITDA and reductions for $52.0
million of cash interest, $40.5
million of repayment of indebtedness and payment of debt
financing costs, $21.6 million from
seasonal working capital use, $16.6
million of capital expenditures, and $2.8 million of tax payments and other cash
items.
Store
Count as of:
|
October
27, 2012
|
|
January
28, 2012
|
|
October
29, 2011
|
|
|
|
|
|
|
North
America
|
1,939
|
|
1,953
|
|
1,959
|
Europe
|
1,149
|
|
1,118
|
|
1,088
|
Subtotal Company-Owned
|
3,088
|
|
3,071
|
|
3,047
|
Franchise
and License
|
381
|
|
381
|
|
381
|
Total
|
3,469
|
|
3,452
|
|
3,428
|
Conference Call Information
The Company will host its third quarter conference call on
November 30, 2012 at 10:00 am. (EST). The call-in number is
210-839-8201 and the password is "Claires." A replay will be
available through December 30,
2012. The replay number is 866-403-8762 and the password is
6582. The conference call is also being webcast and archived
until December 30, 2012 on the
Company's corporate website at http://www.clairestores.com, where
it can be accessed by clicking on the "Events" link located under
"Financial Information" for a replay or download as an MP3
file.
Company Overview
Claire's Stores, Inc. is one of the world's leading specialty
retailers of fashionable jewelry and accessories at affordable
prices for young women, teens, tweens and girls ages 3 to 27.
The Company operates through its two store concepts:
Claire's® and Icing®. As of
October 27, 2012, Claire's Stores,
Inc. operated 3,088 stores in North
America and Europe. The Company also franchised or
licensed 381 stores in Japan, the
Middle East, Turkey, Greece, Guatemala, Malta, Ukraine, Mexico, India, Dominican
Republic, El Salvador,
Venezuela, and Panama. More information regarding Claire's
Stores is available on the Company's corporate website at
http://www.clairestores.com.
Forward-looking Statements
This press release contains "forward-looking statements" which
represent the Company's expectations or beliefs with respect to
future events. Statements that are not historical are
considered forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those
anticipated. Those factors include, without limitation:
changes in consumer preferences and consumer spending; competition;
our level of indebtedness; general economic conditions; general
political and social conditions such as war, political unrest and
terrorism; natural disasters or severe weather events; currency
fluctuations and exchange rate adjustments; uncertainties generally
associated with the specialty retailing business, such as decreases
in mall traffic due to high gasoline prices or other general
economic conditions; disruptions in our supply of inventory;
inability to increase same store sales; inability to renew, replace
or enter into new store leases on favorable terms; increase in our
cost of merchandise; significant increases in our merchandise
markdowns; inability to grow our store base in Europe or expand our international franchising
operations; inability to design and implement new information
systems or disruptions in adapting our information systems to allow
for expansion into new geographic markets or grow our e-commerce
sales; delays in anticipated store openings or renovations;
uncertainty that definitive financial results may differ from
preliminary financial results due to, among other things, final
U.S. GAAP adjustments; results from any future asset impairment
analysis; changes in applicable laws, rules and regulations,
including changes in federal, state or local regulations governing
the sale of our merchandise, particularly regulations relating to
the content in our merchandise, general employment laws, including
laws relating to overtime pay and employee benefits, health care
laws, tax laws and import laws; product recalls; data or security
breaches of confidential information; loss of key members of
management; increases in the cost of labor; labor disputes;
unwillingness of vendors and service providers to supply goods or
services pursuant to historical customary credit arrangements;
increases in the cost of borrowings; unavailability of additional
debt or equity capital; and the impact of our substantial
indebtedness on our operating income and our ability to grow.
These and other applicable risks, cautionary statements and factors
that could cause actual results to differ from the Company's
forward-looking statements are included in the Company's filings
with the SEC, specifically as described in the Company's Annual
Report on Form 10-K for the fiscal year ended January 28, 2012 filed with the SEC on
April 4, 2012. The Company
undertakes no obligation to update or revise any forward-looking
statements to reflect subsequent events or circumstances. The
historical results contained in this press release are not
necessarily indicative of the future performance of the
Company.
Additional Information
Note: Other Claire's Stores, Inc. press releases, a
corporate profile and the most recent Form 10-K and Form 10-Q
reports are available on Claire's business website at:
http://www.clairestores.com.
Contact Information
J. Per Brodin, Executive Vice
President and Chief Financial Officer
Phone: (847) 765-1100, or E-mail,
investor.relations@claires.com
CLAIRE'S STORES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS
OF
OPERATIONS
(In
thousands)
|
THIRD
FISCAL QUARTER
|
|
|
|
|
Three
Months
|
|
Three
Months
|
|
Ended
|
|
Ended
|
|
October
27, 2012
|
|
October
29, 2011
|
Net
sales
|
$
363,388
|
|
$
356,000
|
Cost of
sales, occupancy and buying expenses
(exclusive of
depreciation and amortization shown
separately
below)
|
179,583
|
|
172,505
|
Gross
profit
|
183,805
|
|
183,495
|
Other
expenses:
|
|
|
|
Selling, general and administrative
|
121,211
|
|
123,378
|
Depreciation and amortization
|
16,042
|
|
17,129
|
Severance and transaction-related costs
|
(29)
|
|
180
|
Other income, net
|
(3,234)
|
|
(1,840)
|
|
133,990
|
|
138,847
|
Operating
income
|
49,815
|
|
44,648
|
Gain
(loss) on early debt extinguishment
|
(5,105)
|
|
3,986
|
Interest
expense, net
|
54,042
|
|
43,543
|
Income
(loss) before income tax expense
|
(9,332)
|
|
5,091
|
Income tax
expense
|
4,398
|
|
3,193
|
Net (loss)
income
|
$
(13,730)
|
|
$
1,898
|
|
|
YEAR TO
DATE
|
|
|
|
|
Nine
Months
|
|
Nine
Months
|
|
Ended
|
|
Ended
|
|
October
27, 2012
|
|
October
29, 2011
|
Net
sales
|
$
1,063,622
|
|
$
1,060,993
|
Cost of
sales, occupancy and buying expenses
(exclusive of depreciation
and amortization shown
separately
below)
|
531,452
|
|
519,246
|
Gross
profit
|
532,170
|
|
541,747
|
Other
expenses:
|
|
|
|
Selling, general and administrative
|
360,122
|
|
380,309
|
Depreciation and amortization
|
48,232
|
|
50,535
|
Severance and transaction-related costs
|
1,168
|
|
949
|
Other (income) expense, net
|
(2,654)
|
|
2,290
|
|
406,868
|
|
434,083
|
Operating
income
|
125,302
|
|
107,664
|
Gain
(loss) on early debt extinguishment
|
(9,707)
|
|
4,468
|
Interest
expense, net
|
149,943
|
|
134,113
|
Loss
before income tax expense
|
(34,348)
|
|
(21,981)
|
Income tax
expense
|
6,576
|
|
5,861
|
Net
loss
|
$
(40,924)
|
|
$
(27,842)
|
CLAIRE'S STORES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
October
27, 2012
|
|
January
28, 2012
|
|
(In
thousands, except share and per share
amounts)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash equivalents and restricted cash of $0
and $4,350, respectively
|
$
62,673
|
|
$
174,374
|
Inventories
|
192,417
|
|
142,104
|
Prepaid expenses
|
18,880
|
|
20,010
|
Other current assets
|
30,667
|
|
25,423
|
Total current assets
|
304,637
|
|
361,911
|
Property
and equipment:
|
|
|
|
Furniture, fixtures and equipment
|
223,919
|
|
207,620
|
Leasehold improvements
|
302,709
|
|
281,774
|
|
526,628
|
|
489,394
|
Less accumulated depreciation and
amortization
|
(317,103)
|
|
(281,874)
|
|
209,525
|
|
207,520
|
Leased
property under capital lease:
|
|
|
|
Land and building
|
18,055
|
|
18,055
|
Less accumulated depreciation and
amortization
|
(2,483)
|
|
(1,805)
|
|
15,572
|
|
16,250
|
|
|
|
|
Goodwill
|
1,550,056
|
|
1,550,056
|
Intangible
assets, net of accumulated amortization of $55,662 and $49,270,
respectively
|
543,840
|
|
549,768
|
Deferred
financing costs, net of accumulated amortization of
$24,922
|
43,249
|
|
33,025
|
and $55,818, respectively
|
Other
assets
|
46,161
|
|
44,495
|
|
2,183,306
|
|
2,177,344
|
|
|
|
|
Total
assets
|
$
2,713,040
|
|
$
2,763,025
|
|
|
|
|
LIABILITIES AND STOCKHOLDER'S
DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Trade accounts
payable
|
$
68,716
|
|
$
60,704
|
Income taxes
payable
|
4,889
|
|
10,228
|
Accrued interest
payable
|
48,149
|
|
31,859
|
Accrued expenses and other
current liabilities
|
94,160
|
|
104,525
|
Total current liabilities
|
215,914
|
|
207,316
|
|
|
|
|
Long-term
debt
|
2,373,906
|
|
2,386,382
|
Obligation
under capital lease
|
17,249
|
|
17,290
|
Deferred
tax liability
|
119,404
|
|
120,452
|
Deferred
rent expense
|
29,759
|
|
28,861
|
Unfavorable lease obligations and other long-term
liabilities
|
21,745
|
|
25,020
|
|
2,562,063
|
|
2,578,005
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Stockholder's deficit:
|
|
|
|
Common stock par value $0.001 per share; authorized
1,000 shares;
|
|
|
|
issued and outstanding 100 shares
|
―
|
|
―
|
Additional paid-in capital
|
618,050
|
|
619,453
|
Accumulated other comprehensive loss, net of
tax
|
(4,665)
|
|
(4,351)
|
Accumulated deficit
|
(678,322)
|
|
(637,398)
|
|
(64,937)
|
|
(22,296)
|
|
|
|
|
Total
liabilities and stockholder's deficit
|
$
2,713,040
|
|
$
2,763,025
|
Net Income (Loss) Reconciliation to EBITDA and Adjusted
EBITDA
EBITDA represents net income (loss) before provision for income
taxes, gain (loss) on early debt extinguishment, interest income
and expense, impairment and depreciation and amortization.
Adjusted EBITDA represents EBITDA further adjusted to exclude
non-cash and unusual items. Management uses Adjusted EBITDA
as an important tool to assess our operating performance.
Management considers Adjusted EBITDA to be a useful measure in
highlighting trends in our business and in analyzing the
profitability of similar enterprises. Management believes
that Adjusted EBITDA is effective, when used in conjunction with
net income (loss), in evaluating asset performance, and
differentiating efficient operators in the industry.
Furthermore, management believes that Adjusted EBITDA provides
useful information to potential investors and analysts because it
provides insight into management's evaluation of our results of
operations. Our calculation of Adjusted EBITDA may not be
consistent with "EBITDA" for the purpose of the covenants in the
agreements governing our indebtedness.
EBITDA and Adjusted EBITDA are not measures of financial
performance under U.S. GAAP, are not intended to represent cash
flow from operations under U.S. GAAP and should not be used as an
alternative to net income (loss) as an indicator of operating
performance or to cash flow from operating, investing or financing
activities as a measure of liquidity. Management compensates
for the limitations of using EBITDA and Adjusted EBITDA by using it
only to supplement our U.S. GAAP results to provide a more complete
understanding of the factors and trends affecting our
business. Each of EBITDA and Adjusted EBITDA has its
limitations as an analytical tool, and you should not consider them
in isolation or as a substitute for analysis of our results as
reported under U.S. GAAP.
Some of the limitations of EBITDA and Adjusted EBITDA are:
- EBITDA and Adjusted EBITDA do not reflect our cash used
for capital expenditures;
- Although depreciation and amortization are non-cash
charges, the assets being depreciated or amortized often will have
to be replaced and EBITDA and Adjusted EBITDA do not reflect the
cash requirements for such replacements;
- EBITDA and Adjusted EBITDA do not reflect changes in, or
cash requirements for, our working capital
requirements;
- EBITDA and Adjusted EBITDA do not reflect the cash
necessary to make payments of interest or principal on our
indebtedness; and
- EBITDA and Adjusted EBITDA do not reflect extraordinary
items and non-recurring expenses such as one-time write-offs to
inventory and reserve accruals.
While EBITDA and Adjusted EBITDA are frequently used as a
measure of operations and the ability to meet indebtedness service
requirements, they are not necessarily comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.
While management believes that these measures provide useful
information to investors, the SEC may require that EBITDA and
Adjusted EBITDA be presented differently or not at all in future
filings we will make with the SEC.
CLAIRE'S STORES, INC. AND
SUBSIDIARIES
ADJUSTED EBITDA
(UNAUDITED)
(In
Thousands)
|
|
|
|
|
|
|
|
|
|
Three
Months
Ended October
27,
2012
|
|
Three
Months
Ended October
29,
2011
|
|
Nine
Months
Ended October
27,
2012
|
|
Nine
Months
Ended October
29,
2011
|
Net (loss)
income (a)
|
$
(13,730)
|
|
$
1,898
|
|
$
(40,924)
|
|
$
(27,842)
|
Income tax
expense
|
4,398
|
|
3,193
|
|
6,576
|
|
5,861
|
Loss
(gain) on early debt extinguishment
|
5,105
|
|
(3,986)
|
|
9,707
|
|
(4,468)
|
Interest
expense
|
54,060
|
|
43,654
|
|
150,025
|
|
134,391
|
Interest
income
|
(18)
|
|
(111)
|
|
(82)
|
|
(278)
|
Depreciation and amortization
|
16,042
|
|
17,129
|
|
48,232
|
|
50,535
|
Reported EBITDA
|
65,857
|
|
61,777
|
|
173,534
|
|
158,199
|
– stock
compensation, book to cash rent, intangible
amortization
(b)
|
53
|
|
1,580
|
|
167
|
|
5,117
|
–
management fee, consulting (c)
|
544
|
|
750
|
|
2,679
|
|
2,250
|
– other
(d)
|
(706)
|
|
(1,491)
|
|
2,081
|
|
6,475
|
Adjusted EBITDA
|
$
65,748
|
|
$
62,616
|
|
$
178,461
|
|
$
172,041
|
a)
|
Fiscal
2011 includes a $(0.7) million gain and $1.5 million charge for the
three and nine months ended October 27, 2011, respectively, to
remeasure the Euro Loan at the period end foreign exchange
rate.
|
b)
|
Includes:
non-cash stock compensation expense, net non-cash rent expense,
amortization of rent free periods, the inclusion of cash landlord
allowances, and the net accretion of favorable (unfavorable) lease
obligations and non-cash amortization of lease rights.
|
c)
|
Includes:
the management fee paid to Apollo Management and Morgan Joseph
Tri-Artisan Capital Partners, and non-recurring consulting
expenses.
|
d)
|
Includes:
non-cash losses on property and equipment associated with remodels,
relocations and closures; non-cash loss on disposition of lease
rights upon exiting certain European locations; costs, including
third party charges and compensation, incurred in conjunction with
the relocation of new employees; severance and transaction related
costs; non-cash foreign exchange gains/losses resulting from
intercompany transactions and remeasurements of U.S. dollar
denominated cash accounts and foreign currency denominated debt of
our foreign entities into their functional currency; and severance
and transaction related costs. A majority of the fiscal 2011
adjustments is foreign exchange related.
|
SOURCE Claire's Stores, Inc.