PEMBROKE PINES, Fla., Sept. 17 /PRNewswire/ -- Claire's Stores, Inc., a
leading specialty retailer offering value-priced jewelry and accessories,
today reported its financial results for the second quarter of Fiscal 2008,
which ended August 4, 2007.
On May 29, 2007, the Company was acquired by Apollo Management VI, L.P.
and certain affiliated co-investment partnerships (the "Acquisition"). The
accompanying consolidated statements of operations and related information
present the Company's results of operations during the second fiscal
quarter for the period preceding the Acquisition (the "Predecessor" period)
and the period succeeding the Acquisition (the "Successor" period). The
discussion below compares the results of operations of the combined
Successor and Predecessor entities for the thirteen weeks ended August 4,
2007 to the results of the Predecessor entity for the thirteen weeks ended
July 29, 2006. This discussion does not comply with generally accepted
accounting principles; however, the Company believes that it provides a
more meaningful method of comparison.
Commenting on second quarter results, Chief Executive Officer Gene Kahn
said, "My first three months at Claire's have exceeded my expectations. I
have always been aware of Claire's as an excellent retail concept focused
on jewelry and accessories, with exceptionally high brand recognition and
great strength and popularity with its core customers. Having gained
greater insight and first-hand knowledge of the Company, I am confident
that we have the vision, ability and operational expertise to become a
highly successful global specialty retailer. While second quarter results
were not up to expectations, we responded quickly and took the necessary
steps to liquidate poorly performing Spring and Summer merchandise in order
to keep our stocks clean and the Company focused on the transition for Back
to School and the Fall season. I am comfortable that we have been able to
focus on the key components of our business strategy, and remain
steadfastly committed to our priorities of growing same store sales and
EBITDA along with cash generation. We have gained experience across the
board, successfully transitioned new management at various levels, and put
the distraction of the sale of the Company behind us. We are working hard
to ensure we realize better short term results in the Fall and Holiday
periods while we simultaneously focus on our longer term growth
opportunities."
The Company reported net sales of $365.5 million for the quarter, a
4.7% increase over the second quarter of Fiscal 2007, which ended July 29,
2006. The increase was primarily attributable to the growth in our new
store base, particularly in Europe, and foreign currency translation gains,
offset by decreased same store sales. A 2.4% increase in the average number
of transactions per store was partially offset by a 3.5% decline in our
average sale per transaction.
Second quarter consolidated same store sales were negative 1.7%. In
North America, we had a decrease of 1.4%, comprised of Claire's North
America at negative 0.4% and Icing at negative 5.8%. Europe had a decrease
of 2.2%. Please note that we measure same store sales on a constant local
currency basis, as last year's same store sales are adjusted to this year's
exchange rates before computing the change in same store sales.
Gross margins, which are computed after the cost of buying and
occupancy, declined 200 basis points to 49.9% primarily because of a 60
basis point decrease in merchandise margins and a 140 basis point loss of
operating leverage in rent and rent related expenses.
Selling, general and administrative expenses, excluding Acquisition
related costs, increased 4.6% to $123.5 million in the second quarter of
Fiscal 2008 compared to $118.1 million in last year's comparable fiscal
quarter. Our SG&A as a percentage of net sales remained flat at 33.8%.
For the quarter, Adjusted EBITDA was $64.3 million, a 7.3% decrease
compared to $69.4 million in the second quarter of Fiscal 2007. The Company
defines Adjusted EBITDA as earnings before interest, income taxes,
depreciation and amortization, excluding the impact of transaction related
costs incurred in connection with the Acquisition and other non-recurring
or non-cash expenses, and normalizing occupancy costs for certain
rent-related adjustments.
At August 4, 2007, our $200 million revolving credit facility was
undrawn aside from a $4.5 million letter of credit, and cash and cash
equivalents were $92.5 million. During the first six months of Fiscal 2008,
cash used in operating activities was approximately $39.2 million compared
to cash provided by operating activities of $50.6 million during the first
six months of Fiscal 2007. Cash used in operating activities was impacted
by the Acquisition and transaction related costs and other cash outflows.
Capital expenditures during the first six months of Fiscal 2008 were $46.9
million, consistent with the comparable period in Fiscal 2007. In Fiscal
2008, $40.6 million of the $46.9 million related to store openings and
remodeling projects.
Year to Date Results
Net sales for the first six months of Fiscal 2008 grew 6.8% to $706.1
million from $661.1 million. Same store sales decreased 0.3 percent. For
the first six months of Fiscal 2008, Adjusted EBITDA was $125.0 million, a
2.4% decrease compared to $128.0 million in the first six months of Fiscal
2007.
Store Count: End of Second Fiscal Quarter:
August 4, 2007 July 29, 2006
Claire's North America 1,685 1,686
Claire's Europe 883 811
Icing 448 438
Claire's Nippon 203 186
Total 3,219 3,121
Conference Call Information
The Company will host its second quarter conference call on September
18, 2007, at 10:00 a.m. (EDT). The call in number is 630-395-0260 and the
password is "Claires." A replay will be available through September 28,
2007. The replay number is 203-369-1696 and the password is 25247. The
conference call is also being webcast and archived until September 28th on
the Company's corporate website at http://www.clairestores.com, where it
can be accessed by clicking on the "Conference Calls" link located under
"Financial Information" for a replay or download as an MP3 file.
Company Overview
Claire's Stores, Inc. is a leading specialty retailer of value-priced
jewelry and accessories for girls and young women through its two store
concepts: Claire's and Icing. While the latter operates only in North
America, Claire's operates internationally. As of September 1, 2007,
Claire's Stores, Inc. operated 3,022 stores in the United States, Canada,
Puerto Rico, the Virgin Islands, the United Kingdom, Ireland, France,
Switzerland, Austria, Germany, Spain, Portugal, Belgium, and the
Netherlands. Claire's Stores, Inc. operates through its subsidiary,
Claire's Nippon, Co., Ltd., 203 stores in Japan as a 50:50 joint venture
with AEON, Co., Ltd. The Company also franchises 153 stores in the Middle
East, Turkey, Russia, Poland, and South Africa.
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; general economic
conditions such as inflation and increased energy costs; 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; disruptions in our supply of inventory; inability to
increase same store sales at historical rates; significant increases in our
merchandise markdowns; inability to design and implement new information
systems; delays in anticipated store openings or renovations; uncertainty
that definitive financial results may differ from preliminary financial
results due to, among other things, final GAAP adjustments; changes in
applicable laws, rules and regulations, including changes in federal, state
or local regulations governing the sale of our products, particularly
regulations relating to the metal content in jewelry, and employment laws
relating to overtime pay, tax laws and import laws; loss of key members of
management; increases in the cost of labor; labor disputes; 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 February 3, 2007 and Form
10-Q Equivalent for the quarterly period ended May 5, 2007. 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 Annual Report on Form 10-K and Form 10-Q Equivalent are
available on Claire's business website at: http://www.clairestores.com.
Second Fiscal Quarter
CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands)
Successor Predecessor
Entity Entity
May 29, 2007 May 6, 2007 Three Months
Through Through Ended
August 4, May 28, July 29,
2007 2007 2006
Net sales $281,190 $84,328 $349,160
Cost of sales, occupancy and
buying expenses 138,276 44,846 167,879
Gross profit 142,914 39,482 181,281
Other expenses (income):
Selling, general and
administrative 92,746 30,798 118,106
Depreciation and amortization 13,165 4,417 13,912
Transaction-related costs 2,061 69,186 -
Other income (396) (135) (830)
107,576 104,266 131,188
Operating income (loss) 35,338 (64,784) 50,093
Interest expense (income), net 35,928 (1,123) (3,848)
Income (loss) before income taxes (590) (63,661) 53,941
Income taxes 217 8,890 17,979
Net income (loss) $(807) $(72,551) $35,962
Year to date
CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands)
Successor Predecessor
Entity Entity
May 29, 2007 Feb. 4, 2007 Six Months
Through Through Ended
August 4, May 28, July 29,
2007 2007 2006
Net sales $281,190 $424,899 $661,087
Cost of sales, occupancy and
buying expenses 138,276 206,438 315,053
Gross profit 142,914 218,461 346,034
Other expenses (income):
Selling, general and
administrative 92,746 154,482 229,727
Depreciation and amortization 13,165 19,652 27,070
Transaction-related costs 2,061 72,672 -
Other income (396) (1,476) (1,160)
107,576 245,330 255,637
Operating income (loss) 35,338 (26,869) 90,397
Interest expense (income), net 35,928 (4,876) (8,030)
Income (loss) before income taxes (590) (21,993) 98,427
Income taxes 217 21,779 32,764
Net income (loss) $(807) $(43,772) $65,663
CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
Successor Predecessor
Entity Entity
August 4, February 3,
2007 2007
(In thousands, except share and
per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $92,542 $340,877
Inventories 123,159 121,119
Prepaid expenses 46,411 35,565
Other current assets 25,203 41,081
Total current assets 287,315 538,642
Property and equipment:
Land and building 21,868 17,350
Furniture, fixtures and equipment 106,718 283,556
Leasehold improvements 195,472 288,499
324,058 589,405
Less accumulated depreciation and
amortization (8,547) (324,080)
315,511 265,325
Intangible assets, net of accumulated
amortization of $1,106 and $7,176,
respectively 814,860 51,582
Deferred debt issuance costs, net 75,681 -
Other assets 68,414 34,775
Goodwill 1,802,246 200,942
2,761,201 287,299
Total assets $3,364,027 $1,091,266
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $76,737 $56,323
Current portion of long-term debt 14,500 -
Income taxes payable 7,761 35,102
Accrued interest payable 24,866 -
Accrued expenses and other liabilities 92,374 104,026
Total current liabilities 216,238 195,451
Long-term debt 2,370,500
Deferred tax liability 162,729 19,424
Deferred rent expense 5,669 26,125
Other liabilities 9,390 2,604
2,548,288 48,153
Commitments and contingencies - -
Stockholders' equity:
Preferred stock par value $1.00 per
share; authorized 1,000,000
shares, issued and outstanding 0 shares
(predecessor entity) - -
Class A common stock par value $0.05 per
share; authorized 40,000,000 shares,
issued and outstanding 4,869,041
shares (predecessor entity) - 243
Common stock par value $0.05 per share;
authorized 300,000,000 shares, issued and
outstanding 88,202,733 shares
(predecessor entity); par value $0.001
per share; authorized 1,000 shares; issued
and outstanding 100 shares (successor entity) - 4,410
Additional paid-in capital 596,563 75,486
Accumulated other comprehensive income,
net of tax 3,745 33,956
Retained earnings (accumulated deficit) (807) 733,567
599,501 847,662
Total liabilities and stockholders'
equity $3,364,027 $1,091,266
Net income (loss) reconciliation to EBITDA and Adjusted EBITDA
EBITDA represents net income (loss) before provision for income taxes,
interest income and expense, 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.
In addition, our calculation of Adjusted EBITDA is consistent with the
equivalent measurement in the covenants for the indentures governing the
senior notes.
EBITDA and Adjusted EBITDA are not measures of financial performance
under GAAP, are not intended to represent cash flow from operations under
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 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 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 non-recurring expenses which
qualify as extraordinary items 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 filings will we make with
the SEC.
For the thirteen and twenty six week periods ended August 4, 2007 and
July 29, 2006, a reconciliation of net income (loss) to EBITDA, EBITDA
after rent related adjustments and Adjusted EBITDA is set forth in the
following tables:
CLAIRE'S STORES, INC. AND SUBSIDIARIES
(UNAUDITED) (IN THOUSANDS)
May 29, Thirteen
May 6, 2007 2007 Weeks Thirteen
Through Through ended Weeks ended
May 28, August 4, August 4, July 29,
2007 2007 2007 2006
(Predecessor) (Successor) (Combined) (Predecessor)
Net income (loss) $(72,551) $(807) $(73,358) $35,962
Income tax 8,890 217 9,107 17,979
Interest expense 19 36,840 36,859 3
Interest income (1,142) (912) (2,054) (3,851)
Depreciation and
amortization 4,417 13,165 17,582 13,912
Reported EBITDA (60,367) 48,503 (11,864) 64,005
Book to cash rent
adjustment (a) 177 1,328 1,505 486
EBITDA after rent
related adjustment (60,190) 49,831 (10,359) 64,491
Amortization of
intangible assets(b) 119 248 367 355
Equity income (c) (17) 33 16 (323)
Loss on retirement of
property and equipment (d) 270 461 731 717
Stock compensation
expense (e) - 889 889 1,375
Legal settlement &
related costs (f) 100 - 100 1,250
Consulting expenses (g) 90 194 284 58
Fixture leases (h) 103 262 365 770
Cost savings (i) 150 33 183 712
Management fee (j) - 500 500 -
Transaction related
costs (k) 69,186 2,061 71,247 -
Adjusted EBITDA $9,811 $54,512 $64,323 $69,405
See Page 10 for related footnotes.
CLAIRE'S STORES, INC. AND SUBSIDIARIES
(UNAUDITED) (In thousands)
February 4, May 29, Twenty Six
2007 2007 Weeks Twenty Six
Through Through ended Weeks ended
May 28, August 4, August 4, July 29,
2007 2007 2007 2006
(Predecessor) (Successor) (Combined) (Predecessor)
Net income (loss) $(43,772) $(807) $(44,579) $65,663
Income tax 21,779 217 21,996 32,764
Interest expense 86 36,840 36,926 58
Interest income (4,962) (912) (5,874) (8,088)
Depreciation and
amortization 19,652 13,165 32,817 27,070
Reported EBITDA (7,217) 48,503 41,286 117,467
Book to cash rent
adjustment (a) 677 1,328 2,005 1,006
EBITDA after rent
related adjustment (6,540) 49,831 43,291 118,473
Amortization of
intangible assets(b) 622 248 870 703
Equity income (c) (665) 33 (632) (345)
Loss on retirement of
property and equipment (d) 1,201 461 1,662 570
Stock compensation
expense (e) 1,275 889 2,164 3,810
Legal settlement &
related costs (f) 200 - 200 1,250
Consulting expenses (g) 341 194 535 518
Fixture leases (h) 479 262 741 1,669
Cost savings (i) 897 33 930 1,394
Management fee (j) - 500 500 -
Transaction related
costs (k) 72,672 2,061 74,733 -
Adjusted EBITDA $70,482 $54,512 $124,994 $128,042
The following footnotes relate to the charts on pages 9 and 10.
(a) Represents the elimination of non-cash straight-line rent expense,
amortization of rent free periods and the inclusion of cash landlord
allowances.
(b) Represents the elimination of non-cash amortization of lease rights.
(c) Represents the elimination of non-cash equity income or loss related
to our 50:50 joint venture with AEON Co. Ltd.
(d) Represents the elimination of non-cash losses on store related
property and equipment primarily associated with remodels, relocations
and closures.
(e) Represents the elimination of non-cash stock compensation expense.
(f) Represents the elimination of a legal settlement and fees in
connection with wage and hour class action litigation currently
pending in California.
(g) Represents the elimination of consulting expenses related to our
European distribution center. We began to centralize our distribution
operations in continental Europe by transitioning to a third party
distribution center in the Netherlands.
(h) Represents the elimination of non-cash amortization expenses
associated with synthetic leases of store fixtures. The Company has
not entered into any new synthetic leases after 2001.
(i) Reflects the adjustment of executive air travel and other costs to the
Company's estimate for such costs on a normalized basis and the
estimated savings on directors' and officers' insurance reflective of
the Company no longer being a public company. For purposes of
estimating these savings, we have assumed an annual air travel budget
of $250 for our senior executive officers.
(j) Represents the management fee paid to Apollo Management.
(k) Transaction costs represent legal, financial advisory, compensation,
and other Acquisition related expenses.
SOURCE Claire's Stores, Inc.
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Related links:
http://www.clairestores.com/
http://www.prnewswire.com/comp/174913.html /
CONTACT:
Marisa F. Jacobs, Vice President of Corporate
Communications and Investor Relations of Claire's Stores, Inc.,
+1-212-594-3127, Fax +1-212-244-4237, marisa.jacobs@claires.com
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