The Michaels Companies, Inc. (NASDAQ: MIK) today announced
financial results for the fourth quarter and full year fiscal 2020
ended January 30, 2021.
Key Financial Results:
13 Weeks Ended
January 30, 2021
13 Weeks Ended
February 1, 2020
52 Weeks Ended
January 30, 2021
52 Weeks Ended
February 1, 2020
Net Sales
$1,916.8M
$1,722.6M
$5,271.1M
$5,072.0M
Comp. Store Sales
12.9%
-2.4%
4.8%
-1.9%
Operating Income
$342.0M
$275.0M
$533.5M
$515.0M
Net Income
$255.1M
$181.7M
$294.9M
$272.6M
Diluted Earnings per Share
$1.72
$1.24
$1.98
$1.78
Adjusted Operating Income1
$361.0M
$278.6M
$607.6M
$572.6M
Adjusted Net Income 1
$249.3M
$185.1M
$347.0M
$323.8M
Adjusted Diluted Earnings per Share1
$1.69
$1.26
$2.33
$2.11
1 See additional information in this release for a
reconciliation of non-GAAP financial measures to the respective
GAAP measures.
Conference Call
Given the recently announced agreement for Michaels to be
acquired by funds affiliated with Apollo Global Management, the
Company will not be hosting a conference call to discuss its
financial results.
Non-GAAP Information
This press release includes non-GAAP measures including adjusted
operating income, adjusted net income, adjusted diluted earnings
per share, EBITDA and adjusted EBITDA. The Company has reconciled
these non-GAAP financial measures with the most directly comparable
GAAP financial measures in a table accompanying this release. The
Company believes that these non-GAAP financial measures not only
provide its management with comparable financial data for internal
financial analysis but also provide meaningful supplemental
information to investors. Specifically, these non-GAAP financial
measures allow investors to better understand the performance of
the Company's business and facilitate a meaningful evaluation of
its quarterly and fiscal 2020 results on a comparable basis with
its quarterly and fiscal 2019 results.
The Company has provided this information as a means to evaluate
the results of its ongoing operations. Non-GAAP financial measures
have limitations as analytical tools, and investors should not
consider them in isolation or as a substitute for analysis of the
Company's results as reported under GAAP. The Company's
presentation of non-GAAP financial measures should not be construed
to imply that its future results will be unaffected by any such
adjustments. Other companies in the Company's industry may
calculate these items differently than it does.
IMPORTANT INFORMATION
The tender offer for the outstanding shares of The Michaels
Companies, Inc. (“Michaels”) common
stock has not yet commenced. This communication is for
informational purposes only and is neither an offer to purchase nor
a solicitation of an offer to sell shares of Michaels common stock.
The solicitation and offer to buy shares of Michaels common stock
will only be made pursuant to the tender offer materials that Magic
MergeCo, Inc. (“Merger Sub”) intends
to file with the U.S. Securities and Exchange Commission (the
“SEC”). Merger Sub is beneficially
owned by certain equity funds managed by Apollo Management IX, L.P.
At the time the tender offer is commenced, Merger Sub will file a
tender offer statement on Schedule TO with the SEC, and Michaels
will file a solicitation/recommendation statement on Schedule 14D-9
with respect to the tender offer. MICHAELS’ STOCKHOLDERS ARE
ADVISED TO READ THE SCHEDULE TO (INCLUDING AN OFFER TO PURCHASE, A
RELATED LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS) AND THE
SCHEDULE 14D-9, AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO
TIME, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY
BECOME AVAILABLE BEFORE THEY MAKE ANY DECISION WITH RESPECT TO THE
TENDER OFFER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED TRANSACTION AND THE PARTIES THERETO. Both the tender
offer statement and the solicitation/recommendation statement will
be mailed to Michaels’ stockholders free of charge. Investors and
stockholders may obtain free copies of the Schedule TO and Schedule
14D-9, as each may be amended or supplemented from time to time,
and other documents filed by the parties (when available) at the
SEC’s web site at www.sec.gov, by contacting Michaels’ Investor
Relations either by telephone at 972-409-1393, e-mail at
james.mathias@Michaels.com or on Michaels’ website at
www.Michaels.com.
About The Michaels Companies, Inc.:
The Michaels Companies, Inc. is North America's largest
specialty provider of arts, crafts, framing, floral, wall décor,
and seasonal merchandise for Makers and do-it-yourself home
decorators. The Company operates more than 1,250 Michaels stores in
49 states and Canada. Additionally, the Company serves customers
through digital platforms including Michaels.com and
Canada.michaels.com. The Michaels Companies, Inc., also owns
Artistree, a manufacturer of high-quality custom and specialty
framing merchandise. For a list of store locations or to shop
online, visit www.michaels.com or download the Michaels app.
The Michaels Companies,
Inc.
Consolidated Statements of
Comprehensive Income
(Unaudited)
13 Weeks Ended
52 Weeks Ended
January 30,
February 1,
January 30,
February 1,
(in thousands, except per share data)
2021
2020
2021
2020
Net sales $
1,916,842
$
1,722,608
$
5,271,112
$
5,072,037
Cost of sales and occupancy expense
1,106,815
1,076,610
3,315,035
3,199,780
Gross profit
810,027
645,998
1,956,077
1,872,257
Selling, general and administrative
447,032
370,803
1,390,620
1,304,280
Restructure and impairment charges
19,447
—
28,835
48,332
Store pre-opening costs
1,554
238
3,082
4,608
Operating income
341,994
274,957
533,540
515,037
Interest expense
40,209
37,816
152,442
154,090
Losses on early extinguishments of debt and refinancing costs
—
—
22,044
1,316
Other (income) expense, net
(124
)
(1,671
)
(1,550
)
1,260
Income before income taxes
301,909
238,812
360,604
358,371
Income taxes
46,834
57,161
65,669
85,776
Net income $
255,075
$
181,651
$
294,935
$
272,595
Other comprehensive income, net of tax: Foreign
currency and cash flow hedges
10,853
85
9,387
(8,273
)
Comprehensive income $
265,928
$
181,736
$
304,322
$
264,322
Earnings per common share: Basic $
1.76
$
1.24
$
2.01
$
1.78
Diluted $
1.72
$
1.24
$
1.98
$
1.78
Weighted-average common shares outstanding: Basic
144,598
146,638
146,541
153,134
Diluted
147,844
146,701
148,531
153,202
The following table sets forth the percentage relationship
to net sales of each line item of our unaudited consolidated
statements of comprehensive income:
13 Weeks Ended
52 Weeks Ended
January 30,
February 1,
January 30,
February 1,
2021
2020
2021
2020
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales and occupancy expense
57.7
62.5
62.9
63.1
Gross profit
42.3
37.5
37.1
36.9
Selling, general and administrative
23.3
21.5
26.4
25.7
Restructure and impairment charges
1.0
—
0.5
1.0
Store pre-opening costs
0.1
—
0.1
0.1
Operating income
17.8
16.0
10.1
10.2
Interest expense
2.1
2.2
2.9
3.0
Losses on early extinguishments of debt and refinancing costs
—
—
0.4
—
Other (income) expense, net
—
(0.1
)
—
—
Income before income taxes
15.8
13.9
6.8
7.1
Income taxes
2.4
3.3
1.2
1.7
Net income
13.3
%
10.5
%
5.6
%
5.4
%
The Michaels Companies,
Inc.
Consolidated Balance
Sheets
(Unaudited)
January 30,
February 1,
(in thousands, except per share data)
2021
2020
ASSETS Current Assets: Cash and equivalents $
1,194,389
$
409,964
Merchandise inventories
1,007,043
1,097,109
Prepaid expenses and other
56,822
62,287
Accounts receivable, net
14,039
30,442
Total current assets
2,272,293
1,599,802
Property and equipment, net
472,563
430,432
Operating lease assets
1,594,554
1,610,013
Goodwill
94,290
94,290
Other intangible assets, net
57,121
66,417
Deferred income taxes
19,394
18,201
Other assets
18,190
18,940
Total assets $
4,528,405
$
3,838,095
LIABILITIES AND STOCKHOLDERS' DEFICIT Current
Liabilities: Accounts payable $
858,790
$
476,298
Accrued liabilities and other
488,658
347,136
Current portion of operating lease liabilities
324,238
306,796
Current portion of long-term debt
16,700
24,900
Income taxes payable
27,313
41,236
Total current liabilities
1,715,699
1,196,366
Long-term debt
2,480,953
2,644,460
Long-term operating lease liabilities
1,378,394
1,357,821
Deferred income taxes
54,200
—
Other liabilities
96,329
85,912
Total liabilities
5,725,575
5,284,559
Stockholders’ Deficit: Common stock, $0.06775 par
value, 350,000 shares authorized; 141,608 shares issued and
outstanding at January 30, 2021, 146,803 shares issued and
outstanding at February 1, 2020.
9,508
9,852
Additional paid-in-capital
—
4,872
Accumulated deficit
(1,193,234
)
(1,438,357
)
Accumulated other comprehensive loss
(13,444
)
(22,831
)
Total stockholders’ deficit
(1,197,170
)
(1,446,464
)
Total liabilities and stockholders’ deficit $
4,528,405
$
3,838,095
The Michaels Companies,
Inc.
Consolidated Statements of
Cash Flows
(Unaudited)
52 Weeks Ended
January 30,
February 1,
(in thousands)
2021
2020
Cash flows from operating activities: Net income $
294,935
$
272,595
Adjustments to reconcile net income to cash provided by operating
activities: Non-cash operating lease expense
308,777
325,962
Depreciation and amortization
130,303
125,499
Share-based compensation
25,010
22,910
Debt issuance costs amortization
3,507
4,451
Loss on write-off of investment
—
5,036
Accretion of long-term debt, net
1,391
(129
)
Restructure and impairment charges
28,835
48,332
Impairment of intangible assets
3,500
—
Deferred income taxes
52,114
9,455
Losses on early extinguishments of debt and refinancing costs
22,044
1,316
Gain on sale of building
(101
)
—
Changes in assets and liabilities: Merchandise inventories
88,183
9,504
Prepaid expenses and other
4,869
1,671
Accounts receivable
14,627
29,516
Other assets
198
(3,562
)
Operating lease liabilities
(277,375
)
(323,010
)
Accounts payable
389,756
(14,787
)
Accrued interest
6,978
(2,192
)
Accrued liabilities and other
128,671
(36,020
)
Income taxes
(5,323
)
17,647
Other liabilities
1,537
(1,019
)
Net cash provided by operating activities
1,222,436
493,175
Cash flows from investing activities: Additions to
property and equipment
(162,004
)
(120,545
)
Proceeds from sale of building
875
—
Acquisition of intangible assets
—
(58,000
)
Net cash used in investing activities
(161,129
)
(178,545
)
Cash flows from financing activities: Common stock
repurchased
(91,118
)
(107,997
)
Payments on term loan credit facility
(545,950
)
(24,900
)
Borrowings on asset-based revolving credit facility
600,000
23,200
Payments on asset-based revolving credit facility
(600,000
)
(23,200
)
Payment of 2020 senior subordinated notes
—
(510,000
)
Issuance of senior notes
—
500,000
Issuance of senior secured notes
375,000
—
Payment of debt refinancing costs
(26,812
)
(8,162
)
Proceeds from stock options exercised
12,473
506
Other financing activities
(475
)
—
Net cash used in financing activities
(276,882
)
(150,553
)
Net change in cash and equivalents
784,425
164,077
Cash and equivalents at beginning of period
409,964
245,887
Cash and equivalents at end of period $
1,194,389
$
409,964
The Michaels Companies,
Inc.
Reconciliation of Adjusted
EBITDA
(Unaudited)
13 Weeks Ended
52 Weeks Ended
January 30,
February 1,
January 30,
February 1,
(in thousands)
2021
2020
2021
2020
Net cash provided by operating activities $
509,576
$
386,808
$
1,222,436
$
493,175
Non-cash operating lease expense
(67,737
)
(81,704
)
(308,777
)
(325,962
)
Depreciation and amortization
(34,921
)
(31,474
)
(130,303
)
(125,499
)
Share-based compensation
(5,251
)
(4,246
)
(25,010
)
(22,910
)
Debt issuance costs amortization
(750
)
(942
)
(3,507
)
(4,451
)
Loss on write-off of investment
—
—
—
(5,036
)
Accretion of long-term debt, net
(911
)
(66
)
(1,391
)
129
Restructure and impairment charges
(19,447
)
—
(28,835
)
(48,332
)
Impairment of intangible assets
—
—
(3,500
)
—
Deferred income taxes
(52,403
)
(19,439
)
(52,114
)
(9,455
)
Losses on early extinguishments of debt and refinancing costs
—
—
(22,044
)
(1,316
)
Gain on sale of building
—
—
101
—
Changes in assets and liabilities
(73,081
)
(67,286
)
(352,121
)
322,252
Net income
255,075
181,651
294,935
272,595
Interest expense
40,209
37,816
152,442
154,090
Income taxes
46,834
57,161
65,669
85,776
Depreciation and amortization
34,921
31,474
130,303
125,499
Interest income
(144
)
(1,172
)
(1,570
)
(3,185
)
EBITDA
376,895
306,930
641,779
634,775
Adjustments: COVID-19 expense (1)
683
—
19,842
—
Losses on early extinguishments of debt and refinancing costs
—
—
22,044
1,316
Share-based compensation
5,251
4,246
25,010
22,910
Restructure and impairment charges
19,447
—
28,835
48,332
Darice liquidation charges
(467
)
—
45,244
—
Severance costs
3,435
431
8,972
5,607
Store pre-opening costs
1,554
238
3,082
4,608
Store remodel costs
64
94
1,739
337
Foreign currency transaction losses (gains), net
314
(383
)
(8
)
276
Store closing costs
621
313
1,528
(156
)
Consultant costs
6,476
—
20,625
—
CEO transition costs(2)
—
3,668
—
9,236
Other(3)
4,203
2,173
11,846
6,661
Adjusted EBITDA $
418,476
$
317,710
$
830,538
$
733,902
(1)
Includes costs attributable to the COVID-19 pandemic including
hazard pay for team members, costs associated with furloughed
employees, certain inventory charges and sanitation supplies. This
amount also includes $8.0 million of wage subsidies resulting form
COVID-19 relief legislation.
(2)
CEO transition costs include $5.6 million of severance paid to our
previous CEO and a $3.7 million sign-on bonus for our new CEO.
(3)
Other adjustments primarily relate to items such as moving and
relocation expenses, franchise taxes, sign-on bonuses, director's
fees, search costs and the support center move.
The Michaels Companies,
Inc.
Reconciliation of GAAP basis
to Adjusted operating income, Adjusted net income and Adjusted
earnings per share
(Unaudited)
13 Weeks Ended
52 Weeks Ended
January 30,
February 1,
January 30,
February 1,
(In thousands, except per share)
2021
2020
2021
2020
Operating income $
341,994
$
274,957
$
533,540
$
515,037
Restructure and impairment charges (a)
19,447
—
28,835
48,332
Darice liquidation (income) charges (b)
(467
)
—
45,244
—
CEO transition costs (c)
—
3,668
—
9,237
Adjusted operating income $
360,974
$
278,625
$
607,619
$
572,606
Net income $
255,075
$
181,651
$
294,935
$
272,595
Restructure and impairment charges (a)
19,447
—
28,835
48,332
Darice liquidation (income) charges (b)
(467
)
—
45,244
—
CEO transition costs (c)
—
3,668
—
9,237
Write-off of investment (d)
—
—
—
5,036
Losses on early extinguishments of debt and refinancing costs
—
—
22,044
1,316
Interest on 2020 senior subordinated notes (e)
—
—
—
1,748
Tax adjustment for above items
(6,358
)
(257
)
(25,706
)
(14,489
)
Tax benefit in connection with the CARES Act
(18,374
)
—
(18,374
)
—
Adjusted net income $
249,323
$
185,062
$
346,978
$
323,775
Earnings per common share, diluted $
1.72
$
1.24
$
1.98
$
1.78
Restructure and impairment charges (a)
0.13
—
0.19
0.32
Darice liquidation (income) charges (b)
(0.00
)
—
0.30
—
CEO transition costs (c)
—
0.02
—
0.06
Write-off of investment (d)
—
—
—
0.03
Losses on early extinguishments of debt and refinancing costs
—
—
0.15
0.01
Interest on 2020 senior subordinated notes (e)
—
—
—
0.01
Tax adjustment for above items
(0.04
)
(0.00
)
(0.17
)
(0.09
)
Tax benefit in connection with the CARES Act
(0.12
)
—
(0.12
)
-
Adjusted earnings per common share, diluted $
1.69
$
1.26
$
2.33
$
2.11
(a)
Fiscal 2020 excludes $19.4 million of impairment charges related to
the closure of 13 underperforming stores and $9.4 million of
impairment charges related to the relocation of our support center.
Fiscal 2019 excludes charges related to the closure of our Pat
Catan's stores and impairment charges recorded as a result of lower
than expected operating performance in our wholesale business.
(b)
Excludes (income) charges related to the closure of the Darice
wholesale business.
(c)
Excludes $5.6 million of severance paid to our previous CEO and a
$3.7 million sign-on bonus for our new CEO.
(d)
Excludes the write-off of an investment in a liquidated business.
(e)
Excludes interest paid on our 2020 Senior Subordinated notes during
the period between the issuance of our 2027 Senior Notes and when
the proceeds from that issuance were used to redeem the 2020 Senior
Subordinated Notes.
The Michaels Companies,
Inc.
Summary of Operating
Data
(Unaudited)
The following table sets forth certain of our unaudited operating
data:
13 Weeks Ended
52 Weeks Ended
January 30,
February 1,
January 30,
February 1,
2021
2020
2021
2020
Store open at beginning of period
1,272
1,274
1,274
1,258
New stores
-
-
6
21
Relocated stores opened
1
-
8
13
Closed stores
(18
)
-
(25
)
(5
)
Relocated stores closed
(3
)
-
(11
)
(13
)
Store open at end of period
1,252
1,274
1,252
1,274
Other Operating Data: Average inventory
per store (in thousands)
$ 800
$ 816
$ 800
$ 816
Comparable store sales
12.9
%
(2.4
)%
4.8
%
(1.9
)%
Comparable store sales, at constant currency
12.7
%
(2.5
)%
4.8
%
(1.8
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210304005255/en/
Investor Contact: Jim Mathias 972.409.1393
James.Mathias@michaels.com
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