In the news release, Claire's Stores, Inc. Reports Fiscal 2008
Third Quarter Results; Net Sales Increase Three Percent, issued
earlier today by Claire's Stores, Inc. over PR Newswire, we are
advised by a representative of the company that the footnote
reference below the fourth table should read "See below for related
footnotes." rather than "See Page 7 for related footnotes." The
footnote reference below the fifth and final table that reads "The
following footnotes relate to the tables on pages 6 and 7." should
not appear. The complete, corrected release follows: PEMBROKE
PINES, Fla., Dec. 14 /PRNewswire-FirstCall/ -- Claire's Stores,
Inc., a leading specialty retailer offering value-priced jewelry
and accessories, today reported its financial results for the third
quarter of Fiscal 2008, which ended November 3, 2007. Third Quarter
Results The Company reported net sales of $357.4 million for the
quarter, a 2.8% increase over the third quarter of Fiscal 2007,
which ended October 28, 2006. The increase was primarily
attributable to the growth in our new store base, particularly in
Europe, and foreign currency translation gains, offset by a slight
decrease in same store sales. A 0.5% increase in our average sale
per transaction was insufficient to offset a 3.5% decline in the
average number of transactions per store. Third quarter
consolidated same store sales declined 0.7%. In North America, same
store sales decreased 1.0% versus last year's third fiscal quarter.
European same store sales were essentially flat with last year's
third fiscal quarter, at negative 0.1%. Please note that we compute
same store sales on a local currency basis, and as such they are
not impacted by changes in foreign exchange. Commenting on third
quarter results, Chief Executive Officer Gene Kahn said, "This
quarter concludes my first full quarter as Claire's CEO. Our third
quarter results are reflective of a softening retail environment.
In response to consumer demand, we began to shift our product mix
from jewelry to accessory classifications in order to capitalize on
the strength of handbags, fashion accessories and cosmetics as we
completed Back to School and transitioned into Fall. Jewelry sales
are currently challenging, except among our younger customers. Our
repositioning of Icing is still in its early stages as we work to
refine and improve the concept and content. Our merchandise margins
improved and through disciplined buying and markdown activity,
inventory levels remained low and fresh." Gross margin, which
represents merchandise margin less occupancy and buying expense,
declined 170 basis points to 50.7%. A 60 basis point improvement in
merchandise margin was more than offset by a loss of operating
leverage in rent and rent related items that resulted in a 190
basis point decline, and by higher buying expenses resulting in a
40 basis point decrease. Selling, general and administrative
expenses increased 7.5% to $127.8 million in the third quarter of
Fiscal 2008 compared to $118.8 million in last year's comparable
fiscal quarter. On a constant currency basis, SG&A expenses
increased by only 4.3%, due largely to a 2.1% growth in company
operated stores. For the quarter, Adjusted EBITDA was $60.5 million
compared to $68.5 million in the third 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 November 3, 2007, our $200 million revolving credit facility was
undrawn aside from a $4.5 million letter of credit. Cash and cash
equivalents were $78.0 million. During the third quarter of Fiscal
2008, cash provided by operating activities was approximately $24.4
million, compared with cash provided by operating activities of
$56.6 million during the third quarter of Fiscal 2007. The change
in cash provided by operating activities was impacted by the
interest expense associated with debt incurred to fund the
acquisition. Capital expenditures during the third quarter of
Fiscal 2008 were $23.8 million, of which $19.0 million related to
store openings and remodeling projects, with the remainder relating
primarily to the enhanced POS rollout. Capital expenditures during
the third quarter of Fiscal 2007 were $30.1 million. Year to Date
Results Net sales for the first nine months of Fiscal 2008 grew
5.4% to $1,063.5 million from $1,008.7 million. Consolidated same
store sales decreased 0.4%. For the first nine months of Fiscal
2008, Adjusted EBITDA was $185.5 million compared to $196.6 million
in the first nine months of Fiscal 2007. Store Count: End of Third
Quarter: November 3, 2007 October 28, 2006 Claire's North America
2,151 2,145 Claire's Europe 900 842 Claire's Nippon 202 192 Total
3,253 3,179 Conference Call Information The Company will host its
third quarter conference call on December 14, 2007, at 10:00 a.m.
(EST). The call in number is 630-395-0260 and the password is
"Claires." A replay will be available through December 20, 2007.
The replay number is 203-369-0434 and the password is 25247. The
conference call is also being webcast and archived until December
20th 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 December 1, 2007, Claire's Stores, Inc.
operated 3,061 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., 202 stores in Japan as a 50:50 joint
venture with AEON, Co., Ltd. The Company also franchises 162 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/. THIRD
FISCAL QUARTER CLAIRE'S STORES, INC. AND SUBSIDIARIES UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands)
Three Months Ended Three Months Ended November 3, 2007 October 28,
2006 Successor Entity Predecessor Entity Net sales $357,366 100.0%
$347,593 100.0% Cost of sales, occupancy and buying expenses
176,215 49.3 165,487 47.6 Gross profit 181,151 50.7 182,106 52.4
Other expenses (income): Selling, general and administrative
127,772 35.8 118,843 34.2 Depreciation and amortization 26,428 7.4
14,249 4.1 Transaction-related costs 1,200 0.3 - 0.0 Other income
(1,310) (0.4) (754) (0.2) 154,090 43.1 132,338 38.1 Operating
income 27,061 7.6 49,768 14.3 Interest expense (income), net 56,322
15.8 (3,162) (0.9) Income (loss) before income taxes (29,261) (8.2)
52,930 15.2 Income taxes (15,449) (4.3) 16,303 4.7 Net income
(loss) $(13,812) (3.9%) $36,627 10.5% YEAR TO DATE CLAIRE'S STORES,
INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (In thousands) Successor Entity Predecessor Entity
May 29 February 4, Nine 2007 2007 Months through through Ended
November 3, May 28, October 28, 2007 2007 2006 Net sales $638,556
$424,899 $1,008,680 Cost of sales, occupancy and buying expenses
314,490 206,438 480,540 Gross profit 324,066 218,461 528,140 Other
expenses (income): Selling, general and administrative 220,513
154,482 348,569 Depreciation and amortization 39,598 19,652 41,319
Transaction-related costs 3,261 72,672 - Other income (1,706)
(1,476) (1,914) 261,666 245,330 387,974 Operating income (loss)
62,400 (26,869) 140,166 Interest expense (income), net 92,250
(4,876) (11,191) Income (loss) before income taxes (29,850)
(21,993) 151,357 Income taxes (15,231) 21,779 49,067 Net income
(loss) $(14,619) $(43,772) $102,290 CLAIRE'S STORES, INC. AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
Successor Predecessor Entity Entity November 3, February 3, 2007
2007 (In thousands, except share and per share amounts) ASSETS
Current assets: Cash and cash equivalents $78,038 $340,877
Inventories 156,538 121,119 Prepaid expenses 41,275 35,565 Other
current assets 25,498 41,081 Total current assets 301,349 538,642
Property and equipment: Land and building 22,288 17,350 Furniture,
fixtures and equipment 118,730 283,556 Leasehold improvements
214,223 288,499 355,241 589,405 Less accumulated depreciation and
amortization (36,532) (324,080) 318,709 265,325 Intangible assets,
net 816,212 51,582 Deferred debt issuance costs, net of accumulated
amortization of $4,421 73,140 - Other assets 71,949 34,775 Goodwill
1,807,052 200,942 2,768,353 287,299 Total assets $3,388,411
$1,091,266 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Trade accounts payable $83,960 $56,323 Current portion
of long-term debt 14,500 - Income taxes payable 7,941 35,102
Accrued interest payable 49,321 - Accrued expenses and other
liabilities 105,379 104,026 Total current liabilities 261,101
195,451 Long-term debt 2,366,875 - Deferred tax liability 142,254
19,424 Deferred rent expense 8,623 26,125 Other liabilities 12,683
2,604 2,530,435 48,153 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 598,507 75,486 Accumulated other comprehensive
income, net of tax 12,987 33,956 Retained earnings (accumulated
deficit) (14,619) 733,567 596,875 847,662 Total liabilities and
stockholders' equity $3,388,411 $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 three and nine month
periods ended November 3, 2007 and October 28, 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) Three Months Ended Three Months Ended
November 3, 2007 October 28, 2006 Net income (loss) $(13,812)
$36,627 Income tax (15,449) 16,303 Interest expense 57,169 17
Interest income (847) (3,179) Depreciation and amortization 26,428
14,249 Reported EBITDA 53,489 64,017 Book to cash rent adjustment
(a) 2,736 552 EBITDA after rent related adjustment 56,225 64,569
Amortization of intangible assets (b) 540 438 Equity income (c)
(531) (130) Loss on retirement of property and equipment, net (d)
(62) 570 Stock compensation expense (e) 1,944 2,171 Consulting
expenses (g) 77 182 Fixture leases (h) 360 406 Cost savings (i) -
337 Management fee (j) 750 - Transaction related costs (k) 1,200 -
Adjusted EBITDA $60,503 $68,543 See below for related footnotes.
CLAIRE'S STORES, INC. AND SUBSIDIARIES (UNAUDITED) (IN THOUSANDS)
Nine Months Ended Nine Months Ended November 3, 2007 October 28,
2006 Net income (loss) $(58,391) $102,290 Income tax 6,548 49,067
Interest expense 94,095 75 Interest income (6,721) (11,266)
Depreciation and amortization 59,250 41,319 Reported EBITDA 94,781
181,485 Book to cash rent adjustment (a) 4,741 1,558 EBITDA after
rent related adjustment 99,522 183,043 Amortization of intangible
assets (b) 1,410 1,141 Equity income (c) (1,163) (475) Loss on
retirement of property and Equipment, net (d) 1,600 1,140 Stock
compensation expense (e) 4,108 5,981 Legal settlement & related
costs (f) 200 1,250 Consulting expenses (g) 612 700 Fixture leases
(h) 1,101 2,075 Cost savings (i) 930 1,731 Management fee (j) 1,250
- Transaction related costs (k) 75,933 - Adjusted EBITDA $185,503
$196,586 (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 related to our 50:50 joint
venture with AEON Co. Ltd. (d) Represents the elimination of
non-cash losses or gains 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 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 $250,000 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. DATASOURCE:
Claire's Stores, Inc. CONTACT: Marisa F. Jacobs, Vice President of
Corporate Communications and Investor Relations of Claire's Stores,
Inc., +1-212-594-3127, +1-212-244-4237 (fax), Web site:
http://www.clairestores.com/ Company News On-Call:
http://www.prnewswire.com/comp/174913.html
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