"Today, we reported fourth quarter results within our initial guidance,
and I am encouraged that we delivered market share gains and increased
earnings," said
Fourth Quarter Income Statement Highlights
Fiscal 2016 Income Statement Highlights
Balance Sheet and Cash Flow Statement Highlights
Outlook
"As we begin 2017, we will incorporate key lessons learned in fiscal 2016. We will strengthen our focus on expanding our market share and delivering greater value for our customers with a more inclusive and experiential shopping experience, online and in stores; with more trend-right and exclusive products; and with more targeted and impactful marketing," concluded Rubin. "We are the largest player in the arts and crafts industry and operate a business model that consistently generates strong cash flow. As we continue to pursue our Vision 2020 strategy, we believe we can continue to leverage our size and leadership position to increase our market share and deliver returns to shareholders."
For fiscal 2017, a 53-week year, the Company expects:
For the first quarter of fiscal 2017, the Company expects:
Conference Call Information
A conference call to discuss the Company's financial results is
scheduled for today,
The conference call will also be webcast at http://investors.michaels.com/.
To listen to the live call, please go to the website at least 15 minutes
before the call is scheduled to begin to register and download any
necessary audio software. The webcast will be accessible for 30 days
after the call. Additionally, a telephone replay will be available until
Non-GAAP Information
This press release includes non-GAAP measures including Adjusted EBITDA;
operating income excluding integration costs and non-recurring,
inventory-related purchase accounting entries related to the acquisition
of
In evaluating these non-GAAP financial measures, investors should be aware that in the future the Company may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in this presentation. 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. The Company has provided this information as a means to evaluate the results of its ongoing operations. Other companies in the Company's industry may calculate these items differently than it does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. 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.
Forward-Looking Statements
This news release includes forward-looking statements which reflect
management's current views and estimates regarding the Company's
industry, business strategy, goals and expectations concerning its
market position, future operations, margins, profitability, capital
expenditures, share repurchases, liquidity and capital resources, and
other financial and operating information. The words "anticipate,"
"assume," "believe," "continue," "could," "estimate," "expect,"
"forecast," "future," "guidance," "imply," "intend," "may," "outlook,"
"plan," "potential," "predict," "project," and similar terms and phrases
are intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. The Company
cannot assure investors that future developments affecting the Company
will be those that it has anticipated. Actual results may differ
materially from these expectations due to risks relating to the effect
of economic uncertainty; substantial changes to fiscal and tax policies;
our reliance on foreign suppliers; regulatory changes; the seasonality
of our business; changes in customer demand; damage to the reputation of
the Michaels brand or our private and exclusive brands; unexpected or
unfavorable consumer responses to our promotional or merchandising
programs; our failure to adequately maintain security and prevent
unauthorized access to electronic and other confidential information;
increased competition including internet-based competition from other
retailers; and other risks and uncertainties including those identified
under the heading "Risk Factors" in the Company's Annual Report on Form
10-K filed with the
About
As of
|
||||||||||||||||||||
Consolidated Statements of Comprehensive Income | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Quarter Ended | Fiscal Year Ended | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
(in thousands, except per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Net sales | $ | 1,750,854 | $ | 1,682,489 | $ | 5,197,292 | $ | 4,912,782 | ||||||||||||
Cost of sales and occupancy expense | 1,045,093 | 994,854 | 3,169,476 | 2,944,431 | ||||||||||||||||
Gross profit | 705,761 | 687,635 | 2,027,816 | 1,968,351 | ||||||||||||||||
Selling, general and administrative | 368,960 | 362,987 | 1,308,052 | 1,242,961 | ||||||||||||||||
Store pre-opening costs | 245 | 460 | 4,484 | 4,786 | ||||||||||||||||
Operating income | 336,556 | 324,188 | 715,280 | 720,604 | ||||||||||||||||
Interest expense | 30,560 | 33,438 | 126,270 | 139,405 | ||||||||||||||||
Losses on early extinguishments of debt and refinancing costs | — | 2,413 | 7,292 | 8,485 | ||||||||||||||||
Other (income) expense, net | (244 | ) | 423 | (55 | ) | 594 | ||||||||||||||
Income before income taxes | 306,240 | 287,914 | 581,773 | 572,120 | ||||||||||||||||
Income taxes | 110,922 | 104,248 | 203,614 | 209,208 | ||||||||||||||||
Net income | $ | 195,318 | $ | 183,666 | $ | 378,159 | $ | 362,912 | ||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||
Foreign currency translation adjustment and other | 2,032 | (7,432 | ) | 7,832 | (10,251 | ) | ||||||||||||||
Comprehensive income | $ | 197,350 | $ | 176,234 | $ | 385,991 | $ | 352,661 | ||||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ | 0.96 | $ | 0.88 | $ | 1.84 | $ | 1.75 | ||||||||||||
Diluted | $ | 0.95 | $ | 0.87 | $ | 1.82 | $ | 1.72 | ||||||||||||
Weighted-average common shares outstanding: | ||||||||||||||||||||
Basic | 202,201 | 207,492 | 204,735 | 206,845 | ||||||||||||||||
Diluted | 203,498 | 209,409 | 206,354 | 209,346 | ||||||||||||||||
The following table sets forth the percentage relationship to net sales of each line item of our unaudited consolidated statements of comprehensive income: | ||||||||||||||||||||
Quarter Ended | Fiscal Year Ended | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Cost of sales and occupancy expense | 59.7 | 59.1 | 61.0 | 59.9 | ||||||||||||||||
Gross profit | 40.3 | 40.9 | 39.0 | 40.1 | ||||||||||||||||
Selling, general and administrative | 21.1 | 21.6 | 25.2 | 25.3 | ||||||||||||||||
Store pre-opening costs | 0.0 | 0.0 | 0.1 | 0.1 | ||||||||||||||||
Operating income | 19.2 | 19.3 | 13.8 | 14.7 | ||||||||||||||||
Interest expense | 1.7 | 2.0 | 2.4 | 2.8 | ||||||||||||||||
Losses on early extinguishments of debt and refinancing costs | — | 0.1 | 0.1 | 0.2 | ||||||||||||||||
Other (income) expense, net | — | — | — | — | ||||||||||||||||
Income before income taxes | 17.5 | 17.1 | 11.2 | 11.6 | ||||||||||||||||
Income taxes | 6.3 | 6.2 | 3.9 | 4.3 | ||||||||||||||||
Net income | 11.2 | % | 10.9 | % | 7.3 | % | 7.4 | % |
|
||||||||||
Consolidated Balance Sheets | ||||||||||
(Unaudited) | ||||||||||
|
|
|||||||||
(in thousands, except per share data) | 2017 | 2016 | ||||||||
ASSETS | ||||||||||
Current Assets: | ||||||||||
Cash and equivalents | $ | 298,813 | $ | 409,391 | ||||||
Merchandise inventories | 1,127,777 | 1,002,607 | ||||||||
Prepaid expenses and other | 87,175 | 85,010 | ||||||||
Accounts receivable, net | 23,215 | 9,484 | ||||||||
Income taxes receivable | 5,825 | 1,231 | ||||||||
Total current assets | 1,542,805 | 1,507,723 | ||||||||
Property and equipment, net | 413,164 | 378,507 | ||||||||
|
119,074 | 94,290 | ||||||||
Other intangible assets, net | 23,702 | 471 | ||||||||
Deferred income taxes | 36,834 | 40,399 | ||||||||
Other assets | 12,061 | 9,897 | ||||||||
Total assets | $ | 2,147,640 | $ | 2,031,287 | ||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable | $ | 517,268 | $ | 457,704 | ||||||
Accrued liabilities and other | 397,497 | 385,616 | ||||||||
Current portion of long-term debt | 31,125 | 24,900 | ||||||||
Income taxes payable | 78,334 | 44,640 | ||||||||
Total current liabilities | 1,024,224 | 912,860 | ||||||||
Long-term debt | 2,723,187 | 2,744,942 | ||||||||
Other liabilities | 98,655 | 97,580 | ||||||||
Total liabilities | 3,846,066 | 3,755,382 | ||||||||
Stockholders' Deficit: | ||||||||||
Common Stock, |
12,948 | 13,979 | ||||||||
Additional paid-in-capital | 233,129 | 592,420 | ||||||||
Accumulated deficit | (1,930,279 | ) | (2,308,438 | ) | ||||||
Accumulated other comprehensive loss | (14,224 | ) | (22,056 | ) | ||||||
Total stockholders' deficit | (1,698,426 | ) | (1,724,095 | ) | ||||||
Total liabilities and stockholders' deficit | $ | 2,147,640 | $ | 2,031,287 | ||||||
*Certain reclassifications of the amounts for fiscal 2015 have been made to conform to the presentation for fiscal 2016. |
|
||||||||||
Consolidated Statements of Cash Flows | ||||||||||
(Unaudited) | ||||||||||
Fiscal Year Ended | ||||||||||
|
|
|||||||||
(in thousands) |
2017 |
2016 |
||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 378,159 | $ | 362,912 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 115,801 | 114,756 | ||||||||
Share-based compensation | 16,506 | 15,064 | ||||||||
Debt issuance costs amortization | 6,583 | 8,467 | ||||||||
Accretion of long-term debt, net | (334 | ) | (150 | ) | ||||||
Deferred income taxes | 4,570 | 8,611 | ||||||||
Losses on early extinguishments of debt and refinancing costs | 7,292 | 8,485 | ||||||||
Losses (gains) on disposition of property and equipment | 120 | (25 | ) | |||||||
Excess tax benefits from share-based compensation | (10,027 | ) | (14,507 | ) | ||||||
Changes in assets and liabilities, excluding acquired net assets: | ||||||||||
Merchandise inventories | (40,800 | ) | (44,213 | ) | ||||||
Prepaid expenses and other | (1,004 | ) | (4,875 | ) | ||||||
Accounts receivable | 8,948 | 3,725 | ||||||||
Other assets | (711 | ) | (34 | ) | ||||||
Accounts payable | 38,248 | 24,217 | ||||||||
Accrued interest | 7,015 | 1,852 | ||||||||
Accrued liabilities and other | (4,806 | ) | (23,530 | ) | ||||||
Income taxes | 37,276 | 44,941 | ||||||||
Other liabilities | 1,581 | (1,649 | ) | |||||||
Net cash provided by operating activities | 564,417 | 504,047 | ||||||||
Cash flows from investing activities: | ||||||||||
Additions to property and equipment | (114,462 | ) | (123,920 | ) | ||||||
Acquisition of |
(151,100 | ) | — | |||||||
Purchases of long-term investments | (1,325 | ) | (5,000 | ) | ||||||
Net cash used in investing activities | (266,887 | ) | (128,920 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Common stock repurchased | (404,971 | ) | (21,977 | ) | ||||||
Payment of PIK notes | — | (184,467 | ) | |||||||
Payments on term loan credit facility | (18,675 | ) | (174,900 | ) | ||||||
Borrowings on asset-based revolving credit facility | 42,000 | 45,047 | ||||||||
Payments on asset-based revolving credit facility | (42,000 | ) | (45,047 | ) | ||||||
Payment of debt issuance costs | (11,326 | ) | — | |||||||
Payment of dividends | (415 | ) | (492 | ) | ||||||
Proceeds from stock options exercised | 17,252 | 22,655 | ||||||||
Excess tax benefits from share-based compensation | 10,027 | 14,507 | ||||||||
Other financing activities | — | 643 | ||||||||
Net cash used in financing activities | (408,108 | ) | (344,031 | ) | ||||||
Net change in cash and equivalents | (110,578 | ) | 31,096 | |||||||
Cash and equivalents at beginning of period | 409,391 | 378,295 | ||||||||
Cash and equivalents at end of period | $ | 298,813 | $ | 409,391 | ||||||
*Certain reclassifications of the amounts for fiscal 2015 have been made to conform to the presentation for fiscal 2016. |
|
||||||||||||||||||||
Earnings per Share | ||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
The following table sets forth the computation of basic and diluted earnings per share: | ||||||||||||||||||||
Quarter Ended | Fiscal Year Ended | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
2017 |
2016 |
2017 |
2016 |
|||||||||||||||||
Basic earnings per common share: | ||||||||||||||||||||
Net income | $ | 195,318 | $ | 183,666 | $ | 378,159 | $ | 362,912 | ||||||||||||
Less income related to unvested restricted shares | (1,021 | ) | (1,341 | ) | (2,323 | ) | (1,900 | ) | ||||||||||||
Income available to common shareholders - Basic |
$ |
194,297 |
$ |
182,325 | $ | 375,836 | $ | 361,012 | ||||||||||||
Weighted-average common shares outstanding - Basic | 202,201 | 207,492 | 204,735 | 206,845 | ||||||||||||||||
Basic earnings per common share | $ | 0.96 | $ | 0.88 | $ | 1.84 | $ | 1.75 | ||||||||||||
Diluted earnings per common share: | ||||||||||||||||||||
Net income | $ | 195,318 | $ | 183,666 | $ | 378,159 | $ | 362,912 | ||||||||||||
Less income related to unvested restricted shares | (1,014 | ) | (1,329 | ) | (2,305 | ) | (1,877 | ) | ||||||||||||
Income available to common shareholders - Diluted |
$ |
194,304 |
$ |
182,337 | $ | 375,854 | $ | 361,035 | ||||||||||||
Weighted-average common shares outstanding - Basic | 202,201 | 207,492 | 204,735 | 206,845 | ||||||||||||||||
Effect of dilutive stock options and restricted stock units | 1,297 | 1,917 | 1,619 | 2,501 | ||||||||||||||||
Weighted-average common shares outstanding - Diluted | 203,498 | 209,409 | 206,354 | 209,346 | ||||||||||||||||
Diluted earnings per common share |
$ |
0.95 | $ | 0.87 | $ | 1.82 | $ | 1.72 |
|
||||||||||||||||||||
Summary of Operating Data | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
The following table sets forth certain of our unaudited operating data: | ||||||||||||||||||||
Quarter Ended | Fiscal Year Ended | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Michaels stores: | ||||||||||||||||||||
Open at beginning of period | 1,221 | 1,196 | 1,196 | 1,168 | ||||||||||||||||
New stores | 2 | 1 | 32 | 30 | ||||||||||||||||
Relocated stores opened | — | — | 14 | 17 | ||||||||||||||||
Closed stores | — | (1 | ) | (5 | ) | (2 | ) | |||||||||||||
Relocated stores closed | — | — | (14 | ) | (17 | ) | ||||||||||||||
Michaels stores open at end of period | 1,223 | 1,196 | 1,223 | 1,196 | ||||||||||||||||
|
||||||||||||||||||||
Open at beginning of period | 112 | 118 | 117 | 120 | ||||||||||||||||
New stores | 1 | — | 1 | — | ||||||||||||||||
Closed stores | (4 | ) | (1 | ) | (9 | ) | (3 | ) | ||||||||||||
|
109 | 117 | 109 | 117 | ||||||||||||||||
|
||||||||||||||||||||
Open at beginning of period | 35 | — | — | — | ||||||||||||||||
Acquired stores | — | — | 32 | — | ||||||||||||||||
New stores | — | — | 3 | — | ||||||||||||||||
Relocated stores opened | 1 | — | 1 | — | ||||||||||||||||
Relocated stores closed | (1 | ) | — | (1 | ) | — | ||||||||||||||
|
35 | — | 35 | — | ||||||||||||||||
Total store count at end of period | 1,367 | 1,313 | 1,367 | 1,313 | ||||||||||||||||
Other Operating Data: | ||||||||||||||||||||
Average inventory per Michaels store (in thousands)1 | $ | 826 | $ | 813 | $ | 826 | $ | 813 | ||||||||||||
Comparable store sales | -1.0 | % | 3.1 | % | -0.5 | % | 1.8 | % | ||||||||||||
Comparable store sales, at constant currency | -1.2 | % | 4.7 | % | -0.4 | % | 3.2 | % | ||||||||||||
1 The calculation of average inventory per Michaels
store excludes our |
|
||||||||||||||||||||
Reconciliation of Adjusted EBITDA (Excluding losses on early extinguishments of debt and refinancing costs) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Quarter Ended | Fiscal Year Ended | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Net cash provided by operating activities | $ | 427,901 | $ | 486,177 | $ | 564,417 | $ | 504,047 | ||||||||||||
Depreciation and amortization | (29,122 | ) | (29,374 | ) | (115,801 | ) | (114,756 | ) | ||||||||||||
Share-based compensation | (4,622 | ) | (5,581 | ) | (16,506 | ) | (15,064 | ) | ||||||||||||
Debt issuance costs amortization | (1,275 | ) | (2,012 | ) | (6,583 | ) | (8,467 | ) | ||||||||||||
Accretion of long-term debt, net | 117 | 52 | 334 | 150 | ||||||||||||||||
Deferred income taxes | 5,536 | (1,058 | ) | (4,570 | ) | (8,611 | ) | |||||||||||||
Losses on early extinguishments of debt and refinancing costs | — | (2,413 | ) | (7,292 | ) |
|
(8,485 | ) | ||||||||||||
(Losses) gains on disposition of property and equipment | (64 | ) | 25 | (120 | ) | 25 | ||||||||||||||
Excess tax benefits from share-based compensation | 2,542 | 468 | 10,027 | 14,507 | ||||||||||||||||
Changes in assets and liabilities | (205,695 | ) | (262,618 | ) | (45,747 | ) | (434 | ) | ||||||||||||
Net income | 195,318 | 183,666 | 378,159 | 362,912 | ||||||||||||||||
Interest expense | 30,560 | 33,438 | 126,270 | 139,405 | ||||||||||||||||
Losses on early extinguishments of debt and refinancing costs | — | 2,413 | 7,292 | 8,485 | ||||||||||||||||
Income taxes | 110,922 | 104,248 | 203,614 | 209,208 | ||||||||||||||||
Depreciation and amortization | 29,122 | 29,374 | 115,801 | 114,756 | ||||||||||||||||
Interest income | (299 | ) | (389 | ) | (820 | ) | (615 | ) | ||||||||||||
EBITDA (excluding losses on early extinguishments of debt and refinancing costs) | 365,623 | 352,750 | 830,316 | 834,151 | ||||||||||||||||
Adjustments: | ||||||||||||||||||||
Share-based compensation | 4,622 | 5,581 | 16,506 | 15,064 | ||||||||||||||||
Severance costs | 3,012 | 1,240 | 6,113 | 2,733 | ||||||||||||||||
Store pre-opening costs | 270 | 489 | 4,554 | 4,858 | ||||||||||||||||
Store remodel costs | — | 2,412 | 802 | 4,554 | ||||||||||||||||
Foreign currency transaction (gains) losses | (27 | ) | 465 | 667 | 579 | |||||||||||||||
Store closing costs | (199 | ) | (192 | ) | 2,877 | (104 | ) | |||||||||||||
Lamrite integration costs | (215 | ) | — | 7,390 | — | |||||||||||||||
Other (a) | 958 | 1,424 | 3,475 | 4,336 | ||||||||||||||||
Adjusted EBITDA | $ | 374,044 | $ | 364,169 | $ | 872,700 | $ | 866,171 | ||||||||||||
(a) Other adjustments primarily relate to items such as moving and relocation expenses, franchise taxes, sign on bonuses, and certain legal expenses. |
|
||||||||||||||||||||
Reconciliation of GAAP basis to Adjusted operating income, Adjusted net income and Adjusted earnings per share | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Quarter Ended | Fiscal Year Ended | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
(In thousands, except per share) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Operating income | $ | 336,556 | $ | 324,188 | $ | 715,280 | $ | 720,604 | ||||||||||||
Add: Non-recurring, inventory-related purchase accounting adjustments (a) |
1,095 | — | 4,001 | — | ||||||||||||||||
Add: Non-recurring integration expenses (b) | (214 | ) | — | 7,390 | — | |||||||||||||||
Adjusted operating income | $ | 337,437 | $ | 324,188 | $ | 726,671 | $ | 720,604 | ||||||||||||
Net income | $ | 195,318 | $ | 183,666 | $ | 378,159 | $ | 362,912 | ||||||||||||
Add: Non-recurring, inventory-related purchase accounting adjustments (a) |
1,095 | — | 4,001 | — | ||||||||||||||||
Add: Non-recurring integration expenses (b) | (214 | ) | — | 7,390 | — | |||||||||||||||
Add: Losses on early extinguishments of debt and refinancing costs ( c) |
— | 2,413 | 7,292 | 8,485 | ||||||||||||||||
Less tax adjustment for above add-backs (d) | (339 | ) | (929 | ) | (7,228 | ) | (3,267 | ) | ||||||||||||
Adjusted net income | $ | 195,860 | $ | 185,150 | $ | 389,614 | $ | 368,130 | ||||||||||||
Earnings per common share, diluted | $ | 0.95 | $ | 0.87 | $ | 1.82 | $ | 1.72 | ||||||||||||
Adjusted earnings per common share, diluted | $ | 0.96 | $ | 0.88 | $ | 1.88 | $ | 1.75 |
(a) |
Excludes non-recurring, inventory-related purchase accounting
adjustments related to the acquisition of |
|
(b) |
Excludes non-recurring integration expenses related to the
acquisition of |
|
(c) |
Eliminates the loss on early extinguishments of debt and refinancing costs. |
|
(d) |
Adjusts for the tax impact of integration costs and purchase
accounting adjustments related to the acquisition of |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170307005515/en/
Investor Contact:
Kiley F.
Rawlins, CFA, 972-409-7404
Kiley.Rawlins@michaels.com
or
Farah.Soi@icrinc.com
or
Financial
Media Contact:
or
Michaels@icrinc.com
Source:
News Provided by Acquire Media