press release

March 4, 2021, 9:00 a.m. EST

The Michaels Companies Announces Fourth Quarter and Full Year Fiscal 2020 Results

The Michaels Companies, Inc. /zigman2/quotes/207984083/composite MIK -0.14% today announced financial results for the fourth quarter and full year fiscal 2020 ended January 30, 2021.

Key Financial Results:

  13 Weeks Ended 13 Weeks Ended 52 Weeks Ended 52 Weeks Ended
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 Income [1] $361.0M $278.6M $607.6M $572.6M
Adjusted Net Income [1] $249.3M $185.1M $347.0M $323.8M
Adjusted Diluted Earnings per Share [1 ] $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 ()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/

SOURCE: The Michaels Companies, Inc.

Investor Contact:
Jim Mathias
972.409.1393
James.Mathias@michaels.com

COMTEX_382133180/2456/2021-03-04T09:00:29

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/zigman2/quotes/207984083/composite
US : U.S.: Nasdaq
$ 21.97
-0.03 -0.14%
Volume: 0.00
April 14, 2021 4:00p
P/E Ratio
11.11
Dividend Yield
N/A
Market Cap
$3.11 billion
Rev. per Employee
$117,136
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