Michaels Companies 10-Q 7 Dec 18 2018 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Nov. 03, 2018	Nov. 27, 2018
Document and Entity Information
Entity Registrant Name	Michaels Companies, Inc.
Entity Central Index Key	1,593,936
Document Type	10-Q
Document Period End Date	Nov. 3, 2018
Amendment Flag	false
Current Fiscal Year End Date	--02-02
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		157,694,568
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q3
Entity Small Business	false
Entity Emerging Growth Company	false

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net sales	$ 1,274,058	$ 1,240,196	$ 3,482,835	$ 3,471,352
Cost of sales and occupancy expense	795,104	756,088	2,173,990	2,117,100
Gross profit	478,954	484,108	1,308,845	1,354,252
Selling, general and administrative	340,593	329,298	970,191	970,561
Restructure charge			44,278
Store pre-opening costs	1,196	952	3,995	2,592
Operating income	137,165	153,858	290,381	381,099
Interest expense	37,798	32,818	109,493	94,305
Losses on early extinguishments of debt and refinancing costs			1,835
Other (income) expense, net	(121)	(360)	(2,646)	950
Income before income taxes	99,488	121,400	181,699	285,844
Income taxes	15,719	41,640	43,557	98,314
Net income	83,769	79,760	138,142	187,530
Other comprehensive income, net of tax:
Foreign currency translation adjustment and other	3,016	(4,418)	(3,230)	4,254
Comprehensive income	$ 86,785	$ 75,342	$ 134,912	$ 191,784
Earnings per common share:
Basic (in dollars per share)	$ 0.50	$ 0.44	$ 0.79	$ 1.01
Diluted (in dollars per share)	$ 0.50	$ 0.44	$ 0.78	$ 1
Weighted-average common shares outstanding:
Basic (in shares)	165,975	180,710	174,949	185,521
Diluted (in shares)	166,570	181,987	175,851	186,775

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Nov. 03, 2018	Feb. 03, 2018	Oct. 28, 2017
Current Assets:
Cash and equivalents	$ 102,670	$ 425,896	$ 176,771
Merchandise inventories	1,440,875	1,123,288	1,404,206
Prepaid expenses and other	100,791	97,830	95,993
Accounts receivable, net	42,997	26,207	30,936
Income taxes receivable	6,544	3,761	5,792
Total current assets	1,693,877	1,676,982	1,713,698
Property and equipment, at cost	1,642,838	1,593,683	1,545,004
Less accumulated depreciation and amortization	(1,189,442)	(1,173,663)	(1,143,112)
Property and equipment, net	453,396	420,020	401,892
Goodwill	119,074	119,074	119,074
Other intangible assets, net	20,591	21,769	22,253
Deferred income taxes	23,367	34,538	36,946
Other assets	28,730	27,832	12,233
Total assets	2,339,035	2,300,215	2,306,096
Current Liabilities:
Accounts payable	645,469	483,002	674,222
Accrued liabilities and other	407,684	370,457	400,138
Current portion of long-term debt	240,261	24,900	140,125
Income taxes payable	476	79,586	16,673
Total current liabilities	1,293,890	957,945	1,231,158
Long-term debt	2,690,302	2,701,764	2,707,120
Other liabilities	144,694	150,001	100,656
Total liabilities	4,128,886	3,809,710	4,038,934
Commitments and contingencies
Stockholders’ Deficit:
Common stock, $0.06775 par value, 350,000 shares authorized; 158,616 shares issued and outstanding at November 3, 2018; 181,919 shares issued and outstanding at February 3, 2018; and 181,263 shares issued and outstanding at October 28, 2017	10,700	12,206	12,159
Additional paid-in-capital		21,740	7,722
Treasury stock	(12,168)
Accumulated deficit	(1,781,493)	(1,539,781)	(1,742,749)
Accumulated other comprehensive loss	(6,890)	(3,660)	(9,970)
Total stockholders' deficit	(1,789,851)	(1,509,495)	(1,732,838)
Total liabilities and stockholders' deficit	$ 2,339,035	$ 2,300,215	$ 2,306,096

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Nov. 03, 2018	Feb. 03, 2018	Oct. 28, 2017
CONSOLIDATED BALANCE SHEETS
Common Stock, par value (in dollars per share)	$ 0.06775	$ 0.06775	$ 0.06775
Common Stock, shares authorized	350,000	350,000	350,000
Common Stock, shares issued	158,616	181,919	181,263
Common Stock, shares outstanding	158,616	181,919	181,263

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017
Cash flows from operating activities:
Net income	$ 138,142	$ 187,530
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	89,933	86,232
Share-based compensation	20,780	18,232
Debt issuance costs amortization	3,759	3,823
Accretion of long-term debt, net	(385)	(379)
Restructure charge	44,278
Deferred income taxes	7,710	529
Losses on early extinguishments of debt and refinancing costs	1,835
Changes in assets and liabilities:
Merchandise inventories	(338,260)	(275,086)
Prepaid expenses and other	(2,886)	(8,818)
Accounts receivable	(18,269)	(7,721)
Other assets	(1,314)	(1,010)
Accounts payable	150,088	150,947
Accrued interest	7,850	(314)
Accrued liabilities and other	1,077	12,685
Income taxes	(79,258)	(61,628)
Other liabilities	734	1,405
Net cash provided by operating activities	25,814	106,427
Cash flows used in investing activities:
Additions to property and equipment	(119,553)	(72,640)
Cash flows from financing activities:
Common stock repurchased	(430,509)	(253,595)
Payments on term loan credit facility	(17,356)	(18,675)
Borrowings on asset-based revolving credit facility	307,400	357,200
Payments on asset-based revolving credit facility	(89,400)	(248,200)
Payment of debt refinancing costs	(1,117)
Payment of dividends	(317)	(408)
Proceeds from stock options exercised	1,812	7,849
Net cash used in financing activities	(229,487)	(155,829)
Net change in cash and equivalents	(323,226)	(122,042)
Cash and equivalents at beginning of period	425,896	298,813
Cash and equivalents at end of period	102,670	176,771
Cash paid for interest	98,864	91,794
Cash paid for taxes	$ 115,724	$ 159,013

BASIS OF PRESENTATION

BASIS OF PRESENTATION	9 Months Ended
	Nov. 03, 2018
BASIS OF PRESENTATION
BASIS OF PRESENTATION	1. BASIS OF PRESENTATION All expressions of the “Company”, “us”, “we”, “our”, and all similar expressions are references to The Michaels Companies, Inc. and our consolidated, wholly-owned subsidiaries, unless otherwise expressly stated or the context otherwise requires. Our consolidated financial statements include the accounts of The Michaels Companies, Inc. and our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 3, 2018 filed with the Securities and Exchange Commission (“SEC”) pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934. In the opinion of management, all adjustments (consisting of normal recurring accruals and other items) considered necessary for a fair presentation have been included. We report on the basis of a 52- or 53-week fiscal year, which ends on the Saturday closest to January 31. All references to fiscal year mean the year in which that fiscal year began. References to “fiscal 2018” relate to the 52 weeks ending February 2, 2019 and references to “fiscal 2017” relate to the 53 weeks ended February 3, 2018. In addition, all references to “the third quarter of fiscal 2018” relate to the 13 weeks ended November 3, 2018 and all references to “the third quarter of fiscal 2017” relate to the 13 weeks ended October 28, 2017. Finally, all references to “the nine months ended November 3, 2018” relate to the 39 weeks ended November 3, 2018 and all references to “the nine months ended October 28, 2017” relate to the 39 weeks ended October 28, 2017. Because of the seasonal nature of our business, the results of operations for the 13 and 39 weeks ended November 3, 2018 are not indicative of the results to be expected for the entire year. Aaron Brothers In March 2018, we closed substantially all of our Aaron Brothers stores and began the process of repositioning our Aaron Brothers brand as a store-within-a-store, providing custom framing services in all Michaels stores. In the first nine months of fiscal 2018, we recorded a restructure charge totaling $44.3 million, consisting primarily of costs associated with the termination of the remaining lease obligations, the write-off of fixed assets and employee-related expenses. For the nine months ended November 3, 2018 and October 28, 2017, Aaron Brothers net sales totaled approximately $12.9 million and $78.0 million, respectively. Excluding the restructure charge, Aaron Brothers did not have a material impact on the Company’s operating income in the periods presented. Share Repurchase Program In September 2018, the Board of Directors authorized a new share repurchase program for the Company to purchase $500.0 million of the Company’s common stock on the open market or through accelerated share repurchase transactions. The share repurchase program does not have an expiration date, and the timing and number of repurchase transactions under the program will depend on market conditions, corporate considerations, debt agreements and regulatory requirements. Shares repurchased under the program are held as treasury shares until retired. In June 2018, the Company entered into an accelerated share repurchase agreement (“ASR Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan”). Under the ASR Agreement, we paid JPMorgan a purchase price of $250.0 million for delivery of 12.4 million shares of our common stock. The total number of shares repurchased was based upon a volume weighted average price of our stock over a predetermined period. The ASR agreement was completed on August 30, 2018. During the nine months ended November 3, 2018, we repurchased 23.6 million shares under our share repurchase programs for an aggregate amount of $434.2 million, inclusive of the ASR Agreement. As of November 3, 2018, we had $416.0 million of availability remaining under our current share repurchase program. Accounting Pronouncements Recently Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014‑09”). ASU 2014-09 supersedes the revenue recognition requirements in “ Revenue Recognition (Topic 605) ” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08 , “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ” which provides further guidance on identifying performance obligations and improves the operability and understandability of the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition. We used the modified retrospective transition method to adopt ASU 2014-09 in the first quarter of fiscal 2018 with no adjustments required to our opening retained earnings. The adoption did not have a material impact to the consolidated financial statements; however, it did result in additional disclosures. Recent Accounting Pronouncements Not Yet Adopted In October 2018, the FASB issued ASU 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes” (“ASU 2018-16”). ASU 2018-16 allows for the use of the Overnight Index Swap ("OIS") rate based on the Secured Overnight Financing Rate ("SOFR") as a U.S. benchmark interest rate for purposes of applying hedge accounting under Accounting Standard Codification (“ASC”) 815, Derivatives and Hedging . ASU 2018-16 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the new standard but do not anticipate a material impact to the consolidated financial statements once implemented. In August 2018, the FASB issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract,” (“ASU 2018-15”) . ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The standard is to be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently evaluating the impact that ASU 2018-15 will have on the consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements for fair value measurements under ASC 820, Fair Value Measurements (“ASC 820”). ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. We do not anticipate a material impact to the consolidated financial statements once implemented. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 simplifies the measurement of goodwill impairment by removing the second step of the goodwill impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit. Under ASU 2017-04, goodwill impairment is to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value with the loss recognized not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The standard is to be applied on a prospective basis. We do not anticipate a material impact to the consolidated financial statements once implemented. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). Under ASU 2016‑02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The lease standard requires companies to use a modified retrospective transition approach as of the beginning of the earliest comparable period presented in the company’s financial statements. In July 2018, the FASB issued ASU 2018-11, “ Leases (Topic 842): Targeted Improvements ” which provided an additional transition option that allows companies to continue applying the guidance under the current lease standard in the comparative periods presented in the consolidated financial statements. The Company has elected to adopt this transition option and will record a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption. The guidance under these standards is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. We are currently evaluating the impact that ASU 2016-02 will have on the consolidated financial statements and related disclosures. We believe the most significant impact relates to our accounting for real estate leases, which will be recorded as right-of-use assets and lease liabilities on our balance sheet upon adoption. We do not expect a material impact on our consolidated statements of comprehensive income or our consolidated statements of cash flows once implemented.

REVENUE RECOGNITION

REVENUE RECOGNITION	9 Months Ended
	Nov. 03, 2018
REVENUE RECOGNITION
REVENUE RECOGNITION	2. REVENUE RECOGNITION Our revenue is primarily associated with sales of merchandise to customers within our stores, customers utilizing our e-commerce platforms and through our Darice wholesale business (“Darice”). Revenue is measured based on the amount of consideration that we expect to receive, reduced by estimates for return allowances, point-of-sale coupons and discounts. Revenue also excludes any amounts collected on behalf of third parties, including sales tax. Revenue from sales of our merchandise is recognized when the customer takes possession of the merchandise. Payment for our retail sales is typically due at the time of the sale. Right of Return We allow for merchandise to be returned under most circumstances up to 180 days after purchase. A sales return reserve is established using historical customer return behavior and reduces both revenue and cost of goods sold. Historically, the sales returns reserve was presented net of cost of sales in other current liabilities in the consolidated balance sheets. As a result of adopting ASU 2014-09, the Company presents the gross sales return reserve in other current liabilities and the estimated value of the merchandise expected to be returned in prepaid expenses and other in the consolidated balance sheets. The change did not have a material impact on our consolidated balance sheet as of November 3, 2018. Customer Receivables As of November 3, 2018, February 3, 2018 and October 28, 2017, receivables from customers, which consist primarily of trade receivables related to Darice, were approximately $30.5 million, $19.2 million and $23.5 million, respectively, and are included in accounts receivable, net in the consolidated balance sheets. Gift Cards We record a gift card liability on the date we issue the gift card to the customer. We record revenue and reduce the gift card liability as the customer redeems the gift card or when the likelihood of redemption by the customer is remote (“gift card breakage”). We estimate gift card breakage using the expected value method based on customers’ historical redemption rates and patterns. Gift card breakage income is recorded in net sales in the consolidated statements of comprehensive income over the estimated redemption period. The gift card liability is included in accrued liabilities and other in the consolidated balance sheets. The following table includes activity related to gift cards (in thousands): 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 Balance at beginning of period $ 50,513 $ 44,185 $ 56,729 $ 49,869 Issuance of gift cards 12,077 11,582 36,873 36,536 Revenue recognized (1) (12,403) (11,678) (41,541) (41,190) Gift card breakage (749) (454) (2,623) (1,580) Balance at end of period $ 49,438 $ 43,635 $ 49,438 $ 43,635 (1) Revenue recognized from the beginning liability during the third quarters of fiscal 2018 and fiscal 2017 totaled $7.1 million. Revenue recognized from the beginning liability during the first nine months of fiscal 2018 and fiscal 2017 totaled $19.9 million and $19.4 million, respectively.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	9 Months Ended
	Nov. 03, 2018
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS	3. FAIR VALUE MEASUREMENTS As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level valuation hierarchy for fair value measurements. These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect less transparent active market data, as well as internal assumptions. These two types of inputs create the following fair value hierarchy: · Level 1—Quoted prices for identical instruments in active markets; · Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and · Level 3—Instruments with significant unobservable inputs. Impairment losses related to store-level property and equipment are calculated using significant unobservable inputs including the present value of future cash flows expected to be generated using a risk-adjusted weighted-average cost of capital and comparable store sales growth assumptions and, therefore, are classified as a Level 3 measurement in the fair value hierarchy. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximates their estimated fair values due to the short maturities of these instruments. The table below provides the fair values of our senior secured term loan facility (“Amended Term Loan Credit Facility”), our 5.875% senior subordinated notes maturing in 2020 (“2020 Senior Subordinated Notes’’) and our interest rate swaps executed in April 2018. November 3, February 3, October 28, 2018 2018 2017 (in thousands) Assets Interest rate swaps $ 5,028 $ — $ — Liabilities Term loan credit facility $ 2,195,613 $ 2,246,302 $ 2,250,412 Senior subordinated notes 510,000 518,288 520,838 Interest rate swaps 571 — — The fair values of our Amended Term Loan Credit Facility and our 2020 Senior Subordinated Notes were determined based on quoted market prices which are considered Level 1 inputs within the fair value hierarchy. The fair value of our interest rate swaps was calculated using significant observable inputs including the present value of estimated future cash flows using the applicable interest rate curves and, therefore, were classified as Level 2 inputs within the fair value hierarchy.

DEBT

DEBT	9 Months Ended
	Nov. 03, 2018
DEBT
DEBT	4. DEBT Long-term debt consists of the following (in thousands): November 3, February 3, October 28, Interest Rate 2018 2018 2017 Term loan credit facility Variable $ 2,214,994 $ 2,232,350 $ 2,244,800 Asset-based revolving credit facility Variable 218,000 — 109,000 Senior subordinated notes % 510,000 510,000 510,000 Total debt 2,942,994 2,742,350 2,863,800 Less unamortized discount/premium and debt costs (12,431) (15,686) (16,555) Total debt, net 2,930,563 2,726,664 2,847,245 Less current portion (240,261) (24,900) (140,125) Long-term debt $ 2,690,302 $ 2,701,764 $ 2,707,120 Revolving Credit Facility As of November 3, 2018 and October 28, 2017, the borrowing base under our senior secured asset-based revolving credit facility was $850.0 million, of which Michaels Stores, Inc. (“MSI”) had unused borrowing capacity of $567.0 million and $675.7 million, respectively. As of November 3, 2018 and October 28, 2017, outstanding standby letters of credit, which reduce our borrowing base, totaled $65.0 million and $65.3 million, respectively. Term Loan Credit Facility On May 23, 2018, MSI entered into an amendment with JPMorgan and other lenders to amend and restate our term loan credit facility. The amended and restated credit agreement, together with the related security, guarantee and other agreements, is referred to as the “Amended and Restated Term Loan Credit Facility”. Borrowings under the Amended and Restated Term Loan Credit Facility bear interest at a rate per annum, at MSI’s option, of either (a) a margin of 1.50% plus a base rate defined as the highest of (1) the prime rate of JPMorgan, (2) the federal funds effective rate plus 0.5%, and (3) the one-month London Interbank Offered Rate (“LIBOR”) plus 1% or (b) a margin of 2.50% plus the applicable LIBOR. MSI is required to make scheduled quarterly payments equal to 0.25% of the original principal amount of the term loans (subject to adjustments relating to the incurrence of additional term loans) for the first four years and two quarters of the Amended and Restated Term Loan Credit Facility, with the balance to be paid on January 28, 2023. All other terms under the Amended Term Loan Credit Facility have remained unchanged. As a result of this refinancing, we recorded a loss on the early extinguishment of debt of $1.8 million during the second quarter of fiscal 2018. Interest Rate Swaps In April 2018, we executed two interest rate swaps with an aggregate notional value of $1.0 billion associated with our outstanding Amended Term Loan Credit Facility. The interest rate swaps have a maturity date of April 30, 2021 and were executed for risk management and are not held for trading purposes. The objective of the interest rate swaps is to hedge the variability of cash flows resulting from fluctuations in the one-month LIBOR. The swaps replaced the one-month LIBOR with a fixed interest rate of 2.7765% and payments are settled monthly. The swaps qualify as cash flow hedges and changes in the fair values are recorded in accumulated other comprehensive income in the consolidated balance sheet. The changes in fair value are reclassified from accumulated other comprehensive income to interest expense in the same period that the hedged items affect earnings. We reclassified $1.6 million and $3.7 million from accumulated other comprehensive income to interest expense during the three and nine months ended November 3, 2018, respectively. As of November 3, 2018, the fair value of the interest rate swaps was a net asset of $4.5 million, consisting of $5.0 million recorded in other assets and $0.6 million recorded in accrued liabilities in our consolidated balance sheets.

ACCUMULATED OTHER COMPREHENSIVE

ACCUMULATED OTHER COMPREHENSIVE LOSS	9 Months Ended
	Nov. 03, 2018
ACCUMULATED OCI (LOSS)
ACCUMULATED OCI (LOSS)	5. ACCUMULATED OTHER COMPREHENSIVE LOSS The following table includes detail regarding changes in the composition of accumulated other comprehensive loss (in thousands): 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 Beginning of period $ (9,906) $ (5,552) $ (3,660) $ (14,224) Foreign currency translation adjustment and other (942) (4,418) (6,528) 4,254 Interest rate swaps 3,958 — 3,298 — End of period $ (6,890) $ (9,970) $ (6,890) $ (9,970)

INCOME TAXES

INCOME TAXES	9 Months Ended
	Nov. 03, 2018
INCOME TAXES
INCOME TAXES	6. INCOME TAXES The effective tax rate was 15.8% for the third quarter of fiscal 2018 compared to 34.3% for the third quarter of fiscal 2017 and 24.0% for the nine months ended November 3, 2018 compared to 34.4% for the same period in the prior year. The effective tax rate for both the third quarter of fiscal 2018 and the nine months ended November 3, 2018 were lower than the comparable period in the prior year due to benefits recognized related to the enactment of the Tax Cuts and Jobs Act (“Tax Act”) in the fourth quarter of fiscal 2017, including the reduction of the federal statutory tax rate from 35% to 21%. In addition, a provisional charge of $5.0 million was recognized for the nine months ended November 3, 2018 related to repatriation taxes for accumulated earnings of our foreign subsidiaries, partially offset by a provisional benefit of $4.0 million related to the revaluation of our net deferred tax assets as a result of the Tax Act. The U.S. Treasury is expected to issue additional regulations and guidance in connection with the Tax Act, which may alter interpretations of the new tax law and could materially change our estimated provisional adjustments.

EARNINGS PER SHARE

EARNINGS PER SHARE	9 Months Ended
	Nov. 03, 2018
EARNINGS PER SHARE
EARNINGS PER SHARE	7. EARNINGS PER SHARE The Company’s unvested restricted stock awards contain non-forfeitable rights to dividends and meet the criteria of a participating security as defined by ASC 260, “ Earnings Per Share ”. In applying the two-class method, net income is allocated to both common and participating securities based on their respective weighted-average shares outstanding for the period. Basic earnings per share is computed by dividing net income allocated to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average common shares outstanding plus the potential dilutive impact from stock options and restricted stock units. Common equivalent shares are excluded from the computation if their effect is anti-dilutive. There were 8.4 million and 5.8 million anti-dilutive shares during the third quarters of fiscal 2018 and fiscal 2017, respectively. There were 7.1 million and 6.0 million anti-dilutive shares during the nine months ended November 3, 2018 and October 28, 2017, respectively. The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data): 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 Basic earnings per common share: Net income $ 83,769 $ 79,760 $ 138,142 $ 187,530 Less income related to unvested restricted shares (138) (297) (285) (789) Income available to common shareholders - Basic $ 83,631 $ 79,463 $ 137,857 $ 186,741 Weighted-average common shares outstanding - Basic 165,975 180,710 174,949 185,521 Basic earnings per common share $ $ $ $ Diluted earnings per common share: Net income $ 83,769 $ 79,760 $ 138,142 $ 187,530 Less income related to unvested restricted shares (138) (295) (284) (784) Income available to common shareholders - Diluted $ 83,631 $ 79,465 $ 137,858 $ 186,746 Weighted-average common shares outstanding - Basic 165,975 180,710 174,949 185,521 Effect of dilutive stock options and restricted stock units 595 1,277 902 1,254 Weighted-average common shares outstanding - Diluted 166,570 181,987 175,851 186,775 Diluted earnings per common share $ $ $ $

SEGMENTS AND GEOGRAPHIC INFORMA

SEGMENTS AND GEOGRAPHIC INFORMATION	9 Months Ended
	Nov. 03, 2018
SEGMENTS AND GEOGRAPHIC INFORMATION
SEGMENTS AND GEOGRAPHIC INFORMATION	8. SEGMENTS AND GEOGRAPHIC INFORMATION We consider Michaels-U.S., Michaels-Canada, Aaron Brothers, Pat Catan’s and Darice to be our operating segments for purposes of determining reportable segments based on the criteria of ASC 280, Segment Reporting (“ASC 280”). We determined that Michaels-U.S., Michaels-Canada, Aaron Brothers and Pat Catan’s have similar economic characteristics and meet the aggregation criteria set forth in ASC 280. Therefore, we combine these operating segments into one reporting segment. Darice does not meet the materiality criteria in ASC 280 and, therefore, is not disclosed separately as a reportable segment. Our chief operating decision makers evaluate historical operating performance and forecast future periods’ operating performance based on operating income. Our net sales by country are as follows (in thousands): 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 United States (1) $ 1,153,784 $ 1,117,626 $ 3,158,393 $ 3,152,048 Canada 120,274 122,570 324,442 319,304 Total $ 1,274,058 $ 1,240,196 $ 3,482,835 $ 3,471,352 (1) In March 2018, we closed substantially all of our Aaron Brothers stores. There were no Aaron Brothers net sales in the third quarter of fiscal 2018 and net sales totaled approximately $25.2 million in the third quarter of fiscal 2017. For the nine months ended November 3, 2018 and October 28, 2017, Aaron Brothers net sales totaled approximately $12.9 million and $78.0 million, respectively.

CONTINGENCIES

CONTINGENCIES	9 Months Ended
	Nov. 03, 2018
CONTINGENCIES
CONTINGENCIES	9. CONTINGENCIES Fair Credit Reporting Claim On December 11, 2014, MSI was served with a lawsuit, Christina Graham v. Michaels Stores, Inc. , filed in the U.S. District Court for the District of New Jersey by a former employee. The lawsuit was a purported class action, bringing plaintiff’s individual claims, as well as claims on behalf of a putative class of applicants who applied for employment with Michaels through an online application, and on whom a background check for employment was procured. The lawsuit alleged that MSI violated the Fair Credit Reporting Act (“FCRA”) and the New Jersey Fair Credit Reporting Act by failing to provide the proper disclosure and obtain the proper authorization to conduct background checks. Since the initial filing, another named plaintiff joined the lawsuit, which was amended in February 2015, Christina Graham and Gary Anderson v. Michaels Stores, Inc. , with substantially similar allegations. The plaintiffs sought statutory and punitive damages as well as attorneys’ fees and costs. Following the filing of the Graham case in New Jersey, five additional purported class action lawsuits with six plaintiffs were filed, Michele Castro and Janice Bercut v. Michaels Stores, Inc. , in the U.S. District Court for the Northern District of Texas, Michelle Bercut v. Michaels Stores, Inc. in the Superior Court of California for Sonoma County, Raini Burnside v. Michaels Stores, Inc. , in the U.S. District Court for the Western District of Missouri, Sue Gettings v. Michaels Stores, Inc ., in the U.S. District Court for the Southern District of New York, and Barbara Horton v. Michaels Stores, Inc., in the U.S. District Court for the Central District of California. All of the plaintiffs alleged violations of the FCRA. In addition, the Castro, Horton and Janice Bercut lawsuits also alleged violations of California’s unfair competition law. The Burnside, Horton and Gettings lawsuits, as well as the claims by Michele Castro, have been dismissed. The Graham, Janice Bercut and Michelle Bercut lawsuits were transferred for centralized pretrial proceedings to the District of New Jersey. On January 24, 2017, the Company’s motion to dismiss for lack of standing was granted, and the court declined to rule on the merits of plaintiffs’ claims. The dismissal order was stayed for 30 days to allow the plaintiffs to amend their complaints. Because there were no amendments filed, two of the three centralized cases were dismissed and subsequently appealed to the U.S. Court of Appeals for the Third Circuit, and the remaining case ( Michelle Bercut ) was remanded to California Superior Court. The parties reached a class settlement which was approved by the California Superior Court on October 10, 2018. The resolution of the lawsuits did not have a material effect on our consolidated financial statements. General In addition to the litigation discussed above, we are now, and may be in the future, involved in various other lawsuits, claims and proceedings incident to the ordinary course of business. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	9 Months Ended
	Nov. 03, 2018
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS	10. RELATED PARTY TRANSACTIONS Affiliates of, or funds advised by, Bain Capital Private Equity, L.P. (“Bain Capital”) and The Blackstone Group L.P. (“The Blackstone Group”, together with Bain Capital and their applicable affiliates, the “Sponsors”) owned approximately 46% of our outstanding common stock as of November 3, 2018. The Blackstone Group owns a majority equity position in RGIS, a vendor we utilized until February 2018 to count our store inventory. There were no payments associated with this vendor during the third quarter of fiscal 2018. Payments associated with this vendor during the third quarter of fiscal 2017 were $2.3 million. Payments associated with this vendor during the nine months ended November 3, 2018 and October 28, 2017 were $0.7 million and $6.0 million, respectively. These expenses are included in selling, general and administrative (“SG&A”) in the consolidated statements of comprehensive income. The Blackstone Group owns a majority equity position in Excel Trust, Inc., Blackstone Real Estate DDR Retail Holdings III, LLC and Blackstone Real Estate RC Retail Holdings, LLC, vendors we utilize to lease certain properties. Payments associated with these vendors during the third quarters of fiscal 2018 and fiscal 2017 were $1.4 The Blackstone Group owns a majority equity position in JDA Software Group, Inc., a vendor we utilize for transportation and supply chain software. Payments associated with this vendor during the third quarters of fiscal 2018 and fiscal 2017 were $0.3 million. Payments made during the nine months ended November 3, 2018 and October 28, 2017 were $2.2 million and $1.0 million, respectively. These expenses are included in SG&A in the consolidated statements of comprehensive income. Three of our current directors, Joshua Bekenstein, Ryan Cotton and Peter F. Wallace, are affiliates of either Bain Capital or The Blackstone Group. As such, some or all of such directors may have an indirect material interest in payments with respect to debt securities of the Company that have been purchased by affiliates of Bain Capital and The Blackstone Group. As of November 3, 2018, affiliates of The Blackstone Group held $93.2 million of our Amended Term Loan Credit Facility.

CONDENSED CONSOLIDATED FINANCIA

CONDENSED CONSOLIDATED FINANCIAL INFORMATION	9 Months Ended
	Nov. 03, 2018
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED FINANCIAL INFORMATION	11. CONDENSED CONSOLIDATED FINANCIAL INFORMATION Our debt covenants restrict MSI, and certain subsidiaries of MSI, from various activities including the incurrence of additional debt, payment of dividends and the repurchase of MSI’s capital stock (subject to certain exceptions), among other things. The following condensed consolidated financial information represents the financial information of MSI and its wholly-owned subsidiaries subject to these restrictions. The information is presented in accordance with the requirements of Rule 12-04 under the SEC’s Regulation S-X. Michaels Stores, Inc. Condensed Consolidated Balance Sheets (in thousands) November 3, February 3, October 28, ASSETS 2018 2018 2017 Current assets: Cash and equivalents $ 101,895 $ 425,129 $ 176,007 Merchandise inventories 1,440,875 1,123,288 1,404,206 Prepaid expenses and other current assets 146,317 127,656 131,695 Total current assets 1,689,087 1,676,073 1,711,908 Property and equipment, net 453,396 420,020 401,892 Goodwill 119,074 119,074 119,074 Other assets 73,088 84,537 72,036 Total assets $ 2,334,645 $ 2,299,704 $ 2,304,910 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 645,469 $ 483,002 $ 674,222 Accrued liabilities and other 407,252 369,647 399,363 Current portion of long-term debt 240,261 24,900 140,125 Other current liabilities 41,948 124,881 60,884 Total current liabilities 1,334,930 1,002,430 1,274,594 Long-term debt 2,690,302 2,701,764 2,707,120 Other liabilities 156,770 165,662 108,112 Total stockholders’ deficit (1,847,357) (1,570,152) (1,784,916) Total liabilities and stockholders’ deficit $ 2,334,645 $ 2,299,704 $ 2,304,910 Michaels Stores, Inc. Condensed Consolidated Statements of Comprehensive Income (in thousands) 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 Net sales $ 1,274,058 $ 1,240,196 $ 3,482,835 $ 3,471,352 Cost of sales and occupancy expense 795,104 756,088 2,173,990 2,117,100 Gross profit 478,954 484,108 1,308,845 1,354,252 Selling, general and administrative 340,375 328,855 969,500 969,793 Restructure charge — — 44,278 — Store pre-opening costs 1,196 952 3,995 2,592 Operating income 137,383 154,301 291,072 381,867 Interest and other expense 37,680 32,460 106,857 95,261 Losses on early extinguishment of debt and refinancing costs — — 1,835 — Income before income taxes 99,703 121,841 182,380 286,606 Income taxes 15,771 41,806 43,722 98,601 Net income $ 83,932 $ 80,035 $ 138,658 $ 188,005 Other comprehensive income, net of tax: Foreign currency translation adjustment and other 3,016 (4,418) (3,230) 4,254 Comprehensive income $ 86,948 $ 75,617 $ 135,428 $ 192,259 Michaels Stores, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) 39 Weeks Ended November 3, October 28, 2018 2017 Cash flows from operating activities: Net cash provided by operating activities $ 22,855 $ 109,782 Cash flows used in investing activities: Additions to property and equipment (119,553) (72,640) Cash flows from financing activities: Net repayments of debt (106,756) (266,875) Net borrowings of debt 307,400 357,200 Payment of debt refinancing costs (1,117) — Payment of dividend to Michaels Funding, Inc. (426,063) (245,514) Net cash used in financing activities (226,536) (155,189) Net change in cash and equivalents (323,234) (118,047) Cash and equivalents at beginning of period 425,129 294,054 Cash and equivalents at end of period $ 101,895 $ 176,007

REVENUE RECOGNITION (Tables)

REVENUE RECOGNITION (Tables)	9 Months Ended
	Nov. 03, 2018
REVENUE RECOGNITION
Schedule of gift card liability	The following table includes activity related to gift cards (in thousands): 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 Balance at beginning of period $ 50,513 $ 44,185 $ 56,729 $ 49,869 Issuance of gift cards 12,077 11,582 36,873 36,536 Revenue recognized (1) (12,403) (11,678) (41,541) (41,190) Gift card breakage (749) (454) (2,623) (1,580) Balance at end of period $ 49,438 $ 43,635 $ 49,438 $ 43,635 (1) Revenue recognized from the beginning liability during the third quarters of fiscal 2018 and fiscal 2017 totaled $7.1 million. Revenue recognized from the beginning liability during the first nine months of fiscal 2018 and fiscal 2017 totaled $19.9 million and $19.4 million, respectively.

FAIR VALUE MEASUREMENTS (Tables

FAIR VALUE MEASUREMENTS (Tables)	9 Months Ended
	Nov. 03, 2018
FAIR VALUE MEASUREMENTS
Schedule of fair values of debt and interest rate swaps	November 3, February 3, October 28, 2018 2018 2017 (in thousands) Assets Interest rate swaps $ 5,028 $ — $ — Liabilities Term loan credit facility $ 2,195,613 $ 2,246,302 $ 2,250,412 Senior subordinated notes 510,000 518,288 520,838 Interest rate swaps 571 — —

DEBT (Tables)

DEBT (Tables)	9 Months Ended
	Nov. 03, 2018
DEBT
Schedule of outstanding debt	Long-term debt consists of the following (in thousands): November 3, February 3, October 28, Interest Rate 2018 2018 2017 Term loan credit facility Variable $ 2,214,994 $ 2,232,350 $ 2,244,800 Asset-based revolving credit facility Variable 218,000 — 109,000 Senior subordinated notes % 510,000 510,000 510,000 Total debt 2,942,994 2,742,350 2,863,800 Less unamortized discount/premium and debt costs (12,431) (15,686) (16,555) Total debt, net 2,930,563 2,726,664 2,847,245 Less current portion (240,261) (24,900) (140,125) Long-term debt $ 2,690,302 $ 2,701,764 $ 2,707,120

ACCUMULATED OTHER COMPREHENSI_2

ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)	9 Months Ended
	Nov. 03, 2018
ACCUMULATED OCI (LOSS)
Schedule of accumulated other comprehensive loss	The following table includes detail regarding changes in the composition of accumulated other comprehensive loss (in thousands): 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 Beginning of period $ (9,906) $ (5,552) $ (3,660) $ (14,224) Foreign currency translation adjustment and other (942) (4,418) (6,528) 4,254 Interest rate swaps 3,958 — 3,298 — End of period $ (6,890) $ (9,970) $ (6,890) $ (9,970)

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	9 Months Ended
	Nov. 03, 2018
EARNINGS PER SHARE
Schedule of calculation of basic and diluted earnings per share	The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data): 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 Basic earnings per common share: Net income $ 83,769 $ 79,760 $ 138,142 $ 187,530 Less income related to unvested restricted shares (138) (297) (285) (789) Income available to common shareholders - Basic $ 83,631 $ 79,463 $ 137,857 $ 186,741 Weighted-average common shares outstanding - Basic 165,975 180,710 174,949 185,521 Basic earnings per common share $ $ $ $ Diluted earnings per common share: Net income $ 83,769 $ 79,760 $ 138,142 $ 187,530 Less income related to unvested restricted shares (138) (295) (284) (784) Income available to common shareholders - Diluted $ 83,631 $ 79,465 $ 137,858 $ 186,746 Weighted-average common shares outstanding - Basic 165,975 180,710 174,949 185,521 Effect of dilutive stock options and restricted stock units 595 1,277 902 1,254 Weighted-average common shares outstanding - Diluted 166,570 181,987 175,851 186,775 Diluted earnings per common share $ $ $ $

SEGMENTS AND GEOGRAPHIC INFOR_2

SEGMENTS AND GEOGRAPHIC INFORMATION (Tables)	9 Months Ended
	Nov. 03, 2018
SEGMENTS AND GEOGRAPHIC INFORMATION
Schedule of net sales by country	Our net sales by country are as follows (in thousands): 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 United States (1) $ 1,153,784 $ 1,117,626 $ 3,158,393 $ 3,152,048 Canada 120,274 122,570 324,442 319,304 Total $ 1,274,058 $ 1,240,196 $ 3,482,835 $ 3,471,352 (1) In March 2018, we closed substantially all of our Aaron Brothers stores. There were no Aaron Brothers net sales in the third quarter of fiscal 2018 and net sales totaled approximately $25.2 million in the third quarter of fiscal 2017. For the nine months ended November 3, 2018 and October 28, 2017, Aaron Brothers net sales totaled approximately $12.9 million and $78.0 million, respectively.

CONDENSED CONSOLIDATED FINANC_2

CONDENSED CONSOLIDATED FINANCIAL INFORMATION (Tables)	9 Months Ended
	Nov. 03, 2018
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Schedule of Condensed Consolidated Balance Sheets	Michaels Stores, Inc. Condensed Consolidated Balance Sheets (in thousands) November 3, February 3, October 28, ASSETS 2018 2018 2017 Current assets: Cash and equivalents $ 101,895 $ 425,129 $ 176,007 Merchandise inventories 1,440,875 1,123,288 1,404,206 Prepaid expenses and other current assets 146,317 127,656 131,695 Total current assets 1,689,087 1,676,073 1,711,908 Property and equipment, net 453,396 420,020 401,892 Goodwill 119,074 119,074 119,074 Other assets 73,088 84,537 72,036 Total assets $ 2,334,645 $ 2,299,704 $ 2,304,910 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 645,469 $ 483,002 $ 674,222 Accrued liabilities and other 407,252 369,647 399,363 Current portion of long-term debt 240,261 24,900 140,125 Other current liabilities 41,948 124,881 60,884 Total current liabilities 1,334,930 1,002,430 1,274,594 Long-term debt 2,690,302 2,701,764 2,707,120 Other liabilities 156,770 165,662 108,112 Total stockholders’ deficit (1,847,357) (1,570,152) (1,784,916) Total liabilities and stockholders’ deficit $ 2,334,645 $ 2,299,704 $ 2,304,910
Schedule of Condensed Consolidated Statements of Comprehensive Income	Michaels Stores, Inc. Condensed Consolidated Statements of Comprehensive Income (in thousands) 13 Weeks Ended 39 Weeks Ended November 3, October 28, November 3, October 28, 2018 2017 2018 2017 Net sales $ 1,274,058 $ 1,240,196 $ 3,482,835 $ 3,471,352 Cost of sales and occupancy expense 795,104 756,088 2,173,990 2,117,100 Gross profit 478,954 484,108 1,308,845 1,354,252 Selling, general and administrative 340,375 328,855 969,500 969,793 Restructure charge — — 44,278 — Store pre-opening costs 1,196 952 3,995 2,592 Operating income 137,383 154,301 291,072 381,867 Interest and other expense 37,680 32,460 106,857 95,261 Losses on early extinguishment of debt and refinancing costs — — 1,835 — Income before income taxes 99,703 121,841 182,380 286,606 Income taxes 15,771 41,806 43,722 98,601 Net income $ 83,932 $ 80,035 $ 138,658 $ 188,005 Other comprehensive income, net of tax: Foreign currency translation adjustment and other 3,016 (4,418) (3,230) 4,254 Comprehensive income $ 86,948 $ 75,617 $ 135,428 $ 192,259
Schedule of Condensed Consolidated Statements of Cash Flows	Michaels Stores, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) 39 Weeks Ended November 3, October 28, 2018 2017 Cash flows from operating activities: Net cash provided by operating activities $ 22,855 $ 109,782 Cash flows used in investing activities: Additions to property and equipment (119,553) (72,640) Cash flows from financing activities: Net repayments of debt (106,756) (266,875) Net borrowings of debt 307,400 357,200 Payment of debt refinancing costs (1,117) — Payment of dividend to Michaels Funding, Inc. (426,063) (245,514) Net cash used in financing activities (226,536) (155,189) Net change in cash and equivalents (323,234) (118,047) Cash and equivalents at beginning of period 425,129 294,054 Cash and equivalents at end of period $ 101,895 $ 176,007

BASIS OF PRESENTATION, Fiscal Y

BASIS OF PRESENTATION, Fiscal Year (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017	Feb. 02, 2019	Feb. 03, 2018
Fiscal year
Duration period of fiscal year	91 days	91 days	273 days	273 days	364 days	371 days
Minimum
Fiscal year
Duration period of fiscal year			364 days
Maximum
Fiscal year
Duration period of fiscal year			371 days

BASIS OF PRESENTATION, Aaron Br

BASIS OF PRESENTATION, Aaron Brothers (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017
Disposal group information
Restructure charge			$ 44,278
Revenues	$ 1,274,058	$ 1,240,196	3,482,835	$ 3,471,352
Not Discontinued Operations | Aaron Brothers
Disposal group information
Restructure charge			44,300
Revenues	$ 0	$ 25,200	$ 12,900	$ 78,000

BASIS OF PRESENTATION, Stock Re

BASIS OF PRESENTATION, Stock Repurchase (Details) - USD ($) shares in Millions, $ in Millions	1 Months Ended	3 Months Ended	9 Months Ended
	Jun. 30, 2018	Aug. 31, 2018	Nov. 03, 2018	Sep. 30, 2018
Share Repurchase Program
Value of shares repurchased			$ 434.2
Number of shares repurchased			23.6
Share Repurchase Program September 2018
Share Repurchase Program
Common stock share repurchase authorized amount				$ 500
Remaining amount under share repurchase program			$ 416
Accelerated Share Repurchase Agreement June 2018
Share Repurchase Program
Value of shares repurchased	$ 250
Number of shares repurchased		12.4

BASIS OF PRESENTATION, Accounti

BASIS OF PRESENTATION, Accounting Pronouncements (Details) - USD ($) $ in Thousands	Nov. 03, 2018	Feb. 04, 2018	Feb. 03, 2018	Oct. 28, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Retained earnings	$ (1,781,493)		$ (1,539,781)	$ (1,742,749)
Effect of change in guidance | ASU 2014-09
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Retained earnings		$ 0

REVENUE RECOGNITION, Right of R

REVENUE RECOGNITION, Right of Return (Details)	9 Months Ended
	Nov. 03, 2018
REVENUE RECOGNITION
Maximum number of days merchandise allowed to be returned	180 days

REVENUE RECOGNITION, Customer R

REVENUE RECOGNITION, Customer Receivables (Details) - USD ($) $ in Thousands	Nov. 03, 2018	Feb. 03, 2018	Oct. 28, 2017
Customer Receivables
Accounts receivable, net	$ 42,997	$ 26,207	$ 30,936
Darice
Customer Receivables
Accounts receivable, net	$ 30,500	$ 19,200	$ 23,500

REVENUE RECOGNITION, Gift Cards

REVENUE RECOGNITION, Gift Cards (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017
REVENUE RECOGNITION
Balance at beginning of period	$ 50,513	$ 44,185	$ 56,729	$ 49,869
Issuance of gift cards	12,077	11,582	36,873	36,536
Revenue recognized	(12,403)	(11,678)	(41,541)	(41,190)
Gift card breakage	(749)	(454)	(2,623)	(1,580)
Balance at end of period	49,438	43,635	49,438	43,635
Revenue recognized from the beginning liability	$ 7,100	$ 7,100	$ 19,900	$ 19,400

FAIR VALUE MEASUREMENTS, Debt (

FAIR VALUE MEASUREMENTS, Debt (Details) - USD ($) $ in Thousands	Nov. 03, 2018	Feb. 03, 2018	Oct. 28, 2017
Senior subordinated notes
Fair Value Measurements
Interest rate (as a percent)	5.875%	5.875%	5.875%
Level 2 | Interest rate swap
Assets
Interest rate swaps	$ 5,028
Liabilities
Interest rate swaps	571
Level 1
Liabilities
Term loan credit facility	2,195,613	$ 2,246,302	$ 2,250,412
Senior subordinated notes	$ 510,000	$ 518,288	$ 520,838

DEBT (Details)

DEBT (Details) - USD ($) $ in Thousands	Nov. 03, 2018	Feb. 03, 2018	Oct. 28, 2017
Debt
Total debt	$ 2,942,994	$ 2,742,350	$ 2,863,800
Less unamortized discount/premium and debt costs	(12,431)	(15,686)	(16,555)
Total debt, net	2,930,563	2,726,664	2,847,245
Less current portion	(240,261)	(24,900)	(140,125)
Long-term debt	2,690,302	2,701,764	2,707,120
Term loan credit facility
Debt
Total debt	2,214,994	$ 2,232,350	2,244,800
Asset-based revolving credit facility
Debt
Total debt	$ 218,000		$ 109,000
Senior subordinated notes
Debt
Stated interest rate (as a percent)	5.875%	5.875%	5.875%
Total debt	$ 510,000	$ 510,000	$ 510,000

DEBT, Revolving (Details)

DEBT, Revolving (Details) - Michaels Stores - Asset-based revolving credit facility - USD ($) $ in Millions	Nov. 03, 2018	Oct. 28, 2017
Asset-based Revolving Credit Facility
Maximum borrowing capacity	$ 850	$ 850
Unused borrowing capacity	567	675.7
Outstanding letters of credit	$ 65	$ 65.3

DEBT, Term Loan (Details)

DEBT, Term Loan (Details) - USD ($) $ in Thousands	May 23, 2018	Aug. 04, 2018	Nov. 03, 2018
Debt
Losses on early extinguishments of debt and refinancing costs			$ 1,835
Michaels Stores
Debt
Losses on early extinguishments of debt and refinancing costs			$ 1,835
Michaels Stores | Senior Secured Term Loan Facility
Debt
Scheduled quarterly payments as a percentage of the original principal amount of the term loans	0.25%
Period of incurrence of additional term loans to make scheduled quarterly payments	4 years 6 months
Losses on early extinguishments of debt and refinancing costs		$ 1,800
Michaels Stores | Senior Secured Term Loan Facility | Base rate
Debt
Margin basis spread on reference rate (as a percent)	1.50%
Michaels Stores | Senior Secured Term Loan Facility | Federal Funds
Debt
Margin basis spread on reference rate (as a percent)	0.50%
Michaels Stores | Senior Secured Term Loan Facility | One-month LIBOR
Debt
Margin basis spread on reference rate (as a percent)	1.00%
Michaels Stores | Senior Secured Term Loan Facility | LIBOR
Debt
Margin basis spread on reference rate (as a percent)	2.50%

DEBT, Interest Rate Swaps (Deta

DEBT, Interest Rate Swaps (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018USD ($)	Oct. 28, 2017USD ($)	Nov. 03, 2018USD ($)	Oct. 28, 2017USD ($)	Apr. 30, 2018USD ($)derivative
Debt
Interest expense	$ 37,798	$ 32,818	$ 109,493	$ 94,305
Senior Secured Term Loan Facility | Michaels Stores
Debt
Interest rate (as a percent)					2.7765%
Senior Secured Term Loan Facility | Michaels Stores | Accumulated Gain (Loss), Cash Flow Hedge | Reclassification out of Accumulated Other Comprehensive Income
Debt
Interest expense	1,600		3,700
Interest rate swap | Senior Secured Term Loan Facility | Michaels Stores
Debt
Number of interest rate swaps | derivative					2
Notional value					$ 1,000,000
Net asset (liability)	4,500		4,500
Interest rate swap | Senior Secured Term Loan Facility | Michaels Stores | Other assets
Debt
Net asset (liability)	5,000		5,000
Interest rate swap | Senior Secured Term Loan Facility | Michaels Stores | Accrued liabilities and other
Debt
Net asset (liability)	$ (600)		$ (600)

ACCUMULATED OTHER COMPREHENSI_3

ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017
Accumulated Other Comprehensive Loss
Balance at the beginning			$ (1,509,495)
Balance at the end	$ (1,789,851)	$ (1,732,838)	(1,789,851)	$ (1,732,838)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Loss
Balance at the beginning	(9,906)	(5,552)	(3,660)	(14,224)
Balance at the end	(6,890)	(9,970)	(6,890)	(9,970)
Foreign Currency Translation Adjustment & Other
Accumulated Other Comprehensive Loss
Accumulated other comprehensive income (loss)	(942)	$ (4,418)	(6,528)	$ 4,254
Interest rate swaps
Accumulated Other Comprehensive Loss
Accumulated other comprehensive income (loss)	$ 3,958		$ 3,298

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($) $ in Millions	Dec. 22, 2017	Dec. 21, 2017	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017
INCOME TAXES
Effective tax rate (as a percent)			15.80%	34.30%	24.00%	34.40%
Charge for repatriation of earnings of foreign subsidiaries					$ 5
Provisional benefit related to revaluation of net deferred tax assets as result of Tax Act					$ 4
Income taxes at statutory rate (as a percent)	21.00%	35.00%

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017
Earnings per share
Anti-dilutive stock options shares excluded from the computation of earnings per share (in shares)	8,400	5,800	7,100	6,000
Basic earnings per common share:
Net income	$ 83,769	$ 79,760	$ 138,142	$ 187,530
Income available to common shareholders - Basic	$ 83,631	$ 79,463	$ 137,857	$ 186,741
Weighted-average common shares outstanding - Basic (in shares)	165,975	180,710	174,949	185,521
Basic earnings per common share (in dollars per share)	$ 0.50	$ 0.44	$ 0.79	$ 1.01
Diluted earnings per common share:
Net income	$ 83,769	$ 79,760	$ 138,142	$ 187,530
Income available to common shareholders - Diluted	$ 83,631	$ 79,465	$ 137,858	$ 186,746
Weighted-average common shares outstanding - Basic (in shares)	165,975	180,710	174,949	185,521
Effect of dilutive stock options and restricted stock units (in shares)	595	1,277	902	1,254
Weighted-average common shares outstanding - Diluted (in shares)	166,570	181,987	175,851	186,775
Diluted earnings per common share (in dollars per share)	$ 0.50	$ 0.44	$ 0.78	$ 1
Restricted Shares
Basic earnings per common share:
Less income related to unvested restricted shares	$ (138)	$ (297)	$ (285)	$ (789)
Diluted earnings per common share:
Less income related to unvested restricted shares	$ (138)	$ (295)	$ (284)	$ (784)

SEGMENTS AND GEOGRAPHIC INFOR_3

SEGMENTS AND GEOGRAPHIC INFORMATION (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018USD ($)	Oct. 28, 2017USD ($)	Nov. 03, 2018USD ($)item	Oct. 28, 2017USD ($)
Segments
Number of reportable segments | item			1
Net Sales	$ 1,274,058	$ 1,240,196	$ 3,482,835	$ 3,471,352
United States
Segments
Net Sales	1,153,784	1,117,626	3,158,393	3,152,048
Canada
Segments
Net Sales	$ 120,274	$ 122,570	$ 324,442	$ 319,304

SEGMENTS AND GEOGRAPHIC INFOR_4

SEGMENTS AND GEOGRAPHIC INFORMATION, Aaron Brothers (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenues	$ 1,274,058	$ 1,240,196	$ 3,482,835	$ 3,471,352
Aaron Brothers | Not Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenues	$ 0	$ 25,200	$ 12,900	$ 78,000

CONTINGENCIES (Details)

CONTINGENCIES (Details) - Fair credit reporting claim - item	Jan. 24, 2017	Nov. 03, 2018
Commitments and Contingencies
Number of claims filed		5
Number of plaintiffs		6
Period dismissal order was stayed	30 days
Number of amendments filed	0
Number of cases dismissed	2
Number of consolidated cases filed	3

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details)	Nov. 03, 2018
The Sponsors
Related Party Transactions
Percentage of equity ownership owned	46.00%

RELATED PARTY TRANSACTIONS, Tra

RELATED PARTY TRANSACTIONS, Transactions (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018USD ($)item	Oct. 28, 2017USD ($)	Nov. 03, 2018USD ($)item	Oct. 28, 2017USD ($)	Feb. 03, 2018USD ($)
Related Party Transactions
Long-term debt	$ 2,930,563	$ 2,847,245	$ 2,930,563	$ 2,847,245	$ 2,726,664
The Blackstone Group | Term loan credit facility
Related Party Transactions
Long-term debt	93,200		93,200
The Blackstone Group | Store Inventory Count Services | Selling, General and Administrative Expenses
Related Party Transactions
Expenses recognized	0	2,300	700	6,000
The Blackstone Group | Lease Services | Cost of Sales and Occupancy Expense
Related Party Transactions
Expenses recognized	1,400	2,000	4,700	5,400
The Blackstone Group | Transportation and Supply Chain Software | Selling, General and Administrative Expenses
Related Party Transactions
Expenses recognized	$ 300	$ 300	$ 2,200	$ 1,000
Bain Capital or The Blackstone Group
Related Party Transactions
Number of directors | item	3		3

CONDENSED CONSOLIDATED FINANC_3

CONDENSED CONSOLIDATED FINANCIAL INFORMATION, Balance Sheet (Details) - USD ($) $ in Thousands	Nov. 03, 2018	Feb. 03, 2018	Oct. 28, 2017
Current assets:
Cash and equivalents	$ 102,670	$ 425,896	$ 176,771
Merchandise inventories	1,440,875	1,123,288	1,404,206
Prepaid expenses and other current assets	100,791	97,830	95,993
Total current assets	1,693,877	1,676,982	1,713,698
Property and equipment, net	453,396	420,020	401,892
Goodwill	119,074	119,074	119,074
Other assets	28,730	27,832	12,233
Total assets	2,339,035	2,300,215	2,306,096
Current liabilities:
Accounts payable	645,469	483,002	674,222
Accrued liabilities and other	407,684	370,457	400,138
Current portion of long-term debt	240,261	24,900	140,125
Total current liabilities	1,293,890	957,945	1,231,158
Long-term debt	2,690,302	2,701,764	2,707,120
Other liabilities	144,694	150,001	100,656
Total stockholders' deficit	(1,789,851)	(1,509,495)	(1,732,838)
Total liabilities and stockholders' deficit	2,339,035	2,300,215	2,306,096
Michaels Stores
Current assets:
Cash and equivalents	101,895	425,129	176,007
Merchandise inventories	1,440,875	1,123,288	1,404,206
Prepaid expenses and other current assets	146,317	127,656	131,695
Total current assets	1,689,087	1,676,073	1,711,908
Property and equipment, net	453,396	420,020	401,892
Goodwill	119,074	119,074	119,074
Other assets	73,088	84,537	72,036
Total assets	2,334,645	2,299,704	2,304,910
Current liabilities:
Accounts payable	645,469	483,002	674,222
Accrued liabilities and other	407,252	369,647	399,363
Current portion of long-term debt	240,261	24,900	140,125
Other current liabilities	41,948	124,881	60,884
Total current liabilities	1,334,930	1,002,430	1,274,594
Long-term debt	2,690,302	2,701,764	2,707,120
Other liabilities	156,770	165,662	108,112
Total stockholders' deficit	(1,847,357)	(1,570,152)	(1,784,916)
Total liabilities and stockholders' deficit	$ 2,334,645	$ 2,299,704	$ 2,304,910

CONDENSED CONSOLIDATED FINANC_4

CONDENSED CONSOLIDATED FINANCIAL INFORMATION, Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017	Nov. 03, 2018	Oct. 28, 2017
Supplemental Condensed Consolidating Statement of Comprehensive Income
Net sales	$ 1,274,058	$ 1,240,196	$ 3,482,835	$ 3,471,352
Cost of sales and occupancy expense	795,104	756,088	2,173,990	2,117,100
Gross profit	478,954	484,108	1,308,845	1,354,252
Selling, general and administrative	340,593	329,298	970,191	970,561
Restructure charge			44,278
Store pre-opening costs	1,196	952	3,995	2,592
Operating income	137,165	153,858	290,381	381,099
Losses on early extinguishments of debt and refinancing costs			1,835
Income before income taxes	99,488	121,400	181,699	285,844
Income taxes	15,719	41,640	43,557	98,314
Net income	83,769	79,760	138,142	187,530
Other comprehensive income, net of tax:
Foreign currency translation adjustment and other	3,016	(4,418)	(3,230)	4,254
Comprehensive income	86,785	75,342	134,912	191,784
Michaels Stores
Supplemental Condensed Consolidating Statement of Comprehensive Income
Net sales	1,274,058	1,240,196	3,482,835	3,471,352
Cost of sales and occupancy expense	795,104	756,088	2,173,990	2,117,100
Gross profit	478,954	484,108	1,308,845	1,354,252
Selling, general and administrative	340,375	328,855	969,500	969,793
Restructure charge			44,278
Store pre-opening costs	1,196	952	3,995	2,592
Operating income	137,383	154,301	291,072	381,867
Interest and other expense	37,680	32,460	106,857	95,261
Losses on early extinguishments of debt and refinancing costs			1,835
Income before income taxes	99,703	121,841	182,380	286,606
Income taxes	15,771	41,806	43,722	98,601
Net income	83,932	80,035	138,658	188,005
Other comprehensive income, net of tax:
Foreign currency translation adjustment and other	3,016	(4,418)	(3,230)	4,254
Comprehensive income	$ 86,948	$ 75,617	$ 135,428	$ 192,259

CONDENSED CONSOLIDATED FINANC_5

CONDENSED CONSOLIDATED FINANCIAL INFORMATION, Cash Flow (Details) - USD ($) $ in Thousands	9 Months Ended
	Nov. 03, 2018	Oct. 28, 2017
Cash flows from operating activities:
Net cash provided by operating activities	$ 25,814	$ 106,427
Cash flows used in investing activities:
Additions to property and equipment	(119,553)	(72,640)
Cash flows from financing activities:
Payment of debt refinancing costs	(1,117)
Net cash used in financing activities	(229,487)	(155,829)
Net change in cash and equivalents	(323,226)	(122,042)
Cash and equivalents at beginning of period	425,896	298,813
Cash and equivalents at end of period	102,670	176,771
Michaels Stores
Cash flows from operating activities:
Net cash provided by operating activities	22,855	109,782
Cash flows used in investing activities:
Additions to property and equipment	(119,553)	(72,640)
Cash flows from financing activities:
Net repayments of debt	(106,756)	(266,875)
Net borrowings of debt	307,400	357,200
Payment of debt refinancing costs	(1,117)
Payment of dividend to Michaels Funding, Inc.	(426,063)	(245,514)
Net cash used in financing activities	(226,536)	(155,189)
Net change in cash and equivalents	(323,234)	(118,047)
Cash and equivalents at beginning of period	425,129	294,054
Cash and equivalents at end of period	$ 101,895	$ 176,007