Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Nov. 02, 2013 | Dec. 06, 2013 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'MICHAELS STORES INC | ' |
Entity Central Index Key | '0000740670 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 2-Nov-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--02-01 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Non-accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 100 |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Nov. 02, 2013 | Feb. 02, 2013 | Oct. 27, 2012 |
In Millions, unless otherwise specified | |||
Current assets: | ' | ' | ' |
Cash and equivalents | $68 | $56 | $161 |
Merchandise inventories | 1,119 | 862 | 1,078 |
Prepaid expenses and other | 99 | 86 | 91 |
Receivable from Parent | 1 | ' | ' |
Deferred income taxes | 38 | 37 | 42 |
Income tax receivable | 20 | 3 | 17 |
Total current assets | 1,345 | 1,044 | 1,389 |
Property and equipment, at cost | 1,570 | 1,502 | 1,478 |
Less accumulated depreciation and amortization | -1,217 | -1,164 | -1,134 |
Property and equipment, net | 353 | 338 | 344 |
Goodwill | 94 | 94 | 95 |
Debt issuance costs, net of accumulated amortization of $57, $54, and $77, respectively | 38 | 46 | 53 |
Deferred income taxes | 29 | 30 | 32 |
Long-term receivable from Parent | 5 | ' | ' |
Other assets | 2 | 3 | 4 |
Total non-current assets | 168 | 173 | 184 |
Total assets | 1,866 | 1,555 | 1,917 |
Current liabilities: | ' | ' | ' |
Accounts payable | 467 | 263 | 374 |
Accrued liabilities and other | 342 | 367 | 424 |
Share-based compensation | 21 | 35 | 30 |
Current portion of long-term debt | 203 | 150 | 180 |
Deferred income taxes | 4 | 4 | 1 |
Income taxes payable | 6 | 37 | 6 |
Total current liabilities | 1,043 | 856 | 1,015 |
Long-term debt | 2,878 | 2,891 | 3,188 |
Deferred income taxes | 2 | 2 | 11 |
Share-based compensation | 28 | 27 | 24 |
Other long-term liabilities | 86 | 83 | 86 |
Total long-term liabilities | 2,994 | 3,003 | 3,309 |
Total liabilities | 4,037 | 3,859 | 4,324 |
Commitments and contingencies | ' | ' | ' |
Stockholders' deficit: | ' | ' | ' |
Common Stock, $0.10 par value, 100 shares authorized; 100 shares issued and outstanding | ' | ' | ' |
Additional paid-in capital | 63 | 49 | 51 |
Accumulated deficit | -2,238 | -2,359 | -2,464 |
Accumulated other comprehensive income | 4 | 6 | 6 |
Total stockholders' deficit | -2,171 | -2,304 | -2,407 |
Total liabilities and stockholders' deficit | $1,866 | $1,555 | $1,917 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Nov. 02, 2013 | Feb. 02, 2013 | Oct. 27, 2012 |
In Millions, except Share data, unless otherwise specified | |||
CONSOLIDATED BALANCE SHEETS | ' | ' | ' |
Debt issuance costs, accumulated amortization (in dollars) | $57 | $54 | $77 |
Common Stock, par value (in dollars per share) | $0.10 | $0.10 | $0.10 |
Common Stock, shares authorized | 100 | 100 | 100 |
Common Stock, shares issued | 100 | 100 | 100 |
Common Stock, shares outstanding | 100 | 100 | 100 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ' | ' | ' | ' |
Net sales | $1,118 | $1,014 | $3,015 | $2,884 |
Cost of sales and occupancy expense | 665 | 612 | 1,816 | 1,736 |
Gross profit | 453 | 402 | 1,199 | 1,148 |
Selling, general, and administrative expense | 309 | 277 | 835 | 787 |
Share-based compensation expense | 4 | 2 | 15 | 9 |
Related party expenses | 3 | 3 | 10 | 10 |
Store pre-opening costs | 2 | 3 | 5 | 5 |
Operating income | 135 | 117 | 334 | 337 |
Interest expense | 45 | 60 | 137 | 187 |
Refinancing costs and losses on early extinguishment of debt | ' | 3 | 7 | 3 |
Other (income) and expense, net | ' | ' | 1 | -1 |
Income before income taxes | 90 | 54 | 189 | 148 |
Provision for income taxes | 32 | 19 | 68 | 53 |
Net income | 58 | 35 | 121 | 95 |
Other comprehensive income, net of tax: | ' | ' | ' | ' |
Foreign currency translation adjustment and other | ' | ' | -2 | ' |
Comprehensive income | $58 | $35 | $119 | $95 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 |
Operating activities: | ' | ' |
Net income | $121 | $95 |
Adjustments: | ' | ' |
Depreciation and amortization | 74 | 71 |
Share-based compensation expense | 19 | 15 |
Debt issuance costs amortization | 6 | 12 |
Accretion of long-term debt | -1 | ' |
Refinancing costs and losses on early extinguishment of debt | 7 | 3 |
Changes in assets and liabilities: | ' | ' |
Merchandise inventories | -254 | -233 |
Prepaid expenses and other | -13 | -11 |
Accounts payable | 211 | 72 |
Accrued interest | -29 | 36 |
Accrued liabilities and other | -21 | -15 |
Income taxes | -49 | -33 |
Other long-term liabilities | 3 | 1 |
Net cash provided by operating activities | 74 | 13 |
Investing activities: | ' | ' |
Additions to property and equipment | -82 | -85 |
Net cash used in investing activities | -82 | -85 |
Financing activities: | ' | ' |
Issuance of senior notes due 2018 | ' | 213 |
Redemption of senior subordinated notes due 2016 | ' | -127 |
Repurchase of subordinated discount notes due 2016 | -142 | ' |
Repayments on senior secured term loan facility | -8 | -209 |
Borrowings on asset-based revolving credit facility | 389 | ' |
Payments on asset-based revolving credit facility | -203 | ' |
Payments of debt issuance costs | ' | -8 |
Payment of capital leases | ' | -2 |
Change in cash overdraft | -9 | -5 |
Payments on behalf of Parent | -7 | ' |
Net cash provided by (used in) financing activities | 20 | -138 |
Net increase (decrease) in cash and equivalents | 12 | -210 |
Cash and equivalents at beginning of period | 56 | 371 |
Cash and equivalents at end of period | 68 | 161 |
Supplemental Cash Flow Information: | ' | ' |
Cash paid for interest | 160 | 138 |
Cash paid for income taxes | $115 | $85 |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 9 Months Ended |
Nov. 02, 2013 | |
Summary of Significant Accounting Policies | ' |
Summary of Significant Accounting Policies | ' |
Note 1. Summary of Significant Accounting Policies | |
Basis of Presentation | |
The consolidated financial statements include the accounts of Michaels Stores, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. All expressions of the “Company”, “Michaels”, “us,” “we,” “our,” and all similar expressions are references to Michaels Stores, Inc. and its consolidated, wholly-owned subsidiaries, unless otherwise expressly stated or the context otherwise requires. | |
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 notes 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 2, 2013. | |
The balance sheet at February 2, 2013 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. | |
In the opinion of management, all adjustments (consisting of normal recurring accruals and other items) considered necessary for a fair presentation have been included. | |
Because of the seasonal nature of our business, the results of operations for the quarter and nine months ended November 2, 2013 are not indicative of the results to be expected for the entire year. | |
We report on the basis of a 52- or 53-week fiscal year, which ends on the Saturday closest to January 31. All references herein to “fiscal 2013” relate to the 52 weeks ending February 1, 2014, and all references to “fiscal 2012” relate to the 53 weeks ended February 2, 2013. In addition, all references herein to “the third quarter of fiscal 2013” relate to the 13 weeks ended November 2, 2013, and all references to “the third quarter of fiscal 2012” relate to the 13 weeks ended October 27, 2012. Finally, all references to “the nine months ended November 2, 2013” relate to the 39 weeks ended November 2, 2013, and “the nine months ended October 27, 2012” relate to the 39 weeks ended October 27, 2012. | |
Recent Accounting Pronouncements | |
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists.” ASU 2013-11 requires unrecognized tax benefits to be presented as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. ASU 2013-11, which is prospective, is effective for reporting periods beginning after December 15, 2013, with earlier adoption permitted. Beginning with the fourth quarter of fiscal year 2012, the Company has reported unrecognized tax benefits consistent with ASU No. 2013-11. | |
Restatement_Sharebased_Compens
Restatement - Share-based Compensation | 9 Months Ended | ||||||||||
Nov. 02, 2013 | |||||||||||
Restatement - Share-based Compensation | ' | ||||||||||
Restatement-Accounting for Income Taxes | ' | ||||||||||
Note 2. Restatement — Share-based Compensation | |||||||||||
The Company determined its previously issued unaudited interim consolidated financial statements for the three and nine months ended October 27, 2012, contained an error with respect to ASC 718, Compensation — Stock Compensation. The accounting error was material to fiscal 2011 and fiscal 2012 financial statements and those financial statements required restatement. As a result, the Company is also restating its financial statements for the three and nine months ended October 27, 2012. Specifically, former participants in the Company’s Equity Incentive Plan and its successor Plan (The Michaels Companies, Inc. (“Parent”) Equity Incentive Plan, together the “Plan”) exercised stock options upon their termination from the Company, and the Company repurchased the immature shares. Immature shares are defined as shares held for less than six months following exercise. The Company consistently repurchased shares in this manner and therefore, under accounting rules, established a pattern of repurchasing immature shares during the third quarter of 2011. The Company determined all stock options should have been treated as liability awards in accordance with the rules of ASC 718-10-25-9. Under liability accounting, the Company re-measures the fair value of stock compensation each period and recognizes changes in fair value as awards vest and until the award is settled. The Company originally recognized expense ratably over the vesting period based on the grant date fair value of the option in accordance with the fixed method of accounting. The impact to share-based compensation cost for the three and nine months ended October 27, 2012, was $2 million ($1, net of tax) and $12 million ($7, net of tax), respectively. | |||||||||||
The following tables illustrate the correction as associated with certain line items in the unaudited interim consolidated financial statements (amounts in millions): | |||||||||||
Consolidated Balance Sheet | |||||||||||
As of October 27, 2012 | |||||||||||
(unaudited) | |||||||||||
As | Share-based | As | |||||||||
Reported | compensation | Restated | |||||||||
Adjustment | |||||||||||
Merchandise inventories | $ | 1,076 | $ | 2 | $ | 1,078 | |||||
Total current assets | 1,387 | 2 | 1,389 | ||||||||
Deferred income taxes | 18 | 14 | 32 | ||||||||
Total non-current assets | 170 | 14 | 184 | ||||||||
Share-based compensation | — | 30 | 30 | ||||||||
Income taxes payable | 8 | (2 | ) | 6 | |||||||
Total current liabilities | 987 | 28 | 1,015 | ||||||||
Share-based compensation | — | 24 | 24 | ||||||||
Total long-term liabilities | 3,285 | 24 | 3,309 | ||||||||
Additional paid-in capital | 61 | (10 | ) | 51 | |||||||
Accumulated deficit | (2,438 | ) | (26 | ) | (2,464 | ) | |||||
Total stockholders’ deficit | (2,371 | ) | (36 | ) | (2,407 | ) | |||||
Consolidated Statements of Comprehensive Income | |||||||||||
Quarter Ended October 27, 2012 | |||||||||||
(unaudited) | |||||||||||
As | Share-based | As | |||||||||
Reported | compensation | Restated | |||||||||
Adjustment | |||||||||||
Cost of sales and occupancy expense | $ | 611 | $ | 1 | $ | 612 | |||||
Gross Profit | 403 | (1 | ) | 402 | |||||||
Selling, general and administrative expense | 278 | (1 | ) | 277 | |||||||
Share-based compensation expense | — | 2 | 2 | ||||||||
Operating income | 119 | (2 | ) | 117 | |||||||
Income before income taxes | 56 | (2 | ) | 54 | |||||||
Provision for income taxes | 20 | (1 | ) | 19 | |||||||
Net income | 36 | (1 | ) | 35 | |||||||
Comprehensive income | 36 | (1 | ) | 35 | |||||||
Consolidated Statements of Comprehensive Income | |||||||||||
Nine Months Ended October 27, 2012 | |||||||||||
(unaudited) | |||||||||||
As | Share-based | As | |||||||||
Reported | compensation | Restated | |||||||||
Adjustment | |||||||||||
Cost of sales and occupancy expense | $ | 1,730 | $ | 6 | $ | 1,736 | |||||
Gross Profit | 1,154 | (6 | ) | 1,148 | |||||||
Selling, general and administrative expense | 790 | (3 | ) | 787 | |||||||
Share-based compensation expense | — | 9 | 9 | ||||||||
Operating income | 349 | (12 | ) | 337 | |||||||
Income before income taxes | 160 | (12 | ) | 148 | |||||||
Provision for income taxes | 58 | (5 | ) | 53 | |||||||
Net income | 102 | (7 | ) | 95 | |||||||
Comprehensive income | 102 | (7 | ) | 95 | |||||||
Cash Flow Data | |||||||||||
Nine Months Ended October 27, 2012 | |||||||||||
(unaudited) | |||||||||||
As | Share-based | As | |||||||||
Reported | compensation | Restated | |||||||||
Adjustment | |||||||||||
Operating Activities: | |||||||||||
Net income | $ | 102 | (7 | ) | $ | 95 | |||||
Share-based compensation and other | 4 | 11 | 15 | ||||||||
Merchandise inventories | (236 | ) | 3 | (233 | ) | ||||||
Accrued liabilities and other | (11 | ) | (4 | ) | (15 | ) | |||||
Income taxes | (27 | ) | (6 | ) | (33 | ) | |||||
Net cash provided by operating activities | 16 | (3 | ) | 13 | |||||||
Repurchase of Common Stock | (10 | ) | 10 | — | |||||||
Proceeds from stock options exercised | 7 | (7 | ) | — | |||||||
Net cash used in financing activities | (141 | ) | 3 | (138 | ) | ||||||
Debt
Debt | 9 Months Ended | ||||||||||||
Nov. 02, 2013 | |||||||||||||
Debt | ' | ||||||||||||
Debt | ' | ||||||||||||
Note 3. Debt | |||||||||||||
On November 22, 2013, the Audit Committee of our Board of Directors (the “Audit Committee”), after considering the recommendation of management and discussing with Ernst & Young LLP, our independent registered public accounting firm, concluded it was necessary to restate our previously issued consolidated financial statements for the fiscal years ended February 2, 2013 and January 28, 2012. In connection with the preparation of our Quarterly Report on Form 10-Q for the quarterly period ended November 2, 2013, we determined that we had incorrectly accounted for certain stock compensation transactions under the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718 Compensation — Stock Compensation. The Company’s covenants for its outstanding debt require annual and quarterly financial statements prepared in accordance with GAAP to be provided within 45 or 90 days of the end of the period. As a result of the restatement described above and in Note 2 to the consolidated financial statements, the Company rescinded its previously issued financial statements for fiscal 2011 and fiscal 2012 and the first and second quarters of 2013. The Company believes it has cured the potential defect through the filing with the Securities and Exchange Commission of its amended fiscal 2011 and fiscal 2012 audited consolidated financial statements on December 2, 2013 and its unaudited quarterly financial statements for the first and second quarter of fiscal 2013 on December 9, 2013. The Company is in compliance with the other terms and conditions of all debt agreements for all periods presented. Our outstanding debt is detailed in the table below. | |||||||||||||
November 2, 2013 | February 2, 2013 | October 27, 2012 | Interest Rate | ||||||||||
(in millions) | |||||||||||||
Senior secured term loan | $ | 1,632 | $ | 1,640 | $ | 1,787 | Variable | ||||||
Senior notes | 1,007 | 1,007 | 1,008 | 7.75% | |||||||||
Senior subordinated notes | 255 | 393 | 393 | 11.38% | |||||||||
Subordinated discount notes | — | — | 180 | 13.00% | |||||||||
Asset-based revolving credit facility | 187 | 1 | — | Variable | |||||||||
Total debt | 3,081 | 3,041 | 3,368 | ||||||||||
Less current portion | 203 | 150 | 180 | ||||||||||
Long-term debt | $ | 2,878 | $ | 2,891 | $ | 3,188 | |||||||
113/8% Senior Subordinated Notes due 2016 | |||||||||||||
On January 28, 2013, we caused to be delivered to the holders of our outstanding 113/8% Senior Subordinated Notes due November 1, 2016 (the “Senior Subordinated Notes”) an irrevocable notice relating to the redemption of $137 million in aggregate principal amount of the Senior Subordinated Notes. On February 27, 2013, we redeemed the $137 million of Senior Subordinated Notes at a redemption price equal to 103.792%. In accordance with Accounting Standards Codification (“ASC”) 470 Debt, we recorded a loss on early extinguishment of debt of approximately $7 million related to the partial redemption of our Senior Subordinated Notes. The $7 million loss is comprised of a $5 million redemption premium and $2 million to write off related debt issuance costs. | |||||||||||||
Restated Revolving Credit Facility | |||||||||||||
As of November 2, 2013, the borrowing base of our restated senior secured asset-based revolving credit facility (“the Restated Revolving Credit Facility”) was $650 million, of which we had $187 million in borrowings, $62 million of outstanding letters of credit and the unused borrowing capacity was $401 million. | |||||||||||||
Restated Term Loan Credit Facility | |||||||||||||
The Company is required to make scheduled quarterly payments, each equal to 0.25% of the original principal amount of the term loans, subject to adjustments relating to the incurrence of additional term loans under our senior secured term loan facility (“Restated Term Loan Credit Facility”), for the first six years and three quarters, with the balance paid on January 28, 2020. The Company paid $4 million and $8 million for the quarter and nine months ended November 2, 2013, respectively and the current portion of debt includes $16 million that will be paid during the next four quarters. | |||||||||||||
Comprehensive_Income
Comprehensive Income | 9 Months Ended | ||||
Nov. 02, 2013 | |||||
Comprehensive Income | ' | ||||
Comprehensive Income | ' | ||||
Note 4. Comprehensive Income | |||||
Accumulated other comprehensive income, net of tax, is reflected in the Consolidated Balance Sheets as follows: | |||||
Foreign Currency | |||||
Translation | |||||
and Other | |||||
(in millions) | |||||
Balance at February 2, 2013 | $ | 6 | |||
Foreign currency translation adjustment and other | (2 | ) | |||
Balance at November 2, 2013 | $ | 4 | |||
Fair_Value_Measurements
Fair Value Measurements | 9 Months Ended | |||||||
Nov. 02, 2013 | ||||||||
Fair Value Measurements | ' | |||||||
Fair Value Measurements | ' | |||||||
Note 5. Fair Value Measurements | ||||||||
As defined in ASC 820, Fair Value Measurements and Disclosures, 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. | ||||||||
We apply fair value techniques on a non-recurring basis for the establishment of potential impairment loss related to goodwill pursuant to ASC 350, Intangibles—Goodwill and Other and determining the fair value of long-lived assets pursuant to ASC 360, Property, Plant, and Equipment. During the quarter and nine months ended November 2, 2013, there were no material events or changes in circumstances indicating the carrying amounts of our goodwill or long-lived assets may not be recoverable. | ||||||||
The table below provides the carrying and fair values of our Restated Term Loan Credit Facility, our 7 3/4% Senior Notes that mature in 2018 (“2018 Senior Notes”) and our Senior Subordinated Notes, (together, with our 2018 Senior Notes, “our notes” ) as of November 2, 2013. The fair value of our Restated Term Loan Credit Facility was determined based on quoted market prices of similar instruments which are considered Level 2 inputs within the fair value hierarchy. The fair value of our notes was determined based on recent trades which are considered Level 1 inputs within the fair value hierarchy. | ||||||||
Carrying Value | Fair Value | |||||||
(in millions) | ||||||||
Senior secured term loan | $ | 1,632 | $ | 1,641 | ||||
Senior notes | 1,007 | 1,085 | ||||||
Senior subordinated notes | 255 | 262 | ||||||
Income_Taxes
Income Taxes | 9 Months Ended |
Nov. 02, 2013 | |
Income Taxes | ' |
Income Taxes | ' |
Note 6. Income Taxes | |
The effective tax rate was 35.6% for the third quarter of fiscal 2013. The effective tax rate was 35.2% for the third quarter of fiscal 2012. The current year tax rate is higher than the prior year tax rate due primarily to the reduced rate impact of our permanent adjustments as a result of our greater profit before tax. | |
The effective tax rate was 36.0% for the first nine months of fiscal 2013. The effective tax rate was 35.8% for the first nine months of fiscal 2012. The rate was higher than the prior year nine month tax rate due primarily to the reduced rate impact of our permanent adjustments as a result of our greater profit before tax. We currently estimate our annualized effective tax rate for fiscal 2013 to be 37.0%. | |
Commitments_and_Contingencies
Commitments and Contingencies | 9 Months Ended |
Nov. 02, 2013 | |
Commitments and Contingencies | ' |
Commitments and Contingencies | ' |
Note 7. Commitments and Contingencies | |
We are involved in ongoing legal and regulatory proceedings. Other than those described in the following paragraphs, there were no material changes to our disclosures of commitments and contingencies from our Annual Report on Form 10-K for the fiscal year ended February 2, 2013 and our Quarterly Report on Form 10-Q for the quarterly periods ended May 4, 2013 and August 3, 2013. | |
Employee Claims | |
Rea Claim | |
On September 15, 2011, the Company was served with a lawsuit filed in the California Superior Court in and for the County of Orange (“Superior Court”) by four former store managers as a purported class action proceeding on behalf of themselves and certain former and current store managers employed by Michaels stores in California. The lawsuit alleges that the Company improperly classified its store managers as exempt employees and as such failed to pay all wages, overtime, waiting time penalties and failed to provide accurate wage statements. The lawsuit also alleges that the foregoing conduct was in breach of various laws, including California’s unfair competition law. The plaintiffs have pled less than five million dollars in damages, penalties, costs of suit and attorneys’ fees, exclusive of interest. On December 3, 2013, the Superior Court entered an order certifying a class of approximately 200 members and the Company is considering its options with respect to the ruling. We believe we have meritorious defenses and intend to defend the lawsuit vigorously. We do not believe the resolution of the lawsuit will have a material effect on our consolidated financial statements. | |
Consumer Class Action Claims | |
California Zip Code Claims | |
On August 15, 2008, Linda Carson, a consumer, filed a purported class action proceeding against Michaels Stores, Inc. in the Superior Court of California, County of San Diego (“San Diego Superior Court”), on behalf of herself and all similarly-situated California consumers. The Carson lawsuit alleges that Michaels unlawfully requested and recorded personally identifiable information (i.e., her zip code) as part of a credit card transaction. The plaintiff sought statutory penalties, costs, interest, and attorneys’ fees. We contested certification of this claim as a class action and filed a motion to dismiss the claim. On March 9, 2009, the Court dismissed the case with prejudice. The plaintiff appealed this decision to the California Court of Appeals for the Fourth District, San Diego. On July 22, 2010, the Court of Appeals upheld the dismissal of the case. The plaintiff appealed this decision to the Supreme Court of California (“California Supreme Court”). On September 29, 2010, the California Supreme Court granted the plaintiff’s petition for review; however, it stayed any further proceedings in the case until another similar zip code case pending before the court, Pineda v. Williams-Sonoma, was decided. On February 10, 2011, the California Supreme Court ruled, in the Williams-Sonoma case, that zip codes are personally identifiable information and therefore the Song-Beverly Credit Card Act of 1971, as amended (“Song Act”), prohibits businesses from requesting or requiring zip codes in connection with a credit card transaction. On or about April 6, 2011, the Supreme Court transferred the Carson case back to the Court of Appeals with directions to the Court to reconsider its decision in light of the Pineda decision. Upon reconsideration, the Court of Appeals remanded the case back to the San Diego Superior Court on May 31, 2011. | |
Additionally, since the California Supreme Court decision on February 10, 2011, three additional purported class action lawsuits alleging violations of the Song Act have been filed against the Company: Carolyn Austin v. Michaels Stores, Inc. and Tiffany Heon v. Michaels Stores, Inc., both in the San Diego Superior Court and Sandra A. Rubinstein v. Michaels Stores, Inc. in the Superior Court of California, County of Los Angeles, Central Division. The Rubinstein case was transferred to the San Diego Superior Court. An order coordinating the cases has been entered and plaintiffs filed a Consolidated Complaint on April 24, 2012. Plaintiffs seek damages, civil penalties, common settlement fund recovery, attorney fees, costs of suit and prejudgment interest. The parties mediated the matter in March and a tentative settlement was reached for an amount that will not have a material effect on our Consolidated Financial Statements. On December 6, 2013, the Court advised that it was granting preliminary approval of the settlement agreement. | |
General | |
In addition to the litigation discussed above, we are, and in the future, may be 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. | |
ASC 450, Contingencies, governs the disclosure and recognition of loss contingencies, including potential losses from litigation and regulatory matters. It imposes different requirements for the recognition and disclosure of loss contingencies based on the likelihood of occurrence of the contingent future event or events. It distinguishes among degrees of likelihood using the following three terms: “probable”, meaning that “the future event or events are likely to occur”; “remote”, meaning that “the chance of the future event or events occurring is slight”; and “reasonably possible”, meaning that “the chance of the future event or events occurring is more than remote but less than likely”. In accordance with ASC 450, the Company accrues for a loss contingency when we conclude that the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. When the loss cannot be reasonably estimated we estimate the range of amounts, and if no amount in the range constitutes a better estimate than any other amount, we accrue for the amount at the low end of the range. We adjust our accruals from time to time as we receive additional information, but the loss we incur may be significantly greater than or less than the amount we have accrued. We disclose loss contingencies if there is at least a reasonable possibility that a material loss has been incurred. No accrual or disclosure is required for losses that are remote. | |
For the matters disclosed above, as well as other matters previously disclosed in the Company’s filings with the Securities and Exchange Commission (“SEC”), the Company is currently able to estimate a reasonably possible loss or range of loss in excess of amounts accrued (if any). For some of the matters included within this estimation, an accrual has been made because a loss is believed to be both probable and reasonably estimable, but an exposure to loss exists in excess of the amount accrued; in these cases, the estimate reflects the reasonably possible range of loss in excess of the accrued amount. For other matters included within this estimation, no accrual has been made because a loss, although estimable, is believed to be reasonably possible, but not probable; in these cases the estimate reflects the reasonably possible loss or range of loss within the ranges identified. For the various ranges identified, the aggregate of these estimated amounts is approximately $6 million, which is also inclusive of amounts accrued by the Company. | |
For other matters previously disclosed in the Company’s filings with the SEC, the Company is not currently able to estimate the reasonably possible loss or range of loss, and has indicated such. Many of these matters remain in preliminary stages (even in some cases where a substantial period of time has passed since the commencement of the matter), with few or no substantive legal decisions by the court defining the scope of the claims, the class (if any), or the potentially available damages, and fact discovery is still in progress or has not yet begun. For all these reasons, the Company cannot at this time estimate the reasonably possible loss or range of loss, if any, for these matters. | |
It is the opinion of the Company’s management, based on current knowledge and after taking into account its current legal accruals, the eventual outcome of all matters described in this Note would not be likely to have a material impact on the consolidated financial condition of the Company. Nonetheless, given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could, from time to time, have a material effect on the Company’s consolidated results of operations or cash flows in particular quarterly or annual periods. | |
The_Michaels_Companies_and_its
The Michaels Companies and its Subsidiaries | 9 Months Ended |
Nov. 02, 2013 | |
The Michaels Companies and its Subsidiaries | ' |
The Michaels Companies and its Subsidiaries | ' |
Note 8. The Michaels Companies and its Subsidiaries | |
In July 2013, Michaels was reorganized into a holding company structure (“Reorganization”). The Michaels Companies, Inc. (“Parent”), Michaels FinCo Holdings, LLC (“FinCo Holdings”), Michaels FinCo, Inc. (“ FinCo Inc”) and Michaels Funding, Inc. (“Holdings”) and Michaels Stores Merger Co, Inc. (“MergerCo”) were formed in connection with the Reorganization: (i) MergerCo was merged with and into Michaels with Michaels being the surviving corporation; (ii) each share of Michaels’ common stock was converted into the right to receive one share of Parent common stock, subject to the same vesting conditions, if any, as applied to the share so converted, and each such share of Michaels’ common stock was cancelled and retired and ceased to exist; and (iii) each option to purchase one or more shares of common stock of Michaels was assumed by Parent and converted into an option to purchase an equivalent number of shares of common stock of Parent with the remaining terms of each such option remaining unchanged except as was necessary to reflect the Reorganization. Approximately 118 million shares of Michaels common stock were converted into Parent common stock. The Michaels’ shares were then cancelled and retired and an amount equal to the par value of the original shares was transferred from the common stock account to paid-in capital. Michaels then issued 100 shares of stock with a $0.10 par value to Holdings. In addition, common stock issued and outstanding and additional paid-in capital for February 2, 2013 and October 27, 2012 on the Consolidated Balance Sheets have been adjusted to reflect this transaction as if it happened prior to those dates. | |
As a result of the Reorganization, FinCo Holdings is wholly owned by the Parent. FinCo Inc and Holdings are wholly owned by FinCo Holdings. Michaels is wholly owned by Holdings. | |
Subsequent to the Reorganization, on July 29, 2013, FinCo Holdings and FinCo Inc issued $800 million aggregate principal amount of 7.50%/8.25% PIK Toggle Notes due 2018 (“PIK Notes”). The PIK Notes were issued in a private transaction. Interest payments on the PIK Notes are due February 1 and August 1 of each year until maturity. The first two interest payments and the last interest payment are required to be paid entirely in cash. All other interest payments must be made in cash, except that all or a portion of the interest on the PIK Notes may be paid by increasing the principal amount of the outstanding PIK Notes or by issuing additional PIK Notes depending on the amount of cash dividends that can be paid by the Company under our credit agreements governing our Senior Secured Credit Facilities, the terms of the indentures governing our outstanding notes and the terms of our other indebtedness outstanding at the time. The proceeds from the debt issuance were approximately $782 million, after deducting the initial purchasers’ discount and estimated fees and expenses. FinCo Holdings distributed the net proceeds to Parent and the proceeds were used to fund a cash dividend to the Parent’s equity and equity-award holders and pay related fees and expenses. | |
The PIK Notes are senior unsecured obligations of FinCo Holdings and FinCo Inc. The PIK Notes are not guaranteed by the Company, Holdings or any of their subsidiaries, but the indenture governing the PIK Notes contains restrictive covenants that apply to FinCo Holdings and its restricted subsidiaries, including the Company, Holdings and their subsidiaries, and a breach of such covenants would cause FinCo Holdings and FinCo Inc to be in default under the indenture governing the PIK Notes. In addition, neither the PIK Notes nor the dividend transaction is reflected in the financial statements of the Company. The cash interest payments due February 1, 2014 and August 1, 2014 total approximately $61 million. If interest on the PIK Notes for all interest periods is paid in cash, annual interest payments will total $60 million or a total of approximately $301 million from July 29, 2013 until August 1, 2018, the maturity date. Any cash interest payments will be funded by the Company through a cash dividend to Holdings. | |
Segments_and_Geographic_Inform
Segments and Geographic Information | 9 Months Ended | |||||||||||||
Nov. 02, 2013 | ||||||||||||||
Segments and Geographic Information | ' | |||||||||||||
Segments and Geographic Information | ' | |||||||||||||
Note 9. Segments and Geographic Information | ||||||||||||||
We consider our Michaels — U.S., Michaels — Canada, Aaron Brothers and online scrapbooking business operations to be our operating segments for purposes of determining reportable segments based on the criteria of ASC 280, Segment Reporting. We determined that our Michaels — U.S., Michaels — Canada, and Aaron Brothers operating segments have similar economic characteristics and meet the aggregation criteria set forth in ASC 280. Therefore, we combine those operating segments into one reporting segment. During the second quarter of 2013, the online scrapbooking business was discontinued; as an operating segment, it is immaterial to the financial statements as a whole. | ||||||||||||||
Our sales and assets by country are as follows: | ||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||
November 2, 2013 | October 27, 2012 | November 2, 2013 | October 27, 2012 | |||||||||||
(in millions) | ||||||||||||||
Net Sales: | ||||||||||||||
United States | $ | 1,013 | $ | 915 | $ | 2,731 | $ | 2,617 | ||||||
Canada | 105 | 99 | 284 | 267 | ||||||||||
Consolidated Total | $ | 1,118 | $ | 1,014 | $ | 3,015 | $ | 2,884 | ||||||
November 2, 2013 | February 2, 2013 | October 27, 2012 | ||||||||||||
(Restated) | (Restated) | |||||||||||||
(in millions) | ||||||||||||||
Total Assets: | ||||||||||||||
United States | $ | 1,728 | $ | 1,446 | $ | 1,777 | ||||||||
Canada | 138 | 109 | 140 | |||||||||||
Consolidated Total | $ | 1,866 | $ | 1,555 | $ | 1,917 | ||||||||
Our chief operating decision makers evaluate historical operating performance, plan and forecast future periods’ operating performance based on earnings before interest, income taxes, depreciation, amortization, and refinancing costs and losses on early extinguishment of debt (“EBITDA (excluding refinancing costs and losses on early extinguishment of debt)”). We believe EBITDA (excluding refinancing costs and losses on early extinguishment of debt) represents the financial measure that more closely reflects the operating effectiveness of factors over which management has control. As such, an element of base incentive compensation targets for certain management personnel are based on EBITDA (excluding refinancing costs and losses on early extinguishment of debt). A reconciliation of EBITDA (excluding refinancing costs and losses on early extinguishment of debt) to Net income is presented below. | ||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||
November 2, 2013 | October 27, 2012 | November 2, 2013 | October 27, 2012 | |||||||||||
(Restated) | (Restated) | |||||||||||||
(in millions) | ||||||||||||||
Net income | $ | 58 | $ | 35 | $ | 121 | $ | 95 | ||||||
Interest expense | 45 | 60 | 137 | 187 | ||||||||||
Refinancing costs and losses on early extinguishments of debt | — | 3 | 7 | 3 | ||||||||||
Provision for income taxes | 32 | 19 | 68 | 53 | ||||||||||
Depreciation and amortization | 24 | 25 | 74 | 71 | ||||||||||
EBITDA (excluding refinancing costs and losses on early extinguishments of debt) | $ | 159 | $ | 142 | $ | 407 | $ | 409 | ||||||
Related_Party_Transactions
Related Party Transactions | 9 Months Ended |
Nov. 02, 2013 | |
Related Party Transactions | ' |
Related Party Transactions | ' |
Note 10. Related Party Transactions | |
We pay annual management fees to Bain Capital Partners, LLC (“Bain Capital”) and The Blackstone Group L.P. (“The Blackstone Group” and, together with Bain Capital, the “Sponsors”) and Highfields Capital Management LP in the amount of $12 million and $1 million, respectively. We recognized $3 million of expense related to annual management fees during each of the third quarters of fiscal 2013 and fiscal 2012 and $10 million during each of the nine months ended November 2, 2013 and October 27, 2012. These expenses are included in related party expenses on the Consolidated Statements of Comprehensive Income. | |
Bain Capital owns a majority equity position in LogicSource, an external vendor we utilize for print procurement services. Payments associated with this vendor during the third quarters of fiscal 2013 and fiscal 2012 were $2 million and $1 million, respectively and were $4 million and $3 million during the nine months ended November 2, 2013 and October 27, 2012, respectively. These expenses are included in Selling, general and administrative expense on the Consolidated Statements of Comprehensive Income. | |
The Blackstone Group owns a majority equity position in Brixmor Properties Group, a vendor we utilize to lease certain properties. Payments associated with this vendor were $1 million during each of the third quarters of fiscal 2013 and fiscal 2012. Payments associated with this vendor were $3 million during each of the nine months ended November 2, 2013 and October 27, 2012. These expenses are included in Cost of sales and occupancy expense in the Consolidated Statements of Comprehensive Income. | |
The Blackstone Group owns a majority equity position in RGIS, an external vendor we utilize to count our store inventory. Payments associated with this vendor were $2 million during each of the third quarters of fiscal 2013 and fiscal 2012. Payments associated with this vendor were $5 million and $6 million during the nine months ended November 2, 2013 and October 27, 2012, respectively. These expenses are included in Selling, general and administrative expense on the Consolidated Statements of Comprehensive Income. | |
The Blackstone Group owns a majority equity position in Vistar, an external vendor we utilize for all of the candy-type items in our stores. Payments associated with this vendor were $5 million during each of the third quarters of fiscal 2013 and fiscal 2012. Payments associated with this vendor were $17 million and $16 million during the nine months ended November 2, 2013 and October 27, 2012, respectively. These expenses are recognized in cost of sales as the sales are recorded. | |
Our current directors (other than Jill A. Greenthal, John J. Mahoney and Carl S. Rubin) are affiliates of 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 2, 2013, affiliates of The Blackstone Group held $33 million of our Restated Term Loan Credit Facility. | |
As a result of the Reorganization discussed in Note 8, at November 2, 2013, the Company has recorded a receivable from Parent of $6 million for payments made by the Company primarily related to the repurchase of Parent stock from former Company officers. Amounts paid by the Company on Parent’s behalf related to the dividend payment discussed in Note 8, and stock option exercises discussed above were $3 million for the quarter ended November 2, 2013 and $23 million for the nine months ended November 2, 2013. | |
Condensed_Consolidating_Financ
Condensed Consolidating Financial Information | 9 Months Ended | |||||||||||||
Nov. 02, 2013 | ||||||||||||||
Condensed Consolidating Financial Information | ' | |||||||||||||
Condensed Consolidating Financial Information | ' | |||||||||||||
Note 11. Condensed Consolidating Financial Information | ||||||||||||||
All obligations of the Company under its notes, the Restated Revolving Credit Facility and the Restated Term Loan Credit Facility are guaranteed by each of its subsidiaries other than Aaron Brothers Card Services, LLC, Artistree of Canada, ULC and Michaels Stores of Puerto Rico, LLC and will be guaranteed by its direct parent, Holdings. As of November 2, 2013, the financial statements of Aaron Brothers Card Services, LLC, Artistree of Canada, ULC and Michaels Stores of Puerto Rico, LLC were immaterial. Each subsidiary guarantor is 100% owned, directly or indirectly, by the Company and such guarantees of each subsidiary guarantor are (and the guarantee of Holdings will be) joint and several and full and unconditional. | ||||||||||||||
The following condensed consolidating financial information represents the financial information of Michaels Stores, Inc. and its wholly-owned subsidiary guarantors, prepared on the equity basis of accounting. The information is presented in accordance with the requirements of Rule 3-10 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations, cash flows, or financial position had the subsidiary guarantors operated as independent entities. | ||||||||||||||
Supplemental Condensed Consolidating Balance Sheet | ||||||||||||||
November 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and equivalents | $ | 49 | $ | 19 | $ | — | $ | 68 | ||||||
Merchandise inventories | 745 | 374 | — | 1,119 | ||||||||||
Intercompany receivables | 1 | 614 | (614 | ) | 1 | |||||||||
Other | 129 | 28 | — | 157 | ||||||||||
Total current assets | 924 | 1,035 | (614 | ) | 1,345 | |||||||||
Property and equipment, net | 278 | 75 | — | 353 | ||||||||||
Goodwill | 94 | — | — | 94 | ||||||||||
Investment in subsidiaries | 489 | — | (489 | ) | — | |||||||||
Long-term receivable from Parent | 5 | — | 5 | |||||||||||
Other assets | 66 | 3 | — | 69 | ||||||||||
Total assets | $ | 1,856 | $ | 1,113 | $ | (1,103 | ) | $ | 1,866 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 13 | $ | 454 | $ | — | $ | 467 | ||||||
Accrued liabilities and other | 209 | 133 | — | 342 | ||||||||||
Share-based compensation | 8 | 13 | — | 21 | ||||||||||
Current portion of long-term debt | 203 | — | — | 203 | ||||||||||
Intercompany payable | 614 | — | (614 | ) | — | |||||||||
Other | 9 | 1 | — | 10 | ||||||||||
Total current liabilities | 1,056 | 601 | (614 | ) | 1,043 | |||||||||
Long-term debt | 2,878 | — | — | 2,878 | ||||||||||
Share-based compensation | 18 | 10 | — | 28 | ||||||||||
Other long-term liabilities | 75 | 13 | — | 88 | ||||||||||
Total stockholders’ deficit | (2,171 | ) | 489 | (489 | ) | (2,171 | ) | |||||||
Total liabilities and stockholders’ deficit | $ | 1,856 | $ | 1,113 | $ | (1,103 | ) | $ | 1,866 | |||||
Supplemental Condensed Consolidating Balance Sheet | ||||||||||||||
February 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and equivalents | $ | 37 | $ | 19 | $ | — | $ | 56 | ||||||
Merchandise inventories | 591 | 271 | — | 862 | ||||||||||
Intercompany receivables | — | 329 | (329 | ) | — | |||||||||
Other | 105 | 21 | — | 126 | ||||||||||
Total current assets | 733 | 640 | (329 | ) | 1,044 | |||||||||
Property and equipment, net | 271 | 67 | — | 338 | ||||||||||
Goodwill | 94 | — | — | 94 | ||||||||||
Investment in subsidiaries | 284 | — | (284 | ) | — | |||||||||
Other assets | 76 | 3 | — | 79 | ||||||||||
Total assets | $ | 1,458 | $ | 710 | $ | (613 | ) | $ | 1,555 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 5 | $ | 258 | $ | — | $ | 263 | ||||||
Accrued liabilities and other | 235 | 132 | — | 367 | ||||||||||
Share-based compensation | 22 | 13 | — | 35 | ||||||||||
Current portion of long-term debt | 150 | — | — | 150 | ||||||||||
Intercompany payable | 329 | — | (329 | ) | — | |||||||||
Other | 36 | 5 | — | 41 | ||||||||||
Total current liabilities | 777 | 408 | (329 | ) | 856 | |||||||||
Long-term debt | 2,891 | — | — | 2,891 | ||||||||||
Other long-term liabilities | 73 | 12 | — | 85 | ||||||||||
Share-based compensation | 21 | 6 | — | 27 | ||||||||||
Total stockholders’ deficit | (2,304 | ) | 284 | (284 | ) | (2,304 | ) | |||||||
Total liabilities and stockholders’ deficit | $ | 1,458 | $ | 710 | $ | (613 | ) | $ | 1,555 | |||||
Supplemental Condensed Consolidating Balance Sheet | ||||||||||||||
October 27, 2012 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
Restated (in millions) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and equivalents | $ | 138 | $ | 23 | $ | — | $ | 161 | ||||||
Merchandise inventories | 717 | 361 | — | 1,078 | ||||||||||
Intercompany receivables | — | 637 | (637 | ) | — | |||||||||
Other | 120 | 30 | — | 150 | ||||||||||
Total current assets | 975 | 1,051 | (637 | ) | 1,389 | |||||||||
Property and equipment, net | 277 | 67 | — | 344 | ||||||||||
Goodwill | 95 | — | — | 95 | ||||||||||
Investment in subsidiaries | 610 | — | (610 | ) | — | |||||||||
Other assets | 86 | 3 | — | 89 | ||||||||||
Total assets | $ | 2,043 | $ | 1,121 | $ | (1,247 | ) | $ | 1,917 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 23 | $ | 351 | $ | — | $ | 374 | ||||||
Accrued liabilities and other | 295 | 129 | — | 424 | ||||||||||
Share-based compensation | 19 | 11 | — | 30 | ||||||||||
Current portion of long-term debt | 180 | — | — | 180 | ||||||||||
Intercompany payable | 637 | — | (637 | ) | — | |||||||||
Other | 6 | 1 | — | 7 | ||||||||||
Total current liabilities | 1,160 | 492 | (637 | ) | 1,015 | |||||||||
Long-term debt | 3,188 | — | — | 3,188 | ||||||||||
Other long-term liabilities | 85 | 12 | — | 97 | ||||||||||
Share-based compensation | 17 | 7 | — | 24 | ||||||||||
Total stockholders’ deficit | (2,407 | ) | 610 | (610 | ) | (2,407 | ) | |||||||
Total liabilities and stockholders’ deficit | $ | 2,043 | $ | 1,121 | $ | (1,247 | ) | $ | 1,917 | |||||
Supplemental Condensed Consolidating Statement of Comprehensive Income | ||||||||||||||
Quarter Ended November 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Net sales | $ | 981 | $ | 748 | $ | (611 | ) | $ | 1,118 | |||||
Cost of sales and occupancy expense | 623 | 653 | (611 | ) | 665 | |||||||||
Gross profit | 358 | 95 | — | 453 | ||||||||||
Selling, general, and administrative expense | 265 | 44 | — | 309 | ||||||||||
Share-based compensation expense | 3 | 1 | 4 | |||||||||||
Related party expenses | 3 | — | — | 3 | ||||||||||
Store pre-opening costs | 1 | 1 | — | 2 | ||||||||||
Operating income | 86 | 49 | — | 135 | ||||||||||
Interest expense | 45 | — | — | 45 | ||||||||||
Refinancing costs and losses on early extinguishment of debt | — | — | — | — | ||||||||||
Other (income) and expense, net | — | — | — | — | ||||||||||
Intercompany charges (income) | 20 | (20 | ) | — | — | |||||||||
Equity in earnings of subsidiaries | 69 | — | (69 | ) | — | |||||||||
Income before income taxes | 90 | 69 | (69 | ) | 90 | |||||||||
Provision for income taxes | 32 | 25 | (25 | ) | 32 | |||||||||
Net income | 58 | 44 | (44 | ) | 58 | |||||||||
Comprehensive income | $ | 58 | $ | 44 | $ | (44 | ) | $ | 58 | |||||
Supplemental Condensed Consolidating Statement of Comprehensive Income | ||||||||||||||
Quarter Ended October 27, 2012 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Net sales | $ | 883 | $ | 685 | $ | (554 | ) | $ | 1,014 | |||||
Cost of sales and occupancy expense | 573 | 593 | (554 | ) | 612 | |||||||||
Gross profit | 310 | 92 | — | 402 | ||||||||||
Selling, general, and administrative expense | 239 | 38 | — | 277 | ||||||||||
Share-based compensation expense | 1 | 1 | — | 2 | ||||||||||
Related party expenses | 3 | — | — | 3 | ||||||||||
Store pre-opening costs | 2 | 1 | — | 3 | ||||||||||
Operating income | 65 | 52 | — | 117 | ||||||||||
Interest expense | 60 | — | — | 60 | ||||||||||
Refinancing costs and losses on early extinguishment of debt | 3 | — | — | 3 | ||||||||||
Other (income) and expense, net | — | — | — | — | ||||||||||
Intercompany charges (income) | 21 | (21 | ) | — | — | |||||||||
Equity in earnings of subsidiaries | 73 | — | (73 | ) | — | |||||||||
Income before income taxes | 54 | 73 | (73 | ) | 54 | |||||||||
Provision for income taxes | 19 | 26 | (26 | ) | 19 | |||||||||
Net income | 35 | 47 | (47 | ) | 35 | |||||||||
Comprehensive income | $ | 35 | $ | 47 | $ | (47 | ) | $ | 35 | |||||
Supplemental Condensed Consolidating Statement of Comprehensive Income | ||||||||||||||
Nine Months Ended November 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Net sales | $ | 2,633 | $ | 1,829 | $ | (1,447 | ) | $ | 3,015 | |||||
Cost of sales and occupancy expense | 1,702 | 1,561 | (1,447 | ) | 1,816 | |||||||||
Gross profit | 931 | 268 | — | 1,199 | ||||||||||
Selling, general, and administrative expense | 721 | 114 | — | 835 | ||||||||||
Share-based compensation expense | 12 | 3 | 15 | |||||||||||
Related party expenses | 10 | — | — | 10 | ||||||||||
Store pre-opening costs | 4 | 1 | — | 5 | ||||||||||
Operating income | 184 | 150 | — | 334 | ||||||||||
Interest expense | 137 | — | — | 137 | ||||||||||
Refinancing costs and losses on early extinguishment of debt | 7 | — | — | 7 | ||||||||||
Other (income) and expense, net | — | 1 | — | 1 | ||||||||||
Intercompany charges (income) | 44 | (44 | ) | — | — | |||||||||
Equity in earnings of subsidiaries | 193 | — | (193 | ) | — | |||||||||
Income before income taxes | 189 | 193 | (193 | ) | 189 | |||||||||
Provision for income taxes | 68 | 69 | (69 | ) | 68 | |||||||||
Net income | 121 | 124 | (124 | ) | 121 | |||||||||
Other comprehensive income, net of tax: | ||||||||||||||
Foreign currency translation adjustment | (2 | ) | — | — | (2 | ) | ||||||||
Comprehensive income | $ | 119 | $ | 124 | $ | (124 | ) | $ | 119 | |||||
Supplemental Condensed Consolidating Statement of Comprehensive Income | ||||||||||||||
Nine Months Ended October 27, 2012 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Net sales | $ | 2,520 | $ | 1,756 | $ | (1,392 | ) | $ | 2,884 | |||||
Cost of sales and occupancy expense | 1,625 | 1,503 | (1,392 | ) | 1,736 | |||||||||
Gross profit | 895 | 253 | — | 1,148 | ||||||||||
Selling, general, and administrative expense | 681 | 106 | — | 787 | ||||||||||
Share-based compensation expense | 7 | 2 | — | 9 | ||||||||||
Related party expenses | 10 | — | — | 10 | ||||||||||
Store pre-opening costs | 4 | 1 | — | 5 | ||||||||||
Operating income | 193 | 144 | — | 337 | ||||||||||
Interest expense | 187 | — | — | 187 | ||||||||||
Refinancing costs and losses on early extinguishment of debt | 3 | — | — | 3 | ||||||||||
Other (income) and expense, net | (1 | ) | — | — | (1 | ) | ||||||||
Intercompany charges (income) | 53 | (53 | ) | — | — | |||||||||
Equity in earnings of subsidiaries | 197 | — | (197 | ) | — | |||||||||
Income before income taxes | 148 | 197 | (197 | ) | 148 | |||||||||
Provision for income taxes | 53 | 71 | (71 | ) | 53 | |||||||||
Net income | 95 | 126 | (126 | ) | 95 | |||||||||
Comprehensive income | $ | 95 | $ | 126 | $ | (126 | ) | $ | 95 | |||||
Supplemental Condensed Consolidating Statement of Cash Flows | ||||||||||||||
Nine Months Ended November 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Operating activities: | ||||||||||||||
Net cash provided by operating activities | $ | 51 | $ | 94 | $ | (71 | ) | $ | 74 | |||||
Investing activities: | ||||||||||||||
Cash paid for property and equipment | (59 | ) | (23 | ) | — | (82 | ) | |||||||
Net cash used in investing activities | (59 | ) | (23 | ) | — | (82 | ) | |||||||
Financing activities: | ||||||||||||||
Net repayments of short-term debt | 36 | — | — | 36 | ||||||||||
Intercompany dividends | — | (71 | ) | 71 | — | |||||||||
Other financing activities | (16 | ) | — | — | (16 | ) | ||||||||
Net cash provided by (used in) financing activities | 20 | (71 | ) | 71 | 20 | |||||||||
Increase in cash and equivalents | 12 | — | — | 12 | ||||||||||
Beginning cash and equivalents | 37 | 19 | — | 56 | ||||||||||
Ending cash and equivalents | $ | 49 | $ | 19 | $ | — | $ | 68 | ||||||
Supplemental Condensed Consolidating Statement of Cash Flows | ||||||||||||||
Nine Months Ended October 27, 2012 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
Restated (in millions) | ||||||||||||||
Operating activities: | ||||||||||||||
Net cash (used in) provided by operating activities | $ | (22 | ) | $ | 109 | $ | (74 | ) | $ | 13 | ||||
Investing activities: | ||||||||||||||
Cash paid for property and equipment | (66 | ) | (19 | ) | — | (85 | ) | |||||||
Net cash used in investing activities | (66 | ) | (19 | ) | — | (85 | ) | |||||||
Financing activities: | ||||||||||||||
Net repayments of long term debt | (123 | ) | — | — | (123 | ) | ||||||||
Intercompany dividends | — | (74 | ) | 74 | — | |||||||||
Other financing activities | (14 | ) | (1 | ) | — | (15 | ) | |||||||
Net cash used in financing activities | (137 | ) | (75 | ) | 74 | (138 | ) | |||||||
Decrease in cash and equivalents | (225 | ) | 15 | — | (210 | ) | ||||||||
Beginning cash and equivalents | 363 | 8 | — | 371 | ||||||||||
Ending cash and equivalents | $ | 138 | $ | 23 | $ | — | $ | 161 | ||||||
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Nov. 02, 2013 | |
Summary of Significant Accounting Policies | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The consolidated financial statements include the accounts of Michaels Stores, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. All expressions of the “Company”, “Michaels”, “us,” “we,” “our,” and all similar expressions are references to Michaels Stores, Inc. and its consolidated, wholly-owned subsidiaries, unless otherwise expressly stated or the context otherwise requires. | |
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 notes 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 2, 2013. | |
The balance sheet at February 2, 2013 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. | |
In the opinion of management, all adjustments (consisting of normal recurring accruals and other items) considered necessary for a fair presentation have been included. | |
Because of the seasonal nature of our business, the results of operations for the quarter and nine months ended November 2, 2013 are not indicative of the results to be expected for the entire year. | |
We report on the basis of a 52- or 53-week fiscal year, which ends on the Saturday closest to January 31. All references herein to “fiscal 2013” relate to the 52 weeks ending February 1, 2014, and all references to “fiscal 2012” relate to the 53 weeks ended February 2, 2013. In addition, all references herein to “the third quarter of fiscal 2013” relate to the 13 weeks ended November 2, 2013, and all references to “the third quarter of fiscal 2012” relate to the 13 weeks ended October 27, 2012. Finally, all references to “the nine months ended November 2, 2013” relate to the 39 weeks ended November 2, 2013, and “the nine months ended October 27, 2012” relate to the 39 weeks ended October 27, 2012. | |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements | |
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists.” ASU 2013-11 requires unrecognized tax benefits to be presented as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. ASU 2013-11, which is prospective, is effective for reporting periods beginning after December 15, 2013, with earlier adoption permitted. Beginning with the fourth quarter of fiscal year 2012, the Company has reported unrecognized tax benefits consistent with ASU No. 2013-11. | |
Restatement_Sharebased_Compens1
Restatement - Share-based Compensation (Tables) | 9 Months Ended | ||||||||||
Nov. 02, 2013 | |||||||||||
Restatement - Share-based Compensation | ' | ||||||||||
Schedule of correction as associated with certain line items in the financial statements | ' | ||||||||||
The following tables illustrate the correction as associated with certain line items in the unaudited interim consolidated financial statements (amounts in millions): | |||||||||||
Consolidated Balance Sheet | |||||||||||
As of October 27, 2012 | |||||||||||
(unaudited) | |||||||||||
As | Share-based | As | |||||||||
Reported | compensation | Restated | |||||||||
Adjustment | |||||||||||
Merchandise inventories | $ | 1,076 | $ | 2 | $ | 1,078 | |||||
Total current assets | 1,387 | 2 | 1,389 | ||||||||
Deferred income taxes | 18 | 14 | 32 | ||||||||
Total non-current assets | 170 | 14 | 184 | ||||||||
Share-based compensation | — | 30 | 30 | ||||||||
Income taxes payable | 8 | (2 | ) | 6 | |||||||
Total current liabilities | 987 | 28 | 1,015 | ||||||||
Share-based compensation | — | 24 | 24 | ||||||||
Total long-term liabilities | 3,285 | 24 | 3,309 | ||||||||
Additional paid-in capital | 61 | (10 | ) | 51 | |||||||
Accumulated deficit | (2,438 | ) | (26 | ) | (2,464 | ) | |||||
Total stockholders’ deficit | (2,371 | ) | (36 | ) | (2,407 | ) | |||||
Consolidated Statements of Comprehensive Income | |||||||||||
Quarter Ended October 27, 2012 | |||||||||||
(unaudited) | |||||||||||
As | Share-based | As | |||||||||
Reported | compensation | Restated | |||||||||
Adjustment | |||||||||||
Cost of sales and occupancy expense | $ | 611 | $ | 1 | $ | 612 | |||||
Gross Profit | 403 | (1 | ) | 402 | |||||||
Selling, general and administrative expense | 278 | (1 | ) | 277 | |||||||
Share-based compensation expense | — | 2 | 2 | ||||||||
Operating income | 119 | (2 | ) | 117 | |||||||
Income before income taxes | 56 | (2 | ) | 54 | |||||||
Provision for income taxes | 20 | (1 | ) | 19 | |||||||
Net income | 36 | (1 | ) | 35 | |||||||
Comprehensive income | 36 | (1 | ) | 35 | |||||||
Consolidated Statements of Comprehensive Income | |||||||||||
Nine Months Ended October 27, 2012 | |||||||||||
(unaudited) | |||||||||||
As | Share-based | As | |||||||||
Reported | compensation | Restated | |||||||||
Adjustment | |||||||||||
Cost of sales and occupancy expense | $ | 1,730 | $ | 6 | $ | 1,736 | |||||
Gross Profit | 1,154 | (6 | ) | 1,148 | |||||||
Selling, general and administrative expense | 790 | (3 | ) | 787 | |||||||
Share-based compensation expense | — | 9 | 9 | ||||||||
Operating income | 349 | (12 | ) | 337 | |||||||
Income before income taxes | 160 | (12 | ) | 148 | |||||||
Provision for income taxes | 58 | (5 | ) | 53 | |||||||
Net income | 102 | (7 | ) | 95 | |||||||
Comprehensive income | 102 | (7 | ) | 95 | |||||||
Cash Flow Data | |||||||||||
Nine Months Ended October 27, 2012 | |||||||||||
(unaudited) | |||||||||||
As | Share-based | As | |||||||||
Reported | compensation | Restated | |||||||||
Adjustment | |||||||||||
Operating Activities: | |||||||||||
Net income | $ | 102 | (7 | ) | $ | 95 | |||||
Share-based compensation and other | 4 | 11 | 15 | ||||||||
Merchandise inventories | (236 | ) | 3 | (233 | ) | ||||||
Accrued liabilities and other | (11 | ) | (4 | ) | (15 | ) | |||||
Income taxes | (27 | ) | (6 | ) | (33 | ) | |||||
Net cash provided by operating activities | 16 | (3 | ) | 13 | |||||||
Repurchase of Common Stock | (10 | ) | 10 | — | |||||||
Proceeds from stock options exercised | 7 | (7 | ) | — | |||||||
Net cash used in financing activities | (141 | ) | 3 | (138 | ) | ||||||
Debt_Tables
Debt (Tables) | 9 Months Ended | ||||||||||||
Nov. 02, 2013 | |||||||||||||
Debt | ' | ||||||||||||
Schedule of outstanding debt | ' | ||||||||||||
November 2, 2013 | February 2, 2013 | October 27, 2012 | Interest Rate | ||||||||||
(in millions) | |||||||||||||
Senior secured term loan | $ | 1,632 | $ | 1,640 | $ | 1,787 | Variable | ||||||
Senior notes | 1,007 | 1,007 | 1,008 | 7.75% | |||||||||
Senior subordinated notes | 255 | 393 | 393 | 11.38% | |||||||||
Subordinated discount notes | — | — | 180 | 13.00% | |||||||||
Asset-based revolving credit facility | 187 | 1 | — | Variable | |||||||||
Total debt | 3,081 | 3,041 | 3,368 | ||||||||||
Less current portion | 203 | 150 | 180 | ||||||||||
Long-term debt | $ | 2,878 | $ | 2,891 | $ | 3,188 |
Comprehensive_Income_Tables
Comprehensive Income (Tables) | 9 Months Ended | ||||
Nov. 02, 2013 | |||||
Comprehensive Income | ' | ||||
Schedule of accumulated other comprehensive income, net of tax | ' | ||||
Foreign Currency | |||||
Translation | |||||
and Other | |||||
(in millions) | |||||
Balance at February 2, 2013 | $ | 6 | |||
Foreign currency translation adjustment and other | (2 | ) | |||
Balance at November 2, 2013 | $ | 4 | |||
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 9 Months Ended | |||||||
Nov. 02, 2013 | ||||||||
Fair Value Measurements | ' | |||||||
Schedule of carrying and fair values of debt | ' | |||||||
Carrying Value | Fair Value | |||||||
(in millions) | ||||||||
Senior secured term loan | $ | 1,632 | $ | 1,641 | ||||
Senior notes | 1,007 | 1,085 | ||||||
Senior subordinated notes | 255 | 262 | ||||||
Segments_and_Geographic_Inform1
Segments and Geographic Information (Tables) | 9 Months Ended | |||||||||||||
Nov. 02, 2013 | ||||||||||||||
Segments and Geographic Information | ' | |||||||||||||
Schedule of sales and assets by country | ' | |||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||
November 2, 2013 | October 27, 2012 | November 2, 2013 | October 27, 2012 | |||||||||||
(in millions) | ||||||||||||||
Net Sales: | ||||||||||||||
United States | $ | 1,013 | $ | 915 | $ | 2,731 | $ | 2,617 | ||||||
Canada | 105 | 99 | 284 | 267 | ||||||||||
Consolidated Total | $ | 1,118 | $ | 1,014 | $ | 3,015 | $ | 2,884 | ||||||
November 2, 2013 | February 2, 2013 | October 27, 2012 | ||||||||||||
(Restated) | (Restated) | |||||||||||||
(in millions) | ||||||||||||||
Total Assets: | ||||||||||||||
United States | $ | 1,728 | $ | 1,446 | $ | 1,777 | ||||||||
Canada | 138 | 109 | 140 | |||||||||||
Consolidated Total | $ | 1,866 | $ | 1,555 | $ | 1,917 | ||||||||
Schedule of reconciliation of EBITDA (excluding refinancing costs and losses on early extinguishment of debt) to Net income | ' | |||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||
November 2, 2013 | October 27, 2012 | November 2, 2013 | October 27, 2012 | |||||||||||
(Restated) | (Restated) | |||||||||||||
(in millions) | ||||||||||||||
Net income | $ | 58 | $ | 35 | $ | 121 | $ | 95 | ||||||
Interest expense | 45 | 60 | 137 | 187 | ||||||||||
Refinancing costs and losses on early extinguishments of debt | — | 3 | 7 | 3 | ||||||||||
Provision for income taxes | 32 | 19 | 68 | 53 | ||||||||||
Depreciation and amortization | 24 | 25 | 74 | 71 | ||||||||||
EBITDA (excluding refinancing costs and losses on early extinguishments of debt) | $ | 159 | $ | 142 | $ | 407 | $ | 409 | ||||||
Condensed_Consolidating_Financ1
Condensed Consolidating Financial Information (Tables) | 9 Months Ended | |||||||||||||
Nov. 02, 2013 | ||||||||||||||
Condensed Consolidating Financial Information | ' | |||||||||||||
Schedule of Supplemental Condensed Consolidating Balance Sheet | ' | |||||||||||||
November 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and equivalents | $ | 49 | $ | 19 | $ | — | $ | 68 | ||||||
Merchandise inventories | 745 | 374 | — | 1,119 | ||||||||||
Intercompany receivables | 1 | 614 | (614 | ) | 1 | |||||||||
Other | 129 | 28 | — | 157 | ||||||||||
Total current assets | 924 | 1,035 | (614 | ) | 1,345 | |||||||||
Property and equipment, net | 278 | 75 | — | 353 | ||||||||||
Goodwill | 94 | — | — | 94 | ||||||||||
Investment in subsidiaries | 489 | — | (489 | ) | — | |||||||||
Long-term receivable from Parent | 5 | — | 5 | |||||||||||
Other assets | 66 | 3 | — | 69 | ||||||||||
Total assets | $ | 1,856 | $ | 1,113 | $ | (1,103 | ) | $ | 1,866 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 13 | $ | 454 | $ | — | $ | 467 | ||||||
Accrued liabilities and other | 209 | 133 | — | 342 | ||||||||||
Share-based compensation | 8 | 13 | — | 21 | ||||||||||
Current portion of long-term debt | 203 | — | — | 203 | ||||||||||
Intercompany payable | 614 | — | (614 | ) | — | |||||||||
Other | 9 | 1 | — | 10 | ||||||||||
Total current liabilities | 1,056 | 601 | (614 | ) | 1,043 | |||||||||
Long-term debt | 2,878 | — | — | 2,878 | ||||||||||
Share-based compensation | 18 | 10 | — | 28 | ||||||||||
Other long-term liabilities | 75 | 13 | — | 88 | ||||||||||
Total stockholders’ deficit | (2,171 | ) | 489 | (489 | ) | (2,171 | ) | |||||||
Total liabilities and stockholders’ deficit | $ | 1,856 | $ | 1,113 | $ | (1,103 | ) | $ | 1,866 | |||||
February 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and equivalents | $ | 37 | $ | 19 | $ | — | $ | 56 | ||||||
Merchandise inventories | 591 | 271 | — | 862 | ||||||||||
Intercompany receivables | — | 329 | (329 | ) | — | |||||||||
Other | 105 | 21 | — | 126 | ||||||||||
Total current assets | 733 | 640 | (329 | ) | 1,044 | |||||||||
Property and equipment, net | 271 | 67 | — | 338 | ||||||||||
Goodwill | 94 | — | — | 94 | ||||||||||
Investment in subsidiaries | 284 | — | (284 | ) | — | |||||||||
Other assets | 76 | 3 | — | 79 | ||||||||||
Total assets | $ | 1,458 | $ | 710 | $ | (613 | ) | $ | 1,555 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 5 | $ | 258 | $ | — | $ | 263 | ||||||
Accrued liabilities and other | 235 | 132 | — | 367 | ||||||||||
Share-based compensation | 22 | 13 | — | 35 | ||||||||||
Current portion of long-term debt | 150 | — | — | 150 | ||||||||||
Intercompany payable | 329 | — | (329 | ) | — | |||||||||
Other | 36 | 5 | — | 41 | ||||||||||
Total current liabilities | 777 | 408 | (329 | ) | 856 | |||||||||
Long-term debt | 2,891 | — | — | 2,891 | ||||||||||
Other long-term liabilities | 73 | 12 | — | 85 | ||||||||||
Share-based compensation | 21 | 6 | — | 27 | ||||||||||
Total stockholders’ deficit | (2,304 | ) | 284 | (284 | ) | (2,304 | ) | |||||||
Total liabilities and stockholders’ deficit | $ | 1,458 | $ | 710 | $ | (613 | ) | $ | 1,555 | |||||
October 27, 2012 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
Restated (in millions) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and equivalents | $ | 138 | $ | 23 | $ | — | $ | 161 | ||||||
Merchandise inventories | 717 | 361 | — | 1,078 | ||||||||||
Intercompany receivables | — | 637 | (637 | ) | — | |||||||||
Other | 120 | 30 | — | 150 | ||||||||||
Total current assets | 975 | 1,051 | (637 | ) | 1,389 | |||||||||
Property and equipment, net | 277 | 67 | — | 344 | ||||||||||
Goodwill | 95 | — | — | 95 | ||||||||||
Investment in subsidiaries | 610 | — | (610 | ) | — | |||||||||
Other assets | 86 | 3 | — | 89 | ||||||||||
Total assets | $ | 2,043 | $ | 1,121 | $ | (1,247 | ) | $ | 1,917 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 23 | $ | 351 | $ | — | $ | 374 | ||||||
Accrued liabilities and other | 295 | 129 | — | 424 | ||||||||||
Share-based compensation | 19 | 11 | — | 30 | ||||||||||
Current portion of long-term debt | 180 | — | — | 180 | ||||||||||
Intercompany payable | 637 | — | (637 | ) | — | |||||||||
Other | 6 | 1 | — | 7 | ||||||||||
Total current liabilities | 1,160 | 492 | (637 | ) | 1,015 | |||||||||
Long-term debt | 3,188 | — | — | 3,188 | ||||||||||
Other long-term liabilities | 85 | 12 | — | 97 | ||||||||||
Share-based compensation | 17 | 7 | — | 24 | ||||||||||
Total stockholders’ deficit | (2,407 | ) | 610 | (610 | ) | (2,407 | ) | |||||||
Total liabilities and stockholders’ deficit | $ | 2,043 | $ | 1,121 | $ | (1,247 | ) | $ | 1,917 | |||||
Schedule of Supplemental Condensed Consolidating Statement of Comprehensive Income | ' | |||||||||||||
Quarter Ended November 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Net sales | $ | 981 | $ | 748 | $ | (611 | ) | $ | 1,118 | |||||
Cost of sales and occupancy expense | 623 | 653 | (611 | ) | 665 | |||||||||
Gross profit | 358 | 95 | — | 453 | ||||||||||
Selling, general, and administrative expense | 265 | 44 | — | 309 | ||||||||||
Share-based compensation expense | 3 | 1 | 4 | |||||||||||
Related party expenses | 3 | — | — | 3 | ||||||||||
Store pre-opening costs | 1 | 1 | — | 2 | ||||||||||
Operating income | 86 | 49 | — | 135 | ||||||||||
Interest expense | 45 | — | — | 45 | ||||||||||
Refinancing costs and losses on early extinguishment of debt | — | — | — | — | ||||||||||
Other (income) and expense, net | — | — | — | — | ||||||||||
Intercompany charges (income) | 20 | (20 | ) | — | — | |||||||||
Equity in earnings of subsidiaries | 69 | — | (69 | ) | — | |||||||||
Income before income taxes | 90 | 69 | (69 | ) | 90 | |||||||||
Provision for income taxes | 32 | 25 | (25 | ) | 32 | |||||||||
Net income | 58 | 44 | (44 | ) | 58 | |||||||||
Comprehensive income | $ | 58 | $ | 44 | $ | (44 | ) | $ | 58 | |||||
Quarter Ended October 27, 2012 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Net sales | $ | 883 | $ | 685 | $ | (554 | ) | $ | 1,014 | |||||
Cost of sales and occupancy expense | 573 | 593 | (554 | ) | 612 | |||||||||
Gross profit | 310 | 92 | — | 402 | ||||||||||
Selling, general, and administrative expense | 239 | 38 | — | 277 | ||||||||||
Share-based compensation expense | 1 | 1 | — | 2 | ||||||||||
Related party expenses | 3 | — | — | 3 | ||||||||||
Store pre-opening costs | 2 | 1 | — | 3 | ||||||||||
Operating income | 65 | 52 | — | 117 | ||||||||||
Interest expense | 60 | — | — | 60 | ||||||||||
Refinancing costs and losses on early extinguishment of debt | 3 | — | — | 3 | ||||||||||
Other (income) and expense, net | — | — | — | — | ||||||||||
Intercompany charges (income) | 21 | (21 | ) | — | — | |||||||||
Equity in earnings of subsidiaries | 73 | — | (73 | ) | — | |||||||||
Income before income taxes | 54 | 73 | (73 | ) | 54 | |||||||||
Provision for income taxes | 19 | 26 | (26 | ) | 19 | |||||||||
Net income | 35 | 47 | (47 | ) | 35 | |||||||||
Comprehensive income | $ | 35 | $ | 47 | $ | (47 | ) | $ | 35 | |||||
Nine Months Ended November 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Net sales | $ | 2,633 | $ | 1,829 | $ | (1,447 | ) | $ | 3,015 | |||||
Cost of sales and occupancy expense | 1,702 | 1,561 | (1,447 | ) | 1,816 | |||||||||
Gross profit | 931 | 268 | — | 1,199 | ||||||||||
Selling, general, and administrative expense | 721 | 114 | — | 835 | ||||||||||
Share-based compensation expense | 12 | 3 | 15 | |||||||||||
Related party expenses | 10 | — | — | 10 | ||||||||||
Store pre-opening costs | 4 | 1 | — | 5 | ||||||||||
Operating income | 184 | 150 | — | 334 | ||||||||||
Interest expense | 137 | — | — | 137 | ||||||||||
Refinancing costs and losses on early extinguishment of debt | 7 | — | — | 7 | ||||||||||
Other (income) and expense, net | — | 1 | — | 1 | ||||||||||
Intercompany charges (income) | 44 | (44 | ) | — | — | |||||||||
Equity in earnings of subsidiaries | 193 | — | (193 | ) | — | |||||||||
Income before income taxes | 189 | 193 | (193 | ) | 189 | |||||||||
Provision for income taxes | 68 | 69 | (69 | ) | 68 | |||||||||
Net income | 121 | 124 | (124 | ) | 121 | |||||||||
Other comprehensive income, net of tax: | ||||||||||||||
Foreign currency translation adjustment | (2 | ) | — | — | (2 | ) | ||||||||
Comprehensive income | $ | 119 | $ | 124 | $ | (124 | ) | $ | 119 | |||||
Nine Months Ended October 27, 2012 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Net sales | $ | 2,520 | $ | 1,756 | $ | (1,392 | ) | $ | 2,884 | |||||
Cost of sales and occupancy expense | 1,625 | 1,503 | (1,392 | ) | 1,736 | |||||||||
Gross profit | 895 | 253 | — | 1,148 | ||||||||||
Selling, general, and administrative expense | 681 | 106 | — | 787 | ||||||||||
Share-based compensation expense | 7 | 2 | — | 9 | ||||||||||
Related party expenses | 10 | — | — | 10 | ||||||||||
Store pre-opening costs | 4 | 1 | — | 5 | ||||||||||
Operating income | 193 | 144 | — | 337 | ||||||||||
Interest expense | 187 | — | — | 187 | ||||||||||
Refinancing costs and losses on early extinguishment of debt | 3 | — | — | 3 | ||||||||||
Other (income) and expense, net | (1 | ) | — | — | (1 | ) | ||||||||
Intercompany charges (income) | 53 | (53 | ) | — | — | |||||||||
Equity in earnings of subsidiaries | 197 | — | (197 | ) | — | |||||||||
Income before income taxes | 148 | 197 | (197 | ) | 148 | |||||||||
Provision for income taxes | 53 | 71 | (71 | ) | 53 | |||||||||
Net income | 95 | 126 | (126 | ) | 95 | |||||||||
Comprehensive income | $ | 95 | $ | 126 | $ | (126 | ) | $ | 95 | |||||
Schedule of Supplemental Condensed Consolidating Statement of Cash Flows | ' | |||||||||||||
Nine Months Ended November 2, 2013 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
(in millions) | ||||||||||||||
Operating activities: | ||||||||||||||
Net cash provided by operating activities | $ | 51 | $ | 94 | $ | (71 | ) | $ | 74 | |||||
Investing activities: | ||||||||||||||
Cash paid for property and equipment | (59 | ) | (23 | ) | — | (82 | ) | |||||||
Net cash used in investing activities | (59 | ) | (23 | ) | — | (82 | ) | |||||||
Financing activities: | ||||||||||||||
Net repayments of short-term debt | 36 | — | — | 36 | ||||||||||
Intercompany dividends | — | (71 | ) | 71 | — | |||||||||
Other financing activities | (16 | ) | — | — | (16 | ) | ||||||||
Net cash provided by (used in) financing activities | 20 | (71 | ) | 71 | 20 | |||||||||
Increase in cash and equivalents | 12 | — | — | 12 | ||||||||||
Beginning cash and equivalents | 37 | 19 | — | 56 | ||||||||||
Ending cash and equivalents | $ | 49 | $ | 19 | $ | — | $ | 68 | ||||||
Nine Months Ended October 27, 2012 | ||||||||||||||
Parent | Guarantor | Eliminations | Consolidated | |||||||||||
Company | Subsidiaries | |||||||||||||
Restated (in millions) | ||||||||||||||
Operating activities: | ||||||||||||||
Net cash (used in) provided by operating activities | $ | (22 | ) | $ | 109 | $ | (74 | ) | $ | 13 | ||||
Investing activities: | ||||||||||||||
Cash paid for property and equipment | (66 | ) | (19 | ) | — | (85 | ) | |||||||
Net cash used in investing activities | (66 | ) | (19 | ) | — | (85 | ) | |||||||
Financing activities: | ||||||||||||||
Net repayments of long term debt | (123 | ) | — | — | (123 | ) | ||||||||
Intercompany dividends | — | (74 | ) | 74 | — | |||||||||
Other financing activities | (14 | ) | (1 | ) | — | (15 | ) | |||||||
Net cash used in financing activities | (137 | ) | (75 | ) | 74 | (138 | ) | |||||||
Decrease in cash and equivalents | (225 | ) | 15 | — | (210 | ) | ||||||||
Beginning cash and equivalents | 363 | 8 | — | 371 | ||||||||||
Ending cash and equivalents | $ | 138 | $ | 23 | $ | — | $ | 161 | ||||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Nov. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 | Feb. 01, 2014 | Feb. 02, 2013 | |
item | item | item | item | item | item | |
Fiscal year | ' | ' | ' | ' | ' | ' |
Number of weeks in a fiscal year | 13 | 13 | 39 | 39 | 52 | 53 |
Restatement_Sharebased_Compens2
Restatement - Share-based Compensation (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | |||
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 | Feb. 02, 2013 | Oct. 27, 2012 | Oct. 27, 2012 | Oct. 27, 2012 | Oct. 27, 2012 | Feb. 02, 2013 |
As Reported | As Reported | Restatement adjustment | Restatement adjustment | Maximum | ||||||
Share-based compensation Adjustment | Share-based compensation Adjustment | |||||||||
Term of immature shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | '6 months |
Impact to share-based compensation expense | ' | $2 | ' | $12 | ' | ' | ' | ' | ' | ' |
Impact to share-based compensation expense, net of tax | ' | 1 | ' | 7 | ' | ' | ' | ' | ' | ' |
Consolidated Balance Sheet | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Merchandise inventories | 1,119 | 1,078 | 1,119 | 1,078 | 862 | 1,076 | 1,076 | 2 | 2 | ' |
Total current assets | 1,345 | 1,389 | 1,345 | 1,389 | 1,044 | 1,387 | 1,387 | 2 | 2 | ' |
Deferred income taxes | 29 | 32 | 29 | 32 | 30 | 18 | 18 | 14 | 14 | ' |
Total non-current assets | 168 | 184 | 168 | 184 | 173 | 170 | 170 | 14 | 14 | ' |
Share-based compensation | 21 | 30 | 21 | 30 | 35 | ' | ' | 30 | 30 | ' |
Income taxes payable | 6 | 6 | 6 | 6 | 37 | 8 | 8 | -2 | -2 | ' |
Total current liabilities | 1,043 | 1,015 | 1,043 | 1,015 | 856 | 987 | 987 | 28 | 28 | ' |
Share-based compensation | 28 | 24 | 28 | 24 | 27 | ' | ' | 24 | 24 | ' |
Total long-term liabilities | 2,994 | 3,309 | 2,994 | 3,309 | 3,003 | 3,285 | 3,285 | 24 | 24 | ' |
Additional paid-in capital | 63 | 51 | 63 | 51 | 49 | 61 | 61 | -10 | -10 | ' |
Accumulated deficit | -2,238 | -2,464 | -2,238 | -2,464 | -2,359 | -2,438 | -2,438 | -26 | -26 | ' |
Total stockholders' deficit | -2,171 | -2,407 | -2,171 | -2,407 | -2,304 | -2,371 | -2,371 | -36 | -36 | ' |
Consolidated Statements of Comprehensive Income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cost of sales and occupancy expense | 665 | 612 | 1,816 | 1,736 | ' | 611 | 1,730 | 1 | 6 | ' |
Gross profit | 453 | 402 | 1,199 | 1,148 | ' | 403 | 1,154 | -1 | -6 | ' |
Selling, general, and administrative expense | 309 | 277 | 835 | 787 | ' | 278 | 790 | -1 | -3 | ' |
Share-based compensation expense | 4 | 2 | 15 | 9 | ' | ' | ' | 2 | 9 | ' |
Operating income | 135 | 117 | 334 | 337 | ' | 119 | 349 | -2 | -12 | ' |
Income before income taxes | 90 | 54 | 189 | 148 | ' | 56 | 160 | -2 | -12 | ' |
Provision for income taxes | 32 | 19 | 68 | 53 | ' | 20 | 58 | -1 | -5 | ' |
Net income | 58 | 35 | 121 | 95 | ' | 36 | 102 | -1 | -7 | ' |
Comprehensive income | 58 | 35 | 119 | 95 | ' | 36 | 102 | -1 | -7 | ' |
Operating Activities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net income | 58 | 35 | 121 | 95 | ' | 36 | 102 | -1 | -7 | ' |
Share-based compensation and other | ' | ' | 19 | 15 | ' | ' | 4 | ' | 11 | ' |
Merchandise inventories | ' | ' | -254 | -233 | ' | ' | -236 | ' | 3 | ' |
Accrued liabilities and other | ' | ' | -21 | -15 | ' | ' | -11 | ' | -4 | ' |
Income taxes | ' | ' | -49 | -33 | ' | ' | -27 | ' | -6 | ' |
Net cash provided by operating activities | ' | ' | 74 | 13 | ' | ' | 16 | ' | -3 | ' |
Repurchase of common stock | ' | ' | ' | ' | ' | ' | -10 | ' | 10 | ' |
Proceeds from stock options exercised | ' | ' | ' | ' | ' | ' | 7 | ' | -7 | ' |
Net cash used in financing activities | ' | ' | $20 | ($138) | ' | ' | ($141) | ' | $3 | ' |
Debt_Details
Debt (Details) (USD $) | Nov. 02, 2013 | Feb. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Nov. 02, 2013 | Nov. 02, 2013 | Feb. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Feb. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Feb. 02, 2013 | Jan. 28, 2013 | Oct. 27, 2012 | Oct. 27, 2012 | Nov. 02, 2013 | Feb. 02, 2013 |
In Millions, unless otherwise specified | Minimum | Maximum | Senior secured term loan | Senior secured term loan | Senior secured term loan | Senior notes | Senior notes | Senior notes | Senior subordinated notes | Senior subordinated notes | Senior subordinated notes | Senior subordinated notes | Subordinated discount notes | Asset-based revolving credit facility | Asset-based revolving credit facility | |||
Debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of days from end of period within which annual and quarterly financial statements are to be provided | ' | ' | ' | '45 days | '90 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total debt | $3,081 | $3,041 | $3,368 | ' | ' | $1,632 | $1,640 | $1,787 | $1,007 | $1,007 | $1,008 | $255 | $393 | ' | $393 | $180 | $187 | $1 |
Less current portion | 203 | 150 | 180 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long-term debt | $2,878 | $2,891 | $3,188 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 7.75% | ' | ' | 11.38% | ' | 11.38% | ' | 13.00% | ' | ' |
Debt_Details_2
Debt (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | 0 Months Ended | |||
In Millions, unless otherwise specified | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 | Feb. 27, 2013 | Nov. 02, 2013 | Jan. 28, 2013 |
11 3/8% Senior Subordinated Notes due 2016 | 11 3/8% Senior Subordinated Notes due 2016 | 11 3/8% Senior Subordinated Notes due 2016 | ||||
Debt | ' | ' | ' | ' | ' | ' |
Stated interest rate (as a percent) | ' | ' | ' | ' | 11.38% | 11.38% |
Aggregate principal amount of debt instrument for which the entity delivered an irrevocable notice relating to the redemption | ' | ' | ' | ' | ' | $137 |
Principal amount of notes repurchased | ' | ' | ' | 137 | ' | ' |
Redemption price of debt instrument as a percentage of principal amount | ' | ' | ' | 103.79% | ' | ' |
Loss related to the early extinguishment of the repurchased notes | 3 | 7 | 3 | 7 | ' | ' |
Redemption premiums included in loss on extinguishment of debt | ' | ' | ' | 5 | ' | ' |
Unamortized debt issuance costs written-off related to loss on early extinguishment of debt | ' | ' | ' | $2 | ' | ' |
Debt_Details_3
Debt (Details 3) (USD $) | Nov. 02, 2013 | Feb. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Nov. 02, 2013 | Nov. 02, 2013 |
In Millions, unless otherwise specified | Restated Revolving Credit Facility | Restated Term Loan Credit Facility | Restated Term Loan Credit Facility | |||
Asset-based Revolving Credit Facility | ' | ' | ' | ' | ' | ' |
Borrowing base amount | ' | ' | ' | $650 | ' | ' |
Outstanding borrowings | ' | ' | ' | 187 | ' | ' |
Outstanding letters of credit | ' | ' | ' | 62 | ' | ' |
Unused borrowing capacity | ' | ' | ' | 401 | ' | ' |
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 | ' | ' | ' | ' | ' | '6 years 9 months |
Scheduled quarterly payments of the original principal amount of the term loans | ' | ' | ' | ' | 4 | 8 |
Current portion of long-term debt | $203 | $150 | $180 | ' | $16 | $16 |
Period of scheduled quarterly payments | ' | ' | ' | ' | '12 months | ' |
Comprehensive_Income_Details
Comprehensive Income (Details) (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 |
Comprehensive Income | ' | ' |
Balance at the beginning of the period | $6 | $6 |
Foreign currency translation adjustment and other | -2 | ' |
Balance at the end of the period | $4 | $6 |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | Nov. 02, 2013 |
In Millions, unless otherwise specified | |
Senior notes | ' |
Fair Value Measurements | ' |
Interest rate (as a percent) | 7.75% |
Carrying Value | Senior secured term loan | ' |
Fair Value Measurements | ' |
Long-term loans and notes | 1,632 |
Carrying Value | Senior notes | ' |
Fair Value Measurements | ' |
Long-term loans and notes | 1,007 |
Carrying Value | Senior subordinated notes | ' |
Fair Value Measurements | ' |
Long-term loans and notes | 255 |
Fair Value | Senior secured term loan | ' |
Fair Value Measurements | ' |
Long-term loans and notes | 1,641 |
Fair Value | Senior notes | ' |
Fair Value Measurements | ' |
Long-term loans and notes | 1,085 |
Fair Value | Senior subordinated notes | ' |
Fair Value Measurements | ' |
Long-term loans and notes | 262 |
Income_Taxes_Details
Income Taxes (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Nov. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 | Feb. 01, 2014 | |
Annualized Estimate | |||||
Effective tax rate from continuing operations | ' | ' | ' | ' | ' |
Effective tax rate (as a percent) | 35.60% | 35.20% | 36.00% | 35.80% | 37.00% |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) (USD $) | 9 Months Ended | 0 Months Ended | 0 Months Ended | ||
In Millions, unless otherwise specified | Nov. 02, 2013 | Sep. 15, 2011 | Dec. 03, 2013 | Sep. 15, 2011 | Feb. 10, 2011 |
Employee Claims | Employee Claims | Employee Claims | Consumer Class Action Claims | ||
Rea Claim | Rea Claim | Rea Claim | Zip Code Claims | ||
item | item | Maximum | item | ||
Commitments and Contingencies | ' | ' | ' | ' | ' |
Amount of accrual for estimable and reasonably possible loss | $0 | ' | ' | ' | ' |
Aggregate estimate of possible loss | 6 | ' | ' | ' | ' |
Commitments and Contingencies | ' | ' | ' | ' | ' |
Number of plaintiffs | ' | 4 | ' | ' | ' |
Damages, penalties, costs of suit and attorneys' fees sought by plaintiff | ' | ' | ' | $5 | ' |
Number of certified members | ' | ' | 200 | ' | ' |
Additional purported class action lawsuits | ' | ' | ' | ' | 3 |
The_Michaels_Companies_and_its1
The Michaels Companies and its Subsidiaries (Details) (USD $) | Nov. 02, 2013 | Feb. 02, 2013 | Oct. 27, 2012 | Jul. 31, 2013 | Jul. 29, 2013 | Aug. 01, 2014 |
In Millions, except Share data, unless otherwise specified | Michaels Companies, Inc. | PIK Notes | PIK Notes | |||
item | ||||||
Reorganization | ' | ' | ' | ' | ' | ' |
Number of shares of common stock for which rights to receive available | ' | ' | ' | 1 | ' | ' |
Number of shares of common stock of which options assumed | ' | ' | ' | 1 | ' | ' |
Number of shares of common stock converted into Parent common stock | ' | ' | ' | 118,000,000 | ' | ' |
Shares issued | 100 | 100 | 100 | 100 | ' | ' |
Common Stock, par value (in dollars per share) | $0.10 | $0.10 | $0.10 | $0.10 | ' | ' |
Principal amount of notes issued | ' | ' | ' | ' | $800 | ' |
PIK interest rate one (as a percent) | ' | ' | ' | ' | 7.50% | ' |
PIK interest rate two (as a percent) | ' | ' | ' | ' | 8.25% | ' |
Number of interest payments to be paid entirely in cash | ' | ' | ' | ' | 2 | ' |
Proceeds from debt after discount, fees and expenses | ' | ' | ' | ' | 782 | ' |
Cash interest payments due | ' | ' | ' | ' | ' | 61 |
Annual interest payments | ' | ' | ' | ' | 60 | ' |
Total interest payments | ' | ' | ' | ' | $301 | ' |
Segments_and_Geographic_Inform2
Segments and Geographic Information (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 | Feb. 02, 2013 |
item | |||||
Segments and Geographic Information | ' | ' | ' | ' | ' |
Number of reportable segments | ' | ' | 1 | ' | ' |
Sales and assets by country | ' | ' | ' | ' | ' |
Net sales | $1,118 | $1,014 | $3,015 | $2,884 | ' |
Total Assets | 1,866 | 1,917 | 1,866 | 1,917 | 1,555 |
United States | ' | ' | ' | ' | ' |
Sales and assets by country | ' | ' | ' | ' | ' |
Net sales | 1,013 | 915 | 2,731 | 2,617 | ' |
Total Assets | 1,728 | 1,777 | 1,728 | 1,777 | 1,446 |
Canada | ' | ' | ' | ' | ' |
Sales and assets by country | ' | ' | ' | ' | ' |
Net sales | 105 | 99 | 284 | 267 | ' |
Total Assets | $138 | $140 | $138 | $140 | $109 |
Segments_and_Geographic_Inform3
Segments and Geographic Information (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 |
Segment and Geographic Information | ' | ' | ' | ' |
Net income | $58 | $35 | $121 | $95 |
Interest expense | 45 | 60 | 137 | 187 |
Refinancing costs and losses on early extinguishment of debt | ' | 3 | 7 | 3 |
Provision for income taxes | 32 | 19 | 68 | 53 |
Depreciation and amortization | 24 | 25 | 74 | 71 |
Reporting segment | ' | ' | ' | ' |
Segment and Geographic Information | ' | ' | ' | ' |
Net income | 58 | 35 | 121 | 95 |
Interest expense | 45 | 60 | 137 | 187 |
Refinancing costs and losses on early extinguishment of debt | ' | 3 | 7 | 3 |
Provision for income taxes | 32 | 19 | 68 | 53 |
Depreciation and amortization | 24 | 25 | 74 | 71 |
EBITDA (excluding refinancing costs and losses on early extinguishments of debt) | $159 | $142 | $407 | $409 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 | Feb. 02, 2013 |
Related Party Transactions | ' | ' | ' | ' | ' |
Expenses recognized | $3 | $3 | $10 | $10 | ' |
Long-term debt held | 3,081 | 3,368 | 3,081 | 3,368 | 3,041 |
Receivable from parent | 6 | ' | 6 | ' | ' |
Payments on behalf of parent | 3 | ' | 23 | ' | ' |
The Sponsors | ' | ' | ' | ' | ' |
Related Party Transactions | ' | ' | ' | ' | ' |
Annual management fees | ' | ' | 12 | ' | ' |
Highfields Capital Management LP | ' | ' | ' | ' | ' |
Related Party Transactions | ' | ' | ' | ' | ' |
Annual management fees | ' | ' | 1 | ' | ' |
Bain Capital Partners, LLC | Print procurement services received from an external vendor | ' | ' | ' | ' | ' |
Related Party Transactions | ' | ' | ' | ' | ' |
Expenses recognized | 2 | 1 | 4 | 3 | ' |
The Blackstone Group | Restated Term Loan Credit Facility | ' | ' | ' | ' | ' |
Related Party Transactions | ' | ' | ' | ' | ' |
Long-term debt held | 33 | ' | 33 | ' | ' |
The Blackstone Group | Lease services of certain properties from a vendor | ' | ' | ' | ' | ' |
Related Party Transactions | ' | ' | ' | ' | ' |
Expenses recognized | 1 | 1 | 3 | 3 | ' |
The Blackstone Group | Store inventory counting services received from an external vendor | ' | ' | ' | ' | ' |
Related Party Transactions | ' | ' | ' | ' | ' |
Expenses recognized | 2 | 2 | 5 | 6 | ' |
The Blackstone Group | Candy-type items in stores received from an external vendor | ' | ' | ' | ' | ' |
Related Party Transactions | ' | ' | ' | ' | ' |
Expenses recognized | $5 | $5 | $17 | $16 | ' |
Condensed_Consolidating_Financ2
Condensed Consolidating Financial Information (Details) (USD $) | Nov. 02, 2013 | Feb. 02, 2013 | Oct. 27, 2012 | Jan. 28, 2012 |
In Millions, unless otherwise specified | ||||
Current assets: | ' | ' | ' | ' |
Cash and equivalents | $68 | $56 | $161 | $371 |
Merchandise inventories | 1,119 | 862 | 1,078 | ' |
Intercompany receivables | 1 | ' | ' | ' |
Other | 157 | 126 | 150 | ' |
Total current assets | 1,345 | 1,044 | 1,389 | ' |
Property and equipment, net | 353 | 338 | 344 | ' |
Goodwill | 94 | 94 | 95 | ' |
Long-term receivable from Parent | 5 | ' | ' | ' |
Other assets | 69 | 79 | 89 | ' |
Total assets | 1,866 | 1,555 | 1,917 | ' |
Current liabilities: | ' | ' | ' | ' |
Accounts payable | 467 | 263 | 374 | ' |
Accrued liabilities and other | 342 | 367 | 424 | ' |
Share-based compensation | 21 | 35 | 30 | ' |
Current portion of long-term debt | 203 | 150 | 180 | ' |
Other | 10 | 41 | 7 | ' |
Total current liabilities | 1,043 | 856 | 1,015 | ' |
Long-term debt | 2,878 | 2,891 | 3,188 | ' |
Share-based compensation | 28 | 27 | 24 | ' |
Other long-term liabilities | 88 | 85 | 97 | ' |
Total stockholders' deficit | -2,171 | -2,304 | -2,407 | ' |
Total liabilities and stockholders' deficit | 1,866 | 1,555 | 1,917 | ' |
Parent Company | ' | ' | ' | ' |
Current assets: | ' | ' | ' | ' |
Cash and equivalents | 49 | 37 | 138 | 363 |
Merchandise inventories | 745 | 591 | 717 | ' |
Intercompany receivables | 1 | ' | ' | ' |
Other | 129 | 105 | 120 | ' |
Total current assets | 924 | 733 | 975 | ' |
Property and equipment, net | 278 | 271 | 277 | ' |
Goodwill | 94 | 94 | 95 | ' |
Investment in subsidiaries | 489 | 284 | 610 | ' |
Long-term receivable from Parent | 5 | ' | ' | ' |
Other assets | 66 | 76 | 86 | ' |
Total assets | 1,856 | 1,458 | 2,043 | ' |
Current liabilities: | ' | ' | ' | ' |
Accounts payable | 13 | 5 | 23 | ' |
Accrued liabilities and other | 209 | 235 | 295 | ' |
Share-based compensation | 8 | 22 | 19 | ' |
Current portion of long-term debt | 203 | 150 | 180 | ' |
Intercompany payable | 614 | 329 | 637 | ' |
Other | 9 | 36 | 6 | ' |
Total current liabilities | 1,056 | 777 | 1,160 | ' |
Long-term debt | 2,878 | 2,891 | 3,188 | ' |
Share-based compensation | 18 | 21 | 17 | ' |
Other long-term liabilities | 75 | 73 | 85 | ' |
Total stockholders' deficit | -2,171 | -2,304 | -2,407 | ' |
Total liabilities and stockholders' deficit | 1,856 | 1,458 | 2,043 | ' |
Guarantor Subsidiaries | ' | ' | ' | ' |
Percentage of equity ownership owned | 100.00% | ' | ' | ' |
Current assets: | ' | ' | ' | ' |
Cash and equivalents | 19 | 19 | 23 | 8 |
Merchandise inventories | 374 | 271 | 361 | ' |
Intercompany receivables | 614 | 329 | 637 | ' |
Other | 28 | 21 | 30 | ' |
Total current assets | 1,035 | 640 | 1,051 | ' |
Property and equipment, net | 75 | 67 | 67 | ' |
Other assets | 3 | 3 | 3 | ' |
Total assets | 1,113 | 710 | 1,121 | ' |
Current liabilities: | ' | ' | ' | ' |
Accounts payable | 454 | 258 | 351 | ' |
Accrued liabilities and other | 133 | 132 | 129 | ' |
Share-based compensation | 13 | 13 | 11 | ' |
Other | 1 | 5 | 1 | ' |
Total current liabilities | 601 | 408 | 492 | ' |
Share-based compensation | 10 | 6 | 7 | ' |
Other long-term liabilities | 13 | 12 | 12 | ' |
Total stockholders' deficit | 489 | 284 | 610 | ' |
Total liabilities and stockholders' deficit | 1,113 | 710 | 1,121 | ' |
Eliminations | ' | ' | ' | ' |
Current assets: | ' | ' | ' | ' |
Intercompany receivables | -614 | -329 | -637 | ' |
Total current assets | -614 | -329 | -637 | ' |
Investment in subsidiaries | -489 | -284 | -610 | ' |
Total assets | -1,103 | -613 | -1,247 | ' |
Current liabilities: | ' | ' | ' | ' |
Intercompany payable | -614 | -329 | -637 | ' |
Total current liabilities | -614 | -329 | -637 | ' |
Total stockholders' deficit | -489 | -284 | -610 | ' |
Total liabilities and stockholders' deficit | ($1,103) | ($613) | ($1,247) | ' |
Condensed_Consolidating_Financ3
Condensed Consolidating Financial Information (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 | Nov. 02, 2013 | Oct. 27, 2012 |
Net sales | $1,118 | $1,014 | $3,015 | $2,884 |
Cost of sales and occupancy expense | 665 | 612 | 1,816 | 1,736 |
Gross profit | 453 | 402 | 1,199 | 1,148 |
Selling, general, and administrative expense | 309 | 277 | 835 | 787 |
Share-based compensation expense | 4 | 2 | 15 | 9 |
Related party expenses | 3 | 3 | 10 | 10 |
Store pre-opening costs | 2 | 3 | 5 | 5 |
Operating income | 135 | 117 | 334 | 337 |
Interest expense | 45 | 60 | 137 | 187 |
Refinancing costs and losses on early extinguishment of debt | ' | 3 | 7 | 3 |
Other (income) and expense, net | ' | ' | 1 | -1 |
Income before income taxes | 90 | 54 | 189 | 148 |
Provision for income taxes | 32 | 19 | 68 | 53 |
Net income | 58 | 35 | 121 | 95 |
Comprehensive income | 58 | 35 | 119 | 95 |
Parent Company | ' | ' | ' | ' |
Net sales | 981 | 883 | 2,633 | 2,520 |
Cost of sales and occupancy expense | 623 | 573 | 1,702 | 1,625 |
Gross profit | 358 | 310 | 931 | 895 |
Selling, general, and administrative expense | 265 | 239 | 721 | 681 |
Share-based compensation expense | 3 | 1 | 12 | 7 |
Related party expenses | 3 | 3 | 10 | 10 |
Store pre-opening costs | 1 | 2 | 4 | 4 |
Operating income | 86 | 65 | 184 | 193 |
Interest expense | 45 | 60 | 137 | 187 |
Refinancing costs and losses on early extinguishment of debt | ' | 3 | 7 | 3 |
Other (income) and expense, net | ' | ' | ' | -1 |
Intercompany charges (income) | 20 | 21 | 44 | 53 |
Equity in earnings of subsidiaries | 69 | 73 | 193 | 197 |
Income before income taxes | 90 | 54 | 189 | 148 |
Provision for income taxes | 32 | 19 | 68 | 53 |
Net income | 58 | 35 | 121 | 95 |
Comprehensive income | 58 | 35 | 119 | 95 |
Guarantor Subsidiaries | ' | ' | ' | ' |
Net sales | 748 | 685 | 1,829 | 1,756 |
Cost of sales and occupancy expense | 653 | 593 | 1,561 | 1,503 |
Gross profit | 95 | 92 | 268 | 253 |
Selling, general, and administrative expense | 44 | 38 | 114 | 106 |
Share-based compensation expense | 1 | 1 | 3 | 2 |
Store pre-opening costs | 1 | 1 | 1 | 1 |
Operating income | 49 | 52 | 150 | 144 |
Other (income) and expense, net | ' | ' | 1 | ' |
Intercompany charges (income) | -20 | -21 | -44 | -53 |
Income before income taxes | 69 | 73 | 193 | 197 |
Provision for income taxes | 25 | 26 | 69 | 71 |
Net income | 44 | 47 | 124 | 126 |
Comprehensive income | 44 | 47 | 124 | 126 |
Eliminations | ' | ' | ' | ' |
Net sales | -611 | -554 | -1,447 | -1,392 |
Cost of sales and occupancy expense | -611 | -554 | -1,447 | -1,392 |
Equity in earnings of subsidiaries | -69 | -73 | -193 | -197 |
Income before income taxes | -69 | -73 | -193 | -197 |
Provision for income taxes | -25 | -26 | -69 | -71 |
Net income | -44 | -47 | -124 | -126 |
Comprehensive income | ($44) | ($47) | ($124) | ($126) |
Condensed_Consolidating_Financ4
Condensed Consolidating Financial Information (Details 3) (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Nov. 02, 2013 | Oct. 27, 2012 |
Operating activities: | ' | ' |
Net cash provided by operating activities | $74 | $13 |
Investing activities: | ' | ' |
Cash paid for property and equipment | -82 | -85 |
Net cash used in investing activities | -82 | -85 |
Financing activities: | ' | ' |
Net repayments of short-term debt | 36 | ' |
Net repayments of long-term debt | ' | -123 |
Other financing activities | -16 | -15 |
Net cash provided by (used in) financing activities | 20 | -138 |
Net increase (decrease) in cash and equivalents | 12 | -210 |
Cash and equivalents at beginning of period | 56 | 371 |
Cash and equivalents at end of period | 68 | 161 |
Parent Company | ' | ' |
Operating activities: | ' | ' |
Net cash provided by operating activities | 51 | -22 |
Investing activities: | ' | ' |
Cash paid for property and equipment | -59 | -66 |
Net cash used in investing activities | -59 | -66 |
Financing activities: | ' | ' |
Net repayments of short-term debt | 36 | ' |
Net repayments of long-term debt | ' | -123 |
Other financing activities | -16 | -14 |
Net cash provided by (used in) financing activities | 20 | -137 |
Net increase (decrease) in cash and equivalents | 12 | -225 |
Cash and equivalents at beginning of period | 37 | 363 |
Cash and equivalents at end of period | 49 | 138 |
Guarantor Subsidiaries | ' | ' |
Operating activities: | ' | ' |
Net cash provided by operating activities | 94 | 109 |
Investing activities: | ' | ' |
Cash paid for property and equipment | -23 | -19 |
Net cash used in investing activities | -23 | -19 |
Financing activities: | ' | ' |
Intercompany dividends | -71 | -74 |
Other financing activities | ' | -1 |
Net cash provided by (used in) financing activities | -71 | -75 |
Net increase (decrease) in cash and equivalents | ' | 15 |
Cash and equivalents at beginning of period | 19 | 8 |
Cash and equivalents at end of period | 19 | 23 |
Eliminations | ' | ' |
Operating activities: | ' | ' |
Net cash provided by operating activities | -71 | -74 |
Financing activities: | ' | ' |
Intercompany dividends | 71 | 74 |
Net cash provided by (used in) financing activities | $71 | $74 |