FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended October 29, 1994
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-8899
CLAIRE'S STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-0940416
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 S.W. 129th Avenue Pembroke Pines, Florida 33027
(Address of principal executive offices) (Zip Code)
(305) 433-3900
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X . No .
The number of shares of the registrant's Common Stock and Class A Common
Stock outstanding as of November 30, 1994 was 19,541,043 and 1,329,568,
respectively, excluding treasury shares.
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CLAIRE'S STORES, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at October 29, 1994 and
January 29, 1994. 3
Consolidated Statements of Income for the Three
Months and Nine Months Ended October 29, 1994
and October 30, 1993. 4
Consolidated Statements of Cash Flows for the
Nine Months Ended October 29, 1994 and
October 30, 1993. 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
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<TABLE>
PART I. FINANCIAL INFORMATION
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
October 29, January 29,
ASSETS 1994 1994
Current Assets:
<S> <C> <C>
Cash $ 29,843,000 $ 41,128,000
Inventories 31,366,000 22,694,000
Prepaid expenses and other current assets 10,233,000 5,431,000
Total current assets 71,442,000 69,253,000
Property and Equipment:
Land and building 793,000 793,000
Furniture, fixtures and equipment 59,428,000 51,455,000
Leasehold improvements 73,251,000 71,162,000
133,472,000 123,410,000
Less accumulated depreciation and
amortization ( 71,027,000) ( 62,571,000)
62,445,000 60,839,000
Other Assets 9,130,000 5,127,000
$143,017,000 $135,219,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 3,000,000 $ -
Trade accounts payable 15,997,000 9,664,000
Income taxes payable 152,000 7,350,000
Accrued expenses 10,592,000 9,527,000
Dividends payable 670,000 551,000
Total current liabilities 30,411,000 27,092,000
Long-term debt 3,000,000 6,000,000
Deferred credits 3,059,000 2,212,000
Stockholders' Equity:
Preferred Stock par value $l.00 per share;
authorized 1,000,000 shares, issued and
outstanding -0- shares - -
Class A Common Stock par value $.05 per
share; authorized 20,000,000 shares,
issued 1,329,943 shares and 1,344,638 shares 66,000 67,000
Common Stock par value $.05 per share;
authorized 50,000,000 shares, issued
and outstanding 19,540,668 shares and
19,431,280 shares 977,000 972,000
Additional paid-in capital 13,618,000 12,261,000
Retained earnings 92,654,000 86,921,000
107,315,000 100,221,000
Less treasury stock, at cost, 82,759 shares
and 48,759 shares ( 768,000) ( 306,000)
106,547,000 99,915,000
$143,017,000 $135,219,000
</TABLE>
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<TABLE>
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED
OCTOBER 29, 1994 AND OCTOBER 30, 1993
(Unaudited)
Three Months Ended Nine Months Ended
<CAPTION>
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales $69,500,000 $ 65,242,000 $198,083,000 $185,078,000
Cost of sales, occupancy
and buying expenses 33,847,000 31,123,000 95,842,000 89,387,000
Gross profit 35,653,000 34,119,000 102,241,000 95,691,000
Other expenses:
Selling, general and
administrative 27,697,000 25,233,000 80,311,000 72,836,000
Depreciation and
amortization 3,488,000 3,234,000 10,284,000 9,616,000
Interest (income)
expense, net ( 203,000) 89,000 ( 575,000) 322,000
30,982,000 28,556,000 90,020,000 82,774,000
Income before income
taxes 4,671,000 5,563,000 12,221,000 12,917,000
Income taxes 1,776,000 2,086,000 4,644,000 4,770,000
Net income $ 2,895,000 $ 3,477,000 $ 7,577,000 $ 8,147,000
Net income per share $ .14 $ .17 $ .37 $ .40
Dividends per share of
common stock $ .03 $ .025 $ .09 $ .075
Average number of shares
of common stock and
equivalents 20,792,000 20,574,000 20,756,000 20,560,000
</TABLE>
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<TABLE>
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
OCTOBER 29, 1994 AND OCTOBER 30, 1993
(Unaudited)
Nine Months Ended
<CAPTION>
October 29, October 30,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,577,000 $ 8,147,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 10,284,000 9,616,000
Loss on retirement of property and
equipment 858,000 1,110,000
Other ( 49,000) 56,000
Change in assets and liabilities:
(Increase) decrease in -
Inventories ( 8,672,000) ( 8,562,000)
Prepaid expenses and other assets ( 8,388,000) ( 4,984,000
Increase (decrease) in
Trade accounts payable 6,333,000 5,294,000
Income taxes payable ( 7,198,000) ( 6,800,000)
Accrued Expenses 1,065,000 ( 588,000)
Deferred credits 847,000 625,000
Net cash provided by operating
activities 2,657,000 3,914,000
Cash flows from investing activities:
Acquisition of property and equipment (12,739,000) ( 7,042,000)
Cash flows from financing activities:
Principal payments on long-term debt - (15,000,000)
Common Stock repurchase for treasury ( 811,000) -
Proceeds from stock conversions 167,000 -
Proceeds from stock options exercised 1,117,000 344,000
Dividends paid ( 1,676,000) ( 1,443,000)
Net cash used in financing
activities ( 1,203,000) (16,099,000)
Net increase (decrease) in cash (11,285,000) (19,227,000)
Cash at beginning of period 41,128,000 39,032,000
Cash at end of period $29,843,000 $19,805,000
</TABLE>
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CLAIRE'S STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements
reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management,
necessary to a fair statement of the results for the interim
periods. These financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore do
not include all of the information or footnotes necessary for
a complete presentation. They should be read in conjunction
with the Company's audited financial statements included as
part of the Annual Report on Form 10-K for the year ended
January 29, 1994 filed with the Securities and Exchange
Commission.
2. Due to the seasonal nature of the Company's business, the
results of operations for the first nine months of the year
are not indicative of the results of operations on an
annualized basis.
3. Income per share is based on the weighted average number of
shares of common stock and equivalents outstanding during the
three and nine months ended October 29, 1994 and October 30,
1993.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
Net sales for the three and nine months ended October 29, 1994
increased approximately 7% compared to the comparable periods ended
October 30, 1993. The increases for the periods resulted primarily
from the addition of a net 93 stores. The sales increase from the
additional stores was partially offset by a decrease in same-store
sales of 3% and 1% in the three month and nine month periods ended
October 29, 1994, respectively. The same-store sales decline was
primarily due to a lack of a significant fashion trend. In the prior
year, the Company quickly responded to consumer demand for "Chokers".
This fashion item was sold at a retail price which was in excess of the
Company average, thus increasing the average unit retail of merchandise
sold. The combination of a significant fashion item in the prior year
and the higher retail price related to that item caused this year's
same-store sales volume to decrease, as stated above.
Cost of sales, occupancy and buying expenses increased 9% and 7% for
the three and nine months ended October 29, 1994, respectively, over
the comparable periods ended October 30, 1993. The principal reasons
for these increases were the rise in the number of stores and the
volume of merchandise sold. As a percentage of net sales, these
expenses were 49% for the three months ended October 29, 1994 compared
to 48% for the same period in the prior year. For both the nine months
ended October 29, 1994 and October 30, 1993, these expenses remained
comparable. For the three month period ended October 29, 1994, these
expenses, as a percentage of sales, increased due to the same-store
sales decline described above and the fact that fixed expenses, such as
rent and rent support, which are included in cost of sales, represented
a larger percentage of net sales. For the nine month period ended
October 29, 1994, the 1% same-store sales decline did not have a
significant impact on cost of sales as a percentage of sales.
Selling, general and administrative expense (S,G&A) as a percentage of
sales for the three and nine months ended October 29, 1994 was 40% and
41%, respectively, compared to 39% for the comparable three month and
nine month periods ended October 30, 1993. The increases noted during
the periods ended October 29, 1994 were due to the increase in the cost
of operating the additional stores coupled with the same-store sales
declines discussed above. In addition, the Company incurred expenses
related to it's expansion into Canada and Japan. These expenses are
not expected to have a significant impact going forward.
Depreciation and amortization as a percentage of sales was 5% for the
three and nine months ended October 29, 1994, which was comparable to
the three and nine months ended October 30, 1993. Since depreciation
and amortization is a "fixed" expense, one would expect these expenses
to increase as a percentage of sales considering the same-store sales
declines discussed previously. However, due to the Company opening a
majority of new stores in the third and fourth quarters of the fiscal
year ending January 28, 1995, the additional depreciation and
amortization from the new stores did not materially impact these
expenses as a percentage of sales.
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Due to the increase in cash levels and the reduction of long-term debt,
interest income exceeded interest expense for the three months and nine
months ended October 29, 1994. As a percentage of sales, interest
income, net of interest expense, was .3% for the three and nine month
periods ended October 29, 1994, compared to interest expense, net of
interest income, of .1% and .2% for the three and nine month periods
ended October 30, 1993, respectively. The average debt balance
decreased to $6,000,000 during the three and nine months ended October
29, 1994 from $10,000,000 during the three and nine months ended
October 30, 1993. Invested cash during the three and nine months ended
October 29, 1994 averaged approximately $33,500,000 and $34,900,000,
respectively. During the three and nine months ended October 30, 1993
invested cash averaged approximately $21,900,000 and $20,400,000,
respectively.
Inflation has not affected the Company as it has generally been able to
pass along inflationary increases in its costs through increased sales
prices.
Liquidity and Capital Resources
Net cash decreased $11,285,000 for the nine months ended October 29,
1994 due to the acquisition of property and equipment totaling
$12,739,000, the purchase of treasury stock of $811,000 and the payment
of dividends of $1,676,000. These cash expenditures were offset by net
cash provided by operating activities of $2,657,000 and the proceeds
from stock options exercised totalling $1,117,000.
Inventory at October 29, 1994 was $8,672,000 higher than the inventory
level at the end of the Company's January 29, 1994 fiscal year. The
increase is due to the Company building its inventory for the Christmas
selling season. The Company believes these inventory levels are
appropriate given the current economic environment and the level of
sales currently being achieved.
The Company opened 100 stores in the nine months ended October 29, 1994
and remodelled 78 stores.
At October 29, 1994, the Company had available a $10 million credit
line with a bank to finance the Company's letters of credit and working
capital requirements. This credit facility matures October 31, 1995.
In addition, the Company has a $10 million term note with a bank, which
matures on January 31, 1996. The term note, with a presently
outstanding balance of $6 million, calls for a mandatory prepayment of
$3 million on January 31, 1995, with final maturity on January 31,
1996. The Company believes that cash on hand, internally generated
funds and borrowings available under its credit agreements will be
sufficient to meet its current operating needs and its presently
anticipated capital expenditures.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CLAIRE'S STORES, INC.
(Registrant)
Date: December 12, 1994 /s/Ira D. Kaplan
Ira D. Kaplan
Chief Financial Officer and
Treasurer
(Mr. Kaplan is the Chief
Financial Officer and
Treasurer and has been duly
authorized to sign on
behalf of the registrant)
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CLAIRE'S STORES, INC.
(Registrant)
Date: December 10, 1994
Ira D. Kaplan
Chief Financial Officer and
Treasurer
(Mr. Kaplan is the Chief
Financial Officer and
Treasurer and has been duly
authorized to sign on
behalf of the registrant)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> QTR-3 9-MOS
<FISCAL-YEAR-END> JAN-28-1995 JAN-28-1995
<PERIOD-START> JUL-31-1994 JAN-30-1994
<PERIOD-END> OCT-29-1994 OCT-29-1994
<CASH> 29,843 29,843
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 31,366 31,366
<CURRENT-ASSETS> 71,442 71,442
<PP&E> 133,472 133,472
<DEPRECIATION> 71,027 71,027
<TOTAL-ASSETS> 143,017 143,017
<CURRENT-LIABILITIES> 30,411 30,411
<BONDS> 0 0
<COMMON> 1,043 1,043
0 0
0 0
<OTHER-SE> 105,504 105,504
<TOTAL-LIABILITY-AND-EQUITY> 143,017 143,017
<SALES> 69,500 198,083
<TOTAL-REVENUES> 69,500 198,083
<CGS> 0 0
<TOTAL-COSTS> 33,847 95,842
<OTHER-EXPENSES> 30,982 90,020
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 4,671 12,221
<INCOME-TAX> 1,776 4,644
<INCOME-CONTINUING> 2,895 7,577
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,895 7,577
<EPS-PRIMARY> .14 .37
<EPS-DILUTED> .14 .37
</TABLE>
