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 July 29, 1995
OR
( )Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission fil e 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 August 29, 1995 was 19,742,857 and 1,282,415
respectively, excluding treasury shares.
<PAGE>
CLAIRE'S STORES, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at July 29, 1995 and
January 28, 1995 3
Consolidated Statements of Income for the Three
Months and Six Months Ended July 29, 1995
and July 30, 1994 4
Consolidated Statements of Cash Flows for the
Six Months Ended July 29, 1995 and July 30,
1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 7-8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 9
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<PAGE>
PART I. FINANCIAL INFORMATION
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
July 29, January 28,
ASSETS 1995 1995
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 36,126,000 $ 48,473,000
Inventories 28,268,000 24,330,000
Prepaid expenses and other current assets 13,504,000 5,867,000
Total current assets 77,898,000 78,670,000
Property and Equipment:
Land and building 8,346,000 8,267,000
Furniture, fixtures and equipment 63,333,000 61,088,000
Leasehold improvements 74,234,000 73,617,000
145,913,000 142,972,000
Less accumulated depreciation and
amortization ( 75,716,000) ( 72,705,000)
70,197,000 70,267,000
Other Assets 10,817,000 9,641,000
$158,912,000 $158,578,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 3,000,000 $ -
Trade accounts payable 11,617,000 11,705,000
Income taxes payable 162,000 7,500,000
Accrued expenses 11,458,000 10,086,000
Dividends payable 678,000 672,000
Total current liabilities 26,915,000 29,963,000
Long-term debt - 3,000,000
Deferred credits 3,756,000 3,464,000
Stockholders' Equity:
Preferred Stock par value $1.00 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 1,283,272 and 1,315,627 shares 64,000 66,000
Common Stock par value $.05 per share;
authorized 50,000,000 shares, issued
and outstanding 19,693,500 and 19,554,895
shares 985,000 978,000
Additional paid-in capital 14,594,000 13,618,000
Foreign currency translation adjustments 23,000 ( 115,000)
Retained earnings 113,343,000 108,372,000
129,009,000 122,919,000
Treasury stock, at cost (82,759 shares) ( 768,000) ( 768,000)
128,241,000 122,151,000
Commitments and contingencies - -
$158,912,000 $158,578,000
</TABLE>
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<PAGE>
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED
JULY 29, 1995 AND JULY 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $ 77,296,000 $ 64,926,000 $145,350,000 $128,583,000
Cost of sales, occupancy
and buying expenses 36,949,000 31,658,000 70,117,000 61,995,000
Gross profit 40,347,000 33,268,000 75,233,000 66,588,000
Other expenses:
Selling, general and
administrative 30,308,000 26,761,000 58,695,000 52,614,000
Depreciation and
amortization 3,767,000 3,424,000 7,483,000 6,796,000
Interest income, net ( 421,000) ( 189,000)( 925,000) ( 372,000)
33,654,000 29,996,000 65,253,000 59,038,000
Income before income
taxes 6,693,000 3,272,000 9,980,000 7,550,000
Income taxes 2,544,000 1,243,000 3,793,000 2,868,000
Net income $ 4,149,000 $ 2,029,000 $ 6,187,000 $ 4,682,000
Net income per share $ .20 $ .10 $ .30 $ .23
Dividends per common
share $ .03 $ .03 $ .06 $ .06
Dividends per Class A
common share $ .015 $ .015 $ .03 $ .015
Average number of shares
of common stock and
equivalents 20,839,000 20,788,000 20,824,000 20,772,000
</TABLE>
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<PAGE>
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JULY 29, 1995 AND JULY 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 29, July 30,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net income $ 6,187,000 $ 4,682,000
Adjustments to reconcile net
income to net cash (use in) provided
by operating activities:
Depreciation and amortization 7,483,000 6,796,000
Loss on retirement of property
and equipment 448,000 535,000
Other - ( 48,000)
Changes in assets and liabilities:
(Increase) in -
Inventories ( 3,938,000) ( 95,000)
Prepaid expenses and other
assets ( 8,819,000) ( 4,918,000)
Increase (decrease) in -
Trade accounts payable ( 88,000) 1,524,000
Income taxes payable ( 7,338,000) ( 7,285,000)
Accrued expenses 1,372,000 326,000
Deferred credits 292,000 665,000
Net cash (used in) provided by
operating activities ( 4,401,000) 2,182,000
Cash flows from investing activities:
Acquisition of property and
equipment which represents net cash
used in investing activities ( 7,856,000) ( 6,507,000)
Cash flows from financing activities:
Purchase of Treasury Stock - ( 811,000)
Proceeds from stock options exercised 981,000 1,091,000
Dividends paid ( 1,210,000) ( 1,071,000)
Net cash used in financing
activities ( 229,000) ( 791,000)
Effect of foreign currency exchange
rate changes on cash and cash
equivalents 139,000 -
Net decrease in cash and cash equivalents (12,347,000) ( 5,116,000)
Cash and cash equivalents at beginning
of period 48,473,000 41,128,000
Cash and cash equivalents at end of period $36,126,000 $36,012,000
</TABLE>
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<PAGE>
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 28, 1995 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 six 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 six months ended July 29, 1995 and July 30, 1994.
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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 six months ended July 29, 1995 increased
approximately 19% and 13%, respectively, compared to the comparable
periods ended July 30, 1994. The increases for the periods resulted
primarily from the addition of a net 128 stores and same-store sales
increases of 7% and 2% in the three and six month periods ended July
29, 1995, respectively. The same-store sales increases were primarily
due to the Company refocusing its merchandising strategy to its core
customer - female teenagers. In addition, inventories were increased
to offer a larger assortment of merchandise for sale and to meet the
anticipated increase in customer demand.
Cost of sales, occupancy and buying expenses increased 17% and 13%,
respectively, for the three and six months ended July 29, 1995 over the
comparable periods ended July 30, 1994. 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
decreased to 47.8% for the three months ended July 29, 1995 compared to
48.8% for the three months ended July 30, 1994. The decrease as a
percentage of sales was primarily due to the increase in same-store
sales as discussed above. As same-store sales increased, occupancy and
buying expenses, which are essentially fixed, decreased as a percentage
of sales. For the six months ended July 29, 1995 and July 30, 1994,
cost of sales, occupancy and buying expenses as a percentage of sales
remained comparable.
Selling, general and administrative expense (S,G&A), as a percentage of
sales for the three and six months ended July 29, 1995 were 39.2% and
40.4%, respectively, compared to 41.2% and 40.9%, respectively, for
the comparable periods ended July 30, 1994. The decrease in SG&A as a
percentage of sales is primarily attributable to the increase in same-store
sales as previously discussed and the leverage of fixed expenses with the
addition of 128 net stores.
Depreciation and amortization as a percentage of sales was 5% for the
three and six months ended July 29, 1995, which were comparable to the
three and six months ended July 30, 1994. No significant change in
depreciation expense as a percentage of sales was expected given the
increase in net sales previously discussed. This increase in net
sales offset the increase in depreciation expense associated with the
new stores opened and stores which were remodeled.
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<PAGE>
Due to the increase in cash levels and the reduction of long-term
debt, interest income, net of interest expense, totaled $421,000 and
$925,000 for the three and six month periods ended July 29, 1995,
respectively, compared to interest income, net of interest expense,
of $189,000 and $372,000 for the three and six month periods ended
July 30, 1994, respectively. The average debt balance decreased to
$3,000,000 during the three and six months ended July 29, 1995 from
$6,000,000 during the three and six months ended July 30, 1994.
Invested cash during the three and six months ended July 29, 1995
averaged approximately $36,649,000 and $39,997,000, respectively.
During the three and six months ended July 30, 1994, invested cash
averaged approximately $33,987,000 and $36,806,000, 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 $12,347,000 for the six months ended July 29, 1995
due to net cash used in operating activities of $4,401,000, the
acquisition of property and equipment totaling $7,856,000 and the
payment of dividends of $1,210,000. These cash expenditures were
offset by net cash provided by the proceeds from stock options
exercised totalling $981,000.
Inventory at July 29, 1995 increased 16% compared to the inventory
balance at the end of the Company's January 28, 1995 fiscal year. The
increase is mainly attributable to the increase in the number of
stores and the inventory buildup for the back-to-school selling
season. The Company believes overall inventory levels are appropriate
given the current economic environment and the level of sales
currently being achieved.
The Company opened sixty-two stores in the six months ended July 29,
1995 and remodeled fifty-two stores.
At July 29, 1995, 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 January 31, 1997.
In addition, the Company has a $10 million term note with a bank,
which matures on January 31, 1996. The term note has a presently
outstanding balance of $3 million. The Company believes that
internally generated funds and borrowings available under its credit
agreements will be sufficient to meet its current operating needs and
its presently anticipated required capital expenditures.
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<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders
On June 12, 1995, the annual meeting of stockholders of the
Company was held at which the following directors were elected to
the Board of Directors for a one-year term: Rowland Schaefer
(25,966,384 votes for, 50,859 votes abstained), Sylvia Schaefer
(25,968,913 votes for, 48,330 votes abstained), Bruce G. Miller
(25,969,013 votes for, 48,230 votes abstained), Joel J. Silver
(25,969,087 votes for, 48,156 votes abstained), Harold E. Berritt
(25,969,013 votes for, 48,230 votes abstained), Fred D. Hirt
(25,969,087 votes for, 48,156 votes abstained) and Marla L.
Schaefer (25,969,013 votes for, 48,230 votes abstained).
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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: September 8, 1995 /s/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: September 8, 1995 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>
<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> OTHER 6-MOS
<FISCAL-YEAR-END> FEB-03-1995 FEB-03-1995
<PERIOD-START> APR-30-1995 APR-30-1995
<PERIOD-END> JUL-29-1995 JUL-29-1995
<CASH> 36,126 36,126
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 28,268 28,268
<CURRENT-ASSETS> 77,898 77,898
<PP&E> 145,913 145,913
<DEPRECIATION> 70,197 70,197
<TOTAL-ASSETS> 158,912 158,912
<CURRENT-LIABILITIES> 26,915 26,915
<BONDS> 0 0
<COMMON> 1049 1049
0 0
0 0
<OTHER-SE> 127,960 127,960
<TOTAL-LIABILITY-AND-EQUITY> 158,912 158,912
<SALES> 77,296 145,350
<TOTAL-REVENUES> 77,296 145,350
<CGS> 0 0
<TOTAL-COSTS> 36,949 70,117
<OTHER-EXPENSES> 33,654 65,253
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 6,693 9,980
<INCOME-TAX> 2,544 3,793
<INCOME-CONTINUING> 4,149 6,187
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,149 6,187
<EPS-PRIMARY> .20 .30
<EPS-DILUTED> .20 .30
</TABLE>
