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 28, 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 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)
(954) 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, 1995 was 19,791,938 and 1,278,784,
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 October 28, 1995 and
January 28, 1995. 3
Consolidated Statements of Income for the Three
Months and Nine Months Ended October 28, 1995
and October 29, 1994. 4
Consolidated Statements of Cash Flows for the
Nine Months Ended October 28, 1995 and
October 29, 1994. 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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<PAGE>
PART I. FINANCIAL INFORMATION
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
October 28, January 28,
ASSETS 1995 1995
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 37,755,000 $ 48,473,000
Inventories 36,177,000 24,330,000
Prepaid expenses and other current assets 12,265,000 5,867,000
Total current assets 86,197,000 78,670,000
Property and equipment:
Land and building 8,305,000 8,267,000
Furniture, fixtures and equipment 62,348,000 61,088,000
Leasehold improvements 74,323,000 73,617,000 144,976,000 142,972,000
Less accumulated depreciation and
amortization ( 75,019,000) ( 72,705,000)
69,957,000 70,267,000
Other assets 12,422,000 9,641,000
$168,576,000 $158,578,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,000,000 $ -
Trade accounts payable 13,982,000 11,705,000
Income taxes payable 1,076,000 7,500,000
Accrued expenses 12,282,000 10,086,000
Dividends payable 675,000 672,000
Total current liabilities 31,015,000 29,963,000
Long-term debt - 3,000,000
Deferred credits 3,998,000 3,464,000
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 1,278,864 shares and 1,315,627 shares 64,000 66,000
Common stock par value $.05 per share;
authorized 50,000,000 shares, issued
19,790,858 shares and 19,554,895 shares 990,000 978,000
Additional paid-in capital 15,483,000 13,618,000
Foreign currency translation adjustments 41,000 ( 115,000)
Retained earnings 117,753,000 108,372,000
134,331,000 122,919,000
Treasury stock, at cost, (82,759 shares) ( 768,000) ( 768,000)
133,563,000 122,151,000
Commitments and contingencies - -
$168,576,000 $158,578,000
</TABLE>
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<PAGE>
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED
OCTOBER 28, 1995 AND OCTOBER 29, 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $ 79,842,000 $ 69,500,000 $225,192,000 $198,083,000
Cost of sales, occupancy
and buying expenses 37,974,000 33,847,000 108,091,000 95,842,000
Gross profit 41,868,000 35,653,000 117,101,000 102,241,000
Other expenses:
Selling, general and
administrative 30,582,000 27,697,000 89,277,000 80,311,000
Depreciation and
amortization 3,649,000 3,488,000 11,132,000 10,284,000
Interest income, net ( 454,000)( 203,000) ( 1,379,000) ( 575,000)
33,777,000 30,982,000 99,030,000 90,020,000
Income before income
taxes 8,091,000 4,671,000 18,071,000 12,221,000
Income taxes 3,075,000 1,776,000 6,868,000 4,644,000
Net income $ 5,016,000 $ 2,895,000 $ 11,203,000 $ 7,577,000
Net income per share $ .24 $ .14 $ .54 $ .37
Dividends per share of
common stock $ .03 $ .03 $ .09 $ .09
Dividends per share of
class A common stock $ .015 $ .015 $ .045 $ .015
Average number of shares
of common stock and
equivalents 20,953,000 20,792,000 20,867,000 20,756,000
</TABLE>
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<PAGE>
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
OCTOBER 28, 1995 AND OCTOBER 29, 1994
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 28, October 29,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net income $ 11,203,000 $ 7,577,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 11,132,000 10,284,000
Loss on retirement of property and
equipment 693,000 858,000
Other - ( 49,000)
Changes in assets and liabilities:
(Increase) in -
Inventories ( 11,847,000) ( 8,672,000)
Prepaid expenses and other assets ( 9,187,000) ( 8,388,000)
Increase (decrease) in -
Trade accounts payable 2,277,000 6,333,000
Income taxes payable ( 6,424,000) ( 7,198,000)
Accrued expenses 2,196,000 1,065,000
Deferred credits 532,000 847,000
Net cash provided by operating
activities 575,000 2,657,000
Cash flows from investing activities:
Acquisition of property and equipment
which represents net cash used in
investing activities ( 11,507,000) (12,739,000)
Cash flows from financing activities:
Purchase of Treasury Stock - ( 811,000)
Proceeds from stock conversions - 167,000
Proceeds from stock options exercised 1,875,000 1,117,000
Dividends paid ( 1,818,000) ( 1,676,000)
Net cash provided by (used in) financing
activities 57,000 ( 1,203,000)
Effect of foreign currency exchange
rate changes on cash and cash
equivalents 157,000 -
Net decrease in cash and cash equivalents ( 10,718,000) (11,285,000)
Cash and cash equivalents at beginning
of period 48,473,000 41,128,000
Cash and cash equivalents at end of period $ 37,755,000 $29,843,000
</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 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 28, 1995 and October 29,
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 nine months ended October 28, 1995
increased approximately 15% and 14%, respectively, compared to the
comparable periods ended October 29, 1994. The increases for the
periods resulted primarily from the addition of a net 117 stores and
same-store sales increases of 5% and 3% in the three and nine month
periods ended October 28, 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 12% and 13%,
respectively, for the three and nine months ended October 28, 1995
over the comparable periods ended October 29, 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 47.6% and 48% for the three and nine month
periods ended October 28, 1995, respectively, compared to 48.7% and
48.4% for the three and nine month periods ended October 29, 1994,
respectively. 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.
Selling, general and administrative expense (S,G&A), as a percentage of
sales for the three and nine months ended October 28, 1995, were 38.3%
and 39.6%, respectively, compared to 39.9% and 40.5%, respectively, for
the comparable periods ended October 29, 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 117 net stores.
Depreciation and amortization as a percentage of sales was
approximately 5% for the three and nine months ended October 28, 1995,
which were comparable to the three and nine months ended October 29,
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 $454,000 and
$1,379,000 for the three and nine month periods ended October 28, 1995,
respectively, compared to interest income, net of interest expense, of
$203,000 and $575,000 for the three and nine month periods ended
October 29, 1994, respectively. The average debt balance decreased to
$3,000,000 during the three and nine months ended October 28, 1995 from
$6,000,000 during the three and nine months ended October 29, 1994.
The average cash balance during the three and nine months ended October
28, 1995 averaged approximately $39,543,000 and $40,202,000,
respectively. During the three and nine months ended October 29, 1994,
invested cash averaged approximately $34,253,000 and $35,864,000,
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 $10,718,000 for the nine months ended October 28,
1995 due to net cash used in the acquisition of property and equipment
totaling $11,507,000 and the payment of dividends of $1,818,000. These
cash expenditures were offset by net cash provided by operating
activities of $575,000 and the proceeds from stock options exercised
totaling $1,875,000.
Inventory at October 28, 1995 increased 49% 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 Christmas 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 ninety-one stores in the nine months ended October
28, 1995 and remodeled sixty-five stores.
At October 28, 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>
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 4, 1995 /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 4, 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> 9-MOS OTHER
<FISCAL-YEAR-END> FEB-03-1996 FEB-03-1996
<PERIOD-START> JUL-30-1995 JAN-29-1995
<PERIOD-END> OCT-28-1995 OCT-28-1995
<CASH> 37755 37755
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 36177 36177
<CURRENT-ASSETS> 86197 86197
<PP&E> 144976 144976
<DEPRECIATION> 75019 75019
<TOTAL-ASSETS> 168576 168576
<CURRENT-LIABILITIES> 31015 31015
<BONDS> 0 0
<COMMON> 1054 1054
0 0
0 0
<OTHER-SE> 132509 132509
<TOTAL-LIABILITY-AND-EQUITY> 168576 168576
<SALES> 79842 225192
<TOTAL-REVENUES> 79842 225192
<CGS> 0 0
<TOTAL-COSTS> 37974 108091
<OTHER-EXPENSES> 30582 89277
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<INCOME-TAX> 3075 6868
<INCOME-CONTINUING> 5016 11203
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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<NET-INCOME> 5016 11203
<EPS-PRIMARY> .24 .54
<EPS-DILUTED> .24 .54
</TABLE>
