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 May 4, 1996
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 May 31, 1996 was 29,892,209 and 1,956,257 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 May 4, 1996 and
February 3, 1996 3
Consolidated Statements of Income for the
Three Months Ended May 4, 1996 and April 29, 1995 4
Consolidated Statements of Cash Flows for the
Three Months Ended May 4, 1996 and April 29, 1995 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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PART I. FINANCIAL INFORMATION
CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
May 4, February 3,
ASSETS 1996 1996
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 64,867,000 $ 59,323,000
Inventories 33,320,000 32,383,000
Prepaid expenses and other current assets 11,842,000 12,056,000
Total current assets 110,029,000 103,762,000
Property and Equipment:
Land and building 8,476,000 8,347,000
Furniture, fixtures and equipment 66,794,000 63,957,000
Leasehold improvements 74,337,000 74,156,000
149,607,000 146,460,000
Less accumulated depreciation and
amortization ( 79,965,000) ( 77,114,000)
69,642,000 69,346,000
Other Assets 16,364,000 14,674,000
$196,035,000 $187,782,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 14,831,000 10,745,000
Income taxes payable 3,776,000 6,800,000
Accrued expenses 12,099,000 11,991,000
Dividends payable 982,000 985,000
Total current liabilities 31,688,000 30,521,000
Deferred credits 4,606,000 4,325,000
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 1,957,893 and 1,915,294 shares 98,000 96,000
Common stock par value $.05 per share;
authorized 50,000,000 shares, issued
29,888,698 and 29,767,814 shares 1,494,000 1,488,000
Additional paid-in capital 17,154,000 16,126,000
Foreign currency translation adjustments 20,000 ( 22,000)
Retained earnings 141,743,000 136,016,000
160,509,000 153,704,000
Treasury stock, at cost, (124,139 shares) ( 768,000) ( 768,000)
159,741,000 152,936,000
Commitments and contingencies - -
$196,035,000 $187,782,000
</TABLE>
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CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
MAY 4, 1995 AND APRIL 29, 1995
(Unaudited)
<TABLE>
THREE MONTHS ENDED
May 4, April 29,
1996 1995
<S> <C> <C>
Net sales $92,382,000 $68,054,000
Cost of sales, occupancy and
buying expenses 44,605,000 33,168,000
Gross profit 47,777,000 34,886,000
Other expenses:
Selling, general and
administrative 34,056,000 28,387,000
Depreciation and amortization 3,828,000 3,716,000
Interest income, net ( 833,000) ( 504,000)
37,051,000 31,599,000
Income before income taxes 10,726,000 3,287,000
Income taxes 4,076,000 1,249,000
Net income $ 6,650,000 $ 2,038,000
Net income per share $ .21 $ .07
Dividends per common share $ .03 $ .02
Dividends per class A common
share $ .015 $ .01
Average number of shares of
common stock and equivalents 31,655,000 31,211,000
</TABLE>
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CLAIRE'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MAY 4, 1995 AND APRIL 29, 1995
(Unaudited)
<TABLE>
THREE MONTHS ENDED
May 4, April 29,
1996 1995
Cash flows from operating
activities:
<S> <C> <C>
Net income $ 6,650,000 $ 2,038,000
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 3,828,000 3,716,000
Loss on retirement of property
and equipment 447,000 199,000
Changes in assets and
liabilities
(Increase) decrease in -
Inventories ( 937,000) ( 878,000)
Prepaid expenses and other
assets ( 1,710,000) ( 4,553,000)
Increase (decrease) in -
Trade accounts payable 4,086,000 ( 676,000)
Income taxes payable ( 3,024,000) ( 6,978,000)
Accrued expenses 108,000 378,000)
Deferred credits 281,000 111,000
Net cash provided by (used)
in operating activities 9,729,000 ( 6,643,000)
Cash flows from investing activities:
Acquisition of property and
equipment which represents net
cash used in investing activities ( 4,336,000) ( 4,351,000)
Cash flows from financing activities:
Proceeds from stock options
exercised 1,035,000 278,000
Dividends paid ( 926,000) ( 605,000)
Net cash provided by (used
in) financing activities 109,000 ( 327,000)
Effect of foreign currency exchange
rate changes on cash and cash
equivalents 42,000 171,000
Net Increase (decrease) in cash and
cash equivalents 5,544,000 (11,150,000)
Cash and cash equivalents at beginning
of period 59,323,000 48,473,000
Cash and cash equivalents at end of
period $64,867,000 $37,323,000
</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 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 February 3, 1996 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 three 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
period.
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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 months ended May 4, 1996 increased
approximately 36% over the comparable period ended April 29, 1995. The
increase for the period resulted primarily from the addition of a net
226 stores and same-store sales increases of 16%. The same-store sales
increases were primarily due to the Company focusing 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 34% for the
three months ended May 4, 1996 over the comparable period ended April
29, 1995. The principal reason for this increase was the rise in the
number of stores and the volume of merchandise sold. As a percentage
of net sales, these expenses decreased to 48.3% for the three months
ended May 4, 1996 compared to 48.7% for the three months ended April
29, 1995. The decrease as a percentage of sales was primarily due to
the increase in same-store sales. As same-store sales increased, rent,
rent support and merchandising costs, which are fixed, decreased as a
percentage of sales.
Selling, general and administrative expense (SG&A) as a percentage of
sales for the three months ended May 4, 1996 was 36.9% compared to
41.7% for the comparable period ended April 29, 1995. The decrease in
SG&A as a percentage of net sales was primarily attributable to the
increase in same-store sales as previously discussed and the leveraging
of fixed expenses with the addition of 226 net stores.
Depreciation and amortization as a percentage of sales was 4% for the
three months ended May 4, 1996 compared to 5% for the three months
ended April 29, 1995. The decrease noted as a percentage of sales was
due to the recent store acquisitions by the Company. The favorable
purchase prices paid have enabled the Company to increase revenues
significantly without incurring the level of depreciation and
amortization expense normally associated with opening new stores.
Interest income, net of interest expense, totaled $833,000 for the
three month period ended May 4, 1996 compared to $504,000 for the
comparable period ended April 29, 1995. This increase was primarily due
to the increase in the average cash balance to $62,913,000 during the
three months ended May 4, 1996 compared to $42,700,000 during the same
period ended April 29, 1995. In addition, there was no debt
outstanding during the three month period ended May 4, 1996 compared to
an average debt balance of $3,000,000 during the three month period
ended April 29, 1995.
Inflation has not affected the Company as it has generally been able to
pass along inflationary increases in its costs through increased sales
prices.
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<PAGE>
Liquidity and Capital Resources
Net cash increased $5,544,000 for the three months ended May 4, 1996
due to cash provided by operations of $9,729,000 and the proceeds from
stock options exercised of $1,035,000, partially off-set by the
acquisition of property and equipment totaling $4,336,000 and the
payment of dividends of $926,000.
Inventory at May 4, 1996 was comparable to the inventory level at the
end of the Company's February 3, 1996 fiscal year. The Company
believes these inventory levels are appropriate given the current
economic environment and the level of sales currently being achieved.
The Company opened 134 stores in the three months ended May 4, 1996,
including 107 already existing locations acquired from other companies.
In addition, the Company remodeled fifteen stores.
At May 4, 1996, 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 on January 31,
1997. No borrowings were outstanding under this line of credit at any
time during the three month period ended May 4, 1996. The Company
believes that its cash on hand, internally generated funds and
borrowings available under its credit agreements will be sufficient to
meet its current operating needs and its minimum 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: June 10, 1996 /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: June 10, 1996
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>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 3-MOS 3-MOS
<FISCAL-YEAR-END> FEB-01-1997 FEB-01-1997
<PERIOD-START> FEB-04-1996 FEB-04-1996
<PERIOD-END> MAY-04-1996 MAY-04-1996
<CASH> 64,867 64,867
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 33,320 33,320
<CURRENT-ASSETS> 110,029 110,029
<PP&E> 149,607 149,607
<DEPRECIATION> 79,965 79,965
<TOTAL-ASSETS> 196,035 196,035
<CURRENT-LIABILITIES> 31,688 31,688
<BONDS> 0 0
1,494 1,494
0 0
<COMMON> 0 0
<OTHER-SE> 159,741 159,741
<TOTAL-LIABILITY-AND-EQUITY> 196,035 196,035
<SALES> 92,382 92,382
<TOTAL-REVENUES> 92,382 92,382
<CGS> 0 0
<TOTAL-COSTS> 44,605 44,605
<OTHER-EXPENSES> 37,051 37,051
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<INCOME-PRETAX> 10,726 10,726
<INCOME-TAX> 4,076 4,076
<INCOME-CONTINUING> 6,650 6,650
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<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,650 6,650
<EPS-PRIMARY> .21 .21
<EPS-DILUTED> .21 .21
</TABLE>
