Item 1. Business
General
Claire's Stores, Inc. (the "Company"), operating through its subsidiaries, Claire's Boutiques, Inc. ("Claire's"), Claire's Puerto Rico Corp. ("CPRC"), Claire's Canada Corp. ("CCC") and Claire's Accessories UK Ltd ("CUK") and its 50%-owned subsidiary Claire's Nippon Co., Ltd. ("Nippon"), is a leading mall-based retailer of popular-priced women's fashion accessories. As of March 31, 1996, the Company operated a total of 1,422 such stores in 49 states, Canada, the Caribbean, the United Kingdom and Japan. These include 1,206 "Claire's Boutiques" or "Claire's Accessories" stores, 97 "Topkapi" stores, 39 "The Icing" stores, 48 "Bow Bangles" stores, 19 "Dara Michelle" stores and 5 "L'ccessory" stores (collectively the "Fashion Accessory Stores"). The Company also operates 8 trend gift stores under the name "Arcadia" or "Art Explosion" (collectively the "Trend Gift Stores").
In February 1996, Claire's purchased certain assets of The Icing, Inc. which had filed for liquidation under Chapter 7 of the United States Bankruptcy Code. The assets consisted of the assumption of 85 real property leases, furniture, fixtures and equipment. The Company plans to remodel these stores prior to opening for business. The level of remodeling is dependent on several factors including the current condition of the store's furniture, fixtures and equipment and remaining term of the lease. In malls where there is not an existing Claire's store, the store will be renamed "Claire's Accessories". All of the stores opened as of March 31, 1996 are operating under The Icing name. Claire's expects all of these stores to be open by May 31, 1996.
Also in February 1996, the Company, through its wholly owned subsidiary , Claire's Accessories UK Ltd, purchased the assets of Bow Bangles, PLC., a retail operator of fashion accessory stores with locations throughout the United Kingdom. Bow Bangles, PLC. had filed for administrative protection under United Kingdom Bankruptcy Laws. The assets purchased included the assumption of 48 store leases and certain furniture, fixtures and equipment.
The Fashion Accessory Stores specialize in selling popular-priced women's fashion accessories designed to appeal to females from ages 13 to 40. Merchandise in the Fashion Accessory Stores ranges in price between $2 and $20, with the average product priced at about $4. The stores average 919 square feet and are primarily located in enclosed shopping malls. The Company's Topkapi, The Icing, Bow Bangles, Dara Michelle and L'ccessory stores are similar in size and format to the Claire's Boutiques and Claire's Accessories stores and give the Company the ability to have multiple store locations in malls that currently have a successful Claire's Boutiques or Claire's Accessories store. Based on its knowledge of competitors, the Company believes that its Fashion Accessory Stores comprise the largest chain of specialty retail stores in the World devoted to the sale of popular-priced women's fashion accessories.
The Trend Gift Stores sell T-shirts, unframed posters, calendars and stationery products, seasonal items and other trend gift items. These stores are located in enclosed shopping malls and vary in size from approximately 900 to 3,000 square feet. Merchandise in the Trend Gift Stores ranges in price between $1 to $75, with most sales in the $5 to $10 range.
- 2 -
Costume jewelry, including hair ornaments, pierced earrings and fees for piercing ears, accounts for a majority of sales. The balance consists of other fashion accessories, totebags and trend gifts. The following table compares sales of each category of merchandise sold by the Company for the last three fiscal years:
- 3 -
Except as stated below, responsibility for managing the Fashion Accessory Stores rests with the President and Chief Operating Officer of Claire's, who reports to the President of the Company. The Company currently employs a total of 129 District Managers for the Fashion Accessory Stores, each of whom oversees approximately ten stores in his or her respective geographic area and reports to one of eleven Regional Managers. Each Regional Manager reports to one of three Territorial Vice Presidents, who in turn report to the President of Claire's. Each store is staffed by a Manager, an Assistant Manager and one or more part-time employees. A majority of the District Managers have been promoted from within the organization, while a majority of the Regional Managers were hired externally.
The Company continues to expand its international operations. In addition to the acquisition of the 48 Bow Bangles stores in the United Kingdom, 27 stores were opened in Canada in Fiscal 1996. The Company now operates 72 stores in Canada. The Company plans to open an additional 15 to 20 stores in Canada in the fiscal year ending February 1, 1997 ("Fiscal 1997"). Store expansion continued in Japan as the Company, with its joint venture partner, Jusco Co., Ltd., a Japanese Company, opened 14 stores in Fiscal 1996, bringing the total number of stores operating in Japan to 16. Current plans call for opening approximately 30 additional stores in Japan in Fiscal 1997. Net sales and identifiable assets outside the United States represented less than 10% of consolidated net sales or identifiable assets in Fiscal 1996.
Trend Gift Stores
During Fiscal 1996, the Company closed one Trend Gift Store. It is the Company's intention to continue to take advantage of opportunities to either close the remaining Trend Gift Stores or convert them to Fashion Accessory Stores. This policy is due to management's decision to discontinue the gift division concept.
Item 2.
Item 2. Properties
The Company's 1,422 stores operating as of March 31, 1996 are located in 49 states, Canada, the United Kingdom, the Caribbean and Japan. The Company leases all of its stores, generally for terms of seven to ten years (up to 25 years in the United Kingdom). Under the leases, the Company pays a fixed minimum rent and/or rentals based on gross sales in excess of specified amounts. The Company also pays certain other expenses (e.g., common area maintenance charges and real estate taxes) under the leases. The internal layout and fixtures of each store are designed by management and constructed under contracts with third parties.
Most of the Company's stores are located in enclosed shopping malls, while some stores are located within a central business district and others are located in "open-air" outlet malls. The Company actively seeks locations that meet its criteria and opens new stores when opportunities are found within its budget for expansion. Criteria include geographic location and demographic aspects of communities surrounding the mall, acceptable anchor tenants, suitable location within a mall, appropriate space availability and proposed rental rates. In choosing new locations, the Company generally attempts to cluster stores geographically, thus affording economies of scale in supervision. The Company believes that sufficient desirable locations are available to accommodate its expansion plans. The Company refurbishes its existing stores on a regular basis.
- 4 -
The Company has closed 69 stores in the last three fiscal years, primarily because of lack of profit potential or the unwillingness of the landlord to renew the lease on terms acceptable to the Company. Five of these stores were closed due to the down-sizing of the Trend Gift division. The Company has not experienced any substantial difficulty in renewing desired store leases and has no reason to expect any such difficulty in the future. For each of the last three years, no individual store accounted for more than one percent of total sales.
The Company opened 142 Fashion Accessory Stores during Fiscal 1996 and has opened as of March 31, 1996 a net 96 stores in the first two months of Fiscal 1997. The Company plans to continue opening Fashion Accessory Stores when suitable locations are found and satisfactory lease negotiations are concluded. The Company's initial investment in new stores opened during the last fiscal year, including leasehold improvements and fixtures, but excluding inventories, averaged approximately $95,000 per store.
The offices of Claire's and the distribution center for the Company's stores are located in Wood Dale, Illinois. Of the facility's approximately 176,000 square feet, 150,000 square feet are devoted to receiving and distribution. The facility is a one story industrial building constructed in 1985 and equipped with automated systems for receiving, processing and shipping merchandise to the stores. The lease for this space expires on June 30, 1996. The Company does not intend to extend the lease on this facility. Rather, the Company intends to relocate these offices and distribution facility in June 1996 to a building located in Hoffman Estates, Illinois, purchased by Claire's in January 1995 for $7.4 million. The facility is located on 24.8 acres and consists of 247,000 total square feet with 201,000 square feet devoted to receiving and distribution and 46,000 square feet for office space. Unused acreage at this sight will allow Claire's to expand its facility in the future by an additional 100,000 square feet.
In August 1990, Claire's entered into a lease which expires on July 31, 2001 for 40,000 square feet of office space in Wood Dale, Illinois. Under the terms of the lease, Claire's is required to pay taxes, utilities, insurance costs and maintenance costs. Due to a downsizing of the corporate staff, it was decided that the additional space would not be needed, and in March 1992, approximately 30,000 square feet of the space was subleased to an unrelated third party. The sublease term runs parallel to the original lease. Claire's is currently seeking to sublease the remaining 10,000 square feet.
The Company leases from Rowland Schaefer & Associates (formerly Two Centrum Plaza Associates) approximately 30,000 square feet in Pembroke Pines, Florida, where it maintains its executive, accounting and finance offices. Rowland Schaefer & Associates is a general partnership of two corporate general partners which are owned by the Chairman of the Board and President of the Company and members of his immediate family, both of whom are Vice Presidents of Claire's. The lease provides for the payment by the Company of annual base rent of approximately $480,000, which is subject to annual cost-of-living increases, and a proportionate share of all taxes and operating expenses of the building. The lease expires on July 31, 2000 and may be extended, at the option of the Company, for an additional five-year term.
- 5 -
The Company also owns 10,000 square feet of office space in Miami, Florida. In November 1992, 5,000 square feet of the space was leased to an unrelated third party. The lease is currently on a month to month basis. The remaining 5,000 square feet of space is being utilized as a storage facility for the Company. The Company also leases executive office space in New York City under a lease which expires on October 31, 1998, and is the beneficial owner of two cooperative apartments in New York City.
Item 3.
Item 3. Legal Proceedings
There are no material legal proceedings pending to which the Company or any of its subsidiaries is a party or of which any of their property is subject.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of Fiscal 1996.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company has two classes of common stock, par value $.05 per share, outstanding: Common Stock having one vote per share and Class A Common Stock having ten votes per share. The Common Stock is traded on the New York Stock Exchange, Inc. ("NYSE") under the symbol CLE. The Class A Common Stock has only limited transferability and is not traded on any stock exchange or in any organized market. However, the Class A Common Stock is convertible on a share-for-share basis into Common Stock and may be sold, as Common Stock, in open market transactions. The following table sets forth, for the fiscal quarters of the Company indicated, the high and low closing prices of the Common Stock on the NYSE Composite Tape and the per share dividends declared on the Common Stock and the Class A Common Stock (as adjusted to give effect to the three-for-two stock split effective February 21, 1996). No dividends had been declared on the Class A Common Stock prior to Fiscal 1995. At March 31, 1996, the approximate number of record holders of shares of Common Stock and Class A Common Stock was 1,872 and 923, respectively.
- 6 -
In 1985, the Board of Directors instituted a quarterly dividend on the Common Stock of $.017 per share. In February 1994, the Board of Directors increased the quarterly dividend to $.02 per share and in July 1994 declared a quarterly dividend of $.01 per share on the Class A Common Stock. In January 1996, the Board of Directors increased the quarterly dividend to $.03 per share on the Common Stock and $.015 per share on the Class A Common Stock. The Board expects to continue this policy; however, there is no assurance that dividends will continue to be paid since they are dependent upon earnings, the financial condition of the Company and other factors, including certain restrictive provisions of the Company's credit facility.
Item 6.
Item 6. Selected Financial Data
- 7 -
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following table sets forth, for the periods indicated, percentages which certain items reflected in the financial data bear to net sales of the Company:
- 8 -
Results of Operations
From the fiscal year ended January 29, 1994("Fiscal 1994") to February 3, 1996 ("Fiscal 1996"), the Company's net sales increased at a compounded annual rate of 10%. Net Income increased from $23,634,000 in Fiscal 1994 to $30,915,000 in Fiscal 1996.
Fiscal 1996 Compared to Fiscal 1995
Net sales increased by $43,446,000, or 14%, to $344,881,000 in Fiscal 1996 compared to $301,435,000 for the year ended January 28, 1995 ("Fiscal 1995"). The increase for the period resulted primarily from the addition of a net 108 stores in North America and same-store sales increases of 3%. 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 by $18,765,000, or 13%, to $157,857,000 in Fiscal 1996 compared to $139,092,000 in Fiscal 1995. The principal reason for this increase was the rise in the number of stores and volume of merchandise sold. As a percentage of net sales, these expenses decreased to 45.8% for Fiscal 1996 compared to 46.1% for Fiscal 1995. The decrease as a percentage of sales was primarily due to the increase in same-store sales as discussed above. As same-store sales increase, occupancy and buying expenses, which are essentially fixed, decrease as a percentage of sales.
Selling, general and administrative ("SG&A") expenses increased by $13,574,000, or 12%, to $124,461,000 in Fiscal 1996 from the Fiscal 1995 level of $110,887,000. The increase noted was due to the increase in the cost of operating the additional stores. As a percentage of net sales, these expenses decreased to approximately 36% in Fiscal 1996 compared to 37% in Fiscal 1995. 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 108 net stores in North America.
Depreciation and amortization increased by $1,087,000, or 8%, to $14,969,000 in Fiscal 1996 from the Fiscal 1995 level of $13,882,000. The increase was primarily due to the investment in 128 new stores, and the remodeling of approximately 100 stores in North America. In addition, the Company continued to invest in its management information systems.
Due to the increase in cash levels and the reduction of long-term debt, interest income again exceeded interest expense in Fiscal 1996. As a percentage of sales, interest income, net of interest expense, was .6% for Fiscal 1996 compared to .3% in Fiscal 1995. The average debt balance decreased to $3,000,000 during Fiscal 1996 from $6,000,000 in Fiscal 1995. The cash balance during Fiscal 1996 averaged approximately $44,400,000 compared to approximately $38,300,000 in Fiscal 1995. The weighted average interest rates paid by the Company during Fiscal 1996 and Fiscal 1995 were 8.9% and 8.1%, respectively. These rates are directly related to the bank's prime rate.
Income taxes increased by $4,074,000 to $18,694,000 in Fiscal 1996 compared to $14,620,000 in Fiscal 1995. The Company's effective tax rates remained relatively constant from fiscal year to fiscal year.
- 9 -
Fiscal 1995 Compared to Fiscal 1994
Net sales increased by $19,742,000, or 7%, to $301,435,000 in Fiscal 1995 compared to $281,693,000 for Fiscal 1994. The increase for the period resulted primarily from the addition of a net 114 stores. The sales increase from the additional stores was partially offset by a decrease in same-store sales of 2%. The same-store sales decline was primarily due to the lack of a significant fashion trend. In Fiscal 1994, 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 price of merchandise sold. The combination of a significant fashion item in the prior year and the higher average unit 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 by $8,921,000, or 7%, to $139,092,000 in Fiscal 1995 compared to $130,171,000 in Fiscal 1994. The principal reason for this increase was the rise in the number of stores and volume of merchandise sold. As a percentage of net sales, these expenses were 46% for both Fiscal 1995 and Fiscal 1994. The effect of the same-store sales decline discussed above was mitigated by the benefit realized by the Company's continuing expansion of its overseas merchandise buying program.
Selling, general and administrative expenses increased by $10,185,000, or 10%, to $110,887,000 in Fiscal 1995 from the Fiscal 1994 level of $100,702,000. The increase noted was due to the increase in the cost of operating the additional stores. In addition, the Company incurred expenses related to its expansion into Canada and Japan. These expenses are not expected to have a significant impact going forward. As a percentage of net sales, these expenses increased to approximately 37% in Fiscal 1995 compared to 36% in Fiscal 1994. The increase noted was mainly attributable to the decrease in same-store sales discussed previously, thus making fixed expenses a larger percentage of sales.
Depreciation and amortization increased by $908,000, or 7%, to $13,882,000 in Fiscal 1995 from the Fiscal 1994 level of $12,974,000. The increase was primarily due to the 11% increase in new stores and approximately 100 stores which were remodeled during the year. In addition, the Company made a significant investment to enhance its management information systems.
Due to the increase in cash levels and the reduction of long-term debt, interest income exceeded interest expense in Fiscal 1995. As a percentage of sales, interest income, net of interest expense, was .3% for Fiscal 1995 compared to interest expense, net of interest income, of .1% in Fiscal 1994. The average debt balance decreased to $6,000,000 during Fiscal 1995 from $10,850,000 in Fiscal 1994. The cash balance during Fiscal 1995 averaged approximately $38,300,000 compared to approximately $24,630,000 in Fiscal 1994. The weighted average interest rates paid by the Company during Fiscal 1995 and Fiscal 1994 were 8.1% and 7.3%, respectively. These rates are directly related to the bank's prime rate.
Income taxes increased by $739,000 to $14,620,000 in Fiscal 1995 compared to $13,881,000 in Fiscal 1994. The Company's effective tax rates remained relatively constant from fiscal year to fiscal year.
- 10 -
Impact of Inflation
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
Company operations have historically provided a strong, positive cash flow which, together with the Company's credit facilities, provides adequate liquidity to meet the Company's operational needs. Cash and cash equivalents totaled $59,323,000 at the end of Fiscal 1996.
Net cash provided by operating activities amounted to $28,749,000 in Fiscal 1996 compared to $37,030,000 in Fiscal 1995 and $34,750,000 in Fiscal 1994. The Company's current ratio (current assets over current liabilities) was 3.40:1.0 for Fiscal 1996 and 2.63:1.0 for Fiscal 1995.
At the end of Fiscal 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 facility matures on January 31, 1997.
During Fiscal 1996, the Company continued to expand and remodel its store base. Significant capital projects included the opening of 142 new stores and remodeling approximately 100 stores. In addition, the Company continued to invest in technology. In Fiscal 1995, the Company purchased a new distribution center in Hoffman Estates, Illinois. The Company expects to begin utilization of the new facility in June 1996. Funds expended for capital improvements in Fiscal 1996 totaled $15,083,000 compared to $24,762,000 in Fiscal 1995 and $12,831,000 in Fiscal 1994. In the year ending February 1, 1997 ("Fiscal 1997"), capital expenditures are expected to be approximately $20,000,000 as the Company continues to invest in its store base and technology.
The Company has significant cash balances, a consistent ability to generate cash flow from operations and available funds under its credit line. The Company foresees no difficulty in maintaining its present financial condition and liquidity and the ability to finance its capital expenditure plans and other foreseeable future needs.
- 11 -
Item 8.
Item 8. Financial Statements and Supplementary Data Page No.
Independent Auditors' Report 13
Consolidated Balance Sheets at February 3, 1996 and January 28, 1995 14
Consolidated Statements of Income for the three fiscal years ended February 3, 1996 15
Consolidated Statements of Changes in Stockholders' Equity for the three fiscal years ended February 3, 1996 16
Consolidated Statements of Cash Flows for the three fiscal years ended February 3, 1996 17
Notes to Consolidated Financial Statements 18-23
Selected Quarterly Financial Data (Unaudited) 24
- 12 -
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders Claire's Stores, Inc.
We have audited the accompanying consolidated balance sheets of Claire's Stores, Inc. and subsidiaries as of February 3, 1996 and January 28, 1995, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the years in the three year period ended February 3, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Claire's Stores, Inc. and subsidiaries as of February 3, 1996 and January 28, 1995, and the results of their operations and their cash flows for each of the years in the three year period ended February 3, 1996 in conformity with generally accepted accounting principles.
/S/KPMG PEAT MARWICK LLP Fort Lauderdale, Florida March 26, 1996
- 13 -
- 14 -
- 15 -
- 16 -
- 17 -
CLAIRE'S STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year - The Company's fiscal year ends on the Saturday closest to January 31. Fiscal year 1996 consisted of 53 weeks. Fiscal years 1995 and 1994 each consisted of 52 weeks.
Cash and Cash Equivalents - For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Inventories - Merchandise inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out basis on the retail method.
Property and Equipment - Property and equipment are recorded at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the building and the furniture, fixtures and equipment, which range from three to twenty-five years. Amortization of leasehold improvements is computed on the straight-line method based upon the shorter of the estimated useful lives of the assets, or the terms of the respective leases.
Net Income Per Share - Primary income per share is based on the weighted average number of shares of Class A Common Stock and Common Stock outstanding during the period (31,350,000 shares in Fiscal 1996, 31,170,000 shares in Fiscal 1995 and 30,956,000 shares in Fiscal 1994).
Income Taxes - The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109 which generally requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. In addition, SFAS No. 109 requires the adjustment of previously deferred income taxes for changes in tax rates under the liability method.
Foreign Currency Translation - The financial statements of the Company's foreign operations are translated into U.S. dollars. Assets and liabilities are translated at current exchange rates while income and expense accounts are translated at the average rates in effect during the year. Resulting translation adjustments are accumulated as a component of stockholders' equity.
- 18 -
Fair Value of Financial Instruments - The Company's financial instruments consist primarily of current assets and current liabilities. Current assets and liabilities are stated at fair market value.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Standard
In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to be Disposed Of," which became effective for fiscal years beginning after December 15, 1995. This standard establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain intangibles to be disposed of. The Company believes that adoption of this standard will not have a material impact on the financial condition or operating results of the Company.
- 19 -
The approximate tax effect on each type of significant temporary difference for which the asset is included in prepaid expenses and other current assets and other assets on the accompanying balance sheets is as follows:
- 20 -
4. STOCKHOLDERS' EQUITY
Stock Splits - In January 1996, the Company's Board of Directors declared a 3-for-2 stock split of its Common stock and Class A common stock in the form of a dividend 50 percent distribution.
On February 21, 1996, 9,906,680 shares of Common stock and 653,807 shares of Class A common stock were distributed to stockholders of record as of February 7, 1996. Shareholders' equity has been adjusted to give recognition of the stock split by reclassifying from retained earnings to the Common stock and Class A common stock accounts the par value of the additional shares arising from the split. In addition, all references in the financial statements to number of shares, per share amounts, stock option data and market prices of the Company's stock have been restated.
Preferred Stock - The Company has authorized 1,000,000 shares of $1 par value preferred stock, none of which has been issued. The rights and preferences of such stock may be designated in the future by the Board of Directors.
Class A Common Stock - The Class A common stock has only limited transferability and is not traded on any stock exchange or any organized market. However, the Class A common stock is convertible on a share-for-share basis into Common stock and may be sold, as Common stock, in open market transactions. The Class A common stock has ten votes per share. Dividends declared on the Class A common stock are limited to 50% of the dividends declared on the Common stock.
Treasury Stock - Treasury stock acquired is recorded at cost. Occasionally, the Company uses treasury stock to fulfill its obligations under its stock option plans. When stock is issued pursuant to the stock option plans, the difference between the cost of treasury stock issued and the option price is charged or credited to additional paid-in capital.
5. STOCK OPTIONS
In April 1991, the Board of Directors of the Company adopted, and in June 1991 the Company's stockholders approved, the Claire's Stores, Inc. 1991 Stock Option Plan (the "1991 Plan"). The 1991 Plan replaced the Company's 1982 Incentive Stock Option Plan (the "1982 Plan") and the Company's 1985 Non-Qualified Stock Option Plan (the "1985 Plan"), although options granted under such plans remain outstanding. Under the 1991 Plan, the Company may grant either incentive stock options, non-qualified stock options, tandem stock appreciation rights and stock appreciation rights exercisable in conjunction with stock options to purchase up to 1,500,000 shares of Common Stock, plus any shares unused or recaptured under the 1982 Plan or the 1985 Plan. Incentive stock options granted under the 1991 Plan are exercisable at prices equal to the fair market value of shares at the date of grant, except that incentive stock options granted to any person holding 10% or more of the total combined voting power or value of all classes of capital stock of the Company, or any subsidiary of the Company, carry an exercise price equal to 110% of the fair market value at the date of grant. No stock option or stock appreciation right may be exercised less than one year after the date granted. Each incentive stock option, non-qualified stock option or stock appreciation right will terminate ten years after the date of grant (or such shorter period as specified in the grant) and may not be exercised thereafter.
- 21 -
Tandem stock appreciation rights granted in conjunction with options may be exercised only to the extent, during the period and on the conditions that their related options are exercisable and may not be exercised after the expiration or termination of their related options. Incentive stock options currently outstanding are exercisable at various rates beginning one year from the date of grant, and expire five to ten years after the date of grant. Non-qualified stock options currently outstanding are exercisable at prices equal to the fair market value of the shares, or one dollar below the fair market value, at the date of grant and expire five to ten years after the date of grant.
At February 3, 1996, options to purchase 86,460, 27,750 and 383,001 shares of Common Stock were exercisable under the 1982 Plan, 1985 Plan and 1991 Plan, respectively. Options to purchase an additional 16,665, 24,750 and 813,324 shares were outstanding, but not yet exercisable, at February 3, 1996 under the 1982 Plan, 1985 Plan and 1991 Plan, respectively. There were 431,653 shares of Common Stock available for future option grants under the 1991 Plan at February 3, 1996.
In October 1992, stock options to purchase an aggregate of 450,000 shares of Common Stock at a purchase price of $7.43 per share were granted to the Chairman of the Board and President of the Company. These options are non-qualified and were not issued under the 1991 Plan.
Transactions and other information relating to the 1982 Plan, 1985 Plan and the 1991 Plan are summarized as follows:
- 22 -
7. COMMITMENTS
The Company leases retail stores, offices and warehouse space and certain equipment under operating leases which expire at various dates through the year 2006 with options to renew certain of such leases for additional periods. The lease agreements covering retail store space provide for minimum rentals and/or rentals based on a percentage of net sales. Rental expense for each of the three fiscal years ended February 3, 1996 was as follows:
Minimum aggregate rental commitments under non-cancelable operating leases are summarized by fiscal year ending as follows:
Certain leases provide for payment of real estate taxes, insurance and certain other operating expenses of the properties. In other leases, certain of these costs are included in the basic contractual rental payments.
8. STATEMENTS OF CASH FLOWS
Payments of income taxes were $20,883,000 in Fiscal 1996, $16,014,000 in Fiscal 1995 and $16,414,000 in Fiscal 1994. Payments of interest were $340,000 in Fiscal 1996, $488,000 in Fiscal 1995 and $866,000 in Fiscal 1994.
9. RELATED PARTY TRANSACTIONS
The Company leases from Rowland Schaefer & Associates (formerly Two Centrum Plaza Associates) approximately 30,000 square feet of office space in a building where it maintains its executive and accounting and finance offices. The lease for this space expires on July 31, 2000 and may be extended at the option of the Company for an additional five-year term. Rowland Schaefer & Associates is a general partnership of two corporate general partnerships which are owned by the Chairman of the Board and President of the Company and members of his immediate family, both of whom are Vice Presidents of Claire's. The lease provides for the payment by the Company of annual base rent of approximately $480,000, which is subject to annual cost-of-living increases, and a proportionate share of all taxes and operating expenses of the building.
- 23 -
- 24 -
PART III
Items 10,11,12 and 13. Directors and Executive Officers of the Registrant; Executive Compensation ; Security Ownership of Certain Beneficial Owners and Management; and Certain Relationships and Related Transactions.
The information required by these items is omitted because the Company will file a definitive proxy statement pursuant to Regulation 14A under the Securities Exchange Act of 1934 for the Company's 1996 Annual Meeting of Stockholders containing such information, which information is incorporated herein by reference as if set out in full.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) List of documents filed as part of this report. Page No.
1. Financial Statements
Independent Auditors' Report 13 Consolidated Balance Sheets at February 3, 1996 and January 28, 1995 14 Consolidated Statements of Income for the three fiscal years ended February 3, 1996 15 Consolidated Statements of Changes in Stockholders' Equity for the three fiscal years ended February 3, 1996 16 Consolidated Statements of Cash Flows for the three fiscal years ended February 3, 1996 17 Notes to Consolidated Financial Statements 18-23
2. Financial Statement Schedules
All schedules have been omitted since the required information is included in the consolidated financial statements or the notes thereto, or the omitted schedules are not applicable.
3. Exhibits
(3)(a) Restated Certificate of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3(a) to the Company's Annual Report on form 10-K for the fiscal year ended February 1, 1992).
(3)(b) Amended By-laws of the Company (incorporated by reference to Exhibit 3(b) to the Company's Annual Report on form 10-K for the fiscal year ended January 28, 1995).
(4)(a) Revolving Credit Agreement dated as of October 22, 1992 between the Company and its subsidiaries and The Bank of Tokyo Trust Company (incorporated by reference to exhibit 4(a) to the Company's Annual Report on form 10-K for the fiscal year ended January 30, 1993).
- 25 -
(4)(b) First Amendment dated as of March 11, 1993 to the Revolving Credit Agreement (incorporated by reference to exhibit 4(b) to the Company's Annual Report on form 10-K for the fiscal year ended January 30, 1993).
(4)(c) Second Amendment dated as of May 28, 1993 to the Revolving Credit Agreement (incorporated by reference to exhibit 4(c) to the Company's Annual Report on form 10-K for the fiscal year ended January 29, 1994).
(4)(d) Third Amendment dated as of February 28, 1994 to the Revolving Credit Agreement (incorporated by reference to exhibit 4(d) to the Company's Annual Report on form 10-K for the fiscal year ended January 29, 1994).
(4)(e) Fourth Amendment dated as of March 27, 1995 to the Revolving Credit Agreement (incorporated by reference to Exhibit 4(e) to the Company's Annual Report on form 10-K for the fiscal year ended January 28, 1995).
(4)(f) Fifth Amendment dated as of April 3, 1995 to the Revolving Credit Agreement (incorporated by reference to Exhibit 4(f) to the Company's Annual Report on form 10-K for the fiscal year ended January 28, 1995).
(10)(a) Incentive Stock Option Plan of the Company, as amended (incorporated by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1986).
(10)(b) Lease between La Salle National Bank and Claire's Boutiques, Inc. dated July 31, 1984 (incorporated by reference to Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 1985).
(10)(c) Amendment to Lease between La Salle National Bank and Claire's Boutiques, Inc. dated December 11, 1985 (incorporated by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1986).
(10)(d) Non-Qualified Stock Option Plan of the Company, as amended (incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1986).
(10)(e) 401(k) Profit Sharing Plan, as amended (incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1992).
(10)(f) Office Lease Agreement dated September 8, 1989 between the Company and Two Centrum Plaza Associates (incorporated by reference to Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 1991).
(10)(g) Amendment of Office Lease Agreement dated July 31, 1990 between the Company and Two Centrum Plaza Associates (incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 1991).
- 26 -
(10)(h) Addendum to Office Lease dated September 8, 1989 between the Company and Two Centrum Plaza Associates (incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 1991).
(10)(i) Lease between Chancellory Commons I Limited Partnership and Claire's Boutiques, Inc. dated August 31, 1990 (incorporated by reference to Exhibit 10(I) to the Company's Annual Report on form 10-K for the fiscal year ended February 1, 1992).
(10)(j) 1991 Stock Option Plan of the Company (incorporated by reference to Exhibit 10(j) to the Company's Annual Report on form 10-K for the fiscal year ended February 1, 1992).
(10)(k) Non-Qualified Stock Option Agreement dated October 19, 1992 between the Company and Rowland Schaefer (incorporated by reference to exhibit (10)(l) to the Company's Annual Report on form 10-K for the fiscal year ended January 30, 1993).
(21) Subsidiaries of the Company.
(24) Consent of independent auditor.
(b) Reports on Form 8-K.
None.
- 27 -
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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.
By /S/Rowland Schaefer Rowland Schaefer President and Chairman of the Board of Directors
April 11, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 5, 1995.
/S/ Rowland Schaefer President and Rowland Schaefer Chairman of the Board of Directors (Principal Executive Officer)
/S/ Ira D. Kaplan Chief Financial Officer and Treasurer Ira D. Kaplan (Principal Financial Officer)
/S/ Harold E. Berritt Director Harold E. Berritt
/S/ Fred D. Hirt Director Fred D. Hirt
/S/ Bruce G. Miller Director Bruce G. Miller
/S/ Sylvia Schaefer Director Sylvia Schaefer
/S/ Marla Schaefer Director Marla Schaefer
/S/ Joel J. Silver Director Joel J. Silver
- 28 -
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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.
By Rowland Schaefer President and Chairman of the Board of Directors
April 11, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 5, 1995.
President and Rowland Schaefer Chairman of the Board of Directors (Principal Executive Officer)
Chief Financial Officer and Treasurer Ira D. Kaplan (Principal Financial Officer)
Director Harold E. Berritt
Director Fred D. Hirt
Director Bruce G. Miller
Director Sylvia Schaefer
Director Marla Schaefer
Director Joel J. Silver
- 28 -