Michaels Cos. (NASDAQ: MIK) reported Q1 EPS of $0.39, $0.01 better than the analyst estimate of $0.38. Revenue for the quarter came in at $1.16 billion versus the consensus estimate of $1.15 billion.

Second Quarter and Fiscal Year 2018 Outlook:

During the first quarter of fiscal 2018, the Company executed two interest rate swaps with an aggregate notional value of $1.0 billion associated with its outstanding Amended Term Loan Credit Facility to hedge the variability of cash flows resulting from fluctuations in the one-month LIBOR rate. The swaps replaced the one-month LIBOR rate with a fixed interest rate of 2.7765% and payments are settled monthly. The Company expects the incremental interest expense resulting from the cost of the swaps will be between $4 million and $5 million in fiscal 2018.

In addition, in May 2018, the Company successfully amended its $2.2 billion Amended Term Loan Credit Facility to reduce the interest rate to LIBOR plus 2.50% from LIBOR plus 2.75%. The Company expects to realize approximately $4 million in interest expense savings in fiscal 2018 resulting from the repricing of the Amended Term Loan Credit Facility. The Company expects to recognize a loss on the early extinguishment of debt related to this transaction of approximately $2 million in the second quarter of fiscal 2018.

The Company’s guidance for fiscal 2018 assumes Aaron Brothers stores were closed as of the start of the fiscal year, excludes the restructuring charge, excludes provisional tax adjustments and excludes any one-time costs associated with debt refinancing.

For fiscal 2018, a 52-week year, the Company continues to expect:

• net sales will be between $5,217 million and $5,293 million;
• comparable store sales to increase between 0% and 1.5%;
• to open 19 new Michaels stores and relocate 17 Michaels stores;
• adjusted operating income will be in the range of $677 million to $710 million;
• net interest expense will be approximately $144 million;
• the effective tax rate will be approximately 24%;
• adjusted diluted earnings per common share will be between $2.19 and $2.32, based on diluted weighted average common shares of approximately 185 million; and
• capital expenditures will be between $160 million and $170 million.

For the second quarter of fiscal 2018, the Company expects:

• comparable store sales to be approximately flat;
• to open six new Michaels stores and relocate eight Michaels stores;
• adjusted operating income will be between $65 million and $70 million;
• net interest expense will be approximately $37 million;
• the effective tax rate will be approximately 24%; and
• adjusted diluted earnings per common share will be between $0.12 and $0.14, based on diluted weighted average common shares of 183 million.

For earnings history and earnings-related data on Michaels Cos. (MIK) click here.