In 1984, with only 16 Michaels stores located primarily in Texas, Michaels Stores, Inc. became a publicly held company. Shortly thereafter, we embarked on an aggressive national expansion program, and by 1995, through a series of new store openings and acquisitions, we had increased our holdings to over 500 stores, more than tripling our size to become the largest arts and crafts specialty retailer in North America.

Beginning in 1996, we focused on increasing the profitability of our existing stores by implementing a variety of operating initiatives, including installing point-of-sale systems chain-wide to record item-level sales, implementing standardized merchandise planograms to enhance merchandise presentation, eliminating non-core merchandise, reducing costs through centralization of functions, and strengthening the quality and dept of our management team.

Over the following few years, we strengthened our operations by improving our infrastructure. We invested heavily in point-of-sale, perpetual inventory, automated replenishment, distribution, seasonal allocation, human resource, financial, and labor management systems. These systems have significantly improved our ability to properly forecast, manage, and analyze our inventory levels, margins, and merchandise ordering quantities and have created efficiencies within our stores, distribution centers, and corporate office. We are seeing the benefits of these systems now with the potential for improvements in the future as we further refine the usage and integration among our systems.

On October 31, 2006, substantially all of the Common Stock of Michaels Stores, Inc. (formerly NYSE: MIK) was acquired through a merger transaction by affiliates of two private investment firms, Bain Capital Partners, LLC and The Blackstone Group (collectively, the “Sponsors”), with certain shares retained by affiliates of Highfields Capital Partners (a then-existing shareholder of Michaels Stores, Inc.). As a result of the Merger, Michaels Holdings, LLC, an entity controlled by the Sponsors, owns over 93% of our outstanding Common Stock, which is no longer publicly traded.

Since our founding, the family of Michaels Stores, Inc., the nation’s largest retailer of arts and crafts materials, has been helping crafters of all ages express their imaginations with skill and originality. With a broad assortment of products, knowledgeable and friendly sales associates, educational in-store events, classrooms, and instructional displays, we offer a shopping experience that inspires our customers to pursue their creative goals. At Michaels Stores, Inc. we provide the ideas and education to complete an array of artistic, leisure, and home accents projects for beginners and experts from start to finish.

Michaels stores can be found in 49 states and Canada and offer a large selection of arts, crafts, framing, floral, wall décor, and seasonal merchandise. They carry approximately 37,000 basic items and average 18,300 square feet of selling space. As of March 30, 2009, we had 1,018 Michaels stores in operation.

Our Aaron Brothers stores are located in Arizona, California, Colorado, Georgia, Idaho, Maryland, Nevada, Oregon, Texas, Virginia, and Washington. Aaron Brothers is a wholly owned subsidiary of Michaels Stores, Inc. that offers photo frames, a full line of ready-made frames, custom framing services, and a wide selection of art supplies. Each store averages 5,500 square feet of selling space and carries approximately 5,700 items. We had 157 Aaron Brothers stores in operation as of March 30, 2009.

Artistree is our vertically integrated frame and moulding manufacturing operation with facilities in City of Industry, CA, Coppell, TX, and Kernersville, Combined, these facilities occupy approximately 476,000 square feet and, in fiscal 2008, processed over 25 million linear feet of frame moulding and 5 million individually custom cut mats for our Michaels and Aaron Brothers stores.

In addition to these retail and wholesale divisions, Michaels Stores, Inc. also operates seven distribution centers strategically located throughout the United States to supply our stores with merchandise. They are located in California, Florida, Illinois, Pennsylvania, Texas, and Washington. Michaels stores generally receive deliveries from the distribution centers each week through an internal transportation distribution network using a dedicated fleet of trucks and contract carriers.