##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended November 1, 2008
 OR
 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to   Commission File No. 333-148108
 Claires Stores, Inc.
  Florida
    
    59-0940416(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 3 S.W. 129th Avenue, Pembroke Pines, Florida
    
    33027(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (954) 433-3900
 x o
   Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer x
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o x




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##### 



CLAIRES STORES, INC. AND SUBSIDIARIES
INDEX
 PAGE NO.PART I.
    
    FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Condensed Consolidated Balance Sheets at November 1, 2008 and February 2, 2008
    
    
    3Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended
November 1, 2008 (Successor Entity), the Three Months Ended November 3, 2007 (Successor Entity), the Nine Months Ended November 1, 2008, (Successor Entity), the period from May 29, 2007 through November 3, 2007 (Successor Entity), and the period from February 4, 2007 through May 28, 2007 (Predecessor Entity)
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended November 1, 2008 (Successor Entity), the period from May 29, 2007 through November 3, 2007 (Successor Entity), and the period from February 4, 2007 through May 28, 2007 (Predecessor Entity)
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4T. Controls and Procedures
    
    
    29PART II.
    
    OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 6. Exhibits
    
    
    30SIGNATURE PAGEEx-31.1 Section 302 Certification of CEO
    
    
    33Ex-31.2 Section 302 Certification of CFO
    
    
    34Ex-32.1 Section 906 Certification of CEO
    
    
    35Ex-32.2 Section 906 Certification of CFO
    
    
    36
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 CLAIRES STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 November 1, 2008
    
    
    February 2, 2008(In thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    193,897
    
    
    $
    85,974Inventories
    
    
    148,578
    
    
    
    117,679Prepaid expenses
    
    
    37,283
    
    
    
    37,315Other current assets
    
    
    47,323
    
    
    
    37,658Total current assets
    
    
    427,081
    
    
    
    278,626Property and equipment:Land and building
    
    
    22,288
    
    
    
    22,288Furniture, fixtures and equipment
    
    
    142,372
    
    
    
    130,130Leasehold improvements
    
    
    217,084
    
    
    
    211,163381,744
    
    
    
    363,581Less accumulated depreciation and amortization
    
    
    (101,813
    )
    
    
    (53,972
    )279,931
    
    
    
    309,609Intangible assets, net of accumulated amortization of $16,256 and
$4,762, respectively
    
    
    790,000
    
    
    
    777,130Deferred
financing costs, net of accumulated amortization of $15,010 and $7,079, respectively
    
    
    62,580
    
    
    
    70,511Other assets
    
    
    69,227
    
    
    
    71,754Goodwill
    
    
    1,841,346
    
    
    
    1,840,8672,763,153
    
    
    
    2,760,262Total assets
    
    $
    3,470,165
    
    
    $
    3,348,497LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    82,559
    
    
    $
    56,089Current portion of long-term debt
    
    
    14,500
    
    
    
    14,500Income taxes payable
    
    
    5,948
    
    
    
    12,191Accrued interest payable
    
    
    38,403
    
    
    
    19,536Accrued expenses and other liabilities
    
    
    105,202
    
    
    
    117,076Total current liabilities
    
    
    246,612
    
    
    
    219,392Long-term debt
    
    
    2,367,505
    
    
    
    2,363,250Revolving credit facility
    
    
    194,000
    
    
    
    Deferred tax liability
    
    
    93,276
    
    
    
    139,506Deferred rent expense
    
    
    16,789
    
    
    
    10,572Unfavorable lease obligations and other liabilities
    
    
    45,367
    
    
    
    10,5772,716,937
    
    
    
    2,523,905Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity:Common stock par value $0.001 per share; authorized 1,000
shares, issued and outstanding 100 shares
    
    
    
    
    
    
    Additional paid-in capital
    
    
    607,354
    
    
    
    601,201Accumulated other comprehensive income (loss), net of tax
    
    
    (27,324
    )
    
    
    3,358Retained earnings (deficit)
    
    
    (73,414
    )
    
    
    641506,616
    
    
    
    605,200Total liabilities and stockholders equity
    
    $
    3,470,165
    
    
    $
    3,348,497
  3




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
 Successor Entity
    
    
    
    Predecessor EntityThree Months
    
    
    Three Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    
    February 4, 2007Ended
    
    
    Ended
    
    
    Ended
    
    
    Through
    
    
    
    ThroughNov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    
    May 28, 2007Net sales
    
    $
    332,971
    
    
    $
    357,366
    
    
    $
    1,019,947
    
    
    $
    638,556
    
    
    
    $
    424,899Cost of sales, occupancy and buying
expenses
    
    
    170,979
    
    
    
    176,215
    
    
    
    523,228
    
    
    
    314,490
    
    
    
    
    206,438Gross profit
    
    
    161,992
    
    
    
    181,151
    
    
    
    496,719
    
    
    
    324,066
    
    
    
    
    218,461Other expenses (income):Selling, general and administrative
    
    
    129,121
    
    
    
    127,772
    
    
    
    392,877
    
    
    
    220,513
    
    
    
    
    154,482Depreciation and amortization
    
    
    20,024
    
    
    
    26,428
    
    
    
    64,686
    
    
    
    39,598
    
    
    
    
    19,652Transaction-related costs
    
    
    (569
    )
    
    
    1,200
    
    
    
    5,695
    
    
    
    3,261
    
    
    
    
    72,672Other income
    
    
    (2,612
    )
    
    
    (1,310
    )
    
    
    (3,721
    )
    
    
    (1,706
    )
    
    
    
    (1,476
    )145,964
    
    
    
    154,090
    
    
    
    459,537
    
    
    
    261,666
    
    
    
    
    245,330Operating income (loss)
    
    
    16,028
    
    
    
    27,061
    
    
    
    37,182
    
    
    
    62,400
    
    
    
    
    (26,869
    )Interest expense (income), net
    
    
    50,462
    
    
    
    56,322
    
    
    
    147,858
    
    
    
    92,250
    
    
    
    
    (4,876
    )Loss before income taxes
    
    
    (34,434
    )
    
    
    (29,261
    )
    
    
    (110,676
    )
    
    
    (29,850
    )
    
    
    
    (21,993
    )Income taxes
    
    
    (12,880
    )
    
    
    (15,449
    )
    
    
    (36,621
    )
    
    
    (15,231
    )
    
    
    
    21,779Net loss
    
    $
    (21,554
    )
    
    $
    (13,812
    )
    
    $
    (74,055
    )
    
    $
    (14,619
    )
    
    
    $
    (43,772
    )Net loss
    
    $
    (21,554
    )
    
    $
    (13,812
    )
    
    $
    (74,055
    )
    
    $
    (14,619
    )
    
    
    $
    (43,772
    )Foreign currency
translation and
interest rate swap
adjustments, net of
tax
    
    
    (42,827
    )
    
    
    9,242
    
    
    
    (30,682
    )
    
    
    12,987
    
    
    
    
    8,440Comprehensive loss
    
    $
    (64,381
    )
    
    $
    (4,570
    )
    
    $
    (104,737
    )
    
    $
    (1,632
    )
    
    
    $
    (35,332
    )
  4




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Successor Entity
    
    
    
    Predecessor EntityNine Months
    
    
    May 29, 2007
    
    
    
    February 4, 2007Ended
    
    
    Through
    
    
    
    ThroughNov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    
    May 28, 2007Cash flows from operating activities:Net loss
    
    $
    (74,055
    )
    
    $
    (14,619
    )
    
    
    $
    (43,772
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    64,686
    
    
    
    39,598
    
    
    
    
    19,652Amortization of lease rights and other assets
    
    
    1,593
    
    
    
    789
    
    
    
    
    622Amortization of debt issuance costs
    
    
    7,931
    
    
    
    4,421
    
    
    
    
    Payment in kind interest expense
    
    
    15,130
    
    
    
    
    
    
    
    
    Net accretion of favorable (unfavorable) lease obligations
    
    
    (1,114
    )
    
    
    
    
    
    
    
    Impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    
    73(Gain) loss on sale/retirement of property and equipment and other assets, net
    
    
    (215
    )
    
    
    399
    
    
    
    
    1,201Gain on sale of intangible assets
    
    
    (1,446
    )
    
    
    
    
    
    
    
    Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    (2,885
    )Stock compensation expense
    
    
    6,153
    
    
    
    2,832
    
    
    
    
    8,946(Increase) decrease in:Inventories
    
    
    (37,704
    )
    
    
    (20,695
    )
    
    
    
    (10,932
    )Prepaid expenses
    
    
    (4,989
    )
    
    
    (9,676
    )
    
    
    
    6,389Other assets
    
    
    (3,600
    )
    
    
    (25,256
    )
    
    
    
    (2,941
    )Increase (decrease) in:Trade accounts payable
    
    
    31,874
    
    
    
    (6,138
    )
    
    
    
    31,202Income taxes payable
    
    
    (14,551
    )
    
    
    619
    
    
    
    
    (11,732
    )Accrued expenses and other liabilities
    
    
    2,863
    
    
    
    (61,502
    )
    
    
    
    39,727Accrued interest payable
    
    
    18,867
    
    
    
    49,321
    
    
    
    
    Deferred income taxes
    
    
    (38,204
    )
    
    
    (21,397
    )
    
    
    
    6,723Deferred rent expense
    
    
    7,337
    
    
    
    3,851
    
    
    
    
    373Net cash provided by (used in) operating activities
    
    
    (19,444
    )
    
    
    (57,453
    )
    
    
    
    42,646Cash flows from investing activities:Acquisition of property and equipment, net
    
    
    (45,267
    )
    
    
    (42,667
    )
    
    
    
    (27,988
    )Acquisition of predecessor entity
    
    
    
    
    
    
    (3,045,247
    )
    
    
    
    Acquisition of intangible assets/lease rights
    
    
    (1,273
    )
    
    
    (1,670
    )
    
    
    
    (81
    )Net cash used in investing activities
    
    
    (46,540
    )
    
    
    (3,089,584
    )
    
    
    
    (28,069
    )Cash flows from financing activities:Credit facility proceeds
    
    
    194,000
    
    
    
    1,450,000
    
    
    
    
    Credit facility payments
    
    
    (10,875
    )
    
    
    (3,625
    )
    
    
    
    Note offerings proceeds
    
    
    
    
    
    
    935,000
    
    
    
    
    Capital contribution
    
    
    
    
    
    
    595,675
    
    
    
    
    Stock option proceeds
    
    
    
    
    
    
    
    
    
    
    
    177Excess tax benefit from stock compensation
    
    
    
    
    
    
    
    
    
    
    
    2,885Option conversion payment
    
    
    
    
    
    
    (7,924
    )
    
    
    
    Financing fees paid
    
    
    
    
    
    
    (77,561
    )
    
    
    
    Dividends paid
    
    
    
    
    
    
    (7,252
    )
    
    
    
    (9,065
    )Net cash provided by (used in) financing activities
    
    
    183,125
    
    
    
    2,884,313
    
    
    
    
    (6,003
    )Effect of foreign currency exchange rate changes on cash and cash equivalents
    
    
    (9,218
    )
    
    
    (9,714
    )
    
    
    
    1,025Net increase (decrease) in cash and cash equivalents
    
    
    107,923
    
    
    
    (272,438
    )
    
    
    
    9,599Cash and cash equivalents at beginning of period
    
    
    85,974
    
    
    
    350,476
    
    
    
    
    340,877Cash and cash equivalents at end of period
    
    $
    193,897
    
    
    $
    78,038
    
    
    
    $
    350,476Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    15,251
    
    
    $
    6,340
    
    
    
    $
    22,820Interest paid
    
    
    107,186
    
    
    
    40,268
    
    
    
    
    86
  5




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation
       6




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##### Table of Contents



Predecessor Entity
    
    
    Successor EntityMay 28,
    
    
    Transaction
    
    
    May 29,2007
    
    
    Adjustments
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    350,476
    
    
    $
    (186,053
    )
    
    $
    164,423Inventories
    
    
    133,156
    
    
    
    
    
    
    
    133,156Prepaid expenses
    
    
    29,792
    
    
    
    
    
    
    
    29,792Other current assets
    
    
    36,378
    
    
    
    
    
    
    
    36,378Total current assets
    
    
    549,802
    
    
    
    (186,053
    )
    
    
    363,749Property and equipment:Land and buildings
    
    
    17,272
    
    
    
    5,016
    
    
    
    22,288Furniture, fixtures and equipment
    
    
    289,974
    
    
    
    (194,125
    )
    
    
    95,849Leasehold improvements
    
    
    305,469
    
    
    
    (120,083
    )
    
    
    185,386612,715
    
    
    
    (309,192
    )
    
    
    303,523Less accumulated depreciation and amortization
    
    
    (336,240
    )
    
    
    336,240
    
    
    
    276,475
    
    
    
    27,048
    
    
    
    303,523Intangible assets, net
    
    
    55,629
    
    
    
    753,424
    
    
    
    809,053Deferred financing costs
    
    
    
    
    
    
    77,411
    
    
    
    77,411Other assets
    
    
    35,589
    
    
    
    27,570
    
    
    
    63,159Goodwill
    
    
    201,552
    
    
    
    1,638,181
    
    
    
    1,839,733292,770
    
    
    
    2,496,586
    
    
    
    2,789,356Total assets
    
    $
    1,119,047
    
    
    $
    2,337,581
    
    
    $
    3,456,628LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    87,854
    
    
    $
    (753
    )
    
    $
    87,101Current portion of long-term debt
    
    
    
    
    
    
    10,875
    
    
    
    10,875Income taxes payable
    
    
    11,355
    
    
    
    3,611
    
    
    
    14,966Accrued expenses and other liabilities
    
    
    170,444
    
    
    
    531
    
    
    
    170,975Total current liabilities
    
    
    269,653
    
    
    
    14,264
    
    
    
    283,917Long-term debt
    
    
    
    
    
    
    2,374,125
    
    
    
    2,374,125Deferred tax liability
    
    
    21,534
    
    
    
    131,279
    
    
    
    152,813Deferred rent expense
    
    
    26,808
    
    
    
    (26,808
    )
    
    
    Unfavorable lease obligations and other liabilities
    
    
    8,981
    
    
    
    41,117
    
    
    
    50,09857,323
    
    
    
    2,519,713
    
    
    
    2,577,036Stockholders equity
    
    
    792,071
    
    
    
    (196,396
    )
    
    
    595,675Total liabilities and stockholders equity
    
    $
    1,119,047
    
    
    $
    2,337,581
    
    
    $
    3,456,628
 7




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##### Table of Contents



Nine MonthsEndedNovember 3, 2007Net sales
    
    $
    1,063,455Depreciation and amortization
    
    
    68,441Transaction-related costs
    
    
    3,261Operating income
    
    
    98,902Interest expense, net
    
    
    162,551Loss before income taxes
    
    
    (63,649
    )Net loss
    
    
    (32,536
    )
 3. Significant Accounting Policies
 Recent Accounting Pronouncements
    8




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##### Table of Contents



4. Segment Information
   Successor Entity
    
    
    Predecessor EntityThree Months
    
    
    Three Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    February 4, 2007Ended
    
    
    Ended
    
    
    Ended
    
    
    Through
    
    
    ThroughNov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    May 28, 2007Net sales:North America
    
    $
    211,873
    
    
    $
    232,011
    
    
    $
    643,893
    
    
    $
    413,924
    
    
    $
    292,483Europe
    
    
    121,098
    
    
    
    125,355
    
    
    
    376,054
    
    
    
    224,632
    
    
    
    132,416Total net sales
    
    
    332,971
    
    
    
    357,366
    
    
    
    1,019,947
    
    
    
    638,556
    
    
    
    424,899Depreciation and amortization:North America
    
    
    13,356
    
    
    
    20,057
    
    
    
    42,758
    
    
    
    29,173
    
    
    
    12,823Europe
    
    
    6,668
    
    
    
    6,371
    
    
    
    21,928
    
    
    
    10,425
    
    
    
    6,829Total depreciation and amortization
    
    
    20,024
    
    
    
    26,428
    
    
    
    64,686
    
    
    
    39,598
    
    
    
    19,652Operating income (loss) for reportable segmentsNorth America
    
    
    11,642
    
    
    
    16,422
    
    
    
    30,871
    
    
    
    42,671
    
    
    
    46,569Europe
    
    
    3,817
    
    
    
    11,839
    
    
    
    12,006
    
    
    
    22,990
    
    
    
    (766
    )Operating income (loss) for reportable segments
    
    
    15,459
    
    
    
    28,261
    
    
    
    42,877
    
    
    
    65,661
    
    
    
    45,803Transaction-related costs
    
    
    (569
    )
    
    
    1,200
    
    
    
    5,695
    
    
    
    3,261
    
    
    
    72,672Total consolidated operating income (loss)
    
    
    16,028
    
    
    
    27,061
    
    
    
    37,182
    
    
    
    62,400
    
    
    
    (26,869
    )Interest expense (income), net
    
    
    50,462
    
    
    
    56,322
    
    
    
    147,858
    
    
    
    92,250
    
    
    
    (4,876
    )Total consolidated loss before income taxes
    
    $
    (34,434
    )
    
    $
    (29,261
    )
    
    $
    (110,676
    )
    
    $
    (29,850
    )
    
    $
    (21,993
    )
 9




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##### Table of Contents



5. Long-Term Debt and Revolving Credit Facility
   6. Stock Options and Stock-Based Compensation
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life (Years)
    
    
    ValueOutstanding at beginning of period
    
    
    6,142,622
    
    
    $
    10.00
    
    
    
    6.4
    
    
    
    Options granted
    
    
    1,717,550
    
    
    $
    10.00
    
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options forfeited
    
    
    (1,465,240
    )
    
    $
    10.00
    
    
    
    
    
    
    
    Options expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of period
    
    
    6,394,932
    
    
    $
    10.00
    
    
    
    5.7
    
    
    
    Exercisable at end of period
    
    
    1,337,128
    
    
    $
    10.00
    
    
    
    5.7
    
    
    
    
   10




---



##### Table of Contents



7. Income Taxes
   8. Fair Value of Financial Instruments
   Fair Value Measurements at November 1, 2008 UsingQuoted Prices inActive Markets for
    
    
    Significant
    
    
    SignificantIdentical Assets
    
    
    Other Observable
    
    
    Unobservable(Liabilities)
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Interest rate swaps
    
    $
    
    
    
    $
    18,069
    
    
    $
    
  9. Commitments and Contingencies
  10. Supplemental Financial Information
  11




---



##### Table of Contents



Condensed Consolidating Balance Sheet
November 1, 2008
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    155,382
    
    
    $
    (2,237
    )
    
    $
    40,752
    
    
    $
    
    
    
    $
    193,897Inventories
    
    
    
    
    
    
    107,216
    
    
    
    41,362
    
    
    
    
    
    
    
    148,578Prepaid expenses
    
    
    957
    
    
    
    15,343
    
    
    
    20,983
    
    
    
    
    
    
    
    37,283Other current assets
    
    
    8
    
    
    
    33,733
    
    
    
    13,582
    
    
    
    
    
    
    
    47,323Total current assets
    
    
    156,347
    
    
    
    154,055
    
    
    
    116,679
    
    
    
    
    
    
    
    427,081Property and equipment:Land and building
    
    
    
    
    
    
    22,288
    
    
    
    
    
    
    
    
    
    
    
    22,288Furniture, fixtures and equipment
    
    
    2,061
    
    
    
    101,089
    
    
    
    39,222
    
    
    
    
    
    
    
    142,372Leasehold improvements
    
    
    1,630
    
    
    
    137,619
    
    
    
    77,835
    
    
    
    
    
    
    
    217,0843,691
    
    
    
    260,996
    
    
    
    117,057
    
    
    
    
    
    
    
    381,744Less accumulated depreciation and amortization
    
    
    (1,100
    )
    
    
    (68,216
    )
    
    
    (32,497
    )
    
    
    
    
    
    
    (101,813
    )2,591
    
    
    
    192,780
    
    
    
    84,560
    
    
    
    
    
    
    
    279,931Intercompany receivables
    
    
    39,069
    
    
    
    
    
    
    
    36,779
    
    
    
    (75,848
    )
    
    
    Investment in subsidiaries
    
    
    2,438,855
    
    
    
    (3,820
    )
    
    
    
    
    
    
    (2,435,035
    )
    
    
    Intangible assets, net
    
    
    421,313
    
    
    
    19,580
    
    
    
    349,107
    
    
    
    
    
    
    
    790,000Deferred financing costs, net
    
    
    62,580
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,580Other assets
    
    
    35,387
    
    
    
    1,876
    
    
    
    31,964
    
    
    
    
    
    
    
    69,227Goodwill
    
    
    
    
    
    
    1,409,940
    
    
    
    431,406
    
    
    
    
    
    
    
    1,841,3462,997,204
    
    
    
    1,427,576
    
    
    
    849,256
    
    
    
    (2,510,883
    )
    
    
    2,763,153Total assets
    
    $
    3,156,142
    
    
    $
    1,774,411
    
    
    $
    1,050,495
    
    
    $
    (2,510,883
    )
    
    $
    3,470,165LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    4,206
    
    
    $
    30,395
    
    
    $
    47,958
    
    
    $
    
    
    
    $
    82,559Current portion of long-term debt
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,500Income taxes payable
    
    
    
    
    
    
    
    
    
    
    5,948
    
    
    
    
    
    
    
    5,948Accrued interest payable
    
    
    38,390
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    38,403Accrued expenses and other liabilities
    
    
    30,088
    
    
    
    36,003
    
    
    
    39,111
    
    
    
    
    
    
    
    105,202Total current liabilities
    
    
    87,184
    
    
    
    66,398
    
    
    
    93,030
    
    
    
    
    
    
    
    246,612Intercompany payables
    
    
    
    
    
    
    75,848
    
    
    
    
    
    
    
    (75,848
    )
    
    
    Long-term debt
    
    
    2,367,505
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,367,505Revolving credit facility
    
    
    194,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,000Deferred tax liability
    
    
    
    
    
    
    77,094
    
    
    
    16,182
    
    
    
    
    
    
    
    93,276Deferred rent expense
    
    
    837
    
    
    
    10,971
    
    
    
    4,981
    
    
    
    
    
    
    
    16,789Unfavorable lease obligations and other liabilities
    
    
    
    
    
    
    40,679
    
    
    
    4,688
    
    
    
    
    
    
    
    45,3672,562,342
    
    
    
    204,592
    
    
    
    25,851
    
    
    
    (75,848
    )
    
    
    2,716,937Stockholders equity:Common stock
    
    
    
    
    
    
    367
    
    
    
    2
    
    
    
    (369
    )
    
    
    Additional paid in capital
    
    
    607,354
    
    
    
    1,445,795
    
    
    
    876,748
    
    
    
    (2,322,543
    )
    
    
    607,354Accumulated other comprehensive loss, net of tax
    
    
    (27,324
    )
    
    
    (2,126
    )
    
    
    (17,283
    )
    
    
    19,409
    
    
    
    (27,324
    )Retained earnings (deficit)
    
    
    (73,414
    )
    
    
    59,385
    
    
    
    72,147
    
    
    
    (131,532
    )
    
    
    (73,414
    )506,616
    
    
    
    1,503,421
    
    
    
    931,614
    
    
    
    (2,435,035
    )
    
    
    506,616Total liabilities and stockholders equity
    
    $
    3,156,142
    
    
    $
    1,774,411
    
    
    $
    1,050,495
    
    
    $
    (2,510,883
    )
    
    $
    3,470,165
 12




---



##### Table of Contents



Condensed Consolidating Balance Sheet
February 2, 2008
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    25,835
    
    
    $
    1,892
    
    
    $
    58,247
    
    
    $
    
    
    
    $
    85,974Inventories
    
    
    
    
    
    
    84,952
    
    
    
    32,727
    
    
    
    
    
    
    
    117,679Prepaid expenses
    
    
    403
    
    
    
    15,264
    
    
    
    21,648
    
    
    
    
    
    
    
    37,315Other current assets
    
    
    100
    
    
    
    31,501
    
    
    
    6,057
    
    
    
    
    
    
    
    37,658Total current assets
    
    
    26,338
    
    
    
    133,609
    
    
    
    118,679
    
    
    
    
    
    
    
    278,626Property and equipment:Land and building
    
    
    
    
    
    
    22,288
    
    
    
    
    
    
    
    
    
    
    
    22,288Furniture, fixtures and equipment
    
    
    2,050
    
    
    
    83,924
    
    
    
    44,156
    
    
    
    
    
    
    
    130,130Leasehold improvements
    
    
    1,628
    
    
    
    127,522
    
    
    
    82,013
    
    
    
    
    
    
    
    211,1633,678
    
    
    
    233,734
    
    
    
    126,169
    
    
    
    
    
    
    
    363,581Less accumulated depreciation and amortization
    
    
    (609
    )
    
    
    (34,615
    )
    
    
    (18,748
    )
    
    
    
    
    
    
    (53,972
    )3,069
    
    
    
    199,119
    
    
    
    107,421
    
    
    
    
    
    
    
    309,609Intercompany receivables
    
    
    20,198
    
    
    
    
    
    
    
    13
    
    
    
    (20,211
    )
    
    
    Investment in subsidiaries
    
    
    2,452,074
    
    
    
    5,764
    
    
    
    
    
    
    
    (2,457,838
    )
    
    
    Intangible assets, net
    
    
    423,000
    
    
    
    300
    
    
    
    353,830
    
    
    
    
    
    
    
    777,130Deferred financing costs, net
    
    
    70,511
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,511Other assets
    
    
    35,124
    
    
    
    1,269
    
    
    
    35,361
    
    
    
    
    
    
    
    71,754Goodwill
    
    
    
    
    
    
    1,401,959
    
    
    
    438,908
    
    
    
    
    
    
    
    1,840,8673,000,907
    
    
    
    1,409,292
    
    
    
    828,112
    
    
    
    (2,478,049
    )
    
    
    2,760,262Total assets
    
    $
    3,030,314
    
    
    $
    1,742,020
    
    
    $
    1,054,212
    
    
    $
    (2,478,049
    )
    
    $
    3,348,497LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    762
    
    
    $
    22,140
    
    
    $
    33,187
    
    
    $
    
    
    
    $
    56,089Current portion of long-term debt
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,500Income taxes payable
    
    
    (8,383
    )
    
    
    14,246
    
    
    
    6,328
    
    
    
    
    
    
    
    12,191Accrued interest payable
    
    
    19,534
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    19,536Accrued expenses and other liabilities
    
    
    34,194
    
    
    
    39,737
    
    
    
    43,145
    
    
    
    
    
    
    
    117,076Total current liabilities
    
    
    60,607
    
    
    
    76,123
    
    
    
    82,662
    
    
    
    
    
    
    
    219,392Intercompany payables
    
    
    
    
    
    
    20,211
    
    
    
    
    
    
    
    (20,211
    )
    
    
    Long-term debt
    
    
    2,363,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,363,250Deferred tax liability
    
    
    
    
    
    
    120,742
    
    
    
    18,764
    
    
    
    
    
    
    
    139,506Deferred rent expense
    
    
    1,257
    
    
    
    5,350
    
    
    
    3,965
    
    
    
    
    
    
    
    10,572Unfavorable lease obligations and other liabilities
    
    
    
    
    
    
    10,577
    
    
    
    
    
    
    
    
    
    
    
    10,5772,364,507
    
    
    
    156,880
    
    
    
    22,729
    
    
    
    (20,211
    )
    
    
    2,523,905Stockholders equity:Common stock
    
    
    
    
    
    
    367
    
    
    
    2
    
    
    
    (369
    )
    
    
    Additional paid in capital
    
    
    601,201
    
    
    
    1,449,307
    
    
    
    878,145
    
    
    
    (2,327,452
    )
    
    
    601,201Accumulated other comprehensive income, net of
tax
    
    
    3,358
    
    
    
    2,959
    
    
    
    17,513
    
    
    
    (20,472
    )
    
    
    3,358Retained earnings
    
    
    641
    
    
    
    56,384
    
    
    
    53,161
    
    
    
    (109,545
    )
    
    
    641605,200
    
    
    
    1,509,017
    
    
    
    948,821
    
    
    
    (2,457,838
    )
    
    
    605,200Total liabilities and stockholders equity
    
    $
    3,030,314
    
    
    $
    1,742,020
    
    
    $
    1,054,212
    
    
    $
    (2,478,049
    )
    
    $
    3,348,497
 13




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##### Table of Contents



Successor Entity
Condensed Consolidating Statement of Operations and Comprehensive Loss
For The Three Months Ended November 1, 2008
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    422,260
    
    
    $
    136,281
    
    
    $
    (225,570
    )
    
    $
    332,971Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    330,020
    
    
    
    66,529
    
    
    
    (225,570
    )
    
    
    170,979Gross profit
    
    
    
    
    
    
    92,240
    
    
    
    69,752
    
    
    
    
    
    
    
    161,992Other expenses (income):Selling, general and administrative
    
    
    8,108
    
    
    
    66,553
    
    
    
    54,460
    
    
    
    
    
    
    
    129,121Depreciation and amortization
    
    
    733
    
    
    
    11,735
    
    
    
    7,556
    
    
    
    
    
    
    
    20,024Transaction-related costs
    
    
    (569
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (569
    )Other (income) expense
    
    
    (7,608
    )
    
    
    6,857
    
    
    
    (1,861
    )
    
    
    
    
    
    
    (2,612
    )664
    
    
    
    85,145
    
    
    
    60,155
    
    
    
    
    
    
    
    145,964Operating income (loss)
    
    
    (664
    )
    
    
    7,095
    
    
    
    9,597
    
    
    
    
    
    
    
    16,028Interest expense (income), net
    
    
    50,703
    
    
    
    (46
    )
    
    
    (195
    )
    
    
    
    
    
    
    50,462Income (loss) before income taxes
    
    
    (51,367
    )
    
    
    7,141
    
    
    
    9,792
    
    
    
    
    
    
    
    (34,434
    )Income tax expense (benefit)
    
    
    (26,135
    )
    
    
    11,347
    
    
    
    1,908
    
    
    
    
    
    
    
    (12,880
    )Income (loss) from continuing operations
    
    
    (25,232
    )
    
    
    (4,206
    )
    
    
    7,884
    
    
    
    
    
    
    
    (21,554
    )Equity in earnings of subsidiaries
    
    
    3,678
    
    
    
    2,646
    
    
    
    
    
    
    
    (6,324
    )
    
    
    Net income (loss)
    
    
    (21,554
    )
    
    
    (1,560
    )
    
    
    7,884
    
    
    
    (6,324
    )
    
    
    (21,554
    )Foreign currency translation and interest
rate swap adjustments
    
    
    (42,827
    )
    
    
    (5,124
    )
    
    
    (40,587
    )
    
    
    45,711
    
    
    
    (42,827
    )Comprehensive loss
    
    $
    (64,381
    )
    
    $
    (6,684
    )
    
    $
    (32,703
    )
    
    $
    39,387
    
    
    $
    (64,381
    )
  Successor Entity
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Three Months Ended November 3, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    468,643
    
    
    $
    140,612
    
    
    $
    (251,889
    )
    
    $
    357,366Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    361,073
    
    
    
    67,031
    
    
    
    (251,889
    )
    
    
    176,215Gross profit
    
    
    
    
    
    
    107,570
    
    
    
    73,581
    
    
    
    
    
    
    
    181,151Other expenses (income):Selling, general and administrative
    
    
    7,327
    
    
    
    68,394
    
    
    
    52,051
    
    
    
    
    
    
    
    127,772Depreciation and amortization
    
    
    1,546
    
    
    
    17,378
    
    
    
    7,504
    
    
    
    
    
    
    
    26,428Transaction-related costs
    
    
    1,000
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    1,200Other (income) expense
    
    
    (4,362
    )
    
    
    3,896
    
    
    
    (844
    )
    
    
    
    
    
    
    (1,310
    )5,511
    
    
    
    89,668
    
    
    
    58,911
    
    
    
    
    
    
    
    154,090Operating income (loss)
    
    
    (5,511
    )
    
    
    17,902
    
    
    
    14,670
    
    
    
    
    
    
    
    27,061Interest expense (income), net
    
    
    56,838
    
    
    
    (86
    )
    
    
    (430
    )
    
    
    
    
    
    
    56,322Income (loss) before income taxes
    
    
    (62,349
    )
    
    
    17,988
    
    
    
    15,100
    
    
    
    
    
    
    
    (29,261
    )Income tax expense (benefit)
    
    
    (24,212
    )
    
    
    9,745
    
    
    
    (982
    )
    
    
    
    
    
    
    (15,449
    )Income (loss) from continuing operations
    
    
    (38,137
    )
    
    
    8,243
    
    
    
    16,082
    
    
    
    
    
    
    
    (13,812
    )Equity in earnings of subsidiaries
    
    
    24,325
    
    
    
    863
    
    
    
    
    
    
    
    (25,188
    )
    
    
    Net income (loss)
    
    
    (13,812
    )
    
    
    9,106
    
    
    
    16,082
    
    
    
    (25,188
    )
    
    
    (13,812
    )Foreign currency translation and interest
rate swap adjustments
    
    
    9,242
    
    
    
    3,567
    
    
    
    14,242
    
    
    
    (17,809
    )
    
    
    9,242Comprehensive income (loss)
    
    $
    (4,570
    )
    
    $
    12,673
    
    
    $
    30,324
    
    
    $
    (42,997
    )
    
    $
    (4,570
    )
 14




---



##### Table of Contents



Successor Entity
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Nine Months Ended November 1, 2008
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,173,323
    
    
    $
    420,993
    
    
    $
    (574,369
    )
    
    $
    1,019,947Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    889,345
    
    
    
    208,252
    
    
    
    (574,369
    )
    
    
    523,228Gross profit
    
    
    
    
    
    
    283,978
    
    
    
    212,741
    
    
    
    
    
    
    
    496,719Other expenses (income):Selling, general and administrative
    
    
    24,969
    
    
    
    200,364
    
    
    
    167,544
    
    
    
    
    
    
    
    392,877Depreciation and amortization
    
    
    2,244
    
    
    
    37,648
    
    
    
    24,794
    
    
    
    
    
    
    
    64,686Transaction-related costs
    
    
    3,737
    
    
    
    
    
    
    
    1,958
    
    
    
    
    
    
    
    5,695Other (income) expense
    
    
    (16,765
    )
    
    
    15,189
    
    
    
    (2,145
    )
    
    
    
    
    
    
    (3,721
    )14,185
    
    
    
    253,201
    
    
    
    192,151
    
    
    
    
    
    
    
    459,537Operating income (loss)
    
    
    (14,185
    )
    
    
    30,777
    
    
    
    20,590
    
    
    
    
    
    
    
    37,182Interest expense (income), net
    
    
    148,922
    
    
    
    (300
    )
    
    
    (764
    )
    
    
    
    
    
    
    147,858Income (loss) before income taxes
    
    
    (163,107
    )
    
    
    31,077
    
    
    
    21,354
    
    
    
    
    
    
    
    (110,676
    )Income tax expense (benefit)
    
    
    (64,201
    )
    
    
    29,150
    
    
    
    (1,570
    )
    
    
    
    
    
    
    (36,621
    )Income (loss) from continuing operations
    
    
    (98,906
    )
    
    
    1,927
    
    
    
    22,924
    
    
    
    
    
    
    
    (74,055
    )Equity in earnings of subsidiaries
    
    
    24,851
    
    
    
    4,878
    
    
    
    
    
    
    
    (29,729
    )
    
    
    Net income (loss)
    
    
    (74,055
    )
    
    
    6,805
    
    
    
    22,924
    
    
    
    (29,729
    )
    
    
    (74,055
    )Foreign currency translation and interest
rate swap adjustments
    
    
    (30,682
    )
    
    
    (5,085
    )
    
    
    (34,147
    )
    
    
    39,232
    
    
    
    (30,682
    )Comprehensive income (loss)
    
    $
    (104,737
    )
    
    $
    1,720
    
    
    $
    (11,223
    )
    
    $
    9,503
    
    
    $
    (104,737
    )
 Successor Entity
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Period May 29, 2007 Through November 3, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    778,114
    
    
    $
    252,946
    
    
    $
    (392,504
    )
    
    $
    638,556Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    586,521
    
    
    
    120,473
    
    
    
    (392,504
    )
    
    
    314,490Gross profit
    
    
    
    
    
    
    191,593
    
    
    
    132,473
    
    
    
    
    
    
    
    324,066Other expenses (income):Selling, general and administrative
    
    
    11,816
    
    
    
    117,741
    
    
    
    90,956
    
    
    
    
    
    
    
    220,513Depreciation and amortization
    
    
    2,598
    
    
    
    24,818
    
    
    
    12,182
    
    
    
    
    
    
    
    39,598Transaction-related costs
    
    
    2,042
    
    
    
    
    
    
    
    1,219
    
    
    
    
    
    
    
    3,261Other (income) expense
    
    
    (5,164
    )
    
    
    5,039
    
    
    
    (1,581
    )
    
    
    
    
    
    
    (1,706
    )11,292
    
    
    
    147,598
    
    
    
    102,776
    
    
    
    
    
    
    
    261,666Operating income (loss)
    
    
    (11,292
    )
    
    
    43,995
    
    
    
    29,697
    
    
    
    
    
    
    
    62,400Interest expense (income), net
    
    
    93,423
    
    
    
    (588
    )
    
    
    (585
    )
    
    
    
    
    
    
    92,250Income (loss) before income taxes
    
    
    (104,715
    )
    
    
    44,583
    
    
    
    30,282
    
    
    
    
    
    
    
    (29,850
    )Income tax expense (benefit)
    
    
    (39,688
    )
    
    
    22,467
    
    
    
    1,990
    
    
    
    
    
    
    
    (15,231
    )Income (loss) from continuing operations
    
    
    (65,027
    )
    
    
    22,116
    
    
    
    28,292
    
    
    
    
    
    
    
    (14,619
    )Equity in earnings of subsidiaries
    
    
    50,408
    
    
    
    3,106
    
    
    
    
    
    
    
    (53,514
    )
    
    
    Net income (loss)
    
    
    (14,619
    )
    
    
    25,222
    
    
    
    28,292
    
    
    
    (53,514
    )
    
    
    (14,619
    )Foreign currency translation and interest
rate swap adjustments
    
    
    12,987
    
    
    
    3,840
    
    
    
    19,399
    
    
    
    (23,239
    )
    
    
    12,987Comprehensive income (loss)
    
    $
    (1,632
    )
    
    $
    29,062
    
    
    $
    47,691
    
    
    $
    (76,753
    )
    
    $
    (1,632
    )
 15




---



##### Table of Contents



Predecessor Entity
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Period February 4, 2007 Through May 28, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    540,394
    
    
    $
    149,666
    
    
    $
    (265,161
    )
    
    $
    424,899Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    397,435
    
    
    
    74,164
    
    
    
    (265,161
    )
    
    
    206,438Gross profit
    
    
    
    
    
    
    142,959
    
    
    
    75,502
    
    
    
    
    
    
    
    218,461Other expenses (income):Selling, general and administrative
    
    
    7,021
    
    
    
    84,633
    
    
    
    62,828
    
    
    
    
    
    
    
    154,482Depreciation and amortization
    
    
    367
    
    
    
    11,504
    
    
    
    7,781
    
    
    
    
    
    
    
    19,652Transaction-related costs
    
    
    72,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,672Other (income) expense
    
    
    (8,054
    )
    
    
    5,926
    
    
    
    652
    
    
    
    
    
    
    
    (1,476
    )72,006
    
    
    
    102,063
    
    
    
    71,261
    
    
    
    
    
    
    
    245,330Operating income (loss)
    
    
    (72,006
    )
    
    
    40,896
    
    
    
    4,241
    
    
    
    
    
    
    
    (26,869
    )Interest expense (income), net
    
    
    (3,235
    )
    
    
    (376
    )
    
    
    (1,265
    )
    
    
    
    
    
    
    (4,876
    )Income (loss) before income taxes
    
    
    (68,771
    )
    
    
    41,272
    
    
    
    5,506
    
    
    
    
    
    
    
    (21,993
    )Income tax expense (benefit)
    
    
    8,369
    
    
    
    15,361
    
    
    
    (1,951
    )
    
    
    
    
    
    
    21,779Income (loss) from continuing operations
    
    
    (77,140
    )
    
    
    25,911
    
    
    
    7,457
    
    
    
    
    
    
    
    (43,772
    )Equity in earnings of subsidiaries
    
    
    33,368
    
    
    
    2,775
    
    
    
    
    
    
    
    (36,143
    )
    
    
    Net income (loss)
    
    
    (43,772
    )
    
    
    28,686
    
    
    
    7,457
    
    
    
    (36,143
    )
    
    
    (43,772
    )Foreign currency translation
    
    
    8,440
    
    
    
    2,861
    
    
    
    8,478
    
    
    
    (11,339
    )
    
    
    8,440Comprehensive income (loss)
    
    $
    (35,332
    )
    
    $
    31,547
    
    
    $
    15,935
    
    
    $
    (47,482
    )
    
    $
    (35,332
    )
 Successor Entity
Condensed Consolidating Statement of Cash Flows
For The Nine Months Ended November 1, 2008
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (74,055
    )
    
    $
    6,805
    
    
    $
    22,924
    
    
    $
    (29,729
    )
    
    $
    (74,055
    )Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Equity in earnings of subsidiaries
    
    
    (24,851
    )
    
    
    (4,878
    )
    
    
    
    
    
    
    29,729
    
    
    
    Depreciation and amortization
    
    
    2,244
    
    
    
    37,648
    
    
    
    24,794
    
    
    
    
    
    
    
    64,686Amortization of lease rights and other assets
    
    
    
    
    
    
    41
    
    
    
    1,552
    
    
    
    
    
    
    
    1,593Amortization of debt issuance costs
    
    
    7,931
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,931Payment in kind interest expense
    
    
    15,130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,130Net accretion of favorable (unfavorable) lease obligations
    
    
    
    
    
    
    (1,520
    )
    
    
    406
    
    
    
    
    
    
    
    (1,114
    )(Gain) loss on sale/retirement of property and equipment
and other assets, net
    
    
    
    
    
    
    7
    
    
    
    (222
    )
    
    
    
    
    
    
    (215
    )Gain on sale of intangible assets
    
    
    
    
    
    
    
    
    
    
    (1,446
    )
    
    
    
    
    
    
    (1,446
    )Stock compensation expense
    
    
    4,516
    
    
    
    
    
    
    
    1,637
    
    
    
    
    
    
    
    6,153(Increase) decrease in:Inventories
    
    
    
    
    
    
    (22,265
    )
    
    
    (15,439
    )
    
    
    
    
    
    
    (37,704
    )Prepaid expenses
    
    
    (553
    )
    
    
    (79
    )
    
    
    (4,357
    )
    
    
    
    
    
    
    (4,989
    )Other assets
    
    
    (137
    )
    
    
    (3,232
    )
    
    
    (231
    )
    
    
    
    
    
    
    (3,600
    )Increase (decrease) in:Trade accounts payable
    
    
    3,444
    
    
    
    8,255
    
    
    
    20,175
    
    
    
    
    
    
    
    31,874Income taxes payable
    
    
    8,383
    
    
    
    (17,468
    )
    
    
    (5,466
    )
    
    
    
    
    
    
    (14,551
    )Accrued expenses and other liabilities
    
    
    2,455
    
    
    
    (3,056
    )
    
    
    3,464
    
    
    
    
    
    
    
    2,863Accrued interest payable
    
    
    18,855
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    18,867Deferred income taxes
    
    
    
    
    
    
    (35,756
    )
    
    
    (2,448
    )
    
    
    
    
    
    
    (38,204
    )Deferred rent expense
    
    
    (122
    )
    
    
    5,621
    
    
    
    1,838
    
    
    
    
    
    
    
    7,337Net cash provided by (used in) operating activities
    
    
    (36,760
    )
    
    
    (29,877
    )
    
    
    47,193
    
    
    
    
    
    
    
    (19,444
    )Cash flows from investing activities:Acquisition of property and equipment, net
    
    
    (78
    )
    
    
    (31,307
    )
    
    
    (13,882
    )
    
    
    
    
    
    
    (45,267
    )Acquisition of intangible assets/lease rights
    
    
    
    
    
    
    
    
    
    
    (1,273
    )
    
    
    
    
    
    
    (1,273
    )Net cash used in investing activities
    
    
    (78
    )
    
    
    (31,307
    )
    
    
    (15,155
    )
    
    
    
    
    
    
    (46,540
    )Cash flows from financing activities:Proceeds from credit facility
    
    
    194,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,000Credit facility payments
    
    
    (10,875
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,875
    )Intercompany activity, net
    
    
    (16,740
    )
    
    
    57,413
    
    
    
    (40,673
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    166,385
    
    
    
    57,413
    
    
    
    (40,673
    )
    
    
    
    
    
    
    183,125Effect of foreign currency exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (358
    )
    
    
    (8,860
    )
    
    
    
    
    
    
    (9,218
    )Net increase (decrease) in cash and cash equivalents
    
    
    129,547
    
    
    
    (4,129
    )
    
    
    (17,495
    )
    
    
    
    
    
    
    107,923Cash and cash equivalents at beginning of period
    
    
    25,835
    
    
    
    1,892
    
    
    
    58,247
    
    
    
    
    
    
    
    85,974Cash and cash equivalents at end of period
    
    $
    155,382
    
    
    $
    (2,237
    )
    
    $
    40,752
    
    
    $
    
    
    
    $
    193,897
 16




---



##### Table of Contents



Successor Entity
Condensed Consolidating Statement of Cash Flows
For The Period May 29, 2007 through November 3, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (14,619
    )
    
    $
    25,222
    
    
    $
    28,292
    
    
    $
    (53,514
    )
    
    $
    (14,619
    )Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Equity in earnings of subsidiaries
    
    
    (50,408
    )
    
    
    (3,106
    )
    
    
    
    
    
    
    53,514
    
    
    
    Depreciation and amortization
    
    
    2,598
    
    
    
    24,818
    
    
    
    12,182
    
    
    
    
    
    
    
    39,598Amortization of lease rights and other assets
    
    
    
    
    
    
    24
    
    
    
    765
    
    
    
    
    
    
    
    789Amortization of debt issuance costs
    
    
    4,421
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,421Loss on sale/retirement of property and equipment, net
    
    
    
    
    
    
    265
    
    
    
    134
    
    
    
    
    
    
    
    399Stock compensation expense
    
    
    2,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,832(Increase) decrease in:Inventories
    
    
    
    
    
    
    (16,058
    )
    
    
    (4,637
    )
    
    
    
    
    
    
    (20,695
    )Prepaid expenses
    
    
    328
    
    
    
    (12,578
    )
    
    
    2,574
    
    
    
    
    
    
    
    (9,676
    )Other assets
    
    
    10,681
    
    
    
    (864
    )
    
    
    (35,073
    )
    
    
    
    
    
    
    (25,256
    )Increase (decrease) in:Trade accounts payable
    
    
    (649
    )
    
    
    1,728
    
    
    
    (7,217
    )
    
    
    
    
    
    
    (6,138
    )Income taxes payable
    
    
    (3,978
    )
    
    
    6,805
    
    
    
    (2,208
    )
    
    
    
    
    
    
    619Accrued expenses and other liabilities
    
    
    (80,810
    )
    
    
    6,805
    
    
    
    12,503
    
    
    
    
    
    
    
    (61,502
    )Accrued interest payable
    
    
    49,308
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    49,321Deferred income taxes
    
    
    
    
    
    
    (21,086
    )
    
    
    (311
    )
    
    
    
    
    
    
    (21,397
    )Deferred rent expense
    
    
    
    
    
    
    3,157
    
    
    
    694
    
    
    
    
    
    
    
    3,851Net cash provided by (used in) operating activities
    
    
    (80,296
    )
    
    
    15,132
    
    
    
    7,711
    
    
    
    
    
    
    
    (57,453
    )Cash flows from investing activities:Acquisition of property and equipment, net
    
    
    (142
    )
    
    
    (28,271
    )
    
    
    (14,254
    )
    
    
    
    
    
    
    (42,667
    )Acquisition of predecessor entity
    
    
    (2,877,176
    )
    
    
    (78,642
    )
    
    
    (89,429
    )
    
    
    
    
    
    
    (3,045,247
    )Acquisition of intangible assets/lease rights
    
    
    
    
    
    
    (58
    )
    
    
    (1,612
    )
    
    
    
    
    
    
    (1,670
    )Net cash used in investing activities
    
    
    (2,877,318
    )
    
    
    (106,971
    )
    
    
    (105,295
    )
    
    
    
    
    
    
    (3,089,584
    )Cash flows from financing activities:Credit facility proceeds
    
    
    1,450,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,450,000Credit facility payments
    
    
    (3,625
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,625
    )Note offerings proceeds
    
    
    935,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    935,000Capital contribution
    
    
    595,675
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    595,675Option conversion payment
    
    
    (7,924
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,924
    )Financing fees paid
    
    
    (77,561
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77,561
    )Dividends paid
    
    
    (7,252
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,252
    )Intercompany activity, net
    
    
    (105,023
    )
    
    
    (37,451
    )
    
    
    142,474
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    2,779,290
    
    
    
    (37,451
    )
    
    
    142,474
    
    
    
    
    
    
    
    2,884,313Effect of foreign currency exchange rate changes on cash and
cash equivalents
    
    
    (5,231
    )
    
    
    (153
    )
    
    
    (4,330
    )
    
    
    
    
    
    
    (9,714
    )Net increase (decrease) in cash and cash equivalents
    
    
    (183,555
    )
    
    
    (129,443
    )
    
    
    40,560
    
    
    
    
    
    
    
    (272,438
    )Cash and cash equivalents at beginning of period
    
    
    188,407
    
    
    
    131,210
    
    
    
    30,859
    
    
    
    
    
    
    
    350,476Cash and cash equivalents at end of period
    
    $
    4,852
    
    
    $
    1,767
    
    
    $
    71,419
    
    
    $
    
    
    
    $
    78,038
 17




---



##### Table of Contents



Predecessor Entity
Condensed Consolidating Statement of Cash Flows
For The Period February 4, 2007 Through May 28, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (43,772
    )
    
    $
    28,686
    
    
    $
    7,457
    
    
    $
    (36,143
    )
    
    $
    (43,772
    )Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Equity in earnings of subsidiaries
    
    
    (33,368
    )
    
    
    (2,775
    )
    
    
    
    
    
    
    36,143
    
    
    
    Depreciation and amortization
    
    
    367
    
    
    
    11,504
    
    
    
    7,781
    
    
    
    
    
    
    
    19,652Amortization of lease rights and other assets
    
    
    
    
    
    
    39
    
    
    
    583
    
    
    
    
    
    
    
    622Impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    73Loss on retirement of property and equipment, net
    
    
    
    
    
    
    873
    
    
    
    328
    
    
    
    
    
    
    
    1,201Excess tax benefit from stock compensation
    
    
    (2,885
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,885
    )Stock compensation expense
    
    
    8,946
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,946(Increase) decrease in:Inventories
    
    
    
    
    
    
    (9,551
    )
    
    
    (1,381
    )
    
    
    
    
    
    
    (10,932
    )Prepaid expenses
    
    
    465
    
    
    
    11,266
    
    
    
    (5,342
    )
    
    
    
    
    
    
    6,389Other assets
    
    
    (941
    )
    
    
    1,164
    
    
    
    (3,164
    )
    
    
    
    
    
    
    (2,941
    )Increase (decrease) in:Trade accounts payable
    
    
    (90
    )
    
    
    7,490
    
    
    
    23,802
    
    
    
    
    
    
    
    31,202Income taxes payable
    
    
    3,754
    
    
    
    (9,903
    )
    
    
    (5,583
    )
    
    
    
    
    
    
    (11,732
    )Accrued expenses and other liabilities
    
    
    54,909
    
    
    
    (8,666
    )
    
    
    (6,516
    )
    
    
    
    
    
    
    39,727Deferred income taxes
    
    
    
    
    
    
    7,015
    
    
    
    (292
    )
    
    
    
    
    
    
    6,723Deferred rent expense
    
    
    
    
    
    
    634
    
    
    
    (261
    )
    
    
    
    
    
    
    373Net cash provided by (used in) operating activities
    
    
    (12,615
    )
    
    
    37,776
    
    
    
    17,485
    
    
    
    
    
    
    
    42,646Cash flows from investing activities:Acquisition of property and equipment, net
    
    
    (171
    )
    
    
    (18,822
    )
    
    
    (8,995
    )
    
    
    
    
    
    
    (27,988
    )Acquisition of intangible assets/lease rights
    
    
    
    
    
    
    (20
    )
    
    
    (61
    )
    
    
    
    
    
    
    (81
    )Net cash used in investing activities
    
    
    (171
    )
    
    
    (18,842
    )
    
    
    (9,056
    )
    
    
    
    
    
    
    (28,069
    )Cash flows from financing activities:Stock option proceeds
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177Excess tax benefit from stock compensation
    
    
    2,885
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,885Dividends paid
    
    
    (9,065
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,065
    )Intercompany activity, net
    
    
    13,118
    
    
    
    96,485
    
    
    
    (109,603
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    7,115
    
    
    
    96,485
    
    
    
    (109,603
    )
    
    
    
    
    
    
    (6,003
    )Effect of foreign currency exchange rate changes on
cash and cash equivalents
    
    
    (20
    )
    
    
    (16
    )
    
    
    1,061
    
    
    
    
    
    
    
    1,025Net increase (decrease) in cash and cash equivalents
    
    
    (5,691
    )
    
    
    115,403
    
    
    
    (100,113
    )
    
    
    
    
    
    
    9,599Cash and cash equivalents at beginning of period
    
    
    194,098
    
    
    
    15,807
    
    
    
    130,972
    
    
    
    
    
    
    
    340,877Cash and cash equivalents at end of period
    
    $
    188,407
    
    
    $
    131,210
    
    
    $
    30,859
    
    
    $
    
    
    
    $
    350,476
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   18




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Business Overview
         19




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##### Table of Contents



Consolidated Results of Operations
   Three Months
    
    
    Three MonthsEnded
    
    
    EndedNovember 1, 2008
    
    
    November 3, 2007Net sales
    
    $
    332,971
    
    
    $
    357,366Increase (decrease) in same store sales
    
    
    (6.3
    )%
    
    
    (0.7
    %)Gross profit percentage
    
    
    48.7
    %
    
    
    50.7
    %Selling, general and administrative expenses as a
percentage of net sales
    
    
    38.8
    %
    
    
    35.8
    %Depreciation and amortization as a percentage of net sales
    
    
    6.0
    %
    
    
    7.4
    %Transaction-related costs as a percentage of net sales
    
    
    (0.2
    )%
    
    
    0.3
    %Operating income
    
    $
    16,028
    
    
    $
    27,061Net loss
    
    $
    (21,554
    )
    
    $
    (13,812
    )Number of stores at the end of the period (1)
    
    
    3,074
    
    
    
    3,051
 
 (1)
    
    Number of stores excludes stores operated under franchising agreements and joint venture stores. Successor
    
    
    
    
    
    
    Successor
    
    
    PredecessorEntity
    
    
    Combined
    
    
    Entity
    
    
    EntityNine Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    Feb. 4, 2007Ended
    
    
    Ended
    
    
    Through
    
    
    ThroughNov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 3, 2007
    
    
    May 28, 2007Net sales
    
    $
    1,019,947
    
    
    $
    1,063,455
    
    
    $
    638,556
    
    
    $
    424,899Increase (decrease) in same store sales
    
    
    (6.8
    )%
    
    
    (0.4
    %)
    
    
    (1.1
    %)
    
    
    0.5
    %Gross profit percentage
    
    
    48.7
    %
    
    
    51.0
    %
    
    
    50.7
    %
    
    
    51.4
    %Selling, general and administrative expenses as a
percentage of net sales
    
    
    38.5
    %
    
    
    35.3
    %
    
    
    34.5
    %
    
    
    36.4
    %Depreciation and amortization as a percentage of net
sales
    
    
    6.3
    %
    
    
    5.6
    %
    
    
    6.2
    %
    
    
    4.6
    %Transaction-related costs as a percentage of net sales
    
    
    0.6
    %
    
    
    7.1
    %
    
    
    0.5
    %
    
    
    17.1
    %Operating income (loss)
    
    $
    37,182
    
    
    $
    35,531
    
    
    $
    62,400
    
    
    $
    (26,869
    )Net loss
    
    $
    (74,055
    )
    
    $
    (58,391
    )
    
    $
    (14,619
    )
    
    $
    (43,772
    )Number of stores at the end of the period (1)
    
    
    3,074
    
    
    
    3,051
    
    
    
    3,051
    
    
    
    3,003
 
 (1)
    
    Number of stores excludes stores operated under franchising agreements and joint venture stores.   20




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##### Table of Contents



Three Months
    
    
    Three MonthsEnded
    
    
    Ended% of Total
    
    November 1, 2008
    
    
    November 3, 2007Jewelry
    
    
    51.2
    
    
    
    54.4Accessories
    
    
    48.8
    
    
    
    45.6100.0
    
    
    
    100.0
 Successor
    
    
    
    
    
    
    Successor
    
    
    PredecessorEntity
    
    
    Combined
    
    
    Entity
    
    
    EntityNine Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    Feb. 4, 2007Ended
    
    
    Ended
    
    
    Through
    
    
    Through% of Total
    
    Nov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 3, 2007
    
    
    May 28, 2007Jewelry
    
    
    53.3
    
    
    
    55.3
    
    
    
    54.9
    
    
    
    55.8Accessories
    
    
    46.7
    
    
    
    44.7
    
    
    
    45.1
    
    
    
    44.2100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
     21




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22




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##### Table of Contents



Segment Operations
  North America
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedNovember 1, 2008
    
    
    November 3, 2007Net sales
    
    $
    211,873
    
    
    $
    232,011Increase (decrease) in same store sales
    
    
    (8.7
    )%
    
    
    (1.0
    %)Gross profit percentage
    
    
    48.1
    %
    
    
    50.6
    %Number of stores at the end of the period (1)
    
    
    2,144
    
    
    
    2,151
 
 (1)
    
    Number of stores excludes stores operated under franchising agreements and joint venture stores. Successor
    
    
    
    
    
    
    Successor
    
    
    PredecessorEntity
    
    
    Combined
    
    
    Entity
    
    
    EntityNine Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    Feb. 4, 2007Ended
    
    
    Ended
    
    
    Through
    
    
    ThroughNov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 3, 2007
    
    
    May 28, 2007Net sales
    
    $
    643,893
    
    
    $
    706,407
    
    
    $
    413,924
    
    
    $
    292,483Increase (decrease) in same store sales
    
    
    (9.7
    )%
    
    
    (0.1
    %)
    
    
    (1.2
    %)
    
    
    1.3
    %Gross profit percentage
    
    
    48.2
    %
    
    
    51.7
    %
    
    
    50.7
    %
    
    
    53.1
    %Number of stores at the end of the
period (1)
    
    
    2,144
    
    
    
    2,151
    
    
    
    2,151
    
    
    
    2,124
 
 (1)
    
    Number of stores excludes stores operated under franchising agreements and joint venture stores.     23




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##### Table of Contents



Three Months
    
    
    Three MonthsEnded
    
    
    Ended% of Total
    
    November 1, 2008
    
    
    November 3, 2007Jewelry
    
    
    56.3
    
    
    
    59.0Accessories
    
    
    43.7
    
    
    
    41.0100.0
    
    
    
    100.0
 Successor
    
    
    
    
    
    
    Successor
    
    
    PredecessorEntity
    
    
    Combined
    
    
    Entity
    
    
    EntityNine Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    Feb. 4, 2007Ended
    
    
    Ended
    
    
    Through
    
    
    Through% of Total
    
    Nov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 3, 2007
    
    
    May 28, 2007Jewelry
    
    
    58.7
    
    
    
    59.3
    
    
    
    59.2
    
    
    
    59.4Accessories
    
    
    41.3
    
    
    
    40.7
    
    
    
    40.8
    
    
    
    40.6100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
 Europe
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedNovember 1, 2008
    
    
    November 3, 2007Net sales
    
    
    
    
    
    $
    121,098
    
    
    $
    125,355Increase (decrease) in same store sales
    
    
    
    
    
    
    (1.8
    )%
    
    
    (0.1
    %)Gross profit percentage
    
    
    
    
    
    
    49.7
    %
    
    
    50.9
    %Number of stores at the end of the period (1)
    
    
    
    
    
    
    930
    
    
    
    900
 
 (1)
    
    Number of stores excludes stores operated under franchising agreements and joint
venture stores. Successor
    
    
    
    
    
    
    Successor
    
    
    PredecessorEntity
    
    
    Combined
    
    
    Entity
    
    
    EntityNine Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    Feb. 4, 2007Ended
    
    
    Ended
    
    
    Through
    
    
    ThroughNov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 3, 2007
    
    
    May 28, 2007Net sales
    
    $
    376,054
    
    
    $
    357,048
    
    
    $
    224,632
    
    
    $
    132,416Increase (decrease) in same store sales
    
    
    (1.3
    )%
    
    
    (1.0
    %)
    
    
    (0.9
    %)
    
    
    (1.2
    %)Gross profit percentage
    
    
    49.6
    %
    
    
    49.7
    %
    
    
    50.8
    %
    
    
    47.8
    %Number of stores at the end of the period (1)
    
    
    930
    
    
    
    900
    
    
    
    900
    
    
    
    879
 
 (1)
    
    Number of stores excludes stores operated under franchising agreements and joint venture stores.   24




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##### Table of Contents



Three Months
    
    
    Three MonthsEnded
    
    
    Ended% of Total
    
    November 1, 2008
    
    
    November 3, 2007Jewelry
    
    
    42.4
    
    
    
    45.7Accessories
    
    
    57.6
    
    
    
    54.3100.0
    
    
    
    100.0
 Successor
    
    
    
    
    
    
    Successor
    
    
    PredecessorEntity
    
    
    Combined
    
    
    Entity
    
    
    EntityNine Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    Feb. 4, 2007Ended
    
    
    Ended
    
    
    Through
    
    
    ThroughNov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 3, 2007
    
    
    May 28, 2007Jewelry
    
    
    44.1
    
    
    
    47.4
    
    
    
    47.1
    
    
    
    47.9Accessories
    
    
    55.9
    
    
    
    52.6
    
    
    
    52.9
    
    
    
    52.1100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
 Analysis of Consolidated Financial Condition
  Successor
    
    
    
    
    
    
    Successor
    
    
    PredecessorEntity
    
    
    Combined
    
    
    Entity
    
    
    EntityNine Months
    
    
    Nine Months
    
    
    May 29, 2007
    
    
    Feb. 4, 2007Ended
    
    
    Ended
    
    
    Through
    
    
    ThroughNov. 1, 2008
    
    
    Nov. 3, 2007
    
    
    Nov. 3, 2007
    
    
    May 28, 2007Operating activities
    
    $
    (19,444
    )
    
    $
    (14,807
    )
    
    $
    (57,453
    )
    
    $
    42,646Investing activities
    
    
    (46,540
    )
    
    
    (3,117,653
    )
    
    
    (3,089,584
    )
    
    
    (28,069
    )Financing activities
    
    
    183,125
    
    
    
    2,878,310
    
    
    
    2,884,313
    
    
    
    (6,003
    )
  25




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##### Table of Contents



26




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##### Table of Contents



Intangible Asset and Goodwill Impairment Assessment
  Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
     27




---



##### Table of Contents



Cautionary Note Regarding Forward-Looking Statements and Risk Factors
  28




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency
    Interest Rates
   
 Item 4T. Controls and Procedures
   29




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 6. Exhibits
 31.1
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a).32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 Items 2, 3, 4 and 5 of Part II are not applicable and have been omitted.
 30




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##### Table of Contents



SIGNATURES
  CLAIRES STORES, INC.December 5, 2008
    By:
    /s/ Eugene S. KahnEugene S. Kahn, Chief Executive Officer(principal executive officer) December 5, 2008
    By:
    /s/ J. Per BrodinJ. Per Brodin, Senior Vice President and ChiefFinancial Officer (principal financial and
accounting officer) 31




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##### Table of Contents



INDEX TO EXHIBITS
 EXHIBIT NO.
    
    DESCRIPTION31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a).32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 USC Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 USC Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 32