##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 30, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Transition Period
    From          to          .   Commission file number
    000-51676
      Eddie Bauer Holdings,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

42-1672352(State of or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   15010 NE 36th Street
 Redmond, WA 98052
 (425) 755-6544
 (Address and telephone number,
    including area code, of registrants principal executive
    offices)
      Securities
    Registered Pursuant to Section 12(b) of the Act:
 Common Stock, Par Value $0.01 per share
 Name of each exchange on which registered
 The NASDAQ Stock Market LLC
 Securities Registered Pursuant to Section 12(g) of the
    Act:
 None
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ
    þ o
    DOCUMENTS
    INCORPORATED BY REFERENCE:
  Form 10-K.




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##### 



TABLE OF
    CONTENTS
  PagePART IItem 1.

Business


1Item 1A

Risk
    Factors


20Item 1B

Unresolved Staff
    Comments


36Item 2.

Properties


36Item 3.

Legal
    Proceedings


37Item 4.

Submission of
    Matters to a Vote of Security Holders


38PART IIItem 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Repurchases of Equity Securities


39Item 6.

Selected Financial
    Data


41Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


48Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


79Item 8.

Financial
    Statements and Supplementary Data


80Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


81Item 9A.

Controls and
    Procedures


81PART IIIItem 10.

Directors,
    Executive Officers and Corporate Governance


83Item 11.

Executive
    Compensation


83Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


83Item 13.

Certain
    Relationships and Related Transactions and Director
    Independence


84Item 14.

Principal
    Accounting Fees and Services


84PART IVItem 15.

Exhibits, Financial
    Statement Schedules


84EXHIBIT 21EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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SAFE
    HARBOR STATEMENT UNDER THE PRIVATE
    SECURITIES LITIGATION ACT OF 1995
    
    our ability to refinance our secured term loan on acceptable
    terms or at all, including our ability to raise junior capital
    as part of our refinancing efforts and thus avoid the
    anticipated breach of the financial covenants in our secured
    term loan credit agreement during the first half of fiscal 2007;
    consumer acceptance of our products and our ability to keep up
    with fashion trends, develop new merchandise, launch new product
    lines successfully, offer products at the appropriate price
    points and enhance our brand image;
    the highly competitive nature of the retail industry generally
    and the segment in which we operate particularly;
    the possible lack of availability of suitable store locations on
    appropriate terms;
    our reliance on foreign sources of production, including risks
    related to the disruption of imports by labor disputes,
    political instability, legal and regulatory matters, duties,
    taxes, other charges and quotas on imports, local business
    practices and political issues and risks related to currency and
    exchange rates;
    our ability to service any debt we incur from time to time, as
    well as the requirements the agreements related to such debt
    impose upon us;
    shifts in general economic conditions, consumer confidence and
    consumer spending patterns;
    our ability to retain, hire and train key personnel and
    management;
    the seasonality of our business;
    the ability of our manufacturers to deliver products in a timely
    manner or meet quality standards;
    changes in weather patterns;
    the impact of the material weaknesses in internal control
    identified by management and the lack of effectiveness of our
    disclosure controls and procedures currently;
    increases in the costs of mailing, paper and printing;
    the price and supply volatility of energy supplies;
    our reliance on information technology, including risks related
    to the implementation of new information technology systems,
    risks associated with service interruptions and risks related to
    utilizing third parties to provide information technology
    services;
    natural disasters;
    the potential impact of national and international security
    concerns on the retail environment, including any possible
    military action, terrorist attacks or other hostilities; and
    the other risks identified in this Annual Report on
    Form 10-K.




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PART I  Item 1.
    Business    Executive
    Overview
  30-54 years Womens Wear
    Daily
  stand-alone
    
    retail, which consists of our Eddie Bauer stores and our Eddie
    Bauer outlet stores located in the United States and
    Canada; and
    direct, which consists of our Eddie Bauer catalogs and our
    websites www.eddiebauer.comand
    www.eddiebaueroutlet.com.  in-store
    www.eddiebauer.co.jp www.eddiebauer.de.
   1




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Recent
    Developments and Initiatives
  Merger
    Agreement
  stand-alone
  Initiatives
  12-18 months,
  Merchandise
    Strategy
  30-54 year-old
  
    re-setting the styling, fit and construction of our products,
    while leveraging Eddie Bauers unique outdoor heritage as a
    point of differentiation;
    returning to a color palette that emphasizes Eddie Bauers
    tradition of rich, textured and natural colors inspired by the
    outdoors;
    increasing emphasis on down outerwear and accessories as we seek
    to capitalize on our past success in these classifications as
    well as our reputation as one of the worlds most
    recognized outerwear brands; and
    modifying pricing in certain areas to improve the price/value
    equation for our customers.  non-traditional
  product-focused i.e
 2




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Loyalty
    Program
  full-scale www.eddiebauerfriends.com www.eddiebauerfriends.com www.eddiebauerfriends.com
    Company
    History
  (1899-1986)
     3




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stand-alone publicly-owned
  Our
    Products
  outdoor-inspired
  Our
    Market
  30-54 years
  Revitalizing
    the Eddie Bauer Brand
    The
    Fall/Holiday 2005 Re-Launch of the Brand
  re-launch
     4




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Redirecting
    Our Modern Outdoor Lifestyle Brand Strategy
    
    Leverage outdoor heritage.  We plan to leverage
    our outdoor heritage by infusing products with functionality and
    designs that more explicitly reference the outdoors and with
    marketing that reflects our outdoor inspired brand.
    Offer basics, neutrals and heritage pieces.  We
    are building on products in which we have a strong history by
    expanding product offerings in these core product areas and
    introducing new updated products featuring similar styles, fits
    and functionality. We are retaining our tradition of offering
    rich, textured, natural colors inspired by the outdoors by
    featuring neutral and seasonally appropriate colors and targeted
    use of some brighter colors on selected novelty pieces to
    generate excitement. We are also updating classic designs with
    proven selling histories that reflect our outdoor heritage, and
    we are replacing the less successful items offered in 2005.
    Address core customer preferences  age appropriate
    styling, fits and construction.  Our target
    demographic range is 30 to 54, and the average age of our
    customer is 45. We are balancing our product line to appeal to
    our target demographic base through product offerings with
    appropriate fits, styles and functionality that meet the needs
    and preferences of our core customers.
    Leverage our authority in outerwear.  We
    believe that Eddie Bauer has an established reputation in the
    outerwear market, and Eddie Bauer was ranked as the number three
    outerwear brand in a survey conducted by Womens Wear
    Dailyin July 2006. We will continue with our efforts to
    maintain and strengthen our authority in outerwear by leveraging
    our brand recognition in the outerwear category, emphasizing
    both technical and heritage attributes, and revising our
    products to reflect seasonal apparel needs.
    Redirect our catalog and our store merchandising to present
    more product specific marketing.  We are working
    on better balancing wardrobing and product presentation. We also
    are diversifying our models 5




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to reflect the full scope of our target demographic and to
    inspire customer confidence in the fit of our products.  
    Refine our marketing to enhance our image as a lifestyle
    brand.  We believe that how we present and talk
    about our products in use has a significant impact on how our
    customers relate to them and to Eddie Bauer as a brand.
    Therefore, we are placing increased emphasis on showing and
    talking about our products being used in locations, contexts and
    activities that our customers can easily relate to in terms of
    how they live their own lives.
    Reset price/value equation.  We found our
    prices were not consistent with customer expectations, in part
    because we did not emphasize to our customers our use of more
    expensive materials in the products and in part because the
    change in quality may not have justified a relative price
    increase in the minds of our customers. We plan to continue to
    offer high quality, durable products at prices that appeal to
    our customers.    Other
    Turnaround Initiatives
    
    focusing on recruiting a highly qualified chief executive
    officer and chief financial officer and filling other senior
    management positions;
    increasing profitability at our retail stores, by
    right-sizing
    the stores, increasing traffic and increasing conversion;
    rebuilding our customer database through customer acquisition
    and retention measures and making investments to improve website
    functionality;
    restructuring our capital structure, including attempting to
    refinance our existing secured term loan;
    improving the customers experience by making our stores
    more appealing, improving the presentation of our products in
    our catalogs and on our websites, and improving the quality of
    customer service in our stores and at our call centers; and
    further streamlining our back-end operations to maximize
    productivity.    12-18 months.
  Our
    Strengths
    Established brand heritage and awareness.
 6




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20th best-known
  Recognized strength in outerwear. Womens Wear Daily.
  Already focused on desirable market
    segment.
  Integrated distribution network.
  Ability to control inventory in our direct
    channel.
  Licensing opportunities support our modern outdoor lifestyle
    brand image while providing an additional stream of
    revenue.
  Our
    Strategy
    Revitalizing our brand.
 7




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Increasing sales and productivity across both of our
    channels. down-sizing
  Augmenting our management team.
  Optimizing productivity of our back-end
    operations.
  Improving the customer experience.
  Increasing Customer Loyalty. full-scale
 8




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www.eddiebauerfriends.com
  Our
    Design and Merchandising
            Our Sales
    Channels
  www.eddiebauer.com www.eddiebaueroutlet.com.
  Retail
    Channel
    Retail Stores.
 9




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down-sizing
  head-to-toe
  under-performing
  Outlet Stores.
      Direct
    Channel
   10




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e-mail e-mails
  Catalogs.
  Websites. www.eddiebauer.com www.eddiebaueroutlet.com in-house Internet Retailer
  e-mails pay-per-click
  Our Joint
    Ventures
     11




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Eddie
    Bauer Japan
    www.eddiebauer.co.jp U.S.-designed
  Eddie
    Bauer Germany
    www.eddiebauer.de U.S.-designed
  Our
    Licensing
     12




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Our
    Marketing
  Our
    Marketing Strategy
  ages 30-54 e-mail Oprah,
    In Style Mens Journal
  e-mails
    Our
    Private-Label Credit Card
    tm tm
 13




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Our
    Product Sourcing
  Our
    Sourcing Strategy
    
    we retain close control over our product quality, design and
    costs by designing and developing most clothing and accessory
    products in-house;
    we work with a select group of sourcing agents and vendors,
    directly negotiate product cost with our vendors and send
    detailed specification packages to these sourcing agents and
    vendors;
    we inspect pre-production samples, make periodic site visits to
    our vendors factories and selectively inspect inbound
    shipments at our distribution center; and
    we establish quality standards at our headquarters in Redmond,
    Washington, that are included in our policies with these
    sourcing agents and vendors and enforced by our associates.      Our
    Sourcing Agents
       14




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Our
    Vendors
      Our
    Global Labor Practices Program
      Our
    Distribution and Logistics Infrastructure
  Transport
   15




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non-U.S. shipments
  Distribution
    Centers
    Call
    Centers
    Information
    Technology Center
    Competition
   16




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Seasonality
    Trademarks
  ® ® ®
  and/or cease-and-desist
 17




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Associates
    Government
    Regulation
  U.S. Regulation
  (C-TPAT)
  Non-U.S. Regulation
  and/or
        THE
    SPIEGEL BANKRUPTCY
  The
    Spiegel Group
   18




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tm tm
    Events
    Leading to the Spiegel Bankruptcy
      tm tm
    parties-in-interest
 19




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Actions
    Taken Under the Plan of Reorganization
    
    Eddie Bauer Holdings, Inc. was formed as a new holding company
    to serve as the parent company for Eddie Bauer, Inc. and its
    subsidiaries;
    Spiegel transferred to Eddie Bauer Holdings 100% of its
    ownership interest in Eddie Bauer, Inc., FSAC, SAC, Eddie Bauer
    Fulfillment Services, Inc. (EBFS), and Eddie Bauer
    Customer Services Inc. (EBCS), in exchange for Eddie
    Bauer Holdings issuance of 30 million shares of common
    stock to certain unsecured creditors of the Debtors;
    Eddie Bauer Holdings contributed to Eddie Bauer, Inc. its shares
    in EBFS and EBCS such that these entities became wholly-owned
    subsidiaries of Eddie Bauer, Inc.;
    Eddie Bauer Information Technology, LLC, or EBIT, was formed as
    a wholly-owned subsidiary of Eddie Bauer, Inc., and Spiegel
    Management Group, after having transferred all of its assets
    that did not comprise or support its information services to
    Spiegel, Inc., merged with and into EBIT;
    in order to take advantage of tax net operating losses
    (NOLs) available to Eddie Bauer Holdings from FSAC
    and SAC, we included ownership limitations on our newly issued
    common stock in our certificate of incorporation and bylaws;
    we agreed to use commercially reasonable best efforts to become
    a reporting company under the Exchange Act and cause, as soon as
    reasonably practicable, our common stock to be quoted on the
    Nasdaq National Market;
    we and our U.S. subsidiaries entered into a
    $300 million senior secured term loan agreement that is
    secured by a first lien on certain of our real estate assets and
    trademarks and a second lien on other U.S. assets and a
    $150 million working capital facility that replaced a
    debtor-in-possession
    facility and that is secured by a first lien on our
    U.S. inventory and U.S. accounts receivables balances
    and a second lien on all other U.S. assets (other than our
    real estate). See Item 7 
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations  Liquidity and Capital
    Resources  Sources of Liquidity; and
    we issued a nonrecourse promissory obligation to a liquidating
    trust established for the benefit of the creditors of Spiegel,
    pursuant to which we are obligated to pay the creditors
    trust 90% of proceeds (as defined in the obligation)
    received by SAC and FSAC in respect of securitization interests
    held by either entity in certain pre-petition securitization
    transactions to which Spiegel and its subsidiaries were a party.  Item 1A.
    Risk
    Factors  Any of the risks discussed below, as well as any of the other
    risks described in this
    Form 10-K,
    could materially affect our business, financial condition,
    results of operations and cash flows.
  Risks
    Relating to Our Industry
  If we
    cannot compete effectively in the apparel industry our business
    and financial condition may be adversely affected.
      
    brand recognition; 20




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
    the selection, availability, quality and fit of products;
    the ability to anticipate and react to changing customer demands
    and fashion trends in a timely manner;
    price;
    effectiveness of marketing and advertising; and
    effectiveness of customer service.    Adverse
    changes in the economy may adversely affect consumer spending,
    which could negatively impact our business.
    Results
    of operations could be hurt if new trade restrictions are
    imposed or existing trade restrictions become more
    burdensome.
    Competitors
    in the retail apparel industry have been experiencing a trend
    towards lower prices, which has affected and may continue to
    affect our results of operations.
   21




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The
    retail apparel business is seasonal in nature, and any decrease
    in our sales or margins during these periods could have a
    material adverse effect on our company.
    The
    apparel industry is characterized by rapidly changing customer
    demands and our failure to anticipate and respond to changing
    customer style preferences in a timely manner will adversely
    affect our business and financial condition.
    Risks
    Relating to Our Business
  If we
    cannot revitalize the Eddie Bauer brand, our business will be
    adversely impacted.
    
    our attempt to revitalize the brand by offering a more current
    and updated look may result in confusion among existing
    customers;
    our desire to attract additional female customers may result in
    the loss of existing male customers;
    our desire to attract new customers with more current and
    updated product offerings may result in the loss of some
    existing customers;
    our addition of higher priced classifications may drive away
    existing customers and may not attract new customers;
    our efforts to increase traffic and sales in our retail stores
    may not be cost effective; or
    our marketing efforts to promote our revitalized brand may not
    be effective.   22




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We
    face numerous challenges as a result of our involvement in the
    Spiegel bankruptcy process which, if not addressed, could have a
    material adverse effect on our business.
    
    distributing a significant portion of our cash flow and the
    proceeds of the $300 million senior secured term loan to
    the creditors of Spiegel, instead of reinvesting that capital in
    our business and infrastructure during the bankruptcy process;
    borrowing significant amounts (including $300 million under
    our senior secured loan and amounts from time to time under our
    senior secured credit facility of up to $150 million) and
    as a result becoming subject to the restrictions and limitations
    imposed by the lenders under our financing facilities;
    limiting capital expenditures and investment into the
    infrastructure and growth of our company;
    focusing on short term cash flow and operating income rather
    than long term sustainability of our company;
    assuming ongoing obligations, equal to approximately
    $17 million, associated with Spiegels former pension
    and other retirement plans;
    assuming the obligations of Spiegel and its subsidiaries to
    indemnify officers or employees for liability associated with
    their service;
    selling and subsequently leasing back our corporate headquarters;
    allocating substantial management resources to participating in
    the bankruptcy proceedings; and
    inheriting facilities that were not optimally suited for our
    operations and, as a result, having to sell, streamline,
    consolidate or relocate some of these facilities.    Managements
    attention may be diverted from operations while establishing
    post-emergence infrastructure.
   23




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If our
    management team cannot integrate effectively or if we cannot
    attract and retain qualified senior and middle management and
    associates, our business will be adversely
    affected.
      We
    have determined that we have material weaknesses in our internal
    control over financial reporting. Our disclosure controls and
    procedures and internal control over financial reporting may not
    be effective in future periods, as a result of existing or
    subsequently identified material weaknesses in internal control
    over financial reporting.
  Form 10-K
    Form 10-K
 24




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If we
    are not successful in improving profitability of our retail
    stores, our business will be adversely affected.
      
    offer relevant products to our customers;
    avoid construction delays and cost overruns in connection with
    the build-out of new stores;
    close underperforming stores in a rational manner, such as upon
    their natural lease expirations;
    adjust the average size of our existing stores to a more
    cost-efficient size; and 25




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
    generate sufficient average sales per square foot in the stores
    we wish to keep open, to prevent a landlord exercising its
    contractual right to terminate the lease early if the store does
    not perform well.  If we
    cannot negotiate leases on reasonable terms, our business would
    be adversely affected.
    We
    depend on a high volume of mall traffic, the lack of which would
    hurt our business.
    If our
    catalogs are not successful, it could adversely affect both of
    our sales channels.
      
    customer acceptance of our catalog presentations;
    increases in paper and printing costs, postage rates and other
    costs relating to our catalog mailings;
    a failure in the timing of catalog deliveries;
    the implementation of government-mandated return policies that
    would require us to pay for all returns;
    our inability to adequately replenish our customer database,
    which has decreased in each of the last several years, primarily
    due to the loss of customers who were private-label credit card
    holders in connection with the liquidation of FCNB; and
    the accuracy, breadth and depth of the information contained in
    our customer database so we can correctly analyze our mailing
    lists and maximize our customer targeting efforts.   26




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Our
    website operations may not be successful, which could adversely
    affect our business.
    Our
    processing, storage and use of personal data could give rise to
    liabilities as a result of governmental regulation, conflicting
    legal requirements or differing views of personal privacy
    rights.
      We may
    be subject to significant liability should the consumption of
    any of our products cause injury or death.
      There
    is no assurance that our royalty stream from licensing
    arrangements will continue in the future.
   27




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We
    rely on one sourcing agent for a substantial majority of our
    sourcing needs.
    We
    outsource the manufacturing of our products to vendors outside
    the U.S. As a result, we may have difficulty securing
    production sources that meet our requirements. We also are
    subject to a variety of risks associated with doing business
    abroad.
  and/or
      Increased
    energy prices may increase our sourcing and shipping
    costs.
   28




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Any
    disruption in our transportation delivery chain could delay
    shipments to our stores and to our customers.
    A
    significant disruption in back-end operations could adversely
    affect our business.
  -the-art
    Our
    financial condition and results of operations may be adversely
    affected by our joint venture partners inability to market
    and sell merchandise and operate our joint ventures
    effectively.
   29




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If we
    cannot protect our trademarks and other proprietary intellectual
    property rights, our business may be adversely
    affected.
  and/or
  and/or
  If our
    independent vendors do not use ethical business practices or
    comply with applicable laws and regulations, our business and
    our reputation could be harmed.
      Unseasonable
    or severe weather conditions may adversely impact our net
    merchandise sales and our operating results.
    Risks
    Relating to Our Financial Condition and Results of
    Operations
  Any
    failure to refinance our existing secured indebtedness in a
    timely manner or on favorable terms may adversely affect our
    financial condition or cash flows.
   30




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Our
    independent registered public accountants have included an
    explanatory paragraph in their report for our fiscal year ended
    December 30, 2006 with respect to our ability to continue
    as a going concern.
    If our
    net operating loss carryforwards become unavailable or limited
    in the future, we may be obligated to pay income tax in excess
    of amounts retained with respect to the securitization
    note.
   31




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Our
    reorganization valuation was based in part on estimates of
    future performance. If actual results do not meet or exceed the
    projections in our long term plan, we could experience
    additional impairment charges that could adversely affect our
    operating results.
  90-7, SOP 90-7. Business Combinations
      Our
    substantial amount of debt may limit the cash flow available for
    our operations and place us at a competitive
    disadvantage.
    
    requires us to use a substantial portion of our cash flow from
    operations to pay interest and principal on our debt (currently
    50% of our excess cash flow must be used to reduce our
    outstanding obligations under the senior secured term loan on an
    annual basis), which reduces our funds available for working
    capital, capital expenditures and other general corporate
    purposes, and may also prevent us from taking advantage of
    business opportunities as they arise or successfully carrying
    out expansion plans, if any;
    may result in higher interest expense if interest rates increase
    on our floating rate borrowings; 32




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
    limits our flexibility in planning for or reacting to, and
    heighten our vulnerability to, changes or downturns in our
    business, the industry or in the general economy; and
    limits our ability to pay future dividends.    
    incur additional debt;
    grant liens;
    dispose of certain property;
    make certain capital expenditures; and
    engage in sale-leaseback transactions and transactions with
    affiliates.    We
    experience fluctuations in our quarterly comparable store
    sales.
      Risks
    Relating to Our Common Stock
  An
    active trading market for our common stock may not develop, and
    there can be no assurance as to the market price for our common
    stock if an active trading market develops.
   33




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As a
    public company we will incur substantial additional costs to
    comply with securities laws, rules and regulations, including,
    in particular, Section 404 of the Sarbanes Oxley Act of
    2002.
  Form 10-K
    Provisions
    of our Certificate of Incorporation, Bylaws and Senior Officer
    Change in Control Compensation Benefits Plan could discourage
    potential acquirers and could deter or prevent a change in
    control.
    
    our ability to issue blank check preferred stock;
    provisions restricting stockholders from calling a special
    meeting of stockholders; 34




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
    provisions that set forth advance notice procedures for meetings
    of stockholders; and
    payments of certain bonus and severance amounts to covered
    employees in certain circumstances.        Our
    ability to utilize our NOLs and certain other tax attributes may
    be limited.
    Future
    issuances or sales of our securities could cause our stock price
    to fall.
    Our
    dividend policies and other restrictions on the payment of
    dividends prevent the payment of dividends for the foreseeable
    future.
   35




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##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Corporate
    Headquarters
    Retail
    Stores and Outlet Stores
       36




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Back-End
    Operations
  Distribution
    and Logistics
    Groveport Facility.
  Vaughan, Ontario Facility.
  Customer
    Contact Center
    Information
    Technology
    Item 3.
    Legal
    Proceedings  The
    Spiegel Bankruptcy Plan of Reorganization
     37




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Other
    Litigation
  Tara Hill v. Eddie
    Bauer, Inc.
      Item 4.
    Submission
    of Matters to a Vote of Security Holders   38




---



##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Repurchases of Equity Securities  (A)  Market
    Information
  over-the-counter.
  High


LowFiscal 2005June 3, 2005 through
    July 1, 2005

$
28.40


$
27.00Third Quarter Ended
    September 30, 2005

$
31.50


$
22.75Fourth Quarter Ended
    December 31, 2005

$
25.00


$
11.50Fiscal 2006First Quarter Ended March 31,
    2006

$
16.00


$
11.75Second Quarter Ended July 1,
    2006

$
15.00


$
6.00Third Quarter Ended
    September 30, 2006

$
15.00


$
8.30Fourth Quarter Ended
    December 30, 2006

$
11.00


$
6.88   (B)  Holders
    (C)  Dividends
    (D)  Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   39




---



##### Table of Contents



(E) Performance
    Graph
    Comparison
    of Cumulative Total Return
  
 Peer Group:
    Chicos FAS, Inc. (NYSE:CHS)       (F)
    Unregistered
    Sales of Equity Securities and Use of Proceeds and Issuer
    Purchases of Equity Securities     40




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Overview
  The
    Bankruptcy      
    Eddie Bauer, Inc., including its subsidiaries;
    FSAC and SAC, which are two non-operating subsidiaries that hold
    securitization interests in certain pre-petition securitization
    transactions to which Spiegel and its subsidiaries (including
    FSAC and SAC, as applicable) were a party;
    DFS (now known as EBFS), which historically has provided catalog
    and retail distribution services for us; and
    SGTS (now known as EBCS), which has an office in Saint John,
    Canada, and which historically provided call center support for
    us (Saint John).    Predecessor
    and Successor Entities     41




---



##### Table of Contents



The Predecessors results of operations for periods
    prior to our emergence from bankruptcy are not comparable to the
    Successors results of operations for periods after our
    emergence from bankruptcy.
  Reorganization costs and expenses, net: 90-7, Financial Reporting by Entities in Reorganization under the
    Bankruptcy Code (SOP 90-7),
  Revenue from Spiegel-affiliated parties:
  Allocations of certain costs of Spiegel: Allocation of Expenses and Related Disclosure in Financial
    Statements of Subsidiaries, Divisions or Lesser Business
    Components of Another Entity,
  Expenses of EBFS, Saint John and the IT
    Group:
  Discontinuation of Eddie Bauer Home
 42




---



##### Table of Contents



Fresh
    Start Accounting
  SOP 90-7, Business Combinations
  Fiscal
    2005 Presentation
  As a result of applying fresh start accounting,
    the Successors results of operations for periods after our
    emergence from bankruptcy are not comparable to the
    Predecessors results of operations for periods prior to
    our emergence from bankruptcy, and therefore, the combined
    results for fiscal 2005 should not be taken as indicative of our
    historical or future results.
  Financial
    Operations Overview
    
    Net merchandise sales  Net merchandise sales
    include sales of merchandise from our retail and outlet stores,
    catalogs and websites, less discounts and sales return
    allowances. Upon the sale of a gift card or gift certificate, we
    defer the revenue and record a liability. We reduce the
    liability and record merchandise sales when the gift card or
    gift certificate is redeemed by the customer. A significant
    percentage of our customers make purchases through more than one
    sales channel.
    Comparable store sales  Comparable store sales
    include net merchandise sales from retail and outlet stores that
    have been open for one complete fiscal year. We exclude new
    store locations from our comparable store sales until they have
    been in operation for one complete fiscal year. Similarly,
    stores that are expanded or down-sized by more than 30% are also
    excluded from our comparable store base until they have been in
    operation in their new configuration for one complete fiscal
    year. Stores that are closed for more than 10 consecutive days
    are also excluded from our comparable store base. Comparable
    store sales do not include net sales from our catalogs and
    websites.
    Average sales per square foot  Average sales
    per square foot is determined on an annual basis by dividing net
    merchandise sales from our retail and outlet stores for the
    fiscal year by the monthly average of the gross square feet
    during such fiscal year. References to square feet represent
    gross square feet and not net selling space.
    Other revenues  Other revenues include
    revenues associated with the royalties we receive from licensing
    agreements for the use of the Eddie Bauer trademark, royalties
    we receive from our international joint ventures and shipping
    revenues from shipments to customers from our direct channel.
    Other revenues also included services we billed to former
    Spiegel-affiliated entities under transition services agreements
    after Spiegels sale of these entities in June and July
    2004 through December 2004.
    Revenue from Spiegel-affiliated parties 
    Revenue from Spiegel-affiliated parties included intercompany
    revenues from Spiegel affiliates, which were primarily Newport
    News and Spiegel Catalog, prior to Spiegels sale of these
    entities in June and July of 2004. These intercompany revenues
    resulted from these and other Spiegel affiliates using the
    distribution services of EBFS, the call center support of Saint
    John and the information technology services of the IT Group. 43




---



##### Table of Contents




    Gross margin  Gross margin is equal to our net
    merchandise sales less our costs of sales. We include in our
    costs of sales the direct cost of purchased merchandise, inbound
    freight, inventory write downs, design, buying and production
    costs and occupancy costs related to store operations and
    warehouses. Costs of sales also include the amortization
    expenses associated with our finite-lived intangible assets. As
    noted below, our warehousing and distribution expenses
    (excluding occupancy costs related to our warehouses) and
    shipping costs are included in selling, general and
    administrative expenses and are therefore excluded from our
    calculation of gross margin and gross margin percentage. As a
    result, our gross margin and gross margin percentages may not be
    comparable to those of other retailers.    
    Gross margin %  Gross margin % is
    calculated as our gross margin as a percentage of our net
    merchandise sales.
    Impairment of indefinite-lived intangible
    assets  These expenses include impairment charges
    related to our goodwill and trademarks.
    Selling, general and administrative
    (SG&A)  These expenses include
    all operating expenses not included within costs of sales, such
    as store expenses other than occupancy costs, administrative
    expenses, marketing and advertising expenses, catalog production
    and mailing costs, warehousing and distribution expenses
    (excluding occupancy costs related to our warehouses, which are
    reflected in costs of sales), call center expenses, shipping
    costs associated with our catalog and Internet sales and
    depreciation and amortization of our non-store related property
    and equipment and computer software costs. Selling, general and
    administrative expenses also include gift card breakage related
    to gift cards purchased, which is the estimated amount of gift
    cards and gift certificates that will go unredeemed. We record a
    liability associated with the sale of gift cards and gift
    certificates. We reduce the liability and record revenue when
    the gift card or gift certificate is redeemed by the customer.
    Gift card breakage is recorded as a reduction to selling,
    general and administrative expenses for amounts when redemption
    is determined to be remote, based upon historical breakage
    percentages.
    Interest expense  Interest expense for periods
    prior to July 2, 2005 represent interest charged by our
    former parent, Spiegel, on our intercompany borrowings. Interest
    expense for periods subsequent to July 2, 2005 includes
    interest on our senior secured revolving credit facility and
    interest on our senior secured term loan, which was amended in
    April 2006, both of which we entered into upon our emergence
    from bankruptcy.
    Other income (expense)  Other income (expense)
    primarily includes interest earned on our cash and cash
    equivalents, gains or losses on our derivative instruments not
    designated in hedging relationships, and the net accretion on
    the financing receivables and liabilities associated with our
    securitization interests.
    Equity in earnings (losses) of foreign joint
    ventures  This includes our proportionate share
    of the earnings or losses of our joint ventures in Germany and
    Japan. We own a 30% interest in Eddie Bauer Japan, Inc. and a
    40% interest in Eddie Bauer GmbH & Co. We account for
    these investments under the equity method of accounting as we do
    not control these entities. 44




---



##### Table of Contents




    Gain on discharge of liabilities  In
    conjunction with our emergence from bankruptcy, we recognized a
    net gain of $107.6 million for the six months ended
    July 2, 2005 associated with the discharge of our
    liabilities in accordance with the Plan of Reorganization.
    Reorganization costs and expenses, net  In
    accordance with
    SOP 90-7,
    our financial statements prior to our emergence from bankruptcy
    reflect our revenues, expenses, realized gains and losses, and
    provisions for losses resulting from the reorganization
    separately as reorganization costs and expenses, net
    in our combined statements of operations.
    Discontinuation of Eddie Bauer Home  In
    February 2005 we announced our plan to discontinue operating our
    Eddie Bauer Home concept. As such, we have reflected
    the historical results of the Eddie Bauer Home group within
    discontinued operations in our financial statements. All Eddie
    Bauer Home store locations were closed by September 2005.  SELECTED
    HISTORICAL FINANCIAL INFORMATION
  Because of our emergence from bankruptcy and our
    corresponding adoption of fresh start accounting and for the
    reasons stated above in  Predecessor and
    Successor Entities, our financial information for any
    period prior to July 2, 2005 will not be comparable to
    financial information for periods after that date.
        Successor


PredecessorSix Months


Six MonthsEnded


EndedSuccessor


December 31,


July 2,


Combined


Predecessor


Predecessor


Predecessor2006


2005


2005


2005


2004


2003


2002($ in thousands, except per share data)Statement of Operations
    Information:Net sales and other revenues

$
1,013,447


$
593,711


$
465,723


$
1,059,434


$
1,120,761


$
1,243,927


$
1,374,204Revenue from Spiegel-affiliated
    parties


















37,154



73,288



97,748Total revenues


1,013,447



593,711



465,723



1,059,434



1,157,915



1,317,215



1,471,952 45




---



##### Table of Contents



Successor


PredecessorSix Months


Six MonthsEnded


EndedSuccessor


December 31,


July 2,


Combined


Predecessor


Predecessor


Predecessor2006


2005


2005


2005


2004


2003


2002($ in thousands, except per share data)Costs of sales, including buying
    and occupancy


603,171



337,318



259,536



596,854



604,864



695,872



797,037Impairment of indefinite-lived
    intangible assets(a)


117,584



40,000







40,000











Selling, general and administrative
    expenses


411,300



214,125



185,225



399,350



452,603



531,101



619,003Total operating expenses


1,132,055



591,443



444,761



1,036,204



1,057,467



1,226,973



1,416,040Operating income (loss)


(118,608
)


2,268



20,962



23,230



100,448



90,242



55,912Interest expense


26,928



11,064



761



11,825



316



2,513



18,952Other income


3,031



1,919







1,919











Equity in earnings (losses) of
    foreign joint ventures


(3,413
)


174



(95
)


79



3,590



1,606



(281
)Income (loss) from continuing
    operations before reorganization items and income tax expense


(145,918
)


(6,703
)


20,106



13,403



103,722



89,335



36,679Gain on discharge of liabilities(b)










(107,559
)


(107,559
)










Reorganization costs and expenses,
    net










13,686



13,686



26,871



91,022



Income (loss) from continuing
    operations before income tax expense (benefit)


(145,918
)


(6,703
)


113,979



107,276



76,851



(1,687
)


36,679Income tax expense (c)


65,531



14,645



50,402



65,047



36,080



4,803



14,425Income (loss) from continuing
    operations


(211,449
)


(21,348
)


63,577



42,229



40,771



(6,490
)


22,254Income (loss) from discontinued
    operations, net of tax


(534
)


(1,440
)


(2,661
)


(4,101
)


2,893



6,171



8,075Net income (loss)

$
(211,983
)

$
(22,788
)

$
60,916


$
38,128


$
43,664


$
(319
)

$
30,329Basic and Diluted Earnings Per
    Share Information(d):Loss from continuing operations per
    share

$
(7.04
)

$
(0.71
)


n/a



n/a



n/a



n/a



n/aLoss from discontinued operations
    per share

$
(0.02
)

$
(0.05
)


n/a



n/a



n/a



n/a



n/aNet loss per share

$
(7.06
)

$
(0.76
)


n/a



n/a



n/a



n/a



n/aWeighted average shares used to
    complete basic and diluted earnings per share


30,012,896



29,995,092



n/a



n/a



n/a



n/a



n/a 46




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##### Table of Contents



Successor


PredecessorSix Months


Six MonthsEnded


EndedSuccessor


December 31,


July 2,


Combined


Predecessor


Predecessor


Predecessor2006


2005


2005


2005


2004


2003


2002($ in thousands, except per share data)Operating
    Information  Unaudited(e):Percentage increase (decrease) in
    comparable store sales(f)


(2.0
)%


(6.0
)%


3.4
%


(2.2
)%


(1.7
)%


(5.3
)%


(12.9
)%Average sales per square foot

$
256



n/a



n/a


$
256


$
252


$
245


$
247Number of retail stores(g):Open at beginning of period


292



279



304



304



330



399



432Opened during the period


16



16







16



7



1



7Closed during the period


29



3



25



28



33



70



40Open at the end of the period


279



292



279



292



304



330



399Number of outlet stores(g):Open at beginning of period


108



103



101



101



103



102



99Opened during the period


8



5



3



8



2



2



4Closed during the period


1







1



1



4



1



1Open at the end of the period


115



108



103



108



101



103



102Total store square footage at end
    of period (in thousands)


2,752



2,897



n/a



2,897



2,960



3,220



3,775Gross margin

$
353,517


$
228,161


$
176,478


$
404,639


$
442,875


$
478,170


$
506,586Gross margin %


37.0
%


40.3
%


40.5
%


40.4
%


42.3
%


40.7
%


38.9
%Capital expenditures

$
45,814


$
30,214


$
8,641


$
38,855


$
13,906


$
6,313


$
24,967Depreciation and amortization

$
55,494


$
26,589


$
16,171


$
42,760


$
41,142


$
57,339


$
71,360   Successor


Successor


Successor


Predecessor


Predecessor


PredecessorAs of


As of


As of


As of


As of


As ofDecember 30,


December 31,


July 2,


January 1,


January 3,


December 28,2006


2005


2005


2005


2004


2002($ in thousands)Balance Sheet
    Information:Working capital

$
105,067


$
107,297


$
115,087


$
112,577


$
12,805


$
(208,529
)Goodwill

$
114,765


$
220,481


$
220,481


$
76,601


$
76,601


$
76,601Trademarks

$
185,000


$
185,000


$
225,000


$
58,756


$
58,756


$
58,756Total assets

$
855,910


$
1,153,236


$
1,186,005


$
591,975


$
643,137


$
850,912Due to (from) Spiegel













$
(37,751
)

$
90,688


$
300,129Total long-term debt(h)

$
274,500


$
298,500


$
300,000











Stockholders equity

$
346,641


$
545,020


$
564,900


$
292,391


$
248,013


$
246,638     (a)
    
    In conjunction with our impairment tests of indefinite-lived
    intangible assets, we recorded an impairment charge of
    $40 million related to our trademarks during the fourth
    quarter of 2005 and an impairment charge of $117.6 million
    related to our goodwill during the third quarter of 2006. See
    Note 7 to our annual financial statements for more detailed
    descriptions of the impairment tests performed.(b)
    
    In accordance with
    SOP 90-7,
    we recorded a net gain of $107.6 million related to the
    discharge of our liabilities upon our emergence from bankruptcy
    for the six months ended July 2, 2005.(c)
    
    We recorded income tax expense associated with increases to our
    tax valuation allowance of $71.3 million and
    $15.3 million during fiscal 2006 and 2005, respectively.
    See further discussion in Note 15 to our annual financial
    statements for more detailed descriptions of our tax valuation
    allowance changes. 47




---



##### Table of Contents



(d)
    
    On June 21, 2005, in connection with the Effective Date of
    the Plan of Reorganization, we issued 30,000,000 shares of
    our common stock to certain unsecured creditors of the Debtors.
    Accordingly, earnings per share data have been included for
    periods subsequent to July 2, 2005. No earnings per share
    data have been presented for periods prior to July 2, 2005
    because there were no shares outstanding for the combined entity.(e)
    
    Represents unaudited financial measures used by our management
    to assess the performance of our business.(f)
    
    Represents increase (decrease) over respective prior year period.(g)
    
    Retail and outlet store count data excludes stores related to
    our discontinued Eddie Bauer Home business.(h)
    
    Includes current portion of long-term debt, which totaled
    $8.0 million as of December 30, 2006,
    $24.0 million as of December 31, 2005 and
    $3.0 million as of July 2, 2005.  Quarterly
    Comparable Sales Results
    Fiscal 2006

Fiscal 2005

Fiscal 2004Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Q14.6%

(1.5)%

(5.9)%

(10.0)%

(7.1)%

(4.3)%

3.7%

3.0%

2.0%

(3.9)%

(6.0)%

(0.9)%   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The information in this Managements Discussion and
    Analysis contains certain forward-looking statements, which
    reflect our current view with respect to future events and
    financial performance. Any such forward-looking statements are
    subject to risks and uncertainties that could cause our actual
    results of operations to differ materially from historical
    results or current expectations. This discussion and analysis
    should be read in conjunction with our consolidated and combined
    financial statements and the related notes included elsewhere in
    this document.
  EXECUTIVE
    OVERVIEW
  Business
    Summary
  30-54 years Womens Wear
    Daily
      
    retail, which consists of our Eddie Bauer stores and our Eddie
    Bauer Outlet stores located in the United States and
    Canada; and
    direct, which consists of our Eddie Bauer catalogs and our
    websites www.eddiebauer.comand
    www.eddiebaueroutlet.com.   48




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##### Table of Contents



www.eddiebauer.co.jp www.eddiebauer.de.
    Fiscal
    and Fourth Quarter 2006 Overview
      Recent
    Developments and Initiatives
  Term Loan
    Refinancing
   49




---



##### Table of Contents



Merger
    Agreement
    Initiatives
    Merchandise
    Strategy
  30-54 year-old
  
    re-setting the styling, fit and construction of our products,
    while leveraging Eddie Bauers unique outdoor heritage as a
    point of differentiation,
    returning to a color palette that emphasizes Eddie Bauers
    tradition of rich, textured and natural colors inspired by the
    outdoors,
    increasing emphasis on down outerwear and accessories as we seek
    to capitalize on our past success in these classifications as
    well as our reputation as one of the worlds most
    recognized outerwear brands, and
    modifying pricing in certain areas to improve the price/value
    equation for our customers.    product-focused i.e
 50




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##### Table of Contents



Loyalty
    Program
  full-scale www.eddiebauerfriends.com www.eddiebauerfriends.com www.eddiebauerfriends.com
  on-going
  Real
    Estate
  right-sizing down-sizing. build-out
  Outlook
  quarter-to-date mark-downs.
 51




---



##### Table of Contents



non-cash
  Industry
    Trends
    
    Constantly shifting consumer style preferences, such as the
    general shift in the U.S. towards more casual apparel and a
    shift towards consumers being more willing to purchase either
    premium apparel at higher prices or value apparel with lower
    prices, and being less willing to purchase
    mid-priced
    apparel;
    The maturation and fragmentation of the apparel industry by
    channel of distribution, age, gender, price points and
    classification, as well as the increase in brand proliferation,
    especially with the growth of private label brands;
    Increased competition due to fewer barriers to entry;
    The increased availability of quality, global
    low-cost
    sourcing for apparel due to the elimination of import quotas in
    the U.S., which puts deflationary pressures on pricing and
    further lowers barriers to entry;
    Retail sales of apparel is seasonal in nature,
    i.e., revenues, the related expenses and profits are
    typically higher during the fourth quarter of the calendar year,
    driven by significant holiday purchases; and
    In the international markets in which we participate through our
    joint ventures (Japan and Germany), Germany has experienced a
    deteriorating retail environment while Japan continues to
    experience a fairly robust retail environment.  Results
    of Operations
  Our historical results for
    periods prior to July 2, 2005 are not comparable with our
    results for periods subsequent to July 2, 2005 for several
    reasons. SOP 90-7
 52




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##### Table of Contents



Fiscal
    2006 Compared to Fiscal 2005
  Revenues
  Successor


CombinedFiscal


Fiscal2006


2005


Change(Unaudited)


(Unaudited)($ in thousands)Retail & outlet store
    sales:Comparable store sales

$
559,549


$
570,838


$
(11,289
)Non-comparable store sales


140,595



162,325



(21,730
)Total retail & outlet
    store sales


700,144



733,163



(33,019
)Direct sales


256,463



268,135



(11,672
)Other merchandise sales


81



195



(114
)Net Merchandise Sales


956,688



1,001,493



(44,805
)Shipping revenues


34,022



35,726



(1,704
)Licensing revenues


15,707



15,300



407Foreign royalty revenues


6,626



6,100



526Other revenues


404



815



(411
)Net sales and other revenues


1,013,447



1,059,434



(45,987
)Percentage increase (decrease) in
    comparable store sales


(2.0
)%


(2.2
)%


n/aNumber of retail stores:Open at beginning of period


292



304



n/aOpened during the period


16



16



n/aClosed during the period


29



28



n/aOpen at the end of the period


279



292



n/aNumber of outlet stores:Open at beginning of period


108



101



n/aOpened during the period


8



8



n/aClosed during the period


1



1



n/aOpen at the end of the period


115



108



n/a    53




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##### Table of Contents



Cost
    of Goods Sold, Including Buying and Occupancy and Gross margin
    and gross margin %
  Successor


CombinedFiscal


Fiscal2006


2005


Change(Unaudited)


(Unaudited)($ in thousands)Net Merchandise Sales

$
956,688


$
1,001,493


$
(44,805
)Cost of sales, including buying
    and occupancy

$
603,171


$
596,854


$
6,317Gross margin

$
353,517


$
404,639


$
(51,122
)Gross margin as a % of net
    merchandise sales


37.0
%


40.4
%


(3.4
)%         Selling,
    general and administrative expenses
  Successor


CombinedFiscal


Fiscal2006


2005


Change(Unaudited)


(Unaudited)($ in thousands)Selling, general and
    administrative expenses (SG&A)

$
411,300


$
399,350


$
11,950SG&A as a % of net merchandise
    sales


43.0
%


39.9
%


3.1
%    54




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##### Table of Contents



Impairment
    of indefinite-lived intangible assets
  Successor


CombinedFiscal


Fiscal2006


2005


Change(Unaudited)


(Unaudited)($ in thousands)Impairment of indefinite-lived
    intangible assets

$
117,584


$
40,000


$
77,584            55




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##### Table of Contents



Equity in
    earnings (losses) of foreign joint ventures
  Successor


CombinedFiscal


Fiscal2006


2005


Change(Unaudited)


(Unaudited)($ in thousands)Equity in earnings (losses) of
    foreign joint ventures

$
(3,413
)

$
79


$
(3,492
)    56




---



##### Table of Contents



Interest
    expense
  Successor


CombinedFiscal


Fiscal2006


2005


Change(Unaudited)


(Unaudited)($ in thousands)Interest expense

$
26,928


$
11,825


$
15,103     Other
    income
  Successor


CombinedFiscal


Fiscal2006


2005


Change(Unaudited)


(Unaudited)($ in thousands)Other income

$
3,031


$
1,919


$
1,112     Income
    tax expense
  Successor


CombinedFiscal


Fiscal2006


2005


Change(Unaudited)


(Unaudited)($ in thousands)Income tax expense

$
65,531


$
65,047


$
484Effective tax rate


n/m



60.6
%


n/a  57




---



##### Table of Contents



Fiscal
    2005 Compared to Fiscal 2004
  Revenues
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Retail & outlet store
    sales:Comparable store sales

$
616,335


$
630,098


$
(13,763
)Non-comparable store sales


116,828



135,864



(19,036
)Total retail & outlet
    store sales


733,163



765,962



(32,799
)Direct sales


268,135



277,168



(9,033
)Other merchandise sales


195



4,609



(4,414
)Net Merchandise Sales


1,001,493



1,047,739



(46,246
) 58




---



##### Table of Contents



Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Shipping revenues


35,726



39,342



(3,616
)Licensing revenues


15,300



18,540



(3,240
)Foreign royalty revenues


6,100



6,338



(238
)Other revenues


815



8,802



(7,987
)Net sales and other revenues


1,059,434



1,120,761



(61,327
)Revenue from Spiegel-affiliated
    parties






37,154



(37,154
)Total revenues

$
1,059,434


$
1,157,915


$
(98,481
)Percentage increase (decrease) in
    comparable store sales


(2.2
)%


(1.7
)%


n/aNumber of retail stores:Open at beginning of period


304



330



n/aOpened during the period


16



7



n/aClosed during the period


28



33



n/aOpen at the end of the period


292



304



n/aNumber of outlet stores:Open at beginning of period


101



103



n/aOpened during the period


8



2



n/aClosed during the period


1



4



n/aOpen at the end of the period


108



101



n/a        59




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##### Table of Contents



Cost
    of Goods Sold, Including Buying and Occupancy and Gross margin
    and gross margin %
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Net Merchandise Sales

$
1,001,493


$
1,047,739


$
(46,246
)Cost of sales, including buying
    and occupancy

$
596,854


$
604,864


$
(8,010
)Gross margin

$
404,639


$
442,875


$
(38,236
)Gross margin as a % of net
    merchandise sales


40.4
%


42.3
%


(1.9
)%         Selling,
    general and administrative expenses
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)(Unaudited)($ in thousands)Selling, general and
    administrative expenses (SG&A)

$
399,350


$
452,603


$
(53,253
)SG&A as a % of net merchandise
    sales


39.9
%


43.2
%


(3.3
)%    60




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##### Table of Contents



Impairment
    of indefinite-lived intangible assets
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Impairment of indefinite-lived
    intangible assets

$
40,000






$
40,000         Equity in
    earnings (losses) of foreign joint ventures
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Equity in earnings (losses) of
    foreign joint ventures

$
79


$
3,590


$
(3,511
)    61




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##### Table of Contents



Interest
    expense
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Interest expense

$
11,825


$
316


$
11,509     Other
    income
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Other income

$
1,919






$
1,919     Reorganization
    costs and expenses, net
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Lease rejections

$
2,749


$
(3,708
)

$
6,457Professional service fees


10,705



23,373



(12,668
)Asset impairment and other, net


232



8,254



(8,022
)Severance and relocation






2,452



(2,452
)Interest income






(3,500
)


3,500$
13,686


$
26,871


$
(13,185
)    62




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##### Table of Contents



Income
    tax expense
  Combined


PredecessorFiscal


Fiscal2005


2004


Change(Unaudited)


(Unaudited)($ in thousands)Income tax expense

$
65,047


$
36,080


$
28,967Effective tax rate


60.6
%


47.0
%


n/a     Liquidity
    and Capital Resources
  Cash
    Flow Analysis
  Fiscal
    2006, Fiscal 2005 and Fiscal 2004
  Successor


Combined


PredecessorFiscal


Fiscal


Fiscal2006


2005


2004(Unaudited)($ in thousands)Cash flow data:Net cash provided by operating
    activities

$
50,424


$
37,767


$
94,188Net cash (used in) provided by
    investing activities

$
(45,452
)

$
(39,179
)

$
40,685Net cash provided by (used in)
    financing activities

$
(26,107
)

$
68,319


$
(133,880
)  63




---



##### Table of Contents



Net cash
    provided by operating activities
        Net cash
    (used in) provided by investing activities
    Net cash
    provided by (used in) financing activities
   64




---



##### Table of Contents



Sources
    of Liquidity
    Senior
    Secured Revolving Credit Facility
        
    LIBOR plus 1.25% if the average aggregate outstanding (based
    upon the preceding calendar month) is less than
    $75 million; or
    LIBOR plus 1.50% if the average aggregate outstanding is greater
    than or equal to $75 million.     65




---



##### Table of Contents



Senior
    Secured Term Loan
        time-to-time
 66




---



##### Table of Contents



12-month
  
    5.25 to 1.00 for the fiscal quarter ending December 31,
    2006;
    4.00 to 1.00 for the fiscal quarter ending March 31, 2007;
    2.50 to 1.00 for the next three fiscal quarters; and
    thereafter being reduced on a graduated basis to 1.50 to 1.00 at
    March 31, 2009.  12-month
  
    0.95 to 1.00 for the fiscal quarter ending December 31,
    2006;
    0.975 to 1.00 for the fiscal quarter ending March 31,
    2007; and
    thereafter increasing to 1.50 to 1.00 for the quarters ending
    June 30, 2007 through June 30, 2011.        
    Secured on a first priority basis by our intellectual property,
    certain owned real estate and the stock of the company and its
    subsidiaries. The senior secured term loan will have a second
    priority lien on the collateral that currently secures our
    existing revolving credit facility.
    Interest will be payable semi-annually at a variable rate based
    upon LIBOR plus a stated number of basis points.
    Principal payments due quarterly at a rate of 1% per year,
    with the remainder due on the seventh anniversary date.
    Mandatory prepayment provisions, including: (i) 50% of
    excess cash flow, with step-downs to 25% and 0% based upon
    certain leverage ratios, (ii) 100% of net proceeds from
    asset sales, and (iii) 100% of net proceeds from debt
    issuances, other than proceeds from our existing revolving
    credit facility. 67




---



##### Table of Contents




    Financial covenants, including but not limited to, (i) a
    maximum senior secured leverage ratio, (ii) a minimum fixed
    charge coverage ratio, and (iii) a maximum amount of annual
    capital expenditures.    
    Maturity date on the seventh year anniversary of issuance.
    The notes will be general, unsecured obligations ranking equally
    in right of payment with existing and future senior unsecured
    indebtedness and senior in right of payment to any subordinated
    indebtedness.
    The notes will be guaranteed by certain of our subsidiaries on a
    senior unsecured basis.
    Interest will be payable semi-annually at a fixed rate of
    interest per year.
    Holders may convert their notes under certain circumstances,
    including but not limited to, (i) conversion features based
    upon our common stock price or the convertible notes price
    reaching a certain level for a stated period of time and
    (ii) following certain corporate transactions that occur
    prior to the convertible notes scheduled maturity.    Interest
    Rate Swap Agreement
       68




---



##### Table of Contents



Financial
    Condition
  At
    December 30, 2006 Compared to December 31,
    2005
            Cash
    Requirements
   69




---



##### Table of Contents



Contractual
    Obligations
  Contractual Obligations

Payments Due by Periodas of December 30, 2006




Less Than








After(unless otherwise noted)

Total


1 Year


1-3 Years


3-5 Years


5 Years($ in thousands)Long-term debt obligations(1)

$
274,500


$
8,000


$
6,000


$
260,500


$
Interest on long-term debt(2)

$
96,902


$
24,397


$
44,888


$
27,617


$
Operating lease obligations(3)

$
424,584


$
69,233


$
118,844


$
86,823


$
149,684Purchase obligations(4)

$
161,580


$
161,580


$



$



$
Other contractual obligations(5)

$
10,423


$
7,801


$
2,484


$
138


$
Total

$
967,989


$
271,011


$
172,216


$
375,078


$
149,684     (1)
    
    Includes payments due under our existing senior term loan
    agreement including excess cash flows required to be repaid as
    of December 30, 2006, but excluding any mandatory
    prepayment provisions subsequent to December 30, 2006
    discussed above under  Sources of
    Liquidity  Senior Secured Term Loan. See
    further discussion above related to the financing transaction we
    anticipate closing in April 2007, which will impact the amounts
    and timing of principal payments required related to our
    long-term debt obligations.(2)
    
    Represents interest due under our term loan agreement discussed
    above under  Sources of Liquidity 
    Senior Secured Term Loan, taking into consideration the
    increase in our interest rate margin as a result of the term
    loan amendment we executed in April 2006. Interest due also
    includes the impact of the interest rate swap agreement we
    entered into in October 2005. Interest payments include the
    assumption of 50% of the outstanding loan at a fixed rate of
    7.415% and 50% of the outstanding loan using implied forward
    LIBOR rates based upon Eurodollar futures rates. See
     Sources of Liquidity  Interest Rate
    Swap Agreement above. See further discussion above related
    to the financing transaction we anticipate closing in April
    2007, which will impact the amounts and timing of interest
    payments required related to our long-term debt obligations.(3)
    
    Includes future minimum lease payments under non-cancelable
    operating leases for retail stores, corporate headquarters, call
    center and distribution facilities. Amounts do not include costs
    for maintenance, common areas or real estate taxes. 70




---



##### Table of Contents



(4)
    
    Includes open purchase orders with vendors for merchandise not
    yet received or recorded on our balance sheet.(5)
    
    Includes facility-related contracts, such as utility and
    telecommunication services; information technology contracts;
    printing services; and other miscellaneous business agreements.    Other
    Contractual Obligations
  Merger
    Termination Fee
    CEO
    Resignation  Severance Payments
  tax-gross-up
 71




---



##### Table of Contents



Promissory
    Note
             72




---



##### Table of Contents



Insurance
    and Self-insurance
    Pension
    and Other Post-retirement Benefit Obligations
    Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans (an amendment of FASB Statements
    No. 87, 88, 106, and 132R)
         73




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Seasonality
    Critical
    Accounting Policies and Estimates
      
    It requires us to make assumptions because information was not
    available at the time or it included matters that were highly
    uncertain at the time we were making the estimate; and
    Changes in the estimate or different estimates that we could
    have selected may have had a material impact on our financial
    condition or results of operations.      Revenue
    recognition
  Nature of
    Critical Estimate
  Merchandise sales.
 74




---



##### Table of Contents



Sales returns.
  Licensing revenues.
  Assumptions/Approach
    Used
  Merchandise sales.
  Sales returns.
  Licensing revenue.
  Effect if
    Different Assumptions Used
  Merchandise sales.
  Sales returns.
  Licensing revenue.
  Inventory
    valuation
  Nature of
    Critical Estimate
  Inventory valuation.
  Assumptions/Approach
    Used
  Inventory valuation.
 75




---



##### Table of Contents



Effect if
    Different Assumptions Used
  Inventory valuation.
  Valuation
    of long-lived assets
  Nature of
    Critical Estimate
  Fair values of property and equipment. Accounting for the Impairment or
    Disposal of Long-lived Assets
  Fair values of indefinite-lived intangible
    assets. Goodwill and
    Other Intangible Assets
  Assumptions/Approach
    Used
  Fair values of property and equipment.
  Fair values of indefinite-lived intangible
    assets.
 76




---



##### Table of Contents



Effect if
    Different Assumptions Used
  Fair values of property and equipment and indefinite-lived
    intangible assets.
  Deferred
    tax valuation allowances
  Nature of
    Critical Estimate
    Assumptions/Approach
    Used
       77




---



##### Table of Contents



Effect if
    Different Assumptions Used
    Stock
    based compensation
  Nature of
    Critical Estimate
  Share Based Payments
  Assumptions/Approach
    Used
    Volatility
  Risk-free interest rate
  Expected term
  Dividend yield
  Forfeitures
  Effect if
    Different Assumptions Used
   78




---



##### Table of Contents



Inflation
    Recent
    Accounting Pronouncements
    Related
    Party Transactions
    Subsequent
    Events
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Interest
    Rates
     79




---



##### Table of Contents



Foreign
    Exchange
    Item 8.
    Financial
    Statements and Supplementary Data   80




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e))
  Identification
    of Material Weaknesses and Other Control Deficiencies
  Form 10-K
       81




---



##### Table of Contents



Remediation
    Plan
    
    hiring qualified key accounting and finance personnel with
    appropriate experience in companies which face similar financial
    reporting requirements;
    hiring and integrating additional qualified key accounting and
    finance personnel with appropriate technical experience; and
    identifying and implementing additional improvements to the
    internal control framework to ensure ongoing compliance.    
    implemented more rigorous financial closing procedures,
    including more formal documentation of controls and procedures;
    expanded the project to remediate control deficiencies related
    to granting and tracking access to our computerized accounting
    and merchandising systems;
    retained additional external resources with public company
    reporting expertise, as well as specialized experts, to
    research, analyze and document various accounting, and financial
    reporting issues and processes associated with the preparation
    and review of the Companys consolidated financial
    statements in accordance with generally accepted accounting
    principles;
    engaged specialized resources to fully reconcile the deferred
    tax asset /liability accounts; and
    implemented additional in-depth analyses and other post-closing
    procedures, to validate the financial statements and related
    disclosures.      and/or
 82




---



##### Table of Contents



PART III  Item 10.
    Directors
    and Executive Officers and Corporate Governance    http://www.eddiebauer.com. http://www.eddiebauer.com Form 8-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number of securitiesNumber of securities





remaining available forto be issued


Weighted-average


future issuance underupon exercise of


exercise price of


equity compensation plansoutstanding options,


outstanding options,


(excluding securitiesPlan category

warrants and rights


warrants and rights


reflected in column (a))Equity compensation plans approved
    by security holders










Equity compensation plans not
    approved by security holders(1)


1,193,908
(2)

$
23.28
(3)


587,845Total


1,193,908


$
23.28



587,845     (1)
    
    Eddie Bauers 2005 Stock Incentive Plan. This plan provides
    for the grant of stock options, restricted shares of common
    stock and other awards valued by reference to our common stock,
    which may be granted to our directors, employees and consultants
    of our company or our affiliates. Shares issued pursuant to
    awards under the plan may be authorized but unissued common
    stock, or shares that we have reacquired on the market or by
    forfeiture of awards. In the event of significant corporate
    transaction, such as a dissolution or liquidation of Eddie Bauer
    Holdings, or any corporate separation or division, or similar
    transaction in which we are not the surviving entity, then all
    outstanding stock awards under the plan may be assumed,
    continued, or substituted for by any surviving or acquiring
    entity (or its parent company), or may be cancelled either with
    or without consideration for the vested portion of the awards.
    The terms and conditions of options granted under this plan are
    to be determined by the board of directors, provided, that the
    exercise price of an option generally cannot be less than the
    fair market value of our common stock on 83




---



##### Table of Contents



the date of grant. Unless otherwise provided by the plan
    administrator, following termination of continuous service stock
    options granted under this plan generally will remain
    exercisable, to the extent exercisable at the time of
    termination, for three months (12 months in the case of
    death or disability) or until they expire by their terms.  (2)
    
    Reflects securities issued under the Eddie Bauer 2005 Stock
    Incentive Plan. Includes stock options to acquire
    590,375 shares of common stock at a weighted-average
    exercise price of $23.28 per share and 603,533 restricted
    stock units.(3)
    
    Reflects the weighted-average exercise price of stock options
    granted and outstanding under the Eddie Bauer 2005 Stock
    Incentive Plan as of December 30, 2006.  Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules    PageFinancial StatementsAnnual Financial StatementsReport of Independent Registered
    Public Accounting Firm

85Consolidated Balance
    Sheets  Successor Entity as of December 30, 2006
    and December 31, 2005

86Consolidated and Combined
    Statements of Operations  Successor Entity for the
    year ended December 30, 2006 and for the six months ended
    December 31, 2005, Predecessor Entity for the six months
    ended July 2, 2005 and for the year ended January 1,
    2005

87Consolidated and Combined
    Statements of Stockholders Equity and Comprehensive Income
    (Loss)  Successor Entity for the year ended
    December 30, 2006 and for the six months ended
    December 31, 2005, Predecessor Entity for the six months
    ended July 2, 2005 and for the year ended January 1,
    2005

88Consolidated and Combined
    Statements of Cash Flows  Successor Entity for the
    year ended December 30, 2006 and for the six months ended
    December 31, 2005, Predecessor Entity for the six months
    ended July 2, 2005 and for the year ended January 1,
    2005

90Notes to Consolidated and Combined
    Financial Statements

92    84




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              BDO
    Seidman, LLP
     85




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  CONSOLIDATED
    BALANCE SHEETS
  Successor


SuccessorAs of


As ofDecember 30,


December 31,2006


2005($ in thousands)Cash and cash equivalents

$
53,174


$
74,186Restricted cash






825Accounts receivable, less
    allowances for doubtful accounts of $1,274 and $982, respectively


29,774



32,737Current assets of discontinued
    operations






498Inventories


153,778



142,302Prepaid expenses


23,572



22,562Current receivables from
    securitization interests






62,907Financing receivables


45,978



Deferred tax assets 
    current


2,345



2,745Total Current Assets


308,621



338,762Property and equipment, net


177,344



182,608Goodwill


114,765



220,481Trademarks


185,000



185,000Other intangible assets, net


29,720



39,089Other assets


24,490



22,712Receivables from securitization
    interests






76,434Deferred tax assets 
    noncurrent


15,970



88,150Total Assets

$
855,910


$
1,153,236Trade accounts payable

$
40,092


$
35,550Bank overdraft


13,622



15,729Accrued expenses


100,460



99,570Current liabilities related to
    securitization note


41,380



56,616Current portion of long-term debt


8,000



24,000Total Current Liabilities


203,554



231,465Deferred rent obligations


18,935



7,221Unfavorable lease obligations, net


4,679



5,493Long-term debt


266,500



274,500Non-current liabilities related to
    securitization note






68,791Other non-current liabilities


270



Pension and other post-retirement
    benefit liabilities


15,331



20,746Total Liabilities


509,269



608,216Commitments and Contingencies (See
    Note 20)Common stock:Eddie Bauer Holdings, Inc.
    $0.01 par value, 100 million shares authorized;
    30,309,931 and 29,991,684 shares issued and outstanding as
    of December 30, 2006 and December 31, 2005,
    respectively


303



300Treasury stock, at cost


(157
)


(157
)Additional paid-in capital


578,402



568,205Accumulated deficit


(234,771
)


(22,788
)Accumulated other comprehensive
    income (loss), net of taxes of $1,759 and ($270), respectively


2,864



(540
)Total Stockholders Equity


346,641



545,020Total Liabilities and
    Stockholders Equity

$
855,910


$
1,153,236    86




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  CONSOLIDATED
    AND COMBINED STATEMENTS OF OPERATIONS
  Successor Six



Predecessor SixMonths Ended



Months EndedSuccessor


December 31,



July 2,


PredecessorFiscal 2006


2005



2005


Fiscal 2004($ in thousands, except per share data)Net sales and other revenues

$
1,013,447


$
593,711



$
465,723


$
1,120,761Revenue from Spiegel-affiliated
    parties















37,154Total revenues


1,013,447



593,711




465,723



1,157,915Costs of sales, including buying
    and occupancy


603,171



337,318




259,536



604,864Impairment of indefinite-lived
    intangible assets


117,584



40,000








Selling, general and
    administrative expenses


411,300



214,125




185,225



452,603Total operating expenses


1,132,055



591,443




444,761



1,057,467Operating income (loss)


(118,608
)


2,268




20,962



100,448Interest expense


26,928



11,064




761



316Other income


3,031



1,919








Equity in earnings (losses) of
    foreign joint ventures


(3,413
)


174




(95
)


3,590Income (loss) from continuing
    operations before reorganization items and income tax expense


(145,918
)


(6,703
)



20,106



103,722Gain on discharge of liabilities











(107,559
)


Reorganization costs and expenses,
    net











13,686



26,871Income (loss) from continuing
    operations before income tax expense


(145,918
)


(6,703
)



113,979



76,851Income tax expense


65,531



14,645




50,402



36,080Income (loss) from continuing
    operations


(211,449
)


(21,348
)



63,577



40,771Income (loss) from discontinued
    operations (net of income tax expense (benefit) of $0, $0
    $(1,686) and $1,834, respectively)


(534
)


(1,440
)



(2,661
)


2,893Net income (loss)

$
(211,983
)

$
(22,788
)


$
60,916


$
43,664Income (loss) per basic and
    diluted share:Loss from continuing operations
    per share

$
(7.04
)

$
(0.71
)



n/a



n/aLoss from discontinued operations
    per share


(0.02
)


(0.05
)



n/a



n/aNet loss per share

$
(7.06
)

$
(0.76
)



n/a



n/aWeighted average shares used to
    compute income (loss) per share:Basic


30,012,896



29,995,092




n/a



n/aDiluted


30,012,896



29,995,092




n/a



n/a    87




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  CONSOLIDATED AND COMBINED STATEMENTS OF
 STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
  CommonCommon











Stock


CommonStock


Common


Common





Eddie


StockEddie


Stock


Stock


Common


Bauer,


Eddie











AccumulatedBauer,


Eddie


DFS,


Stock


Holdings


Bauer,








Retained


OtherInc.


Bauer,


Inc.


DFS,


Inc.


Holdings





Additional


Earnings


Comprehensive(# of


Inc.


(# of


Inc.


(# of


Inc.


Treasury


Paid-In


(Accumulated


IncomeShares)


($)


Shares)


($)


Shares)


($)


Stock


Capital


Deficit)


(Loss)


Total($ in thousands)PredecessorBalances at January 3, 2004


5,000


$
500



1,000


$
100














$
261,595


$
(12,227
)

$
(1,955
)

$
248,013Comprehensive Income:Net income


































43,664







43,664Foreign currency translation
    adjustment, net of income taxes of $557






































714



714Total comprehensive income










































44,378PredecessorBalances at January 1, 2005


5,000


$
500



1,000


$
100














$
261,595


$
31,437


$
(1,241
)

$
292,391Comprehensive Loss:Net loss


































(46,643
)






(46,643
)Foreign currency translation
    adjustments, net of income taxes of $126






































97



97Total comprehensive loss










































(46,546
)PredecessorBalances at July 2, 2005


5,000


$
500



1,000


$
100














$
261,595


$
(15,206
)

$
(1,144
)

$
245,845Gain on discharge of liabilities


































107,559







107,559Recapitalization and fresh start
    adjustments


(5,000
)


(500
)


(1,000
)


(100
)


30,000



300







303,005



(92,353
)


1,144



211,496SuccessorBalances at July 2, 2005


















30,000


$
300






$
564,600










$
564,900Comprehensive Loss:Net loss


































(22,788
)






(22,788
)Additional minimum pension
    liability, net of income taxes of ($179)






































(282
)


(282
)Foreign currency translation
    adjustment, net of income taxes of ($91)






































(258
)


(258
)Total comprehensive loss










































(23,328
)Stock based compensation expense






























3,605











3,605Treasury stock purchased


















(8
)






(157
)














(157
) 88




---



##### Table of Contents



CommonCommon











Stock


CommonStock


Common


Common





Eddie


StockEddie


Stock


Stock


Common


Bauer,


Eddie











AccumulatedBauer,


Eddie


DFS,


Stock


Holdings


Bauer,








Retained


OtherInc.


Bauer,


Inc.


DFS,


Inc.


Holdings





Additional


Earnings


Comprehensive(# of


Inc.


(# of


Inc.


(# of


Inc.


Treasury


Paid-In


(Accumulated


IncomeShares)


($)


Shares)


($)


Shares)


($)


Stock


Capital


Deficit)


(Loss)


Total($ in thousands)SuccessorBalances at December 31, 2005


















29,992


$
300


$
(157
)

$
568,205


$
(22,788
)

$
(540
)

$
545,020Comprehensive Loss:Net loss


































(211,983
)






(211,983
)Unrecognized obligations related to
    pension and post-retirement plans, net of income taxes of $1,401






































2,281



2,281Reversal of additional minimum
    pension liability, net of income taxes of $179






































282



282Foreign currency translation
    adjustment, net of income taxes of $91






































258



258Fair value adjustments of cash flow
    hedge, net of income taxes of $358






































583



583Total comprehensive loss










































(208,579
)Shares issued for RSU awards


















318



3







(3
)










Stock based compensation expense






























10,200











10,200SuccessorBalances at December 30, 2006


















30,310


$
303


$
(157
)

$
578,402


$
(234,771
)

$
2,864


$
346,641    89




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  CONSOLIDATED
    AND COMBINED STATEMENTS OF CASH FLOWS
  Successor Six



Predecessor SixSuccessor


Months Ended



Months Ended


PredecessorFiscal 2006


December 31, 2005



July 2, 2005


Fiscal 2004($ in thousands)Cash flows from operating
    activities:Net income (loss)

$
(211,983
)

$
(22,788
)


$
60,916


$
43,664Adjustments to reconcile net
    income (loss) to net cash provided from operating activities:Reorganization costs and expenses,
    net











(93,873
)


26,871Net cash used for reorganization
    items











(9,702
)


(20,222
)Reorganization items non-cash











(103,575
)


6,649(Gain) loss on disposals of
    property and equipment


1,057



19




(388
)


2,163Impairment of property and
    equipment


3,451



2,536








952Equity in (earnings) losses of
    foreign joint ventures


3,413



(174
)



95



(3,590
)Depreciation and amortization


55,494



26,589




16,171



41,142Impairment of indefinite-lived
    intangible assets


117,584



40,000








Stock-based compensation expense


10,200



3,605








Other non-cash income


(2,257
)


(1,661
)







Deferred income taxes


58,487



8,093




4,168



6,797Changes in operating assets and
    liabilities:Accounts receivable


1,057



(1,884
)



5,446



1,567Inventories


(11,574
)


(6,464
)



4,783



(8,433
)Prepaid expenses


(1,011
)


78




(169
)


4,008Current receivables from
    securitization interests


115,624



19,898








Other assets


(2,110
)


1,049




(3,103
)


802Accounts payable


5,524



6,745




708



6,752Liabilities subject to compromise











(17,372
)


159Accrued expenses


1,385



10,674




(13,866
)


293Current liabilities related to
    securitization note


(104,061
)


(17,908
)







Pension and other post-retirement
    liabilities


(1,273
)


597








(211
)Deferred rent and unfavorable
    lease obligations


10,919



6,059




(8,096
)


(8,796
)Operating cash flows related to
    discontinued operations


498



8,075




8,911



270Net cash provided by (used in)
    operating activities


50,424



83,138




(45,371
)


94,188 90




---



##### Table of Contents



Successor Six



Predecessor SixSuccessor


Months Ended



Months Ended


PredecessorFiscal 2006


December 31, 2005



July 2, 2005


Fiscal 2004($ in thousands)Cash flows from investing
    activities:Capital expenditures from
    continuing operations


(45,814
)


(30,214
)



(8,641
)


(13,906
)Capital proceeds (expenditures)
    from discontinued operations






320




(944
)


(746
)Proceeds from sale of capital
    assets in conjunction with reorganization















55,337Distribution from foreign joint
    ventures


362








300



Net cash provided by (used in)
    investing activities


(45,452
)


(29,894
)



(9,285
)


40,685Cash flows from financing
    activities:Repayments of long-term debt


(24,000
)


(1,500
)







Treasury stock purchased






(157
)







Change in due to/from Spiegel











65,727



(132,991
)Change in bank overdraft from
    continuing operations


(2,107
)


4,525




797



(1,015
)Change in bank overdraft from
    discontinued operations






(961
)



(112
)


126Net cash provided by (used in)
    financing activities


(26,107
)


1,907




66,412



(133,880
)Effect of exchange rate changes on
    cash


123



(1,328
)



74



(555
)Net change in cash and cash
    equivalents


(21,012
)


53,823




11,830



438Cash and cash equivalents at
    beginning of period


74,186



20,363




8,533



8,095Cash and cash equivalents at end
    of period

$
53,174


$
74,186



$
20,363


$
8,533Supplemental disclosures:Cash paid for income taxes

$
3,107


$
1,868



$
46,234


$
29,283Cash paid for interest


27,287



10,671




3,011



360Payments (receipts) made in
    conjunction with Chapter 11:Professional service fees










$
9,702


$
23,373Severance















2,173Interest income















(3,500
)Other, net















(1,824
)    91




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
 ($ in
    thousands except per share amounts, unless otherwise
    noted)
  (1)
    Description
    of Business  www.eddiebauer.com www.eddiebaueroutlet.com.
      (2)  Chapter 11
    Bankruptcy Proceedings
  Confirmation
    of Plan of Reorganization
   92




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Discharge
    of Liabilities and Equity Interests
    Chapter 11
    Bankruptcy Proceedings
    and/or
  (3)  Basis
    of Presentation
  Successor
    Entity
  90-7, Financial Reporting by Entities in Reorganization under the
    Bankruptcy Code,
 93




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Predecessor
    Entity
  Push Down
    Basis of Accounting Required in Certain Limited Circumstances, Allocation of
    Expenses and Related Disclosure in Financial Statements of
    Subsidiaries, Divisions or Lesser Business Components of Another
    Entity,
  SOP 90-7
  Going
    Concern Consideration
   94




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
        Discontinued
    Operations
    (4)  Summary
    of Significant Accounting Policies
  (a)
    Basis
    of Combination and Consolidation    (b)
    Fiscal
    Year  52-week 52-week 52-week
  (c)
    Seasonality   95




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    (d)
    Use of
    Estimates    (e)
    Segments  Disclosures about Segments
    of an Enterprise and Related Information,
    (f)
    Revenue
    Recognition   96




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    (g)
    Cash
    and cash equivalents    (h)
    Accounts
    Receivable    (i)
    Inventories    (j)
    Advertising
    Costs  SOP 93-7, Reporting on Advertising Costs (SOP 93-7). SOP 93-7
  (k)
    Store
    Preopening Costs   97




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  (l)
    Gift
    Certificate Liability    (m)
    Customer
    Loyalty Programs    (n)
    Software
    Development Costs    (o)
    Property
    and Equipment     98




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  (p)
    Intangible
    Assets  Goodwill and Other Intangible Assets
    (q)
    Investments    (r)
    Deferred
    Financing Costs    (s)
    Income
    Taxes  Accounting
    for Income Taxes
  (t)
    Foreign
    Currency Translation and Exchange Rates   99




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    (u)
    Comprehensive
    Income (Loss)    (v)
    Impairment
    of Long-Lived Assets and Store Closing Costs  Accounting for the
    Impairment of Long-Lived Assets
  Accounting for Costs Associated with Exit or Disposal
    Activities SOP 90-7
  (w)
    Insurance/Self-Insurance    (x)
    Operating
    leases, Deferred rent obligations and Unfavorable lease
    obligations  and/or
 100




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
      SOP 90-7 Business Combinations
    (y)
    Guarantees  Guarantors Accounting
    and Disclosure Requirements for Guarantees of the Indebtedness
    of Others,
  (z)
    Derivative
    Instruments  Derivative Instruments and Hedging
    Activities
 101




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
      (aa)  Stock-Based
    Compensation Expense
  Share-Based Payment Accounting for Stock-Based
    Compensation Accounting for Stock Issued to Employees
  (bb)  SAC
    Securitization Interest Asset and Related Promissory
    Note Obligation
    Accounting for Transfers and Servicing of
    Financial Assets and Extinguishment of Liabilities,
 102




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  (cc)  Correction
    of Immaterial Error Related to Prior Periods
    Materiality Considering the Effects of Prior Year Misstatements when
    Quantifying Misstatements in Current Year Financial Statements
  (dd)  Recent
    Accounting Pronouncements
  FAS 158-1, Conforming Amendments to the Illustrations in FASB Statements
    No. 87, No. 88 and No. 106 and to the Related
    Staff Implementation Guides FAS 158-1). FAS 158-1 FAS 158-1 FAS 158-1
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Amendment of FASB Staff Position
    FAS 123(R)-1 Classification and Measurement of Freestanding Financial
    Instruments Originally Issued in Exchange for Employee Services
    under FASB Statement No. 123(R).
 103




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans (an amendment of FASB Statements
    No. 87, 88, 106, and 132R)
  Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
  Fair Value Measurements
  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109 Accounting for Income Taxes
  No. 06-03, How Taxes Collected From Customers and Remitted to
    Governmental Authorities Should Be Presented in the Income
    Statement (That Is, Gross Versus Net Presentation)
 104




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  06-03
  Accounting for Servicing of Financial Assets Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities
  Classification of Options and Similar Instruments Issued as
    Employee Compensation That Allow for Cash Settlement upon the
    Occurrence of a Contingent Event
  Accounting for Certain Hybrid Financial
    Instruments  an amendment of FASB Statements
    No. 133 and 140 Accounting for
    Derivative Instruments and Hedging Activities Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities.
 105




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
   (5)     Discontinued
    Operations
      Successor



PredecessorSuccessor


Six Months Ended



Six Months Ended


Predecessor2006


December 31, 2005



July 2, 2005


2004Total revenue

$
(21
)

$
13,890



$
39,177


$
75,355Income (loss) before taxes


(534
)


(1,440
)



(4,347
)


4,727Income tax (benefit) expense











(1,686
)


1,834Net income (loss)


(534
)


(1,440
)



(2,661
)


2,893     SuccessorDecember 31, 2005Cash

$
Receivables, net


Inventory


Other current assets


498Total current assets

$
498   (6)     Earnings
    per Share
   106




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
     SuccessorSuccessor


Six Months EndedFiscal 2006


December 31, 2005Loss from continuing operations

$
(211,449
)

$
(21,348
)Loss from discontinued operations


(534
)


(1,440
)Net loss

$
(211,983
)

$
(22,788
)Weighted average common shares
    outstanding


30,012,896



29,995,092Net effect of dilutive stock
    options(a)






Weighted average common shares and
    equivalents outstanding


30,012,896



29,995,092Income (loss) per basic share:Loss from continuing operations

$
(7.04
)

$
(0.71
)Loss from discontinued operations


(0.02
)


(0.05
)Net loss

$
(7.06
)

$
(0.76
)Income (loss) per diluted share:Loss from continuing operations

$
(7.04
)

$
(0.71
)Loss from discontinued operations


(0.02
)


(0.05
)Net loss

$
(7.06
)

$
(0.76
)     (a)
    
    As of December 30, 2006 and December 31, 2005, there
    were 590,375 and 651,668, respectively, Eddie Bauer common stock
    options and 603,533 and 1,003,515, respectively, restricted
    stock units outstanding that were antidilutive and therefore
    were excluded from the calculation of diluted earnings per share.  (7)     Intangible
    Assets
  Carrying
    Values of Intangible Assets and Amortization
    Expense
    Successor as of December 30, 2006Gross Carrying


AccumulatedUseful Life


Amount


AmortizationIntangible assets subject to
    amortization:Customer lists


3.5 years


$
9,000


$
(5,530
)Licensing agreements


6 years


$
35,000


$
(8,750
)Intangible assets not subject to
    amortization:Trademarks


n/a


$
185,000



n/aGoodwill


n/a


$
114,765



n/a   107




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Successor as of December 31, 2005Gross Carrying


AccumulatedUseful Life


Amount


AmortizationIntangible assets subject to
    amortization:Customer lists


3.5 years


$
9,000


$
(1,994
)Licensing agreements


6 years


$
35,000


$
(2,917
)Intangible assets not subject to
    amortization:Trademarks


n/a


$
185,000



n/aGoodwill


n/a


$
220,481



n/a     Goodwill balance as of
    January 1, 2005

$
76,601Net impact of fresh start
    adjustments recorded as of July 2, 2005


143,880Goodwill balance as of
    December 31, 2005

$
220,481Impairment charge recorded during
    three months ended September 30, 2006


(117,584
)Goodwill balance as of
    September 30, 2006

$
102,897Adjustment to goodwill balance
    recorded as of December 30, 2006 (see further discussion
    below and in Note 4 (cc))


11,868Goodwill balance as of
    December 30, 2006

$
114,765       Estimated amortization expense for
    fiscal years:2007

$
8,0522008

$
7,0852009

$
5,8332010

$
5,8332011

$
2,917$
29,720   Impairment
    Charges of Indefinite-Lived Intangible Assets
     108




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
             109




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    (8)  Investments
    in Foreign Joint Ventures
         110




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
        Eddie Bauer


Eddie BauerJapan


GermanyAccounts receivable:December 30, 2006 (Successor)

$
1,521


$
122December 31, 2005 (Successor)


2,416



1,314Investment:December 30, 2006 (Successor)

$
12,855


$
3,142December 31, 2005 (Successor)


12,493



5,163Royalty income:2006 (Successor)

$
4,647


$
1,979Six months ended December 31,
    2005 (Successor)


2,082



1,012Six months ended July 2, 2005
    (Predecessor)


2,021



9852004 (Predecessor)


3,803



2,535     Eddie Bauer


Eddie BauerJapan


GermanyAs of November 30, 2006:Current assets

$
42,928


$
20,436Total assets


66,462



23,842Current liabilities


35,872



18,649Total liabilities


35,872



18,649Total partners capital


30,589



5,193As of November 30, 2005:Current assets

$
35,886


$
21,795Total assets


60,639



25,467Current liabilities


31,257



12,559Total liabilities


31,257



12,559Total partners capital


29,382



12,908  111




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Eddie Bauer


Eddie BauerJapan


GermanyTwelve months ended
    November 30, 2006:Net revenue

$
128,770


$
60,079Gross margin


79,356



30,088Net income (loss)


2,761



(8,655
)Twelve months ended
    November 30, 2005:Net revenue (Restated)

$
123,981


$
64,696Gross margin


76,595



32,616Net income (loss)


2,077



(2,380
)Twelve months ended
    November 30, 2004:Net revenue (Restated)

$
118,175


$
75,790Gross margin


73,049



38,399Net income


1,954



6,115     (9)  SAC
    and FSAC Securitization Interests and Related Eddie Bauer
    Holdings Promissory Note
      FSAC
    Securitization Interest
   112




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    SAC
    Securitization Interest
            SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a
    Transfer, (SOP 03-3). SOP 03-3,
 113




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
      Successor


SuccessorAt


AtDecember 30,


December 31,2006


2005Assets:Financing receivables 
    current(a)

$
45,978


$
Current receivables from
    securitization interests






62,907Non-current receivables from
    securitization interests






76,434Total Assets

$
45,978


$
139,341Liabilities:Current liabilities related to
    securitization note

$
41,380


$
56,616Non-current liabilities related to
    securitization note






68,791Total Liabilities

$
41,380


$
125,407     (a)
    
    No amounts have been recorded as an allowance for uncollectible
    accounts as of December 30, 2006.    SOP 03-3),
  Accretable Yield:Cash flows expected to be
    collected as of acquisition date

$
50,158Less: Carrying value as of
    acquisition date


45,978Accretable Yield as of acquisition
    date

$
4,180Nonaccretable
    Difference:Contractually required payments as
    of acquisition date

$
150,180Less: Cash flows expected to be
    collected as of acquisition date


50,158Nonaccretable difference as of
    acquisition date

$
100,022  114




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    SuccessorSuccessor


Six Months Ended2006


December 31, 2005Statement of
    Operations:Accretion income related to
    receivables from securitization interests

$
17,898


$
8,724Accretion expense related to
    liabilities from securitization interests


(16,107
)


(7,851
)Net accretion income recorded in
    Other income

$
1,791


$
873   (10)  Debt
  Senior
    Secured Revolving Credit Facility
        
    LIBOR plus 1.25% if the average aggregate outstanding (based
    upon the preceding calendar month) is less than
    $75 million; or
    LIBOR plus 1.50% if the average aggregate outstanding is greater
    than or equal to $75 million.     115




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##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Senior
    Secured Term Loan
        time-to-time
 116




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
      12-month
  
    5.25 to 1.00 for the fiscal quarter ending December 31,
    2006;
    4.00 to 1.00 for the fiscal quarter ending March 31, 2007;
    2.50 to 1.00 for the next three fiscal quarters; and
    thereafter being reduced on a graduated basis to 1.50 to 1.00 at
    March 31, 2009.  12-month
  
    0.95 to 1.00 for the fiscal quarter ending December 31,
    2006;
    0.975 to 1.00 for the fiscal quarter ending March 31,
    2007; and
    thereafter increasing to 1.50 to 1.00 for the quarters ending
    June 30, 2007 through June 30, 2011.  Basis of
    Presentation  Going Concern
 117




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
     AmountFiscal:2007

$
8,0002008


3,0002009


3,0002010


3,0002011


257,500Thereafter


$
274,500   (11)  Derivatives
       118




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    (12)  Fair
    Value of Financial Instruments
        (13)  Supplemental
    Financial Information
  Supplemental
    Statement of Operations Information:
  Depreciation
    and amortization:
  Successor



PredecessorSix Months



Six MonthsSuccessor


Ended



Ended


Predecessor2006


December 31, 2005



July 2, 2005


2004Depreciation

$
44,247


$
20,533



$
15,191


$
37,708Amortization of internal-use
    software


1,090



862




980



3,434Amortization of deferred financing
    costs


788



283








Amortization of intangible assets


9,369



4,911








Total depreciation and amortization

$
55,494


$
26,589



$
16,171


$
41,142  119




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Supplemental
    Balance Sheet Information:
  Property
    and equipment:
  Successor


SuccessorDecember 30,


December 31,2006


2005Land

$
7,471


$
7,471Buildings and improvements


50,193



53,749Leasehold improvements


106,035



79,961Fixtures and equipment


60,510



47,406Construction in progress


10,990



12,744235,199



201,331Less accumulated depreciation and
    amortization


(57,855
)


(18,723
)Property and equipment, net

$
177,344


$
182,608   Accrued
    Expenses:
  Successor


SuccessorDecember 30,


December 31,2006


2005Salaries and wages

$
11,901


$
18,407Sales, payroll and business taxes


14,113



13,661Allowance for sales returns


15,566



14,592Gift certificates and other
    customer deposits


46,620



44,696Other accrued expenses


12,260



8,214Total accrued expenses

$
100,460


$
99,570   Other
    Comprehensive Income (Loss):
  Successor


SuccessorDecember 30,


December 31,2006


2005Net foreign currency translation,
    net of tax

$



$
(258
)Fair value adjustment of cash flow
    hedge, net of tax


583



Unrecognized obligations related
    to pension and post-retirement plans, net of tax


2,281



(282
)Total other comprehensive income
    (loss)

$
2,864


$
(540
)  120




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  (14)  Reorganization
    Items
    PredecessorSix MonthsEnded


PredecessorJuly 2,


Fiscal2005


2004Lease rejections

$
2,749


$
(3,708
)Professional service fees


10,705



23,373Asset impairment and other, net


232



8,254Severance and relocation






2,452Interest income






(3,500
)$
13,686


$
26,871            121




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  15-year
        (15)  Income
    Taxes    Successor



PredecessorSix Months



Six MonthsSuccessor


Ended



Ended


Predecessor2006


December 31, 2005



July 2, 2005


2004Current:Federal

$
1,739


$
1,718



$
40,753


$
21,073State






1,774




4,397



3,943Foreign


5,305



3,060




1,084



4,267$
7,044


$
6,552



$
46,234


$
29,283Deferred:Federal

$
49,909


$
7,698



$
2,375


$
5,171State


9,211



1,150




1,173



1,003Foreign


(633
)


(755
)



620



62358,487



8,093




4,168



6,797$
65,531


$
14,645



$
50,402


$
36,080    122




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Successor



PredecessorSix Months



Six MonthsSuccessor


Ended



Ended


Predecessor2006


December 31, 2005



July 2, 2005


2004Income tax expense (benefit) at
    U.S. statutory rate

$
(51,259
)

$
(2,346
)


$
41,434


$
26,896State income taxes (net of Federal
    income tax expense/benefit)


(664
)


1,271




5,058



2,496Rate differential for foreign
    income taxes


343



519




2,184



1,090Increase in valuation allowance


71,265



14,695








Non-deductible goodwill impairment


41,154












Non-deductible securitization
    interest expenses


5,814



1,131








Non-deductible reorganization costs











781



5,344Other nondeductible items


(1,122
)


(625
)



945



254Income tax expense

$
65,531


$
14,645



$
50,402


$
36,080     Successor



PredecessorSix Months



Six MonthsSuccessor


Ended



Ended


Predecessor2006


December 31, 2005



July 2, 2005


2004Income (loss) from
    U.S. operations

$
(158,287
)

$
(13,328
)


$
117,557


$
66,092Income (loss) from foreign
    operations


12,369



6,625




(3,578
)


10,759Income (loss) from continuing
    operations before income tax expense

$
(145,918
)

$
(6,703
)


$
113,979


$
76,851  123




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Successor


SuccessorDecember 30,


December 31,2006


2005Deferred tax assets 
    current:Net operating loss carryforwards

$
9,000


$
Allowance for sales returns


3,412



3,310Accrued vacation


2,018



2,030Reserve for store closings


1,339



Deferred revenue


1,580



1,450Other


1,411



2,711Subtotal


18,760



9,501Less: Valuation allowance


(7,250
)


(1,207
)Total deferred tax
    assets  current


11,510



8,294Deferred tax
    liabilities  current:Prepaid expenses


(2,105
)


(2,224
)Capitalized inventory costs


(6,760
)


(3,020
)Other


(300
)


(305
)Total deferred tax
    liabilities  current


(9,165
)


(5,549
)Net deferred tax
    assets  current

$
2,345


$
2,745Deferred tax assets 
    noncurrent:Net operating loss carryforwards

$
180,137


$
247,507Deferred rent obligations/
    Unfavorable lease obligations, net


10,473



6,570Pension and other post-retirement
    benefit liabilities


6,180



8,188Other


6,201



4,503Subtotal

$
202,991


$
266,768Less: Valuation allowance


(77,590
)


(33,846
)Total deferred tax
    assets  non-current

$
125,401


$
232,922Deferred tax
    liabilities  noncurrent:Other intangible assets, net

$
(81,683
)

$
(86,894
)Property and equipment, net


(9,201
)


Receivables related to
    securitization interests


(17,605
)


(54,032
)Equity investments in foreign
    joint ventures


(942
)


(3,846
)Total deferred tax
    liabilities  noncurrent


(109,431
)


(144,772
)Net deferred tax
    assets  noncurrent

$
15,970


$
88,150    124




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
         125




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
           (16)  Employee
    Benefit Plans
   126




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
   401(k)
    Savings Plans and Spiegel Group Value in Partnership Profit
    Sharing
    Post-retirement
    Healthcare and Life Insurance Plans
     127




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Before Application of





After Application ofSFAS 158


Adjustments


SFAS 158Deferred income taxes






(1,030
)


(1,030
)Total assets

$



$
(1,030
)

$
(1,030
)Accrued benefit
    liability  current


654







654Pension and other post-retirement
    benefit liabilities


10,452



(2,707
)


7,745Total liabilities

$
11,106


$
(2,707
)

$
8,399Other comprehensive income (loss),
    net of tax






1,677



1,677Total stockholders equity

$



$
1,677


$
1,677Total liabilities and
    stockholders equity

$
11,106


$
(1,030
)

$
10,076   Successor


SuccessorAs of


As ofDecember 30,


December 31,2006


2005Funded Status:Accumulated benefit obligation

$
8,399


$
10,370Fair value of plan assets






Funded status

$
(8,399
)

$
(10,370
)Unrecognized net actuarial
    (gain)/loss






(592
)Unrecognized net prior service cost






Accrued benefit cost

$
(8,399
)

$
(10,962
)   Successor


SuccessorAs of


As ofDecember 30,


December 31,2006


2005Amounts recognized in the
    balance sheet consist of:Prepaid benefit cost

$



$
Accrued benefit
    liability  current


(654
)


Accrued benefit
    liability  noncurrent


(7,745
)


(10,962
)Accumulated other comprehensive
    income


(2,707
)


Net amount recognized

$
(11,106
)

$
(10,962
)   128




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Successor


Successor



PredecessorJanuary 1, 2006


July 3, 2005



January 1, 2005to


to



toDecember 30, 2006


December 31, 2005



July 2, 2005Projected Benefit
    Obligation:Benefit obligation as of beginning
    of period

$
10,370


$
10,825



$
2,716Service cost


247



175




123Interest cost


472



274




88Participant contributions


610








Benefits paid


(1,084
)


(312
)



(85
)Actuarial (gain)/loss


(1,574
)


(592
)



1,231Plan amendments/curtailment gain


(566
)







Adjustment to include former
    Spiegel employees











6,752Benefit obligation as of end of
    period

$
8,475


$
10,370



$
10,825     Successor


Successor



PredecessorJanuary 1, 2006


July 3, 2005



January 1, 2005to


to



toDecember 30, 2006


December 31, 2005



July 2, 2005Fair Value of Plan
    Assets:Fair value of plan assets as of
    beginning of period

$



$




$
Employer contributions


474



312




85Participant contributions


610








Benefits paid


(1,084
)


(312
)



(85
)Fair value of plan assets as of
    end of period

$



$




$
   SuccessorSix Months



PredecessorEnded



Six MonthsSuccessor


December 31,



Ended July 2,


Predecessor2006


2005



2005


2004Net benefit cost:Service cost

$
247


$
175



$
123


$
195Interest cost


472



274




88



160Amortization of priorservice cost


(71
)







(47
)


(128
)Recognized net actuarial
    (gain)/loss


(80
)







17



15Curtailment gain















(298
)Total expense (benefit)

$
568


$
449



$
181


$
(56
)   129




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  SuccessorSix MonthsEndedSuccessor


December 31,2006


2005Other changes in Plan Assets
    and Benefit Obligations recognized in Other Comprehensive Income
    (Loss):Transition obligation

$




n/aPrior service cost (credit)


(495
)


n/aNet actuarial (gain) loss


(2,212
)


n/aAmortization of net transition
    obligation (asset)






n/aAmortization of prior service cost






n/aAmortization of net actuarial
    (gain) loss






n/aTotal recognized in other
    comprehensive income (loss)

$
(2,707
)

$
     Assumptions:
    Contributions:
    Estimated
    Future Benefit Payments:
    Fiscal2007

$
6542008


5972009


6252010


6062011


6082012-2016


3,067$
6,157  130




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Pension
    Plan
      Before Application of





After Application ofSFAS 158


Adjustments


SFAS 158Deferred income taxes






(370
)


(370
)Total assets

$



$
(370
)

$
(370
)Pension and other post-retirement
    benefit liabilities


8,560



(974
)


7,586Total liabilities

$
8,560


$
(974
)

$
7,586Other comprehensive income (loss),
    net of tax






604



604Total stockholders equity

$



$
604


$
604Total liabilities and
    stockholders equity

$
8,560


$
(370
)

$
8,190   Successor


SuccessorDecember 30,


December 31,2006


2005Funded Status:Projected benefit obligation

$
52,056


$
55,717Fair value of plan assets


44,470



45,933Funded status

$
(7,586
)

$
(9,784
)Unrecognized net actuarial
    (gain)/loss


(974
)


461Accrued pension cost

$
(8,560
)

$
(9,323
)   131




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Successor


SuccessorDecember 30.


December 31,2006


2005Amounts recognized in the
    balance sheet consist of:Accrued benefit
    liability  current liabilities

$



$
Accrued benefit
    liability  non-current liabilities


(7,586
)


(9,784
)Accumulated other comprehensive
    income


(974
)


461Net amount recognized

$
(8,560
)

$
(9,323
)   SuccessorSix MonthsEndedSuccessor


December 31,2006


2005Projected Benefit
    Obligation:Projected benefit obligation at
    beginning of period

$
55,717


$
55,068Service cost






Interest cost


2,924



1,546Benefits paid


(5,057
)


(1,265
)Actuarial (gain)/loss


(1,528
)


368Projected benefit obligation at
    end of period

$
52,056


$
55,717   SuccessorSix MonthsEndedSuccessor


December 31,2006


2005Fair value of Plan
    Assets:Fair value of plan assets at
    beginning of period

$
45,933


$
45,416Actual return on plan assets


3,594



1,782Employer contributions






Benefits paid


(5,057
)


(1,265
)Fair value of plan assets at end
    of period

$
44,470


$
45,933   SuccessorSix MonthsEndedSuccessor


December 31,2006


2005Net periodic pension
    cost:Service cost

$



$
Interest cost


2,924



1,546Expected return on plan assets


(3,687
)


(1,875
)Total expense (benefit)

$
(763
)

$
(329
)   132




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  SuccessorSix MonthsEndedSuccessor


December 31,2006


2005Other changes in Plan Assets
    and Benefit Obligations recognized in Other Comprehensive Income
    (Loss):Transition obligation

$




n/aPrior service cost (credit)






n/aNet actuarial (gain) loss


(974
)


n/aAmortization of net transition
    obligation (asset)






n/aAmortization of prior service cost






n/aAmortization of net actuarial
    (gain) loss






n/aTotal recognized in other
    comprehensive income (loss)

$
(974
)

$
     Assumptions:
         133




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Plan
    Assets:
    As of


As ofSeptember 30,


September 30,2006


2005Asset Category:Equity securities


61
%


61
%Debt securities


38
%


38
%Real estate


0
%


0
%Other


1
%


1
%Total


100
%


100
%     Contributions:
    Estimated
    Future Benefit Payments:
    Fiscal:2007

$
5,0792008


4,8852009


4,7802010


4,6582011


4,5252012-2016


20,094   (17)     Stock
    Based Compensation
     134




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
         135




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    SuccessorSuccessor


Six Months Ended2006


December 31, 2005Risk-free interest rate


4.47
%


4.52
%Expected term (years)


6.25



5.8Expected volatility


46
%


46
%Dividend yield


0.0
%


0.0
%Weighted-average fair value

$
7.34


$
11.57Forfeiture rate


12.5
%


5
%       Successor2006WeightedAverageExerciseShares


PriceOutstanding at beginning of period


651,668


$
23.37Awards granted


5,775


$
14.35Awards forfeited


(67,068
)

$
23.37Awards exercised






n/aOutstanding at end of year


590,375


$
23.28Vested at end of year


287,463


$
23.37Exercisable at end of year


287,463


$
23.37   SuccessorSix Months EndedDecember 31, 2005WeightedAverageExerciseShares


PriceOutstanding at beginning of period






n/aAwards granted


656,000


$
23.37Awards forfeited


(4,332
)

$
23.37Awards exercised






n/aOutstanding at end of year


651,668


$
23.37Vested at end of year


129,977


$
23.37Exercisable at end of year


129,977


$
23.37  136




---



##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    OutstandingNumber

Weighted

Weighted Averagedof

Average

Remaining Years ofRange of Exercise Prices

Options

Exercise Price

Contractual Life$14.35



5,775



$14.35



9.1$23.37



584,600



$23.37



8.8   ExercisableNumber

Weighted

Weighted AveragedRange of

of

Average

Remaining Years ofExercise Prices

Options

Exercise Price

Contractual Life$23.37



287,463



$23.37



8.8     OutstandingNumber

Weighted

Weighted AveragedRange of

of

Average

Remaining Years ofExercise Prices

Options

Exercise Price

Contractual Life$23.37



651,668



$23.37



9.8   ExercisableNumber

Weighted

Weighted AveragedRange of

of

Average

Remaining Years ofExercise Prices

Options

Exercise Price

Contractual Life$23.37



129,977



$23.37



9.8       Successor2006WeightedAverageRestricted


Grant-DateStock Units


Fair ValueUnvested at beginning of period


1,003,515


$
23.37Granted


15,765


$
14.35Vested


(318,247
)

$
23.37Forfeited


(97,500
)

$
23.37Outstanding at end of year


603,533


$
23.13  137




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##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Successor Six MonthsEnded December 31, 2005WeightedAverageRestricted


Grant-DateStock Units


Fair ValueUnvested at beginning of period






n/aGranted


1,014,240


$
23.37Vested






n/aForfeited


(10,725
)

$
23.37Outstanding at end of year


1,003,515


$
23.37     (18)  Affiliated
    Company Transactions
       138




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##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
              (19)  Related
    Party Transactions
      PredecessorSix Months Ended


PredecessorJuly 2, 2005


2004EBI

$
147,780



70.1%


$
265,682



69.0%EBI Americas


30,412



14.4%



64,884



16.9%  139




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##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
        (20)  Commitments
    and Contingencies
  Lease
    Commitments
      Successor



PredecessorSuccessor


Six Months Ended



Six Months Ended


Predecessor2006


December 31, 2005



July 2, 2005


2004Minimum rent  stores

$
74,197


$
37,763



$
36,607


$
73,339Percentage rent  stores


253



24




13



(488
)Minimum rent  other


2,985



1,882




(2,523
)


(6,737
)$
77,435


$
39,669



$
34,097


$
66,114  140




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##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    AmountFiscal:2007

$
69,2332008


62,1222009


56,7222010


48,3462011


38,477Thereafter


149,684$
424,584   Litigation
        Professional
    Service Fees related to Bankruptcy Proceedings
   141




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##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
    (21)  Concentrations
    (22)  Quarterly
    Information (Unaudited)
    First


Second


Third


Fourth(a)(c)($ in thousands, except per share data)2005Net sales and other revenues


n/a



n/a


$
217,339


$
376,372Operating income (loss)


n/a



n/a



(10,243
)


12,511Loss from continuing operations


n/a



n/a



(9,706
)


(11,642
)Loss from discontinued operations


n/a



n/a



(287
)


(1,153
)Net loss










(9,993
)


(12,795
)Loss from continuing operations
    per basic and diluted share


n/a



n/a


$
(0.32
)

$
(0.39
)Loss from discontinued operations
    per basic and diluted share


n/a



n/a



(0.01
)


(0.04
)Net loss per basic and diluted
    share


n/a



n/a



(0.33
)


(0.43
)Stock price  Eddie
    Bauer Holdings, Inc.High


n/a



n/a


$
31.50


$
25.00Low


n/a



n/a



22.75



11.50Quarter-end close


n/a



n/a



24.75



15.00   142




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##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  First


Second(c)


Third(b)(c)


Fourth($ in thousands, except per share data)2006Net sales and other revenues

$
194,501


$
225,742


$
211,285


$
381,919Operating income (loss)


(33,780
)


(2,762
)


(134,142
)


52,076Income (loss) from continuing
    operations


(35,037
)


(41,980
)


(197,585
)


63,153Loss from discontinued operations


(534
)










Net income (loss)


(35,571
)


(41,980
)


(197,585
)


63,153Income (loss) from continuing
    operations per basic and diluted share

$
(1.17
)

$
(1.40
)

$
(6.58
)

$
2.11Loss from discontinued operations
    per basic and diluted share


(0.02
)










Net income (loss) per basic and
    diluted share


(1.19
)


(1.40
)


(6.58
)


2.11Stock price  Eddie
    Bauer Holdings, Inc.High

$
16.00


$
15.00


$
15.00


$
11.00Low


11.75



6.00



8.30



6.88Quarter-end close


12.90



11.50



10.75



9.06     (a)
    
    Fourth quarter 2005 includes an impairment charge of $40,000
    related to the Companys trademarks. See further discussion
    in Note 7.(b)
    
    Third quarter 2006 includes an impairment charge of $117,584
    related to the Companys goodwill. See further discussion
    in Note 7.(c)
    
    The Company recorded income tax expense associated with
    increases to its tax valuation allowance of $15,253, $23,462,
    and $52,662 during the fourth quarter of 2005, second quarter of
    2006 and third quarter of 2006, respectively. See further
    discussion in Note 15.  (23)  Subsequent
    Events
  Merger
    Termination Fee
    CEO
    Resignation
   143




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##### Table of Contents



EDDIE
    BAUER HOLDINGS, INC.
  NOTES TO
    CONSOLIDATED AND COMBINED
    FINANCIAL STATEMENTS  (Continued)
  tax-gross-up
 144




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##### Table of Contents



SCHEDULE II
  VALUATION
    AND QUALIFYING ACCOUNTS
  Charged toBeginning


Costs and





EndingBalance


Expenses


Deduction


Balance($ in thousands)Inventory valuation
    allowanceFiscal 2006

$
5,494


$
8,059


$
(9,435
)

$
4,118Six months ended December 31,
    2005


2,286



14,356



(11,148
)


5,494Six months ended July 2, 2005


7,779



787
(b)


(6,280
)


2,286Fiscal 2004


13,622



7,355



(13,198
)


7,779Allowance for sales
    returnsFiscal 2006

$
14,592


$
174,806


$
(173,832
)

$
15,566Six months ended December 31,
    2005


7,641



184,759



(177,808
)


14,592Six months ended July 2, 2005


14,992



80,958



(88,309
)


7,641Fiscal 2004


17,230



177,868



(180,106
)


14,992Deferred tax valuation
    allowanceFiscal 2006

$
35,053


$
71,265


$
(21,478
)(c)

$
84,840Six months ended December 31,
    2005


19,800



15,253







35,053Six months ended July 2, 2005






19,800
(a)






19,800Fiscal 2004














     (a)
    
    Includes $19,800 established in conjunction with the
    Companys adoption of fresh start accounting effective
    July 2, 2005.(b)
    
    Amount is net of a $1,905 increase in fair value of inventory in
    conjunction with the Companys adoption of fresh start
    accounting effective July 2, 2005.(c)
    
    Includes reversal of original amount recorded in conjunction
    with fresh start accounting related to state NOLs (see further
    discussion in Note 15) and $1,678 reduction due to
    immaterial error related to prior periods (see further
    discussion in Note 4 (cc)). 145




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##### Table of Contents



EXHIBIT
    INDEX
  ExhibitNo.

Document2
.1


Modified First Amended Joint Plan
    of Reorganization of Affiliated Debtors pursuant to
    Chapter 11 of the Bankruptcy Code, dated as of May 23,
    2005.(1)3
.1


Certificate of Incorporation of
    Eddie Bauer Holdings, Inc.(1)3
.2


Amended & Restated Bylaws
    of Eddie Bauer Holdings, Inc.(1)4
.1


Article V of the Certificate
    of Incorporation of Eddie Bauer Holdings, Inc., included in
    Exhibit 3.1.(1)10
.1


Term Loan Agreement, dated as of
    June 21, 2005, among Eddie Bauer Holdings, Inc., Eddie
    Bauer, Inc. as Borrower, the Lenders, General Electric Capital
    Corporation as Syndication Agent, Credit Suisse as Documentation
    Agent and JPMorgan Chase Bank, N.A. as Administrative Agent.(1)10
.2


Guarantee and Collateral Agreement
    made by Eddie Bauer Holdings, Inc., Eddie Bauer, Inc. and
    certain of its subsidiaries in favor of JPMorgan Chase Bank,
    N.A. as Administrative Agent, dated June 21, 2005.(1)10
.3


Pledge Agreement, dated as of
    June 21, 2005, by and between Eddie Bauer Holdings, Inc. as
    Pledgor, and Bank of America, N.A. as Agent.(1)10
.4


Pledge Agreement, dated as of
    June 21, 2005, by and between Eddie Bauer, Inc. as Pledgor
    and Bank of America, N.A. as Agent.(1)10
.5


First Amendment, Waiver and
    Agreement, dated as of April 13, 2006, to and under the
    Term Loan Agreement.(1)10
.6


Loan and Security Agreement, dated
    as of June 21, 2005, among the Lenders, Bank of America,
    N.A. as Agent, Banc of America Securities LLC as Sole Lead
    Arranger and Book Manager, Bank of America, N.A. and the CIT
    Group/Business Credit, Inc. as Co-Syndication Agents, GE Capital
    Corporation as Documentation Agent, Eddie Bauer, Inc. as
    Borrower and Eddie Bauer Holdings, Inc., Eddie Bauer Services,
    LLC, Distribution Fulfillment Services, Inc. (DFS) and Eddie
    Bauer Information Technology, LLC as Guarantors.(1)10
.7


Waiver, effective April 14,
    2006, under the Loan and Security Agreement.(1)10
.8


Intercreditor Agreement, dated as
    of June 21, 2005, by and between Bank of America, N.A., as
    agent, JPMorgan Chase Bank, N.A. as administrative agent, Eddie
    Bauer Holdings, Inc., Eddie Bauer, Inc. and certain direct and
    indirect subsidiaries of Eddie Bauer, Inc.(1)10
.9


Settlement Agreement, dated as of
    December 3, 2004, by and among Spiegel, Inc., Newport News,
    Inc., Eddie Bauer, Inc., Spiegel Catalog, Inc., Spiegel Catalog
    Services, LLC, Spiegel Credit Corporation III, Spiegel
    Acceptance Corporation, First Consumers National Bank, Michael
    Crusemann, Horst Hansen, Martin Zaepfel, Michael Otto, Spiegel
    Holdings, Inc., Otto (GmbH & Co KG) and The Bank of New
    York, as Trustee.(1)10
.10
(a)

Joint Venture Agreement, dated
    September 28, 1993, between Eddie Bauer, Inc. and
    Otto-Sumisho Inc.(1)10
.10
(b)

Joint Venture Agreement, dated
    June 6, 1995, by and between Eddie Bauer, Inc.,
    Handelsgesellschaft Heinrich Heine GmbH and Sport-Scheck GmbH.(1)10
.11
(a)

Buying Agency Agreement, dated
    June 29, 2005, by and between Eddie Bauer International
    (Americas), Inc. and Eddie Bauer, Inc.(1)10
.11
(b)

Buying Agency Agreement, dated
    June 29, 2005, by and between Eddie Bauer International,
    Ltd. and Eddie Bauer, Inc.(1)10
.12


Vendor Payment Services Agreement,
    dated June 29, 2005, between Eddie Bauer, Inc. and Otto
    International (Hong Kong) Limited.(1)10
.13


Private Label Credit Card Program
    Agreement, dated May 2, 2003, between World Financial
    Network National Bank, Spiegel, Inc. and Eddie Bauer, Inc.(1)10
.14
(a)

Lease dated August 13, 2004,
    between Eddie Bauer, Inc. and Microsoft Corporation.(1)10
.14
(b)

Lease dated December 14, 2005
    between Lincoln Square Office, LLC and Eddie Bauer, Inc.(1)10
.14
(c)

First Lease Addendum dated
    May 15, 2006 between Lincoln Square Office, LLC and Eddie
    Bauer, Inc.(1)




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##### Table of Contents



ExhibitNo.

Document10
.14
(d)

Lease dated January 23, 2001,
    by and among Plaza Corp Retail Properties, Spiegel Group
    Teleservices  Canada, Inc. and Spiegel, Inc., as
    guarantor, as amended by a First Amendment dated June 18,
    2001 and a Second Amendment dated December 11, 2001.(1)10
.15
(a)

Amended and Restated Employment
    Agreement, dated December 14, 2005, by and between Eddie
    Bauer Holdings, Inc. and Eddie Bauer, Inc., and Fabian
    Mansson.(1)10
.15
(b)

Letter Agreement, dated
    July 12, 2004, by and between Eddie Bauer, Inc. and Kathy
    Boyer.(1)10
.15
(c)

Letter Agreement, dated
    March 11, 2005, by and between Eddie Bauer, Inc. and
    Shelley Milano.(1)10
.16


Eddie Bauer Holdings, Inc. 2005
    Stock Incentive Plan.(1)10
.17


Form of Stock Option Agreement.(1)10
.18


Form of Restricted Stock Unit
    Award Certificate.(1)10
.19


Form of Restricted Stock Award
    Certificate.(1)10
.20


Form of Non-Employee Director
    Stock Option Agreement.(1)10
.21


Form of Non-Employee Director
    Restricted Stock Unit Award Certificate.(1)10
.22


Form of Non-Employee Director
    Restricted Stock Award Certificate.(1)10
.23


Eddie Bauer Holdings, Inc. Senior
    Officer Change in Control Compensation Benefits Plan (amended
    and restated effective June 23, 2006).(2)10
.24


Form of Amended and Restated
    Senior Officer Change in Control Compensation Benefits Plan
    Participation Agreement.(1)10
.25


Eddie Bauer Holdings, Inc.
    Non-Qualified Deferred Compensation Plan.(1)10
.26


Eddie Bauer Holdings, Inc. 2005
    Annual Incentive Plan.(1)10
.27


Eddie Bauer Holdings, Inc. 2006
    Annual Incentive Plan.(1)10
.28


Spiegel Group Severance Plan.(1)10
.29


Form of Indemnification Agreement
    for Directors and Executive Officers of Eddie Bauer Holdings,
    Inc.(1)10
.30


The Spiegel Group Performance
    Incentive Plan  KERP Participants
    2003-2004.(1)10
.31


Eddie Bauer 2004 Bridge Incentive
    Plan.(1)21



Subsidiaries of Eddie Bauer
    Holdings, Inc.31
.1


Rule 13a-14(a)/15-14(a)
    Certification of Chief Executive Officer31
.2


Rule 13a-14(a)/15-14(a)
    Certification of Chief Financial Officer32
.1


Section 1350 Certification of
    Chief Executive Officer32
.2


Section 1350 Certification of
    Chief Financial Officer     (1)
    
    Incorporated by reference to the identically numbered exhibit of
    the companys registration statement on Form 10, SEC
    File
    No. 000-51676.(2)
    
    Incorporated herein by reference to exhibit 10.4 of the
    companys quarterly report on
    Form 10-Q
    filed August 15, 2006.




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##### Table of Contents



SIGNATURES
      
   Interim Chief Executive Officer
      /s/  Howard
    GrossHoward
    Gross

Interim Chief Executive Officer
    and Director
    (Principal executive officer)

Date: March 28, 2007/s/  David
    TaylorDavid
    Taylor

Interim Chief Financial Officer
    (Principal financial and accounting officer)

Date: March 28, 2007/s/  William
    T. EndWilliam
    T. End

Director

Date: March 28, 2007/s/  John
    C. BrouillardJohn
    C. Brouillard

Director

Date: March 28, 2007/s/  Paul
    E. KirincicPaul
    E. Kirincic

Director

Date: March 28, 2007/s/  Kenneth
    M. ReissKenneth
    M. Reiss

Director

Date: March 28, 2007/s/  Laurie
    M. ShahonLaurie
    M. Shahon

Director

Date: March 28, 2007/s/  Edward
    M. StrawEdward
    M. Straw

Director

Date: March 28, 2007/s/  Stephen
    E. WatsonStephen
    E. Watson

Director

Date: March 28, 2007