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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended January 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ___ to ___
 Commission File Nos. 1-8899 and 333-148108
 Claires Stores, Inc.
  Florida
    
    59-0940416(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 3 S.W. 129th Avenue, Pembroke Pines, Florida
    
    33027(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (954) 433-3900
 None
 o þ
 o þ
 þ o
 þ o
 þ
 Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 Item
    
    Page No.PART I.
    
    
    
    
    3Item 1.
    
    Business
    
    
    4Item 1A.
    
    Risk Factors
    
    
    12Item 1B.
    
    Unresolved Staff Comments
    
    
    22Item 2.
    
    Properties
    
    
    22Item 3.
    
    Legal Proceedings
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23PART II
    
    
    
    
    23Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    23Item 6.
    
    Selected Financial Data
    
    
    23Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    24Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 8.
    
    Financial Statements and Supplementary Data
    
    
    46Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    96Item 9A.
    
    Controls and Procedures
    
    
    96Item 9B.
    
    Other Information
    
    
    96PART III.
    
    
    
    
    96Item 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    96Item 11.
    
    Executive Compensation
    
    
    96Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    96Item 13.
    
    Certain Relationships and Related Transactions and Director Independence
    
    
    96Item 14.
    
    Principal Accountant Fees and Services
    
    
    96PART IV.
    
    
    
    
    97Item 15.
    
    Exhibits, Financial Statement Schedules
    
    
    97Signatures
    
    
    
    
    100EX-21.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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PART I.
 Explanatory Notes
        Statement Regarding Forward-Looking Disclosures
  3




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Item 1. Business
 The Company
       4




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
    
    Accessories  includes hair goods, handbags, small leather goods, and other fashion
classifications, like scarves, headwear, attitude glasses, and legwear; seasonal
accessories, like sunglasses, sandals, slippers and cold weather merchandise including
hats, gloves, scarves and boots; as well as cosmetics.
    
    Jewelry  includes earrings, ear piercing, necklaces, bracelets and rings.
    Our Competitive Strengths
 Strong Claires Name Brand Recognition Across the Globe.
 Cost-Efficient Global Sourcing Capabilities and Proven Merchandise Strategy.
 Diversification Across Geographies and Merchandise Categories.
 5




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Compelling Unit Economics.
 Strong and Experienced Senior Management Team.
 Business Strategy
  Recap of Fiscal 2008 Strategies
  Build on Effective Organizational Model
 
    
    Corporate, comprised of senior leaders that set our strategies and supervise our
divisions to help drive results.
Included in Corporate is the Corporate Merchandise function, which includes Fashion, Trend
and Product Innovation, Product Design and Development and RSI. Finance and Other Sales
Support functions provide global oversight and, in some cases, have a direct reporting relationship as well.
 6




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##### Table of Contents




    
    North American Division, our largest group, operates from both Hoffman Estates, IL as
well as Pembroke Pines, FL and has fundamental responsibility for the Claires and Icing
brands in North America from merchandise inception, to delivery, in-store set-up and
execution, to selling and building our brand and connecting with our customers.
    
    European Division, formally established at the time of the Merger in May 2007 under one
leader based in Europe, to better maximize our growth potential in Europe, with similar
operating responsibilities as the North American Division. The Pan-European
Transformation, initiative implemented in Fiscal 2008, centralized our European operations
into our Birmingham, UK offices.
    
    International Group, which is comprised of our Franchise and Joint Venture business,
operates from Hoffman Estates, IL and is dedicated to identifying and fostering
partnerships and providing oversight to these business groups to ensure execution and
integrity of our brand and store concepts.
    
    RSI, our sourcing, buying and logistics subsidiary based in Hong Kong, with
responsibility for coordinating merchandise development, procurement, overseas vendor
relationships and quality control.
 Strengthen our Merchandise Offense.
 
    
    Research and fact gathering for our business in general and specifically across Europe
for our Claires brand and to support our repositioning of Icing in North America
    
    Improve the planning and buying surrounding our merchandise assortments
    
    Create a dynamic merchandising cycle
    
    Develop merchandise relevant to each of our target customer groups
  Implement our Pan European Transformation (PET) Initiatives
 Reposition Icing.
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Focus on Expense Reduction Opportunities.
 Fiscal 2009 Objectives
  Drive Same Store Sales with Commensurate Merchandise Margin.
   Achieve Aggressive Expense Reduction Objectives and Build a Cost Conscious Culture.
  Refine and Strengthen our Merchandise Offense.
 8




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Build on the Established Foundation to Further Develop our Pan-European Business
 Develop our Organization into Top Performers and Execute as a Management Team.
 Stores
  9




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Store Management
   Store Openings, Closings and Future Growth
    10




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Purchasing and Distribution
  Brand Building
  Trademarks and Service Marks
  Information Technology
  Competition
  Seasonality
  Employees
  11




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Item 1A. Risk Factors
 These risks could have a material adverse effect on our business, financial position or results of
operations. The following risk factors may not include all of the important factors that could
affect our business or our industry or that could cause our future financial results to differ
materially from historic or expected results.
 Risks Relating to Current Economic Conditions
 Current economic conditions may adversely impact demand for our merchandise, reduce access to
credit and cause our customers and others with which we do business to suffer financial hardship,
all of which could adversely impact our business, results of operations, financial condition and
cash flows.
   The global economic crisis could have a material adverse effect on our liquidity and capital
resources.
   Risks Relating to Our Company
 Fluctuations in consumer preference may adversely affect the demand for our products and result in
a decline in our sales.
  12




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Advance purchases of our merchandise make us vulnerable to changes in consumer preferences and
pricing shifts and may negatively affect our results of operations.
  A disruption of imports from our foreign suppliers may increase our costs and reduce our supply of
merchandise.
  Fluctuations in foreign currency exchange rates could negatively impact our results of operations.
  Our business depends on the willingness of vendors and service providers to supply us with goods
and services pursuant to customary credit arrangements which may not be available to us in the
future.
  13




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We are continuing to execute our strategy in Europe to centralize certain resources and this
process involves costs and the risk of operational interruption.
  The failure to grow our store base in Europe or expand our international franchising may adversely
affect our business.
   Our cost of doing business could increase as a result of changes in federal, state, local and
international regulations regarding the content of our merchandise.
   14




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Recalls, product liability claims, and government, customer or consumer concerns about product
safety could harm our reputation, increase costs or reduce sales.
  If we are unable to renew or replace our store leases or enter into leases for new stores on
favorable terms, or if any of our current leases are terminated prior to the expiration of their
stated term and we cannot find suitable alternate locations, our growth and profitability could be
adversely harmed.
  Natural disasters or unusually adverse weather conditions or potential emergence of disease or
pandemic could adversely affect our net sales or supply of inventory.
  Information technology systems changes may disrupt our supply of merchandise.
  15




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If we experience a data security breach and confidential customer information is disclosed, we may
be subject to penalties and experience negative publicity, which could affect our customer
relationships and have a material adverse effect on our business.
  Changes in the anticipated seasonal business pattern could adversely affect our sales and profits
and our quarterly results may fluctuate due to a variety of factors.
  A decline in number of people who go to shopping malls, particularly in North America, could reduce
the number of our customers and reduce our net sales.
  Our industry is highly competitive.
  16




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If the Employee Free Choice Act is adopted, it would be easier for our employees to obtain union
representation and our business could be adversely impacted.
  Higher health care costs and labor costs could adversely affect our business.
  Our profitability could be adversely affected by high petroleum prices.
  The possibility of war and acts of terrorism could disrupt our information or distribution systems
and increase our costs of doing business.
  We depend on our key personnel.
  Litigation matters incidental to our business could be adversely determined against us.
  17




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Goodwill, intangible assets, our investment in joint venture and long-lived assets comprise a
significant portion of our total assets. We must test these assets for impairment at least
annually; which could result in a material, non-cash write-down of goodwill, intangible and other
assets and could have a material adverse impact on our results of operations.
  There are factors that can affect our provision for income taxes.
  If our independent manufacturers or franchisees or joint venture partners do not use ethical
business practices or comply with applicable laws and regulations, our brand name could be harmed
due to negative publicity and our results of operations could be adversely affected.
  We rely on third parties to distribute our merchandise and if these third parties do not adequately
perform this function, our business would be disrupted.
  We depend on single North American and single European distribution facilities.
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We may be unable to protect our tradenames and other intellectual property rights.
  Our success depends on our ability to maintain the value of our brands.
  We may be unable to rely on liability indemnities given by foreign vendors which could adversely
affect our financial results.
  We are indirectly owned and controlled by Apollo, a private equity firm, and its interests as an
equity holder may conflict with the interest of our creditors.
  19




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Risks Relating to Our Indebtedness
 Our substantial leverage could adversely affect our ability to raise additional capital to fund our
operations, limit our ability to react to changes in the economy or our industry and prevent us
from meeting our obligations under the Notes and Credit Facility.
   
    
    increasing our vulnerability to adverse economic, industry or competitive developments;
    
    requiring a substantial portion of cash flow from operations to be dedicated to the
payment of principal and interest on our indebtedness, therefore reducing our ability to
use our cash flow to fund our operations, capital expenditures and future business
opportunities;
    
    exposing us to the risk of increased interest rates because certain of our borrowings,
including borrowings under our Credit Facility, will be at variable rates of interest;
    
    making it more difficult for us to satisfy our obligations with respect to our
indebtedness, including the Notes, and any failure to comply with the obligations of any of
our debt instruments, including restrictive covenants and borrowing conditions, could
result in an event of default under the indentures governing the Notes and the agreements
governing such other indebtedness;
    
    restricting us from making strategic acquisitions or causing us to make non-strategic
divestitures;
    
    limiting our ability to obtain additional financing for working capital, capital
expenditures, product development, debt service requirements, acquisitions and general
corporate or other purposes; and
    
    limiting our flexibility in planning for, or reacting to, changes in our business or
market conditions and placing us at a competitive disadvantage compared to our competitors
who are less highly leveraged and who therefore, may be able to take advantage of
opportunities that our leverage prevents us from exploiting.
 Despite our high indebtedness level, we and our subsidiaries are still able to incur significant
additional amounts of debt, which could further exacerbate the risks associated with our
substantial indebtedness.
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Our debt agreements contain restrictions that limit our flexibility in operating our business.
  
    
    incur additional indebtedness or issue certain preferred shares;
    
    pay dividends on, repurchase or make distributions in respect of our capital stock or
make other restricted payments;
    
    make certain investments;
    
    sell certain assets;
    
    create liens;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
and
    
    enter into certain transactions with our affiliates.
  We may not be able to generate sufficient cash to service all of our indebtedness, and may be
forced to take other actions to satisfy our obligations under our indebtedness, which may not be
successful.
   Repayment of our debt is dependent on cash flow generated by our subsidiaries.
  21




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To service our debt obligations, we may need to increase the portion of the income of our foreign
subsidiaries that is expected to be remitted to the United States, which could increase our income
tax expense.
  If we default on our obligations to pay our other indebtedness, the holders of our debt could
exercise rights that could have a material effect on us.
  
    
    the holders of such indebtedness may be able to cause all of our available cash flow to
be used to pay such indebtedness and, in any event, could elect to declare all the funds
borrowed thereunder to be due and payable, together with accrued and unpaid interest;
    
    the lenders under our Credit Facility could elect to terminate their commitments
thereunder, cease making further loans and institute foreclosure proceedings against our
assets; and
    
    we could be forced into bankruptcy or liquidation.
 
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   22




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
  Holders
  Dividends
  
 Item 6. Selected Financial Data
  23




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Successor Entity
    
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    
    Feb. 4, 2007
    
    
    Fiscal Year Ended
    
    
    Fiscal Year Ended
    
    
    Fiscal Year EndedEnded
    
    
    Through
    
    
    
    Through
    
    
    February 3,
    
    
    January 28,
    
    
    January 29,Jan 31, 2009
    
    
    Feb. 2, 2008
    
    
    
    May 28, 2007
    
    
    2007 (1)
    
    
    2006 (1)
    
    
    2005 (1)(In thousands, except for ratios and store data)Statement of Operations Data:Net sales
    
    $
    1,412,960
    
    
    $
    1,085,932
    
    
    
    $
    424,899
    
    
    $
    1,480,987
    
    
    $
    1,369,752
    
    
    $
    1,279,407Cost of sales, occupancy and buying expenses
    
    
    720,351
    
    
    
    521,384
    
    
    
    
    206,438
    
    
    
    691,646
    
    
    
    625,866
    
    
    
    587,687Gross profit
    
    
    692,609
    
    
    
    564,548
    
    
    
    
    218,461
    
    
    
    789,341
    
    
    
    743,886
    
    
    
    691,720Other expenses (income):Selling, general and administrative
    
    
    518,233
    
    
    
    354,875
    
    
    
    
    154,409
    
    
    
    481,979
    
    
    
    449,430
    
    
    
    430,868Depreciation and amortization
    
    
    85,093
    
    
    
    61,451
    
    
    
    
    19,652
    
    
    
    56,771
    
    
    
    48,900
    
    
    
    44,882Impairment of assets
    
    
    523,990
    
    
    
    3,478
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    Severance and transaction-related costs
    
    
    15,928
    
    
    
    7,319
    
    
    
    
    72,672
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    (4,499
    )
    
    
    (3,088
    )
    
    
    
    (1,476
    )
    
    
    (3,484
    )
    
    
    (4,622
    )
    
    
    (2,335
    )1,138,745
    
    
    
    424,035
    
    
    
    
    245,330
    
    
    
    535,266
    
    
    
    493,708
    
    
    
    473,415Operating income (loss)
    
    
    (446,136
    )
    
    
    140,513
    
    
    
    
    (26,869
    )
    
    
    254,075
    
    
    
    250,178
    
    
    
    218,305Interest expense (income), net
    
    
    195,947
    
    
    
    147,892
    
    
    
    
    (4,876
    )
    
    
    (14,575
    )
    
    
    (9,493
    )
    
    
    (3,331
    )Income (loss) from continuing operations before
income taxes
    
    
    (642,083
    )
    
    
    (7,379
    )
    
    
    
    (21,993
    )
    
    
    268,650
    
    
    
    259,671
    
    
    
    221,636Income taxes
    
    
    1,509
    
    
    
    (8,020
    )
    
    
    
    21,779
    
    
    
    79,888
    
    
    
    87,328
    
    
    
    75,377Income (loss) from continuing operations
    
    $
    (643,592
    )
    
    $
    641
    
    
    
    $
    (43,772
    )
    
    $
    188,762
    
    
    $
    172,343
    
    
    $
    146,259Other Financial Data:Capital expenditures:New stores and remodels
    
    $
    36,270
    
    
    $
    46,225
    
    
    
    $
    24,231
    
    
    $
    77,021
    
    
    $
    64,275
    
    
    $
    58,582Other
    
    
    23,135
    
    
    
    12,259
    
    
    
    
    3,757
    
    
    
    18,171
    (2)
    
    
    9,169
    
    
    
    5,052Total capital expenditures
    
    
    59,405
    
    
    
    58,484
    
    
    
    
    27,988
    
    
    
    95,192
    
    
    
    73,444
    
    
    
    63,634Cash interest expense (4)
    
    
    168,567
    
    
    
    123,620
    
    
    
    
    86
    
    
    
    118
    
    
    
    125
    
    
    
    193Ratio of earnings to fixed charges (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.2
    x
    
    
    5.3
    x
    
    
    4.7
    xStore Data:Number of stores (at period end)North America
    
    
    2,026
    
    
    
    2,135
    
    
    
    
    2,124
    
    
    
    2,133
    
    
    
    2,106
    
    
    
    2,119Europe
    
    
    943
    
    
    
    905
    
    
    
    
    879
    
    
    
    859
    
    
    
    772
    
    
    
    717Total number of stores (at period end)
    
    
    2,969
    
    
    
    3,040
    
    
    
    
    3,003
    
    
    
    2,992
    
    
    
    2,878
    
    
    
    2,836Total gross square footage (000s) (at period end)
    
    
    3,011
    
    
    
    3,105
    
    
    
    
    3,043
    
    
    
    3,021
    
    
    
    2,883
    
    
    
    2,801Net sales per store (000s) (5)
    
    $
    461
    
    
    $
    359
    
    
    
    $
    142
    
    
    $
    504
    
    
    $
    479
    
    
    $
    452Net sales per square foot (6)
    
    $
    453
    
    
    
    353
    
    
    
    
    140
    
    
    
    500
    
    
    
    480
    
    
    
    459Balance Sheet Data (at period end)Cash and cash equivalents
    
    $
    204,574
    
    
    $
    85,974
    
    
    
    $
    350,476
    
    
    $
    340,877
    
    
    $
    431,122
    
    
    $
    191,006Total assets
    
    
    2,881,095
    
    
    
    3,348,497
    
    
    
    
    1,119,047
    
    
    
    1,091,266
    
    
    
    1,090,701
    
    
    
    966,129Total debt
    
    
    2,581,772
    
    
    
    2,377,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total stockholders equity (deficit)
    
    
    (55,843
    )
    
    
    605,200
    
    
    
    
    792,071
    
    
    
    847,662
    
    
    
    868,318
    
    
    
    755,687
 
 (1)
    
    Fiscal 2006 was a fifty-three week period and Fiscal 2008, Fiscal 2007, Fiscal 2005 and
Fiscal 2004 were fifty-two week periods.(2)
    
    Includes management information system expenditures of $5.2 million in Fiscal 2006 for
strategic projects of POS, merchandising systems, business intelligence, technology and the
logistics system for the new distribution center in the Netherlands.(3)
    
    For purposes of calculating the ratio of earnings to fixed charges, earnings represent
income from continuing operations before income taxes plus fixed charges. Fixed charges
include interest expense, including amortization of debt issuance costs, and the portion of
rental expense which management believes is representative of the interest component of
rental expense. Due to the Companys loss during Fiscal 2008, the period from May 29, 2007
through February 2, 2008 and the period from February 4, 2007 through May 28, 2007, the
ratio coverage was less than 1:1. The Company must generate additional earnings of
$642,403, $7,480 and $22,661 during Fiscal 2008, the period from May 29, 2007 through
February 2, 2008 and the period from February 4, 2007 through May 28, 2007, respectively, to
achieve coverage of 1:1.(4)
    
    Cash interest expense does not include amortization of debt issuance costs or interest
expense paid in kind.(5)
    
    Net sales per store are calculated based on the average number of stores during the
period.(6)
    
    Net sales per square foot are calculated based on the average gross square feet during
the period. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
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Acquisition of the Company by Apollo Management VI, L.P.
  
    
    the closing of the offering of the Notes;
    
    the closing of our $1.65 billion Credit Facility;
    
    the termination of the Companys existing $60.0 million secured credit facility; and
    
    the equity investment of approximately $595.7 million by Apollo Management VI, L.P. on
behalf of certain affiliated co-investment partnerships.
  Effect of the Transactions
    Results of Consolidated Operations
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Management overview
  
    
    We began to implement our Cost Savings Initiative (CSI) project. This project is designed to identify areas for cost savings and to implement actions to achieve these savings. We incurred $16.4 million of costs related to the CSI project, primarily related to employee severance and advisory fees.
    
    We implemented our Pan European Transformation (PET) project. As the European market continues to grow and become an increasingly larger share of our operations, we believe we need to have the resources close at hand to the European operations. Accordingly, we initiated Phase 1 of the PET project, which transitioned an integrated merchandising team to Europe to focus on our European operations.
This also allows our North American merchandising team to focus on our North American operations. We incurred $9.1 million of costs associated with the PET project in Fiscal 2008. After completing the most substantial phase of PET project,
we began Phase II thereof, which focused on centralizing our European finance and operations in one central location located in Birmingham, England.
    
    We closed 118 stores in North America that were performing below our expectations. These stores accounted for 1.7% of the net sales in Fiscal 2008 and had a combined operating loss before depreciation and amortization of $0.7 million in Fiscal 2008.
    
    We improved our inventory management. Notwithstanding the unprecedented level of promotional activity in the overall retail sector, we successfully managed our inventory levels throughout the year and ended Fiscal 2008 with total inventory per square foot decreasing 9.0% versus year-end Fiscal 2007. We have also been focused on preserving our cash and ended Fiscal 2008 with $204.6 million in cash and cash equivalents.
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Successor Entity
    
    Combined
    
    Successor Entity
    
    Predecessor EntityFiscal Year
    
    Fiscal Year
    
    May 29, 2007
    
    Feb. 4, 2007
    
    Fiscal YearEnded
    
    Ended
    
    Through
    
    Through
    
    EndedJan. 31, 2009
    
    Feb. 2, 2008
    
    Feb. 2, 2008
    
    May 28, 2007
    
    Feb. 3, 2007Net sales
    
    $
    1,412,960
    
    
    $
    1,510,831
    
    
    $
    1,085,932
    
    
    $
    424,899
    
    
    $
    1,480,987Increase (decrease) in same store sales
    
    
    (6.9
    )%
    
    
    (1.8
    )%
    
    
    (2.8
    )%
    
    
    0.5
    %
    
    
    1.5
    %Gross profit percentage
    
    
    49.0
    %
    
    
    51.8
    %
    
    
    52.0
    %
    
    
    51.4
    %
    
    
    53.3
    %Selling, general and administrative expenses
as a percentage of net sales
    
    
    36.7
    %
    
    
    33.7
    %
    
    
    32.7
    %
    
    
    36.3
    %
    
    
    32.5
    %Depreciation and amortization as a
percentage of net sales
    
    
    6.0
    %
    
    
    5.4
    %
    
    
    5.7
    %
    
    
    4.6
    %
    
    
    3.8
    %Severance and transaction-related costs as
percentage of net sales
    
    
    1.1
    %
    
    
    5.3
    %
    
    
    0.7
    %
    
    
    17.1
    %
    
    
    0.0
    %Impairment of assets
    
    $
    523,990
    
    
    $
    3,551
    
    
    $
    3,478
    
    
    $
    73
    
    
    $
    Operating income (loss)
    
    $
    (446,136
    )
    
    $
    113,644
    
    
    $
    140,513
    
    
    $
    (26,869
    )
    
    $
    254,075Net income (loss)
    
    $
    (643,592
    )
    
    $
    (43,131
    )
    
    $
    641
    
    
    $
    (43,772
    )
    
    $
    188,762Number of stores at the end of the period (1)
    
    
    2,969
    
    
    
    3,040
    
    
    
    3,040
    
    
    
    3,003
    
    
    
    2,992
 
 (1)
    
    Number of stores excludes stores operated under franchise agreements outside of North America and joint venture stores.  Net sales
    rd
  27




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##### Table of Contents



Successor Entity
    
    Combined
    
    Successor Entity
    
    Predecessor EntityFiscal Year
    
    Fiscal Year
    
    May 29, 2007
    
    
    
    
    
    Fiscal YearEnded
    
    Ended
    
    Through
    
    Feb. 4, 2007
    
    EndedJanuary 31,
    
    February 2,
    
    February 2,
    
    Through
    
    February 3,% of Total
    
    2009
    
    2008
    
    2008
    
    May 28, 2007
    
    2007Accessories
    
    
    48.8
    
    
    
    46.4
    
    
    
    47.4
    
    
    
    44.2
    
    
    
    42.2Jewelry
    
    
    51.2
    
    
    
    53.6
    
    
    
    52.6
    
    
    
    55.8
    
    
    
    57.8100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
  Gross profit
    Selling, general and administrative expenses
   Depreciation and amortization expense
  28




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##### Table of Contents



Impairment of assets
  Severance and transaction-related costs
  Other income
   Interest expense (income), net
     29




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##### Table of Contents



Income taxes
  Segment Operations
  North America
  Successor Entity
    
    Combined
    
    Successor Entity
    
    Predecessor EntityFiscal Year
    
    Fiscal Year
    
    May 29, 2007
    
    Feb. 4, 2007
    
    Fiscal YearEnded
    
    Ended
    
    Through
    
    Through
    
    EndedJanuary 31,
    
    February 2,
    
    February 2,
    
    May 28,
    
    February 3,2009
    
    2008
    
    2008
    
    2007
    
    2007Net sales
    
    $
    907,486
    
    
    $
    995,469
    
    
    $
    702,986
    
    
    $
    292,483
    
    
    $
    1,024,009Increase (decrease) in same store sales
    
    
    (9.2
    )%
    
    
    (2.6
    )%
    
    
    (4.2
    )%
    
    
    1.3
    %
    
    
    2.5
    %Gross profit percentage
    
    
    48.5
    %
    
    
    52.0
    %
    
    
    51.5
    %
    
    
    53.1
    %
    
    
    53.6
    %Number of stores at the end of the
period (1)
    
    
    2,026
    
    
    
    2,135
    
    
    
    2,135
    
    
    
    2,124
    
    
    
    2,133
 
 (1)
    
    Number of stores excludes stores operated under franchise agreements outside of North America and joint venture stores. Net sales
   30




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##### Table of Contents



rd
  Gross profit
    Successor Entity
    
    
    
    
    
    Successor Entity
    
    Predecessor EntityCombined
    
    May 29, 2007Fiscal Year Ended
    
    Fiscal Year Ended
    
    Through
    
    Feb. 4, 2007
    
    Fiscal Year EndedJanuary 31,
    
    February 2,
    
    February 2,
    
    Through
    
    February 3,% of Total
    
    2009
    
    2008
    
    2008
    
    May 28, 2007
    
    2007Accessories
    
    
    44.1
    
    
    
    42.8
    
    
    
    43.7
    
    
    
    40.6
    
    
    
    38.0Jewelry
    
    
    55.9
    
    
    
    57.2
    
    
    
    56.3
    
    
    
    59.4
    
    
    
    62.0100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
  Europe
  Successor Entity
    
    
    
    
    
    Successor Entity
    
    Predecessor EntityCombined
    
    May 29, 2007
    
    Feb. 4, 2007Fiscal Year Ended
    
    Fiscal Year Ended
    
    Through
    
    Through
    
    Fiscal Year EndedJanuary 31,
    
    February 2,
    
    February 2,
    
    May 28,
    
    February 3,2009
    
    2008
    
    2008
    
    2007
    
    2007Net sales
    
    $
    505,474
    
    
    $
    515,362
    
    
    $
    382,946
    
    
    $
    132,416
    
    
    $
    456,978Increase (decrease) in same store sales
    
    
    (2.5
    )%
    
    
    (0.2
    )%
    
    
    0.2
    %
    
    
    (1.2
    )%
    
    
    (0.9
    )%Gross profit percentage
    
    
    50.0
    %
    
    
    51.5
    %
    
    
    52.8
    %
    
    
    47.8
    %
    
    
    52.7
    %Number of stores at the end of the
period (1)
    
    
    943
    
    
    
    905
    
    
    
    905
    
    
    
    879
    
    
    
    859
 
 (1)
    
    Number of stores excludes stores operated under franchise agreements outside of North America and joint venture stores. 31




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##### Table of Contents



Net sales
   rd
 Gross profit
    Successor Entity
    
    
    
    
    
    Successor Entity
    
    Predecessor EntityCombined
    
    May 29, 2007Fiscal Year Ended
    
    Fiscal Year Ended
    
    Through
    
    Feb. 4, 2007
    
    Fiscal Year EndedJanuary 31,
    
    February 2,
    
    February 2,
    
    Through
    
    February 3,% of Total
    
    2009
    
    2008
    
    2008
    
    May 28, 2007
    
    2007Accessories
    
    
    57.2
    
    
    
    53.5
    
    
    
    54.0
    
    
    
    52.1
    
    
    
    51.7Jewelry
    
    
    42.8
    
    
    
    46.5
    
    
    
    46.0
    
    
    
    47.9
    
    
    
    48.3100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
  Liquidity and Capital Resources
  32




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##### Table of Contents



Credit Facility
        
    
    a perfected pledge of all the equity interests held by us or any subsidiary guarantor,
which pledge, in the case of any foreign subsidiary, is limited to 100% of the non-voting
equity interests and 65% of the voting equity interests of such foreign subsidiary held
directly by us and the subsidiary guarantors; and
    
    perfected security interests in, and mortgages on, substantially all material tangible
and intangible assets owned by us and each subsidiary guarantor, subject to certain
exceptions.
  33




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##### Table of Contents



Notes
       Pre-Transaction Credit Facilities
  34




---



##### Table of Contents



Analysis of Consolidated Financial Condition
  Successor Entity
    
    
    
    
    
    Successor Entity
    
    Predecessor EntityFiscal Year
    
    Fiscal Year
    
    May 29, 2007
    
    Feb. 4, 2007
    
    Fiscal YearEnded
    
    Ended
    
    Through
    
    Through
    
    EndedJanuary 31,
    
    February 2,
    
    February 2,
    
    May 28,
    
    February 2,2009
    
    2008
    
    2008
    
    2007
    
    2008Operating activities
    
    $
    1,373
    
    
    $
    6,795
    
    
    $
    (35,851
    )
    
    $
    42,646
    
    
    $
    232,250Investing activities
    
    
    (60,756
    )
    
    
    (3,140,441
    )
    
    
    (3,112,372
    )
    
    
    (28,069
    )
    
    
    (99,256
    )Financing activities
    
    
    179,500
    
    
    
    2,874,807
    
    
    
    2,880,810
    
    
    
    (6,003
    )
    
    
    (224,584
    )
  Cash flows from operating activities
  Cash flows from investing activities
   Cash flows from financing activities
   35




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##### Table of Contents



Cash position
   Current market conditions
  Critical Accounting Policies and Estimates
  36




---



##### Table of Contents



Inventory Valuation
  Valuation of Long-Lived Assets
  Goodwill Impairment
  37




---



##### Table of Contents



Intangible Asset Impairment
    Investment in Joint Venture
  38




---



##### Table of Contents



Income Taxes
      Stock-Based Compensation
   39




---



##### Table of Contents



40




---



##### Table of Contents



Derivatives and Hedging
     Contractual Obligations and Off Balance Sheet Arrangements
  41




---



##### Table of Contents



Payments Due by PeriodContractual Obligations
    
    
    
    
    
    
    
    
    
    2-3
    
    
    4-5
    
    
    More than 5(in millions)
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsOperating leases for real estate
    
    $
    1,118.3
    
    
    $
    183.6
    
    
    $
    323.4
    
    
    $
    259.1
    
    
    $
    352.2Operating leases for equipment,
leasehold improvements, and
equipment purchases
    
    
    3.9
    
    
    
    1.9
    
    
    
    1.9
    
    
    
    
    
    
    
    0.1Long-term debt obligations
    
    
    2,681.4
    
    
    
    14.5
    
    
    
    29.0
    
    
    
    223.0
    (1)
    
    
    2,414.9
    (2)Letters of credit
    
    
    6.0
    
    
    
    6.0
    
    
    
    
    
    
    
    
    
    
    
    Interest (3)
    
    
    1,008.1
    
    
    
    131.1
    
    
    
    283.6
    
    
    
    346.0
    
    
    
    247.4Total
    
    $
    4,817.7
    
    
    $
    337.1
    
    
    $
    637.9
    
    
    $
    828.1
    
    
    $
    3,014.6
 
 (1)
    
    Includes $194.0 million under our revolving credit facility.(2)
    
    Includes $959.5 million under our Notes and, $1,355.8 million under our Credit Facility.(3)
    
    Represents interest expected to be paid on our debt and does not assume any debt repurchases
or prepayments, other than scheduled amortization of our Credit Facility. Projected interest
on variable rate debt is based on the 90 day LIBOR rate in effect on January 30, 2009, plus
the applicable LIBOR margin of 2.75%, and the impact through June 2010 of interest rate swaps
discussed in Note 9 to the consolidated financial statements.   Seasonality and Quarterly Results
  Impact of Inflation
  Recent Accounting Pronouncements
  42




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##### Table of Contents



Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active
 Disclosures about Derivative Instruments and Hedging
Activities  an Amendment of FASB Statement No. 133
  43




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Cash and cash equivalents
  Foreign Currency
    Interest Rates
  44




---



##### Table of Contents



General Market Risk
  45




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 Page No.Report of Independent Registered Public Accounting Firm
    
    
    47Consolidated Balance Sheets as of January 31, 2009 and February 2, 2008
    
    
    48Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended January
31, 2009 (Successor Entity), the period from May 29, 2007 through February 2, 2008 (Successor
Entity), the period from February 4, 2007 through May 28, 2007 (Predecessor Entity) and the fiscal
year ended February 3, 2007 (Predecessor Entity)
    
    
    49Consolidated Statements of Changes in Stockholders Equity (Deficit) for the fiscal year ended January
31, 2009 (Successor Entity), the period from May 29, 2007 through February 2, 2008 (Successor
Entity), the period from February 4, 2007 through May 28, 2007 (Predecessor Entity) and the fiscal
year ended February 3, 2007 (Predecessor Entity)
    
    
    50Consolidated Statements of Cash Flows for the fiscal year ended January 31,
2009 (Successor Entity), the period from May 29, 2007 through February 2,
2008 (Successor Entity), the period from February 4, 2007 through May 28,
2007 (Predecessor Entity) and the fiscal year ended February 3, 2007
(Predecessor Entity)
    
    
    51Notes to Consolidated Financial Statements
    
    
    53
 46




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Fair
Value Measurements.
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109.
  
 47




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 January 31, 2009
    
    
    February 2, 2008(In thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    204,574
    
    
    $
    85,974Inventories
    
    
    103,691
    
    
    
    117,679Prepaid expenses
    
    
    31,837
    
    
    
    37,315Other current assets
    
    
    27,079
    
    
    
    37,658Total current assets
    
    
    367,181
    
    
    
    278,626Property and equipment:Land and building
    
    
    22,288
    
    
    
    22,288Furniture, fixtures and equipment
    
    
    143,702
    
    
    
    130,130Leasehold improvements
    
    
    214,007
    
    
    
    211,163379,997
    
    
    
    363,581Less accumulated depreciation and amortization
    
    
    (113,926
    )
    
    
    (53,972
    )266,071
    
    
    
    309,609Intangible assets, net of accumulated amortization of $19,371 and
$4,762, respectively
    
    
    587,125
    
    
    
    777,130Deferred financing costs, net of accumulated amortization of $17,646
and $7,079, respectively
    
    
    59,944
    
    
    
    70,511Other assets
    
    
    56,428
    
    
    
    71,754Goodwill
    
    
    1,544,346
    
    
    
    1,840,8672,247,843
    
    
    
    2,760,262Total assets
    
    $
    2,881,095
    
    
    $
    3,348,497LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Trade accounts payable
    
    $
    53,237
    
    
    $
    56,089Current portion of long-term debt
    
    
    14,500
    
    
    
    14,500Income taxes payable
    
    
    6,477
    
    
    
    12,191Accrued interest payable
    
    
    13,316
    
    
    
    19,536Accrued expenses and other current liabilities
    
    
    107,974
    
    
    
    117,076Total current liabilities
    
    
    195,504
    
    
    
    219,392Long-term debt
    
    
    2,373,272
    
    
    
    2,363,250Revolving Credit Facility
    
    
    194,000
    
    
    
    Deferred tax liability
    
    
    112,829
    
    
    
    139,506Deferred rent expense
    
    
    18,462
    
    
    
    10,572Unfavorable lease obligations and other long-term liabilities
    
    
    42,871
    
    
    
    10,5772,741,434
    
    
    
    2,523,905Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity (deficit):Common stock par value $0.001 per share; authorized 1,000 shares;
issued and outstanding 100 shares
    
    
    
    
    
    
    Additional paid-in capital
    
    
    609,427
    
    
    
    601,201Accumulated other comprehensive income (loss), net of tax
    
    
    (22,319
    )
    
    
    3,358Retained earnings (deficit)
    
    
    (642,951
    )
    
    
    641(55,843
    )
    
    
    605,200Total liabilities and stockholders equity (deficit)
    
    $
    2,881,095
    
    
    $
    3,348,497
  48




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
 Successor Entity
    
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    
    Feb. 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    
    Through
    
    
    EndedJanuary 31,
    
    
    February 2,
    
    
    
    May 28,
    
    
    February 3,2009
    
    
    2008
    
    
    
    2007
    
    
    2007Net sales
    
    $
    1,412,960
    
    
    $
    1,085,932
    
    
    
    $
    424,899
    
    
    $
    1,480,987Cost of sales, occupancy and buying
expenses
    
    
    720,351
    
    
    
    521,384
    
    
    
    
    206,438
    
    
    
    691,646Gross profit
    
    
    692,609
    
    
    
    564,548
    
    
    
    
    218,461
    
    
    
    789,341Other expenses (income):Selling, general and administrative
    
    
    518,233
    
    
    
    354,875
    
    
    
    
    154,409
    
    
    
    481,979Depreciation and amortization
    
    
    85,093
    
    
    
    61,451
    
    
    
    
    19,652
    
    
    
    56,771Impairment of assets
    
    
    523,990
    
    
    
    3,478
    
    
    
    
    73
    
    
    
    Severance and transaction-related costs
    
    
    15,928
    
    
    
    7,319
    
    
    
    
    72,672
    
    
    
    Other income
    
    
    (4,499
    )
    
    
    (3,088
    )
    
    
    
    (1,476
    )
    
    
    (3,484
    )1,138,745
    
    
    
    424,035
    
    
    
    
    245,330
    
    
    
    535,266Operating income (loss)
    
    
    (446,136
    )
    
    
    140,513
    
    
    
    
    (26,869
    )
    
    
    254,075Interest expense (income), net
    
    
    195,947
    
    
    
    147,892
    
    
    
    
    (4,876
    )
    
    
    (14,575
    )Income (loss) before income taxes
    
    
    (642,083
    )
    
    
    (7,379
    )
    
    
    
    (21,993
    )
    
    
    268,650Income tax expense (benefit)
    
    
    1,509
    
    
    
    (8,020
    )
    
    
    
    21,779
    
    
    
    79,888Net income (loss)
    
    $
    (643,592
    )
    
    $
    641
    
    
    
    $
    (43,772
    )
    
    $
    188,762Net income (loss)
    
    $
    (643,592
    )
    
    $
    641
    
    
    
    $
    (43,772
    )
    
    $
    188,762Foreign currency translation and interest
rate swap adjustments, net of tax
    
    
    (25,677
    )
    
    
    3,358
    
    
    
    
    8,440
    
    
    
    12,920Comprehensive income (loss)
    
    $
    (669,269
    )
    
    $
    3,999
    
    
    
    $
    (35,332
    )
    
    $
    201,682
  49




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN 
STOCKHOLDERS EQUITY (DEFICIT)
 Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    Accumulatedshares of
    
    
    Class A
    
    
    shares of
    
    
    
    
    
    
    Additional
    
    
    other
    
    
    RetainedClass A
    
    
    common
    
    
    common
    
    
    Common
    
    
    paid-in
    
    
    comprehensive
    
    
    earningsPredecessor Entity
    
    common stock
    
    
    stock
    
    
    stock
    
    
    stock
    
    
    capital
    
    
    income (loss), net
    
    
    (deficit)
    
    
    TotalBalance: January 28 2006
    
    
    4,896
    
    
    $
    245
    
    
    
    94,581
    
    
    $
    4,729
    
    
    $
    60,631
    
    
    $
    21,036
    
    
    $
    781,677
    
    
    $
    868,318Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188,762
    
    
    
    188,762Class A common stock converted to common stock
    
    
    (27
    )
    
    
    (2
    )
    
    
    27
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends ($0.40 per common share and $0.20 per
Class A common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,553
    )
    
    
    (37,553
    )Stock options exercised, including tax benefit
    
    
    
    
    
    
    
    
    
    
    619
    
    
    
    31
    
    
    
    12,618
    
    
    
    
    
    
    
    
    
    
    
    12,649Stock repurchased
    
    
    
    
    
    
    
    
    
    
    (7,097
    )
    
    
    (356
    )
    
    
    
    
    
    
    
    
    
    
    (199,319
    )
    
    
    (199,675
    )Restricted stock, net of unearned compensation
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    1
    
    
    
    1,287
    
    
    
    
    
    
    
    
    
    
    
    1,288Long-term incentive plan
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    3
    
    
    
    950
    
    
    
    
    
    
    
    
    
    
    
    953Foreign currency translation adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,920
    
    
    
    
    
    
    
    12,920Balance: February 3, 2007
    
    
    4,869
    
    
    
    243
    
    
    
    88,203
    
    
    
    4,410
    
    
    
    75,486
    
    
    
    33,956
    
    
    
    733,567
    
    
    
    847,662Net loss for period from Feb. 4, 2007 to May 28, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,772
    )
    
    
    (43,772
    )Cash dividends ($0.18 per common share and $0.09 per
Class A common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,317
    )
    
    
    (16,317
    )Stock options exercised, including tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    177Restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,851
    
    
    
    
    
    
    
    
    
    
    
    1,851Option conversion payment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,924
    )
    
    
    
    
    
    
    
    
    
    
    (7,924
    )Tax benefit options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,885
    
    
    
    
    
    
    
    
    
    
    
    2,885Long-term incentive plan, net of amount reclassified
as liabilities upon acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    (933
    )
    
    
    
    
    
    
    
    
    
    
    (931
    )Foreign currency translation adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,440
    
    
    
    
    
    
    
    8,440Balance: May 28, 2007 (prior to acquisition)
    
    
    4,869
    
    
    
    243
    
    
    
    88,203
    
    
    
    4,412
    
    
    
    71,542
    
    
    
    42,396
    
    
    
    673,478
    
    
    
    792,071Successor EntityAcquisition transaction
    
    
    (4,869
    )
    
    
    (243
    )
    
    
    (88,103
    )
    
    
    (4,412
    )
    
    
    524,133
    
    
    
    (42,396
    )
    
    
    (673,478
    )
    
    
    (196,396
    )Capital contribution
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    595,675
    
    
    
    
    
    
    
    
    
    
    
    595,675Net income for period May 29, 2007 to February 2, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    641
    
    
    
    641Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,092
    
    
    
    
    
    
    
    
    
    
    
    5,092Restricted stock, net of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    434
    
    
    
    
    
    
    
    
    
    
    
    434Foreign currency translation adjustment and
unrealized loss on interest rate swaps, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,358
    
    
    
    
    
    
    
    3,358Balance: February 2, 2008
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    601,201
    
    
    
    3,358
    
    
    
    641
    
    
    
    605,200Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (643,592
    )
    
    
    (643,592
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,783
    
    
    
    
    
    
    
    
    
    
    
    7,783Restricted stock, net of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    443
    
    
    
    
    
    
    
    
    
    
    
    443Foreign currency translation adjustment and
unrealized loss on interest rate swaps, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,677
    )
    
    
    
    
    
    
    (25,677
    )Balance: January 31, 2009
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    $
    609,427
    
    
    $
    (22,319
    )
    
    $
    (642,951
    )
    
    $
    (55,843
    )
  50




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Successor Entity
    
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    
    Feb. 4. 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    
    Through
    
    
    EndedJanuary 31, 2009
    
    
    Feb. 2, 2008
    
    
    
    May 28, 2007
    
    
    February 3, 2007Cash flows from operating activities:Net income (loss)
    
    $
    (643,592
    )
    
    $
    641
    
    
    
    $
    (43,772
    )
    
    $
    188,762Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    85,093
    
    
    
    61,451
    
    
    
    
    19,652
    
    
    
    56,771Impairment of assets
    
    
    523,990
    
    
    
    3,478
    
    
    
    
    73
    
    
    
    Amortization of lease rights and other assets
    
    
    2,059
    
    
    
    1,313
    
    
    
    
    622
    
    
    
    1,489Amortization of debt issuance costs
    
    
    10,567
    
    
    
    7,079
    
    
    
    
    
    
    
    
    Payment in kind interest expense
    
    
    24,522
    
    
    
    
    
    
    
    
    
    
    
    
    Net accretion of favorable (unfavorable) lease
obligations
    
    
    (1,856
    )
    
    
    
    
    
    
    
    
    
    
    
    (Gain) loss on sale/retirement of property and
equipment, net
    
    
    (183
    )
    
    
    592
    
    
    
    
    1,201
    
    
    
    2,361Gain on sale of intangible assets
    
    
    (1,372
    )
    
    
    
    
    
    
    
    
    
    
    
    5Excess tax benefit from stock compensation
    
    
    
    
    
    
    
    
    
    
    
    (2,885
    )
    
    
    (3,648
    )Stock compensation expense
    
    
    8,226
    
    
    
    5,526
    
    
    
    
    8,946
    
    
    
    7,080(Increase) decrease in:Inventories
    
    
    6,482
    
    
    
    16,838
    
    
    
    
    (10,932
    )
    
    
    (5,105
    )Prepaid expenses
    
    
    (1,087
    )
    
    
    (6,551
    )
    
    
    
    6,389
    
    
    
    (16,441
    )Other assets
    
    
    (9,085
    )
    
    
    (31,144
    )
    
    
    
    (2,941
    )
    
    
    (10,725
    )Increase (decrease) in:Trade accounts payable
    
    
    7,372
    
    
    
    (32,987
    )
    
    
    
    31,202
    
    
    
    3,444Income taxes payable
    
    
    (10,710
    )
    
    
    4,076
    
    
    
    
    (11,732
    )
    
    
    2,184Accrued expenses and other current liabilities
    
    
    3,032
    
    
    
    (73,060
    )
    
    
    
    39,727
    
    
    
    6,853Accrued interest payable
    
    
    (6,219
    )
    
    
    19,531
    
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    (4,809
    )
    
    
    (18,508
    )
    
    
    
    6,723
    
    
    
    (4,558
    )Deferred rent expense
    
    
    8,943
    
    
    
    5,874
    
    
    
    
    373
    
    
    
    3,778Net cash provided by (used in) operating activities
    
    
    1,373
    
    
    
    (35,851
    )
    
    
    
    42,646
    
    
    
    232,250Cash flows from investing activities:Acquisition of property and equipment
    
    
    (59,405
    )
    
    
    (58,484
    )
    
    
    
    (27,988
    )
    
    
    (95,192
    )Acquisition of Predecessor Entity, net of cash
acquired
    
    
    
    
    
    
    (3,053,334
    )
    
    
    
    
    
    
    
    Proceeds from sale of property and equipment
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    881Acquisition of intangible assets
    
    
    (1,971
    )
    
    
    (554
    )
    
    
    
    (81
    )
    
    
    (4,945
    )Proceeds from sale of intangible assets
    
    
    516
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (60,756
    )
    
    
    (3,112,372
    )
    
    
    
    (28,069
    )
    
    
    (99,256
    )Cash flows from financing activities:Credit Facility proceeds
    
    
    194,000
    
    
    
    1,450,000
    
    
    
    
    
    
    
    
    Credit Facility payments
    
    
    (14,500
    )
    
    
    (7,250
    )
    
    
    
    
    
    
    
    Note offerings proceeds
    
    
    
    
    
    
    935,000
    
    
    
    
    
    
    
    
    Capital contribution
    
    
    
    
    
    
    595,675
    
    
    
    
    
    
    
    
    Exercised stock option proceeds
    
    
    
    
    
    
    
    
    
    
    
    177
    
    
    
    8,996Purchase and retirement of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199,675
    )Excess tax benefit from stock compensation
    
    
    
    
    
    
    
    
    
    
    
    2,885
    
    
    
    3,648Option conversion payment
    
    
    
    
    
    
    (7,924
    )
    
    
    
    
    
    
    
    Financing fees paid
    
    
    
    
    
    
    (77,439
    )
    
    
    
    
    
    
    
    Dividends paid
    
    
    
    
    
    
    (7,252
    )
    
    
    
    (9,065
    )
    
    
    (37,553
    )Net cash provided by (used in) financing activities:
    
    
    179,500
    
    
    
    2,880,810
    
    
    
    
    (6,003
    )
    
    
    (224,584
    )Effect of foreign currency exchange rate changes on cash
and cash equivalents
    
    
    (1,517
    )
    
    
    2,911
    
    
    
    
    1,025
    
    
    
    1,345Net increase (decrease) in cash and cash equivalents
    
    
    118,600
    
    
    
    (264,502
    )
    
    
    
    9,599
    
    
    
    (90,245
    )Cash and cash equivalents at beginning of period
    
    
    85,974
    
    
    
    350,476
    
    
    
    
    340,877
    
    
    
    431,122Cash and cash equivalents at end of period
    
    $
    204,574
    
    
    $
    85,974
    
    
    
    $
    350,476
    
    
    $
    340,877
 51




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
 Successor Entity
    
    Predecessor EntityFiscal Year
    
    May 29, 2007
    
    Feb. 4. 2007
    
    Fiscal YearEnded
    
    Through
    
    Through
    
    EndedJanuary 31, 2009
    
    Feb. 2, 2008
    
    May 28, 2007
    
    February 3, 2007Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    14,227
    
    
    $
    10,464
    
    
    $
    22,820
    
    
    $
    79,100Interest paid
    
    
    168,567
    
    
    
    123,620
    
    
    
    86
    
    
    
    118
  52




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##### Table of Contents



CLAIRES STORES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. NATURE OF OPERATIONS AND ACQUISITION OF CLAIRES STORES, INC.
 Nature of Operations
 Acquisition of Claires Stores, Inc.
     
    
    the closing of the Companys offering for the senior notes (Notes) in the aggregate
principal amount of $935.0 million;
    
    the closing of the Companys senior secured term loan facility and revolving Credit
Facility (collectively the Credit Facility) of $1.65 billion;
    
    the termination of the Companys existing $60.0 million secured Credit Facility; and
    
    the equity investment described above.
    53




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##### Table of Contents



Predecessor Entity
    
    
    Successor EntityMay 28,
    
    
    Transaction
    
    
    May 29,2007
    
    
    Adjustments
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    350,476
    
    
    $
    (186,053
    )
    
    $
    164,423Inventories
    
    
    133,156
    
    
    
    
    
    
    
    133,156Prepaid expenses
    
    
    29,792
    
    
    
    
    
    
    
    29,792Other current assets
    
    
    36,378
    
    
    
    
    
    
    
    36,378Total current assets
    
    
    549,802
    
    
    
    (186,053
    )
    
    
    363,749Property and equipment:Land and buildings
    
    
    17,272
    
    
    
    5,016
    
    
    
    22,288Furniture, fixtures and equipment
    
    
    289,974
    
    
    
    (194,125
    )
    
    
    95,849Leasehold improvements
    
    
    305,469
    
    
    
    (120,083
    )
    
    
    185,386612,715
    
    
    
    (309,192
    )
    
    
    303,523Less accumulated depreciation and amortization
    
    
    (336,240
    )
    
    
    336,240
    
    
    
    276,475
    
    
    
    27,048
    
    
    
    303,523Intangible assets, net
    
    
    55,629
    
    
    
    753,424
    
    
    
    809,053Deferred debt issuance costs, net
    
    
    
    
    
    
    77,411
    
    
    
    77,411Other assets
    
    
    35,589
    
    
    
    27,570
    
    
    
    63,159Goodwill
    
    
    201,552
    
    
    
    1,638,181
    
    
    
    1,839,733292,770
    
    
    
    2,496,586
    
    
    
    2,789,356Total assets
    
    $
    1,119,047
    
    
    $
    2,337,581
    
    
    $
    3,456,628LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    87,854
    
    
    $
    (753
    )
    
    $
    87,101Current portion of long-term debt
    
    
    
    
    
    
    10,875
    
    
    
    10,875Income taxes payable
    
    
    11,355
    
    
    
    3,611
    
    
    
    14,966Accrued expenses and other current liabilities
    
    
    170,444
    
    
    
    531
    
    
    
    170,975Total current liabilities
    
    
    269,653
    
    
    
    14,264
    
    
    
    283,917Long-term debt
    
    
    
    
    
    
    2,374,125
    
    
    
    2,374,125Deferred tax liability
    
    
    21,534
    
    
    
    131,279
    
    
    
    152,813Deferred rent expense
    
    
    26,808
    
    
    
    (26,808
    )
    
    
    Unfavorable lease obligations and other
long-term liabilities
    
    
    8,981
    
    
    
    41,117
    
    
    
    50,09857,323
    
    
    
    2,519,713
    
    
    
    2,577,036Stockholders equity
    
    
    792,071
    
    
    
    (196,396
    )
    
    
    595,675Total liabilities and stockholders equity
    
    $
    1,119,047
    
    
    $
    2,337,581
    
    
    $
    3,456,628
 54




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##### Table of Contents




    
    Tradenames  $646.1 million.
    
    Lease rights  $73.6 million (including residual value of approximately $62 million).
    
    Franchise agreements  $53.0 million.
    
    Favorable lease obligations  $31.9 million
    
    Covenants not to compete  $4.5 million.
  Fiscal Year EndedFebruary 2, 2008
    
    February 3, 2007(in thousands)(unaudited)Net sales
    
    $
    1,510,831
    
    
    $
    1,480,987Depreciation and amortization
    
    
    92,177
    
    
    
    87,567Transaction-related costs
    
    
    7,319
    
    
    
    7,319Operating income
    
    
    175,682
    
    
    
    212,878Interest expense, net
    
    
    218,133
    
    
    
    210,775Income (loss) before income taxes
    
    
    (42,451
    )
    
    
    2,103Net income (loss)
    
    
    (18,054
    )
    
    
    25,902
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
 Use of Estimates
 55




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##### Table of Contents



Fiscal Year
 Cash and Cash Equivalents
  Inventories
 Prepaid Expenses
 January 31, 
2009
    
    
    February 2, 
2008Prepaid rent and occupancy
    
    $
    28,183
    
    
    $
    32,135Prepaid insurance
    
    
    1,585
    
    
    
    1,781Other
    
    
    2,069
    
    
    
    3,399Total prepaid expenses
    
    $
    31,837
    
    
    $
    37,315
 Other Current Assets
 January 31,
    
    
    February 2,2009
    
    
    2008Credit card and other receivables
    
    $
    12,943
    
    
    $
    11,495Store supplies
    
    
    6,533
    
    
    
    6,519Deferred tax assets, net of valuation allowance
    
    
    3,815
    
    
    
    19,474Income taxes receivable
    
    
    3,788
    
    
    
    Other
    
    
    
    
    
    
    170Total other current assets
    
    $
    27,079
    
    
    $
    37,658
 Property and Equipment
 56




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##### Table of Contents



Impairment of Long-Lived Assets
 Goodwill
  Other Assets
 January 31,
    
    
    February 2,2009
    
    
    2008Investment in Claires Nippon joint venture
    
    $
    18,907
    
    
    $
    34,772Initial direct costs of leases
    
    
    16,047
    
    
    
    18,038Prepaid lease payments
    
    
    11,034
    
    
    
    14,235Deferred tax assets, non-current
    
    
    2,117
    
    
    
    1,965Other
    
    
    8,323
    
    
    
    2,744Total other assets
    
    $
    56,428
    
    
    $
    71,754
   57




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##### Table of Contents



Intangible Assets
 Deferred Financing Costs
 Accrued Expenses and Other Current Liabilities
 January 31,
    
    
    February 2,2009
    
    
    2008Compensation and benefits
    
    $
    37,092
    
    
    $
    37,441Interest rate swaps
    
    
    19,734
    
    
    
    22,640Sales and local taxes
    
    
    8,888
    
    
    
    11,548Gift cards and certificates
    
    
    19,772
    
    
    
    17,992Store rent
    
    
    4,678
    
    
    
    6,367Other
    
    
    17,810
    
    
    
    21,088Total accrued expenses and other current liabilities
    
    $
    107,974
    
    
    $
    117,076
 Revenue Recognition
  Cost of Sales
 58




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##### Table of Contents



Leasing
 Income Taxes
 Accounting for Uncertainty in Income Taxes
 Foreign Currency Translation
 Accumulated Other Comprehensive Income (Loss)
 59




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##### Table of Contents



ForeignCurrency
    
    
    DerivativePredecessor Entity
    
    Translation
    
    
    Instruments
    
    
    TotalBalance as of January 29, 2006
    
    $
    21,036
    
    
    $
    
    
    
    $
    21,036Foreign currency translation adjustment
    
    
    12,920
    
    
    
    
    
    
    
    12,920Balance as of February 3, 2007
    
    
    33,956
    
    
    
    
    
    
    
    33,956Foreign currency translation adjustment
    
    
    8,440
    
    
    
    
    
    
    
    8,440Balance as of May 28, 2007
    
    
    42,396
    
    
    
    
    
    
    
    42,396Acquisition transaction
    
    
    (42,396
    )
    
    
    
    
    
    
    (42,396
    )Successor EntityForeign currency translation adjustment
    
    
    17,191
    
    
    
    
    
    
    
    17,191Unrealized loss on interest rate swaps
    
    
    
    
    
    
    (13,833
    )
    
    
    (13,833
    )Balance as of February 2, 2008
    
    
    17,191
    
    
    
    (13,833
    )
    
    
    3,358Foreign currency translation adjustment
    
    
    (27,052
    )
    
    
    
    
    
    
    (27,052
    )Unrealized gain on interest rate swaps
    
    
    
    
    
    
    1,375
    
    
    
    1,375Balance as of January 31, 2009
    
    $
    (9,861
    )
    
    $
    (12,458
    )
    
    $
    (22,319
    )
 Fair Value of Financial Instruments
    Fair Value Measurements at January 31, 2009 UsingQuoted Prices inActive Markets for
    
    
    Significant
    
    
    SignificantIdentical Assets
    
    
    Other Observable
    
    
    Unobservable(Liabilities)
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Debt and Credit Facility
    
    $
    (734,000
    )
    
    $
    
    
    
    $
    Interest rate swaps(net
of $7,276 tax)
    
    $
    
    
    
    $
    (19,734
    )
    
    $
    
 Derivative Financial Instruments
 60




---



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Stock-Based Compensation
  Predecessor Entity
    Successor Entity
   Recent Accounting Pronouncements
   61




---



##### Table of Contents



62




---



##### Table of Contents



Reclassifications
 3. IMPAIRMENT OF ASSETS
  Successor Entity
    
    
    Predecessor EntityPeriod From
    
    
    Period FromFiscal Year
    
    
    May 29, 2007
    
    
    February 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    Through
    
    
    EndedJanuary 31,
    
    
    February 2,
    
    
    May 28,
    
    
    February 3,2009
    
    
    2008
    
    
    2007
    
    
    2007Goodwill
    
    $
    297,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Tradenames
    
    
    199,000
    
    
    
    
    
    
    
    
    
    
    
    Investment in Claires
Nippon (Note 2)
    
    
    25,500
    
    
    
    
    
    
    
    
    
    
    
    Long-lived assets
    
    
    2,490
    
    
    
    3,478
    
    
    
    73
    
    
    
    Total impairment charges
    
    $
    523,990
    
    
    $
    3,478
    
    
    $
    73
    
    
    $
    
    63




---



##### Table of Contents



Goodwill acquired through the Acquisition
    
    $
    1,840,867Goodwill balance as of February 2, 2008
    
    
    1,840,867Goodwill adjustments within one year
    
    
    479Impairment of goodwill
    
    
    (297,000
    )Goodwill balance as of January 31, 2009
    
    $
    1,544,346
   4. INTANGIBLE ASSETS
  64




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##### Table of Contents



January 31, 2009
    
    
    February 2, 2008Estimated
    
    Gross
    
    
    
    
    
    
    GrossLife
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulatedin Years
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets subject to amortization:Lease rights
    
    Lease terms ranging from 4.5 to 16.5
    
    $
    71,307
    
    
    $
    (2,245
    )
    
    $
    81,181
    
    
    $
    (1,008
    )Franchise agreements
    
    
    15
    
    
    
    53,000
    
    
    
    (5,758
    )
    
    
    50,000
    
    
    
    (2,222
    )Favorable lease obligations
    
    
    10
    
    
    
    30,332
    
    
    
    (7,580
    )
    
    
    
    
    
    
    Non-compete agreements
    
    
    2
    
    
    
    4,500
    
    
    
    (3,750
    )
    
    
    4,500
    
    
    
    (1,500
    )Other
    
    
    5
    
    
    
    261
    
    
    
    (38
    )
    
    
    85
    
    
    
    (32
    )Total intangible assets subject to
amortization
    
    
    
    
    
    
    159,400
    
    
    
    (19,371
    )
    
    
    135,766
    
    
    
    (4,762
    )Indefinite-lived tradenames
    
    
    
    
    
    
    447,096
    
    
    
    
    
    
    
    646,126
    
    
    
    Total intangible assets
    
    
    
    
    
    $
    606,496
    
    
    $
    (19,371
    )
    
    $
    781,892
    
    
    $
    (4,762
    )
  Weighted Average AmortizationPeriod for AmortizableIntangible Asset Acquisitions (in 000s)
    
    Amortizable
    
    Intangible Asset AcquisitionsOther:Fiscal 2008
    
    $
    176
    
    
    
    5.0Lease rights:Fiscal 2008
    
    
    1,794
    
    
    
    8.7Period from May 29,
2007 through
February 2, 2008
    
    
    554
    
    
    
    9.2Period from February 4,
2007 through May 28,
2007
    
    
    81
    
    
    
    9.0Fiscal 2006
    
    
    4,945
    
    
    
    12.2
  65




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##### Table of Contents



Fiscal Year


    Amortization2009
    
    $
    12,9692010
    
    
    10,2222011
    
    
    8,9122012
    
    
    7,4012013
    
    
    6,5422014 and thereafter
    
    
    36,458Total
    
    $
    82,504
 5. DEBT
  January 31, 2009
    
    
    February 2, 2008Senior secured term loan facility due 2014
    
    $
    1,428,250
    
    
    $
    1,442,750Senior notes due 2015
    
    
    250,000
    
    
    
    250,000Senior toggle notes due 2015
    
    
    374,522
    
    
    
    350,000Senior subordinated notes due 2017
    
    
    335,000
    
    
    
    335,0002,387,772
    
    
    
    2,377,750Less: current portion of long-term debt
    
    
    (14,500
    )
    
    
    (14,500
    )Long-term debt
    
    $
    2,373,272
    
    
    $
    2,363,250Senior secured revolving credit facility due
2013
    
    $
    194,000
    
    
    $
    
  Term
    
    
    Revolving
    
    
    
    
    
    
    Senior
    
    
    SeniorLoan
    
    
    Credit
    
    
    Senior
    
    
    Toggle
    
    
    SubordinatedFiscal Year
    
    Facility
    
    
    Facility
    
    
    Notes
    
    
    Notes
    
    
    Notes
    
    
    Total2009
    
    $
    14,500
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    14,5002010
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,5002011
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,5002012
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,5002013
    
    
    14,500
    
    
    
    194,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    208,500Thereafter
    
    
    1,355,750
    
    
    
    
    
    
    
    250,000
    
    
    
    374,522
    
    
    
    335,000
    
    
    
    2,315,272Total maturities
    
    $
    1,428,250
    
    
    $
    194,000
    
    
    $
    250,000
    
    
    $
    374,522
    
    
    $
    335,000
    
    
    $
    2,581,772
  66




---



##### Table of Contents



Successor Entity
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    Feb. 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    Through
    
    
    EndedJanuary 31, 2009
    
    
    February 2, 2008
    
    
    May 28, 2007
    
    
    February 3, 2007Term loan facility
    
    $
    88,216
    
    
    $
    81,021
    
    
    $
    
    
    
    $
    Revolving Credit Facility
    
    
    4,835
    
    
    
    
    
    
    
    
    
    
    
    Senior notes
    
    
    23,074
    
    
    
    15,623
    
    
    
    
    
    
    
    Senior toggle notes
    
    
    35,671
    
    
    
    22,753
    
    
    
    
    
    
    
    Senior subordinated notes
    
    
    35,090
    
    
    
    23,757
    
    
    
    
    
    
    
    Amortization of deferred
debt issue costs
    
    
    10,567
    
    
    
    7,079
    
    
    
    
    
    
    
    Other interest expense
    
    
    (17
    )
    
    
    83
    
    
    
    86
    
    
    
    118Interest income
    
    
    (1,489
    )
    
    
    (2,424
    )
    
    
    (4,962
    )
    
    
    (14,693
    )Net interest expense (income)
    
    $
    195,947
    
    
    $
    147,892
    
    
    $
    (4,876
    )
    
    $
    (14,575
    )
  January 31, 2009
    
    
    February 2, 2008Term loan facility
    
    $
    2,899
    
    
    $
    3,948Revolving Credit Facility
    
    
    697
    
    
    
    Senior notes
    
    
    3,854
    
    
    
    3,918Senior toggle notes
    
    
    
    
    
    
    5,708Senior subordinated notes
    
    
    5,863
    
    
    
    5,960Other
    
    
    3
    
    
    
    2Total accrued interest payable
    
    $
    13,316
    
    
    $
    19,536
 Credit Facility
      
    
    a perfected pledge of all the equity interests held by us or any subsidiary guarantor,
which pledge,
 67




---



##### Table of Contents



in the case of any foreign subsidiary, is limited to 100% of the non-voting
equity interests and 65% of the voting equity interests of such foreign subsidiary held
directly by us and the subsidiary guarantors; and
    
    perfected security interests in, and mortgages on, substantially all material tangible
and intangible assets owned by us and each subsidiary guarantor, subject to certain
exceptions.
   
    
    incur additional indebtedness or issue certain preferred shares;
    
    pay dividends on, repurchase or make distributions in respect of our capital stock or
make other restricted payments;
    
    make certain investments;
    
    sell certain assets;
    
    create liens;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
and
    
    enter into certain transactions with our affiliates.
  Senior Notes
  1)
    
    $250.0 million of 9.25% Senior Notes due 2015 (the Senior Cash Pay Notes), and2)
    
    $350.0 million of 9.625%/10.375% Senior Toggle Notes due 2015 (the Senior Toggle
Notes and together with the Senior Cash Pay Notes, the Senior Notes)
 68




---



##### Table of Contents



Senior Subordinated Notes
   69




---



##### Table of Contents



6. COMMITMENTS AND CONTINGENCIES
 Leasing
 Successor Entity
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    Feb. 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    Through
    
    
    EndedJanuary 31,
    
    
    February 2,
    
    
    May 28,
    
    
    February 3,2009
    
    
    2008
    
    
    2007
    
    
    2007Minimum store rentals
    
    $
    205,807
    
    
    $
    137,236
    
    
    $
    60,751
    
    
    $
    178,591Store rentals based on net sales
    
    
    2,398
    
    
    
    2,332
    
    
    
    1,938
    
    
    
    4,421Other rental expense
    
    
    16,745
    
    
    
    7,929
    
    
    
    4,078
    
    
    
    12,051Total rental expense
    
    $
    224,950
    
    
    $
    147,497
    
    
    $
    66,767
    
    
    $
    195,063
 70




---



##### Table of Contents



2009
    
    $
    185,4912010
    
    
    171,0382011
    
    
    154,2072012
    
    
    138,1422013
    
    
    120,958Thereafter
    
    
    352,304Total
    
    $
    1,122,140
    Legal
  Employment Agreements
 Other
   7. STOCKHOLDERS EQUITY
 Predecessor Entity
 Preferred Stock
 71




---



##### Table of Contents



Class A Common Stock
 Rights to Purchase Series A Junior Participating Preferred Stock
 Stock Repurchase Program
 8. STOCK OPTIONS AND STOCK-BASED COMPENSATION
 Predecessor
   72




---



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73




---



##### Table of Contents



Stock Options
  Period from February 4, 2007
    
    
    Fiscal Year Endedthrough May 28, 2007
    
    
    February 3, 2007Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    Averageof
    
    
    Exercise
    
    
    Of
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of period
    
    
    484,000
    
    
    $
    16.31
    
    
    
    1,113,436
    
    
    $
    15.33Options granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options exercised
    
    
    (10,000
    )
    
    
    17.72
    
    
    
    (619,436
    )
    
    
    14.53Options canceled
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    16.93Options converted
    
    
    (474,000
    )
    
    
    16.28
    
    
    
    
    
    
    
    Outstanding at end of period
    
    
    
    
    
    $
    
    
    
    
    484,000
    
    
    $
    16.31Exercisable at end of period
    
    
    
    
    
    $
    
    
    
    
    484,000
    
    
    $
    16.31
  Time-Vested Stock Awards
     74




---



##### Table of Contents



Period From February 4, 2007
    
    
    Fiscal Year EndedThrough May 28, 2007
    
    
    February 3, 2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageNumber of
    
    
    Grant Date
    
    
    Number of
    
    
    Grant DateShares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair ValueNon-vested at beginning of period
    
    
    93,400
    
    
    $
    22.64
    
    
    
    169,933
    
    
    $
    22.48Granted
    
    
    
    
    
    
    
    
    
    
    18,400
    
    
    
    24.38Vested
    
    
    (93,400
    )
    
    
    22.64
    
    
    
    (94,933
    )
    
    
    22.70Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-vested at end of period
    
    
    
    
    
    $
    
    
    
    
    93,400
    
    
    $
    22.64
 Long-Term Incentive Stock Plans
    75




---



##### Table of Contents



Successor Entity
    .
  76




---



##### Table of Contents



WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Exercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Life (Years)
    
    ValueOutstanding as of date of Acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options granted
    
    
    6,204,872
    
    
    $
    10.00
    
    
    
    6.4
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options forfeited
    
    
    (62,250
    )
    
    
    
    
    
    
    
    
    
    
    Options expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding as of February 2, 2008
    
    
    6,142,622
    
    
    $
    10.00
    
    
    
    6.4
    
    
    
    Options granted
    
    
    2,216,800
    
    
    $
    10.00
    
    
    
    6.4
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options forfeited
    
    
    (1,551,866
    )
    
    
    
    
    
    
    6.3
    
    
    
    Options expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding as of January 31, 2009
    
    
    6,807,556
    
    
    $
    10.00
    
    
    
    5.5
    
    
    
    Exercisable at end of period
    
    
    1,392,378
    
    
    $
    10.00
    
    
    
    5.3
    
    
    
    
   Fiscal 2008
    
    May 29, 2007 Through Feb. 2, 2008Time Options
    
    Performance
    
    Time Options
    
    Performanceand BOGO Options
    
    Options
    
    and BOGO Options
    
    Options(Black-Scholes)
    
    (Monte Carlo)
    
    (Black-Scholes)
    
    (Monte Carlo)Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Weighted average expected stock price
volatility
    
    
    45.26
    %
    
    
    48.00
    %
    
    
    47.56
    %
    
    
    52.00
    %Weighted average risk-free interest rate
    
    
    3.18
    %
    
    
    3.21
    %
    
    
    4.55
    %
    
    
    4.71
    %Range of risk-free interest rate
    
    
    2.50% - 3.44
    %
    
    
    1.56% - 4.38
    %
    
    
    2.99% - 5.01
    %
    
    
    2.97% - 5.16
    %Weighted average expected life of
options (years)
    
    
    4.75
    
    
    
    N/A
    
    
    
    4.92
    
    
    
    N/A
    77




---



##### Table of Contents



Time-Vested Stock Awards
   Weighted AverageShares
    
    
    Grant Date Fair ValueNonvested at date of Acquisition of May 29, 2007
    
    
    
    
    
    
    Granted
    
    
    125,000
    
    
    $
    10.00Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Nonvested as of February 2, 2008
    
    
    125,000
    
    
    $
    10.00Granted
    
    
    
    
    
    
    Vested
    
    
    (31,250
    )
    
    $
    10.00Forfeited
    
    
    
    
    
    
    Nonvested as of January 31, 2009
    
    
    93,750
    
    
    $
    10.00
 9. DERIVATIVES AND HEDGING ACTIVITIES
     78




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##### Table of Contents



10. EMPLOYEE BENEFIT PLANS
  Predecessor Entity
  79




---



##### Table of Contents



11. INCOME TAXES
  Successor Entity
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    Feb. 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    Through
    
    
    EndedJan. 31, 2009
    
    
    Feb. 2, 2008
    
    
    May 28, 2007
    
    
    Feb. 3, 2007U.S.
    
    $
    (501,248
    )
    
    $
    (75,357
    )
    
    $
    (27,568
    )
    
    $
    198,603Foreign
    
    
    (140,835
    )
    
    
    67,978
    
    
    
    5,575
    
    
    
    70,047Total income (loss)
before income taxes
    
    $
    (642,083
    )
    
    $
    (7,379
    )
    
    $
    (21,993
    )
    
    $
    268,650
  Successor Entity
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    Feb. 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    Through
    
    
    EndedJan. 31, 2009
    
    
    Feb. 2, 2008
    
    
    May 28, 2007
    
    
    Feb. 3, 2007Federal:Current
    
    $
    509
    
    
    $
    (460
    )
    
    $
    16,408
    
    
    $
    64,044Deferred
    
    
    12,440
    
    
    
    (10,838
    )
    
    
    6,416
    
    
    
    (3,169
    )12,949
    
    
    
    (11,298
    )
    
    
    22,824
    
    
    
    60,875StateCurrent
    
    
    225
    
    
    
    (381
    )
    
    
    314
    
    
    
    5,978Deferred
    
    
    (11,413
    )
    
    
    (5,283
    )
    
    
    599
    
    
    
    (508
    )(11,188
    )
    
    
    (5,664
    )
    
    
    913
    
    
    
    5,470ForeignCurrent
    
    
    5,532
    
    
    
    8,768
    
    
    
    (1,670
    )
    
    
    14,333Deferred
    
    
    (5,784
    )
    
    
    174
    
    
    
    (288
    )
    
    
    (790
    )(252
    )
    
    
    8,942
    
    
    
    (1,958
    )
    
    
    13,543Total income tax expense (benefit)
    
    $
    1,509
    
    
    $
    (8,020
    )
    
    $
    21,779
    
    
    $
    79,888
  Successor Entity
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    Feb. 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    Through
    
    
    EndedJan. 31, 2009
    
    
    Feb. 2, 2008
    
    
    May 28, 2007
    
    
    Feb. 3, 2007U.S. income taxes at statutory federal rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Valuation allowance
    
    
    (15.6
    )
    
    
    
    
    
    
    
    
    
    
    Nondeductible impairment charges
    
    
    (17.6
    )
    
    
    
    
    
    
    
    
    
    
    Foreign rate differential
    
    
    (0.4
    )
    
    
    237.8
    
    
    
    28.6
    
    
    
    (6.8
    )State and local income taxes, net of federal tax
benefit
    
    
    1.1
    
    
    
    12.0
    
    
    
    (0.1
    )
    
    
    1.7Transaction related costs
    
    
    
    
    
    
    
    
    
    
    (45.3
    )
    
    
    Repatriation of foreign earnings
    
    
    (2.1
    )
    
    
    (70.7
    )
    
    
    (100.1
    )
    
    
    Change in accrual for estimated tax contingencies
    
    
    (0.4
    )
    
    
    (24.9
    )
    
    
    (5.3
    )
    
    
    (3.0
    )Other, net
    
    
    (0.2
    )
    
    
    (80.5
    )
    
    
    (11.8
    )
    
    
    2.8(0.2
    )%
    
    
    108.7
    %
    
    
    (99.0
    )%
    
    
    29.7
    %
  80




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##### Table of Contents



Jan. 31, 2009
    
    
    Feb. 2, 2008Deferred tax assets:Accrued expenses
    
    $
    4,770
    
    
    $
    5,956Deferred rent
    
    
    5,983
    
    
    
    643Compensation & benefits
    
    
    8,813
    
    
    
    4,366Inventory
    
    
    1,297
    
    
    
    1,331Gift cards
    
    
    1,740
    
    
    
    1,319Tax carryforwards
    
    
    89,774
    
    
    
    59,235Other
    
    
    15,231
    
    
    
    9,443Total gross deferred tax assets
    
    
    127,608
    
    
    
    82,293Valuation allowance
    
    
    (110,228
    )
    
    
    (11,472
    )Total deferred tax assets, net
    
    
    17,380
    
    
    
    70,821Deferred tax liabilities:Depreciation
    
    
    3,229
    
    
    
    4,011Tradename intangibles
    
    
    109,713
    
    
    
    168,880Other
    
    
    11,335
    
    
    
    15,997Total deferred tax liabilities
    
    
    124,277
    
    
    
    188,888Net deferred tax liability
    
    $
    (106,897
    )
    
    $
    (118,067
    )
  Jan. 31, 2009
    
    
    Feb. 2, 2008Current deferred tax assets, net of valuation allowance
    
    $
    3,815
    
    
    $
    19,474Current deferred tax liabilities
    
    
    
    
    
    
    Non-current deferred tax assets, net of valuation
allowance
    
    
    2,117
    
    
    
    1,965Non-current deferred tax liabilities
    
    
    (112,829
    )
    
    
    (139,506
    )Net
    
    $
    (106,897
    )
    
    $
    (118,067
    )
 81




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##### Table of Contents



Amount
    
    
    Expiration DateU.S. federal net operating loss carryforwards
    
    $
    63,234
    
    
    2028 - 2029Non-U.S. net operating loss carryforwards
    
    
    11,053
    
    
    IndefiniteNon-U.S. net operating loss carryforwards
    
    
    4,751
    
    
    2015 - 2024State net operating loss carryforwards
    
    
    5,433
    
    
    2013 - 2029U.S. foreign tax credits
    
    
    5,303
    
    
    2019Total
    
    $
    89,774
      82




---



##### Table of Contents



May 29, 2007
    
    February 4, 2007Through
    
    ThroughFiscal 2008
    
    February 2, 2008
    
    May 28, 2007Beginning balance
    
    $
    9,617
    
    
    $
    7,386
    
    
    $
    6,481Additions based on tax positions related
to the current year
    
    
    2,070
    
    
    
    1,418
    
    
    
    748Additions for tax positions of prior years
    
    
    1
    
    
    
    1,754
    
    
    
    174Reductions for tax positions of prior years
    
    
    
    
    
    
    (517
    )
    
    
    (17
    )Statute expirations
    
    
    (154
    )
    
    
    (239
    )
    
    
    Settlements
    
    
    (491
    )
    
    
    (185
    )
    
    
    Ending balance
    
    $
    11,043
    
    
    $
    9,617
    
    
    $
    7,386
     12. RELATED PARTY TRANSACTIONS
   83




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##### Table of Contents



13. SELECTED QUARTERLY FINANCIAL DATA
  Successor EntityFiscal Year Ended January 31, 20091st Qtr
    
    2nd Qtr
    
    3rd Qtr
    
    4th Qtr
    
    Total YearNet sales
    
    $
    327,003
    
    
    $
    359,973
    
    
    $
    332,971
    
    
    $
    393,013
    
    
    $
    1,412,960Gross profit
    
    
    155,021
    
    
    
    179,706
    
    
    
    161,992
    
    
    
    195,890
    
    
    
    692,609Impairment of assets (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    523,990
    
    
    
    523,990Severance and
transaction related
costs
    
    
    5,968
    
    
    
    296
    
    
    
    (569
    )
    
    
    10,233
    
    
    
    15,928Interest expense (income)
    
    
    48,657
    
    
    
    48,739
    
    
    
    50,462
    
    
    
    48,089
    
    
    
    195,947Income taxes (b)
    
    
    (16,910
    )
    
    
    (6,831
    )
    
    
    (12,880
    )
    
    
    38,130
    
    
    
    1,509Net loss
    
    
    (35,570
    )
    
    
    (16,931
    )
    
    
    (21,554
    )
    
    
    (569,537
    )
    
    
    (643,592
    )
 Fiscal Year Ended February 2, 2008Predecessor Entity
    

    Successor Entity1st Qtr
    
    2nd Qtr
    
    3rd Qtr
    
    4th Qtr
    
    YearMay 6, 2007
    
    May 29, 2007Through
    
    ThroughMay 28, 2007
    
    August 4, 2007Net sales
    
    $
    340,571
    
    
    $
    84,328
    
    
    $
    281,190
    
    
    $
    357,366
    
    
    $
    447,376
    
    
    $
    1,510,831Gross profit
    
    
    178,980
    
    
    
    39,481
    
    
    
    142,915
    
    
    
    181,151
    
    
    
    240,482
    
    
    
    783,009Impairment of assets (a)
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,478
    
    
    
    3,551Severance and
transaction related
costs
    
    
    3,486
    
    
    
    69,186
    
    
    
    2,061
    
    
    
    1,200
    
    
    
    4,058
    
    
    
    79,991Interest expense (income)
    
    
    (3,753
    )
    
    
    (1,123
    )
    
    
    35,928
    
    
    
    56,322
    
    
    
    55,642
    
    
    
    143,016Income taxes
    
    
    12,888
    
    
    
    8,891
    
    
    
    217
    
    
    
    (15,449
    )
    
    
    7,212
    
    
    
    13,759Net income (loss)
    
    
    28,781
    
    
    
    (72,553
    )
    
    
    (805
    )
    
    
    (13,812
    )
    
    
    15,258
    
    
    
    (43,131
    )
 84




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##### Table of Contents



(a)
    
    Represents impairment charges related to goodwill, tradenames, investment in joint venture and
long-lived assets. See Note 3 for detail of impairment charges.(b)
    
    Includes a $95.8 million charge for an increase in the valuation allowance related to deferred
tax assets. 14. SEGMENT REPORTING
   Successor Entity
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    Feb. 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    Through
    
    
    EndedJan. 31, 2009
    
    
    Feb. 2, 2008
    
    
    May 28, 2007
    
    
    Feb. 3, 2007Net sales:North America
    
    $
    907,486
    
    
    $
    702,986
    
    
    $
    292,483
    
    
    $
    1,024,009Europe
    
    
    505,474
    
    
    
    382,946
    
    
    
    132,416
    
    
    
    456,978Total net sales
    
    $
    1,412,960
    
    
    $
    1,085,932
    
    
    $
    424,899
    
    
    $
    1,480,987Depreciation and amortization:North America
    
    $
    57,516
    
    
    $
    42,846
    
    
    $
    12,823
    
    
    $
    37,252Europe
    
    
    27,577
    
    
    
    18,605
    
    
    
    6,829
    
    
    
    19,519Total depreciation and amortization
    
    $
    85,093
    
    
    $
    61,451
    
    
    $
    19,652
    
    
    $
    56,771Segment operating income (loss):North America
    
    $
    63,490
    
    
    $
    98,716
    
    
    $
    46,569
    
    
    $
    197,961Europe
    
    
    30,292
    
    
    
    52,594
    
    
    
    (693
    )
    
    
    56,114Total segment operating income (loss)
    
    $
    93,782
    
    
    $
    151,310
    
    
    $
    45,876
    
    
    $
    254,075Impairment of assets:North America
    
    $
    339,500
    
    
    $
    3,478
    
    
    $
    
    
    
    $
    Europe
    
    
    184,490
    
    
    
    
    
    
    
    73
    
    
    
    Total impairment charges
    
    $
    523,990
    
    
    $
    3,478
    
    
    $
    73
    
    
    $
    Interest expense (income), net:North America
    
    $
    196,732
    
    
    $
    148,616
    
    
    $
    (3,898
    )
    
    $
    (12,617
    )Europe
    
    
    (785
    )
    
    
    (724
    )
    
    
    (978
    )
    
    
    (1,958
    )Total interest expense (income), net
    
    $
    195,947
    
    
    $
    147,892
    
    
    $
    (4,876
    )
    
    $
    (14,575
    )Income (loss) before income taxes:North America
    
    $
    (482,670
    )
    
    $
    (59,468
    )
    
    $
    (22,205
    )
    
    $
    210,578Europe
    
    
    (159,413
    )
    
    
    52,089
    
    
    
    212
    
    
    
    58,072Total income (loss) before income taxes
    
    $
    (642,083
    )
    
    $
    (7,379
    )
    
    $
    (21,993
    )
    
    $
    268,650Income taxes:North America
    
    $
    1,613
    
    
    $
    (17,444
    )
    
    $
    25,189
    
    
    $
    70,207Europe
    
    
    (104
    )
    
    
    9,424
    
    
    
    (3,410
    )
    
    
    9,681Total income taxes
    
    $
    1,509
    
    
    $
    (8,020
    )
    
    $
    21,779
    
    
    $
    79,888Net income (loss):North America
    
    $
    (484,283
    )
    
    $
    (42,024
    )
    
    $
    (47,394
    )
    
    $
    140,371
 85




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##### Table of Contents



Successor Entity
    
    
    Predecessor EntityFiscal Year
    
    
    May 29, 2007
    
    
    Feb. 4, 2007
    
    
    Fiscal YearEnded
    
    
    Through
    
    
    Through
    
    
    EndedJan. 31, 2009
    
    
    Feb. 2, 2008
    
    
    May 28, 2007
    
    
    Feb. 3, 2007Europe
    
    
    (159,309
    )
    
    
    42,665
    
    
    
    3,622
    
    
    
    48,391Net income (loss)
    
    $
    (643,592
    )
    
    $
    641
    
    
    $
    (43,772
    )
    
    $
    188,762Goodwill:North America
    
    $
    1,229,941
    
    
    $
    1,401,959
    
    
    $
    170,650
    
    
    $
    170,650Europe
    
    
    314,405
    
    
    
    438,908
    
    
    
    30,902
    
    
    
    30,292Total goodwill
    
    $
    1,544,346
    
    
    $
    1,840,867
    
    
    $
    201,552
    
    
    $
    200,942Long lived assets:North America
    
    $
    197,839
    
    
    $
    217,230
    
    
    $
    189,226
    
    
    $
    181,756Europe
    
    
    68,232
    
    
    
    92,379
    
    
    
    87,249
    
    
    
    83,569Total long lived assets
    
    $
    266,071
    
    
    $
    309,609
    
    
    $
    276,475
    
    
    $
    265,325Total assets:North America
    
    $
    1,687,952
    
    
    $
    2,600,540
    
    
    $
    746,996
    
    
    $
    746,805Europe
    
    
    1,193,143
    
    
    
    747,957
    
    
    
    372,051
    
    
    
    344,461Total assets
    
    $
    2,881,095
    
    
    $
    3,348,497
    
    
    $
    1,119,047
    
    
    $
    1,091,266Capital expenditures:North America
    
    $
    42,623
    
    
    $
    38,105
    
    
    $
    19,697
    
    
    $
    62,557Europe
    
    
    16,782
    
    
    
    20,379
    
    
    
    8,291
    
    
    
    32,635Total capital expenditures
    
    $
    59,405
    
    
    $
    58,484
    
    
    $
    27,988
    
    
    $
    95,192
     86




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##### Table of Contents



15. SUPPLEMENTAL FINANCIAL INFORMATION
   87




---



##### Table of Contents



Condensed Consolidating Balance Sheet
January 31, 2009
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    154,414
    
    
    $
    211
    
    
    $
    49,949
    
    
    $
    
    
    
    $
    204,574Inventories
    
    
    
    
    
    
    73,445
    
    
    
    30,246
    
    
    
    
    
    
    
    103,691Prepaid expenses
    
    
    434
    
    
    
    14,641
    
    
    
    16,762
    
    
    
    
    
    
    
    31,837Other current assets
    
    
    6
    
    
    
    16,104
    
    
    
    10,969
    
    
    
    
    
    
    
    27,079Total current assets
    
    
    154,854
    
    
    
    104,401
    
    
    
    107,926
    
    
    
    
    
    
    
    367,181Property and equipment:Land and building
    
    
    
    
    
    
    22,288
    
    
    
    
    
    
    
    
    
    
    
    22,288Furniture, fixtures and equipment
    
    
    2,025
    
    
    
    103,571
    
    
    
    38,106
    
    
    
    
    
    
    
    143,702Leasehold improvements
    
    
    1,704
    
    
    
    136,554
    
    
    
    75,749
    
    
    
    
    
    
    
    214,0073,729
    
    
    
    262,413
    
    
    
    113,855
    
    
    
    
    
    
    
    379,997Less accumulated depreciation and amortization
    
    
    (1,250
    )
    
    
    (77,042
    )
    
    
    (35,634
    )
    
    
    
    
    
    
    (113,926
    )2,479
    
    
    
    185,371
    
    
    
    78,221
    
    
    
    
    
    
    
    266,071Intercompany receivables
    
    
    
    
    
    
    26,876
    
    
    
    58,416
    
    
    
    (85,292
    )
    
    
    Investment in subsidiaries
    
    
    2,139,955
    
    
    
    (4,061
    )
    
    
    
    
    
    
    (2,135,894
    )
    
    
    Intangible assets, net
    
    
    286,750
    
    
    
    17,960
    
    
    
    282,415
    
    
    
    
    
    
    
    587,125Deferred financing costs, net
    
    
    59,944
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,944Other assets
    
    
    19,392
    
    
    
    2,602
    
    
    
    34,434
    
    
    
    
    
    
    
    56,428Goodwill
    
    
    
    
    
    
    1,229,940
    
    
    
    314,406
    
    
    
    
    
    
    
    1,544,3462,506,041
    
    
    
    1,273,317
    
    
    
    689,671
    
    
    
    (2,221,186
    )
    
    
    2,247,843Total assets
    
    $
    2,663,374
    
    
    $
    1,563,089
    
    
    $
    875,818
    
    
    $
    (2,221,186
    )
    
    $
    2,881,095LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Trade accounts payable
    
    $
    2,347
    
    
    $
    21,112
    
    
    $
    29,778
    
    
    $
    
    
    
    $
    53,237Current portion of long-term debt
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,500Income taxes payable
    
    
    
    
    
    
    
    
    
    
    6,477
    
    
    
    
    
    
    
    6,477Accrued interest payable
    
    
    13,313
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    13,316Accrued expenses and other current liabilities
    
    
    35,795
    
    
    
    35,782
    
    
    
    36,397
    
    
    
    
    
    
    
    107,974Total current liabilities
    
    
    65,955
    
    
    
    56,894
    
    
    
    72,655
    
    
    
    
    
    
    
    195,504Intercompany payables
    
    
    85,292
    
    
    
    
    
    
    
    
    
    
    
    (85,292
    )
    
    
    Long-term debt
    
    
    2,373,272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,373,272Revolving Credit Facility
    
    
    194,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,000Deferred tax liability
    
    
    
    
    
    
    99,122
    
    
    
    13,707
    
    
    
    
    
    
    
    112,829Deferred rent expense
    
    
    698
    
    
    
    12,532
    
    
    
    5,232
    
    
    
    
    
    
    
    18,462Unfavorable lease obligations and other long-term
liabilities
    
    
    
    
    
    
    39,074
    
    
    
    3,797
    
    
    
    
    
    
    
    42,8712,653,262
    
    
    
    150,728
    
    
    
    22,736
    
    
    
    (85,292
    )
    
    
    2,741,434Stockholders equity (deficit):Common stock
    
    
    
    
    
    
    367
    
    
    
    2
    
    
    
    (369
    )
    
    
    Additional paid in capital
    
    
    609,427
    
    
    
    1,445,795
    
    
    
    876,798
    
    
    
    (2,322,593
    )
    
    
    609,427Accumulated other comprehensive loss, net of tax
    
    
    (22,319
    )
    
    
    (2,326
    )
    
    
    (20,597
    )
    
    
    22,923
    
    
    
    (22,319
    )Retained earnings (deficit)
    
    
    (642,951
    )
    
    
    (88,369
    )
    
    
    (75,776
    )
    
    
    164,145
    
    
    
    (642,951
    )(55,843
    )
    
    
    1,355,467
    
    
    
    780,427
    
    
    
    (2,135,894
    )
    
    
    (55,843
    )Total liabilities and stockholders equity (deficit)
    
    $
    2,663,374
    
    
    $
    1,563,089
    
    
    $
    875,818
    
    
    $
    (2,221,186
    )
    
    $
    2,881,095
 88




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##### Table of Contents



Condensed Consolidating Balance Sheet
February 2, 2008
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    25,835
    
    
    $
    1,892
    
    
    $
    58,247
    
    
    $
    
    
    
    $
    85,974Inventories
    
    
    
    
    
    
    84,952
    
    
    
    32,727
    
    
    
    
    
    
    
    117,679Prepaid expenses
    
    
    403
    
    
    
    15,264
    
    
    
    21,648
    
    
    
    
    
    
    
    37,315Other current assets
    
    
    100
    
    
    
    31,501
    
    
    
    6,057
    
    
    
    
    
    
    
    37,658Total current assets
    
    
    26,338
    
    
    
    133,609
    
    
    
    118,679
    
    
    
    
    
    
    
    278,626Property and equipment:Land and building
    
    
    
    
    
    
    22,288
    
    
    
    
    
    
    
    
    
    
    
    22,288Furniture, fixtures and equipment
    
    
    2,050
    
    
    
    83,924
    
    
    
    44,156
    
    
    
    
    
    
    
    130,130Leasehold improvements
    
    
    1,628
    
    
    
    127,522
    
    
    
    82,013
    
    
    
    
    
    
    
    211,1633,678
    
    
    
    233,734
    
    
    
    126,169
    
    
    
    
    
    
    
    363,581Less accumulated depreciation and amortization
    
    
    (609
    )
    
    
    (34,615
    )
    
    
    (18,748
    )
    
    
    
    
    
    
    (53,972
    )3,069
    
    
    
    199,119
    
    
    
    107,421
    
    
    
    
    
    
    
    309,609Intercompany receivables
    
    
    20,198
    
    
    
    
    
    
    
    13
    
    
    
    (20,211
    )
    
    
    Investment in subsidiaries
    
    
    2,452,074
    
    
    
    5,764
    
    
    
    
    
    
    
    (2,457,838
    )
    
    
    Intangible assets, net
    
    
    423,000
    
    
    
    300
    
    
    
    353,830
    
    
    
    
    
    
    
    777,130Deferred financing costs
    
    
    70,511
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,511Other assets
    
    
    35,124
    
    
    
    1,269
    
    
    
    35,361
    
    
    
    
    
    
    
    71,754Goodwill
    
    
    
    
    
    
    1,401,959
    
    
    
    438,908
    
    
    
    
    
    
    
    1,840,8673,000,907
    
    
    
    1,409,292
    
    
    
    828,112
    
    
    
    (2,478,049
    )
    
    
    2,760,262Total assets
    
    $
    3,030,314
    
    
    $
    1,742,020
    
    
    $
    1,054,212
    
    
    $
    (2,478,049
    )
    
    $
    3,348,497LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Trade accounts payable
    
    $
    762
    
    
    $
    22,140
    
    
    $
    33,187
    
    
    $
    
    
    
    $
    56,089Current portion of long-term debt
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,500Income taxes payable
    
    
    (8,383
    )
    
    
    14,246
    
    
    
    6,328
    
    
    
    
    
    
    
    12,191Accrued interest payable
    
    
    19,534
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    19,536Accrued expenses and other current liabilities
    
    
    34,194
    
    
    
    39,737
    
    
    
    43,145
    
    
    
    
    
    
    
    117,076Total current liabilities
    
    
    60,607
    
    
    
    76,123
    
    
    
    82,662
    
    
    
    
    
    
    
    219,392Intercompany payables
    
    
    
    
    
    
    20,211
    
    
    
    
    
    
    
    (20,211
    )
    
    
    Long-term debt
    
    
    2,363,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,363,250Deferred tax liability
    
    
    
    
    
    
    120,742
    
    
    
    18,764
    
    
    
    
    
    
    
    139,506Deferred rent expense
    
    
    1,257
    
    
    
    5,350
    
    
    
    3,965
    
    
    
    
    
    
    
    10,572Unfavorable lease obligation and other long-term liabilities
    
    
    
    
    
    
    10,577
    
    
    
    
    
    
    
    
    
    
    
    10,5772,364,507
    
    
    
    156,880
    
    
    
    22,729
    
    
    
    (20,211
    )
    
    
    2,523,905Stockholders equity (deficit):Common stock
    
    
    
    
    
    
    367
    
    
    
    2
    
    
    
    (369
    )
    
    
    Additional paid in capital
    
    
    601,201
    
    
    
    1,449,307
    
    
    
    878,145
    
    
    
    (2,327,452
    )
    
    
    601,201Accumulated other comprehensive income, net of tax
    
    
    3,358
    
    
    
    2,959
    
    
    
    17,513
    
    
    
    (20,472
    )
    
    
    3,358Retained earnings
    
    
    641
    
    
    
    56,384
    
    
    
    53,161
    
    
    
    (109,545
    )
    
    
    641605,200
    
    
    
    1,509,017
    
    
    
    948,821
    
    
    
    (2,457,838
    )
    
    
    605,200Total liabilities and stockholders equity (deficit)
    
    $
    3,030,314
    
    
    $
    1,742,020
    
    
    $
    1,054,212
    
    
    $
    (2,478,049
    )
    
    $
    3,348,497
 89




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##### Table of Contents



Successor Entity
Condensed Consolidating Statement of Operations and Comprehensive Loss
Fiscal Year Ended January 31, 2009
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,482,874
    
    
    $
    567,530
    
    
    $
    (637,444
    )
    
    $
    1,412,960Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    1,078,308
    
    
    
    279,487
    
    
    
    (637,444
    )
    
    
    720,351Gross profit
    
    
    
    
    
    
    404,566
    
    
    
    288,043
    
    
    
    
    
    
    
    692,609Other expenses (income):Selling, general and administrative
    
    
    32,720
    
    
    
    271,281
    
    
    
    214,232
    
    
    
    
    
    
    
    518,233Depreciation and amortization
    
    
    3,013
    
    
    
    50,584
    
    
    
    31,496
    
    
    
    
    
    
    
    85,093Impairment of assets
    
    
    159,500
    
    
    
    180,000
    
    
    
    184,490
    
    
    
    
    
    
    
    523,990Severance and transaction-related costs
    
    
    2,374
    
    
    
    7,553
    
    
    
    6,001
    
    
    
    
    
    
    
    15,928Other (income) expense
    
    
    (19,778
    )
    
    
    21,740
    
    
    
    (6,461
    )
    
    
    
    
    
    
    (4,499
    )177,829
    
    
    
    531,158
    
    
    
    429,758
    
    
    
    
    
    
    
    1,138,745Operating loss
    
    
    (177,829
    )
    
    
    (126,592
    )
    
    
    (141,715
    )
    
    
    
    
    
    
    (446,136
    )Interest expense (income), net
    
    
    197,089
    
    
    
    (261
    )
    
    
    (881
    )
    
    
    
    
    
    
    195,947Loss before income taxes
    
    
    (374,918
    )
    
    
    (126,331
    )
    
    
    (140,834
    )
    
    
    
    
    
    
    (642,083
    )Income tax expense (benefit)
    
    
    (18,143
    )
    
    
    19,904
    
    
    
    (252
    )
    
    
    
    
    
    
    1,509Loss from continuing operations
    
    
    (356,775
    )
    
    
    (146,235
    )
    
    
    (140,582
    )
    
    
    
    
    
    
    (643,592
    )Equity in earnings (loss) of subsidiaries
    
    
    (286,817
    )
    
    
    7,706
    
    
    
    
    
    
    
    279,111
    
    
    
    Net loss
    
    
    (643,592
    )
    
    
    (138,529
    )
    
    
    (140,582
    )
    
    
    279,111
    
    
    
    (643,592
    )Foreign currency translation adjustments and
interest rate swap
adjustments, net
    
    
    (25,677
    )
    
    
    (5,285
    )
    
    
    (38,137
    )
    
    
    43,422
    
    
    
    (25,677
    )Comprehensive loss
    
    $
    (669,269
    )
    
    $
    (143,814
    )
    
    $
    (178,719
    )
    
    $
    322,533
    
    
    $
    (669,269
    )
 Successor Entity
Condensed Consolidating Statement of Operations and Comprehensive Income
For The Period May 29, 2007 Through February 2, 2008
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,224,858
    
    
    $
    431,615
    
    
    $
    (570,541
    )
    
    $
    1,085,932Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    893,847
    
    
    
    198,078
    
    
    
    (570,541
    )
    
    
    521,384Gross profit
    
    
    
    
    
    
    331,011
    
    
    
    233,537
    
    
    
    
    
    
    
    564,548Other expenses (income):Selling, general and administrative
    
    
    18,897
    
    
    
    188,066
    
    
    
    147,912
    
    
    
    
    
    
    
    354,875Depreciation and amortization
    
    
    2,136
    
    
    
    37,930
    
    
    
    21,385
    
    
    
    
    
    
    
    61,451Impairment of assets
    
    
    
    
    
    
    3,478
    
    
    
    
    
    
    
    
    
    
    
    3,478Severance and transaction-related costs
    
    
    6,090
    
    
    
    
    
    
    
    1,229
    
    
    
    
    
    
    
    7,319Other (income) expense
    
    
    (8,570
    )
    
    
    9,595
    
    
    
    (4,113
    )
    
    
    
    
    
    
    (3,088
    )18,553
    
    
    
    239,069
    
    
    
    166,413
    
    
    
    
    
    
    
    424,035Operating income (loss)
    
    
    (18,553
    )
    
    
    91,942
    
    
    
    67,124
    
    
    
    
    
    
    
    140,513Interest expense (income), net
    
    
    149,527
    
    
    
    (711
    )
    
    
    (924
    )
    
    
    
    
    
    
    147,892Income (loss) before income taxes
    
    
    (168,080
    )
    
    
    92,653
    
    
    
    68,048
    
    
    
    
    
    
    
    (7,379
    )Income tax expense (benefit)
    
    
    (56,335
    )
    
    
    38,035
    
    
    
    10,280
    
    
    
    
    
    
    
    (8,020
    )Income (loss) from continuing operations
    
    
    (111,745
    )
    
    
    54,618
    
    
    
    57,768
    
    
    
    
    
    
    
    641Equity in earnings of subsidiaries
    
    
    112,386
    
    
    
    6,371
    
    
    
    
    
    
    
    (118,757
    )
    
    
    Net income
    
    
    641
    
    
    
    60,989
    
    
    
    57,768
    
    
    
    (118,757
    )
    
    
    641Foreign currency translation and interest
rate swap adjustments, net
    
    
    3,358
    
    
    
    2,959
    
    
    
    17,513
    
    
    
    (20,472
    )
    
    
    3,358Comprehensive income
    
    $
    3,999
    
    
    $
    63,948
    
    
    $
    75,281
    
    
    $
    (139,229
    )
    
    $
    3,999
 90




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##### Table of Contents



Predecessor Entity
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Period February 4, 2007 Through May 28, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    540,394
    
    
    $
    149,666
    
    
    $
    (265,161
    )
    
    $
    424,899Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    397,435
    
    
    
    74,164
    
    
    
    (265,161
    )
    
    
    206,438Gross profit
    
    
    
    
    
    
    142,959
    
    
    
    75,502
    
    
    
    
    
    
    
    218,461Other expenses (income):Selling, general and administrative
    
    
    7,021
    
    
    
    84,633
    
    
    
    62,755
    
    
    
    
    
    
    
    154,409Depreciation and amortization
    
    
    367
    
    
    
    11,504
    
    
    
    7,781
    
    
    
    
    
    
    
    19,652Impairment of assets
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    73Severance and transaction-related costs
    
    
    72,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,672Other (income) expense
    
    
    (8,054
    )
    
    
    5,926
    
    
    
    652
    
    
    
    
    
    
    
    (1,476
    )72,006
    
    
    
    102,063
    
    
    
    71,261
    
    
    
    
    
    
    
    245,330Operating income (loss)
    
    
    (72,006
    )
    
    
    40,896
    
    
    
    4,241
    
    
    
    
    
    
    
    (26,869
    )Interest expense (income), net
    
    
    (3,235
    )
    
    
    (376
    )
    
    
    (1,265
    )
    
    
    
    
    
    
    (4,876
    )Income (loss) before income taxes
    
    
    (68,771
    )
    
    
    41,272
    
    
    
    5,506
    
    
    
    
    
    
    
    (21,993
    )Income tax expense (benefit)
    
    
    8,369
    
    
    
    15,361
    
    
    
    (1,951
    )
    
    
    
    
    
    
    21,779Income (loss) from continuing operations
    
    
    (77,140
    )
    
    
    25,911
    
    
    
    7,457
    
    
    
    
    
    
    
    (43,772
    )Equity in earnings of subsidiaries
    
    
    33,368
    
    
    
    2,775
    
    
    
    
    
    
    
    (36,143
    )
    
    
    Net income (loss)
    
    
    (43,772
    )
    
    
    28,686
    
    
    
    7,457
    
    
    
    (36,143
    )
    
    
    (43,772
    )Foreign currency translation adjustments
    
    
    8,440
    
    
    
    2,861
    
    
    
    8,478
    
    
    
    (11,339
    )
    
    
    8,440Comprehensive income (loss)
    
    $
    (35,332
    )
    
    $
    31,547
    
    
    $
    15,935
    
    
    $
    (47,482
    )
    
    $
    (35,332
    )
 Predecessor Entity
Condensed Consolidating Statement of Operations and Comprehensive Income
Fiscal Year Ended February 3, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,905,368
    
    
    $
    526,451
    
    
    $
    (950,832
    )
    
    $
    1,480,987Cost of sales, occupancy and buying expenses
    
    
    
    
    
    
    1,405,906
    
    
    
    236,572
    
    
    
    (950,832
    )
    
    
    691,646Gross profit
    
    
    
    
    
    
    499,462
    
    
    
    289,879
    
    
    
    
    
    
    
    789,341Other expenses (income):Selling, general and administrative
    
    
    32,095
    
    
    
    265,704
    
    
    
    184,180
    
    
    
    
    
    
    
    481,979Depreciation and amortization
    
    
    945
    
    
    
    33,389
    
    
    
    22,437
    
    
    
    
    
    
    
    56,771Other (income) expense
    
    
    (22,267
    )
    
    
    3,031
    
    
    
    15,752
    
    
    
    
    
    
    
    (3,484
    )10,773
    
    
    
    302,124
    
    
    
    222,369
    
    
    
    
    
    
    
    535,266Operating income (loss)
    
    
    (10,773
    )
    
    
    197,338
    
    
    
    67,510
    
    
    
    
    
    
    
    254,075Interest expense (income), net
    
    
    (11,714
    )
    
    
    (326
    )
    
    
    (2,535
    )
    
    
    
    
    
    
    (14,575
    )Income before income taxes
    
    
    941
    
    
    
    197,664
    
    
    
    70,045
    
    
    
    
    
    
    
    268,650Income tax expense
    
    
    379
    
    
    
    66,736
    
    
    
    12,773
    
    
    
    
    
    
    
    79,888Income from continuing operations
    
    
    562
    
    
    
    130,928
    
    
    
    57,272
    
    
    
    
    
    
    
    188,762Equity in earnings of subsidiaries
    
    
    188,200
    
    
    
    8,702
    
    
    
    
    
    
    
    (196,902
    )
    
    
    Net income
    
    
    188,762
    
    
    
    139,630
    
    
    
    57,272
    
    
    
    (196,902
    )
    
    
    188,762Foreign currency translation adjustments
    
    
    12,920
    
    
    
    (731
    )
    
    
    12,605
    
    
    
    (11,874
    )
    
    
    12,920Comprehensive income
    
    $
    201,682
    
    
    $
    138,899
    
    
    $
    69,877
    
    
    $
    (208,776
    )
    
    $
    201,682
 91




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##### Table of Contents



Successor Entity
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended January 31, 2009
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net loss
    
    $
    (643,592
    )
    
    $
    (138,529
    )
    
    $
    (140,582
    )
    
    $
    279,111
    
    
    $
    (643,592
    )Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:Equity in (earnings) loss of subsidiaries
    
    
    286,817
    
    
    
    (7,706
    )
    
    
    
    
    
    
    (279,111
    )
    
    
    Depreciation and amortization
    
    
    3,013
    
    
    
    50,584
    
    
    
    31,496
    
    
    
    
    
    
    
    85,093Impairment of assets
    
    
    159,500
    
    
    
    180,000
    
    
    
    184,490
    
    
    
    
    
    
    
    523,990Amortization of lease rights and other assets
    
    
    
    
    
    
    54
    
    
    
    2,005
    
    
    
    
    
    
    
    2,059Amortization of debt issuance costs
    
    
    10,567
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,567Payment in kind interest expense
    
    
    24,522
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,522Net accretion of favorable (unfavorable) lease obligations
    
    
    
    
    
    
    (2,424
    )
    
    
    568
    
    
    
    
    
    
    
    (1,856
    )(Gain) loss on sale/retirement of property and
equipment,net
    
    
    (23
    )
    
    
    (55
    )
    
    
    (105
    )
    
    
    
    
    
    
    (183
    )Gain on sale of intangible assets
    
    
    
    
    
    
    
    
    
    
    (1,372
    )
    
    
    
    
    
    
    (1,372
    )Stock compensation expense
    
    
    6,203
    
    
    
    
    
    
    
    2,023
    
    
    
    
    
    
    
    8,226(Increase) decrease in:Inventories
    
    
    
    
    
    
    11,506
    
    
    
    (5,024
    )
    
    
    
    
    
    
    6,482Prepaid expenses
    
    
    (31
    )
    
    
    624
    
    
    
    (1,680
    )
    
    
    
    
    
    
    (1,087
    )Other assets
    
    
    (358
    )
    
    
    (822
    )
    
    
    (7,905
    )
    
    
    
    
    
    
    (9,085
    )Increase (decrease) in:Trade accounts payable
    
    
    1,582
    
    
    
    3,225
    
    
    
    2,565
    
    
    
    
    
    
    
    7,372Income taxes payable
    
    
    8,383
    
    
    
    (16,239
    )
    
    
    (2,854
    )
    
    
    
    
    
    
    (10,710
    )Accrued expenses and other current liabilities
    
    
    4,507
    
    
    
    (3,271
    )
    
    
    1,796
    
    
    
    
    
    
    
    3,032Accrued interest payable
    
    
    (6,222
    )
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (6,219
    )Deferred income taxes
    
    
    
    
    
    
    716
    
    
    
    (5,525
    )
    
    
    
    
    
    
    (4,809
    )Deferred rent expense
    
    
    (558
    )
    
    
    7,182
    
    
    
    2,319
    
    
    
    
    
    
    
    8,943Net cash provided by (used in) operating activities
    
    
    (145,690
    )
    
    
    84,845
    
    
    
    62,218
    
    
    
    
    
    
    
    1,373Cash flows from investing activities:Acquisition of property and equipment, net
    
    
    (248
    )
    
    
    (41,013
    )
    
    
    (18,144
    )
    
    
    
    
    
    
    (59,405
    )Proceeds from sale of property and equipment
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104Acquisition of intangible assets
    
    
    
    
    
    
    (177
    )
    
    
    (1,794
    )
    
    
    
    
    
    
    (1,971
    )Proceeds from sale of intangible assets
    
    
    
    
    
    
    
    
    
    
    516
    
    
    
    
    
    
    
    516Net cash used in investing activities
    
    
    (144
    )
    
    
    (41,190
    )
    
    
    (19,422
    )
    
    
    
    
    
    
    (60,756
    )Cash flows from financing activities:Credit Facility proceeds
    
    
    194,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,000Credit Facility payments
    
    
    (14,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,500
    )Intercompany activity, net
    
    
    94,913
    
    
    
    (45,557
    )
    
    
    (49,356
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    274,413
    
    
    
    (45,557
    )
    
    
    (49,356
    )
    
    
    
    
    
    
    179,500Effect of foreign currency exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    221
    
    
    
    (1,738
    )
    
    
    
    
    
    
    (1,517
    )Net increase (decrease) in cash and cash equivalents
    
    
    128,579
    
    
    
    (1,681
    )
    
    
    (8,298
    )
    
    
    
    
    
    
    118,600Cash and cash equivalents at beginning of period
    
    
    25,835
    
    
    
    1,892
    
    
    
    58,247
    
    
    
    
    
    
    
    85,974Cash and cash equivalents at end of period
    
    $
    154,414
    
    
    $
    211
    
    
    $
    49,949
    
    
    $
    
    
    
    $
    204,574
 92




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##### Table of Contents



Successor Entity
Condensed Consolidating Statement of Cash Flows
For The Period May 29, 2007 through February 2, 2008
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income
    
    $
    641
    
    
    $
    60,989
    
    
    $
    57,768
    
    
    $
    (118,757
    )
    
    $
    641Adjustments to reconcile net income to net
cash provided by (used in) operating activities:Equity in
earnings of subsidiaries
    
    
    (112,386
    )
    
    
    (6,371
    )
    
    
    
    
    
    
    118,757
    
    
    
    Depreciation and amortization
    
    
    2,136
    
    
    
    37,930
    
    
    
    21,385
    
    
    
    
    
    
    
    61,451Impairment of assets
    
    
    
    
    
    
    3,478
    
    
    
    
    
    
    
    
    
    
    
    3,478Amortization of lease rights and other assets
    
    
    
    
    
    
    37
    
    
    
    1,276
    
    
    
    
    
    
    
    1,313Amortization of debt issuance costs
    
    
    7,079
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,079Loss on sale / retirement of property and equipment, net
    
    
    23
    
    
    
    368
    
    
    
    201
    
    
    
    
    
    
    
    592Stock compensation expense
    
    
    5,526
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,526(Increase) decrease in:Inventories
    
    
    
    
    
    
    13,057
    
    
    
    3,781
    
    
    
    
    
    
    
    16,838Prepaid expenses
    
    
    596
    
    
    
    (13,403
    )
    
    
    6,256
    
    
    
    
    
    
    
    (6,551
    )Other assets
    
    
    18,942
    
    
    
    (12,039
    )
    
    
    (38,047
    )
    
    
    
    
    
    
    (31,144
    )Increase (decrease) in:Trade accounts payable
    
    
    (570
    )
    
    
    (10,579
    )
    
    
    (21,838
    )
    
    
    
    
    
    
    (32,987
    )Income taxes payable
    
    
    (9,252
    )
    
    
    11,508
    
    
    
    1,820
    
    
    
    
    
    
    
    4,076Accrued expenses and other current liabilities
    
    
    (87,819
    )
    
    
    4,624
    
    
    
    10,135
    
    
    
    
    
    
    
    (73,060
    )Accrued interest payable
    
    
    19,534
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    19,531Deferred income taxes
    
    
    
    
    
    
    (24,684
    )
    
    
    6,176
    
    
    
    
    
    
    
    (18,508
    )Deferred rent expense
    
    
    (372
    )
    
    
    4,971
    
    
    
    1,275
    
    
    
    
    
    
    
    5,874Net cash provided by (used in) operating activities
    
    
    (155,922
    )
    
    
    69,886
    
    
    
    50,185
    
    
    
    
    
    
    
    (35,851
    )Cash flows from investing activities:Acquisition of property and equipment
    
    
    (160
    )
    
    
    (40,224
    )
    
    
    (18,100
    )
    
    
    
    
    
    
    (58,484
    )Acquisition of Predecessor Entity
    
    
    (2,857,411
    )
    
    
    (79,065
    )
    
    
    (116,858
    )
    
    
    
    
    
    
    (3,053,334
    )Acquisition of intangible assets
    
    
    
    
    
    
    20
    
    
    
    (574
    )
    
    
    
    
    
    
    (554
    )Net cash used in investing activities
    
    
    (2,857,571
    )
    
    
    (119,269
    )
    
    
    (135,532
    )
    
    
    
    
    
    
    (3,112,372
    )Cash flows from financing activities:Credit Facility proceeds
    
    
    1,450,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,450,000Credit Facility payments
    
    
    (7,250
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,250
    )Note offerings proceeds
    
    
    935,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    935,000Capital contribution
    
    
    595,675
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    595,675Option conversion payment
    
    
    (7,924
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,924
    )Financing fees paid
    
    
    (77,439
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77,439
    )Dividends paid
    
    
    (7,252
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,252
    )Intercompany financing
    
    
    (29,636
    )
    
    
    (79,809
    )
    
    
    109,445
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    2,851,174
    
    
    
    (79,809
    )
    
    
    109,445
    
    
    
    
    
    
    
    2,880,810Effect of foreign currency exchange rate changes on cash and
cash equivalents
    
    
    (253
    )
    
    
    (126
    )
    
    
    3,290
    
    
    
    
    
    
    
    2,911Net increase (decrease) in cash and cash equivalents
    
    
    (162,572
    )
    
    
    (129,318
    )
    
    
    27,388
    
    
    
    
    
    
    
    (264,502
    )Cash and cash equivalents at beginning of period
    
    
    188,407
    
    
    
    131,210
    
    
    
    30,859
    
    
    
    
    
    
    
    350,476Cash and cash equivalents at end of period
    
    $
    25,835
    
    
    $
    1,892
    
    
    $
    58,247
    
    
    $
    
    
    
    $
    85,974
 93




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##### Table of Contents



Predecessor Entity
Condensed Consolidating Statement of Cash Flows
For The Period February 4, 2007 Through May 28, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (43,772
    )
    
    $
    28,686
    
    
    $
    7,457
    
    
    $
    (36,143
    )
    
    $
    (43,772
    )Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Equity in
earnings of subsidiaries
    
    
    (33,368
    )
    
    
    (2,775
    )
    
    
    
    
    
    
    36,143
    
    
    
    Depreciation and amortization
    
    
    367
    
    
    
    11,504
    
    
    
    7,781
    
    
    
    
    
    
    
    19,652Impairment of assets
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    73Amortization of lease rights and other assets
    
    
    
    
    
    
    39
    
    
    
    583
    
    
    
    
    
    
    
    622(Gain) loss on sale / retirement of property
and equipment, net
    
    
    
    
    
    
    873
    
    
    
    328
    
    
    
    
    
    
    
    1,201Excess tax benefit from stock compensation
    
    
    (2,885
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,885
    )Stock compensation expense
    
    
    8,946
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,946(Increase) decrease in:Inventories
    
    
    
    
    
    
    (9,551
    )
    
    
    (1,381
    )
    
    
    
    
    
    
    (10,932
    )Prepaid expenses
    
    
    465
    
    
    
    11,266
    
    
    
    (5,342
    )
    
    
    
    
    
    
    6,389Other assets
    
    
    (941
    )
    
    
    1,164
    
    
    
    (3,164
    )
    
    
    
    
    
    
    (2,941
    )Increase (decrease) in:Trade accounts payable
    
    
    (90
    )
    
    
    7,490
    
    
    
    23,802
    
    
    
    
    
    
    
    31,202Income taxes payable
    
    
    3,754
    
    
    
    (9,903
    )
    
    
    (5,583
    )
    
    
    
    
    
    
    (11,732
    )Accrued expenses and other current liabilities
    
    
    54,909
    
    
    
    (8,666
    )
    
    
    (6,516
    )
    
    
    
    
    
    
    39,727Deferred income taxes
    
    
    
    
    
    
    7,015
    
    
    
    (292
    )
    
    
    
    
    
    
    6,723Deferred rent expense
    
    
    
    
    
    
    634
    
    
    
    (261
    )
    
    
    
    
    
    
    373Net cash provided by (used in) operating activities
    
    
    (12,615
    )
    
    
    37,776
    
    
    
    17,485
    
    
    
    
    
    
    
    42,646Cash flows from investing activities:Acquisition of property and equipment
    
    
    (171
    )
    
    
    (18,822
    )
    
    
    (8,995
    )
    
    
    
    
    
    
    (27,988
    )Acquisition of intangible assets
    
    
    
    
    
    
    (20
    )
    
    
    (61
    )
    
    
    
    
    
    
    (81
    )Net cash used in investing activities
    
    
    (171
    )
    
    
    (18,842
    )
    
    
    (9,056
    )
    
    
    
    
    
    
    (28,069
    )Cash flows from financing activities:Exercised stock option proceeds
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177Excess tax benefit from stock compensation
    
    
    2,885
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,885Dividends paid
    
    
    (9,065
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,065
    )Intercompany financing
    
    
    13,118
    
    
    
    96,485
    
    
    
    (109,603
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    7,115
    
    
    
    96,485
    
    
    
    (109,603
    )
    
    
    
    
    
    
    (6,003
    )Effect of foreign currency exchange rate changes on
cash and cash equivalents
    
    
    (20
    )
    
    
    (16
    )
    
    
    1,061
    
    
    
    
    
    
    
    1,025Net increase (decrease) in cash and cash equivalents
    
    
    (5,691
    )
    
    
    115,403
    
    
    
    (100,113
    )
    
    
    
    
    
    
    9,599Cash and cash equivalents at beginning of period
    
    
    194,098
    
    
    
    15,807
    
    
    
    130,972
    
    
    
    
    
    
    
    340,877Cash and cash equivalents at end of period
    
    $
    188,407
    
    
    $
    131,210
    
    
    $
    30,859
    
    
    $
    
    
    
    $
    350,476
 94




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##### Table of Contents



Predecessor Entity
Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended February 3, 2007
(in thousands)
 Non-Issuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income
    
    $
    188,762
    
    
    $
    139,630
    
    
    $
    57,272
    
    
    $
    (196,902
    )
    
    $
    188,762Adjustments to reconcile net income to net
cash provided by operating activities:Equity in
earnings of subsidiaries
    
    
    (188,200
    )
    
    
    (8,702
    )
    
    
    
    
    
    
    196,902
    
    
    
    Depreciation and amortization
    
    
    945
    
    
    
    33,389
    
    
    
    22,437
    
    
    
    
    
    
    
    56,771Amortization of lease rights and other assets
    
    
    
    
    
    
    76
    
    
    
    1,413
    
    
    
    
    
    
    
    1,489(Gain) loss on retirement of property and equipment, net
    
    
    (734
    )
    
    
    2,397
    
    
    
    698
    
    
    
    
    
    
    
    2,361Loss on sale of intangible assets
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Excess tax benefit from stock compensation
    
    
    (3,648
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,648
    )Stock compensation expense
    
    
    7,080
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,080(Increase) decrease in:Inventories
    
    
    
    
    
    
    (3,449
    )
    
    
    (1,656
    )
    
    
    
    
    
    
    (5,105
    )Prepaid expenses
    
    
    100
    
    
    
    (12,186
    )
    
    
    (4,355
    )
    
    
    
    
    
    
    (16,441
    )Other assets
    
    
    (4,785
    )
    
    
    (623
    )
    
    
    (5,317
    )
    
    
    
    
    
    
    (10,725
    )Increase (decrease) in:Trade accounts payable
    
    
    142
    
    
    
    (1,544
    )
    
    
    4,846
    
    
    
    
    
    
    
    3,444Income taxes payable
    
    
    3,648
    
    
    
    (7,170
    )
    
    
    5,706
    
    
    
    
    
    
    
    2,184Accrued expenses and other current liabilities
    
    
    2,247
    
    
    
    1,734
    
    
    
    2,872
    
    
    
    
    
    
    
    6,853Deferred income taxes
    
    
    
    
    
    
    (3,677
    )
    
    
    (881
    )
    
    
    
    
    
    
    (4,558
    )Deferred rent expense
    
    
    
    
    
    
    812
    
    
    
    2,966
    
    
    
    
    
    
    
    3,778Net cash provided by operating activities
    
    
    5,557
    
    
    
    140,687
    
    
    
    86,006
    
    
    
    
    
    
    
    232,250Cash flows from investing activities:Acquisition of property and equipment
    
    
    (1,242
    )
    
    
    (57,225
    )
    
    
    (36,725
    )
    
    
    
    
    
    
    (95,192
    )Proceeds from sale of land and buildings
    
    
    881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    881Acquisition of intangible assets
    
    
    
    
    
    
    (266
    )
    
    
    (4,679
    )
    
    
    
    
    
    
    (4,945
    )Net cash used in investing activities
    
    
    (361
    )
    
    
    (57,491
    )
    
    
    (41,404
    )
    
    
    
    
    
    
    (99,256
    )Cash flows from financing activities:Exercised stock option proceeds
    
    
    8,996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,996Purchase and retirement of common stock
    
    
    (199,675
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199,675
    )Excess tax benefit from stock compensation
    
    
    3,648
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,648Dividends paid
    
    
    (37,553
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,553
    )Intercompany financing
    
    
    72,249
    
    
    
    (70,597
    )
    
    
    (1,652
    )
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (152,335
    )
    
    
    (70,597
    )
    
    
    (1,652
    )
    
    
    
    
    
    
    (224,584
    )Effect of foreign currency exchange rate changes on cash and
cash equivalents
    
    
    (31
    )
    
    
    344
    
    
    
    1,032
    
    
    
    
    
    
    
    1,345Net increase (decrease) in cash and cash equivalents
    
    
    (147,170
    )
    
    
    12,943
    
    
    
    43,982
    
    
    
    
    
    
    
    (90,245
    )Cash and cash equivalents at beginning of period
    
    
    341,268
    
    
    
    2,864
    
    
    
    86,990
    
    
    
    
    
    
    
    431,122Cash and cash equivalents at end of period
    
    $
    194,098
    
    
    $
    15,807
    
    
    $
    130,972
    
    
    $
    
    
    
    $
    340,877
 95




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A (T). Controls and Procedures
    Internal
Control  Integrated Framework Internal Control  Integrated
Framework
    
 Item 9B. Other Information
  
 PART III.
  96




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##### Table of Contents



PART IV.
 
 Item 15. Exhibits, Financial Statement Schedules
  1.
    
    Financial Statements
 Page No.Report of Independent Registered Public Accounting Firm
    
    
    47Consolidated Balance Sheets as of January 31, 2009 and February 2, 2008
    
    
    48Consolidated Statements of Operations and Comprehensive Income
(Loss) for the fiscal year ended January 31, 2009
(Successor Entity), the period from May 29, 2007 through
February 2, 2008 (Successor Entity), the period from
February 4, 2007 through May 28, 2007 (Predecessor
Entity) and the fiscal year ended February 3, 2007
(Predecessor Entity)
    
    
    49Consolidated Statements of Changes in Stockholders Equity
(Deficit) for the fiscal year ending January 31, 2009
(Successor Entity), the period from May 29, 2007 through
February 2, 2008 (Successor Entity), the period from
February 4, 2007 through May 28, 2007 (Predecessor
Entity) and the fiscal year ended February 3, 2007
(Predecessor Entity)
    
    
    50Consolidated Statements of Cash Flows for the fiscal year ending
January 31, 2009 (Successor Entity), the period from May
29, 2007 through February 2, 2008 (Successor Entity), the
period from February 4, 2007 through May 28, 2007
(Predecessor Entity) and the fiscal year ended February
3, 2007 (Predecessor Entity)
    
    
    51Notes to Consolidated Financial Statements
    
    
    53
 2.
    
    Financial Statement Schedules
  3.
    
    Exhibits
 3.1
    
    Articles of Incorporation of Claires Stores, Inc.*3.2
    
    By-laws of Claires Stores, Inc.*3.3
    
    Certificate of Incorporation of Afterthoughts Merchandising Corp.*3.4
    
    By-laws of Afterthoughts Merchandising Corp.*3.5
    
    Certificate of Incorporation of BMS Distributing Corp.*3.6
    
    By-laws of BMS Distributing Corp.*3.7
    
    Certificate of Incorporation of CBI Distributing Corp.*3.8
    
    By-laws of CBI Distributing Corp.*3.9
    
    Articles of Incorporation of Claires Boutiques, Inc.*
 97




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##### Table of Contents



3.10
    
    By-laws of Claires Boutiques, Inc.*3.11
    
    Certificate of Incorporation of Claires Canada Corp.*3.12
    
    By-laws of Claires Canada Corp.*3.13
    
    Certificate of Incorporation of Claires Puerto Rico Corp.*3.14
    
    By-laws of Claires Puerto Rico Corp.*3.15
    
    Certificate of Incorporation of Sassy Doo!, Inc.*3.16
    
    By-laws of Sassy Doo!, Inc.*4.1
    
    Senior Notes Indenture, dated as of May 29, 2007, between Bauble
Acquisition Sub, Inc. and The Bank of New York, as Trustee*4.2
    
    Senior Toggle Notes Indenture, dated as of May 29, 2007, between
Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee*4.3
    
    Senior Subordinated Notes Indenture, dated as of May 29, 2007,
between Bauble Acquisition Sub, Inc. and The Bank of New York, as Trustee*4.4
    
    Senior Notes Supplemental Indenture, dated as of May 29, 2007, by
and among Claires Stores, Inc., the guarantors listed on Exhibit A thereto and
The Bank of New York, as Trustee, to the Senior Notes Indenture, dated as of May
29, 2007, between Bauble Acquisition Sub, Inc. and The Bank of New York, as
Trustee*4.5
    
    Senior Toggle Notes Supplemental Indenture, dated as of May 29,
2007, by and among Claires Stores, Inc., the guarantors listed on Exhibit A
thereto and The Bank of New York, as Trustee, to the Senior Toggle Notes
Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The
Bank of New York, as Trustee*4.6
    
    Senior Subordinated Notes Supplemental Indenture, dated as of May
29, 2007, by and among Claires Stores, Inc., the guarantors listed on Exhibit A
thereto and The Bank of New York, as Trustee, to the Senior Subordinated Notes
Indenture, dated as of May 29, 2007, between Bauble Acquisition Sub, Inc. and The
Bank of New York, as Trustee*4.7
    
    Form of 9.25% Senior Notes due 2015*4.8
    
    Form of 9.625%/10.375% Senior Toggle Notes due 2015*4.9
    
    Form of 10.50% Senior Subordinated Notes due 2017*4.10
    
    Senior Notes Registration Rights Agreement, dated May 29, 2007, by
and among Claires Stores, Inc., the Guarantors listed on Schedule I thereto and
Bear, Stearns & Co. Inc., Credit Suisse Securities (USA) LLC, Lehman Brothers
Inc., ABN AMRO Incorporated, Mizuho Securities USA Inc. and Natexis Bleichroeder
Inc.*4.11
    
    Senior Subordinated Notes Registration Rights Agreement, dated May
29, 2007, by and among Claires Stores, Inc., the Guarantors listed on Schedule I
thereto and Bear, Stearns & Co. Inc., Credit Suisse Securities (USA) LLC, Lehman
Brothers Inc., ABN AMRO Incorporated, Mizuho Securities USA Inc. and Natexis
Bleichroeder Inc.*10.1
    
    Credit Agreement, dated as of May 29, 2007, among Bauble Holdings
Corp., Bauble Acquisition Sub, Inc. (to be merged with and into Claires Stores,
Inc.), as
 98




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##### Table of Contents



Borrower, the Lenders party thereto, Credit Suisse, as Administrative Agent,
Bear Stearns Corporate Lending Inc. and Mizuho Corporate Bank, Ltd., as
Co-Syndication Agents, Lehman Commercial Paper Inc. and LaSalle Bank National
Association, as Co-Documentation Agents, and Bear, Stearns & Co. Inc., Credit
Suisse Securities (USA) LLC, and Lehman Brothers Inc., as Joint Bookrunners
and Joint Lead Arrangers*10.2
    
    Management Services Agreement, dated as of May 29, 2007, among
Claires Stores, Inc., Bauble Holdings Corp. and Apollo Management VI, L.P. and
Tri-Artisan Capital Partners, LLC and TACP Investments  Claires LLC*10.3
    
    Claires Inc. Amended and Restated Stock Incentive Plan, dated June
29, 2007*10.4
    
    Standard Form of Option Grant Letter (Target Performance Option and
Stretch Performance Option)*10.5
    
    Standard Form of Option Grant Letter (Target Performance Option)*10.6
    
    Standard Form of Director Option Grant Letter*10.7
    
    Employment Agreement with Eugene S. Kahn*10.8
    
    Employment Agreement with Mark Smith*10.9
    
    Employment Agreement with James Conroy*21.1
    
    Subsidiaries of Claires Stores, Inc.**24
    
    Power of Attorney (included on signature page)31.1
    
    Certification of Chief Executive Officer pursuant to Rules
13a-14(a) and 15d-14(a)***31.2
    
    Certification of Chief Financial Officer pursuant to Rules
13a-14(a) and 15d-14(a)***32.1
    
    Certification of Chief Executive Officer pursuant to 18 USC Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002****32.2
    
    Certification of Chief Financial Officer pursuant to 18 USC Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002****
 
 (*)
    
    Filed previously as exhibit to the Registration Statement on Form S-4 (File No. 333-148108) by the Company on December 17, 2007.(**)
    
    Filed herewith.(***)
    
    Furnished herewith. 99




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##### Table of Contents



SIGNATURES
  CLAIRES STORES, INC.April 27, 2009
    By:
    /s/ Eugene S. KahnEugene S. Kahn, Chief Executive Officer(principal executive officer)April 27, 2009
    By:
    /s/ J. Per BrodinJ. Per Brodin, Senior Vice President and ChiefFinancial Officer (principal financial and
accounting officer) POWER OF ATTORNEY
   April 27, 2009
    /s/ Peter CopsesPeter Copses, Chairman of the Board of DirectorsApril 27, 2009
    /s/ Eugene S. KahnEugene S. Kahn, Chief Executive Officer and DirectorApril 27, 2009
    /s/ Lance MilkenLance Milken, DirectorApril 27, 2009
    /s/ George GolleherGeorge Golleher, DirectorApril 27, 2009
    /s/ Robert J. DiNicolaRobert J. DiNicola, DirectorApril 27, 2009
    /s/ Rohit ManochaRohit Manocha, DirectorApril 27, 2009
    /s/ Ron MarshallRon Marshall, Director 100




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##### Table of Contents



INDEX TO EXHIBITS
 EXHIBIT NO.
    
    DESCRIPTION21.1
    
    Claires Stores, Inc. Subsidiaries.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
15d-14(a).32.1
    
    Certification of Chief Executive Officer pursuant to 18 USC Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 USC Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 101