##### Table of Contents





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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    January 29, 2011oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number 1-12552
 THE TALBOTS, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

41-1111318State or other jurisdiction
    of
    incorporation or organization

(I.R.S. Employer
    Identification No.)    (Address of principal executive
    offices)
 Registrants telephone number, including area code
 781-749-7600
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

Name of exchange on which registeredCommon stock, $.01 par value
    Warrants to purchase common stock

New York Stock Exchange
    NYSE Amex   Securities registered pursuant to Section 12(g) of the
    Act:
 None
 (Title of class)
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
  Large accelerated filer þ

Accelerated filer o

Non-accelerated filero
    (Do not check if a smaller reporting company)

Smaller reporting company o   Rule 12b-2 o þ
      Documents
    Incorporated by Reference
  Form 10-K.




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##### 





The
    Talbots, Inc.
  Annual
    Report on
    Form 10-K
    for the Fiscal Year Ended January 29, 2011
   
 PagePART IItem 1.


Business


2Item 1A.


Risk Factors


9Item 1B.


Unresolved Staff Comments


18Item 2.


Properties


18Item 3.


Legal Proceedings


18Item 4.


Reserved


20PART IIItem 5.


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


21Item 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


47Item 8.


Financial Statements and Supplementary Data


48Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


48Item 9A.


Controls and Procedures


48Item 9B.


Other Information


51PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


51Item 11.


Executive Compensation


51Item 12.


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


51Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


52Item 14.


Principal Accounting Fees and Services


52PART IVItem 15.


Exhibits, Financial Statement Schedules


53Signatures.


59EX-10.35EX-10.36EX-10.79EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1   1




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PART I  Item 1.
    Business  General
    best-in-class
    Description
    of Operations
  Stores
    end-of-season
      Total Store


Total StoreNumber of


Gross Square


Selling SquareStores


Footage


Footage(In thousands)United StatesRetail


505Upscale outlets


28Surplus outlets


18Subtotal  United States


551



3,965



3,053CanadaRetail


16Surplus outlets


1Subtotal  Canada


17



89



67Total


568



4,054



3,120  2




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market-by-market
    Direct
    Marketing
             3




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Merchandising,
    Sourcing and Inventory Control &
    Distribution
  Merchandising
        head-to-toe.
  Sourcing
     4




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Percent ofCountry

SourcingChina


41.5
%Indonesia


16.9
%Vietnam


14.0
%India


5.0
%Thailand


5.0
%Other


17.6
%       Inventory
    Control & Distribution
       5




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Customer
    Credit
      Management
    Information Systems
  e-commerce, e-commerce
  point-of-sale
    Marketing
  e-commerce
 6




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e-commerce
  Seasonality
      Competition
  head-to-toe,
  Employees
    Executive
    Officers of the Company
    Name

Age

PositionTrudy F. Sullivan


61


President and Chief Executive Officer, a DirectorMichael Scarpa


55


Chief Operating Officer, Chief Financial Officer and TreasurerMichael Smaldone


46


Chief Creative OfficerBenedetta I. Casamento


44


Executive Vice President, FinanceRichard T. OConnell, Jr.


60


Executive Vice President, Real Estate, Legal, Store Planning
    & Design and Construction and SecretaryGregory I. Poole


49


Executive Vice President, Chief Supply Chain OfficerLori Wagner


46


Executive Vice President, Chief Marketing Officer    7




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direct-to-consumer
              Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
 8




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##### Table of Contents



(781) 741-4500, e-mail
  Item 1A.
    Risk
    Factors  Form 10-K
  The
    success of our business depends on our ability to develop
    merchandise offerings that resonate with our existing customers
    and help to attract new customers as well as our ability to
    continue to develop, evolve, promote and protect the value of
    our brand.
      We
    face substantial competitive pressures from other
    retailers.
     9




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Increased
    store productivity will be largely dependent upon our success in
    continuing to rationalize our existing store portfolio as well
    as in increasing customer traffic in our stores.
        There
    are significant risks associated with our strategic
    initiatives.
    
    an enhanced, coordinated marketing campaign;
    a store re-image initiative, a program which is designed to
    translate our updated brand image into a renovated storefront
    and store lay-out;
    an information technology enhancement and upgrade;
    a segmentation strategy, a system whereby we sort our stores
    based on customer lifestyle, behavior and climate which seeks to
    improve store productivity by tailoring our merchandise
    assortment and store experience to specific segments; and
    a plan to rationalize and reduce our store real estate portfolio
    and square footage.   10




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Our
    2011 operating plan and strategic plan are based on a number of
    material assumptions that may not occur.
    Our
    ability to attract and retain a talented and experienced
    management team is critical to the continued execution of our
    turnaround strategy.
    Unfavorable
    economic conditions or the slowing, stalling or reversal of an
    economic recovery could materially and adversely impact our
    financial condition and results of operations.
    If we
    are unable to manage our inventory effectively, we may incur
    lower margins or losses.
    The
    sufficiency and availability of our sources of liquidity may be
    affected by a variety of factors.
   11




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There
    are risks associated with our reliance on an exclusive global
    merchandise buying agent.
    Our
    overseas merchandise purchasing strategy makes us vulnerable to
    certain risks, and any disruption in our supply of merchandise
    would materially impact us.
    
    political, social and economic instability in any of the
    countries related to our sourcing activities;
    imposition of new legislation relating to import quotas that may
    limit the quantity of goods that may be imported into the
    U.S. from countries in a region where we do business;
    imposition of duties, taxes, tariffs and other charges on
    imports;
    natural disasters and public health concerns;
    potential delays or disruption in international shipping and
    related pricing impacts;
    the receipt of any merchandise that does not meet our quality
    standards; and 12




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
    local business practices and political issues, including issues
    relating to compliance with domestic or international labor
    standards.      Our
    third party manufacturers may fail to comply with our social
    compliance program requirements.
    Fluctuations
    in the price, availability and quality of raw materials could
    have an adverse impact on our business and financial
    results.
       13




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The
    loss of or infringement upon our trademarks and other
    proprietary rights could have a material adverse effect on our
    business.
    If our
    intangible or long-lived assets become impaired, we may need to
    record significant non-cash impairment charges.
      The
    costs to close underperforming stores may be significant and may
    negatively impact our cash flows and our results of
    operations.
   14




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We may
    not be able to successfully execute or manage our plan to grow
    our upscale outlet portfolio.
    In
    connection with the sale in 2009 of the J. Jill business we
    remain contingently responsible for certain material risks and
    obligations.
    We are
    subject to credit risk and to potential increased defaults and
    delinquencies on our customer credit card account
    portfolio.
    Recently
    enacted financial system reforms could have a negative impact on
    our profitability.
   15




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There
    are risks associated with Internet sales.
    We
    must protect against security breaches or other disclosures of
    private data of our customers as well as of our employees and
    other third parties.
    Our
    Credit Facility contains provisions which may restrict our
    operations and proposed financing and strategic
    transactions.
      Failure
    to meet market expectations of our financial performance will
    likely affect the market price and volatility of our
    stock.
  period-to-period and/or
 16




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We
    depend on a single distribution facility and a principal third
    party transportation company.
    We
    depend on information systems to manage our operations and any
    failure in or our inability to upgrade or maintain these systems
    could materially and adversely affect our
    operations.
  e-commerce,
  We are
    required to comply with certain legal and regulatory
    requirements, including in the area of health care
    reform.
      The
    outcome of litigation and other claims is unpredictable and any
    rulings not in our favor could have a material adverse effect on
    our business and results of operations.
  Legal Proceedings
  External
    economic factors could materially impact our Pension
    Plan.
   17




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##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    GrossLocation

Square Feet


Primary Function

InterestHingham, Massachusetts


313,000


Talbots headquarters

Own (44 acres)Lakeville, Massachusetts


933,000


Distribution and fulfillment center

Own (115 acres)Tampa, Florida


28,304


Systems center

LeaseKnoxville, Tennessee


37,656


Call center

LeaseNew York, New York


55,697


Creative studio

LeaseLincoln, Rhode Island


9,645


Credit and banking facilities

LeaseOntario, Canada


1,350


Canadian regional office

Lease568 Talbots stores throughout the U.S. and Canada


4,054,231


Retail stores

Own and lease (a)Quincy, Massachusetts


93,248


Former subsidiary headquarters

Lease     (a)
    
    We own the property for five of our 568 Talbots stores.      Years Lease

Number ofTerms Expire

Store Leases (a)(b)2011-2012


1292013-2015


822016-2018


1332019- and later


291     (a)
    
    Includes six Talbots executed leases related to future stores
    not yet opened at January 29, 2011(b)
    
    Includes certain stores that have multiple leases  Item 3.
    Legal
    Proceedings  Washtenaw County
    Employees Retirement System v. The Talbots, Inc. et
    al. No. 1:11-cv-10186-NMG, Rule 10b-5
 18




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Greco v. Sullivan, et al. No. 11-0728
  Campbell v. The Talbots, Inc., et al. No. 5199-VCS,
         19




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Contractual
    Obligations, Commercial Commitments and Contingent
    Liabilities
    Item 4.
    Reserved 20




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Market PriceHigh


LowFiscal Year 2010:Fourth quarter

$
11.84


$
5.91Third quarter

$
13.43


$
9.30Second quarter

$
17.79


$
9.59First quarter

$
17.33


$
10.14Fiscal Year 2009:Fourth quarter

$
11.26


$
6.61Third quarter

$
11.80


$
5.10Second quarter

$
6.96


$
2.05First quarter

$
4.57


$
2.01         Approximate DollarValue of Sharesthat May Yet BeAverage


Purchased Under theTotal Number of


Price Paid


Equity AwardPeriod

Shares Reacquired(1)


per Share


Programs(3)October 31, 2010 through November 27, 2010


612


$
10.03


$
20,132November 28, 2010 through January 1, 2011


86,272



2.14



19,081January 2, 2011 through January 29, 2011


178,600



0.01
(2)


19,145Total


265,484


$
2.11


$
19,145     (1)
    
    We repurchased 73,000 shares in connection with stock
    forfeited by employees prior to vesting under our equity
    compensation plan at an acquisition price of $0.01 per share.Our equity program generally requires employees to tender shares
    in order to satisfy the employees tax withholding
    obligations from the vesting of their restricted stock. During
    the period, we repurchased 17,484 shares of common stock
    from certain employees to cover tax withholding obligations from
    the vesting of stock at a weighted average acquisition price of
    $10.86 per share.   (2)
    
    The average price paid per share reported here does not reflect
    the value of the 175,000 shares reacquired from Perella
    Weinberg Partners LP as a component of the settlement of
    Campbell v. The Talbots, Inc., et al.Refer to
    Item 3, Legal Proceedings, for additional
    information regarding this transaction.   (3)
    
    As of January 29, 2011, there were 1,914,492 shares of
    nonvested stock that were subject to repurchase at $0.01 per
    share, or $19,145 in the aggregate, that we have the option to
    repurchase if the holders employment is terminated prior
    to vesting.   21




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Stock
    Performance Graph
    Comparison
    of Cumulative Five-Year Total Return of The Talbots, Inc.,
    S&P 500 Index, and Dow Jones General Retailers
    Index
  
  Base

Indexed ReturnsPeriod

for The Years EndedCompany/Index

1/27/06

2/02/07

2/01/08

1/30/09

1/29/10

1/28/11The Talbots, Inc.

$
100.00


$
86.74


$
34.85


$
8.20


$
45.50


$
24.12S&P 500 Index

$
100.00


$
115.03


$
112.92


$
68.46


$
91.15


$
110.53Dow Jones U.S. General Retailers Index

$
100.00


$
109.86


$
101.00


$
69.69


$
102.00


$
123.39    22




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
  Year EndedJanuary 29,


January 30,


January 31,


February 2,


February 3,2011


2010


2009


2008


2007(52 weeks)


(52 weeks)


(52 weeks)


(52 weeks)


(53 weeks)(In thousands, except per share data)Statements of Operations Information:Net sales

$
1,213,060


$
1,235,632


$
1,495,170


$
1,708,115


$
1,772,306Operating income (loss)


31,436



(8,690
)


(98,389
)


35,204



114,596Income (loss) from continuing operations


7,570(a
)(b)(c)


(25,308
)(b)(c)


(139,521
)(c)(d)


43
(c)


56,876Net income (loss)

$
10,815


$
(29,412
)

$
(555,659
)(d)(e)

$
(188,841
)(e)

$
31,576Basic earnings (loss) per share:Continuing operations


0.11


$
(0.47
)

$
(2.63
)

$
(0.01
)

$
1.06Net earnings (loss)


0.16


$
(0.55
)

$
(10.41
)

$
(3.58
)

$
0.59Diluted earnings (loss) per share:Continuing operations


0.11


$
(0.47
)

$
(2.63
)

$
(0.01
)

$
1.05Net earnings (loss)


0.16


$
(0.55
)

$
(10.41
)

$
(3.58
)

$
0.58Weighted average shares outstanding:Basic


65,790



53,797



53,436



53,006



52,651Diluted


66,844



53,797



53,436



53,006



53,092Cash dividends per share(f)

$



$



$
0.52


$
0.52


$
0.51Balance Sheets Information:Working capital (deficiency)

$
95,917


$
(261,942
)

$
(13,680
)

$
208,803


$
262,609Total assets


668,516



825,818



971,293



1,502,979



1,748,688Total long-term debt, including current portion(g)


25,516



486,494



328,377



389,027



469,643Stockholders equity (deficit)

$
183,586


$
(185,636
)

$
(178,097
)

$
454,779


$
643,311     (a)
    
    Gift card breakage income of $6.9 million, including a
    cumulative change in estimate of $6.3 million, was recorded
    in fiscal year 2010.(b)
    
    During fiscal years 2010 and 2009, we recorded merger-related
    costs of $25.9 million and $8.2 million, respectively,
    in connection with our merger with BPW Acquisition Corp. and
    related transactions.(c)
    
    During fiscal years 2010, 2009, 2008 and 2007, we recorded
    restructuring charges of $5.6 million, $10.3 million,
    $17.8 million and $3.7 million, respectively, relating
    to our restructuring activities. These actions include reducing
    headcount and employee benefit costs, shuttering or disposing of
    non-core businesses, and reducing office and retail space when
    determined to no longer coincide with the vision of the brand or
    the needs of the business, among other steps. 23




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(d)
    
    During fiscal year 2008, we recorded a $211.7 million
    valuation allowance on substantially all of our net deferred tax
    assets, excluding deferred tax liabilities for
    non-amortizing
    intangibles, comprised of $61.0 million related to
    continuing operations, $21.3 million related to other
    comprehensive loss and $129.4 million related to
    discontinued operations.(e)
    
    During fiscal years 2008 and 2007, we recorded impairment
    charges relating to the J. Jill brand of $318.4 million and
    $149.6 million, respectively, which are included in income
    (loss) from discontinued operations.(f)
    
    In February 2009, our Board of Directors approved the indefinite
    suspension of our quarterly dividends.(g)
    
    Total long-term debt excludes notes payable to banks of
    $148.5 million at January 31, 2009 and
    $45.0 million at February 3, 2007.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K,
    Management
    Overview
         24




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
    In fiscal 2010, we launched an enhanced, coordinated marketing
    campaign, including a return to national and regional
    advertising,
    e-commerce
    advertising and increased in-store visual, aimed at increasing
    brand awareness and customer retention, reactivation and
    acquisition, by providing current and prospective future
    customers with images designed to communicate our updated brand
    image of tradition transformed. We expect to
    continue this campaign in the coming year and will continue to
    evaluate the results achieved, making any adjustments to the
    strategy as we deem appropriate.
    Further in 2010, we began the roll-out of our store re-image
    initiative, a program which is designed to translate our updated
    brand image into a renovated storefront and store lay-out and is
    aimed at increasing customer traffic. The phases undertaken in
    fiscal 2010 included renovations of fourteen retail stores,
    storefront refreshes of eleven additional stores and a complete
    rebuild of a retail location in a key market, which serves as
    our design concept store. Based on the results of the
    renovations undertaken to-date, we plan to initiate the next
    phase of our re-image initiative in fiscal 2011, including
    anticipated renovations of up to approximately 70 stores. Going
    forward, we will continue to evaluate the results achieved as
    well as the scope and execution of any future phases of the
    initiative.
    Fiscal 2010 also marked the start of the reinvestment phase of
    our three-year IT systems strategic plan which focuses on making
    systems enhancements designed to aid management in understanding
    and meeting customer needs, driving growth across the business
    and promoting operational excellence. Most significantly, we
    commenced the process of upgrading our Oracle financial system
    and implementing our Oracle and JDA merchandise financial
    planning, assortment planning and allocation systems. These
    systems will provide cross-functional support and analysis tools
    to better serve our business as well as a foundation for
    developing a leaner systems operation which will allow us to
    eliminate redundant systems and reduce customizations. We expect
    these phases of our systems upgrade to be completed by the close
    of fiscal 2011 and expect to continue to reinvest in our
    information systems in the coming year as we continue to execute
    on this plan.
    The 2010 fall selling season reflected the first distribution of
    product to our stores following our segmentation strategy,
    whereby we sort our stores based on customer lifestyle, behavior
    and climate, which seeks to improve store productivity by
    tailoring our merchandise assortment and store experience to
    specific segments. We expect to continue to follow our
    segmentation strategy for determining merchandise allocation
    through 2011, adjusting the mix and assortment of merchandise
    across the store categories as well as adjusting the store
    category classification of certain locations, based on the
    results of this implemented strategy as we go forward.
    Finally, in fiscal 2010, we announced our intention to closely
    evaluate our store real estate portfolio and rationalize our
    store locations, under a program aimed at increasing the
    productivity of our store square footage. This program was still
    in the early stages of evaluation at the close of fiscal 2010;
    however in the fourth quarter of 2010, we began to take
    advantage of opportunities to reduce leased store space in
    accordance with lease expirations of several leases, closing
    eighteen stores in the fourth quarter of 2010. Our evaluation of
    our store portfolio includes consideration, on a
    market-by-market
    basis, of factors such as overall size and potential sales in
    each market, current performance and growth potential of each
    store, and available lease expirations, lease renewals and other
    lease termination opportunities.   25




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Results
    of Operations
    
    Achieved operating income of $31.4 million compared to an
    operating loss of $8.7 million in the prior year, a 461.7%
    improvement
    year-over-year,
    while recording:  
    $17.7 million in incremental merger-related costs,
    $11.1 million of incremental expense related to the
    reinstatement and enhancement of operational performance-based
    and certain other employee compensation programs and
    $9.4 million of incremental marketing expense, partially
    offset by
    $6.3 million of gift card breakage income, representing a
    one-time cumulative change in estimate adjustment in 2010;  
    Recorded net sales declines of 1.8% in fiscal 2010, compared to
    fiscal 2009;
    Improved gross profit margins to 37.7% from 33.5% in the prior
    year; and
    Reduced total outstanding debt by $461.0 million, or 94.8%.    Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Net sales


100.0
%


100.0
%


100.0
%Cost of sales, buying and occupancy


62.3
%


66.5
%


70.2
%Selling, general and administrative


32.4
%


32.6
%


35.0
%Merger-related costs


2.1
%


0.7
%


Restructuring charges


0.5
%


0.8
%


1.2
%Impairment of store assets


0.1
%


0.1
%


0.2
%Operating income (loss)


2.6
%


(0.7
)%


(6.6
)%Interest expense, net


1.6
%


2.3
%


1.4
%Income (loss) before taxes


1.0
%


(3.0
)%


(8.0
)%Income tax expense (benefit)


0.4
%


(1.0
)%


1.3
%Income (loss) from continuing operations


0.6
%


(2.0
)%


(9.3
)%      26




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##### Table of Contents



2010
    Compared to 2009
  Net
    Sales
    January 29,


January 30,


(Decrease)2011


2010


Increase(In millions)Net store sales

$
991.4


$
1,027.9


$
(36.5
)Net direct marketing sales


221.7



207.7



14.0Total

$
1,213.1


$
1,235.6


$
(22.5
)   Store
    Sales
      year-over-year,
    Direct
    Marketing Sales
   27




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##### Table of Contents



Cost of
    Sales, Buying and Occupancy
    January 29,


January 30,2011


2010


Decrease(In millions)Cost of sales, buying and occupancy

$
755.2


$
821.3


$
(66.1
)Percentage of net sales


62.3
%


66.5
%


(4.2
) %   mark-up
  year-over-year year-over-year
  Selling,
    General and Administrative
    January 29,


January 30,2011


2010


(Decrease)(In millions)Selling, general and administrative

$
393.5


$
403.2


$
(9.7
)Percentage of net sales


32.4
%


32.6
%


(0.2
)%   e-commerce year-over-year
    Merger-Related
    Costs
  Legal Proceedings,
 28




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##### Table of Contents



Restructuring
    Charges
    January 29,


January 30,2011


2010


Decrease(In millions)Restructuring charges

$
5.6


$
10.3


$
(4.7
)Percentage of net sales


0.5
%


0.8
%


(0.3
)%     Impairment
    of Store Assets
      Interest
    Expense, net
    January 29,


January 30,2011


2010


Decrease(In millions)Interest expense, net

$
18.8


$
28.1


$
(9.3
)   year-over-year year-over-year.
 29




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##### Table of Contents



Income
    Tax Expense (Benefit)
    January 29,


January 30,2011


2010


Increase(In millions)Income tax expense (benefit)

$
5.0


$
(11.5
)

$
16.5     non-amortizing
  2009
    Compared to 2008
  Net
    Sales
    January 30,


January 31,2010


2009


Decrease(In millions)Net store sales

$
1,027.9


$
1,261.6


$
(233.7
)Net direct marketing sales


207.7



233.6



(25.9
)Total

$
1,235.6


$
1,495.2


$
(259.6
)   Store
    Sales
       30




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##### Table of Contents



Direct
    Marketing Sales
  year-over-year
  Cost of
    Sales, Buying and Occupancy
    January 30,


January 31,2010


2009


Decrease(In millions)Cost of sales, buying and occupancy

$
821.3


$
1,049.8


$
(228.5
)Percentage of net sales


66.5
%


70.2
%


(3.7
)%     Selling,
    General and Administrative
    January 30,


January 31,2010


2009


Decrease(In millions)Selling, general and administrative

$
403.2


$
523.1


$
(119.9
)Percentage of net sales


32.6
%


35.0
%


(2.4
)%    31




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##### Table of Contents



Merger-Related
    Costs
    Restructuring
    Charges
    January 30,


January 31,2010


2009


Decrease(In millions)Restructuring charges

$
10.3


$
17.8


$
(7.5
)Percentage of net sales


0.8
%


1.2
%


(0.4
)%     Impairment
    of Store Assets
    January 30,


January 31,2010


2009


Decrease(In millions)Impairment of store assets

$
1.4


$
2.8


$
(1.4
)Percentage of net sales


0.1
%


0.2
%


(0.1
)%     Interest
    Expense, net
    January 30,


January 31,2010


2009


Increase(In millions)Net interest expense

$
28.1


$
20.3


$
7.8Average debt outstanding


498.7



474.5



24.2Average interest rate on borrowings


4.9
%


3.7
%


1.2
%    32




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##### Table of Contents



Income
    Tax (Benefit) Expense
    January 30,


January 31,2010


2009


Decrease(In millions)Income tax (benefit) expense

$
(11.5
)

$
20.8


$
(32.3
)     Discontinued
    Operations
      Contractual
    Commitments
   33




---



##### Table of Contents



Liquidity
    and Capital Resources
    market-by-market
      Merger
    with BPW and Related Financing Transactions
   34




---



##### Table of Contents



sub-facility)
   35




---



##### Table of Contents



Outlook
     36




---



##### Table of Contents



Cash
    Flows
    Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In millions)Net cash provided by operating activities

$
54.1


$
81.2


$
16.3Net cash provided by (used in) investing activities

$
304.2


$
(20.9
)

$
(42.1
)Net cash (used in) provided by financing activities

$
(453.0
)

$
4.3


$
57.8   Cash
    provided by operating activities
    Cash
    provided by (used in) investing activities
  Merger with BPW and Related
    Financing Transactions
  e-commerce
 37




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##### Table of Contents



Cash
    (used in) provided by financing activities
  Merger with BPW and Related
    Financing Transactions
 38




---



##### Table of Contents



Contractual
    Obligations, Commercial Commitments and Contingent
    Liabilities
    Contractual Obligations and




Less than


1 to 3


3 to 5


More thanCommercial Commitments

Total


1 year


Years


Years


5 Years(In thousands)Revolving credit facility, including estimated interest payments

$
28,824


$
28,824


$



$



$
Operating leases:Real estate


577,750



127,326



207,330



129,099



113,995Equipment


1,621



798



677



146



Merchandise purchases


128,496



128,496











Construction contracts


836



836











Other contractual commitments


12,357



7,071



4,738



548



Benefit plan obligations


20,852



1,756



4,685



4,503



9,908Unrecognized tax benefits


6,319



5,550



769







Total obligations and commitments

$
777,055


$
300,657


$
218,199


$
134,296


$
123,903   
    Revolving credit facility, including estimated interest
    payments Represents amounts due under our
    revolving credit facility, including estimated interest
    payments. Our revolving credit facility matures on
    October 7, 2013, however, is considered to be a current
    obligation as it requires repayment of outstanding borrowings
    with substantially all cash collected by us and contains a
    subjective acceleration clause. In consideration of the
    classification of this facility as a current obligation, the
    above table includes only the principal plus estimated interest
    payments for the next twelve months. Interest payments were
    estimated using the effective interest rate as of
    January 29, 2011. Refer to Liquidity and Capital
    Resourcesfor further information regarding the Credit
    Facility.
    Operating Leases Represents future minimum
    lease payments under non-cancelable operating leases in effect
    as of January 29, 2011, including six executed leases
    related to Talbots stores not yet opened at January 29,
    2011 and, the remaining lease payments for six former Talbots
    Kids and Mens stores, two former J. Jill stores and the
    remaining portion of the Quincy office space. The minimum lease
    payments above do not include common area maintenance
    (CAM) charges, real estate taxes or any rent that
    may be due in the future under contingent rent terms, such as
    incremental rent due as a function of sales volume. Equipment
    operating leases are primarily for store computer and other
    corporate equipment and have lease terms that generally range
    between three and five years.  Discontinued Operations
  
    Merchandise Purchases Represents commitments
    by us to purchase merchandise from our network of vendors. We
    generally make merchandise purchase commitments up to six to
    nine months in advance of the 39




---



##### Table of Contents



selling season and do not maintain any long-term or exclusive
    commitments or arrangements to purchase from any vendor.  
    Construction Contracts Represents amounts
    committed or contractually obligated under contracts to
    facilitate the build-out and renovation of our stores.
    Other Contractual Commitments Represents
    amounts committed or contractually obligated under contracts for
    products and services required in the normal course of
    operation, such as contracts for insurance, maintenance on
    equipment, services and advertising. These contracts vary in
    length but generally carry
    30-day to
    three-year terms.
    Benefit Plan Obligations Represents estimates
    of annual cash payments expected to be made related to the SERP,
    the supplemental 401(k) plan, the deferred compensation plan and
    the executive postretirement medical plan. We sponsor various
    benefit plans for certain employees, including the Pension Plan,
    the SERP, two deferred compensation plans and postretirement
    medical plans. Our postretirement medical plan for non-executive
    retirees is entirely self-funded effective January 2011. We also
    expect to make required contributions of $11.6 million to
    the Pension Plan in fiscal 2011 which is not reflected in the
    table above.
    Unrecognized Tax Benefits Represents income
    tax, interest and penalties expected to be due to various taxing
    authorities related to our uncertain tax positions. As we are
    unable to reasonably predict the timing of settlement of certain
    of our other uncertain tax positions, the above table does not
    include $70.8 million of income tax, interest and penalties
    relating to unrecognized tax benefits, including
    $20.0 million of unrecognized tax benefit recorded as a
    result of the BPW Transactions which is expected to be reversed
    in the coming year due to a favorable outcome of a Private
    Letter Ruling request submitted by the Company on this tax
    position and a $14.7 million tax assessment related to
    certain state tax matters for which an adverse decision to the
    Company on a similar issue was recently affirmed by a state
    appeals court. To the extent that we do not prevail in this
    matter through any future appeals and the relevant state tax
    authority does not allow us to establish a payment plan related
    to this matter, we may be required to pay this assessment in the
    next twelve months.  Critical
    Accounting Policies
  Managements Discussion and Analysis of Financial
    Condition and Results of Operations
    Inventory Markdown
    Reserve
   40




---



##### Table of Contents



Gift Card Breakage
  Sales Return Reserve
  Customer Loyalty Program
   41




---



##### Table of Contents



Retirement Plans
        Long-lived Assets
 42




---



##### Table of Contents



Goodwill and Other Intangible
    Assets
      relief-of-royalty
    Income Taxes non-amortizing
 43




---



##### Table of Contents



Stock-Based Compensation
    Inflation
    and Changing Prices
    Exchange
    Rates
    Recent
    Accounting Pronouncements
  2010-6, Fair Value Measurements and Disclosures 2010-6 ASC 820-10, Fair Value Measurements and Disclosures 2010-06
 44




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##### Table of Contents



2010-6 2010-06
  2010-20, Disclosures About the Credit Quality of Financing Receivables
    and the Allowance for Credit Losses 2010-20 ASC 310-10, Receivables 2010-20 2010-20
  2010-28, When to Perform Step 2 of the Goodwill Impairment Test for
    Reporting Units With Zero or Negative Carrying Amounts 2010-28 ASC 350-20, Goodwill 2010-28
  Recent
    Regulatory Changes
      Forward-looking
    Information
  Form 10-K
 45




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##### Table of Contents




    the ability to successfully increase our store customer traffic
    and the success and customer acceptance of our merchandise
    offerings in our stores, on our website and in our catalogs;
    the continuing material impact of the U.S. economic
    environment on our business, continuing operations, liquidity
    and financial results, including any negative impact on consumer
    discretionary spending, substantial loss of household wealth and
    savings, significant tightening of the U.S. credit markets
    and continued high unemployment levels;
    the risks associated with our efforts to successfully implement
    and achieve the benefits of our current strategic initiatives
    including store segmentation, store re-imaging, store
    rationalization, enhanced marketing, information technology
    reinvestments and any other future initiatives that we may
    undertake;
    the risks associated with competitive pricing pressures and the
    current increased promotional environment;
    the risks associated with our on-going efforts to adequately
    manage rising raw material and freight costs;
    the ability to attract and retain talented and experienced
    executives that are necessary to execute our strategic
    initiatives;
    the risks associated with our efforts to maintain our
    traditional customer and expand to attract new customers;
    the ability to accurately estimate and forecast future
    regular-price and markdown selling and other future financial
    results and financial position;
    the satisfaction of all borrowing conditions under our Credit
    Facility including accuracy of all representations and
    warranties, no events of default, absence of material adverse
    effect or change and all other borrowing conditions;
    the ability to access on satisfactory terms, or at all, adequate
    financing and sources of liquidity necessary to fund our
    continuing operations and strategic initiatives and to obtain
    further increases in our Credit Facility as may be needed from
    time to time;
    the risks associated with our appointment of an exclusive global
    merchandise buying agent, including that the anticipated
    benefits and cost savings from this arrangement may not be
    realized or may take longer to realize than expected and the
    risk that upon any cessation of the relationship, for any
    reason, we would be unable to successfully transition to an
    internal or other external sourcing function;
    the ability to continue to purchase merchandise on open account
    purchase terms at existing or future expected levels and with
    acceptable payment terms and the risk that suppliers could
    require earlier or immediate payment or other security due to
    any payment concerns;
    the risks and uncertainties in connection with any need to
    source merchandise from alternate vendors;
    any impact to or disruption in our supply of merchandise
    including from any current or any future increased political,
    social or other unrest or future labor shortages in various
    other countries;
    the ability to successfully execute, fund and achieve the
    expected benefits of supply chain initiatives;
    any significant interruption or disruption in the operation of
    our distribution facility or the domestic and international
    transportation infrastructure;
    the impact of the current regulatory environment and financial
    systems reforms on our business, including new consumer credit
    rules; 46




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##### Table of Contents




    the risk that estimated or anticipated costs, charges and
    liabilities to settle and complete the transition and exit from
    and disposal of the J. Jill business, including both retained
    obligations and contingent risk for assigned obligations, may
    materially differ from or be materially greater than anticipated;
    any future store closings and the success of and necessary
    funding for closing underperforming stores;
    the risks associated with our upscale outlet expansion;
    the ability to reduce spending as needed;
    the ability to achieve our 2011 financial plan and strategic
    plan for operating results, working capital and cash flows;
    any negative publicity concerning the specialty retail business
    in general or our business in particular;
    the risk of impairment of goodwill and other intangible or
    long-lived assets;
    the risk associated with our efforts in transforming our
    information technology systems to meet our changing business
    systems and operations;
    any lack of sufficiency of available cash flows and other
    internal cash resources to satisfy all future operating needs
    and other cash requirements; and
    the risks and uncertainties associated with the outcome of
    current and future litigation, claims, tax audits and tax and
    other proceedings and the risk that actual liabilities,
    assessments or other financial impact will exceed any estimated,
    accrued or expected amounts or outcomes.    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk       47




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data    INDEX
  PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Statements of Operations for the
    Years Ended January 29, 2011, January 30, 2010 and
    January 31, 2009


F-3Consolidated Balance Sheets as of
    January 29, 2011 and January 30, 2010


F-4Consolidated Statements of Cash Flows for the
    Years Ended January 29, 2011, January 30, 2010 and
    January 31, 2009


F-5Consolidated Statements of Stockholders
    Equity (Deficit) for the Years Ended January 29, 2011,
    January 30, 2010 and January 31, 2009


F-6Notes to Consolidated Financial Statements


F-7   Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
    Rules 13a-15(e) 15d-15(e) Form 10-K.
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
 48




---



##### Table of Contents



Internal
    Control-Integrated Framework
  Form 10-K.
  Changes
    in Internal Controls over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
 49




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework
        Internal Control  Integrated Framework
    /s/ Deloitte &
    Touche LLP
    50




---



##### Table of Contents



Item 9B.
    Other
    Information    PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    (781) 741-4500, e-mail
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters      Equity
    Compensation Plan Information
  (c)Number of Securities(a)


(b)


Remaining Available forNumber of Securities to


Weighted-Average


Future Issuance Underbe Issued Upon Exercise


Exercise Price of


Equity Compensation Plansof Outstanding Options,


Outstanding Options,


(Excluding SecuritiesPlan Category

Warrants and Rights


Warrants and Rights


Reflected in Column (a))Equity compensation plans approved by security holders


9,482,855


$
21.72



3,992,641
(1)Equity compensation plans not approved by security holders










Total


9,482,855


$
21.72



3,992,641  51




---



##### Table of Contents



(1)
    
    Of the 3,992,641 securities remaining available for future
    issuance under equity compensation plans at January 29,
    2011, 3,703,520 shares were available under the 2003
    Executive Stock Based Incentive Plan, as amended, and
    289,121 shares were available under the Restated Directors
    Stock Plan, as amended.  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   52




---



##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules    Financial Statements:
              Financial Statement Schedules:
    Exhibits:
    (2)





Plan of Acquisition, Reorganization, Arrangement, Liquidation or
    Succession.2.1





Asset Purchase Agreement, dated as of June 7, 2009, by and
    among The Talbots, Inc., The Talbots Group, Limited Partnership,
    J. Jill, LLC, Birch Pond Realty Corporation, and Jill
    Acquisition LLC.(11)2.2





Amendment No. 1 to Asset Purchase Agreement and Parent
    Disclosure Schedule, dated as of July 2, 2009, by and among
    The Talbots, Inc., The Talbots Group, Limited Partnership, J.
    Jill, LLC, Birch Pond Realty Corporation, and Jill Acquisition
    LLC.(31)2.3





Amendment No. 2 to Asset Purchase Agreement, dated as of
    September 30, 2009, by and among The Talbots, Inc., The
    Talbots Group, Limited Partnership, J. Jill, LLC, Birch Pond
    Realty Corporation, and Jill Acquisition LLC.(31)2.4





Agreement and Plan of Merger, by and among The Talbots, Inc.,
    Tailor Acquisition, Inc. and BPW Acquisition Corp., dated as of
    December 8, 2009.(32)2.5





First Amendment to the Agreement and Plan of Merger, dated as of
    February 16, 2010, by and among The Talbots, Inc., Tailor
    Acquisition, Inc. and BPW Acquisition Corp.(34)2.6





Second Amendment to Agreement and Plan of Merger, dated as of
    April 6, 2010, by and among The Talbots, Inc., Tailor
    Acquisition, Inc. and BPW Acquisition Corp.(37)(3)





Articles of Incorporation and By-laws.3.1





Certificate of Incorporation, as amended, of Talbots.(1)(6)(8)3.2





Amended and Restated By-laws of The Talbots, Inc., effective as
    of April 16, 2010.(42)(4)





Instruments Defining the Rights of Security Holders, including
    Indentures.4.1





Form of Common Stock Certificate of Talbots.(1)4.2





Form of Warrant Agreement, by and between The Talbots, Inc.,
    Computershare Inc. and Computershare Trust Company, N.A.,
    including Form of Warrant to purchase shares of Talbots common
    stock (38)4.3





Warrant Agreement, including Form of Warrant, dated as of
    February 26, 2008, by and between BPW Acquisition Corp. and
    Mellon Investor Services LLC, and the First Amendment thereto,
    dated as of April 14, 2010, by and between The Talbots,
    Inc. (as successor to BPW Acquisition Corp.) and Mellon Investor
    Services LLC. (39)(41) 53




---



##### Table of Contents



4.4





AEON Warrant Agreement, including Form of Warrant Certificate,
    dated as of April 7, 2010, by and between The Talbots,
    Inc., Computershare Inc. and Computershare Trust Company,
    N.A.(38)(10)





Material Contracts.10.1





Stockholders Agreement, dated as of November 18, 1993,
    between Talbots and AEON (U.S.A.), Inc.(2)10.2





Stock Purchase Agreement, dated as of November 26, 1993,
    between Talbots and AEON (U.S.A.), Inc.(2)10.3





Trademark Purchase and License Agreement, dated as of
    November 26, 1993, between AEON Co. Ltd., (as successor in
    interest to JUSCO (Europe) B.V.) and The Classics Chicago,
    Inc.(2)10.4





License Agreement, dated as of November 26, 1993, between
    The Classics Chicago, Inc., Talbots, Talbots International
    Retailing Limited, Inc., Talbots (Canada), Inc. and Talbots
    (U.K.) Retailing Limited.(2)10.5





Amendment to License Agreement, dated January 29, 1997,
    among The Classics Chicago, Inc., Talbots, Talbots International
    Retailing Limited, Inc., Talbots (Canada), Inc., and Talbots
    (U.K.) Retailing, Ltd.(4)10.6





Tax Allocation Agreement, dated as of November 18, 1993,
    between AEON (U.S.A.), Inc., Talbots, Talbots International
    Retailing Limited, Inc., Talbots (U.K.) Retailing Limited and
    The Classics Chicago, Inc.(2)10.7





Services Agreement, dated as of November 18, 1993, between
    Talbots Japan Co., Ltd. and Talbots.(2)10.8





Consulting and Advisory Services Contract between AEON (U.S.A.),
    Inc. and Talbots dated as of November 1, 1999.(5)10.9





First Amendment, dated as of March 12, 2009, to the Term
    Loan Agreement between The Talbots, Inc. and AEON (U.S.A.),
    Inc., dated as of July 16, 2008.(25)10.10





Second Amendment, dated as of December 28, 2009, to the
    Term Loan Agreement between The Talbots, Inc. and AEON (U.S.A.),
    Inc., dated as of July 16, 2008.(33)10.11





Term Loan Agreement, dated as of July 16, 2008, between The
    Talbots, Inc. (as Borrower) and AEON (U.S.A.), Inc. (as
    Lender).(19)10.12





Commitment Letter and Summary of Proposed $200,000,000 Loan
    Facility Agreement between The Talbots, Inc. (as Borrower) and
    AEON Co., Ltd. (as Lender), dated February 5, 2009.(22)10.13





Term Loan Facility Agreement between The Talbots, Inc. and AEON
    Co., Ltd., dated as of February 25, 2009.(23)10.14





First Amendment, dated as of December 28, 2009, to the Term
    Loan Facility Agreement between The Talbots, Inc. and AEON
    (U.S.A.), Inc., dated as of February 25, 2009.(33)10.15





Support Letters from AEON Co., Ltd., dated April 9,
    2009.(26)10.16





Secured Revolving Credit Agreement dated as of April 10,
    2009 between Talbots and AEON Co., Ltd.(27)10.17





Amended and Restated Secured Revolving Credit Agreement dated as
    of December 28, 2009 between The Talbots, Inc. and AEON
    Co., Ltd.(33)10.18





Amended and Restated Security Agreement dated as of
    December 28, 2009 entered into by The Talbots, Inc. in
    favor of AEON Co., Ltd.(33)10.19





Repurchase, Repayment and Support Agreement, by and among The
    Talbots, Inc., BPW Acquisition Corp., AEON (U.S.A.), Inc. and
    AEON Co., Ltd., dated as of December 8, 2009.(32)10.20





Commitment Letter, by and between General Electric Capital
    Corporation and The Talbots, Inc., dated as of December 7,
    2009.(32)10.21





Secured Revolving Credit Agreement, dated April 7, 2010, by
    and among The Talbots, Inc., Talbots Classics Finance Company,
    Inc., The Talbots Group Limited Partnership, each as a borrower,
    the subsidiaries of the Company from time to time party thereto,
    as guarantors, and General Electric Capital Corporation, as
    agent, for the financial institutions from time to time party
    thereto, and as a lender.(40)10.22





Guaranty and Security Agreement, dated as of April 7, 2010,
    by The Talbots, Inc., The Talbots Group, Limited Partnership,
    Talbots Classics Finance Company, Inc., and certain other
    parties thereto, in favor of General Electric Capital
    Corporation, as administrative agent for the lenders and each
    other secured party.(40)10.23





Private Label Credit Card Access and Monitoring Agreement, dated
    as of April 7, 2010, by and among The Talbots, Inc., each
    other Credit Party as defined in the Credit Agreement, Talbots
    Classics National Bank, and General Electric Capital
    Corporation.(40) 54




---



##### Table of Contents



10.24





First Amendment to Credit Agreement, dated August 31, 2010,
    by and among, the Company, TCFC, TGLP, each as borrower, the
    subsidiaries of the Company from time to time party thereto, as
    guarantors, and General Electric Capital Corporation, as Agent,
    for the financial institutions from time to time party thereto,
    and as a lender.(43)10.25





Master Agreement for Documentary Letters of Credit, dated
    August 31, 2010, by General Electric Capital Corporation,
    the Company, TCFC, TGLP, Talbots Classics, Inc., Talbots Import,
    LLC, Birch Pond Realty Corporation, Talbots International
    Retailing Limited, Inc., Talbots (U.K.) Retailing Limited, and
    Talbots (Canada), Inc.(43)10.26





Master Agreement for Standby Letters of Credit, dated
    August 31, 2010, by General Electric Capital Corporation,
    the Company, TCFC, TGLP, Talbots Classics, Inc., Talbots Import,
    LLC, Birch Pond Realty Corporation, Talbots International
    Retailing Limited, Inc., Talbots (U.K.) Retailing Limited, and
    Talbots (Canada), Inc.(43)10.27





Sponsors Agreement, by and among Perella Weinberg Partners
    Acquisition LP, BPW BNYH Holdings LLC, The Talbots, Inc. and BPW
    Acquisition Corp., dated as of December 8, 2009.(32)10.28





Stipulation with respect to the action captioned
    Campbell v. The Talbots, Inc., et al., dated March 6,
    2010.(36)10.29





Amended and Restated Registration Rights Agreement, dated as of
    April 7, 2010, by and among The Talbots, Inc., BPW
    Acquisition Corp., Perella Weinberg Partners Acquisition LP,
    BNYH BPW Holdings LLC, Roger W. Einiger, J. Richard Fredericks
    and Wolfgang Schoellkopf.(40)10.30





The Talbots, Inc. Supplemental Retirement Plan, as amended and
    restated effective January 1, 2009.(26)*10.31





The Talbots, Inc. Supplemental Savings Plan, as amended and
    restated effective January 1, 2009.(26)*10.32





The Talbots, Inc. Deferred Compensation Plan, as amended and
    restated effective January 1, 2009.(26)*10.33





The Talbots, Inc. Amended and Restated 1993 Executive Stock
    Based Incentive Plan.(8)*10.34





The Talbots, Inc. 2003 Executive Stock Based Incentive Plan, as
    amended through February 28, 2008.(14)*10.35





Form of The Talbots, Inc. 2003 Executive Stock Based Incentive
    Plan Nonqualified Stock Option Agreement.(44)*10.36





Form of The Talbots, Inc. 2003 Executive Stock Based Incentive
    Plan Restricted Stock Agreement.(44)*10.37





Form of The Talbots, Inc. 2003 Executive Stock Based Incentive
    Plan Special Restricted Stock Unit Award Agreement.(24)*10.38





Form of The Talbots, Inc. 2003 Executive Stock Based Incentive
    Plan Nonqualified Stock Option Agreement (prior form).(18)*10.39





Form of The Talbots, Inc. 2003 Executive Stock Based Incentive
    Plan Restricted Stock Agreement (prior form).(18)*10.40





Form of The Talbots, Inc. 2003 Executive Stock Based Incentive
    Plan Restricted Stock Agreement (prior form).(10)*10.41





Form of The Talbots, Inc. 2003 Executive Stock Based Incentive
    Plan Nonqualified Stock Option Agreement (prior form).(10)*10.42





The Talbots, Inc. Directors Deferred Compensation Plan restated
    as of May 27, 2004.(9)*10.43





The Talbots, Inc. Restated Directors Stock Plan as amended
    through March 5, 2005.(7)*10.44





Form of Restricted Stock Unit Award under The Talbots, Inc.
    Restated Directors Stock Plan (prior form).(12)*10.45





Form of Option Agreement pursuant to The Talbots, Inc. Restated
    Directors Stock Plan (prior form).(13)*10.46





Form of Performance Accelerated Option Agreement pursuant to The
    Talbots, Inc. Restated Directors Stock Plan.(21)*10.47





Form of Option Agreement pursuant to The Talbots, Inc. Restated
    Directors Stock Plan (prior form).(26)*10.48





Director Compensation Arrangements, adopted April 16,
    2010.(38)*10.49





Form of Restricted Stock Unit Award under The Talbots, Inc.
    Restated Directors Stock Plan.(38)*10.50





Form of Option Agreement pursuant to The Talbots, Inc. Restated
    Directors Stock Plan.(38)* 55




---



##### Table of Contents



10.51





Form of Option Agreement pursuant to The Talbots, Inc. Restated
    Directors Stock Plan for one-time stock option awards granted to
    newly-appointed or elected directors.(38)*10.52





Employment Agreement by and between The Talbots, Inc. and Trudy
    F. Sullivan, dated August 6, 2007, and Amendment
    No. 1, dated as of June 16, 2009, thereto. (16)(29)*10.53





Stock Option Agreement by and between The Talbots, Inc. and
    Trudy F. Sullivan, dated August 7, 2007.(16)*10.54





Offer Letter between The Talbots, Inc. and Michael Scarpa, dated
    December 4, 2008.(26)*10.55





Severance Agreement between The Talbots, Inc. and Michael
    Scarpa, dated December 4, 2008.(26)*10.56





Change in Control Agreement between The Talbots, Inc. and
    Michael Scarpa, dated December 4, 2008.(26)*10.57





Offer Letter between The Talbots, Inc. and Benedetta I.
    Casamento, dated March 6, 2009.(26)*10.58





Severance Agreement between The Talbots, Inc. and Benedetta I.
    Casamento, dated April 6, 2009.(26)*10.59





Change in Control Agreement between The Talbots, Inc. and
    Benedetta I. Casamento, dated April 6, 2009.(26)*10.60





Offer Letter between The Talbots, Inc. and John Fiske, III,
    dated as of March 20, 2009, executed on September 20,
    2009.(31)*10.61





Severance Agreement between The Talbots, Inc. and John
    Fiske, III, dated as of March 20, 2009, executed on
    September 20, 2009.(31)*10.62





Change in Control Agreement by and between The Talbots, Inc. and
    John Fiske, III, effective April 1, 2007.(15)*10.63





Amendments to Compensation Arrangements of Richard T.
    OConnell, Jr., effective April 30, 2009.(28)*10.64





Severance Agreement between The Talbots, Inc. and Richard T.
    OConnell, Jr., effective as of April 30, 2009.(30)*10.65





Offer Letter between The Talbots, Inc. and Gregory I. Poole,
    dated June 5, 2008.(20)*10.66





Change in Control Agreement between The Talbots, Inc. and
    Gregory I. Poole, dated June 5, 2008.(26)*10.67





Severance Agreement between The Talbots, Inc. and Gregory I.
    Poole, dated June 5, 2008.(20)*10.68





Offer Letter between The Talbots, Inc. and Michael Smaldone,
    dated December 13, 2007.(26)*10.69





Severance Agreement between The Talbots, Inc. and Michael
    Smaldone, dated December 17, 2007.(26)*10.70





Change in Control Agreement between The Talbots, Inc. and
    Michael Smaldone, dated December 17, 2007.(26)*10.71





Offer Letter between The Talbots, Inc. and Lori Wagner, dated
    February 19, 2008.(17)*10.72





Change in Control Agreement between The Talbots, Inc. and Lori
    Wagner, dated March 31, 2008.(17)*10.73





Severance Agreement between The Talbots, Inc. and Lori Wagner,
    dated March 31, 2008.(17)*10.74





Summary of The Talbots, Inc. Executive Medical Plan dated
    June 19, 2007.(31)*10.75





Change in Control Agreements between Talbots and certain
    officers of Talbots.(2)(3)*10.76





Summary of financing incentive awards and operating performance
    incentive awards approved on February 25, 2010.(35)*10.77





The Talbots, Inc. Management Incentive Plan Performance Criteria
    for fiscal 2010.(38)*10.78





Form of 409A Letter Agreement, dated December 31, 2008,
    between The Talbots, Inc. and Richard T. OConnell, Jr.,
    John Fiske, III, Michael Smaldone, Lori Wagner, Basha Cohen
    and Gregory I. Poole.(26)*10.79





Form of 409A Amendment Letter Agreements, dated
    November 18, 2010, between The Talbots, Inc. and Trudy
    Sullivan, Michael Scarpa, Richard T. OConnell, Michael
    Smaldone, Gregory Poole, John Fiske, III, Lori Wagner,
    Benedetta Casamento and Bruce Prescott.(44)*     *
    
    Management contract and compensatory plan or arrangement.  (11)
    
    Statement re: Computation of Per Share Earnings.11.1
    
    Incorporated by reference to Note 8, Earnings (Loss)
    Per Share, of the Companys consolidated financial
    statements for the fiscal year ended January 29, 2011,
    included in this Report. 56




---



##### Table of Contents



(21)
    
    Subsidiaries.21.1
    
    List of Subsidiaries of The Talbots, Inc.(44)   (23)
    
    Consents of Experts and Counsel.   23.1
    
    Consent of Independent Registered Public Accounting Firm,
    Deloitte & Touche LLP.(44)(31)
    
    Rule 13a-14(a)/15d-14(a)
    Certifications.31.1
    
    Certification of Trudy F. Sullivan, President and Chief
    Executive Officer of the Company, pursuant to Securities
    Exchange Act
    Rule 13a-14(a).(44)31.2
    
    Certification of Michael Scarpa, Chief Operating Officer, Chief
    Financial Officer, and Treasurer of the Company, pursuant to
    Securities Exchange Act
    Rule 13a-14(a).(44)(32)
    
    Section 1350 Certifications.32.1
    
    Certifications pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of The Sarbanes-Oxley Act
    of 2002, by Trudy F. Sullivan, President and Chief Executive
    Officer of the Company and Michael Scarpa, Chief Operating
    Officer, Chief Financial Officer, and Treasurer of the
    Company.(44)    1
    
    Incorporated by reference to the exhibits filed with Talbots
    Registration Statement on Form
    S-1
    (No. 33-69082),
    which Registration Statement became effective November 18,
    1993.2
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated April 26, 1994 (SEC file number reference
    001-12552).3
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated April 27, 1995 (SEC file number reference
    001-12552).4
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated May 1, 1997 (SEC file number reference
    001-12552).5
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated July 1, 1999 (SEC file number reference
    001-12552).6
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated May 24, 2000 (SEC file number reference
    001-12552).7
    
    Incorporated by reference to the 2005 Proxy Statement
    (Exhibit A) dated April 21, 2005 (SEC file number
    reference
    001-12552).8
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated September 6, 2001 (SEC file number reference
    001-12552).9
    
    Incorporated by reference to the exhibits filed with Quarterly
    Report on
    Form 10-Q
    for the period ended July 31, 2004 (SEC file number
    reference
    001-12552).10
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated November 18, 2004 (SEC file number reference
    001-12552).11
    
    Incorporated by reference to the exhibit filed with Current
    Report on
    Form 8-K
    filed on June 8, 2009.12
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated March 3, 2005 (SEC file number reference
    001-12552).13
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated May 25, 2005 (SEC file number reference
    001-12552).14
    
    Incorporated by reference to the 2008 Proxy Statement
    (Appendix A) dated April 25, 2008.15
    
    Incorporated by reference to the exhibits filed with Quarterly
    Report on
    Form 10-Q
    for the period ended May 5, 2007.16
    
    Incorporated by reference to the exhibits filed with Quarterly
    Report on
    Form 10-Q
    for the period ended August 4, 2007.17
    
    Incorporated by reference to the exhibits filed with Annual
    Report on
    Form 10-K
    for the period ended February 2, 2008. 57




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##### Table of Contents



18
    
    Incorporated by reference to the Current Report on
    Form 8-K
    dated February 28, 2008 and the exhibits filed therewith.19
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated July 18, 2008.20
    
    Incorporated by reference to the exhibits filed with Quarterly
    Report on
    Form 10-Q
    for the period ended August 2, 2008.21
    
    Incorporated by reference to the exhibits filed with Quarterly
    Report on
    Form 10-Q
    for the period ended November 1, 2008.22
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated February 5, 2009.23
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated February 25, 2009.24
    
    Incorporated by reference to the exhibits filed with the Annual
    Report on
    Form 10-K
    filed on April 15, 2010.25
    
    Incorporated by reference to the exhibits filed with Current
    Report on
    Form 8-K
    dated March 12, 2009.26
    
    Incorporated by reference to the exhibits filed with the Annual
    Report on
    Form 10-K
    filed on April 16, 2009.27
    
    Incorporated by reference to the exhibit filed with the Current
    Report on
    Form 8-K
    dated April 10, 2009.28
    
    Incorporated by reference to the Current Report on
    Form 8-K
    filed on May 6, 2009.29
    
    Incorporated by reference to the exhibit filed with the Current
    Report on
    Form 8-K
    filed on June 18, 2009.30
    
    Incorporated by reference to the exhibits filed with the
    Quarterly Report on
    Form 10-Q
    filed on September 10, 2009.31
    
    Incorporated by reference to the exhibits filed with the
    Quarterly Report on
    Form 10-Q
    filed on December 10, 2009.32
    
    Incorporated by reference to the exhibits filed with the Current
    Report on
    Form 8-K
    filed on December 10, 2009.33
    
    Incorporated by reference to the exhibits filed with the Current
    Report on
    Form 8-K
    filed on January 4, 2010.34
    
    Incorporated by reference to the exhibit filed with the Current
    Report on
    Form 8-K
    filed on February 17, 2010.35
    
    Incorporated by reference to the Current Report on
    Form 8-K
    filed on March 3, 2010.36
    
    Incorporated by reference to the exhibit filed with the Current
    Report on
    Form 8-K
    filed on March 9, 2010.37
    
    Incorporated by reference to the exhibits filed with the Current
    Report on
    Form 8-K
    filed on April 6, 2010.38
    
    Incorporated by reference to exhibits filed with the Quarterly
    Report on
    Form 10-Q
    filed on June 8, 2010.39
    
    Incorporated by reference to Appendix A to the proxy
    statement filed by BPW Acquisition Corp. on April 6, 2010.40
    
    Incorporated by reference to the Current Report on
    Form 8-K
    filed on April 8, 2010.41
    
    Incorporated by reference to the exhibit filed with the Current
    Report on
    Form 8-K
    filed on April 14, 2010.42
    
    Incorporated by reference to the exhibits filed with the Current
    Report on
    Form 8-K
    filed on April 21, 2010.43
    
    Incorporated by reference to the exhibits filed with the Current
    Report on
    Form 8-K
    filed on August 31, 2010.44
    
    Filed with this
    Form 10-K. 58




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##### Table of Contents



SIGNATURES    The Talbots, Inc.
  By:
    /s/  Michael
    Scarpa   Chief Operating Officer,
 Chief Financial Officer and Treasurer
 (Principal Financial and Accounting Officer)
      /s/  Trudy
    F. SullivanTrudy
    F. SullivanPresident and Chief Executive Officer
    (Principal Executive Officer)

/s/  John
    W. GleesonJohn
    W. GleesonDirector/s/  Michael
    ScarpaMichael
    ScarpaChief Operating Officer, Chief Financial Officer and
    Treasurer
    (Principal Financial and Accounting Officer)

/s/  Gary
    M. PfeifferGary
    M. PfeifferDirector/s/  Susan
    M. SwainSusan
    M. SwainDirector

/s/  Marjorie
    L. BowenMajorie
    L. BowenDirector/s/  Andrew
    H. MadsenAndrew
    H. MadsenDirector  59




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##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Statements of Operations for the
    Years Ended January 29, 2011, January 30, 2010 and
    January 31, 2009


F-3Consolidated Balance Sheets as of
    January 29, 2011 and January 30, 2010


F-4Consolidated Statements of Cash Flows for the
    Years Ended January 29, 2011, January 30, 2010 and
    January 31, 2009


F-5Consolidated Statements of Stockholders
    Equity (Deficit) for the Years Ended January 29, 2011,
    January 30, 2010 and January 31, 2009


F-6Notes to Consolidated Financial Statements


F-7  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control  Integrated Framework
  Deloitte &
    Touche LLP
    F-2




---



##### Table of Contents



THE
    TALBOTS, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
 Amounts
    in thousands except per share data
   Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Net sales

$
1,213,060


$
1,235,632


$
1,495,170Costs and expensesCost of sales, buying and occupancy


755,232



821,278



1,049,785Selling, general and administrative


393,477



403,204



523,136Merger-related costs


25,855



8,216



Restructuring charges


5,640



10,273



17,793Impairment of store assets


1,420



1,351



2,845Operating income (loss)


31,436



(8,690
)


(98,389
)InterestInterest expense


18,902



28,394



20,589Interest income


75



271



299Interest expense, net


18,827



28,123



20,290Income (loss) before taxes


12,609



(36,813
)


(118,679
)Income tax expense (benefit)


5,039



(11,505
)


20,842Income (loss) from continuing operations


7,570



(25,308
)


(139,521
)Income (loss) from discontinued operations


3,245



(4,104
)


(416,138
)Net income (loss)

$
10,815


$
(29,412
)

$
(555,659
)Basic earnings (loss) per share:Continuing operations

$
0.11


$
(0.47
)

$
(2.63
)Discontinued operations


0.05



(0.08
)


(7.78
)Net earnings (loss)

$
0.16


$
(0.55
)

$
(10.41
)Diluted earnings (loss) per share:Continuing operations

$
0.11


$
(0.47
)

$
(2.63
)Discontinued operations


0.05



(0.08
)


(7.78
)Net earnings (loss)

$
0.16


$
(0.55
)

$
(10.41
)Weighted average shares outstanding:Basic


65,790



53,797



53,436Diluted


66,844



53,797



53,436    F-3




---



##### Table of Contents



THE
    TALBOTS, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
 Amounts
    in thousands except share and per share data
  January 29,


January 30,2011


2010ASSETSCurrent Assets:Cash and cash equivalents

$
10,181


$
112,775Customer accounts receivable, net


145,472



163,587Merchandise inventories


158,040



142,696Deferred catalog costs


4,184



6,685Prepaid and other current assets


33,235



48,139Due from related party






959Income tax refundable






2,006Total current assets


351,112



476,847Property and equipment, net


186,658



220,404Goodwill


35,513



35,513Trademarks


75,884



75,884Other assets


19,349



17,170Total Assets

$
668,516


$
825,818LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current Liabilities:Accounts payable

$
91,855


$
104,118Accrued liabilities


137,824



148,177Revolving credit facility


25,516



Related party debt






486,494Total current liabilities


255,195



738,789Deferred rent under lease commitments


93,440



111,137Deferred income taxes


28,456



28,456Other liabilities


107,839



133,072Commitments and contingenciesStockholders Equity (Deficit):Common stock, $0.01 par value; 200,000,000 authorized;
    97,247,847 shares and 81,473,215 shares issued,
    respectively; and 70,261,905 shares and
    55,000,142 shares outstanding, respectively


972



815Additional paid-in capital


860,819



499,457Retained deficit


(37,875
)


(48,690
)Accumulated other comprehensive loss


(51,216
)


(51,179
)Treasury stock, at cost: 26,985,942 shares and
    26,473,073 shares, respectively


(589,114
)


(586,039
)Total stockholders equity (deficit)


183,586



(185,636
)Total Liabilities and Stockholders Equity (Deficit)

$
668,516


$
825,818    F-4




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##### Table of Contents



THE
    TALBOTS, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 Amounts
    in thousands
  Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
10,815


$
(29,412
)

$
(555,659
)Income (loss) from discontinued operations


3,245



(4,104
)


(416,138
)Income (loss) from continuing operations


7,570



(25,308
)


(139,521
)Adjustments to reconcile income (loss) from continuing
    operations to net cashprovided by operating activities:Depreciation and amortization


61,501



74,309



84,526Stock-based compensation


14,461



6,423



8,562Amortization of debt issuance costs


3,118



2,335



399Impairment of store assets


1,420



1,351



2,845Deferred rent


(13,480
)


(11,559
)


(242
)Gift card breakage income


(6,940
)






Non-cash portion of gain on settlement of shareholder litigation


(1,045
)






Deferred income taxes






(12,116
)


44,769Loss (gain) on disposal of property and equipment


110



223



(28
)Tax benefit from options exercised










76Changes in assets and liabilities:Customer accounts receivable


18,187



5,950



41,156Merchandise inventories


(15,116
)


64,311



41,325Deferred catalog costs


2,501



(1,890
)


1,453Prepaid and other current assets


13,249



(9,257
)


(2,653
)Due from related party


959



(583
)


2,664Income tax refundable


2,006



24,640



(26,646
)Accounts payable


(12,317
)


(17,275
)


(20,898
)Accrued income taxes










(4,308
)Accrued liabilities


4,245



(14,016
)


(3,665
)Other assets


(635
)


(1,285
)


13,047Other liabilities


(25,656
)


(5,066
)


(26,601
)Net cash provided by operating activities


54,138



81,187



16,260CASH FLOWS FROM INVESTING ACTIVITIES:Additions to property and equipment


(28,805
)


(20,980
)


(44,698
)Proceeds from disposal of property and equipment


15



61



2,555Cash acquired in merger with BPW Acquisition Corp.


332,999







Net cash provided by (used in) investing activities


304,209



(20,919
)


(42,143
)CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings on revolving credit facility


1,651,638







Payments on revolving credit facility


(1,626,122
)






Proceeds from related party borrowings






475,000



20,000Payments on related party borrowings


(486,494
)


(8,506
)


Payments on long-term borrowings






(308,351
)


(80,502
)Proceeds from working capital notes payable






8,000



57,000Payments on working capital notes payable






(156,500
)


(15,000
)Proceeds from working capital notes payable, net










106,500Payment of debt issuance costs


(6,163
)


(4,760
)


(866
)Payment of equity issuance costs


(3,594
)






Proceeds from warrants exercised


19,042







Proceeds from options exercised


752







888Purchase of treasury stock


(2,030
)


(556
)


(1,505
)Cash dividends










(28,752
)Net cash (used in) provided by financing activities


(452,971
)


4,327



57,763EFFECT OF EXCHANGE RATE CHANGES ON CASH


607



503



(464
)CASH FLOWS FROM DISCONTINUED OPERATIONS:Operating activities


(8,577
)


(34,110
)


(20,119
)Investing activities






63,827



(18,684
)Effect of exchange rate changes on cash






23



(154
)(8,577
)


29,740



(38,957
)NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(102,594
)


94,838



(7,541
)CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR


112,775



16,551



24,280DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS OF
    DISCONTINUED OPERATIONS






1,386



(188
)CASH AND CASH EQUIVALENTS, END OF YEAR

$
10,181


$
112,775


$
16,551    F-5




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##### Table of Contents



THE
    TALBOTS, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY (DEFICIT)
 Amounts
    in thousands except share data
  AccumulatedAdditional


Retained


Other








TotalCommon Stock


Paid-in


Earnings


Comprehensive


Treasury


Comprehensive


StockholdersShares


Amount


Capital


(Deficit)


Loss


Stock


(Loss) Income


Equity (Deficit)BALANCE AT FEBRUARY 2, 2008


79,755,443


$
797


$
485,629


$
565,805


$
(13,474
)

$
(583,978
)





$
454,779Adoption of accounting guidance related to changing the
    measurement date of the benefit plans to January 31, 2009














(897
)














(897
)Cash dividends paid










(225
)


(28,527
)














(28,752
)Common stock issued as stock awards


1,298,415



13























13Compensation expense related to stock options










4,677



















4,677Compensation expense related to nonvested common stock awards










4,178



















4,178Tax deficiency on vested stock awards










(2,277
)


















(2,277
)Stock options exercised, including tax benefit


71,668



1



950



















951Purchase of 915,489 shares of vested and nonvested common
    stock awards






















(1,505
)






(1,505
)Comprehensive (loss) income:Net loss














(555,659
)









$
(555,659
)


(555,659
)Translation adjustment


















(1,216
)






(1,216
)


(1,216
)Change in pension and postretirement liabilities, net of tax


















(52,389
)






(52,389
)


(52,389
)Comprehensive loss

























$
(609,264
)BALANCE AT JANUARY 31, 2009


81,125,526



811



492,932



(19,278
)


(67,079
)


(585,483
)






(178,097
)Common stock issued as stock awards


347,689



4























4Compensation expense related to stock options










2,574



















2,574Compensation expense related to nonvested common stock awards










3,951



















3,951Purchase of 723,918 shares of vested and nonvested common
    stock awards






















(556
)






(556
)Comprehensive (loss) income:Net loss














(29,412
)









$
(29,412
)


(29,412
)Translation adjustment


















895







895



895Change in pension and postretirement liabilities, net of tax


















15,005







15,005



15,005Comprehensive loss

























$
(13,512
)BALANCE AT JANUARY 30, 2010


81,473,215



815



499,457



(48,690
)


(51,179
)


(586,039
)






(185,636
)Merger and related BPW Transactions:Issuance of common stock and warrants in merger with BPW


41,469,003



415



332,584



















332,999Issuance of warrants to repurchase and retire common stock held
    by AEON (U.S.A.)


(29,921,829
)


(299
)


299



















Equity issuance costs










(3,594
)


















(3,594
)Extinguishment of related party debt










(1,706
)


















(1,706
)Tax expense on extinguishment of related party debt










(435
)


















(435
)Total merger-related


11,547,174



116



327,148



















327,264Exercise of Non-Tendered Warrants


2,538,946



25



19,017



















19,042Exercise of stock options


240,512



2



750



















752Stock-based compensation


1,448,000



14



14,447



















14,461Purchase of 337,869 shares of vested and nonvested common
    stock awards






















(2,030
)






(2,030
)Receipt of 175,000 shares of common stock on settlement of
    shareholder litigation






















(1,045
)






(1,045
)Comprehensive income (loss):Net income














10,815










$
10,815



10,815Translation adjustment


















725







725



725Change in pension and postretirement liabilities


















(762
)






(762
)


(762
)Comprehensive income

























$
10,778BALANCE AT JANUARY 29, 2011


97,247,847


$
972


$
860,819


$
(37,875
)

$
(51,216
)

$
(589,114
)





$
183,586    F-6




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Description
    of Business    2.
    Summary
    of Significant Accounting Policies  Use of Estimates
  Subsequent Events
  Principles of Consolidation
  Fiscal Year
  Cash and Cash Equivalents
  Customer Accounts Receivable, net
   F-7




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Customer Loyalty Program
  Merchandise Inventories (first-in,
  Property and Equipment
  Description

YearsBuildings

10-50Fixtures and equipment

3-10Software

3-7Leasehold improvements

3-10 or term of lease, if shorter     Preopening Expenses
  Fair Value Measurements Fair Value
    Measurements
 F-8




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Goodwill and Indefinite-lived
    Trademarks
    relief-of-royalty
  Long-Lived Assets
  Grantor Trust
 F-9




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Deferred Rent Under Lease Commitments
  Foreign Currency Adjustments
  Revenue Recognition point-of-sale
  Cost of Sales, Buying and Occupancy
  Selling, General and
    Administrative
  Gift Cards and Gift Card Breakage
 F-10




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Finance Charge Income
  Advertising
  Income Taxes non-amortizing
    Stock-Based Compensation
  Comprehensive Income (Loss)
 F-11




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    January 29,


January 30,2011


2010(In thousands)Cumulative translation adjustment, net of tax benefit of
    $0.2 million and $0.2 million, respectively

$
495


$
(230
)Pension and postretirement plan liabilities, net of tax
    (benefit) expense of ($0.2) million and $1.0 million,
    respectively


(51,711
)


(50,949
)Accumulated other comprehensive loss

$
(51,216
)

$
(51,179
)   Income Taxes.
  Earnings (Loss) Per Share non-director Earnings (Loss) Per
    Share
  Supplemental Cash Flow Information
  Recent
    Accounting Pronouncements
  2010-6, Fair Value Measurements and Disclosures 2010-6 ASC 820-10, Fair Value Measurements and Disclosures 2010-06 2010-6 Fair Value Measurements 2010-06
  2010-20, Disclosures About the Credit Quality of Financing Receivables
    and the Allowance for Credit Losses 2010-20 ASC 310-10, Receivables 2010-20
 F-12




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2010-20 Summary of Significant Accounting Policies Customer Accounts Receivable, net
  2010-28, When to Perform Step 2 of the Goodwill Impairment Test for
    Reporting Units With Zero or Negative Carrying Amounts 2010-28 ASC 350-20, Goodwill 2010-28
  3.
    Merger
    with BPW Acquisition Corp. and Related Transactions         F-13




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              Debt
   F-14




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Commitments and Contingencies
      Year EndedJanuary 29, 2011


January 30, 2010(In thousands)Investment banking

$
14,255


$
4,941Accounting and legal


6,071



2,598Financing incentive compensation


6,686



Net gain on settlement of shareholder litigation


(2,695
)


Other costs


1,538



677Total merger-related costs

$
25,855


$
8,216     F-15




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year EndedJanuary 29, 2011


January 30, 2010Actual


Pro Forma


Actual


Pro Forma(In thousands, except per share data)Net sales

$
1,213,060


$
1,213,060


$
1,235,632


$
1,235,632Operating income (loss)


31,436



24,564



(8,690
)


(10,370
)Income (loss) from continuing operations


7,570



5,958



(25,308
)


(8,133
)Earnings (loss) per share
    - continuing operations:Basic

$
0.11


$
0.09


$
(0.47
)

$
(0.12
)Diluted

$
0.11


$
0.08


$
(0.47
)

$
(0.12
)Weighted average shares outstanding:Basic


65,790



67,884



53,797



65,344Diluted


66,844



68,938



53,797



65,344     4.
    Restructuring
    Charges      
    In June 2008, the Company reduced its corporate headcount by 9%,
    or 88 positions.
    In February 2009, the Company reduced its corporate headcount by
    an additional 17%, or 370 positions.
    In June 2009, the Company reduced its corporate headcount by an
    additional 20%, including the elimination of open positions.
    In August 2009, the Company reorganized its global sourcing
    activities, closing its Hong Kong and India sourcing offices and
    reducing its corporate sourcing headcount.
    In March 2010, the Company consolidated its Madison Avenue, New
    York flagship location in which it reduced active leased floor
    space and wrote down certain assets and leasehold improvements
    no longer used in the redesigned lay-out.   F-16




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Corporate - WideStrategic InitiativesSeverance


Lease-Related


Consulting


Total(In thousands)Balance at February 2, 2008

$
678


$



$
1,532


$
2,210Charges


13,751







4,042



17,793Cash payments


(5,717
)






(5,574
)


(11,291
)Non-cash items


2,170











2,170Balance at January 31, 2009


10,882











10,882Charges


7,865



2,247



161



10,273Cash payments


(16,497
)


(835
)


(148
)


(17,480
)Non-cash items


839



(641
)






198Balance at January 30, 2010


3,089



771



13



3,873Charges


1,427



4,213







5,640Cash payments


(4,327
)


(1,159
)


(13
)


(5,499
)Non-cash items


26



(44
)






(18
)Balance at January 29, 2011

$
215


$
3,781


$



$
3,996     5.
    Stock-Based
    Compensation  2003
    Executive Stock Based Incentive Plan, as amended
         F-17




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Restated
    Directors Stock Plan, as amended
            Stock-Based
    Compensation Expense
      Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Cost of sales, buying and occupancy

$
800


$
692


$
(129
)Selling, general and administrative


9,341



6,570



10,861Merger-related costs


4,346







Restructuring charges


(26
)


(839
)


(2,170
)Total

$
14,461


$
6,423


$
8,562      F-18




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock
    Options
    Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Risk-free interest rate


3.1%



2.0%



2.6%Expected life of options


6.8 years



4.8 years



5.3 yearsExpected volatility of underlying stock


79.7%



83.9%



50.8%Expected dividend yield


0.0%



0.0%



7.8%       Weighted


WeightedAverage


Average Remaining


AggregateNumber of


Exercise Price


Contractual Term


IntrinsicShares


per Share


(In Years)


Value(In thousands)Outstanding at January 30, 2010


10,402,019


$
24.06Granted


92,385



14.26Exercised


(240,512
)


3.13Forfeited or expired


(3,138,251
)


22.85Outstanding at January 29, 2011


7,115,641


$
25.17



3.1


$
4,436Exercisable at January 29, 2011


5,918,848


$
29.29



2.1


$
1,202       Nonvested
    Stock Awards and RSUs
   F-19




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedAverage GrantNumber of


Date Fair ValueShares


per ShareNonvested at January 30, 2010


1,330,890


$
12.62Granted


1,789,701



11.63Vested


(564,648
)


15.54Forfeited


(188,729
)


10.95Nonvested at January 29, 2011


2,367,214


$
11.34       6.
    Income
    Taxes    Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Domestic

$
12,625


$
(35,089
)

$
(118,749
)Foreign


(16
)


(1,724
)


70Income (loss) before taxes

$
12,609


$
(36,813
)

$
(118,679
)     Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Current expense (benefit):Federal

$



$
(2,006
)

$
(24,104
)State


3,856



4,665



398Foreign


26



(2,308
)


Total current expense (benefit)


3,882



351



(23,706
)Deferred (benefit) expense:Federal


1,012



(10,543
)


42,651State


145



(1,313
)


1,897Total deferred (benefit) expense


1,157



(11,856
)


44,548Income tax expense (benefit)

$
5,039


$
(11,505
)

$
20,842  F-20




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Tax at federal statutory rate

$
4,413


$
(12,885
)

$
(41,538
)Adjustments resulting from:State income taxes, net of federal tax benefit


1,448



3,402



(706
)Foreign tax


32



(1,704
)


(361
)Valuation allowance


(9,952
)


6,447



60,975Employment related obligations


1,081



1,354



2,541Merger-related costs


6,972



2,800



Intraperiod tax allocation from other comprehensive income


1,157



(10,500
)


In-kind donations










(1,138
)Other


(112
)


(419
)


1,069Income tax expense (benefit)

$
5,039


$
(11,505
)

$
20,842    F-21




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Deferred
    tax assets (liabilities)
    January 29,


January 30,2011


2010(In thousands)Deferred tax assets:Merchandise inventories

$
4,508


$
11,993Deferred rent


14,614



18,787Lease commitments


22,816



27,184Accrued vacation pay


26



65Deferred compensation


2,942



5,543Stock-based compensation


13,138



10,863Pension and postretirement liabilities


29,238



32,416Charitable contribution carryforward


5,877



6,755Net operating loss carryforwards


42,982



54,271Deferred interest






7,172Deferred unrecognized tax benefits


21,773



24,001Restructuring charges


1,405



3,242Bad debts


1,760



1,995Accrued expenses


11,904



8,611Other


6,208



1,968Total deferred tax assets


179,191



214,866Deferred tax liabilities:Prepaid costs


(2,187
)


(2,728
)Depreciation and amortization


(2,938
)


(11,890
)Identifiable intangibles


(28,456
)


(28,456
)Total deferred tax liabilities


(33,581
)


(43,074
)Less: Valuation allowance


(174,066
)


(200,248
)Net deferred tax liability

$
(28,456
)

$
(28,456
)      F-22




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Merger with
    BPW Acquisition Corp. and Related Transactions
    Uncertain
    tax positions
    January 29,


January 30,


January 31,2011


2010


2009(In thousands)Unrecognized tax benefits, beginning of year

$
35,030


$
38,520


$
37,908Gross increases  tax positions of prior periods


5,454



7,666



3,704Gross decreases  tax positions of prior periods


(7,310
)


(1,946
)


(2,243
)Gross increases  tax positions of current periods


20,025



293



1,597Settlements with taxing authorities


(836
)


(7,979
)


(2,166
)Lapse of statute of limitations


(443
)


(1,524
)


(280
)Unrecognized tax benefits, end of year

$
51,920


$
35,030


$
38,520      F-23




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    7.
    Discontinued
    Operations      Commitments and
    Contingencies
   F-24




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Net sales

$



$
178,297


$
470,815Loss from operations


(210
)


(3,818
)


(416,138
)Gain (loss) on disposal


3,455



(286
)


Income (loss) from discontinued operations

$
3,245


$
(4,104
)

$
(416,138
)           8.
    Earnings
    (Loss) Per Share  Summary of Significant
    Accounting Policies
 F-25




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands, except per share data)Basic earnings (loss) per share:Income (loss) from continuing operations

$
7,570


$
(25,308
)

$
(139,521
)Less: income associated with participating securities


223







Less: dividends paid to participating securities










850Income (loss) available for common stockholders

$
7,347


$
(25,308
)

$
(140,371
)Weighted average shares outstanding


65,790



53,797



53,436Basic earnings (loss) per share  continuing operations

$
0.11


$
(0.47
)

$
(2.63
)   Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands, except per share data)Diluted earnings (loss) per share:Income (loss) from continuing operations

$
7,570


$
(25,308
)

$
(139,521
)Less: income associated with participating securities


219







Less: dividends paid to participating securities










850Income (loss) available for common stockholders

$
7,351


$
(25,308
)

$
(140,371
)Weighted average shares outstanding


65,790



53,797



53,436Effect of dilutive securities


1,054







Diluted weighted average shares outstanding


66,844



53,797



53,436Diluted earnings (loss) per share  continuing
    operations

$
0.11


$
(0.47
)

$
(2.63
)     Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Nonvested stock






1,200,890



1,895,660Nonvested director RSUs






28,000



28,000Stock options


5,863,356



10,409,219



9,480,355Warrants


18,242,750







24,106,106



11,638,109



11,404,015   9.
    Fair
    Value Measurements  Summary of Significant
    Accounting Policies
   F-26




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fair Value Measurements UsingQuoted Market


ObservableNet Carrying


Prices in Active


Inputs Other


Significant


Impairment ofValue at


Markets for


than Quoted


Unobservable


Store Assets, FiscalJanuary 29,


Identical Assets


Market Prices


Inputs


Year Ended2011


(Level 1)


(Level 2)


(Level 3)


January 29, 2011(In thousands)Long-lived assets held and used

$
1,904


$



$



$
1,904


$
1,420Total

$
1,904


$



$



$
1,904


$
1,420   Fair Value Measurements UsingQuoted Market


ObservableNet Carrying


Prices in Active


Inputs Other


Significant


Impairment ofValue at


Markets for


than Quoted


Unobservable


Store Assets, FiscalJanuary 30,


Identical Assets


Market Prices


Inputs


Year Ended2010


(Level 1)


(Level 2)


(Level 3)


January 30, 2010(In thousands)Long-lived assets held and used

$
2,493


$



$



$
2,493


$
1,351Total

$
2,493


$



$



$
2,493


$
1,351   Benefit Plans
  10.
    Customer
    Accounts Receivable, net    January 29,


January 30,2011


2010(In thousands)Customer accounts receivable

$
149,872


$
168,887Less: allowance for doubtful accounts


(4,400
)


(5,300
)Customer accounts receivable, net

$
145,472


$
163,587  F-27




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Summary of Significant
    Accounting Policies 61-120 days 121-180 days
      Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Balance, beginning of year

$
5,300


$
4,000


$
2,700Charges to costs and expenses


3,348



8,097



5,987Charge-offs, net of recoveries


(4,248
)


(6,797
)


(4,687
)Balance, end of year

$
4,400


$
5,300


$
4,000    F-28




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Property
    and Equipment, net    January 29,


January 30,2011


2010(In thousands)Land

$
10,817


$
10,817Buildings


69,161



69,198Fixtures and equipment


367,149



375,692Software


61,468



57,508Leasehold improvements


296,885



307,123Construction-in-progress


15,206



5,292Property and equipment


820,686



825,630Less: accumulated depreciation and amortization


(634,028
)


(605,226
)Property and equipment, net

$
186,658


$
220,404     12.
    Accrued
    Liabilities    January 29,


January 30,2011


2010(In thousands)Gift cards and merchandise credits outstanding, sales return
    reserve and other customer-related liabilities

$
45,062


$
56,032Accrued employee compensation including related tax and benefits


23,241



21,018Accrued taxes, other than income and withholding


7,558



10,997Accrued interest due to related party






6,106Current portion of unrecognized tax benefit liability


18,558



4,153Other accrued liabilities


43,405



49,871Total accrued liabilities

$
137,824


$
148,177     Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Balance, beginning of year

$
7,250


$
4,737


$
9,486Provision for merchandise returns


218,414



300,737



348,359Merchandise returned


(221,982
)


(298,224
)


(353,108
)Balance, end of year

$
3,682


$
7,250


$
4,737  F-29




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  13.
    Debt    January 29,


January 30,2011


2010(In thousands)Revolving credit facility

$
25,516


$
Related party debt






486,494Total

$
25,516


$
486,494   Revolving
    Credit Facility
  sub-facility,
     F-30




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                Related
    Party Debt
  $250.0 Million Secured Revolving Loan Facility with
    AEON
 F-31




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            $200.0 Million Term Loan Facility with
    AEON
   F-32




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Term Loan with AEON (U.S.A.)
    14.
    Equity
    Transactions  Treasury
    Stock
        Campbell v. The Talbots, Inc., et al. Merger
    with BPW Acquisition Corp. and Related Transactions
   F-33




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Dividends
    Additional
    Equity Transactions
  Merger with BPW Acquisition Corp. and Related
    Transactions
  15.
    Benefit
    Plans  Pension
    Plan
    Supplemental
    Executive Retirement Plans
    Postretirement
    Medical Plans
     F-34




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Plan
    Remeasurements
      Postretirement MedicalPension Plan


SERP


PlansJanuary 29,


January 30,


January 29,


January 30,


January 29,


January 30,2011


2010


2011


2010


2011


2010(In thousands)Change in benefit obligations:Projected benefit obligations at beginning of year

$
155,757


$
161,398


$
20,063


$
19,179


$
1,257


$
1,235Interest cost


9,421



9,009



1,129



1,165



63



74Actuarial loss


6,721



14,725



2,359



3,415



203



64Curtailment / settlement






(25,359
)






(2,035
)


(37
)


Benefits paid


(5,207
)


(4,016
)


(1,642
)


(1,661
)


(89
)


(116
)Projected benefit obligations at end of year

$
166,692


$
155,757


$
21,909


$
20,063


$
1,397


$
1,257Changes in assets:Fair value at beginning of year

$
97,233


$
73,070


$



$



$



$
Actual return on plan assets


17,836



24,063















Employer contributions


4,610



4,116



1,642



1,661



89



116Benefits paid


(5,207
)


(4,016
)


(1,642
)


(1,661
)


(89
)


(116
)Fair value at end of year

$
114,472


$
97,233


$



$



$



$
  F-35




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    PostretirementPension Plan


SERP


Medical PlansJanuary 29,


January 30,


January 29,


January 30,


January 29,


January 30,2011


2010


2011


2010


2011


2010(In thousands)Funded status:Projected benefit obligations in excess of plan assets

$
52,220


$
58,524


$
21,909


$
20,063


$
1,397


$
1,257Net amounts recognized in the consolidated balance sheet:

$
52,220


$
58,524


$
21,909


$
20,063


$
1,397


$
1,257Net amounts recognized in the consolidated balance sheet
    consist of:Accrued liabilities (current)

$



$



$
1,650


$
1,450


$



$
33Other liabilities (non-current)


52,220



58,524



20,259



18,613



1,397



1,224Net amounts recognized in the consolidated balance sheets

$
52,220


$
58,524


$
21,909


$
20,063


$
1,397


$
1,257Net amounts recognized in accumulated other comprehensive
    loss consist of:Net actuarial loss

$
48,186


$
50,233


$
3,525


$
1,234


$



$
114Prior service credit






















(632
)Net amounts recognized in accumulated other comprehensive loss

$
48,186


$
50,233


$
3,525


$
1,234


$



$
(518
)     Pension Plan


SERPJanuary 29,


January 30,


January 29,


January 30,2011


2010


2011


2010(In thousands)Projected benefit obligation

$
166,692


$
155,757


$
21,909


$
20,063Accumulated benefit obligation

$
166,692


$
155,757


$
21,909


$
20,063Fair value of plan assets

$
114,472


$
97,233


$



$
  F-36




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Service expense  benefits earned during the period

$



$



$
9,494Interest expense on projected benefit obligation


9,421



9,009



9,636Expected return on plan assets


(9,588
)


(7,474
)


(10,263
)Curtailment loss






124



17Prior service cost net amortization






5



69Net amortization and deferral


521



978



1,254Net pension expense

$
354


$
2,642


$
10,207     Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Service expense  benefits earned during the period

$



$



$
398Interest expense on projected benefit obligation


1,129



1,165



1,270Curtailment (gain) loss






(451
)


15Prior service cost net amortization






2



26Net amortization and deferral


68







21Net SERP expense

$
1,197


$
716


$
1,730     Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Service expense  benefits earned during the period

$



$



$
1Interest expense on accumulated postretirement benefit obligation


63



74



70Settlement / curtailment gain


(687
)


(442
)


Prior service cost net amortization


(1,393
)


(1,519
)


(1,696
)Net amortization and deferral


571



555



633Net postretirement medical credit

$
(1,446
)

$
(1,332
)

$
(992
)  F-37




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    PostretirementPension Plan


SERP


Medical PlansJanuary 29,


January 30,


January 29,


January 30,


January 29,


January 30,2011


2010


2011


2010


2011


2010(In thousands)Net (gain) loss

$
(2,047
)

$
(16,890
)

$
2,291


$
1,111


$
(114
)

$
(294
)Prior service (credit) cost






(78
)






(13
)


632



1,177Total recognized in other comprehensive (income) loss


(2,047
)


(16,968
)


2,291



1,098



518



883Total expense (credit)


354



2,642



1,197



716



(1,446
)


(1,332
)Total recognized in net periodic (benefit) cost and other
    comprehensive (income) loss

$
(1,693
)

$
(14,326
)

$
3,488


$
1,814


$
(928
)

$
(449
)       Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009Pension Plan:Discount rate


6.00
%


6.75
%


6.50
%Discount rate used to determine projected benefit obligation at
    end of year


6.00
%


6.00
%


6.50
%Expected long-term rate of return on plan assets


8.25
%


8.50
%


9.00
%Rate of future compensation increases


N/A



N/A



4.00
%Rate of future compensation increases used to determine
    projected benefit obligation at end of year


N/A



N/A



4.00
%SERP:Discount rate


5.50
%


6.75
%


7.00
%Discount rate used to determine projected benefit obligation at
    end of year


5.25
%


5.50
%


6.50
%Rate of future compensation increases


N/A



N/A



4.00
%Rate of future compensation increases used to determine
    projected benefit obligation at end of year


N/A



N/A



4.00
%Postretirement Medical Plans:Discount rate


5.25
%


6.50
%


6.25
%Discount rate used to determine projected benefit obligation at
    end of year


N/A



5.50
%


6.50
%Initial healthcare cost trend rate  projected benefit
    obligations


N/A



7.00
%


9.00
%Initial healthcare cost trend rate  periodic expense


9.00
%


8.00
%


10.00
%Ultimate health care cost trend rate


5.00
%


5.00
%


5.00
%  F-38




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              Target


January 29, 2011


January 30, 2010Allocation


Amount


Percent


Amount


Percent(In thousands)Equity securites, including foreign securities of $9,801 and
    $10,892 at January 29, 2011 and January 30, 2010,
    respectively


70
%

$
96,012



84
%

$
68,344



70
%Debt securities


30
%


17,036



15
%


27,105



28
%Cash and money market investments






1,424



1
%


1,784



2
%Total





$
114,472



100
%

$
97,233



100
%  F-39




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair Value Measurements UsingQuoted MarketPrices in Active


Observable InputsMarkets for


Other than Quoted


SignificantFair Value at


Identical Assets


Market Prices


Unobservable InputsJanuary 29, 2011


(Level 1)


(Level 2)


(Level 3)(In thousands)Cash and cash equivalents

$
1,424


$
11


$
1,413


$
Domestic equity securities


14,134



14,134







International equity securities


9,801



9,801







Fixed income securities


513



513







Mutual funds


48,517



12,704



35,813



Common/collective trusts


40,083







40,083



Total Pension Plan assets

$
114,472


$
37,163


$
77,309


$
       PensionPlan


SERP(In thousands)Expected benefit payments:2011

$
5,051


$
1,6362012


5,398



1,6992013


5,831



1,6952014


6,317



1,7192015


6,707



1,7122016 to 2020


42,187



8,325      F-40




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    PensionPlan


SERP(In thousands)Net actuarial loss

$
837


$
104     16.
    Commitments
    and Contingencies  Commitments
    Contractual Obligations andCommercial Commitments

Total


2011


2012


2013


2014


2015


Thereafter(In thousands)Operating leases:Real estate

$
577,750


$
127,326


$
112,047


$
95,283


$
76,022


$
53,077


$
113,995Equipment


1,621



798



391



286



146







Merchandise purchases


128,496



128,496



















Construction contracts


836



836



















Other contractual commitments


12,357



7,071



2,950



1,788



548







Total obligations and commitments

$
721,060


$
264,527


$
115,388


$
97,357


$
76,716


$
53,077


$
113,995   Operating Leases
     F-41




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Merchandise Purchases
  Construction Contracts
  Other Contractual Commitments 30-day
  Contingencies
  Discontinued Operations
    Legal
    Proceedings
  Washtenaw County
    Employees Retirement System v. The Talbots, Inc. et
    al. No. 1:11-cv-10186-NMG, Rule 10b-5
  Greco v. Sullivan, et al. No. 11-0728
 F-42




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Campbell v. The Talbots, Inc., et al. No. 5199-VCS,
      17.
    Related
    Party Transactions    Merger with BPW
    Acquisition Corp. and Related Transactions,
   F-43




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Debt,
  18.
    Segment
    and Geographic Information    
    Stores  derives revenue from the sale of womens
    apparel, accessories and shoes through its Talbots retail
    stores, upscale outlets and surplus outlets in the United States
    and Canada, and
    Direct Marketing  derives revenue from the sale of
    womens apparel, accessories and shoes through its
    Internet, catalog and
    red-line
    phone operations        Year Ended January 29, 2011Stores


Direct Marketing


Total(In thousands)Net sales

$
991,353


$
221,707


$
1,213,060Direct profit


120,937



54,202



175,139Depreciation and amortization


50,580



2,696



53,276   Year Ended January 30, 2010Stores


Direct Marketing


Total(In thousands)Net sales

$
1,027,887


$
207,745


$
1,235,632Direct profit


81,219



40,559



121,778Depreciation and amortization


61,855



3,303



65,158   F-44




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year Ended January 31, 2009Stores


Direct Marketing


Total(In thousands)Net sales

$
1,261,536


$
233,634


$
1,495,170Direct profit


65,866



24,689



90,555Depreciation and amortization


70,957



983



71,940     Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Direct profit

$
175,139


$
121,778


$
90,555Less: Indirect expenses


112,208



111,979



171,151Merger-related costs


25,855



8,216



Restructuring charges


5,640



10,273



17,793Operating income (loss)


31,436



(8,690
)


(98,389
)Interest expense, net


18,827



28,123



20,290Income (loss) before taxes


12,609



(36,813
)


(118,679
)Income tax expense (benefit)


5,039



(11,505
)


20,842Income (loss) from continuing operations

$
7,570


$
(25,308
)

$
(139,521
)         Year EndedJanuary 29,


January 30,


January 31,2011


2010


2009(In thousands)Net sales:United States

$
1,176,846


$
1,200,973


$
1,449,399Canada


36,214



34,659



45,771Total

$
1,213,060


$
1,235,632


$
1,495,170   F-45




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  January 29,


January 30,2011


2010(In thousands)Long-lived assets:United States

$
184,818


$
218,167Canada


1,840



2,237Total

$
186,658


$
220,404   19.
    Unaudited
    Quarterly Results    Fiscal 2010 Quarter EndedMay 1,


July 31,


October 30,


January 29,2010


2010


2010


2011(a)(In thousands, except per share data)Net sales

$
320,661


$
300,742


$
299,099


$
292,558Gross profit


139,816



104,965



127,704



85,343(Loss) income from continuing operations


(7,096
)


521



16,974



(2,829
)Income from discontinued operations


2,728



420



74



23Net (loss) income

$
(4,368
)

$
941


$
17,048


$
(2,806
)Basic (loss) earnings per share:Continuing operations

$
(0.12
)

$
0.01


$
0.24


$
(0.04
)Discontinued operations


0.04











Net (loss) earnings

$
(0.08
)

$
0.01


$
0.24


$
(0.04
)Diluted (loss) earnings per share:Continuing operations

$
(0.12
)

$
0.01


$
0.24


$
(0.04
)Discontinued operations


0.04











Net (loss) earnings

$
(0.08
)

$
0.01


$
0.24


$
(0.04
)Weighted average shares outstanding:Basic


57,873



68,338



68,424



68,527Diluted


57,873



69,520



69,442



68,527     (a)
    
    Gift card breakage income of $6.9 million, including a
    cumulative change in estimate of $6.3 million, was
    recognized in the fourth quarter of 2010.  F-46




---



##### Table of Contents



THE
    TALBOTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fiscal 2009 Quarter EndedMay 2,


August 1,


October 31,


January 30,2009


2009


2009


2010(In thousands, except per share data)Net sales

$
306,175


$
304,641


$
308,891


$
315,925Gross profit


95,019



84,402



123,300



111,633(Loss) income from continuing operations


(18,818
)


(20,481
)


15,464



(1,473
)(Loss) income from discontinued operations


(4,752
)


(4,004
)


(911
)


5,563Net (loss) income

$
(23,570
)

$
(24,485
)

$
14,553


$
4,090Basic (loss) earnings per share:Continuing operations

$
(0.35
)

$
(0.38
)

$
0.29


$
(0.03
)Discontinued operations


(0.09
)


(0.07
)


(0.02
)


0.10Net (loss) earnings

$
(0.44
)

$
(0.45
)

$
0.27


$
0.07Diluted (loss) earnings per share:Continuing operations

$
(0.35
)

$
(0.38
)

$
0.28


$
(0.03
)Discontinued operations


(0.09
)


(0.07
)


(0.02
)


0.10Net (loss) earnings

$
(0.44
)

$
(0.45
)

$
0.26


$
0.07Weighted average shares outstanding:Basic


53,621



53,827



53,856



53,884Diluted


53,621



53,827



55,081



54,497  F-47