Supplemental Financial Information

6 Months Ended

Jul. 30, 2011

Supplemental Financial Information [Abstract]

Supplemental Financial Information

11. Supplemental Financial Information

On May 29, 2007, Claire’s Stores, Inc. (the “Issuer”), issued $935.0 million in Senior Notes, Senior Toggle Notes and Senior Subordinated Notes, and on March 4, 2011, issued $450.0 million aggregate principal amount of Senior Secured Second Lien Notes. These Notes are irrevocably and unconditionally guaranteed, jointly and severally, by all wholly-owned domestic current and future subsidiaries of Claire’s Stores, Inc. that guarantee the Company’s Credit Facility (the “Guarantors”). The Company’s other subsidiaries, principally its international subsidiaries including its European, Canadian and Asian subsidiaries (the “Non-Guarantors”), are not guarantors of these Notes.

The tables in the following pages present the condensed consolidating financial information for the Issuer, the Guarantors and the Non-Guarantors, together with eliminations, as of and for the periods indicated. The consolidating financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the Issuer, Guarantors and Non-Guarantors operated as independent entities.

Condensed Consolidating Balance Sheet
July 30, 2011
(in thousands)

							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents and restricted cash (1)	$	109,920		$	12,491		$	88,716		$	—		$	211,127
Inventories		—			89,075			58,590			—			147,665
Prepaid expenses		1,069			15,189			17,570			—			33,828
Other current assets		52			16,290			10,847			—			27,189
Total current assets		111,041			133,045			175,723			—			419,809
Property and equipment:
Furniture, fixtures and equipment		3,533			125,044			74,939			—			203,516
Leasehold improvements		1,071			146,890			124,025			—			271,986
		4,604			271,934			198,964			—			475,502
Less accumulated depreciation and amortization		(2,551	)		(164,170	)		(98,593	)		—			(265,314	)
		2,053			107,764			100,371			—			210,188
Leased property under capital lease:
Land and building		—			18,055			—			—			18,055
Less accumulated depreciation and amortization		—			(1,354	)		—			—			(1,354	)
		—			16,701			—			—			16,701
Intercompany receivables		—			410,510			—			(410,510	)		—
Investment in subsidiaries		2,331,088			(65,396	)		—			(2,265,692	)		—
Goodwill		—			1,235,651			314,405			—			1,550,056
Intangible assets, net		286,000			7,658			264,372			—			558,030
Deferred financing costs, net		37,579			—			247			—			37,826
Other assets		129			3,918			41,860			—			45,907
		2,654,796			1,592,341			620,884			(2,676,202	)		2,191,819
Total assets	$	2,767,890		$	1,849,851		$	896,978		$	(2,676,202	)	$	2,838,517
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Short-term debt	$	—		$	—		$	61,042		$	—		$	61,042
Trade accounts payable		653			24,334			39,883			—			64,870
Income taxes payable		—			(321	)		10,807			—			10,486
Accrued interest payable		32,217			—			65			—			32,282
Accrued expenses and other current liabilities		14,091			36,220			41,302			—			91,613
Total current liabilities		46,961			60,233			153,099			—			260,293
Intercompany payables		336,148			—			74,362			(410,510	)		—
Long-term debt		2,425,589			—			—			—			2,425,589
Revolving credit facility		—			—			—			—			—
Obligation under capital lease		—			17,290			—			—			17,290
Deferred tax liability		—			106,267			14,845			—			121,112
Deferred rent expense		—			17,496			10,309			—			27,805
Unfavorable lease obligations and other long-term liabilities		—			26,126			1,110			—			27,236
		2,761,737			167,179			100,626			(410,510	)		2,619,032
Stockholder’s equity (deficit):
Common stock		—			367			2			(369	)		—
Additional paid in capital		623,241			1,435,909			815,866			(2,251,775	)		623,241
Accumulated other comprehensive income (loss), net of tax		14,721			4,930			4,696			(9,626	)		14,721
Retained earnings (accumulated deficit)		(678,770	)		181,233			(177,311	)		(3,922	)		(678,770	)
		(40,808	)		1,622,439			643,253			(2,265,692	)		(40,808	)
Total liabilities and stockholder’s equity (deficit)	$	2,767,890		$	1,849,851		$	896,978		$	(2,676,202	)	$	2,838,517

(1) Cash and cash equivalents includes restricted cash of $5,000 for “Issuer” and $21,725 for “Non-Guarantors”

Condensed Consolidating Balance Sheet
January 29, 2011
(in thousands)

							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents and restricted cash (1)	$	179,529		$	3,587		$	96,650		$	—		$	279,766
Inventories		—			84,868			51,280			—			136,148
Prepaid expenses		851			1,680			18,918			—			21,449
Other current assets		—			16,547			8,111			—			24,658
Total current assets		180,380			106,682			174,959			—			462,021
Property and equipment:
Furniture, fixtures and equipment		3,276			119,228			64,010			—			186,514
Leasehold improvements		1,052			143,072			103,906			—			248,030
		4,328			262,300			167,916			—			434,544
Less accumulated depreciation and amortization		(2,205	)		(147,857	)		(83,449	)		—			(233,511	)
		2,123			114,443			84,467			—			201,033
Leased property under capital lease:
Land and building		—			18,055			—			—			18,055
Less accumulated depreciation and amortization		—			(903	)		—			—			(903	)
		—			17,152			—			—			17,152
Intercompany receivables		—			366,929			—			(366,929	)		—
Investment in subsidiaries		2,303,333			(63,535	)		—			(2,239,798	)		—
Goodwill		—			1,235,651			314,405			—			1,550,056
Intangible assets, net		286,000			9,294			262,172			—			557,466
Deferred financing costs, net		35,973			—			461			—			36,434
Other assets		130			3,842			38,315			—			42,287
		2,625,436			1,552,181			615,353			(2,606,727	)		2,186,243
Total assets	$	2,807,939		$	1,790,458		$	874,779		$	(2,606,727	)	$	2,866,449
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Short-term debt and current portion of long-term debt	$	18,451		$	—		$	57,703		$	—		$	76,154
Trade accounts payable		1,199			24,545			28,611			—			54,355
Income taxes payable		—			644			11,100			—			11,744
Accrued interest payable		16,696			—			87			—			16,783
Accrued expenses and other current liabilities		20,630			37,910			48,575			—			107,115
Total current liabilities		56,976			63,099			146,076			—			266,151
Intercompany payables		346,636			—			20,293			(366,929	)		—
Long-term debt		2,236,842			—			—			—			2,236,842
Revolving credit facility		194,000			—			—			—			194,000
Obligation under capital lease		—			17,290			—			—			17,290
Deferred tax liability		—			106,797			14,979			—			121,776
Deferred rent expense		—			17,230			9,407			—			26,637
Unfavorable lease obligations and other long-term liabilities		—			28,889			1,379			—			30,268
		2,777,478			170,206			46,058			(366,929	)		2,626,813
Stockholder’s equity (deficit):
Common stock		—			367			2			(369	)		—
Additional paid in capital		621,099			1,435,909			815,866			(2,251,775	)		621,099
Accumulated other comprehensive income (loss), net of tax		1,416			3,663			(7,080	)		3,417			1,416
Retained earnings (accumulated deficit)		(649,030	)		117,214			(126,143	)		8,929			(649,030	)
		(26,515	)		1,557,153			682,645			(2,239,798	)		(26,515	)
Total liabilities and stockholder’s equity (deficit)	$	2,807,939		$	1,790,458		$	874,779		$	(2,606,727	)	$	2,866,449

(1) Cash and cash equivalents includes restricted cash of $3,450 for “Issuer” and $20,414 for “Non-Guarantors”

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Three Months Ended July 30, 2011
(in thousands)

							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Net sales	$	—		$	200,545		$	158,002		$	—		$	358,547
Cost of sales, occupancy and buying expenses		1,346			97,490			76,546			—			175,382
Gross profit (deficit)		(1,346	)		103,055			81,456			—			183,165
Other expenses:
Selling, general and administrative		7,722			65,662			56,825			—			130,209
Depreciation and amortization		184			9,277			6,891			—			16,352
Severance and transaction-related costs		164			—			262			—			426
Other (income) expense		(3,337	)		1,423			733			—			(1,181	)
		4,733			76,362			64,711			—			145,806
Operating income (loss)		(6,079	)		26,693			16,745			—			37,359
Gain on early debt extinguishment		233			—			—			—			233
Interest expense, net		42,283			541			1,511			—			44,335
Income (loss) before income taxes		(48,129	)		26,152			15,234			—			(6,743	)
Income tax expense		—			758			2,642			—			3,400
Income (loss) from continuing operations		(48,129	)		25,394			12,592			—			(10,143	)
Equity in earnings of subsidiaries		37,986			692			—			(38,678	)		—
Net income (loss)		(10,143	)		26,086			12,592			(38,678	)		(10,143	)
Foreign currency translation and interest rate swap adjustments, net of tax		(5,125	)		(480	)		(3,186	)		3,666			(5,125	)
Comprehensive income (loss)	$	(15,268	)	$	25,606		$	9,406		$	(35,012	)	$	(15,268	)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Three Months Ended July 31, 2010
(in thousands)

							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Net sales	$	—		$	194,832		$	139,401		$	—		$	334,233
Cost of sales, occupancy and buying expenses		1,382			93,947			63,891			—			159,220
Gross profit (deficit)		(1,382	)		100,885			75,510			—			175,013
Other expenses (income):
Selling, general and administrative		8,472			64,447			48,828			—			121,747
Depreciation and amortization		155			9,576			6,125			—			15,856
Severance and transaction-related costs		212			—			—			—			212
Other (income) expense		(6,740	)		6,029			4,293			—			3,582
		2,099			80,052			59,246			—			141,397
Operating income (loss)		(3,481	)		20,833			16,264			—			33,616
Gain on early debt extinguishment		6,249			—			—			—			6,249
Impairment of equity investment		—			6,030			—						6,030
Interest expense, net		40,418			175			(20	)		—			40,573
Income (loss) before income taxes		(37,650	)		14,628			16,284			—			(6,738	)
Income tax expense (benefit)		—			(932	)		2,539			—			1,607
Income (loss) from continuing operations		(37,650	)		15,560			13,745			—			(8,345	)
Equity in earnings of subsidiaries		29,305			282			—			(29,587	)		—
Net income (loss)		(8,345	)		15,842			13,745			(29,587	)		(8,345	)
Foreign currency translation and interest rate swap adjustments, net of tax		2,513			(8,521	)		(644	)		9,165			2,513
Reclassification of foreign currency translation adjustment into net income (loss)		(9,572	)		(9,572	)		—			9,572			(9,572	)
Comprehensive income (loss)	$	(15,404	)	$	(2,251	)	$	13,101		$	(10,850	)	$	(15,404	)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Six Months Ended July 30, 2011
(in thousands)

							Non-
	Issuer			Guarantors			Guarantors		Eliminations			Consolidated
Net sales	$	—		$	409,569		$	295,424	$	—		$	704,993
Cost of sales, occupancy and buying expenses		2,941			195,939			147,861		—			346,741
Gross profit (deficit)		(2,941	)		213,630			147,563		—			358,252
Other expenses:
Selling, general and administrative		15,910			128,054			112,967		—			256,931
Depreciation and amortization		365			18,755			14,286		—			33,406
Severance and transaction-related costs		297			—			472		—			769
Other (income) expense		(6,985	)		1,859			9,256		—			4,130
		9,587			148,668			136,981		—			295,236
Operating income (loss)		(12,528	)		64,962			10,582		—			63,016
Gain on early debt extinguishment		482			—			—		—			482
Interest expense, net		86,513			1,072			2,985		—			90,570
Income (loss) before income taxes		(98,559	)		63,890			7,597		—			(27,072	)
Income tax expense (benefit)		—			(354	)		3,022		—			2,668
Income (loss) from continuing operations		(98,559	)		64,244			4,575		—			(29,740	)
Equity in earnings of subsidiaries		68,819			(225	)		—		(68,594	)		—
Net income (loss)		(29,740	)		64,019			4,575		(68,594	)		(29,740	)
Foreign currency translation and interest rate swap adjustments, net of tax		13,305			1,268			11,776		(13,044	)		13,305
Comprehensive income (loss)	$	(16,435	)	$	65,287		$	16,351	$	(81,638	)	$	(16,435	)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For The Six Months Ended July 31, 2010
(in thousands)

							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Net sales	$	—		$	393,424		$	262,886		$	—		$	656,310
Cost of sales, occupancy and buying expenses		2,657			189,934			125,380			—			317,971
Gross profit (deficit)		(2,657	)		203,490			137,506			—			338,339
Other expenses:
Selling, general and administrative		16,904			125,870			96,992			—			239,766
Depreciation and amortization		287			19,214			12,721			—			32,222
Severance and transaction-related costs		314			—			—			—			314
Other (income) expense		(12,615	)		8,283			9,144			—			4,812
		4,890			153,367			118,857			—			277,114
Operating income (loss)		(7,547	)		50,123			18,649			—			61,225
Gain on early debt extinguishment		10,736			—			—			—			10,736
Impairment of equity investment		—			6,030			—			—			6,030
Interest expense, net		83,163			182			(9	)		—			83,336
Income (loss) before income taxes		(79,974	)		43,911			18,658			—			(17,405	)
Income tax expense (benefit)		23			(316	)		3,533			—			3,240
Income (loss) from continuing operations		(79,997	)		44,227			15,125			—			(20,645	)
Equity in earnings of subsidiaries		59,352			235			—			(59,587	)		—
Net income (loss)		(20,645	)		44,462			15,125			(59,587	)		(20,645	)
Foreign currency translation and interest rate swap adjustments, net of tax		(9	)		911			(9,895	)		8,984			(9	)
Reclassification of foreign currency translation adjustment into net income (loss)		(9,572	)		(9,572	)		—			9,572			(9,572	)
Comprehensive income (loss)	$	(30,226	)	$	35,801		$	5,230		$	(41,031	)	$	(30,226	)

Condensed Consolidating Statement of Cash Flows
Six Months Ended July 30, 2011
(in thousands)

							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(29,740	)	$	64,019		$	4,575		$	(68,594	)	$	(29,740	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Equity in (earnings) loss of subsidiaries		(68,819	)		225			—			68,594			—
Depreciation and amortization		365			18,755			14,286			—			33,406
Amortization of lease rights and other assets		—			—			1,600			—			1,600
Amortization of debt issuance costs		8,231			—			304			—			8,535
Payment of in kind interest expense		11,831			—			—			—			11,831
Foreign currency exchange net loss on Euro Loan		—			—			2,158			—			2,158
Net accretion of favorable (unfavorable) lease obligations		—			(663	)		281			—			(382	)
Loss on sale/retirement of property and equipment, net		—			41			17			—			58
Gain on early debt extinguishment		(482	)		—			—			—			(482	)
Stock compensation expense		1,713			—			429			—			2,142
(Increase) decrease in:
Inventories		—			(4,207	)		(4,487	)		—			(8,694	)
Prepaid expenses		(218	)		(13,508	)		2,796			—			(10,930	)
Other assets		(52	)		(350	)		(1,510	)		—			(1,912	)
Increase (decrease) in:
Trade accounts payable		(547	)		(33	)		7,479			—			6,899
Income taxes payable		—			(965	)		(4,849	)		—			(5,814	)
Accrued interest payable		15,520			—			(58	)		—			15,462
Accrued expenses and other liabilities		(7,915	)		(1,689	)		(9,642	)		—			(19,246	)
Deferred income taxes		—			(902	)		(447	)		—			(1,349	)
Deferred rent expense		—			266			381			—			647
Net cash provided by (used in) operating activities		(70,113	)		60,989			13,313			—			4,189
Cash flows from investing activities:
Acquisition of property and equipment, net		(295	)		(11,793	)		(20,114	)		—			(32,202	)
Acquisition of intangible assets/lease rights		—			(20	)		(1,853	)		—			(1,873	)
Changes in restricted cash		(1,550	)		—			(130	)		—			(1,680	)
Net cash used in investing activities		(1,845	)		(11,813	)		(22,097	)		—			(35,755	)
Cash flows from financing activities:
Payments of Credit facility		(438,940	)		—			—			—			(438,940	)
Proceeds from Note		450,000			—			—			—			450,000
Repurchases of Notes		(45,497	)		—			—			—			(45,497	)
Payment of debt issuance costs		(10,453	)		—			(91	)		—			(10,544	)
Intercompany activity, net		45,689			(43,581	)		(2,108	)		—			—
Net cash provided by (used in) financing activities		799			(43,581	)		(2,199	)		—			(44,981	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		—			3,309			1,738			—			5,047
Net increase (decrease) in cash and cash equivalents		(71,159	)		8,904			(9,245	)		—			(71,500	)
Cash and cash equivalents, at beginning of period		176,079			3,587			76,236			—			255,902
Cash and cash equivalents, at end of period		104,920			12,491			66,991			—			184,402
Restricted cash, at end of period		5,000			—			21,725			—			26,725
Cash and cash equivalents and restricted cash, at end of period	$	109,920		$	12,491		$	88,716		$	—		$	211,127

Condensed Consolidating Statement of Cash Flows
Six Months Ended July 31, 2010
(in thousands)

							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(20,645	)	$	44,462		$	15,125		$	(59,587	)	$	(20,645	)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Equity in earnings of subsidiaries		(59,352	)		(235	)		—			59,587			—
Depreciation and amortization		287			19,214			12,721			—			32,222
Impairment		—			6,030			—			—			6,030
Amortization of lease rights and other assets		—			25			1,585			—			1,610
Amortization of debt issuance costs		5,038			—			—			—			5,038
Payment of in kind interest expense		19,003			—			—			—			19,003
Net accretion of favorable (unfavorable) lease obligations		—			(1,023	)		237			—			(786	)
Loss on sale/retirement of property and equipment, net		—			366			—			—			366
Gain on early debt extinguishment		(10,736	)		—			—			—			(10,736	)
Stock compensation expense		1,924			—			617			—			2,541
(Increase) decrease in:
Inventories		—			(11,003	)		(7,498	)		—			(18,501	)
Prepaid expenses		(561	)		133			1,345			—			917
Other assets		1,220			5,110			(2,385	)		—			3,945
Increase (decrease) in:
Trade accounts payable		374			5,867			3,833			—			10,074
Income taxes payable		—			(255	)		(2,335	)		—			(2,590	)
Accrued interest payable		(5,612	)		—			—			—			(5,612	)
Accrued expenses and other liabilities		1,556			2,298			5,120			—			8,974
Deferred income taxes		—			(407	)		55			—			(352	)
Deferred rent expense		(107	)		1,254			731			—			1,878
Net cash provided by (used in) operating activities		(67,611	)		71,836			29,151			—			33,376
Cash flows from investing activities:
Acquisition of property and equipment, net		(740	)		(7,394	)		(11,422	)		—			(19,556	)
Acquisition of intangible assets/lease rights		—			(63	)		(461	)		—			(524	)
Proceeds from sale of property		—			16,765			—			—			16,765
Net cash provided by (used in) investing activities		(740	)		9,308			(11,883	)		—			(3,315	)
Cash flows from financing activities:
Payments of Credit facility		(7,250	)		—			—			—			(7,250	)
Repurchases of Notes		(59,112	)		—			—			—			(59,112	)
Principal payments of capital leases		—			(765	)		—			—			(765	)
Intercompany activity, net		135,200			(77,080	)		(58,120	)		—			—
Net cash provided by (used in) financing activities		68,838			(77,845	)		(58,120	)		—			(67,127	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		—			1,428			(2,938	)		—			(1,510	)
Net increase (decrease) in cash and cash equivalents		487			4,727			(43,790	)		—			(38,576	)
Cash and cash equivalents, at beginning of period		109,138			(10,604	)		100,174			—			198,708
Cash and cash equivalents, at end of period		109,625			(5,877	)		56,384			—			160,132
Restricted cash, at end of period		—			—			—			—			—
Cash and cash equivalents and restricted cash, at end of period	$	109,625		$	(5,877	)	$	56,384		$	—		$	160,132