Segment Reporting

12 Months Ended

Feb. 02, 2013

Segment Reporting

14. SEGMENT REPORTING

The Company is organized based on the geographic markets in which it operates. Under this structure, the Company currently has two reportable segments: North America and Europe. The Company accounts for the goods it sells to third parties under franchising and licensing agreements within “Net sales” and “Cost of sales, occupancy and buying expenses” in the Company’s Consolidated Statements of Operations and Comprehensive Income within its North America division. The franchise fees the Company charges under the franchising agreements are reported in “Other (income) expense, net” in the Company’s Consolidated Statements of Operations and Comprehensive Income within its Europe division. Until September 2, 2010, the Company accounted for the results of operations of Claire’s Nippon under the equity method and included the results within “Other (income) expense, net” in the Company’s Consolidated Statements of Operations and Comprehensive Income within the Company’s North America division. After September 2, 2010, these former joint venture stores began to operate as franchised stores. Substantially all of the interest expense on the Company’s outstanding debt is recorded in the Company’s North America division.

Information about the Company’s operations by segment is as follows (in thousands):

	Fiscal 2012			Fiscal 2011			Fiscal 2010
Net sales:
North America	$	977,310		$	942,278		$	914,149
Europe		579,710			553,622			512,248
Total net sales	$	1,557,020		$	1,495,900		$	1,426,397
Depreciation and amortization:
North America	$	39,829		$	41,650		$	42,169
Europe		25,050			27,103			23,029
Total depreciation and amortization	$	64,879		$	68,753		$	65,198
Segment operating income:
North America	$	173,568		$	153,121		$	124,606
Europe		65,428			46,145			52,859
Total segment operating income	$	238,996		$	199,266		$	177,465
Impairment of assets:
North America	$	—		$	—		$	—
Europe		—			—			12,262
Total impairment charges	$	—		$	—		$	12,262
Impairment of equity investment:
North America	$	—		$	—		$	6,030
Europe		—			—			—
Total impairment of equity investment	$	—		$	—		$	6,030
Interest expense, net:
North America	$	210,224		$	171,211		$	157,595
Europe		573			5,264			111
Total interest expense, net	$	210,797		$	176,475		$	157,706
Income (loss) before income taxes:
North America	$	(48,554	)	$	(15,637	)	$	(26,003	)
Europe		64,218			37,905			40,117
Total income before income taxes	$	15,664		$	22,268		$	14,114
Income tax expense:
North America	$	874		$	1,883		$	2,694
Europe		13,508			8,753			7,097
Total income tax expense	$	14,382		$	10,636		$	9,791
Net income (loss):
North America	$	(49,428	)	$	(17,520	)	$	(28,697	)
Europe		50,710			29,152			33,020
Net income	$	1,282		$	11,632		$	4,323
Goodwill:
North America	$	1,235,651		$	1,235,651		$	1,235,651
Europe		314,405			314,405			314,405
Total goodwill	$	1,550,056		$	1,550,056		$	1,550,056
Long-lived assets:
North America	$	140,269		$	135,555		$	142,090
Europe		96,458			88,215			76,095
Total long lived assets	$	236,727		$	223,770		$	218,185
Total assets:
North America	$	1,448,412		$	1,402,946		$	1,493,210
Europe		1,350,860			1,360,079			1,373,239
Total assets	$	2,799,272		$	2,763,025		$	2,866,449
Capital Expenditures
North America	$	41,924		$	33,830		$	20,480
Europe		31,929			42,787			29,335
Total capital expenditures	$	73,853		$	76,617		$	49,815

The Company measures segment operating income as gross profit less selling, general and administrative expenses and depreciation and amortization expense, including other operating income and expense, but excluding impairment of assets and severance and transaction-related costs. A reconciliation of total segment operating income to consolidated operating income is as follows (in thousands).

	Fiscal 2012		Fiscal 2011		Fiscal 2010
Total segment operating income	$	238,996	$	199,266	$	177,465
Impairment of assets		—		—		12,262
Severance and transaction-related costs		2,828		6,928		741
Consolidated operating income	$	236,168	$	192,338	$	164,462

Excluded from operating income are impairment charges of $0 million, $0 million and $12.3 million for Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively. For Fiscal 2012, Fiscal 2011 and Fiscal 2010, segment operating income also excludes severance and transaction-related costs for North America of $2.2 million, $3.9 million and $0.4 million, respectively, and Europe of $0.6 million, $3.0 million and $0.3 million, respectively. See Note 3 – Impairment Charges.

Identifiable assets are those assets that are identified with the operations of each segment. Corporate assets consist mainly of cash and cash equivalents, investments in affiliated companies and other assets. These assets are included within North America.

The following table compares the Company’s sales of each product category by segment for the last three fiscal years:

	Percentage of Total
Product Category	Fiscal 2012		Fiscal 2011		Fiscal 2010
Jewelry:
North America		32.7		31.8		32.0
Europe		15.2		14.3		13.5
		47.9		46.1		45.5
Accessories:
North America		29.5		30.7		31.8
Europe		22.6		23.2		22.7
		52.1		53.9		54.5
		100.0		100.0		100.0

The following table provides data for selected geographical areas.

	Percentage of Total Net Sales
Net Sales:	Fiscal 2012		Fiscal 2011		Fiscal 2010
United Kingdom		13.0		13.7		15.0
France		9.8		9.6		9.1

	Percentage of Total Long-lived Assets
Long-lived Assets:	February 2, 2013		January 28, 2012
United Kingdom		7.0		8.6
France		5.1		4.4