15.

SUPPLEMENTAL FINANCIAL INFORMATION

On May 29, 2007, Claire’s Stores, Inc. (the “Issuer”), issued $935.0 million in Senior Fixed Rate Notes, Senior Toggle Notes and Senior Subordinated Notes, (collectively, the “2007 Notes”). On March 4, 2011, the Issuer issued $450.0 million aggregate principal amount of Senior Secured Second Lien Notes, (collectively, the “2011 Notes”). On February 28, 2012, March 12, 2012 and September 20, 2012, the Issuer issued $400.0 million, $100.0 million and $625.0 million, respectively, aggregate principal amount of the same series of 9.0% Senior Secured First Lien Notes (collectively, the “2012 Notes”). The 2007 Notes and the 2011 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 2012 Notes are unconditionally guaranteed, jointly and severally, by all wholly-owned domestic current and future subsidiaries of Claire’s Stores, Inc. As of February 2, 2013, Claire’s Stores, Inc. owned 100% of its domestic subsidiaries that guarantee the 2007 Notes, 2011 Notes, and 2012 Notes. All guarantors are collectively referred to as 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

February 2, 2013

(in thousands)


	Issuer			Guarantors			Non- Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	56,392		$	4,299		$	106,265		$	—		$	166,956
Inventories		36			88,127			69,386			—			157,549
Prepaid expenses		592			2,390			16,719			—			19,701
Other current assets		262			19,422			9,937			—			29,621

Total current assets		57,282			114,238			202,307			—			373,827

Property and equipment:
Furniture, fixtures and equipment		6,079			141,232			86,898			—			234,209
Leasehold improvements		1,177			165,075			146,537			—			312,789

		7,256			306,307			233,435			—			546,998
Less accumulated depreciation and amortization		(3,686	)		(199,402	)		(122,530	)		—			(325,618	)

		3,570			106,905			110,905			—			221,380

Leased property under capital lease:
Land and building		—			18,055			—			—			18,055
Less accumulated depreciation and amortization		—			(2,708	)		—			—			(2,708	)

		—			15,347			—			—			15,347

Intercompany receivables		—			252,709			—			(252,709	)		—
Investment in subsidiaries		2,205,303			(56,381	)		—			(2,148,922	)		—
Goodwill		—			1,235,650			314,406			—			1,550,056
Intangible assets, net		286,000			4,054			257,379			—			547,433
Deferred financing costs, net		41,381			—			—			—			41,381
Other assets		129			3,867			45,845			7			49,848

		2,532,813			1,439,899			617,630			(2,401,624	)		2,188,718

Total assets	$	2,593,665		$	1,676,389		$	930,842		$	(2,401,624	)	$	2,799,272


LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable	$	993		$	31,584		$	40,868		$	—		$	73,445
Income taxes payable		—			(12	)		10,520			—			10,508
Accrued interest payable		68,254			—			—			—			68,254
Accrued expenses and other current liabilities		11,420			39,274			48,835			—			99,529

Total current liabilities		80,667			70,846			100,223			—			251,736

Intercompany payables		154,072			—			98,631			(252,703	)		—
Long-term debt		2,373,366			—			—			—			2,373,366
Revolving credit facility		—			—			—			—			—
Obligation under capital lease		—			17,232			—			—			17,232
Deferred tax liability		—			107,618			13,350			—			120,968
Deferred rent expense		—			18,481			11,378			—			29,859
Unfavorable lease obligations and other long-term liabilities		—			20,080			471			—			20,551

		2,527,438			163,411			123,830			(252,703	)		2,561,976

Stockholder’s equity (deficit):
Common stock		—			367			2			(369	)		—
Additional paid in capital		618,403			1,435,909			797,819			(2,233,728	)		618,403
Accumulated other comprehensive income (loss), net of tax		3,273			3,909			(6,731	)		2,822			3,273
Accumulated deficit		(636,116	)		1,947			(84,301	)		82,354			(636,116	)

		(14,440	)		1,442,132			706,789			(2,148,921	)		(14,440	)

Total liabilities and stockholder’s equity (deficit)	$	2,593,665		$	1,676,389		$	930,842		$	(2,401,624	)	$	2,799,272

Condensed Consolidating Balance Sheet

January 28, 2012

(in thousands)


							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents and restricted cash (1)	$	107,265		$	4,908		$	62,201		$	—		$	174,374
Inventories		—			84,608			57,496			—			142,104
Prepaid expenses		676			1,530			17,804			—			20,010
Other current assets		—			15,967			9,456			—			25,423

Total current assets		107,941			107,013			146,957			—			361,911

Property and equipment:
Furniture, fixtures and equipment		4,540			128,650			74,430			—			207,620
Leasehold improvements		1,071			151,891			128,812			—			281,774

		5,611			280,541			203,242			—			489,394
Less accumulated depreciation and amortization		(2,761	)		(175,999	)		(103,114	)		—			(281,874	)

		2,850			104,542			100,128			—			207,520

Leased property under capital lease:
Land and building		—			18,055			—			—			18,055
Less accumulated depreciation and amortization		—			(1,805	)		—			—			(1,805	)

		—			16,250			—			—			16,250

Intercompany receivables		—			234,828			—			(234,828	)		—
Investment in subsidiaries		2,138,159			(58,841	)		—			(2,079,318	)		—
Goodwill		—			1,235,651			314,405			—			1,550,056
Intangible assets, net		286,000			6,176			257,592			—			549,768
Deferred financing costs, net		32,432			—			593			—			33,025
Other assets		130			3,788			40,577			—			44,495

		2,456,721			1,421,602			613,167			(2,314,146	)		2,177,344

Total assets	$	2,567,512		$	1,649,407		$	860,252		$	(2,314,146	)	$	2,763,025


LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable	$	1,468		$	23,845		$	35,391		$	—		$	60,704
Income taxes payable		—			766			9,462			—			10,228
Accrued interest payable		31,859			—			—			—			31,859
Accrued expenses and other current liabilities		14,890			39,744			49,891			—			104,525

Total current liabilities		48,217			64,355			94,744			—			207,316

Intercompany payables		155,209			—			79,619			(234,828	)		—
Long-term debt		2,386,382			—			—			—			2,386,382
Revolving credit facility		—			—			—			—			—
Obligation under capital lease		—			17,290			—			—			17,290
Deferred tax liability		—			106,825			13,627			—			120,452
Deferred rent expense		—			17,680			11,181			—			28,861
Unfavorable lease obligations and other long-term liabilities		—			24,217			803			—			25,020

		2,541,591			166,012			105,230			(234,828	)		2,578,005

Stockholder’s equity (deficit):
Common stock		—			367			2			(369	)		—
Additional paid in capital		619,453			1,435,909			815,866			(2,251,775	)		619,453
Accumulated other comprehensive income (loss), net of tax		(4,351	)		3,675			(11,780	)		8,105			(4,351	)
Accumulated deficit		(637,398	)		(20,911	)		(143,810	)		164,721			(637,398	)

		(22,296	)		1,419,040			660,278			(2,079,318	)		(22,296	)

Total liabilities and stockholder’s equity (deficit)	$	2,567,512		$	1,649,407		$	860,252		$	(2,314,146	)	$	2,763,025

(1)	Cash and cash equivalents includes restricted cash of $4,350 for “Issuer”

Condensed Consolidating Statement of Operations and Comprehensive Income

Fiscal 2012

(in thousands)


							Non-
	Issuer			Guarantors			Guarantors		Eliminations			Consolidated
Net sales	$	—		$	897,434		$	659,586	$	—		$	1,557,020
Cost of sales, occupancy and buying expenses (exclusive of depreciation and amortization shown separately below)		2,288			424,812			328,896		—			755,996

Gross profit (deficit)		(2,288	)		472,622			330,690		—			801,024

Other expenses:
Selling, general and administrative		22,092			258,978			222,184		—			503,254
Depreciation and amortization		1,098			35,273			28,508		—			64,879
Severance and transaction-related costs		2,192			—			636		—			2,828
Other (income) expense		(10,883	)		(129	)		4,907		—			(6,105	)

		14,499			294,122			256,235		—			564,856

Operating income (loss)		(16,787	)		178,500			74,455		—			236,168
Loss on early debt extinguishment		(9,707	)		—			—		—			(9,707	)
Interest expense, net		208,081			2,199			517		—			210,797

Income (loss) before income taxes		(234,575	)		176,301			73,938		—			15,664
Income tax expense (benefit)		—			(41	)		14,423		—			14,382

Income (loss) from continuing operations		(234,575	)		176,342			59,515		—			1,282
Equity in earnings (loss) of subsidiaries		235,857			2,648			—		(238,505	)		—

Net income (loss)		1,282			178,990			59,515		(238,505	)		1,282
Foreign currency translation adjustments		1,182			(127	)		968		(841	)		1,182
Net (loss) gain on intra-entity foreign currency transactions, net of tax		4,283			361			4,081		(4,442	)		4,283
Unrealized gain on interest rate swap, net of tax		375			—			—		—			375
Reclassification adjustment of unrealized loss on termination of interest rate swap into net income		1,784			—			—		—			1,784

Other comprehensive income (loss)		7,624			234			5,049		(5,283	)		7,624

Comprehensive income (loss)	$	8,906		$	179,224		$	64,564	$	(243,788	)	$	8,906

Condensed Consolidating Statement of Operations and Comprehensive Income

Fiscal 2011

(in thousands)


							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Net sales	$	—		$	869,873		$	626,027		$	—		$	1,495,900
Cost of sales, occupancy and buying expenses (exclusive of depreciation and amortization shown separately below)		5,920			412,439			306,416			—			724,775

Gross (deficit) profit		(5,920	)		457,434			319,611			—			771,125

Other expenses:
Selling, general and administrative		23,116			256,816			224,428			—			504,360
Depreciation and amortization		738			38,001			30,014			—			68,753
Severance and transaction-related costs		2,851			1,100			2,977			—			6,928
Other (income) expense, net		(11,030	)		(25	)		9,801			—			(1,254	)

		15,675			295,892			267,220			—			578,787

Operating (loss) income		(21,595	)		161,542			52,391			—			192,338
Gain on early debt extinguishment		6,405			—			—			—			6,405
Interest expense, net		169,107			2,155			5,213			—			176,475

Income (loss) before income taxes		(184,297	)		159,387			47,178			—			22,268
Income tax expense		—			1,609			9,027			—			10,636

Income (loss) from continuing operations		(184,297	)		157,778			38,151			—			11,632
Equity in earnings of subsidiaries		195,929			4,609			—			(200,538	)		—

Net income		11,632			162,387			38,151			(200,538	)		11,632
Foreign currency translation adjustments		(663	)		52			(605	)		553			(663	)
Net (loss) gain on intra-entity foreign currency transactions, net of tax		(4111	)		(40	)		(4,095	)		4,135			(4,111	)
Unrealized gain on interest rate swap, net of tax		(993	)		—			—			—			(993	)

Other comprehensive income (loss)		(5,767	)		12			(4,700	)		4,688			(5,767	)

Comprehensive income	$	5,865		$	162,399		$	33,451		$	(195,850	)	$	5,865

Condensed Consolidating Statement of Operations and Comprehensive Income

Fiscal 2010

(in thousands)


	Issuer			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—		$	847,048		$	579,349		$	—		$	1,426,397
Cost of sales, occupancy and buying expenses (exclusive of depreciation and amortization shown separately below)		5,222			408,851			271,038			—			685,111

Gross (deficit) profit		(5,222	)		438,197			308,311			—			741,286

Other expenses:
Selling, general and administrative		35,132			252,522			205,427			—			493,081
Depreciation and amortization		631			38,700			25,867			—			65,198
Impairment of assets		—			—			12,262			—			12,262
Severance and transaction-related costs		372			—			369			—			741
Other (income) expense, net		(20,304	)		10,325			15,521			—			5,542

		15,831			301,547			259,446			—			576,824

Operating income (loss)		(21,053	)		136,650			48,865			—			164,462
Gain on early debt extinguishment		13,388			—			—			—			13,388
Impairment of equity investment		—			6,030			—			—			6,030
Interest expense, net		156,427			1,190			89			—			157,706

Income (loss) before income taxes		(164,092	)		129,430			48,776			—			14,114
Income tax expense		23			1,939			7,829			—			9,791

Income (loss) from continuing operations		(164,115	)		127,491			40,947			—			4,323
Equity in earnings of subsidiaries		168,438			4,847			—			(173,285	)		—

Net income		4,323			132,338			40,947			(173,285	)		4,323
Foreign currency translation adjustments		10,416			(181	)		(2,370	)		2,551			10,416
Net (loss) gain on intra-entity foreign currency transactions, net of tax		(9,640	)		1,743			(576	)		(1,167	)		(9,640	)
Unrealized gain on interest rate swap, net of tax		7,587			—			—			—			7,587
Reclassification of foreign currency translation adjustments into net income		(9,572	)		(9,572	)		—			9,572			(9,572	)

Other comprehensive income (loss)		(1,209	)		(8,010	)		(2,946	)		10,956			(1,209	)

Comprehensive income	$	3,114		$	124,328		$	38,001		$	(162,329	)	$	3,114

Condensed Consolidating Statement of Cash Flows

Fiscal 2012

(in thousands)


							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	1,282		$	178,990		$	59,515		$	(238,505	)	$	1,282
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in earnings of subsidiaries		(235,857	)		(2,648	)		—			238,505			—
Depreciation and amortization		1,098			35,273			28,508			—			64,879
Amortization of lease rights and other assets		—			—			3,279			—			3,279
Amortization of debt issuance costs		9,319			—			608			—			9,927
Accretion of debt premium		(831	)		—			—			—			(831	)
Net accretion of favorable (unfavorable) lease obligations		—			(901	)		75			—			(826	)
Loss on sale/retirement of property and equipment, net		—			91			5			—			96
Gain on early debt extinguishment		9,707			—			—			—			9,707
Gain on sale of intangible assets/lease rights		—			—			(493	)		—			(493	)
Stock compensation benefit		(737	)		(476	)		163			—			(1,050	)
(Increase) decrease in:
Inventories		(34	)		(3,519	)		(9,865	)		—			(13,418	)
Prepaid expenses		85			(860	)		1,353			—			578
Other assets		(259	)		(2,822	)		(6,752	)		—			(9,833	)
Increase (decrease) in:
Trade accounts payable		(475	)		4,496			6,496			—			10,517
Income taxes payable		—			(747	)		1,376			—			629
Accrued interest payable		36,395			—			—			—			36,395
Accrued expenses and other liabilities		(1,322	)		(522	)		(1,906	)		—			(3,750	)
Deferred income taxes		—			(1,005	)		(245	)		—			(1,250	)
Deferred rent expense		—			801			56			—			857

Net cash (used in) provided by operating activities		(181,629	)		206,151			82,173			—			106,695

Cash flows from investing activities:
Acquisition of property and equipment, net		(1,818	)		(33,467	)		(33,519	)		—			(68,804	)
Acquisition of intangible assets/lease rights		—			(173	)		(4,876	)		—			(5,049	)
Proceeds from sale of intangible assets/lease rights		—			—			1,009			—			1,009
Changes in restricted cash		4,350			—			—			—			4,350

Net cash used in investing activities		2,532			(33,640	)		(37,386	)		—			(68,494	)

Cash flows from financing activities:
Payments of credit facility		(1,154,310	)		—			—			—			(1,154,310	)
Proceeds from notes		1,142,125			—			—			—			1,142,125
Payment of short-term debt		—			—			—			—			—
Repurchase of notes		—			—			—			—			—
Payment of debt issuance costs		(27,976	)		—			(14	)		—			(27,990	)
Principal payments of capital lease		—			(4	)		—			—			(4	)
Intercompany activity, net		172,707			(173,537	)		830			—			—

Net cash provided by (used in) financing activities		132,546			(173,541	)		816			—			(40,179	)

Effect of foreign currency exchange rate changes on cash and cash equivalents		28			421			(1,539	)		—			(1,090	)

Net (decrease) increase in cash and cash equivalents		(46,523	)		(609	)		44,064			—			(3,068	)
Cash and cash equivalents at beginning of period		102,915			4,908			62,201			—			170,024

Cash and cash equivalents at end of period	$	56,392		$	4,299		$	106,265		$	—		$	166,956

Condensed Consolidating Statement of Cash Flows

Fiscal 2011

(in thousands)


							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	11,632		$	162,387		$	38,151		$	(200,538	)	$	11,632
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in earnings of subsidiaries		(195,929	)		(4,609	)		—			200,538			—
Depreciation and amortization		738			38,001			30,014			—			68,753
Amortization of lease rights and other assets		—			—			3,189			—			3,189
Amortization of debt issuance costs		13,148			—			(42	)		—			13,106
Payment of in kind interest expense		11,831			—			—			—			11,831
Foreign currency exchange net gain on Euro Loan		—			—			(1,953	)		—			(1,953	)
Net accretion of favorable (unfavorable) lease obligations		—			(1,174	)		517			—			(657	)
Loss on sale/retirement of property and equipment, net		—			29			13			—			42
Gain on early debt extinguishment		(6,405	)		—			—			—			(6,405	)
Gain on sale of intangible assets/lease rights		—			—			(90	)		—			(90	)
Stock compensation benefit		(1,452	)		—			(194	)		—			(1,646	)
(Increase) decrease in:
Inventories		—			260			(8,654	)		—			(8,394	)
Prepaid expenses		175			150			1,051			—			1,376
Other assets		—			746			(6,598	)		—			(5,852	)
Increase (decrease) in:
Trade accounts payable		269			(1,169	)		8,211			—			7,311
Income taxes payable		—			124			(2,115	)		—			(1,991	)
Accrued interest payable		15,163			—			(82	)		—			15,081
Accrued expenses and other liabilities		(7,073	)		2,174			1,828			—			(3,071	)
Deferred income taxes		—			(540	)		(1,482	)		—			(2,022	)
Deferred rent expense		—			450			1,870			—			2,320

Net cash (used in) provided by operating activities		(157,903	)		196,829			63,634			—			102,560

Cash flows from investing activities:
Acquisition of property and equipment, net		(1,466	)		(26,652	)		(42,790	)		—			(70,908	)
Acquisition of intangible assets/lease rights		—			(46	)		(5,663	)		—			(5,709	)
Proceeds from sale of intangible assets/lease rights		—			—			816			—			816
Changes in restricted cash		(900	)		—			19,317			—			18,417

Net cash used in investing activities		(2,366	)		(26,698	)		(28,320	)		—			(57,384	)

Cash flows from financing activities:
Payments of credit facility		(438,940	)		—			—			—			(438,940	)
Proceeds from notes		450,000			—			—			—			450,000
Payment of short-term debt		—			—			(54,653	)		—			(54,653	)
Repurchase of notes		(78,343	)		—			—			—			(78,343	)
Payment of debt issuance costs		(10,661	)		—			(90	)		—			(10,751	)
Intercompany activity, net		165,049			(168,751	)		3,702			—			—

Net cash provided by (used in) financing activities		87,105			(168,751	)		(51,041	)		—			(132,687	)

Effect of foreign currency exchange rate changes on cash and cash equivalents		—			(59	)		1,692			—			1,633

Net (decrease) increase in cash and cash equivalents		(73,164	)		1,321			(14,035	)		—			(85,878	)
Cash and cash equivalents at beginning of period		176,079			3,587			76,236			—			255,902

Cash and cash equivalents at end of period		102,915			4,908			62,201			—			170,024
Restricted cash at end of period		4,350			—			—			—			4,350

Cash and cash equivalents and restricted cash at end of period	$	107,265		$	4,908		$	62,201		$	—		$	174,374

Condensed Consolidating Statement of Cash Flows

Fiscal 2010

(in thousands)


							Non-
	Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	4,323		$	132,338		$	40,947		$	(173,285	)	$	4,323
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in earnings of subsidiaries		(168,438	)		(4,847	)		—			173,285			—
Depreciation and amortization		631			38,700			25,867			—			65,198
Impairment		—			6,030			12,262			—			18,292
Amortization of lease rights and other assets		—			29			3,175			—			3,204
Amortization of debt issuance costs		9,963			—			42			—			10,005
Payment of in kind interest expense		36,872			—			—			—			36,872
Net accretion of favorable (unfavorable) lease obligations		—			(2,054	)		564			—			(1,490	)
Loss on sale/retirement of property and equipment, net		—			668			4			—			672
Gain on early debt extinguishment		(13,388	)		—			—			—			(13,388	)
Stock compensation expense		3,863			—			1,150			—			5,013
(Increase) decrease in:
Inventories		—			(10,966	)		(14,408	)		—			(25,374	)
Prepaid expenses		(342	)		12,536			464			—			12,658
Other assets		1,243			4,335			(4,827	)		—			751
Increase (decrease) in:
Trade accounts payable		(128	)		6,682			3,760			—			10,314
Income taxes payable		—			2,320			1,347			—			3,667
Accrued interest payable		2,053			—			86			—			2,139
Accrued expenses and other liabilities		4,828			1,800			7,947			—			14,575
Deferred income taxes		—			318			(913	)		—			(595	)
Deferred rent expense		(107	)		2,273			2,257			—			4,423

Net cash provided by (used in) operating activities		(118,627	)		190,162			79,724			—			151,259

Cash flows from investing activities:
Acquisition of property and equipment, net		(1,248	)		(18,310	)		(29,153	)		—			(48,711	)
Proceeds from sale of property and equipment		—			16,765			—			—			16,765
Acquisition of intangible assets/lease rights		—			(126	)		(978	)		—			(1,104	)
Changes in restricted cash		(3,450	)		—			(20,452	)		—			(23,902	)

Net cash provided by (used in) investing activities		(4,698	)		(1,671	)		(50,583	)		—			(56,952	)

Cash flows from financing activities:
Payments of credit facility		(14,500	)		—			—			—			(14,500	)
Proceeds from short-term debt		—			—			57,494						57,494
Repurchase of notes		(79,865	)		—			—			—			(79,865	)
Payment of debt issuance costs		—			—			(503	)					(503	)
Principal payments of capital leases		—			(765	)		—			—			(765	)
Intercompany activity, net		284,631			(176,753	)		(107,878	)		—			—

Net cash provided by (used in) financing activities		190,266			(177,518	)		(50,887	)		—			(38,139	)

Effect of foreign currency exchange rate changes on cash and cash equivalents		—			3,218			(2,192	)		—			1,026

Net increase (decrease) in cash and cash equivalents		66,941			14,191			(23,938	)		—			57,194
Cash and cash equivalents at beginning of period		109,138			(10,604	)		100,174			—			198,708

Cash and cash equivalents at end of period		176,079			3,587			76,236			—			255,902
Restricted cash at end of period		3,450			—			20,414			—			23,864

Cash and cash equivalents and restricted cash at end of period	$	179,529		$	3,587		$	96,650		$	—		$	279,766