Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 2, 2009
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Nos. 333-148108
Claires Stores, Inc.
(Exact name of registrant as specified in its charter)
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Florida
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59-0940416 |
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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3 S.W. 129th Avenue, Pembroke Pines, Florida
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33027 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (954) 433-3900
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether registrant has submitted electronically and posted on its
corporate web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files) Yes o No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer x
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No x
As of June 1, 2009, 100 shares of the Registrants common stock, $0.001 par value, were
outstanding.
CLAIRES STORES, INC. AND SUBSIDIARIES
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CLAIRES STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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May 2, 2009 |
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January 31, 2009 |
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(In thousands, except share and per share amounts) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
206,703 |
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$ |
204,574 |
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Inventories |
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100,993 |
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103,691 |
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Prepaid expenses |
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44,396 |
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31,837 |
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Other current assets |
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26,225 |
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27,079 |
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Total current assets |
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378,317 |
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367,181 |
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Property and equipment: |
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Land and building |
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22,288 |
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22,288 |
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Furniture, fixtures and equipment |
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147,876 |
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143,702 |
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Leasehold improvements |
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218,786 |
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214,007 |
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388,950 |
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379,997 |
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Less accumulated depreciation and amortization |
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(132,094 |
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(113,926 |
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256,856 |
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266,071 |
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Intangible assets, net of accumulated amortization of $23,677 and
$19,371, respectively |
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585,930 |
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587,125 |
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Deferred financing costs, net of accumulated amortization of $20,278
and $17,646, respectively |
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57,312 |
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59,944 |
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Other assets |
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54,503 |
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56,428 |
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Goodwill |
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1,544,346 |
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1,544,346 |
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2,242,091 |
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2,247,843 |
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Total assets |
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$ |
2,877,264 |
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$ |
2,881,095 |
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LIABILITIES AND STOCKHOLDERS DEFICIT |
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Current liabilities: |
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Trade accounts payable |
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$ |
59,595 |
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$ |
53,237 |
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Current portion of long-term debt |
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14,500 |
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14,500 |
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Income taxes payable |
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5,695 |
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6,477 |
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Accrued interest payable |
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28,086 |
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13,316 |
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Accrued expenses and other current liabilities |
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105,008 |
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107,974 |
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Total current liabilities |
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212,884 |
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195,504 |
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Long-term debt |
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2,379,196 |
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2,373,272 |
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Revolving credit facility |
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194,000 |
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194,000 |
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Deferred tax liability |
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112,335 |
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112,829 |
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Deferred rent expense |
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17,544 |
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18,462 |
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Unfavorable lease obligations and other long-term liabilities |
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40,465 |
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42,871 |
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2,743,540 |
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2,741,434 |
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Commitments and contingencies |
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Stockholders deficit: |
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Common stock par value $0.001 per share; authorized 1,000
shares;
issued and outstanding 100 shares |
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Additional paid-in capital |
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609,948 |
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609,427 |
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Accumulated other comprehensive loss, net of tax |
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(17,134 |
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(22,319 |
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Retained deficit |
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(671,974 |
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(642,951 |
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(79,160 |
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(55,843 |
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Total liabilities and stockholders deficit |
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$ |
2,877,264 |
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$ |
2,881,095 |
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See accompanying notes to unaudited condensed consolidated financial statements.
3
CLAIRES STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands)
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Three Months |
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Three Months |
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Ended |
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Ended |
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May 2, 2009 |
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May 3, 2008 |
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Net sales |
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$ |
293,098 |
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$ |
327,003 |
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Cost of sales, occupancy and buying expenses |
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151,179 |
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171,982 |
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Gross profit |
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141,919 |
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155,021 |
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Other expenses (income): |
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Selling, general and administrative |
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108,469 |
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131,335 |
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Depreciation and amortization |
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18,155 |
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22,101 |
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Severance and transaction-related costs |
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349 |
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5,968 |
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Other (income) expense |
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414 |
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(560 |
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127,387 |
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158,844 |
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Operating income (loss) |
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14,532 |
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(3,823 |
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Interest expense (income), net |
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45,234 |
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48,657 |
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Loss before income taxes |
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(30,702 |
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(52,480 |
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Income tax benefit |
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(1,679 |
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(16,910 |
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Net loss |
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$ |
(29,023 |
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$ |
(35,570 |
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Net loss |
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$ |
(29,023 |
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$ |
(35,570 |
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Foreign currency translation and interest rate
swap adjustments, net of tax |
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5,185 |
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9,314 |
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Comprehensive loss |
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$ |
(23,838 |
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$ |
(26,256 |
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See accompanying notes to unaudited condensed consolidated financial statements.
4
CLAIRES STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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Three Months |
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Three Months |
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Ended |
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Ended |
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May 2, 2009 |
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May 3, 2008 |
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Cash flows from operating activities: |
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Net loss |
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$ |
(29,023 |
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$ |
(35,570 |
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Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |
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Depreciation and amortization |
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18,155 |
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22,101 |
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Amortization of lease rights and other assets |
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494 |
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528 |
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Amortization of debt issuance costs |
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2,632 |
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2,647 |
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Payment in kind interest expense |
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9,549 |
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Net accretion of favorable (unfavorable) lease obligations |
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(615 |
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Loss on sale/retirement of property and equipment, net |
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4 |
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27 |
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Stock compensation expense |
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521 |
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2,767 |
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(Increase) decrease in: |
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Inventories |
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3,642 |
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269 |
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Prepaid expenses |
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(11,874 |
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(14,845 |
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Other assets |
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2,046 |
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(1,637 |
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Increase (decrease) in: |
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Trade accounts payable |
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6,139 |
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16,855 |
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Income taxes payable |
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(1,551 |
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(14,164 |
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Accrued expenses and other liabilities |
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(3,349 |
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9,218 |
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Accrued interest payable |
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14,771 |
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22,621 |
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Deferred income taxes |
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(108 |
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(14,329 |
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Deferred rent expense |
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(784 |
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2,153 |
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Net cash provided by (used in) operating activities |
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10,649 |
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(1,359 |
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Cash flows from investing activities: |
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Acquisition of property and equipment, net |
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(5,185 |
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(15,598 |
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Acquisition of intangible assets/lease rights |
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(340 |
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(427 |
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Net cash used in investing activities |
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(5,525 |
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(16,025 |
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Cash flows from financing activities: |
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Credit facility payment |
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(3,625 |
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(3,625 |
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Net cash used in financing activities |
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(3,625 |
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(3,625 |
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Effect of foreign currency exchange rate changes on cash and
cash equivalents |
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630 |
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3,049 |
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Net increase (decrease) in cash and cash equivalents |
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2,129 |
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(17,960 |
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Cash and cash equivalents at beginning of period |
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204,574 |
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85,974 |
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Cash and cash equivalents at end of period |
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$ |
206,703 |
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$ |
68,014 |
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Supplemental disclosure of cash flow information: |
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Income taxes paid |
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$ |
423 |
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$ |
11,973 |
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Interest paid |
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18,356 |
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24,022 |
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See accompanying notes to unaudited condensed consolidated financial statements.
5
CLAIRES STORES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair statement of the results for the interim periods
presented have been included. These statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Annual Report on Form 10-K for the year
ended January 31, 2009 filed with the Securities and Exchange Commission, including Note 2 to the
consolidated financial statements included therein which discusses principles of consolidation and
summary of significant accounting policies.
The consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America, which require management to make
certain estimates and assumptions about future events. These estimates and the underlying
assumptions affect the amounts of assets and liabilities reported, disclosures regarding contingent
assets and liabilities and reported amounts of revenues and expenses. Such estimates include, but
are not limited to, the value of inventories, goodwill, intangible assets, investment in joint
venture and other long-lived assets, legal contingencies and assumptions used in the calculation of
income taxes, retirement and other post-retirement benefits, stock-based compensation, derivative
and hedging activities, residual values and other items. These estimates and assumptions are based
on managements best estimates and judgment. Management evaluates its estimates and assumptions on
an ongoing basis using historical experience and other factors, including the current economic
environment, which management believes to be reasonable under the circumstances. Management
adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit
markets, volatile equity, foreign currency, energy markets and declines in consumer spending have
combined to increase the uncertainty inherent in such estimates and assumptions. As future events
and their effects cannot be determined with precision, actual results could differ significantly
from these estimates. Changes in those estimates will be reflected in the financial statements in
those future periods when the changes occur.
Due to the seasonal nature of the retail industry and the Companys business, the results of
operations for interim periods of the year are not necessarily indicative of the results of
operations on an annualized basis.
2. Significant Accounting Policies
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 157, Fair Value Measurements. The Statement establishes a
framework for measuring fair value in generally accepted accounting principles, and expands
disclosure about fair value measurements. This statement does not require any new fair value
measurement and applies to financial statements issued for fiscal years beginning after November
15, 2007 with early application encouraged. Certain provisions of the statement were effective for
the Company on February 3, 2008, while the effective date of other provisions relating to
nonfinancial assets and liabilities were effective for the Company as of February 1, 2009. The
Companys adoption of SFAS No. 157 on February 1, 2009 related to nonfinancial assets and
nonfinancial liabilities did not have a material impact on its financial position, results of
operations or cash flows.
During April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the
Useful Life of Intangible Assets. This FSP, which applies to intangible assets accounted for
pursuant to SFAS No. 142 Goodwill and Other Intangible Assets, provides guidance for the
development of
renewal or extension assumptions used to determine the useful life of an intangible asset. The
Company adopted this Statement on February 1, 2009 which did not have a material impact on its
financial position, results of operations or cash flows.
6
During June 2008, the Emerging Issues Task Force issued EITF 08-3, Accounting by Lessees for
Nonrefundable Maintenance Deposits. Issue 08-3 requires lessees to account for nonrefundable
maintenance deposits as deposits if it is probable that maintenance activities will occur and the
deposit is realizable. Amounts on deposit that are not probable of being used to fund future
maintenance activities should be charged to expense. Issue 08-3 is effective for fiscal years
beginning after December 15, 2008. The Company adopted this Statement on February 1, 2009 which did
not have a material impact on its financial position, results of operations or cash flows.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities an Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 seeks to
improve financial reporting for derivative instruments and hedging activities by requiring enhanced
disclosures regarding their impact on financial position, financial performance and cash flows. To
achieve this increased transparency, SFAS No. 161 requires (1) disclosure of the fair value of
derivative instruments and gains and losses in a tabular format; (2) disclosure of derivative
features that are credit risk-related; and (3) cross-referencing within the footnotes. SFAS No. 161
is effective prospectively for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application permitted. See Note 6 for further
discussion and disclosure.
In October 2008, the EITF issued EITF No. 08-6 which addressed the potential effect of FASB
Statement No. 141R, Business Combinations and SFAS No. 160 Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51 on equity-method accounting under
APB Opinion No. 18, The Equity Method Accounting for Investments in Common Stock. The consensus
of the EITF will not require the Company to perform a separate impairment test on the underlying
assets of our investment in Claires Nippon. However, the Company would be required to recognize
its proportionate share of impairment charges recognized by our joint venture with AEON Co. Ltd. It
would also be required to perform an overall other than temporary impairment test of its investment
in accordance with APB No. 18. EITF 08-6 is effective for fiscal years beginning on or after
December 15, 2008 and interim periods within those fiscal years and is to be applied on a
prospective basis. The Company adopted this Statement on February 1, 2009 which did not have a
material impact on its financial position, results of operations or cash flows.
In January 2009, the FASB released Staff Position SFAS No. 107-1 and Accounting Principles Board
(APB) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (SFAS
107-1 and APB 28-1). This FSP amends FASB Statement No. 107 Disclosures about Fair Values of
Financial Instruments to require disclosures about fair value of financial instruments in interim
financial statements as well as in annual financial statements. APB 28-1 amends APB Opinion No.
28, Interim Financial Reporting, to require those disclosures in all interim financial
statements. This standard is effective for interim periods ending after June 15, 2009, but early
adoption is permitted for interim periods ending after March 15, 2009. The Company plans to adopt
SFAS 107-1 and APB 28-1 and provide the additional disclosure requirements beginning with the
second quarter interim period ending on August 1, 2009.
In April 2009, the FASB issued FSP No. 115-2 and FAS 124-2. Recognition and Presentation of
Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in
U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation
and disclosure of other-than-temporary impairments on debt and equity securities in the financial
statements. This FSP does not amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. This FSP is effective July 1, 2009 and is
not expected to have a material impact on the Companys financial position, results of operations
or cash flows.
In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly. This FSP provides additional guidance for estimating fair value in
accordance
with FASB No. 157 when the volume and level of activity for the asset or liability have
significantly decreased and also includes guidance on identifying circumstances that indicate a
transaction is not orderly. This FSP emphasizes that even if there has been a significant decrease
in the volume and level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same. Fair value is the
price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction (that is, not a forced liquidation or distressed sale) between market participants at
the measurement date under current market conditions. This FSP is effective for interim and annual
periods ending after June 15, 2009 and is not expected to have a material impact on the Companys
financial position, results of operations or cash flows.
7
3. Segment Information
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, within its North American division, for the goods it sells to third parties under
franchising agreements within Net sales and Cost of sales, occupancy and buying expenses in the
Companys Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. The
franchise fees the Company charges, within its European division, under the franchising agreements
are reported in Other income in the Companys Unaudited Condensed Consolidated Statements of
Operations and Comprehensive Loss.
Net sales and operating income (loss) for the periods presented were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
|
Ended |
|
|
Ended |
|
|
|
May 2, 2009 |
|
|
May 3, 2008 |
|
Net sales: |
|
|
|
|
|
|
|
|
North America |
|
$ |
196,444 |
|
|
$ |
209,344 |
|
Europe |
|
|
96,654 |
|
|
|
117,659 |
|
|
|
|
|
|
|
|
Total net sales |
|
|
293,098 |
|
|
|
327,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization: |
|
|
|
|
|
|
|
|
North America |
|
|
12,567 |
|
|
|
14,626 |
|
Europe |
|
|
5,588 |
|
|
|
7,475 |
|
|
|
|
|
|
|
|
Total depreciation and amortization |
|
|
18,155 |
|
|
|
22,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) for reportable segments: |
|
|
|
|
|
|
|
|
North America |
|
|
16,129 |
|
|
|
3,697 |
|
Europe |
|
|
(1,248 |
) |
|
|
(1,552 |
) |
|
|
|
|
|
|
|
Total operating income for reportable segments |
|
|
14,881 |
|
|
|
2,145 |
|
Severance and transaction-related costs |
|
|
349 |
|
|
|
5,968 |
|
|
|
|
|
|
|
|
Total consolidated operating income (loss) |
|
|
14,532 |
|
|
|
(3,823 |
) |
Interest expense (income), net |
|
|
45,234 |
|
|
|
48,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated loss before income taxes |
|
$ |
(30,702 |
) |
|
$ |
(52,480 |
) |
|
|
|
|
|
|
|
Excluded from operating income (loss) for the North American segment are severance and
transaction-related costs of approximately $0.3 million and $4.3 million for the three months ended
May 2, 2009 and May 3, 2008, respectively.
Excluded from operating income (loss) for the European segment are severance and
transaction-related costs of approximately $1.7 million for the three months ended May 3, 2008.
There were no severance and transaction-related costs for the European segment for the three months
ended May 2, 2009.
8
4. Stock Options and Stock-Based Compensation
The following is a summary of activity in the Companys stock option plan for the three months
ended May 2, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Price |
|
|
Life (Years) |
|
|
Value |
|
Outstanding at January 31, 2009 |
|
|
6,807,556 |
|
|
$ |
10.00 |
|
|
|
5.1 |
|
|
|
|
|
Options granted |
|
|
254,850 |
|
|
$ |
10.00 |
|
|
|
6.9 |
|
|
|
|
|
Options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options forfeited |
|
|
(584,308 |
) |
|
$ |
10.00 |
|
|
|
|
|
|
|
|
|
Options expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at May 2, 2009 |
|
|
6,478,098 |
|
|
$ |
10.00 |
|
|
|
5.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at May 2, 2009 |
|
|
1,387,502 |
|
|
$ |
10.00 |
|
|
|
5.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of options granted during the three months ended May 2,
2009 and May 3, 2008 was $4.24 and $4.47, respectively.
During the three months ended May 2, 2009 and May 3, 2008, the Company recorded additional paid-in
capital relating to stock-based compensation of approximately $0.5 million and $2.8 million,
respectively.
5. Income Taxes
The effective income tax benefit rate was 5.5% for the three months ended May 2, 2009. This
effective income tax rate differed from the statutory federal tax rate of 35% primarily from an
increase in the valuation allowance recorded for additional deferred tax assets generated in the
three months ended May 2, 2009 by the Companys U.S. operations.
The effective income tax benefit rate was 32.2% for the three months ended May 3, 2008. This
effective income tax benefit rate differed from the statutory federal tax rate of 35% due to the
overall geographic mix of losses in jurisdictions with higher tax rates and income in jurisdictions
with lower tax rates, offset by the accrual of U.S. tax expense on current foreign earnings, and
other factors.
9
6. Fair Value of Financial Instruments
The Companys financial instruments consist primarily of current assets, current liabilities,
long-term debt, the revolving credit facility and interest rate swaps. Current assets and
liabilities approximate fair market value due to the relatively short maturity of these financial
instruments.
As of May 2, 2009, the fair value and carrying value of the Companys debt was approximately $1,228
million and $2,588 million, respectively. As of January 31, 2009, the fair value and carrying value
of the Companys debt was approximately $734 million and approximately $2,582 million,
respectively. The fair value (estimated market value) of the debt is based primarily on quoted
prices for similar instruments.
The fair value of the Companys interest rate swaps represents the estimated amounts the Company
would receive or pay to terminate those contracts at the reporting date based upon pricing or
valuation models applied to current market information. The interest rate swaps are valued using
the market standard methodology of netting the discounted future fixed cash payments and the
discounted expected variable cash receipts. The variable cash receipts are based on an expectation
of future interest rates derived from observed market interest rate curves. The Company includes
credit valuation adjustment risk in the calculation of fair value.
The following table summarizes the Companys assets (liabilities) measured at fair value on a
recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at May 2, 2009 Using |
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant |
|
|
Significant |
|
|
|
Identical Assets |
|
|
Other Observable |
|
|
Unobservable |
|
|
|
(Liabilities) |
|
|
Inputs |
|
|
Inputs |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Debt and Credit Facility |
|
$ |
(1,228,000 |
) |
|
$ |
|
|
|
$ |
|
|
Interest rate swaps |
|
$ |
|
|
|
$ |
(19,048 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at January 31, 2009 Using |
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant |
|
|
Significant |
|
|
|
Identical Assets |
|
|
Other Observable |
|
|
Unobservable |
|
|
|
(Liabilities) |
|
|
Inputs |
|
|
Inputs |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Debt and Credit Facility |
|
$ |
(734,000 |
) |
|
$ |
|
|
|
$ |
|
|
Interest rate swaps |
|
$ |
|
|
|
$ |
(19,734 |
) |
|
$ |
|
|
The fair value of the interest rate swaps are included in accrued expenses and other current
liabilities and is recorded, net of tax of approximately $7.0 million and $7.3 million, as a
component in other comprehensive loss as of May 2, 2009 and January 31, 2009, respectively, in the
accompanying Unaudited Condensed Consolidated Balance Sheet. During the three months ended May 2,
2009 and May 3, 2008, unrealized gains were recorded as a component of other comprehensive loss, as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
|
Ended |
|
|
Ended |
|
|
|
May 2, 2009 |
|
|
May 3, 2008 |
|
Unrealized gain from changes in fair value
of interest rate swap agreements, net of tax |
|
$ |
433 |
|
|
$ |
3,109 |
|
|
|
|
|
|
|
|
10
7. Commitments and Contingencies
The Company is, from time to time, involved in litigation incidental to the conduct of its
business, including personal injury litigation, litigation regarding merchandise sold, including
product and safety concerns regarding metal content in merchandise, litigation with respect to
various employment matters, including litigation with present and former employees, wage and hour
litigation, and litigation to protect trademark rights. The Company believes that current pending
litigation will not have a material adverse effect on its consolidated financial position, results
of operations or cash flows.
8. Supplemental Financial Information
On May 29, 2007, Claires Stores, Inc. (the Issuer), issued $935.0 million in senior notes,
senior toggle notes and senior subordinated notes. These notes are irrevocably and unconditionally
guaranteed, jointly and severally, by all wholly-owned domestic current and future subsidiaries of
Claires Stores, Inc. that guarantee the Companys senior secured credit facility (the
Guarantors). The Companys other subsidiaries, principally its international subsidiaries
including our European, Canadian and Asian subsidiaries, (the Non-Guarantors) are not guarantors
of these notes.
11
The following tables 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 |
|
May 2, 2009 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
129,166 |
|
|
$ |
15,640 |
|
|
$ |
61,897 |
|
|
$ |
|
|
|
$ |
206,703 |
|
Inventories |
|
|
|
|
|
|
70,269 |
|
|
|
30,724 |
|
|
|
|
|
|
|
100,993 |
|
Prepaid expenses |
|
|
518 |
|
|
|
14,900 |
|
|
|
28,978 |
|
|
|
|
|
|
|
44,396 |
|
Other current assets |
|
|
59 |
|
|
|
18,196 |
|
|
|
7,970 |
|
|
|
|
|
|
|
26,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
129,743 |
|
|
|
119,005 |
|
|
|
129,569 |
|
|
|
|
|
|
|
378,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and building |
|
|
|
|
|
|
22,288 |
|
|
|
|
|
|
|
|
|
|
|
22,288 |
|
Furniture, fixtures and equipment |
|
|
2,162 |
|
|
|
105,311 |
|
|
|
40,403 |
|
|
|
|
|
|
|
147,876 |
|
Leasehold improvements |
|
|
1,703 |
|
|
|
137,156 |
|
|
|
79,927 |
|
|
|
|
|
|
|
218,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,865 |
|
|
|
264,755 |
|
|
|
120,330 |
|
|
|
|
|
|
|
388,950 |
|
Less accumulated depreciation and amortization |
|
|
(1,432 |
) |
|
|
(87,833 |
) |
|
|
(42,829 |
) |
|
|
|
|
|
|
(132,094 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,433 |
|
|
|
176,922 |
|
|
|
77,501 |
|
|
|
|
|
|
|
256,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivables |
|
|
|
|
|
|
34,131 |
|
|
|
58,631 |
|
|
|
(92,762 |
) |
|
|
|
|
Investment in subsidiaries |
|
|
2,168,336 |
|
|
|
(1,702 |
) |
|
|
|
|
|
|
(2,166,634 |
) |
|
|
|
|
Intangible assets, net |
|
|
286,201 |
|
|
|
16,436 |
|
|
|
283,293 |
|
|
|
|
|
|
|
585,930 |
|
Deferred financing costs, net |
|
|
57,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,312 |
|
Other assets |
|
|
16,536 |
|
|
|
2,785 |
|
|
|
35,182 |
|
|
|
|
|
|
|
54,503 |
|
Goodwill |
|
|
|
|
|
|
1,229,940 |
|
|
|
314,406 |
|
|
|
|
|
|
|
1,544,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,528,385 |
|
|
|
1,281,590 |
|
|
|
691,512 |
|
|
|
(2,259,396 |
) |
|
|
2,242,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,660,561 |
|
|
$ |
1,577,517 |
|
|
$ |
898,582 |
|
|
$ |
(2,259,396 |
) |
|
$ |
2,877,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
611 |
|
|
$ |
17,066 |
|
|
$ |
41,918 |
|
|
$ |
|
|
|
$ |
59,595 |
|
Current portion of long-term debt |
|
|
14,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,500 |
|
Income taxes payable |
|
|
|
|
|
|
1,459 |
|
|
|
4,236 |
|
|
|
|
|
|
|
5,695 |
|
Accrued interest payable |
|
|
28,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,086 |
|
Accrued expenses and other current liabilities |
|
|
30,008 |
|
|
|
34,608 |
|
|
|
40,392 |
|
|
|
|
|
|
|
105,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
73,205 |
|
|
|
53,133 |
|
|
|
86,546 |
|
|
|
|
|
|
|
212,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payables |
|
|
92,762 |
|
|
|
|
|
|
|
|
|
|
|
(92,762 |
) |
|
|
|
|
Long-term debt |
|
|
2,379,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,379,196 |
|
Revolving credit facility |
|
|
194,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,000 |
|
Deferred tax liability |
|
|
|
|
|
|
99,001 |
|
|
|
13,334 |
|
|
|
|
|
|
|
112,335 |
|
Deferred rent expense |
|
|
558 |
|
|
|
13,012 |
|
|
|
3,974 |
|
|
|
|
|
|
|
17,544 |
|
Unfavorable lease obligations and other long-term
liabilities |
|
|
|
|
|
|
37,185 |
|
|
|
3,280 |
|
|
|
|
|
|
|
40,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,666,516 |
|
|
|
149,198 |
|
|
|
20,588 |
|
|
|
(92,762 |
) |
|
|
2,743,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
367 |
|
|
|
2 |
|
|
|
(369 |
) |
|
|
|
|
Additional paid in capital |
|
|
609,948 |
|
|
|
1,445,795 |
|
|
|
876,798 |
|
|
|
(2,322,593 |
) |
|
|
609,948 |
|
Accumulated other comprehensive loss, net of tax |
|
|
(17,134 |
) |
|
|
(591 |
) |
|
|
(13,110 |
) |
|
|
13,701 |
|
|
|
(17,134 |
) |
Retained deficit |
|
|
(671,974 |
) |
|
|
(70,385 |
) |
|
|
(72,242 |
) |
|
|
142,627 |
|
|
|
(671,974 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79,160 |
) |
|
|
1,375,186 |
|
|
|
791,448 |
|
|
|
(2,166,634 |
) |
|
|
(79,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit) |
|
$ |
2,660,561 |
|
|
$ |
1,577,517 |
|
|
$ |
898,582 |
|
|
$ |
(2,259,396 |
) |
|
$ |
2,877,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
January 31, 2009 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
154,414 |
|
|
$ |
211 |
|
|
$ |
49,949 |
|
|
$ |
|
|
|
$ |
204,574 |
|
Inventories |
|
|
|
|
|
|
73,445 |
|
|
|
30,246 |
|
|
|
|
|
|
|
103,691 |
|
Prepaid expenses |
|
|
434 |
|
|
|
14,641 |
|
|
|
16,762 |
|
|
|
|
|
|
|
31,837 |
|
Other current assets |
|
|
6 |
|
|
|
16,104 |
|
|
|
10,969 |
|
|
|
|
|
|
|
27,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
154,854 |
|
|
|
104,401 |
|
|
|
107,926 |
|
|
|
|
|
|
|
367,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and building |
|
|
|
|
|
|
22,288 |
|
|
|
|
|
|
|
|
|
|
|
22,288 |
|
Furniture, fixtures and equipment |
|
|
2,025 |
|
|
|
103,571 |
|
|
|
38,106 |
|
|
|
|
|
|
|
143,702 |
|
Leasehold improvements |
|
|
1,704 |
|
|
|
136,554 |
|
|
|
75,749 |
|
|
|
|
|
|
|
214,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,729 |
|
|
|
262,413 |
|
|
|
113,855 |
|
|
|
|
|
|
|
379,997 |
|
Less accumulated depreciation and amortization |
|
|
(1,250 |
) |
|
|
(77,042 |
) |
|
|
(35,634 |
) |
|
|
|
|
|
|
(113,926 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,479 |
|
|
|
185,371 |
|
|
|
78,221 |
|
|
|
|
|
|
|
266,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivables |
|
|
|
|
|
|
26,876 |
|
|
|
58,416 |
|
|
|
(85,292 |
) |
|
|
|
|
Investment in subsidiaries |
|
|
2,139,955 |
|
|
|
(4,061 |
) |
|
|
|
|
|
|
(2,135,894 |
) |
|
|
|
|
Intangible assets, net |
|
|
286,750 |
|
|
|
17,960 |
|
|
|
282,415 |
|
|
|
|
|
|
|
587,125 |
|
Deferred financing costs, net |
|
|
59,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,944 |
|
Other assets |
|
|
19,392 |
|
|
|
2,602 |
|
|
|
34,434 |
|
|
|
|
|
|
|
56,428 |
|
Goodwill |
|
|
|
|
|
|
1,229,940 |
|
|
|
314,406 |
|
|
|
|
|
|
|
1,544,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,506,041 |
|
|
|
1,273,317 |
|
|
|
689,671 |
|
|
|
(2,221,186 |
) |
|
|
2,247,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,663,374 |
|
|
$ |
1,563,089 |
|
|
$ |
875,818 |
|
|
$ |
(2,221,186 |
) |
|
$ |
2,881,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
2,347 |
|
|
$ |
21,112 |
|
|
$ |
29,778 |
|
|
$ |
|
|
|
$ |
53,237 |
|
Current portion of long-term debt |
|
|
14,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,500 |
|
Income taxes payable |
|
|
|
|
|
|
|
|
|
|
6,477 |
|
|
|
|
|
|
|
6,477 |
|
Accrued interest payable |
|
|
13,313 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
13,316 |
|
Accrued expenses and other current liabilities |
|
|
35,795 |
|
|
|
35,782 |
|
|
|
36,397 |
|
|
|
|
|
|
|
107,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
65,955 |
|
|
|
56,894 |
|
|
|
72,655 |
|
|
|
|
|
|
|
195,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payables |
|
|
85,292 |
|
|
|
|
|
|
|
|
|
|
|
(85,292 |
) |
|
|
|
|
Long-term debt |
|
|
2,373,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,373,272 |
|
Revolving credit facility |
|
|
194,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,000 |
|
Deferred tax liability |
|
|
|
|
|
|
99,122 |
|
|
|
13,707 |
|
|
|
|
|
|
|
112,829 |
|
Deferred rent expense |
|
|
698 |
|
|
|
12,532 |
|
|
|
5,232 |
|
|
|
|
|
|
|
18,462 |
|
Unfavorable lease obligations and other long-term
liabilities |
|
|
|
|
|
|
39,074 |
|
|
|
3,797 |
|
|
|
|
|
|
|
42,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,653,262 |
|
|
|
150,728 |
|
|
|
22,736 |
|
|
|
(85,292 |
) |
|
|
2,741,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
367 |
|
|
|
2 |
|
|
|
(369 |
) |
|
|
|
|
Additional paid in capital |
|
|
609,427 |
|
|
|
1,445,795 |
|
|
|
876,798 |
|
|
|
(2,322,593 |
) |
|
|
609,427 |
|
Accumulated other comprehensive loss, net of tax |
|
|
(22,319 |
) |
|
|
(2,326 |
) |
|
|
(20,597 |
) |
|
|
22,923 |
|
|
|
(22,319 |
) |
Retained deficit |
|
|
(642,951 |
) |
|
|
(88,369 |
) |
|
|
(75,776 |
) |
|
|
164,145 |
|
|
|
(642,951 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,843 |
) |
|
|
1,355,467 |
|
|
|
780,427 |
|
|
|
(2,135,894 |
) |
|
|
(55,843 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit) |
|
$ |
2,663,374 |
|
|
$ |
1,563,089 |
|
|
$ |
875,818 |
|
|
$ |
(2,221,186 |
) |
|
$ |
2,881,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) |
|
For The Three Months Ended May 2, 2009 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
325,983 |
|
|
$ |
107,467 |
|
|
$ |
(140,352 |
) |
|
$ |
293,098 |
|
Cost of sales, occupancy and buying expenses |
|
|
|
|
|
|
234,040 |
|
|
|
57,491 |
|
|
|
(140,352 |
) |
|
|
151,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
91,943 |
|
|
|
49,976 |
|
|
|
|
|
|
|
141,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
6,270 |
|
|
|
58,472 |
|
|
|
43,727 |
|
|
|
|
|
|
|
108,469 |
|
Depreciation and amortization |
|
|
744 |
|
|
|
11,073 |
|
|
|
6,338 |
|
|
|
|
|
|
|
18,155 |
|
Severance and transaction-related costs |
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349 |
|
Other (income) expense |
|
|
(2,667 |
) |
|
|
4,602 |
|
|
|
(1,521 |
) |
|
|
|
|
|
|
414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,696 |
|
|
|
74,147 |
|
|
|
48,544 |
|
|
|
|
|
|
|
127,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(4,696 |
) |
|
|
17,796 |
|
|
|
1,432 |
|
|
|
|
|
|
|
14,532 |
|
Interest expense (income), net |
|
|
45,280 |
|
|
|
|
|
|
|
(46 |
) |
|
|
|
|
|
|
45,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(49,976 |
) |
|
|
17,796 |
|
|
|
1,478 |
|
|
|
|
|
|
|
(30,702 |
) |
Income tax expense (benefit) |
|
|
|
|
|
|
378 |
|
|
|
(2,057 |
) |
|
|
|
|
|
|
(1,679 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(49,976 |
) |
|
|
17,418 |
|
|
|
3,535 |
|
|
|
|
|
|
|
(29,023 |
) |
Equity in earnings of subsidiaries |
|
|
20,953 |
|
|
|
566 |
|
|
|
|
|
|
|
(21,519 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(29,023 |
) |
|
|
17,984 |
|
|
|
3,535 |
|
|
|
(21,519 |
) |
|
|
(29,023 |
) |
Foreign currency translation and interest
rate swap adjustments, net of tax |
|
|
5,185 |
|
|
|
1,734 |
|
|
|
7,510 |
|
|
|
(9,244 |
) |
|
|
5,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
(23,838 |
) |
|
$ |
19,718 |
|
|
$ |
11,045 |
|
|
$ |
(30,763 |
) |
|
$ |
(23,838 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) |
|
For The Three Months Ended May 3, 2008 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
367,918 |
|
|
$ |
131,478 |
|
|
$ |
(172,393 |
) |
|
$ |
327,003 |
|
Cost of sales, occupancy and buying expenses |
|
|
|
|
|
|
275,566 |
|
|
|
68,809 |
|
|
|
(172,393 |
) |
|
|
171,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
92,352 |
|
|
|
62,669 |
|
|
|
|
|
|
|
155,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
10,205 |
|
|
|
66,653 |
|
|
|
54,477 |
|
|
|
|
|
|
|
131,335 |
|
Depreciation and amortization |
|
|
760 |
|
|
|
12,921 |
|
|
|
8,420 |
|
|
|
|
|
|
|
22,101 |
|
Severance and transaction-related costs |
|
|
4,300 |
|
|
|
|
|
|
|
1,668 |
|
|
|
|
|
|
|
5,968 |
|
Other (income) expense |
|
|
(5,301 |
) |
|
|
4,628 |
|
|
|
113 |
|
|
|
|
|
|
|
(560 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,964 |
|
|
|
84,202 |
|
|
|
64,678 |
|
|
|
|
|
|
|
158,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(9,964 |
) |
|
|
8,150 |
|
|
|
(2,009 |
) |
|
|
|
|
|
|
(3,823 |
) |
Interest expense (income), net |
|
|
49,167 |
|
|
|
(185 |
) |
|
|
(325 |
) |
|
|
|
|
|
|
48,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(59,131 |
) |
|
|
8,335 |
|
|
|
(1,684 |
) |
|
|
|
|
|
|
(52,480 |
) |
Income tax expense (benefit) |
|
|
(22,043 |
) |
|
|
8,856 |
|
|
|
(3,723 |
) |
|
|
|
|
|
|
(16,910 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(37,088 |
) |
|
|
(521 |
) |
|
|
2,039 |
|
|
|
|
|
|
|
(35,570 |
) |
Equity in earnings of subsidiaries |
|
|
1,518 |
|
|
|
505 |
|
|
|
|
|
|
|
(2,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(35,570 |
) |
|
|
(16 |
) |
|
|
2,039 |
|
|
|
(2,023 |
) |
|
|
(35,570 |
) |
Foreign currency translation and interest
rate swap adjustments, net of tax |
|
|
9,314 |
|
|
|
56 |
|
|
|
5,672 |
|
|
|
(5,728 |
) |
|
|
9,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
(26,256 |
) |
|
$ |
40 |
|
|
$ |
7,711 |
|
|
$ |
(7,751 |
) |
|
$ |
(26,256 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows |
|
Three Months Ended May 2, 2009 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(29,023 |
) |
|
$ |
17,984 |
|
|
$ |
3,535 |
|
|
$ |
(21,519 |
) |
|
$ |
(29,023 |
) |
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
(20,953 |
) |
|
|
(566 |
) |
|
|
|
|
|
|
21,519 |
|
|
|
|
|
Depreciation and amortization |
|
|
744 |
|
|
|
11,073 |
|
|
|
6,338 |
|
|
|
|
|
|
|
18,155 |
|
Amortization of lease rights and other assets |
|
|
|
|
|
|
12 |
|
|
|
482 |
|
|
|
|
|
|
|
494 |
|
Amortization of debt issuance costs |
|
|
2,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,632 |
|
Payment in kind interest expense |
|
|
9,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,549 |
|
Net accretion of favorable (unfavorable) lease obligations |
|
|
|
|
|
|
(760 |
) |
|
|
145 |
|
|
|
|
|
|
|
(615 |
) |
(Gain) loss on sale/retirement of property and equipment
and other assets, net |
|
|
|
|
|
|
7 |
|
|
|
(3 |
) |
|
|
|
|
|
|
4 |
|
Stock compensation expense |
|
|
(22 |
) |
|
|
|
|
|
|
543 |
|
|
|
|
|
|
|
521 |
|
(Increase) decrease in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
3,177 |
|
|
|
465 |
|
|
|
|
|
|
|
3,642 |
|
Prepaid expenses |
|
|
(84 |
) |
|
|
(259 |
) |
|
|
(11,531 |
) |
|
|
|
|
|
|
(11,874 |
) |
Other assets |
|
|
812 |
|
|
|
(1,202 |
) |
|
|
2,436 |
|
|
|
|
|
|
|
2,046 |
|
Increase (decrease) in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
|
(1,732 |
) |
|
|
(3,615 |
) |
|
|
11,486 |
|
|
|
|
|
|
|
6,139 |
|
Income taxes payable |
|
|
|
|
|
|
10 |
|
|
|
(1,561 |
) |
|
|
|
|
|
|
(1,551 |
) |
Accrued expenses and other liabilities |
|
|
(5,101 |
) |
|
|
(1,175 |
) |
|
|
2,927 |
|
|
|
|
|
|
|
(3,349 |
) |
Accrued interest payable |
|
|
14,774 |
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
14,771 |
|
Deferred income taxes |
|
|
|
|
|
|
386 |
|
|
|
(494 |
) |
|
|
|
|
|
|
(108 |
) |
Deferred rent expense |
|
|
(140 |
) |
|
|
765 |
|
|
|
(1,409 |
) |
|
|
|
|
|
|
(784 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
(28,544 |
) |
|
|
25,837 |
|
|
|
13,356 |
|
|
|
|
|
|
|
10,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment, net |
|
|
(141 |
) |
|
|
(3,046 |
) |
|
|
(1,998 |
) |
|
|
|
|
|
|
(5,185 |
) |
Acquisition of intangible assets/lease rights |
|
|
(13 |
) |
|
|
(17 |
) |
|
|
(310 |
) |
|
|
|
|
|
|
(340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(154 |
) |
|
|
(3,063 |
) |
|
|
(2,308 |
) |
|
|
|
|
|
|
(5,525 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facility payments |
|
|
(3,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,625 |
) |
Intercompany activity, net |
|
|
7,075 |
|
|
|
(7,090 |
) |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
3,450 |
|
|
|
(7,090 |
) |
|
|
15 |
|
|
|
|
|
|
|
(3,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash and
cash equivalents |
|
|
|
|
|
|
(255 |
) |
|
|
885 |
|
|
|
|
|
|
|
630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(25,248 |
) |
|
|
15,429 |
|
|
|
11,948 |
|
|
|
|
|
|
|
2,129 |
|
Cash and cash equivalents at beginning of period |
|
|
154,414 |
|
|
|
211 |
|
|
|
49,949 |
|
|
|
|
|
|
|
204,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
129,166 |
|
|
$ |
15,640 |
|
|
$ |
61,897 |
|
|
$ |
|
|
|
$ |
206,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows |
|
For The Three Months Ended May 3, 2008 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(35,570 |
) |
|
$ |
(16 |
) |
|
$ |
2,039 |
|
|
$ |
(2,023 |
) |
|
$ |
(35,570 |
) |
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
(1,518 |
) |
|
|
(505 |
) |
|
|
|
|
|
|
2,023 |
|
|
|
|
|
Depreciation and amortization |
|
|
760 |
|
|
|
12,921 |
|
|
|
8,420 |
|
|
|
|
|
|
|
22,101 |
|
Amortization of lease rights and other assets |
|
|
|
|
|
|
14 |
|
|
|
514 |
|
|
|
|
|
|
|
528 |
|
Amortization of debt issuance costs |
|
|
2,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,647 |
|
Loss on sale / retirement of property and equipment, net |
|
|
|
|
|
|
11 |
|
|
|
16 |
|
|
|
|
|
|
|
27 |
|
Stock compensation expense |
|
|
2,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,767 |
|
(Increase) decrease in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
2,455 |
|
|
|
(2,186 |
) |
|
|
|
|
|
|
269 |
|
Prepaid expenses |
|
|
(505 |
) |
|
|
190 |
|
|
|
(14,530 |
) |
|
|
|
|
|
|
(14,845 |
) |
Other assets |
|
|
495 |
|
|
|
515 |
|
|
|
(2,647 |
) |
|
|
|
|
|
|
(1,637 |
) |
Increase (decrease) in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
|
(442 |
) |
|
|
(1,828 |
) |
|
|
19,125 |
|
|
|
|
|
|
|
16,855 |
|
Income taxes payable |
|
|
(683 |
) |
|
|
(8,040 |
) |
|
|
(5,441 |
) |
|
|
|
|
|
|
(14,164 |
) |
Accrued expenses and other liabilities |
|
|
3,808 |
|
|
|
2,096 |
|
|
|
3,314 |
|
|
|
|
|
|
|
9,218 |
|
Accrued interest payable |
|
|
22,616 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
22,621 |
|
Deferred income taxes |
|
|
|
|
|
|
(13,575 |
) |
|
|
(754 |
) |
|
|
|
|
|
|
(14,329 |
) |
Deferred rent expense |
|
|
(135 |
) |
|
|
1,859 |
|
|
|
429 |
|
|
|
|
|
|
|
2,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
(5,760 |
) |
|
|
(3,903 |
) |
|
|
8,304 |
|
|
|
|
|
|
|
(1,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment, net |
|
|
(20 |
) |
|
|
(11,575 |
) |
|
|
(4,003 |
) |
|
|
|
|
|
|
(15,598 |
) |
Acquisition of intangible assets |
|
|
|
|
|
|
(35 |
) |
|
|
(392 |
) |
|
|
|
|
|
|
(427 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(20 |
) |
|
|
(11,610 |
) |
|
|
(4,395 |
) |
|
|
|
|
|
|
(16,025 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facility payment |
|
|
(3,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,625 |
) |
Intercompany financing |
|
|
(13,849 |
) |
|
|
15,419 |
|
|
|
(1,570 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(17,474 |
) |
|
|
15,419 |
|
|
|
(1,570 |
) |
|
|
|
|
|
|
(3,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash and
cash equivalents |
|
|
(2,361 |
) |
|
|
1,587 |
|
|
|
3,823 |
|
|
|
|
|
|
|
3,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(25,615 |
) |
|
|
1,493 |
|
|
|
6,162 |
|
|
|
|
|
|
|
(17,960 |
) |
Cash and cash equivalents at beginning of period |
|
|
25,835 |
|
|
|
1,892 |
|
|
|
58,247 |
|
|
|
|
|
|
|
85,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
220 |
|
|
$ |
3,385 |
|
|
$ |
64,409 |
|
|
$ |
|
|
|
$ |
68,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Managements Discussion and Analysis of Financial Condition and Results of Operations is designed
to provide the reader of the financial statements with a narrative on our results of operations,
financial position and liquidity, risk management activities, and significant accounting policies
and critical estimates. Managements Discussion and Analysis should be read in conjunction with
the Unaudited Condensed Consolidated Financial Statements and related notes thereto contained
elsewhere in this document.
We include a store in the calculation of same store sales once it has been in operation sixty weeks
after its initial opening. A store which is temporarily closed, such as for remodeling, is removed
from the same store sales computation if it is closed for nine consecutive weeks. The removal is
effective prospectively upon the completion of the ninth consecutive week of closure. A store
which is closed permanently, such as upon termination of the lease, is immediately removed from the
same store sales computation. We compute same store sales on a local currency basis, which
eliminates any impact for changes in foreign currency rates.
Business Overview
We are a leading specialty retailer offering value-priced, fashion-right accessories and jewelry
for kids, tweens, teens, and young women in the 3 to 27 age range. We are organized based on our
geographic markets, which include our North American Division and our European Division. As of May
2, 2009, we operated a total of 2,970 stores, of which 2,024 were located in all 50 states of the
United States, Puerto Rico, Canada, and the U.S. Virgin Islands (our North American Division) and
946 stores were located in the United Kingdom, France, Switzerland, Spain, Ireland, Austria,
Germany, Netherlands, Portugal, and Belgium (our European Division). Our stores operate under the
trade names Claires and Icing.
In addition, as of May 2, 2009, we franchised 198 stores in the Middle East, Turkey, Russia, South
Africa, Poland and Guatemala under franchising agreements. We account within our North American
Division for the goods we sell under the merchandising agreements with our franchisees within Net
sales and Cost of sales, occupancy and buying expenses. The royalty fees are accounted for
within our European Division in Other income in our unaudited condensed consolidated financial
statements included in this report.
We also operated, as of January 31, 2009, 213 stores in Japan through our Claires Nippon 50:50
joint venture with AEON Co. Ltd. We account for the results of operations of Claires Nippon under
the equity method. These results are included within our North American Division in Other income
in our Unaudited Condensed Consolidated Financial Statements included in this report.
Our primary brand in North America and exclusively in Europe is Claires. Our Claires customers
are predominantly teens (ages 13 to 18), tweens (ages 7 to 12) and kids (ages 3 to 6), or known
internally to Claires as our Young, Younger and Youngest target customer groups.
Our second brand in North America is Icing, which targets a single edit point customer represented
by a 23 year old young woman just graduating from college and entering the workforce who dresses
consistent with the current fashion influences. We believe this niche strategy will enable us to
create a well defined merchandise point of view and attract a broad group of customers from 19 to
27 years of age.
We believe that we are the leading accessories and jewelry destination for our target customers,
which is embodied in our mission statement to be a fashion authority and fun destination
offering a compelling, focused assortment of value-priced accessories, jewelry and other emerging
fashion categories targeted to the lifestyles of kids, tweens, teens and young women.
We provide our target customer groups a significant selection of fashion right merchandise across a
wide range of categories, all with a compelling value proposition. Our two major categories of
business are:
|
|
|
Accessories includes hair goods, handbags, small leather goods, and other fashion
classifications, such as scarves, headwear, attitude glasses, leg wear and seasonal
accessories,
such as sunglasses, sandals, slippers and cold weather merchandise including hats, gloves,
scarves and boots, as well as cosmetics |
|
|
|
Jewelry includes earrings, ear piercing, necklaces, bracelets and rings |
17
In Fiscal 2008, we began shifting our merchandise assortment more towards accessory categories and
away from jewelry and more towards casual fashion and away from dress-up styling.
In North America, our stores are located primarily in shopping malls. The differentiation of our
Claires and Icing brands allows us to operate multiple store locations within a single mall. In
Europe and Japan, our stores are located primarily on high streets, in shopping malls and in high
traffic urban areas.
Current Market Conditions
The current distress in the financial markets has resulted in declines in consumer confidence and
spending, extreme volatility in securities prices, and has had a negative impact on credit
availability and declining valuations of certain investments. We have assessed the implications of
these factors on our current business and have responded with our Cost Savings Initiative (CSI)
and Pan European Transformation (PET) projects, scaled back planned capital expenditures for
Fiscal 2009 and have implemented a conservative approach to discretionary spending. If the
national, or global, economies or credit market conditions in general were to deteriorate further
in the future, it is possible that such deterioration could put additional negative pressure on
consumer spending and negatively affect our cash flows or cause a tightening of trade credit that
may negatively affect our liquidity.
Consolidated Results of Operations
A summary of our consolidated results of operations is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Three Months |
|
|
Ended |
|
Ended |
|
|
May 2, 2009 |
|
May 3, 2008 |
Net sales |
|
$ |
293,098 |
|
|
$ |
327,003 |
|
Increase (decrease) in same store sales |
|
|
(2.3 |
)% |
|
|
(8.4 |
)% |
Gross profit percentage |
|
|
48.4 |
% |
|
|
47.4 |
% |
Selling, general and administrative expenses as a percentage of
net sales |
|
|
37.0 |
% |
|
|
40.2 |
% |
Depreciation and amortization as a percentage of net sales |
|
|
6.2 |
% |
|
|
6.8 |
% |
Severance and transaction-related costs as percentage of net sales |
|
|
0.1 |
% |
|
|
1.8 |
% |
Operating income (loss) |
|
$ |
14,532 |
|
|
$ |
(3,823 |
) |
Net loss |
|
$ |
(29,023 |
) |
|
$ |
(35,570 |
) |
Number of stores at the end of the period (1) |
|
|
2,970 |
|
|
|
3,053 |
|
|
|
|
(1) |
|
Number of stores excludes stores operated under franchise agreements and joint venture stores. |
Net sales
Net sales for the three months ended May 2, 2009 decreased by $33.9 million, or 10.4%, from the
three months ended May 3, 2008. This decrease was primarily attributable to currency translation
of our foreign locations sales of $26.7 million and a decrease in same store sales of $6.6
million, or 2.3%.
The decrease in same store sales is largely attributable to a decrease in the average number of
transactions per store of 2.9%, which was partially offset by an increase in average transaction
value.
18
The following table compares our sales of each product category for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
|
Ended |
|
|
Ended |
|
% of Total |
|
May 2, 2009 |
|
|
May 3, 2008 |
|
Accessories |
|
|
49.1 |
|
|
|
45.2 |
|
Jewelry |
|
|
50.9 |
|
|
|
54.8 |
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
Gross profit
In calculating gross profit and gross profit percentages, we exclude the costs related to our
distribution center. These costs are included instead in selling, general and administrative
expenses. Other retail companies may include these costs in cost of sales, so our gross profit
percentages may not be comparable to those retailers.
Gross profit percentage increased 100 basis points during the fiscal 2009 first quarter to 48.4%
compared to the fiscal 2008 first quarter of 47.4%. The increase included a 90 basis point
improvement in merchandise margin and a 30 basis point decrease in buying cost, partially offset by
a 20 basis point increase in occupancy cost. The improvement in merchandise margin was due to
increased initial mark-up on purchases and reduced freight and shrink related costs. Excluding
$1.2 million of non-recurring expenses relating to our PET project that were included in buying
costs in the fiscal 2008 first quarter, the increase in gross profit percentage would have been
approximately 70 basis points.
Selling, general and administrative expenses
During the three months ended May 2, 2009, selling, general and administrative expenses decreased
$22.9 million, or 17.4%, from the comparable prior year period. Excluding a $10.5 million foreign
currency translation effect and a decrease of $1.8 million of non-recurring CSI and PET project
costs, the net decrease in selling, general and administrative expenses was $10.6 million or 8.1%.
Depreciation and amortization expense
Depreciation and amortization expense decreased $3.9 million to $18.2 million during the three
months ended May 2, 2009 compared to the three months ended May 3, 2008. The majority of this
decrease is due to foreign currency translation effect and the effect of assets becoming fully
depreciated or amortized.
Severance and transaction-related costs
Since 2007, we have incurred costs related to the sale of the Company. These costs consisted
primarily of financial advisory fees, legal fees and change in control payments to employees. In
connection with our CSI and PET projects, we incurred severance costs for terminated employees.
The aggregate of these severance and transaction-related costs for the three months ended May 3,
2009 and May 2, 2008 were $0.3 million and $6.0 million, respectively.
Other (income) expense
We recognized $0.4 million of other expense for the three months ended May 2, 2009 compared to $0.6
million other income for the three months ended May 3, 2008. This decrease in other income of $1.0
million was due primarily to losses recognized in connection with our Claires Nippon joint
venture.
Interest expense (income), net
Net interest expense for the three months ended May 2, 2009 totaled $45.2 million (of which
approximately $2.6 million consisted of amortization of deferred debt issuance costs) compared to
$48.7 million for the three months ended May 3, 2008. This decrease of $3.5 million is primarily
the result of reductions in interest rates on the floating portion of our debt.
19
Income tax benefit
The effective income tax benefit rates were 5.5% and 32.2% for the three months ended May 2, 2009
and May 3, 2008, respectively. The decrease in the income tax benefit rate was primarily the
result of an increase in our valuation allowance recorded for additional deferred tax assets
generated in the three months ended May 2, 2009 by our U.S. operations.
Segment Operations
We are organized into two business segments North America and Europe. The following is a
discussion of results of operations by business segment.
North America
Key statistics and results of operations for our North American division are as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Three Months |
|
|
Ended |
|
Ended |
|
|
May 2, 2009 |
|
May 3, 2008 |
Net sales |
|
$ |
196,444 |
|
|
$ |
209,344 |
|
Increase (decrease) in same store sales |
|
|
(2.9 |
)% |
|
|
(12.3 |
)% |
Gross profit percentage |
|
|
50.0 |
% |
|
|
47.6 |
% |
Number of stores at the end of the period (1) |
|
|
2,024 |
|
|
|
2,142 |
|
|
|
|
(1) |
|
Number of stores excludes stores operated under franchise agreements and joint venture stores. |
Net sales in North America decreased by $12.9 million during the three months ended May 2, 2009, or
6.2%, from the three months ended May 3, 2008. This decrease was primarily attributable to a
decrease in sales resulting from foreign currency translation of our Canadian operations of $2.9
million, a decrease in same store sales of $5.7 million, or 2.9%, and, a decrease in new store
revenue, net of store closures, of $4.8 million.
Gross profit percentage increased 240 basis points for the three months ended May 2, 2009 compared
to the three months ended May 3, 2008. Of this increase, 180 basis points were attributable to an
increase in merchandise margin. The remainder was primarily the result of a 40 basis point
decrease in buying expense and a 20 basis point decrease in occupancy costs.
20
The following table compares our sales of each product category for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
|
Ended |
|
|
Ended |
|
% of Total |
|
May 2, 2009 |
|
|
May 3, 2008 |
|
Accessories |
|
|
43.9 |
|
|
|
39.7 |
|
Jewelry |
|
|
56.1 |
|
|
|
60.3 |
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
Europe
Key statistics and results of operations for our European division are as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Three Months |
|
|
Ended |
|
Ended |
|
|
May 2, 2009 |
|
May 3, 2008 |
Net sales |
|
$ |
96,654 |
|
|
$ |
117,659 |
|
Increase (decrease) in same store sales |
|
|
(0.9 |
)% |
|
|
(0.2 |
)% |
Gross profit percentage |
|
|
45.2 |
% |
|
|
47.1 |
% |
Number of stores at the end of the period (1) |
|
|
946 |
|
|
|
911 |
|
|
|
|
(1) |
|
Number of stores excludes stores operated under franchise agreements and joint venture stores. |
Net sales in our European division during the three months ended May 2, 2009 decreased by $21.0
million, or 17.9%, over the comparable prior year period. This decrease was primarily attributable
to a decrease of $23.8 million resulting from foreign currency translation of our European
operations and a decrease in same store sales of $0.9 million, or 0.9%, partially offset by new
store revenue, net of store closures of $3.7 million.
Gross profit percentage decreased 190 basis points for the three months ended May 2, 2009 compared
to the comparable prior year period due to a 190 basis point increase in occupancy costs.
The following table compares our sales of each product category for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
|
Ended |
|
|
Ended |
|
% of Total |
|
May 2, 2009 |
|
|
May 3, 2008 |
|
Accessories |
|
|
59.7 |
|
|
|
55.0 |
|
Jewelry |
|
|
40.3 |
|
|
|
45.0 |
|
|
|
|
|
|
|
|
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
21
Analysis of Consolidated Financial Condition
A summary of cash flows provided by (used in) operating, investing and financing activities is
outlined in the table below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Three Months |
|
|
Ended |
|
Ended |
|
|
May 2, 2009 |
|
May 3, 2008 |
Operating activities |
|
$ |
10,649 |
|
|
$ |
(1,359 |
) |
Investing activities |
|
|
(5,525 |
) |
|
|
(16,025 |
) |
Financing activities |
|
|
(3,625 |
) |
|
|
(3,625 |
) |
Cash flows from operating activities
During the three months ended May 2, 2009, cash provided by operating activities approximated $10.6
million compared to cash used in operating activities of $1.4 million during the three months ended
May 3, 2008. The primary reason for the improvement of $12.0 million was an improvement of
operating income and lower interest and taxes paid in the three months ended May 2, 2009.
Cash flows from investing activities
Cash used in investing activities during the three months ended May 2, 2009 and May 3, 2008
aggregated $5.5 million and $16.0 million, respectively. These funds were used primarily to
remodel existing stores, open new stores and to improve technology systems. During the remainder
of Fiscal 2009, we expect to fund a total of approximately $18.0 to $22.0 million of capital
expenditures to remodel existing stores, open new stores and to improve technology systems.
Cash flows from financing activities
Cash used in financing activities aggregated $3.6 million for each of the three months ended May 2,
2009 and May 3, 2008. These amounts represented scheduled principal payments on our credit
facility.
As discussed in our Annual Report on Form 10-K for the year ended January 31, 2009, we elected to
pay interest in kind on our Senior Toggle Notes for the interest period of December 2, 2008 through
June 1, 2009, as permitted by the terms of the Notes. It is our current intention to pay interest
in kind on the Senior Toggle Notes for all interest periods through June 1, 2011.
We or our affiliates may, from time to time, purchase portions of our indebtedness.
Cash position
As of May 2, 2009, we had cash and cash equivalents of $206.7 million, and substantially all of
such cash equivalents consisted of U.S. Treasury Securities.
The current distress in the financial markets has resulted in extreme volatility in security prices
and has had a negative impact on credit availability, and there can be no assurance that our
liquidity will not be affected by changes in the financial markets and the global economy or that
our capital resources will at all times be sufficient to satisfy our liquidity needs. Although we
believe that our existing cash will provide us with sufficient liquidity through the current credit
crisis, tightening of the credit markets could make it more difficult for us to access funds,
refinance our existing indebtedness and enter into agreements for new indebtedness.
We have significant amounts of cash and cash equivalents at financial institutions that are in
excess of federally insured limits. With the current financial environment and the instability of
financial institutions, we cannot be assured that we will not experience losses on our deposits.
22
We anticipate that cash generated from operations will be sufficient to meet our future working
capital requirements, new store expenditures, and debt service requirements as they become due.
However, our ability to fund future operating expenses and capital expenditures and our ability to
make scheduled payments of interest on, to pay principal on, or refinance indebtedness and to
satisfy any other present or future debt obligations will depend on future operating performance.
Our future operating performance and liquidity may also be adversely affected by general economic,
financial, and other factors beyond the Companys control, including those disclosed in Risk
Factors in our Annual Report on Form 10-K for the year ended January 31, 2009.
Critical Accounting Policies and Estimates
Our Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with
U.S. generally accepted accounting principles. Preparation of these statements requires management
to make judgments and estimates. Some accounting policies have a significant impact on amounts
reported in these financial statements. A summary of significant accounting policies and a
description of accounting policies that are considered critical may be found in our Fiscal 2008
Annual Report on Form 10-K, filed on April 28, 2009, in the Notes to the Consolidated Financial
Statements, Note 2, and the Critical Accounting Policies and Estimates section contained in the
Managements Discussion and Analysis of Financial Condition and Results of Operations therein.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 157, Fair Value Measurements. The Statement establishes a
framework for measuring fair value in generally accepted accounting principles, and expands
disclosure about fair value measurements. This statement does not require any new fair value
measurement and applies to financial statements issued for fiscal years beginning after November
15, 2007 with early application encouraged. Certain provisions of the statement were effective for
us on February 3, 2008, while the effective date of other provisions relating to nonfinancial
assets and liabilities were effective for us as of February 1, 2009. Our adoption of SFAS No. 157
on February 1, 2009 related to nonfinancial assets and nonfinancial liabilities did not have a
material impact on our financial position, results of operations or cash flows.
During April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the
Useful Life of Intangible Assets. This FSP, which applies to intangible assets accounted for
pursuant to SFAS No. 142 Goodwill and Other Intangible Assets, provides guidance for the
development of renewal or extension assumptions used to determine the useful life of an intangible
asset. The Company must adopt the FSP for its fiscal year beginning February 1, 2009. We adopted
this Statement on February 1, 2009 which did not have an impact on the Companys financial
position, results of operations or cash flows.
During June 2008, the Emerging Issues Task Force issued EITF 08-3, Accounting by Lessees for
Nonrefundable Maintenance Deposits. Issue 08-3 requires lessees to account for nonrefundable
maintenance deposits as deposits if it is probable that maintenance activities will occur and the
deposit is realizable. Amounts on deposit that are not probable of being used to fund future
maintenance activities should be charged to expense. Issue 08-3 is effective for fiscal years
beginning after December 15, 2008. We adopted this Statement on February 1, 2009 which did not have
an impact on the Companys financial position, results of operations or cash flows.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities an Amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 seeks to
improve financial reporting for derivative instruments and hedging activities by requiring enhanced
disclosures regarding their impact on financial position, financial performance and cash flows. To
achieve this increased transparency, SFAS No. 161 requires (1) disclosure of the fair value of
derivative instruments and gains and losses in a tabular format; (2) disclosure of derivative
features that are credit
risk-related; and (3) cross-referencing within the footnotes. SFAS No. 161 is effective
prospectively for financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application permitted. See Note 6 to the Unaudited Condensed
Consolidated Financial Statements for further discussion and disclosure.
23
In October 2008, the EITF issued EITF No. 08-6 which addressed the potential effect of FASB
Statement No. 141R, Business Combinations and SFAS No. 160 Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51 on equity-method accounting under
APB Opinion No. 18, The Equity Method Accounting for Investments in Common Stock. The consensus
of the EITF will not require us to perform a separate impairment test on the underlying assets of
our investment in Claires Nippon. However, we would be required to recognize its proportionate
share of impairment charges recognized by Claires Nippon. We are also required to perform an
overall other than temporary impairment test of our investment in accordance with APB No. 18. EITF
is effective for fiscal years beginning on or after December 15, 2008 and interim periods within
those fiscal years and is to be applied on a prospective basis. We adopted this Statement on
February 1, 2009 which did not have an impact on the Companys financial position, results of
operations or cash flows.
In January 2009, the FASB released Staff Position SFAS No. 107-1 and Accounting Principles Board
(APB) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (SFAS
107-1 and APB 28-1). This FSP amends FASB Statement No. 107 Disclosures about Fair Values of
Financial Instruments to require disclosures about fair value of financial instruments in interim
financial statements as well as in annual financial statements. APB 28-1 also amends APB Opinion
No. 28, Interim Financial Reporting, to require those disclosures in all interim financial
statements. This standard is effective for interim periods ending after June 15, 2009, but early
adoption is permitted for interim periods ending after March 15, 2009. We plan to adopt SFAS 107-1
and APB 28-1 and provide the additional disclosure requirements beginning with the second quarter
interim period ending on August 1, 2009.
In April 2009, the FASB issued FSP No. 115-2 and FAS 124-2. Recognition and Presentation of
Other-Than-Temporary Impairments. This FSB amends the other-than-temporary impairment guidance in
U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation
and disclosure of other-than-temporary impairments on debt and equity securities in the financial
statements. This FSP does not amend existing recognition and measurement guidance related to
other-than-temporary impairments of equity securities. This FSP is effective July 1, 2009 and is
not expected to have a material impact on our financial position, results of operations or cash
flows.
In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly. This FSP provides additional guidance for estimating fair value in
accordance with FASB No. 157 when the volume and level of activity for the asset or liability have
significantly decreased and also includes guidance on identifying circumstances that indicate a
transaction is not orderly. This FSP emphasizes that even if there has been a significant decrease
in the volume and level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same. Fair value is the
price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction (that is, not a forced liquidation or distressed sale) between market participants at
the measurement date under current market conditions. This FSP is effective for interim and annual
periods ending after June 15, 2009 and is not expected to have a material impact on our financial
position, results of operations or cash flows.
24
Cautionary Note Regarding Forward-Looking Statements and Risk Factors
We and our representatives may from time to time make written or oral forward-looking statements,
including statements contained in this and other filings with the Securities and Exchange
Commission and in our press releases and reports we issue publicly. All statements which address
operating performance,
events or developments that we expect or anticipate will occur in the future, including statements
relating to our future financial performance, business strategy, planned capital expenditures,
ability to service our debt, and new store openings for future periods, are forward-looking
statements. The forward-looking statements are and will be based on managements then current
views and assumptions regarding future events and operating performance, and we assume no
obligation to update any forward-looking statement. Forward-looking statements involve known or
unknown risks, uncertainties and other factors, including changes in estimates and judgments
discussed under Critical Accounting Policies and Estimates which may cause our actual results,
performance or achievements, or industry results to be materially different from any future
results, performance or achievements expressed or implied by such forward-looking statements. The
forward-looking statements may use the words expect, anticipate, plan, intend, project,
may, believe, forecasts and similar expressions. Some of these risks, uncertainties and
other factors are as follows: our level of indebtedness; general economic conditions; changes in
consumer preferences and consumer spending; competition; general political and social conditions
such as war, political unrest and terrorism; natural disasters or severe weather events; currency
fluctuations and exchange rate adjustments; uncertainties generally associated with the specialty
retailing business; disruptions in our supply of inventory; inability to increase same store sales;
inability to renew, replace or enter into new store leases on favorable terms; significant
increases in our merchandise markdowns; inability to grow our store base in Europe; inability to
design and implement new information systems; delays in anticipated store openings or renovations;
changes in applicable laws, rules and regulations, including changes in federal, state or local
regulations governing the sale of our products, particularly regulations relating to the content in
our products, and employment laws relating to overtime pay, tax laws and import laws; product
recalls; loss of key members of management; increases in the cost of labor; labor disputes;
unwillingness of vendors and service providers to supply goods or services pursuant to historical
customary credit arrangements; increases in the cost of borrowings; unavailability of additional
debt or equity capital; and the impact of our substantial indebtedness on our operating income and
our ability to grow. The Company undertakes no obligation to update or revise any forward-looking
statements to reflect subsequent events or circumstances. In addition, we typically earn a
disproportionate share of our operating income in the fourth quarter due to seasonal buying
patterns, which are difficult to forecast with certainty. Additional discussion of these and other
risks and uncertainties is contained elsewhere in this Item 2, in Item 3, Quantitative and
Qualitative Disclosures About Market Risk and in our Form 10-K for Fiscal 2008 under Statement
Regarding Forward-Looking Disclosures and Risk Factors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Cash and cash equivalents
We have significant amounts of cash and cash equivalents at financial institutions that are in
excess of federally insured limits. With the current financial environment and the instability of
financial institutions, we cannot be assured that we will not experience losses on our deposits. We
mitigate this risk by investing in two money market funds that are invested exclusively in U.S.
Treasury securities and limiting the cash balance in any one bank account. As of May 2, 2009,
approximately 58% of cash equivalents were maintained in two money market funds that were invested
exclusively in U.S. Treasury securities.
Foreign Currency
We are exposed to market risk from foreign currency exchange rate fluctuations on the U.S. dollar
value of foreign currency denominated transactions and our investment in foreign subsidiaries. We
manage this exposure to market risk through our regular operating and financing activities, and
from time to time, the use of foreign currency options. Exposure to market risk for changes in
foreign exchange rates relates primarily to foreign operations buying, selling, and financing in
currencies other than local currencies and to the carrying value of net investments in foreign
subsidiaries. At May 2, 2009, we maintained no foreign currency options. We do not generally hedge
the translation exposure related to our net investment in foreign subsidiaries. Included in
comprehensive loss are $4.6 million and $6.2 million, net
of tax, reflecting the unrealized gain on foreign currency translation during the three months
ended May 2, 2009 and May 3, 2008, respectively. Based on the extent of our foreign operations in
Fiscal 2009, the potential gain or loss due to a 10% adverse change on foreign currency exchange
rates could be significant to our consolidated operations.
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Certain of our subsidiaries make significant U.S. dollar purchases from Asian suppliers
particularly in China. In July 2005, China revalued its currency 2.1%, changing the fixed exchange
rate from 8.28 to 8.11 Chinese Yuan to the U.S. Dollar. Since July 2005, the Chinese Yuan increased
by 18.7% as compared to the U.S. Dollar, based on continued pressure from the international
community. If China adjusts the exchange rate further or allows the value to float, we may
experience increases in our cost of merchandise imported from China, which could have a significant
effect on our results of operations.
Interest Rates
Between July 20, 2007 and August 3, 2007, we entered into three interest rate swap agreements (the
Swaps) to manage exposure to fluctuations in interest rates. The Swaps represent contracts to
exchange floating rate for fixed interest payments periodically over the lives of the Swaps without
exchange of the underlying notional amount. At May 2, 2009, the Swaps cover an aggregate notional
amount of $435.0 million of the $1.42 billion outstanding principal balance of the senior secured
term loan facility. The fixed rates of the three swap agreements range from 4.96% to 5.25% and each
swap expires on June 30, 2010. The Swaps have been designated as cash flow hedges. At May 2, 2009
and January 31, 2009, the estimated fair value of the Swaps were liabilities of approximately $19.0
million and $19.7 million, respectively, and were recorded, net of tax, as a component in other
comprehensive income (loss).
At May 2, 2009, we had fixed rate debt of $969 million and variable rate debt of $1.62 billion.
Based on our variable rate debt balance (less $435 million of interest rate swaps) as of January
31, 2009, a 1% change in interest rates would increase or decrease our annual interest expense by
approximately $11.8 million, net.
General Market Risk
Our competitors include department stores, specialty stores, mass merchandisers, discount stores
and other retail and internet channels. Our operations are impacted by consumer spending levels,
which are affected by general economic conditions, consumer confidence, employment levels,
availability of consumer credit and interest rates on credit, consumer debt levels, consumption of
consumer staples including food and energy, consumption of other goods, adverse weather conditions
and other factors over which the company has little or no control. The increase in costs of such
staple items has reduced the amount of discretionary funds that consumers are willing and able to
spend for other goods, including our merchandise. Should there be continued volatility in food and
energy costs, sustained recession in the U.S. and Europe, rising unemployment and continued
declines in discretionary income, our revenue and margins could be significantly affected in the
future. We can not predict whether, when or the manner in which the economic conditions described
above will change.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were effective as of the end of the period covered by this
Quarterly Report to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified in the Securities
Exchange Commissions rules and forms, and that such information is accumulated and communicated to
our management, including each of such officers as appropriate to allow timely decisions regarding
required disclosure.
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Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting have been made during the quarter ended
May 2, 2009, that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are, from time to time, involved in routine litigation incidental to the conduct of our
business, including litigation instituted by persons injured upon premises under our control,
litigation regarding the merchandise that we sell, including product and safety concerns regarding
metal content in our merchandise, litigation with respect to various employment matters, including
wage and hour litigation, litigation with present and former employees, and litigation regarding
intellectual property rights. Although litigation is routine and incidental to the conduct of our
business, like any business of our size and employing a significant number of employees, such
litigation can result in large monetary awards when judges, juries or other finders of facts do not
agree with managements evaluation of possible liability or outcome of litigation. Accordingly,
the consequences of these matters cannot be finally determined by management. However, in the
opinion of management, we believe that current pending litigation will not have a material adverse
effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes in our risk factors disclosed in our Annual Report on Form 10-K
for the year ended January 31, 2009.
Item 6. Exhibits
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31.1 |
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Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a). |
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31.2 |
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Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a). |
|
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32.1 |
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Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
|
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32.2 |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
Items 2, 3, 4 and 5 of Part II are not applicable and have been omitted.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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CLAIRES STORES, INC.
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June 12, 2009 |
By: |
/s/ Eugene S. Kahn
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Eugene S. Kahn, Chief Executive Officer |
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(principal executive officer) |
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June 12, 2009 |
By: |
/s/ J. Per Brodin
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J. Per Brodin, Senior Vice President and Chief |
|
|
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Financial Officer (principal financial and
accounting officer) |
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INDEX TO EXHIBITS
|
|
|
|
|
EXHIBIT NO. |
|
DESCRIPTION |
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
|
|
|
|
|
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31.2 |
|
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Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a). |
|
|
|
|
|
|
32.1 |
|
|
Certification of Chief Executive Officer pursuant to 18 USC Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.2 |
|
|
Certification of Chief Financial Officer pursuant to 18 USC Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
29