0000798955 2010-01-30 0000798955 2011-09-07 0000798955 2011-07-30 0000798955 2011-01-29 0000798955 2010-07-31 0000798955 2011-05-01 2011-07-30 0000798955 2010-05-02 2010-07-31 0000798955 2010-01-31 2010-07-31 0000798955 2011-01-30 2011-07-30 iso4217:USD xbrli:shares xbrli:shares iso4217:USD 2. ACCRUED STORE CLOSURE AND LEASE EXIT COSTS When stores under long-term leases close, the Company records a liability for the future minimum lease payments and related ancillary costs, net of estimated sublease income and discounted using a risk-adjusted rate of interest. This liability is recorded at the time the store is closed and at the end of each quarter, the Company adjusts the estimated liability balance based on actual sublease income and lease settlement agreements that occurred during the period. Accrued store closure and lease exit costs also include costs related to closing the stores and relocating and terminating employees. Additional charges or recoveries related to the planned disposition of stores may be incurred as a result of changes to management's current estimates and assumptions. The timing of future transactions and charges related to these store closures are subject to significant uncertainty, including the variability in future vacancy periods, sublease income or negotiations with landlords regarding buy-out payments on leases.   Following is a year-to-date summary of the accrued store closure and lease exit costs as of the six months ended July 30, 2011, the 12 months ended January 29, 2011 and the six months ended July 31, 2010, respectively:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr><td width="65%"> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" nowrap="nowrap">(In thousands)</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 30, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">January 29, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Beginning Balance</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,575</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,220</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,220</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Lease exit costs, net of estimated sublease income</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">670</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,245</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,835</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Severance and closure costs</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">455</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">416</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">257</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Payments for leases and settlements</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(2,892</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(7,827</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(5,562</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Payments for severance and closure costs</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(541</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(479</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(375</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Ending Balance1 </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,267</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,575</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,375</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td width="4%"> </td> <td valign="top" width="3%" align="left">1.</td> <td valign="top" align="left">At July 30, 2011, January 29, 2011 and July 31, 2010, the reserve for store closures includes $0.9 million, $1.6 million and $1.9 million, respectively, for stores that are classified within continuing operations and includes $3.4 million, $5.0 million and $5.5 million, respectively, for stores that are classified within discontinued operations.</td></tr></table> 262231000 131122000 275250000 138932000 886000 885000 899000 7. DISTRIBUTION CENTER SALE-LEASEBACK OBLIGATIONS The Company's distribution center sale-leaseback obligations as of July 30, 2011, January 29, 2011, and July 31, 2010 are summarized as follows:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="70%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom" nowrap="nowrap"> (In thousands)</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 30, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">January 29, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Obligations under sale and leaseback:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> California distribution centers</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">61,155</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">61,462</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">61,773</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Virginia distribution center</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">51,135</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">51,270</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">51,403</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total distribution center sale-leaseback obligations</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">112,290</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">112,732</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">113,176</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Less current portion</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(899</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(885</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(886</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Long-term distribution center sale-leaseback obligations</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">111,391</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">111,847</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">112,290</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table> The Company's distribution center lease obligations include financing obligations related to the sale-leaseback of its distribution centers in Stockton, California and Windsor, Virginia. The Company has accounted for the sale-leaseback transactions as financings whereby the net book value of the assets remain on the Company's condensed consolidated balance sheet. The Company also recorded a financing obligation, which is being amortized over the period of the leases (including option periods) and approximates the discounted value of minimum lease payments under the leases. The monthly lease payments are accounted for as principal and interest payments on the recorded obligations. For further details on the Company's obligations under the sale and leaseback of the distribution centers, see Note 7 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2011. 112290000 111847000 111391000 433000 442000 false --01-29 Q2 2011 2011-07-30 10-Q 0000798955 22321913 Non-accelerated Filer COST PLUS INC/CA/

56612000

55822000

66236000

7375000

6575000

4267000

11668000

17516000

13786000

172000000

172768000

174294000

366523000

348649000

359161000

209241000

196964000

215159000

2652000

-62000

-388000

-710000

6469000

6029000

5613000

2602000

2911000

2691000

2803000

309000

112000

0.01

67500000

22087113

22260663

22087113

22260663

221000

223000

6. LONG-TERM DEBT AND REVOLVING LINE OF CREDIT On January 3, 2011, the Company entered into a secured five-year credit agreement with a group of banks and Bank of America, N.A. as the administrative agent, collateral agent, swing line lender, and letter of credit issuer (the "Credit Agreement"). The Credit Agreement amended and extended the previous $200.0 million Credit Agreement dated as of June 25, 2007 which was due to expire on June 25, 2012. The Credit Agreement allows for cash borrowings under a revolving loan and letters of credit under a secured asset-based credit facility of up to $190.0 million as well as a $10.0 million term loan, which was drawn on the effective date. The amount available for borrowing at any time is limited by a stated percentage of the aggregate amount of the liquidated value of eligible inventory and the face amount of eligible credit card receivables. The Credit Agreement includes three options to increase the size of the asset-based credit facility by up to $50.0 million in the aggregate. All borrowings and letters of credit under the Credit Agreement are collateralized by all assets presently owned or hereafter-acquired by the Company. Interest is paid in arrears monthly, quarterly, or over the applicable interest period as selected by the Company in the Revolving Loan Notice, with the entire balance payable on January 3, 2016. Borrowings pursuant to the asset-based credit facility bear interest, at the Company's election, at a rate equal to either (i) the higher of Bank of America's prime rate or the federal funds effective rate plus an applicable margin; or (ii) the LIBOR rate plus an applicable margin. The applicable margin is based on the Company's Average Daily Availability (as defined in the Credit Agreement). In addition, the Company pays a commitment fee on the unused portion of the amount available for borrowing as described in the Credit Agreement. The Credit Agreement includes limitations on the ability of the Company to, among other things, incur debt, grant liens, make investments, enter into mergers and acquisitions, pay dividends, change its business, enter into transactions with affiliates, and dispose of assets. The events of default under the Credit Agreement include, among others, payment defaults, cross defaults with certain other indebtedness, breaches of covenants, loss of collateral, judgments, changes in control, and bankruptcy events. In the event of a default, the Credit Agreement requires the Company to pay incremental interest at the rate of 2.0% and the lenders may, among other remedies, foreclose on the security (which could include the sale of the Company's inventory), eliminate their commitments to make credit available, declare due all unpaid principal amounts outstanding, and require cash collateral for any letter of credit obligations. In addition, in the event of a default or if the Company's Availability (as defined in the Credit Agreement) is not equal to the greater of either $20.0 million or 15% of the loan cap under the asset-based credit facility, the Company will be subject to additional restrictions, including specific restrictions with respect to its cash management procedures. The Company uses the borrowings under the Credit Agreement for working capital, issuance of commercial and standby letters of credit, capital expenditures, and other general corporate purposes. As of July 30, 2011, the Company was in compliance with its loan covenant requirements, had $45.2 million in borrowings (including the $10.0 million term loan) and $7.7 million in issued and outstanding letters of credit, and had remaining credit available under the Credit Agreement of $82.4 million. Based on current projections, the Company expects to be in compliance throughout fiscal 2011. The Company's business is highly seasonal, reflecting the general pattern associated with the retail industry of peak sales and earnings during the fourth quarter holiday season, therefore borrowings under the line of credit often peak early in the fourth quarter of each fiscal year. The borrowing base, based on inventory and accounts receivable value less certain reserves, at July 30, 2011, January 29, 2011 and July 31, 2010 consisted of the following (in millions):   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="70%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 30, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">January 29, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Account receivable availability</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6.8</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6.5</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7.5</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Inventory availability</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">137.2</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">132.9</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">135.9</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Less: reserves</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(8.7</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(10.4</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(11.0</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Total borrowing base</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">135.3</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">129.0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">132.4</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td height="16" colspan="13"> </td></tr> <tr><td valign="top" colspan="12">The aggregate borrowing base is reduced by the following obligations:</td> <td valign="top">  </td></tr> <tr><td height="16"> </td> <td height="16" colspan="4"> </td> <td height="16" colspan="4"> </td> <td height="16" colspan="4"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Ending loan balance</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">45.2</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">25.4</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">68.0</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Outstanding letters of credit</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">7.7</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">10.8</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">9.9</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total obligations</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">52.9</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">36.2</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">77.9</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top" colspan="12"> The availability at July 30, 2011, January 29, 2011 and July 31, 2010 was:  </td> <td valign="top">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total borrowing base</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">      135.3</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">    </td> <td valign="bottom">$</td> <td valign="bottom" align="right">            129.0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">    </td> <td valign="bottom">$</td> <td valign="bottom" align="right">       132.4</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Less: obligations</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(52.9</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">    </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(36.2</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom">    </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(77.9</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">    </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">    </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Total availability</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">82.4</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">    </td> <td valign="bottom">$</td> <td valign="bottom" align="right">92.8</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">    </td> <td valign="bottom">$</td> <td valign="bottom" align="right">54.5</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">    </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom">    </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>

12394000

9952000

4. SHARE-BASED COMPENSATION Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company had share-based compensation expense of $0.6 million for the three months ended July 30, 2011 compared to $0.3 million for the three months ended July 31, 2010. Share-based compensation expense for the six months ended July 30, 2011 and the six months ended July 31, 2010 was $1.2 million and $0.7 million, respectively. Share-based compensation expense is recorded as a component of selling, general and administrative expenses. As of July 30, 2011, there was $4.2 million of total unrecognized compensation cost related to unvested share-based compensation that is expected to be recognized over a weighted-average period of approximately 3.0 years. No stock options to purchase shares of the Company's common stock were granted during the second quarter of fiscal 2011 and during the second quarter of fiscal 2010, the Company granted options to purchase 821,500 shares of common stock to its employees and non-employee directors. The weighted-average fair value per option granted was $7.13 during the six-month period ended July 30, 2011, and $3.38 during the three-month and six-month periods ended July 31, 2010. The following table presents the weighted-average assumptions used in the Black-Scholes-Merton option pricing model to value the stock options granted during the three-month and six-month periods ended July 31, 2010 and the six-month period ended July 30, 2011:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="67%"> </td> <td valign="bottom" width="9%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="9%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="9%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Six Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 31, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 30, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 31, 2010</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Expected dividend rate</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0 </td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0 </td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0 </td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr><td valign="top"> Expected volatility</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">94.1</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">90.0</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">94.1</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Risk-free interest rate</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2.0</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2.0</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2.0</td> <td valign="bottom" nowrap="nowrap">% </td></tr> <tr><td valign="top"> Expected term (years)</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.5</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.5</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.5</td> <td valign="bottom" nowrap="nowrap">  </td></tr></table>

3. DISCONTINUED OPERATIONS During the third quarter of fiscal 2010, the Company closed one store in Wellington, Florida. Therefore, the condensed consolidated statements of operations for prior periods have been revised to present certain components as discontinued operations. The prior year results for this store are classified as discontinued operations on the Company's condensed consolidated statements of operations. The loss from discontinued operations also includes the costs associated with stores that closed in prior years that have not yet settled as the estimated lease exit costs are recorded at the time a store is closed and then subsequently adjusted based on actual sublease income and lease settlement agreements. These costs were approximately $0.6 million for the six-month period ended July 30, 2011 and $0.4 million for six-month period ended July 31, 2010. The recognition of the costs associated with closing the stores requires the Company to make judgments and estimates regarding the nature, timing, and amount of costs, including estimated lease exit costs net of estimated sublease income, employee severance and various other costs related to the closure of stores. At the end of each quarter, the Company evaluates the remaining accrual balance. Additional charges or recoveries related to the planned disposition of stores may be incurred as a result of changes to management's current estimates and assumptions. The timing of future transactions and charges related to these store closures are subject to significant uncertainty, including the variability in future vacancy periods, and sublease income or negotiations with landlords regarding buy-out payments on leases. Results from discontinued operations were as follows:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="63%"> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="6%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center">Six Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 30, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 31, 2010</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 30, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">July 31, 2010</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom">(In thousands)</td> <td valign="bottom">  </td> <td valign="bottom" colspan="6"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="6"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Store sales</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">568</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,145</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Costs and expenses:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Cost of store sales and occupancy</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">429</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">877</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Operating and administrative expenses</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">205</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">49</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">418</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Lease exit costs, net of estimated sublease income</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">262</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">298</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">566</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">440</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr> <tr><td valign="top"> Loss from discontinued operations, net of tax</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(284</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(364</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(615</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(590</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom">  </td> <td> </td></tr></table>

-0.78

-0.32

-0.52

-0.36

-0.78

-0.32

-0.52

-0.36

5. RECONCILIATION OF BASIC SHARES TO DILUTED SHARES Basic earnings (loss) per share ("EPS") is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Diluted EPS reflects the potential dilution that could occur if options to purchase common stock were exercised into common stock. The following is a reconciliation of the weighted-average number of shares (in thousands) used in the Company's basic and diluted earnings per share computations:   <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="52%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="10" align="center">Three Months Ended</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="10" align="center">Six Months Ended</td> <td valign="bottom"> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Basic EPS</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Effect of Dilutive Stock Options (treasury stock method)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Diluted EPS</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Basic EPS</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Effect of Dilutive Stock Options (treasury stock method)</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">Diluted EPS</td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> July 30, 2011</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" colspan="9"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="9"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Shares</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22,223</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22,223</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22,172</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22,172</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Loss</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.36</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.00</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.36</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.52</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.00</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.52</td> <td valign="bottom" nowrap="nowrap">) </td></tr> <tr><td valign="top"> July 31, 2010</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Shares</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22,087</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22,087</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22,087</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">22,087</td> <td valign="bottom" nowrap="nowrap">  </td></tr> <tr><td valign="top"> Loss</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.32</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.00</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.32</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.78</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.00</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.78</td> <td valign="bottom" nowrap="nowrap">) </td></tr></table>   Certain options to purchase common stock were outstanding but were not included in the computation of diluted earnings per share because the effect would be anti-dilutive. For the three-month and six-month periods ended July 30, 2011 and July 31, 2010, there were 4,129,367 and 3,764,365 anti-dilutive options, respectively.

-87000

-262000

118201000

60673000

122409000

59017000

-16704000

-6619000

-10797000

-7762000

-16354000

-6427000

-11259000

-8139000

-10913000

-3708000

-4955000

-4916000

-0.75

-0.30

-0.49

-0.35

-0.75

-0.30

-0.49

-0.35

-590000

-364000

-615000

-284000

-0.03

-0.02

-0.03

-0.01

-0.03

-0.02

-0.03

-0.01

8. INCOME TAXES The Company's effective tax rate from continuing operations was a benefit of 4.5%, before discrete items, in the second quarter of fiscal 2011 compared to a provision of 1.6%, before discrete items, in the second quarter of fiscal 2010. The effective tax rate increase is due to an increase in state tax expense as a result of increased projected earnings. Income tax expense or benefit reflects the amount of taxes payable or refundable for the current year, the impact of deferred tax liabilities and deferred tax assets, accrued interest on tax deficiencies and refunds and accrued penalties on tax deficiencies. Deferred income taxes represent future net tax effects resulting from temporary differences between the financial statement and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded against deferred tax assets if there is doubt about the realization of such assets in the future. The Company has recorded a full valuation allowance against its deferred tax assets as of July 30, 2011 and July 31, 2010. At July 30, 2011, the Company had $0.4 million in unrecognized tax benefits and at January 29, 2011, the Company had $1.4 million in unrecognized tax benefits; the recognition of which would both have an impact of $282,000 on the Company's income tax provision. At the end of the second quarter of fiscal 2011, it is reasonably possible that the total amounts of unrecognized tax benefits could decrease by $439,000 within the next 12 months due to the expiration of the statute of limitations. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. At July 30, 2011 and at July 31, 2010, the Company had accrued $189,000 and $196,000, respectively, for the potential payment of interest and penalties. As of July 30, 2011, the Company is subject to U.S. federal income tax examinations for tax years 2004 and forward, and is subject to state and local tax examinations for tax years 2003 and forward.

-12878000

743000

350000

192000

-462000

-377000

-9550000

10420000

13132000

-1185000

11977000

9493000

-1893000

7564000

-6057000

-8334000

5441000

2719000

6304000

3223000

5530000

6201000

189180000

181853000

191346000

366523000

348649000

359161000

96226000

126986000

150339000

25400000

45200000

68000000

18632000

19194000

-1647000

-2928000

-16676000

-16154000

-17294000

-6983000

-11412000

-8046000

1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared from the records of Cost Plus, Inc. ("Cost Plus World Market" or "the Company") and, in the opinion of management, include all adjustments that are normal and recurring in nature necessary to present fairly the Company's financial position at July 30, 2011 and July 31, 2010, and the interim results of operations for the three months and six months ended July 30, 2011 and July 31, 2010, and cash flows for the six months ended July 30, 2011 and July 31, 2010. The balance sheet at January 29, 2011, presented herein, has been derived from the audited financial statements of the Company for the fiscal year then ended. The condensed consolidated statements of operations for the three-month and six-month periods ended July 31, 2010 have been revised to present certain components as discontinued operations (see Note 3). Unless otherwise indicated, information presented in the notes to the financial statements relates only to the Company's continuing operations. Accounting policies followed by the Company are described in Note 1 to the audited consolidated financial statements for the fiscal year ended January 29, 2011 in the Company's Annual Report on Form 10-K. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted for purposes of presenting the interim condensed consolidated financial statements. Such statements should be read in conjunction with the audited consolidated financial statements, including notes thereto, for the fiscal year ended January 29, 2011. Prior to achieving net income in fiscal 2010, we incurred net losses in each annual period since fiscal 2006. As of July 30, 2011, we had an accumulated deficit of $106.0 million. For the six months ended July 30, 2011, and for fiscal 2009 and fiscal 2008, we did not generate positive cash flows from operating activities. We are dependent upon our asset-based credit facility to fund operations and seasonal inventory purchases throughout the year. Access to our asset-based credit facility is dependent upon meeting our debt covenants and not exceeding the borrowing limit of the asset-based credit facility. There can be no assurance that we will achieve or sustain positive cash flows from operations or profitability. If we are unable to maintain adequate liquidity, it could have a material adverse affect on our financial condition and future operations may need to be scaled back or discontinued. However, based on our current business plan and revenue projections, we believe that our existing cash balance, our anticipated cash flows from operations and our available asset-based credit facility will be sufficient to meet our working capital and operating resource expenditure requirements for the next 12 months and the foreseeable future. The results of operations for the three-month and six-month periods ended July 30, 2011, presented herein, are not indicative of the results to be expected for the full year because of, among other things, seasonal factors in the retail business.

17150000

12420000

21010000

3858000

6007000

5598000

19685000

20788000

19951000

26093000

25422000

23337000

69000

1691000

2979000

0.01

5000000

106000

326000

95256000

162160000

44000

51000

153424000

145678000

138404000

75756000

142360000

435000

421000

-114776000

-94624000

-106036000

380432000

191795000

397659000

197949000

126356000

64443000

127752000

64643000

696000

1200000

57445000

78365000

68481000

22087000

22172000

22223000

22087000

22172000

22223000