10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2013

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-11735

99 CENTS ONLY STORES LLC

(Exact Name of Registrant as Specified in Its Charter)

California (State or Other Jurisdiction of Incorporation or Organization)	95-2411605 (I.R.S. Employer Identification No.)
4000 Union Pacific Avenue, City of Commerce, California (Address of Principal Executive Offices)	90023 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (323) 980-8145

Former name, address and fiscal year, if changed since last report

99¢ ONLY STORES

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 the 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes    x    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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   o    No   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

As of November 5, 2013, there were 100 units outstanding of the registrant’s common units, none of which are publicly traded.

99¢ ONLY STORES

Form 10-Q

Table of Contents

		Page
	Part I - Financial Information
Item 1.	Financial Statements	4
	Consolidated Balance Sheets as of September 28, 2013 (unaudited) and March 30, 2013	4
	Consolidated Statements of Comprehensive Income (Loss) for the second quarter and first half ended September 28, 2013 (unaudited) and September 29, 2012 (unaudited)	5
	Consolidated Statements of Cash Flows for the first half ended September 28, 2013 (unaudited) and September 29, 2012 (unaudited)	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
	Part II — Other Information
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
	Signatures	48

2

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.  The words “expect,” “estimate,” “anticipate,” “predict,” “will,” “project,” “plan,” “believe” and other similar expressions and variations thereof are intended to identify forward-looking statements.  Such statements appear in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company and its directors or officers with respect to, among other things, (a) trends affecting the financial condition or results of operations of the Company, and (b) the business and growth strategies of the Company (including the Company’s store opening growth rate), that are not historical in nature.  The term the “Company” refers to 99¢ Only Stores and its consolidated subsidiaries prior to the conversion to a California limited liability company effective October 18, 2013 and to 99 Cents Only Stores LLC and its consolidated subsidiaries on or after such conversion.  Readers are cautioned not to put undue reliance on such forward-looking statements.  Such forward-looking statements are and will be based on the Company’s then-current expectations, estimates and assumptions regarding future events and are applicable only as of the date of such statements.  The Company may not realize its expectations and its estimates and assumptions may not prove correct.  In addition, such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected in this Report, for the reasons, among others, discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections.  The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.  Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission or posts on the Company’s website, including the Company’s Annual Report on Form 10-K containing the Company’s most recent audited financial statements for the fiscal year ended March 30, 2013.

3

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

99¢ ONLY STORES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	September 28,2013			March 30,2013
	(Unaudited)
ASSETS
Current Assets:
Cash	$	77,378		$	45,476
Accounts receivable, net of allowance for doubtful accounts of $217 and $84 at September 28, 2013 and March 30, 2013, respectively	1,894			1,851
Income taxes receivable	3,775			3,969
Deferred income taxes	35,377			33,139
Inventories, net	197,464			201,601
Assets held for sale	2,106			2,106
Other	18,276			16,370
Total current assets	336,270			304,512
Property and equipment, net	481,476			476,051
Deferred financing costs, net	19,568			21,016
Intangible assets, net	468,322			471,359
Goodwill	479,745			479,745
Deposits and other assets	5,057			4,554
Total assets	$	1,790,438		$	1,757,237
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	73,280		$	50,011
Payroll and payroll-related	24,081			17,096
Sales tax	6,353			7,200
Other accrued expenses	40,391			29,695
Workers’ compensation	37,215			39,498
Current portion of long-term debt	3,216			8,567
Current portion of capital lease obligation	86			83
Total current liabilities	184,622			152,150
Long-term debt, net of current portion	751,234			749,758
Unfavorable lease commitments, net	12,922			14,833
Deferred rent	9,649			4,823
Deferred compensation liability	1,070			1,153
Capital lease obligation, net of current portion	227			271
Long-term deferred income taxes	181,634			186,851
Other liabilities	6,660			8,428
Total liabilities	1,148,018			1,118,267
Commitments and contingencies (Note 11)
Shareholders’ Equity:
Preferred stock, no par value — authorized, 1,000 shares; no shares issued or outstanding	—			—
Common stock $0.01 par value — Class A authorized, 1,000 shares; issued and outstanding, 100 shares and Class B authorized, 1,000 shares; issued and outstanding, 100 shares at September 28, 2013 and March 30, 2013, respectively	—			—
Additional paid-in capital	649,106			654,424
Accumulated deficit	(5,571		)	(14,202		)
Other comprehensive loss	(1,115		)	(1,252		)
Total shareholders’ equity	642,420			638,970
Total liabilities and shareholders’ equity	$	1,790,438		$	1,757,237

The accompanying notes are an integral part of these consolidated financial statements.

4

99¢ ONLY STORES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	For the Second Quarter Ended						For the First Half Ended
	September 28,  2013			September 29, 2012			September 28,  2013			September 29, 2012
Net Sales:
99¢ Only Stores	$	431,553		$	382,073		$	852,489		$	771,029
Bargain Wholesale	12,370			11,290			25,300			23,284
Total sales	443,923			393,363			877,789			794,313
Cost of sales (excluding depreciation and amortization expense shown separately below)	277,118			242,699			543,797			486,601
Gross profit	166,805			150,664			333,992			307,712
Selling, general and administrative expenses:
Operating expenses	138,911			120,362			270,743			239,133
Depreciation	15,685			13,931			31,011			27,683
Amortization of intangible assets	442			442			884			883
Total selling, general and administrative expenses	155,038			134,735			302,638			267,699
Operating income	11,767			15,929			31,354			40,013
Other (income) expense:
Interest income	—			(35		)	(15		)	(259		)
Interest expense	15,174			15,537			29,862			31,114
Loss on extinguishment of debt	—			—			—			16,346
Other	—			3			—			67
Total other expense, net	15,174			15,505			29,847			47,268
(Loss) income before provision for income taxes	(3,407		)	424			1,507			(7,255		)
(Benefit) provision for income taxes	(8,874		)	214			(7,124		)	(2,574		)
Net income (loss)	$	5,467		$	210		$	8,631		$	(4,681	)
Other comprehensive (loss) income, net of tax:
Unrealized holding gains on securities arising during period	—			4			—			4
Unrealized (losses) gains on interest rate cash flow hedge	(332		)	(473		)	137			(1,017		)
Less: reclassification adjustment included in net income	—			—			—			(5		)
Other comprehensive (loss) income, net of tax	(332		)	(469		)	137			(1,018		)
Comprehensive income (loss)	$	5,135		$	(259	)	$	8,768		$	(5,699	)

The accompanying notes are an integral part of these consolidated financial statements.

5

99¢ ONLY STORES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	For the First Half Ended
	September 28, 2013			September 29, 2012
Cash flows from operating activities:
Net income (loss)	$	8,631		$	(4,681	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	31,011			27,683
Amortization of deferred financing costs and accretion of OID	2,212			2,059
Amortization of intangible assets	884			883
Amortization of favorable/unfavorable leases, net	242			91
Loss on extinguishment of debt	—			16,346
Loss on disposal of fixed assets	124			403
(Gain) loss on interest rate hedge	(114		)	665
Deferred income taxes	(7,546		)	—
Stock-based compensation	(5,318		)	1,593
Changes in assets and liabilities associated with operating activities:
Accounts receivable	(43		)	1,586
Inventories	4,137			(11,437		)
Deposits and other assets	(2,492		)	(3,874		)
Accounts payable	18,874			9,047
Accrued expenses	16,834			6,358
Accrued workers’ compensation	(2,283		)	(1,186		)
Income taxes	194			(13,347		)
Deferred rent	4,826			2,362
Other long-term liabilities	(1,780		)	(73		)
Net cash provided by operating activities	68,393			34,478
Cash flows from investing activities:
Purchases of property and equipment	(32,348		)	(19,861		)
Proceeds from sale of property and fixed assets	537			11,549
Purchases of investments	—			(449		)
Proceeds from sale of investments	—			2,470
Net cash used in investing activities	(31,811		)	(6,291		)
Cash flows from financing activities:
Payment of debt	(4,639		)	(2,618		)
Payments of capital lease obligation	(41		)	(38		)
Payment of debt issuance costs	—			(11,230		)
Net cash used in financing activities	(4,680		)	(13,886		)
Net increase in cash	31,902			14,301
Cash - beginning of period	45,476			27,766
Cash - end of period	$	77,378		$	42,067
Supplemental cash flow information:
Income taxes paid	$	228		$	10,772
Interest paid	$	24,639		$	26,125
Non-cash investing activities for purchases of property and equipment	$	(4,395	)	$	(1,679	)

The accompanying notes are an integral part of these consolidated financial statements.

6

99¢ ONLY STORES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Basis of Presentation and Summary of Significant Accounting Policies

Nature of Business

99¢ Only Stores is organized under the laws of the State of California.  Effective October 18, 2013, 99¢ Only Stores converted from a California corporation to a California limited liability company, 99 Cents Only Stores LLC, that is managed by a single member, Parent (as defined below).  The term the “Company” refers to 99¢ Only Stores and its consolidated subsidiaries prior to the Conversion (as defined below) and to 99 Cents Only Stores LLC and its consolidated subsidiaries on or after the Conversion. The Company is an extreme value retailer of primarily consumable and general merchandise with an emphasis on name-brand products.  As of September 28, 2013, the Company operated 329 retail stores with 238 in California, 43 in Texas, 31 in Arizona, and 17 in Nevada.  The Company is also a wholesale distributor of various products.

Merger

On January 13, 2012, the Company was acquired through a merger (the “Merger”) with a subsidiary of Number Holdings, Inc., a Delaware corporation (“Parent”) with the Company surviving.  In connection with the Merger, the Company became a subsidiary of Parent, which is controlled by affiliates of Ares Management LLC and Canada Pension Plan Investment Board, and prior to the Gold-Schiffer Purchase (as described in Notes 9 and 16), certain former members of the Company’s management and their affiliates (collectively, the “Rollover Investors”).  As a result of the Merger, the Company’s common stock was delisted from the New York Stock Exchange and the Company ceased to be operating as a public company.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).  However, certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been omitted or condensed pursuant to the rules and regulations of the Securities and Exchange Commission.  These statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s  Annual Report on Form 10-K for the fiscal year ended March 30, 2013.  In the opinion of the Company’s management, these interim consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the consolidated financial position and results of operations for each of the periods presented.  The results of operations and cash flows for such periods are not necessarily indicative of results to be expected for the full fiscal year ending March 29, 2014 (“fiscal 2014”).

Fiscal Periods

The Company follows a fiscal calendar consisting of four quarters with 91 days, each ending on the Saturday closest to the calendar quarter-end, and a 52-week fiscal year with 364 days, with a 53-week year every five to six years.  Unless otherwise stated, references to years in this Quarterly Report on Form 10-Q relate to fiscal years rather than calendar years.  Fiscal 2014 began on March 31, 2013 and will end on March 29, 2014 and will consist of 52 weeks. The Company’s fiscal year ended March 30, 2013 (“fiscal 2013”) began on April 1, 2012 and ended on March 30, 2013 and consisted of 52 weeks.  The second quarter ended September 28, 2013 (the “second quarter of fiscal 2014”) and second quarter ended September 29, 2012 (the “second quarter of fiscal 2013”) were each comprised of 91 days.  The period ended September 28, 2013 (“first half of fiscal 2014”) and the period ended September 29, 2012 (“first half of fiscal 2013”) were each comprised of 182 days.

Use of Estimates

The preparation of the unaudited consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash

For purposes of reporting cash flows, cash includes cash on hand, cash at the stores and cash in financial institutions.  The majority of payments due from financial institutions for the settlement of debit card and credit card transactions are processed within three business days and therefore are classified as cash.  Cash balances held at financial institutions are generally in excess of federally insured limits.  These accounts are only insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts.  The Company places its temporary cash investments with what it believes to be high credit, quality financial institutions. Under the Company’s cash management system, checks issued but not presented to the bank may result in book cash overdraft balances for accounting purposes.  The Company reclassifies book overdrafts to accounts payable, which are reflected as an operating activity in its unaudited consolidated statements of cash flows. Book overdrafts included in accounts payable were $3.1 million as of September 28, 2013.

7

Allowance for Doubtful Accounts

In connection with its wholesale business, the Company evaluates the collectability of accounts receivable based on a combination of factors.  In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will record an allowance against amounts due and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected.  For all other customers and tenants, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, industry and geographic concentrations, the current business environment and the Company’s historical experiences.

Inventories

Inventories are valued at the lower of cost or market. Inventory cost is established using a methodology that approximates first in, first out, which for store inventories is based on a retail inventory method. Valuation allowances for shrinkage as well as excess and obsolete inventory are also recorded. Shrinkage is estimated as a percentage of sales for the period from the last physical inventory date to the end of the applicable period. Such estimates are based on experience and the most recent physical inventory results. Physical inventories are taken at each of the Company’s retail stores at least once a year by an outside inventory service company. Additional store-level physical inventories are taken by the service companies from time to time based on a particular store’s performance and/or book inventory balance.  The Company performs inventory cycle counts at its warehouses throughout the year.  The Company also performs inventory reviews and analysis on a quarterly basis for both warehouse and store inventory to determine inventory valuation allowances for excess and obsolete inventory.  The Company’s policy is to analyze all items held in inventory that are at least twelve months old and that are not expected to be sold through at the current sales rates over the next twelve months in order to determine what merchandise should be reserved for as excess or obsolete. The valuation allowances for excess and obsolete inventory in many locations (including various warehouses, store backrooms, and sales floors of its stores), require management judgment and estimates that may impact the ending inventory valuation and valuation allowances that may affect the reported gross margin for the period.

In order to obtain inventory at attractive prices, the Company takes advantage of large volume purchases, closeouts and other similar purchase opportunities but within the above stipulated policy.  As such, the Company’s inventory fluctuates from period to period and the inventory balances vary based on the timing and availability of such opportunities.

Property and Equipment

Property and equipment are carried at cost and are depreciated or amortized on a straight-line basis over the following useful lives:

Owned buildings and improvements	Lesser of 30 years or the estimated useful life of the improvement
Leasehold improvements	Lesser of the estimated useful life of the improvement or remaining lease term
Fixtures and equipment	5 years
Transportation equipment	3-5 years
Information technology systems	For major corporate systems, estimated useful life up to 7 years; for functional stand alone systems, estimated useful life up to 5 years

The Company’s policy is to capitalize expenditures that materially increase asset lives and expense ordinary repairs and maintenance as incurred.

Long-Lived Assets

The Company assesses the impairment of long-lived assets quarterly or when events or changes in circumstances indicate that the carrying value may not be recoverable.  Recoverability is measured by comparing the carrying amount of an asset to expected future net cash flows generated by the asset.  If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, the carrying amount is compared to its fair value and an impairment charge is recognized to the extent of the difference.  Factors that the Company considers important that could individually or in combination trigger an impairment review include the following: (1) significant underperformance relative to expected historical or projected future operating results; (2) significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business; and (3) significant changes in the Company’s business strategies and/or negative industry or economic trends.  On a quarterly basis, the Company assesses whether events or changes in circumstances occur that potentially indicate that the carrying value of long-lived assets may not be recoverable.  Considerable management judgment is necessary to estimate projected future operating cash flows.  Accordingly, if actual results fall short of such estimates, significant future impairments could result.  During each of the second quarter and first half of fiscal 2014 and 2013, the Company did not record any asset impairment charges.

8

Goodwill and Other Intangible Assets

In connection with the Merger purchase price allocation, the fair values of long-lived and intangible assets were determined based upon assumptions related to the future cash flows, discount rates and asset lives utilizing then available information, and in some cases were obtained from independent professional valuation experts.  The Company amortizes intangible assets over their estimated useful lives unless such lives are deemed indefinite.

Goodwill and indefinite-lived intangible assets are not amortized but instead tested annually for impairment or more frequently when events or changes in circumstances indicate that the assets might be impaired.  Goodwill is tested for impairment by comparing the carrying amount of the reporting unit to the fair value of the reporting unit to which the goodwill is assigned.  The Company has the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step one of the goodwill impairment test). If the Company does not perform a qualitative assessment, or determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The first step is to compare the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill. Management has determined that the Company has two reporting units, the wholesale reporting unit and the retail reporting unit.

The Company performs the annual test for impairment in the fourth quarter of the fiscal year and determines fair value based on a combination of the income approach and the market approach. The income approach is based on discounted cash flows to determine fair value. The market approach uses a selection of comparable companies and transactions in determining fair value. The fair value of the trade name is also tested for impairment in the fourth quarter by comparing the carrying value to the fair value. Fair value of a trade name is determined using a relief from royalty method under the income approach, which uses projected revenue allocable to the trade name and an assumed royalty rate.

Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on undiscounted cash flows, and, if impaired, written down to fair value based on either discounted cash flows or appraised values.  Significant judgment is required in determining whether a potential indicator of impairment of long-lived assets exists and in estimating future cash flows used in the impairment tests.

During each of the second quarter and first half of fiscal 2014 and fiscal 2013, the Company did not record any impairment charges related to goodwill or other intangible assets.

Derivatives

The Company accounts for derivative financial instruments in accordance with authoritative guidance for derivative instrument and hedging activities.  All financial instrument positions taken by the Company are intended to be used to manage risks associated with interest rate exposures.

The Company’s derivative financial instruments are recorded on the balance sheet at fair value, and are recorded in either current or noncurrent assets or liabilities based on their maturity.  Changes in the fair values of derivatives are recorded in net earnings or other comprehensive income (“OCI”), based on whether the instrument is designated and effective as a hedge transaction and, if so, the type of hedge transaction.  Gains or losses on derivative instruments reported in accumulated other comprehensive income (“AOCI”) are reclassified to earnings in the period the hedged item affects earnings.  Any ineffectiveness is recognized in earnings in the period incurred.

Purchase Accounting

The Company’s assets and liabilities have been recorded at their estimated fair values as of the date of the Merger.  The aggregate purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed, based upon an assessment of their relative fair value as of the Merger date.  These estimates of fair values, the allocation of the purchase price and other factors related to the accounting for the Merger are subject to significant judgments and the use of estimates.

9

Income Taxes

The Company utilizes the liability method of accounting for income taxes.  Under the liability method, deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities.  Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The Company’s ability to realize deferred tax assets is assessed throughout the year and a valuation allowance is established accordingly.  The Company recognizes the impact of a tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense.

Stock-Based Compensation

The Company accounts for stock-based payment awards based on their fair value.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods.  For awards classified as equity, the Company estimates the fair value for each option award as of the date of grant using the Black-Scholes option pricing model or other appropriate valuation models.  The Black-Scholes model considers, among other factors, the expected life of the award and the expected volatility of the stock price.  Stock options are generally granted to employees at exercise prices equal to the fair market value of the stock at the dates of grant.  Former executive put rights are classified as equity awards and revalued using a binomial model at each reporting period with changes in the fair value recognized as stock-based compensation expense.

Revenue Recognition

The Company recognizes retail sales in its retail stores at the time the customer takes possession of merchandise. All sales are net of discounts and returns and exclude sales tax.  Wholesale sales are recognized in accordance with the shipping terms agreed upon on the purchase order. Wholesale sales are typically recognized free on board origin, where title and risk of loss pass to the buyer when the merchandise leaves the Company’s distribution facility.

The Company has a gift card program.  The Company does not charge administrative fees on gift cards and the Company’s gift cards do not have expiration dates.  The Company records the sale of gift cards as a current liability and recognizes a sale when a customer redeems a gift card.  The liability for outstanding gift cards is recorded in accrued expenses.  The Company has not recorded any breakage income related to its gift card program.

Cost of Sales

Cost of sales includes the cost of inventory, freight in, inter-state warehouse transportation costs, obsolescence, spoilage, scrap and inventory shrinkage, and is net of discounts and allowances.  Cash discounts for satisfying early payment terms are recognized when payment is made, and allowances and rebates based upon milestone achievements such as reaching a certain volume of purchases of a vendor’s products are included as a reduction of cost of sales when such contractual milestones are reached.  In addition, the Company analyzes its inventory levels and the related cash discounts received to arrive at a value for cash discounts to be included in the inventory balance.  The Company does not include purchasing, receiving, distribution, warehouse, and occupancy costs in its cost of sales.  Due to this classification, the Company’s gross profit rates may not be comparable to those of other retailers that include costs related to their distribution network and occupancy in cost of sales.

Operating Expenses

Selling, general and administrative expenses include purchasing, receiving, inspection and warehouse costs, the costs of selling merchandise in stores (payroll and associated costs, occupancy and other store-level costs), distribution costs (payroll and associated costs, occupancy, transportation to and from stores and other distribution-related costs) and corporate costs (payroll and associated costs, occupancy, advertising, professional fees and other corporate administrative costs).

Leases

The Company follows the policy of capitalizing allowable expenditures that relate to the acquisition and signing of its retail store leases.  These costs are amortized on a straight-line basis over the applicable lease term.

The Company recognizes rent expense for operating leases on a straight-line basis (including the effect of reduced or free rent and rent escalations) over the applicable lease term.  The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is included in deferred rent.  Cash reimbursements received from landlords for leasehold improvements and other cash payments received from landlords as lease incentives are recorded as deferred rent.  Deferred rent related to landlord incentives is amortized as an offset to rent expense using the straight-line method over the applicable lease term.

10

For store closures where a lease obligation still exists, the Company records the estimated future liability associated with the rental obligation on the cease use date (when the store is closed).  Liabilities are established at the cease use date for the present value of any remaining operating lease obligations, net of estimated sublease income, and at the communication date for severance and other exit costs. Key assumptions in calculating the liability include the timeframe expected to terminate lease agreements, estimates related to the sublease potential of closed locations, and estimates of other related exit costs. If actual timing and potential termination costs or realization of sublease income differ from the Company’s estimates, the resulting liabilities could vary from recorded amounts. These liabilities are reviewed periodically and adjusted when necessary.

Self-Insured Workers’ Compensation Liability

The Company self-insures for workers’ compensation claims in California and Texas.  The Company establishes a liability for losses of both estimated known and incurred but not reported insurance claims based on reported claims and actuarial valuations of estimated future costs of known and incurred but not yet reported claims.  Should an amount of claims greater than anticipated occur, the liability recorded may not be sufficient and additional workers’ compensation costs, which may be significant, could be incurred. The Company has not discounted the projected future cash outlays for the time value of money for claims and claim-related costs when establishing its workers’ compensation liability in its financial reports for September 28, 2013 and March 30, 2013.

Self-Insured Health Insurance Liability

During the second quarter of fiscal 2012 ended October 1, 2011 (the “second quarter of fiscal 2012”), the Company began self-insuring for a portion of its employee medical benefit claims.  The liability for the self-funded portion of the Company health insurance program is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported.  The Company maintains stop loss insurance coverage to limit its exposure for the self-funded portion of its health insurance program.

Pre-Opening Costs

The Company expenses, as incurred, pre-opening costs such as payroll, rent and marketing related to the opening of new retail stores.

Advertising

The Company expenses advertising costs as incurred. Advertising expenses were $1.7 million and $1.3 million for the second quarter of fiscal 2014 and 2013, respectively.  Advertising expenses were $3.1 million and $2.6 million for the first half of fiscal 2014 and 2013, respectively.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash, accounts receivable, interest rate derivatives, accounts payable, accruals, debt, and other liabilities.  Cash and interest rate derivatives are measured and recorded at fair value.  Accounts receivable and other receivables are financial assets with carrying values that approximate fair value.  Accounts payable and other accrued expenses are financial liabilities with carrying values that approximate fair value.  See Note 7 for further discussion of the fair value of debt.

The Company utilizes the authoritative guidance for fair value, which includes the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements.  Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants.  Fair value measurements reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model.

Comprehensive Income

OCI includes unrealized gains or losses on investments and interest rate derivatives designated as cash flow hedges.

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2.Goodwill and Other Intangibles

As a result of the Merger, the Company recognized goodwill, and other intangible assets and liabilities.  The following tables set forth the value of the goodwill and other intangible assets and liabilities, and unfavorable leases, respectively, each as of September 28, 2013 and March 30, 2013 (in thousands):

	As of September 28, 2013								As of March 30, 2013
	Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Indefinite lived intangible assets:
Goodwill		$	479,745	$	—		$	479,745		$	479,745	$	—		$	479,745
Trade name		410,000		—			410,000			410,000		—			410,000
Total indefinite lived intangible assets		$	889,745	$	—		$	889,745		$	889,745	$	—		$	889,745
Finite lived intangible assets:
Trademarks	18	$	2,000	$	(171	)	$	1,829	19	$	2,000	$	(121	)	$	1,879
Bargain Wholesale customer relationships	10	20,000		(2,853		)	17,147		11	20,000		(2,019		)	17,981
Favorable leases	1 to 15	46,723		(7,377		)	39,346		1 to 16	46,723		(5,224		)	41,499
Total finite lived intangible assets		68,723		(10,401		)	58,322			68,723		(7,364		)	61,359
Total goodwill and other intangible assets		$	958,468	$	(10,401	)	$	948,067		$	958,468	$	(7,364	)	$	951,104
	As of September 28, 2013								As of March 30, 2013
	Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Unfavorable leases	1 to 16	$	19,835	$	(6,913	)	$	12,922	1 to 17	$	19,835	$	(5,002	)	$	14,833

3.Property and Equipment, net

The following table provides details of property and equipment (in thousands):

	September 28, 2013			March 30, 2013
Land	$	160,446		$	160,446
Buildings	90,466			90,466
Buildings improvements	66,450			64,429
Leasehold improvements	124,027			112,779
Fixtures and equipment	84,471			76,831
Transportation equipment	9,745			7,497
Construction in progress	43,193			30,949
Total property and equipment	578,798			543,397
Less: accumulated depreciation and amortization	(97,322		)	(67,346		)
Property and equipment, net	$	481,476		$	476,051

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4.Comprehensive Income

The following table sets forth the calculation of comprehensive income (loss), net of tax effects for the periods indicated (in thousands):

	For the Second Quarter Ended						For the First Half Ended
	September 28,2013			September 29,2012			September 28,2013		September 29, 2012
Net income (loss)	$	5,467		$	210		$	8,631	$	(4,681	)
Unrealized holding gains on marketable securities, net of tax effects of $0, $3, $0 and $3 for the second quarter and first half of fiscal 2014 and 2013, respectively	—			4			—		4
Unrealized (losses) gain on interest rate cash flow hedge, net of tax effects of $(222), $(315) $91 and $(678) for the second quarter and first half of fiscal 2014 and 2013, respectively	(332		)	(473		)	137		(1,017		)
Reclassification adjustment, net of tax effects of $0, $0 ,$0 and $(3) for the second quarter and first half of fiscal 2014 and 2013, respectively	—			—			—		(5		)
Total unrealized (losses) gains, net	(332		)	(469		)	137		(1,018		)
Total comprehensive income (loss)	$	5,135		$	(259	)	$	8,768	$	(5,699	)

Amounts in accumulated other comprehensive loss as September 28, 2013 and March 30, 2013 consisted of unrealized losses on interest rate cash flow hedge.  There were no reclassifications out of AOCI in the second quarter and first half of fiscal 2014.

5.Debt

Short and long-term debt consists of the following (in thousands):

	September 28, 2013		March 30, 2013
ABL Facility agreement, maturing January 13, 2017, with available borrowing up to $175,000, interest due quarterly, with unpaid principal and accrued interest due January 13, 2017	$	—	$	—
First Lien Term Loan Facility agreement, maturing on January 13, 2019, payable in quarterly installments of $1,309, plus interest, commencing March 31, 2012 through December 31, 2019, with unpaid principal and accrued interest due January 13, 2019, net of unamortized OID of $9,362 and $10,126 as of September 28, 2013 and March 30, 2013, respectively	504,450		508,325
Senior Notes (unsecured) maturing December 15, 2019, unpaid principal and accrued interest due on December 15, 2019	250,000		250,000
Total long-term debt	754,450		758,325
Less: current portion of long-term debt	3,216		8,567
Long-term debt, net of current portion	$	751,234	$	749,758

As of September 28, 2013 and March 30, 2013, the deferred financing costs are as follows (in thousands):

	September 28, 2013							March 30, 2013
Deferred financing costs	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
ABL Facility	$	3,078	$	(1,053	)	$	2,025	$	3,078	$	(746	)	$	2,332
First Lien Term Loan Facility	9,308		(1,793		)	7,515		9,308		(1,179		)	8,129
Senior Notes	11,761		(1,733		)	10,028		11,761		(1,206		)	10,555
Total deferred financing costs	$	24,147	$	(4,579	)	$	19,568	$	24,147	$	(3,131	)	$	21,016

On January 13, 2012, in connection with the Merger, the Company obtained Credit Facilities (as defined below) provided by a syndicate of lenders arranged by Royal Bank of Canada as administrative agent, as well as other agents and lenders that are parties to these Credit Facilities.  The Credit Facilities include (a) $175 million in commitments under the first lien based revolving credit facility (as amended, “ABL Facility”), and (b) $525 million in aggregate principal amount under the first lien term loan facility (as amended, “First Lien Term Loan Facility” and together with the ABL Facility, the “Credit Facilities”).

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First Lien Term Loan Facility

As of September 28, 2013, the First Lien Term Loan Facility provided for $525 million of borrowings (which may be increased by up to $150.0 million in certain circumstances).  All obligations under the First Lien Term Loan Facility are guaranteed by Parent and the Company’s direct wholly owned subsidiary, 99 Cents Only Stores Texas, Inc. (“99 Cents Texas” and together with Parent, the “Credit Facilities Guarantors”).  In addition, the First Lien Term Loan Facility is secured by pledges of certain of the Company’s equity interests and the equity interests of the Credit Facilities Guarantors.

As of September 28, 2013, the Company was required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the term loan (approximately $1.3 million), with the balance due on the maturity date, January 13, 2019.  Borrowings under the First Lien Term Loan Facility bear interest at an annual rate equal to an applicable margin plus, at the Company’s option, (A) a Base Rate determined by reference to the highest of (a) the interest rate in effect determined by the administrative agent as “Prime Rate” (3.25% as of September 28, 2013), (b) the federal funds effective rate plus 0.50% and (c) an adjusted Eurocurrency rate for one month (determined by reference to the greater of the Eurocurrency rate for the interest period multiplied by the Statutory Reserve Rate or 1.50% per annum) plus 1.00%, or (B) an Adjusted Eurocurrency Rate.

On April 4, 2012, the Company amended the terms of the existing seven-year $525 million First Lien Term Loan Facility, and incurred refinancing costs of $11.2 million. The amendment, among other things, decreased the applicable margin from the London Interbank Offered Rate (“LIBOR”) plus 5.50% (or Base Rate plus 4.50%) to LIBOR plus 4.00% (or Base Rate plus 3.00%) and decreased the LIBOR floor from 1.50% to 1.25%.  The maximum capital expenditures covenant in the First Lien Term Loan Facility was also amended to permit an additional $5 million in capital expenditures each year throughout the term of the First Lien Term Loan Facility.

The Company determined that a portion of the refinancing transaction should be accounted for as debt extinguishment. In accordance with applicable guidance for debt modification and extinguishment, the Company recognized a $16.3 million loss on debt extinguishment related to a portion of the unamortized debt issuance costs, unamortized original issue discount (“OID”) and refinancing costs incurred in connection with the amendment for the portion of the First Lien Term Loan Facility that was extinguished.  The Company recorded $0.3 million as deferred debt issuance costs and $5.9 million as OID in connection with the amendment.

As of September 28, 2013, $1.7 million of the amount outstanding under the First Lien Term facility bore an interest charge of 6.25% (3.25% Prime Rate, plus the margin of 3.00%), while the interest rate charged on the remainder of First Lien Term Loan Facility was 5.25% (1.25% Eurocurrency rate, plus the Eurocurrency loan margin of 4.00%).  As of September 28, 2013, the amount outstanding under the First Lien Term Loan Facility was $504.4 million.

Following the end of each fiscal year, the Company is required to prepay the First Lien Term Loan Facility in an amount equal to 50% of Excess Cash Flow (as defined in the First Lien Term Loan Facility agreement and with stepdowns to 25% and 0% based on achievement of specified total leverage ratios), minus the amount of certain voluntary prepayments of the First Lien Term Loan Facility and/or the ABL Facility during such fiscal year. The Excess Cash Flow required payment for fiscal 2013 was $3.3 million and was made in July 2013.

The First Lien Term Loan Facility includes restrictions on the Company’s ability and the ability of Parent and certain of the Company’s subsidiaries to, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase, the Company’s capital stock, make certain acquisitions or investments, materially change the Company’s business, incur or permit to exist certain liens, enter into transactions with affiliates or sell its assets to and make capital expenditures or merge or consolidate with or into, another company.  As of March 30, 2013, the Company was in compliance with the terms of the First Lien Term Loan Facility.  In June 2013, the Company failed to comply with the covenant that required delivery of audited financial statements for the fiscal year ended March 30, 2013 within 90 days of the completion of fiscal 2013 as required under the First Lien Term Loan Facility.  Prior to the expiration of the applicable 30-day grace period under the First Lien Term Loan Facility, the Company delivered the required financial statements.  As of September 28, 2013, the Company is in compliance with the applicable reporting obligations and other terms of the First Lien Term Loan Facility.

On October 8, 2013, the Company completed a repricing of its First Lien Term Loan Facility, borrowed $100 million of incremental term loans under that facility and amended certain other provisions thereto.  See Note 16 for more information regarding the amendment to the First Lien Term Loan Facility.

During the first quarter of fiscal 2013, the Company entered into an interest rate cap agreement.  The interest rate cap agreement limits the Company’s interest exposure on a notional value of $261.8 million to 3.00% plus an applicable margin of 4.00%.  The term of the interest rate cap is from May 29, 2012 to November 29, 2013.  The Company paid fees of $0.05 million to enter into the interest rate cap agreement.

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In addition, during the first quarter of fiscal 2013, the Company entered into an interest rate swap agreement to limit the variability of cash flows associated with interest payments on the First Lien Term Loan Facility that result from fluctuations in the LIBOR rate.  The swap limits the Company’s interest exposure on a notional value of $261.8 million to 1.36% plus an applicable margin of 4.00%.  The term of the swap is from November 29, 2013 through May 31, 2016.  The fair value of the swap on the trade date was zero as the Company neither paid nor received any value to enter into the swap, which was entered into at market rates.  The fair value of the swap at September 28, 2013 was a liability of $2.3 million.  See Note 6 for more information on the Company’s interest rate cap and interest rate swap agreements.

ABL Facility

The ABL Facility provides for up to $175.0 million of borrowings (which may be increased by up to $50.0 million in certain circumstances), subject to certain borrowing base limitations.  All obligations under the ABL Facility are guaranteed by the Company, Parent and 99 Cents Texas (collectively, the “ABL Guarantors”).  The ABL Facility is secured by substantially all of the Company’s assets and the assets of the ABL Guarantors.

Borrowings under the ABL Facility bear interest for an initial period until June 30, 2012 at an applicable margin plus, at the Company’s option, a fluctuating rate equal to (A) the highest of (a) Federal Funds Rate plus 0.50%, (b) rate of interest in effect determined by the administrative agent as “Prime Rate” (3.25% at the date of the Merger), and (c) Adjusted Eurocurrency Rate (determined to be the LIBOR rate multiplied by the Statutory Reserve Rate) for an Interest Period of one (1) month plus 1.00% or (B) the Adjusted Eurocurrency Rate.  The interest rate charged on borrowings under the ABL Facility from the date of the Merger until June 30, 2012 was 4.25% (the base rate (prime rate at 3.25%) plus the applicable margin of 1.00%).  Thereafter, borrowings under the ABL Facility will have variable pricing and will be based, at the Company’s option, on (a) LIBOR plus an applicable margin to be determined (1.75% as of September 28, 2013) or (b) the determined base rate (prime rate) plus an applicable margin to be determined (0.75% at September 28, 2013), in each case based on a pricing grid depending on average daily excess availability for the most recently ended quarter.

In addition to paying interest on outstanding principal under the Credit Facilities, the Company was required to pay a commitment fee to the lenders under the ABL Facility on unused commitments at a rate of 0.375% for the period from the date of the Merger until June 30, 2012.  Thereafter, the commitment fee will be adjusted at the beginning of each quarter based upon the average historical excess availability of the prior quarter (0.50% for the quarter ended September 28, 2013).  The Company must also pay customary letter of credit fees and agency fees.

As of September 28, 2013 and March 30, 2013, the Company had no outstanding borrowings under the ABL Facility, outstanding letters of credit were $1.6 million, and availability under the ABL Facility subject to the borrowing base, was $133.9 million as of September 28, 2013.

The ABL Facility includes restrictions on the Company’s ability, and the ability of the Parent and certain of the Company’s subsidiaries to, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase, its capital stock, make certain acquisitions or investments, materially change its business, incur or permit to exist certain liens, enter into transactions with affiliates or sell our assets to, make capital expenditures or merge or consolidate with or into, another company.  The ABL Facility was amended on April 4, 2012 to permit an additional $5 million in capital expenditures for each year during the term of the ABL Facility.  As of March 30, 2013, the Company was in compliance with the terms of the ABL Facility. In June 2013, the Company failed to comply with the covenant that required delivery of audited financial statements for the fiscal year ended March 30, 2013 within 90 days of the completion of fiscal 2013 as required under the in the ABL Facility. Prior to the expiration of the applicable 30-day grace period under the ABL Facility, the Company delivered the required financial statements.  As of September 28, 2013, the Company is in compliance with the applicable reporting obligations and other terms of the ABL Facility.

The ABL Facility was amended on October 8, 2013.  See Note 16 for information regarding the amendment to the ABL Facility.

Senior Notes

On December 29, 2011, the Company issued $250 million aggregate principal amount of 11% Senior Notes that mature on December 15, 2019 (the “Senior Notes”).  The Senior Notes are guaranteed by 99 Cents Texas (the “Senior Notes Guarantor”).

In connection with the issuance of the Senior Notes, the Company entered into a registration rights agreement that required the Company to file an exchange offer registration statement, enabling holders to exchange the Senior Notes for registered notes with terms identical in all material respects to the terms of the Senior Notes, except the registered notes would be freely tradable.  The exchange offer was closed on November 7, 2012.

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Pursuant to the terms of the indenture governing the Senior Notes (the “Indenture”), the Company may redeem all or a part of the Senior Notes at certain redemption prices applicable based on the date of redemption.

The Senior Notes are (i) equal in right of payment with all of the Company’s and the Senior Notes Guarantor’s existing and future senior indebtedness; (ii) effectively junior to the Company’s and the Senior Notes Guarantor’s existing and future secured indebtedness, to the extent of the value of the interest of the holders of that secured indebtedness in the assets securing such indebtedness; (iii) unconditionally guaranteed on a senior unsecured unsubordinated basis by the Senior Notes Guarantor; and (iv) junior to the indebtedness or other liabilities of the Company’s subsidiaries that are not guarantors. The Company is not required to make any mandatory redemptions or sinking fund payments, and may at any time or from time to time purchase notes in the open market.

The Indenture contains covenants that, among other things, limit the Company’s ability and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness, create or incur certain liens, pay dividends or make other restricted payments, incur restrictions on the payment of dividends or other distributions from its restricted subsidiaries, make certain investments, transfer or sell assets, engage in transactions with affiliates, or merge or consolidate with other companies or transfer all or substantially all of its assets.

As of September 28, 2013, the Company was in compliance with the terms of the Indenture.

The significant components of interest expense are as follows (in thousands):

	For the Second Quarter Ended				For the First Half Ended
	September 28, 2013		September 29, 2012		September 28, 2013		September 29, 2012
First lien term loan facility	$	7,033	$	7,299	$	13,591	$	14,753
ABL facility	224		221		449		383
Senior notes	6,799		6,951		13,597		13,903
Amortization of deferred financing costs and OID	1,111		1,059		2,212		2,059
Other interest expense	7		7		13		16
Interest expense	$	15,174	$	15,537	$	29,862	$	31,114

6.Derivative Financial Instruments

The Company entered into derivative instruments for risk management purposes and uses these derivatives to manage exposure to fluctuation in interest rates.

Interest Rate Cap

In May 2012, the Company entered into an interest rate cap agreement for an aggregate notional amount of $261.8 million in order to hedge the variability of cash flows related to a portion of the Company’s floating rate indebtedness.  The cap agreement, effective in May 2012, hedges a portion of contractual floating rate interest commitments through the expiration of the agreement in November 2013.  Pursuant to the agreement, the Company has capped LIBOR at 3.00% plus an applicable margin of 4.00% with respect to the aggregate notional amount of $261.8 million.  In the event LIBOR exceeds 3.00% the Company will pay interest at the capped rate.  In the event LIBOR is less than 3.00%, the Company will pay interest at the prevailing LIBOR rate.  In the first half of each of fiscal 2014 and 2013, the Company paid interest at the prevailing LIBOR rate.

The interest rate cap agreement has not been designated as a hedge for financial reporting purposes.  Gains and losses on derivative instruments not designated as hedges are recorded directly in earnings.

Interest Rate Swap

In May 2012, the Company entered into a floating-to-fixed interest rate swap agreement for an initial aggregate notional amount of $261.8 million to limit exposure to interest rate increases related to a portion of the Company’s floating rate indebtedness once the Company’s interest rate cap agreement expires.  The swap agreement, effective November 2013, will hedge a portion of contractual floating rate interest commitments through the expiration of the agreements in May 2016.  As a result of the agreement, the Company’s effective fixed interest rate on the notional amount of floating rate indebtedness will be 1.36% plus an applicable margin of 4.00%.

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The Company designated the interest rate swap agreement as a cash flow hedge.  The interest rate swap agreement is highly correlated to the changes in interest rates to which the Company is exposed.  Unrealized gains and losses on the interest rate swap are designated as effective or ineffective.  The effective portion of such gains or losses is recorded as a component of AOCI or loss, while the ineffective portion of such gains or losses is recorded as a component of interest expense. Future realized gains and losses in connection with each required interest payment will be reclassified from AOCI or loss to interest expense.

Fair Value

The fair values of the interest rate cap and swap agreements are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves (Level 2, as defined in Note 7).

A summary of the recorded amounts included in the consolidated balance sheets is as follows (in thousands):

	September 28,2013		March 30,2013
Derivatives designated as cash flow hedging instruments
Interest rate swap (included in other current liabilities)	$	1,187	$	381
Interest rate swap (included in other liabilities)	$	1,110	$	2,249
Accumulated other comprehensive loss, net of tax (included in shareholders’ equity)	$	1,115	$	1,252

A summary of recorded amounts included in the unaudited consolidated statements of comprehensive income (loss) is as follows (in thousands):

	For the Second Quarter Ended				For the First Half Ended
	September 28, 2013		September 29, 2012		September 28, 2013			September 29, 2012
Derivatives designated as cash flow hedging instruments:
Loss (gain) related to effective portion of derivative recognized in OCI	$	332	$	473	$	(137	)	$	1,017
Loss (gain) related to ineffective portion of derivative recognized in interest expense	$	208	$	366	$	(114	)	$	642
Derivatives not designated as hedging instruments:
Loss recognized in other expense	$	—	$	3	$	—		$	23

7.Fair Value of Financial Instruments

The Company complies with authoritative guidance for fair value measurement and disclosures which establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1: Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2: Defined as observable inputs other than Level 1 prices.  These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company utilizes the best available information in measuring fair value.  The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of September 28, 2013 (in thousands):

	September 28, 2013
	Total		Level 1		Level 2		Level 3
ASSETS
Other assets — assets that fund deferred compensation	$	1,070	$	1,070	$	—	$	—
LIABILITES
Other current liabilities — interest rate swap	$	1,187	$	—	$	1,187	$	—
Other long-term liabilities — interest rate swap	$	1,100	$	—	$	1,100	$	—
Other long-term liabilities — deferred compensation	$	1,070	$	1,070	$	—	$	—

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Level 1 measurements include $1.1 million of deferred compensation assets that fund the liabilities related to the Company’s deferred compensation, including investments in trust funds.  The fair values of these funds are based on quoted market prices in an active market.

Level 2 measurements include interest rate swap agreements estimated using industry standard valuation models using market-based observable inputs, including interest rate curves.

There were no Level 3 assets or liabilities as of September 28, 2013.

The Company did not have any transfers of investments in and out of Levels 1 and 2 during the second quarter and the first half of fiscal 2014.

The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of March 30, 2013 (in thousands):

	March 30, 2013
	Total		Level 1		Level 2		Level 3
ASSETS
Other assets — assets that fund deferred compensation	$	1,153	$	1,153	$	—	$	—
LIABILITES
Other current liabilities — interest rate swap	$	381	$	—	$	381	$	—
Other long-term liabilities — interest rate swap	$	2,249	$	—	$	2,249	$	—
Other long-term liabilities — deferred compensation	$	1,153	$	1,153	$	—	$	—

Level 1 measurements include $1.2 million of deferred compensation assets that fund the liabilities related to the Company’s deferred compensation, including investments in trust funds.  The fair values of these funds are based on quoted market prices in an active market.

Level 2 measurements include interest rate swap agreement estimated using industry standard valuation models using market-based observable inputs, including interest rate curves.

There were no Level 3 assets or liabilities as of March 30, 2013.

In connection with the Merger, the Company entered into the Credit Facilities, including the ABL Facility of $175 million and the First Lien Term Loan Facility of $525 million, and also issued $250 million of the Senior Notes with a coupon rate of 11% in a private placement.  The outstanding debt under the Credit Facilities and the Senior Notes is recorded in the financial statements at historical cost, net of applicable unamortized discounts.

The Credit Facilities are tied directly to market rates and fluctuate as market rates change; as a result, the carrying value of the Credit Facilities approximates fair value as of September 28, 2013.

The fair value of the Senior Notes was estimated at $281.9 million, or $31.9 million greater than the carrying value, as of September 28, 2013, based on quoted market prices of the debt (Level 1 inputs). The fair value of the Senior Notes was estimated at $288.1 million, or $38.1 million greater than the carrying value, as of March 30, 2013, based on quoted market prices of the debt (Level 1 inputs).

See Note 5 for more information on the Company’s debt.

8.Stock-Based Compensation

Number Holdings, Inc. 2012 Equity Incentive Plan

On February 27, 2012, the board of directors of Parent adopted the Number Holdings, Inc. 2012 Stock Incentive Plan (the “2012 Plan”), which authorizes equity awards to be granted for up to 74,603 shares of Class A common stock, par value $0.001 per share, of Parent (the “Class A Common Stock”) and 74,603 shares of Class B common stock, par value $0.001 per share, of Parent (the “Class B Common Stock”).  On September 27, 2013, the 2012 Plan was amended to increase the aggregate number of shares available under the 2012 Plan to 85,000 shares.  As of September 28, 2013, options for 57,893 shares of each Class were issued to certain members of management with an aggregate exercise price of $1,000 for one share of Class A Common Stock and for one share of Class B Common Stock, together.  Options become exercisable over the five year service period and have terms of ten years from date of the grant.  Options upon vesting may be exercised only for units consisting of an equal number of Class A Common Stock and Class B Common Stock.  Class B Common Stock has de minimis economic rights and the right to vote solely for election of directors.

18

Share repurchase rights

Under the 2012 Plan’s standard form of option award agreement, Parent has a right to repurchase from the participant all or a portion of (i) Class A and Class B Common Stock of Parent issued upon the exercise of the options awarded to a participant and (ii) fully vested but unexercised options.  The repurchase price for the shares of Class A and Class B Common Stock of Parent is the fair market value of such shares as of the date of such termination, and, for the fully vested but unexercised options, the repurchase price is the difference between the fair market value of the Class A and Class B Common Stock of Parent as of the date of termination of employment and the exercise price of the option.  However, upon (i) a termination of employment for cause, (ii) a voluntary resignation without good reason, or (iii) upon discovery that the participant engaged in detrimental activity, the repurchase price is the lesser of the exercise price paid by the participant to exercise the option or the fair market value of the Class A and Class B Common Stock of Parent.  If Parent elects to exercise its repurchase right for any shares acquired pursuant to the exercise of an option, it must do so no later than 180 days after the date of participant’s termination of employment, or (ii) for any unexercised option no later than 90 days from the latest date that an option can be exercised.  All of the options that the Company has granted to its executive officers and employees (with the exception of options granted to Rollover Investors that contain no repurchase rights and certain directors that contain less restrictive repurchase rights) contain such repurchase rights. There were 24,515 options outstanding as of September 28, 2013 subject to such repurchase rights. In accordance with accounting guidance, the Company has not recorded any stock-based compensation expense for these grants.  For all other options, fair value of the option awards is recognized as compensation expense on a straight line basis over the requisite service period of the award, and is included in operating expenses.

Former Executive Put Rights

Pursuant to the employment agreements between the Company and Messrs. Eric Schiffer, Jeff Gold and Howard Gold, in connection with their separation from the Company, for a period of one year following such separation, each executive has a right to require Parent to repurchase the shares of Class A and Class B Common Stock owned by such executive (a “put right”) at the greater of (i) $1,000 per combined share of Class A and Class B Common Stock less any distributions made with respect to such shares and (ii) the fair market value of such shares as of the date the executive exercises the put right.  The put right applies to the lesser of (i) 20,000 shares of each of Class A and Class B Common Stock and (ii) $12.5 million in value (unless Parent agrees to purchase a higher value).  If exercising the put right is prohibited (e.g., under the First Lien Term Loan Credit Facility, the ABL Facility and the Indenture), then the put right is extended up to three additional years until Parent is no longer prohibited from repurchasing the shares.  If, during the four years following termination, Parent is at no time able to make the required payments, the put right expires and is deemed unexercised.  For payout after the first year, the put right is only at the fair market value as of the date the exercising the put right.

On January 23, 2013, Eric Schiffer, Jeff Gold and Howard Gold separated from their positions as Chief Executive Officer, Chief Administrative Officer and Executive Vice President of Special Projects, respectively, of the Company and Parent, and as directors of the Company and Parent.  As such, for a period of one year from January 23, 2013, each executive may exercise the put right as described above.  The fair value of these put rights was estimated using a binomial model to be $1.2 million and $6.5 million as of September 28, 2013 and March 30, 2013, respectively. Changes in the fair value for these put rights have been included in operating expenses. Subsequent to September 28, 2013, these put rights terminated as a result of the Gold-Schiffer Purchase. See Notes 9 and 16 for more information regarding the Gold-Schiffer Purchase.

Accounting for stock-based compensation

Determining the fair value of options at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise and the associated volatility.  At the grant date, the Company estimates an amount of forfeitures that will occur prior to vesting.  During the second quarter and the first half of fiscal 2014, as a result of a decrease in the fair value of former executive put rights, the Company recorded negative stock-based compensation expense of $(3.7) million and $(5.3) million, respectively.  During the second quarter and the first half of fiscal 2013, the Company incurred stock-based compensation expense of $0.8 million and $1.6 million, respectively.  There was no stock-based compensation expense for former executive put rights in the second quarter and first half of fiscal 2013.

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The fair value of stock options was estimated at the date of grant using the Black-Scholes pricing model with the following assumptions:

	For the First Half Ended
	September 28, 2013			September 29, 2012
Weighted-average fair value of options granted	$	357.07		$	374.29
Risk free interest rate	1.51		%	0.72		%
Expected life (in years)	6.50			6.32
Expected stock price volatility	33.83		%	37.90		%
Expected dividend yield	None			None

The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant with an equivalent remaining term.  Expected life represents the estimated period of time until exercise and is calculated by using “simplified method.”  Expected stock price volatility is based on average historical volatility of stock prices of companies in a peer group analysis.  The Company currently does not anticipate the payment of any cash dividends.  Compensation expense is recognized only for those options expected to vest, with forfeitures estimated based on the Company’s historical experience and future expectations.

As of September 28, 2013, there were $7.2 million of total unrecognized compensation costs related to non-vested options and options subject to repurchase rights for which no compensation has been recorded.

The following summarizes stock option activity in the first half of fiscal 2014:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Options outstanding at the beginning of the period	55,279		$	1,000
Granted	3,670		$	1,000
Exercised	—		$	—
Cancelled	(1,056	)	$	1,000
Outstanding at the end of the period	57,893		$	1,000	4.40
Exercisable at the end of the period	38,661		$	1,000	2.30
Exercisable and expected to vest at the end of the period	55,455		$	1,000	4.30

The following table summarizes the stock awards available for grant under the 2012 Plan:

	Number of Shares
Available for grant as of March 30, 2013	19,324
Authorized	10,397
Granted	(3,670	)
Cancelled	1,056
Available for grant at September 28, 2013	27,107

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9.Related-Party Transactions

On October 15, 2013, Parent and the Company entered into an agreement with certain former members of the Company’s management, Eric Schiffer, Jeff Gold and Howard Gold (who was a director of Parent and the Company at the date of the agreement), and Karen Schiffer, Sherry Gold and The Gold Revocable Trust dated October 26, 2005 (collectively, the “Sellers”), pursuant to which (a)(i) Parent purchased from each Seller all of the shares of Class A Common Stock and Class B Common Stock, owned by such Seller and (ii) all of the options to purchase shares of Class A Common Stock and Class B Common Stock held by such Seller were cancelled and forfeited, for aggregate consideration of approximately $129.7 million (the “Gold-Schiffer Purchase”) and (b) the Company agreed to certain amendments to the Non-Competition, Non-Solicitation and Confidentiality Agreements and the Separation and Release Agreements with the Sellers who were former management.  The Gold-Schiffer Purchase was completed on October 21, 2013.  Prior to completion of the transaction, Howard Gold resigned from the board of directors of Parent and the Company.  See Note 16 for more information regarding the Gold-Schiffer Purchase.

10.Income Taxes

During the first quarter of fiscal 2014, the California legislature passed draft bills, which effectively eliminated the Enterprise Zone hiring credits after December 31, 2013.  The effect of these bills restricts the generation of the California Enterprise Zone (“EZ”) hiring credits for fiscal 2014 to nine months for the Company as compared to a full year in prior fiscal years, and the carryforward period to ten years from a previous indefinite life. During the second quarter of fiscal 2014, the legislation was signed into law. As a result, the Company will no longer be adding to its existing EZ credit carryforwards after the current tax year.  Rather, the Company will be able to utilize its EZ credit carryforwards in subsequent taxable years.  As a result of the law change, the Company released the valuation allowance associated with its $11.6 million California EZ credit carryforwards as a discrete item in the second quarter of fiscal 2014, which benefited the income tax provision by $7.5 million.

The effective income tax rate for the first half of fiscal 2014 was 472.9% compared to a rate of 35.5% for the first half of fiscal 2013.  The change in the effective tax rate is primarily due to the release of the valuation allowance of EZ credit carryforwards, which was recognized as a discrete item during the second quarter of fiscal 2014.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of September 28, 2013, the Company has not accrued any interest and penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction and in various states.  The Company is subject to examinations by the major tax jurisdictions in which it files for the tax years 2008 forward.  The federal tax return for the period ended March 27, 2010 was examined by the Internal Revenue Service resulting in no changes to the reported tax.

11.Commitments and Contingencies

Credit Facilities

The Credit Facilities and commitments are discussed in detail in Note 5.

Workers’ Compensation

The Company self-insures its workers’ compensation claims in California and Texas and provides for losses of estimated known and incurred but not reported insurance claims.  The Company does not discount the projected future cash outlays for the time value of money for claims and claim related costs when establishing its workers’ compensation liability.

As of September 28, 2013 and March 30, 2013, the Company had recorded a liability $37.1 million and $39.4 million, respectively, for estimated workers’ compensation claims in California.  The Company has limited self-insurance exposure in Texas and had recorded a liability of less than $0.1 million as of September 28, 2013 and March 30, 2013 for workers’ compensation claims in Texas.  The Company purchases workers’ compensation insurance coverage in Arizona and Nevada.

Self-Insured Health Insurance Liability

During the second quarter of fiscal 2012, the Company began self-insuring for a portion of its employee medical benefit claims.  As of September 28, 2013 and March 30, 2013, the Company had recorded a liability of $0.5 million for estimated health insurance claims.  The Company maintains stop loss insurance coverage to limit its exposure for the self-funded portion of its health insurance program.

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Legal Matters

Wage and Hour Matters

Thomas Allen v. 99¢ Only Stores, Superior Court of the State of California, County of Los Angeles.  Plaintiff, a former store manager for the Company, filed this action on March 18, 2011. He asserted claims on behalf of himself and all others allegedly similarly situated under the California Labor Code for alleged failure to pay overtime, failure to provide meal and rest periods, failure to pay wages timely upon termination, and failure to provide accurate wage statements.  Mr. Allen also asserted a derivative claim for unfair competition under the California Business and Professions Code.  Mr. Allen seeks to represent a class of all employees who were employed by the Company as salaried managers in 99¢ Only retail stores from March 18, 2007 through the date of trial or settlement.  Plaintiff seeks to recover alleged unpaid wages, statutory penalties, interest, attorney’s fees and costs, declaratory relief, injunctive relief and restitution.  On October 17, 2011, the Court heard the Company’s motion to compel Plaintiff Allen to arbitrate his claims on an individual basis, and following the hearing, the Court ordered the parties to submit further briefing and argument.  Following this supplemental briefing and while the motion was under advisement, Mr. Allen sought leave to amend his complaint to add a cause of action pursuant to the Private Attorneys General Act of 2004 (“PAGA”).  The Company did not oppose this motion and on January 5, 2012, the Court granted Mr. Allen’s motion and his First Amended Complaint was filed.  On February 27, 2012, the Court denied the Company’s motion to compel arbitration.  The Company filed a notice of its intention to appeal that ruling on April 12, 2012.  Following a mediation of this matter on August 30, 2012, the parties entered into a “term sheet” settlement agreement for an immaterial amount, which is subject to court approval.  As of April 11, 2013, all parties had executed a Stipulation Re: Settlement of Class Action.  On April 17, 2013, Mr. Allen filed his motion for preliminary approval of the settlement.  The Company filed a notice of non-opposition to this motion on April 25, 2013.  On May 9, 2013, the Court granted preliminary approval of the settlement.  A hearing regarding final approval of the settlement was set for August 23, 2013, during which the Court granted final approval of the settlement and dismissed the case.  The judgment became final on October 23, 2013.  The claims administration process is scheduled for November, and the Company must file a declaration from the claims administrator by December 20, 2013 confirming that the settlement amounts have been distributed pursuant to the settlement agreement.

Shelley Pickett v. 99¢ Only Stores, Superior Court of the State of California, County of Los Angeles.  Plaintiff Shelley Pickett filed a representative action complaint against the Company on November 4, 2011, alleging a PAGA claim virtually identical to that of another matter which was dismissed with prejudice in December 2011, Bright v. 99¢ Only Stores. Like the plaintiff in the Bright case, Plaintiff Pickett asserts that the Company violated section 14 of Wage Order 7-2001 by failing to provide seats for its cashiers behind checkout counters. She seeks civil penalties of $100 to $200 per violation, per each pay period for each affected employee, and attorney’s fees.  On November 8, 2011, Plaintiff Pickett filed a Notice of Related Case, stating that her case and the Bright case assert “identical claims.” After hearing arguments from the parties on December 1, 2011, the Court determined that the cases were related and assigned Pickett’s case to Judge William Fahey, the judge who presided over the Bright case.  Plaintiff Pickett then attempted to exercise a 170.6 challenge to Judge Fahey, which the Company opposed. The Court struck Plaintiff Pickett’s 170.6 challenge on December 16, 2011. Plaintiff Pickett appealed this ruling, filing a petition for writ of mandate on December 30, 2011. The Company filed an opposition to Plaintiff Pickett’s petition and oral argument took place on February 1, 2012.  On February 22, 2012, the Court of Appeal ruled in Plaintiff Pickett’s favor and issued the writ of mandate.  On April 2, 2012, the Company filed a petition for review of that ruling with the California Supreme Court, which Pickett answered on April 23, 2012.  The California Supreme Court denied the Company’s petition for review on May 9, 2012 and the Court of Appeals has remanded the case to Los Angeles Superior Court.  On October 2, 2012, the Company filed a motion to compel arbitration of Pickett’s individual claims or, in the alternative, to strike the representative action allegations in the Complaint.  The Court denied that motion on November 15, 2012, and on January 11, 2013, the Company filed a Notice of Appeal.  On October 15, 2013, the Court of Appeals affirmed the trial court’s ruling.  The Company has until November 25, 2013 to seek review of the decision in the California Supreme Court.  On June 27, 2013, Plaintiff Pickett entered into a settlement agreement and release with the Company in another matter.  Payment has been made to Plaintiff Pickett under that agreement and the other action has been dismissed.  The Company’s position is that that release she executed in that matter waives the claims she asserts in this action, waives her right to proceed on a class or representative basis or as a private attorney general, and requires her to dismiss this action with prejudice as to her individual claims, thus mooting the pending appeal.  The Company notified Plaintiff Pickett of its position by a letter dated as of July 30, 2013, but she has yet to dismiss the lawsuit.  The Company cannot predict the outcome of this lawsuit or the amount of potential loss, if any, that it could face as a result of such lawsuit.

Sofia Wilton Barriga v. 99¢ Only Stores, Superior Court of the State of California, County of Riverside.  Plaintiff, a former store associate, filed this action on August 5, 2013.  She asserts claims on behalf of herself and all others allegedly similarly situated under the California Labor Code for alleged failure to pay wages for all hours worked, failure to provide meal periods, failure to pay wages timely upon termination, and failure to provide accurate wage statements.  Ms. Barriga also asserts a derivative claim for unfair competition under the California Business and Professions Code.  Ms. Barriga seeks to represent a class of all non-exempt employees who were employed in California in 99¢ Only retail stores who worked the graveyard shift at any time from August 5, 2009, through the date of trial or settlement.  Plaintiff seeks to recover alleged unpaid wages, statutory penalties, interest, attorney’s fees and costs, and restitution.  On September 23, 2013, the Company filed an answer denying all material allegations.  A case management conference was held on October 4, 2013, at which the court ordered that discovery may proceed as to class certification issues only and set a further status conference for August 5, 2014.  The Company cannot predict the outcome of this lawsuit or the amount of potential loss, if any, that it could face as a result of such lawsuit.

22

District Attorney Investigation

In August 2013, the Company received a pre-litigation subpoena from the San Joaquin County and Alameda County District Attorney offices.  This subpoena arises out of an investigation of the Company’s hazardous materials, hazardous substances and hazardous waste practices at its California retail stores and distribution centers that is being conducted jointly by the District Attorney of San Joaquin County along with other environmental prosecutorial offices in the state of California (the “Prosecutors”).  This investigation arises out of the Notices to Comply (“Notices”) received by the Company for certain of its stores and distribution centers.

The Notices alleged non-compliance with hazardous waste, hazardous substances and hazardous material regulatory requirements imposed under California law identified during compliance inspections and required corrective actions to be taken by certain dates set forth in the Notices.  The Company believes that it properly implemented the corrective actions required by the Notices; however, it now faces additional demands to improve its hazardous waste and hazardous material compliance programs.  The Company is cooperating with the Prosecutors in their investigation and is working with them to implement revisions to such programs.

The Prosecutors can also seek civil penalties and investigation costs for the alleged instances of past non-compliance, even after corrective action is taken.  No penalties or costs have been demanded and the Company cannot predict the amount of penalties that may be sought.

Other Matters

The Company is also subject to other private lawsuits, administrative proceedings and claims that arise in its ordinary course of business.  A number of these lawsuits, proceedings and claims may exist at any given time.  While the resolution of such a lawsuit, proceeding or claim may have an impact on the Company’s financial results for the period in which it is resolved, and litigation is inherently unpredictable, in management’s opinion, none of these matters arising in the ordinary course of business is expected to have a material adverse effect on the Company’s financial position, results of operations or overall liquidity.

12.Assets Held for Sale

Assets held for sale during the quarter ended September 28, 2013 consisted of the vacant land in La Quinta, California and the vacant land in Rancho Mirage, California.  The carrying value as of September 28, 2013 for the La Quinta land was $0.4 million and for the Rancho Mirage land was $1.7 million.

In October 2013, the Company completed the sale of the land in La Quinta, California and received proceeds of $0.7 million.

13.Other Accrued Expenses

Other accrued expenses as of September 28, 2013 and March 30, 2013 are as follows (in thousands):

	September 28, 2013		March 30, 2013
Accrued interest	$	12,358	$	9,243
Accrued occupancy costs	10,546		7,514
Accrued professional fees, outside services and advertising	4,880		3,271
Accrued legal reserves and fees	4,607		3,367
Other	8,000		6,300
Total other accrued expenses	$	40,391	$	29,695

14.New Authoritative Standards

On July 27, 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment,” (“ASU 2012-02”). The ASU 2012-02 provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required. However, if an entity concludes otherwise, it would be required to determine the fair value of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under GAAP. The new guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. This new guidance became effective for the Company in the first quarter of fiscal 2014 and did not have a material impact on the Company or its consolidated financial statements.

23

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”), which is effective for reporting periods beginning after December 15, 2012.  ASU 2013-02 was issued to improve the reporting of reclassifications out of AOCI.  ASU 2013-02 requires companies to provide information about the amounts reclassified out of AOCI either in a single note or on the face of the financial statements.  Significant amounts reclassified out of AOCI should be presented by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified in its entirety to net income in the same reporting period.  For amounts not required to be reclassified in their entirety to net income, a cross-reference to other disclosures provided for in accordance with GAAP is required.  This new guidance became effective for the Company in the first quarter of fiscal 2014 and did not have a material impact the on the Company or its consolidated financial statements.

In July 2013, the FASB issued ASU 2013-10, “Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes” (“ASU 2013-10”), which is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.  ASU 2013-10 was issued to allow the use of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as benchmark interest rate for hedge accounting purposes in addition to interest rates on direct treasury obligations of the United States government and LIBOR.  In addition, this new guidance removes the restriction on using different benchmark rates for similar hedges.  This new guidance became effective for the Company in the second quarter of fiscal 2014 and did not have a material impact on the Company or its consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”), which is effective for fiscal years and interim periods beginning after December 15, 2013.  ASU 2013-11 provides guidance regarding the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar loss or a tax credit carryforward exists.  Under certain circumstances, unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or tax credit carryforward.  This new guidance will be effective for the Company in the fourth quarter of fiscal 2014 and is not expected to have a material impact on the Company or its consolidated financial statements.

15.Financial Guarantees

On December 29, 2011, the Company (the “Issuer”) issued $250 million principal amount of the Senior Notes.  The Senior Notes are irrevocably and unconditionally guaranteed, jointly and severally, by each of the Issuer’s existing and future restricted subsidiaries that are guarantors under the Credit Facilities and certain other indebtedness.

As of September 28, 2013 and March 30, 2013, the Senior Notes are guaranteed by 99 Cents Only Stores Texas, Inc. (the “Subsidiary Guarantor”).

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

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CONDENSED CONSOLIDATING BALANCE SHEETS

As of September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
ASSETS
Current Assets:
Cash	$	75,828		$	1,550		$	—		$	77,378
Accounts receivable, net	1,705			189			—			1,894
Income taxes receivable	3,775			—			—			3,775
Deferred income taxes	35,377			—			—			35,377
Inventories, net	169,579			27,885			—			197,464
Assets held for sale	2,106			—			—			2,106
Other	16,830			1,446			—			18,276
Total current assets	305,200			31,070			—			336,270
Property and equipment, net	418,393			63,083			—			481,476
Deferred financing costs, net	19,568			—			—			19,568
Equity investments and advances to subsidiaries	180,065			98,887			(278,952		)	—
Intangible assets, net	465,692			2,630			—			468,322
Goodwill	479,745			—			—			479,745
Deposits and other assets	4,592			465			—			5,057
Total assets	$	1,873,255		$	196,135		$	(278,952	)	$	1,790,438
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	64,928		$	8,352		$	—		$	73,280
Intercompany payable	98,888			91,454			(190,342		)	—
Payroll and payroll-related	22,295			1,786			—			24,081
Sales tax	5,880			473			—			6,353
Other accrued expenses	36,577			3,814			—			40,391
Workers’ compensation	37,125			90			—			37,215
Current portion of long-term debt	3,216			—			—			3,216
Current portion of capital lease obligation	86			—			—			86
Total current liabilities	268,995			105,969			(190,342		)	184,622
Long-term debt, net of current portion	751,234			—			—			751,234
Unfavorable lease commitments, net	12,432			490			—			12,922
Deferred rent	8,583			1,066			—			9,649
Deferred compensation liability	1,070			—			—			1,070
Capital lease obligation, net of current portion	227			—			—			227
Long-term deferred income taxes	181,634			—			—			181,634
Other liabilities	6,660			—			—			6,660
Total liabilities	1,230,835			107,525			(190,342		)	1,148,018
Shareholders’ Equity:
Preferred stock	—			—			—			—
Common stock	—			—			—			—
Additional paid-in capital	649,106			99,943			(99,943		)	649,106
Accumulated deficit	(5,571		)	(11,333		)	11,333			(5,571		)
Other comprehensive loss	(1,115		)	—			—			(1,115		)
Total shareholders’ equity	642,420			88,610			(88,610		)	642,420
Total liabilities and shareholders’ equity	$	1,873,255		$	196,135		$	(278,952	)	$	1,790,438

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CONDENSED CONSOLIDATING BALANCE SHEETS

As of March 30, 2013

(In thousands)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
ASSETS
Current Assets:
Cash	$	45,841		$	113		$	(478	)	$	45,476
Accounts receivable, net	1,672			179			—			1,851
Income taxes receivable	3,969			—			—			3,969
Deferred income taxes	33,139			—			—			33,139
Inventories, net	172,068			29,533			—			201,601
Assets held for sale	2,106			—			—			2,106
Other	15,300			1,070			—			16,370
Total current assets	274,095			30,895			(478		)	304,512
Property and equipment, net	413,543			62,508			—			476,051
Deferred financing costs, net	21,016			—			—			21,016
Equity investments and advances to subsidiaries	119,642			34,631			(154,273		)	—
Intangible assets, net	468,593			2,766			—			471,359
Goodwill	479,745			—			—			479,745
Deposits and other assets	4,191			363			—			4,554
Total assets	$	1,780,825		$	131,163		$	(154,751	)	$	1,757,237
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	46,595		$	3,894		$	(478	)	$	50,011
Intercompany payable	32,991			28,075			(61,066		)	—
Payroll and payroll-related	15,798			1,298			—			17,096
Sales tax	6,628			572			—			7,200
Other accrued expenses	26,892			2,803			—			29,695
Workers’ compensation	39,423			75			—			39,498
Current portion of long-term debt	8,567			—			—			8,567
Current portion of capital lease obligation	83			—			—			83
Total current liabilities	176,977			36,717			(61,544		)	152,150
Long-term debt, net of current portion	749,758			—			—			749,758
Unfavorable lease commitments, net	14,200			633			—			14,833
Deferred rent	4,217			606			—			4,823
Deferred compensation liability	1,153			—			—			1,153
Capital lease obligation, net of current portion	271			—			—			271
Long-term deferred income taxes	186,851			—			—			186,851
Other liabilities	8,428			—			—			8,428
Total liabilities	1,141,855			37,956			(61,544		)	1,118,267
Shareholders’ Equity:
Preferred stock	—			—			—			—
Common stock	—			—			—			—
Additional paid-in capital	654,424			99,943			(99,943		)	654,424
Accumulated deficit	(14,202		)	(6,736		)	6,736			(14,202		)
Other comprehensive loss	(1,252		)	—			—			(1,252		)
Total shareholders’ equity	638,970			93,207			(93,207		)	638,970
Total liabilities and shareholders’ equity	$	1,780,825		$	131,163		$	(154,751	)	$	1,757,237

26

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Second Quarter Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	404,801		$	39,122		$	—		$	443,923
Cost of sales (excluding depreciation and amortization expense shown separately below)	251,240			25,878			—			277,118
Gross profit	153,561			13,244			—			166,805
Selling, general and administrative expenses:
Operating expenses	124,964			13,947			—			138,911
Depreciation and amortization	13,500			2,627			—			16,127
Total selling, general and administrative expenses	138,464			16,574			—			155,038
Operating income (loss)	15,097			(3,330		)	—			11,767
Other expense:
Interest expense	15,174			—			—			15,174
Equity in (earnings) loss of subsidiaries	3,330			—			(3,330		)	—
Total other expense, net	18,504			—			(3,330		)	15,174
Loss before provision for income taxes	(3,407		)	(3,330		)	3,330			(3,407		)
Benefit for income taxes	(8,874		)	—			—			(8,874		)
Net income (loss)	$	5,467		$	(3,330	)	$	3,330		$	5,467
Comprehensive income	$	5,135		$	—		$	—		$	5,135

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the First Half Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	801,326		$	76,463		$	—		$	877,789
Cost of sales (excluding depreciation and amortization expense shown separately below)	493,916			49,881			—			543,797
Gross profit	307,410			26,582			—			333,992
Selling, general and administrative expenses:
Operating expenses	244,725			26,018			—			270,743
Depreciation and amortization	26,734			5,161			—			31,895
Total selling, general and administrative expenses	271,459			31,179			—			302,638
Operating income (loss)	35,951			(4,597		)	—			31,354
Other (income) expense:
Interest income	(15		)	—			—			(15		)
Interest expense	29,862			—			—			29,862
Equity in (earnings) loss of subsidiaries	4,597			—			(4,597		)	—
Total other expense, net	34,444			—			(4,597		)	29,847
Income (loss) before provision for income taxes	1,507			(4,597		)	4,597			1,507
Benefit for income taxes	(7,124		)	—			—			(7,124		)
Net income (loss)	$	8,631		$	(4,597	)	$	4,597		$	8,631
Comprehensive income	$	8,768		$	—		$	—		$	8,768

27

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Second Quarter Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	359,352		$	34,011		$	—		$	393,363
Cost of sales (excluding depreciation and amortization expense shown separately below)	220,996			21,703			—			242,699
Gross profit	138,356			12,308			—			150,664
Selling, general and administrative expenses:
Operating expenses	108,694			11,668			—			120,362
Depreciation and amortization	12,001			2,372			—			14,373
Total selling, general and administrative expenses	120,695			14,040			—			134,735
Operating income (loss)	17,661			(1,732		)	—			15,929
Other (income) expense:
Interest income	(35		)	—			—			(35		)
Interest expense	15,537			—			—			15,537
Equity in (earnings) loss of subsidiaries	1,732			—			(1,732		)	—
Other	3			—			—			3
Total other expense (income), net	17,237			—			(1,732		)	15,505
Income (loss) before provision for income taxes	424			(1,732		)	1,732			424
Provision for income taxes	214			—			—			214
Net income (loss)	$	210		$	(1,732	)	$	1,732		$	210
Comprehensive loss	$	(259	)	$	—		$	—		$	(259	)

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the First Half Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	724,627		$	69,686		$	—		$	794,313
Cost of sales (excluding depreciation and amortization expense shown separately below)	442,579			44,022			—			486,601
Gross profit	282,048			25,664			—			307,712
Selling, general and administrative expenses:
Operating expenses	215,724			23,409			—			239,133
Depreciation and amortization	23,537			5,029			—			28,566
Total selling, general and administrative expenses	239,261			28,438			—			267,699
Operating income (loss)	42,787			(2,774		)	—			40,013
Other (income) expense:
Interest income	(215		)	(44		)	—			(259		)
Interest expense	31,114			—			—			31,114
Equity in (earnings) loss of subsidiaries	2,730			—			(2,730		)	—
Loss on extinguishment of debt	16,346			—			—			16,346
Other	67			—			—			67
Total other expense (income), net	50,042			(44		)	(2,730		)	47,268
Loss before provision for income taxes	(7,255		)	(2,730		)	2,730			(7,255		)
Benefit for income taxes	(2,574		)	—			—			(2,574		)
Net loss	$	(4,681	)	$	(2,730	)	$	2,730		$	(4,681	)
Comprehensive loss	$	(5,699	)	$	—		$	—		$	(5,699	)

28

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the First Half Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net cash provided by operating activities	$	61,629		$	6,286		$	478		$	68,393
Cash flows from investing activities:
Purchases of property and equipment	(27,498		)	(4,850		)	—			(32,348		)
Proceeds from sales of fixed assets	536			1			—			537
Net cash used in investing activities	(26,962		)	(4,849		)	—			(31,811		)
Cash flows from financing activities:
Payment of debt	(4,639		)	—			—			(4,639		)
Payments of capital lease obligation	(41		)	—			—			(41		)
Net cash used in financing activities	(4,680		)	—			—			(4,680		)
Net increase in cash	29,987			1,437			478			31,902
Cash — beginning of period	45,841			113			(478		)	45,476
Cash — end of period	$	75,828		$	1,550		$	—		$	77,378

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the First Half Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantors			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net cash provided by operating activities	$	33,925		$	553		$	—		$	34,478
Cash flows from investing activities:
Purchases of property and equipment	(18,553		)	(1,308		)	—			(19,861		)
Proceeds from sale of fixed assets	11,549			—			—			11,549
Purchases of investments	(449		)	—			—			(449		)
Proceeds from sale of investments	2,470			—			—			2,470
Investment in subsidiaries	(4,213		)	—			4,213			—
Net cash used in investing activities	(9,196		)	(1,308		)	4,213			(6,291		)
Cash flows from financing activities:
Payment of debt	(2,618		)	—			—			(2,618		)
Payments of capital lease obligation	(38		)	—			—			(38		)
Payment of debt issuance costs	(11,230		)	—			—			(11,230		)
Capital contributions	—			4,213			(4,213		)	—
Net cash (used in) provided by financing activities	(13,886		)	4,213			(4,213		)	(13,886		)
Net increase in cash	10,843			3,458			—			14,301
Cash — beginning of period	23,793			3,973			—			27,766
Cash — end of period	$	34,636		$	7,431		$	—		$	42,067

29

16.Subsequent Events

Parent Stock Purchase Agreements

On September  30, 2013, in connection with Stéphane Gonthier’s employment as President and Chief Executive Officer of the Company and the Parent, Parent entered into a Stock Purchase Agreement with Avenue of the Stars Investments LLC, a Delaware limited liability company (the “Purchaser”), of which Mr. Gonthier is the sole member.  Pursuant to the Stock Purchase Agreement, Parent issued and sold to the Purchaser 4,922 shares of Class A Common Stock and 4,922 shares of Class B Common Stock, for an aggregate purchase price of $6.0 million.

On October 8, 2013, Parent entered into a Stock Purchase Agreement with Andrew Giancamilli, a director of Parent and of the Company.  Pursuant to the terms of the Stock Purchase Agreement, Mr. Giancamilli purchased 410 shares of Class A Common Stock and 410 shares of Class B Common Stock, for an aggregate purchase price of $0.5 million.

Credit Facilities Amendment

On October 8, 2013, the Company completed a repricing of its First Lien Term Loan Facility borrowed $100 million of incremental term loans and amended certain other provisions thereto.  The amendment decreased the interest rate applicable to the term loans from LIBOR plus 4.00% (or base rate plus 3.00%) to LIBOR plus 3.50% (or base rate plus 2.50%) and the LIBOR floor from 1.25% to 1.00%.  Under the amendment, the incremental term loans have the same interest rate as the other term loans. The Company will continue to be required to make scheduled quarterly payments each equal to 0.25% of the amended principal amount of the term loan (approximately $1.5 million).  The maturity date of January 13, 2019 of the First Lien Term Loan Facility was not affected by the amendment.

The Company determined that a portion of the repricing transaction should be accounted for as debt extinguishment. In the third quarter of fiscal 2014, in accordance with applicable guidance for debt modification and extinguishment, the Company plans to record a loss on debt extinguishment of approximately $4.4 million related to a portion of the unamortized debt issuance costs, unamortized original issue discount and repricing costs incurred in connection with the amendment for the portion of the First Lien Term Loan Facility that was extinguished.

In connection with the amendment to the First Lien Term Loan Facility, on October 8, 2013, the ABL Facility was also amended.

Each amendment (a) amended certain restricted payment provisions to permit the Gold-Schiffer Purchase and (b) removed the maximum capital expenditures covenant.

In addition, the amendment to the First Lien Term Loan Facility (a) modifies the existing restricted payment builder basket construct so that from and after March 31, 2013 it is based on 50% of positive Consolidated Net Income (as defined in the First Lien Term Loan Facility agreement), subject to a reduction for 100% of negative Consolidated Net Income, and (b) permits proceeds of any sale leasebacks of any assets acquired after January 13, 2012, to be reinvested in the Company’s business without restriction.

Chief Executive Officer Equity Awards

On October 9, 2013, in connection with Stéphane Gonthier’s employment as President and Chief Executive Officer of the Company and the Parent, the compensation committee of the Parent granted to Mr. Gonthier stock options to purchase an aggregate of 21,505 shares of each of the Class A and Class B Common Stock (the “Options”).  Subject to the continued employment of Mr. Gonthier, (a) 75% of the Options will vest 30% on the first anniversary of the grant date, 20% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries of the grant date and (b) 25% of the Options will vest subject to the Company’s and Parent’s achievement of performance hurdles.  The Options are subject to the terms of the 2012 Plan and the award agreement under which they were granted.

Repurchase Transaction with Rollover Investors

On October 15, 2013, Parent and the Company entered into an agreement with the Sellers, pursuant to which (a)(i) Parent purchased from each Seller all of the shares of Class A Common Stock and Class B Common Stock, owned by such Seller and (ii) all of the options to purchase shares of Class A Common Stock and Class B Common Stock held by such Seller were cancelled and forfeited, for aggregate consideration of approximately $129.7 million and (b) the Company agreed to certain amendments to the Non-Competition, Non-Solicitation and Confidentiality Agreements and the Separation and Release Agreements with the Sellers who were former management of the Company.  The Gold-Schiffer Purchase was completed on October 21, 2013. Prior to completion of the transaction, Howard Gold resigned from the board of directors of each of Parent and the Company.  The Gold-Schiffer Purchase was funded through a combination of borrowings of $100 million of incremental term loans under the First Lien Term Loan Facility and cash on hand at the Company and Parent.  In connection with the Gold-Schiffer Purchase, the Company made a distribution to, and investment in shares of preferred stock of, Parent.

30

Conversion to LLC

On October 18, 2013, the Company converted (the “Conversion”) from a California corporation to a California limited liability company, 99 Cents Only Stores LLC (“99 LLC”), that is managed by a single member, Parent.  In connection with the Conversion, each outstanding share of Class A common stock of the Company, par value $0.01 per share, was converted into one membership unit of 99 LLC, and each outstanding share of Class B common stock of the Company, par value $0.01 per share, was cancelled and forfeited.  Pursuant to the laws of the State of California, all rights and property of the Company were vested in 99 LLC and all debts, liabilities and obligations of the Company continued as debts, liabilities and obligations of 99 LLC.  99 LLC has elected to be treated as a disregarded entity for United States federal income tax purposes.  The conversion to LLC did not have any impact on deferred tax assets or liabilities, and the Company will continue to utilize the liability method of accounting for income taxes.  The Company and its Parent will continue to file consolidated or combined income tax returns with its subsidiaries in all jurisdictions.  The Company and its Parent will continue to allocate tax expense.

31

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this quarterly report on Form 10-Q (this “Report”), unless the context suggests otherwise, the terms “Company,” “we,” “us,” and “our” refer to 99¢ Only Stores and its consolidated subsidiaries prior to the Conversion (as described in Note 16 to the Unaudited Consolidated Financial Statements) and to 99 Cents Only Stores LLC and its consolidated subsidiaries on or after the Conversion.

General

We are an extreme value retailer of primarily consumable and general merchandise with an emphasis on name-brand products.  Our stores offer a wide assortment of regularly available consumer goods as well as a broad variety of first-quality closeout merchandise. In addition, we carry many fresh produce, deli, dairy and frozen food products found in traditional grocery stores.

On January 13, 2012, we were acquired through a merger (the “Merger”) with a subsidiary of Number Holdings, Inc., a Delaware corporation (“Parent”) with us surviving. In connection with the Merger, we became a subsidiary of Parent, which is controlled by affiliates of Ares Management LLC and Canada Pension Plan Investment Board, and prior to the Gold-Schiffer Purchase (as described in Notes 9 and 16 to the Unaudited Consolidated Financial Statements) certain former members of our management and their affiliates (the “Rollover Investors”).

The Merger was accounted for as a business combination, whereby the purchase price paid to effect the Merger was allocated to recognize the acquired assets and liabilities at fair value.  In connection with the Merger, we incurred significant indebtedness.  Subsequent to the Merger, interest expense and non-cash depreciation and amortization charges have significantly increased.  Our fiscal year 2014 (“fiscal 2014”) began on March 31, 2013 and will end on March 29, 2014 and will consist of 52 weeks.  Our fiscal year 2013 (“fiscal 2013”) began on April 1, 2012 and ended on March 30, 2013 and consisted of 52 weeks.  The second quarter ended September 28, 2013 (the “second quarter of fiscal 2014”) and the second quarter ended September 29, 2012 (the “second quarter of fiscal 2013”) were each comprised of 91 days.  The first half ended September 28, 2013 (“first half of fiscal 2014”) and first half ended September 29, 2012 (“first half of fiscal 2013”) were each comprised of 182 days.

For the second quarter of fiscal 2014, we had net sales of $443.9 million, operating income of $11.8 million and net income of $5.5 million.  Sales increased during the second quarter of fiscal 2014 primarily due to a 5.9% increase in same-store sales, the full quarter effect of 19 new stores opened in fiscal 2013, and the effect of 14 new stores opened in fiscal 2014.  For the first half of fiscal 2014, we had net sales of $877.8 million, operating income of $31.4 million and net income of $8.6 million.  Sales increased during the first half of fiscal 2014 primarily due to a 4.5% increase in same-store sales, the full year effect of 19 new stores opened in fiscal 2013, and the effect of 14 new stores opened in fiscal 2014.

During the second quarter of fiscal 2014, we opened seven net new stores. In first half of fiscal 2014, we opened 13 net new stores.  In fiscal 2014, we currently intend to open 26 to 30 new stores, all of which are expected to be opened in our existing markets. We believe that our near term growth for the remainder of fiscal 2014 will primarily result from new store openings in our existing territories and increases in same-store sales.

Critical Accounting Policies and Estimates

Our critical accounting policies reflecting management’s estimates and judgments are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended March 30, 2013.

Results of Operations

The following discussion defines the components of the statement of income.

Net Sales: Revenue is recognized at the point of sale in our stores (“retail sales”).  Bargain Wholesale sales revenue is recognized in accordance with the shipping terms agreed upon on the purchase order.  Bargain Wholesale sales are typically recognized free on board origin, where title and risk of loss pass to the buyer when the merchandise leaves our distribution facility.

Cost of Sales: Cost of sales includes the cost of inventory, freight in, inter-state warehouse transportation costs and inventory shrinkage (obsolescence, spoilage, and shrink), and is net of discounts and allowances.  Cash discounts for satisfying early payment terms are recognized when payment is made, and allowances and rebates based upon milestone achievements such as reaching a certain volume of purchases of a vendor’s products are included as a reduction of cost of sales when such contractual milestones are reached. In addition, we analyze our inventory levels and related cash discounts received to arrive at a value for cash discounts to be included in the inventory balance.  We do not include purchasing, receiving, distribution, warehouse costs and transportation to and from stores in our cost of sales, which totaled $23.2 million and $19.0 million for the second quarter of fiscal 2014 and 2013, respectively, and totaled $44.4 million and $37.1 million for the first half of fiscal 2014 and 2013, respectively.  Due to this classification, our gross profit rates may not be comparable to those of other retailers that include costs related to their distribution network in cost of sales.

32

Selling, General and Administrative Expenses: Selling, general, and administrative expenses include purchasing, receiving, inspection and warehouse costs, the costs of selling merchandise in stores (payroll and associated costs, occupancy and other store-level costs), distribution costs (payroll and associated costs, occupancy, transportation to and from stores, and other distribution-related costs), and corporate costs (payroll and associated costs, occupancy, advertising, professional fees, stock-based compensation expense and other corporate administrative costs).  Selling, general, and administrative expenses also include depreciation and amortization expense.

Other Expense (Income): Other expense (income) relates primarily to loss on extinguishment of debt, interest expense on our debt, capitalized leases, net of interest income on our marketable securities.

The following table sets forth selected income statement data, including such data as percentage of net sales for the periods indicated (percentages may not add up due to rounding):

	For the Second Quarter Ended										For the First Half Ended
	September 28, 2013			% of Net Sales		September 29, 2012			% of Net Sales		September 28, 2013			% of Net Sales		September 29, 2012			% of Net Sales
Net Sales:
99¢ Only Stores	$	431,553		97.2	%	$	382,073		97.1	%	$	852,489		97.1	%	$	771,029		97.1	%
Bargain Wholesale	12,370			2.8		11,290			2.9		25,300			2.9		23,284			2.9
Total sales	443,923			100.0		393,363			100.0		877,789			100.0		794,313			100.0
Cost of sales (excluding depreciation and amortization expense shown separately below)	277,118			62.4		242,699			61.7		543,797			62.0		486,601			61.3
Gross profit	166,805			37.6		150,664			38.3		333,992			38.0		307,712			38.7
Selling, general and administrative expenses:
Operating expenses	138,911			31.3		120,362			30.6		270,743			30.8		239,133			30.1
Depreciation	15,685			3.5		13,931			3.5		31,011			3.5		27,683			3.5
Amortization of intangible assets	442			0.1		442			0.1		884			0.1		883			0.1
Total selling, general and administrative expenses	155,038			34.9		134,735			34.3		302,638			34.5		267,699			33.7
Operating income	11,767			2.7		15,929			4.0		31,354			3.6		40,013			5.0
Other (income) expense:
Interest income	—			0.0		(35		)	0.0		(15		)	0.0		(259		)	0.0
Interest expense	15,174			3.4		15,537			3.9		29,862			3.4		31,114			3.9
Loss on extinguishment of debt	—			0.0		—			0.0		—			0.0		16,346			2.1
Other	—			0.0		3			0.0		—			0.0		67			0.0
Total other expense, net	15,174			3.4		15,505			3.9		29,847			3.4		47,268			6.0
(Loss) income before provision for income taxes	(3,407		)	(0.8	)	424			0.1		1,507			0.2		(7,255		)	(0.9	)
(Benefit) provision for income taxes	(8,874		)	(2.0	)	214			0.1		(7,124		)	(0.8	)	(2,574		)	(0.3	)
Net income (loss)	$	5,467		1.2	%	$	210		0.1	%	$	8,631		1.0	%	(4,681		)	(0.6	)%

33

Second Quarter Ended September 28, 2013 Compared to Second Quarter Ended September 29, 2012

Net sales.  Total net sales increased $50.5 million, or 12.9%, to $443.9 million in the second quarter of fiscal 2014, from $393.4 million in the second quarter of fiscal 2013.  Net retail sales increased $49.5 million, or 13.0%, to $431.6 million in the second quarter of fiscal 2014, from $382.1 million in the second quarter of fiscal 2013.  Bargain Wholesale net sales increased by approximately $1.1 million, or 9.6%, to $12.4 million in the second quarter of fiscal 2014, from $11.3 million in the second quarter of fiscal 2013.  Of the $49.5 million increase in net retail sales, $22.1 million was due to a 5.9% increase in same-store sales.  Approximately, two-thirds of the same-store sales increase was attributable to increase in transaction counts and approximately one-third of the increase was attributable to higher average ticket.  The full quarter effect of stores opened in fiscal 2013 increased net retail sales by $16.9 million and the effect of new stores opened during fiscal 2014 increased net retail sales by $12.6 million.  The increase in sales was partially offset by a decrease in sales of approximately $2.1 million due to the effect of a closed store.

Gross profit.  Gross profit increased $16.1 million, or 10.7%, to $166.8 million in the second quarter of fiscal 2014, from $150.7 million in the second fiscal quarter of 2013.  As a percentage of net sales, overall gross margin decreased to 37.6% in the second quarter of fiscal 2014, from 38.3% in the second quarter of fiscal 2013.  Among the gross profit components, cost of products sold decreased by 10 basis points compared to the second quarter of fiscal 2013, primarily attributable to the shift in the product mix.  Inventory shrinkage increased by 30 basis points compared to the second quarter of fiscal 2013, primarily due to higher scrap and spoilage.  The remaining change was made up of increases in freight costs of 20 basis points and other less significant items included in cost of sales.

Operating expenses.  Operating expenses increased by $18.5 million, or 15.4%, to $138.9 million in the second quarter of fiscal 2014, from $120.4 million in the second quarter of fiscal 2013.  As a percentage of net sales, operating expenses increased to 31.3% for the second quarter of fiscal 2014, from 30.6% for the second quarter of fiscal 2013.  Of the 70 basis point increase in operating expenses as a percentage of net sales, retail operating expenses increased by 50 basis points, distribution and transportation costs increased by 40 basis points, corporate expenses increased by 100 basis points, and other items decreased by 120 basis points.

Retail operating expenses for the second quarter of fiscal 2014 increased as a percentage of net sales by 50 basis points to 22.4% of net sales, compared to 21.9% of net sales for the second quarter of fiscal 2013.  The majority of the increase was due to higher utilities expenses with smaller increases in other expenses such as rent, advertising, and outside services fees as a percentage of net sales.

Distribution and transportation expenses for the second quarter of fiscal 2014 increased as a percentage of net sales by 40 basis points to 5.2% of net sales, compared to 4.8% of net sales for the second quarter of fiscal 2013.  The increase in distribution and transportation expenses compared to the second quarter of fiscal 2013 was primarily due to increase in rent expense for additional warehouse space and higher labor costs.

Corporate operating expenses for the second quarter of fiscal 2014 increased as a percentage of net sales by 100 basis points to 4.4% of net sales as compared to 3.4% of net sales for the second quarter of fiscal 2013.  The increase as a percentage of sales was primarily due to higher outside service professional fees, payroll-related expenses and legal expenses.

The remaining operating expenses for the second quarter of fiscal 2014 decreased as a percentage of net sales by 120 basis points to (0.7)% compared to 0.6% of net sales for the second quarter of fiscal 2013.  In second quarter of fiscal 2014, as a result of a decrease in the fair value of former executive put rights, we recorded a negative stock-based compensation expense of $(3.7) million, compared to an expense of $0.8 million in the second quarter of fiscal 2013.

Depreciation and amortization.  Depreciation increased $1.8 million to $15.7 million in the second quarter of fiscal 2014 from $13.9 million in the second quarter of fiscal 2013.  Depreciation as a percentage of net sales was 3.5% in each of the second quarter of fiscal 2014 and 2013.  The increase was primarily a result of adding new depreciable assets from new store openings, the full quarter depreciation impact of stores opened in fiscal 2013 and adding new depreciable assets for technology projects. Amortization of intangibles was $0.4 million in each of the second quarter of fiscal 2014 and 2013.

Operating income.  Operating income was $11.8 million for the second quarter of fiscal 2014 compared to operating income of $15.9 million for the second quarter of fiscal 2013.  Operating income as a percentage of net sales was 2.7% in the second quarter of fiscal 2014 compared to 4.0% in the second quarter of fiscal 2013.  The decrease in operating income as a percentage of net sales was primarily due to changes in gross margin and operating expenses, as discussed above.

Interest expense.  Interest expense was $15.2 million for the second quarter of 2014 compared to interest expense of $15.5 million for the second quarter of fiscal 2013, primarily reflecting debt service on borrowings used to finance the Merger.

(Benefit) provision for income taxes. The provision for income taxes was a benefit of $8.9 million for the second quarter of fiscal 2014 compared to an expense of $0.2 million for the second quarter of fiscal 2013, primarily due to the release of the valuation allowance associated with the California enterprise zone credit carryforwards (as described in Note 10 to the Consolidated Financial Statements).

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Net income.  As a result of the items discussed above, net income for the second quarter of fiscal 2014 was $5.5 million compared to $0.2 million for the second quarter of fiscal 2013.  Net income as a percentage of net sales was 1.2% for the second quarter of fiscal 2014 compared to net income of 0.1% for the second quarter of fiscal 2013.

First Half Ended September 28, 2013 Compared to the First Half Ended September 29, 2012

Net sales.  Total net sales increased $83.5 million, or 10.5%, to $877.8 million for the first half of fiscal 2014, from $794.3 million for the first half of fiscal 2013.  Net retail sales increased $81.5 million, or 10.6%, to $852.5 million for the first half of fiscal 2014, from $771.0 million for the first half of fiscal 2013.  Bargain Wholesale net sales increased by approximately $2.0 million, or 8.7%, to $25.3 million for the first half of fiscal 2014, from $23.3 million for the first half of fiscal 2013.  Of the $81.5 million increase in net retail sales, $33.9 million was due to a 4.5% increase in same-store sales, which were negatively impacted by a shift in the Easter holiday compared to the same period in the prior year. Approximately, two-thirds of the same-store sales increase was attributable to increase in transaction counts and approximately one-third of the increase was attributable to higher average ticket.  The full quarter effect of stores opened in fiscal 2013 increased net retail sales by $37.3 million and the effect of new stores opened during fiscal 2014 increased net retail sales by $14.3 million.  The increase in sales was partially offset by a decrease in sales of approximately $4.0 million due to the effect of closed stores.

Gross profit.  Gross profit increased $26.3 million, or 8.5%, to $334.0 million for the first half of fiscal 2014, from $307.7 million for the first half of 2013.  As a percentage of net sales, overall gross margin decreased to 38.0% for the first half of fiscal 2014, from 38.7% for the first half of fiscal 2013.  Among the gross profit components, cost of products sold increased by 20 basis points compared for the first half of fiscal 2013, primarily attributable to the shift in the product mix away from higher margin seasonal Easter items due to the timing of the Easter holiday.  Inventory shrinkage increased by 20 basis points compared to the first half of fiscal 2013.  The remaining change was made up of increases in freight costs of 10 basis points and other less significant items included in cost of sales.

Operating expenses.  Operating expenses increased by $31.6 million, or 13.2%, to $270.7 million for the first half of fiscal 2014, from $239.1 million for the first half of fiscal 2013.  As a percentage of net sales, operating expenses increased to 30.8% for the first half of fiscal 2014, from 30.1% for the first half of fiscal 2013.  Of the 70 basis point increase in operating expenses as a percentage of net sales, retail operating expenses increased by 30 basis points, distribution and transportation costs increased by 40 basis points, corporate expenses increased by 80 basis points, and other items decreased by 80 basis points.

Retail operating expenses for the first half of fiscal 2014 increased as a percentage of net sales by 30 basis points to 21.9% of net sales, compared to 21.6% of net sales for the first half of fiscal 2013.  The majority of the increase was due to higher utilities and outside service professional fees as a percentage of net sales.

Distribution and transportation expenses for the first half of fiscal 2014 increased as a percentage of net sales by 40 basis points to 5.1% of net sales, compared to 4.7% of net sales for the first half of fiscal 2013.  The increase in distribution and transportation expenses compared to the first half of fiscal 2013, was primarily due to increase in rent expense for additional warehouse space and higher labor costs.

Corporate operating expenses for the first half of fiscal 2014 increased as a percentage of net sales by 80 basis points to 4.2% of net sales as compared to 3.4% of net sales for the first half of fiscal 2013.  The increase as a percentage of sales was primarily due to higher outside service professional fees, payroll-related expenses and legal expenses.

The remaining operating expenses for the first half of fiscal 2014 decreased as a percentage of net sales by 80 basis points to (0.4)% compared to 0.4% of net sales for the first half of fiscal 2013.  In the first half of fiscal 2014, as a result of a decrease in the fair value of former executive put rights, we recorded a negative stock-based compensation expense of $(5.3) million, compared to an expense of $1.6 million for the first half of fiscal 2013.

Depreciation and amortization.  Depreciation increased $3.3 million to $31.0 million for the first half of fiscal 2014 from $27.7 million for the first half of fiscal 2013.  Depreciation as a percentage of net sales was 3.5% in each of the first half of fiscal 2014 and 2013.  The increase was primarily a result of adding new depreciable assets from new store openings, the full quarter depreciation impact of stores opened in fiscal 2013 and adding new depreciable assets for completed information technology projects. Amortization of intangibles was $0.9 million in each of the first half of fiscal 2014 and 2013.

Operating income.  Operating income was $31.4 million for the first half of fiscal 2014 compared to operating income of $40.0 million for the first half of fiscal 2013.  Operating income as a percentage of net sales was 3.6% for the first half of fiscal 2014 compared to 5.0% for the first half of fiscal 2013.  The decrease in operating income as a percentage of net sales was primarily due to changes in gross margin and operating expenses, as discussed above.

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Interest expense and loss on extinguishment of debt.  Interest expense was $29.9 million for the first half of 2014 compared to interest expense of $31.1 million for the first half of fiscal 2013, primarily reflecting debt service on borrowings used to finance the Merger. Loss on extinguishment of debt was $16.3 million relating to amendment of the First Lien Term Loan Facility (as defined below) in April 2012.

Interest income and other expenses.  Interest income for the first half of fiscal 2014 was not significant due to liquidation of our previously-held investment portfolio. Interest income was $0.3 million for the first half of fiscal 2013.  Other expense for the first half of fiscal 2013 was less than $0.1 million.

Benefit for income taxes. The provision for income taxes was a benefit of $7.1 million for the first half of fiscal 2014 compared to a benefit of $2.6 million for the first half of fiscal 2013, primarily due to the release of the valuation allowance associated with the California enterprise zone carryforwards in the second quarter of fiscal 2014 (as described in Note 10 to the Consolidated Financial Statements).

Net income (loss).  As a result of the items discussed above, net income for the first half of fiscal 2014 was $8.6 million compared to net loss of $4.7 million for the first half of fiscal 2013.  Net income as a percentage of net sales was 1.0% for the first half of fiscal 2014 compared to net loss of (0.6)% for the first half of fiscal 2013.

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Liquidity and Capital Resources

Our capital requirements consist primarily of purchases of inventory, expenditures related to new store openings, working capital requirements for new and existing stores, including lease obligations, and debt service requirements.  Our primary sources of liquidity are the net cash flow from operations, which we believe will be sufficient to fund our regular operating needs and principal and interest payments on our indebtedness, together with availability under our ABL Facility (as defined below) for at least the next 12 months.  We currently do not intend to use the availability under our ABL Facility to fund our capital needs in fiscal 2014; however, depending on the exact timing of budgeted capital expenditures, we may borrow under our ABL Facility for short-term capital requirements from time to time. Our availability under our ABL Facility is not expected to affect our ability to make immediate buying decisions, willingness to take on large volume purchases or ability to pay cash or accept abbreviated credit terms.

As of the end of the second quarter of fiscal 2014, we held $77.4 million in cash, and our total indebtedness was $754.5 million consisting of borrowings under our First Lien Term Loan Facility of $504.4 million and $250 million of our Senior Notes (as defined below).  We had up to an additional $175 million of available borrowings under our ABL Facility and, subject to certain limitations and the satisfaction of certain conditions, we were also permitted to incur up to an aggregate of $200 million of additional borrowings under incremental facilities in our ABL Facility and First Lien Term Loan Facility.  As of September 28, 2013, availability under the ABL Facility subject to the borrowing base was $133.9 million.  We also have, and will continue to have, significant lease obligations.  As of September 28, 2013, our minimum annual rental obligations under long-term operating leases for the remainder of fiscal 2014 are $28.5 million.  These obligations are significant and could affect our ability to pursue significant growth initiatives, such as strategic acquisitions, in the future.  However, we expect to be able to service these obligations from our net cash flow from operations, and we do not expect these obligations to negatively affect our expansion plans for the foreseeable future, including our plans to increase our store count, planned upgrades to our information technology systems and other planned capital expenditures.

Credit Facilities and Senior Notes

On January 13, 2012, in connection with the Merger, we obtained Credit Facilities provided by a syndicate of lenders arranged by Royal Bank of Canada as administrative agent, as well as other agents and lenders that are parties to these Credit Facilities.  As of September 28, 2013, the Credit Facilities include (a) $175 million in commitments under the first lien based revolving credit facility (as amended, “ABL Facility”), and (b) $525 million in aggregate principal amount under the first lien term loan facility (as amended, “First Lien Term Loan Facility” and together with the ABL Facility, the “Credit Facilities”).

First Lien Term Loan Facility

As of September 28, 2013, the First Lien Term Loan Facility provided for $525 million of borrowings (which could be increased by up to $150.0 million in certain circumstances).  All obligations under the First Lien Term Loan Facility were guaranteed by Parent and our direct wholly owned subsidiary, 99 Cents Only Stores Texas, Inc. (“99 Cents Texas” and together (with Parent, the “Credit Facilities Guarantors”).  In addition, the First Lien Term Loan Facility is secured by pledges of certain of our equity interests and equity interests of the Credit Facilities Guarantors.

As of September 28, 2013, we were required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the term loan (approximately $1.3 million), with the balance due on the maturity date, January 13, 2019.  Borrowings under the First Lien Term Loan Facility bear interest at an annual rate equal to an applicable margin plus, at our option, (A) a Base Rate determined by reference to the highest of (a) the interest rate in effect determined by the administrative agent as “Prime Rate” (3.25% as of September 28, 2013), (b) the federal funds effective rate plus 0.50% and (c) an adjusted Eurocurrency rate for one month (determined by reference to the greater of the Eurocurrency rate for the interest period multiplied by the Statutory Reserve Rate or 1.50% per annum) plus 1.00%, or (B) an Adjusted Eurocurrency Rate.

On April 4, 2012, we amended the terms of our existing seven-year $525 million First Lien Term Loan Facility, and incurred refinancing costs of $11.2 million.  The amendment, among other things, decreased the applicable margin from London Interbank Offered Rate (“LIBOR”) plus 5.50% (or Base Rate plus 4.50%) to LIBOR plus 4.00% (or Base Rate plus 3.00%) and decreased the LIBOR floor from 1.50% to 1.25%.  The maximum capital expenditures covenant in the First Lien Term Loan Facility was also amended to permit an additional $5 million in capital expenditures each year throughout the term of the First Lien Term Loan Facility.

We determined that a portion of the refinancing transaction was to be accounted for as debt extinguishment, representing the outstanding principal amount of loans held by lenders under the original First Lien Term Loan Facility that were not lenders under the amended First Lien Term Loan Facility.  In accordance with applicable guidance for debt modification and extinguishment, we recognized a $16.3 million loss on debt extinguishment in the first quarter of fiscal 2013 related to a portion of the unamortized debt issuance costs, unamortized original issue discount (“OID”) and refinancing costs incurred in connection with the amendment for the portion of the First Lien Term Loan Facility that was extinguished.

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As of September 28, 2013, $1.7 million of the amount outstanding under the First Lien Term facility bore an interest charge of 6.25%, while the interest rate charged on the remainder was 5.25% (1.25% Eurocurrency rate, plus the Eurocurrency loan margin of 4.00%).  As of September 28, 2013, the amount outstanding under the First Lien Term Loan Facility was $504.4 million.

Following the end of each fiscal year, we are required to prepay the First Lien Term Loan Facility in an amount equal to 50% of Excess Cash Flow (as defined in the First Lien Term Loan Facility agreement and with stepdowns to 25% and 0% based on achievement of specified total leverage ratios), minus the amount of certain voluntary prepayments of the First Lien Term Loan Facility and/or the ABL Facility during such fiscal year. The required Excess Cash Flow payment for fiscal 2013 was $3.3 million and was made in July 2013.

The First Lien Term Loan Facility includes restrictions on our ability and the ability of the Parent and certain of our subsidiaries to, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase, our capital stock, make certain acquisitions or investments, materially change our business, incur or permit to exist certain liens, enter into transactions with affiliates or sell our assets to, make capital expenditures or merge or consolidate with or into, another company.  As of March 30, 2013, we were in compliance with the terms of the First Lien Term Loan Facility.  In June 2013, we failed to comply with the covenant that required delivery of audited financial statements for the fiscal year ended March 30, 2013 within 90 days of the completion of fiscal 2013 as required under the First Lien Term Loan Facility.  On the date hereof and prior to the expiration of the applicable 30-day grace period under the First Lien Term Loan Facility, we delivered the required financial statements. As September 28, 2013, we are in compliance with the applicable reporting obligations and other terms of the First Lien Term Loan Facility.

On October 8, 2013, we completed a repricing of our First Lien Term Loan Facility, borrowed $100 million of incremental term loans and amended certain other provisions thereto.  The amendment decreased the interest rate applicable to the term loans from LIBOR plus 4.00% (or Base Rate plus 3.00%) to LIBOR plus 3.50% (or Base Rate plus 2.50%) and the LIBOR floor from 1.25% to 1.00%.  Under the amendment, the incremental term loans have the same interest rate as the other term loans. We will continue to be required to make scheduled quarterly payments each equal to 0.25% of the amended principal amount of the term loan (approximately $1.5 million).  The maturity date of January 13, 2019 of the First Lien Term Loan Facility was not affected by the amendment.

The Company determined that a portion of the repricing transaction should be accounted for as debt extinguishment. In the third quarter of fiscal 2014, in accordance with applicable guidance for debt modification and extinguishment, the Company plans to record a loss on debt extinguishment of approximately $4.4 million related to a portion of the unamortized debt issuance costs, unamortized original issue discount and repricing costs incurred in connection with the amendment for the portion of the First Lien Term Loan Facility that was extinguished.

The term amendment  (a) amended certain restricted payment provisions to permit the Gold-Schiffer Purchase (as defined below) and (b) removed the maximum capital expenditures covenant.  See “—Repurchase Transaction with Rollover Investors” for more information on the Gold-Schiffer Purchase.

The amendment to the First Lien Term Loan Facility (a) modifies the existing restricted payment builder basket construct so that from and after March 31, 2013 it is based on 50% of positive Consolidated Net Income (as defined in the First Lien Term Loan Facility agreement), subject to a reduction for 100% of negative Consolidated Net Income, and (b) permits proceeds of any sale leasebacks of any assets acquired after January 13, 2012, to be reinvested in the Company’s business without restriction.

During the first quarter of fiscal 2013, we entered into an interest rate cap agreement.  The interest rate cap agreement limits our interest exposure on a notional value of $261.8 million to 3.00% plus an applicable margin of 4.00%.  The term of the interest rate cap is from May 29, 2012 to November 29, 2013.  We paid fees of $0.05 million to enter into the interest rate cap agreement.

During the first quarter of fiscal 2013, we entered into an interest rate swap agreement to limit the variability of cash flows associated with interest payments on our First Lien Term Loan Facility that result from fluctuations in the LIBOR rate.  The swap limits our interest exposure on a notional value of $261.8 million to 1.36% plus an applicable margin of 4.00%.  The term of the swap is from November 29, 2013 through May 31, 2016.  The fair value of the swap on the trade date was zero as we neither paid nor received any value to enter into the swap, which was entered into at market rates.  The fair value of the swap at September 28, 2013 was a liability of $2.3 million.

ABL Facility

The ABL Facility provides for up to $175.0 million of borrowings (which may be increased by up to $50.0 million in certain circumstances), subject to certain borrowing base limitations.  All obligations under the ABL Facility are guaranteed by us, Parent and 99 Cents Texas (collectively, the “ABL Guarantors”).  The ABL Facility is secured by substantially all of our assets and the assets of the ABL Guarantors.

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Borrowings under the ABL Facility bear interest for an initial period until June 30, 2012 at an applicable margin plus, at our option, a fluctuating rate equal to (A) the highest of (a) the Federal Funds Rate plus 0.50%, (b) the interest rate in effect determined by the administrative agent as “Prime Rate”  (3.25% at the date of the Merger), and (c) Adjusted Eurocurrency Rate (determined to be the LIBOR rate multiplied by the Statutory Reserve Rate) for an Interest Period of one (1) month plus 1.00% or (B) the Adjusted Eurocurrency Rate.  The interest rate charged on borrowings under the ABL Facility from the date of the Merger until June 30, 2012 was 4.25% (the base rate (prime rate at 3.25%) plus the applicable margin of 1.00%).  Thereafter, borrowings under the ABL Facility will have variable pricing and will be based, at our option, on (a) LIBOR plus an applicable margin to be determined (1.75% as of September 28, 2013) or (b) the determined base rate (prime rate) plus an applicable margin to be determined (0.75% at September 28, 2013) in each case based on a pricing grid depending on average daily excess availability for the most recently ended quarter.

In addition to paying interest on outstanding principal under the Credit Facilities, we were required to pay a commitment fee to the lenders under the ABL Facility on unused commitments at a rate of 0.375% for the period from the date of the Merger until June 30, 2012.  Thereafter, the commitment fee will be adjusted at the beginning of each quarter based upon the average historical excess availability of the prior quarter (0.50% for the quarter ended September 28, 2013).  We must also pay customary letter of credit fees and agency fees.

As of September 28, 2013 and March 30, 2013, we had no outstanding borrowings under the ABL Facility, outstanding letters of credit were $1.6 million and availability under the ABL Facility, subject to the borrowing base was $133.9 million as of September 28, 2013.

The ABL Facility includes restrictions on our ability, and the ability of the Parent and certain of our subsidiaries to, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase, our capital stock, make certain acquisitions or investments, materially change our business, incur or permit to exist certain liens, enter into transactions with affiliates or sell our assets to, make capital expenditures or merge or consolidate with or into, another company.  The ABL Facility was amended on April 4, 2012 to permit an additional $5 million in capital expenditures for each year during the term of the ABL Facility.  As of March 30, 2013, we were in compliance with the terms of the ABL Facility.  In June 2013, we failed to comply with the covenant that required delivery of audited financial statements for the fiscal year ended March 30, 2013 within 90 days of the completion of fiscal 2013 as required under the ABL Facility. On the date hereof and prior to the expiration of the applicable 30-day grace period under the ABL Facility, we delivered the required financial statements. As of September 28, 2013 we are in compliance with the applicable reporting obligations and other terms of the ABL Facility.

On October 8, 2013, we amended the ABL Facility. The amendment to the ABL Facility (a) amended certain restricted payment provisions to permit the Gold-Schiffer Purchase and (b) removed the maximum capital expenditures covenant.

Senior Notes

On December 29, 2011, we issued $250 million aggregate principal amount of 11% Senior Notes that mature on December 15, 2019 (the “Senior Notes”). The Senior Notes are guaranteed by 99 Cents Texas (the “Senior Notes Guarantor”).

In connection with the issuance of the Senior Notes, we entered into a registration rights agreement that required us to file an exchange offer registration statement, enabling holders to exchange the Senior Notes for registered notes with terms identical in all material respects to the terms of the Senior Notes, except the registered notes would be freely tradable.  The exchange offer was closed on November 7, 2012.

Pursuant to the terms of the indenture governing the Senior Notes (the “Indenture”), we may redeem all or a part of the Senior Notes at certain redemption prices applicable based on the date of redemption.

The Senior Notes are (i) equal in right of payment with all of our and the Senior Notes Guarantor’s existing and future senior indebtedness; (ii) effectively junior to our and the Senior Notes Guarantor’s existing and future secured indebtedness, to the extent of the value of the interest of the holders of that secured indebtedness in the assets securing such indebtedness; (iii) unconditionally guaranteed on a senior unsecured unsubordinated basis by the Senior Notes Guarantor; and (iv) junior to the indebtedness or other liabilities of our subsidiaries that are not guarantors.  We are not required to make any mandatory redemptions or sinking fund payments, and may at any time or from time to time purchase notes in the open market.

The Indenture contains covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to incur or guarantee additional indebtedness, create or incur certain liens, pay dividends or make other restricted payments, incur restrictions on the payment of dividends or other distributions from our restricted subsidiaries, make certain investments, transfer or sell assets, engage in transactions with affiliates, or merge or consolidate with other companies or transfer all or substantially all of our assets.

As of September 28, 2013, we were in compliance with the terms of the Indenture.

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Repurchase Transaction with Rollover Investors

On October 15, 2013, Parent and the Company entered into an agreement with certain former members of the Company’s management, Eric Schiffer, Jeff Gold and Howard Gold (who was a director of Parent and the Company at the date of the agreement), and Karen Schiffer, Sherry Gold and The Gold Revocable Trust dated October 26, 2005 (collectively, the “Sellers”), pursuant to which (a)(i) Parent purchased from each Seller all of the shares of Class A Common Stock and Class B Common Stock, owned by such Seller and (ii) all of the options to purchase shares of Class A Common Stock and Class B Common Stock held by such Seller were cancelled and forfeited, for aggregate consideration of approximately $129.7 million (the “Gold-Schiffer Purchase”) and (b) the Company agreed to certain amendments to the Non-Competition, Non-Solicitation and Confidentiality Agreements and the Separation and Release Agreements with the Sellers who were former management of the Company.  The Gold-Schiffer Purchase was completed on October 21, 2013. Prior to completion of the transaction, Howard Gold resigned from the board of directors of each of Parent and the Company.  The Gold-Schiffer Purchase was funded through a combination of borrowings of $100 million of incremental term loans under the First Lien Term Loan Facility and cash on hand at the Company and Parent.  In connection with the Gold-Schiffer Purchase, the Company made a distribution to, and investment in shares of preferred stock of, Parent.

Cash Flows

Operating Activities

	First Half Ended
	September 28, 2013			September 29, 2012
	(amounts in thousands)
Cash flows from operating activities:
Net income (loss)	$	8,631		$	(4,681	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	31,011			27,683
Amortization of deferred financing costs and accretion of OID	2,212			2,059
Amortization of intangible assets	884			883
Amortization of favorable/unfavorable leases, net	242			91
Loss on extinguishment of debt	—			16,346
Loss on disposal of fixed assets	124			403
(Gain) loss on interest rate hedge	(114		)	665
Deferred income taxes	(7,546		)	—
Stock-based compensation	(5,318		)	1,593
Changes in assets and liabilities associated with operating activities:
Accounts receivable	(43		)	1,586
Inventories	4,137			(11,437		)
Deposits and other assets	(2,492		)	(3,874		)
Accounts payable	18,874			9,047
Accrued expenses	16,834			6,358
Accrued workers’ compensation	(2,283		)	(1,186		)
Income taxes	194			(13,347		)
Deferred rent	4,826			2,362
Other long-term liabilities	(1,780		)	(73		)
Net cash provided by operating activities	$	68,393		$	34,478

Cash provided by operating activities during the first half of fiscal 2014 was $68.4 million and consisted of (i) net income of $8.6 million; (ii) net income adjustments for depreciation and other non-cash items of $21.5 million; (iii) an increase in working capital activities of $35.8 million; and (iv) an increase in other activities of $2.5 million, primarily due to an increase in deferred rent partially offset by a decrease other long-term liabilities, and an increase in other long-term assets.  The increase in working capital activities was primarily due to decreases in inventories, increases in account payable and accrued expenses, which were partially offset by an increase in other current assets and decrease in workers compensation.

Cash provided by operating activities during the first half of fiscal 2013 was $34.5 million and consisted of (i) net loss of $4.7 million; (ii) net loss adjustments for depreciation and other non-cash items of $49.7 million; (iii) a decrease in working capital activities of $12.3 million; and (iv) an increase in other activities of $1.8 million, primarily due to increase in deferred rent.  The decrease in working capital activities was primarily reflects an increase in inventories and income taxes receivable and decreases in workers’ compensation liability and account receivable, partially offset by decreases in accounts payable and accrued expenses.

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Investing Activities

	First Half Ended
	September 28, 2013			September 29, 2012
	(amounts in thousands)
Cash flows from investing activities:
Purchases of property and equipment	$	(32,348	)	$	(19,861	)
Proceeds from sale of fixed assets	537			11,549
Purchases of investments	—			(449		)
Proceeds from sale of investments	—			2,470
Net cash used in investing activities	$	(31,811	)	$	(6,291	)

Capital expenditures in the first half of fiscal 2014 consisted of leasehold improvements, fixtures and equipment for new store openings, information technology projects and other capital projects of $32.3 million.

Capital expenditures in the first half of fiscal 2013 consisted of leasehold improvements, fixtures and equipment for new store openings, information technology projects and other capital projects of $19.9 million.  Proceeds from sale of fixed assets primarily relate to sale-leaseback transactions and sale of held for sale warehouse.  During the first half of fiscal 2013, we sold a portion of our investments.

We estimate that total capital expenditures in fiscal year 2014 will be approximately $69 million and relate primarily to approximately $44 million for leasehold improvements, fixtures and equipment for new and existing stores, approximately $14 million for information technology projects and approximately $11 million for other capital projects.  We intend to fund our liquidity requirements in fiscal 2014 from net cash provided by operations, cash on hand, and the ABL Facility, if necessary.

Financing Activities

	First Half Ended
	September 28, 2013			September 29, 2012
	(amounts in thousands)
Cash flows from financing activities:
Payments of debt	$	(4,639	)	$	(2,618	)
Payments of capital lease obligation	(41		)	(38		)
Payment of debt issuance costs	—			(11,230		)
Net cash used in financing activities	$	(4,680	)	$	(13,886	)

Net cash used in financing activities in the first half of fiscal 2014 was comprised primarily of repayments of debt.

Net cash used in financing activities in the first half of fiscal 2013 was comprised primarily of payment of debt issuance costs and repayments of debt.

Off-Balance Sheet Arrangements

As of September 28, 2013, we had no off-balance sheet arrangements.

Contractual Obligations

A summary of our contractual obligations as of March 30, 2013 is provided in our Annual Report on Form 10-K for the fiscal year ended March 30, 2013. During the first half of fiscal 2014, except as discussed below, there were no material changes in our contractual obligations previously disclosed.

In April 2013, we entered into a 15-year lease for a cold warehouse facility located in Los Angeles, California.  The lease expires in December 2028 and total minimum lease payments under this lease agreement will be approximately $29 million.

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Lease Commitments

We lease various facilities under operating leases (except for one location that is classified as a capital lease), which will expire at various dates through fiscal year 2031.  Most of the lease agreements contain renewal options and/or provide for fixed rent escalations or increases based on the Consumer Price Index.  Total minimum lease payments under each of these lease agreements, including scheduled increases, are charged to operations on a straight-line basis over the term of each respective lease.  Most leases require us to pay property taxes, maintenance and insurance. Rental expense charged to operations for the second quarter of fiscal 2014 and 2013 was $18.1 million and $15.1 million, respectively.  Rental expense charged to operations for the first half of fiscal 2014 and 2013 was $34.4 million and $30.3 million, respectively.  We typically seek leases with a five-year to ten-year term and with multiple five-year renewal options.  A large majority of our store leases were entered into with multiple renewal periods, which are typically five years and occasionally longer.

Seasonality and Quarterly Fluctuations

We have historically experienced and expect to continue to experience some seasonal fluctuations in our net sales, operating income, and net income.  The highest sales periods for us are the Christmas, Halloween and Easter seasons.  A proportionately greater amount of our net sales and operating and net income is generally realized during the quarter ended on or near December 31. Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of certain holidays such as Easter, the timing of new store openings and the merchandise mix.

During fiscal 2013 there were two Easter selling seasons that occurred early in the first quarter of fiscal 2013 and late in the fourth quarter of 2013. There is no Easter selling season in either the first quarter of fiscal 2014 or in fiscal 2014.

New Authoritative Pronouncements

Information regarding new authoritative pronouncements is contained in Note 14 to our Unaudited Consolidated Financial Statements for the quarter ended September 28, 2013, which is incorporated herein by this reference.

42

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to interest rate risk for our debt borrowings.

Our primary interest rate exposure relates to outstanding principal amounts under the Credit Facilities.  As of September 28, 2013, we had variable rate borrowings of $504.4 million under the First Lien Term Loan Facility and no borrowings under the ABL Facility.  The maximum commitment under the ABL Facility was $175 million on September 28, 2013.  The Credit Facilities provide interest rate options based on certain indices as described in Note 5 to our Unaudited Consolidated Financial Statements for the quarter ended September 28, 2013, which is incorporated herein by this reference.

During the first quarter of fiscal 2013, we entered into an interest rate swap agreement to limit the variability of cash flows associated with interest payments on the First Lien Term Loan Facility that result from fluctuations in the LIBOR rate.  The swap limits our interest exposure on a notional value of $261.8 million to 1.36% plus an applicable margin of 4.00%.  The term of the swap is from November 29, 2013 through May 31, 2016.  The fair value of the swap on the trade date was zero as we neither paid nor received any value to enter into the swap, which was entered into at market rates.  As of September 28, 2013, the fair value of the interest rate swap was a liability of $2.3 million.

In addition, during the first quarter of fiscal 2013, we entered into an interest rate cap agreement.  The interest rate cap agreement limits our interest exposure on a notional value of $261.8 million to 3.00% plus an applicable margin of 4.00%.  The term of the interest rate cap is from May 29, 2012 to November 29, 2013.  We paid $0.05 million to enter into the interest rate cap agreement.

A change in interest rates on our variable rate debt impacts our pre-tax earnings and cash flows.  Based on our variable rate borrowing levels and interest rate derivatives outstanding, the annualized effect of a 1% increase in applicable interest rates would have resulted in a reduction of our pre-tax earnings and cash flows of less than $0.1 million for the three months ended September 28, 2013.

43

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Report. Disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, has been appropriately recorded, processed, summarized and reported on a timely basis and are effective in ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 28, 2013, our controls and procedures were not effective due to the material weaknesses related to the accounting for inventory valuation and stock-based compensation.

Material Weaknesses in Internal Control Over Financial Reporting In Process of Being Remediated

Stock-based Compensation

As previously described in our Annual Report on Form 10-K for the fiscal year ended March 30, 2013, during the fourth quarter of fiscal 2013, we identified a material weakness in our internal controls over financial reporting related to accounting for stock-based compensation.  We did not correctly evaluate the accounting treatment for certain share repurchase rights for Parent options granted to our executive officers and employees that resulted in no stock-based compensation expense for these grants. In addition, we did not correctly evaluate the accounting treatment for former executive put rights that became exercisable by the former executives in the fourth quarter of fiscal 2013. We believe that the material weakness was due to the complex and non-routine nature of these equity arrangements.

In an effort to remediate the identified material weakness, we initiated and implemented the following series of measures:

·education and training of personnel on the accounting treatment for stock-based complex financial instruments;

·redesign of procedures to enhance identification, capture and recording of contractual terms included in complex equity arrangements, including consideration for the need of consultation with third party subject matter and valuation experts.

Based on the implementation of the above measures, management believes that the above mentioned material weakness will be remediated during the third quarter of fiscal 2014.

Retail Store Level Inventory Valuation

As previously reported in our Annual Report on Form 10-K for the fiscal year ended March 30, 2013, during the fourth quarter of fiscal 2013, we identified a material weakness in our internal controls over financial reporting related to our inventory valuation methodology.  As more fully described in Note 1 to our Consolidated Financial Statements included in Form 10-K for the year ended March 30, 2013, we determined that the inventory valuation methodology used in prior periods resulted in an accounting error that was immaterial to prior periods.  In connection with correcting this prior period error, we identified an overstatement in total inventory of $13.3 million at the Merger date, which amount has accumulated over prior periods and we determined that our related controls were not adequately designed to yield the correct cost complement for valuing inventory.  We have determined that this overstatement constituted a material weakness in our internal controls over financial reporting.

In an effort to remediate the identified material weakness, we initiated and implemented the following series of measures:

·documentation of the new retail store level physical inventory preparation and counting procedures, including individual product bar code scanning

·education and training of appropriate Company and third party personnel on retail store level physical inventory by SKU including:

·preparation and counting procedures

·valuation and accounting procedures

·development, review and approval of calculations specific to costing inventory by applying estimated cost compliment by merchandise category.

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Moreover, in addition to the foregoing remediation measures, the process of taking physical inventories by SKU for our retail stores during the second half of fiscal 2013 enabled us to more precisely value specific products during physical inventory counts and estimate cost complement by merchandise category, which in turn enabled a more accurate estimate of cost of store physical inventories.

Based on the foregoing processes and remediation measures, management believes that the above mentioned material weakness will be remediated during the third quarter of fiscal 2014.

We are committed to a strong internal control environment and will continue to review the effectiveness of our internal controls over financial reporting and other disclosure controls and procedures.

Changes in Internal Control Over Financial Reporting

Except as described above, we did not make any changes that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II    OTHER INFORMATION

Item 1.     Legal Proceedings

Information regarding legal proceedings is contained in Note 11 to our Unaudited Consolidated Financial Statements for the quarter ended September 28, 2013 under the heading “Legal Matters”, which is incorporated herein by reference.

Item 1A.  Risk Factors

Reference is made to Item 1A. Risk Factors, in the Annual Report on Form 10-K for the fiscal year ended March 30, 2013 for information regarding the most significant factors affecting our operations.  As of September 28, 2013, there have been no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 30, 2013.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.     Defaults Upon Senior Securities

None

Item 4.     Mine Safety Disclosures

None

Item 5.     Other Information

None

46

Item 6.     Exhibits

Exhibit No.	Description
3.1	Limited Liability Company Articles of Organization — Conversion of 99 Cents Only Stores LLC, dated as of October 18, 2013.*
3.2	Limited Liability Company Agreement of 99 Cents Only Stores. LLC, dated as of October 18, 2013.*
10.1	Employment Agreement, dated September 3, 2013, among the Registrant and Stéphane Gonthier*
10.2	Stock Purchase Agreement, dated September 30, 2013, among Number Holdings, Inc., Avenue of the Stars Investments LLC and Stéphane Gonthier.*
10.3	Non-Qualified Stock Option Agreement pursuant to the Number Holdings, Inc. 2012 Stock Incentive Plan, dated as of October 9, 2013, between Number Holdings, Inc. and Stéphane Gonthier.*
10.4	First Amendment to the 2012 Stock Incentive Plan of Number Holdings, Inc., dated as of September 27, 2013.*
10.5	Amendment No. 2 to the ABL Credit Agreement, dated as of October 8, 2013, among the Registrant, Number Holdings, Inc., each other Loan Party party thereto, each Lender party thereto and Royal Bank of Canada, as administrative agent.*
10.6	Amendment No. 2 to the Term Credit Agreement, dated as of October 8, 2013, among the Registrant, Number Holdings, Inc., each other Loan Party party thereto, each Lender party thereto and Royal Bank of Canada, as administrative agent.*
10.7	Purchase Agreement, dated as of October 15, 2013, by and among Number Holdings, Inc., Sherry Gold, individually and in her capacity as Trustee of The Gold Revocable Trust dated 10/26/2005, Jeff Gold, Howard Gold, Karen Schiffer and Eric Schiffer. (1)
31.1	Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*
32.1	Certification of Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.**
32.2	Certification of Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.**
101.INS	XBRL Instance Document***
101.SCH	XBRL Taxonomy Extension Schema***
101.CAL	XBRL Taxonomy Extension Calculation Linkbase***
101.DEF	XBRL Taxonomy Extension Definition Linkbase***
101.LAB	XBRL Taxonomy Extension Label Linkbase***
101.PRE	XBRL Taxonomy Extension Presentation Linkbase***

*Filed herewith.

**Furnished herewith.

***Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections.

(1) Incorporated by reference from the Registrant’s Current Report on Form 8-K as filed with Securities and Exchange Commission on October 16, 2013.

47

SIGNATURE

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.

	99 CENTS ONLY STORES LLC
Date: November 8, 2013	By:	/s/ Frank Schools
	Frank Schools
	Senior Vice President, Chief Financial Officer and Treasurer

48

EXHIBIT INDEX

Exhibit No.	Description
3.1	Limited Liability Company Articles of Organization — Conversion of 99 Cents Only Stores LLC, dated as of October 18, 2013.*
3.2	Limited Liability Company Agreement of 99 Cents Only Stores LLC, dated as of October 18, 2013.*
10.1	Employment Agreement, dated September 3, 2013, among the Registrant and Stéphane Gonthier.*
10.2	Stock Purchase Agreement, dated September 30, 2013, among Number Holdings, Inc., Avenue of the Stars Investments LLC and Stéphane Gonthier.*
10.3	Non-Qualified Stock Option Agreement pursuant to the Number Holdings, Inc. 2012 Stock Incentive Plan, dated as of October 9, 2013, between Number Holdings, Inc. and Stéphane Gonthier.*
10.4	First Amendment to the 2012 Stock Incentive Plan of Number Holdings, Inc., dated as of September 27, 2013.*
10.5	Amendment No. 2 to the ABL Credit Agreement, dated as of October 8, 2013, among the Registrant, Number Holdings, Inc., each other Loan Party party thereto, each Lender party thereto and Royal Bank of Canada, as administrative agent.*
10.6	Amendment No. 2 to the Term Credit Agreement, dated as of October 8, 2013, among the Registrant, Number Holdings, Inc., each other Loan Party party thereto, each Lender party thereto and Royal Bank of Canada, as administrative agent.*
10.7	Purchase Agreement, dated as of October 15, 2013, by and among Number Holdings, Inc., Sherry Gold, individually and in her capacity as Trustee of The Gold Revocable Trust dated 10/26/2005, Jeff Gold, Howard Gold, Karen Schiffer and Eric Schiffer. (1)
31.1	Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*
32.1	Certification of Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.**
32.2	Certification of Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.**
101.INS	XBRL Instance Document***
101.SCH	XBRL Taxonomy Extension Schema***
101.CAL	XBRL Taxonomy Extension Calculation Linkbase***
101.DEF	XBRL Taxonomy Extension Definition Linkbase***
101.LAB	XBRL Taxonomy Extension Label Linkbase***
101.PRE	XBRL Taxonomy Extension Presentation Linkbase***

*Filed herewith.

**Furnished herewith.

***Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections.

(1) Incorporated by reference from the Registrant’s Current Report on Form 8-K as filed with Securities and Exchange Commission on October 16, 2013.

49

EX-3.1

Exhibit 3.1

LLC-1A File # 201329510100

DI206027

	State of California	FILED
	Secretary of State	Secretary of State
	0496340 out	State of California
	Limited Liability Company	OCT 18 2013
	Articles of Organization - Conversion
IMPORTANT — Read all instructions before completing this form.		This Space For Filing Use Only

Converted Entity Information

1.Name of Limited Liability Company (End the name with the words “Limited Liability Company,” or the abbreviations “LLC” or “L.L.C.” The words Limited” and “Company” may be abbreviated to “Ltd.” and “Co.,” respectively.)

99 Cents Only Stores LLC

2.The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Beverly-Killea Limited Liability Company Act.

3.The limited liability company will be managed by (check only one):

o One Manager o More Than One Manager x All Limited Liability Company Member(s)

4.	Initial Street Address of Limited Liability Company	City	State	Zip Code
	4000 East Union Pacific Ave	City of Commerce	CA	90023
5.	Initial Mailing Address of Limited Liability Company, if different from Item 4	City	State	Zip Code

6.Name of Initial Agent For Service of Process (Item 6: Enter the name of the agent for service of process. The agent may be an individual residing in California or a corporation that has filed a certificate pursuant to California Corporations Code section 1505. Item 7: If the agent is an individual, enter the agent’s business or residential street address in CA. Do not list the address if the agent is a corporation. Item 8: If the converting entity is a CA limited partnership, enter the mailing address of the agent, if different from Item 7, or if the agent is a corporation.)

CT Corporation System

7.	If an individual, Street Address of Agent for Service of Process in CA	City	State	Zip Code
			CA
8.	Mailing Address of Agent for Service of Process	City	State	Zip Code

Converting Entity Information

9.	Name of Converting Entity
	99¢ Only Stores

10.  Form of Entity	11. Jurisdiction	12. CA Secretary of State File Number, if any
Corporation	California	C0496340

13.The principal terms of the plan of conversion were approved by a vote of the number of interests or shares of each class that equaled or exceeded the vote required. If a vote was required, provide the following for each class:

AND

The class and number of outstanding interests entitled to vote.	The percentage vote required of each class.
Class A Common Stock (100)	More than 50%
Class B Common Stock (100)	More than 50%

Additional Information

14.Additional information set forth on the attached pages, if any, is incorporated herein by this reference and made part of this certificate.

15.I certify under penalty of perjury that the contents of this document are true. I declare I am the person who executed this instrument, which execution is my act and deed.

/s/ Stephane Gonthier	Stéphane Gonthier, President and Chief Executive Officer
Signature of Authorized Person	Type or Print Name and Title of Authorized Person
/s/ Frank Schools	Frank Schools, Senior Vice President and Chief Financial Officer
Signature of Authorized Person	Type or Print Name and Title of Authorized Person

LLC-1A (REV 01/2013) APPROVED BY SECRETARY OF STATE

EX-3.2

Exhibit 3.2

LIMITED LIABILITY COMPANY AGREEMENT

OF

99 CENTS ONLY STORES LLC

This Limited Liability Company Agreement of 99 Cents Only Stores LLC (the “Company”), dated as of October 18, 2013 (this “Agreement”), is entered into by Number Holdings, Inc., the sole member of the Company (the “Member”).

WHEREAS, the Articles of Organization — Conversion of the Company (the “Articles”) were filed with the Secretary of State of the State of California on October 18, 2013; and

WHEREAS, the Member hereby forms a limited liability company pursuant to and in accordance with the provisions of the California Beverly-Killea Limited Liability Company Act (the “Act”) and subject to the terms, provisions and conditions set forth in this Agreement.

NOW, THEREFORE, the Member hereby agrees as follows:

1.Name.  The name of the Company is 99 Cents Only Stores LLC.  The Company may do business under such other names as the Member shall designate.

2.Term.  The Company’s existence commenced on the date the Articles of Incorporation of 99¢ Only Stores, the Company’s predecessor, were filed with the Secretary of State of California on August 31, 1965 and shall continue until dissolved pursuant to this Agreement.

3.Purpose.  The purpose of the Company is to engage in any lawful activity for which a limited liability company may be organized under the Act.

4.Registered Agent.  The name and address of the registered agent of the Company for service of process on the Company in the State of California is as follows:

CT Corporation System
818 West Seventh Street, Suite 200
Los Angeles, California 90017

5.Members.  The name and the business address of the Member is set forth on Exhibit A hereto.

6.Management.  The business and affairs of the Company shall be managed by the Member.  The Member shall have full, complete and exclusive authority and discretion to manage and control the business, affairs and properties of the Company, to make all decisions regarding those matters, and to perform any and all other acts or activities customary or incident to the management of the Company’s business.  At no time shall the Company have a board of directors, board of managers or similar governing body.

7.No Required Meetings.  No annual or special meetings of the Member shall be required.

8.Officers.  The Member may in its discretion appoint officers of the Company and delegate to such officers such duties as the Member shall deem necessary or appropriate.  Each officer of the Company shall be chosen by the Member in its sole discretion and shall serve at the pleasure of the Member.  Any officer may be removed, with or without cause and with or without advance notice, by the Member at any time.  Any officer may resign at any time by giving written notice to the Company.  Any resignation shall take effect at the time of the receipt of that notice or at any later time specified in that notice.  Unless otherwise specified in such notice, the acceptance of the resignation shall not be necessary to make it effective.  Any vacancy in any office because of death, resignation, removal, disqualification or other cause shall be filled by the Member.  Any number of offices may be held by the same person.  An officer may, but need not, be a Member of the Company.  The compensation of any officers, if any, shall be determined by the Member.  Nothing contained in this Section 8 shall affect or be construed as affecting the terms of any contract of employment between the Company and any officer.  The initial officers of the Company shall be as follows:

Name	Office
Stéphane Gonthier	President and Chief Executive Officer
Michael Kvitko	Executive Vice President and Chief Marketing Officer
Frank Schools	Senior Vice President, Chief Financial Officer and Treasurer
Robert Adams	Senior Vice President and Chief Information Officer
Michael Green	Interim Senior Vice President, Chief Legal Officer and Secretary
Howard Derman	Senior Vice President, Human Resources
Karim Sheikh	Vice President and Corporate Controller

9.Indemnification of Member.  The Company shall indemnify the Member and may indemnify any other person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding because he or she is or was a Member, officer, employee or other agent of the Company, to the fullest extent permitted by applicable law.

10.Bank Accounts.  Company funds may be deposited in the Company’s name in one or more banks, money funds, bank certificates of deposit or government securities to be designated by the Member.  All deposits into and withdrawals from any such Company account shall be made by the Member or such persons as the Member may designate in a writing making specific reference to this Section 10.

2

11.Dissolution.  The Company shall dissolve, and its affairs shall be wound up upon the first to occur of the following: (a) the written consent of the Member, (b) the bankruptcy or dissolution of the Member or (c) the occurrence of any other event that terminates the continued membership of the Member in the Company or the entry of a decree of judicial dissolution pursuant to Section 17351 of the Act.

12.Capital Contributions.  The Member is not required to make any capital contribution to the capital of the Company.  However, the Member may, at any time and in its sole discretion, make contributions to the capital of the Company in the form of cash, services or otherwise.

13.Allocation of Profits and Losses.  The Company’s profits and losses shall be allocated to the Member.

14.Distributions.  Distributions shall be made solely to the Member at the times and in the aggregate amounts determined by the Member.

15.Certificated Interests.  The Company shall issue certificates representing limited liability interests in the Company unless otherwise determined by the Member.

16.Article 8 of the Uniform Commercial Code.  The Company hereby irrevocably elects that all limited liability company interests in the Company shall be securities governed by Article 8 of the Uniform Commercial Code as in effect in each State.  Each certificate evidencing limited liability company interests in the Company shall bear the following legend:

“This certificate evidences an interest in 99 Cents Only Stores LLC and shall be a security governed by Article 8 of the Uniform Commercial Code as in effect in each State.”

This Section 16 shall not be amended, and any purported amendment to this Section 16 shall not take effect until all outstanding certificates have been surrendered for cancellation.

17.Assignments.  The Member may assign in whole or in part its limited liability company interests in the Company; provided that each assignee of a Member’s limited liability company interests shall execute and deliver to the Company a joinder to this Agreement and agree to be bound by the terms of this Agreement with respect to the limited liability company interests acquired.  Following execution and delivery of such joinder, the Company shall update Exhibit A hereto to reflect the assignment.

18.Admission of Additional Members.  One or more additional members of the Company may be admitted to the Company only with the prior written consent of the Member.

19.No Liability of Members.  The Member shall not have any liability for the obligations or liabilities of the Company, whether arising in contract, tort or otherwise.

3

20.Amendment.  This Agreement may not be modified, waived or amended except in a writing executed by the Member.  Notwithstanding the foregoing, the Member may at any time amend Exhibit A to provide any necessary information regarding additional or substituted Members and changes to percentage interests of the Members.

21.Entire Agreement.  This Agreement constitutes the entire agreement concerning the Company’s affairs and the conduct of its business and supersedes all prior agreements and understandings, whether oral or written.  The Company shall have no oral operating agreements.

22.Severability.  If any provision of this Agreement, or the application of such provision to any person or circumstances, is held invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall continue in full force without being impaired or invalidated.

23.Governing Law.  This Agreement shall be governed by, and construed under, the laws of the State of California without regard to its conflicts of laws principles.

[Signature Page Follows]

4

IN WITNESS WHEREOF, the undersigned Member, intending to be legally bound hereby, has duly executed this Agreement as of the date and year first set forth above.

NUMBER HOLDINGS, INC.
By:	/s/ Frank Schools
	Name:	Frank Schools
	Title:	Senior Vice President and Chief Financial Officer

[Signature Page to 99 Cents Only Stores LLC Limited Liability Company Agreement]

Exhibit A

Members

Name	Address	Percentage Interest
Number Holdings, Inc.	4000 Union Pacific Avenue Commerce, CA 90023 Attn: CFO	100	%

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”), dated as of September 3, 2013 (the “Effective Date”), is entered into by and among 99¢ Only Stores, a California corporation (the “Company”), and Stephane Gonthier (“Executive”).

NOW, THEREFORE, the Company and Executive agree as follows:

1.Employment.

(a)Term.  The term of this Agreement shall commence on the Effective Date and shall continue until the fifth anniversary of the Effective Date (the “Initial Term”); provided, that on the last day of the Initial Term and on each anniversary of such date thereafter, the term of this Agreement automatically shall be extended for an additional year unless, not later than 90 days prior to the expiration of the then-existing term, either party gives written notice to the other that the term of this Agreement will not be extended.  The Initial Term, together with any extensions, collectively shall be referred to as the “Term.”  After the Term, Executive’s continued employment with the Company, if any, shall be pursuant to such terms and conditions as Executive and the Company may agree.

(b)Duties and Responsibilities.  Executive shall serve as the full-time President and Chief Executive Officer of the Company and have the duties and responsibilities customarily associated with such position, and such additional duties and responsibilities as may from time to time be assigned to him by the Company’s Board of Directors (the “Board”).  Executive shall report directly to the Board.  Executive also shall serve (or following an initial public offering, be nominated) as a director on the Board and, so long as Number Holdings, Inc. (“Parent”) is the parent of the Company, on the Board of Directors of Parent (the “Parent Board”).  Executive shall (i) devote his full business time to the business and affairs of the Company, (ii) not engage in any other business activities, as a director, officer, employee or consultant or in any other capacity, whether or not he receives compensation therefor, and (iii) observe and comply with all rules, regulations, policies and practices of the Company and Parent.  Notwithstanding clause (ii) above, Executive may devote a reasonable amount of time to (A) managing his personal investments, and serving as a director, officer or trustee of family-owned companies, trusts or foundations, (B) serving as a director of one board of directors (other than the Board and the Parent Board), and (C) serving on the boards of charitable, civic or religious organizations, or engaging in charitable and community affairs and activities; provided that such activities do not adversely interfere with the performance of Executive’s duties and responsibilities hereunder.

2.Compensation.

(a)Base Salary.  Executive shall be paid a base salary (“Base Salary”), initially at the annual rate of $900,000 (the “Initial Base Salary”), payable in installments consistent with the Company’s normal payroll practices.  If LTM EBITDA (as defined below) is greater than the EBITDA Target (as defined below) on the last day of each of 12 consecutive fiscal months, the Base Salary shall thereafter be increased to $1,000,000, retroactive to the first day of the first such month. “LTM EBITDA,” on any date, means the adjusted EBITDA of the Company for the

12 fiscal months ending on such date, calculated by the Company, in consultation with Executive, in a manner consistent with the calculation of budgeted EBIDA in the Company’s 2013 budget.  “EBITDA Target” means $300,000,000, as such target may be adjusted from time to time, as determined by the Parent Board to take into account any acquisitions, divestitures, recapitalizations and similar items.

(b)Annual Incentive Bonus.

(i)Executive shall be eligible to earn a cash incentive bonus (the “FY2014 Bonus”) for fiscal year 2014 (“FY2014”) pursuant to the terms of the bonus plan approved by the Board.  Executive’s target FY2014 Bonus shall be 100% of the Initial Base Salary, with the opportunity to earn up to 150% of the Initial Base Salary. The actual level of payment shall be contingent upon levels of achievement specified in the approved bonus plan relative to budgeted Adjusted EBITDA set forth in the Company’s FY2014 budget approved by the Board; provided, that Executive shall be guaranteed a minimum FY2014 Bonus of 100% of the Initial Base Salary. The FY2014 Bonus (including the guaranteed minimum) shall be prorated for the actual period of employment between September 3, 2013 (the “Start Date”) and the last day of FY2014.

(ii)Beginning with fiscal year 2015, Executive shall be eligible to earn an annual incentive bonus (“Annual Bonus”) for each fiscal year of the Company under a bonus plan approved by the Board after consultation with Executive regarding, among other things, the applicable threshold and “stretch” levels of performance under the plan; provided, that (x) the threshold for any fiscal year shall not be higher than the greater of (A) 98% of budgeted Adjusted EBITDA for such fiscal year and (B) 100% of actual Adjusted EBITDA for the prior fiscal year, or lower than 100% of Adjusted EBITDA for the prior fiscal year and (y) the threshold shall be set at a level of performance that the Board believes is reasonably possible to be achieved.  Executive’s target Annual Bonus shall be 125% of the Base Salary in effect at the beginning of such fiscal year, with the opportunity to earn up to 250% of such Base Salary. The actual level of payment will be contingent upon levels of achievement specified in the approved bonus plan relative to budgeted Adjusted EBITDA set forth in the Company’s budget for such fiscal year approved by the Board and the achievement of other goals as may be established by the Board in consultation with Executive. For purposes of this Agreement, “Bonus” refers, collectively, to the FY2014 Bonus or any Annual Bonus, as the context may require. No Bonus shall be earned until the date that such Bonus is paid, and Executive must be an employee in good standing on such date to earn any such Bonus.  Each such Bonus (if any) shall be paid by July 15 following completion of the applicable fiscal year, or, if earlier, within five business days after completion of the audit for such fiscal year.

(c)Signing Bonus.

(i)The Company shall pay to Executive a cash bonus of (i) $900,000 plus (ii) an amount equal to (x) the Base Salary times (y) a fraction, the numerator of which is the number of days between the Start Date and the Effective Date, and the denominator of which is 365 (the “Cash Signing Bonus”) within 90 days after the Effective Date unless, prior to such payment, the Company has terminated Executive’s employment for Cause or Executive has resigned without Good Reason (each as defined below).

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(ii)If Executive’s employment is terminated for Cause or Executive resigns without Good Reason prior to the first anniversary of the Effective Date, Executive shall repay the full Cash Signing Bonus and all Relocation Expenses (as defined below) to the Company within 60 days following the date of termination of Executive’s employment for Cause or the date of Executive’s resignation without Good Reason.

(iii)If Executive’s employment is terminated for Cause or Executive resigns without Good Reason on or after the first anniversary of the Effective Date and prior to the second anniversary of the Effective Date, Executive shall repay 50% of the Cash Signing Bonus to the Company within 60 days following the date of termination of Executive’s employment for Cause or the date of Executive’s resignation for Good Reason.

(iv)If the Company incurs any attorneys’ fees in the collection of the repayment of all or any portion of the Cash Signing Bonus or the Relocation Expenses (as defined below), then, in addition to all other remedies, Executive shall promptly reimburse the Company for all such attorneys’ fees.

(d)Option Grant.  Promptly, but in no event later than ten days, following the Effective Date, the Company shall grant Executive nonqualified options (the “Options”) to purchase 21,505 shares of each of the Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”) and the Class B Common Stock, par value $0.001 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”), of Parent; provided, that the number of shares covered by the Options shall be increased by the number of shares (in equal numbers of Class A Common Stock and Class B Common Stock) that is equal to 3% of the net shares of Common Stock issued by the Company between the date Executive’s employment offer letter from the Company is executed by the Company and Executive (the “Offer Letter Date”) and the grant date of the Options. The Options shall be subject to the terms and conditions of the Number Holdings, Inc. 2012 Stock Incentive Plan and applicable award agreements provided by Parent.  The exercise price per share of the Options will equal the fair market value of the underlying Common Stock on the date of grant.

(e)Co-Investment.  Executive represents that he is an “accredited investor” as such term is defined under Regulation D of the Securities Exchange Act of 1933, as amended.  Executive shall purchase, directly or, so long as the purchaser is an entity solely owned by Executive or the members of his immediate family, indirectly, on or about the Effective Date, a number of shares of Common Stock with an aggregate fair market value on the date of purchase (as determined by the Parent Board) equal to approximately $4,000,000, and shall execute and deliver customary agreements in connection with such purchase, including a purchase agreement and joinder to Parent’s Stockholders Agreement.

(f)Equity Backstop.

(i)Definitions

“Aggregate Adjustment” means the lesser of (A) $5 million and (B) the sum of the Per Share Adjustment for all of the Applicable Shares.

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“Applicable Shares” means (A) all of the shares of common stock of DOL (x) owned by Executive on the Offer Letter Date or (y) purchased by Executive through the exercise of options held on the Offer Letter Date, that are sold by Executive in a bona fide brokerage transaction during the period after the Effective Date and on or prior to the Cut-off Date or (B) if fewer, the first 196,691 of such shares so sold.

“Closing Price” on any trading date means the closing price of a share of common stock of DOL on the Toronto Stock Exchange on such date, as determined by the Parent Board.

“Cut-off Date” means the earliest of (A) the 180th day following the Effective Date and (B) the first trading date on which the average Closing Price for either (x) the five consecutive trading days or (y) seven out of ten consecutive trading days, in either case, ending on such trading date, equals or exceeds the Initial Share Price.

“DOL” means Dollarama Inc.

“Guaranteed Share Price” on any date means the Initial Share Price multiplied by (1+ the Index Percentage Change on such date).

“Index Percentage Change” on any date means the percentage change, as determined by the Parent Board, in the average of (A) the closing price of the S&P North American Consumer Sector Index and (B) the closing price of the S&P/TSX Composite Index (excluding the Capped Energy Index, the Capped Diversified Metals & Mining Index and the Capped Materials Index) from the trading day immediately preceding the Resignation Date and such date.

“Initial Share Price” means the average Closing Price for the ten trading days ending on the trading day immediately prior to the Resignation Date.

“Per Share Adjustment” means, with respect to each Applicable Share, the amount (positive or negative) equal to (A) the lower of (x) the Initial Share Price and (y) the Guaranteed Share Price on the trade date relating to such sale minus (B) the aggregate gross sale price received from the sale of such Applicable Share (before deducting commissions or any other amounts).

“Resignation Date” means the first date on which Executive’s resignation from DOL is publicly announced.

(ii)On the 5th day following the earlier of (x) the Cutoff Date and (y) the first date on which the number of Applicable Shares equals 196,691, Executive shall deliver to Parent:

(A)Brokerage confirmations for each sale of Applicable Shares;

(B)A written certification, in form and substance satisfactory to Parent that (w) each such sale complied with all applicable laws, (x) Executive was not in possession of any material non-public information at the time of any such sale, (y) Executive did not purchase or sell any other shares of common stock of DOL (or any derivative relating thereto) from and after the Effective Date and on or prior to the date of such certification, and (z) Executive is in compliance with each of his agreements with the Company, Parent or any of their respective subsidiaries; and

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(C)If applicable, an executed joinder to the Stockholders Agreement, and other customary agreements requested by Parent.

(iii)If the Aggregate Adjustment is greater than $0, then Parent, at its option, shall (A) pay to Executive a cash amount or (B) issue to Executive a number of shares of Common Stock with an aggregate fair market value on the date of issuance thereof (as determined by the Parent Board), in either case equal to the Aggregate Adjustment, subject to all applicable withholding.

(g)Payment.  Payment of all compensation and other amounts to Executive under this Agreement shall be made in accordance with the relevant Company policies in effect from time to time, including normal payroll practices, and shall be subject to applicable withholding requirements.

3.Employee Benefits.

(a)Business Expenses.  Upon timely submission of itemized expense statements and other documentation in accordance with the customary procedures specified by the Company, Executive shall be reimbursed for actual out of pocket business and travel expenses incurred by Executive in the course of his duties hereunder in accordance with the policies of the Company then in effect generally applicable to senior executives of the Company.

(b)Relocation Expenses.  Prior to the earlier of (i) the date on which Executive’s children start school in the greater Los Angeles area and (ii) the first anniversary of the Effective Date, the Company shall reimburse Executive for reasonable, out-of-pocket expenses (submitted in accordance with clause (a) above) for business class airfare (first class if business class is not offered) for (A) up to two round-trip flights per month between Los Angeles, California, and Montreal, Quebec, for Executive and (B) up to two round-trip flights (in total) between Los Angeles, California, and Montreal, Quebec, for each of Executive’s domestic partner and his children. Prior to the earlier of (i) the date on which Executive moves into a permanent residence in the greater Los Angeles Area and (ii) the first anniversary of the Effective Date, the Company shall reimburse Executive for reasonable, out-of-pocket expenses (submitted in accordance with clause (a) above) for appropriate temporary housing in the Los Angeles, California metropolitan region. The items described in the preceding two sentences are collectively referred to as “Relocation Expenses.”

(c)Benefit Plans.

(i)Executive shall be entitled to participate in the Company’s employee benefit plans and programs (“Benefit Plans”) as they may exist from time to time, in each case as offered by the Company to its senior executives generally, subject to the terms and conditions thereof.  The Company shall cause applicable waiting periods to be waived under the Company’s group health plan, to the extent permitted pursuant to the terms of such plan. Nothing in this Agreement shall require the Company to maintain any Benefit Plan, or shall preclude the Company from terminating or amending any Benefit Plan from time to time.

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(ii)To the extent not covered by insurance, the Company shall cover the reasonable cost, either through regular expense reimbursement or by direct payment to the medical provider, of a comprehensive annual physical examination for Executive from a medical provider of Executive’s choice.

(d)Automobile Allowance.  Executive shall receive an automobile allowance in an annual amount equal to $20,000, which shall be paid in equal amounts in accordance with the Company’s normal payroll practices.

(e)Vacation.  Executive shall be entitled to four weeks paid vacation time in accordance with the Company’s vacation policy for senior executives.  Executive acknowledges that given his position at the Company, Executive will remain generally available and accessible to the Company’s senior managers and the Board through an electronic means of communication when reasonably possible.

(f)Immigration/Work Authorization.  Executive has provided the Company with documentation evidencing his authorization to work in the United States.  During the Term, the Company’s Human Resources department will assist Executive in (i) maintaining his O-1 visa (on a premium processing basis) and (ii) obtaining a permanent resident card (i.e., a “green card”) for Executive and his children, and, for so long as permissible, obtaining other immigration-related authorizations for his domestic partner and one additional household member, in each case as described below, it being understood that United States government entities make all decisions regarding the maintenance of O-1 visas, granting of green cards and approval of other immigration-related authorizations. The Company shall pay all reasonable (x) government filing fees and (y) legal fees and costs, in each case relating to the application process so long as Executive uses the Company’s preferred immigration counsel and vendors.  Executive shall, and shall cause his domestic partner, children, and other household member to, (A) take all actions necessary or desirable to maintain his O-1 visa and, as promptly as practicable, obtain a green card or, for so long as permissible, other immigration-related authorizations and (B) without limiting the foregoing, execute and deliver such documents, instruments, conveyances and assurances, complete all questionnaires and forms, and obtain all documents (e.g. university transcripts, resumes, medical records, paystubs, etc.), in each case as may be necessary or desirable, in connection therewith.  If Executive’s employment is terminated for any reason before obtaining a green card, except as otherwise required by law, the Company shall not take any action to hinder any work authorization or immigration-related applications pending on behalf of Executive, his domestic partner, children or household member.

(g)Legal Fees.  Following receipt of reasonably detailed invoices from Executive’s legal counsel, the Company shall pay to such legal counsel legal fees and expenses incurred in connection with the negotiation of this Agreement and other written agreements related to the commencement of Executive’s employment with the Company, up to a maximum of $15,000 in the aggregate.

(h)Directors’ and Officers’ Insurance. At all times during the Term, the Company shall provide to Executive the benefit of, and pay all of the costs of, any directors’ and officers’ liability insurance policy or policies obtained by the Company. Executive acknowledges that he

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has been provided with a copy of (i) the By-Laws of each of the Company and Parent, Articles VI and VIII of which, respectively, provide for indemnification of directors and officers and (ii) the Articles of Incorporation of each of the Company and Parent, Sections Fourth and Seventh of which, respectively, provide for indemnification of directors and officers.

(i)Professional Memberships/Dues.  The Company shall pay or reimburse Executive for (i) the annual professional membership dues/fees to maintain his license to practice law in good standing , (ii) the annual membership dues/fees for applicable Canadian bar associations and (iii) the reasonable cost of continuing legal education courses and lectures taken locally, “on-line” or via videoconferencing.

4.Termination of Employment.

(a)For Cause.  The Company may terminate Executive’s employment for “Cause” immediately upon written notice for any of the following reasons:  (i) Executive’s (x) being indicted for, or charged with, a felony under U.S. Federal or state law (or Canadian law equivalent), or (y) conviction of, or plea of guilty or nolo contendere to, a misdemeanor under U.S. Federal or state law (or Canadian law equivalent) where imprisonment is imposed (excluding traffic-related offenses and DUIs); (ii) perpetration by Executive of an illegal act, dishonesty, or fraud that could cause economic injury to Parent, the Company or any affiliate of either of them, (iii) Executive’s insubordination, or refusal to perform his duties or responsibilities for any reason other than illness or mental incapacity; (iv) failure by Executive to perform Executive’s material duties; (v) Executive’s willful misconduct or gross negligence with regard to Parent, the Company or any subsidiary of either of them; (vi) Executive’s appropriation of a material corporate opportunity of Parent, the Company or any subsidiary of either of them; or (vii) Executive’s material breach of this Agreement or any other agreement with Parent, the Company or any of their respective affiliates, including any confidentiality or other restrictive covenant; provided, that the occurrence of an event described in (iii) through (vii) above only shall constitute Cause if (I) the Company provides Executive with written notice that describes with reasonable particularity the facts and circumstances giving rise to Cause within 90 days after the grounds constituting Cause have been presented to the Parent Board at a duly-called meeting (the “Cause Notice”); (II) if curable, Executive fails to substantially cure such event within 20 days after delivery of the Cause Notice; and (III) the Company terminates Executive’s employment for Cause within 60 days following delivery of the Cause Notice.

Upon termination of Executive’s employment for Cause, neither the Company nor any of its affiliates shall be under any further obligation to Executive, except the Company’s obligation to pay (A) all accrued but unpaid Base Salary to the date of termination within 30 days following such termination, less all applicable deductions, (B) any accrued but unused vacation and any earned and vested benefits and payments pursuant to the terms of any Benefit Plan or this Agreement, and (C) all unreimbursed business and relocation expenses incurred and properly submitted in accordance with this Agreement (the payments and benefits described in subsections (A), (B) and (C) of this paragraph shall be referred herein as the “Accrued Benefits”); provided, that if Executive’s employment is terminated pursuant to Section 4(a)(i) at the time of a conviction or during the pendency of any appeals, any severance payments, other severance benefits, or stock or other equity to which Executive would have been entitled had

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Executive’s employment been terminated without Cause shall be placed into an interest-bearing escrow account and either (i) forfeited upon a conviction that is later affirmed on appeal or not reversed, or from which no appeal is taken, or (ii) provided to Executive upon Executive’s being acquitted or the charges being dropped or dismissed, in accordance with the timing (unless the applicable time periods have passed, in which case such amounts will be provided within 30 days after such acquittal or such charges being dropped or dismissed), and subject to the conditions, described in Section 4(b).

(b)Without Cause; Good Reason.  The Company may terminate Executive’s employment at any time without Cause immediately; and, subject to meeting the applicable conditions, Executive may terminate Executive’s employment at any time for Good Reason, in either case by delivery of written notice.  Upon termination of Executive’s employment by the Company without Cause or by Executive for Good Reason, or in accordance with the proviso in the last paragraph of Section 4(a), in addition to the Accrued Benefits, Executive shall be entitled to receive:

(i)an amount equal to two times the sum of (A) Executive’s then-current Base Salary, plus (B) the average of the actual Bonuses earned by Executive for the three most recent completed fiscal years immediately preceding the fiscal year in which the termination of employment occurs (including any Bonus contemplated by clause (iii) below), or, if less than three, all completed fiscal years since the Effective Date (the “Severance Amount”).  In any case in which the FY2014 Bonus is taken into account for the purpose of calculating the Severance Amount, such calculation shall be based on the Bonus that otherwise would have been earned by Executive under the bonus plan approved by the Board based on actual performance (i.e., disregarding the minimum Bonus guarantee), but such amount shall be annualized to eliminate the effects of proration.  One-half of the Severance Amount shall be paid in equal installments over 24 months in accordance with the Company’s regular payroll schedule, and the remainder of the Severance Amount shall be payable in a lump sum on the 30th day following termination of employment;

(ii)if the date of Executive’s termination of employment is (A) prior to the second anniversary of the Effective Date, the vesting of the time-based Options (the “Time-Vested Options”) shall be accelerated such that 50% of the total number of Time-Vested Options are vested or (B) on or after the second anniversary of the Effective Date, Executive will receive an additional 12 months of vesting on the Time-Vested Options;

(iii)any unpaid Bonus for a completed fiscal year that otherwise would have been earned by Executive had Executive’s employment continued through the Bonus payment date;

(iv)if the date of Executive’s termination of employment is on or after the first day of the third fiscal quarter of the Company for the fiscal year in which such termination of employment occurs, a pro-rated portion of the Bonus that would have been earned by Executive had Executive remained employed through the Bonus payment date, based on the actual achievement of the Company against the performance goals set by the Board for the applicable fiscal year, such pro-rated portion to be equal to a fraction, the numerator of which is the number of days between the first day of the fiscal year and the date of such termination of employment (inclusive) and the denominator of which is 365, payable at the same time bonuses are paid to similarly situated employees of the Company; and

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(v)subject to Executive timely electing COBRA, the Company shall continue to contribute towards health insurance premiums under the Company’s group health plan on behalf of Executive and his covered dependents as of immediately prior to the date of Executive’s termination of employment in the same dollar amount as it contributed immediately prior to the date of Executive’s termination of employment (or, if such contributions are prohibited or penalized under then-applicable law, reimburse to Executive, upon submission of proof of payment by Executive, an equivalent dollar amount) until the earlier of 18 months after the date of Executive’s termination of employment or such time as Executive becomes eligible for substantially similar benefits from another employer.

The foregoing payments and benefits shall commence on the 30th day following termination of employment (or, in the case of (iii) and (iv) above, at the same time as Bonuses are paid to employees, generally, if later); provided, that such payments and benefits shall be contingent on (A) Executive executing and delivering to the Company a release of claims against the Company substantially in the form attached hereto as Exhibit A (subject to any modifications necessary to render such release fully enforceable under applicable law, as agreed between the parties) (“Release”), and such Release becoming effective, by such date and (B) Executive’s continued compliance with all post-termination restrictive covenants applicable to Executive, including the covenants contained in the Fair Competition Agreement.  For purposes of the foregoing calculations in this Section 4(b), “Base Salary” shall mean the base salary in effect on the date of termination of employment without regard to any reduction that may have given rise to Good Reason.  A termination of Executive’s employment under this Section 4(b) does not include a termination of employment by reason of Executive’s Disability (as defined below) or upon the death of Executive.

“Good Reason” means the occurrence of any of the following events, without Executive’s consent, (i) any reduction in Base Salary other than, prior to a Change in Control or an Initial Public Offering (as each is defined in the Number Holdings, Inc. 2012 Stock Incentive Plan), a one-time reduction not exceeding ten percent that is imposed simultaneously on all executive officers of the Company; (ii) a diminution in Executive’s job title, authority, duties or responsibilities for the Company or a change in reporting relationship to anyone other than the Board; (iii) the Company relocates its headquarters more than 5 miles further (one-way) from the permanent residence to which Executive first relocates in connection with his employment by the Company than the location of the Company’s headquarters as of the Effective Date; (iv) removal of Executive from the Board or Parent Board, or the failure to appoint or re-appoint, as the case may be (or, following an initial public offering, nominate or re-nominate, as the case may be), Executive to the Board and Parent Board throughout the Term; or (v) any election by the Company not to extend the Term under Section 1(a); provided that, the occurrence of an event described in (i), (ii), (iii) or (iv) above only shall constitute Good Reason if (A) Executive provides the Company with written notice within 90 days following the occurrence of the event allegedly constituting Good Reason (the “Good Reason Notice”); (B) the Company fails to substantially cure such event within 30 days after receiving the Good Reason Notice; and (C) Executive resigns within 60 days following delivery of the Good Reason Notice. For the avoidance of doubt, Executive’s job shall require significant travel outside of Los Angeles County, which shall not constitute Good Reason.

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(c)Resignation.  Executive may resign his employment (without Good Reason) upon providing the Company 30 day’s prior written notice; provided, that the Company shall have the right to accelerate Executive’s termination date to an earlier date than specified in Executive’s notice.  In the event of such resignation by Executive, the Company shall be under no further obligation to Executive, except to pay the Accrued Benefits.

(d)Disability; Death.  The Company may terminate Executive’s employment if Executive experiences a “Total Disability” (or equivalent) as defined under the Company’s Long Term Disability Plan in effect at the time of the disability (or, if no Long Term Disability Plan is in effect at the time of the disability, if executive becomes disabled within the meaning of Section 409A (as defined below)) (a “Disability”).  In the event that Executive’s employment is terminated by reason of Executive’s Disability or upon the death of Executive, in addition to the Accrued Benefits, Executive shall be entitled to receive (i) continuation of the Base Salary for the shorter of (A) 12 months or (B) the remainder of the then-current Term, and (ii) a pro-rated portion of the Bonus that otherwise would have been earned by Executive for the fiscal year in which the termination of Executive’s employment occurs had Executive’s employment continued through the Bonus payment date, payable at the time Bonuses are paid to other employees of the Company.  In addition, if the date of termination is (x) prior to the second anniversary of the Effective Date, the vesting of the Time-Vested Options shall be accelerated such that 50% of the total number of Time-Vested Options are vested or (y) on or after the second anniversary of the Effective Date, Executive will receive an additional 12 months of vesting on the Time-Vested Options.

(e)Cooperation.  Following termination of employment for any reason, Executive shall (i) cooperate with the Company, as reasonably requested by the Company, to effect a transition of Executive’s responsibilities and to ensure that the Company is aware of all matters being handled by Executive and (ii) cooperate and provide assistance to the Company at its reasonable request in connection with any action, suit or proceeding brought by or against the Company or any of its affiliates (or in which any of them is or may be a party) or that relates in any way to Executive’s acts or omissions while employed by the Company.  The Company shall reimburse Executive promptly for actual out-of-pocket expenses incurred by him in connection with assisting the Company in the manner described in the immediately preceding sentence in accordance with the policies of the Company then in effect generally applicable to senior executives of the Company.  Upon termination for any reason, Executive shall be deemed to have resigned from all offices and directorships then held with Parent, the Company or any of their respective subsidiaries.

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5.Fair Competition Agreement.  Executive shall execute and deliver to the Company the Fair Competition Agreement attached hereto as Exhibit B on or before the Effective Date. Such execution and delivery is a condition to the effectiveness of this Agreement. Executive shall at all times comply with the Fair Competition Agreement.

6.Section 409A.  Notwithstanding anything herein to the contrary:

(a)The Company does not guarantee to Executive any particular tax treatment relating to the payments and benefits under this Agreement. It is intended that such payments and benefits be exempt from, or comply with, Section 409A of the Internal Revenue Code (the “Code”) and the regulations and guidance promulgated thereunder (collectively, “Section 409A”), and all provisions of this Agreement shall be administered, interpreted and construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.  Notwithstanding any other provision hereof, in no event shall the Company be liable for, or be required to indemnify Executive for, any liability of Executive for taxes or penalties under Section 409A or otherwise.

(b)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A.

(c)With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; provided, that this clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.

(d)Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within ten calendar days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  If under this Agreement, an amount is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.

(e)Notwithstanding any other provision hereof, if Executive is, as of the date of termination, a “specified employee” for purposes of Treas.  Reg. § 1.409A-1(i), then any amount payable to Executive pursuant to Section 4 hereof that is neither a short-term deferral within the meaning of Treas.  Reg. § 1.409A-1(b)(4) nor within the involuntary separation pay limit under Treas.  Reg. § 1.409A-1(b)(9)(iii)(A) will not be paid before the date that is six months after the date of termination, or if earlier, the date of Executive’s death, to the extent such delay is necessary in order to avoid the imposition of taxes under Section 409A.  Any payments to which

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Executive would otherwise be entitled during such non-payment period will be accumulated and paid or otherwise provided to Executive on the first day of the seventh month following such date of termination, or if earlier, within 30 days after Executive’s death to his surviving spouse (or to his estate if Executive’s spouse does not survive him).

7.Miscellaneous.

(a)Governing Law.  This Agreement, and any contest, dispute, controversy or claim arising hereunder or related hereto (collectively, “Disputes”), shall be governed by and construed in accordance with the laws of the State of California without regard to conflict of law principles that would require the application of the laws of another jurisdiction.

(b)Assignment and Transfer.  Executive’s rights and obligations under this Agreement shall not be transferable by assignment or otherwise, and any purported assignment, transfer or delegation thereof shall be void.  This Agreement shall inure to the benefit of, and be binding upon and enforceable by, any purchaser of substantially all of the Company’s assets, any corporate successor to the Company or any assignee thereof.

(c)Entire Agreement.  This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes any prior or contemporaneous written or oral agreements, representations and warranties between them respecting the subject matter hereof.  Without limiting the foregoing, this Agreement expressly supersedes all prior agreements (written or oral) relating to Executive’s employment with the Company or any of its subsidiaries.

(d)Amendment and Waiver; Rights Cumulative.  This Agreement may be amended, waived or discharged only by a writing signed by Executive and by a duly authorized representative of the Company (other than Executive).  No failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of any other right, power or privilege or of the same right, power or privilege in any other instance.  All waivers by either party hereto must be contained in a written instrument signed by the party to be charged and, in the case of the Company, by a duly authorized representative of the Company (other than Executive).  The rights and remedies provided by this Agreement are cumulative, and the exercise of any right or remedy by either party hereto (or by its successor), whether pursuant to this Agreement, to any other agreement, or to law, shall not preclude or waive its right to exercise any or all other rights and remedies.

(e)Severability.  If any term, provision, covenant or condition of this Agreement, or the application thereof to any person, place or circumstance, shall be held to be invalid, unenforceable or void, the remainder of this Agreement and such term, provision, covenant or condition as applied to other persons, places and circumstances shall remain in full force and effect.

(f)Dispute Resolution.  Except as provided in the Fair Competition Agreement, all Disputes shall be resolved in accordance with the Arbitration of Disputes Agreement attached hereto as Exhibit C, and incorporated herein. Executive shall execute and deliver to the Company a copy of such Agreement on or before the Effective Date as a condition to the effectiveness of this Agreement.

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(g)Notices.  Any notice or other communication required or permitted under this Agreement shall be effective only if it is in writing and shall be deemed given when delivered personally, one day after it is sent through a reputable overnight carrier, or three business days after it is mailed by registered mail, return receipt requested, to the parties at the following addresses (or at such other address as a party may specify by notice given hereunder to the other party):

If to Executive:

At the address listed in the Company’s personnel records.

with copies to:

Littler Mendelson, P.C.

2049 Century Park East, 5th Floor

Los Angeles, CA 90067

Telephone:  (310) 553-0308

Facsimile:  (310) 553-5583

Attention:  Robert F. Millman, Esq.

If to the Company:

99¢ Only Stores
4000 Union Pacific Avenue
Commerce, CA 90023
Telephone: (323) 980-8145
Facsimile: (323) 307-9611
Attention: General Counsel

with copies to:

Ares Management LLC
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067
Telephone: (310) 201-4100
Facsimile: (310) 201-4170
Attention: Adam Stein

and

Proskauer Rose LLP
2049 Century Park East, Suite 3200
Los Angeles, CA 90067
Telephone: (310) 284-4582
Facsimile: (310) 557-2193 
Attention: Michael A. Woronoff, Esq.

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(h)Further Assurances.  Executive shall, upon the Company’s reasonable request, execute such further documents and take such other actions as may be permitted or reasonably required by law to implement the purposes, objectives, terms, and provisions of this Agreement.

(i)Interpretation.  The headings and captions of this Agreement are provided for convenience only and are intended to have no effect in construing or interpreting this Agreement.  The language in all parts of this Agreement shall be in all cases construed according to its fair meaning and not strictly for or against the Company or Executive.  As used herein:  (i) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (ii) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (iii) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof; (iv) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (v) “or” is used in the inclusive sense of “and/or”; and (vi) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

(j)Acknowledgement.  Executive understands the terms and conditions set forth in this Agreement and acknowledges having had adequate time to consider whether to agree to the terms and conditions and to consult a lawyer or other advisor of Executive’s choice.

(k)Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be considered to have the force and effect of an original.

(l)Each Party the Drafter.  Executive understands the terms and conditions set forth in this Agreement and acknowledges having had adequate time to consider whether to agree to the terms and conditions and to consult a lawyer or other advisor of Executive’s choice.  This Agreement and the provisions contained herein shall not be construed or interpreted for or against any party to this Agreement because that party drafted or caused that party’s legal representative to draft any of its provisions.

(m)Time of Essence.  Time is and shall be of the essence in connection with this Agreement and the terms and conditions contained herein.

(n)Survival.  All rights and obligations of any party in Sections 4 through 7 of this Agreement not fully satisfied or performed, as applicable, on the date Executive’s employment is terminated, shall survive the termination of Executive’s employment and the expiration or termination of this Agreement.

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[Remainder of Page Intentionally Left Blank / Signatures on Next Page]

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.

99¢ ONLY STORES
By:	/s/ Richard Anicetti
Name:	Richard Anicetti
Title:	Interim President and CEO
STEPHANE GONTHIER
/s/ Stephane Gonthier

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EXHIBIT A

RELEASE

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EXHIBIT B

FAIR COMPETITION AGREEMENT

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EXHIBIT C

ARBITRATION OF DISPUTES AGREEMENT

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EX-10.2

Exhibit 10.2

EXECUTION VERSION

Stock Purchase Agreement

This STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of September 30, 2013, by and between Number Holdings, Inc., a Delaware corporation (the “Company”) and Avenue of the Stars Investments LLC, a Delaware limited liability company (the “Purchaser”).

WHEREAS, Stéphane Gonthier (“Gonthier”) is the sole manager of Purchaser and is an employee of 99¢ Only Stores, Inc. (“99¢”) the Company’s subsidiary; and

WHEREAS, as part of Gonthier’s compensatory arrangement, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase, in the aggregate, (i) 4,922 shares of Class A Common Stock, par value $0.001 per share (the “Class A Shares”), of the Company, and (ii) 4,922 shares of Class B Common Stock, par value $0.001 per share (the “Class B Shares,” and together with the Class A Shares, the “Shares”).

NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:

Section 1.Purchase and Sale.  The Company shall issue and sell to the Purchaser and the Purchaser shall purchase from the Company, the Shares for the cash purchase price of $5,999,918 (the “Purchase Price”).

Section 2.Closing.  The purchase and sale of the Shares shall take place on the date hereof (the “Closing”).  At the Closing, the Company shall deliver to the Purchaser stock certificates evidencing the Shares registered in the Purchaser’s name, against delivery to the Company by the Purchaser of the Purchase Price in full by cashier’s check, wire transfer of immediately available funds to an account designated by the Company prior to the Closing or other means approved by the Company at or prior to the Closing.

Section 3.Stockholders Agreement.  At the Closing, the Purchaser shall execute and deliver to the Company a joinder agreement to the Stockholders Agreement, dated as of January 13, 2012, among the Company and the stockholders of the Company (as amended, supplemented or otherwise modified from time to time, the “Stockholders Agreement”), in substantially the form attached to the Stockholders Agreement.  Upon such execution and delivery, the Purchaser will become bound by the terms and conditions of the Stockholders Agreement and become a “Stockholder” and hold the status of a “Stockholder” thereunder and the Shares shall be designated as “Common Stock” under the Stockholders Agreement.

Section 4.Company’s Right to Repurchase.

a.Company’s Right to Repurchase.  In the event of Gonthier’s termination of employment with 99¢ for any reason (a “Termination”), the Company shall have the right (the “Repurchase Right”), but not the obligation, to repurchase (or to cause one or more of its designees to repurchase) from the Purchaser (or its transferee) any or all of the Shares, during the 90 day period following the date of Termination (the “Repurchase Period”) for a price (the “Repurchase Price”) equal to the fair market value of the Shares on the date of Termination; provided, that the Company must exercise the Repurchase Right with respect to an equal number of Class A Shares and Class B Shares, concurrently.

b.To exercise any Repurchase Right, the Company (or one or more of its designees) shall deliver a written notice to the Purchaser (or its transferee) setting forth the securities to be repurchased and the price thereof, and the date on which such repurchase is to be consummated, which

date shall be not less than 15 days or more than 30 days after the date of such notice.  On the date of consummation of the repurchase, (i) the Company (or one or more of its designees) will pay the Purchaser (or its transferee) the Repurchase Price in cash or, in the Company’s discretion and to the extent not prohibited by law, by cancellation of indebtedness of Gonthier to the Company or any subsidiary or any combination thereof and (ii) the Purchaser (or its transferee) shall (A) cooperate with the Company to cause any certificates evidencing the shares being purchased that are being held in escrow by the Company to be delivered to the Company or its designee or (B) deliver the certificates evidencing the shares being purchased, duly endorsed in blank by the person in whose name the certificate is issued or accompanied, free and clear of any liens, and with stock (or equivalent) transfer taxes affixed.  The Company may exercise its Repurchase Rights upon one or more occasions at any time during the Repurchase Period.

c.Notwithstanding the foregoing, the Repurchase Period and the date on which any repurchase is to be consummated may be extended by the Company at any time when repurchase by the Company (i) is prohibited pursuant to applicable law, (ii) is prohibited under any debt instrument of the Company or any of its affiliates or (iii) would result in adverse accounting consequences for the Company, in each case as determined by the Company.

Section 5.  Cancellation of Equity Backstop.  Upon the sale of the Shares to the Purchaser pursuant to this Agreement, Section 2(f) (Equity Backstop) of the Employment Agreement between 99¢ and Gonthier, dated as of September 3, 2013 (the “Employment Agreement”), is hereby terminated in its entirety and Gonthier hereby agrees that he shall not be entitled to any payments pursuant thereto.

Section 6.  Representations and Warranties of the Company.  The Company represents and warrants to the Purchaser as follows:

a.The Company has all requisite power and authority to execute, deliver and perform this Agreement.  This Agreement has been duly authorized, executed and delivered by the Company.

b.The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement do not and will not: (i) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, consent, termination, cancelation or acceleration of any obligation or loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any lien upon any of the properties or assets of the Company or any of the Company’s subsidiaries under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, any provision of (A) the charter or organizational documents of the Company, (B) any contract to which the Company is a party or by which any of their respective properties or assets is bound or (C) any judgment or law applicable to the Company or (ii) require any consent of, or registration, declaration or filing with, notice to, or permit from, any governmental entity, other than compliance with the applicable requirements, if any, of the United States Securities Exchange Act of 1934, except, in the case of clauses (i) and (ii) above, any such items that, individually or in the aggregate, would not be expected to be materially adverse with respect to the ability of the Company to timely perform any of its obligations hereunder in any material respect.

c.The Shares to be issued to the Purchaser under this Agreement have been duly and validly authorized and, when issued to the Purchaser in the manner contemplated by this Agreement, will be validly issued, fully paid and non-assessable and not issued in violation of any options, rights of first refusal, rights of first offer, subscription rights, preemptive rights or similar rights under (i) any provision of law, (ii) the Company’s organizational documents or (iii) any material contract to which the Company is a party or otherwise bound.

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Section 7.Representation and Warranties of the Purchaser.  The Purchaser represents and warrants to the Company as follows:

a.The Purchaser has all requisite power and authority to execute, deliver and perform its obligations under this Agreement.  This Agreement has been duly authorized, executed and delivered by the Purchaser.

b.The execution, delivery and performance of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated by this Agreement do not and will not (i) conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, consent, termination, cancelation or acceleration of any obligation or loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any lien upon any of the properties or assets of the Purchaser under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, any provision of (A) the organizational documents of the Purchaser, (B) any contract to which the Purchaser is a party or by which any of its properties or assets is bound or (C) any judgment or law applicable to the Purchaser or (ii) require any consent of, or registration, declaration or filing with, notice to, or permit from, any governmental entity, other than compliance with the applicable requirements, if any, of the United States Securities Exchange Act of 1934, except, in the case of clauses (i) and (ii) above, any such items that, individually or in the aggregate, would not be expected to be materially adverse with respect to the ability of the Purchaser to timely perform any of its obligations hereunder in any material respect.

c.The Purchaser is acquiring the Shares solely for its own account and not with a view to its distribution within the meaning of the United States Securities Act of 1933, and the rules and regulations promulgated thereunder (collectively, the “Act”).  The Purchaser acknowledges that (i) the Shares have not been registered under the Act nor qualified under any applicable state securities or blue sky laws and, as such, may not be offered, sold or otherwise transferred unless they are registered under the Act and applicable state securities or blue sky laws or an applicable exemption from such registration is available, (ii) no federal or state agency has made any finding or determination as to the fairness of this offering for investment, nor any recommendation or endorsement of the Shares, and (iii) there is no public market for the Shares or any of the Company’ securities and there is no certainty that such a market will ever develop.  There can be no assurance that the Purchaser will be able to sell or dispose of the Shares.

d.The Company has made available to the Purchaser and the Purchaser has received all documents and information that the Purchaser has requested relating to an investment in the Company.  The Purchaser has carefully reviewed such documents and understands the information contained therein, prior to the execution of this Agreement.  The Purchaser recognizes that investing in the Company involves substantial risks and has taken full cognizance of and understands all of the risk factors related in an investment in the Shares.  The Purchaser has carefully considered and has, to the extent the Purchaser believes such discussion necessary, discussed with the Purchaser’s professional legal, tax and financial advisers the suitability of an investment in the Company and the Purchaser has determined that the issuance of the Shares is a suitable investment for the Purchaser.  The Purchaser acknowledges that the Company has not (i) given any guarantee or representation as to the potential success, return, effect or benefit (either legal, regulatory, tax, financial, accounting or otherwise) of an investment in the Shares or (ii) made any representation to the Purchaser regarding the legality of an investment in the Shares under applicable legal investment or similar laws or regulations.  In deciding to purchase the Shares, the Purchaser is not relying on the advice or recommendations of the Company or its affiliates or any of their respective officers, directors, employees, agents or advisors, and the Purchaser has made its own independent decision that the investment in the Shares is suitable and appropriate for the Purchaser.

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e.The Purchaser is an “Accredited Investor” as such term is defined under Rule 501(a) of Regulation D promulgated under the Act.  The Purchaser has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risks of investment in the Company and of making an informed investment decision.  The Purchaser, or the Purchaser’s professional advisor, has the capacity to protect the Purchaser’s concerns in connection with the investment in the Shares, and the Purchaser is able to bear the economic risk, including the complete loss, of an investment in the Shares.

f.The Purchaser is unaware of, is in no way relying on, and did not become aware of the investment through or as a result of, any form of general solicitation or general advertising, including, without limitation, any article, notice or advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television and radio, or electronic mail over the Internet, in connection with the investment in the Shares and did not become aware of the investment in the Shares through or as a result of any seminar or meeting to which the Purchaser was invited by, or any solicitation of a subscription by, a person not previously known to the Purchaser in connection with investments in securities generally.

Section 8.Certain Transfers.  Notwithstanding anything herein to the contrary, the Shares may be transferred at the discretion of the Purchaser, to the extent lawful, upon reasonable advance notice to, and subject to documentation reasonably requested by, the Company, to a limited liability company, the sole members of which are members of Gonthier’s immediate family, or a trust solely for the benefit of members of Gonthier’s immediate family, unless such transfer, in the Company’s reasonable determination, could result in a material financial adverse impact to the Company. Any Person to whom the Shares are transferred pursuant to this Section 8 shall be subject to all of the terms of this Agreement and the Stockholders Agreement.

Section 9Entire Agreement.  This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes any prior or contemporaneous written or oral agreements (including Section 2(f) of the Employment Agreement), representations and warranties between them respecting the subject matter hereof.

Section 10.Successors and Assigns.  This Agreement shall inure to the benefit of, and be binding upon and enforceable by, any purchaser of substantially all of the Company’s assets, any corporate successor to the Company or any assignee thereof.  Neither this Agreement nor any of the rights of the parties hereunder may otherwise be transferred or assigned by any party hereto without the prior written consent of the other party.  Any attempted transfer or assignment in violation of this Section 10 shall be void.

Section 11.No Third-Party Beneficiaries.   This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

Section 12.Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be considered to have the force and effect of an original.

Section 13.Governing Law.  This Agreement, and any contest, dispute, controversy or claim arising hereunder or related hereto (collectively, “Disputes”), shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to its principles of conflict of laws that would require the application of the laws of another jurisdiction.

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Section 14.Waiver of Jury Trial.  Except as provided in the Fair Competition Agreement entered into by and between 99¢ and Gonthier, all Disputes shall be resolved in accordance with the Arbitration of Disputes Agreement by and between 99¢ and Gonthier, which is incorporated herein.

Section 15.No Right to Employment.  This Agreement is not an agreement of employment.  This Agreement shall not (a) guarantee that 99¢ will employ Gonthier for any specific time period or (b) modify or limit in any respect 99¢’s right to terminate or modify Gonthier’s employment or consideration.

Section 16.Interpretation.  The headings and captions of this Agreement are provided for convenience only and are intended to have no effect in construing or interpreting this Agreement.  The language in all parts of this Agreement shall be in all cases construed according to its fair meaning and not strictly for or against the Company or the Purchaser.  As used herein:  (i) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (ii) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (iii) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof; (iv) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (v) “or” is used in the inclusive sense of “and/or”; and (vi) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

Section 17.No Strict Construction.  This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[Signature page follows]

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IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement as of the date first written above.

NUMBER HOLDINGS, INC.
By:	/s/ Frank Schools
	Name:	Frank Schools
	Title:	Chief Financial Officer
STÉPHANE GONTHIER
By:	/s/ Stéphane Gonthier
	Stéphane Gonthier
AVENUE OF THE STARS INVESTMENTS LLC
By:	/s/ Stéphane Gonthier
	Name:	Stéphane Gonthier
	Title:	Manager

EX-10.3

Exhibit 10.3

Award Number: 13-018

NUMBER HOLDINGS, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT
PURSUANT TO THE
NUMBER HOLDINGS, INC.
2012 STOCK INCENTIVE PLAN

AGREEMENT (“Agreement”), dated as of the Grant Date between Number Holdings, Inc., a Delaware corporation (the “Company”), and Stéphane Gonthier (the “Participant”).

Preliminary Statement

The Committee hereby grants this non-qualified stock option (the “Option”) as of October 9, 2013 (the “Grant Date”), pursuant to the Number Holdings, Inc. 2012 Stock Incentive Plan, as it may be amended from time to time (the “Plan”),  to purchase the number of shares of Class A Common Stock, $0.001 par value per share of the Company (the “Class A Common Stock”), and Class B Common Stock, par value $0.001 per share, of the Company (the “Class B Common Stock,” and, together with the Class A Common Stock, the “Common Stock”), set forth below to the Participant, as an Eligible Employee of the Company or one of its Affiliates (collectively, the Company and all of its Affiliates shall be referred to as the “Employer”).  Except as otherwise indicated, any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan.  A copy of the Plan has been delivered to the Participant.  By signing and returning this Agreement, the Participant acknowledges having received and read a copy of the Plan and agrees to comply with it, this Agreement and all applicable laws and regulations.

Accordingly, the parties hereto agree as follows:

1.Tax Matters.  No part of the Option is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.

2.Common Stock Subject to Option;  Exercise Price.  Subject in all respects to the Plan and the terms and conditions set forth herein and therein, the Option entitles the Participant to purchase from the Company, upon exercise, 21,505 shares of Class A Common Stock and 21,505 shares of Class B Common Stock, provided that the Participant must exercise the Option with respect to an equal number of shares of Class A Common Stock and Class B Common Stock concurrently.  The exercise price under the Option is $1,219 for each unit (a “Unit”) consisting of one share of Class A Common Stock and one share of Class B Common Stock (the “Unit Exercise Price”).

3.Vesting; Exercise.

(a)Time-Based Vesting.  Options to purchase 16,129 shares of each class of Common Stock (the “Time-Vested Options”) shall vest and become exercisable on the dates and in the cumulative percentages provided in the table below (which percentages shall

apply equally with respect to the Class A Common Stock and the Class B Common Stock subject to the Option); provided, that except as provided below, with respect to each vesting date, the Participant has not experienced a Termination prior to such date.  There shall be no proportionate or partial vesting in the periods prior to each vesting date.

Vesting Date	Percent Vested
First Anniversary of Grant Date	30	%
Second Anniversary of Grant Date	50	%
Third Anniversary of Grant Date	75	%
Fourth Anniversary of Grant Date	100	%

Notwithstanding the foregoing:

(i)If the Participant’s employment is Terminated without Cause or for Good Reason (as such terms are defined in the Employment Agreement by and between 99¢ Only Stores and the Participant as in effect on the date hereof (the “Employment Agreement”)), then (A) if the date of Termination is prior to the second anniversary of the effective date of the Employment Agreement (the “Effective Date”), the vesting of the Time-Vested Options shall be accelerated such that 50% of the total number of Time-Vested Options are vested and (B) if the date of Termination is on or after the second anniversary of the Effective Date, Participant will receive an additional 12 months of vesting on the Time-Vested Options; and

(ii)upon the occurrence of a Change in Control, all unvested Time-Vested Options shall accelerate and vest.

(b)Options to purchase 5,376 shares of each class of Common Stock (the “Performance-Vested Options”) shall vest and become exercisable on the date the Option Hurdle (as defined below) is satisfied (which percentages shall apply equally with respect to the Class A Common Stock and the Class B Common Stock subject to the Option); provided, that except as provided below, the Participant has not experienced a Termination prior to such date.

(i)If the Participant’s employment is Terminated without Cause or for Good Reason, unvested Performance-Vested Options shall remain outstanding, and shall not be forfeited, until the earlier of (A) 180 days after the date of such Termination and (B) the Expiration Date (as defined below) (the “Post-Termination Performance Period”).  If the Option Hurdle is satisfied during such Post-Termination Performance Period, the Performance-Vested Options shall vest and be exercisable until the 90th day after the satisfaction of the Option Hurdle or, if sooner, the Expiration Date.

(ii)The “Option Hurdle” will be satisfied on the first date on which all of the following conditions are met: (A) the Returned Capital (as defined below) as of such date (x) results in an IRR (as defined below) greater than 20% and (y) equals or

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exceeds 50% of the Invested Capital (as defined below); and (B) the Unit Value (as defined below) on such date is at least three times greater than the Unit Value on the Grant Date (subject to appropriate adjustment at the discretion of the Committee for any stock split, stock dividend, reclassification, subdivision, reorganization, recapitalization or similar event).  All determinations relevant to calculating whether the Option Hurdle has been satisfied shall be made by the Committee.

(iii)Definitions

“IRR” means, as of any date, a rate of return (taking into account the Returned Capital as of such date and the fair market value of the shares of Class A Common Stock and Class B Common Stock held by the Sponsors (as defined below) on such date), that is the discount rate, compounded annually, which, when applied to the Invested Capital as of such date, produces a net present value equal to zero.

“Invested Capital” means, as of any date, the aggregate amount of equity contributions made by the Sponsors in the Company and its subsidiaries through such date; provided, that, for the purposes of calculating IRR, the Sponsors’ equity contribution in the Company prior to the Effective Date will be deemed to be equal to the fair market value of the shares of Class A Common Stock and Class B Common Stock owned by the Sponsors on the Grant Date.

“Returned Capital” means, as of any date, the aggregate amount of cash and marketable securities (valued at the fair market value thereof) resulting from (A) dividends in respect of shares of Class A Common Stock and Class B Common Stock and (B) any sale or other exchange of shares of Class A Common Stock and Class B Common Stock, in each case actually distributed to or received by the Sponsors from and after the Effective Date.

Returned Capital shall not include (A) amounts placed in escrow that are not released to the Sponsors within 18 months after being placed in escrow or (B) amounts received by the Sponsors that the Sponsors are required to repay to satisfy indemnification claims or similar contingencies.

“Sponsors” means Ares Corporate Opportunities Fund III, L.P., the Canada Pension Plan Investment Board and their respective Affiliates.

“Unit Value” means on any date the combined fair market value per share of the Class A Common Stock and Class B Common on such date.

(c)To the extent that the Option has become vested and exercisable with respect to a number of shares of Common Stock, the Option may thereafter be exercised by the Participant, in whole or in part, at any time, or from time to time, prior to the Expiration Date, in accordance with the Plan and this Agreement; provided, that the Participant must exercise

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the Option with respect to an equal number of shares of Class A Common Stock and Class B Common Stock concurrently.  Notwithstanding the foregoing, the Participant may not exercise the Option unless the offering of shares of Common Stock issuable upon such exercise (i) is then registered under the Securities Act, or, if such offering is not then so registered, the Company has determined that such offering is exempt from the registration requirements of the Securities Act and (ii) complies with all other applicable laws and regulations governing the Option, and the Participant may not exercise the Option if the Committee determines that such exercise would not be so registered or exempt and otherwise in compliance with such laws and regulations.

(d)To exercise the Option, unless otherwise directed or permitted by the Committee, the Participant must:

(i)execute and deliver to the Company a properly completed Notice of Exercise in the form attached hereto as Exhibit A,

(ii)execute and deliver such documentation as is required by the Committee, which documentation shall set forth certain restrictions on transferability of the shares of Common Stock acquired upon exercise, a right of first refusal or a right of first offer of the Company and other Persons with respect to shares, and such other terms or restrictions as the Board or Committee shall from time to time establish, including any drag along rights, tag along rights, transfer restrictions and registration rights, and

(iii)remit the aggregate Unit Exercise Price to the Company in full, payable (A) in cash or by check, bank draft or money order payable to the order of the Company or (B) on such other terms and conditions as may be acceptable to the Committee.

(e)Unless otherwise directed or permitted by the Committee, the Participant must pay or provide for all applicable withholding taxes in respect of the exercise of the Option, by (i) remitting the aggregate amount of such taxes to the Company in full, in cash or by check, bank draft or money order payable to the order of the Company, or (ii) making arrangements with the Company to have such taxes withheld from other compensation, to the extent permitted by the Committee.

4.Option Term.  The term of the Option shall be until the tenth anniversary of the Grant Date (the “Expiration Date”).  Upon the Expiration Date, the Option shall expire and be canceled for no consideration, and no longer shall be exercisable.  The Option is subject to termination prior to the Expiration Date to the extent provided in Sections 5 and 6 below.

5.Detrimental Activity.  The provisions in the Plan regarding Detrimental Activity shall apply to the Option; provided that the term “Detrimental Activity” shall mean a breach by Participant of Participant’s “Fair Competition Agreement” with 99¢ Only Stores (the “Fair Competition Agreement”).

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6.Termination; Change in Control; Changes in Capital Structure.  Except as expressly provided herein, the provisions in the Plan regarding Termination and Change in Control shall apply to the Option, provided that if the Participant’s employment agreement expressly provides more favorable rights with respect to the Option in the event of Termination or Change in Control, such rights shall apply. In addition, in the event of a Section 4.2 Event (as defined in the Plan), the aggregate number and kind of shares that may be issued pursuant to the exercise of the Option, and the exercise price of the Option, shall be appropriately adjusted in accordance with Section 4.2(b) of the Plan.

7.Restriction on Transfer of Option.  Unless otherwise determined by the Committee in accordance with the Plan, (a) no part of the Option shall be Transferable other than by will or by the laws of descent and distribution and (b) during the lifetime of the Participant, the Option may be exercised only by the Participant or the Participant’s guardian or legal representative.  Any attempt to Transfer the Option other than in accordance with the Plan shall be void; provided, that the Option may be transferred at the discretion of the Participant, to the extent lawful, upon reasonable advance notice to, and subject to documentation reasonably requested by, the Committee, to a limited liability company, the sole members of which are members of the Participant’s immediate family, or a trust solely for the benefit of members of the Participant’s immediate family, unless such Transfer, in the Committee’s reasonable determination, could result in a material financial adverse impact to the Company. Any Person to whom the Option is Transferred pursuant to this Section 7 shall be subject to all of the terms of this Agreement and the Plan.

8.Company’s Right to Repurchase; Other Restrictions.

(a)Company’s Right to Repurchase.  In the event of the Participant’s Termination, the Company shall have the right (the “Repurchase Right”), but not the obligation, to repurchase (or to cause one or more of its designees to repurchase) from the Participant (or his transferee) (X) any or all of the shares of Common Stock acquired upon the exercise of the Option and still held at the time of such repurchase by the Participant (or his transferee); provided, that the Company must exercise the Repurchase Right with respect to an equal number of shares of Class A Common Stock and Class B Common Stock concurrently or (Y) any vested but unexercised portion of the Option at the price determined in the manner set forth below (the “Repurchase Price”), during each period set forth below (each, a “Repurchase Period”) and to the extent set forth below:

(i)In the event of Termination for Cause or a breach by the Participant of the Fair Competition Agreement, the Company may exercise the Repurchase Right with respect to all shares previously acquired pursuant to the exercise of the Option.  The Repurchase Period under this Section 8(a)(i) shall be 90 days from the date of Termination.  The Repurchase Price under this Section 8(a)(i) shall be, for each Unit, the lesser of (A) the Unit Exercise Price or (B) the Fair Market Value of a Unit on the date of Termination.

(ii)In the event of Termination for any reason other than Termination for Cause (including Termination due to retirement, death, Disability, involuntary Termination without Cause, or voluntary Termination by the Participant for any reason) or a breach by the Participant of the Fair Competition Agreement:

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(A)The Company may exercise the Repurchase Right with respect to all shares acquired pursuant to the exercise of the Option on or prior to the date of Termination.  The Repurchase Period under this Section 8(a)(ii)(A) shall be 90 days from the date of Termination.  The Repurchase Price under this Section 8(a)(ii)(A) shall be, for each Unit, the Fair Market Value of a Unit on the date of Termination.

(B)The Company may exercise the Repurchase Right with respect to all shares acquired pursuant to the exercise of the Option after the date of Termination.  The Repurchase Period under this Section 8(a)(ii)(B) shall be 90 days from the latest date on which the Option is permitted to be exercised under this Agreement.  The Repurchase Price under this Section 8(a)(ii)(B) shall be, for each Unit, the Fair Market Value of a Unit on the date of Termination.

(C)The Company may exercise the Repurchase Right with respect to the vested but unexercised portion of the Option.  The Repurchase Period under this Section 8(a)(ii)(C) shall be the latest date on which the Option is permitted to be exercised under this Agreement.  The Repurchase Price under this Section 8(a)(ii)(C) shall be the product of (A) the excess (if any) of the Fair Market Value of a Unit on the date of Termination over the Unit Exercise Price multiplied by (B) the number of Units covered by the Option being repurchased.  For the avoidance of doubt, upon such repurchase such Option shall no longer be exercisable for any shares of Common Stock.

(iii)To exercise any Repurchase Right, the Company (or one or more of its designees) shall deliver a written notice to the Participant (or his transferee) setting forth the securities to be repurchased and the applicable Repurchase Price thereof, and the date on which such repurchase is to be consummated, which date shall be not less than 15 days or more than 30 days after the date of such notice.  On the date of consummation of the repurchase, (A) the Company (or one or more of its designees) will pay the Participant (or his transferee) the applicable Repurchase Price in cash or, in the Company’s discretion and to the extent not prohibited by law, by cancellation of indebtedness of the Participant to the Company or any Subsidiary or any combination thereof and (B) the Participant (or his transferee) shall (1) cooperate with the Company to cause any certificates evidencing the shares being purchased that are being held in escrow by the Company to be delivered to the Company or its designee or (2) deliver the certificates evidencing the shares being purchased, duly endorsed in blank by the person in whose name the certificate is issued or accompanied, free and clear of any liens, and with stock (or equivalent) transfer taxes affixed.  The Company may exercise its Repurchase Rights upon one or more occasions at any time during the Repurchase Periods set forth above.

(iv)Notwithstanding the foregoing, the Repurchase Period and the date on which any repurchase is to be consummated may be extended by the Company at any time when repurchase by the Company (A) is prohibited pursuant to applicable law, (B) is prohibited under any debt instrument of the Company or any of its Affiliates or (C) would result in adverse accounting consequences for the Company, in each case as determined by the Company.

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(b)To ensure that the shares of Common Stock issuable upon exercise of the Option are not transferred in contravention of the terms of the Plan and this Agreement, and to ensure compliance with other provisions of the Plan and this Agreement, the Company may deposit any certificates evidencing such shares with an escrow agent designated by the Company.

(c)Notwithstanding anything in this Agreement to the contrary, the Option and any Common Stock purchased pursuant to the exercise thereof shall be subject to the terms of the Stockholders Agreement in addition to the provisions of this Section 8.

9.Securities Representations.  Upon the exercise of the Option prior to registration of the offering of the Common Stock subject to the Option pursuant to the Securities Act or other applicable securities laws, the Participant (or his transferee) shall be deemed to acknowledge and make the representations and warranties as described below and as otherwise may be requested by the Company for compliance with applicable laws, and any issuances of Common Stock by the Company shall be made in reliance upon the express representations and warranties of the Participant (or his transferee).

(a)The Participant is acquiring and will hold the shares of Common Stock for investment for his account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act or other applicable securities laws.

(b)The Participant has been advised that offerings of the shares of Common Stock have not been registered under the Securities Act or other applicable securities laws, on the ground that no public offering of the shares of Common Stock is to be effected (it being understood, however, that the shares of Common Stock are being offered in reliance on the exemption provided under Rule 701 under the Securities Act), and that the shares of Common Stock must be held indefinitely, unless they are subsequently registered under the applicable securities laws or the Participant obtains an opinion of counsel (in the form and substance satisfactory to the Company and its counsel) that registration is not required.  In connection with the foregoing, the Company is relying in part on the Participant’s representations set forth in this Section.  The Participant further acknowledges and understands that the Company is under no obligation hereunder to register offerings of the shares of Common Stock.

(c)The Participant is aware of the adoption of Rule 144 by the Securities and Exchange Commission under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions.  The Participant acknowledges that he is familiar with the conditions for resale set forth in Rule 144, and acknowledges and understands that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company has no plans to satisfy these conditions in the foreseeable future.

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(d)The Participant will not sell, transfer or otherwise dispose of the shares of Common Stock in violation of the Plan, this Agreement, the Securities Act (or the rules and regulations promulgated thereunder) or under any other applicable securities laws.  The Participant agrees that he will not dispose of the Common Stock unless and until he has complied with all requirements of this Agreement applicable to the disposition of the shares of Common Stock.

(e)The Participant has been furnished with, and has had access to, such information as he considers necessary or appropriate for deciding whether to invest in the shares of Common Stock, and the Participant has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Common Stock.

(f)The Participant is aware that his investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss.  The Participant is able, without impairing his financial condition, to hold the Common Stock for an indefinite period and to suffer a complete loss of his investment in the Common Stock.

10.No Rights as Stockholder.  The Participant shall have no rights as a stockholder with respect to any shares of Common Stock covered by the Option unless and until the Participant has become the holder of record of such shares, and no adjustments shall be made for dividends (whether in cash, in kind or other property), distributions or other rights in respect of any such shares, except as otherwise specifically provided for in the Plan.

11.Provisions of Plan Control.  This Agreement is subject to all the terms, conditions and provisions of the Plan, including the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time.  The Plan is incorporated herein by reference.  If and to the extent that this Agreement conflicts or is inconsistent with the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly; provided that if the Committee determines that the rights of the Participant hereunder with respect to the Option would be adversely impaired by an amendment of the Plan, the consent of the Participant shall be required for such amendment.

12.Notices.  Any notice or other communication required or permitted under this Agreement shall be effective only if it is in writing and shall be deemed given when delivered personally, one day after it is sent through a reputable overnight carrier, or three business days after it is mailed by registered mail, return receipt requested, to the parties at the following addresses (or at such other address as a party may specify by notice given hereunder to the other party):

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If to the Participant:

At the address listed in the personnel records of 99¢ Only Stores.

If to the Company:

Number Holdings, Inc.
c/o Ares Management LLC
2000 Avenue of the Stars, 12th Floor
Los Angeles, CA 90067
Attention:Adam Stein
Telephone:(310) 201-4100
Facsimile:(310) 201-4170

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP
2049 Century Park East, Suite 3200
Los Angeles, CA 90067
Attention:Michael A. Woronoff, Esq.
Telephone:(310) 284-4550
Facsimile:(310) 557-2193

13.No Right to Employment.  This Agreement is not an agreement of employment.  None of this Agreement, the Plan or the grant of the Option hereunder shall (a) guarantee that the Employer will employ the Participant for any specific time period or (b) modify or limit in any respect the Employer’s right to terminate or modify the Participant’s employment or compensation.

14.Stockholders Agreement.  As a condition to the receipt of shares of Common Stock when the Option is exercised, the Participant (or his transferee) shall execute and deliver a Joinder Agreement or such other documentation as required by the Committee which shall set forth certain restrictions on transferability of the shares of Common Stock acquired upon exercise, a right of first refusal or a right of first offer of the Company and other Persons with respect to shares, and such other terms or restrictions as the Board or Committee shall from time to time establish, including any drag along rights, tag along rights, transfer restrictions and registration rights.  The Stockholders Agreement or other documentation shall apply to the Common Stock acquired when the Option is exercised and covered by the Stockholders Agreement or other documentation.

15.Dispute Resolution.  Except as provided in the Fair Competition Agreement entered into by and between 99¢ Only Stores and the Participant and Section 5 hereof, all Disputes (as defined below) shall be resolved in accordance with the Arbitration of Disputes Agreement by and between 99¢ Only Stores and the Participant, which is incorporated herein.

16.Severability of Provisions.  If any provision of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Agreement shall be construed and enforced as if such provisions had not been included; provided, that if the Company’s call rights and rights of first refusal or rights of first offer set forth in the Stockholders Agreement or other agreement shall be held invalid or unenforceable, the Option shall be cancelled and terminated.

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17.Governing Law.  This Agreement, and any contest, dispute, controversy or claim arising hereunder or related hereto (collectively, “Disputes”), shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to its principles of conflict of laws that would require the application of the laws of another jurisdiction.

18.Interpretation.  The headings and captions of this Agreement are provided for convenience only and are intended to have no effect in construing or interpreting this Agreement.  The language in all parts of this Agreement shall be in all cases construed according to its fair meaning and not strictly for or against the Company or Executive.  As used herein:  (i) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (ii) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (iii) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof; (iv) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (v) “or” is used in the inclusive sense of “and/or”; and (vi) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

[Remainder of Page Left Intentionally Blank]

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

	NUMBER HOLDINGS, INC.
	By:	/s/ Frank Schools
	Name:	Frank Schools
	Title:	Senior Vice President, Chief Financial Officer
/s/ Stéphane Gonthier
Employee Name: Stéphane Gonthier
Employee ID number: 145774

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EXHIBIT A

NUMBER HOLDINGS, INC.

2012 STOCK INCENTIVE PLAN

NOTICE OF EXERCISE

Number Holdings, Inc.

c/o Ares Management LLC

2000 Avenue of the Stars, 12th Floor

Attention: General Counsel

Date:  [•], 20     

Ladies and Gentlemen:

This document constitutes notice under my stock option agreement that I elect to purchase the number of shares for the aggregate payment set forth below.

Type of option (check one):	Incentive o	Nonqualified o
Option number and grant date:
Number of shares as to which option is exercised:
Unit exercise price:	$
Aggregate exercise price (number of shares as to which option is exercised multiplied by unit exercise price):	$

I (i) acknowledge that I remain subject to the applicable provisions of my option award agreement, including Number Holdings, Inc.’s repurchase rights thereunder and (ii) acknowledge and make the representations and warranties set forth in my option award agreement, including those in Section 9 thereof.

The shares purchased pursuant to this Notice of Exercise will be bound by and subject to the terms of the Stockholders Agreement. I hereby adopt the Stockholders Agreement with the same force and effect as if I were originally a party thereto and acknowledge that I will be considered a “Stockholder” for all purposes of the Stockholders Agreement.

Any notice required or permitted by the Stockholders Agreement will be given to me at the address listed below my signature hereto.

o Attached is cash, or a check, bank draft or money order payable to Number Holdings, Inc., in the amount of $                       (aggregate exercise price).

Estimated withholding taxes (per Company) $

o Attached is cash, or a check, bank draft or money order payable to Number Holdings, Inc., in the amount of $                       (estimated withholding taxes).

o I have made arrangements with the Company to have applicable withholding taxes withheld from other compensation.

[Participant]

Address:

Telephone:

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EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO

NUMBER HOLDINGS, INC.

2012 STOCK INCENTIVE PLAN

WHEREAS, Number Holdings, Inc. (the “Company”) maintains the Number Holdings, Inc. 2012 Stock Incentive Plan (as amended, the “Plan”);

WHEREAS, pursuant to Article XI of the Plan, the Board of Directors of the Company (the “Board”), may at any time amend the Plan to increase the aggregate number of shares of common stock of the Company that may be issued under the Plan, provided such increase is approved by the shareholders of the Company; and

WHEREAS, the Board desires to amend the Plan as set forth herein to increase the number of shares of common stock of the Company that may be issued under the Plan.

NOW, THEREFORE, pursuant to Article XI of the Plan, effective as of September 27, 2013, the first sentence of Section 4.1 of the Plan is hereby replaced in its entirety with the following sentences:

“The aggregate number of shares of Common Stock that may be issued or used for reference purposes under the Plan or with respect to which Awards may be granted under the Plan, including with respect to Incentive Stock Options, shall not exceed 85,000 shares of Class A Common Stock and 85,000 shares of Class B Common Stock (subject, in each case, to any increase or decrease pursuant to Section 4.2), which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company or both.”

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Board and a majority of the stockholders of the Company have approved the amendment to the Plan as set forth herein, the Board has authorized the undersigned officer of the Company to execute this amendment, and the undersigned has caused this amendment to be as of the date first written above.

NUMBER HOLDINGS, INC.
By:	/s/ Frank Schools
	Name:	Frank Schools
	Title:	Chief Financial Officer

[Signature Page to First Amendment to Number Holdings 2012 Stock Incentive Plan]

EX-10.5

Exhibit 10.5

EXECUTION VERSION

AMENDMENT NO. 2
TO THE ABL CREDIT AGREEMENT

AMENDMENT NO. 2 (this “Amendment”), dated as of October 8, 2013, among 99¢ ONLY STORES (the successor by merger with Number Merger Sub, Inc.) (the “Borrower”), NUMBER HOLDINGS, INC. (“Holdings”), each other Loan Party party hereto, each Lender party hereto and ROYAL BANK OF CANADA (“Royal Bank”), as Administrative Agent (in such capacity, the “Administrative Agent”), to the Existing Credit Agreement (as defined below).  Unless otherwise indicated, capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Existing Credit Agreement referred to below.

PRELIMINARY STATEMENTS:

Holdings, the Borrower, the Lenders party thereto, Royal Bank, as Administrative Agent and as Collateral Agent and the other agents party thereto, entered into that certain $175,000,000 Credit Agreement dated as of January 13, 2012 (as amended by Amendment No. 1 to the ABL Credit Agreement, dated as of April 4, 2012, and as may be further amended, restated, amended and restated, supplemented, or otherwise modified from time to time prior to the date of this Amendment, the “Existing Credit Agreement”; as amended by this Amendment and as otherwise may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; and the Lenders party to the Existing Credit Agreement immediately prior to the effectiveness of this Amendment being the “Existing Lenders”).

In connection with this Amendment, the Borrower is amending the Term Facility Credit Agreement to provide for the incurrence of new term loans thereunder, the proceeds of which are intended to finance certain share repurchases of Holdings and/or its direct or indirect parents (which, for the avoidance of doubt, may take the form of Restricted Payments to a direct or indirect parent of the Borrower in order to (x) make such share repurchases, (y) to refinance indebtedness, in whole or in part, of such direct or indirect parent incurred to finance such share repurchases, or (z) effect a combination of the actions described in foregoing sub-clauses (x) and (y) (the “Share Repurchase”) in an aggregate amount not to exceed $130.0 million.

Holdings, the Borrower, the Administrative Agent and the Requisite Lenders have agreed to amend the Existing Credit Agreement on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

SECTION 1.Amendments to the Existing Credit Agreement.  The Existing Credit Agreement is, effective as of the Amendment Effective Date (as defined below), hereby amended as follows:

(a)Section 1.1 of the Existing Credit Agreement is amended by inserting the following new definitions in their correct alphabetical order:

“Amendment No. 2” means Amendment No. 2 to this Agreement, dated as of October 8, 2013, among Holdings, the Borrower, the other Loan Parties party thereto, the Lenders party thereto and the Administrative Agent.

“Amendment No. 2 Effective Date” means the “Amendment Effective Date” under and as defined in Amendment No. 2.

“Share Repurchase” has the meaning specified in Amendment No. 2.

(b)The definition of “Fixed Charge Coverage Ratio” in Section 1.1 of the Existing Credit Agreement is amended by replacing the reference to “Maintenance Capital Expenditures” therein with “Capital Expenditures”.

(c)The definition of “Payment Conditions” in Section 1.1 of the Existing Credit Agreement is amended and restated in its entirety as follows:

“Payment Conditions” means, at any time of determination, that (a) no Event of Default exists immediately prior to the making of the subject Specified Payment or would thereafter result from the making of the subject Specified Payment, (b) for five (5) consecutive Business Days immediately prior to such Specified Payment and immediately after giving Pro Forma Effect to such Specified Payment, Excess Availability shall be at least the greater of (i) 15.0% of the Maximum Credit and (ii) $20,000,000 and (c) the Fixed Charge Coverage Ratio as of the end of the most recently ended Test Period for which financial statements have been or are required to have been delivered pursuant to Section 7.1(a) or (b) shall be greater than or equal to 1.00 to 1.00 after giving Pro Forma Effect to such Specified Payment as if such Specified Payment (if applicable to such calculation) had been made as of the first day of such period (the “Pro Forma Fixed Charge Coverage Ratio”), and, in each case, the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, (A) certifying that no Event of Default exists immediately prior to the making of the subject Specified Payment or would thereafter result from the making of such subject Specified Payment and (B) setting forth a reasonably detailed calculation of the Pro Forma Fixed Charge Coverage Ratio; provided that the condition described in the foregoing clause (c) (and the related certification) shall not be required in respect of a Specified Payment if, for five (5) consecutive Business Days immediately prior to such Specified Payment, and immediately after giving Pro Forma Effect to such Specified Payment, Excess Availability shall be at least the greater of (i) 25.0% of the Maximum Credit and (ii) $40,000,000.

(d)Clause (c) of the definition of “Permitted Sale-Leaseback Transaction” in Section 1.1 of the Existing Credit Agreement is amended and restated as follows: “(c) the Net Cash Proceeds from such transaction are used by the Borrower or such Restricted Subsidiary to prepay outstanding Indebtedness (including any Junior Financing) or reinvested or used in accordance with and to the extent required by Section 2.4(b) of the Term Facility Credit Agreement”.

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(e)The definition of “Rollover Investor Put” in Section 1.1 of the Existing Credit Agreement is amended and restated as follows:

“Rollover Investor Put” means the put right held by certain members of the Management Group pursuant to each such member’s employment agreement with the Borrower, or the agreement by any such members to sell Equity Interests in the Borrower or its direct or indirect parent to the Borrower or its direct or indirect parent.

(f)Section 9.2(r) of the Existing Credit Agreement is amended by deleting the phrase “from the Available Amount” therefrom.

(g)Section 9.6(l) of the Existing Credit Agreement is amended by deleting the phrase “out of the Available Amount” therefrom.

(h)Section 9.6(n) of the Existing Credit Agreement is amended and restated in its entirety as follows:

(i)“(n)Restricted Payments by the Borrower, including to a direct or indirect parent of the Borrower, for the purpose of funding the repurchase of Equity Interests pursuant to the Rollover Investor Put in an aggregate amount not to exceed $37,500,000;”

(j)Section 9.11(i) of the Existing Credit Agreement is amended by deleting the phrase “out of the Available Amount” therefrom.

(k)Section 9.14 of the Existing Credit Agreement is hereby deleted in its entirety and replaced with “[Reserved]”.

In consideration for the amendments contained herein, the Borrower hereby agrees that the Restricted Payments made to fund the Share Repurchase shall be applied to the exceptions contained in Section 9.6 of the Credit Agreement in the following order (in each case, to the full extent that Restricted Payments are available thereunder at the time of determination): first, to Section 9.6(f); second, to Section 9.6(n); third, to Section 9.6(l); and fourth, to Section 9.6(k).

SECTION 2.Conditions to Effectiveness.  This Amendment shall become effective as of the first date (the “Amendment Effective Date”) when, and only when, each of the following conditions have been satisfied (or waived) in accordance with the terms therein:

(a)The Administrative Agent shall have received counterparts of this Amendment executed by Holdings, the Borrower, the other Loan Parties, the Administrative Agent and the Requisite Lenders.

(b)The Borrower shall have paid (i) all reasonable, documented and invoiced fees payable to Royal Bank as agreed in writing between Royal Bank and the Borrower and (ii) all reasonable fees, expenses and disbursements of Paul Hastings LLP, as counsel for the Administrative Agent, incurred in connection with the preparation, negotiation and execution of this Amendment to the extent invoiced at least three (3) Business Days prior to the date hereof.

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(c)(i) On and as of the Amendment Effective Date, both immediately before and immediately after giving effect to the effectiveness of this Amendment, (A) the representations and warranties of the Borrower and each other Loan Party contained in Article V of the Credit Agreement or any other Loan Document shall be true and correct in all material respects; provided that, to the extent such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date; and provided, further that, any representation or warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates and (B) no Default shall exist, or would result from, the execution or delivery of this Amendment and (ii) the Administrative Agent shall have received a certificate from a Responsible Officer of the Borrower certifying as to the matters set forth in this Section 2(c).

(d)All conditions to effectiveness contained in Section 3(a) of that certain Amendment No. 2 to the $525,000,000 Credit Agreement, dated as of October 8, 2013, among the Borrower, Holdings, the loan parties party thereto, each Participating Lender (as defined therein) party or consenting thereto and Royal Bank, as Administrative Agent (as defined therein), other than the condition set forth in Section 3(a)(xii) thereof, shall have been, or concurrently with the effectiveness of this Amendment be, satisfied (or waived).

SECTION 3.Consent and Affirmation of the Loan Parties.  Each Loan Party (prior to and after giving effect to this Amendment) hereby consents to the amendment of the Existing Credit Agreement effected hereby and confirms and agrees that, notwithstanding the effectiveness of this Amendment, each Loan Document to which such Loan Party is a party is, and the obligations of such Loan Party contained in the Existing Credit Agreement, this Amendment or in any other Loan Document to which it is a party are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects, in each case as amended or modified by this Amendment.  For greater certainty and without limiting the foregoing, each Loan Party hereby confirms that the existing security interests granted by such Loan Party in favor of the Secured Parties pursuant to the Loan Documents in the Collateral described therein shall continue to secure the obligations of the Loan Parties under the Credit Agreement and the other Loan Documents as and to the extent provided in the Loan Documents.

SECTION 4.Representations and Warranties.  (a) Each Loan Party represents and warrants, on and as of the Amendment Effective Date, that: (i) it has the corporate or other organizational power to execute and deliver this Amendment, and all corporate or other organizational action required to be taken by it for the execution, delivery and performance by it of this Amendment and the consummation of the transactions contemplated hereby has been taken; (ii) this Amendment has been duly authorized, executed and delivered by it; and (iii) no action, consent or approval of, registration or filing with or any other action by any Governmental Authority is required to be obtained by it in connection with the execution and delivery of this Amendment, except for such actions, consents, approvals, registrations or filings as have been taken or the failure of which to be obtained or made could not reasonably be expected to have a Material Adverse Effect.

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(b)Each Loan Party hereby represents and warrants that, on and as of the Amendment Effective Date, both immediately before and immediately after giving effect to this Amendment, no Default has occurred and is continuing.

SECTION 5.Reference to and Effect on the Credit Agreement.

(a)On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof’ or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement, as amended and otherwise modified by this Amendment.

(b)The Credit Agreement, as specifically amended and otherwise modified by this Amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.  This Amendment shall be a “Loan Document” for purposes of the definition thereof in the Credit Agreement.

(c)The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent or the Collateral Agent under the Credit Agreement or any other Loan Document.

SECTION 6.Execution in Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.  Delivery of an executed counterpart of a signature page to this Amendment by facsimile or in “pdf” or similar format by electronic mail shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 7.Governing Law.  This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York.

SECTION 8.Headings.  Section headings are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

SECTION 9.Severability.  In case any provision in or obligation hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired hereby.

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SECTION 10.Notices; Successors; Waiver of Jury Trial.  All communications and notices hereunder shall be given as provided in the Credit Agreement.  The terms of this Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.  Each of the parties hereto irrevocably waives trial by jury in any action or proceeding with respect to this Amendment or any other Loan Document.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective authorized officers as of the date first above written.

NUMBER HOLDINGS, INC.,
as Holdings
By:	/s/ Frank Schools
Name:	Frank Schools
Title:	Senior Vice President, Chief Financial Officer
99¢ ONLY STORES,
as the Borrower
By:	/s/ Frank Schools
Name:	Frank Schools
Title:	Senior Vice President, Chief Financial Officer
99 CENTS ONLY STORES TEXAS, INC.,
as a Guarantor
By:	/s/ Frank Schools
Name:	Frank Schools
Title:	Senior Vice President, Chief Financial Officer

[Signature Page to Amendment No. 2 to the ABL Credit Agreement]

ROYAL BANK OF CANADA,
as Administrative Agent
By:	/s/ Susan Khokher
Name:	Susan Khokher
Title:	Manager, Agency

[Signature Page to Amendment No. 2 to the ABL Credit Agreement]

ROYAL BANK OF CANADA,
as a Lender
By:	/s/ Gordon MacArthur
Name:	Gordon MacArthur
Title:	Authorized Signatory

[Signature Page to Amendment No. 2 to the ABL Credit Agreement]

BANK OF MONTREAL,
as a Lender
By:	/s/ Jason Hoefler
Name:	Jason Hoefler
Title:	Director

[Signature Page to Amendment No. 2 to the ABL Credit Agreement]

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CITY NATIONAL BANK,
as a Lender
By:	/s/ Mia Bolin
Name:	Mia Bolin
Title:	Vice President

[Signature Page to Amendment No. 2 to the ABL Credit Agreement]

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DEUTSCHE BANK TRUST COMPANY AMERICAS,
as a Lender
By:	/s/ Dusan Lazarov
Name:	Dusan Lazarov
Title:	Director
By:	/s/ Marcus M Tarkington
Name:	Marcus M Tarkington
Title:	Director

[Signature Page to Amendment No. 2 to the ABL Credit Agreement]

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HSBC BANK USA, N.A.,
as a Lender
By:	/s/ Andrew Hietala
Name:	Andrew Hietala
Title:	Senior Vice President

[Signature Page to Amendment No. 2 to the ABL Credit Agreement]

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SIEMENS FINANCIAL SERVICES, INC.,
as a Lender
By:	/s/ Jeffrey B Iervese
Name:	Jeffrey B Iervese
Title:	Vice President
By:	/s/ John Finore
Name:	John Finore
Title:	Vice President

[Signature Page to Amendment No. 2 to the ABL Credit Agreement]

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EX-10.6

Exhibit 10.6

EXECUTION VERSION

AMENDMENT NO. 2
TO THE TERM CREDIT AGREEMENT

AMENDMENT NO. 2 (this “Amendment”), dated as of October 8, 2013, among 99¢ ONLY STORES (the “Borrower”), NUMBER HOLDINGS, INC. (“Holdings”), each other Loan Party party hereto, each Incremental Lender party hereto, each Lender party or consenting in writing hereto and ROYAL BANK OF CANADA (“Royal Bank”), as Administrative Agent (in such capacity, the “Administrative Agent”), to the Existing Credit Agreement (as defined below).  Unless otherwise indicated, capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement.

PRELIMINARY STATEMENTS:

(1)Holdings, the Borrower, the Lenders party thereto, Royal Bank, as Administrative Agent and as Collateral Agent, and the other agents party thereto, entered into that certain $525,000,000 Credit Agreement dated as of January 13, 2012 (as amended by Amendment No. 1 to the Term Credit Agreement, dated as of April 4, 2012, and as may be further amended, restated, amended and restated, supplemented, or otherwise modified from time to time prior to the date of this Amendment, the “Existing Credit Agreement”; as amended by this Amendment and as otherwise may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; and the Lenders party to the Existing Credit Agreement immediately prior to the effectiveness of this Amendment being the “Existing Lenders”).

(2)The Borrower has requested (a) that the Lenders reduce the interest rates applicable to the Tranche B-1 Loans, which reduction in interest rates shall be effected by the exchange of Tranche B-1 Loans for Tranche B-2 Loans otherwise having the same terms (except as otherwise provided in this Amendment) as the Tranche B-1 Loans (the “Repriced Term Loans”), (b) Incremental Loans in an aggregate principal amount of $100,000,000 (the “New Term Loans”), which will be available on the Amendment Effective Date (as defined below), and which Incremental Loans shall constitute additional Tranche B-2 Loans under the Credit Agreement and (c) the other amendments to the Existing Credit Agreement set forth herein, in each case, on the terms and conditions set forth herein.

(3)Each Existing Lender executing and delivering a commitment (a “Tranche B-2 Commitment”) in the form attached as Exhibit A hereto and electing the cashless settlement option therein (each such Lender in such capacity, a “Converting Lender” and, together with each other Person executing and delivering a Tranche B-2 Commitment and/or a New Term Loan Commitment (as defined below), the “Participating Lenders”) shall be deemed to have exchanged the aggregate outstanding amount of its Tranche B-1 Loans (or such lesser amount as the Lead Arranger may allocate and/or as such Converting Lender may specify in its Tranche B-2 Commitment) under the Existing Credit Agreement for an equal aggregate principal amount of Tranche B-2 Loans under the Credit Agreement.

(4)Each lender party hereto with a commitment in respect of the New Term Loans (each, an “Incremental Lender”; and such Incremental Lender’s commitment in respect of the New Term Loans, the “New Term Loan Commitment” of such Incremental Lender) is willing to make New Term Loans in the amount set forth opposite such Incremental Lender’s name in Schedule I hereof.

(5)The proceeds of the New Term Loans are intended to finance certain share repurchases of Holdings and/or its direct or indirect parents (which, for the avoidance of doubt, may take the form of Restricted Payments to a direct or indirect parent of the Borrower in order to (x) make such share repurchases, (y) to refinance indebtedness, in whole or in part, of such direct or indirect parent incurred to finance such share repurchases, or (z) effect a combination of the actions described in foregoing sub-clauses (x) and (y)) (the “Share Repurchase”) in an aggregate amount not to exceed $130.0 million.

(6)With respect to the Repriced Term Loans, at the election of Royal Bank, in its capacity as lead arranger (in such capacity, the “Lead Arranger”), pursuant to Section 3.7 of the Existing Credit Agreement, to the extent that one or more Persons agree to act as fronting banks for the syndication of the Tranche B-2 Loans (such Persons in such capacity, the “Fronting Banks”), the Fronting Banks will purchase, and the applicable Existing Lenders will sell to the Fronting Banks, immediately prior to effectiveness of this Amendment, (A) Tranche B-1 Loans of Existing Lenders that do not execute and deliver a Tranche B-2 Commitment (the “Non-Participating Lenders”), (B) Tranche B-1 Loans of Existing Lenders that execute and deliver a Tranche B-2 Commitment and elect the cash settlement option therein and (C) Tranche B-1 Loans of Existing Lenders that execute and deliver a Tranche B-2 Commitment to the extent that such Existing Lenders have elected to exchange, or have been allocated by the Lead Arranger, an aggregate principal amount of Tranche B-2 Loans that is less than their outstanding principal amount of Tranche B-1 Loans (solely to the extent of such non-exchanged Tranche B-1 Loans) (the Tranche B-1 Loans described in the foregoing clauses (A), (B) and (C), collectively, and together with the New Term Loans, the “Reallocated Loans”).

(7)To the extent there exist any Reallocated Loans (other than New Term Loans), such Reallocated Loans shall be exchanged by the Fronting Banks on a cashless settlement basis for an equal aggregate principal amount of Tranche B-2 Loans under the Credit Agreement and shall promptly thereafter be purchased by Participating Lenders (other than Converting Lenders (except to the extent a Converting Lender is purchasing additional Tranche B-2 Loans)) in accordance with such Participating Lenders’ respective Tranche B-2 Commitments and as allocated by the Lead Arranger.

Holdings, the Borrower, the Administrative Agent and the Participating Lenders have agreed to amend the Existing Credit Agreement on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

SECTION 1.Amendments to the Existing Credit Agreement.  The Existing Credit Agreement is, effective as of the Amendment Effective Date (as defined below), hereby amended as follows:

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(a)Schedule I of the Existing Credit Agreement is amended by adding thereto the New Term Loan Commitments of the Incremental Lenders party hereto as set forth on Schedule I hereto.

(b)Section 1.1 of the Existing Credit Agreement is amended by inserting the following new definitions in their correct alphabetical order:

“Amendment No. 2” means Amendment No. 2 to this Agreement, dated as of October 8, 2013, among Holdings, the Borrower, the other Loan Parties party thereto, the Lenders party thereto and the Administrative Agent.

“Amendment No. 2 Effective Date” means the “Amendment Effective Date” under and as defined in Amendment No. 2.

“Exempt Permitted Sale-Leaseback Transaction” means a Permitted Sale-Leaseback Transaction involving a sale and leaseback of any asset acquired by the Borrower or any of its Restricted Subsidiaries after January 13, 2012.

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the ratio of Consolidated EBITDA of such Person for such period to the Fixed Charges of such Person for such period.

“Non-Exempt Permitted Sale-Leaseback Transaction” means a Permitted Sale-Leaseback Transaction involving a sale and leaseback of any asset owned by the Borrower or any of its Restricted Subsidiaries as of January 13, 2012.

“Share Repurchase” has the meaning specified in Amendment No. 2.

“Tranche B-2 Commitment” has the meaning specified in Amendment No. 2.

“Tranche B-2 Loan” means a Loan into which Tranche B-1 Loans are exchanged pursuant to Section 2.1(c) and, upon the Borrowing of the New Term Loans (as defined in Amendment No. 2) on the Amendment No. 2 Effective Date pursuant to Section 2.1(c), shall include such New Term Loans (as defined in Amendment No. 2).

(c)The definitions of “Adjusted Eurocurrency Rate” and “All-In Yield” in Section 1.1 of the Existing Credit Agreement are in each case amended by replacing each reference to “1.25%” therein with “1.00%”.

(d)The definition of “Applicable Margin” in Section 1.1 of the Existing Credit Agreement is amended and restated in its entirety as follows:

“Applicable Margin” means a percentage per annum equal to, (a) in the case of Initial Loans, (i) for Eurocurrency Rate Loans, 5.50%, and (ii) for Base Rate Loans, 4.50%, (b) in the case of Tranche B-1 Loans, (i) for Eurocurrency Rate Loans, 4.00%, and (ii) for Base Rate Loans, 3.00%, and (c) in the case of Tranche B-2 Loans, (i) for Eurocurrency Rate Loans, 3.50%, and (ii) for Base Rate Loans, 2.50%.

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(e)(i) Clause (a) of the definition of “Available Amount” in Section 1.1 of the Existing Credit Agreement is amended by adding the following proviso to the end thereof immediately before the reference therein to “plus”:

“; provided that, after giving effect to the Share Repurchase, such amount shall be reset at $20,000,000;” and

(ii) clause (b) of the definition of “Available Amount” in Section 1.1 of the Existing Credit Agreement is amended by adding the following proviso to the end thereof immediately before the reference therein to “plus”:

“; provided that, from and after March 31, 2013, such amount shall equal 50% of Consolidated Net Income of the Borrower for the period (taken as one accounting period) from March 31, 2013 to the end of the Borrower’s most recently ended fiscal quarter for which internal financial statements are available at the time of determination (or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit);”.

(f)Clause (2)(c) of the definition of “Excess Cash Flow” in Section 1.1 of the Existing Credit Agreement is amended by inserting the following at the end thereof:

“and in each case excluding any prepayments or repayments of Tranche B-1 Loans made in connection with the exchange or refinancing of such Loans for or with Tranche B-2 Loans pursuant to Amendment No. 2”.

(g)The definition of “Payment Conditions” in Section 1.1 of the Existing Credit Agreement is amended and restated in its entirety as follows:

“Payment Conditions” means, at any time of determination, that (a) no Event of Default exists immediately prior to the making of the subject Specified Payment or would thereafter result from the making of the subject Specified Payment and (b) the Fixed Charge Coverage Ratio of the Borrower as of the end of the most recently ended Test Period for which internal financial statements are available shall be at least 2.00 to 1.00, after giving Pro Forma Effect to such Specified Payment (including a pro forma application of the net proceeds therefrom), and, in each case, the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, (A) certifying that no Event of Default exists immediately prior to the making of the subject Specified Payment or would thereafter result from the making of such subject Specified Payment and (B) setting forth a reasonably detailed calculation of such Fixed Charge Coverage Ratio.

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(h)The definition of “Repricing Transaction” in Section 1.1 of the Existing Credit Agreement is amended by inserting “or Tranche B-2 Loans” immediately after “Tranche B-1 Loans” in each instance in which it appears therein.

(i)The definition of “Rollover Investor Put” in Section 1.1 of the Existing Credit Agreement is amended and restated as follows:

“Rollover Investor Put” means the put right held by certain members of the Management Group pursuant to each such member’s employment agreement with the Borrower, or the agreement by any such members to sell Equity Interests in the Borrower or its direct or indirect parent to the Borrower or its direct or indirect parent.

(j)Section 1.7 of the Existing Credit Agreement is amended by adding “and the Fixed Charge Coverage Ratio” immediately after each reference to “Senior Secured Leverage Ratio” therein.

(k)Section 2.1 of the Existing Credit Agreement is amended by adding the following new clause (c) thereto:

“(c)Subject to the terms and conditions set forth herein, (i) each Converting Lender (as defined in Amendment No. 2) severally agrees to exchange, on the Amendment No. 2 Effective Date, the aggregate principal amount of its Tranche B-1 Loans (or such lesser amount as the Lead Arranger (as defined in Amendment No. 2) may allocate and/or as such Converting Lender may specify in its Tranche B-2 Commitment) for a like principal amount of Tranche B-2 Loans, on the terms and subject to the conditions set forth in Amendment No. 2 and (ii) each Incremental Lender (as defined in Amendment No. 2) severally agrees to make to the Borrower a single loan denominated in Dollars equal to such Lender’s New Term Loan Commitment (as defined in Amendment No. 2) on the Amendment No. 2 Effective Date.  Amounts borrowed, converted or exchanged under this Section 2.1(c) and repaid or prepaid may not be reborrowed.  Tranche B-2 Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.”

(l)Section 2.4(a) of the Existing Credit Agreement is amended by inserting the following immediately prior to the proviso thereto:

“and excluding prepayments or repayments of Tranche B-1 Loans made in connection with the exchange or refinancing of such Loans for or with Tranche B-2 Loans pursuant to Amendment No. 2”.

(m)Section 2.4(b)(i) of the Existing Credit Agreement is amended by inserting the following sentence at the end of such Section:

“Notwithstanding anything to the contrary herein or in any other Loan Document, the provisions of this Section 2.4(b)(i) shall not apply to any Net Cash Proceeds realized or received by the Borrower or any Restricted Subsidiary from any Exempt Permitted Sale-Leaseback Transaction.”

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(n)Section 2.4(b)(ii) of the Existing Credit Agreement is amended by deleting clause (ii) in its entirety and replacing it with the following:

“(ii)(A) With respect to any Net Cash Proceeds realized or received with respect to any Asset Sale (other than a Permitted Sale-Leaseback Transaction) or any Recovery Event and (B) with respect to (1) 100% of $50,000,000 of Net Cash Proceeds realized or received by the Borrower or any of its Restricted Subsidiaries following the Effective Date from one or more Non-Exempt Permitted Sale-Leaseback Transactions and (2) without duplication of the amount in the foregoing clause (1), 50% of an additional $50,000,000 of Net Cash Proceeds realized or received by the Borrower or any of its Restricted Subsidiaries following the Effective Date from one or more Non-Exempt Permitted Sale-Leaseback Transactions, in each case, at the option of the Borrower, the Borrower may reinvest all or any portion of such Net Cash Proceeds in assets useful for its business within 450 days following receipt of such Net Cash Proceeds; provided that if any Net Cash Proceeds are no longer intended to be or cannot be so reinvested at any time after delivery of a notice of intent to reinvest by the Borrower to the Administrative Agent, and subject to clause (d) of this Section 2.4, an amount equal to any such Net Cash Proceeds shall be applied within five (5) Business Days after the Borrower reasonably determines that such Net Cash Proceeds are no longer intended to be or cannot be so reinvested to the prepayment of the Loans as set forth in this Section 2.4.  Notwithstanding anything to the contrary herein or in any other Loan Document, the provisions of this Section 2.4(b)(ii) shall not restrict in any manner the application or use of any Net Cash Proceeds realized or received by the Borrower or any Restricted Subsidiary from any Exempt Permitted Sale-Leaseback Transaction.”

(o)Section 2.6 of the Existing Credit Agreement is amended by (i) renumbering clause (c) thereto as clause (d) and (ii) inserting the following as a new clause (c) thereto:

“, (c) on the last Business Day of each March, June, September and December, commencing with the last Business Day of December, 2013, an aggregate principal amount equal to 0.25% of the aggregate principal amount of all Tranche B-2 Loans outstanding on the Amendment No. 2 Effective Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.3)”.

(p)Section 2.15 of the Existing Credit Agreement is amended and restated in its entirety as follows:

“SECTION 2.15Loan Repricing Protection.  In the event that, on or prior to the date that is one year after the Amendment No. 2 Effective Date, the Borrower

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(a) makes any prepayment of Tranche B-2 Loans in connection with any Repricing Transaction or (b) effects any amendment of this Agreement resulting in a Repricing Transaction, the Borrower shall pay to the Administrative Agent, for the ratable account of each applicable Lender, (i) in the case of clause (a), a prepayment premium of 1.0% of the principal amount of the Tranche B-2 Loans being prepaid and (ii) in the case of clause (b), a payment equal to 1.0% of the aggregate principal amount of the applicable Tranche B-2 Loans outstanding immediately prior to such amendment.  Such amounts shall be due and payable on the date of effectiveness of such Repricing Transaction.”

(q)The preamble to Article V of the Existing Credit Agreement, and Sections 5.12 and 5.18 of the Existing Credit Agreement, are each amended by inserting “and the Amendment No. 2 Effective Date” immediately after “the Amendment No. 1 Effective Date” in each instance in which it appears therein.

(r)Section 5.15 of the Existing Credit Agreement is amended by inserting the following at the end thereof:

“On the Amendment No. 2 Effective Date immediately after giving effect to the transactions contemplated by Amendment No. 2, the Borrower and its Subsidiaries, on a Consolidated basis, are Solvent.”

(s)Section 7.2(f) of the Existing Credit Agreement is amended by replacing the reference to “Total Leverage Ratio” therein with “Fixed Charge Coverage Ratio”.

(t)Section 9.6(n) of the Existing Credit Agreement is amended and restated in its entirety as follows:

“(n)Restricted Payments by the Borrower, including to a direct or indirect parent of the Borrower, for the purpose of funding the repurchase of Equity Interests pursuant to the Rollover Investor Put in an aggregate amount not to exceed $37,500,000;”

(u)Section 9.14 of the Existing Credit Agreement is hereby deleted in its entirety and replaced with “[Reserved]”.

(v)Each of Sections 12.1(b) and 12.1(c) of the Existing Credit Agreement is amended by adding “or Fixed Charge Coverage Ratio” immediately after each reference to “Senior Secured Leverage Ratio” therein.

(w)The Lenders hereby agree that clause (vi) of the proviso to Section 2.12(a) shall not apply with respect to the incurrence of the New Term Loans on the Amendment No. 2 Effective Date.

(x)For purposes of clause (c) of the definition of “Scheduled Termination Date” in Section 1.1 of the Credit Agreement, the “Scheduled Termination Date” and final maturity date of the Tranche B-2 Loans (to the extent that such Loans are not extended pursuant to Section 2.13 of the Credit Agreement) shall be the date that is seven years after the Effective Date.

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In consideration for the amendments contained herein, the Borrower hereby agrees that the Restricted Payments made to fund the Share Repurchase shall be applied to the exceptions contained in Section 9.6 of the Credit Agreement in the following order (in each case, to the full extent that Restricted Payments are available thereunder at the time of determination (or, in the case of the following clause third, as of March 30, 2013)): first, to Section 9.6(f); second, to Section 9.6(n); third, to Section 9.6(l); fourth, to Section 9.6(k); and fifth, to Section 9.6(l).

SECTION 2.Refinancing and Incremental Amendment.  (a)  In each case for all purposes of the Credit Agreement and each of the other Loan Documents, (i) this Amendment shall constitute a “Refinancing Amendment” and an “Incremental Amendment”, (ii) the Repriced Term Loans shall constitute “Other Loans” and “Credit Agreement Refinancing Indebtedness”, (iii) the Lenders’ commitments in respect of the Tranche B-2 Loans shall constitute “Other Commitments” and (iv) the New Term Loans shall constitute “Incremental Loans”.

(b)Upon the funding of the New Term Loans on the Effective Date, (i) the New Term Loans shall automatically and without further action by any Person constitute Tranche B-2 Loans for all purposes of the Credit Agreement and the other Loan Documents, (ii) the scheduled amortization payments in respect of the Tranche B-2 Loans under Section 2.6 of the Existing Credit Agreement shall be automatically ratably increased by the aggregate principal amount of the New Term Loans and (iii) the Administrative Agent shall take any and all action as may be reasonably necessary to ensure that the New Term Loans are included in each Borrowing and repayment of Tranche B-2 Loans on a pro rata basis.

(c)Each Incremental Lender party hereto hereby acknowledges and agrees that it has a New Term Loan Commitment in the amount set forth opposite such Incremental Lender’s name on Schedule I to this Amendment and agrees to make New Term Loans on the Amendment Effective Date in accordance with Section 2.1 of the Credit Agreement.  From and after the Amendment Effective Date, (a) each Incremental Lender shall be a Lender for all purposes under the Credit Agreement and the other Loan Documents and (b) the New Term Loan Commitment of each Incremental Lender party hereto shall be a Commitment for all purposes under the Credit Agreement and the other Loan Documents.

SECTION 3.Conditions to Effectiveness.

(a)This Amendment shall become effective as of the first date (the “Amendment Effective Date”) when, and only when, each of the following conditions have been satisfied (or waived) in accordance with the terms therein:

(i)The Administrative Agent shall have received counterparts of this Amendment executed by Holdings, the Borrower, the other Loan Parties and the Administrative Agent.

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(ii)The Administrative Agent shall have received fully executed and delivered Tranche B-2 Commitments from Participating Lenders representing (A) 100% of the aggregate outstanding principal amount of Tranche B-1 Loans and (B) 100% of the aggregate outstanding principal amount of the New Term Loan Commitments.

(iii)The Borrower shall have paid, for the ratable account of each Existing Lender, all accrued and unpaid interest in respect of the Tranche B-1 Loans owing to each Existing Lender (and it is hereby acknowledged by the parties to this Amendment that this Amendment constitutes notice of such payment in accordance with the terms of the Existing Credit Agreement).

(iv)The Borrower shall have paid (A) all reasonable, documented and invoiced fees payable to Royal Bank as agreed in writing between Royal Bank and the Borrower and (B) all reasonable fees, expenses and disbursements of Paul Hastings LLP, as counsel for the Administrative Agent, incurred in connection with the preparation, negotiation and execution of this Amendment to the extent invoiced at least three (3) Business Days prior to the date hereof.

(v)(A) On and as of the Amendment Effective Date, both immediately before and immediately after giving effect to the effectiveness of this Amendment and the exchange or refinancing of Tranche B-1 Loans for or with Tranche B-2 Loans and the incurrence of New Term Loans, (1) the representations and warranties of the Borrower and each other Loan Party contained in Article V of the Credit Agreement or any other Loan Document shall be true and correct in all material respects; provided that, to the extent such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date; and provided, further that, any representation or warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates and (2) no Default or Event of Default shall exist, or would result from the execution and delivery of this Amendment or the exchange or refinancing of Tranche B-1 Loans for or with Tranche B-2 Loans and the incurrence of the New Term Loans and (B) the Administrative Agent shall have received a certificate from a Responsible Officer of the Borrower certifying as to the matters set forth in this Section 3(a)(v) and Section 3(a)(vii) below.

(vi)The Administrative Agent shall have received a certificate of a Responsible Officer of each Loan Party dated as of the Amendment Effective Date and certifying that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors (or other equivalent governing body) of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the Borrowing of the New Term Loans, and that such resolutions have not been modified, rescinded or amended and are in full force and effect.

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(vii)The conditions precedent to the incurrence of Incremental Loans pursuant to Section 2.12 of the Existing Credit Agreement shall have been satisfied.

(viii)The Administrative Agent shall have received a certificate, in form and substance reasonably satisfactory to the Administrative Agent, from the chief financial officer of the Borrower certifying that the Borrower and its Subsidiaries, on a Consolidated basis, immediately after giving effect to the effectiveness of this Amendment and the making of the New Term Loans on the Amendment Effective Date and the other transactions contemplated hereby (including the Share Repurchase), are Solvent.

(ix)All actions shall have been taken as the Administrative Agent shall have reasonably requested to ensure that the New Term Loans and Repriced Loans shall have a perfected security interest in the Collateral of the type and priority described in each applicable Collateral Document, including delivery to the Administrative Agent of (A) one or more mortgage amendments, supplements or restatements in form and substance reasonably satisfactory to the Administrative Agent (the “Mortgage Amendments”) with respect to the Mortgages, duly executed, acknowledged and delivered by a duly authorized officer of each party thereto, in form suitable for filing and recording in all applicable filing or recording offices and (B) fully-paid title searches and update endorsements to the Administrative Agent’s Mortgage Policies, each in form and substance reasonably satisfactory to, and to the extent requested by, the Administrative Agent; provided that, if any of the items required pursuant to this clause (ix) in respect of the Mortgaged Properties shall not be delivered on or prior to the Amendment Effective Date after the Loan Parties’ use of commercially reasonable efforts to deliver same, then such items may be delivered on a date reasonably agreed by the Administrative Agent after the Amendment Effective Date.

(x)The Administrative Agent shall have received a completed “Life-of-Loan” Federal Emergency Management Agency Standard Flood Hazard Determination with respect to each Mortgaged Property and, if any such Mortgaged Property is located in a special flood hazard area, evidence of flood insurance to the extent required pursuant to the Credit Agreement.

(xi)The Borrower shall have executed and delivered to the Administrative Agent and the Lead Arranger a syndication consent letter in form and substance reasonably acceptable to the Administrative Agent and the Lead Arranger.

(xii)All conditions to effectiveness contained in Section 2 of that certain Amendment No. 2 to the $175,000,000 Credit Agreement, dated as of October 8, 2013, among the Borrower, Holdings, the loan parties party thereto, each lender party thereto and Royal Bank, as Administrative Agent (as defined therein), other than the condition set forth in Section 2(d) thereof, shall have been, or concurrently with the effectiveness of this Amendment be, satisfied (or waived).

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(xiii)The Administrative Agent shall have received, on behalf of itself and the Lenders, dated the Amendment Effective Date, a favorable written opinion of Proskauer Rose, LLP, special counsel for the Loan Parties, in form and substance reasonably acceptable to the Administrative Agent.

(xiv)The Participating Lenders shall have received on or prior to the Amendment Effective Date, all documentation and other information reasonably requested by them in writing at least four (4) Business Days prior to the Amendment Effective Date in order to allow the Lenders to comply with applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

(b)On the Amendment Effective Date, upon the satisfaction of the conditions set forth in Section 3(a) hereof:

(i)With respect to each Converting Lender:

(A)the outstanding amount of Tranche B-1 Loans of such Converting Lender (or such lesser amount as may be allocated by the Lead Arranger and/or specified by such Converting Lender in its Tranche B-2 Commitment) shall be deemed to be exchanged for an equal outstanding amount of Tranche B-2 Loans under the Credit Agreement; and

(B)for purposes of Section 12.1 of the Existing Credit Agreement, each Converting Lender shall be deemed to have consented to this Amendment and the amendment of the Existing Credit Agreement contemplated hereby.

(ii)The exchange of outstanding Tranche B-1 Loans for Tranche B-2 Loans by Converting Lenders shall be effected by book entry in such manner, and with such supporting documentation, as may be reasonably determined by the Administrative Agent.

(c)To the extent there exist any Non-Participating Lenders, such Non-Participating Lenders shall be replaced (and the Tranche B-1 Loans of such Non-Participating Lenders shall be assumed) by one or more Converting Lenders pursuant to Section 3.7 of the Existing Credit Agreement as directed by the Lead Arranger.  To the extent that this Section 3(c) cannot be effected or otherwise at the election of the Lead Arranger, each Participating Lender (other than a Converting Lender (except to the extent such Converting Lender is purchasing additional Tranche B-2 Loans)) shall severally advance Tranche B-2 Loans in Dollars on the Amendment No. 2 Effective Date in accordance with its Tranche B-2 Commitment (or such lesser amount as the Lead Arranger may allocate and/or as such Participating Lender may specify in its Tranche B-2 Commitment).  Such funding of Tranche B-2 Loans shall be deemed, automatically and without further act by any Person, to constitute a simultaneous (A) Borrowing by the

11

Borrower of Tranche B-2 Loans pursuant to Section 2.1(c) of the Credit Agreement and (B) prepayment of Tranche B-1 Loans of Non-Participating Lenders pursuant to Section 2.3(a) of the Existing Credit Agreement, and such Participating Lenders shall be Lenders for all purposes of the Credit Agreement and the other Loan Documents.

(d)On or prior to the Amendment Effective Date, the Lenders (including Existing Lenders) shall sell and purchase Tranche B-1 Loans, and make and receive payments, in immediately available funds, among themselves (and the Fronting Banks, if applicable), as directed by the Lead Arranger, in order to permit the exercise of Section 3.7 and the penultimate paragraph of Section 12.1 of the Existing Credit Agreement.  All such sales and purchases shall be deemed to have been made in accordance with Section 3.7, the penultimate paragraph of Section 12.1 and Section 12.2 of the Existing Credit Agreement and are hereby ratified and confirmed.

(e)To the extent there exist any Reallocated Loans, promptly following the Amendment Effective Date (but not later than 30 days following the Amendment Effective Date), each Participating Lender (other than a Converting Lender (except to the extent a Converting Lender is purchasing additional Tranche B-2 Loans)) shall purchase Reallocated Loans from the Fronting Banks as directed by the Lead Arranger in accordance with such Participating Lender’s Tranche B-2 Commitment and/or New Term Loan Commitment and as allocated by the Lead Arranger.  Except to the extent otherwise agreed by the Fronting Banks, such purchases and sales of Reallocated Loans shall be made on a ratable basis among the Fronting Banks.

SECTION 4.Consent and Affirmation of the Loan Parties.  Each Loan Party (prior to and after giving effect to this Amendment) hereby consents to the amendment of the Existing Credit Agreement effected hereby and confirms and agrees that, notwithstanding the effectiveness of this Amendment, each Loan Document to which such Loan Party is a party is, and the obligations of such Loan Party contained in the Existing Credit Agreement, this Amendment or in any other Loan Document to which it is a party are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects, in each case as amended or modified by this Amendment.  For greater certainty and without limiting the foregoing, each Loan Party hereby confirms that the existing security interests granted by such Loan Party in favor of the Secured Parties pursuant to the Loan Documents in the Collateral described therein shall continue to secure the obligations of the Loan Parties under the Credit Agreement and the other Loan Documents as and to the extent provided in the Loan Documents.

SECTION 5.Representations and Warranties.  (a) Each Loan Party represents and warrants, on and as of the Amendment Effective Date, that: (i) it has the corporate or other organizational power to execute and deliver this Amendment, and all corporate or other organizational action required to be taken by it for the execution, delivery and performance by it of this Amendment and the consummation of the transactions contemplated hereby has been taken; (ii) this Amendment has been duly authorized, executed and delivered by it; and (iii) no action, consent or approval of, registration or filing with or any other action by any Governmental Authority is required to be obtained by it in connection with the execution and delivery of this Amendment, except for such actions, consents, approvals, registrations or filings as have been taken or the failure of which to be obtained or made could not reasonably be expected to have a Material Adverse Effect.

12

(b)Each Loan Party hereby represents and warrants that, on and as of the Amendment Effective Date, both immediately before and immediately after giving effect to this Amendment, no Default has occurred and is continuing.

SECTION 6.Reference to and Effect on the Credit Agreement.

(a)On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof’ or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement, as amended and otherwise modified by this Amendment.

(b)The Credit Agreement, as specifically amended and otherwise modified by this Amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.  This Amendment shall be a “Loan Document” for purposes of the definition thereof in the Credit Agreement.

(c)The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent or the Collateral Agent under the Credit Agreement or any other Loan Document.

SECTION 7.Execution in Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.  Delivery of an executed counterpart of a signature page to this Amendment by facsimile or in “pdf” or similar format by electronic mail shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 8.Governing Law.  This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York.

SECTION 9.Headings.  Section headings are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

SECTION 10.Severability.  In case any provision in or obligation hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired hereby.

SECTION 11.Notices; Successors; Waiver of Jury Trial.  All communications and notices hereunder shall be given as provided in the Credit Agreement; provided that each of the Administrative Agent and the Lenders party hereto waive any notice, demand or other communication required to request or make a prepayment and borrowing of Loans (including Incremental Loans).  The terms of this Amendment shall be binding upon, and shall inure to the

13

benefit of, the parties hereto and their respective successors and assigns.  Each of the parties hereto irrevocably waives trial by jury in any action or proceeding with respect to this Amendment or any other Loan Document.

[Remainder of Page Intentionally Left Blank]

14

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective authorized officers as of the date first above written.

NUMBER HOLDINGS, INC.,
as Holdings
By:	/s/ Frank Schools
Name:	Frank Schools
Title:	Senior Vice President, Chief Financial Officer
99¢ ONLY STORES,
as the Borrower
By:	/s/ Frank Schools
Name:	Frank Schools
Title:	Senior Vice President, Chief Financial Officer
99 CENTS ONLY STORES TEXAS, INC.,
as a Guarantor
By:	/s/ Frank Schools
Name:	Frank Schools
Title:	Senior Vice President, Chief Financial Officer

ROYAL BANK OF CANADA,
as Administrative Agent
By:	/s/ James S. Wolfe
Name:	James S. Wolfe
Title:	Managing Director
	Head of US Leveraged Finance

ROYAL BANK OF CANADA,
as Incremental Lender
By:	/s/ James S. Wolfe
Name:	James S. Wolfe
Title:	Managing Director
	Head of US Leveraged Finance

Schedule I

New Term Loan Commitments

Incremental Lender	New Term Loan Commitment
Royal Bank of Canada	$	100,000,000
Total	$	100,000,000

Exhibit A
Form of Tranche B-2 Commitment

Date:                           , 2013

Royal Bank of Canada, as Administrative Agent
4th Floor, 20 King Street West
Toronto, Ontario M5H 1C4
Attention:Manager, Agency Service Group
Facsimile:(416) 842-4023

99¢ Only Stores
4000 Union Pacific Avenue
City of Commerce, CA 90023
Attention:Frank Schools

Tranche B-2 Commitment

Ladies and Gentlemen:

Reference is made to Amendment No. 2 (the “Amendment”) to that certain $525,000,000 Credit Agreement, dated as of January 13, 2012 (as amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”; and as amended by the Amendment and as otherwise may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among 99¢ Only Stores (the “Borrower”), Number Holdings, Inc., the lenders party thereto, Royal Bank of Canada, as administrative agent, and the other agents party thereto.  Unless otherwise specified herein, capitalized terms used but not defined herein are used as defined in the Amendment.

By delivery of this Tranche B-2 Commitment, each of the undersigned (each a “Participating Lender”), hereby irrevocably consents to the Amendment and the amendment of the Existing Credit Agreement contemplated thereby and (check as applicable):

For Existing Lenders:

oCashless Settlement Option.  Hereby elects, upon the Amendment Effective Date, to exchange the outstanding amount of Tranche B-1 Loans of such Participating Lender (or such lesser amount specified on the schedule below or as may be allocated by the Lead Arranger) for an equal outstanding amount of Tranche B-2 Loans under the Credit Agreement.

oCash Settlement Option.  Hereby elects to have the outstanding amount of Tranche B-1 Loans of such Participating Lender (or such lesser amount specified on the schedule below) repaid or purchased and agrees to purchase, on or prior to the date that is 30

days following the Amendment Effective Date, Tranche B-2 Loans up to the amount set forth on the schedule below (or such lesser amount as may be allocated by the Lead Arranger).

oAdditional Tranche B-2 Loans.  Hereby agrees to purchase, on or prior to the date that is 30 days following the Amendment Effective Date, additional Tranche B-2 Loans up to the amount set forth on the schedule below (or such lesser amount as may be allocated by the Lead Arranger).

New Lenders:

oHereby agrees to purchase, on or prior to the date that is 30 days following the Amendment Effective Date, Tranche B-2 Loans up to the amount set forth on the schedule below (or such lesser amount as may be allocated by the Lead Arranger).

Name of Participating Lender*	Outstanding Amount of Existing Tranche B-1 Loans	Amount to be Exchanged for Tranche B-2 Loans and/or Purchased†	Lender Requires Cash Settlement (Y/N)
	$	$
	$	$
	$	$

Very truly yours,
,
By:
	Name:
	Title:

*  Include each sub-fund that is a lender of record, to the extent applicable.

†  If providing an increase in commitments, insert aggregate amount of converted loans plus the desired increase in commitments.

,
By:
	Name:
	Title:

EX-31.1

EXHIBIT 31.1

Certification of

Chief Executive Officer

of 99 Cents Only Stores LLC

I, Stéphane Gonthier, certify that:

1.         I have reviewed this quarterly report on Form 10-Q of 99 Cents Only Stores LLC;

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)       Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.         The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2013
By:	/s/ Stéphane Gonthier
	Stéphane Gonthier
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of

Chief Financial Officer

of 99 Cents Only Stores LLC

I, Frank Schools, certify that:

1.         I have reviewed this quarterly report on Form 10-Q of 99 Cents Only Stores LLC;

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)       Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.         The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2013
By:	/s/ Frank Schools
	Frank Schools
	Senior Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

OF 99 CENTS ONLY STORES LLC

This certification is provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and accompanies the quarterly report on Form 10-Q (the “Report”) for the period ended  September 28, 2013 of 99 Cents Only Stores LLC (the “Issuer”).

I, Stéphane Gonthier, the Chief Executive Officer of the Issuer certify that to the best of my knowledge:

(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date: November 8, 2013

By:	/s/ Stéphane Gonthier
	Stéphane Gonthier, President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C 1350) and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

OF 99 CENTS ONLY STORES LLC

This certification is provided pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and accompanies the quarterly report on Form 10-Q (the “Report”) for the period ended September 28, 2013 of 99 Cents Only Stores LLC (the “Issuer”).

I, Frank Schools, the Chief Financial Officer of the Issuer certify that to the best of my knowledge:

(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date:  November 8, 2013

By:	/s/ Frank Schools
	Frank Schools, Senior Vice President, Chief Financial Officer and Treasurer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C 1350) and is not being filed as part of the Report or as a separate disclosure document.

XML

Assets Held for Sale

6 Months Ended

Sep. 28, 2013

Assets Held for Sale

Assets Held for Sale

12. Assets Held for Sale

Assets held for sale during the quarter ended September 28, 2013 consisted of the vacant land in La Quinta, California and the vacant land in Rancho Mirage, California.  The carrying value as of September 28, 2013 for the La Quinta land was $0.4 million and for the Rancho Mirage land was $1.7 million.

In October 2013, the Company completed the sale of the land in La Quinta, California and received proceeds of $0.7 million.

XML

Financial Guarantees (Details 3) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Sep. 28, 2013	Sep. 29, 2012
Cash flows from operating activities:
Net cash provided by operating activities	$ 68,393	$ 34,478
Cash flows from investing activities:
Purchases of property and equipment	(32,348)	(19,861)
Proceeds from sales of fixed assets	537	11,549
Purchases of investments		(449)
Proceeds from sale of investments		2,470
Net cash used in investing activities	(31,811)	(6,291)
Cash flows from financing activities:
Payment of debt	(4,639)	(2,618)
Payments of capital lease obligation	(41)	(38)
Payment of debt issuance costs		(11,230)
Net cash used in financing activities	(4,680)	(13,886)
Net increase in cash	31,902	14,301
Cash - beginning of period	45,476	27,766
Cash - end of period	77,378	42,067
Issuer
Cash flows from operating activities:
Net cash provided by operating activities	61,629	33,925
Cash flows from investing activities:
Purchases of property and equipment	(27,498)	(18,553)
Proceeds from sales of fixed assets	536	11,549
Purchases of investments		(449)
Proceeds from sale of investments		2,470
Investment in subsidiaries		(4,213)
Net cash used in investing activities	(26,962)	(9,196)
Cash flows from financing activities:
Payment of debt	(4,639)	(2,618)
Payments of capital lease obligation	(41)	(38)
Payment of debt issuance costs		(11,230)
Net cash used in financing activities	(4,680)	(13,886)
Net increase in cash	29,987	10,843
Cash - beginning of period	45,841	23,793
Cash - end of period	75,828	34,636
Subsidiary Guarantors
Cash flows from operating activities:
Net cash provided by operating activities	6,286	553
Cash flows from investing activities:
Purchases of property and equipment	(4,850)	(1,308)
Proceeds from sales of fixed assets	1
Net cash used in investing activities	(4,849)	(1,308)
Cash flows from financing activities:
Capital contributions		4,213
Net cash used in financing activities		4,213
Net increase in cash	1,437	3,458
Cash - beginning of period	113	3,973
Cash - end of period	1,550	7,431
Consolidating Adjustments
Cash flows from operating activities:
Net cash provided by operating activities	478
Cash flows from investing activities:
Investment in subsidiaries		4,213
Net cash used in investing activities		4,213
Cash flows from financing activities:
Capital contributions		(4,213)
Net cash used in financing activities		(4,213)
Net increase in cash	478
Cash - beginning of period	$ (478)

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2013	Sep. 29, 2012	Sep. 28, 2013	Sep. 29, 2012
Net Sales:
99 Only Stores	$ 431,553	$ 382,073	$ 852,489	$ 771,029
Bargain Wholesale	12,370	11,290	25,300	23,284
Total sales	443,923	393,363	877,789	794,313
Cost of sales (excluding depreciation and amortization expense shown separately below)	277,118	242,699	543,797	486,601
Gross profit	166,805	150,664	333,992	307,712
Selling, general and administrative expenses:
Operating expenses	138,911	120,362	270,743	239,133
Depreciation	15,685	13,931	31,011	27,683
Amortization of intangible assets	442	442	884	883
Total selling, general and administrative expenses	155,038	134,735	302,638	267,699
Operating income	11,767	15,929	31,354	40,013
Other (income) expense:
Interest income		(35)	(15)	(259)
Interest expense	15,174	15,537	29,862	31,114
Loss on extinguishment of debt				16,346
Other		3		67
Total other expense, net	15,174	15,505	29,847	47,268
(Loss) income before provision for income taxes	(3,407)	424	1,507	(7,255)
(Benefit) provision for income taxes	(8,874)	214	(7,124)	(2,574)
Net income (loss)	5,467	210	8,631	(4,681)
Other comprehensive (loss) income, net of tax:
Unrealized holding gains on securities arising during period		4		4
Unrealized (losses) gains on interest rate cash flow hedge	(332)	(473)	137	(1,017)
Less: reclassification adjustment included in net income				(5)
Other comprehensive (loss) income, net of tax	(332)	(469)	137	(1,018)
Comprehensive income (loss)	$ 5,135	$ (259)	$ 8,768	$ (5,699)

XML

Debt

6 Months Ended

Sep. 28, 2013

Debt

Debt

5. Debt

Short and long-term debt consists of the following (in thousands):

	September 28, 2013		March 30, 2013
ABL Facility agreement, maturing January 13, 2017, with available borrowing up to $175,000, interest due quarterly, with unpaid principal and accrued interest due January 13, 2017	$	—	$	—
First Lien Term Loan Facility agreement, maturing on January 13, 2019, payable in quarterly installments of $1,309, plus interest, commencing March 31, 2012 through December 31, 2019, with unpaid principal and accrued interest due January 13, 2019, net of unamortized OID of $9,362 and $10,126 as of September 28, 2013 and March 30, 2013, respectively	504,450		508,325
Senior Notes (unsecured) maturing December 15, 2019, unpaid principal and accrued interest due on December 15, 2019	250,000		250,000
Total long-term debt	754,450		758,325
Less: current portion of long-term debt	3,216		8,567
Long-term debt, net of current portion	$	751,234	$	749,758

As of September 28, 2013 and March 30, 2013, the deferred financing costs are as follows (in thousands):

	September 28, 2013							March 30, 2013
Deferred financing costs	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
ABL Facility	$	3,078	$	(1,053	)	$	2,025	$	3,078	$	(746	)	$	2,332
First Lien Term Loan Facility	9,308		(1,793		)	7,515		9,308		(1,179		)	8,129
Senior Notes	11,761		(1,733		)	10,028		11,761		(1,206		)	10,555
Total deferred financing costs	$	24,147	$	(4,579	)	$	19,568	$	24,147	$	(3,131	)	$	21,016

On January 13, 2012, in connection with the Merger, the Company obtained Credit Facilities (as defined below) provided by a syndicate of lenders arranged by Royal Bank of Canada as administrative agent, as well as other agents and lenders that are parties to these Credit Facilities.  The Credit Facilities include (a) $175 million in commitments under the first lien based revolving credit facility (as amended, “ABL Facility”), and (b) $525 million in aggregate principal amount under the first lien term loan facility (as amended, “First Lien Term Loan Facility” and together with the ABL Facility, the “Credit Facilities”).

First Lien Term Loan Facility

As of September 28, 2013, the First Lien Term Loan Facility provided for $525 million of borrowings (which may be increased by up to $150.0 million in certain circumstances).  All obligations under the First Lien Term Loan Facility are guaranteed by Parent and the Company’s direct wholly owned subsidiary, 99 Cents Only Stores Texas, Inc. (“99 Cents Texas” and together with Parent, the “Credit Facilities Guarantors”).  In addition, the First Lien Term Loan Facility is secured by pledges of certain of the Company’s equity interests and the equity interests of the Credit Facilities Guarantors.

As of September 28, 2013, the Company was required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the term loan (approximately $1.3 million), with the balance due on the maturity date, January 13, 2019.  Borrowings under the First Lien Term Loan Facility bear interest at an annual rate equal to an applicable margin plus, at the Company’s option, (A) a Base Rate determined by reference to the highest of (a) the interest rate in effect determined by the administrative agent as “Prime Rate” (3.25% as of September 28, 2013), (b) the federal funds effective rate plus 0.50% and (c) an adjusted Eurocurrency rate for one month (determined by reference to the greater of the Eurocurrency rate for the interest period multiplied by the Statutory Reserve Rate or 1.50% per annum) plus 1.00%, or (B) an Adjusted Eurocurrency Rate.

On April 4, 2012, the Company amended the terms of the existing seven-year $525 million First Lien Term Loan Facility, and incurred refinancing costs of $11.2 million. The amendment, among other things, decreased the applicable margin from the London Interbank Offered Rate (“LIBOR”) plus 5.50% (or Base Rate plus 4.50%) to LIBOR plus 4.00% (or Base Rate plus 3.00%) and decreased the LIBOR floor from 1.50% to 1.25%.  The maximum capital expenditures covenant in the First Lien Term Loan Facility was also amended to permit an additional $5 million in capital expenditures each year throughout the term of the First Lien Term Loan Facility.

The Company determined that a portion of the refinancing transaction should be accounted for as debt extinguishment. In accordance with applicable guidance for debt modification and extinguishment, the Company recognized a $16.3 million loss on debt extinguishment related to a portion of the unamortized debt issuance costs, unamortized original issue discount (“OID”) and refinancing costs incurred in connection with the amendment for the portion of the First Lien Term Loan Facility that was extinguished.  The Company recorded $0.3 million as deferred debt issuance costs and $5.9 million as OID in connection with the amendment.

As of September 28, 2013, $1.7 million of the amount outstanding under the First Lien Term facility bore an interest charge of 6.25% (3.25% Prime Rate, plus the margin of 3.00%), while the interest rate charged on the remainder of First Lien Term Loan Facility was 5.25% (1.25% Eurocurrency rate, plus the Eurocurrency loan margin of 4.00%).  As of September 28, 2013, the amount outstanding under the First Lien Term Loan Facility was $504.4 million.

Following the end of each fiscal year, the Company is required to prepay the First Lien Term Loan Facility in an amount equal to 50% of Excess Cash Flow (as defined in the First Lien Term Loan Facility agreement and with stepdowns to 25% and 0% based on achievement of specified total leverage ratios), minus the amount of certain voluntary prepayments of the First Lien Term Loan Facility and/or the ABL Facility during such fiscal year. The Excess Cash Flow required payment for fiscal 2013 was $3.3 million and was made in July 2013.

The First Lien Term Loan Facility includes restrictions on the Company’s ability and the ability of Parent and certain of the Company’s subsidiaries to, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase, the Company’s capital stock, make certain acquisitions or investments, materially change the Company’s business, incur or permit to exist certain liens, enter into transactions with affiliates or sell its assets to and make capital expenditures or merge or consolidate with or into, another company.  As of March 30, 2013, the Company was in compliance with the terms of the First Lien Term Loan Facility.  In June 2013, the Company failed to comply with the covenant that required delivery of audited financial statements for the fiscal year ended March 30, 2013 within 90 days of the completion of fiscal 2013 as required under the First Lien Term Loan Facility.  Prior to the expiration of the applicable 30-day grace period under the First Lien Term Loan Facility, the Company delivered the required financial statements.  As of September 28, 2013, the Company is in compliance with the applicable reporting obligations and other terms of the First Lien Term Loan Facility.

On October 8, 2013, the Company completed a repricing of its First Lien Term Loan Facility, borrowed $100 million of incremental term loans under that facility and amended certain other provisions thereto.  See Note 16 for more information regarding the amendment to the First Lien Term Loan Facility.

During the first quarter of fiscal 2013, the Company entered into an interest rate cap agreement.  The interest rate cap agreement limits the Company’s interest exposure on a notional value of $261.8 million to 3.00% plus an applicable margin of 4.00%.  The term of the interest rate cap is from May 29, 2012 to November 29, 2013.  The Company paid fees of $0.05 million to enter into the interest rate cap agreement.

In addition, during the first quarter of fiscal 2013, the Company entered into an interest rate swap agreement to limit the variability of cash flows associated with interest payments on the First Lien Term Loan Facility that result from fluctuations in the LIBOR rate.  The swap limits the Company’s interest exposure on a notional value of $261.8 million to 1.36% plus an applicable margin of 4.00%.  The term of the swap is from November 29, 2013 through May 31, 2016.  The fair value of the swap on the trade date was zero as the Company neither paid nor received any value to enter into the swap, which was entered into at market rates.  The fair value of the swap at September 28, 2013 was a liability of $2.3 million.  See Note 6 for more information on the Company’s interest rate cap and interest rate swap agreements.

ABL Facility

The ABL Facility provides for up to $175.0 million of borrowings (which may be increased by up to $50.0 million in certain circumstances), subject to certain borrowing base limitations.  All obligations under the ABL Facility are guaranteed by the Company, Parent and 99 Cents Texas (collectively, the “ABL Guarantors”).  The ABL Facility is secured by substantially all of the Company’s assets and the assets of the ABL Guarantors.

Borrowings under the ABL Facility bear interest for an initial period until June 30, 2012 at an applicable margin plus, at the Company’s option, a fluctuating rate equal to (A) the highest of (a) Federal Funds Rate plus 0.50%, (b) rate of interest in effect determined by the administrative agent as “Prime Rate” (3.25% at the date of the Merger), and (c) Adjusted Eurocurrency Rate (determined to be the LIBOR rate multiplied by the Statutory Reserve Rate) for an Interest Period of one (1) month plus 1.00% or (B) the Adjusted Eurocurrency Rate.  The interest rate charged on borrowings under the ABL Facility from the date of the Merger until June 30, 2012 was 4.25% (the base rate (prime rate at 3.25%) plus the applicable margin of 1.00%).  Thereafter, borrowings under the ABL Facility will have variable pricing and will be based, at the Company’s option, on (a) LIBOR plus an applicable margin to be determined (1.75% as of September 28, 2013) or (b) the determined base rate (prime rate) plus an applicable margin to be determined (0.75% at September 28, 2013), in each case based on a pricing grid depending on average daily excess availability for the most recently ended quarter.

In addition to paying interest on outstanding principal under the Credit Facilities, the Company was required to pay a commitment fee to the lenders under the ABL Facility on unused commitments at a rate of 0.375% for the period from the date of the Merger until June 30, 2012.  Thereafter, the commitment fee will be adjusted at the beginning of each quarter based upon the average historical excess availability of the prior quarter (0.50% for the quarter ended September 28, 2013).  The Company must also pay customary letter of credit fees and agency fees.

As of September 28, 2013 and March 30, 2013, the Company had no outstanding borrowings under the ABL Facility, outstanding letters of credit were $1.6 million, and availability under the ABL Facility subject to the borrowing base, was $133.9 million as of September 28, 2013.

The ABL Facility includes restrictions on the Company’s ability, and the ability of the Parent and certain of the Company’s subsidiaries to, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase, its capital stock, make certain acquisitions or investments, materially change its business, incur or permit to exist certain liens, enter into transactions with affiliates or sell our assets to, make capital expenditures or merge or consolidate with or into, another company.  The ABL Facility was amended on April 4, 2012 to permit an additional $5 million in capital expenditures for each year during the term of the ABL Facility.  As of March 30, 2013, the Company was in compliance with the terms of the ABL Facility. In June 2013, the Company failed to comply with the covenant that required delivery of audited financial statements for the fiscal year ended March 30, 2013 within 90 days of the completion of fiscal 2013 as required under the in the ABL Facility. Prior to the expiration of the applicable 30-day grace period under the ABL Facility, the Company delivered the required financial statements.  As of September 28, 2013, the Company is in compliance with the applicable reporting obligations and other terms of the ABL Facility.

The ABL Facility was amended on October 8, 2013.  See Note 16 for information regarding the amendment to the ABL Facility.

Senior Notes

On December 29, 2011, the Company issued $250 million aggregate principal amount of 11% Senior Notes that mature on December 15, 2019 (the “Senior Notes”).  The Senior Notes are guaranteed by 99 Cents Texas (the “Senior Notes Guarantor”).

In connection with the issuance of the Senior Notes, the Company entered into a registration rights agreement that required the Company to file an exchange offer registration statement, enabling holders to exchange the Senior Notes for registered notes with terms identical in all material respects to the terms of the Senior Notes, except the registered notes would be freely tradable.  The exchange offer was closed on November 7, 2012.

Pursuant to the terms of the indenture governing the Senior Notes (the “Indenture”), the Company may redeem all or a part of the Senior Notes at certain redemption prices applicable based on the date of redemption.

The Senior Notes are (i) equal in right of payment with all of the Company’s and the Senior Notes Guarantor’s existing and future senior indebtedness; (ii) effectively junior to the Company’s and the Senior Notes Guarantor’s existing and future secured indebtedness, to the extent of the value of the interest of the holders of that secured indebtedness in the assets securing such indebtedness; (iii) unconditionally guaranteed on a senior unsecured unsubordinated basis by the Senior Notes Guarantor; and (iv) junior to the indebtedness or other liabilities of the Company’s subsidiaries that are not guarantors. The Company is not required to make any mandatory redemptions or sinking fund payments, and may at any time or from time to time purchase notes in the open market.

The Indenture contains covenants that, among other things, limit the Company’s ability and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness, create or incur certain liens, pay dividends or make other restricted payments, incur restrictions on the payment of dividends or other distributions from its restricted subsidiaries, make certain investments, transfer or sell assets, engage in transactions with affiliates, or merge or consolidate with other companies or transfer all or substantially all of its assets.

As of September 28, 2013, the Company was in compliance with the terms of the Indenture.

The significant components of interest expense are as follows (in thousands):

	For the Second Quarter Ended				For the First Half Ended
	September 28, 2013		September 29, 2012		September 28, 2013		September 29, 2012
First lien term loan facility	$	7,033	$	7,299	$	13,591	$	14,753
ABL facility	224		221		449		383
Senior notes	6,799		6,951		13,597		13,903
Amortization of deferred financing costs and OID	1,111		1,059		2,212		2,059
Other interest expense	7		7		13		16
Interest expense	$	15,174	$	15,537	$	29,862	$	31,114

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Goodwill and Other Intangibles (Tables)

6 Months Ended

Sep. 28, 2013

Goodwill and Other Intangibles

Schedule of goodwill and other intangible assets and liabilities and unfavorable leases, respectively

The following tables set forth the value of the goodwill and other intangible assets and liabilities, and unfavorable leases, respectively, each as of September 28, 2013 and March 30, 2013 (in thousands):

	As of September 28, 2013								As of March 30, 2013
	Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Indefinite lived intangible assets:
Goodwill		$	479,745	$	—		$	479,745		$	479,745	$	—		$	479,745
Trade name		410,000		—			410,000			410,000		—			410,000
Total indefinite lived intangible assets		$	889,745	$	—		$	889,745		$	889,745	$	—		$	889,745
Finite lived intangible assets:
Trademarks	18	$	2,000	$	(171	)	$	1,829	19	$	2,000	$	(121	)	$	1,879
Bargain Wholesale customer relationships	10	20,000		(2,853		)	17,147		11	20,000		(2,019		)	17,981
Favorable leases	1 to 15	46,723		(7,377		)	39,346		1 to 16	46,723		(5,224		)	41,499
Total finite lived intangible assets		68,723		(10,401		)	58,322			68,723		(7,364		)	61,359
Total goodwill and other intangible assets		$	958,468	$	(10,401	)	$	948,067		$	958,468	$	(7,364	)	$	951,104

Schedule of unfavorable leases

	As of September 28, 2013								As of March 30, 2013
	Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Unfavorable leases	1 to 16	$	19,835	$	(6,913	)	$	12,922	1 to 17	$	19,835	$	(5,002	)	$	14,833

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Other Accrued Expenses

6 Months Ended

Sep. 28, 2013

Other Accrued Expenses

Other Accrued Expenses

13. Other Accrued Expenses

Other accrued expenses as of September 28, 2013 and March 30, 2013 are as follows (in thousands):

	September 28, 2013		March 30, 2013
Accrued interest	$	12,358	$	9,243
Accrued occupancy costs	10,546		7,514
Accrued professional fees, outside services and advertising	4,880		3,271
Accrued legal reserves and fees	4,607		3,367
Other	8,000		6,300
Total other accrued expenses	$	40,391	$	29,695

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Commitments and Contingencies (Details) (USD $)	6 Months Ended
	Sep. 28, 2013	Mar. 30, 2013
Commitments and contingencies
Estimated workers' compensation claims	$ 37,215,000	$ 39,498,000
Penalties or costs demanded	0
Wage and Hour Matters | Shelley Pickett v. 99 Cents Only Stores | Minimum
Commitments and contingencies
Civil penalties per violation, per each pay period for each affected employee	100
Wage and Hour Matters | Shelley Pickett v. 99 Cents Only Stores | Maximum
Commitments and contingencies
Civil penalties per violation, per each pay period for each affected employee	200
Health Insurance
Commitments and contingencies
Self Insured Health Insurance Liability	500,000	500,000
Texas | Workers' Compensation | Maximum
Commitments and contingencies
Estimated workers' compensation claims	100,000	100,000
California | Workers' Compensation
Commitments and contingencies
Estimated workers' compensation claims	$ 37,100,000	$ 39,400,000

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Goodwill and Other Intangibles (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Sep. 28, 2013	Mar. 30, 2013
Unfavorable leases
Remaining Amortization Life, minimum	1 year	1 year
Remaining Amortization Life, maximum	16 years	17 years
Gross Carrying Amount	$ 19,835	$ 19,835
Accumulated Amortization	(6,913)	(5,002)
Net Carrying Amount	$ 12,922	$ 14,833

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Debt (Tables)

6 Months Ended

Sep. 28, 2013

Debt

Schedule of short and long-term debt

Short and long-term debt consists of the following (in thousands):

	September 28, 2013		March 30, 2013
ABL Facility agreement, maturing January 13, 2017, with available borrowing up to $175,000, interest due quarterly, with unpaid principal and accrued interest due January 13, 2017	$	—	$	—
First Lien Term Loan Facility agreement, maturing on January 13, 2019, payable in quarterly installments of $1,309, plus interest, commencing March 31, 2012 through December 31, 2019, with unpaid principal and accrued interest due January 13, 2019, net of unamortized OID of $9,362 and $10,126 as of September 28, 2013 and March 30, 2013, respectively	504,450		508,325
Senior Notes (unsecured) maturing December 15, 2019, unpaid principal and accrued interest due on December 15, 2019	250,000		250,000
Total long-term debt	754,450		758,325
Less: current portion of long-term debt	3,216		8,567
Long-term debt, net of current portion	$	751,234	$	749,758

Schedule of deferred financing costs

As of September 28, 2013 and March 30, 2013, the deferred financing costs are as follows (in thousands):

	September 28, 2013							March 30, 2013
Deferred financing costs	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
ABL Facility	$	3,078	$	(1,053	)	$	2,025	$	3,078	$	(746	)	$	2,332
First Lien Term Loan Facility	9,308		(1,793		)	7,515		9,308		(1,179		)	8,129
Senior Notes	11,761		(1,733		)	10,028		11,761		(1,206		)	10,555
Total deferred financing costs	$	24,147	$	(4,579	)	$	19,568	$	24,147	$	(3,131	)	$	21,016

Schedule of significant components of interest expense

The significant components of interest expense are as follows (in thousands):

	For the Second Quarter Ended				For the First Half Ended
	September 28, 2013		September 29, 2012		September 28, 2013		September 29, 2012
First lien term loan facility	$	7,033	$	7,299	$	13,591	$	14,753
ABL facility	224		221		449		383
Senior notes	6,799		6,951		13,597		13,903
Amortization of deferred financing costs and OID	1,111		1,059		2,212		2,059
Other interest expense	7		7		13		16
Interest expense	$	15,174	$	15,537	$	29,862	$	31,114

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Comprehensive Income (Tables)

6 Months Ended

Sep. 28, 2013

Comprehensive Income

Schedule of comprehensive income (loss)

The following table sets forth the calculation of comprehensive income (loss), net of tax effects for the periods indicated (in thousands):

	For the Second Quarter Ended						For the First Half Ended
	September 28,2013			September 29,2012			September 28,2013		September 29, 2012
Net income (loss)	$	5,467		$	210		$	8,631	$	(4,681	)
Unrealized holding gains on marketable securities, net of tax effects of $0, $3, $0 and $3 for the second quarter and first half of fiscal 2014 and 2013, respectively	—			4			—		4
Unrealized (losses) gain on interest rate cash flow hedge, net of tax effects of $(222), $(315) $91 and $(678) for the second quarter and first half of fiscal 2014 and 2013, respectively	(332		)	(473		)	137		(1,017		)
Reclassification adjustment, net of tax effects of $0, $0 ,$0 and $(3) for the second quarter and first half of fiscal 2014 and 2013, respectively	—			—			—		(5		)
Total unrealized (losses) gains, net	(332		)	(469		)	137		(1,018		)
Total comprehensive income (loss)	$	5,135		$	(259	)	$	8,768	$	(5,699	)

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Related-Party Transactions (Details) (Parent, Sellers, USD $) In Millions, unless otherwise specified	0 Months Ended
	Oct. 21, 2013
Parent | Sellers
Related-Party transactions
Aggregate consideration paid by parent for shares	$ 129.7

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Basis of Presentation and Summary of Significant Accounting Policies (Details 2)	6 Months Ended
	Sep. 28, 2013
Owned buildings and improvements | Maximum
Property and equipment
Property, Plant and Equipment, Useful Life	30 years
Fixtures and equipment
Property and equipment
Property, Plant and Equipment, Useful Life	5 years
Transportation equipment | Minimum
Property and equipment
Property, Plant and Equipment, Useful Life	3 years
Transportation equipment | Maximum
Property and equipment
Property, Plant and Equipment, Useful Life	5 years
Information and technology major corporate systems | Maximum
Property and equipment
Property, Plant and Equipment, Useful Life	7 years
Information and technology stand alone systems | Maximum
Property and equipment
Property, Plant and Equipment, Useful Life	5 years

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Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2013	Sep. 29, 2012	Sep. 28, 2013	Sep. 29, 2012
Comprehensive Income
Net income (loss)	$ 5,467	$ 210	$ 8,631	$ (4,681)
Unrealized holding gains on marketable securities		4		4
Unrealized (losses) gain on interest rate cash flow hedge	(332)	(473)	137	(1,017)
Reclassification adjustment, net of tax effects				(5)
Other comprehensive (loss) income, net of tax	(332)	(469)	137	(1,018)
Comprehensive income (loss)	5,135	(259)	8,768	(5,699)
Tax effect of unrealized holding gains on marketable securities	0	3	0	3
Tax effects of unrealized gains (losses) on interest rate cash flow hedge	(222)	(315)	91	(678)
Tax effect of reclassification adjustment	$ 0	$ 0	$ 0	$ (3)

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Assets Held for Sale (Details) (USD $)	Sep. 28, 2013	Mar. 30, 2013	Oct. 31, 2013 La Quinta land	Sep. 28, 2013 La Quinta land	Sep. 28, 2013 Rancho Mirage land
Assets held for sale
Assets held for sale, current	$ 2,106,000	$ 2,106,000		$ 400,000
Carrying value of land held for sale					1,700,000
Proceeds from sale of asset			$ 700,000

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Other Accrued Expenses (Tables)

6 Months Ended

Sep. 28, 2013

Other Accrued Expenses

Schedule of other accrued expenses

Other accrued expenses as of September 28, 2013 and March 30, 2013 are as follows (in thousands):

	September 28, 2013		March 30, 2013
Accrued interest	$	12,358	$	9,243
Accrued occupancy costs	10,546		7,514
Accrued professional fees, outside services and advertising	4,880		3,271
Accrued legal reserves and fees	4,607		3,367
Other	8,000		6,300
Total other accrued expenses	$	40,391	$	29,695

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Fair Value of Financial Instruments (Details) (Fair value measurements on a recurring basis, USD $) In Thousands, unless otherwise specified	Sep. 28, 2013	Mar. 30, 2013
Total
ASSETS
Other assets - assets that fund deferred compensation	$ 1,070	$ 1,153
LIABILITES
Other long-term liabilities - deferred compensation	1,070	1,153
Total | Interest Rate Swap
LIABILITES
Other current liabilities - interest rate swap	1,187	381
Other long-term liabilities - interest rate swap	1,100	2,249
Level 1
ASSETS
Other assets - assets that fund deferred compensation	1,070	1,153
LIABILITES
Other long-term liabilities - deferred compensation	1,070	1,153
Level 2 | Interest Rate Swap
LIABILITES
Other current liabilities - interest rate swap	1,187	381
Other long-term liabilities - interest rate swap	1,100	2,249
Level 3
Fair value of financial instruments
Assets	0	0
Liabilities	$ 0	$ 0

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Property and Equipment, net (Tables)

6 Months Ended

Sep. 28, 2013

Property and Equipment, net

Schedule of details of property and equipment

The following table provides details of property and equipment (in thousands):

	September 28, 2013			March 30, 2013
Land	$	160,446		$	160,446
Buildings	90,466			90,466
Buildings improvements	66,450			64,429
Leasehold improvements	124,027			112,779
Fixtures and equipment	84,471			76,831
Transportation equipment	9,745			7,497
Construction in progress	43,193			30,949
Total property and equipment	578,798			543,397
Less: accumulated depreciation and amortization	(97,322		)	(67,346		)
Property and equipment, net	$	481,476		$	476,051

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Sep. 28, 2013

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Summary of Significant Accounting Policies

1. Basis of Presentation and Summary of Significant Accounting Policies

Nature of Business

99¢ Only Stores is organized under the laws of the State of California.  Effective October 18, 2013, 99¢ Only Stores converted from a California corporation to a California limited liability company, 99 Cents Only Stores LLC, that is managed by a single member, Parent (as defined below).  The term the “Company” refers to 99¢ Only Stores and its consolidated subsidiaries prior to the Conversion (as defined below) and to 99 Cents Only Stores LLC and its consolidated subsidiaries on or after the Conversion. The Company is an extreme value retailer of primarily consumable and general merchandise with an emphasis on name-brand products.  As of September 28, 2013, the Company operated 329 retail stores with 238 in California, 43 in Texas, 31 in Arizona, and 17 in Nevada.  The Company is also a wholesale distributor of various products.

Merger

On January 13, 2012, the Company was acquired through a merger (the “Merger”) with a subsidiary of Number Holdings, Inc., a Delaware corporation (“Parent”) with the Company surviving.  In connection with the Merger, the Company became a subsidiary of Parent, which is controlled by affiliates of Ares Management LLC and Canada Pension Plan Investment Board, and prior to the Gold-Schiffer Purchase (as described in Notes 9 and 16), certain former members of the Company’s management and their affiliates (collectively, the “Rollover Investors”).  As a result of the Merger, the Company’s common stock was delisted from the New York Stock Exchange and the Company ceased to be operating as a public company.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).  However, certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been omitted or condensed pursuant to the rules and regulations of the Securities and Exchange Commission.  These statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s  Annual Report on Form 10-K for the fiscal year ended March 30, 2013.  In the opinion of the Company’s management, these interim consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the consolidated financial position and results of operations for each of the periods presented.  The results of operations and cash flows for such periods are not necessarily indicative of results to be expected for the full fiscal year ending March 29, 2014 (“fiscal 2014”).

Fiscal Periods

The Company follows a fiscal calendar consisting of four quarters with 91 days, each ending on the Saturday closest to the calendar quarter-end, and a 52-week fiscal year with 364 days, with a 53-week year every five to six years.  Unless otherwise stated, references to years in this Quarterly Report on Form 10-Q relate to fiscal years rather than calendar years.  Fiscal 2014 began on March 31, 2013 and will end on March 29, 2014 and will consist of 52 weeks. The Company’s fiscal year ended March 30, 2013 (“fiscal 2013”) began on April 1, 2012 and ended on March 30, 2013 and consisted of 52 weeks.  The second quarter ended September 28, 2013 (the “second quarter of fiscal 2014”) and second quarter ended September 29, 2012 (the “second quarter of fiscal 2013”) were each comprised of 91 days.  The period ended September 28, 2013 (“first half of fiscal 2014”) and the period ended September 29, 2012 (“first half of fiscal 2013”) were each comprised of 182 days.

Use of Estimates

The preparation of the unaudited consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash

For purposes of reporting cash flows, cash includes cash on hand, cash at the stores and cash in financial institutions.  The majority of payments due from financial institutions for the settlement of debit card and credit card transactions are processed within three business days and therefore are classified as cash.  Cash balances held at financial institutions are generally in excess of federally insured limits.  These accounts are only insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts.  The Company places its temporary cash investments with what it believes to be high credit, quality financial institutions. Under the Company’s cash management system, checks issued but not presented to the bank may result in book cash overdraft balances for accounting purposes.  The Company reclassifies book overdrafts to accounts payable, which are reflected as an operating activity in its unaudited consolidated statements of cash flows. Book overdrafts included in accounts payable were $3.1 million as of September 28, 2013.

Allowance for Doubtful Accounts

In connection with its wholesale business, the Company evaluates the collectability of accounts receivable based on a combination of factors.  In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will record an allowance against amounts due and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected.  For all other customers and tenants, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, industry and geographic concentrations, the current business environment and the Company’s historical experiences.

Inventories

Inventories are valued at the lower of cost or market. Inventory cost is established using a methodology that approximates first in, first out, which for store inventories is based on a retail inventory method. Valuation allowances for shrinkage as well as excess and obsolete inventory are also recorded. Shrinkage is estimated as a percentage of sales for the period from the last physical inventory date to the end of the applicable period. Such estimates are based on experience and the most recent physical inventory results. Physical inventories are taken at each of the Company’s retail stores at least once a year by an outside inventory service company. Additional store-level physical inventories are taken by the service companies from time to time based on a particular store’s performance and/or book inventory balance.  The Company performs inventory cycle counts at its warehouses throughout the year.  The Company also performs inventory reviews and analysis on a quarterly basis for both warehouse and store inventory to determine inventory valuation allowances for excess and obsolete inventory.  The Company’s policy is to analyze all items held in inventory that are at least twelve months old and that are not expected to be sold through at the current sales rates over the next twelve months in order to determine what merchandise should be reserved for as excess or obsolete. The valuation allowances for excess and obsolete inventory in many locations (including various warehouses, store backrooms, and sales floors of its stores), require management judgment and estimates that may impact the ending inventory valuation and valuation allowances that may affect the reported gross margin for the period.

In order to obtain inventory at attractive prices, the Company takes advantage of large volume purchases, closeouts and other similar purchase opportunities but within the above stipulated policy.  As such, the Company’s inventory fluctuates from period to period and the inventory balances vary based on the timing and availability of such opportunities.

Property and Equipment

Property and equipment are carried at cost and are depreciated or amortized on a straight-line basis over the following useful lives:

Owned buildings and improvements	Lesser of 30 years or the estimated useful life of the improvement
Leasehold improvements	Lesser of the estimated useful life of the improvement or remaining lease term
Fixtures and equipment	5 years
Transportation equipment	3-5 years
Information technology systems	For major corporate systems, estimated useful life up to 7 years; for functional stand alone systems, estimated useful life up to 5 years

The Company’s policy is to capitalize expenditures that materially increase asset lives and expense ordinary repairs and maintenance as incurred.

Long-Lived Assets

The Company assesses the impairment of long-lived assets quarterly or when events or changes in circumstances indicate that the carrying value may not be recoverable.  Recoverability is measured by comparing the carrying amount of an asset to expected future net cash flows generated by the asset.  If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, the carrying amount is compared to its fair value and an impairment charge is recognized to the extent of the difference.  Factors that the Company considers important that could individually or in combination trigger an impairment review include the following: (1) significant underperformance relative to expected historical or projected future operating results; (2) significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business; and (3) significant changes in the Company’s business strategies and/or negative industry or economic trends.  On a quarterly basis, the Company assesses whether events or changes in circumstances occur that potentially indicate that the carrying value of long-lived assets may not be recoverable.  Considerable management judgment is necessary to estimate projected future operating cash flows.  Accordingly, if actual results fall short of such estimates, significant future impairments could result.  During each of the second quarter and first half of fiscal 2014 and 2013, the Company did not record any asset impairment charges.

Goodwill and Other Intangible Assets

In connection with the Merger purchase price allocation, the fair values of long-lived and intangible assets were determined based upon assumptions related to the future cash flows, discount rates and asset lives utilizing then available information, and in some cases were obtained from independent professional valuation experts.  The Company amortizes intangible assets over their estimated useful lives unless such lives are deemed indefinite.

Goodwill and indefinite-lived intangible assets are not amortized but instead tested annually for impairment or more frequently when events or changes in circumstances indicate that the assets might be impaired.  Goodwill is tested for impairment by comparing the carrying amount of the reporting unit to the fair value of the reporting unit to which the goodwill is assigned.  The Company has the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step one of the goodwill impairment test). If the Company does not perform a qualitative assessment, or determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The first step is to compare the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill. Management has determined that the Company has two reporting units, the wholesale reporting unit and the retail reporting unit.

The Company performs the annual test for impairment in the fourth quarter of the fiscal year and determines fair value based on a combination of the income approach and the market approach. The income approach is based on discounted cash flows to determine fair value. The market approach uses a selection of comparable companies and transactions in determining fair value. The fair value of the trade name is also tested for impairment in the fourth quarter by comparing the carrying value to the fair value. Fair value of a trade name is determined using a relief from royalty method under the income approach, which uses projected revenue allocable to the trade name and an assumed royalty rate.

Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on undiscounted cash flows, and, if impaired, written down to fair value based on either discounted cash flows or appraised values.  Significant judgment is required in determining whether a potential indicator of impairment of long-lived assets exists and in estimating future cash flows used in the impairment tests.

During each of the second quarter and first half of fiscal 2014 and fiscal 2013, the Company did not record any impairment charges related to goodwill or other intangible assets.

Derivatives

The Company accounts for derivative financial instruments in accordance with authoritative guidance for derivative instrument and hedging activities.  All financial instrument positions taken by the Company are intended to be used to manage risks associated with interest rate exposures.

The Company’s derivative financial instruments are recorded on the balance sheet at fair value, and are recorded in either current or noncurrent assets or liabilities based on their maturity.  Changes in the fair values of derivatives are recorded in net earnings or other comprehensive income (“OCI”), based on whether the instrument is designated and effective as a hedge transaction and, if so, the type of hedge transaction.  Gains or losses on derivative instruments reported in accumulated other comprehensive income (“AOCI”) are reclassified to earnings in the period the hedged item affects earnings.  Any ineffectiveness is recognized in earnings in the period incurred.

Purchase Accounting

The Company’s assets and liabilities have been recorded at their estimated fair values as of the date of the Merger.  The aggregate purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed, based upon an assessment of their relative fair value as of the Merger date.  These estimates of fair values, the allocation of the purchase price and other factors related to the accounting for the Merger are subject to significant judgments and the use of estimates.

Income Taxes

The Company utilizes the liability method of accounting for income taxes.  Under the liability method, deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities.  Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The Company’s ability to realize deferred tax assets is assessed throughout the year and a valuation allowance is established accordingly.  The Company recognizes the impact of a tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense.

Stock-Based Compensation

The Company accounts for stock-based payment awards based on their fair value.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods.  For awards classified as equity, the Company estimates the fair value for each option award as of the date of grant using the Black-Scholes option pricing model or other appropriate valuation models.  The Black-Scholes model considers, among other factors, the expected life of the award and the expected volatility of the stock price.  Stock options are generally granted to employees at exercise prices equal to the fair market value of the stock at the dates of grant.  Former executive put rights are classified as equity awards and revalued using a binomial model at each reporting period with changes in the fair value recognized as stock-based compensation expense.

Revenue Recognition

The Company recognizes retail sales in its retail stores at the time the customer takes possession of merchandise. All sales are net of discounts and returns and exclude sales tax.  Wholesale sales are recognized in accordance with the shipping terms agreed upon on the purchase order. Wholesale sales are typically recognized free on board origin, where title and risk of loss pass to the buyer when the merchandise leaves the Company’s distribution facility.

The Company has a gift card program.  The Company does not charge administrative fees on gift cards and the Company’s gift cards do not have expiration dates.  The Company records the sale of gift cards as a current liability and recognizes a sale when a customer redeems a gift card.  The liability for outstanding gift cards is recorded in accrued expenses.  The Company has not recorded any breakage income related to its gift card program.

Cost of Sales

Cost of sales includes the cost of inventory, freight in, inter-state warehouse transportation costs, obsolescence, spoilage, scrap and inventory shrinkage, and is net of discounts and allowances.  Cash discounts for satisfying early payment terms are recognized when payment is made, and allowances and rebates based upon milestone achievements such as reaching a certain volume of purchases of a vendor’s products are included as a reduction of cost of sales when such contractual milestones are reached.  In addition, the Company analyzes its inventory levels and the related cash discounts received to arrive at a value for cash discounts to be included in the inventory balance.  The Company does not include purchasing, receiving, distribution, warehouse, and occupancy costs in its cost of sales.  Due to this classification, the Company’s gross profit rates may not be comparable to those of other retailers that include costs related to their distribution network and occupancy in cost of sales.

Operating Expenses

Selling, general and administrative expenses include purchasing, receiving, inspection and warehouse costs, the costs of selling merchandise in stores (payroll and associated costs, occupancy and other store-level costs), distribution costs (payroll and associated costs, occupancy, transportation to and from stores and other distribution-related costs) and corporate costs (payroll and associated costs, occupancy, advertising, professional fees and other corporate administrative costs).

Leases

The Company follows the policy of capitalizing allowable expenditures that relate to the acquisition and signing of its retail store leases.  These costs are amortized on a straight-line basis over the applicable lease term.

The Company recognizes rent expense for operating leases on a straight-line basis (including the effect of reduced or free rent and rent escalations) over the applicable lease term.  The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is included in deferred rent.  Cash reimbursements received from landlords for leasehold improvements and other cash payments received from landlords as lease incentives are recorded as deferred rent.  Deferred rent related to landlord incentives is amortized as an offset to rent expense using the straight-line method over the applicable lease term.

For store closures where a lease obligation still exists, the Company records the estimated future liability associated with the rental obligation on the cease use date (when the store is closed).  Liabilities are established at the cease use date for the present value of any remaining operating lease obligations, net of estimated sublease income, and at the communication date for severance and other exit costs. Key assumptions in calculating the liability include the timeframe expected to terminate lease agreements, estimates related to the sublease potential of closed locations, and estimates of other related exit costs. If actual timing and potential termination costs or realization of sublease income differ from the Company’s estimates, the resulting liabilities could vary from recorded amounts. These liabilities are reviewed periodically and adjusted when necessary.

Self-Insured Workers’ Compensation Liability

The Company self-insures for workers’ compensation claims in California and Texas.  The Company establishes a liability for losses of both estimated known and incurred but not reported insurance claims based on reported claims and actuarial valuations of estimated future costs of known and incurred but not yet reported claims.  Should an amount of claims greater than anticipated occur, the liability recorded may not be sufficient and additional workers’ compensation costs, which may be significant, could be incurred. The Company has not discounted the projected future cash outlays for the time value of money for claims and claim-related costs when establishing its workers’ compensation liability in its financial reports for September 28, 2013 and March 30, 2013.

Self-Insured Health Insurance Liability

During the second quarter of fiscal 2012 ended October 1, 2011 (the “second quarter of fiscal 2012”), the Company began self-insuring for a portion of its employee medical benefit claims.  The liability for the self-funded portion of the Company health insurance program is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported.  The Company maintains stop loss insurance coverage to limit its exposure for the self-funded portion of its health insurance program.

Pre-Opening Costs

The Company expenses, as incurred, pre-opening costs such as payroll, rent and marketing related to the opening of new retail stores.

Advertising

The Company expenses advertising costs as incurred. Advertising expenses were $1.7 million and $1.3 million for the second quarter of fiscal 2014 and 2013, respectively.  Advertising expenses were $3.1 million and $2.6 million for the first half of fiscal 2014 and 2013, respectively.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash, accounts receivable, interest rate derivatives, accounts payable, accruals, debt, and other liabilities.  Cash and interest rate derivatives are measured and recorded at fair value.  Accounts receivable and other receivables are financial assets with carrying values that approximate fair value.  Accounts payable and other accrued expenses are financial liabilities with carrying values that approximate fair value.  See Note 7 for further discussion of the fair value of debt.

The Company utilizes the authoritative guidance for fair value, which includes the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements.  Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants.  Fair value measurements reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model.

Comprehensive Income

OCI includes unrealized gains or losses on investments and interest rate derivatives designated as cash flow hedges.

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Property and Equipment, net

6 Months Ended

Sep. 28, 2013

Property and Equipment, net

Property and Equipment, net

3. Property and Equipment, net

The following table provides details of property and equipment (in thousands):

	September 28, 2013			March 30, 2013
Land	$	160,446		$	160,446
Buildings	90,466			90,466
Buildings improvements	66,450			64,429
Leasehold improvements	124,027			112,779
Fixtures and equipment	84,471			76,831
Transportation equipment	9,745			7,497
Construction in progress	43,193			30,949
Total property and equipment	578,798			543,397
Less: accumulated depreciation and amortization	(97,322		)	(67,346		)
Property and equipment, net	$	481,476		$	476,051

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Derivative Financial Instruments

6 Months Ended

Sep. 28, 2013

Derivative Financial Instruments

Derivative Financial Instruments

6. Derivative Financial Instruments

The Company entered into derivative instruments for risk management purposes and uses these derivatives to manage exposure to fluctuation in interest rates.

Interest Rate Cap

In May 2012, the Company entered into an interest rate cap agreement for an aggregate notional amount of $261.8 million in order to hedge the variability of cash flows related to a portion of the Company’s floating rate indebtedness.  The cap agreement, effective in May 2012, hedges a portion of contractual floating rate interest commitments through the expiration of the agreement in November 2013.  Pursuant to the agreement, the Company has capped LIBOR at 3.00% plus an applicable margin of 4.00% with respect to the aggregate notional amount of $261.8 million.  In the event LIBOR exceeds 3.00% the Company will pay interest at the capped rate.  In the event LIBOR is less than 3.00%, the Company will pay interest at the prevailing LIBOR rate.  In the first half of each of fiscal 2014 and 2013, the Company paid interest at the prevailing LIBOR rate.

The interest rate cap agreement has not been designated as a hedge for financial reporting purposes.  Gains and losses on derivative instruments not designated as hedges are recorded directly in earnings.

Interest Rate Swap

In May 2012, the Company entered into a floating-to-fixed interest rate swap agreement for an initial aggregate notional amount of $261.8 million to limit exposure to interest rate increases related to a portion of the Company’s floating rate indebtedness once the Company’s interest rate cap agreement expires.  The swap agreement, effective November 2013, will hedge a portion of contractual floating rate interest commitments through the expiration of the agreements in May 2016.  As a result of the agreement, the Company’s effective fixed interest rate on the notional amount of floating rate indebtedness will be 1.36% plus an applicable margin of 4.00%.

The Company designated the interest rate swap agreement as a cash flow hedge.  The interest rate swap agreement is highly correlated to the changes in interest rates to which the Company is exposed.  Unrealized gains and losses on the interest rate swap are designated as effective or ineffective.  The effective portion of such gains or losses is recorded as a component of AOCI or loss, while the ineffective portion of such gains or losses is recorded as a component of interest expense. Future realized gains and losses in connection with each required interest payment will be reclassified from AOCI or loss to interest expense.

Fair Value

The fair values of the interest rate cap and swap agreements are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves (Level 2, as defined in Note 7).

A summary of the recorded amounts included in the consolidated balance sheets is as follows (in thousands):

	September 28,2013		March 30,2013
Derivatives designated as cash flow hedging instruments
Interest rate swap (included in other current liabilities)	$	1,187	$	381
Interest rate swap (included in other liabilities)	$	1,110	$	2,249
Accumulated other comprehensive loss, net of tax (included in shareholders’ equity)	$	1,115	$	1,252

A summary of recorded amounts included in the unaudited consolidated statements of comprehensive income (loss) is as follows (in thousands):

	For the Second Quarter Ended				For the First Half Ended
	September 28, 2013		September 29, 2012		September 28, 2013			September 29, 2012
Derivatives designated as cash flow hedging instruments:
Loss (gain) related to effective portion of derivative recognized in OCI	$	332	$	473	$	(137	)	$	1,017
Loss (gain) related to ineffective portion of derivative recognized in interest expense	$	208	$	366	$	(114	)	$	642
Derivatives not designated as hedging instruments:
Loss recognized in other expense	$	—	$	3	$	—		$	23

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Comprehensive Income

6 Months Ended

Sep. 28, 2013

Comprehensive Income

Comprehensive Income

4. Comprehensive Income

The following table sets forth the calculation of comprehensive income (loss), net of tax effects for the periods indicated (in thousands):

	For the Second Quarter Ended						For the First Half Ended
	September 28,2013			September 29,2012			September 28,2013		September 29, 2012
Net income (loss)	$	5,467		$	210		$	8,631	$	(4,681	)
Unrealized holding gains on marketable securities, net of tax effects of $0, $3, $0 and $3 for the second quarter and first half of fiscal 2014 and 2013, respectively	—			4			—		4
Unrealized (losses) gain on interest rate cash flow hedge, net of tax effects of $(222), $(315) $91 and $(678) for the second quarter and first half of fiscal 2014 and 2013, respectively	(332		)	(473		)	137		(1,017		)
Reclassification adjustment, net of tax effects of $0, $0 ,$0 and $(3) for the second quarter and first half of fiscal 2014 and 2013, respectively	—			—			—		(5		)
Total unrealized (losses) gains, net	(332		)	(469		)	137		(1,018		)
Total comprehensive income (loss)	$	5,135		$	(259	)	$	8,768	$	(5,699	)

Amounts in accumulated other comprehensive loss as September 28, 2013 and March 30, 2013 consisted of unrealized losses on interest rate cash flow hedge.  There were no reclassifications out of AOCI in the second quarter and first half of fiscal 2014.

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Debt (Details) (USD $)	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended					6 Months Ended			6 Months Ended				0 Months Ended	1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended	3 Months Ended	6 Months Ended	0 Months Ended	6 Months Ended	0 Months Ended	6 Months Ended	0 Months Ended			3 Months Ended					0 Months Ended	3 Months Ended		6 Months Ended			0 Months Ended		0 Months Ended		6 Months Ended	0 Months Ended
	Sep. 28, 2013	Sep. 29, 2012	Sep. 28, 2013	Sep. 29, 2012	Mar. 30, 2013	Sep. 28, 2013 ABL Facility	Sep. 29, 2012 ABL Facility	Sep. 28, 2013 ABL Facility	Sep. 29, 2012 ABL Facility	Jun. 30, 2012 ABL Facility	Mar. 30, 2013 ABL Facility	Jan. 13, 2012 ABL Facility	Jun. 30, 2012 ABL Facility Prime rate	Jun. 30, 2012 ABL Facility Base rate	Sep. 28, 2013 ABL Facility Base rate	Jun. 30, 2012 ABL Facility Federal funds rate	Jun. 30, 2012 ABL Facility One month adjusted Eurocurrency rate	Jun. 30, 2012 ABL Facility LIBOR	Sep. 28, 2013 ABL Facility LIBOR	Apr. 04, 2012 First Lien Term Loan Facility	Jul. 27, 2013 First Lien Term Loan Facility	Jan. 31, 2012 First Lien Term Loan Facility	Sep. 28, 2013 First Lien Term Loan Facility	Sep. 29, 2012 First Lien Term Loan Facility	Sep. 28, 2013 First Lien Term Loan Facility	Sep. 29, 2012 First Lien Term Loan Facility	Mar. 30, 2013 First Lien Term Loan Facility	Sep. 28, 2013 First Lien Term Loan Facility Prime rate	Sep. 28, 2013 First Lien Term Loan Facility Prime rate	Jan. 13, 2012 First Lien Term Loan Facility Base rate	Sep. 28, 2013 First Lien Term Loan Facility Federal funds rate	Jan. 13, 2012 First Lien Term Loan Facility One month adjusted Eurocurrency rate	Sep. 28, 2013 First Lien Term Loan Facility One month adjusted Eurocurrency rate	Apr. 04, 2012 First Lien Term Loan Facility LIBOR	Sep. 28, 2013 First Lien Term Loan Facility Interest Rate Swap	Jun. 30, 2012 First Lien Term Loan Facility Interest Rate Swap	Jun. 30, 2012 First Lien Term Loan Facility Interest Rate Cap	Sep. 28, 2013 Prime rate loans	Sep. 28, 2013 Prime rate loans Prime rate	Sep. 28, 2013 Eurocurrency loans	Sep. 28, 2013 Eurocurrency loans Eurocurrency loan	Dec. 29, 2011 Senior Notes	Sep. 28, 2013 Senior Notes	Sep. 29, 2012 Senior Notes	Sep. 28, 2013 Senior Notes	Sep. 29, 2012 Senior Notes	Mar. 30, 2013 Senior Notes	Apr. 04, 2012 First Lien Term Loan Facility Amended April 2012	Apr. 04, 2012 First Lien Term Loan Facility Amended April 2012 Base rate	Apr. 04, 2012 First Lien Term Loan Facility Amended April 2012 LIBOR	Apr. 04, 2012 Amended ABL Facility	Sep. 28, 2013 Amended ABL Facility	Oct. 08, 2013 First Lien Term Loan Facility Amended October 2013
Debt
Total long-term debt	$ 754,450,000		$ 754,450,000		$ 758,325,000																		$ 504,450,000		$ 504,450,000		$ 508,325,000																$ 250,000,000		$ 250,000,000		$ 250,000,000
Less: current portion of long-term debt	3,216,000		3,216,000		8,567,000
Long-term debt, net of current portion	751,234,000		751,234,000		749,758,000
Unamortized OID																							9,362,000		9,362,000		10,126,000
Deferred financing costs
Gross Carrying Amount	24,147,000		24,147,000		24,147,000	3,078,000		3,078,000			3,078,000												9,308,000		9,308,000		9,308,000																11,761,000		11,761,000		11,761,000
Accumulated Amortization	(4,579,000)		(4,579,000)		(3,131,000)	(1,053,000)		(1,053,000)			(746,000)												(1,793,000)		(1,793,000)		(1,179,000)																(1,733,000)		(1,733,000)		(1,206,000)
Net Amount	19,568,000		19,568,000		21,016,000	2,025,000		2,025,000			2,332,000												7,515,000		7,515,000		8,129,000																10,028,000		10,028,000		10,555,000
Debt Instruments
Amount borrowed																						525,000,000																				250,000,000											100,000,000
Amount outstanding						0		0			0												1,700,000		1,700,000
Increase in borrowing capacity available under certain circumstances						50,000,000		50,000,000															150,000,000		150,000,000
Scheduled quarterly payments as a percentage of original principal amount																									0.25%																												0.25%
Variable rate (as a percent)																												3.25%	3.25%
Variable rate (as a percent)													3.25%																			1.50%
Applicable margin (as a percent)																0.50%	1.00%		1.75%									3.00%	3.00%		0.50%		1.00%	5.50%															3.00%	4.00%
Description of basis rate use for variable rate													Prime rate	Prime rate		Federal Funds Rate	One month adjusted Eurocurrency rate	LIBOR											Prime rate	Base rate	federal funds		One month adjusted Eurocurrency rate																	LIBOR
Term of loan																				7 years
Interest rate, variable interest rate floor (as a percent)																																		1.50%																1.25%
Refinancing costs																																																11,200,000
Loss on extinguishment of debt				16,346,000																																												16,300,000
Additional Deferred debt issuance costs																																																300,000
Additional unamortized OID																																																5,900,000
Capital expenditures																																																5,000,000			5,000,000
Interest rate at the end of the period (as a percent)										4.25%																												6.25%		5.25%
Variable rate at the end of the period (as a percent)														3.25%																									3.25%		1.25%
Applicable margin at the end of the period (as a percent)																																							3.00%		4.00%
Percentage of excess cash flow to be used for prepayment of debt																									50.00%
Stepdown percentage one of excess cash flow to be used for prepayment of debt																									25.00%
Stepdown percentage two of excess cash flow to be used for prepayment of debt (as a percent)																									0.00%
Excess cash flow payment required																					3,300,000
Required period for delivery of audited financial statements under compliance with the debt covenants																									90 days																											90 days
Grace period for delivery of audited financial statements under compliance with the debt covenants																									30 days																											30 days
Aggregate notional amount																																				261,800,000	261,800,000
Effective fixed interest rate (as a percent)																																				1.36%	3.00%
Applicable margin (as a percent)														1.00%	0.75%																					4.00%	4.00%
Fair value																																			2,300,000	0
Fees paid to enter into agreement																																					50,000
Commitment fee on unused commitments (as a percent)								0.50%		0.375%
Amount available						133,900,000		133,900,000
Outstanding letters of credit						1,600,000		1,600,000
Scheduled quarterly payments																							1,309,000		1,309,000		1,309,000
Maximum borrowing capacity						175,000,000		175,000,000				175,000,000
Maximum borrowing capacity																							525,000,000		525,000,000
Interest rate (as a percent)																																											11.00%		11.00%
Significant components of interest expense
Interest debt expense						224,000	221,000	449,000	383,000														7,033,000	7,299,000	13,591,000	14,753,000																	6,799,000	6,951,000	13,597,000	13,903,000
Amortization of deferred financing costs and OID	1,111,000	1,059,000	2,212,000	2,059,000
Other interest expense	7,000	7,000	13,000	16,000
Interest expense	$ 15,174,000	$ 15,537,000	$ 29,862,000	$ 31,114,000

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Derivative Financial Instruments (Tables)

6 Months Ended

Sep. 28, 2013

Derivative Financial Instruments

Summary of the recorded amounts included in the consolidated balance sheets

A summary of the recorded amounts included in the consolidated balance sheets is as follows (in thousands):

	September 28,2013		March 30,2013
Derivatives designated as cash flow hedging instruments
Interest rate swap (included in other current liabilities)	$	1,187	$	381
Interest rate swap (included in other liabilities)	$	1,110	$	2,249
Accumulated other comprehensive loss, net of tax (included in shareholders’ equity)	$	1,115	$	1,252

Summary of recorded amounts included in the unaudited consolidated statements of comprehensive income (loss)

A summary of recorded amounts included in the unaudited consolidated statements of comprehensive income (loss) is as follows (in thousands):

	For the Second Quarter Ended				For the First Half Ended
	September 28, 2013		September 29, 2012		September 28, 2013			September 29, 2012
Derivatives designated as cash flow hedging instruments:
Loss (gain) related to effective portion of derivative recognized in OCI	$	332	$	473	$	(137	)	$	1,017
Loss (gain) related to ineffective portion of derivative recognized in interest expense	$	208	$	366	$	(114	)	$	642
Derivatives not designated as hedging instruments:
Loss recognized in other expense	$	—	$	3	$	—		$	23

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Financial Guarantees (Tables)

6 Months Ended

Sep. 28, 2013

Supplemental financial information

Schedule of condensed consolidating balance sheets

CONDENSED CONSOLIDATING BALANCE SHEETS

As of September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
ASSETS
Current Assets:
Cash	$	75,828		$	1,550		$	—		$	77,378
Accounts receivable, net	1,705			189			—			1,894
Income taxes receivable	3,775			—			—			3,775
Deferred income taxes	35,377			—			—			35,377
Inventories, net	169,579			27,885			—			197,464
Assets held for sale	2,106			—			—			2,106
Other	16,830			1,446			—			18,276
Total current assets	305,200			31,070			—			336,270
Property and equipment, net	418,393			63,083			—			481,476
Deferred financing costs, net	19,568			—			—			19,568
Equity investments and advances to subsidiaries	180,065			98,887			(278,952		)	—
Intangible assets, net	465,692			2,630			—			468,322
Goodwill	479,745			—			—			479,745
Deposits and other assets	4,592			465			—			5,057
Total assets	$	1,873,255		$	196,135		$	(278,952	)	$	1,790,438
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	64,928		$	8,352		$	—		$	73,280
Intercompany payable	98,888			91,454			(190,342		)	—
Payroll and payroll-related	22,295			1,786			—			24,081
Sales tax	5,880			473			—			6,353
Other accrued expenses	36,577			3,814			—			40,391
Workers’ compensation	37,125			90			—			37,215
Current portion of long-term debt	3,216			—			—			3,216
Current portion of capital lease obligation	86			—			—			86
Total current liabilities	268,995			105,969			(190,342		)	184,622
Long-term debt, net of current portion	751,234			—			—			751,234
Unfavorable lease commitments, net	12,432			490			—			12,922
Deferred rent	8,583			1,066			—			9,649
Deferred compensation liability	1,070			—			—			1,070
Capital lease obligation, net of current portion	227			—			—			227
Long-term deferred income taxes	181,634			—			—			181,634
Other liabilities	6,660			—			—			6,660
Total liabilities	1,230,835			107,525			(190,342		)	1,148,018
Shareholders’ Equity:
Preferred stock	—			—			—			—
Common stock	—			—			—			—
Additional paid-in capital	649,106			99,943			(99,943		)	649,106
Accumulated deficit	(5,571		)	(11,333		)	11,333			(5,571		)
Other comprehensive loss	(1,115		)	—			—			(1,115		)
Total shareholders’ equity	642,420			88,610			(88,610		)	642,420
Total liabilities and shareholders’ equity	$	1,873,255		$	196,135		$	(278,952	)	$	1,790,438

CONDENSED CONSOLIDATING BALANCE SHEETS

As of March 30, 2013

(In thousands)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
ASSETS
Current Assets:
Cash	$	45,841		$	113		$	(478	)	$	45,476
Accounts receivable, net	1,672			179			—			1,851
Income taxes receivable	3,969			—			—			3,969
Deferred income taxes	33,139			—			—			33,139
Inventories, net	172,068			29,533			—			201,601
Assets held for sale	2,106			—			—			2,106
Other	15,300			1,070			—			16,370
Total current assets	274,095			30,895			(478		)	304,512
Property and equipment, net	413,543			62,508			—			476,051
Deferred financing costs, net	21,016			—			—			21,016
Equity investments and advances to subsidiaries	119,642			34,631			(154,273		)	—
Intangible assets, net	468,593			2,766			—			471,359
Goodwill	479,745			—			—			479,745
Deposits and other assets	4,191			363			—			4,554
Total assets	$	1,780,825		$	131,163		$	(154,751	)	$	1,757,237
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	46,595		$	3,894		$	(478	)	$	50,011
Intercompany payable	32,991			28,075			(61,066		)	—
Payroll and payroll-related	15,798			1,298			—			17,096
Sales tax	6,628			572			—			7,200
Other accrued expenses	26,892			2,803			—			29,695
Workers’ compensation	39,423			75			—			39,498
Current portion of long-term debt	8,567			—			—			8,567
Current portion of capital lease obligation	83			—			—			83
Total current liabilities	176,977			36,717			(61,544		)	152,150
Long-term debt, net of current portion	749,758			—			—			749,758
Unfavorable lease commitments, net	14,200			633			—			14,833
Deferred rent	4,217			606			—			4,823
Deferred compensation liability	1,153			—			—			1,153
Capital lease obligation, net of current portion	271			—			—			271
Long-term deferred income taxes	186,851			—			—			186,851
Other liabilities	8,428			—			—			8,428
Total liabilities	1,141,855			37,956			(61,544		)	1,118,267
Shareholders’ Equity:
Preferred stock	—			—			—			—
Common stock	—			—			—			—
Additional paid-in capital	654,424			99,943			(99,943		)	654,424
Accumulated deficit	(14,202		)	(6,736		)	6,736			(14,202		)
Other comprehensive loss	(1,252		)	—			—			(1,252		)
Total shareholders’ equity	638,970			93,207			(93,207		)	638,970
Total liabilities and shareholders’ equity	$	1,780,825		$	131,163		$	(154,751	)	$	1,757,237

Schedule of condensed consolidated statements of comprehensive income (loss)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Second Quarter Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	404,801		$	39,122		$	—		$	443,923
Cost of sales (excluding depreciation and amortization expense shown separately below)	251,240			25,878			—			277,118
Gross profit	153,561			13,244			—			166,805
Selling, general and administrative expenses:
Operating expenses	124,964			13,947			—			138,911
Depreciation and amortization	13,500			2,627			—			16,127
Total selling, general and administrative expenses	138,464			16,574			—			155,038
Operating income (loss)	15,097			(3,330		)	—			11,767
Other expense:
Interest expense	15,174			—			—			15,174
Equity in (earnings) loss of subsidiaries	3,330			—			(3,330		)	—
Total other expense, net	18,504			—			(3,330		)	15,174
Loss before provision for income taxes	(3,407		)	(3,330		)	3,330			(3,407		)
Benefit for income taxes	(8,874		)	—			—			(8,874		)
Net income (loss)	$	5,467		$	(3,330	)	$	3,330		$	5,467
Comprehensive income	$	5,135		$	—		$	—		$	5,135

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the First Half Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	801,326		$	76,463		$	—		$	877,789
Cost of sales (excluding depreciation and amortization expense shown separately below)	493,916			49,881			—			543,797
Gross profit	307,410			26,582			—			333,992
Selling, general and administrative expenses:
Operating expenses	244,725			26,018			—			270,743
Depreciation and amortization	26,734			5,161			—			31,895
Total selling, general and administrative expenses	271,459			31,179			—			302,638
Operating income (loss)	35,951			(4,597		)	—			31,354
Other (income) expense:
Interest income	(15		)	—			—			(15		)
Interest expense	29,862			—			—			29,862
Equity in (earnings) loss of subsidiaries	4,597			—			(4,597		)	—
Total other expense, net	34,444			—			(4,597		)	29,847
Income (loss) before provision for income taxes	1,507			(4,597		)	4,597			1,507
Benefit for income taxes	(7,124		)	—			—			(7,124		)
Net income (loss)	$	8,631		$	(4,597	)	$	4,597		$	8,631
Comprehensive income	$	8,768		$	—		$	—		$	8,768

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Second Quarter Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	359,352		$	34,011		$	—		$	393,363
Cost of sales (excluding depreciation and amortization expense shown separately below)	220,996			21,703			—			242,699
Gross profit	138,356			12,308			—			150,664
Selling, general and administrative expenses:
Operating expenses	108,694			11,668			—			120,362
Depreciation and amortization	12,001			2,372			—			14,373
Total selling, general and administrative expenses	120,695			14,040			—			134,735
Operating income (loss)	17,661			(1,732		)	—			15,929
Other (income) expense:
Interest income	(35		)	—			—			(35		)
Interest expense	15,537			—			—			15,537
Equity in (earnings) loss of subsidiaries	1,732			—			(1,732		)	—
Other	3			—			—			3
Total other expense (income), net	17,237			—			(1,732		)	15,505
Income (loss) before provision for income taxes	424			(1,732		)	1,732			424
Provision for income taxes	214			—			—			214
Net income (loss)	$	210		$	(1,732	)	$	1,732		$	210
Comprehensive loss	$	(259	)	$	—		$	—		$	(259	)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the First Half Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	724,627		$	69,686		$	—		$	794,313
Cost of sales (excluding depreciation and amortization expense shown separately below)	442,579			44,022			—			486,601
Gross profit	282,048			25,664			—			307,712
Selling, general and administrative expenses:
Operating expenses	215,724			23,409			—			239,133
Depreciation and amortization	23,537			5,029			—			28,566
Total selling, general and administrative expenses	239,261			28,438			—			267,699
Operating income (loss)	42,787			(2,774		)	—			40,013
Other (income) expense:
Interest income	(215		)	(44		)	—			(259		)
Interest expense	31,114			—			—			31,114
Equity in (earnings) loss of subsidiaries	2,730			—			(2,730		)	—
Loss on extinguishment of debt	16,346			—			—			16,346
Other	67			—			—			67
Total other expense (income), net	50,042			(44		)	(2,730		)	47,268
Loss before provision for income taxes	(7,255		)	(2,730		)	2,730			(7,255		)
Benefit for income taxes	(2,574		)	—			—			(2,574		)
Net loss	$	(4,681	)	$	(2,730	)	$	2,730		$	(4,681	)
Comprehensive loss	$	(5,699	)	$	—		$	—		$	(5,699	)

Schedule of condensed consolidated statements of cash flows

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the First Half Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net cash provided by operating activities	$	61,629		$	6,286		$	478		$	68,393
Cash flows from investing activities:
Purchases of property and equipment	(27,498		)	(4,850		)	—			(32,348		)
Proceeds from sales of fixed assets	536			1			—			537
Net cash used in investing activities	(26,962		)	(4,849		)	—			(31,811		)
Cash flows from financing activities:
Payment of debt	(4,639		)	—			—			(4,639		)
Payments of capital lease obligation	(41		)	—			—			(41		)
Net cash used in financing activities	(4,680		)	—			—			(4,680		)
Net increase in cash	29,987			1,437			478			31,902
Cash — beginning of period	45,841			113			(478		)	45,476
Cash — end of period	$	75,828		$	1,550		$	—		$	77,378

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the First Half Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantors			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net cash provided by operating activities	$	33,925		$	553		$	—		$	34,478
Cash flows from investing activities:
Purchases of property and equipment	(18,553		)	(1,308		)	—			(19,861		)
Proceeds from sale of fixed assets	11,549			—			—			11,549
Purchases of investments	(449		)	—			—			(449		)
Proceeds from sale of investments	2,470			—			—			2,470
Investment in subsidiaries	(4,213		)	—			4,213			—
Net cash used in investing activities	(9,196		)	(1,308		)	4,213			(6,291		)
Cash flows from financing activities:
Payment of debt	(2,618		)	—			—			(2,618		)
Payments of capital lease obligation	(38		)	—			—			(38		)
Payment of debt issuance costs	(11,230		)	—			—			(11,230		)
Capital contributions	—			4,213			(4,213		)	—
Net cash (used in) provided by financing activities	(13,886		)	4,213			(4,213		)	(13,886		)
Net increase in cash	10,843			3,458			—			14,301
Cash — beginning of period	23,793			3,973			—			27,766
Cash — end of period	$	34,636		$	7,431		$	—		$	42,067

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Goodwill and Other Intangibles (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Sep. 28, 2013	Mar. 30, 2013
Indefinite lived intangible assets:
Goodwill	$ 479,745	$ 479,745
Total indefinite lived intangible assets	889,745	889,745
Finite lived intangible assets:
Gross Carrying Amount	68,723	68,723
Accumulated Amortization	(10,401)	(7,364)
Net Carrying Amount	58,322	61,359
Total goodwill and other intangible assets, Gross Carrying Amount	958,468	958,468
Total goodwill and other intangible assets, Net Carrying Amount	948,067	951,104
Trademarks
Finite lived intangible assets:
Remaining Amortization Life	18 years	19 years
Gross Carrying Amount	2,000	2,000
Accumulated Amortization	(171)	(121)
Net Carrying Amount	1,829	1,879
Bargain Wholesale customer relationships
Finite lived intangible assets:
Remaining Amortization Life	10 years	11 years
Gross Carrying Amount	20,000	20,000
Accumulated Amortization	(2,853)	(2,019)
Net Carrying Amount	17,147	17,981
Favorable leases
Finite lived intangible assets:
Gross Carrying Amount	46,723	46,723
Accumulated Amortization	(7,377)	(5,224)
Net Carrying Amount	39,346	41,499
Favorable leases | Minimum
Finite lived intangible assets:
Remaining Amortization Life	1 year	1 year
Favorable leases | Maximum
Finite lived intangible assets:
Remaining Amortization Life	15 years	16 years
Trade name
Indefinite lived intangible assets:
Net Carrying Amount	$ 410,000	$ 410,000

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Other Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2013	Mar. 30, 2013
Other accrued expenses
Accrued interest	$ 12,358	$ 9,243
Accrued occupancy costs	10,546	7,514
Accrued professional fees, outside services and advertising	4,880	3,271
Accrued legal reserves and fees	4,607	3,367
Other	8,000	6,300
Total other accrued expenses	$ 40,391	$ 29,695

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Stock-Based Compensation (Details) (USD $)	3 Months Ended		6 Months Ended									6 Months Ended		0 Months Ended		6 Months Ended	0 Months Ended	3 Months Ended	6 Months Ended				6 Months Ended
	Sep. 28, 2013	Sep. 29, 2012	Sep. 28, 2013	Sep. 29, 2012	Sep. 27, 2013 Amended 2012 Plan	Sep. 28, 2013 Class A Common Stock	Mar. 30, 2013 Class A Common Stock	Feb. 27, 2012 Class A Common Stock 2012 Plan's Number Holdings, Inc.	Sep. 28, 2013 Class B Common Stock	Mar. 30, 2013 Class B Common Stock	Feb. 27, 2012 Class B Common Stock 2012 Plan's Number Holdings, Inc.	Sep. 28, 2013 Stock options	Sep. 29, 2012 Stock options	Feb. 27, 2012 Stock options 2012 Plan's	Sep. 28, 2013 Stock options 2012 Plan's Number Holdings, Inc.	Sep. 28, 2013 Share repurchase rights 2012 Plan's	Mar. 30, 2013 Former Executive Put Rights	Sep. 29, 2012 Former Executive Put Rights	Sep. 28, 2013 Former Executive Put Rights	Sep. 29, 2012 Former Executive Put Rights	Sep. 28, 2013 Former Executive Put Rights Former Chief Executive Officer Maximum	Sep. 28, 2013 Former Executive Put Rights Former Executive Vice President of Special Projects Maximum	Sep. 28, 2013 Former Executive Put Rights Class A Common Stock Former Chief Executive Officer Maximum	Sep. 28, 2013 Former Executive Put Rights Class A Common Stock Former Chief Administrative Officer Maximum	Sep. 28, 2013 Former Executive Put Rights Class A Common Stock Former Executive Vice President of Special Projects Maximum	Sep. 28, 2013 Former Executive Put Rights Class B Common Stock Former Chief Executive Officer Maximum	Sep. 28, 2013 Former Executive Put Rights Class B Common Stock Former Chief Administrative Officer Maximum	Sep. 28, 2013 Former Executive Put Rights Class B Common Stock Former Executive Vice President of Special Projects Maximum	Sep. 28, 2013 Former Executive Put Rights Class A and Class B Common Stock Former Chief Executive Officer Maximum	Sep. 28, 2013 Former Executive Put Rights Class A and Class B Common Stock Former Chief Administrative Officer Maximum	Sep. 28, 2013 Former Executive Put Rights Class A and Class B Common Stock Former Executive Vice President of Special Projects Maximum
Stock-based compensation
Number of shares authorized under the plan					85,000			74,603			74,603
Common stock, par value (in dollars per share)						$ 0.01	$ 0.01	$ 0.001	$ 0.01	$ 0.01	$ 0.001
Aggregate number of shares available under the 2012 Plan												27,107
Aggregate exercise price of one share of Class A common stock and for one share of Class B common stock, together (in dollars per share)															$ 1,000
Vesting period														5 years
Expiration term														10 years
Period of rights repurchases after the date of participant's termination of employment																180 days
Period of rights repurchases from the latest date that an option can be exercised																90 days
Options outstanding (In shares)												57,893				24,515
Separation period from entity during which put rights are available																			1 year
Conditional price per combined share of Class A and Class B stock for repurchase put rights (in dollars per share)																													$ 1,000	$ 1,000	$ 1,000
Number of shares of common stock under the first condition for application of put right																							20,000	20,000	20,000	20,000	20,000	20,000
Value of shares of common stock under the second condition for application of put right																					$ 12,500,000	$ 12,500,000
Maximum put right extended exercise period, if exercising the put right is prohibited																			3 years
Period after termination after which put right expires and is deemed unexercised																			4 years
Fair value of awards vested																	6,500,000		1,200,000
Stock-Based Compensation
Stock-based compensation	(3,700,000)	800,000	(5,318,000)	1,593,000														0		0
Assumptions made for estimating the fair value of stock options at the date of grant using the Black-Scholes pricing model
Weighted-average fair value of options granted (in dollars per share)												$ 357.07	$ 374.29
Risk free interest rate (as a percent)												1.51%	0.72%
Expected life												6 years 6 months	6 years 3 months 25 days
Expected stock price volatility (as a percent)												33.83%	37.90%
Expected dividend yield (as a percent)												0.00%	0.00%
Share-based compensation costs, additional disclosure
Total unrecognized compensation cost related to non-vested options												$ 7,200,000
Number of Shares
Options outstanding at the beginning of the period (in shares)												55,279
Granted (in shares)												3,670
Cancelled (in shares)												(1,056)
Outstanding at the end of the period (in shares)												57,893				24,515
Exercisable at the end of the period (in shares)												38,661
Exercisable and expected to vest at the end of the period (in shares)												55,455
Weighted Average Exercise Price
Options outstanding at the beginning of the period (in dollars per share)												$ 1,000
Granted (in dollars per share)												$ 1,000
Cancelled (in dollars per share)												$ 1,000
Outstanding at the end of the period (in dollars per share)												$ 1,000
Exercisable at the end of the period (in dollars per share)												$ 1,000
Exercisable and expected to vest at the end of the period (in dollars per share)												$ 1,000
Weighted Average Remaining Contractual Life
Outstanding at the end of the period												4 years 4 months 24 days
Exercisable at the end of the period												2 years 3 months 18 days
Exercisable and expected to vest at the end of the period												4 years 3 months 18 days
Stock awards available for grant under the 2012 Plan
Available for grant at the beginning of the period (in shares)												19,324
Authorized (in shares)												10,397
Granted (in shares)												(3,670)
Cancelled (in shares)												1,056
Available for grant at the end of the period (in shares)												27,107

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 28, 2013	Mar. 30, 2013
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 217	$ 84
Preferred stock, par value (in dollars per share)	$ 0.00	$ 0.00
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Class A
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	1,000	1,000
Common stock, shares issued	100	100
Common stock, shares outstanding	100	100
Class B
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	1,000	1,000
Common stock, shares issued	100	100
Common stock, shares outstanding	100	100

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Related-Party Transactions

6 Months Ended

Sep. 28, 2013

Related-Party Transactions

Related-Party Transactions

9. Related-Party Transactions

On October 15, 2013, Parent and the Company entered into an agreement with certain former members of the Company’s management, Eric Schiffer, Jeff Gold and Howard Gold (who was a director of Parent and the Company at the date of the agreement), and Karen Schiffer, Sherry Gold and The Gold Revocable Trust dated October 26, 2005 (collectively, the “Sellers”), pursuant to which (a)(i) Parent purchased from each Seller all of the shares of Class A Common Stock and Class B Common Stock, owned by such Seller and (ii) all of the options to purchase shares of Class A Common Stock and Class B Common Stock held by such Seller were cancelled and forfeited, for aggregate consideration of approximately $129.7 million (the “Gold-Schiffer Purchase”) and (b) the Company agreed to certain amendments to the Non-Competition, Non-Solicitation and Confidentiality Agreements and the Separation and Release Agreements with the Sellers who were former management.  The Gold-Schiffer Purchase was completed on October 21, 2013.  Prior to completion of the transaction, Howard Gold resigned from the board of directors of Parent and the Company.  See Note 16 for more information regarding the Gold-Schiffer Purchase.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Sep. 28, 2013	Sep. 29, 2012
Cash flows from operating activities:
Net income (loss)	$ 8,631	$ (4,681)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	31,011	27,683
Amortization of deferred financing costs and accretion of OID	2,212	2,059
Amortization of intangible assets	884	883
Amortization of favorable/unfavorable leases, net	242	91
Loss on extinguishment of debt		16,346
Loss on disposal of fixed assets	124	403
(Gain) loss on interest rate hedge	(114)	665
Deferred income taxes	(7,546)
Stock-based compensation	(5,318)	1,593
Changes in assets and liabilities associated with operating activities:
Accounts receivable	(43)	1,586
Inventories	4,137	(11,437)
Deposits and other assets	(2,492)	(3,874)
Accounts payable	18,874	9,047
Accrued expenses	16,834	6,358
Accrued workers' compensation	(2,283)	(1,186)
Income taxes	194	(13,347)
Deferred rent	4,826	2,362
Other long-term liabilities	(1,780)	(73)
Net cash provided by operating activities	68,393	34,478
Cash flows from investing activities:
Purchases of property and equipment	(32,348)	(19,861)
Proceeds from sale of property and fixed assets	537	11,549
Purchases of investments		(449)
Proceeds from sale of investments		2,470
Net cash used in investing activities	(31,811)	(6,291)
Cash flows from financing activities:
Payment of debt	(4,639)	(2,618)
Payments of capital lease obligation	(41)	(38)
Payment of debt issuance costs		(11,230)
Net cash used in financing activities	(4,680)	(13,886)
Net increase in cash	31,902	14,301
Cash - beginning of period	45,476	27,766
Cash - end of period	77,378	42,067
Supplemental cash flow information:
Income taxes paid	228	10,772
Interest paid	24,639	26,125
Non-cash investing activities for purchases of property and equipment	$ (4,395)	$ (1,679)

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 28, 2013	Mar. 30, 2013
Current Assets:
Cash	$ 77,378	$ 45,476
Accounts receivable, net of allowance for doubtful accounts of $217 and $84 at September 28, 2013 and March 30, 2013, respectively	1,894	1,851
Income taxes receivable	3,775	3,969
Deferred income taxes	35,377	33,139
Inventories, net	197,464	201,601
Assets held for sale	2,106	2,106
Other	18,276	16,370
Total current assets	336,270	304,512
Property and equipment, net	481,476	476,051
Deferred financing costs, net	19,568	21,016
Intangible assets, net	468,322	471,359
Goodwill	479,745	479,745
Deposits and other assets	5,057	4,554
Total assets	1,790,438	1,757,237
Current Liabilities:
Accounts payable	73,280	50,011
Payroll and payroll-related	24,081	17,096
Sales tax	6,353	7,200
Other accrued expenses	40,391	29,695
Workers' compensation	37,215	39,498
Current portion of long-term debt	3,216	8,567
Current portion of capital lease obligation	86	83
Total current liabilities	184,622	152,150
Long-term debt, net of current portion	751,234	749,758
Unfavorable lease commitments, net	12,922	14,833
Deferred rent	9,649	4,823
Deferred compensation liability	1,070	1,153
Capital lease obligation, net of current portion	227	271
Long-term deferred income taxes	181,634	186,851
Other liabilities	6,660	8,428
Total liabilities	1,148,018	1,118,267
Commitments and contingencies (Note 11)
Shareholders' Equity:
Preferred stock, no par value - authorized, 1,000 shares; no shares issued or outstanding
Common stock $0.01 par value - Class A authorized, 1,000 shares; issued and outstanding, 100 shares and Class B authorized, 1,000 shares; issued and outstanding, 100 shares at September 28, 2013 and March 30, 2013, respectively
Additional paid-in capital	649,106	654,424
Accumulated deficit	(5,571)	(14,202)
Other comprehensive loss	(1,115)	(1,252)
Total shareholders' equity	642,420	638,970
Total liabilities and shareholders' equity	$ 1,790,438	$ 1,757,237

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Financial Guarantees (Details) (USD $)					0 Months Ended					0 Months Ended
	Sep. 28, 2013	Mar. 30, 2013	Sep. 29, 2012	Mar. 31, 2012	Dec. 29, 2011 Senior Notes	Sep. 28, 2013 Issuer	Mar. 30, 2013 Issuer	Sep. 29, 2012 Issuer	Mar. 31, 2012 Issuer	Dec. 29, 2011 Issuer Senior Notes	Sep. 28, 2013 Subsidiary Guarantors	Mar. 30, 2013 Subsidiary Guarantors	Sep. 29, 2012 Subsidiary Guarantors	Mar. 31, 2012 Subsidiary Guarantors	Sep. 28, 2013 Consolidating Adjustments	Mar. 30, 2013 Consolidating Adjustments
Supplemental financial information
Principal amount of debt instrument issued					$ 250,000,000					$ 250,000,000
Current Assets:
Cash	77,378,000	45,476,000	42,067,000	27,766,000		75,828,000	45,841,000	34,636,000	23,793,000		1,550,000	113,000	7,431,000	3,973,000		(478,000)
Accounts receivable, net	1,894,000	1,851,000				1,705,000	1,672,000				189,000	179,000
Income taxes receivable	3,775,000	3,969,000				3,775,000	3,969,000
Deferred income taxes	35,377,000	33,139,000				35,377,000	33,139,000
Inventories, net	197,464,000	201,601,000				169,579,000	172,068,000				27,885,000	29,533,000
Assets held for sale	2,106,000	2,106,000				2,106,000	2,106,000
Other	18,276,000	16,370,000				16,830,000	15,300,000				1,446,000	1,070,000
Total current assets	336,270,000	304,512,000				305,200,000	274,095,000				31,070,000	30,895,000				(478,000)
Property and equipment, net	481,476,000	476,051,000				418,393,000	413,543,000				63,083,000	62,508,000
Deferred financing costs, net	19,568,000	21,016,000				19,568,000	21,016,000
Equity investments and advances to subsidiaries						180,065,000	119,642,000				98,887,000	34,631,000			(278,952,000)	(154,273,000)
Intangible assets, net	468,322,000	471,359,000				465,692,000	468,593,000				2,630,000	2,766,000
Goodwill	479,745,000	479,745,000				479,745,000	479,745,000
Deposits and other assets	5,057,000	4,554,000				4,592,000	4,191,000				465,000	363,000
Total assets	1,790,438,000	1,757,237,000				1,873,255,000	1,780,825,000				196,135,000	131,163,000			(278,952,000)	(154,751,000)
Current Liabilities:
Accounts payable	73,280,000	50,011,000				64,928,000	46,595,000				8,352,000	3,894,000				(478,000)
Intercompany payable						98,888,000	32,991,000				91,454,000	28,075,000			(190,342,000)	(61,066,000)
Payroll and payroll-related	24,081,000	17,096,000				22,295,000	15,798,000				1,786,000	1,298,000
Sales tax	6,353,000	7,200,000				5,880,000	6,628,000				473,000	572,000
Other accrued expenses	40,391,000	29,695,000				36,577,000	26,892,000				3,814,000	2,803,000
Workers' compensation	37,215,000	39,498,000				37,125,000	39,423,000				90,000	75,000
Current portion of long-term debt	3,216,000	8,567,000				3,216,000	8,567,000
Current portion of capital lease obligation	86,000	83,000				86,000	83,000
Total current liabilities	184,622,000	152,150,000				268,995,000	176,977,000				105,969,000	36,717,000			(190,342,000)	(61,544,000)
Long-term debt, net of current portion	751,234,000	749,758,000				751,234,000	749,758,000
Unfavorable lease commitments, net	12,922,000	14,833,000				12,432,000	14,200,000				490,000	633,000
Deferred rent	9,649,000	4,823,000				8,583,000	4,217,000				1,066,000	606,000
Deferred compensation liability	1,070,000	1,153,000				1,070,000	1,153,000
Capital lease obligation, net of current portion	227,000	271,000				227,000	271,000
Long-term deferred income taxes	181,634,000	186,851,000				181,634,000	186,851,000
Other liabilities	6,660,000	8,428,000				6,660,000	8,428,000
Total liabilities	1,148,018,000	1,118,267,000				1,230,835,000	1,141,855,000				107,525,000	37,956,000			(190,342,000)	(61,544,000)
Shareholders' Equity:
Preferred stock
Common stock
Additional paid-in capital	649,106,000	654,424,000				649,106,000	654,424,000				99,943,000	99,943,000			(99,943,000)	(99,943,000)
Accumulated deficit	(5,571,000)	(14,202,000)				(5,571,000)	(14,202,000)				(11,333,000)	(6,736,000)			11,333,000	6,736,000
Other comprehensive loss	(1,115,000)	(1,252,000)				(1,115,000)	(1,252,000)
Total shareholders' equity	642,420,000	638,970,000				642,420,000	638,970,000				88,610,000	93,207,000			(88,610,000)	(93,207,000)
Total liabilities and shareholders' equity	$ 1,790,438,000	$ 1,757,237,000				$ 1,873,255,000	$ 1,780,825,000				$ 196,135,000	$ 131,163,000			$ (278,952,000)	$ (154,751,000)

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Sep. 28, 2013

Fair Value of Financial Instruments

Schedule of financial assets and liabilities recorded at fair value on a recurring basis, by level within the fair value hierarchy

The Company utilizes the best available information in measuring fair value.  The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of September 28, 2013 (in thousands):

	September 28, 2013
	Total		Level 1		Level 2		Level 3
ASSETS
Other assets — assets that fund deferred compensation	$	1,070	$	1,070	$	—	$	—
LIABILITES
Other current liabilities — interest rate swap	$	1,187	$	—	$	1,187	$	—
Other long-term liabilities — interest rate swap	$	1,100	$	—	$	1,100	$	—
Other long-term liabilities — deferred compensation	$	1,070	$	1,070	$	—	$	—

The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of March 30, 2013 (in thousands):

	March 30, 2013
	Total		Level 1		Level 2		Level 3
ASSETS
Other assets — assets that fund deferred compensation	$	1,153	$	1,153	$	—	$	—
LIABILITES
Other current liabilities — interest rate swap	$	381	$	—	$	381	$	—
Other long-term liabilities — interest rate swap	$	2,249	$	—	$	2,249	$	—
Other long-term liabilities — deferred compensation	$	1,153	$	1,153	$	—	$	—

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Basis of Presentation and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Sep. 28, 2013

Basis of Presentation and Summary of Significant Accounting Policies

Schedule of details of carrying cost, amortized cost and useful life of property and equipment

Owned buildings and improvements	Lesser of 30 years or the estimated useful life of the improvement
Leasehold improvements	Lesser of the estimated useful life of the improvement or remaining lease term
Fixtures and equipment	5 years
Transportation equipment	3-5 years
Information technology systems	For major corporate systems, estimated useful life up to 7 years; for functional stand alone systems, estimated useful life up to 5 years

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Fair Value of Financial Instruments (Details 2) (USD $)			1 Months Ended	0 Months Ended		6 Months Ended	12 Months Ended
	Sep. 28, 2013 ABL Facility	Jan. 13, 2012 ABL Facility	Jan. 31, 2012 First Lien Term Loan Facility	Dec. 29, 2011 Senior Notes	Sep. 28, 2013 Senior Notes	Sep. 28, 2013 Senior Notes Level 1	Mar. 30, 2013 Senior Notes Level 1
Fair value of financial instruments
Maximum borrowing capacity	$ 175,000,000	$ 175,000,000
Additional amount borrowed			525,000,000	250,000,000
Coupon rate (as a percent)					11.00%
Estimated fair value of debt instrument						281,900,000	288,100,000
Fair value adjustment to liability incurred or settled						$ 31,900,000	$ 38,100,000

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Subsequent Events (Details) (USD $)	6 Months Ended	0 Months Ended			0 Months Ended					6 Months Ended	0 Months Ended		9 Months Ended	0 Months Ended
	Sep. 29, 2012	Apr. 04, 2012 First Lien Term Loan Facility Amended April 2012	Apr. 04, 2012 First Lien Term Loan Facility Amended April 2012 LIBOR	Apr. 04, 2012 First Lien Term Loan Facility Amended April 2012 Base rate	Oct. 08, 2013 First Lien Term Loan Facility Amended October 2013	Sep. 28, 2013 Class A Common Stock	Mar. 30, 2013 Class A Common Stock	Sep. 28, 2013 Class B Common Stock	Mar. 30, 2013 Class B Common Stock	Sep. 28, 2013 Stock options	Oct. 21, 2013 Parent Sellers	Oct. 08, 2013 Subsequent events First Lien Term Loan Facility Amended October 2013	Dec. 28, 2013 Subsequent events First Lien Term Loan Facility Amended October 2013 Forecast	Oct. 08, 2013 Subsequent events First Lien Term Loan Facility Amended October 2013 LIBOR	Oct. 08, 2013 Subsequent events First Lien Term Loan Facility Amended October 2013 Base rate	Oct. 10, 2013 Subsequent events Stock options Stephane Gonthier	Oct. 10, 2013 Subsequent events Parent Stephane Gonthier Options vesting on the achievement of performance	Oct. 10, 2013 Subsequent events Parent Stock options Stephane Gonthier Time-based service options	Oct. 10, 2013 Subsequent events Parent Stock options Stephane Gonthier Time-based service awards vesting on the first anniversary of the date of the award	Oct. 10, 2013 Subsequent events Parent Stock options Stephane Gonthier Time-based service awards vesting on the second anniversary of the date of the award	Oct. 10, 2013 Subsequent events Parent Stock options Stephane Gonthier Time-based service awards vesting on the third anniversary of the date of the award	Oct. 10, 2013 Subsequent events Parent Stock options Stephane Gonthier Time-based service awards vesting on the fourth anniversary of the date of the award	Oct. 21, 2013 Subsequent events Parent Sellers	Oct. 18, 2013 Subsequent events 99 LLC	Sep. 30, 2013 Subsequent events Stock Purchase Agreement Parent Purchasers	Sep. 30, 2013 Subsequent events Stock Purchase Agreement Parent Purchasers Class A Common Stock	Sep. 30, 2013 Subsequent events Stock Purchase Agreement Parent Purchasers Class B Common Stock	Oct. 08, 2013 Subsequent events Stock Purchase Agreement Parent Andrew Giancamilli	Oct. 08, 2013 Subsequent events Stock Purchase Agreement Parent Andrew Giancamilli Class A Common Stock	Oct. 08, 2013 Subsequent events Stock Purchase Agreement Parent Andrew Giancamilli Class B Common Stock
Subsequent events
Number of shares issued																										4,922	4,922		410	410
Aggregate purchase price																									$ 6,000,000			$ 500,000
Amount borrowed					100,000,000							100,000,000
Description of basis rate use for variable rate			LIBOR											LIBOR	Base rate
Applicable margin (as a percent)			4.00%	3.00%										3.50%	2.50%
Interest rate, variable interest rate floor (as a percent)			1.25%											1.00%
Scheduled quarterly payments as a percentage of amended principal amount												0.25%
Periodic Payment												1,500,000
Loss on extinguishment of debt	16,346,000	16,300,000											4,400,000
Percentage of positive consolidated net income to determine restricted payment under builder basket terms of debt instruments.												50.00%
Percentage of negative consolidated net income to determine restricted payment under builder basket terms of debt instruments.												100.00%
Granted (in shares)										3,670						21,505
Vesting percentage																	25.00%		30.00%	20.00%	25.00%	25.00%
Percentage of options that vest based on time-based service																		75.00%
Aggregate consideration paid by parent for shares											$ 129,700,000												$ 129,700,000
Common stock, par value (in dollars per share)						$ 0.01	$ 0.01	$ 0.01	$ 0.01
Number of membership units issued against each class A common stock share																								1

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Property and Equipment, net (Details) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2013	Mar. 30, 2013
Property and equipment
Total property and equipment	$ 578,798	$ 543,397
Less: accumulated depreciation and amortization	(97,322)	(67,346)
Property and equipment, net	481,476	476,051
Land
Property and equipment
Total property and equipment	160,446	160,446
Buildings
Property and equipment
Total property and equipment	90,466	90,466
Building improvements
Property and equipment
Total property and equipment	66,450	64,429
Leasehold improvements
Property and equipment
Total property and equipment	124,027	112,779
Fixtures and equipment
Property and equipment
Total property and equipment	84,471	76,831
Transportation equipment
Property and equipment
Total property and equipment	9,745	7,497
Construction in progress
Property and equipment
Total property and equipment	$ 43,193	$ 30,949

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Basis of Presentation and Summary of Significant Accounting Policies (Details 3)	6 Months Ended
	Sep. 28, 2013 item
Goodwill and Other Intangible Assets
Number of reporting units	2

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Basis of Presentation and Summary of Significant Accounting Policies (Details 4) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2013	Sep. 29, 2012	Sep. 28, 2013	Sep. 29, 2012
Advertising
Advertising Expense	$ 1.7	$ 1.3	$ 3.1	$ 2.6

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Stock-Based Compensation

6 Months Ended

Sep. 28, 2013

Stock-Based Compensation

Stock-Based Compensation

8. Stock-Based Compensation

Number Holdings, Inc. 2012 Equity Incentive Plan

On February 27, 2012, the board of directors of Parent adopted the Number Holdings, Inc. 2012 Stock Incentive Plan (the “2012 Plan”), which authorizes equity awards to be granted for up to 74,603 shares of Class A common stock, par value $0.001 per share, of Parent (the “Class A Common Stock”) and 74,603 shares of Class B common stock, par value $0.001 per share, of Parent (the “Class B Common Stock”).  On September 27, 2013, the 2012 Plan was amended to increase the aggregate number of shares available under the 2012 Plan to 85,000 shares.  As of September 28, 2013, options for 57,893 shares of each Class were issued to certain members of management with an aggregate exercise price of $1,000 for one share of Class A Common Stock and for one share of Class B Common Stock, together.  Options become exercisable over the five year service period and have terms of ten years from date of the grant.  Options upon vesting may be exercised only for units consisting of an equal number of Class A Common Stock and Class B Common Stock.  Class B Common Stock has de minimis economic rights and the right to vote solely for election of directors.

Share repurchase rights

Under the 2012 Plan’s standard form of option award agreement, Parent has a right to repurchase from the participant all or a portion of (i) Class A and Class B Common Stock of Parent issued upon the exercise of the options awarded to a participant and (ii) fully vested but unexercised options.  The repurchase price for the shares of Class A and Class B Common Stock of Parent is the fair market value of such shares as of the date of such termination, and, for the fully vested but unexercised options, the repurchase price is the difference between the fair market value of the Class A and Class B Common Stock of Parent as of the date of termination of employment and the exercise price of the option.  However, upon (i) a termination of employment for cause, (ii) a voluntary resignation without good reason, or (iii) upon discovery that the participant engaged in detrimental activity, the repurchase price is the lesser of the exercise price paid by the participant to exercise the option or the fair market value of the Class A and Class B Common Stock of Parent.  If Parent elects to exercise its repurchase right for any shares acquired pursuant to the exercise of an option, it must do so no later than 180 days after the date of participant’s termination of employment, or (ii) for any unexercised option no later than 90 days from the latest date that an option can be exercised.  All of the options that the Company has granted to its executive officers and employees (with the exception of options granted to Rollover Investors that contain no repurchase rights and certain directors that contain less restrictive repurchase rights) contain such repurchase rights. There were 24,515 options outstanding as of September 28, 2013 subject to such repurchase rights. In accordance with accounting guidance, the Company has not recorded any stock-based compensation expense for these grants.  For all other options, fair value of the option awards is recognized as compensation expense on a straight line basis over the requisite service period of the award, and is included in operating expenses.

Former Executive Put Rights

Pursuant to the employment agreements between the Company and Messrs. Eric Schiffer, Jeff Gold and Howard Gold, in connection with their separation from the Company, for a period of one year following such separation, each executive has a right to require Parent to repurchase the shares of Class A and Class B Common Stock owned by such executive (a “put right”) at the greater of (i) $1,000 per combined share of Class A and Class B Common Stock less any distributions made with respect to such shares and (ii) the fair market value of such shares as of the date the executive exercises the put right.  The put right applies to the lesser of (i) 20,000 shares of each of Class A and Class B Common Stock and (ii) $12.5 million in value (unless Parent agrees to purchase a higher value).  If exercising the put right is prohibited (e.g., under the First Lien Term Loan Credit Facility, the ABL Facility and the Indenture), then the put right is extended up to three additional years until Parent is no longer prohibited from repurchasing the shares.  If, during the four years following termination, Parent is at no time able to make the required payments, the put right expires and is deemed unexercised.  For payout after the first year, the put right is only at the fair market value as of the date the exercising the put right.

On January 23, 2013, Eric Schiffer, Jeff Gold and Howard Gold separated from their positions as Chief Executive Officer, Chief Administrative Officer and Executive Vice President of Special Projects, respectively, of the Company and Parent, and as directors of the Company and Parent.  As such, for a period of one year from January 23, 2013, each executive may exercise the put right as described above.  The fair value of these put rights was estimated using a binomial model to be $1.2 million and $6.5 million as of September 28, 2013 and March 30, 2013, respectively. Changes in the fair value for these put rights have been included in operating expenses. Subsequent to September 28, 2013, these put rights terminated as a result of the Gold-Schiffer Purchase. See Notes 9 and 16 for more information regarding the Gold-Schiffer Purchase.

Accounting for stock-based compensation

Determining the fair value of options at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise and the associated volatility.  At the grant date, the Company estimates an amount of forfeitures that will occur prior to vesting.  During the second quarter and the first half of fiscal 2014, as a result of a decrease in the fair value of former executive put rights, the Company recorded negative stock-based compensation expense of $(3.7) million and $(5.3) million, respectively.  During the second quarter and the first half of fiscal 2013, the Company incurred stock-based compensation expense of $0.8 million and $1.6 million, respectively.  There was no stock-based compensation expense for former executive put rights in the second quarter and first half of fiscal 2013.

The fair value of stock options was estimated at the date of grant using the Black-Scholes pricing model with the following assumptions:

	For the First Half Ended
	September 28, 2013			September 29, 2012
Weighted-average fair value of options granted	$	357.07		$	374.29
Risk free interest rate	1.51		%	0.72		%
Expected life (in years)	6.50			6.32
Expected stock price volatility	33.83		%	37.90		%
Expected dividend yield	None			None

The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant with an equivalent remaining term.  Expected life represents the estimated period of time until exercise and is calculated by using “simplified method.”  Expected stock price volatility is based on average historical volatility of stock prices of companies in a peer group analysis.  The Company currently does not anticipate the payment of any cash dividends.  Compensation expense is recognized only for those options expected to vest, with forfeitures estimated based on the Company’s historical experience and future expectations.

As of September 28, 2013, there were $7.2 million of total unrecognized compensation costs related to non-vested options and options subject to repurchase rights for which no compensation has been recorded.

The following summarizes stock option activity in the first half of fiscal 2014:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Options outstanding at the beginning of the period	55,279		$	1,000
Granted	3,670		$	1,000
Exercised	—		$	—
Cancelled	(1,056	)	$	1,000
Outstanding at the end of the period	57,893		$	1,000	4.40
Exercisable at the end of the period	38,661		$	1,000	2.30
Exercisable and expected to vest at the end of the period	55,455		$	1,000	4.30

The following table summarizes the stock awards available for grant under the 2012 Plan:

	Number of Shares
Available for grant as of March 30, 2013	19,324
Authorized	10,397
Granted	(3,670	)
Cancelled	1,056
Available for grant at September 28, 2013	27,107

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Stock-Based Compensation (Tables)

6 Months Ended

Sep. 28, 2013

Stock-Based Compensation

Schedule of assumptions made for estimating the fair value of stock options at the date of grant using the Black-Scholes pricing model

	For the First Half Ended
	September 28, 2013			September 29, 2012
Weighted-average fair value of options granted	$	357.07		$	374.29
Risk free interest rate	1.51		%	0.72		%
Expected life (in years)	6.50			6.32
Expected stock price volatility	33.83		%	37.90		%
Expected dividend yield	None			None

Summary of stock option activity

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Options outstanding at the beginning of the period	55,279		$	1,000
Granted	3,670		$	1,000
Exercised	—		$	—
Cancelled	(1,056	)	$	1,000
Outstanding at the end of the period	57,893		$	1,000	4.40
Exercisable at the end of the period	38,661		$	1,000	2.30
Exercisable and expected to vest at the end of the period	55,455		$	1,000	4.30

Summary of stock awards available for grant

	Number of Shares
Available for grant as of March 30, 2013	19,324
Authorized	10,397
Granted	(3,670	)
Cancelled	1,056
Available for grant at September 28, 2013	27,107

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Derivative Financial Instruments (Details) (USD $)	3 Months Ended	6 Months Ended	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Sep. 29, 2012 Derivatives not designated as hedging instruments Other expense	Sep. 29, 2012 Derivatives not designated as hedging instruments Other expense	Sep. 28, 2013 Derivatives designated as cash flow hedging instruments OCI	Sep. 29, 2012 Derivatives designated as cash flow hedging instruments OCI	Sep. 28, 2013 Derivatives designated as cash flow hedging instruments OCI	Sep. 29, 2012 Derivatives designated as cash flow hedging instruments OCI	Sep. 28, 2013 Derivatives designated as cash flow hedging instruments Interest expense	Sep. 29, 2012 Derivatives designated as cash flow hedging instruments Interest expense	Sep. 28, 2013 Derivatives designated as cash flow hedging instruments Interest expense	Sep. 29, 2012 Derivatives designated as cash flow hedging instruments Interest expense	Sep. 28, 2013 Interest Rate Cap Derivatives not designated as hedging instruments	May 26, 2012 Interest Rate Cap Derivatives not designated as hedging instruments	Sep. 28, 2013 Interest Rate Swap Derivatives designated as cash flow hedging instruments	May 26, 2012 Interest Rate Swap Derivatives designated as cash flow hedging instruments	Sep. 28, 2013 Interest Rate Swap Derivatives designated as cash flow hedging instruments other current liabilities	Mar. 30, 2013 Interest Rate Swap Derivatives designated as cash flow hedging instruments other current liabilities	Sep. 28, 2013 Interest Rate Swap Derivatives designated as cash flow hedging instruments other liabilities	Mar. 30, 2013 Interest Rate Swap Derivatives designated as cash flow hedging instruments other liabilities	Sep. 28, 2013 Interest Rate Swap Derivatives designated as cash flow hedging instruments Accumulated other comprehensive loss, net of tax (included in shareholders' equity)	Mar. 30, 2013 Interest Rate Swap Derivatives designated as cash flow hedging instruments Accumulated other comprehensive loss, net of tax (included in shareholders' equity)
Derivative Financial Instruments
Aggregate notional amount												$ 261,800,000		$ 261,800,000
Description of variable rate basis											LIBOR
Cap Interest rate on LIBOR (as a percent)											3.00%
Applicable margin (as a percent)											4.00%		4.00%
Effective fixed interest rate (as a percent)													1.36%
Fair Value
Derivative liabilities															1,187,000	381,000	1,110,000	2,249,000	1,115,000	1,252,000
Recorded amounts included in the consolidated statements of comprehensive income
Loss (gain) related to effective portion of derivative recognized in OCI			332,000	473,000	(137,000)	1,017,000
Loss (gain) related to ineffective portion of derivative recognized in interest expense							208,000	366,000	(114,000)	642,000
Loss recognized	$ 3,000	$ 23,000

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Commitments and Contingencies

6 Months Ended

Sep. 28, 2013

Commitments and Contingencies

Commitments and Contingencies

11. Commitments and Contingencies

Credit Facilities

The Credit Facilities and commitments are discussed in detail in Note 5.

Workers’ Compensation

The Company self-insures its workers’ compensation claims in California and Texas and provides for losses of estimated known and incurred but not reported insurance claims.  The Company does not discount the projected future cash outlays for the time value of money for claims and claim related costs when establishing its workers’ compensation liability.

As of September 28, 2013 and March 30, 2013, the Company had recorded a liability $37.1 million and $39.4 million, respectively, for estimated workers’ compensation claims in California.  The Company has limited self-insurance exposure in Texas and had recorded a liability of less than $0.1 million as of September 28, 2013 and March 30, 2013 for workers’ compensation claims in Texas.  The Company purchases workers’ compensation insurance coverage in Arizona and Nevada.

Self-Insured Health Insurance Liability

During the second quarter of fiscal 2012, the Company began self-insuring for a portion of its employee medical benefit claims.  As of September 28, 2013 and March 30, 2013, the Company had recorded a liability of $0.5 million for estimated health insurance claims.  The Company maintains stop loss insurance coverage to limit its exposure for the self-funded portion of its health insurance program.

Legal Matters

Wage and Hour Matters

Thomas Allen v. 99¢ Only Stores, Superior Court of the State of California, County of Los Angeles.  Plaintiff, a former store manager for the Company, filed this action on March 18, 2011. He asserted claims on behalf of himself and all others allegedly similarly situated under the California Labor Code for alleged failure to pay overtime, failure to provide meal and rest periods, failure to pay wages timely upon termination, and failure to provide accurate wage statements.  Mr. Allen also asserted a derivative claim for unfair competition under the California Business and Professions Code.  Mr. Allen seeks to represent a class of all employees who were employed by the Company as salaried managers in 99¢ Only retail stores from March 18, 2007 through the date of trial or settlement.  Plaintiff seeks to recover alleged unpaid wages, statutory penalties, interest, attorney’s fees and costs, declaratory relief, injunctive relief and restitution.  On October 17, 2011, the Court heard the Company’s motion to compel Plaintiff Allen to arbitrate his claims on an individual basis, and following the hearing, the Court ordered the parties to submit further briefing and argument.  Following this supplemental briefing and while the motion was under advisement, Mr. Allen sought leave to amend his complaint to add a cause of action pursuant to the Private Attorneys General Act of 2004 (“PAGA”).  The Company did not oppose this motion and on January 5, 2012, the Court granted Mr. Allen’s motion and his First Amended Complaint was filed.  On February 27, 2012, the Court denied the Company’s motion to compel arbitration.  The Company filed a notice of its intention to appeal that ruling on April 12, 2012.  Following a mediation of this matter on August 30, 2012, the parties entered into a “term sheet” settlement agreement for an immaterial amount, which is subject to court approval.  As of April 11, 2013, all parties had executed a Stipulation Re: Settlement of Class Action.  On April 17, 2013, Mr. Allen filed his motion for preliminary approval of the settlement.  The Company filed a notice of non-opposition to this motion on April 25, 2013.  On May 9, 2013, the Court granted preliminary approval of the settlement.  A hearing regarding final approval of the settlement was set for August 23, 2013, during which the Court granted final approval of the settlement and dismissed the case.  The judgment became final on October 23, 2013.  The claims administration process is scheduled for November, and the Company must file a declaration from the claims administrator by December 20, 2013 confirming that the settlement amounts have been distributed pursuant to the settlement agreement.

Shelley Pickett v. 99¢ Only Stores, Superior Court of the State of California, County of Los Angeles.  Plaintiff Shelley Pickett filed a representative action complaint against the Company on November 4, 2011, alleging a PAGA claim virtually identical to that of another matter which was dismissed with prejudice in December 2011, Bright v. 99¢ Only Stores. Like the plaintiff in the Bright case, Plaintiff Pickett asserts that the Company violated section 14 of Wage Order 7-2001 by failing to provide seats for its cashiers behind checkout counters. She seeks civil penalties of $100 to $200 per violation, per each pay period for each affected employee, and attorney’s fees.  On November 8, 2011, Plaintiff Pickett filed a Notice of Related Case, stating that her case and the Bright case assert “identical claims.” After hearing arguments from the parties on December 1, 2011, the Court determined that the cases were related and assigned Pickett’s case to Judge William Fahey, the judge who presided over the Bright case.  Plaintiff Pickett then attempted to exercise a 170.6 challenge to Judge Fahey, which the Company opposed. The Court struck Plaintiff Pickett’s 170.6 challenge on December 16, 2011. Plaintiff Pickett appealed this ruling, filing a petition for writ of mandate on December 30, 2011. The Company filed an opposition to Plaintiff Pickett’s petition and oral argument took place on February 1, 2012.  On February 22, 2012, the Court of Appeal ruled in Plaintiff Pickett’s favor and issued the writ of mandate.  On April 2, 2012, the Company filed a petition for review of that ruling with the California Supreme Court, which Pickett answered on April 23, 2012.  The California Supreme Court denied the Company’s petition for review on May 9, 2012 and the Court of Appeals has remanded the case to Los Angeles Superior Court.  On October 2, 2012, the Company filed a motion to compel arbitration of Pickett’s individual claims or, in the alternative, to strike the representative action allegations in the Complaint.  The Court denied that motion on November 15, 2012, and on January 11, 2013, the Company filed a Notice of Appeal.  On October 15, 2013, the Court of Appeals affirmed the trial court’s ruling.  The Company has until November 25, 2013 to seek review of the decision in the California Supreme Court.  On June 27, 2013, Plaintiff Pickett entered into a settlement agreement and release with the Company in another matter.  Payment has been made to Plaintiff Pickett under that agreement and the other action has been dismissed.  The Company’s position is that that release she executed in that matter waives the claims she asserts in this action, waives her right to proceed on a class or representative basis or as a private attorney general, and requires her to dismiss this action with prejudice as to her individual claims, thus mooting the pending appeal.  The Company notified Plaintiff Pickett of its position by a letter dated as of July 30, 2013, but she has yet to dismiss the lawsuit.  The Company cannot predict the outcome of this lawsuit or the amount of potential loss, if any, that it could face as a result of such lawsuit.

Sofia Wilton Barriga v. 99¢ Only Stores, Superior Court of the State of California, County of Riverside.  Plaintiff, a former store associate, filed this action on August 5, 2013.  She asserts claims on behalf of herself and all others allegedly similarly situated under the California Labor Code for alleged failure to pay wages for all hours worked, failure to provide meal periods, failure to pay wages timely upon termination, and failure to provide accurate wage statements.  Ms. Barriga also asserts a derivative claim for unfair competition under the California Business and Professions Code.  Ms. Barriga seeks to represent a class of all non-exempt employees who were employed in California in 99¢ Only retail stores who worked the graveyard shift at any time from August 5, 2009, through the date of trial or settlement.  Plaintiff seeks to recover alleged unpaid wages, statutory penalties, interest, attorney’s fees and costs, and restitution.  On September 23, 2013, the Company filed an answer denying all material allegations.  A case management conference was held on October 4, 2013, at which the court ordered that discovery may proceed as to class certification issues only and set a further status conference for August 5, 2014.  The Company cannot predict the outcome of this lawsuit or the amount of potential loss, if any, that it could face as a result of such lawsuit.

District Attorney Investigation

In August 2013, the Company received a pre-litigation subpoena from the San Joaquin County and Alameda County District Attorney offices.  This subpoena arises out of an investigation of the Company’s hazardous materials, hazardous substances and hazardous waste practices at its California retail stores and distribution centers that is being conducted jointly by the District Attorney of San Joaquin County along with other environmental prosecutorial offices in the state of California (the “Prosecutors”).  This investigation arises out of the Notices to Comply (“Notices”) received by the Company for certain of its stores and distribution centers.

The Notices alleged non-compliance with hazardous waste, hazardous substances and hazardous material regulatory requirements imposed under California law identified during compliance inspections and required corrective actions to be taken by certain dates set forth in the Notices.  The Company believes that it properly implemented the corrective actions required by the Notices; however, it now faces additional demands to improve its hazardous waste and hazardous material compliance programs.  The Company is cooperating with the Prosecutors in their investigation and is working with them to implement revisions to such programs.

The Prosecutors can also seek civil penalties and investigation costs for the alleged instances of past non-compliance, even after corrective action is taken.  No penalties or costs have been demanded and the Company cannot predict the amount of penalties that may be sought.

Other Matters

The Company is also subject to other private lawsuits, administrative proceedings and claims that arise in its ordinary course of business.  A number of these lawsuits, proceedings and claims may exist at any given time.  While the resolution of such a lawsuit, proceeding or claim may have an impact on the Company’s financial results for the period in which it is resolved, and litigation is inherently unpredictable, in management’s opinion, none of these matters arising in the ordinary course of business is expected to have a material adverse effect on the Company’s financial position, results of operations or overall liquidity.

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Fair Value of Financial Instruments

6 Months Ended

Sep. 28, 2013

Fair Value of Financial Instruments

Fair Value of Financial Instruments

7. Fair Value of Financial Instruments

The Company complies with authoritative guidance for fair value measurement and disclosures which establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1: Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2: Defined as observable inputs other than Level 1 prices.  These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company utilizes the best available information in measuring fair value.  The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of September 28, 2013 (in thousands):

	September 28, 2013
	Total		Level 1		Level 2		Level 3
ASSETS
Other assets — assets that fund deferred compensation	$	1,070	$	1,070	$	—	$	—
LIABILITES
Other current liabilities — interest rate swap	$	1,187	$	—	$	1,187	$	—
Other long-term liabilities — interest rate swap	$	1,100	$	—	$	1,100	$	—
Other long-term liabilities — deferred compensation	$	1,070	$	1,070	$	—	$	—

Level 1 measurements include $1.1 million of deferred compensation assets that fund the liabilities related to the Company’s deferred compensation, including investments in trust funds.  The fair values of these funds are based on quoted market prices in an active market.

Level 2 measurements include interest rate swap agreements estimated using industry standard valuation models using market-based observable inputs, including interest rate curves.

There were no Level 3 assets or liabilities as of September 28, 2013.

The Company did not have any transfers of investments in and out of Levels 1 and 2 during the second quarter and the first half of fiscal 2014.

The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of March 30, 2013 (in thousands):

	March 30, 2013
	Total		Level 1		Level 2		Level 3
ASSETS
Other assets — assets that fund deferred compensation	$	1,153	$	1,153	$	—	$	—
LIABILITES
Other current liabilities — interest rate swap	$	381	$	—	$	381	$	—
Other long-term liabilities — interest rate swap	$	2,249	$	—	$	2,249	$	—
Other long-term liabilities — deferred compensation	$	1,153	$	1,153	$	—	$	—

Level 1 measurements include $1.2 million of deferred compensation assets that fund the liabilities related to the Company’s deferred compensation, including investments in trust funds.  The fair values of these funds are based on quoted market prices in an active market.

Level 2 measurements include interest rate swap agreement estimated using industry standard valuation models using market-based observable inputs, including interest rate curves.

There were no Level 3 assets or liabilities as of March 30, 2013.

In connection with the Merger, the Company entered into the Credit Facilities, including the ABL Facility of $175 million and the First Lien Term Loan Facility of $525 million, and also issued $250 million of the Senior Notes with a coupon rate of 11% in a private placement.  The outstanding debt under the Credit Facilities and the Senior Notes is recorded in the financial statements at historical cost, net of applicable unamortized discounts.

The Credit Facilities are tied directly to market rates and fluctuate as market rates change; as a result, the carrying value of the Credit Facilities approximates fair value as of September 28, 2013.

The fair value of the Senior Notes was estimated at $281.9 million, or $31.9 million greater than the carrying value, as of September 28, 2013, based on quoted market prices of the debt (Level 1 inputs). The fair value of the Senior Notes was estimated at $288.1 million, or $38.1 million greater than the carrying value, as of March 30, 2013, based on quoted market prices of the debt (Level 1 inputs).

See Note 5 for more information on the Company’s debt.

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Goodwill and Other Intangibles

6 Months Ended

Sep. 28, 2013

Goodwill and Other Intangibles

Goodwill and Other Intangibles

2. Goodwill and Other Intangibles

As a result of the Merger, the Company recognized goodwill, and other intangible assets and liabilities.  The following tables set forth the value of the goodwill and other intangible assets and liabilities, and unfavorable leases, respectively, each as of September 28, 2013 and March 30, 2013 (in thousands):

	As of September 28, 2013								As of March 30, 2013
	Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Indefinite lived intangible assets:
Goodwill		$	479,745	$	—		$	479,745		$	479,745	$	—		$	479,745
Trade name		410,000		—			410,000			410,000		—			410,000
Total indefinite lived intangible assets		$	889,745	$	—		$	889,745		$	889,745	$	—		$	889,745
Finite lived intangible assets:
Trademarks	18	$	2,000	$	(171	)	$	1,829	19	$	2,000	$	(121	)	$	1,879
Bargain Wholesale customer relationships	10	20,000		(2,853		)	17,147		11	20,000		(2,019		)	17,981
Favorable leases	1 to 15	46,723		(7,377		)	39,346		1 to 16	46,723		(5,224		)	41,499
Total finite lived intangible assets		68,723		(10,401		)	58,322			68,723		(7,364		)	61,359
Total goodwill and other intangible assets		$	958,468	$	(10,401	)	$	948,067		$	958,468	$	(7,364	)	$	951,104
	As of September 28, 2013								As of March 30, 2013
	Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Remaining Amortization Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Unfavorable leases	1 to 16	$	19,835	$	(6,913	)	$	12,922	1 to 17	$	19,835	$	(5,002	)	$	14,833

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Financial Guarantees (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Sep. 28, 2013	Sep. 29, 2012	Sep. 28, 2013	Sep. 29, 2012
Net Sales:
Total sales	$ 443,923	$ 393,363	$ 877,789	$ 794,313
Cost of sales (excluding depreciation and amortization expense shown separately below)	277,118	242,699	543,797	486,601
Gross profit	166,805	150,664	333,992	307,712
Selling, general and administrative expenses:
Operating expenses	138,911	120,362	270,743	239,133
Depreciation and amortization	16,127	14,373	31,895	28,566
Total selling, general and administrative expenses	155,038	134,735	302,638	267,699
Operating income	11,767	15,929	31,354	40,013
Other (income) expense:
Interest income		(35)	(15)	(259)
Interest expense	15,174	15,537	29,862	31,114
Loss on extinguishment of debt				16,346
Other		3		67
Total other expense, net	15,174	15,505	29,847	47,268
(Loss) income before provision for income taxes	(3,407)	424	1,507	(7,255)
Benefit (Provision) for income taxes	(8,874)	214	(7,124)	(2,574)
Net income (loss)	5,467	210	8,631	(4,681)
Comprehensive income (loss)	5,135	(259)	8,768	(5,699)
Issuer
Net Sales:
Total sales	404,801	359,352	801,326	724,627
Cost of sales (excluding depreciation and amortization expense shown separately below)	251,240	220,996	493,916	442,579
Gross profit	153,561	138,356	307,410	282,048
Selling, general and administrative expenses:
Operating expenses	124,964	108,694	244,725	215,724
Depreciation and amortization	13,500	12,001	26,734	23,537
Total selling, general and administrative expenses	138,464	120,695	271,459	239,261
Operating income	15,097	17,661	35,951	42,787
Other (income) expense:
Interest income		(35)	(15)	(215)
Interest expense	15,174	15,537	29,862	31,114
Equity in (earnings) loss of subsidiaries	3,330	1,732	4,597	2,730
Loss on extinguishment of debt				16,346
Other		3		67
Total other expense, net	18,504	17,237	34,444	50,042
(Loss) income before provision for income taxes	(3,407)	424	1,507	(7,255)
Benefit (Provision) for income taxes	(8,874)	214	(7,124)	(2,574)
Net income (loss)	5,467	210	8,631	(4,681)
Comprehensive income (loss)	5,135	(259)	8,768	(5,699)
Subsidiary Guarantors
Net Sales:
Total sales	39,122	34,011	76,463	69,686
Cost of sales (excluding depreciation and amortization expense shown separately below)	25,878	21,703	49,881	44,022
Gross profit	13,244	12,308	26,582	25,664
Selling, general and administrative expenses:
Operating expenses	13,947	11,668	26,018	23,409
Depreciation and amortization	2,627	2,372	5,161	5,029
Total selling, general and administrative expenses	16,574	14,040	31,179	28,438
Operating income	(3,330)	(1,732)	(4,597)	(2,774)
Other (income) expense:
Interest income				(44)
Total other expense, net				(44)
(Loss) income before provision for income taxes	(3,330)	(1,732)	(4,597)	(2,730)
Net income (loss)	(3,330)	(1,732)	(4,597)	(2,730)
Consolidating Adjustments
Other (income) expense:
Equity in (earnings) loss of subsidiaries	(3,330)	(1,732)	(4,597)	(2,730)
Total other expense, net	(3,330)	(1,732)	(4,597)	(2,730)
(Loss) income before provision for income taxes	3,330	1,732	4,597	2,730
Net income (loss)	$ 3,330	$ 1,732	$ 4,597	$ 2,730

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended
	Sep. 28, 2013	Sep. 29, 2012	Sep. 28, 2013	Sep. 29, 2012
Credit carry-forward
Income tax benefit	$ (8,874,000)	$ 214,000	$ (7,124,000)	$ (2,574,000)
Effective income tax rate (as a percent)			472.90%	35.50%
California Enterprise Zone
Credit carry-forward
Tax credit generation period			9 months
Tax credit carryforward, period			10 years
Tax credit carryforward, amount	11,600,000		11,600,000
Income tax benefit	$ 7,500,000

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Basis of Presentation and Summary of Significant Accounting Policies (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Sep. 28, 2013 item	Sep. 29, 2012
Nature of Business
Stores in operation	329
Fiscal Periods
Number of quarters in a fiscal year	4
Number of weeks in period	52
Number of days in a fiscal year	364
Number of weeks in a fiscal year every five to six years	53
Days In Each Fiscal Quarter	91 days	91 days
Days in First Half of Fiscal Year	182 days	182 days
Weeks In Current Fiscal Year	52
Cash
Number of business days within which the majority of payments are due for the settlement of debit and credit card transactions	3 days
Book overdrafts included in accounts payable	$ 3.1
Minimum
Fiscal Periods
Period during which fiscal years includes 53 weeks	5 years
Inventories
Holding period for inventory reserve	12 months
Maximum
Fiscal Periods
Period during which fiscal years includes 53 weeks	6 years
California
Nature of Business
Stores in operation	238
Texas
Nature of Business
Stores in operation	43
Arizona
Nature of Business
Stores in operation	31
Nevada
Nature of Business
Stores in operation	17

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New Authoritative Standards

6 Months Ended

Sep. 28, 2013

New Authoritative Standards

New Authoritative Standards

14. New Authoritative Standards

On July 27, 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment,” (“ASU 2012-02”). The ASU 2012-02 provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required. However, if an entity concludes otherwise, it would be required to determine the fair value of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under GAAP. The new guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. This new guidance became effective for the Company in the first quarter of fiscal 2014 and did not have a material impact on the Company or its consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”), which is effective for reporting periods beginning after December 15, 2012.  ASU 2013-02 was issued to improve the reporting of reclassifications out of AOCI.  ASU 2013-02 requires companies to provide information about the amounts reclassified out of AOCI either in a single note or on the face of the financial statements.  Significant amounts reclassified out of AOCI should be presented by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified in its entirety to net income in the same reporting period.  For amounts not required to be reclassified in their entirety to net income, a cross-reference to other disclosures provided for in accordance with GAAP is required.  This new guidance became effective for the Company in the first quarter of fiscal 2014 and did not have a material impact the on the Company or its consolidated financial statements.

In July 2013, the FASB issued ASU 2013-10, “Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes” (“ASU 2013-10”), which is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.  ASU 2013-10 was issued to allow the use of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as benchmark interest rate for hedge accounting purposes in addition to interest rates on direct treasury obligations of the United States government and LIBOR.  In addition, this new guidance removes the restriction on using different benchmark rates for similar hedges.  This new guidance became effective for the Company in the second quarter of fiscal 2014 and did not have a material impact on the Company or its consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”), which is effective for fiscal years and interim periods beginning after December 15, 2013.  ASU 2013-11 provides guidance regarding the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar loss or a tax credit carryforward exists.  Under certain circumstances, unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or tax credit carryforward.  This new guidance will be effective for the Company in the fourth quarter of fiscal 2014 and is not expected to have a material impact on the Company or its consolidated financial statements.

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Income Taxes

6 Months Ended

Sep. 28, 2013

Income Taxes

Income Taxes

10. Income Taxes

During the first quarter of fiscal 2014, the California legislature passed draft bills, which effectively eliminated the Enterprise Zone hiring credits after December 31, 2013.  The effect of these bills restricts the generation of the California Enterprise Zone (“EZ”) hiring credits for fiscal 2014 to nine months for the Company as compared to a full year in prior fiscal years, and the carryforward period to ten years from a previous indefinite life. During the second quarter of fiscal 2014, the legislation was signed into law. As a result, the Company will no longer be adding to its existing EZ credit carryforwards after the current tax year.  Rather, the Company will be able to utilize its EZ credit carryforwards in subsequent taxable years.  As a result of the law change, the Company released the valuation allowance associated with its $11.6 million California EZ credit carryforwards as a discrete item in the second quarter of fiscal 2014, which benefited the income tax provision by $7.5 million.

The effective income tax rate for the first half of fiscal 2014 was 472.9% compared to a rate of 35.5% for the first half of fiscal 2013.  The change in the effective tax rate is primarily due to the release of the valuation allowance of EZ credit carryforwards, which was recognized as a discrete item during the second quarter of fiscal 2014.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of September 28, 2013, the Company has not accrued any interest and penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction and in various states.  The Company is subject to examinations by the major tax jurisdictions in which it files for the tax years 2008 forward.  The federal tax return for the period ended March 27, 2010 was examined by the Internal Revenue Service resulting in no changes to the reported tax.

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Sep. 28, 2013

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).  However, certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been omitted or condensed pursuant to the rules and regulations of the Securities and Exchange Commission.  These statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s  Annual Report on Form 10-K for the fiscal year ended March 30, 2013.  In the opinion of the Company’s management, these interim consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the consolidated financial position and results of operations for each of the periods presented.  The results of operations and cash flows for such periods are not necessarily indicative of results to be expected for the full fiscal year ending March 29, 2014 (“fiscal 2014”).

Fiscal Periods

Fiscal Periods

The Company follows a fiscal calendar consisting of four quarters with 91 days, each ending on the Saturday closest to the calendar quarter-end, and a 52-week fiscal year with 364 days, with a 53-week year every five to six years.  Unless otherwise stated, references to years in this Quarterly Report on Form 10-Q relate to fiscal years rather than calendar years.  Fiscal 2014 began on March 31, 2013 and will end on March 29, 2014 and will consist of 52 weeks. The Company’s fiscal year ended March 30, 2013 (“fiscal 2013”) began on April 1, 2012 and ended on March 30, 2013 and consisted of 52 weeks.  The second quarter ended September 28, 2013 (the “second quarter of fiscal 2014”) and second quarter ended September 29, 2012 (the “second quarter of fiscal 2013”) were each comprised of 91 days.  The period ended September 28, 2013 (“first half of fiscal 2014”) and the period ended September 29, 2012 (“first half of fiscal 2013”) were each comprised of 182 days.

Use of Estimates

Use of Estimates

The preparation of the unaudited consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash

Cash

For purposes of reporting cash flows, cash includes cash on hand, cash at the stores and cash in financial institutions.  The majority of payments due from financial institutions for the settlement of debit card and credit card transactions are processed within three business days and therefore are classified as cash.  Cash balances held at financial institutions are generally in excess of federally insured limits.  These accounts are only insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts.  The Company places its temporary cash investments with what it believes to be high credit, quality financial institutions. Under the Company’s cash management system, checks issued but not presented to the bank may result in book cash overdraft balances for accounting purposes.  The Company reclassifies book overdrafts to accounts payable, which are reflected as an operating activity in its unaudited consolidated statements of cash flows. Book overdrafts included in accounts payable were $3.1 million as of September 28, 2013.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

In connection with its wholesale business, the Company evaluates the collectability of accounts receivable based on a combination of factors.  In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will record an allowance against amounts due and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected.  For all other customers and tenants, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, industry and geographic concentrations, the current business environment and the Company’s historical experiences.

Inventories

Inventories

Inventories are valued at the lower of cost or market. Inventory cost is established using a methodology that approximates first in, first out, which for store inventories is based on a retail inventory method. Valuation allowances for shrinkage as well as excess and obsolete inventory are also recorded. Shrinkage is estimated as a percentage of sales for the period from the last physical inventory date to the end of the applicable period. Such estimates are based on experience and the most recent physical inventory results. Physical inventories are taken at each of the Company’s retail stores at least once a year by an outside inventory service company. Additional store-level physical inventories are taken by the service companies from time to time based on a particular store’s performance and/or book inventory balance.  The Company performs inventory cycle counts at its warehouses throughout the year.  The Company also performs inventory reviews and analysis on a quarterly basis for both warehouse and store inventory to determine inventory valuation allowances for excess and obsolete inventory.  The Company’s policy is to analyze all items held in inventory that are at least twelve months old and that are not expected to be sold through at the current sales rates over the next twelve months in order to determine what merchandise should be reserved for as excess or obsolete. The valuation allowances for excess and obsolete inventory in many locations (including various warehouses, store backrooms, and sales floors of its stores), require management judgment and estimates that may impact the ending inventory valuation and valuation allowances that may affect the reported gross margin for the period.

In order to obtain inventory at attractive prices, the Company takes advantage of large volume purchases, closeouts and other similar purchase opportunities but within the above stipulated policy.  As such, the Company’s inventory fluctuates from period to period and the inventory balances vary based on the timing and availability of such opportunities.

Property and Equipment

Property and Equipment

Property and equipment are carried at cost and are depreciated or amortized on a straight-line basis over the following useful lives:

Owned buildings and improvements	Lesser of 30 years or the estimated useful life of the improvement
Leasehold improvements	Lesser of the estimated useful life of the improvement or remaining lease term
Fixtures and equipment	5 years
Transportation equipment	3-5 years
Information technology systems	For major corporate systems, estimated useful life up to 7 years; for functional stand alone systems, estimated useful life up to 5 years

The Company’s policy is to capitalize expenditures that materially increase asset lives and expense ordinary repairs and maintenance as incurred.

Long-Lived Assets

Long-Lived Assets

The Company assesses the impairment of long-lived assets quarterly or when events or changes in circumstances indicate that the carrying value may not be recoverable.  Recoverability is measured by comparing the carrying amount of an asset to expected future net cash flows generated by the asset.  If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, the carrying amount is compared to its fair value and an impairment charge is recognized to the extent of the difference.  Factors that the Company considers important that could individually or in combination trigger an impairment review include the following: (1) significant underperformance relative to expected historical or projected future operating results; (2) significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business; and (3) significant changes in the Company’s business strategies and/or negative industry or economic trends.  On a quarterly basis, the Company assesses whether events or changes in circumstances occur that potentially indicate that the carrying value of long-lived assets may not be recoverable.  Considerable management judgment is necessary to estimate projected future operating cash flows.  Accordingly, if actual results fall short of such estimates, significant future impairments could result.  During each of the second quarter and first half of fiscal 2014 and 2013, the Company did not record any asset impairment charges.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

In connection with the Merger purchase price allocation, the fair values of long-lived and intangible assets were determined based upon assumptions related to the future cash flows, discount rates and asset lives utilizing then available information, and in some cases were obtained from independent professional valuation experts.  The Company amortizes intangible assets over their estimated useful lives unless such lives are deemed indefinite.

Goodwill and indefinite-lived intangible assets are not amortized but instead tested annually for impairment or more frequently when events or changes in circumstances indicate that the assets might be impaired.  Goodwill is tested for impairment by comparing the carrying amount of the reporting unit to the fair value of the reporting unit to which the goodwill is assigned.  The Company has the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step one of the goodwill impairment test). If the Company does not perform a qualitative assessment, or determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The first step is to compare the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill. Management has determined that the Company has two reporting units, the wholesale reporting unit and the retail reporting unit.

The Company performs the annual test for impairment in the fourth quarter of the fiscal year and determines fair value based on a combination of the income approach and the market approach. The income approach is based on discounted cash flows to determine fair value. The market approach uses a selection of comparable companies and transactions in determining fair value. The fair value of the trade name is also tested for impairment in the fourth quarter by comparing the carrying value to the fair value. Fair value of a trade name is determined using a relief from royalty method under the income approach, which uses projected revenue allocable to the trade name and an assumed royalty rate.

Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on undiscounted cash flows, and, if impaired, written down to fair value based on either discounted cash flows or appraised values.  Significant judgment is required in determining whether a potential indicator of impairment of long-lived assets exists and in estimating future cash flows used in the impairment tests.

During each of the second quarter and first half of fiscal 2014 and fiscal 2013, the Company did not record any impairment charges related to goodwill or other intangible assets.

Derivatives

Derivatives

The Company accounts for derivative financial instruments in accordance with authoritative guidance for derivative instrument and hedging activities.  All financial instrument positions taken by the Company are intended to be used to manage risks associated with interest rate exposures.

The Company’s derivative financial instruments are recorded on the balance sheet at fair value, and are recorded in either current or noncurrent assets or liabilities based on their maturity.  Changes in the fair values of derivatives are recorded in net earnings or other comprehensive income (“OCI”), based on whether the instrument is designated and effective as a hedge transaction and, if so, the type of hedge transaction.  Gains or losses on derivative instruments reported in accumulated other comprehensive income (“AOCI”) are reclassified to earnings in the period the hedged item affects earnings.  Any ineffectiveness is recognized in earnings in the period incurred.

Purchase Accounting

Purchase Accounting

The Company’s assets and liabilities have been recorded at their estimated fair values as of the date of the Merger.  The aggregate purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed, based upon an assessment of their relative fair value as of the Merger date.  These estimates of fair values, the allocation of the purchase price and other factors related to the accounting for the Merger are subject to significant judgments and the use of estimates.

Income Taxes

Income Taxes

The Company utilizes the liability method of accounting for income taxes.  Under the liability method, deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities.  Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The Company’s ability to realize deferred tax assets is assessed throughout the year and a valuation allowance is established accordingly.  The Company recognizes the impact of a tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense.

Stock-Based Compensation

Stock-Based Compensation

The Company accounts for stock-based payment awards based on their fair value.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods.  For awards classified as equity, the Company estimates the fair value for each option award as of the date of grant using the Black-Scholes option pricing model or other appropriate valuation models.  The Black-Scholes model considers, among other factors, the expected life of the award and the expected volatility of the stock price.  Stock options are generally granted to employees at exercise prices equal to the fair market value of the stock at the dates of grant.  Former executive put rights are classified as equity awards and revalued using a binomial model at each reporting period with changes in the fair value recognized as stock-based compensation expense.

Revenue Recognition

Revenue Recognition

The Company recognizes retail sales in its retail stores at the time the customer takes possession of merchandise. All sales are net of discounts and returns and exclude sales tax.  Wholesale sales are recognized in accordance with the shipping terms agreed upon on the purchase order. Wholesale sales are typically recognized free on board origin, where title and risk of loss pass to the buyer when the merchandise leaves the Company’s distribution facility.

The Company has a gift card program.  The Company does not charge administrative fees on gift cards and the Company’s gift cards do not have expiration dates.  The Company records the sale of gift cards as a current liability and recognizes a sale when a customer redeems a gift card.  The liability for outstanding gift cards is recorded in accrued expenses.  The Company has not recorded any breakage income related to its gift card program.

Cost of Sales

Cost of Sales

Cost of sales includes the cost of inventory, freight in, inter-state warehouse transportation costs, obsolescence, spoilage, scrap and inventory shrinkage, and is net of discounts and allowances.  Cash discounts for satisfying early payment terms are recognized when payment is made, and allowances and rebates based upon milestone achievements such as reaching a certain volume of purchases of a vendor’s products are included as a reduction of cost of sales when such contractual milestones are reached.  In addition, the Company analyzes its inventory levels and the related cash discounts received to arrive at a value for cash discounts to be included in the inventory balance.  The Company does not include purchasing, receiving, distribution, warehouse, and occupancy costs in its cost of sales.  Due to this classification, the Company’s gross profit rates may not be comparable to those of other retailers that include costs related to their distribution network and occupancy in cost of sales.

Operating Expenses

Operating Expenses

Selling, general and administrative expenses include purchasing, receiving, inspection and warehouse costs, the costs of selling merchandise in stores (payroll and associated costs, occupancy and other store-level costs), distribution costs (payroll and associated costs, occupancy, transportation to and from stores and other distribution-related costs) and corporate costs (payroll and associated costs, occupancy, advertising, professional fees and other corporate administrative costs).

Leases

Leases

The Company follows the policy of capitalizing allowable expenditures that relate to the acquisition and signing of its retail store leases.  These costs are amortized on a straight-line basis over the applicable lease term.

The Company recognizes rent expense for operating leases on a straight-line basis (including the effect of reduced or free rent and rent escalations) over the applicable lease term.  The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is included in deferred rent.  Cash reimbursements received from landlords for leasehold improvements and other cash payments received from landlords as lease incentives are recorded as deferred rent.  Deferred rent related to landlord incentives is amortized as an offset to rent expense using the straight-line method over the applicable lease term.

For store closures where a lease obligation still exists, the Company records the estimated future liability associated with the rental obligation on the cease use date (when the store is closed).  Liabilities are established at the cease use date for the present value of any remaining operating lease obligations, net of estimated sublease income, and at the communication date for severance and other exit costs. Key assumptions in calculating the liability include the timeframe expected to terminate lease agreements, estimates related to the sublease potential of closed locations, and estimates of other related exit costs. If actual timing and potential termination costs or realization of sublease income differ from the Company’s estimates, the resulting liabilities could vary from recorded amounts. These liabilities are reviewed periodically and adjusted when necessary.

Self-Insured Workers' Compensation Liability

Self-Insured Workers’ Compensation Liability

The Company self-insures for workers’ compensation claims in California and Texas.  The Company establishes a liability for losses of both estimated known and incurred but not reported insurance claims based on reported claims and actuarial valuations of estimated future costs of known and incurred but not yet reported claims.  Should an amount of claims greater than anticipated occur, the liability recorded may not be sufficient and additional workers’ compensation costs, which may be significant, could be incurred. The Company has not discounted the projected future cash outlays for the time value of money for claims and claim-related costs when establishing its workers’ compensation liability in its financial reports for September 28, 2013 and March 30, 2013.

Self-Insured Health Insurance Liability

Self-Insured Health Insurance Liability

During the second quarter of fiscal 2012 ended October 1, 2011 (the “second quarter of fiscal 2012”), the Company began self-insuring for a portion of its employee medical benefit claims.  The liability for the self-funded portion of the Company health insurance program is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported.  The Company maintains stop loss insurance coverage to limit its exposure for the self-funded portion of its health insurance program.

Pre-Opening Costs

Pre-Opening Costs

The Company expenses, as incurred, pre-opening costs such as payroll, rent and marketing related to the opening of new retail stores.

Advertising

Advertising

The Company expenses advertising costs as incurred. Advertising expenses were $1.7 million and $1.3 million for the second quarter of fiscal 2014 and 2013, respectively.  Advertising expenses were $3.1 million and $2.6 million for the first half of fiscal 2014 and 2013, respectively.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash, accounts receivable, interest rate derivatives, accounts payable, accruals, debt, and other liabilities.  Cash and interest rate derivatives are measured and recorded at fair value.  Accounts receivable and other receivables are financial assets with carrying values that approximate fair value.  Accounts payable and other accrued expenses are financial liabilities with carrying values that approximate fair value.  See Note 7 for further discussion of the fair value of debt.

The Company utilizes the authoritative guidance for fair value, which includes the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements.  Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants.  Fair value measurements reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model.

Comprehensive Income

Comprehensive Income

OCI includes unrealized gains or losses on investments and interest rate derivatives designated as cash flow hedges.

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Financial Guarantees

6 Months Ended

Sep. 28, 2013

Financial Guarantees

Financial Guarantees

15. Financial Guarantees

On December 29, 2011, the Company (the “Issuer”) issued $250 million principal amount of the Senior Notes.  The Senior Notes are irrevocably and unconditionally guaranteed, jointly and severally, by each of the Issuer’s existing and future restricted subsidiaries that are guarantors under the Credit Facilities and certain other indebtedness.

As of September 28, 2013 and March 30, 2013, the Senior Notes are guaranteed by 99 Cents Only Stores Texas, Inc. (the “Subsidiary Guarantor”).

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

CONDENSED CONSOLIDATING BALANCE SHEETS

As of September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
ASSETS
Current Assets:
Cash	$	75,828		$	1,550		$	—		$	77,378
Accounts receivable, net	1,705			189			—			1,894
Income taxes receivable	3,775			—			—			3,775
Deferred income taxes	35,377			—			—			35,377
Inventories, net	169,579			27,885			—			197,464
Assets held for sale	2,106			—			—			2,106
Other	16,830			1,446			—			18,276
Total current assets	305,200			31,070			—			336,270
Property and equipment, net	418,393			63,083			—			481,476
Deferred financing costs, net	19,568			—			—			19,568
Equity investments and advances to subsidiaries	180,065			98,887			(278,952		)	—
Intangible assets, net	465,692			2,630			—			468,322
Goodwill	479,745			—			—			479,745
Deposits and other assets	4,592			465			—			5,057
Total assets	$	1,873,255		$	196,135		$	(278,952	)	$	1,790,438
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	64,928		$	8,352		$	—		$	73,280
Intercompany payable	98,888			91,454			(190,342		)	—
Payroll and payroll-related	22,295			1,786			—			24,081
Sales tax	5,880			473			—			6,353
Other accrued expenses	36,577			3,814			—			40,391
Workers’ compensation	37,125			90			—			37,215
Current portion of long-term debt	3,216			—			—			3,216
Current portion of capital lease obligation	86			—			—			86
Total current liabilities	268,995			105,969			(190,342		)	184,622
Long-term debt, net of current portion	751,234			—			—			751,234
Unfavorable lease commitments, net	12,432			490			—			12,922
Deferred rent	8,583			1,066			—			9,649
Deferred compensation liability	1,070			—			—			1,070
Capital lease obligation, net of current portion	227			—			—			227
Long-term deferred income taxes	181,634			—			—			181,634
Other liabilities	6,660			—			—			6,660
Total liabilities	1,230,835			107,525			(190,342		)	1,148,018
Shareholders’ Equity:
Preferred stock	—			—			—			—
Common stock	—			—			—			—
Additional paid-in capital	649,106			99,943			(99,943		)	649,106
Accumulated deficit	(5,571		)	(11,333		)	11,333			(5,571		)
Other comprehensive loss	(1,115		)	—			—			(1,115		)
Total shareholders’ equity	642,420			88,610			(88,610		)	642,420
Total liabilities and shareholders’ equity	$	1,873,255		$	196,135		$	(278,952	)	$	1,790,438

CONDENSED CONSOLIDATING BALANCE SHEETS

As of March 30, 2013

(In thousands)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
ASSETS
Current Assets:
Cash	$	45,841		$	113		$	(478	)	$	45,476
Accounts receivable, net	1,672			179			—			1,851
Income taxes receivable	3,969			—			—			3,969
Deferred income taxes	33,139			—			—			33,139
Inventories, net	172,068			29,533			—			201,601
Assets held for sale	2,106			—			—			2,106
Other	15,300			1,070			—			16,370
Total current assets	274,095			30,895			(478		)	304,512
Property and equipment, net	413,543			62,508			—			476,051
Deferred financing costs, net	21,016			—			—			21,016
Equity investments and advances to subsidiaries	119,642			34,631			(154,273		)	—
Intangible assets, net	468,593			2,766			—			471,359
Goodwill	479,745			—			—			479,745
Deposits and other assets	4,191			363			—			4,554
Total assets	$	1,780,825		$	131,163		$	(154,751	)	$	1,757,237
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	46,595		$	3,894		$	(478	)	$	50,011
Intercompany payable	32,991			28,075			(61,066		)	—
Payroll and payroll-related	15,798			1,298			—			17,096
Sales tax	6,628			572			—			7,200
Other accrued expenses	26,892			2,803			—			29,695
Workers’ compensation	39,423			75			—			39,498
Current portion of long-term debt	8,567			—			—			8,567
Current portion of capital lease obligation	83			—			—			83
Total current liabilities	176,977			36,717			(61,544		)	152,150
Long-term debt, net of current portion	749,758			—			—			749,758
Unfavorable lease commitments, net	14,200			633			—			14,833
Deferred rent	4,217			606			—			4,823
Deferred compensation liability	1,153			—			—			1,153
Capital lease obligation, net of current portion	271			—			—			271
Long-term deferred income taxes	186,851			—			—			186,851
Other liabilities	8,428			—			—			8,428
Total liabilities	1,141,855			37,956			(61,544		)	1,118,267
Shareholders’ Equity:
Preferred stock	—			—			—			—
Common stock	—			—			—			—
Additional paid-in capital	654,424			99,943			(99,943		)	654,424
Accumulated deficit	(14,202		)	(6,736		)	6,736			(14,202		)
Other comprehensive loss	(1,252		)	—			—			(1,252		)
Total shareholders’ equity	638,970			93,207			(93,207		)	638,970
Total liabilities and shareholders’ equity	$	1,780,825		$	131,163		$	(154,751	)	$	1,757,237

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Second Quarter Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	404,801		$	39,122		$	—		$	443,923
Cost of sales (excluding depreciation and amortization expense shown separately below)	251,240			25,878			—			277,118
Gross profit	153,561			13,244			—			166,805
Selling, general and administrative expenses:
Operating expenses	124,964			13,947			—			138,911
Depreciation and amortization	13,500			2,627			—			16,127
Total selling, general and administrative expenses	138,464			16,574			—			155,038
Operating income (loss)	15,097			(3,330		)	—			11,767
Other expense:
Interest expense	15,174			—			—			15,174
Equity in (earnings) loss of subsidiaries	3,330			—			(3,330		)	—
Total other expense, net	18,504			—			(3,330		)	15,174
Loss before provision for income taxes	(3,407		)	(3,330		)	3,330			(3,407		)
Benefit for income taxes	(8,874		)	—			—			(8,874		)
Net income (loss)	$	5,467		$	(3,330	)	$	3,330		$	5,467
Comprehensive income	$	5,135		$	—		$	—		$	5,135

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the First Half Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	801,326		$	76,463		$	—		$	877,789
Cost of sales (excluding depreciation and amortization expense shown separately below)	493,916			49,881			—			543,797
Gross profit	307,410			26,582			—			333,992
Selling, general and administrative expenses:
Operating expenses	244,725			26,018			—			270,743
Depreciation and amortization	26,734			5,161			—			31,895
Total selling, general and administrative expenses	271,459			31,179			—			302,638
Operating income (loss)	35,951			(4,597		)	—			31,354
Other (income) expense:
Interest income	(15		)	—			—			(15		)
Interest expense	29,862			—			—			29,862
Equity in (earnings) loss of subsidiaries	4,597			—			(4,597		)	—
Total other expense, net	34,444			—			(4,597		)	29,847
Income (loss) before provision for income taxes	1,507			(4,597		)	4,597			1,507
Benefit for income taxes	(7,124		)	—			—			(7,124		)
Net income (loss)	$	8,631		$	(4,597	)	$	4,597		$	8,631
Comprehensive income	$	8,768		$	—		$	—		$	8,768

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Second Quarter Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	359,352		$	34,011		$	—		$	393,363
Cost of sales (excluding depreciation and amortization expense shown separately below)	220,996			21,703			—			242,699
Gross profit	138,356			12,308			—			150,664
Selling, general and administrative expenses:
Operating expenses	108,694			11,668			—			120,362
Depreciation and amortization	12,001			2,372			—			14,373
Total selling, general and administrative expenses	120,695			14,040			—			134,735
Operating income (loss)	17,661			(1,732		)	—			15,929
Other (income) expense:
Interest income	(35		)	—			—			(35		)
Interest expense	15,537			—			—			15,537
Equity in (earnings) loss of subsidiaries	1,732			—			(1,732		)	—
Other	3			—			—			3
Total other expense (income), net	17,237			—			(1,732		)	15,505
Income (loss) before provision for income taxes	424			(1,732		)	1,732			424
Provision for income taxes	214			—			—			214
Net income (loss)	$	210		$	(1,732	)	$	1,732		$	210
Comprehensive loss	$	(259	)	$	—		$	—		$	(259	)

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the First Half Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Net Sales:
Total sales	$	724,627		$	69,686		$	—		$	794,313
Cost of sales (excluding depreciation and amortization expense shown separately below)	442,579			44,022			—			486,601
Gross profit	282,048			25,664			—			307,712
Selling, general and administrative expenses:
Operating expenses	215,724			23,409			—			239,133
Depreciation and amortization	23,537			5,029			—			28,566
Total selling, general and administrative expenses	239,261			28,438			—			267,699
Operating income (loss)	42,787			(2,774		)	—			40,013
Other (income) expense:
Interest income	(215		)	(44		)	—			(259		)
Interest expense	31,114			—			—			31,114
Equity in (earnings) loss of subsidiaries	2,730			—			(2,730		)	—
Loss on extinguishment of debt	16,346			—			—			16,346
Other	67			—			—			67
Total other expense (income), net	50,042			(44		)	(2,730		)	47,268
Loss before provision for income taxes	(7,255		)	(2,730		)	2,730			(7,255		)
Benefit for income taxes	(2,574		)	—			—			(2,574		)
Net loss	$	(4,681	)	$	(2,730	)	$	2,730		$	(4,681	)
Comprehensive loss	$	(5,699	)	$	—		$	—		$	(5,699	)

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the First Half Ended September 28, 2013

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantor			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net cash provided by operating activities	$	61,629		$	6,286		$	478		$	68,393
Cash flows from investing activities:
Purchases of property and equipment	(27,498		)	(4,850		)	—			(32,348		)
Proceeds from sales of fixed assets	536			1			—			537
Net cash used in investing activities	(26,962		)	(4,849		)	—			(31,811		)
Cash flows from financing activities:
Payment of debt	(4,639		)	—			—			(4,639		)
Payments of capital lease obligation	(41		)	—			—			(41		)
Net cash used in financing activities	(4,680		)	—			—			(4,680		)
Net increase in cash	29,987			1,437			478			31,902
Cash — beginning of period	45,841			113			(478		)	45,476
Cash — end of period	$	75,828		$	1,550		$	—		$	77,378

99¢ Only Stores

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the First Half Ended September 29, 2012

(In thousands)

(Unaudited)

	Issuer			Subsidiary Guarantors			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net cash provided by operating activities	$	33,925		$	553		$	—		$	34,478
Cash flows from investing activities:
Purchases of property and equipment	(18,553		)	(1,308		)	—			(19,861		)
Proceeds from sale of fixed assets	11,549			—			—			11,549
Purchases of investments	(449		)	—			—			(449		)
Proceeds from sale of investments	2,470			—			—			2,470
Investment in subsidiaries	(4,213		)	—			4,213			—
Net cash used in investing activities	(9,196		)	(1,308		)	4,213			(6,291		)
Cash flows from financing activities:
Payment of debt	(2,618		)	—			—			(2,618		)
Payments of capital lease obligation	(38		)	—			—			(38		)
Payment of debt issuance costs	(11,230		)	—			—			(11,230		)
Capital contributions	—			4,213			(4,213		)	—
Net cash (used in) provided by financing activities	(13,886		)	4,213			(4,213		)	(13,886		)
Net increase in cash	10,843			3,458			—			14,301
Cash — beginning of period	23,793			3,973			—			27,766
Cash — end of period	$	34,636		$	7,431		$	—		$	42,067

XML

Document and Entity Information	6 Months Ended
	Sep. 28, 2013	Nov. 05, 2013
Entity Registrant Name	99 CENTS ONLY STORES LLC
Entity Central Index Key	0001011290
Document Type	10-Q
Document Period End Date	Sep. 28, 2013
Amendment Flag	false
Current Fiscal Year End Date	--03-29
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		100
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

XML

Subsequent Events

6 Months Ended

Sep. 28, 2013

Subsequent Events

Subsequent Events

16. Subsequent Events

Parent Stock Purchase Agreements

On September  30, 2013, in connection with Stéphane Gonthier’s employment as President and Chief Executive Officer of the Company and the Parent, Parent entered into a Stock Purchase Agreement with Avenue of the Stars Investments LLC, a Delaware limited liability company (the “Purchaser”), of which Mr. Gonthier is the sole member.  Pursuant to the Stock Purchase Agreement, Parent issued and sold to the Purchaser 4,922 shares of Class A Common Stock and 4,922 shares of Class B Common Stock, for an aggregate purchase price of $6.0 million.

On October 8, 2013, Parent entered into a Stock Purchase Agreement with Andrew Giancamilli, a director of Parent and of the Company.  Pursuant to the terms of the Stock Purchase Agreement, Mr. Giancamilli purchased 410 shares of Class A Common Stock and 410 shares of Class B Common Stock, for an aggregate purchase price of $0.5 million.

Credit Facilities Amendment

On October 8, 2013, the Company completed a repricing of its First Lien Term Loan Facility borrowed $100 million of incremental term loans and amended certain other provisions thereto.  The amendment decreased the interest rate applicable to the term loans from LIBOR plus 4.00% (or base rate plus 3.00%) to LIBOR plus 3.50% (or base rate plus 2.50%) and the LIBOR floor from 1.25% to 1.00%.  Under the amendment, the incremental term loans have the same interest rate as the other term loans. The Company will continue to be required to make scheduled quarterly payments each equal to 0.25% of the amended principal amount of the term loan (approximately $1.5 million).  The maturity date of January 13, 2019 of the First Lien Term Loan Facility was not affected by the amendment.

The Company determined that a portion of the repricing transaction should be accounted for as debt extinguishment. In the third quarter of fiscal 2014, in accordance with applicable guidance for debt modification and extinguishment, the Company plans to record a loss on debt extinguishment of approximately $4.4 million related to a portion of the unamortized debt issuance costs, unamortized original issue discount and repricing costs incurred in connection with the amendment for the portion of the First Lien Term Loan Facility that was extinguished.

In connection with the amendment to the First Lien Term Loan Facility, on October 8, 2013, the ABL Facility was also amended.

Each amendment (a) amended certain restricted payment provisions to permit the Gold-Schiffer Purchase and (b) removed the maximum capital expenditures covenant.

In addition, the amendment to the First Lien Term Loan Facility (a) modifies the existing restricted payment builder basket construct so that from and after March 31, 2013 it is based on 50% of positive Consolidated Net Income (as defined in the First Lien Term Loan Facility agreement), subject to a reduction for 100% of negative Consolidated Net Income, and (b) permits proceeds of any sale leasebacks of any assets acquired after January 13, 2012, to be reinvested in the Company’s business without restriction.

Chief Executive Officer Equity Awards

On October 9, 2013, in connection with Stéphane Gonthier’s employment as President and Chief Executive Officer of the Company and the Parent, the compensation committee of the Parent granted to Mr. Gonthier stock options to purchase an aggregate of 21,505 shares of each of the Class A and Class B Common Stock (the “Options”).  Subject to the continued employment of Mr. Gonthier, (a) 75% of the Options will vest 30% on the first anniversary of the grant date, 20% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries of the grant date and (b) 25% of the Options will vest subject to the Company’s and Parent’s achievement of performance hurdles.  The Options are subject to the terms of the 2012 Plan and the award agreement under which they were granted.

Repurchase Transaction with Rollover Investors

On October 15, 2013, Parent and the Company entered into an agreement with the Sellers, pursuant to which (a)(i) Parent purchased from each Seller all of the shares of Class A Common Stock and Class B Common Stock, owned by such Seller and (ii) all of the options to purchase shares of Class A Common Stock and Class B Common Stock held by such Seller were cancelled and forfeited, for aggregate consideration of approximately $129.7 million and (b) the Company agreed to certain amendments to the Non-Competition, Non-Solicitation and Confidentiality Agreements and the Separation and Release Agreements with the Sellers who were former management of the Company.  The Gold-Schiffer Purchase was completed on October 21, 2013. Prior to completion of the transaction, Howard Gold resigned from the board of directors of each of Parent and the Company.  The Gold-Schiffer Purchase was funded through a combination of borrowings of $100 million of incremental term loans under the First Lien Term Loan Facility and cash on hand at the Company and Parent.  In connection with the Gold-Schiffer Purchase, the Company made a distribution to, and investment in shares of preferred stock of, Parent.

Conversion to LLC

On October 18, 2013, the Company converted (the “Conversion”) from a California corporation to a California limited liability company, 99 Cents Only Stores LLC (“99 LLC”), that is managed by a single member, Parent.  In connection with the Conversion, each outstanding share of Class A common stock of the Company, par value $0.01 per share, was converted into one membership unit of 99 LLC, and each outstanding share of Class B common stock of the Company, par value $0.01 per share, was cancelled and forfeited.  Pursuant to the laws of the State of California, all rights and property of the Company were vested in 99 LLC and all debts, liabilities and obligations of the Company continued as debts, liabilities and obligations of 99 LLC.  99 LLC has elected to be treated as a disregarded entity for United States federal income tax purposes.  The conversion to LLC did not have any impact on deferred tax assets or liabilities, and the Company will continue to utilize the liability method of accounting for income taxes.  The Company and its Parent will continue to file consolidated or combined income tax returns with its subsidiaries in all jurisdictions.  The Company and its Parent will continue to allocate tax expense.