##### Table of Contents






FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


(Mark One)

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

For the quarterly period ended: October 26, 2002

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from: to

Commission file number: 333-57011

Iron Age Corporation




(Exact name of registrant as specified in its charter)


|                                                           |  |                                        
|---------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                   |  | 25-1376723                             
|                                                           |  |                                        
|(State or other jurisdiction
incorporation or organization |  | (I.R.S. Employer
Identification Number)

Robinson Plaza Three, Suite 400, Pittsburgh, Pennsylvania 15205

(Address of principal executive offices)
(Zip Code)

(412) 787-4100




Registrants telephone number, including area code)




Not Applicable.





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


Indicate by check mark whether 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 [ ]


APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ] Not Applicable.

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuers classes of
common stock as of the latest practicable date. Not Applicable.





---

TABLE OF CONTENTS



|                                  |                                                                                                |                |  |  |  |  |  | 
|--------------------------------- | ---------------------------------------------------------------------------------------------- | -------------- |  |  |  |  |  | 
|FORM 10-Q                        
|PART 1  FINANCIAL INFORMATION   
|                                  | Item 1. Financial Statements.                                                                 
|                                  | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                  | Item 3. Quantitative and Qualitative Disclosures about Market Risk.                           
|                                  | Item 4. Controls and Procedures                                                               
|PART II OTHER INFORMATION        
|                                  |                                                                                                | CERTIFICATIONS
|Promissory Note                  
|Certification of William J. Mills
|Certification of Bart R. Huchel  



---



##### Table of Contents






PART 1  FINANCIAL INFORMATION




Item 1. Financial Statements.



| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | The following financial statements are presented herein:                                                        
|
| | Consolidated Balance Sheets as of October 26, 2002 and
January 26, 2002                                         
|
| | Consolidated Statements of Loss for the three months and nine months
ended October 26, 2002 and October 27, 2001
|
| | Consolidated Statements of Cash Flows for the nine months
ended October 26, 2002 and October 27, 2001           
|
| | Notes to Consolidated Financial Statements                                                                      

-2-



---



##### Table of Contents



Iron Age Corporation
Consolidated Balance Sheets

|                                                     |                                                                             |                        |             |         |            |   |         |         |  
|---------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------- | ----------- | ------- | ---------- | - | ------- | ------- | -
|                                                     |                                                                             |                        | October 26  |         | January 26
|                                                     |                                                                             |                        | 2002        |         | 2002      
|                                                     |                                                                             |                        |             |         |           
|                                                     |                                                                             |                        | (unaudited) |         |            |   |        
|Assets                                               |                                                                             | (Dollars in Thousands)
|                                                     |                                                                             |                        |             |         |            |  
|Current assets:                                      |                                                                             |                        |             |         |            |   |         |        
|                                                     | Cash and cash equivalents                                                   |                        | $           | 677     |            |   | $       | 615     |  
|                                                     | Accounts receivable, net                                                    |                        |             | 14,589  |            |   |         | 14,066  |  
|                                                     | Inventories (Note 2)                                                        |                        |             | 32,473  |            |   |         | 32,089  |  
|                                                     | Prepaid expenses                                                            |                        |             | 1,131   |            |   |         | 2,120   |  
|                                                     | Deferred income taxes                                                       |                        |             | 670     |            |   |         | 726     |  
|                                                     |                                                                             |                        |             |         |            |   |         |        
|Total current assets                                 |                                                                             |                        | 49,540      |         |            |   | 49,616  |        
|                                                    
|Note receivable from parent (Note 5)                 |                                                                             |                        | 1,037       |         |            |   |        |        
|Other noncurrent assets                              |                                                                             |                        | 3,489       |         |            |   | 3,633   |        
|Property and equipment, net                          |                                                                             |                        | 10,186      |         |            |   | 9,253   |        
|Customer lists, net                                  |                                                                             |                        | 10,383      |         |            |   | 11,212  |        
|Other intangible assets, net                         |                                                                             |                        | 3,745       |         |            |   | 81,748  |        
|                                                     |                                                                             |                        |             |         |            |   |         |        
|Total assets                                         |                                                                             | $                      | 78,380      |         |            | $ | 155,462 |        
|                                                     |                                                                             |                        |             |         |            |   |         |        
|Liabilities and stockholders (deficit) equity       |                                                                             |                        |             |         |            |   |         |        
|Current liabilities:                                 |                                                                             |                        |             |         |            |   |         |        
|                                                     | Current maturities of long-term debt                                        |                        | $           | 1,414   |            |   | $       | 6,475   |  
|                                                     | Bank credit facility (Note 6)                                               |                        |             | 15,017  |            |   |         |        |  
|                                                     | Accounts payable                                                            |                        |             | 3,078   |            |   |         | 4,687   |  
|                                                     | Accrued expenses                                                            |                        |             | 7,147   |            |   |         | 5,076   |  
|                                                     |                                                                             |                        |             |         |            |   |         |        
|Total current liabilities                            |                                                                             |                        | 26,656      |         |            |   | 16,238  |        
|                                                    
|Long-term debt, less current maturities              |                                                                             |                        | 80,820      |         |            |   | 86,245  |        
|Other noncurrent liabilities                         |                                                                             |                        | 341         |         |            |   | 390     |        
|Deferred income taxes                                |                                                                             |                        | 2,685       |         |            |   | 5,589   |        
|                                                     |                                                                             |                        |             |         |            |   |         |        
|Total liabilities                                    |                                                                             |                        | 110,502     |         |            |   | 108,462 |        
|Commitments and contingencies                        |                                                                             |                        |            |         |            |   |        |        
|Series B redeemable preferred stock                  |                                                                             |                        | 9,626       |         |            |   | 8,300   |        
|Series C redeemable preferred stock                  |                                                                             |                        | 7,750       |         |            |   | 6,545   |        
|Stockholders (deficit) equity:                      |                                                                             |                        |             |         |            |   |         |        
|                                                     | Common stock, $1 par value; 1,000 shares
authorized, issued and outstanding |                        |             | 1       |            |   |         | 1       |  
|                                                     | Additional paid-in capital                                                  |                        |             | 44,466  |            |   |         | 44,466  |  
|                                                     | Accumulated deficit                                                         |                        |             | (93,654 | )          |   |         | (11,941 | )
|                                                     | Other comprehensive loss                                                    |                        |             | (311    | )          |   |         | (371    | )
|                                                     |                                                                             |                        |             |         |            |   |         |        
|Total stockholders (deficit) equity                 |                                                                             |                        | (49,498     | )       |            |   | 32,155  |        
|                                                     |                                                                             |                        |             |         |            |   |         |        
|Total liabilities and stockholders (deficit) equity |                                                                             | $                      | 78,380      |         |            | $ | 155,462 |        
|                                                     |                                                                             |                        |             |         |            |   |         |        

See accompanying notes.

-3-



---



##### Table of Contents



Iron Age Corporation
Consolidated Statements of Loss (Unaudited)

|                                                                                                     |  |                        |        |                   |  |            |        |            |  |   |         |   |  |   |        |  
|---------------------------------------------------------------------------------------------------- |  | ---------------------- | ------ | ----------------- |  | ---------- | ------ | ---------- |  | - | ------- | - |  | - | ------ | -
|                                                                                                     |  | Three months ended     |        | Nine months ended
|                                                                                                     |  |                        |        |                  
|                                                                                                     |  | October 26             |        | October 27        |  | October 26 |        | October 27
|                                                                                                     |  | 2002                   |        | 2001              |  | 2002       |        | 2001      
|                                                                                                     |  |                        |        |                   |  |            |        |           
|                                                                                                     |  | (Dollars in Thousands)
|Net sales                                                                                            |  | $                      | 24,931 |                   |  | $          | 25,487 |            |  | $ | 76,337  |   |  | $ | 81,010 |  
|Cost of sales                                                                                        |  |                        | 12,748 |                   |  |            | 13,087 |            |  |   | 38,225  |   |  |   | 39,955 |  
|                                                                                                     |  |                        |        |                   |  |            |        |            |  |   |         |   |  |   |        |  
|Gross profit                                                                                         |  |                        | 12,183 |                   |  |            | 12,400 |            |  |   | 38,112  |   |  |   | 41,055 |  
|Selling, general and administrative                                                                  |  |                        | 10,412 |                   |  |            | 10,929 |            |  |   | 30,579  |   |  |   | 31,798 |  
|Provision for impairment                                                                             |  |                        |       |                   |  |            | 1,800  |            |  |   |        |   |  |   | 1,800  |  
|Depreciation                                                                                         |  |                        | 410    |                   |  |            | 445    |            |  |   | 1,185   |   |  |   | 1,510  |  
|Amortization of intangible assets                                                                    |  |                        | 542    |                   |  |            | 1,108  |            |  |   | 1,625   |   |  |   | 3,222  |  
|                                                                                                     |  |                        |        |                   |  |            |        |            |  |   |         |   |  |   |        |  
|Operating income (loss)                                                                              |  |                        | 819    |                   |  |            | (1,882 | )          |  |   | 4,723   |   |  |   | 2,725  |  
|Interest expense                                                                                     |  |                        | 2,362  |                   |  |            | 2,122  |            |  |   | 6,692   |   |  |   | 6,430  |  
|                                                                                                     |  |                        |        |                   |  |            |        |            |  |   |         |   |  |   |        |  
|Loss before income taxes, cumulative effect
of change in accounting principle and
extraordinary item |  |                        | (1,543 | )                 |  |            | (4,004 | )          |  |   | (1,969  | ) |  |   | (3,705 | )
|Income tax (benefit) expense                                                                         |  |                        | (608   | )                 |  |            | (653   | )          |  |   | (502    | ) |  |   | 555    |  
|                                                                                                     |  |                        |        |                   |  |            |        |            |  |   |         |   |  |   |        |  
|Loss before cumulative effect of change
in accounting principle and
extraordinary item               |  |                        | (935   | )                 |  |            | (3,351 | )          |  |   | (1,467  | ) |  |   | (4,260 | )
|Cumulative effect of change in accounting
principle, net of tax effect of $1,718 (Note 3)            |  |                        |       |                   |  |            |       |            |  |   | (77,510 | ) |  |   |       |  
|Extraordinary loss, net of tax effect of $138 (Note 6)                                               |  |                        | (206   | )                 |  |            |       |            |  |   | (206    | ) |  |   |       |  
|                                                                                                     |  |                        |        |                   |  |            |        |            |  |   |         |   |  |   |        |  
|Net loss                                                                                             |  | $                      | (1,141 | )                 |  | $          | (3,351 | )          |  | $ | (79,183 | ) |  | $ | (4,260 | )
|                                                                                                     |  |                        |        |                   |  |            |        |            |  |   |         |   |  |   |        |  

See accompanying notes.

-4-



---



##### Table of Contents



Iron Age Corporation
Consolidated Statements of Cash Flows (Unaudited)

|                                                                                |                                                              |   |         |                        |   |                   |         |        |   | 
|------------------------------------------------------------------------------- | ------------------------------------------------------------ | - | ------- | ---------------------- | - | ----------------- | ------- | ------ | - | 
|                                                                                |                                                              |   |         | Nine months ended      |   | Nine months ended
|                                                                                |                                                              |   |         | October 26             |   | October 27       
|                                                                                |                                                              |   |         | 2002                   |   | 2001             
|                                                                                |                                                              |   |         |                        |   |                  
|                                                                                |                                                              |   |         | (Dollars in Thousands)
|Operating activities                                                            |                                                              |   |         |                        |   |                   |         |       
|Net loss                                                                        |                                                              | $ | (79,183 | )                      |   | $                 | (4,260  | )     
|Adjustments to reconcile net loss to net cash provided by
operating activities: |                                                              |   |         |                        |   |                   |         |       
|                                                                                | Provision for impairment                                     |   |         |                       |   |                   |         | 1,800  |  
|                                                                                | Cumulative effect of change in accounting principle          |   |         | 77,510                 |   |                   |         |       |  
|                                                                                | Extraordinary loss, net of tax                               |   |         | 206                    |   |                   |         |       |  
|                                                                                | Change in fair market value of interest rate swap            |   |         |                       |   |                   |         | (759   | )
|                                                                                | Depreciation and amortization                                |   |         | 3,155                  |   |                   |         | 5,095  |  
|                                                                                | Amortization of deferred financing fees included in interest |   |         | 489                    |   |                   |         | 527    |  
|                                                                                | Provision for losses on accounts receivable                  |   |         | 264                    |   |                   |         | 185    |  
|                                                                                | Deferred income taxes                                        |   |         | (1,130                 | ) |                   |         | 690    |  
|                                                                                | Stock-based compensation                                     |   |         | 132                    |   |                   |         |       |  
|Changes in operating assets and liabilities:                                    |                                                              |   |         |                        |   |                   |         |       
|                                                                                | Accounts receivable                                          |   |         | (919                   | ) |                   |         | 1,800  |  
|                                                                                | Inventories                                                  |   |         | (384                   | ) |                   |         | (1,261 | )
|                                                                                | Prepaid expenses                                             |   |         | 1,127                  |   |                   |         | 371    |  
|                                                                                | Other assets                                                 |   |         | (384                   | ) |                   |         | 988    |  
|                                                                                | Accounts payable                                             |   |         | (1,609                 | ) |                   |         | 2,088  |  
|                                                                                | Accrued expenses                                             |   |         | 2,071                  |   |                   |         | 568    |  
|                                                                                | Other noncurrent liabilities                                 |   |         | (49                    | ) |                   |         | (37    | )
|                                                                                |                                                              |   |         |                        |   |                   |         |       
|Net cash provided by operating activities                                       |                                                              |   | 1,296   |                        |   |                   | 7,795   |       
|Investing activities                                                            |                                                              |   |         |                        |   |                   |         |       
|Capitalization of internal-use software costs                                   |                                                              |   | (234    | )                      |   |                   | (999    | )     
|Purchases of property and equipment                                             |                                                              |   | (2,463  | )                      |   |                   | (1,431  | )     
|                                                                                |                                                              |   |         |                        |   |                   |         |       
|Net cash used in investing activities                                           |                                                              |   | (2,697  | )                      |   |                   | (2,430  | )     
|Financing activities                                                            |                                                              |   |         |                        |   |                   |         |       
|Borrowings under revolving credit agreement                                     |                                                              |   | 36,459  |                        |   |                   | 12,275  |       
|Proceeds from Term Loan A, Term Loan B and Term Loan C                          |                                                              |   | 16,000  |                        |   |                   |        |       
|Principal payments on debt                                                      |                                                              |   | (49,556 | )                      |   |                   | (16,655 | )     
|Payment of financing costs                                                      |                                                              |   | (2,068  | )                      |   |                   | (182    | )     
|Principal payments on capital leases, net                                       |                                                              |   | 568     |                        |   |                   | (11     | )     
|                                                                                |                                                              |   |         |                        |   |                   |         |       
|Net cash provided by (used in) financing activities                             |                                                              |   | 1,403   |                        |   |                   | (4,573  | )     
|Effect of exchange rate changes on cash and cash equivalents                    |                                                              |   | 60      |                        |   |                   | (108    | )     
|                                                                                |                                                              |   |         |                        |   |                   |         |       
|Increase in cash and cash equivalents                                           |                                                              |   | 62      |                        |   |                   | 684     |       
|Cash and cash equivalents at beginning of period                                |                                                              |   | 615     |                        |   |                   | 82      |       
|                                                                                |                                                              |   |         |                        |   |                   |         |       
|Cash and cash equivalents at end of period                                      |                                                              | $ | 677     |                        |   | $                 | 766     |       
|                                                                                |                                                              |   |         |                        |   |                   |         |       
|Supplemental schedule of noncash investing
and financing activities             |                                                              |   |         |                        |   |                   |         |       
|Dividends and accretion on preferred stock                                      |                                                              | $ | 2,531   |                        |   | $                 | 1,858   |       
|Capital lease obligations                                                       |                                                              | $ | 797     |                        |   | $                 | 262     |       

See accompanying notes.

-5-



---



##### Table of Contents



Iron Age Corporation
Notes to Consolidated
Financial Statements (Unaudited)

October 26, 2002

1. Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and with the instructions
to Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine month period ended October 26, 2002 are not necessarily
indicative of the results that may be expected for the fiscal year ended
January 25, 2003. For further information, refer to Iron Age Corporations
(Iron Age or the Company) consolidated financial statements and footnotes
thereto for the fiscal year ended January 26, 2002.



|2. |  | Inventories
|-- |  | -----------

Inventories consist of the following:

|                |  |                        |        |            |  |   |        | 
|--------------- |  | ---------------------- | ------ | ---------- |  | - | ------ | 
|                |  | October 26             |        | January 26
|                |  | 2002                   |        | 2002      
|                |  |                        |        |           
|                |  | (Dollars in Thousands)
|Raw materials   |  | $                      | 1,786  |            |  | $ | 2,060  | 
|Work-in-process |  |                        | 711    |            |  |   | 629    | 
|Finished goods  |  |                        | 29,976 |            |  |   | 29,400 | 
|                |  |                        |        |            |  |   |        | 
|                |  | $                      | 32,473 |            |  | $ | 32,089 | 
|                |  |                        |        |            |  |   |        | 



|3. |  | Intangible Assets
|-- |  | -----------------

Effective January 27, 2002, the Company adopted Statement on Financial
Accounting Standards (SFAS) No. 141, Business Combinations, and Statement on
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets (the Statements). Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the provisions of SFAS
No. 142. While amortization of goodwill will no longer be reflected in the
Companys financial statements, amortization related to certain of the
Companys other intangible assets will continue to be deductible for income tax
purposes. Amortization expense related to the Companys goodwill for the three
months and nine months ended October 27, 2001, was $0.6 million and $1.7
million, respectively.

-6-



---



##### Table of Contents



In connection with the adoption of SFAS No. 142, the Company tested its
goodwill for impairment, which required an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption, January 27,
2002. The Company has identified two reporting units, distribution and
manufacturing, and determined the carrying value of those units as of the date
of adoption. Only the distribution reporting unit had related goodwill. The
Company assessed the fair value of the distribution reporting unit and compared
it to the reporting units carrying amount, as computed in Step 1 of the
evaluation. The fair value of the distribution reporting unit in Step 1 of the
evaluation was determined using a 5-year discounted cash flow model. Key
assumptions included managements estimates of future profitability, capital
requirements, a discount rate of 14.6% and a terminal growth rate of 2%. Based
upon the initial evaluation, Step 2 of the evaluation was required, as the
distribution reporting unit had a carrying value in excess of its fair value.
In conjunction with Step 2, the Company retained an independent appraisal firm
to prepare a valuation of the Companys assets and liabilities. Step 2
requires the implied fair value of goodwill to be calculated by allocating the
fair value of the reporting unit to its tangible and intangible net assets,
other than goodwill. The remaining unallocated fair value represents the
implied fair value of the goodwill. Management and the independent appraisal
firm have determined that all of the Companys goodwill was impaired at January
27, 2002. Accordingly, the Company has recorded a goodwill impairment charge
of $77.5 million, net of tax of $1.7 million, as a cumulative effect of change
in accounting for goodwill, for the nine month period ended October 26, 2002.
The goodwill impairment charge has no effect on cash, the ongoing operation of
the Company, the covenants relating to the Bank Credit Facility or the
indenture for the Senior Subordinated Notes.

The following table presents reported net (loss) income exclusive of goodwill
amortization expense for the three month period and the nine month period ended
October 26, 2002 and October 27, 2001, respectively.

|                                  |  |                    |        |                   |  |                        |        |             |  |   |         |   |  |   |        |  
|--------------------------------- |  | ------------------ | ------ | ----------------- |  | ---------------------- | ------ | ----------- |  | - | ------- | - |  | - | ------ | -
|                                  |  | Three Months Ended |        | Nine Months Ended
|                                  |  |                    |        |                  
|                                  |  | October 26,        |        | October 27,       |  | October 26,            |        | October 27,
|                                  |  | 2002               |        | 2001              |  | 2002                   |        | 2001       
|                                  |  |                    |        |                   |  |                        |        |            
|                                  |  |                    |        |                   |  | (Dollars in Thousands) |        |             |  |  
|Reported net loss                 |  | $                  | (1,141 | )                 |  | $                      | (3,351 | )           |  | $ | (79,183 | ) |  | $ | (4,260 | )
|Add back:                         |  |                    |        |                   |  |                        |        |             |  |   |         |   |  |   |        |  
|Goodwill amortization, net of tax |  |                    |       |                   |  |                        | 575    |             |  |   |        |   |  |   | 1,723  |  
|                                  |  |                    |        |                   |  |                        |        |             |  |   |         |   |  |   |        |  
|Adjusted net loss                 |  | $                  | (1,141 | )                 |  | $                      | (2,776 | )           |  | $ | (79,183 | ) |  | $ | (2,537 | )
|                                  |  |                    |        |                   |  |                        |        |             |  |   |         |   |  |   |        |  

Amortization expense for other intangible assets subject to amortization for
the three month and nine month periods ended October 26, 2002 and October 27,
2001 are $0.5 million, $0.5 million, $1.6 million and $1.5 million,
respectively. Estimated amortization expense for the fiscal year ended January
25, 2003 and the succeeding five fiscal years is approximately $2.2 million per
year.

-7-



---



##### Table of Contents





|4. |  | Comprehensive Loss
|-- |  | ------------------

|                                         |  |                        |        |                   |  |             |        |             |  |   |         |   |  |   |        |  
|---------------------------------------- |  | ---------------------- | ------ | ----------------- |  | ----------- | ------ | ----------- |  | - | ------- | - |  | - | ------ | -
|                                         |  | Three Months Ended     |        | Nine Months Ended
|                                         |  |                        |        |                  
|                                         |  | October 26,            |        | October 27,       |  | October 26, |        | October 27,
|                                         |  | 2002                   |        | 2001              |  | 2002        |        | 2001       
|                                         |  |                        |        |                   |  |             |        |            
|                                         |  | (Dollars in Thousands)
|Net loss                                 |  | $                      | (1,141 | )                 |  | $           | (3,351 | )           |  | $ | (79,183 | ) |  | $ | (4,260 | )
|Foreign currency translation gain (loss) |  |                        | 21     |                   |  |             | (76    | )           |  |   | 60      |   |  |   | (108   | )
|                                         |  |                        |        |                   |  |             |        |             |  |   |         |   |  |   |        |  
|Total comprehensive loss                 |  | $                      | (1,120 | )                 |  | $           | (3,427 | )           |  | $ | (79,123 | ) |  | $ | (4,368 | )
|                                         |  |                        |        |                   |  |             |        |             |  |   |         |   |  |   |        |  



|5. |  | Related Party Transactions
|-- |  | --------------------------

On October 1, 2002, the Company and Iron Age Holdings Corporation (Holdings),
the Companys parent company, entered into a promissory note permitting
Holdings to borrow up to $4.8 million for purposes of repurchasing Holdings 12
1/8% Senior Discount Notes due 2009 (the Discount Notes). The promissory
note bears interest at 14.0% and matures on October 1, 2009. Holdings borrowed
approximately $1.04 million from the Company on October 11, 2002 to partially
fund its repurchase of $6.801 million in face value of its Discount Notes.

On May 23, 2002, the Company purchased 25.08 shares of Iron Age Holdings
Corporations Series B non voting, cumulative, redeemable preferred stock with
a par value of $.01 per share (the Holdings Series B Preferred Stock) from
certain officers of the Company, in exchange for the unpaid balance of
principal and accrued interest of their outstanding Term Promissory Notes in
the amount of approximately $0.14 million. Following the purchase, these
officers held 22.67 shares of Holdings Series B Preferred Stock.
The Company recorded $0.13 million as stock-based compensation for
the nine months ended October 26, 2002.



|6. |  | Long-term debt
|-- |  | --------------

On September 23, 2002, the Company, Holdings and Falcon Shoe Mfg. Co.
(Falcon), one of the Companys wholly-owned subsidiaries, entered into a
$50.0 million Loan and Security Agreement (the Bank Credit Facility) with a
financial institution and another lender. The Bank Credit Facility consists of
a $38.0 million revolving credit facility, including a $2.0 million letter of
credit subfacility, and two term loans: Term Loan A of up to an aggregate of
$1.0 million and Term Loan B of up to an aggregate of $3.0 million. In
addition, the Bank Credit Facility includes a third term loan, Term Loan C, of
up to an aggregate of $12.0 million. Availability under the Bank Credit
Facility is governed by a borrowing base determined by advance rates against
the qualified inventory and accounts receivable of the Company and Falcon.

The revolving credit facility and the Term Loan C are due in full on September
23, 2007. The
-8-Table of Contents

outstanding balances of the Term Loan A and the Term Loan B are
due in monthly installments through September 23, 2007. Term Loan A, Term Loan
B and the revolving credit facility bear interest at either the prime rate or
LIBOR, at the option of the Company, plus an applicable margin. Outstanding
borrowings on the revolving credit facility at prime rate plus a margin of
1.50% and LIBOR plus a margin of 3.75% are approximately $3.0 million and $12.0
million, respectively. Borrowings of approximately $1.0 million for Term Loan
A are at prime rate plus a margin of 1.50%. Borrowings on Term Loan B at prime
rate plus a margin of 3.25% and LIBOR plus a margin of 5.50% are approximately
$0.4 million and $2.5 million, respectively. The interest rate for Term Loan C
is 13.25%, including 2.0% paid-in-kind. Outstanding borrowings For Term Loan C
approximate $12.0 million. The Company pays a 0.375% commitment fee on the
undrawn amounts of the revolving credit facility. The Company pays a 2.00%
letter of credit fee on any outstanding Letters of Credit.

At closing, the Company drew the entire amount of Term Loan A, Term Loan B and
Term Loan C and approximately $14.2 million on the revolving credit facility,
to refinance its previous bank credit facility of approximately $27.6 million,
including accrued interest, and to pay certain financing fees and expenses. In
connection with the refinancing of the Companys previous bank credit facility,
the Company wrote-off approximately $0.2 million, net of tax of $0.1 million,
of unamortized debt issuance costs remaining from its previous bank credit
facility.

The Company incurred approximately $2.0 million in capitalizable debt issuance
costs are being be amortized over the term of the Bank Credit Facility.

The Bank Credit Facility contains certain financial and other covenants,
requiring the Company to maintain various financial ratios, limiting its
ability to incur additional indebtedness, restricting the amount of capital
expenditures that may be incurred, and limiting transactions with affiliates.
The Bank Credit Facility also limits the Companys ability to engage in mergers
or acquisitions, sell certain assets, pay dividends or repurchase its stock.
The Bank Credit Facility is secured by a first priority security interest in
substantially all of the Companys assets. The Companys domestic and Canadian
subsidiaries are required to guarantee its obligations under the Bank Credit
Facility.

Although the Bank Credit Facility
expires on September 23, 2007, the revolving credit facility has been classified as current in accordance with
Statement of Financial Accounting Standards (SFAS) No. 6, Classification of
Short Term Obligations Expected to be Refinanced.

-9-



---



##### Table of Contents






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

General

The following discussions should be read in conjunction with the accompanying
Condensed Consolidated Financial Statements for the period ended October 26,
2002, and the Companys audited consolidated financial statements and Annual
Report on Form 10-K for the fiscal year ended January 26, 2002.

Results of Operations

Three Months ended October 26, 2002 compared to
Three Months ended October 27, 2001

Net Salesfor the three months ended October 26, 2002 (third quarter 2003)
were $24.9 million compared to $25.5 million for the comparable three month
period ended October 27, 2001 (third quarter 2002), a decrease of $0.6
million, or 2.4%. The decrease in net sales was attributable to a decrease of
$0.3 million, or 4.2%, in the Companys primary footwear distribution business
line, primarily related to a decrease of approximately $0.3 million, or 6.6%,
in the Companys industrial direct business line, as a result of decreases in
purchases by several customers, reflecting a continued softness in the general
economic environment. Net sales in third quarter 2003 were flat in the
Companys retail business line at $19.1 million and the Companys direct mail
business line at $1.5 million, compared to third quarter 2002. In addition,
for third quarter 2003, there were no sales relating to the Companys vision
products business line, which was sold in December 2001, compared to $0.3
million in net sales for third quarter 2002, a decrease of $0.3 million, or
50.0% of the overall decrease in net sales.

Gross Profitfor third quarter 2003 was $12.2 million compared to $12.4 million
for third quarter 2002, a decrease of $0.2 million, or 1.6%. The decrease in
gross profit was primarily related to the decrease in net sales as discussed
above. As a percentage of net sales, gross profit for third quarter 2003
increased to 48.9%, an increase of 0.2% from third quarter 2002. Gross profit
percentage decreased in the Companys primary footwear distribution line by
0.1% in third quarter 2003, due primarily to general changes in product mix and
the impact of competitive pricing strategies. The decrease in gross profit
percentage in the primary footwear distribution line was offset by a 2.0%
increase in gross profit percentage in the Companys manufacturing subsidiary.

Selling, General and Administrative Expensesfor third quarter 2003 were $10.4
million compared to $10.9 million for third quarter 2002, a decrease of $0.5
million, or 4.6%, due primarily to decreases
-10-Table of Contents

of approximately $0.4 million in
employee costs, including salaries and wages and approximately $0.1 million in
advertising cost reductions.

Provision for impairmentfor third quarter 2002 was $1.8 million. The provision
for impairment relates to the optical business line that the Company sold in
December 2001. There were no material favorable effects on the financial
statements associated with the assets that were sold. The provision for
impairment included goodwill and certain other intangible assets, including
customer lists, that the Companys management determined was impaired.

Operating Incomefor third quarter 2003 was $0.8 million compared to an
operating loss of $1.9 million for third quarter 2002, an increase of $2.7
million, or 142.1%. As a percentage of net sales, operating income was 3.2% of
net sales for third quarter 2003 compared to an operating loss of 7.5% of net
sales for third quarter 2002. The decrease in gross profit was offset by
reductions in selling, general and administrative expenses as discussed above,
the provision for the optical business line impairment in third quarter 2002
and by decreases in amortization expense, primarily goodwill, in conjunction
with the adoption of Statement of Financial accounting Standards (SFAS) No.
142.

Interest Expensefor third quarter 2003 was $2.4 million compared to $2.1
million for third quarter 2002, an increase of $0.3 million, or 14.3%. Interest
expense for third quarter 2002 included the favorable change of approximately
$0.2 million in the fair market value of the Companys interest rate swap
agreement due to the decrease in interest rates in third quarter 2002. The
interest rate swap agreement was terminated in October 2001. Excluding the
favorable impact of the interest rate swap agreement in third quarter 2002,
interest expense for third quarter 2003 increased due to the effect of higher
interest rates and increased indebtedness relating to the Bank Credit Facility.

Income Tax Benefitfor third quarter 2003 was $0.6 million compared to an
income tax benefit of $0.7 million for third quarter 2002. Income tax benefit
for third quarter 2003 differs from that of the statutory income tax rate due
primarily to nondeductible goodwill amortization. Upon the adoption of SFAS No.
142, the Company recorded no goodwill amortization for third quarter 2003.

Extraordinary Itemfor third quarter 2003 was an extraordinary loss of
approximately $0.2 million, net of income tax effect of $0.14 million, related
to the write-off of unamortized debt issue costs for the previous bank credit
facility which was refinanced in September 2002 as discussed above.

Nine Months ended October 26, 2002 compared to
Nine Months ended October 27, 2001

Net Salesfor the nine months ended October 26, 2002 (first three quarters
2003) were $76.3 million compared to $81.0 million for the comparable nine
month period ended October 27, 2001 (first three quarters 2002), a decrease
of $4.7 million, or 5.8%. The decrease in net sales was attributable to a
decrease of $3.3 million, or 4.2%, in the Companys primary footwear
distribution
business line, primarily related to a decrease of $2.2 million, or 16.0%, in
the Companys industrial direct business line, as a result of decreases in
purchases by several large customers, reflecting a continued softness in the
general economic environment. In addition, net sales decreased by $0.3
-11-Table of Contents

million, or 0.6%, in the Companys retail business line, reflecting a decline
in the general economic environment, including plant closings and employee
layoffs that affected the Companys customers. Further, the economy continues
to adversely impact the Companys direct mail business line. Net sales in the
direct mail business line decreased by $0.3 million, or 6.3%. The decrease in
net sales was also related to a decrease of $0.4 million, or 8.5% of the
overall decrease in net sales, in the Companys branded wholesale business
line, as there were no sales to the Companys primary wholesale customer in
first three quarters 2003, due to the bankruptcy of that customer in October
2001. In addition, sales decreased by $0.4 million, or 24.3% in the Companys
manufacturing subsidiary, due to decreased sales to its external customers.
Also, for first three quarters 2003, there were no sales relating to the
Companys vision products business line, which was sold in December 2001,
compared to $1.0 million in net sales for first three quarters 2002, a decrease
of $1.0 million, or 21.3% of the overall decrease in net sales.

Gross Profitfor first three quarters 2003 was $38.1 million compared to $41.1
million for first three quarters 2002, a decrease of $3.0 million, or 7.3%. The
decrease in gross profit was primarily related to the decrease in net sales as
discussed above. As a percentage of net sales, gross profit for first three
quarters 2003 decreased to 49.9%, a decrease of 0.8% from first three quarters
2002. Gross profit percentage decreased in the Companys primary footwear
distribution line by 1.4% for first three quarters 2003, due primarily to
general changes in product mix and the impact of competitive pricing
strategies. The decrease in gross profit percentage was partially offset by a
2.5% increase in gross profit percentage in the Companys manufacturing
subsidiary.

Selling, General and Administrative Expensesfor first three quarters 2003 were
$30.6 million compared to $31.8 million for first three quarters 2002, a
decrease of $1.2 million, or 3.8%, due primarily to the effect of employee
related cost reductions, including salaries and wages.

Provision for impairmentfor first three quarters 2002 was $1.8 million. The
provision for impairment relates to the optical business line that the Company
sold in December 2001. There were no material favorable effects on the
financial statements associated with the assets that were sold. The provision
for impairment included goodwill and certain other intangible assets, including
customer lists, that the Companys management determined was impaired.

Operating Incomefor first three quarters 2003 was $4.7 million compared to
$2.7 million for first three quarters 2002, an increase of $2.0 million, or
74.1%. As a percentage of net sales, operating income was 6.2% of net sales for
first three quarters 2003 compared to 3.3% of net sales for first three
quarters 2002. The decrease in gross profit was offset by reductions in
selling, general and administrative expenses as discussed above, the provision
for impairment in first three quarters 2002 and by decreases in depreciation
expense and amortization expense, primarily goodwill, in conjunction with the
adoption of SFAS No. 142.

Interest Expensefor first three quarters 2003 was $6.7 million compared to
$6.4 million for first three quarters 2002, an increase of $0.3 million, or
4.7%. For first three quarters 2002, interest expense was favorably impacted by
an increase of approximately $0.8 million in the fair market value of the
Companys interest rate swap agreement due to decreases in interest rates. The
interest rate swap agreement was terminated in October 2001. Excluding the
favorable impact of the interest
-12-Table of Contents

rate swap agreement in first three quarters
2002, interest expense for first three quarters 2003 decreased due to the
effect of lower interest rates and decreased indebtedness relating to the
previous bank credit facility.

Income Tax Benefitfor first three quarters 2003 was $0.5 million compared to
an income tax expense of $0.6 million for first three quarters 2002. Income tax
expense for first three quarters 2002 differs from that of the statutory income
tax rate due primarily to nondeductible goodwill amortization. Upon the
adoption of SFAS No. 142, the Company recorded no goodwill amortization for
first three quarters 2003. In addition, first three quarters 2002 included a
charge related to the recognition of a valuation allowance against the deferred
tax benefit for state net operating loss carryforwards. At January 27, 2001,
the Company had available state net operating loss carryforwards of
approximately $0.7 million, which expire in various years beginning in 2002
through 2019. For first three quarters 2002, the Company reviewed the
likelihood of utilizing the state net operating loss carryforwards and
determined that it is currently more likely than not that the benefit will not
be realized. The Company will continually monitor its state tax position and
may determine in the future that some or all of the state net operating losses
becomes realizable. At that point, the valuation allowance will be reduced to
reflect the net realizable amount which will result in an increase in net
income.

Extraordinary Itemfor first three quarters 2003 was an extraordinary loss of
approximately $0.2 million, net of income tax effect of $0.14 million, related
to the write-off of unamortized debt issue costs for the previous bank credit
facility which was refinanced in September 2002 as discussed above.

Liquidity and Capital Resources

Contractual Obligations and Commercial Commitments

|                                   |  |                        |         |                  |  |           |        |           |  |              |       |  |  |   |        |  |  |   |        | 
|---------------------------------- |  | ---------------------- | ------- | ---------------- |  | --------- | ------ | --------- |  | ------------ | ----- |  |  | - | ------ |  |  | - | ------ | 
|                                   |  | Payments Due by Period
|                                   |  | (Thousands of Dollars)
|Contractual Obligations:           |  | Total                  |         | Less than 1 year |  | 1-3 years |        | 4-5 years |  | Over 5 years
|                                   |  |                        |         |                  |  |           |        |           |  |             
|Long-Term Debt                     |  | $                      | 95,965  |                  |  | $         | 900    |           |  | $            | 2,429 |  |  | $ | 27,636 |  |  | $ | 65,000 | 
|Capital Lease Obligations          |  |                        | 1,108   |                  |  |           | 336    |           |  |              | 693   |  |  |   | 79     |  |  |   |       | 
|Operating Leases                   |  |                        | 6,167   |                  |  |           | 2,864  |           |  |              | 3,198 |  |  |   | 105    |  |  |   |       | 
|Unconditional Purchase Obligations |  |                        | 12,644  |                  |  |           | 12,644 |           |  |              |      |  |  |   |       |  |  |   |       | 
|Other Long-Term Obligations        |  |                        | 178     |                  |  |           | 178    |           |  |              |      |  |  |   |       |  |  |   |       | 
|Total Contractual Cash Obligations |  | $                      | 116,062 |                  |  | $         | 16,922 |           |  | $            | 6,320 |  |  | $ | 27,820 |  |  | $ | 65,000 | 

|                               |  |                                            |        |                  |  |           |     |           |  |              |       |  |  |   |        |  |  |   |   | 
|------------------------------ |  | ------------------------------------------ | ------ | ---------------- |  | --------- | --- | --------- |  | ------------ | ----- |  |  | - | ------ |  |  | - | - | 
|                               |  | Amount of Commitment Expiration Per Period
|                               |  | (Thousands of Dollars)                    
|Other Commercial Commitments:  |  | Total                                      |        | Less than 1 year |  | 1-3 years |     | 4-5 years |  | Over 5 years
|                               |  |                                            |        |                  |  |           |     |           |  |             
|Lines of Credit(1)             |  | $                                          | 49,925 |                  |  | $         | 900 |           |  | $            | 2,429 |  |  | $ | 46,596 |  |  | $ |  | 
|Guarantees                     |  |                                            |       |                  |  |           |    |           |  |              |      |  |  |   |       |  |  |   |  | 
|Standby Repurchase Obligations |  |                                            |       |                  |  |           |    |           |  |              |      |  |  |   |       |  |  |   |  | 
|Other Commercial Commitments   |  |                                            |       |                  |  |           |    |           |  |              |      |  |  |   |       |  |  |   |  | 
|Total Commercial Commitments   |  | $                                          | 49,925 |                  |  | $         | 900 |           |  | $            | 2,429 |  |  | $ | 46,596 |  |  | $ |  | 



---

|(1) |  | Includes $2,000 for Letters of
Credit, which were available to
the extent that available
borrowings exceed such an amount.
|--- |  | --------------------------------------------------------------------------------------------------------------------------

-13-



---



##### Table of Contents



Sources and Uses of Cash

The Companys primary cash needs are working capital, capital expenditures and
debt service. The Company has financed cash requirements primarily through
internally generated cash flow and funds borrowed under credit facilities.

Net cash provided by operating activities was $1.3 million for first three
quarters 2003, a decrease of $6.5 million as compared to net cash provided by
operating activities of $7.8 million in first three quarters 2002. The decrease
in cash provided by operating activities was primarily related to changes in
operating assets and liabilities, particularly increases in accounts receivable
and decreases in accounts payable. The change in accounts receivable relates
to the impact of new orders from a large customer in first three quarters 2003
as well as collection activity in first three quarters 2002 that paralleled the
decline in sales volume. The change in accounts payable reflects a reduced
level of product purchases and the timing of payments to certain key vendors.

The Companys investing activities for first three quarters 2003 consisted of
capital expenditures of approximately $2.5 million for improvements in retail
stores, shoemobiles and equipment and approximately $0.2 million for the
acquisition of software for internal use. Capital expenditures of approximately
$2.4 million for first three quarters 2002 included capital expenditures of
approximately $1.4 million for improvements in retail stores, shoemobiles and
equipment and approximately $1.0 million for the acquisition of software for
internal use.

The Companys financing activities for first three quarters 2003 provided under
the Bank Credit Facility and the previous bank credit facility, were
approximately $1.4 million, which included the scheduled principal payments of
approximately $0.1 million on the Bank Credit Facility and $4.6 million on the
previous bank credit facility. The Company used approximately $4.6 million for
financing activities for first three quarters 2002, which primarily consisted
of principal payments related to the previous bank credit facility.

The Companys total working capital as of October 26, 2002 was $22.9 million.
At January 26, 2002, working capital was $33.4 million. The decrease in
working capital is primarily related to the classification of the revolving
credit facility as current in accordance with Statement of Financial Accounting
Standards (SFAS) No. 6, Classification of Short Term Obligations Expected to be
Refinanced.

Cash flow from operations for first three quarters 2003 was sufficient to cover
debt service requirements under the Bank Credit Facility. The Companys ability
to make scheduled payments of principal, or to pay the interest or premium (if
any) on, or to refinance, its indebtedness, or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based upon the current level of
operations, management believes that cash flow from operations and available
cash, together with available borrowings under the Bank Credit Facility, will
be adequate to meet the Companys anticipated future requirements for working
capital, budgeted capital expenditures and scheduled payments of principal and
interest on its indebtedness
-14-Table of Contents

for the next several years. There can be no
assurance that the Companys business will generate sufficient cash flow from
operations or that future borrowing will be available under the Bank Credit
Facility in an amount sufficient to enable the Company to service its
indebtedness, including the Senior Subordinated Notes, or to make capital
expenditures.

The Companys debt consists of the Senior Subordinated Notes, the Bank Credit
Facility and certain other debt. The Bank Credit Facility, consists of a $38.0
million revolving credit facility, including a $2.0 million letter of credit
subfacility, and two term loans: Term Loan A of up to an aggregate $1.0 million
and Term Loan B of up to an aggregate of $3.0 million. In addition, the Bank
Credit Facility includes a third term loan, Term Loan C, of up to an aggregate
of $12.0 million. The Companys other debt of $1.3 million consists of capital
leases and other notes. As of October 26, 2002, approximately $15.0 million of
the revolving credit facility was outstanding. In addition, outstanding
balances as of October 26, 2002, for Term Loan A, Term Loan B and Term Loan C
were approximately $1.0 million, $2.9 million and $12.0 million, respectively.
The Company has borrowing availability of approximately $6.9 million under the
revolving credit facility as of October 26, 2002. Term Loan A and Term Loan B
mature in monthly installments from October 2002 until final payment in
September 2007. The revolving credit facility and Term Loan C will mature in
September 2007 and have no scheduled interim principal payments.

The Senior Subordinated Notes are fully and unconditionally guaranteed on an
unsecured, senior subordinated basis by each Domestic Restricted Subsidiary
that is a Material Subsidiary (as such terms are defined in the indenture for
the Senior Subordinated Notes (the Senior Subordinated Notes Indenture))
(whether currently existing, newly acquired or created). Each such subsidiary
guaranty (a Subsidiary Guaranty) will provide that the subsidiary guarantor,
as primary obligor and not merely as surety, will irrevocably and
unconditionally guarantee on an unsecured, senior subordinated basis the
performance and punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of the Company under the Senior
Subordinated Notes Indenture and the Senior Subordinated Notes, whether for
payment of principal or of interest on the Senior Subordinated Notes, expenses,
indemnification or otherwise. As of October 26, 2002, none of the Companys
Domestic Restricted Subsidiaries was a Material Subsidiary, and therefore no
Subsidiary Guaranty was in force or effect.

Long-term debt

On September 23, 2002, the Company, Holdings Corporation and Falcon, entered
into the Bank Credit Facility with a financial institution and another lender.
The Bank Credit Facility consists of a $38.0 million revolving credit facility,
including a $2.0 million letter of credit subfacility, and two term loans: Term
Loan A of up to an aggregate of $1.0 million and Term loan B of up to an
aggregate of $3.0 million. In addition, the Bank Credit Facility includes a
third term loan, Term Loan C, of up to an aggregate of $12.0 million.
Availability under the Bank Credit Facility is governed by a borrowing base
determined by advance rates against the inventory and accounts receivable of
the Company and Falcon.

The revolving credit facility and the Term Loan C are due in full on September
23, 2007. The outstanding balances of the Term Loan A and the Term Loan B are
due in installments through
-15-Table of ContentsSeptember 23, 2007. Term Loan A, Term Loan B and
the revolving credit facility bear interest at either the prime rate or LIBOR,
at the option of Holdings, plus an applicable margin. Outstanding borrowings on
the revolving credit facility at prime rate plus a margin of 1.50% and LIBOR
plus a margin of 3.75% are approximately $3.0 million and $12.0 million,
respectively. Borrowings of approximately $1.0 million for Term Loan A are at
prime rate plus a margin of 1.50%. Borrowings on Term Loan B at prime rate
plus a margin of 3.25% and LIBOR plus a margin of 5.50% are approximately $0.4
million and $2.5 million, respectively. The interest rate for Term Loan C is
13.25%, including 2.0% paid-in-kind. Outstanding borrowings For Term Loan C
approximate $12.0 million. The Company pays a 0.375% commitment fee on the
undrawn amounts of the revolving credit facility. The Company pays a 2.00%
letter of credit fee on any outstanding Letters of Credit.At closing, the Company drew the entire amount of Term Loan A, Term Loan B and
Term Loan C and approximately $14.2 million on the revolving credit facility,
to refinance its previous bank credit facility of approximately $27.6 million,
including accrued interest, and to pay certain financing fees and expenses. In
connection with the refinancing of the Companys previous bank credit facility,
The Company wrote-off approximately $0.3 million of unamortized debt issuance
costs remaining from its previous bank credit facility.The Company incurred approximately $2.0 million in capitalizable debt issuance
costs which are being amortized over the term of the Bank Credit Facility.The Bank Credit Facility contains certain financial and other covenants,
including covenants requiring the Company to maintain various financial ratios,
limiting its ability to incur additional indebtedness, restricting the amount
of capital expenditures that may be incurred, and
limiting transactions with affiliates. The Bank Credit Facility also limits
the Companys ability to engage in mergers or acquisitions, sell certain
assets, pay dividends or repurchase its stock. The Bank Credit Facility is
secured by a first priority security interest in substantially all of the
Companys assets. The Companys domestic and Canadian subsidiaries are required
to guarantee its obligations under the Bank Credit Facility.Although the Bank Credit Facility expires on September 23, 2007, the revolving
credit facility has been classified as current in accordance with Statement of
Financial Accounting Standards (SFAS) No. 6, Classification of Short Term
Obligations Expected to be Refinanced.Recently Issued Accounting StandardsEffective January 27, 2002, the Company adopted Statement on financial
Accounting Standards (SFAS) No. 141, Business Combinations, and Statement on
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets (the Statements). Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the provisions of SFAS
No. 142. While amortization of goodwill will no longer be reflected in
Holdings financial statements, amortization related to certain of the
Companys other intangible assets will continue to be deductible for income tax
purposes. Amortization expense related to the Companys goodwill for the three
months and-16-Table of Contents

nine months ended October 27, 2001, was $0.6 million and $1.7
million, respectively.

In connection with the adoption of SFAS No. 142, the Company tested its
goodwill for impairment, which required an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption, January 27,
2002. The Company has identified two reporting units, distribution and
manufacturing, and determined the carrying value of those units as of the date
of adoption. Only the distribution reporting unit had related goodwill. The
Company assessed the fair value of the distribution reporting unit and compared
it to the reporting units carrying amount, as computed in Step 1 of the
evaluation. The fair value of the distribution reporting unit in Step 1 of the
evaluation was determined using a 5-year discounted cash flow model. Key
assumptions included managements estimates of future profitability, capital
requirements, a discount rate of 14.6% and a terminal growth rate of 2%. Based
upon the initial evaluation, Step 2 of the evaluation was required, as the
distribution reporting unit had a carrying value in excess of its fair value.
In conjunction with Step 2, the Company retained an independent appraisal firm
to prepare a valuation of the Companys assets and liabilities. Step 2
requires the implied fair value of goodwill to be calculated by allocating the
fair value of the reporting unit to its tangible and intangible net assets,
other than goodwill. The remaining unallocated fair value represents the
implied fair value of the goodwill. Management and the independent appraisal
firm have determined that all of the Companys goodwill was impaired at January
27, 2002. Accordingly, the Company has recorded a goodwill impairment charge
of $77.5 million, net of tax of $1.7 million, as a cumulative effect of change
in accounting for goodwill, for the nine month period ended October 26, 2002.
The goodwill impairment charge has no effect on cash, the ongoing operation of
the Company, the covenants relating to the Bank Credit Facility or the
indenture for the Senior Subordinated Notes.

Effective January 27, 2002, the Company adopted Statement of Financial
Accounting Standards No. 144 (FAS 144), Accounting for the Impairment or
Disposal of Long-Lived Assets,. This Statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. This
Statement supercedes FAS Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the
accounting and reporting provisions of Accounting Principles Board (APB)
Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the disposal of a segment
of a business (as previously defined in that Opinion). FAS 144 has had no
material impact on the financial statements of the Company for the six months
ended October 26, 2002.

In August 2001, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 143, Accounting for Asset Retirement Obligations. SFAS 143 requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability is
initially recorded, the entity capitalizes the cost by increasing the carrying
amount of the related long-lived asset. Over time, the liability is accreted
to its present value each period, and the capitalized cost is depreciated over
the useful life of the related asset. Upon settlement of the liability, an
entity either settles the obligation for its recorded amount or incurs a gain
or loss upon settlement. This standard is effective for fiscal years beginning
after June 15, 2002, with earlier application encouraged. The Company is
currently evaluating the provisions of SFAS 143, but does not believe that
SFAS 143 will have a material impact on its financial statements.

-17-



---



##### Table of Contents



SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities,
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an
Activity(including Certain Costs Incurred in a Restructuring).The principal
differences between SFAS 146 and Issue 94-3 relates to SFAS 146s requirements
for recognition of a liability for a cost associated with an exit or disposal
activity. SFAS 146 requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. Under
Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was
recognized at the date of an entitys commitment to an exit plan. A
fundamental conclusion reached by the FASB in SFAS 146 is that an entitys
commitment to a plan, by itself, does not create an obligation that meets the
definition of a liability. Therefore, SFAS 146 eliminates the definition and
requirements for recognition of exit costs in Issue 94-3. This Statement also
establishes that fair value is the objective for initial measurement of the
liability. The provisions of SFAS 146 are effective for exit or disposal
activities that are initiated after December 31, 2002, with early application
encouraged. The Company is currently evaluating the provisions of SFAS 146 to
determine what impact, if any, SFAS 146 will have on its financial statements.

Inflation and Changing Prices

The Companys sales and costs are subject to inflation and price fluctuations.
However, they historically have not, and in the future are not expected to
have, a material adverse effect on the Companys results of operations.

Forward Looking Statements

When used in this quarterly report, the words believes, anticipates,
expects and similar expressions are used to identify forward looking
statements. Such statements are subject to risks and uncertainties which could
cause actual results to differ materially from those projected. The Company
wishes to caution readers that the following important factors and others in
some cases have affected and in the future could affect the Companys actual
results and could cause the Companys actual results to differ materially from
those expressed in any forward statements made by the Company: (i) economic
conditions in the safety shoe market, (ii) availability of credit, (iii)
increase in interest rates, (iv) cost of raw materials, (v) inability to
maintain state-of-the-art manufacturing facilities, (vi) heightened
competition, including intensification of price and service competition, the
entry of new competitors and the introduction of new products by existing
competitors, (vii) inability to capitalize on opportunities presented by
industry consolidation, (viii) loss or retirement of key executives, (ix) loss
or disruption of the Companys relationships with its major suppliers,
including the Companys largest supplier in China and (x) inability to grow by
acquisition of additional safety shoe distributors or to effectively
consolidate operations of businesses acquired.

-18-



---



##### Table of Contents






Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company is exposed to market risk primarily from changes in interest rates
and foreign exchange rates.

The following discussion of the Companys exposure to various market risks
contains forward looking statements that are subject to risks and
uncertainties. These projected results have been prepared utilizing certain
assumptions considered reasonable in the circumstances and in light of
information currently available to the Company. Nevertheless, because of the
inherent unpredictability of interest rates and foreign currency translation
rates, actual results could differ materially from those projected in such
forward looking statements.

Interest Rates

At October 26, 2002, the Company had fixed-rate debt totaling $78.3 million in
principal amount and having a fair value of $39.3 million. These instruments
bear interest at a fixed rate and, therefore, do not expose the Company to the
risk of earnings loss due to changes in market interest rates. However, the
fair value of these instruments would decrease (to the holder) by approximately
$3.1 million if interest rates were to increase by 10% from their levels at
October 26, 2002 (i.e., an increase from the weighted average interest rate of
10.4% to a weighted average interest rate of 11.4%).

At October 26, 2002, the Company had variable-rate debt totaling $18.9 million
in principal amount and having a fair value of $18.9 million. These borrowings
are under the Bank Credit Facility. If interest rates were to increase by 10%
from their levels at October 26, 2002, the Company would incur additional
annual interest expense of approximately $0.1 million.

Foreign Exchange Rates

Information relating to the sensitivity to foreign currency exchange rate
changes is omitted as foreign exchange exposure risk has not materially changed
from that disclosed in the Companys Annual Report on Form 10-K for the year
ended January 26, 2002.






|Item 4. Controls and Procedures.
|--------------------------------

Within the 90 days prior to the date of filing this Quarterly Report on Form
10-Q, the Company carried out an evaluation, under the supervision and with the
participation of its Disclosure Committee and management, including the
President (Chief Executive Officer) and the Treasurer (Chief Financial
Officer), of the effectiveness of the design and operation of the Companys
disclosure controls and procedures pursuant to Exchange Act Rule 15d-14. Based
upon that evaluation, the President (Chief Executive Officer) and the Treasurer
(Chief Financial Officer) concluded that the Companys disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to
be included in the Companys periodic SEC filings. Subsequent to the date of
that evaluation, there have been no significant changes in the Companys
internal controls or in other
factors that could significantly affect internal
controls, nor were any corrective actions required with regard to significant
deficiencies and material weaknesses.

-19-



---



##### Table of Contents






PART II OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 2. Changes in Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibit Index.

|         |  |                                                                                                      
|-------- |  | -----------------------------------------------------------------------------------------------------
|3.1(1)   |  | Iron Age Certificate of Incorporation, as amended.                                                   
|3.2(1)   |  | Iron Age By-laws.                                                                                    
|4.1(1)   |  | Indenture dated as of April 24, 1998.                                                                
|10.51    |  | Promissory Note between Iron Age Holdings Corporation and Iron Age
Corporation dated October 1, 2002.
|10.52(8) |  | Loan and Security Agreement dated September 23, 2002.                                                
|10.53(8) |  | Mortgage, Assignment of Leases and Rents Security Agreement dated September 23, 2002.                
|10.54(8) |  | Holdings and Subsidiary Guaranty dated September 23, 2002.                                           
|10.55(8) |  | Guarantor Security Agreement dated September 23, 2002.                                               
|10.56(8) |  | Pledge and Security Agreement dated September 23, 2002.                                              
|10.57(8) |  | Patent Security Agreement dated September 23, 2002.                                                  
|10.58(8) |  | Trademark Security Agreement dated September 23, 2002.                                               
|10.59(8) |  | Canadian Guarantee Agreement dated September 23, 2002                                                
|10.60(8) |  | Canadian Security Agreement dated September 23, 2002.                                                
|10.61(8) |  | Letter Agreement dated September 23, 2002.                                                           
|10.62(8) |  | Contribution Agreement dated September 23, 2002.                                                     
|10.63(8) |  | Intercompany Subordination Agreement dated September 23, 2002.                                       
|10.64(8) |  | Payoff Letter for Banque Nationale de Paris Credit Agreement dated September 23, 2002.               

-20-



---



##### Table of Contents



|        |  |                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------
|21.1(1) |  | Subsidiaries of Iron Age.                                                                                                     
|99.1    |  | Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|99.2    |  | Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



---

|    |  |                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | Incorporated by reference to the similarly numbered exhibit in the
Companys Registration Statement on Form S-4, No. 333-57009, filed June
17, 1998.
|   
|(8) |  | Incorporated by reference to the exhibit in the Companys Report on Form
8-K, filed September 27, 2002.                                             

(b) Reports on Form 8-K.

A report on Form 8-K was filed on September 27, 2002 to disclose the terms
of the Bank Credit Facility that the Company completed on September 23, 2002,
as discussed elsewhere in this Quarterly Report on Form 10Q.

-21-



---



##### Table of Contents



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.

|                         |  |                                                                                                                                                                 
|------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                         |  | IRON AGE CORPORATION                                                                                                                                            
|                        
|Dated: December 10, 2002 |  | By:  /s/ Bart R. HuchelName:    Bart R. Huchel
Title:   Vice President-Finance
Chief Financial Officer and
Treasurer
Principal financial and
accounting officer)

-22-



---



##### Table of Contents






CERTIFICATIONS

I, William J. Mills, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Iron Age
Corporation;

2.     Based on my knowledge, this quarterly 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 quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)  designed such disclosure controls and procedures 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 quarterly report is being prepared;

(b)  evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

(c)  presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

(a)  all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                         |  |                                                                                    
|------------------------ |  | -----------------------------------------------------------------------------------
|                         |  | /s/William J. MillsWilliam J. Mills
Chief Executive Officer, President and Director
|                        
|Dated: December 10, 2002 |  |                                                                                    

-23-



---



##### Table of Contents



I, Bart R. Huchel, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Iron Age Corporation;

2.     Based on my knowledge, this quarterly 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 quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)  designed such disclosure controls and procedures 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 quarterly report is being prepared;

(b)  evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

(c)  presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

(a)  all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                         |  |                                                                               
|------------------------ |  | ------------------------------------------------------------------------------
|                         |  | /s/Bart R. Huchel                                                             
|                         |  |                                                                               
|                         |  | Bart R. Huchel
Chief Financial Officer, Vice President  Finance and Treasurer
|                        
|Dated: December 10, 2002 |  |                                                                               

-24-