##### Table of Contents



FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: July 27, 2002

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period
from:                     to

Commission file 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 o

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 o         No o   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.





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TABLE OF CONTENTS



|                                                   |                                                                                                |  |  |  |  |  |  | 
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART 1  FINANCIAL INFORMATION                    
|                                                   | Item 1. Financial Statements.                                                                 
|                                                   | Consolidated Balance Sheets                                                                   
|                                                   | Consolidated Statements of Loss (Unaudited)                                                   
|                                                   | Consolidated Statements of Cash Flows (Unaudited)                                             
|                                                   | Notes to Consolidated Financial Statements (Unaudited)                                        
|                                                   | 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                         
|                                                   | Item 1. Legal Proceedings.                                                                    
|                                                   | Item 2. Changes in Securities and Use of Proceeds.                                            
|                                                   | Item 3. Defaults upon Senior Securities.                                                      
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders.                                  
|                                                   | Item 5. Other Information.                                                                    
|                                                   | Item 6. Exhibits and Reports on Form 8-K.                                                     
|EX-10.47 Amended and Restated Employment Agreement
|EX-10.48 Amendment to Employment Agreement        
|EX-10.49 Consulting Agreement                     
|EX-10.50 Letter Waiver                            
|EX-99.1 Mills Certification                       
|EX-99.2 Huchel Certification                      



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##### Table of Contents






PART 1  FINANCIAL INFORMATION




Item 1. Financial Statements.

The following financial statements are presented herein:

Consolidated Balance Sheets as of July 27, 2002 and
January 26, 2002

Consolidated Statements of Loss for the three months and six months
ended July 27, 2002 and July 28, 2001

Consolidated Statements of Cash Flows for the six months
ended July 27, 2002 and July 28, 2001

Notes to Consolidated Financial Statements

-2-



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##### Table of Contents






Iron Age Corporation

Consolidated Balance Sheets


|                                                     |                                                                             |   |                        |         |            |   |         |         |  
|---------------------------------------------------- | --------------------------------------------------------------------------- | - | ---------------------- | ------- | ---------- | - | ------- | ------- | -
|                                                     |                                                                             |   | July 27                |         | January 26
|                                                     |                                                                             |   | 2002                   |         | 2002      
|                                                     |                                                                             |   |                        |         |           
|                                                     |                                                                             |   | (unaudited)            |         |            |   |        
|                                                     |                                                                             |   | (Dollars in Thousands)
|Assets                                               |                                                                             |   |                        |         |            |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|Current assets:                                      |                                                                             |   |                        |         |            |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash and cash equivalents                                                   |   | $                      | 683     |            |   | $       | 615     |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accounts receivable, net                                                    |   |                        | 13,216  |            |   |         | 14,066  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Inventories (Note 2)                                                        |   |                        | 33,880  |            |   |         | 32,089  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Prepaid expenses                                                            |   |                        | 1,239   |            |   |         | 2,120   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Deferred income taxes                                                       |   |                        | 655     |            |   |         | 726     |  
|                                                     |                                                                             |   |                        |         |            |   |         |         |  
|Total current assets                                 |                                                                             |   | 49,673                 |         |            |   | 49,616  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Other noncurrent assets                              |                                                                             |   | 3,311                  |         |            |   | 3,633   |        
|                                                    
|                                                    
|                                                    
|                                                    
|Property and equipment, net                          |                                                                             |   | 9,792                  |         |            |   | 9,253   |        
|                                                    
|                                                    
|                                                    
|                                                    
|Customer lists, net                                  |                                                                             |   | 10,658                 |         |            |   | 11,212  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Other intangible assets, net                         |                                                                             |   | 2,377                  |         |            |   | 81,748  |        
|                                                     |                                                                             |   |                        |         |            |   |         |         |  
|Total assets                                         |                                                                             | $ | 75,811                 |         |            | $ | 155,462 |        
|                                                     |                                                                             |   |                        |         |            |   |         |         |  
|Liabilities and stockholders (deficit) equity       |                                                                             |   |                        |         |            |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|Current liabilities:                                 |                                                                             |   |                        |         |            |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Current maturities of long-term debt                                        |   | $                      | 437     |            |   | $       | 6,475   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Long-term debt classified as current (Note 6)                               |   |                        | 65,000  |            |   |         |        |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Long-term debt to be refinanced (Note 6)                                    |   |                        | 27,548  |            |   |         |        |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accounts payable                                                            |   |                        | 4,664   |            |   |         | 4,687   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accrued expenses                                                            |   |                        | 4,953   |            |   |         | 5,076   |  
|                                                     |                                                                             |   |                        |         |            |   |         |         |  
|Total current liabilities                            |                                                                             |   | 102,602                |         |            |   | 534     |        
|                                                    
|                                                    
|                                                    
|                                                    
|Long-term debt, less current maturities              |                                                                             |   | 534                    |         |            |   | 86,245  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Other noncurrent liabilities                         |                                                                             |   | 357                    |         |            |   | 390     |        
|                                                    
|                                                    
|                                                    
|                                                    
|Deferred income taxes                                |                                                                             |   | 3,320                  |         |            |   | 5,589   |        
|                                                     |                                                                             |   |                        |         |            |   |         |         |  
|Total liabilities                                    |                                                                             |   | 106,813                |         |            |   | 108,462 |        
|                                                    
|                                                    
|                                                    
|                                                    
|Commitments and contingencies                        |                                                                             |   |                       |         |            |   |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|Series B redeemable preferred stock                  |                                                                             |   | 9,164                  |         |            |   | 8,300   |        
|                                                    
|                                                    
|                                                    
|                                                    
|Series C redeemable preferred stock                  |                                                                             |   | 7,336                  |         |            |   | 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                                                         |   |                        | (91,637 | )          |   |         | (11,941 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other comprehensive loss                                                    |   |                        | (332    | )          |   |         | (371    | )
|                                                     |                                                                             |   |                        |         |            |   |         |         |  
|Total stockholders (deficit) equity                 |                                                                             |   | (47,502                | )       |            |   | 32,155  |        
|                                                     |                                                                             |   |                        |         |            |   |         |         |  
|Total liabilities and stockholders (deficit) equity |                                                                             | $ | 75,811                 |         |            | $ | 155,462 |        
|                                                     |                                                                             |   |                        |         |            |   |         |         |  

See accompanying notes.

-3-



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##### Table of Contents






Iron Age Corporation

Consolidated Statements of Loss (Unaudited)


|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |         |   |  |   |        |  
|----------------------------------------------------------------------------------------- |  | ---------------------- | ------ | ---------------- |  | ------- | ------ | ------- |  | - | ------- | - |  | - | ------ | -
|                                                                                          |  | Three months ended     |        | Six months ended
|                                                                                          |  |                        |        |                 
|                                                                                          |  | July 27                |        | July 28          |  | July 27 |        | July 28
|                                                                                          |  | 2002                   |        | 2001             |  | 2002    |        | 2001   
|                                                                                          |  |                        |        |                  |  |         |        |        
|                                                                                          |  | (Dollars in Thousands)
|Net sales                                                                                 |  | $                      | 23,830 |                  |  | $       | 25,512 |         |  | $ | 51,406  |   |  | $ | 55,523 |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Cost of sales                                                                             |  |                        | 11,937 |                  |  |         | 12,487 |         |  |   | 25,477  |   |  |   | 26,868 |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |         |   |  |   |        |  
|Gross profit                                                                              |  |                        | 11,893 |                  |  |         | 13,025 |         |  |   | 25,929  |   |  |   | 28,655 |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Selling, general and administrative                                                       |  |                        | 10,380 |                  |  |         | 9,973  |         |  |   | 20,167  |   |  |   | 20,869 |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Depreciation                                                                              |  |                        | 391    |                  |  |         | 643    |         |  |   | 775     |   |  |   | 1,065  |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Amortization of intangible assets                                                         |  |                        | 539    |                  |  |         | 1,069  |         |  |   | 1,083   |   |  |   | 2,114  |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |         |   |  |   |        |  
|Operating income                                                                          |  |                        | 583    |                  |  |         | 1,340  |         |  |   | 3,904   |   |  |   | 4,607  |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Interest expense                                                                          |  |                        | 2,184  |                  |  |         | 2,184  |         |  |   | 4,330   |   |  |   | 4,308  |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |         |   |  |   |        |  
|(Loss) income before income taxes and
cumulative effect of change in accounting principle |  |                        | (1,601 | )                |  |         | (844   | )       |  |   | (426    | ) |  |   | 299    |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Income tax (benefit) expense                                                              |  |                        | (294   | )                |  |         | 559    |         |  |   | 106     |   |  |   | 1,208  |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |         |   |  |   |        |  
|Loss before cumulative effect of change
in accounting principle                           |  |                        | (1,307 | )                |  |         | (1,403 | )       |  |   | (532    | ) |  |   | (909   | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Cumulative effect of change in accounting
principle, net of tax effect of $1,718 (Note 3) |  |                        |       |                  |  |         |       |         |  |   | (77,510 | ) |  |   |       |  
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |         |   |  |   |        |  
|Net loss                                                                                  |  | $                      | (1,307 | )                |  | $       | (1,403 | )       |  | $ | (78,042 | ) |  | $ | (909   | )
|                                                                                          |  |                        |        |                  |  |         |        |         |  |   |         |   |  |   |        |  

See accompanying notes.

-4-



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##### Table of Contents






Iron Age Corporation

Consolidated Statements of Cash Flows (Unaudited)


|                                                                                |                                                              |   |                        |        |                  |   |         |        |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------ | - | ---------------------- | ------ | ---------------- | - | ------- | ------ | -
|                                                                                |                                                              |   | Six months ended       |        | Six months ended
|                                                                                |                                                              |   | July 27                |        | July 28         
|                                                                                |                                                              |   | 2002                   |        | 2001            
|                                                                                |                                                              |   |                        |        |                 
|                                                                                |                                                              |   | (Dollars in Thousands)
|Operating activities                                                            |                                                              |   |                        |        |                  |   |         |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Net loss                                                                        |                                                              | $ | (78,042                | )      |                  | $ | (909    | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Adjustments to reconcile net loss to net cash provided by
operating activities: |                                                              |   |                        |        |                  |   |         |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Cumulative effect of change in accounting principle          |   |                        | 77,510 |                  |   |         |       |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Change in fair market value of interest rate swap            |   |                        |       |                  |   |         | (587   | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Depreciation and amortization                                |   |                        | 2,087  |                  |   |         | 3,419  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Amortization of deferred financing fees included in interest |   |                        | 270    |                  |   |         | 272    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Provision for losses on accounts receivable                  |   |                        | 193    |                  |   |         | 20     |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Deferred income taxes                                        |   |                        | (480   | )                |   |         | 688    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Stock-based compensation                                     |   |                        | 132    |                  |   |         |       |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Changes in operating assets and liabilities:                                    |                                                              |   |                        |        |                  |   |         |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Accounts receivable                                          |   |                        | 657    |                  |   |         | 2,044  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Inventories                                                  |   |                        | (1,791 | )                |   |         | (2,430 | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Prepaid expenses                                             |   |                        | 881    |                  |   |         | (416   | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Other assets                                                 |   |                        | (150   | )                |   |         | 100    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Accounts payable                                             |   |                        | (23    | )                |   |         | 2,678  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Accrued expenses                                             |   |                        | (123   | )                |   |         | (1,670 | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Other noncurrent liabilities                                 |   |                        | (33    | )                |   |         | (24    | )
|                                                                                |                                                              |   |                        |        |                  |   |         |       
|Net cash provided by operating activities                                       |                                                              |   | 1,088                  |        |                  |   | 3,185   |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Investing activities                                                            |                                                              |   |                        |        |                  |   |         |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Capitalization of internal-use software costs                                   |                                                              |   | (167                   | )      |                  |   | (773    | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Purchases of property and equipment                                             |                                                              |   | (1,543                 | )      |                  |   | (1,007  | )     
|                                                                                |                                                              |   |                        |        |                  |   |         |       
|Net cash used in investing activities                                           |                                                              |   | (1,710                 | )      |                  |   | (1,780  | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Financing activities                                                            |                                                              |   |                        |        |                  |   |         |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Borrowings under revolving credit agreement                                     |                                                              |   | 10,500                 |        |                  |   | 9,150   |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Principal payments on debt                                                      |                                                              |   | (9,953                 | )      |                  |   | (10,250 | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Payment of financing costs                                                      |                                                              |   | (149                   | )      |                  |   | (178    | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Principal payments on capital leases                                            |                                                              |   | 253                    |        |                  |   | (86     | )     
|                                                                                |                                                              |   |                        |        |                  |   |         |       
|Net cash provided by (used in) financing activities                             |                                                              |   | 651                    |        |                  |   | (1,364  | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Effect of exchange rate changes on cash and cash equivalents                    |                                                              |   | 39                     |        |                  |   | (32     | )     
|                                                                                |                                                              |   |                        |        |                  |   |         |       
|Increase in cash and cash equivalents                                           |                                                              |   | 68                     |        |                  |   | 9       |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Cash and cash equivalents at beginning of period                                |                                                              |   | 615                    |        |                  |   | 82      |       
|                                                                                |                                                              |   |                        |        |                  |   |         |       
|Cash and cash equivalents at end of period                                      |                                                              | $ | 683                    |        |                  | $ | 91      |       
|                                                                                |                                                              |   |                        |        |                  |   |         |       
|Supplemental schedule of noncash investing
and financing activities             |                                                              |   |                        |        |                  |   |         |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Dividends and accretion on preferred stock                                      |                                                              | $ | 1,655                  |        |                  | $ | 1,239   |       

See accompanying notes.

-5-



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##### Table of Contents






Iron Age Corporation
Notes to Consolidated
Financial Statements (Unaudited)

July 27, 2002



|1. |  | Accounting Policies
|-- |  | -------------------

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended July 27, 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:

|                |  |                        |        |            |  |   |        | 
|--------------- |  | ---------------------- | ------ | ---------- |  | - | ------ | 
|                |  | July 27                |        | January 26
|                |  | 2002                   |        | 2002      
|                |  |                        |        |           
|                |  | (Dollars in Thousands)
|Raw materials   |  | $                      | 1,596  |            |  | $ | 2,060  | 
|               
|               
|               
|               
|Work-in-process |  |                        | 824    |            |  |   | 629    | 
|               
|               
|               
|               
|Finished goods  |  |                        | 31,460 |            |  |   | 29,400 | 
|                |  |                        |        |            |  |   |        | 
|                |  | $                      | 33,880 |            |  | $ | 32,089 | 
|                |  |                        |        |            |  |   |        | 



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

Effective January 27, 2002, the Company was required to adopt 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 six months ended July 28, 2001, was $0.6 million and $1.1
million, respectively.

In connection with the adoption of SFAS No. 142, the Company tested its
goodwill for impairment,

-6-



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##### Table of Contents



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 is 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 six month period ended July 27, 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 six month period ended
July 27, 2002 and July 28, 2001, respectively.

|                           |                                   |   |                        |   |                  |   |          |     |          |   |         |   |  |   |      |       | 
|-------------------------- | --------------------------------- | - | ---------------------- | - | ---------------- | - | -------- | --- | -------- | - | ------- | - |  | - | ---- | ----- | 
|                           |                                   |   | Three Months Ended     |   | Six Months Ended
|                           |                                   |   |                        |   |                 
|                           |                                   |   | July 27,               |   | July 28,         |   | July 27, |     | July 28,
|                           |                                   |   | 2002                   |   | 2001             |   | 2002     |     | 2001    
|                           |                                   |   |                        |   |                  |   |          |     |         
|                           |                                   |   | (Dollars in Thousands)
|Reported net loss          |                                   | $ | (1,307                 | ) |                  | $ | (1,403   | )   |          | $ | (78,042 | ) |  | $ | (909 | )    
|                          
|                          
|                          
|                          
|Add back:                  |                                   |   |                        |   |                  |   |          |     |          |   |         |   |  |   |      |      
|                          
|                          
|                          
|                          
|                           | Goodwill amortization, net of tax |   |                        |  |                  |   |          | 525 |          |   |         |  |  |   |      | 1,051 | 
|                           |                                   |   |                        |   |                  |   |          |     |          |   |         |   |  |   |      |      
|Adjusted net (loss) income |                                   | $ | (1,307                 | ) |                  | $ | (878     | )   |          | $ | (78,042 | ) |  | $ | 142  |      
|                           |                                   |   |                        |   |                  |   |          |     |          |   |         |   |  |   |      |      

Amortization expense for other intangible assets subject to amortization for
the three month and six month periods ended July 27, 2002 and July 28, 2001 are
$0.3 million, $0.3 million, $0.6 million and $0.6 million, respectively.
Estimated amortization expense for the fiscal year ended January 25, 2003 and
the succeeding five fiscal years is approximately $1.1 million per year.

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

|                                         |  |                        |        |                  |  |          |        |          |  |   |         |   |  |   |      |  
|---------------------------------------- |  | ---------------------- | ------ | ---------------- |  | -------- | ------ | -------- |  | - | ------- | - |  | - | ---- | -
|                                         |  | Three Months Ended     |        | Six Months Ended
|                                         |  |                        |        |                 
|                                         |  | July 27,               |        | July 28,         |  | July 27, |        | July 28,
|                                         |  | 2002                   |        | 2001             |  | 2002     |        | 2001    
|                                         |  |                        |        |                  |  |          |        |         
|                                         |  | (Dollars in Thousands)
|Net loss                                 |  | $                      | (1,307 | )                |  | $        | (1,403 | )        |  | $ | (78,042 | ) |  | $ | (909 | )
|                                        
|                                        
|                                        
|                                        
|Foreign currency translation (loss) gain |  |                        | (29    | )                |  |          | 15     |          |  |   | 48      |   |  |   | (32  | )
|                                         |  |                        |        |                  |  |          |        |          |  |   |         |   |  |   |      |  
|Total comprehensive loss                 |  | $                      | (1,336 | )                |  | $        | (1,388 | )        |  | $ | (77,994 | ) |  | $ | (941 | )
|                                         |  |                        |        |                  |  |          |        |          |  |   |         |   |  |   |      |  



|5. |  | Related Party Transaction
|-- |  | -------------------------

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 $0.13 million. Following the purchase, these
officers will hold 22.67 shares of Holdings Series B Preferred
Stock. The Company recorded $0.13 million as stock-based
compensation expense for the three months and six months ended
July 27, 2002.



|6. |  | Long Term Debt
|-- |  | --------------

The Companys Bank Credit Facility, which is guaranteed by Iron Age Holdings
Corporation, the Companys parent company, (Holdings), requires Holdings to
maintain certain financial ratios. Effective September 6, 2002, Holdings
obtained a Letter Waiver from the lenders related to the Bank Credit Facility,
waiving the requirements of those financial ratios for the period from July 27,
through October 25, 2002 with the intention of refinancing its existing bank
credit facility by September 30, 2002. Consequently, the Company has not
violated its debt covenants and the debt is not callable. However, if the Bank
Credit Facility is not refinanced, Holdings projections indicate that it will
likely be in violation of certain financial covenants under its existing Bank
Credit Facility within the next twelve months unless such covenants are amended
or waived.

On August 27, 2002, Holdings obtained a $50.0 million commitment for a new
five-year bank credit facility, consisting of a revolving credit facility, a
letter of credit subfacility and three term loans. The proceeds from the new
bank credit facility are expected to be used to fully repay the obligations of
the existing Bank Credit facility, fund other capital initiatives, and to
provide Holdings with capital to fund its anticipated cash requirements. The
commitment stipulates that the lender will extend the new bank credit facility
unless certain conditions are not met, including, but not limited to, the
completion of due diligence by the lender (which Holdings believes to be
substantially complete) or a material adverse change in Holdings financial
condition or prospects or in the value of collateral. The commitment will
terminate, unless extended by the lender, if the new bank credit facility is not
closed on or before September 30, 2002.

If Holdings is unable to refinance its current Bank Credit Facility on or
before October 26, 2002, and Holdings is unable to obtain additional waivers from
the lenders or amend the Bank Credit Facility, the lenders have the right to
accelerate the bank debt, which would cause the Senior Subordinated Notes to
also be in default. In accordance with SFAS No. 78, Classification of
Obligations That Are Callable by the Creditor an amendment of ARB No. 43,
Chapter 3A,and SFAS No. 6, Classification of Short-Term Obligations Expected to
Be Refinanced, the Company has classified its Bank Credit Facility and Senior
Subordinated Notes as current liabilities because the existing lender has not
waived its right to accelerate the debt for a period of at least twelve months
and the commitment letter contains certain subjective cancellation provisions.
Holdings expects to complete the refinancing by September 30, 2002, at which
time, these obligations would be reclassified as long-term.

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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 July 27, 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 July 27, 2002 compared to
Three Months ended July 28, 2001

Net Salesfor the three months ended July 27, 2002 (second quarter 2003) were
$23.8 million compared to $25.5 million for the comparable three month period
ended July 28, 2001 (second quarter 2002), a decrease of $1.7 million, or
6.7%. The decrease in net sales was attributable to a decrease of $1.1
million, or 4.3%, in the Companys footwear distribution business line,
primarily related to a decrease of $0.9 million, or 21.0%, 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. Further, the
economy continues to adversely impact the Companys direct mail
business line. Net sales in the direct mail business line decreased
by $0.2 million or 13.3%. Partially offsetting the decrease in
net sales in the Companys industrial direct and direct mail
business lines was an increase of $0.1 million, or 0.5%, in the
Companys retail business line. The retail business line, which is
the Companys largest, continued to benefit from the addition of new
customers and a product line that is the industrys most extensive.
In addition, the Company has opened three new retail locations and
has relocated several others to be in a better position to serve its
industrial customer base. The
decrease in net sales was also related to a decrease of $0.3 million, or 15.6%
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 second quarter 2003, due to the bankruptcy of that customer in
October 2001. Also, for second 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 second quarter 2002, a decrease of
$0.3 million, or 19.9% of the overall decrease in net sales.

Gross Profitfor second quarter 2003 was $11.9 million compared to $13.0
million for second quarter 2002, a decrease of $1.1 million, or 8.5%. 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 second
quarter 2003 decreased to 49.9%, a decrease of 1.2% from second quarter 2002.
Gross profit percentage decreased in the Companys primary footwear
distribution line by 2.0% in second quarter 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 3.1% increase in
gross profit percentage in the Companys manufacturing subsidiary.

Selling, General and Administrative Expensesfor second quarter 2003 were $10.4
million compared to $10.0 million for second quarter 2002, an
increase of $0.4
million, or 4.0%, due primarily to increases of approximately $0.6 million in
professional fees, freight costs, insurance, stock-based compensation and other taxes

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not related to income taxes. The increase was partially offset by employee
related cost reductions, including salaries and wages, of approximately $0.3
million.

Operating Incomefor second quarter 2003 was
$0.6 million compared to $1.3
million for second quarter 2002, a decrease of $0.7 million, or
53.9%. As a
percentage of net sales, operating income was 2.5% of net sales for second
quarter 2003 compared to 5.1% of net sales for second quarter 2002. The
decrease was primarily attributable to the decrease in gross profit and the
increase in selling, general and administrative expenses as discussed above.
The decrease in operating income was partially offset by decreases in
depreciation expense and amortization expense, primarily goodwill, in
conjunction with the adoption of Statement on Financial Accounting Standards
(SFAS) No. 142.

Interest Expensefor second quarter 2003 was $2.2 million compared to $2.2
million for second quarter 2002. Interest expense for second quarter 2002
included the favorable change of approximately $0.3 million in the fair market
value of the Companys interest rate swap agreement due to the decrease in
interest rates in second quarter 2002. The interest rate swap agreement was
terminated in October 2001. Excluding the favorable impact of the interest
rate swap agreement in second quarter 2002, interest expense for second quarter
2003 decreased due to the effect of lower interest rates and decreased
indebtedness relating to the Bank Credit Facility.

Income Tax Benefitfor second quarter 2003 was $0.3 million compared to an
income tax expense of $0.6 million for second quarter 2002. Income tax benefit
for second quarter 2002 differs from that of the statutory income tax rate due
primarily to nondeductible goodwill amortization. In addition, second quarter
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 second quarter 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. Upon the adoption of SFAS No. 142, the Company recorded no goodwill
amortization for second quarter 2003.

Six Months ended July 27, 2002 compared to
Six Months ended July 28, 2001

Net Salesfor the six months ended July 27, 2002 (first half 2003) were $51.4
million compared to $55.5 million for the comparable six month period ended
July 28, 2001 (first half 2002), a decrease of $4.1 million, or 7.4%. The
decrease in net sales was attributable to a decrease of $3.0 million, or 5.4%,
in the Companys footwear distribution business line, primarily related to a
decrease of $1.9 million, or 20.3%, 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. Further, the economy continues to
adversely impact the Companys direct mail business line. Net sales
decreased in the direct mail business line by $0.3 million, or
10.4%. In addition, net sales decreased by $0.4 million, or
0.7%, 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. The decrease in net
sales was also related to a decrease of $0.4 million, or 10.6% 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 half
2003, due to the

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bankruptcy of that customer in October 2001. Also, for second quarter 2003,
there were no sales relating to the Companys vision products business line,
which was sold in December 2001, compared to $0.7 million in net sales for
second quarter 2002, a decrease of $0.7 million, or 16.8% of the overall
decrease in net sales.

Gross Profitfor first half 2003 was $25.9 million compared to $28.7 million
for first half 2002, a decrease of $2.8 million, or 9.8%. 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 half 2003 decreased to
50.4%, a decrease of 1.2% from first half 2002. Gross profit percentage
decreased in the Companys primary footwear distribution line by 2.0% for first
half 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 2.7% increase in gross profit percentage in the Companys
manufacturing subsidiary.

Selling, General and Administrative Expensesfor first half 2003 were $20.2
million compared to $20.9 million for first half 2002, a
decrease of $0.7
million, or 3.4%, due primarily to the effect of employee related cost
reductions, including salaries and wages.

Operating Incomefor first half 2003 was $3.9 million compared to $4.6 million
for first half 2002, a decrease of $0.7 million, or 15.2%. As a percentage of
net sales, operating income was 7.6% of net sales for first half 2003 compared
to 8.3% of net sales for first half 2002. The decrease was primarily
attributable to the decrease in gross profit and was partially offset by the
decrease in selling, general and administrative expenses as discussed above and
by decreases in depreciation expense and amortization expense, primarily
goodwill, in conjunction with the adoption of SFAS No. 142.

Interest Expensefor first half 2003 was $4.3 million compared to $4.3 million
for first half 2002. The increase in interest expense relates to the favorable
change of $0.6 million in the fair market value of the Companys interest rate
swap agreement due to decreases in interest rates in first half 2002. The
interest rate swap agreement was terminated in October 2001. Excluding the
favorable impact of the interest rate swap agreement in first half 2002,
interest expense for first half 2003 decreased due to the effect of lower
interest rates and decreased indebtedness relating to the Bank Credit Facility.

Income Tax Expensefor first half 2003 was $0.1 million compared to an income
tax expense of $1.2 million for first half 2002. Income tax expense for first
half 2002 differs from that of the statutory income tax rate due primarily to
nondeductible goodwill amortization. In addition, first half 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 half 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. Upon the adoption of SFAS No. 142, the Company
recorded no goodwill amortization for first half 2003.

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Liquidity and Capital Resources

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 $1.1 million for first half 2003,
a decrease of $2.1 million as compared to net cash provided by operating
activities of $3.2 million in first half 2002. The decrease in
net cash provided by operating activities was primarily related to an
increase in inventory of $1.8 million for first half 2003.
The Company has introduced several new styles of branded merchandise
to meet the demands of its retail customers. With the Companys
extensive distribution channel and relatively higher gross margins on
the branded merchandise, management does not believe that any of its
inventory is subject to obsolescence risk.

The Companys investing activities for first half 2003 consisted of capital
expenditures of approximately $1.5 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 $1.8 million
for first half 2002 included capital expenditures of approximately $1.0 million
for improvements in retail stores, shoemobiles and equipment and approximately
$0.8 million for the acquisition of software for internal use.

The Companys financing activities for first half 2003 provided under the Bank
Credit Facility, were approximately $0.6 million, which included the scheduled
principal payments of approximately $3.1 million on the Acquisition Term Loan.
The Company used approximately $1.4 million for financing activities for first
half 2002, which primarily consisted of payments related to the Bank Credit
Facility.

The Companys total working capital as of July 27, 2002 was $33.5 million. At
January 26, 2002, working capital was $33.4 million.

Cash flow from operations for first half 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 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.

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The Companys debt consists of the Senior Subordinated Notes, the Bank Credit
Facility and certain other debt. The Bank Credit Facility, as amended,
consists of a $21.1 million acquisition term loan facility (the Acquisition
Term Loan) and $20.0 million in revolving credit loans, letters of credit and
swing line loans (the Revolving Credit Facility). The Companys other debt of
$1.0 million consists of capital leases and other notes. As of July 27, 2002,
approximately $14.2 million of the Acquisition Term Loan and approximately
$13.3 million of the Revolving Credit Facility were outstanding. The Company
has no additional borrowing availability under the Acquisition Term Loan and
approximately $6.7 million under the Revolving Credit Facility. The Acquisition
Term Loan matures in quarterly installments from July 2001 until final payment
in April 2004. The Revolving Credit Facility will mature in April 2004 and has
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 July 27, 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

The Companys Bank Credit Facility, which is guaranteed by Iron Age Holdings
Corporation, the Companys parent company, (Holdings), requires Holdings to
maintain certain financial ratios. Effective September 6, 2002, Holdings
obtained a Letter Waiver from the lenders related to the Bank Credit Facility,
waiving the requirements of those financial ratios for the period from July 27,
through October 25, 2002 with the intention of refinancing its existing bank
credit facility by September 30, 2002. Consequently, the Company has not
violated its debt covenants and the debt is not callable. However, if the Bank
Credit Facility is not refinanced, Holdings projections indicate that it will
likely be in violation of certain financial covenants under its existing Bank
Credit Facility within the next twelve months unless such covenants are amended
or waived.

On August 27, 2002, Holdings obtained a $50.0 million commitment for a new
five-year bank credit facility, consisting of a revolving credit facility, a
letter of credit subfacility and three term loans. The proceeds from the new
bank credit facility are expected to be used to fully repay the obligations of
the existing Bank Credit facility, fund other capital initiatives, and to
provide Holdings with capital to fund its anticipated cash requirements. The
commitment stipulates that the lender will extend the new bank credit facility
unless certain conditions are not met, including, but not limited to, the
completion of due diligence by the lender (which Holdings believes to be
substantially complete) or a material adverse change in Holdings financial
condition or prospects or in the value of collateral. The commitment will
terminate, unless extended by the lender, if the new bank credit facility is not
closed on or before September 30, 2002.

If Holdings is unable to refinance its current Bank Credit Facility on or
before October 26, 2002, and Holdings is unable to obtain additional waivers from
the lenders or amend the Bank Credit Facility, the lenders have the right to
accelerate the bank debt, which would cause the Senior Subordinated Notes to
also be in default. In accordance with SFAS No. 78, Classification of
Obligations That Are Callable by the Creditor an amendment of ARB No. 43,
Chapter 3A,and SFAS No. 6, Classification of Short-Term Obligations Expected to
Be Refinanced, the Company has classified its Bank Credit Facility and Senior
Subordinated Notes as current liabilities because the existing lender has not
waived its right to accelerate the debt for a period of at least twelve months
and the commitment letter contains certain subjective cancellation provisions.
Holdings expects to complete the refinancing by September 30, 2002, at which
time, these obligations would be reclassified as long-term.

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Recently Issued Accounting Standards

Effective January 27, 2002, the Company was required to adopt 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 six months ended July 28, 2001, was $0.6 million and $1.1
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 is 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 six month period ended July 27, 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.

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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 July 27, 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. The 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 to determine what impact, if any, SFAS
143 will have on its financial statements.

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
difference 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 and ability to refinance
existing indebtedness, (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.

-16-



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##### 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 July 27, 2002, the Company had fixed-rate debt totaling $66.0 million in
principal amount and having a fair value of $24.4 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
$2.4 million if interest rates were to increase by 10% from their levels at
July 27, 2002 (i.e., an increase from the weighted average interest rate of
9.9% to a weighted average interest rate of 10.9%).

At July 27, 2002, the Company had variable-rate debt totaling $27.5 million in
principal amount and having a fair value of $27.5 million. These borrowings
are under the Bank Credit Facility. If interest rates were to increase by 10%
from their levels at July 27, 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 the Companys foreign exchange activities
are not significant and therefore 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.

There have been no significant changes in the Companys internal controls or
other factors that could significantly affect these controls.

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##### 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.                                                                                                                   
|       
|       
|       
|       
|10.1(1) |  | Credit Agreement dated as of April 24, 1998.                                                                                                            
|       
|       
|       
|       
|10.2(1) |  | Security Agreement dated April 24, 1998.                                                                                                                
|       
|       
|       
|       
|10.3(1) |  | Intellectual Property Security Agreement dated April 24, 1998.                                                                                          
|       
|       
|       
|       
|10.4(1) |  | Canadian Security Agreement dated April 24, 1998.                                                                                                       
|       
|       
|       
|       
|10.5(1) |  | Mortgage, Assignment of Leases and Rents, Fixture Filing, Security
Agreement and Financing Statement dated February 26, 1997, as amended
April 24, 1998.
|       
|       
|       
|       
|10.6(1) |  | Intercompany Subordination agreement dated April 24, 1998.                                                                                              
|       
|       
|       
|       
|10.7(1) |  | Subsidiary Guaranty dated April 24, 1998.                                                                                                               
|       
|       
|       
|       
|10.8(1) |  | Iron Age Trademark License Agreement with W.L Gore & Associates, Inc.
dated August 15, 1994.                                                            
|       
|       
|       
|       
|10.9(1) |  | Falcon Trademark License Agreement with W.L. Gore & Associates, Inc. dated
July 25, 1994.                                                               

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|         |  |                                                                                                                                               
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|        
|        
|        
|        
|10.10(1) |  | Falcon Manufacturing Certification Agreement with W.L Gore &
Associates, Inc. dated July 25, 1994.                                            
|        
|        
|        
|        
|10.11(1) |  | General Services Administration Contract effective July 26, 1994, as modified
May 24, 1995.                                                   
|        
|        
|        
|        
|10.12(1) |  | Amended and Restated Management Agreement dated as of February 26, 1997.                                                                      
|        
|        
|        
|        
|10.13(1) |  | Stockholders Agreement dated as of February 26, 1997.                                                                                         
|        
|        
|        
|        
|10.14(1) |  | Amendment No. 1 to Stockholders Agreement dated as of March 25, 1997.                                                                         
|        
|        
|        
|        
|10.15(1) |  | American Home Assurance Company Joinder to the Stockholders Agreement
dated as of March 25, 1997.                                             
|        
|        
|        
|        
|10.16(1) |  | Banque Nationale de Paris Joinder to the Stockholders Agreement dated as of
March 25, 1997.                                                   
|        
|        
|        
|        
|10.17(1) |  | Stock Option Plan dated February 26, 1997.                                                                                                    
|        
|        
|        
|        
|10.18(1) |  | Securities Purchase Agreement dated February 26, 1997.                                                                                        
|        
|        
|        
|        
|10.19(1) |  | Stock Purchase Agreement dated as of December 26, 1996.                                                                                       
|        
|        
|        
|        
|10.20(1) |  | Amendment No. 1 to the Stock Purchase Agreement dated as of February 26, 1997.                                                                
|        
|        
|        
|        
|10.21(1) |  | Pittsburgh, Pennsylvania Lease Agreement dated March 1, 1993, as amended
June 2, 1994, as amended June 12, 1996, as amended December 10, 1997.
|        
|        
|        
|        
|10.22(1) |  | Jerusalem, New York Lease Agreement dated December 9, 1992, as amended
January 1, 1994, as amended April 1997.                                
|        
|        
|        
|        
|10.23(1) |  | Jerusalem, New York Lease Agreement dated June 20, 1997, as amended
January 9, 1998.                                                          
|        
|        
|        
|        
|10.24(1) |  | Lewiston, Maine Lease Agreement dated January 14, 1994.                                                                                       
|        
|        
|        
|        
|10.25(1) |  | Lewiston, Maine Lease Agreement dated November 30, 1990, as amended
June 8, 1994.                                                             
|        
|        
|        
|        
|10.26(1) |  | Ontario, Canada Lease Agreement dated June 11, 1991, as amended
November 23, 1995.                                                            
|        
|        
|        
|        
|10.27(1) |  | Jensen Employment Agreement dated February 26, 1997.                                                                                          
|        
|        
|        
|        
|10.28(1) |  | Mills Employment Agreement dated November 20, 1995.                                                                                           
|        
|        
|        
|        
|10.29(1) |  | McDonough Employment Agreement dated November 20, 1995.                                                                                       
|        
|        
|        
|        
|10.30(1) |  | Johanson Employment Agreement date August 1, 1994.                                                                                            
|        
|        
|        
|        
|10.31(1) |  | Johanson Non-Competition Agreement dated August 1, 1994.                                                                                      
|        
|        
|        
|        
|10.32(2) |  | Taaffe Severance Agreement dated January 13, 1999.                                                                                            
|        
|        
|        
|        
|10.33(2) |  | Taaffe Agreement and General Release dated January 13, 1999.                                                                                  
|        
|        
|        
|        
|10.34(2) |  | Letter Waiver to Banque Nationale de Paris Credit Agreement dated
August 28, 1998.                                                            
|        
|        
|        
|        
|10.35(2) |  | Amendment No. 2 and Waiver to Banque Nationale de Paris Credit
Agreement dated February 26, 1999.                                             
|        
|        
|        
|        
|10.36(2) |  | Election to reduce Acquisition Commitment of Banque Nationale de Paris
Credit Agreement dated March 5, 1999                                   
|        
|        
|        
|        
|10.37(3) |  | Amendment No. 3 to Banque Nationale de Paris Credit Agreement dated
June 23, 1999.                                                            
|        
|        
|        
|        
|10.38(4) |  | Amendment No. 4 to Banque Nationale de Paris Credit Agreement dated
March 17, 2000.                                                           
|        
|        
|        
|        
|10.39(4) |  | Amendment No. 1 to Stock Option Plan dated April 8, 1999.                                                                                     
|        
|        
|        
|        
|10.40(4) |  | Amendment No. 2 to Stock Option Plan dated January 29, 2000.                                                                                  
|        
|        
|        
|        
|10.41(4) |  | Johanson Consulting Agreement dated February 1, 2000.                                                                                         

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##### Table of Contents



|         |  |                                                                                                                                             
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|        
|        
|        
|        
|10.42(4) |  | Certificate of Designation, Preferences and Rights of the Series B
Preferred Stock of Iron Age Holdings Corporation dated December 29, 1999.
|        
|        
|        
|        
|10.43(5) |  | Amendment No. 5 to Banque Nationale de Paris Credit Agreement dated
September 15, 2000.                                                     
|        
|        
|        
|        
|10.44(6) |  | Certificate of Designation, Preferences and Rights of the Series C
Preferred Stock of Iron Age Holdings Corporation dated December 29, 2000.
|        
|        
|        
|        
|10.45(6) |  | Amendment No. 6 to Banque Nationale de Paris Credit Agreement dated
April 24, 2001.                                                         
|        
|        
|        
|        
|10.46(7) |  | Amendment No. 7 to Banque Nationale de Paris Credit Agreement dated
December 10, 2001.                                                      
|        
|        
|        
|        
|10.47    |  | Amendment to Mills Employment Agreement dated August 1, 2002.                                                                               
|        
|        
|        
|        
|10.48    |  | Amendment to McDonough Employment Agreement dated May 28, 2002.                                                                             
|        
|        
|        
|        
|10.49    |  | Morrison Consulting Agreement dated April 1, 2002.                                                                                          
|        
|        
|        
|        
|10.50    |  | Letter Waiver to Banque Nationale de Paris Credit Agreement dated
September 6, 2002.                                                        
|        
|        
|        
|        
|21.1(1)  |  | Subsidiaries of Iron Age.                                                                                                                   
|        
|        
|        
|        
|99.1     |  | Mills Certification Sarbanes-Oxley Act of 2002.                                                                                             
|        
|        
|        
|        
|99.2     |  | Huchel Certification 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.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Incorporated by reference to the similarly numbered exhibit in the
Companys Annual Report on Form 10-K, filed April 30, 1999.                      
|   
|   
|   
|   
|(3) |  | Incorporated by reference to the similarly numbered exhibit in the
Companys Quarterly Report on Form 10-Q, filed September 14, 1999.               
|   
|   
|   
|   
|(4) |  | Incorporated by reference to the similarly numbered exhibit in the
Companys Annual Report on Form 10-K, filed April 18, 2000.                      
|   
|   
|   
|   
|(5) |  | Incorporated by reference to the similarly numbered exhibit in the
Companys Quarterly Report on Form 10-Q, filed December 11, 2000.                
|   
|   
|   
|   
|(6) |  | Incorporated by reference to the similarly numbered exhibit in the
Companys Annual Report on Form 10-K, filed April 26, 2001.                      
|   
|   
|   
|   
|(7) |  | Incorporated by reference to the similarly numbered exhibit in the
Companys Quarterly Report on Form 10-Q, filed December 11, 2001.                



|(b) |  | Reports on Form 8-K.
|--- |  | --------------------

No reports on Form 8-K were filed during the second quarter ended July 27, 2002.

-20-



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##### 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
|                         
|                         
|                         
|                         
|                          |  |                      |  |                    |  |                                                                                                         
|                          |  | By:                  |  | /s/ Bart R. Huchel
|                          |  |                      |  | Name:              |  | Bart R. Huchel                                                                                          
|                         
|                         
|                         
|                         
|Dated: September 10, 2002 |  |                      |  | Title:             |  | Vice President-Finance
Chief Financial Officer and
Treasurer
(Principal financial andaccounting officer)

-21-



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##### 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; and

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

-22-



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##### 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; and

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

-23-