<PAGE>
 
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-K


(Mark One)


[ x ]  Annual report pursuant to section 13 or 15(d) of the Securities Exchange
       Act of 1934 for the fiscal year ended:       January 30, 1999       OR
                                             ----------------------------
     

[  ]  Transition report pursuant to section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the transition period from:______________________
      to ______________________


Commission file number:   333-57011
                       ----------------

                              Iron Age Corporation
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



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


       Robinson Plaza Three, Suite 400, Pittsburgh, Pennsylvania    15205
       ------------------------------------------------------------------

      Securities registered pursuant to Section 12(b) of the Act:   None
      Securities registered pursuant to Section 12(g) of the Act:   None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes      X      No 
      -------      -----            

Applicable only to registrants involved in bankruptcy proceedings during the
preceding five years:  Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.

Yes  _______   No ______   Not Applicable.

(Applicable only to corporate registrants:)   On April 26, 1999, all of the
voting stock of Iron Age Corporation was held by Iron Age Holdings Corporation
("Holdings"), a Delaware corporation.

As of April 26, 1999, Iron Age Corporation had 1,000 shares of Common Stock
issued and outstanding.


Documents incorporated by reference:  None


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part II of this Form 10-K or
any amendment to this Form 10-K.    [ X ]
<PAGE>
 
                                FORM 10-K INDEX

<TABLE>
<CAPTION>

                                                                                Page
                                                                                ----
<S>              <C>                                                            <C>
Part I                                                                            3
 
     Item 1.     Business                                                         3
 
     Item 2.     Properties                                                       7
 
     Item 3.     Legal Proceedings                                                7
 
     Item 4.     Submission of Matters to a Vote of Security Holders              7
  
 
Part II                                                                           8
 
     Item 5.     Market for Registrant's Common Equity
                 and Related Stockholder Matters                                  8
     Item 6.     Selected Financial Data                                          8
     Item 7.     Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                              9
     Item 7A.    Quantitative and Qualitative Disclosures about Market Risk      16
     Item 8.     Financial Statements and Supplementary Data                     17
     Item 9.     Changes in and Disagreements with Accountants on Accounting and
                 Financial Disclosure                                            47
 
 
 
Part III                                                                         48
 
     Item 10.    Directors and Executive Officers of the Registrant              48
     Item 11.    Executive Compensation                                          50
     Item 12.    Security Ownership of Certain Beneficial Owners and Management  54
     Item 13.    Certain Relationships and Related Transactions                  56
 

Part IV                                                                          57

     Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K  57

</TABLE> 

     Reference in this Annual Report on Form 10-K is made to the Iron Age(R) and
Knapp(R) trademarks, which are owned by Iron Age Holdings Corporation or its
subsidiaries.

                                      -2-
<PAGE>
 
                                     Part I
                                        


Item 1. Business


  Iron Age Corporation (the "Company" or "Iron Age") is a leading distributor of
safety shoes in the United States. The Company's primary business is the
specialty distribution of safety, work and uniform related shoes under the Iron
Age(R) and Knapp(R) brand names, which comprised 91.5% of fiscal 1999 sales. The
Company also distributes footwear directly to retail and wholesale customers
through its wholesale division and manufacturing subsidiary Falcon Shoe Mfg. Co.
("Falcon").  In addition, the Company began distribution of prescription safety
eyewear, on a limited basis, in conjunction with the acquisition of a regional
distributor in April 1998. The Company distributes directly to its customers
over 400 styles of footwear under the Iron Age and Knapp brand names. The Iron
Age and Knapp products and services are marketed principally to industrial,
service and government employers, most of which require safety shoes to be worn
at the workplace and provide purchase subsidies under employer safety programs
to the end-user employee.


Company History


  The Company, a wholly-owned subsidiary of Iron Age Holdings Corporation
("Holdings"), was founded in 1817 and has specialized in safety footwear since
the popularization of steel toe shoes during the 1940s.  On February 26, 1997,
Fenway Partners Capital Fund, L.P. (the "Fenway Fund"), together with certain
investors, in partnership with certain members of management, formed Holdings in
order to effect the acquisition of all of the outstanding stock of the
predecessor to Holdings for an aggregate purchase price of $143.6 million (the
"Fenway Acquisition").

   Concurrent with the Fenway Acquisition, (i) Holdings and the Company entered
into a syndicated senior bank loan facility (the "Old Credit Facility"), (ii)
the Company issued its 12.5% Senior Subordinated Notes due 2006 (the "Old
Subordinated Notes") in the amount of $14.55 million, (iii) Holdings issued
shares of Series A Preferred Stock (the "Holdings Series A Preferred Stock") for
$14.9 million, (iv) Holdings issued shares of Common Stock for approximately
$32.2 million, (v) Holdings issued warrants to acquire Common Stock of Holdings
for $0.1 million, and (vi) management rolled over certain options and were
granted additional options to acquire shares of Common Stock of Holdings.

    On April 24, 1998, (i) Holdings issued its 12 1/8% Senior Discount Notes due
2009 (the "Discount Notes") in an aggregate principal amount at maturity of
$45.14 million, (ii) the Company issued its 9 7/8% Senior Subordinated Notes due
2008 (the "Senior Subordinated Notes") in an aggregate principal amount of
$100.0 million, and (iii) Holdings and the Company entered into a new credit
facility (the "New Credit Facility") that, as amended, provides for a $52.0
million senior secured credit facility consisting of a $30.0 million revolving
working capital facility and a $22.0 million revolving acquisition facility.
Holdings and the Company used excess cash and net proceeds from the Discount
Notes, the Senior Subordinated Notes and the New Credit Facility to repay the
Old Credit Facility, repay the Old Subordinated Notes and redeem the Holdings
Series A Preferred Stock.  The transactions described in this paragraph are
collectively referred to herein as the "April 1998 Transactions."


Industry Overview


  The work shoe market consists of men's and women's work, safety and uniform
shoes and boots. In the United States, the safety shoe sector of the work shoe
market is comprised of three types of customers--industrial or commercial,
government and mass merchandising retail. The Company estimates that sales to
industrial and government customers represent over 60% of the safety shoe
market. End-user safety shoe customers include workers in the primary metals,
chemical and petroleum, automotive, paper, mining, utilities, electronics,
aerospace, food service, hospitality and entertainment, pharmaceutical,
biomedical, agriculture, construction and retail and wholesale trade industries.

                                      -3-
<PAGE>
 
   A significant factor influencing the demand for safety shoes is the
increasing concern regarding workplace safety that is derived from the
employer's desire to reduce employee costs from on-the-job injury and to reduce
workers' compensation expenses. Beginning in the 1970s, the federal government
adopted Occupational Safety and Health Administration ("OSHA") regulations
establishing heightened workplace safety standards, including regulations
governing footwear. OSHA regulations established standards requiring employers
to provide their workers with workplaces free from recognized hazards that could
cause serious injury or death and requiring employees to abide by all safety and
health standards that apply to their jobs. Changes to OSHA regulations in 1994
required employers to assess footwear related hazards and implement a program
designed to mitigate such hazards.

  In order to satisfy the criteria set forth in OSHA regulations, protective
footwear must comply with standards (the "ANSI Standards") established by the
American National Standards Institute ("ANSI"). There are six ANSI categories
for foot protection: impact and compression, metatarsal footwear, conductive
footwear, electrical hazard footwear, sole puncture resistance footwear and
electro-static dissipative footwear. These OSHA regulations, more strict
regulatory enforcement and increased consumer awareness of the regulations have
heightened the focus on safety in the workplace.

  Within the service sector of the work shoe market, a growing category of
safety footwear is non-slip footwear.  Uniform shoes with non-slip soles are
used increasingly by customers in the food service, hotel, gaming and resort
industries.  Fueling the demand are some of the same factors influencing
traditional safety shoe users including the increasing concern regarding
workplace safety.  In addition, employers in these industries require
consistency and uniformity in the performance and appearance of their employees'
footwear.

  In the industrial sector of the work shoe market, sales are made primarily
between the distributor and employer, which generally maintain safety
departments that monitor compliance with overall safety requirements and provide
safety shoe purchase subsidies.  Distributors of safety shoes to industrial
customers typically provide a range of services, including advice with respect
to assessment of workplace safety requirements, recommendations as to
appropriate product selection, coordination of employer safety subsidy programs,
worksite delivery and fitting of shoes and feedback and follow-up with corporate
employers.

  Government sales, which include armed forces, penal institutions, federal,
state, and local municipal employees or civilian employees, are made to two
primary purchasers: GSA-contracted vendors and the military. GSA-contracted
purchases of safety shoes include retail sales to GSA-contracted vendors through
store and shoemobile service and catalog operations. These orders are made for a
variety of purposes and activities and involve a wide range of products.
Suppliers bid for these orders on the basis of product style and quality,
distribution capability and customer service. Sales to the military consist of
price-sensitive, large-volume orders that are designed to strict specifications
and are generally bid directly by the manufacturers. Style selection is minimal
and geared towards a specific purpose.

  The retail/mass merchandiser sector includes large retail chain stores,
specialty retailers and other retail outlets. This is a source of low-end,
protective footwear, the buyers of which include workers whose employers do not
have company-sponsored programs as well as self-employed individuals,
occupational users and agricultural workers.

  Safety prescription eyewear is a related product that the Company has recently
entered into distribution through its subsidiary, IA Vision Acquisition Co. ("IA
Vision"). Eye protection is another element of personal protective equipment
that is regulated by OSHA.  Many of the same customers to whom the Company
currently sells safety footwear have similar requirements for safety eyewear.


Sales and Distribution


  Substantially all shoes sourced for distribution by the Company are
transported to its central distribution facility in Penn Yan, New York. From
Penn Yan, the Company distributes its product to end-users through its multi-
pronged distribution network.  The Company also distributes its products through
catalog operations and channels associated with consumer brands, which include
wholesale merchandising, independent sales representatives and third-party
vendors.

                                      -4-
<PAGE>
 
  Mobile and Store Centers.   Each "mobile and store center" consists of a
retail store for its products and generally one or more affiliated shoemobiles.
Each shoemobile acts as a mobile selling vehicle for the Company's products,
operating generally within a 150-mile radius of its affiliated retail store.
This sector of the Company's business has grown as its customers have become
more demanding and have required a higher level of customer service. Throughout
the last seven years, the Company has identified this shift in the market and
has established new locations in major industrial markets while upgrading the
locations of its existing stores. Through the retail store channel, the Company
is able to service corporate and individual customers generally located within a
40-mile radius of a given store.

  The Company operates its fleet of shoemobiles throughout the United States,
Canada and Mexico. Shoemobiles vary in size--transporting from 900 to 1,600 pair
of shoes--and each contains a display area and a fitting room. The shoemobile
driver/salesperson is responsible for the fitting of footwear and processing of
orders.

  Catalog Direct.   The Company reaches both large and small customers with its
safety shoe catalogs. The mail-order sector of the Company's business provides
direct service to certain customers who are either too small or do not require
direct shoemobile service or who are remotely located. Mail-order sales are
promoted through a combination of the product catalogs, the Company's field
sales force and trade advertising.

  In-Plant Stores.   To add further flexibility to its distribution
capabilities, the Company offers large-volume customers an in-plant store
program, which provides the customer with a base stock of inventory and a sales
staff to manage the store on-site at the customer's manufacturing facility. The
customer provides the Company with the necessary store space and all utilities.

  Wholesale and Consumer Channels.   The Company markets branded products to
select third-party retail customers.  The Company also markets primarily Knapp
branded product directly to consumers through a Direct Mail and Counselor
(independent sales representatives) division.

  Falcon Manufacturing.  Through its Falcon subsidiary, the Company manufactures
private label footwear for such well known customers as New Balance Athletic
Shoe, Inc., Browning Arms Company, L.L. Bean, Inc., Cabela's Inc. and H.S. Trask
& Co.

  IA Vision.  The Company markets safety prescription eyewear to its existing
industrial customer base through distribution methods identical to its safety
footwear distribution.  Mobile service is utilized to bring the product on site
for the customer, where the selection, fitting and sale may be consummated
utilizing a mobile point-of-sale ("POS") system designed specifically for
prescription eyewear.


Products


  The Company's product line addresses a full range of protective footwear
applications covering all six ANSI categories in styles for both men and women
in both steel and non-metallic toe caps. Product categories include work,
athletic, hikers, metatarsal, dress/casual and rubber footwear and consist of
over 400 individual styles ranging in price from $15.00 for an inexpensive steel
PVC boot to a $185.00 waterproof boot. The Company's safety footwear is
manufactured in more than 300 length and width combinations, ranging in sizes
from 5 to 17. Sales of Iron Age products are concentrated in traditional, well-
established styles, with sales of new styles in each of fiscal 1997, 1998 and
1999 representing less than 16% of net sales in each period. All the Company's
work and safety shoes and boots are designed, manufactured and laboratory tested
to meet or exceed applicable ANSI Standards. Through its long-standing
relationship with users of safety footwear, the Company has assembled a product
line that is widely regarded as the industry's most complete. In addition to the
Iron Age product line, the Company distributes work, service oxfords, non-slip
and high-end work and hunting boots under the Knapp brand name. In 1997, the
Company acquired and successfully integrated Knapp Shoes, Inc. ("Knapp"), an
underperforming competitor with a strong franchise in the uniform and service
sector market (the "Knapp Acquisition").  On August 31, 1998, the

                                      -5-
<PAGE>
 
Company sold the Dunham(R) trademark for $2.0 million and on-hand Dunham
inventory for approximately $0.7 million to New Balance Athletic Shoe, Inc. and
New Balance Trading Company, Ltd. (together, "New Balance"). In connection
therewith, the Company agreed to manufacture for New Balance certain products
which New Balance will continue to sell under the Dunham brand name. Net sales
of Dunham products in fiscal 1998, the last full fiscal year of ownership, were
$4.0 million. This transaction did not have a material effect on the results of
operations.

  The Company has successfully expanded its product line to meet new customer
demands and substantially increased the categories and types of footwear
offered. As the safety shoe market has diversified, the Company has expanded its
product line, moving from the basic heavy-duty styles toward casual, lightweight
safety footwear that meet the needs of professional, light industrial and
service sector employees.



Manufacturing


   General. As a result of its strategic acquisitions of Falcon and Knapp,
during fiscal 1999 the Company operated two manufacturing facilities in
Lewiston, Maine. Work shoes are manufactured in the Falcon facility in Lewiston
primarily for sale by the Company under the Iron Age brand name. In addition,
the Company sells work shoes manufactured at the Falcon facility directly to
third parties, including New Balance, Browning Arms Company, L.L. Bean, Inc.,
Cabela's Inc. and H.S. Trask & Co. The Company manufactured the Knapp product
line at its other Lewiston facility. As of March 1999 the Company has
consolidated the Knapp manufacturing operations into the Falcon facility as
originally intended at the time of the Knapp Acquisition.

  Suppliers. As a result of its market leadership position and long operating
history, the Company has developed key supply arrangements with 22 leading
footwear manufacturers in seven countries: the United States, China, Korea,
Canada, Taiwan, Maylasia and the Netherlands. Although in fiscal 1999 one
supplier in China manufactured approximately 24% of the pairs of shoes sold by
the Company, the Company does not believe that it is dependent upon any specific
supplier for its product manufacturing. In fiscal 1999, 49% of its total pairs
were produced by foreign suppliers and 38% of its total pairs were produced in
China. The Company has not experienced any material adverse effects as a result
of the current economic downturn in Asia. However, the economic climate could
have an adverse effect on the Company's suppliers located in Asia. The Company
believes that it could find alternative manufacturing sources for those products
it currently sources from Asia, including its largest supplier in China, through
its existing relationships with independent third-party manufacturing facilities
located outside of Asia. However, the loss of a substantial portion of this
manufacturing capacity or the inability of Asian suppliers to provide products
on schedule or on terms satisfactory to the Company, could have a material
adverse effect on the Company's business, financial condition or results of
operations during the transition to alternative manufacturing facilities.

  Transportation/Freight. The Company utilizes its own trucks as well as common
carriers to deliver product orders from its Falcon manufacturing subsidiary and
to its mobile and store centers.


Competition


  The work shoe market is highly competitive. Management believes that
competition in the industry is based on distribution capabilities, retail
presence, brand name recognition, corporate relationships, systems, service,
product characteristics, product quality and price. The Company's major
competitors in the safety shoe sector of the work shoe industry are Lehigh (a
subsidiary of U.S. Industries, Inc.), Hy-Test (a subsidiary of Wolverine World
Wide, Inc.) and Red Wing Shoe Co. Some of the Company's competitors have greater
financial and other resources than the Company. In addition, the work shoe
market is a mature industry that could experience limited growth.



Environmental Matters

                                      -6-
<PAGE>
 
  The Company's operations, including manufacturing, are subject to extensive
federal, state, local, and foreign laws and regulations relating to the storage,
handling, generation, treatment, emission, release, transportation, discharge
and disposal of certain substance and waste materials. Permits are required for
certain of the Company's operations, and these permits are subject to
revocation, modification and renewal by issuing authorities. Governmental
authorities have the power to enforce compliance with their regulations, and
violations may result in the payment of fines or the entry of injunctions, or
both. The Company does not believe it will be required under existing
environmental laws and enforcement policies to expend amounts that will have a
material adverse effect on its results of operations or financial condition. The
requirements of such laws and enforcement policies, however, have generally
become stricter in recent years. Accordingly, the Company is unable to predict
the ultimate cost of compliance with environmental laws and enforcement
policies.



Employees


  As of January 30, 1999, the Company employed approximately 1,000 people in
sales and distribution, manufacturing and administration. None of the Company's
employees is presently covered by collective bargaining agreements. Management
considers its employee relations to be good.
 

Item 2.  Properties.


  The Company's executive offices are located in Pittsburgh, Pennsylvania. All
of the Company's properties are maintained on a regular basis and are adequate
for the Company's present requirements.

  The following table identifies, as of January 30, 1999, the principal
properties utilized by the Company.


<TABLE>
<CAPTION>
                                                                                 Square
Facility                               Own/Lease     Location                   Footage(1)
--------                               ---------     --------                   ---------
<S>                                    <C>           <C>                        <C>
Corporate Headquarters  .............. Lease         Pittsburgh, Pennsylvania   20,500
Distribution Facility  ............... Own           Penn Yan, New York         175,000
Knapp Direct Mail Facility  .......... Lease         Penn Yan, New York         5,500
Falcon Manufacturing Facility(2)  .... Lease         Lewiston, Maine            112,000
Knapp Manufacturing Facility(2)  ..... Lease         Lewiston, Maine            122,000
                                                                              
</TABLE>


(1) Square footage has been rounded up to the nearest 500 square feet.

(2) The Company consolidated the Knapp manufacturing facility into the Falcon
    manufacturing facility in March 1999. The Knapp manufacturing facility is
    vacant as of March 15, 1999. The lease for the Knapp facility expires in
    December 1999.



Item 3.  Legal Proceedings.


  The Company is a party to various legal actions arising in the ordinary course
of its business. The Company believes that the resolution of these legal actions
will not have a material adverse effect on the Company's business, results of
operations and financial condition.


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

     The Company did not submit any matters during the fourth quarter of the
fiscal year covered by this report to a vote of security holders through the
solicitation of proxies or otherwise.

                                      -7-
<PAGE>
 
                                    Part II
                                        


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

   As of April 26, 1999,  the Company had 1,000 authorized shares of common
stock, par value $1.00, all of which were issued and outstanding and held by
Holdings.  There is no established public trading market for the Company's
common stock.  The Company's ability to pay dividends is limited under an
indenture dated as of April 24, 1998 between the Company and The Chase Manhattan
Bank, as trustee (the "Indenture").



Item 6.  Selected Financial Data.



  The following table sets forth selected historical consolidated financial data
of the Company and its predecessors for the five-year period ended January 30,
1999, which was derived from audited consolidated financial statement of the
Company and its predecessors. The following table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and consolidated financial statements of the Company and
accompanying notes thereto included in Item 8 of this Annual Report on
Form 10-K.


<TABLE>
<CAPTION>
                                                                     
                                                 Successor                           Predecessor 
                                       -------------------------------------------------------------------------
                                                                                               Fiscal Years Ending(1)
                                                                                      -------------------------------------
                                        Fiscal Year    February 27,     January 26,                                
                                         Ending (1)    1997 through    1997 through                                
                                        January 30,     January 31,    February 26,   January 25,  January  27,  January 28,
                                           1999           1998(2)          1997          1997        1996           1995      
                                           ----           -------          ----          ----        ----           ----
                                                                        (Thousands of Dollars)
Summary of Operations:

<S>                                     <C>            <C>             <C>            <C>          <C>           <C>
Net sales  ............................. $124,294        $107,769       $10,937        $99,360     $95,263        $85,543

Net income (loss)  ..................... $ (5,605)(4)    $  1,957       $  (195) (3)   $ 5,589     $ 5,667        $ 4,772

Financial Position at Year End:
Total assets  .......................... $179,228        $174,792       $    --        $90,043     $91,151        $86,173
Total debt  ............................ $123,674        $101,675       $    --        $19,212     $38,295        $35,294

Holdings Series A Preferred Stock (5)... $     --        $ 17,031       $    --        $    --     $   --         $    --
                                         
</TABLE>



(1) The Company utilizes a fiscal year of 52 or 53 weeks, ending on the last
    Saturday in January. Each of the Company's fiscal years set forth herein
    contained 52 weeks except for its fiscal year ended January 31, 1998 which
    contained 53 weeks.

(2) The statement of income data and other financial data for the period
    February 27, 1997 through January 31, 1998 include the results of Knapp
    since it was acquired by the Company on March 14, 1997.



(3) Includes $1,054 of non-cash stock-based compensation and $1,000 of non-
    recurring management bonuses paid in connection with the Fenway Acquisition.



(4) Includes an extraordinary loss on early extinguishment of debt, net of tax
    effect, of $4,015 and compensation payments to certain members of management
    of Iron Age, net of tax effect, of $1,285 incurred in connection with the
    April 1998 Transactions.


(5) The Holdings Series A Preferred Stock is included in the Company's
    consolidated financial statements for financial reporting purposes since the
    Company paid a dividend of $13,700 to Holdings from the proceeds of the
    Transactions that was used to redeem a portion of the Holdings Series A
    Preferred Stock.

                                      -8-
<PAGE>
 
Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.



  The following is management's discussion and analysis of the financial
condition and results of operations of the Company for the fiscal years ended
January 30, 1999 ("fiscal 1999"), January 31, 1998 ("fiscal 1998") and January
25, 1997 ("fiscal 1997"). For purposes of this discussion and analysis, the
financial condition and results of operations of the Company for fiscal 1998
represent the combined results of the Company and its predecessor, unless
otherwise indicated. This discussion and analysis should be read in conjunction
with, and is qualified in its entirety by, "Selected Financial Data" and the
consolidated financial statements and accompanying notes thereto included in
Item 8 of  this Annual Report on Form 10-K.


Overview


  The Company's primary business is the specialty distribution of safety, work
and uniform related shoes directly to end users under the Iron Age and Knapp
brand names, which comprised 91.5% of fiscal 1999 sales. The Company also
distributes footwear directly to retail and wholesale customers through its
wholesale division and its manufacturing subsidiary Falcon. The Company
manufactures approximately 20% of total pairs of shoes sold through Falcon. In
addition, the Company began distributing prescription safety eyewear, on a
limited basis, through its subsidiary IA Vision in conjunction with the
acquisition of a regional distributor in April 1998. The Company's net sales
growth was 4.7% in fiscal 1999, or 6.7% excluding the impact of the additional
week in fiscal 1998. The Company's net sales growth has averaged 9.4% over the
last three fiscal years, excluding the impact of the additional week in fiscal
1998.

  The Company has an extended history of sales and income growth. Historically,
the Company's growth has been generated both internally and through the
acquisition of regional independent distributors. From fiscal 1987 to fiscal
1999, The Company's net sales and EBITDA have increased at a compound annual
growth rate ("CAGR") of 14.2% and 20.1%, respectively.



Acquisitions and Restructuring

  The Fenway Acquisition occurred on February 26, 1997. Concurrent with the
Fenway Acquisition, (i) Holdings and the Company entered into the Old Credit
Facility, (ii) the Company issued the Old Subordinated Notes, (iii) Holdings
issued the Holdings Series A Preferred Stock, (iv) Holdings issued Common Stock
for equity capital of approximately $32.2 million and (v) management rolled over
certain options to acquire shares of the predecessor company into options to
acquire shares of Common Stock of Holdings and were granted additional options
to acquire shares of Common Stock of Holdings. In the April 1998 Transactions,
Holdings and the Company used excess cash and net proceeds from the Discount
Notes, the Senior Subordinated Notes and the New Credit Facility to repay the
Old Credit Facility and the Old Subordinated Notes, to redeem the Holdings
Series A Preferred Stock, to make compensation payments to certain members of
management and to make a distribution to Holdings' stockholders.


  On October 21, 1998, the Company consummated an exchange offer of Senior
Subordinated Notes registered under the Securities Act of 1933, as amended.  The
Senior Subordinated Notes and the notes exchanged therefor are referred to as
the "Senior Subordinated Notes."
 
  In April 1998,  the Company, through IA Vision, acquired the stock of Safety
Supplies & Service Co., Inc. and acquired certain assets and assumed certain
liabilities of Safety Depot Ltd., ACT Safety, Inc. and J. Mars Knapp Shoes (the
"First Quarter Acquisitions"). The combined purchase price for the First
Quarter Acquisitions was approximately $4.64 million, including transactions
costs of approximately $0.15 million. In addition, on July 7, 1998, the Company
acquired certain assets of Work-Saf, Inc. for approximately $0.75 million (the
"Second Quarter Acquisition"). The First Quarter Acquisitions and the Second
Quarter Acquisition have been accounted for using the purchase method of
accounting for business combinations, and accordingly, (i) the results of
operations for each of the acquired companies are included in the Company's
financial statements only from the date of the respective acquisitions and (ii)
the purchase price has been allocated to the Company's net assets based upon
their fair market

                                      -9-
<PAGE>
 
values. The First Quarter Acquisitions and the Second Quarter Acquisition
resulted in goodwill of approximately $2.8 million, which is being amortized
over 40 years.

Divestitures


    Effective August 31, 1998,  the Company sold  the Dunham product line and
related trademarks to New Balance for $2.0 million and recorded a gain of $1.7
million (the "Dunham Sale").  In conjunction with the Dunham Sale, Falcon agreed
to a minimum two year supply agreement with New Balance and the sale of on-hand
inventory.
 
Results of Operations


  The following table sets forth for the periods indicated certain historical
income statement data derived from the consolidated statement of income of the
Company and its predecessor. The application of the purchase method of business
combinations resulted in a presentation of the results of operations for fiscal
1998 in two periods: a one-month period prior to the Fenway Acquisition and an
11-month period following the date of the Fenway Acquisition.


<TABLE>
<CAPTION>
                                                              Successor                           Predecessor
                                                  ---------------------------------------------------------------------
                                                                    Feb. 27, 1997        Jan. 26, 1997
                                                                        through              through     
                                                   Fiscal 1999      January 31, 1998      Feb. 26, 1997     Fiscal 1997
                                                   -----------      ----------------     --------------     -----------
                                                                         (Thousands of Dollars)
<S>                                                <C>              <C>                   <C>               <C>
Income Statement Data: 
Net sales  ........................................  $124,294           $107,769              $10,937         $99,360
Gross profit  .....................................    61,066             54,465                5,327          46,923
Selling, general and administrative  ..............    46,854             36,541                5,120          31,267
Depreciation and amortization  ....................     5,193              4,426                  238           2,751
Operating income (loss)  ..........................     9,019             13,498                  (31)         12,905
Gain on divestiture................................     1,678                 --                   --              --
Interest expense  .................................    12,354              9,855                  232           3,627
(Benefit) provision for income taxes  .............       (67)             1,686                  (68)          3,689
Extraordinary item, net of tax effect..............    (4,015)                --                   --              --

Other Data:
Gross profit margin  ..............................      49.1%              50.5%                48.7%           47.2%
Operating income (loss) margin  ...................       7.2%              12.5%                (0.3)%          13.0%

</TABLE> 

Fiscal 1999 Compared to Fiscal 1998


  Net Sales. For comparability with fiscal 1999, net sales for the predecessor
and successor periods in fiscal 1998 have been discussed on a combined basis.
Management believes that a combined discussion of predecessor and successor
periods is reasonable and appropriate because there were no adjustments to net
sales for a change in basis resulting from the Fenway Acquisition. The Company's
net sales for fiscal 1999 were $124.3 million compared to $118.7 million for
fiscal 1998, an increase of $5.6 million, or 4.7%. Excluding the impact of the
additional week in fiscal 1998, sales increased $7.8 million, or 6.7%. The
increase in fiscal 1999 was primarily attributable to growth in the Company's
primary business of $6.0 million, or 5.6%. Sales of prescription safety eyewear
and safety and medical products were $2.1 million in fiscal 1999.  Growth in net
sales was partially offset by a $2.5 million decrease in sales through the
Company's wholesale division and Dunham wholesale sales due to the Dunham Sale.
 
Gross Profit.   For comparability with fiscal 1999, gross profit for the
predecessor and successor periods in fiscal 1998 has been discussed on a
combined basis. Management believes that a combined discussion of predecessor
and successor periods is reasonable and appropriate because there were no
adjustments to gross profit for a change in basis resulting from the Fenway
Acquisition. The Company's gross profit for fiscal 1999 was $61.1 million
compared to $59.8 million for fiscal 1998, an increase of $1.3 million, or 2.2%.
Total gross profit percentage decreased 1.3% to 49.1% in fiscal 1999 compared to
fiscal 1998. Gross profit percentage increased in the

                                      -10-
<PAGE>
 
Company's primary business by 0.3% in fiscal 1999. The overall decrease in the
gross profit percentage was primarily related to integrating the operations of
the prescription safety eyewear and safety and medical products business and an
increase in lower gross profit margin private label Dunham sales resulting from
the Dunham Sale.

  Selling, General and Administrative Expenses.   For comparability with fiscal
1999, selling, general and administrative expenses for the predecessor and
successor periods in fiscal 1998 have been discussed on a combined basis.
Management believes that a combined discussion of predecessor and successor
periods is reasonable and appropriate because there were no adjustments to
selling, general and administrative expenses for a change in basis resulting
from the Fenway Acquisition. Selling, general and administrative expenses for
fiscal 1999 were $46.9 million compared to $41.7 million for fiscal 1998, an
increase of $5.2 million, or 12.5%. Selling, general and administrative expenses
for fiscal 1999 include  non-recurring charges of $2.2 million of compensation
payments to certain members of  management in connection with the April 1998
Transactions, a $0.2 million charge related to store closings scheduled for the
first and second quarter of fiscal 2000 and $0.2 million of recruitment fees.
Selling, general and administrative expenses for fiscal 1998 include a non-
recurring charge of $2.1 million of stock compensation expense and compensation
payments to certain members of management in connection with the Fenway
Acquisition. Selling, general and administrative expenses increased $4.6
million, or 11.6%, from fiscal 1998 to fiscal 1999, excluding non-recurring
charges in both fiscal 1999 and fiscal 1998. The increase in fiscal 1999 was
primarily related to the First Quarter Acquisitions and infrastructure added in
the Knapp distribution channel since the first half of fiscal 1998. Growth in
selling, general and administrative expenses in the primary business was $1.8
million, or 6.1%, in fiscal 1999, excluding the non-recurring charges discussed
above.

  Operating Income.   Operating income for fiscal 1999 was $9.0 million, or 7.2%
of net sales, compared to $13.5 million, or 12.5% of net sales, for the period
from February 27, 1997 through January 31, 1998. The decrease was attributable
to the increased selling, general and administrative expenses as discussed
above.  Operating loss and operating loss as a percentage of net sales for the
predecessor period January 26, 1997 through February 26, 1997 were $0.03 million
and 0.3%, respectively. Operating income for the successor period included
increased selling, general and administrative expenses, as discussed above, and
additional depreciation and amortization of $0.8 million. The additional
depreciation and amortization is primarily due to the increase in basis of
goodwill, customer lists and other intangible and tangible assets capitalized as
a result of the Fenway Acquisition, the Knapp Acquisition, the First Quarter
Acquisitions and the Second Quarter Acquisition.

  Gain on Divestiture.  Gain on divestiture for fiscal 1999 was $1.7 million
which was related to the gain on the Dunham Sale discussed above.

  Interest Expense.   Interest expense for fiscal 1999 was $12.4 million
compared to $9.9 million for the period from February 27, 1997 through January
31, 1998, an increase of $2.5 million, or 25.3%. Interest expense for the
predecessor period January 26, 1997 through February 26, 1997 was $0.2 million.
Interest expense for the successor periods prior to April 25, 1998 reflect the
additional indebtedness of the Company incurred in connection with the Fenway
Acquisition and the Knapp Acquisition. The successor periods subsequent to April
24, 1998 reflect interest incurred in connection with the April 1998
Transactions.

  Income Tax Expense.   Income tax benefit was $0.07 million for fiscal 1999
compared to income tax expense of $1.7 million  for the period from February 27,
1997 through January 31, 1998. Income tax benefit for the predecessor period
January 26, 1997 through February 26, 1997 was $0.07 million. Income tax benefit
for fiscal 1999 differs from that of the statutory income tax rate due primarily
to nondeductible goodwill amortization. The Company recognized a state income
tax benefit of $1.1 million from net operating loss carryforwards for fiscal
1999.

  The Company needs to generate $10.0 million of state taxable income to realize
this benefit before expiration of the net operating loss carryforward periods,
which begin in fiscal 2002 through fiscal 2019.  The Company evaluates the
adequacy of the valuation reserve and the realization of the deferred tax
benefit on an ongoing basis.  Management believes that future taxable income
will more likely than not allow the Company to realize this benefit.

                                      -11-
<PAGE>
 
  Extraordinary Item.   For fiscal 1999, the Company recorded an extraordinary
loss of $4.0 million, net of a $2.9 million tax benefit, due to the early
extinguishment of indebtedness resulting from the repayment of the Old
Subordinated Notes and the Old Credit Facility in April 1998 in connection with
the April 1998 Transactions.



Fiscal 1998 Compared to Fiscal 1997


Net Sales.   For comparability with prior periods, net sales for the predecessor
and successor periods in fiscal 1998 have been discussed on a combined basis.
Management believes that a combined discussion of predecessor and successor
periods is reasonable and appropriate because there were no adjustments to net
sales for a change in basis resulting from the Fenway Acquisition. The Company's
net sales for fiscal 1998 increased to $118.7 million, an increase of $19.3
million, or 19.4%, compared to fiscal 1997. The increase was attributable to
increased sales in the primary business of $6.2 million, or 7.1%, sales of $12.8
million from the operations of the Knapp brand sales channel and $2.0 million
for the additional week in fiscal 1998. The increase was partially offset by a
$1.7 million decrease in sales of Dunham brand products, the Company's wholesale
division and private label.

  Gross Profit.   For comparability with prior periods, gross profit for the
predecessor and successor periods in fiscal 1998 have been discussed on a
combined basis. Management believes that a combined discussion of predecessor
and successor periods is reasonable and appropriate because there were no
adjustments to gross profit for a change in basis resulting from the Fenway
Acquisition. The Company's  gross profit increased to $59.8 million in fiscal
1998, an increase of $12.9 million, or 27.5%, compared to fiscal 1997. The
increase in gross profit was primarily attributable to the increase in net
sales. In addition, gross profit percentage increased 3.2% in fiscal 1998
compared to fiscal 1997. The increase in gross profit percentage was
attributable to higher margin product sales of both Iron Age and Knapp branded
products, through the higher margin shoemobile and retail store channels, and
stable product costs.

   Selling, General and Administrative Expenses.   For comparability with prior
periods, selling, general and administrative expenses for the predecessor and
successor periods in fiscal 1998 have been discussed on a combined basis.
Management believes that a combined discussion of predecessor and successor
periods is reasonable and appropriate because there were no adjustments to
selling, general and administrative expenses for a change in basis resulting
from the Fenway Acquisition. Selling, general and administrative expenses were
$41.7 million in fiscal 1998, an increase of $10.4 million, or 33.2%, compared
to fiscal 1997. The acquired Knapp sales channels contributed $5.8 million of
this increase and the primary business contributed $2.5 million of this
increase, which represented a percentage increase of 8.8% over fiscal 1997.
Approximately $0.5 million of the increase was attributable to the Knapp
manufacturing operation within Falcon and $1.0 million related to compensation
payments to management in connection with the Fenway Acquisition. The additional
week in fiscal 1998 contributed $0.6 million of the increase.


  Operating Income.   Operating income was $13.5 million and $12.9 million in
the period February 27, 1997 through January 31, 1998 and fiscal 1997,
respectively. Operating income in the period February 27, 1997 through January
31, 1998 reflects the direct result of the Company's gains on both sales and
margins. Operating income as a percentage of net sales was 12.5% in the period
February 27, 1997 through January 31, 1998 and 13.0% in fiscal 1997. Operating
loss and operating loss as a percentage of net sales for the predecessor period
January 26, 1997 through February 26, 1997 were $0.03 million and 0.3%,
respectively. Operating income as a percentage of net sales in the period
February 27, 1997 through January 31, 1998 included additional amortization due
to the increase in the basis of goodwill, customer lists and other intangible
assets capitalized as a component of the purchase accounting related to the
Fenway Acquisition and the Knapp Aquisition.


  Interest Expense.   Interest expense was $9.9 million in the period February
27, 1997 through January 31, 

                                      -12-
<PAGE>
 
1998 and $3.6 million in fiscal 1997. Interest expense for the predecessor
period January 26, 1997 through February 26, 1997 was $0.2 million. Interest
expense for the period February 27, 1997 through January 31, 1998 reflects the
increase in indebtedness of the Company incurred in connection with the Fenway
Acquisition and the Knapp Acquisition.

  Income Tax Expense.   Income tax expense was $1.7 million in the period
February 27, 1997 through January 31, 1998 and $3.7 million in fiscal 1997.
Income tax benefit for the predecessor period January 26, 1997 through February
26, 1997 was $0.07 million. Income taxes for the successor period reflect the
effect of additional non-deductible goodwill amortization.


Liquidity and Capital Resources


  The Company's primary cash needs are working capital, capital expenditures and
debt service. The Company anticipates that it may use cash in the future to
finance acquisitions. The Company has financed cash requirements primarily
through internally generated cash flow and funds borrowed under Holdings' and
the Company's credit facilities.

  Net cash provided by operating activities was $1.0 million in fiscal 1999, as
compared to net cash used for operating activities of $0.5 million in fiscal
1998 and net cash provided by operating activities of $9.1 million in fiscal
1997. The increase in cash provided by operating activities in fiscal 1999 is
primarily the result of the decrease in inventory levels of $0.5 million,
compared to an increase of $6.2 million in fiscal 1998, due to the Knapp
Acquisition.  The reduction in cash provided by operating activities in fiscal
1998 was the result of a one-time increase in inventory of $7.0 million related
to the Knapp Acquisition. The major component of the increase in net cash
generated by operating activities in fiscal 1997  was income before non-cash
charges of $5.6 million, primarily due to increased income from operations.

  Excluding cash paid for acquisitions and proceeds from the divestiture, the
Company's investing activities consisted of capital expenditures of $2.3 million
in fiscal 1999 compared to $2.5 million in fiscal 1998 and $2.2 million in
fiscal 1997. The Company's capital expenditures for fiscal 1999 included $0.2
million in remaining costs related to an addition to the Company's central
distribution center building. The remaining $2.1 million in capital expenditures
was related to improvements in retail stores, shoemobiles and equipment in the
core business and installing the POS systems in stores and trucks acquired in
connection with the First Quarter Acquisitions and the Second Quarter
Acquisition.

  The Company's total working capital as of January 30, 1999 was $48.0 million.
At January 31, 1998, working capital was $42.7 million. The primary reason for
the increase to working capital was the elimination of the current portion of
long term senior debt in connection with the April 1998 Transactions.

  Excluding cash paid for acquisitions, the Company used approximately $2.5
million from financing activities in fiscal 1999, due primarily to the April
1998 Transactions. In fiscal 1998, the Company generated cash of $3.7 million
due primarily to borrowings under the Old Credit Facility. In fiscal 1997, the
Company used $7.3 million for financing activities due primarily to principal
payments on debt and the payment of a dividend.

  Cash flow from operations for fiscal 1999 was sufficient to cover debt service
requirements under the New Credit Facility. Cash flow from operations for fiscal
1998 was sufficient to cover debt service requirements under the Old 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
(including the Senior Subordinated Notes), 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 New 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 New Credit
Facility in an

                                      -13-
<PAGE>
 
amount sufficient to enable the Company to service its indebtedness, including
the Senior Subordinated Notes, or to make capital expenditures.

  As of January 30, 1999 the Company's debt consisted of the Senior Subordinated
Notes, the New Credit Facility and certain other debt. As of January 30, 1999,
the New Credit Facility consisted of a $35.0 million multiple draw acquisition
term loan facility (the "New Acquisition Credit Facility") and approximately
$30.0 million in revolving credit loans, letters of credit and swing line loans
(the "New Revolving Credit Facility"). The Company's other debt of $1.0 million
consisted of capital leases and other notes. As of January 30, 1999,
approximately $11.7 million of the New Acquisition Credit Facility and
approximately $11.0 million of the New Revolving Credit Facility were
outstanding, and the Company had additional borrowing availability under the New
Acquisition Credit Facility of $23.3 million and under the New Revolving Credit
Facility of approximately $19.0 million. The New Credit Facility was amended
effective March 5, 1999 to reduce the New Acquisition Credit Facility to $22.0
million.  The New Acquisition Credit Facility matures in quarterly installments
from July 2001 until final payment in April 2004. The New Revolving Credit
Facility will mature in April 2004 and has no scheduled interim principal
payments.


Year 2000 Issue


  Many existing computer systems use only two digits, rather than four, to
represent a year.  The Year 2000 issue arises because date-sensitive software or
hardware written or developed in this manner may recognize a date using "00" as
the year 1900 rather than the year 2000.  This could potentially result in
system failures or miscalculations causing disruption of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in normal business activities.

  The Company classifies its response to the Year 2000 Issue into five phases:
inventory, assessment, renovation, validation and implementation.  Inventory is
the process in which all electronic/computer components are defined for all
systems (information technology ("IT") and non-information technology ("non-
IT")).  Assessment is the process in which all components are classified as
either compliant or non-compliant.  Renovation is the process in which a system
is upgraded, replaced or retired.  Validation is the process in which compliant
systems are tested within the Company's infrastructure to validate either the
initial compliant assessment is correct or the upgrade or replacement from the
renovation phase is compliant with the Company's infrastructure.  Implementation
is the process in which a compliant system is installed in the Company's
production environment and is used to support business operations.

  The Company has completed the inventory, renovation and validation phases of
its IT systems, and implemented these systems in March 1999.  In the ordinary
course of business, the Company upgraded applications software covering the main
integrated system.  As of January 30, 1999, the Company had expended $26,000 and
has a total expected cost of $50,000 to renovate, validate and implement
software to address the Year 2000 Issue.  The cost is being funded out of
operating cash flow with the entire amount being capitalized as new hardware and
software.

  The Company's inventory and assessment of its non-IT systems (including
telephone, heating/air conditioning, electricity and security systems) was
completed by December 31, 1998.  This is being followed by any required
renovation in calendar 1999.  The Company is using internal resources to address
the Year 2000 Issue of its non-IT systems and has not incurred significant costs
through January 30, 1999 and does not expect to incur significant costs in order
to upgrade its non-IT systems.  All validation and implementation of these non-
IT systems is expected to be completed by mid-1999.

  The cost of systems implementation and Year 2000 modifications are based upon
management's best estimates, which are derived utilizing numerous assumptions
and future events, including continued availability of certain resources, and
other factors.  However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.  As of January 30, 1999, the cost of

                                      -14-
<PAGE>
 
bringing the Company's IT and non-IT systems into Year 2000 compliance is not
expected to have a material effect on the Company's financial condition or
results of operations.

  In addition to reviewing its internal systems, the Company has polled its
major footwear and other vendors, to determine whether they are Year 2000
compliant or to identify any potential issues.  As a result of this
correspondence, management has no reason to believe that the Company's major
footwear and other vendors will not be Year 2000 compliant.  If the Company's
customers and vendors do not achieve Year 2000 compliance before the end of
1999, the Company may experience a variety of problems which may have a material
adverse effect on the Company.  To the extent such vendors are not Year 2000
compliant by the end of 1999, such vendors may fail to deliver ordered materials
and products to the Company and may fail to bill the Company properly and
promptly.  Consequently, the Company may experience delays in sourcing product
to sell to its customers.  The Company plans to address potential problems by
identifying and arranging for alternate sources of supply.  Due to the nature of
its product, the Company does not believe it has any exposure contingencies
related to the Year 2000 Issue for the products it has sold.


Recently Issued Accounting Standards



  In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999.  This Statement
permits early adoption as of the beginning of any fiscal quarter after its
issuance.  The Company expects to adopt the new Statement effective January 30,
2000.  The Statement will require the Company to recognize all derivatives on
the balance sheet at fair value.  Derivatives that are not hedges must be
adjusted to fair value through income.  If a derivative is a hedge, depending
upon the nature of the hedge, changes in the fair value of the derivative will
either be offset against the change in the fair value of the hedged asset,
liability or firm commitment through earnings, or recognized in other
comprehensive income until the hedged item is recognized in earnings.  The
Company does not anticipate that the adoption of this Statement will have a
significant effect on its results of operations or financial position.

 

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 Annual Report on Form 10-K, 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 looking statements made by the Company: (i)
economic conditions in the safety shoe market, (ii) availability of credit,
(iii) increase in interest rates, (iv) cost of raw materials, (v) inability to
maintain state-of-the-art manufacturing facilities, (vi) heightened competition,
including intensification of price and service competition, the entry of new
competitors and the introduction of new products by existing competitors, (vii)
inability to capitalize on opportunities presented by industry consolidation,
(viii) loss or retirement of key executives, (ix) loss or disruption of the
Company's relationships with its major suppliers, including the Company's
largest supplier in China and (x) inability to grow by acquisition of additional
safety shoe distributors or to effectively consolidate operations of businesses
acquired.

                                      -15-
<PAGE>
 
Item 7A. 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 us.  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 January 30, 1999, the Company had fixed-rate debt totaling $101.0
million in principal amount and having a fair value of $76.0 million.  These
instruments are entered into for purposes other than trading.  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 by approximately $5.7  million if
interest rates were to increase by 10% from their levels at January 30, 1999
(i.e., an increase from the weighted average interest rate of 9.9% to a weighted
average interest rate of 10.9%).



     At January 30, 1999, the Company had floating-rate long-term debt totaling
$22.7 million in principal amount and having a fair value of $22.7 million.
These instruments are entered into for purposes other than trading.  These
borrowings are under the New Credit Facility (see "Notes to Consolidated
Financial Statements-Note 7, Long-term debt").  If floating rates were to
increase by 10% from their levels at January 30, 1999, the Company would incur
additional annual interest expense of approximately $0.2 million.



     The Company has entered into interest rate swap agreements with a combined
notional amount of $50.0 million to reduce its exposure to adverse fluctuations
in interest rates relating to this floating-rate debt, rather than for trading
purposes.  The Company has not entered into any derivative financial instruments
for trading purposes.  If floating rates were to increase by 10% from their
levels at January 30, 1999, the Company would incur additional interest expense
of approximately $0.1 million after taking into account the effect of the
interest rate swap agreements.



Foreign Exchange Rates

     A substantial majority of the Company's sales, expenses and cash flows are
transacted in U.S. dollars.  For the fiscal year ended January 30, 1999, sales
denominated in currencies other than U.S. dollars (primarily Mexican peso and
the Canadian dollar) totaled $6.6 million, or approximately 5.3% of total sales.
Net income denominated in currencies other than U.S. dollars totaled $0.03
million, or approximately 2% of total net income before extraordinary item.  An
adverse change in exchange rates of 10% would have resulted in a decrease in
sales of $0.7 million and an immaterial increase in net loss for the year ended
January 30, 1999.  The Company's subsidiaries that operate in Mexico and Canada
have certain accounts receivable and payable accounts in their home currencies
which can act to further mitigate the impact of foreign exchange rate changes.
The Company has no foreign currency exchange contracts.

 

                                      -16-
<PAGE>
 
Item 8.  Financial Statements and Supplementary Data.


 

                              Iron Age Corporation
          (a wholly owned subsidiary of Iron Age Holdings Corporation)

                              Financial Statements


               Years ended January 30, 1999 and January 31, 1998



                                    Contents

                                        
Report of Independent Auditors............................................   18

Audited Financial Statements
 
Consolidated Balance Sheets................................................  19
Consolidated Statements of Income..........................................  20
Consolidated Statements of Stockholders' Equity............................  21
Consolidated Statements of Cash Flows......................................  22
Notes to Consolidated Financial Statements.................................  24
 
Schedule II-Valuation and Qualifying Accounts..............................  47
 

                                      -17-
<PAGE>
 
                         REPORT OF INDEPENDENT AUDITORS


                                        
Board of Directors

Iron Age Corporation

We have audited the accompanying consolidated balance sheets of Iron Age
Corporation and subsidiaries (a wholly owned subsidiary of Iron Age Holdings
Corporation) (the "Company") as of January 30, 1999 and January 31, 1998, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended January 30, 1999.  Our
audits also included the financial statement schedule listed in the index at
Item 8.  These financial statements and schedule are the responsibility of the
Company's  management.  Our responsibility is to express an opinion on these
financial statements and schedule based upon our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Iron Age
Corporation and subsidiaries at January 30, 1999 and January 31, 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 30, 1999, in conformity with generally
accepted accounting principles.  Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.



Ernst & Young LLP

Pittsburgh, Pennsylvania
March 15, 1999

                                      -18-
<PAGE>
 
                              Iron Age Corporation
                                        
          (a wholly owned subsidiary of Iron Age Holdings Corporation)

                          Consolidated Balance Sheets



<TABLE>
<CAPTION>
 
                                                                         Successor
                                                            ----------------------------------
                                                                 January 30       January 31
                                                                    1999             1998
                                                            ------------------------------------
                                                                       (In Thousands)
<S>                                                         <C>                     <C>
Assets
Current assets:
 Cash and cash equivalents                                       $    508           $  2,060
 Accounts receivable, net                                          17,455             15,996
 Inventories                                                       36,681             36,841
 Prepaid expenses                                                   4,433              1,640
 Deferred income taxes                                                861                640
                                                            ------------------------------------
Total current assets                                               59,938             57,177
                                                                                      
Other noncurrent assets                                               431                290
Property and equipment, net                                        11,008             10,479
Intangible assets, net                                            107,851            106,846
                                                            ------------------------------------
Total assets                                                     $179,228           $174,792
                                                            =====================================
Liabilities and stockholders' equity
Current liabilities:
 Current maturities of long-term debt                            $    544           $  3,699
 Accounts payable                                                   3,307              3,510
 Accrued expenses                                                   8,134              7,263
                                                            ------------------------------------
Total current liabilities                                          11,985             14,472

Long-term debt, less current maturities                           123,130             97,976
Other noncurrent liabilities                                          516                516
Deferred income taxes                                               5,728              6,949
                                                            ------------------------------------
Total liabilities                                                 141,359            119,913
Commitments and contingencies                                          --                 --
Redeemable preferred stock                                             --             17,031

Stockholders' equity:
Common stock, $1 par value, 1,000 shares authorized,  
 issued and outstanding                                                  1                 1
Additional paid-in capital                                          44,466            38,086
Accumulated deficit                                                 (6,412)             (174)
Other comprehensive income                                            (186)              (65)
                                                            ------------------------------------
Total stockholders' equity                                          37,869            37,848
                                                            ------------------------------------
Total liabilities and stockholders' equity                        $179,228          $174,792
                                                            =====================================

</TABLE> 
See accompanying notes.

                                      -19-
<PAGE>
 
                              Iron Age Corporation
          (a wholly owned subsidiary of Iron Age Holdings Corporation)

                       Consolidated Statements of Income



<TABLE>
<CAPTION>
                                                                            
                                                   Successor                    Predecessor
                                       ----------------------------------------------------------------
                                                            February 27      January 26
                                           Year ended      1997 through     1997 through      Year ended
                                           January 30       January 31       February 26      January 25 
                                              1999             1998             1997             1997  
                                       --------------------------------------------------------------------
                                                                 (In Thousands)
<S>                                       <C>                <C>            <C>                 <C>
Net sales                                   $124,294        $107,769          $10,937          $99,360  
Cost of sales                                 63,228          53,304            5,610           52,437  
                                       --------------------------------------------------------------------
Gross profit                                  61,066          54,465            5,327           46,923  
                                                                                                       
Selling, general and administrative           46,854          36,541            5,120           31,267  
Depreciation                                   1,670           1,443              121            1,322  
Amortization of intangible assets              3,523           2,983              117            1,429  
                                       --------------------------------------------------------------------
Operating income (loss)                        9,019          13,498              (31)          12,905

Gain on divestiture                            1,678              --               --               --
Interest expense                              12,354           9,855              232            3,627
                                       --------------------------------------------------------------------
(Loss) income before income taxes             (1,657)          3,643             (263)           9,278
(Benefit) provision for income taxes             (67)          1,686              (68)           3,689
                                       --------------------------------------------------------------------
(Loss) income before extraordinary item       (1,590)          1,957             (195)           5,589
Extraordinary item, net of tax effect         (4,015)             --               --               --
                                       --------------------------------------------------------------------
Net (loss) income                          $  (5,605)      $   1,957          $  (195)         $ 5,589
                                       ====================================================================
</TABLE>


See accompanying notes.

                                      -20-
<PAGE>
 
                              Iron Age Corporation
          (a wholly owned subsidiary of Iron Age Holdings Corporation)

                Consolidated Statements of Stockholders' Equity


<TABLE>
<CAPTION>
                                                  
                                                  
                                                                          Retained                   
                                       Common Stock                       Earnings          Other    
                                ------------------------    Paid-In     (Accumulated    Comprehensive 
                                    Shares    Amounts       Capital       Deficit)          Income         Total
                                ------------------------------------------------------------------------------------
                                                        (In Thousands)
Predecessor
<S>                           <C>           <C>            <C>            <C>           <C>                <C>
Balance at January 27, 1996          1,000     $ 1           $35,761       $6,296           $(244)         $41,814
  Net income                            --      --                --        5,589              --            5,589
  Capital contribution                  --      --             2,441           --              --            2,441
  Stock-based compensation              --      --             1,065           --              --            1,065
  Dividends paid on common
      stock                             --      --                --       (2,718)             --           (2,718)
  Foreign currency translation                                                                                    
      adjustment, net of tax            --      --                --           --              21               21 
                                ---------------------------------------------------------------------------------------   
Balance at January 25, 1997          1,000       1            39,267        9,167            (223)          48,212
  Net loss                              --      --                --         (195)             --             (195)
  Stock-based compensation              --      --             1,054           --              --            1,054
  Foreign currency translation                                                                 
     adjustment, net of tax             --      --                --           --             (22)             (22)
                                ---------------------------------------------------------------------------------------    
Balance at February 26, 1997         1,000     $ 1           $40,321       $8,972           $(245)         $49,049
                                =======================================================================================
Successor                                                             
                                                                      
Balance at February 27, 1997            --     $--           $    --       $   --           $  --          $    --
  Net income                            --      --                --        1,957              --            1,957
  Capital contribution               1,000       1            38,086           --              --           38,087
  Dividend accrued on                                                                               
      preferred stock                   --      --                --       (2,131)             --           (2,131)
  Foreign currency translation                                                                      
     Adjustment, net of tax             --      --                --           --             (65)             (65)
                                ---------------------------------------------------------------------------------------      
Balance at January 31, 1998          1,000       1             38,086        (174)            (65)          37,848
  Net loss                              --      --                 --      (5,605)             --           (5,605)
  Capital contribution                  --      --              6,380          --              --            6,380
  Dividend paid on preferred                                                                        
      stock                             --      --                 --        (633)             --             (633)
  Foreign currency translation                                                                       
      adjustment, net of tax            --      --                 --          --            (121)            (121) 
                                ---------------------------------------------------------------------------------------      
Balance at January 30, 1999          1,000       $1           $44,466     $(6,412)          $(186)         $37,869
                                =======================================================================================
</TABLE>


See accompanying notes.

                                      -21-
<PAGE>
 
                              Iron Age Corporation
          (a wholly owned subsidiary of Iron Age Holdings Corporation)

                     Consolidated Statements of Cash Flows



<TABLE>
<CAPTION>
                                                                              
                                                                                 Successor                      Predecessor        
                                                                      -----------------------------------------------------------  
                                                                                       February 27      January 26                 
                                                                         Year ended   1997 through     1997 through    Year ended  
                                                                         January 30    January 31      February 26     January 25  
                                                                            1999          1998             1997           1997
                                                                      ----------------------------------------------------------
                                                                                             (In Thousands)
<S>                                                                    <C>           <C>             <C>             <C> 
Operating activities                                              
Net (loss) income                                                      $(5,605)          $1,957          $  (195)       $5,589 
Adjustments to reconcile net (loss) income to net cash provided   
 by operating activities:                                         
  Extraordinary item, net of tax                                         4,015               --               --            -- 
  Gain on divestiture                                                   (1,678)              --               --            -- 
  Depreciation and amortization                                          5,592            4,727              246         3,109 
  Amortization of deferred financing fees included in interest             528              613               16           384
  Provision for losses on accounts receivable                             (107)              30               10            45 
  Deferred income taxes                                                 (1,612)            (596)              --            82
  Stock-based compensation                                                  --               --            1,054         1,065
  Changes in operating assets and liabilities:                      
     Accounts receivable                                                  (405)             372             (954)         (688) 
     Inventories                                                           502           (6,976)             797         1,558 
     Prepaid expenses                                                       99              232               65          (143) 
     Other noncurrent assets                                               (14)             (14)              20          (182) 
     Accounts payable                                                     (981)          (1,375)            (573)          (19) 
     Accrued expenses                                                      638             (882)             949        (1,657) 
                                                                   -------------------------------------------------------------- 
Net cash provided by (used in) operating activities                        972           (1,912)           1,435         9,143 

Investing activities                                              
Net cash used in business acquisitions                                  (5,241)        (141,717)              --            --
Proceeds from divestiture                                                2,544               --               --            --
Purchases of property and equipment                                     (2,338)          (2,365)            (117)       (2,222) 
                                                                   --------------------------------------------------------------  
                                                                  
Net cash used in investing activities                                   (5,035)        (144,082)            (117)       (2,222)  

Financing activities                                              
Borrowing under revolving credit agreement                              49,150           44,450           (1,909)       93,617 
Proceeds from senior term notes                                   
                                                                            --           65,000               --            -- 
Proceeds from senior subordinated notes                                100,000           14,550               --            --
Contribution by Holdings                                                 6,380           40,000               --         2,441
Issuance of Preferred Stock                                                 --           14,900               --            --
Issuance of stock purchase warrants                                         --              100               --            --
Principal payments on debt                                            (127,683)         (23,531)            (357)     (100,352) 
Payment of financing costs                                              (5,553)          (7,468)              --            -- 
Call premium on early extinguishment of old subordinated notes          (1,562)              --               --            --
Redemption of Holdings Series A Preferred Stock, including        
 cumulative unpaid dividends                                           (17,664)              --               --            --
Dividend paid on common stock                                               --               --               --        (2,718)
Principal payments on capital leases                                      (333)            (328)             (33)         (305) 
                                                                  --------------------------------------------------------------   
                                                                  
Net cash provided by (used in) financing activities                      2,735          147,673           (2,299)       (7,317) 
Effect of exchange rate changes on cash and cash equivalents              (224)            (110)             (37)           40 
                                                                  -------------------------------------------------------------- 
(Decrease) increase in cash and cash equivalents                        (1,552)           1,569           (1,018)         (356) 
Cash and cash equivalents at beginning of year                           2,060              491            1,509         1,865 
                                                                   ------------------------------------------------------------- 
Cash and cash equivalents at end of year                                $  508         $  2,060          $   491        $1,509 
                                                                   =============================================================
</TABLE>

                                      -22-
<PAGE>
 
               Consolidated Statements of Cash Flows (continued)



<TABLE>
<CAPTION>
                                                                              
                                                                  Successor                     Predecessor 
                                                         ----------------------------------------------------------
                                                                        February 27       January 26   
                                                           Year ended   1997 through     1997 through    Year ended  
                                                           January 30    January 31       February 26    January 25 
                                                              1999          1998              1997          1997        
                                                         ----------------------------------------------------------
                                                                              (In Thousands)
Supplemental disclosures of cash flow information
Cash paid during the period for:
<S>                                                       <C>           <C>              <C>             <C>
 Interest                                                    $10,377        $  7,837         $552          $2,717 
 Income taxes                                                  1,254           1,138            7           2,568 

Supplemental schedule of noncash investing and financing
 activities
Capital lease agreements for equipment                       $   373        $    206         $ --          $  340 
                                                           ========================================================= 
Assets acquired and liabilities assumed in connection with
 acquisitions:
  Fair value of assets acquired                              $ 6,626        $171,328         $ --          $   --  
  Liabilities assumed                                         (1,236)        (21,946)          --              --
                                                           --------------------------------------------------------- 
 Cash paid                                                     5,390         149,382           --              --
 Less fees and expenses                                         (149)         (7,468)          --              --
 Less cash acquired                                               --            (197)          --              --
                                                           --------------------------------------------------------- 
 Net cash used in business acquisitions                      $ 5,241        $141,717         $ --          $   -- 
                                                           ========================================================= 
</TABLE>



See accompanying notes.

                                      -23-
<PAGE>
 
                              Iron Age Corporation
          (a wholly owned subsidiary of Iron Age Holdings Corporation)

                   Notes to Consolidated Financial Statements

                     January 30, 1999 and January 31, 1998


1. Organization and Significant Accounting Policies

Organization and Activities

The accompanying consolidated financial statements include the accounts of Iron
Age Corporation and its wholly owned subsidiaries, Falcon Shoe Mfg. Co.
("Falcon"), Iron Age Investment Company, Iron Age Mexico S.A. de C.V., Iron Age
Canada Ltd., IA Vision Acquisition Co., and Safety Supplies and Service Company,
Inc. (together, the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.

The Company is a wholly owned subsidiary of Iron Age Holdings Corporation
("Holdings') which is majority-owned by Fenway Partners Capital Fund, L.P. (the
'Fenway Fund"). Holdings was acquired by the Fenway Fund and certain other
investors, in partnership with certain members of management, effective February
26, 1997 (the "Fenway Acquisition") (see Note 2). The consolidated financial
statements of the Company reflect Holdings' cost in the Company because the
Company is a wholly owned subsidiary of Holdings and Holdings has no assets
other than its investment in the Company.

The accompanying consolidated financial statements present the twelve-month
period ended January 31, 1998 in two components. The period January 26, 1997
through February 26, 1997 includes the historical results of Iron Age
Corporation prior to the Fenway Acquisition of Holdings and the period after
February 26, 1997 includes the results of Iron Age Corporation after the Fenway
Acquisition of Holdings. In these financial statements, Iron Age Corporation is
referred to as the "Predecessor" prior to February 26, 1997 and as the
"Successor" or the "Company" after such date.

Effective April 24, 1998, Holdings and the Company refinanced their old credit
facility (the "Old Credit Facility") and the Company's old subordinated notes
(the "Old Subordinated Notes") with a new credit facility (the "New Credit
Facility"), 9-7/8% senior subordinated notes due 2008 (the "Senior Subordinated
Notes"), and 12-1/8% senior discount notes due 2009 (the "Holdings Senior
Discount Notes") (collectively, the "Transactions") (see Note 7).

The Company distributes and manufactures work footwear with operations
concentrated in North America. As a percentage of sales, 97% and 3% of the
Company's operations are related to distributing and manufacturing,
respectively. The Company has one reportable segment, distribution of work
footwear in the United States.

                                      -24-
<PAGE>
 
1. Organization and Significant Accounting Policies (continued)

Fiscal Year

The Company's fiscal year ends on the last Saturday in January. The 1997 and
1999 fiscal years include 52 weeks. The combined periods of January 26, 1997
through February 26, 1997 and February 27, 1997 through January 31, 1998 include
53 weeks.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of 90 days
or less at the time of original purchase to be cash equivalents.

Inventories

Approximately 93% and 96% of inventories at January 30, 1999 and January 31,
1998, respectively, are stated at the lower of last-in, first-out (LIFO) cost or
market. The remaining inventories are stated at the lower of first-in, first-out
(FIFO) cost or market.

Catalog Costs

The Company produces periodic catalogs and amortizes the mailing and production
costs over the related revenue stream, generally four to twelve months. The
Company has $766,000 and $749,000 of unamortized catalog costs at January 30,
1999 and January 31, 1998, respectively. For the year ended January 30, 1999,
the periods February 27, 1997 through January 31, 1998 and January 26, 1997
through February 26, 1997, and the year ended January 25, 1997, advertising
expense recorded by the Company was $2,455,000, $1,801,000, $110,000, and
$1,134,000, respectively.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method based on estimated useful
lives, as follows:

     Building and improvements
                                                                        40 years
     Machinery and equipment
                                                                      3-10 years

                                      -25-
<PAGE>
 
1. Organization and Significant Accounting Policies (continued)

Property and Equipment (continued)

Leasehold improvements are amortized over the shorter of the useful life of the
asset or the term of the lease. Expenses for repairs, maintenance and renewals
are charged to operations as incurred. Expenditures which improve an asset or
extend its useful life are capitalized.

Intangible Assets

Goodwill--Goodwill represents the excess of amounts paid and liabilities assumed
over the fair value of identifiable tangible and intangible assets acquired.
This amount is amortized using the straight-line method over a period of 40
years. The Company evaluates the carrying value of goodwill for potential
impairment on an ongoing basis. Such evaluation considers projected future
operating results, trends and other circumstances. If factors indicated that
goodwill could be impaired, the Company would use an estimate of the related
undiscounted future cash flows over the remaining life of the goodwill in
measuring whether the goodwill is recoverable. If such an analysis indicated
that impairment had occurred, the Company would adjust the book value of the
goodwill to fair value.

Customer Lists--Customer lists represent the estimated cost of replacing the
Company's customer base and are being amortized by the straight-line method over
15 years. The amortization period of 15 years approximates the Company's
historical customer loss experience.

Deferred Financing Cost--Deferred financing costs relate to the costs of
obtaining financing. These costs are being amortized over the period the related
loans are outstanding.

Foreign Currency Translation

The assets and liabilities of the Company's foreign subsidiaries are measured
using the local currency as the functional currency and are translated into U.S.
dollars at exchange rates as of the balance sheet date. Income statement amounts
are translated at the weighted average rates of exchange during the year. The
translation adjustment is accumulated in "other comprehensive income." Foreign
currency transaction gains and losses are included in determining net income.
Such amounts are not material.

Revenue Recognition

Revenue from product sales is recognized at the time products are shipped.

                                      -26-
<PAGE>
 
1. Organization and Significant Accounting Policies (continued)

Financial Instruments

The Company periodically enters into interest rate swap agreements to moderate
its exposure to interest rate changes. The Company has effectively converted $25
million of its floating rate debt to a fixed rate basis and $25 million of its
fixed rate debt to a floating rate basis. These agreements involve the receipt
of fixed rate amounts in exchange for floating rate interest payments and
floating rate amounts in exchange for fixed rate interest payments over the life
of the agreements without an exchange of the underlying principal amounts. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The related
amount payable to or receivable from counterparties is included in accrued
interest. Based upon the terms of the agreements, the fair values of the swap
agreements are not recognized in the financial statements. The fair value of the
swap agreements are $225,000 and $(702,000) at January 30, 1999 and January 31,
1998, respectively. Approximately 41%, or $50 million, of the Company's
outstanding long-term debt was subject to interest-rate swap agreements at
January 30, 1999.

Stock-Based Compensation

Certain members of the Company's management are granted options to purchase
stock in Holdings. Holdings recognizes stock-based compensation using the
intrinsic value method. Compensation expense related to stock option grants is
reflected in the Company's financial statements as a charge to income and as an
addition to paid-in capital. For disclosure purposes, pro forma net income is
provided as if the fair value method had been applied.

Income Taxes

Deferred income taxes are provided for the tax consequences of temporary
differences between financial statement carrying amounts and the tax bases of
assets and liabilities. The effect on deferred taxes of a change in tax rates is
recognized in income in the period of the enactment.

Other Comprehensive Income

As of February 1, 1998, the Company adopted Financial Accounting Standards Board
Statement No. 130, Reporting Comprehensive Income. Statement No. 130 establishes
new rules for the reporting and display of comprehensive income and its
components. Statement No. 130 requires foreign currency translation gains and
losses, which are reported separately in stockholders' equity, to be included in
other comprehensive income. The adoption of this statement had no impact on the
Company's net income or stockholders' equity.

                                      -27-
<PAGE>
 
1. Organization and Significant Accounting Policies (continued)

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

Reclassification

Certain reclassifications have been made to the January 25, 1997 consolidated
financial statements to conform to the January 31, 1998 and January 30, 1999
presentations.

2. Acquisitions and Divestiture

Iron Age Corporation (Predecessor)

On February 26, 1997, the Predecessor was acquired in a leveraged buyout
transaction by Holdings through an acquisition corporation for approximately
$143,550,000, including transaction costs of $6,962,000. Holdings was formed by
Fenway Partners, Inc. ("Fenway") and other investors, including certain members
of management, to effect the acquisition. The acquisition was financed by
capital contributions of approximately $34,037,000 (net of carryover basis
adjustment of $1,963,000), mandatorily redeemable preferred stock issued for
$14,900,000 (the "Holdings Series A Preferred Stock"), common stock purchase
warrants issued for $100,000, borrowings under the Old Credit Facility of
$79,000,000, and the Old Subordinated Notes issued to certain Outside Investors
(see Note 12) in the amount of $14,550,000 (net of a $450,000 discount).

The Fenway Acquisition of the Predecessor was accounted for under the purchase
method of accounting because, on a fully diluted basis, 90% of the existing
voting interest of Holdings common stock was acquired through a new holding
company which was capitalized by a group of new shareholders, constituting a
change in control of voting interest. The new holding company was capitalized
through the issuance of 88,625 shares of common stock and was owned 100% by the
Fenway Fund prior to the acquisition of Holdings. The new holding company was
subsequently renamed Iron Age Holdings Corporation. Accordingly, the purchase
price was allocated to the assets and liabilities assumed based on their
relative fair values. However, since certain members of management had ownership
in the Predecessor, the net assets acquired were recorded at the reinvesting
stockholders' carryover basis. Therefore, in allocating the purchase price of
the Company among its net assets, the difference between the fair

                                      -28-
<PAGE>
 
2. Acquisitions and Divestiture (continued)

Iron Age Corporation (Predecessor) (continued)

values of the net assets acquired has been proportionately reduced by
approximately $1,963,000 with such amount being charged against the gross
stockholder's equity of $36,100,000. The adjustment to stockholder's equity
represents the difference between the fair value of management's 10% ownership
and the carryover basis. The Company recorded goodwill of approximately
$84,073,000 in connection with the transaction, which is being amortized on a
straight-line basis over 40 years. The 40 year amortization period was
established based upon the characteristics of the Company, its distribution
system and its products. Because of this purchase price allocation, the
accompanying consolidated financial statements of the Company are not directly
comparable to those of the Predecessor.

The Company's 1998 financial statements only include the Predecessor's
operations from the date of acquisition.

Knapp Shoes, Inc.

On March 14, 1997, the Company acquired certain assets and assumed certain
liabilities of Knapp Shoes, Inc. ("Knapp") for approximately $5,832,000,
including transaction costs of approximately $506,000 (the "Knapp Acquisition").
The Knapp Acquisition was funded with capital contributions from Holdings of
$4,000,000 and additional borrowings under the Old Credit Facility of
$1,326,000. The results of operations for Knapp are included in the consolidated
statement of income from the date of acquisition. Knapp was a distributor and
manufacturer of safety footwear. The Knapp Acquisition has been accounted for
using the purchase method of accounting and, accordingly, the purchase price and
transaction costs have been allocated to assets acquired and liabilities assumed
based on their estimated fair values. The excess of consideration paid over the
estimated fair value of assets acquired and liabilities assumed of approximately
$4,885,000 is being amortized on the straight-line basis over 40 years. The
Company has not provided selected unaudited pro forma information as if the
Knapp Acquisition had occurred as of January 26, 1997 because the Knapp
Acquisition was not a significant business combination.

Other Acquisitions

During the year ended January 30, 1999, the Company acquired the stock of Safety
Supplies & Service Co., Inc., and acquired certain assets and assumed certain
liabilities of Safety Depot Ltd., ACT Safety, Inc., J. Mars Knapp Shoes and
Work-Saf, Inc. for approximately $5,390,000, including transaction costs of
approximately $150,000. The results of operations are included from the date of
the acquisitions. The acquisitions have been accounted for using the purchase
method of accounting and, accordingly, the purchase price and transaction costs
have been allocated to assets acquired and liabilities assumed based upon their
estimated fair values. The excess of consideration paid over the estimated fair
value of assets acquired and liabilities assumed of approximately $2,849,000 is
being amortized on the straight-line basis, over 40 years. The Company has not
provided selected unaudited pro forma information as if these acquisitions had
occurred as of January 26, 1997 because these acquisitions, individually and
collectively, were not significant business combinations.

                                      -29-
<PAGE>
 
Divestiture

On September 9, 1998, the Company announced the sale of the Dunham product line
and related trademarks to New Balance Athletic Shoes, Inc. and New Balance
Trading Company, Ltd. ("New Balance"), effective August 31, 1998, for $2,000,000
and recorded a gain of $1,678,000. In conjunction with the sale, the Company's
Falcon manufacturing subsidiary entered into a separate agreement whereby it
agreed to a minimum two-year supply arrangement with New Balance and the sale of
on-hand inventory.

3. Accounts Receivable

Accounts receivable are presented net of allowance for doubtful accounts of
approximately $275,000 and $382,000 as of January 30, 1999 and January 31, 1998,
respectively. The Company does not require collateral for its trade accounts
receivable. Management continually evaluates its accounts receivable and adjusts
its allowance for doubtful accounts for changes in potential credit risk. The
Company serves a diverse customer base and believes there is minimal
concentration of credit risk.

4. Inventories

The major components of inventories are as follows:

<TABLE> 
<CAPTION> 
                                                                          Successor
                                                          --------------------------------------
                                                           January 30 1999      January 31 1998
                                                          --------------------------------------
                                                                       (In Thousands)
<S>                                                       <C>                   <C> 
Finished products                                              $33,814               $33,527
Raw materials                                                    3,143                 3,470
                                                          --------------------------------------
                                                                36,957                36,997
Less excess of current cost over LIFO inventory value              276                   156
                                                          --------------------------------------
                                                               $36,681               $36,841
                                                          ======================================
</TABLE> 

5. Property and Equipment

Property and equipment consist of the following:

<TABLE> 
<CAPTION> 
                                                                        Successor
                                                          --------------------------------------
                                                           January 30 1999      January 31 1998
                                                          --------------------------------------
                                                                     (In Thousands)
<S>                                                        <C>                  <C> 
Land and buildings                                            $  3,217              $  3,158
Vehicles                                                         3,727                 3,047
Furniture and fixtures                                           1,234                   917
Machinery and equipment                                          5,471                 4,133
Leasehold improvements                                           1,060                   857
                                                          --------------------------------------
                                                                14,709                12,112
Less accumulated depreciation and amortization                   3,701                 1,633
                                                          --------------------------------------
Net property and equipment                                     $11,008               $10,479
                                                          ======================================
</TABLE> 

                                      -30-
<PAGE>
 
6. Intangible Assets

Intangible assets consist of the following:

<TABLE> 
<CAPTION> 
                                                                        Successor
                                                          --------------------------------------
                                                            January 30 1999     January 31 1998
                                                          --------------------------------------
                                                                     (In Thousands)
<S>                                                        <C>                   <C> 
Goodwill                                                     $  91,823             $  88,592
Customer lists                                                  17,188                16,150
Deferred financing costs                                         5,555                 5,518
Other                                                              234                   262
                                                          --------------------------------------
                                                               114,800               110,522
Less accumulated amortization                                    6,949                 3,676
                                                          --------------------------------------
                                                              $107,851              $106,846
                                                          ======================================
</TABLE> 

In connection with the Transactions, the Company expensed approximately
$4,927,000 of unamortized deferred financing costs, related to the Old Credit
Facility and the Old Subordinated Notes. Such costs are included in the
Company's extraordinary loss, net of tax, for the fiscal year ended January 30,
1999. Financing costs incurred in connection with obtaining the Senior
Subordinated Notes and the New Credit Facility of approximately $5,553,000 have
been deferred by the Company as of January 30, 1999 and will be amortized over
the periods the Senior Subordinated Notes and the New Credit Facility are
outstanding (see Note 7).

                                      -31-
<PAGE>
 
7. Long-Term Debt

Long-term debt consists of the following:

<TABLE> 
<CAPTION> 
                                                                       Successor
                                                          --------------------------------------
                                                            January 30 1999     January 31 1998
                                                          --------------------------------------
                                                                     (In Thousands)
<S>                                                        <C>                   <C> 
9-7/8% Senior Subordinated Notes due 2008                     $100,000         $           -
New Credit Facility                                             22,700                     -
Old Credit Facility (retired):
  Working capital advance                                            -                23,000
  Term A Note                                                        -                18,500
  Term B Note                                                        -                19,850
  Term C Note                                                        -                24,813
Old Subordinated Notes (retired)                                     -                15,000
Other Notes                                                        178                   208
Capitalized lease obligations                                      796                   754
                                                                     -                     -
                                                          --------------------------------------
                                                               123,674               102,125
Less:
  Current maturities                                               544                 3,699
  Unamortized discount                                               -                   450
                                                          --------------------------------------
                                                              $123,130             $  97,976
                                                          ======================================
</TABLE> 

9-7/8% Senior Subordinated Notes Due 2008

On April 24, 1998, the Company issued $100,000,000 of Senior Subordinated Notes.
The Company used the net proceeds from the issuance of the Senior Subordinated
Notes, approximately $21,600,000 of borrowings under its New Credit Facility and
approximately $1,200,000 of cash to (i) extinguish certain existing
indebtedness, (ii) pay a dividend to Holdings of approximately $13,679,000 to
redeem a portion of Holdings Series A Preferred Stock, and (iii) pay fees and
expenses related to these transactions. These transactions resulted in the
recording of an extraordinary loss during April 1998 of approximately
$6,923,000, excluding related tax effect of $2,908,000. The extraordinary loss
on the extinguishment of debt is comprised of prepayment penalties on the Old
Credit Facility of $1,562,000; unamortized deferred financing fees of
$4,927,000; and unamortized discount on the Old Subordinated Notes of $434,000.

                                      -32-
<PAGE>
 
7. Long-Term Debt (continued)

The Senior Subordinated Notes accrue interest at the rate of 9-7/8% per annum
and are payable semiannually in arrears on May 1 and November 1, commencing on
November 1, 1998.

The Senior Subordinated Notes are subordinated in right of payment to all
existing and future senior indebtedness of the Company.

The Senior Subordinated Notes are redeemable at the option of the Company on and
after May 1, 2003 at prices decreasing from 104.938% of the principal amount
thereof to par on May 1, 2006 and thereafter. The Company is required to redeem
the outstanding notes based upon certain events as described in the indenture
for the Senior Subordinated Notes.

The indenture for the Senior Subordinated Notes requires the Company and its
subsidiaries to comply with certain restrictive covenants, including a
restriction on dividends and limitations on the incurrence of indebtedness,
certain payments and distributions and sales of the Company's assets and stock.

Effective September 15, 1998, the Company filed a registration statement on Form
S-4 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to its offer to exchange an aggregate principal amount of up to
$100,000,000 of its 9-7/8% Senior Subordinated Notes due 2008 (the "Exchange
Notes"), which have been registered under the Securities Act, for a like
principal amount of its Senior Subordinated Notes, which have not been so
registered. The terms of the Exchange Notes are identical in all material
respects to the Senior Subordinated Notes, except for certain transfer
restrictions and registration rights relating to the Senior Subordinated Notes.

                                      -33-
<PAGE>
 
7. Long-Term Debt (continued)

9-7/8% Senior Subordinated Notes Due 2008 (continued)

Concurrent with the Transactions, Holdings issued $45,140,000 principal amount
at maturity of 12-1/8% Senior Discount Notes due 2009 ("Holdings Senior
Discount Notes"), the proceeds of which were used (i) to pay a dividend to
Holdings' stockholders of $17,745,000, (ii) to redeem a portion of the Holdings
Series A Preferred Stock, (iii) to make a capital contribution to the Company of
approximately $2,245,000 for compensation payments to certain members of
management, and (iv) to pay fees and expenses related to these transactions. The
Holdings Senior Discount Notes accrete at a rate of 12-1/8% per annum compounded
semiannually until May 1, 2003. No interest will accrue prior to May 1, 2003.
Interest will accrue thereafter at a rate of 12-1/8% per annum and is payable
semiannually in arrears on May 1 and November 1, commencing on November 1, 2003.
The Holdings Senior Discount Notes mature on May 1, 2009 and will be serviced
entirely by the cash flows of the Company.

Effective September 15, 1998, Holdings filed a registration statement on Form S-
4 under the Securities Act with respect to its offer to exchange an aggregate
principal amount of up to $45,140,000 at maturity of its 12-1/8% Senior Discount
Notes due 2009 (the "Holdings Exchange Senior Discount Notes"), which have
been registered under the Securities Act, for a like principal amount at
maturity of its Holdings Senior Discount Notes, which have not been so
registered. The terms of the Holdings Exchange Senior Discount Notes are
identical in all material respects to the Holdings Senior Discount Notes, except
for certain transfer restrictions and registration rights relating to the
Holdings Senior Discount Notes.

New Credit Facility

On April 24, 1998, the Company entered into a $65,000,000 New Credit Facility
with a syndicate of lenders and a financial institution, as agent for itself and
the other lenders, that is comprised of a $30,000,000 revolving working capital
facility and a $35,000,000 revolving acquisition facility. The revolving
acquisition facility was amended on March 5, 1999 to reduce the borrowing
commitment to $22,000,000. The working capital facility matures on April 24,
2004. The balance of the revolving acquisition facility converts into a term
loan on April 30, 2001 and matures in quarterly installments from July 31, 2001
to April 30, 2004. Under the working capital facility, the Company has a
$2,000,000 letter of credit and a $3,000,000 swing line facility which will
expire April 24, 2004. Outstanding obligations under the letter of credit and
the swing line facility were $294,000 and $0, respectively, at January 30, 1999.

                                      -34-
<PAGE>
 
7. Long-Term Debt (continued)

New Credit Facility (continued)

Borrowings under the New Credit Facility may be used to fund the Company's
working capital requirements, finance certain permitted acquisitions and general
corporate requirements of the Company and pay fees and expenses related to the
foregoing. The Company is required to pay a 0.4375% fee on the average daily
unused portion of the New Credit Facility. The Company is also subject to
mandatory prepayment terms as described in the New Credit Facility.

Borrowings under the New Credit Facility accrue interest, at the option of the
Company, at either LIBOR plus 2.25% or the greater of the financial
institution's prime rate and the federal funds rate plus 0.5%. Borrowings on the
New Credit Facility accrue interest at 8.50% and 7.50% for prime rate borrowings
and LIBOR borrowings, respectively, at January 30, 1999.

The Company has classified its borrowings under the New Credit Facility as long-
term as of January 30, 1999 due to its ability and intent to maintain such
borrowings on a long-term basis.

The New Credit Facility is guaranteed on a senior basis by Holdings and is
collateralized by substantially all of the Company's and its subsidiaries'
assets. The New Credit Facility contains certain covenants which require the
Company to maintain leverage ratios, fixed charge coverage ratios and interest
coverage ratios. The New Credit Facility further limits capital expenditures and
sales of assets, declaration of dividends and other restricted payments, and
additional indebtedness. The New Credit Facility also restricts the sale or
transferring of the Company's assets or capital stock.

Old Credit Facility (Retired)

On February 26, 1997, the Company entered into the $100,000,000 Old Credit
Facility with a financial syndicate of lenders and a financial institution, as
agent for itself and the other lenders, that was comprised of a $23,000,000
working capital advance and three term notes (A, B and C) of $18,500,000,
$19,850,000 and $24,813,000, respectively.

The Old Credit Facility obligations of $86,820,000, including accrued interest
of $253,000, were extinguished with the proceeds of the Senior Subordinated
Notes and the New Credit Facility on April 24, 1998.

                                      -35-
<PAGE>
 
7. Long-Term Debt (continued)

Old Subordinated Notes (Retired)

On February 26, 1997, the Company issued the Old Subordinated Notes in the
principal amounts of $10,000,000 and $5,000,000 at a discount. The Old
Subordinated Notes of $15,000,000 were extinguished with the proceeds of the
Senior Subordinated Notes and the New Credit Facility on April 24, 1998. The
extinguishment required repayment premiums of $1,562,000 which are included in
extraordinary loss, net of tax, for the year ended January 30, 1999. The
unamortized debt discount of approximately $434,000 was also expensed in
connection with the extinguishment of the Old Subordinated Notes and is included
in the Company's extraordinary loss, net of tax, for the fiscal year ended
January 30, 1999.

Other Notes

The Company has other notes of approximately $178,000 and $208,000 at January
30, 1999 and January 31, 1998, respectively. The notes will be paid during 1999.
The notes accrue interest at 9.5%.

Future Maturities of Long-Term Debt

Five-year maturities of long-term debt are as follows (in thousands):

     2000                                                    $       544
     2001                                                            226
     2002                                                          2,760
     2003                                                          3,574
     2004                                                          4,400
     Thereafter                                                  112,170
                                                             -----------
                                                             $   123,674
                                                             ===========

                                      -36-
<PAGE>
 
8. Fair Values of Financial Instruments

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

Cash and cash equivalents--The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.

Long-term debt and interest rate  swaps--The  carrying  amounts of the Company's
borrowings  under  its  new  credit  facility,  old  credit  facility,  and  old
subordinated  notes  approximate  their  fair  value.  The  fair  values  of the
Company's  senior  subordinated  notes are  estimated  based upon quoted  market
prices. The fair values of the Company's  long-term debt and interest rate swaps
are  estimated  using  discounted  cash flow  analysis,  based on the  Company's
current incremental borrowing rates for similar types of borrowing arrangements.

The carrying amounts and fair values of the Company's  financial  instruments at
January 30, 1999 and January 31, 1998 are as follows:

<TABLE> 
<CAPTION> 
                                                                               Successor
                                                   ------------------------------------------------------------------
                                                           January 30, 1999                 January 31, 1998
                                                   ------------------------------------------------------------------
                                                       Carrying                          Carrying 
                                                        Amount        Fair Value          Amount         Fair Value
                                                   ------------------------------------------------------------------
                                                                            (In Thousands)
<S>                                                 <C>              <C>                 <C>             <C> 
Cash and cash equivalents                            $       508     $       508         $  2,060          $2,060
9-7/8% Senior Subordinated Notes due 2008                100,000          75,000                -               -
New Credit Facility                                       22,700          22,700                -               -
Working capital advance (retired)                              -               -           23,000          23,000
Term notes (retired)                                           -               -           63,163          63,163
Old Subordinated Notes (retired)                               -               -           15,000          15,000
Other notes                                                  178             178              208             208
Interest rate swap agreements                                  -             225                _            (702)
</TABLE> 

9. Employee Benefit Plans

The Company and its subsidiary  Falcon  sponsor  401(k) profit  sharing  defined
contribution  pension  plans.  In  connection  with the Knapp  Acquisition,  the
Company assumed a third 401(k) defined  contribution  plan which was merged into
the Company's plan on December 31, 1998. Contributions to the plans are based on
a percentage of profits,  but may be increased or decreased at the discretion of
the  Board of  Directors.  The plans  cover  substantially  all of its  salaried
employees. For the fiscal years ended January 30, 1999, and the periods February
27, 1997  through  January 31, 1998 and January 26, 1997  through  February  26,
1997,  and for the year ended  January  25,  1997,  pension  and profit  sharing
expenses  were  approximately   $520,000,   $820,000,   $156,000,  and  $744,000
respectively.

                                      -37-
<PAGE>
 
10. Income Taxes

Income tax expense consisted of the following:

<TABLE> 
<CAPTION> 
                                                    Successor                              Predecessor
                                      -------------------------------------------------------------------------------
                                                          February 27 1997     January 26 1997
                                          Year ended     through January 31   through February     Year ended 
                                       January 30 1999          1998               26 1997       January 25 1997
                                      -------------------------------------------------------------------------------
                                                                      (In Thousands)
<S>                                    <C>               <C>                  <C>                <C> 
Income taxes:
   Current:
     Federal                                    $ 569             $2,306              $(66)               $2,958
     State                                        145                (24)               (2)                  649
                                      -------------------------------------------------------------------------------
                                                  714              2,282               (68)                3,607
   Deferred:
      Federal                                    (327)              (458)                -                    34
      State                                      (454)              (138)                -                    48
                                      -------------------------------------------------------------------------------
                                                 (781)              (596)                -                    82
                                      ===============================================================================
                                               $  (67)            $1,686              $(68)               $3,689
                                      ===============================================================================
</TABLE> 

A  reconciliation  of U.S.  income tax computed at the statutory rate and actual
expense is as follows:

<TABLE> 
<CAPTION> 
                                                    Successor                              Predecessor
                                      -------------------------------------------------------------------------------
                                                          February 27 1997     January 26 1997
                                          Year ended     through January 31   through February         Year ended 
                                       January 30 1999          1998               26 1997           January 25 1997
                                      -------------------------------------------------------------------------------
                                                                      (In Thousands)
<S>                                   <C>                <C>                  <C>                 <C> 
Amount computed at statutory rate
                                                $(563)            $1,239                $(89)             $3,154
State and local taxes less
    applicable federal income tax
                                                 (203)              (107)                 (1)                460
Goodwill and other amortization
                                                  642                657                  26                 232
Other                                              57               (103)                 (4)               (157)
                                      ===============================================================================
                                              $   (67)            $1,686                $(68)             $3,689
                                      ===============================================================================
</TABLE> 

                                      -38-
<PAGE>
 
10. Income Taxes (continued)

The components of the net deferred tax asset and liability are as follows:

<TABLE> 
<CAPTION> 
                                                                                            Successor
                                                                             ----------------------------------------
                                                                               January 30 1999     January 31 1998
                                                                             ----------------------------------------
                                                                                         (In Thousands)
<S>                                                                           <C>                   <C> 
Deferred tax liabilities:
    Inventory                                                                        $2,244              $2,244
    Property and equipment                                                            1,147               1,088
    Customer lists                                                                    5,584               5,783
    Other                                                                               257                 349
                                                                             ----------------------------------------
Total deferred tax liabilities                                                        9,232               9,464

Deferred tax assets:
   Interest expense                                                                   2,016               2,016
   State net operating loss carryforwards                                             1,100                  -
   Inventory                                                                            556                 568
   Accrued expenses                                                                     553                 526
   Other                                                                                140                  45
                                                                             ----------------------------------------
Total deferred tax assets                                                             4,365               3,155
                                                                             ========================================
Net deferred tax liabilities                                                         $4,867              $6,309
                                                                             ========================================
</TABLE> 

State net operating loss  carryforwards  ("NOLs") were generated during the 1999
fiscal year. Approximately $831,000 relates to the state income tax benefit from
extraordinary  losses incurred in connection with the early debt  extinguishment
(see Note 7). The NOLs expire at various times  beginning in fiscal 2002 through
2019.

11. Commitments and Contingencies

Purchase Commitments

The Company  purchases  the majority of its  inventory  through  purchase  order
commitments  which  are  denominated  in U.S.  dollars.  The  Company  purchased
approximately  24%, 20%,  17%, and 17% of its inventory  from one vendor for the
fiscal year ended  January 30, 1999,  and the periods  February 27, 1997 through
January 31, 1998 and January 26, 1997 through  February 26, 1997, and the fiscal
year ended January 25, 1997,  respectively.  At January 30, 1999 and January 31,
1998,   the  Company  had   outstanding   inventory   purchase   commitments  of
approximately $16,189,000 and $15,275,000, respectively.

A significant  amount of the Company's products are produced in the Far East. As
a result,  the  Company's  operations  could be adversely  affected by political
instability  resulting in the  disruption  of trade from the  countries in which
these  suppliers  are  located  or by the  imposition  of  additional  duties or
regulations  relating  to imports  or by the  supplier's  inability  to meet the
Company's production requirements.

                                      -39-
<PAGE>
 
11. Commitments and Contingencies (continued)

Lease Commitments

The Company leases substantially all of its vehicles and certain other equipment
and facilities. These leases are subject to renewal options for varying periods.
Future minimum payments, by year and in the aggregate,  under capital leases and
noncancelable  operating  leases with initial or remaining  terms of one year or
more consisted of the following:


<TABLE> 
<CAPTION> 
                                                                               Capital Leases     Operating Leases
                                                                             ----------------------------------------
<S>                                                                           <C>                 <C> 
2000                                                                                 $   451            $  3,427
2001                                                                                     291               2,663
2002                                                                                     226               1,784
2003                                                                                      92               1,062
2004                                                                                      34                 707
Thereafter                                                                                 -                 811
                                                                             ----------------------------------------
Total minimum lease payments                                                           1,094             $10,454
                                                                                                 ====================
Less amounts representing interest                                                       298
                                                                             --------------------
Present value of future minimum lease payments                                           796
Less current maturities of capital lease obligations                                     366
                                                                             ====================
Capital lease obligations                                                            $   430
                                                                             ====================
</TABLE> 

Operating lease expense under such  arrangements was  approximately  $3,972,000,
$3,785,000,  $203,000,  and  $2,271,000,  for the fiscal year ended  January 30,
1999,  the periods  February 27, 1997  through  January 31, 1998 and January 26,
1997  through   February  26,  1997,  and  the  year  ended  January  25,  1997,
respectively.

                                      -40-
<PAGE>
 
11. Commitments and Contingencies (continued)

Lease Commitments (continued)

At January 30,  1999 and  January  31,  1998,  property  and  equipment  include
capitalized   vehicle  leases  of   approximately   $1,627,000  and  $1,223,000,
respectively,   and  accumulated  amortization  of  approximately  $592,000  and
$315,000, respectively.

Litigation

The Company is involved  from time to time in lawsuits  that arise in the normal
course of business.  The Company  actively and vigorously  defends all lawsuits.
Management  believes that there are no lawsuits that will have a material effect
on the Company's financial position, results of operations or liquidity.

12. Redeemable Preferred Stock and Stock Purchase Warrants

Effective February 26, 1997, in connection with the Fenway Acquisition described
in Note 2,  Holdings  authorized  10,000  shares  and  issued  to New York  Life
Insurance Company and American Home Assurance Company (the "Outside  Investors")
1,500 shares of Series A nonvoting, cumulative,  redeemable preferred stock with
a par value of $.01 per share (the  "Holdings  Series A  Preferred  Stock")  for
consideration  of  $14,900,000,  with a  liquidation  preference  of $10,000 per
share.  Dividends  are  cumulative at an annual rate of 15.5% and are payable in
cash or, at the option of Holdings,  in whole or in part in additional  Holdings
Series A Preferred  Stock. The Holdings Series A Preferred Stock ranks senior to
all  classifications  of  stock.  The  Holdings  Series  A  Preferred  Stock  is
optionally  redeemable at any time, and  mandatorily  redeemable on February 26,
2007,  upon not less than ten days  notice at a  redemption  price  equal to the
liquidation  preference  thereof  plus  accrued  and  unpaid  dividends  to  the
redemption  date. The Holdings Series A Preferred Stock,  including  accrued and
unpaid  dividends of $2,764,000,  was redeemed with a portion of the proceeds of
the New Credit  Facility,  the  Holdings  Senior  Discount  Notes and the Senior
Subordinated Notes.

In connection with the Fenway Acquisition and the Knapp Acquisition described in
Note 2 and in conjunction  with the issuance of preferred stock described above,
Holdings  issued to the Outside  Investors 9,818 shares of Holdings common stock
for an  aggregate  consideration  of  approximately  $3,570,000,  or $363.64 per
share, and common stock purchase  warrants  ("Warrants") to acquire 6,962 shares
of  Holdings  common  stock for an  aggregate  consideration  of  $100,000.  The
Warrants can be exercised at any time through  February 26, 2007 for an exercise
price of  approximately  $186 per share.  The value  ascribed to the Warrants to
purchase the Holdings  common stock in the Securities  Purchase  Agreement dated
February 26, 1997 among  Holdings,  the Company and the  preferred  stockholders
resulted  in a  corresponding  discount of  $100,000  to the  Holdings  Series A
Preferred  Stock and an addition to paid-in capital of  approximately  $100,000.
The discount is being  amortized over the life of the preferred  stock using the
straight-line  method.  The  addition  to  paid-in  capital  is  net  of  tax of
approximately $40,000.

                                      -41-
<PAGE>
 
13. Stock Options

Successor

The 1997 Stock  Option Plan (the  "Option  Plan")  provides  for the granting of
either incentive stock options or nonqualified  stock options to purchase shares
of  Holdings  common  stock  and  for  other  stock-based  awards  to  officers,
directors,  key  employees,  consultants  and  advisors  who,  in the opinion of
Holdings'   Board  of  Directors  are  in  a  position  to  make  a  significant
contribution  to the success of Holdings and its  subsidiaries.  The Option Plan
authorized  the  issuance of options to purchase  up to an  aggregate  of 20,245
shares of Holdings  common stock;  11,528 of which shall be for Series A Options
and 8,717 of which shall be for Series B Options.

Nonqualified  Series A Options of 11,528 were granted to certain officers of the
Company in connection with the Fenway Acquisition effective February 26, 1997 in
exchange  for options to acquire  shares of the  Predecessor  to  Holdings.  The
exercise price of Series A Options is approximately $36 per share and represents
the  difference  between the fair market value of Holdings'  common stock at the
date of grant  and the  total  fair  value of the  exchanged  options  which was
recognized as a capital contribution to Holdings of approximately $3,772,700, or
approximately  $328 per share. The total fair value of the exchanged options was
recognized as a capital  contribution to Holdings because the exchanged  options
represented  a portion  of the  purchase  price of  Holdings.  The basis used to
determine the fair market value of Holdings  common stock was the purchase price
paid by the Fenway Fund as of the date of the Fenway Acquisition,  which was the
date of grant of the Series A Options. The Series A Options are fully vested and
exercisable as of January 30, 1999 and January 31, 1998.

Nonqualified Series B Options of 8,567 were granted in August 1997 in connection
with the Fenway  Acquisition to certain  officers of the Company.  Approximately
65% of the  options  become  exercisable  ("Series  B  Basic"),  subject  to the
achievement of certain target earnings and continued employment,  at the rate of
20% per year commencing  with the Company's  fiscal year ended January 31, 1998.
The remaining  35% of Series B Options  ("Series B Extra") vest upon a change of
Company control and the attainment of certain internal rate of return objectives
by Holdings'  stockholders  as defined in the Option Plan. The exercise price of
Series B Options granted in August 1997 was approximately  $364 per share at the
time such Series B Options were granted.  On April 24, 1998, in connection  with
the Transactions, the exercise price of Series B Options that were not vested as
of April 24, 1998 was  reduced.  The  exercise  price of (i) Series B Options of
7,465 that were not  vested  (as such term is defined in the Option  Plan) as of
April 24,  1998 is  approximately  $186 per share and (ii)  Series B Options  of
1,102 that were vested (as such term is defined in the Option  Plan) as of April
24, 1998 is approximately $364 per share.  Holdings will recognize  compensation
expense  related to the Series B Options based upon the  difference  between the
estimated fair value of Holdings'  common stock and the exercise  prices of $186
or $364,  respectively,  upon the  achievement  of certain  target  earnings and
continued  employment  as defined in the Option  Plan.  No  additional  Series B
options vested during the year ended January 30, 1999.

The  Company  applies  APB  Opinion  No.  25,  Accounting  for  Stock  Issued to
Employees,  and related interpretations in accounting for its stock option plan.
At  January  31,  1998 and  January  30,  1999,  no  compensation  cost has been
recognized in the Company's financial statements.

                                      -42-
<PAGE>
 
13. Stock Options (continued)

Successor (continued)

Had compensation  cost for the Company's stock option plan been determined based
on the fair value of such awards at the grant date,  consistent with the methods
of Financial  Accounting  Standards  Board  Statement  No. 123,  Accounting  for
Stock-Based  Compensation,  the  Company's  total net income  would have been as
follows:
  
<TABLE> 
<CAPTION> 
                                                                                                  February 27 1997
                                                                             Year ended January  through January 31
                                                                                   30 1999              1998
                                                                             ----------------------------------------
                                                                                         (In Thousands)
<S>                                                                            <C>                <C> 
Net income:
   As reported                                                                      $(5,605)             $1,957
   Pro forma                                                                         (5,683)              1,801
</TABLE> 

The fair values of options  granted in February  and August 1997 were  estimated
using the minimum value option-pricing model based on the following assumptions:

         Risk-free interest rate                                         6.0
         Dividend yield                                                  0.0
         Expected life                                               3 years
         Volatility                                           Not applicable

A summary of the status of the shares under the  Company's  stock option plan is
as follows:

<TABLE> 
<CAPTION> 
                                                                                                 February 27 1997
                                                                            Year ended January  through January 31
                                                                                  30 1999              1998
                                                                            ----------------------------------------
<S>                                                                         <C>                 <C> 
Outstanding, beginning of year                                                       20,245                   -
Granted                                                                                   -              20,245
Expired and forfeited                                                               (1,107) (1)               -
                                                                            ----------------------------------------
Outstanding, end of year                                                             19,138              20,245
                                                                            ========================================
Options exercisable at end of year                                                   12,560              12,660
                                                                            ========================================
</TABLE> 

(1) Subject to re-vesting in fiscal 2000.

                                      -43-
<PAGE>
 
13. Stock Options (continued)

Successor (continued)

Additional  information  regarding  stock options granted in connection with the
1997 stock option plan is outlined below:

<TABLE> 
<CAPTION> 
                                                                                    February 27, 1997 through
                                            Year ended January 30, 1999                  January 31, 1998
                                       -------------------------------------- ---------------------------------------
                                                     Series B     Series B                   Series B     Series B
                                        Series A       Basic        Extra      Series A       Basic         Extra
                                       ------------ ------------ ------------ ------------ ------------- ------------
<S>                                    <C>           <C>          <C>          <C>          <C>          <C> 
Weighted average fair value of
   options at grant date                       5           51           26            5           51            26
Weighted average exercise price of
   all outstanding options                    36          228          186           36          364           364
Weighted average exercise price of
   options exercisable                        36          364            -           36          364             -
Weighted average exercise price of
   expired and forfeited options               -          186            -            -            -             -
Weighted average remaining
   contractual life of options
   outstanding                               8.1          8.1          8.1          9.1          9.1           9.1
Options outstanding at end of year        11,528        4,552        3,058       11,528        5,659         3,058
Options exercisable at end of year        11,528        1,032            -       11,528        1,132             -
</TABLE> 


Predecessor

The Predecessor had an option plan (the "Prior Plan") for eligible  officers and
key management personnel. The Prior Plan authorized the issuance of up to 12,212
shares of Predecessor's  Class A common stock. A summary of Predecessor's  stock
option activity and related  information for the period January 26, 1997 through
February 26, 1997 and the fiscal year ended January 25, 1997 is as follows:

<TABLE> 
<CAPTION> 
                                                                  January 26, 1997 
                                                                        through                Year ended
                                                                  February 26, 1997         January 25, 1997
                                                               ----------------------------------------------------
                                                                              Weighted                  Weighted
                                                                              Average                   Average
                                                                              Exercise                  Exercise
                                                                 Options       Price       Options       Price
                                                               ----------------------------------------------------
<S>                                                             <C>          <C>          <C>          <C> 
Outstanding, beginning of year                                    12,212     $     62       11,595     $     62
Granted                                                                -                       617           62
Exercised                                                         12,212           62            -
                                                               -------------             -------------
Outstanding, end of year                                               -                    12,212
                                                               =============             =============
Exercisable, end of year                                               -                     9,536
                                                               =============             =============
Weighted average fair value of options granted during the year                             $   611
</TABLE> 

                                      -44-
<PAGE>
 
13. Stock Options (continued)

Predecessor (continued)

For the period  January 26, 1997  through  February  26, 1997 and the year ended
January 25, 1997, the Predecessor recognized  compensation expense of $1,054,000
and $1,065,000, respectively for vesting of stock options and warrants issued to
employees in accordance  with APB Opinion No. 25, based on the  intrinsic  value
between the exercise  prices of  performance-based  and fixed options grants and
the fair value of the Predecessor's common stock at the measurement dates.

Had  compensation  expense for the Prior Plan been determined  based on the fair
value of stock option awards at the grant date,  consistent  with the methods of
Financial   Accounting   Standards  Board  Statement  No.  123,  Accounting  for
Stock-Based Compensation,  Predecessor's net income on a pro forma basis for the
period January 26, 1997 through February 26, 1997 and the year ended January 25,
1997, would have been as follows:

<TABLE> 
<CAPTION> 
                                                                                  January 26 1997
                                                                                      through         Year ended
                                                                                  February 26 1997  January 25 1997
                                                                                  -----------------------------------
                                                                                            (In Thousands)
<S>                                                                               <C>               <C> 
Net (loss) income before stock options and warrants                                    $   (195)         $ 5,589
Recorded APB No. 25 compensation expense                                                 (1,054)          (1,065)
Pro forma compensation expense from stock options and warrants:
     Fiscal year ended January 27, 1996 grant                                               108              108
     Fiscal year ended January 25, 1997 grant                                                 -              355
                                                                                  ===================================
Pro forma net income                                                                   $    751          $ 6,191
                                                                                  ===================================
</TABLE> 

The fair value of options  granted under the Prior Plan were estimated using the
minimum value  option-pricing  model based on the following  assumptions for all
periods presented:

         Risk-free interest rate                                       6.0
         Dividend yield                                                0.0
         Expected life                                             3 years
         Volatility                                         Not applicable

                                      -45-
<PAGE>
 
14. Related Party Transactions

Fenway provides  management  services to Holdings and the Company pursuant to an
amended and restated  management  agreement (the "Management  Agreement")  among
Holdings, the Company and Fenway. Fenway is an affiliate of the Fenway Fund, the
principal stockholder of Holdings.  Pursuant to the Management Agreement, Fenway
provides  Holdings  and  the  Company  with  general  management,  advisory  and
consulting  services with respect to the Company's  business and with respect to
such other  matters as the Company  may  reasonably  request  from time to time,
including, without limitation,  strategic planning, financial planning, business
acquisition  and  general  business  development  services.  Prior to the Fenway
Acquisition,  a similar agreement was in effect with Butler Capital Corporation.
The Company paid management fees of $250,000, $250,000, $0, and $132,000, in the
fiscal years ended January 30, 1999,  and the periods  February 27, 1997 through
January 31, 1998 and January 26, 1997 through  February  26, 1997,  and the year
ended  January  25,  1997,  respectively,  for  management  and  other  advisory
services.  In addition,  the Company has reimbursed  Fenway for certain  related
expenses  incurred in connection with rendering such services in an amount equal
to $16,000  for the year ended  January  30,  1999 and $80,000 for the 11 months
ended January 31, 1998.

In connection with the Fenway Acquisition and the Knapp Acquisition, the Company
paid $2,070,000 and $200,000, respectively, to Fenway for financial advisory
fees.

Holdings, the Fenway Fund, the Outside Investors,  Company management and all of
the  other   stockholders  and  option  holders  of  Holdings  are  party  to  a
stockholders'  agreement  (the  "Stockholders'  Agreement")  that,  among  other
things, provides for tag-along rights, take-along,  rights, registration rights,
restrictions  on the  transfer  of shares  held by parties to the  Stockholders'
Agreement,  certain rights of first refusal for Holdings and certain  preemptive
rights for certain stockholders.  The Stockholders' Agreement also provides that
the parties thereto will vote their shares in the same manner as the Fenway Fund
in  connection  with  certain  transactions  and that the  Fenway  Fund  will be
entitled  to  fix  the  number  of  directors  of  Holdings.   Pursuant  to  the
Stockholders'  Agreement,  the Fenway Fund is entitled to designate a sufficient
number of directors to maintain a majority of the board of directors of Holdings
and Donald R. Jensen is entitled to designate one director.

                                      -46-
<PAGE>
 
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                             IRON AGE CORPORATION
                               January 30, 1999

<TABLE> 
<CAPTION> 
             COL. A                       COL. B                    COL. C                    COL. D               COL. E
---------------------------------     ---------------    -----------------------------    --------------------------------------
                                                                  Additions
                                                         -----------------------------
                                                                         Charged to
                                        Balance at        Charged to        Other
                                       Beginning of        Costs and      Accounts-         Deductions-        Balance at End
          Descriptions                    Period           Expenses       Describe           Describe             Of Period
---------------------------------     ---------------    -------------- --------------    ----------------    ------------------
<S>                                   <C>                <C>             <C>              <C>                 <C> 
Year ended January 30, 1999:
  Deducted from assets accounts:
     Allowance for doubtful
     accounts....................      $  382,000         $  151,000          -            $ 258,000 (1)            $ 275,000
     

Year ended January 31, 1998:
  Deducted from assets accounts:
     Allowance for doubtful       
     accounts....................      $  352,000         $    40,000         -            $   10,000 (2)           $ 382,000

Year ended January 25, 1997:
  Deducted from assets accounts:
     Allowance for doubtful       
     accounts.....................     $  307,000         $    45,000         -                  -                  $ 352,000
</TABLE> 

(1)  Uncollectible accounts written off, net of recoveries and adjustments
     related to the Dunham Sale.
(2)  Uncollectible  accounts  written  off, net of recoveries.


Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

         None.

                                      -47-
<PAGE>
 
                                   Part III

Item 10.  Directors and Executive Officers of the Registrant.

     The following table sets forth certain information  regarding the Company's
directors and executive  officers,  including their respective ages, as of April
26, 1999.

<TABLE> 
<CAPTION> 
  Name                        Age   Position
<S>                          <C>    <C> 
Donald R. Jensen..........     61   Chairman and Director

William J. Mills..........     39   Chief Executive Officer,  President and Director

Keith A. McDonough........     40   Executive Vice President and Chief Financial Officer

Theodore C. Johanson......     61   President and Chief Executive Officer, Falcon Shoe Mfg. Co.

Peter Lamm................     47   Director

Andrea Geisser............     56   Director

John B. Ayer..............     37   Director

Reza R. Satchu                 29   Director
</TABLE> 

     Donald R. Jensen has been Chairman of the Company since 1994 and a director
of the Company since 1990. Mr. Jensen retired as Chief Executive  Officer of the
Company on  February  1,  1999.  He joined the  Company as  President  and Chief
Executive  Officer  in 1986.  Prior  to that  time,  Mr.  Jensen  worked  in the
automotive  parts supply  business from 1960 to 1970 and held various  positions
with Endicott Johnson  Corporation  from 1970 to 1985,  beginning as a territory
salesman. At Endicott Johnson Corporation, he served as Vice President in charge
of the product  development,  importing,  athletic  footwear and rubber footwear
divisions and became Executive Vice President in 1985.

     William J. Mills became Chief Executive  Officer of the Company on February
1, 1999.  Immediately  prior to this date,  Mr.  Mills was  President  and Chief
Operating Officer of the Company.  Mr. Mills became a director of the Company in
1995.  Mr. Mills joined the Company in 1987 as a District  Manager before moving
on to manage all national  accounts  and assume the  position of National  Sales
Manager.  He was  promoted to regional  Vice  President  of Sales in 1991 and to
Executive  Vice President in 1994.  Prior to 1987, he held various  positions at
Endicott Johnson in product development, sales, importing and sales management.

     Keith A. McDonough is Executive Vice President and Chief Financial Officer
of the Company. Mr. McDonough joined the Company in 1981. He was appointed to
Executive Vice President of the Company in May 1997 and has been the Company's
Chief Financial Officer since 1990. Mr. McDonough is responsible for all
corporate financial matters, including financial reporting, banking and banking
relationships, subsidiary financial oversight and information technology. Mr.
McDonough also manages acquisition forecast development and financial
accountability implementation.

     Theodore C. Johanson joined Iron Age as President and Chief Executive
Officer of Falcon in August 1994 when Falcon was acquired by the Company. Mr.
Johanson, the founder and President of Falcon since 1963, brings management and
manufacturing expertise to the Iron Age Team. He served Eagle Shoe Manufacturing
Co. as a machine operator, Industrial Engineer, Assistant Factory Superintendent
and Salesman from 1954 until founding Falcon. Mr. Johanson currently serves as a
director of KSB Bancorp, Inc.

                                      -48-
<PAGE>
 
Peter Lamm became a director of the  Company in 1997.  Mr. Lamm is Chairman  and
Chief Executive  Officer of Fenway, a New York-based  direct investment firm for
institutional   investors  with  a  primary   objective  of  acquiring   leading
middle-market companies. From February 1982 to April 1994, Mr. Lamm was a member
of Butler  Capital  Corporation,  a private  investment  firm,  most recently as
Senior  Direct  Investment  Officer and Managing  Director.  Mr. Lamm  currently
serves as a director of Aurora Foods, Inc., Simmons Company,  Delimex, CT Farm &
Country and Blue Capital.

     Andrea Geisser became a director of the Company in 1997. Mr. Geisser has
been a Managing Director of Fenway since its formation in 1994. From February
1989 to June 1994, Mr. Geisser was a Managing Director of Butler Capital
Corporation. From 1986 to 1989, Mr. Geisser served as a Managing Director of
Onex Investment Corporation, the largest Canadian leveraged buyout company. Mr.
Geisser currently serves as a director of Aurora Foods, Inc., Simmons Company,
Decorative Concepts, New Creative Enterprises and Valley Recreation Products.

     John B. Ayer became a director of the  Company in February  1999.  Mr. Ayer
has been a Principal of Fenway since February 1998. Prior to that time, Mr. Ayer
was a  partner  at the law  firm of  Ropes & Gray,  Boston,  Massachusetts  from
November 1996 until January 1998,  and an associate at that firm from  September
1987 until October 1996.

     Reza R. Satchu  became a director of the Company in April 1999.  Mr. Satchu
has been a Vice  President of Fenway since December 1997 and was an Associate of
Fenway from May 1996 until November  1997.  Prior to that time, Mr. Satchu was a
financial analyst in the high yield finance and  restructuring  group at Merrill
Lynch & Co.

     All  directors  are elected and serve until a successor is duly elected and
qualified or until the earlier of his death,  resignation or removal.  There are
no family  relationships  between any of the directors or executive  officers of
Holdings or Iron Age. The  executive  officers of the Company are elected by and
serve at the discretion of the Board of Directors.

                                      -49-
<PAGE>
 
Item 11.  Executive Compensation.

         The following table sets forth information  concerning the compensation
earned for the fiscal  years ended  January 30, 1999 and January 31, 1998 by Mr.
Jensen,  the  Company's  Chairman,  and the four other most  highly  compensated
executive   officers  of  the  Company   (collectively,   the  "Named  Executive
Officers").

                                            Summary Compensation Table
<TABLE> 
<CAPTION> 
                                                                                     Long Term        All Other
                                                         Annual Compensation      Compensation($)  Compensation($)
                                                    --------------------------------------------------------------
                                                                                     Number of
                                                                                     Securities
                                                                                     Underlying
Name and Position                         Year (1)     Salary ($)      Bonus($)      Options(2)
<S>                                       <C>        <C>           <C>             <C>           <C> 
Donald R. Jensen (3)....................    1998         404,740      554,900(5)       9,351.60     9,956(7)
Chairman                                    1999         397,961    1,488,774(6)              -    23,307(8)
                                                                
William J. Mills (4)....................    1998         167,857      237,200(9)       3,189.75     9,956(7)
President and Chief Executive Officer       1999         172,780      431,394(10)             -    11,085(11)
                                                                
Keith A. McDonough......................    1998         118,269      224,760(9)       3,129.75    7,464(13)
Executive Vice President and                1999         122,777     416,495(12)              -   10,437(14)
Chief Financial Officer                                         

William J. Taaffe (15)..................    1998          99,176      206,100(9)       1,617.89    6,301(17)
President and Chief Operating Officer of    1999         101,842      160,116(16)             -   10,609(18)
Knapp Division                                                  

Theodore C. Johanson....................    1998         193,123      20,000(19)         200.00    5,075(21)
President and Chief Executive Officer,      1999         191,361      39,079(20)              -    4,485(22)
Falcon                                                          
</TABLE> 

(1)  1999:  Fiscal year ended January 30, 1999. 1998:  Fiscal year ended January
     31, 1998.
(2)  Options to acquire common stock of Holdings.
(3)  In addition to serving as Chairman of the Company,  Mr.  Jensen also served
     as the Company's's Chief Executive Officer until February 1, 1999.
(4)  Prior to February 1, 1999, Mr. Mills served as President and Chief
     Operating Officer of the Company.
(5)  Includes  $275,000  bonus  paid by  Iron  Age in connection with the
     Fenway  Acquisition.
(6)  Includes $1,202,966 bonus paid by Iron Age in connection with the April
     1998 Transactions.
(7)  Includes Iron Age allocations of $9,309 under defined contribution plan for
     the plan year ended December 31, 1997 and group term life insurance
     premiums of $647 paid by Iron Age during the plan year ended December 31,
     1997.
(8)  Includes Iron Age allocations of $6,020 under defined contribution plan for
     the plan  year  ended  December  31,  1998 and group  term  life  insurance
     premiums of $3,510 paid by Iron Age during the plan year ended December 31,
     1998.
(9)  Includes $175,000 bonus paid by Iron Age in connection with the Fenway
     Acquisition.
(10) Includes  $367,881 bonus paid by Iron Age in connection  with
     the April 1998 Transactions.
(11) Includes Iron Age allocations of $6,020 under defined contribution plan for
     the plan year ended December 31, 1998 and group term life insurance
     premiums of $330 paid by Iron Age during the plan year ended December 31,
     1998.
(12) Includes $365,685 bonus paid by Iron Age in connection with the April
     1998 Transactions.
(13) Includes Iron Age allocations of $6,948 under defined contribution plan for
     the plan  year  ended  December  31,  1997 and group  term  life  insurance
     premiums of $516 paid by Iron Age during the plan year ended  December  31,
     1997.

                                      -50-
<PAGE>
 
(14) Includes Iron Age allocations of $6,020 under defined contribution plan for
     the plan  year  ended  December  31,  1998 and group  term  life  insurance
     premiums of $386 paid by Iron Age during the plan year ended  December  31,
     1998.
(15) Mr. Taaffe resigned effective January 13, 1999.
(16) Includes $128,360 bonus paid by Iron Age in connection with the April 1998
     Transactions.
(17) Includes Iron Age allocations of $5,865 under defined contribution plan for
     the plan  year  ended  December  31,  1997 and group  term  life  insurance
     premiums of $436 paid by Iron Age during the plan year ended  December  31,
     1997.
(18) Includes Iron Age allocations of $5,632 under defined contribution plan for
     the plan  year  ended  December  31,  1998 and group  term  life  insurance
     premiums of $310 paid by Iron Age during the plan year ended  December  31,
     1998.
(19) Includes  $20,000  bonus  paid by Iron Age in  connection  with the Fenway
     Acquisition.
(20) Includes $7,321 bonus paid by Iron Age in connection with the April 1998
     Transactions.
(21) Represents Falcon allocations under defined contribution plan for the plan
     year ended December 31, 1997.
(22) Represents Falcon allocations under defined contribution plan for the year
     ended December 31, 1998.


Aggregated Fiscal Year-End Option Values

     The  following  table  sets  forth  information  concerning  the  value  of
unexercised  stock  options  at the end of fiscal  1999 for the Named  Executive
Officers.

                                     Aggregated Fiscal Year-End Option Values
<TABLE> 
<CAPTION> 
                                               Number of Securities
                                                    Underlying            Value of
                                                    Unexercised         Unexercised
                                                    Options at          In-the-Money
                                               Fiscal Year End(#)(1)      Options
                                                                      at Fiscal Year
                                                                         End($)(2)
                                                   Exercisable/        Exercisable/
Name                                               Unexercisable       Unexercisable
<S>                                            <C>                    <C> 
Donald R. Jensen
     Series A...................                    6,404.83/0            1,188,224/0
     Series B--Basic B...........                  339.60/1,018.40           0/0
     Series B--Extra B...........                    0/1,248.77              0/0
William J. Mills
     Series A...................                    1,929.75/0           358,007/0
     Series B--Basic B...........                      132/396               0/0
     Series B--Extra B...........                       0/600                0/0
Keith A. McDonough
     Series A...................                    1,929.75/0           358,007/0
     Series B--Basic B...........                      120/360               0/0
     Series B--Extra B...........                       0/600                0/0
William J. Taaffe
     Series A...................                     617.89/0            114,631/0
     Series B--Basic B...........                      100/300               0/0
     Series B--Extra B...........                       0/500                0/0
Theodore C. Johanson
     Series B--Basic B...........                      40/120                0/0
</TABLE> 

(1) Options to acquire common stock of Holdings.
(2) Value based on assumed value at January 30, 1999 of $185.52 per share.

                                      -51-
<PAGE>
 
    Compensation of Directors

     The Company pays no compensation  to its independent  directors and pays no
additional  remuneration  to its  employees or to  executives of the Company for
serving as directors.

Employment Agreements

        Mr.  Jensen is currently  employed as Chairman of the Board of Directors
of the Company  pursuant to an agreement  dated  February  26, 1997.  Under this
agreement,  Mr. Jensen is entitled to receive an annual  salary of $250,000.  In
addition,  Mr.  Jensen  is  eligible  for  an  annual  bonus  of up to  $100,000
determined  by the Company's  achievement  of EBITDA  targets.  If Mr. Jensen is
terminated  other than for cause or resigns  voluntarily for good reason,  he is
entitled to receive  continued  salary  until  December  31, 2001 and  continued
coverage  under group  health  plans for  himself and his spouse  until his 65th
birthday, or until his spouse's 65th birthday if he dies prior to age 65. If Mr.
Jensen's  employment  is terminated by reason of his death and he is survived by
his spouse,  his surviving  spouse is entitled to receive a continuation  of his
salary until the month of his 62nd birthday and continued  coverage  under group
health plans until her 65th birthday.  If Mr. Jensen's  employment is terminated
by reason of his incapacity,  Mr. Jensen is entitled to receive continued salary
less amounts  received by him under group  disability  plans and social security
disability  benefits  until  earlier  of his  death  or his  65th  birthday  and
continued  coverage  under group  health  plans for him and his spouse until his
65th birthday if he dies prior to age 65.

        Mr. Mills is currently  employed by the Company pursuant to an agreement
dated November 20, 1995.  Under this  agreement,  which is extended from year to
year in the absence of a notice of  non-renewal  given at least 90 days prior to
end of each  fiscal  year,  Mr.  Mills  receives an annual  salary of  $210,000,
subject  to  annual  increases,  and is  eligible  for a bonus of not less  than
$75,000 based upon the Company's  achievement of EBITDA targets. If Mr. Mills is
terminated  other than for cause or resigns  voluntarily for good reason,  he is
entitled to receive continued salary for 18 months and continued  coverage under
group health plans for one year following his termination or resignation. If Mr.
Mills' employment is terminated by reason of his death and he is survived by his
spouse,  his surviving  spouse is entitled to receive  continued  coverage under
group health  plans until the earlier of her 65th  birthday or January 31, 2000.
If Mr. Mills' employment is terminated by reason of his incapacity, Mr. Mills is
entitled to receive  continued  coverage  under group health plans until January
31, 2000.

       Mr.  McDonough  is  currently  employed  by the  Company  pursuant  to an
agreement dated November 20, 1995. Under this agreement,  which is extended from
year to year in the  absence of a notice of  non-renewal  given at least 90 days
prior to end of each fiscal year,  Mr.  McDonough  receives an annual  salary of
$127,500,  subject to annual increases,  and is eligible for a bonus of not less
than $50,000  based upon the Company's  achievement  of EBITDA  targets.  If Mr.
McDonough is  terminated  other than for cause or resigns  voluntarily  for good
reason,  he is entitled to receive  continued salary for 18 months and continued
coverage  under group health plans for one year  following  his  termination  or
resignation.  If Mr. McDonough's employment is terminated by reason of his death
and he is survived by his spouse,  his  surviving  spouse is entitled to receive
continued  coverage  under  group  health  plans  until the  earlier of her 65th
birthday or January 31, 2000.  If Mr.  McDonough's  employment  is terminated by
reason of his  incapacity,  Mr.  McDonough  is  entitled  to  receive  continued
coverage under group health plans until January 31, 2000.

       Mr.  Johanson is  currently  employed by Falcon  pursuant to an agreement
dated August 1, 1994.  Under this  agreement,  Mr.  Johanson  receives an annual
salary  or  $190,000  and is  eligible  for a bonus  of  25-35%  of base  salary
determined by Falcon's  achievement of operating income targets. If Mr. Johanson
is terminated other than for cause or resigns voluntarily for good reason, he is
entitled to receive  continued  salary,  reduced by one-half of any compensation
received by Mr.  Johanson from other  employment,  and continued  coverage under
group health,  disability and life insurance  plans, to the extent such benefits
are not provided as a result of other employment, until January 31, 2000. If Mr.
Johanson's  employment is terminated by reason of physical or mental disability,
Mr.  Johanson is entitled to receive  continued  coverage under group health and
life  insurance  plans  until  January  31,  2000 and  payments  under  Falcon's
disability income plan.

                                      -52-
<PAGE>
 
Mr.  Taaffe  resigned  from his  executive  officer  position  with the  Company
effective  January 13, 1999 and from his employment  with the Company  effective
June 30, 1999.  Pursuant to a Severance  Agreement  dated January 13, 1999,  Mr.
Taaffe is on a terminal  leave of absence  until June 30, 1999 during which time
he will continue to receive his current salary, will remain fully covered by the
Company's  benefits  plans except to the extent he becomes  covered by a medical
plan of another  employer  and will  continue to  participate  in the  Company's
profit  sharing  retirement  plan.  In  addition,  Mr.  Taaffe  has the right to
exercise  any of his vested  options  under the Option  Plan until such  options
terminate on July 30, 1999.  Pursuant to an Agreement and General  Release dated
January 13, 1999, and in  consideration  for the payments and other benefits set
forth in the Severance  Agreement,  Mr. Taaffe agreed to release all present and
future claims  against Iron Age and its  affiliates,  including past and present
officers, directors and employees of the Company.

Compensation Committee Interlocks and Insider Participation

     The Company does not have a compensation committee. Compensation decisions
regarding the Company's executive officers are made by Holdings' Compensation
Committee. Messrs. Lamm, Geisser and Jensen were appointed to Holdings'
Compensation Committee by Holdings' Board of Directors on September 15, 1998.
Mr. Jensen is an executive officer of Holdings and the Company. Mr. Jensen's
compensation for fiscal 1999 was previously established by the terms of his
employment agreement.

                                      -53-
<PAGE>
 
Item 12. Security Ownership of Certain Beneficial Owners and Management.

     All of the  Company's  issued  and  outstanding  capital  stock is owned by
Holdings.  As of April 26,  1999,  the  outstanding  capital  stock of  Holdings
consisted of 99,624.89 shares of common stock, par value $0.01 per share.

     The  following  table sets forth certain  information  as of April 26, 1999
regarding  the  beneficial  ownership of (i) each class of voting  securities of
Holdings  by each  person  known to Holdings to own more than 5% of any class of
outstanding  voting  securities  of Holdings and (ii) the equity  securities  of
Holdings by each director of the Company,  each Named  Executive  Officer of the
Company,  and the directors and executive officers of the Company as a group. To
the  knowledge  of the  Company,  each  such  stockholder  has sole  voting  and
investment  power as to the shares  owned  unless  otherwise  noted.  Beneficial
ownership  of the  securities  listed  in  the  table  has  been  determined  in
accordance  with the  applicable  rules and  regulations  promulgated  under the
Securities Exchange Act of 1934, as amended.


<TABLE> 
<CAPTION> 


                                                                               Shares Beneficially Owned(1)
                                                                                      Common Stock
                                                                               ------------------------------
                                                                                 Number of   Percentage of
Name and Address                                                                  Shares         Class
------------------------------------------------------------------------------ ------------  ----------------
<S>                                                                            <C>           <C>   
Principal Stockholders:
Fenway Partners Capital Fund, L.P.(2)........................................       88,431.57         88.76%
   152 West 57th Street
   New York, New York 10019

New York Life Insurance Company(3)...........................................       11,187.21       10.73
   51 Madison Avenue
   New York, NY 10010

American Home Assurance Company(4)...........................................        5,593.61        5.49
   c/o AIG Global Investment Co.
   200 Liberty Street
   New York, NY 10281

Directors and Executive Officers:
Donald R. Jensen(5)...........................................................       6,744.43        6.34
William J. Mills(6)...........................................................       2,061.75        2.03
Keith A. McDonough(7).........................................................       2,049.75        2.02
William J. Taaffe(8)..........................................................         717.89           *
Theodore C. Johanson(9).......................................................          40.00           *
Peter Lamm(10)................................................................             --         --
Andrea Geisser(10)............................................................             --         --
John B. Ayer(10)..............................................................             --         --
Reza R. Satchu(10)............................................................             --         --
All directors and executive officers as a group, including the above named
   persons....................................................................      11,613.82       10.44
</TABLE> 


*    Less than one percent.
(1)  As used in this table,  beneficial ownership means the sole or shared power
     to vote, or to direct the voting of a security, or the sole shared power to
     dispose, or direct the disposition,  of a security and includes options and

                                      -54-
<PAGE>
 
     warrants exercisable within 60 days.
(2)  Includes shares of common stock held by the Fenway Fund and its affiliated
     entities FPIP, LLC and FPIP Trust, LLC .
(3)  Includes 4,641.66 shares of common stock subject to acquisition from
     Holdings at a purchase price of $185.52 per share pursuant to a warrant
     that expires on February 26, 2007.
(4)  Includes 2,320.83 shares of common stock subject to acquisition from
     Holdings at a purchase price of $185.52 per share pursuant to a warrant
     that expires on February 26, 2007.
(5)  Includes  6,404.83  shares of common  stock that may be  acquired  upon the
     exercise of outstanding Series A Options at an exercise price of $36.36 per
     share  and  339.60  shares  that  may be  acquired  upon  the  exercise  of
     outstanding  Series B Options at an  exercise  price of  $363.60  per share
     pursuant  to the Option  Plan (as  defined) of  Holdings.  See  "Management
     Equity Arrangements."
(6)  Includes  1,929.75  shares of common  stock that may be  acquired  upon the
     exercise of outstanding Series A Options at an exercise price of $36.36 per
     share and 132 shares that may be acquired upon the exercise of  outstanding
     Series B Options at an exercise  price of $363.60 per share pursuant to the
     Option Plan of Holdings. See "Management Equity Arrangements."
(7)  Includes  1,929.75  shares of common  stock that may be  acquired  upon the
     exercise of outstanding Series A Options at an exercise price of $36.36 per
     share and 120 shares that may be acquired upon the exercise of  outstanding
     Series B Options at an exercise  price of $363.60 per share pursuant to the
     Option Plan of Holdings. See "Management Equity Arrangements."
(8)  Includes  617.89  shares  of common  stock  that may be  acquired  upon the
     exercise of outstanding Series A Options at an exercise price of $36.36 per
     share and 100 shares that may be acquired upon the exercise of  outstanding
     Series B Options at an exercise  price of $363.60 per share pursuant to the
     Option Plan of Holdings. See "Management Equity Arrangements."
(9)  Represents 40 shares of common stock that may be acquired upon the exercise
     of outstanding Series B Options at an exercise price of $363.60 per share
     pursuant to the Option Plan of Holdings. See "Management Equity
     Arrangements."
(10) Includes shares of common stock owned by the Fenway Fund and its affiliated
     entities, FPIP, LLC and FPIP Trust, LLC. Messrs. Lamm, Geisser, Ayer and
     Satchu are limited partners of Fenway Partners, L.P., the general partner
     of the Fenway Fund. Accordingly, Messrs, Lamm, Geisser, Ayer and Satchu may
     be deemed to beneficially own shares owned by the Fenway Fund. Messrs.
     Lamm, Geisser, Ayer and Satchu are members of FPIP, LLC and FPIP Trust, LLC
     and, accordingly, may be deemed to beneficially own shares owned by such
     funds. Messrs. Lamm, Geisser, Ayer and Satchu disclaim beneficial ownership
     of any such shares in which they do not have pecuniary interests. The
     business address of each of the foregoing is c/o Fenway Partners, Inc., 152
     West 57thStreet, New York, New York 10019.

                                      -55-
<PAGE>
 
Item 13.  Certain Relationships and Related Transactions.

Management Equity Arrangements

     Holdings adopted a Stock Option Plan (the "Option Plan") for the benefit of
directors,  executive  officers,  other  employees,  consultants and advisors of
Holdings  and its  subsidiaries  on February  26,  1997.  The Plan  provides for
issuance of Series A options  ("Series A Options") and Series B options ("Series
B  Options").  Series B  Options  are  designated  as either  "Series  B-Basic B
Options" or "Series  B-Extra B Options."  Series A Options vest  immediately  in
full on the date such options are granted,  Series B-Basic B Options are subject
to certain  time and  performance  vesting  restrictions  and  Series  B-Extra B
Options vest only in connection  with the  consummation  by the Fenway Fund of a
sale,  other than to one of its  affiliates,  of its entire  equity  interest in
Holdings  and the  attainment  of certain  internal  rate of return  objectives.
Holdings has  reserved  20,244.70  shares of Holdings  common stock for issuance
under the Option  Plan,  11,527.78  of which  shares are  reserved  for Series A
Options and 8,716.92 of which shares are reserved for Series B Options.

     In February 1997,  Holdings granted Series A Options to certain  management
employees to purchase an  aggregate  of  11,527.78  shares of common stock at an
exercise  price of $36.36  per  share.  These  Series A Options  were  issued in
exchange for  existing  options for shares of the parent of the  predecessor  in
connection with the Fenway  Acquisition.  The Series A Options granted expire on
February  28,  2007.  In August  1997,  Holdings  granted to certain  management
employees  Series  B-Basic B Options to purchase an aggregate of 5,508 shares of
common  stock and Series  B-Extra B Options to purchase an aggregate of 3,058.77
shares of common stock.  All of the Series B Options  granted expire on February
28, 2007. The exercise price of Series B Options granted in August 1997 (i) that
were not vested  (as such term is  defined  in the Option  Plan) as of April 24,
1998 is $185.52  per share and (ii) that were vested (as such term is defined in
the Option Plan) as of April 24, 1998 is $363.60 per share.  None of the options
granted under the Option Plan has been exercised.  See also  "Management--Option
Grants."

     In connection  with the April 1998  Transactions,  members of management of
the Company  holding vested options  received  aggregate  payments of $2,245,000
which  reflects  the  decrease in the equity value of the Company as a result of
the  cash  distribution  to the  stockholders  of  Holdings  in the  April  1998
Transactions.


Stockholders Agreement

     Holdings,   the  Fenway  Fund  and  all  of  the  other   stockholders  and
optionholders   of  Holdings   entered  into  a   stockholders   agreement  (the
"Stockholders  Agreement")  that,  among other  things,  provides for  tag-along
rights, take-along rights,  registration rights, restrictions on the transfer of
shares held by parties to the  Stockholders  Agreement,  certain rights of first
refusal for Holdings and certain preemptive rights for certain stockholders. The
Stockholders  Agreement  also provides that the parties  thereto will vote their
shares  in the  same  manner  as the  Fenway  Fund in  connection  with  certain
transactions  and that the  Fenway  Fund will be  entitled  to fix the number of
directors of Holdings.  Pursuant to the Stockholders Agreement,  the Fenway Fund
is entitled to designate a sufficient number of directors to maintain a majority
of the board of  directors  of  Holdings  and Donald R.  Jensen is  entitled  to
designate one director.


Management Agreement

     Holdings and the Company are party to the amended and  restated  management
agreement  (the  "Management  Agreement")  with Fenway  pursuant to which Fenway
agreed to provide  management and advisory services to Holdings and the Company.
In exchange for such services, Holdings and the Company agreed to pay Fenway (i)
annual  management  fees  equal to  $250,000  for fiscal  1999 and fiscal  1998,
$275,000  for fiscal 2000,  $300,000  for fiscal 2001 and,  for each  subsequent
fiscal year,  0.25% of the net sales for the immediately  preceding  fiscal year
which annual management fees shall be increased by an amount to be negotiated in
good faith in the event of an acquisition of a business with an enterprise value
in excess of $50  million,  (ii) fees in  connection  with the  negotiation  and
consummation  by Fenway of senior  financing for any  acquisition  transactions,
which fees shall not

                                      -56-
<PAGE>
 
exceed the greater of $1 million or 1.5% of the aggregate transaction value and
(iii) certain fees and expenses, including legal and accounting fees and any
out-of-pocket expenses incurred by Fenway in connection with providing services
to Holdings and the Company. Holdings and the Company also agreed to indemnify
Fenway under certain circumstances. In addition, pursuant to the Management
Agreement, Fenway received $2,070,000 in connection with the structuring of the
Fenway Acquisition and the related senior secured financing. The Company
believes that the fees payable pursuant to the Management Agreement are
comparable to fees payable to unaffiliated third parties for similar services.


                                    Part IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)(1) Financial Statements

         See Index to Financial Statements appearing at page 17.

(a)(2) Financial Statement Schedules

         The following Financial Statement Schedule is included at page 47:

         Schedule II - Valuation and Qualifying Accounts.

         Information required by other schedules called for under Regulation S-X
         is either not applicable or is included in the  consolidated  financial
         statements or notes thereto.

(a)(3)  Exhibit Index

3.1*      Iron Age Certificate of Incorporation, as amended.
3.2*      Iron Age By-laws.
4.1*      Indenture dated as of April 24, 1998.
10.1*    Credit Agreement  dated as of April 24, 1998.
10.2*    Security Agreement dated April 24, 1998.
10.3*    Intellectual Property Security Agreement dated April 24, 1998.
10.4*    Canadian Security Agreement dated April 24, 1998.
10.5*    Mortgage,  Assignment of Leases and Rents, Fixture Filing, Security
         Agreement  and  Financing  Statement  dated  February 26, 1997,  as
         amended April 24, 1998.
10.6*    Intercompany Subordination agreement dated April 24, 1998.
10.7*    Subsidiary Guaranty dated April 24, 1998.
10.8*    Iron Age Trademark License Agreement with W.L Gore & Associates, Inc.
         dated August 15, 1994.
10.9*    Falcon Trademark License Agreement with W.L. Gore & Associates, Inc.
         dated July 25, 1994.
10.10*   Falcon Manufacturing Certification Agreement with W.L Gore &
         Associates, Inc. dated July 25, 1994.
10.11*   General Services  Administration Contract effective July 26, 1994,
         as modified May 24, 1995.
10.12*   Amended and Restated Management Agreement dated as of
         February 26, 1997.
10.13*   Stockholders Agreement dated as of February 26, 1997.
10.14*   Amendment No. 1 to Stockholders Agreement dated as of March 25, 1997.
10.15*   American Home Assurance Company Joinder to the Stockholders Agreement
         dated as of March 25, 1997. 10.16* Banque Nationale de Paris Joinder to
         the Stockholders Agreement dated as of March 25, 1997.
10.17*   Stock Option Plan dated February 26, 1997.

                                      -57-
<PAGE>
 
10.18*   Securities Purchase Agreement dated February 26, 1997.
10.19*   Stock Purchase Agreement dated as of December 26, 1996.
10.20*   Amendment No. 1 to the Stock Purchase Agreement dated as of
         February 26, 1997.
10.21*   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*   Jerusalem, New York Lease Agreement dated December 9, 1992, as amended
         January 1, 1994, as amended April 1997.
10.23*   Jerusalem, New York Lease Agreement dated June 20, 1997, as amended
         January 9. 1998.
10.24*   Lewiston, Maine Lease Agreement dated January 14, 1994.
10.25*   Lewiston, Maine Lease Agreement dated November 30, 1990,
         as amended June 8,1994.
10.26*   Ontario,  Canada Lease  Agreement  dated June 11, 1991, as amended
         November 23, 1995.
10.27*   Jensen  Employment  Agreement  dated  February  26,  1997.
10.28*   Mills Employment  Agreement  dated  November 20,  1995.  
10.29*   McDonough  Employment Agreement  dated November 20, 1995.  
10.30*   Johanson  Employment  Agreement date August 1, 1994. 
10.31*   Johanson Non-Competition  Agreement dated August 1, 1994.
10.32    Taaffe  Severance  Agreement dated January 13, 1999.  
10.33    Taaffe Agreement and General Release dated January 13, 1999.
10.34    Letter Waiver to Banque  Nationale de Paris Credit 
         Agreement dated August 28, 1998.
10.35    Amendment No. 2 and Waiver to Banque Nationale de Paris Credit 
         Agreement dated February 26, 1999.
10.36    Election to reduce  Acquisition  Commitment  to Banque  National de
         Paris Credit Agreement dated March 5, 1999.
21.1*    Subsidiaries of Iron Age.
27.1     Financial Data Schedules.
--------------
* Incorporated by reference to the similarly numbered exhibit in the Company's
  Registration Statement on Form S-4, No. 333-57011, filed June 17, 1998.

(b)   Reports on Form 8-K.

         No  reports on Form 8-K were  filed  during  the fourth  quarter of the
fiscal year ended January 30, 1999.

                                      -58-
<PAGE>
 
                                  SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                         Iron Age Corporation

Dated:  April 26, 1999                   By:/S/KEITH A. MCDONOUGH

                                         Executive Vice President and
                                         Chief Financial Officer
                                         (Principal Financial and
                                         Accounting Officer)

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


<TABLE> 
<CAPTION> 

         SIGNATURE                                       TITLE                                   DATE
<S>                                         <C>                                              <C>  
/S/DONALD R. JENSEN                         Chairman and Director                            April 26, 1999
 Donald R. Jensen

/S/WILLIAM J. MILLS                         Chief Executive Officer, President               April 26, 1999
 William J. Mills                           and Director (principal executive officer)

/S/KEITH A. MCDONOUGH                       Executive Vice President, Chief                  April 26, 1999
 Keith A. McDonough                         Financial Officer (principal
                                            financial and accounting officer)

/S/PETER LAMM                               Director                                        April 26, 1999
 Peter Lamm

/S/ANDREA GEISSER                           Director                                        April 26, 1999
 Andrea Geisser

/S/JOHN B. AYER                             Director                                        April 26, 1999
 John B. Ayer

/S/REZA R. SATCHU                           Director                                        April 26, 1999
 Reza R. Satchu

</TABLE> 

                                      -59-