##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended August 4, 2007
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 Commission File Number: 1-14770
 
 COLLECTIVE BRANDS, INC.
  Delaware
    
    43-1813160State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization
    
    Identification No.)3231 Southeast Sixth Avenue, Topeka, Kansas
    
    66607-2207(Address of principal executive offices)
    
    (Zip Code)
 (785) 233-5171
 þ o
  þ o o
  YES o NO þ




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##### 



COLLECTIVE BRANDS, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED AUGUST 4, 2007
INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements. (unaudited)Condensed Consolidated Statements of Earnings for the 13 Weeks and 26 Weeks Ended
August 4, 2007 and July 29, 2006.
    
    
    3Condensed Consolidated Balance Sheets as of August 4, 2007, July 29, 2006 and February 3, 2007.
    
    
    4Condensed Consolidated Statements of Cash Flows for the 26 Weeks Ended August 4, 2007
and July 29, 2006.
    
    
    5Notes to Condensed Consolidated Financial Statements.
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
    
    33Item 4. Controls and Procedures.
    
    
    34PART II  OTHER INFORMATIONItem 1. Legal Proceedings.
    
    
    34Item 1A. Risk Factors.
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
    
    
    36Item 4. Submission of Matters to a Vote of Security Holders.
    
    
    36Item 6. Exhibits.
    
    
    37Signatures.
    
    
    38302 Certification of CEO and President.302 Certification of Senior Vice President, CFO and Treasurer.906 Certification of CEO and President.906 Certification of Senior Vice President, CFO and Treasurer.
  2




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##### 



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 COLLECTIVE BRANDS, INC. AND SUBSIDIARIES
(Formerly Payless ShoeSource, Inc.)
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 (UNAUDITED)
 13 Weeks Ended
    
    
    26 Weeks EndedAugust 4,
    
    
    July 29,
    
    
    August 4,
    
    
    July 29,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    699.3
    
    
    $
    706.1
    
    
    $
    1,427.9
    
    
    $
    1,400.6Cost of sales
    
    
    458.7
    
    
    
    462.1
    
    
    
    918.4
    
    
    
    900.8Gross margin
    
    
    240.6
    
    
    
    244.0
    
    
    
    509.5
    
    
    
    499.8Selling, general and administrative expenses
    
    
    201.0
    
    
    
    193.5
    
    
    
    410.9
    
    
    
    392.6Restructuring charges
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.3Operating profit from continuing operations
    
    
    39.5
    
    
    
    50.2
    
    
    
    98.3
    
    
    
    106.9Interest expense
    
    
    4.8
    
    
    
    4.5
    
    
    
    9.6
    
    
    
    9.4Interest income
    
    
    (4.0
    )
    
    
    (5.2
    )
    
    
    (8.7
    )
    
    
    (10.0
    )Earnings from continuing operations before income taxes
and minority interest
    
    
    38.7
    
    
    
    50.9
    
    
    
    97.4
    
    
    
    107.5Provision for income taxes
    
    
    12.7
    
    
    
    17.3
    
    
    
    31.5
    
    
    
    36.8Earnings from continuing operations before minority interest
    
    
    26.0
    
    
    
    33.6
    
    
    
    65.9
    
    
    
    70.7Minority interest, net of income taxes
    
    
    (1.3
    )
    
    
    (0.6
    )
    
    
    (2.2
    )
    
    
    (0.9
    )Net earnings from continuing operations
    
    
    24.7
    
    
    
    33.0
    
    
    
    63.7
    
    
    
    69.8Earnings (loss) from discontinued operations, net of income
taxes and minority interest
    
    
    0.2
    
    
    
    (0.5
    )
    
    
    0.1
    
    
    
    (1.3
    )Net earnings
    
    $
    24.9
    
    
    $
    32.5
    
    
    $
    63.8
    
    
    $
    68.5Basic earnings per share:Earnings from continuing operations
    
    $
    0.38
    
    
    $
    0.50
    
    
    $
    0.98
    
    
    $
    1.05Earnings (loss) from discontinued operations
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    (0.02
    )Basic earnings per share
    
    $
    0.39
    
    
    $
    0.49
    
    
    $
    0.99
    
    
    $
    1.03Diluted earnings per share:Earnings from continuing operations
    
    $
    0.37
    
    
    $
    0.49
    
    
    $
    0.96
    
    
    $
    1.03Earnings (loss) from discontinued operations
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    (0.02
    )Diluted earnings per share
    
    $
    0.38
    
    
    $
    0.48
    
    
    $
    0.97
    
    
    $
    1.01Basic Weighted Average Shares Outstanding
    
    
    64.5
    
    
    
    66.5
    
    
    
    64.6
    
    
    
    66.5Diluted Weighted Average Shares Outstanding
    
    
    65.7
    
    
    
    67.6
    
    
    
    65.9
    
    
    
    67.6
  3




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##### 



COLLECTIVE BRANDS, INC. AND SUBSIDIARIES
(Formerly Payless ShoeSource, Inc.)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 August 4,
    
    
    July 29,
    
    
    February 3,2007
    
    
    2006
    
    
    2007ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    327.4
    
    
    $
    401.9
    
    
    $
    371.4Short-term investments
    
    
    
    
    
    
    39.0
    
    
    
    90.0Restricted cash
    
    
    2.0
    
    
    
    2.0
    
    
    
    2.0Inventories
    
    
    370.0
    
    
    
    350.7
    
    
    
    361.9Current deferred income taxes
    
    
    16.8
    
    
    
    20.1
    
    
    
    15.6Prepaid expenses
    
    
    46.5
    
    
    
    44.1
    
    
    
    46.5Other current assets
    
    
    24.9
    
    
    
    20.5
    
    
    
    18.1Current assets of discontinued operations
    
    
    0.8
    
    
    
    3.4
    
    
    
    1.1Total current assets
    
    
    788.4
    
    
    
    881.7
    
    
    
    906.6Property and Equipment:Land
    
    
    5.7
    
    
    
    7.7
    
    
    
    6.6Property, buildings and equipment
    
    
    1,323.0
    
    
    
    1,216.9
    
    
    
    1,245.1Accumulated depreciation and amortization
    
    
    (868.6
    )
    
    
    (833.5
    )
    
    
    (830.5
    )Property and equipment, net
    
    
    460.1
    
    
    
    391.1
    
    
    
    421.2Intangible assets, net
    
    
    94.7
    
    
    
    42.0
    
    
    
    39.6Deferred income taxes
    
    
    47.0
    
    
    
    29.4
    
    
    
    37.7Goodwill
    
    
    40.2
    
    
    
    5.9
    
    
    
    5.9Other assets
    
    
    26.0
    
    
    
    19.4
    
    
    
    16.4Noncurrent assets of discontinued operations
    
    
    
    
    
    
    1.3
    
    
    
    Total Assets
    
    $
    1,456.4
    
    
    $
    1,370.8
    
    
    $
    1,427.4LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    0.3
    
    
    $
    0.9
    
    
    $
    0.4Notes payable
    
    
    2.0
    
    
    
    2.0
    
    
    
    2.0Accounts payable
    
    
    164.3
    
    
    
    154.6
    
    
    
    185.6Accrued expenses
    
    
    137.9
    
    
    
    180.7
    
    
    
    190.2Current liabilities of discontinued operations
    
    
    1.5
    
    
    
    2.8
    
    
    
    2.1Total current liabilities
    
    
    306.0
    
    
    
    341.0
    
    
    
    380.3Long-term debt
    
    
    200.9
    
    
    
    201.7
    
    
    
    201.7Other liabilities
    
    
    179.3
    
    
    
    117.9
    
    
    
    132.6Minority interest
    
    
    11.5
    
    
    
    10.8
    
    
    
    12.7Commitments and contingencies (Note 15) 
Total shareowners equity
    
    
    758.7
    
    
    
    699.4
    
    
    
    700.1Total Liabilities and Shareowners Equity
    
    $
    1,456.4
    
    
    $
    1,370.8
    
    
    $
    1,427.4
  4




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##### 



COLLECTIVE BRANDS, INC. AND SUBSIDIARIES
(Formerly Payless ShoeSource, Inc.)
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 26 Weeks EndedAugust 4,
    
    
    July 29,2007
    
    
    2006Operating Activities:Net earnings
    
    $
    63.8
    
    
    $
    68.5(Earnings) loss from discontinued operations, net of income taxes and minority interest
    
    
    (0.1
    )
    
    
    1.3Adjustments for non-cash items included in net earnings:Loss on impairment of and disposal of assets
    
    
    4.3
    
    
    
    4.8Depreciation and amortization
    
    
    50.3
    
    
    
    45.4Share-based compensation expense
    
    
    6.2
    
    
    
    5.5Deferred income taxes
    
    
    (3.9
    )
    
    
    1.1Minority interest, net of income taxes
    
    
    2.2
    
    
    
    0.9Income tax benefit from share-based compensation
    
    
    2.5
    
    
    
    4.4Excess tax benefit from share-based compensation
    
    
    (2.4
    )
    
    
    (4.0
    )Accretion of investments
    
    
    (0.6
    )
    
    
    (1.6
    )Changes in working capital:Inventories
    
    
    (6.0
    )
    
    
    (17.8
    )Prepaid expenses and other current assets
    
    
    (1.5
    )
    
    
    (8.4
    )Accounts payable
    
    
    (20.3
    )
    
    
    (15.0
    )Accrued expenses
    
    
    (38.7
    )
    
    
    16.0Other assets and liabilities, net
    
    
    6.8
    
    
    
    (1.4
    )Net cash used in discontinued operations
    
    
    (0.2
    )
    
    
    (3.5
    )Cash flow provided by operating activities
    
    
    62.4
    
    
    
    96.2Investing Activities:Capital expenditures
    
    
    (93.0
    )
    
    
    (52.8
    )Proceeds from sale of property and equipment
    
    
    1.6
    
    
    
    3.2Intangible asset additions
    
    
    
    
    
    
    (15.1
    )Purchases of investments
    
    
    (6.1
    )
    
    
    (89.9
    )Sales and maturities of investments
    
    
    96.7
    
    
    
    111.5Acquisition of businesses, net of cash acquired
    
    
    (93.2
    )
    
    
    Cash flow used in investing activities
    
    
    (94.0
    )
    
    
    (43.1
    )Financing Activities:Repayment of debt
    
    
    (5.3
    )
    
    
    (2.1
    )Payment of deferred financing costs
    
    
    
    
    
    
    (0.2
    )Issuances of common stock
    
    
    7.8
    
    
    
    25.1Purchases of common stock
    
    
    (20.7
    )
    
    
    (56.5
    )Excess tax benefit from share-based compensation
    
    
    2.4
    
    
    
    4.0Distributions to minority owners
    
    
    (2.4
    )
    
    
    (1.0
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    1.2Cash flow used in financing activities
    
    
    (18.2
    )
    
    
    (29.5
    )Effect of exchange rate changes on cash
    
    
    5.8
    
    
    
    0.1(Decrease) increase in cash and cash equivalents
    
    
    (44.0
    )
    
    
    23.7Cash and cash equivalents, beginning of year
    
    
    371.4
    
    
    
    378.2Cash and cash equivalents, end of quarter
    
    $
    327.4
    
    
    $
    401.9Supplemental cash flow information:Interest paid
    
    $
    9.0
    
    
    $
    10.2Income taxes paid
    
    $
    19.7
    
    
    $
    14.1Non-cash investing and financing activities:Accrued capital additions
    
    $
    17.5
    
    
    $
    9.5Accrued capital lease addition
    
    $
    1.2
    
    
    $
    Accrued acquisition costs
    
    $
    2.5
    
    
    $
    Accrued financing costs
    
    $
    3.0
    
    
    $
    Accrued intangible asset additions
    
    $
    
    
    
    $
    10.0
  5




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##### 



COLLECTIVE BRANDS, INC. AND SUBSIDIARIES
(Formerly Payless ShoeSource, Inc.)
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 Note 1  Interim Results.
  Note 2  Acquisition.
   (dollars in millions)Current assets
    
    $
    4.6Goodwill
    
    
    34.3Trademarks(1)
    
    
    47.7Customer relationships(2)
    
    
    9.2Other intangible assets(3)
    
    
    0.2Current liabilities
    
    
    (4.9
    )Total
    
    $
    91.1
 
 (1)
    
    Comprised of $40.6 million with indefinite lives and $7.1 million with finite lives
amortized over a weighted-average period of ten years.(2)
    
    Amortized over a weighted-average period of seven years.(3)
    
    Comprised of non-compete contracts, amortized over a weighted-average period of
three years. 6




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##### 



Note 3  Exit Costs.
   Costs Incurred13 Weeks Ended
    
    
    26 Weeks Ended
    
    
    Cash
    
    
    Accrual Balance as of(dollars in millions)
    
    August 4, 2007
    
    
    August 4, 2007
    
    
    Payments
    
    
    August 4, 2007Employee severance costs
    
    $
    0.6
    
    
    $
    4.8
    
    
    $
    (0.4
    )
    
    $
    4.4Contract termination
    
    
    0.8
    
    
    
    0.8
    
    
    
    (0.8
    )
    
    
    Accelerated depreciation
    
    
    0.6
    
    
    
    1.2Total Charges
    
    $
    2.0
    
    
    $
    6.8
    
    
    $
    (1.2
    )
    
    $
    4.4
  Note 4  Short-Term Investments.
  July 29,
    
    
    February 3,(dollars in millions)
    
    2006
    
    
    2007Held-to-maturity securities:Commercial paper
    
    $
    38.3
    
    
    $
    90.0Certificates of deposit
    
    
    0.7
    
    
    
    Total held-to-maturity securities
    
    $
    39.0
    
    
    $
    90.0
  7




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##### 



Note 5  Discontinued Operations.
 Domestic
  13 Weeks Ended
    
    
    26 Weeks EndedAugust 4,
    
    
    July 29,
    
    
    August 4,
    
    
    July 29,(dollars in millions)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Earnings (loss) from discontinued operations before income taxes
    
    $
    0.4
    
    
    $
    0.2
    
    
    $
    0.2
    
    
    $
    (0.4
    )Provision (benefit) for income taxes
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    (0.1
    )Earnings (loss) from discontinued operations, net of income taxes
    
    $
    0.2
    
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    (0.3
    )
  August 4,
    
    
    July 29,
    
    
    February 3,(dollars in millions)
    
    2007
    
    
    2006
    
    
    2007AssetsCurrent assets:Current deferred income taxes
    
    $
    0.5
    
    
    $
    0.9
    
    
    $
    0.8Other current assets
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.2Total current assets of discontinued operations
    
    $
    0.8
    
    
    $
    1.1
    
    
    $
    1.0LiabilitiesCurrent liabilities:Accrued expenses
    
    $
    1.5
    
    
    $
    2.4
    
    
    $
    2.1Total current liabilities of discontinued operations
    
    $
    1.5
    
    
    $
    2.4
    
    
    $
    2.1
 International
  13 Weeks Ended
    
    
    26 Weeks EndedAugust 4,
    
    
    July 29,
    
    
    August 4,
    
    
    July 29,(dollars in millions)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    0.6Loss from discontinued operations before income
taxes and minority interest
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.7
    )Minority interest
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    0.7Loss from discontinued operations, net of income
taxes and minority interest
    
    $
    
    
    
    $
    (0.6
    )
    
    $
    
    
    
    $
    (1.0
    )
 8




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##### 



August 4,
    
    
    July 29,
    
    
    February 3,(dollars in millions)
    
    2007
    
    
    2006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    1.7
    
    
    $
    0.1Inventories
    
    
    
    
    
    
    0.2
    
    
    
    Other current assets
    
    
    
    
    
    
    0.4
    
    
    
    Total current assets of discontinued operations
    
    $
    
    
    
    $
    2.3
    
    
    $
    0.1Noncurrent assets:Property and equipment, net
    
    
    
    
    
    
    0.9
    
    
    
    Other assets
    
    
    
    
    
    
    0.4
    
    
    
    Total noncurrent assets of discontinued operations
    
    
    
    
    
    
    1.3
    
    
    
    Total assets of discontinued operations
    
    $
    
    
    
    $
    3.6
    
    
    $
    0.1LiabilitiesCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    0.2
    
    
    $
    Accrued expenses
    
    
    
    
    
    
    0.2
    
    
    
    Total current liabilities of discontinued operations
    
    $
    
    
    
    $
    0.4
    
    
    $
    
 Note 6  Inventories.
  Note 7  Intangible Assets.
  August 4,
    
    
    July 29,
    
    
    February 3,(dollars in millions)
    
    2007
    
    
    2006
    
    
    2007Intangible assets subject to amortization:Favorable lease rights:Gross carrying amount
    
    $
    65.2
    
    
    $
    72.6
    
    
    $
    67.2Less: accumulated amortization
    
    
    (54.2
    )
    
    
    (56.9
    )
    
    
    (54.4
    )Carrying amount, end of period
    
    
    11.0
    
    
    
    15.7
    
    
    
    12.8Trademarks:Gross carrying amount
    
    
    7.1
    
    
    
    
    
    
    
    Less: accumulated amortization
    
    
    (0.3
    )
    
    
    
    
    
    
    Carrying amount, end of period
    
    
    6.8
    
    
    
    
    
    
    
    Other Intangible Assets:Gross carrying amount
    
    
    9.5
    
    
    
    
    
    
    
    0.1Less: accumulated amortization
    
    
    (0.6
    )
    
    
    
    
    
    
    Carrying amount, end of period
    
    
    8.9
    
    
    
    
    
    
    
    0.1Total carrying amount of intangible assets
subject to amortization
    
    
    26.7
    
    
    
    15.7
    
    
    
    12.9Indefinite-lived trademarks
    
    
    68.0
    
    
    
    26.3
    
    
    
    26.7Total intangible assets
    
    $
    94.7
    
    
    $
    42.0
    
    
    $
    39.6
 9




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##### 



Favorable lease rights
    
    A weighted-average period of 14 years.
Favorable lease rights are amortized over the term of the underlying
lease, including renewal options in instances where failure to exercise renewals would result in an economic
penalty.Trademarks
    
    5 to 10 yearsOther intangible assets
    
    2 to 8 years
  13 Weeks Ended
    
    26 Weeks EndedAugust 4,
    
    July 29,
    
    August 4,
    
    July 29,(dollars in millions)
    
    2007
    
    2006
    
    2007
    
    2006Amortization expense on intangible assets
    
    $
    1.2
    
    
    $
    0.7
    
    
    $
    2.1
    
    
    $
    1.5
  Year
    
    AmountRemainder of 2007
    
    $
    2.42008
    
    
    4.62009
    
    
    4.12010
    
    
    3.22011
    
    
    2.9
 Note 8  Long-Term Debt.
   Year
    
    Percentage2008
    
    
    104.125
    %2009
    
    
    102.750
    %2010
    
    
    101.375
    %2011 and thereafter
    
    
    100.000
    %
 Note 9  Pension Plan.
  10




---



##### 



13 Weeks Ended
    
    
    26 Weeks EndedAugust 4,
    
    
    July 29,
    
    
    August 4,
    
    
    July 29,(dollars in millions)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Components of pension expense:Service cost
    
    $
    0.3
    
    
    $
    0.2
    
    
    $
    0.5
    
    
    $
    0.4Interest cost
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.9
    
    
    
    0.7Amortization of prior service cost
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.2Amortization of actuarial loss
    
    
    0.2
    
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.1Total
    
    $
    1.0
    
    
    $
    0.7
    
    
    $
    1.9
    
    
    $
    1.4
 Note 10  Share-Based Compensation.
   13 Weeks Ended
    
    26 Weeks EndedAugust 4, 2007Stock-settled SARs:Vest in installments over 3 years
    
    
    24,590
    
    
    
    482,659Cliff vest after 3 years
    
    
    23,675
    
    
    
    243,400Nonvested Shares:Performance grant  vests in installments over 3 years(1)
    
    
    4,980
    
    
    
    125,710Vest in installments over 3 years
    
    
    2,420
    
    
    
    2,420Cliff vest after 3 years
    
    
    54,435
    
    
    
    54,435Nonvested Share Units:Performance grant  cliff vests after 3 years(1)
    
    
    271,113
    
    
    
    271,113Cash-settled SARs:Vest in installments over 3 years
    
    
    
    
    
    
    22,525Cliff vest after 3 years
    
    
    
    
    
    
    14,000
 
 (1)
    
    Certain nonvested shares and nonvested share units are subject
to a performance condition for vesting. The performance grant vests
only if the performance condition is met. As of August 4, 2007, the
Company has assessed the likelihood that the performance conditions will
be met and has recorded the related expense based on the estimated
outcome.  13 Weeks Ended
    
    
    26 Weeks EndedAugust 4,
    
    
    July 29,
    
    
    August 4,
    
    
    July 29,(dollars in millions, except per share amounts)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Cost of sales
    
    $
    0.7
    
    
    $
    0.8
    
    
    $
    1.6
    
    
    $
    1.5Selling, general and administrative expenses
    
    
    2.4
    
    
    
    1.9
    
    
    
    4.6
    
    
    
    4.0Share-based compensation expense before income taxes
    
    
    3.1
    
    
    
    2.7
    
    
    
    6.2
    
    
    
    5.5Tax benefit
    
    
    (1.2
    )
    
    
    (1.0
    )
    
    
    (2.4
    )
    
    
    (2.0
    )Share-based compensation expense after income taxes
    
    $
    1.9
    
    
    $
    1.7
    
    
    $
    3.8
    
    
    $
    3.5Effect on:Basic earnings per share
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.05Diluted earnings per share
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.05
 11




---



##### 



Note 11  Income Taxes.
        Note 12  Comprehensive Income.
  13 Weeks Ended
    
    
    26 Weeks EndedAugust 4,
    
    
    July 29,
    
    
    August 4,
    
    
    July 29,(dollars in millions)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net earnings
    
    $
    24.9
    
    
    $
    32.5
    
    
    $
    63.8
    
    
    $
    68.5Foreign currency translation adjustments
    
    
    4.1
    
    
    
    (0.6
    )
    
    
    9.3
    
    
    
    0.9Amortization of prior service cost and actuarial loss
    
    
    0.5
    
    
    
    
    
    
    
    0.5
    
    
    
    Total comprehensive income
    
    $
    29.5
    
    
    $
    31.9
    
    
    $
    73.6
    
    
    $
    69.4
   12




---



##### 



Note 13  Earnings Per Share.
  13 Weeks Ended
    
    
    26 Weeks EndedAugust 4,
    
    
    July 29,
    
    
    August 4,
    
    
    July 29,(dollars in millions, except per share amounts; shares in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net earnings from continuing operations
    
    $
    24.7
    
    
    $
    33.0
    
    
    $
    63.7
    
    
    $
    69.8Weighted average shares outstanding  basic
    
    
    64,542
    
    
    
    66,483
    
    
    
    64,633
    
    
    
    66,539Net effect of dilutive stock options
    
    
    895
    
    
    
    959
    
    
    
    947
    
    
    
    924Net effect of dilutive SARs
    
    
    91
    
    
    
    
    
    
    
    101
    
    
    
    Dilutive shares due to nonvested shares
    
    
    174
    
    
    
    116
    
    
    
    171
    
    
    
    106Weighted average shares outstanding  diluted
    
    
    65,702
    
    
    
    67,558
    
    
    
    65,852
    
    
    
    67,569Diluted earnings per share from continuing operations
    
    $
    0.37
    
    
    $
    0.49
    
    
    $
    0.96
    
    
    $
    1.03
  Note 14  Segment Reporting.
 13
        (dollars in millions)
    
    Domestic
    
    International
    
    Consolidated13 weeks ended August 4, 2007Revenues from external customers
    
    $
    591.9
    
    
    $
    107.4
    
    
    $
    699.3Operating profit from continuing operations
    
    
    26.6
    
    
    
    12.9
    
    
    
    39.526 weeks ended August 4, 2007Revenues from external customers
    
    $
    1,229.2
    
    
    $
    198.7
    
    
    $
    1,427.9Operating profit from continuing operations
    
    
    79.7
    
    
    
    18.6
    
    
    
    98.3Total assets
    
    
    1,242.7
    
    
    
    213.7
    
    
    
    1,456.413 weeks ended July 29, 2006Revenues from external customers
    
    $
    604.6
    
    
    $
    101.5
    
    
    $
    706.1Operating profit from continuing operations
    
    
    37.4
    
    
    
    12.8
    
    
    
    50.226 weeks ended July 29, 2006Revenues from external customers
    
    $
    1,217.7
    
    
    $
    182.9
    
    
    $
    1,400.6Operating profit from continuing operations
    
    
    89.5
    
    
    
    17.4
    
    
    
    106.9Total assets
    
    
    1,204.8
    
    
    
    166.0
    
    
    
    1,370.8
  Note 15  Commitments and Contingencies.
  th th
 14




---



##### 



Note 16  Impact of Recently Issued Accounting Standards.
   Note 17  Related Party Transactions.
   August 4,
    
    July 29,
    
    February 3,(dollars in millions)
    
    2007
    
    2006
    
    2007Deposits
    
    $
    2.3
    
    
    $
    4.7
    
    
    $
    7.9Borrowings
    
    
    4.0
    
    
    
    4.5
    
    
    
    4.0
  13 Weeks Ended
    
    26 Weeks EndedAugust 4,
    
    July 29,
    
    August 4,
    
    July 29,(dollars in millions)
    
    2007
    
    2006
    
    2007
    
    2006Interest expense
    
    $
    
    
    
    $
    0.1
    
    
    $
    0.1
    
    
    $
    0.1
 15




---



##### 



Note 18  Subsequent Events.
 Stride Rite Acquisition
  Long-Term Debt
     Share-based Compensation
  Stock-settled SARs:Vest in installments over 3 years
    
    
    867,719Cliff vest after 3 years
    
    
    47,000Nonvested Shares:Performance grant  vests in installments over 3 years
    
    
    157,283Vest in installments over 2 years
    
    
    211,716Cliff vest after 3 years
    
    
    86,755Cash-settled SARs:Vest in installments over 3 years
    
    
    46,750
 16




---



##### 



Note 19  Subsidiary Guarantors of Senior Notes  Condensed Consolidating Financial
Information.
     17




---



##### 



13 Weeks Ended August 4, 2007Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    625.3
    
    
    $
    245.9
    
    
    $
    (171.9
    )
    
    $
    699.3Cost of sales
    
    
    
    
    
    
    439.4
    
    
    
    189.2
    
    
    
    (169.9
    )
    
    
    458.7Gross margin
    
    
    
    
    
    
    185.9
    
    
    
    56.7
    
    
    
    (2.0
    )
    
    
    240.6Selling, general and administrative
expenses
    
    
    1.2
    
    
    
    170.4
    
    
    
    31.4
    
    
    
    (2.0
    )
    
    
    201.0Restructuring charges
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Operating (loss) profit from
continuing operations
    
    
    (1.2
    )
    
    
    15.4
    
    
    
    25.3
    
    
    
    
    
    
    
    39.5Interest expense
    
    
    9.4
    
    
    
    0.4
    
    
    
    0.3
    
    
    
    (5.3
    )
    
    
    4.8Interest income
    
    
    
    
    
    
    (7.7
    )
    
    
    (1.6
    )
    
    
    5.3
    
    
    
    (4.0
    )Equity in earnings of subsidiaries
    
    
    (31.7
    )
    
    
    (21.1
    )
    
    
    
    
    
    
    52.8
    
    
    
    Earnings from continuing operations
before income taxes and minority
interest
    
    
    21.1
    
    
    
    43.8
    
    
    
    26.6
    
    
    
    (52.8
    )
    
    
    38.7(Benefit) provision for income taxes
    
    
    (3.8
    )
    
    
    12.4
    
    
    
    4.1
    
    
    
    
    
    
    
    12.7Earnings from continuing operations
before minority interest
    
    
    24.9
    
    
    
    31.4
    
    
    
    22.5
    
    
    
    (52.8
    )
    
    
    26.0Minority interest, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (1.3
    )
    
    
    
    
    
    
    (1.3
    )Net earnings from continuing
operations
    
    
    24.9
    
    
    
    31.4
    
    
    
    21.2
    
    
    
    (52.8
    )
    
    
    24.7Earnings (loss) from discontinued
operations, net of income taxes and
minority interest
    
    
    
    
    
    
    0.3
    
    
    
    (0.1
    )
    
    
    
    
    
    
    0.2Net earnings
    
    $
    24.9
    
    
    $
    31.7
    
    
    $
    21.1
    
    
    $
    (52.8
    )
    
    $
    24.9
 13 Weeks Ended July 29, 2006Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    635.8
    
    
    $
    212.7
    
    
    $
    (142.4
    )
    
    $
    706.1Cost of sales
    
    
    
    
    
    
    441.4
    
    
    
    160.1
    
    
    
    (139.4
    )
    
    
    462.1Gross margin
    
    
    
    
    
    
    194.4
    
    
    
    52.6
    
    
    
    (3.0
    )
    
    
    244.0Selling, general and administrative expenses
    
    
    1.2
    
    
    
    167.5
    
    
    
    27.8
    
    
    
    (3.0
    )
    
    
    193.5Restructuring charges
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Operating (loss) profit from continuing operations
    
    
    (1.2
    )
    
    
    26.6
    
    
    
    24.8
    
    
    
    
    
    
    
    50.2Interest expense
    
    
    9.3
    
    
    
    
    
    
    
    0.5
    
    
    
    (5.3
    )
    
    
    4.5Interest income
    
    
    
    
    
    
    (9.9
    )
    
    
    (0.6
    )
    
    
    5.3
    
    
    
    (5.2
    )Equity in earnings of subsidiaries
    
    
    (39.3
    )
    
    
    (20.8
    )
    
    
    
    
    
    
    60.1
    
    
    
    Earnings from continuing operations before income taxes and minority
interest
    
    
    28.8
    
    
    
    57.3
    
    
    
    24.9
    
    
    
    (60.1
    )
    
    
    50.9(Benefit) provision for income taxes
    
    
    (3.7
    )
    
    
    18.1
    
    
    
    2.9
    
    
    
    
    
    
    
    17.3Earnings from continuing operations before minority interest
    
    
    32.5
    
    
    
    39.2
    
    
    
    22.0
    
    
    
    (60.1
    )
    
    
    33.6Minority interest, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (0.6
    )Net earnings from continuing operations
    
    
    32.5
    
    
    
    39.2
    
    
    
    21.4
    
    
    
    (60.1
    )
    
    
    33.0Earnings (loss) from discontinued operations, net of income taxes and
minority interest
    
    
    
    
    
    
    0.1
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (0.5
    )Net earnings
    
    $
    32.5
    
    
    $
    39.3
    
    
    $
    20.8
    
    
    $
    (60.1
    )
    
    $
    32.5
 18




---



##### 



26 Weeks Ended August 4, 2007Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,292.5
    
    
    $
    479.5
    
    
    $
    (344.1
    )
    
    $
    1,427.9Cost of sales
    
    
    
    
    
    
    878.3
    
    
    
    380.2
    
    
    
    (340.1
    )
    
    
    918.4Gross margin
    
    
    
    
    
    
    414.2
    
    
    
    99.3
    
    
    
    (4.0
    )
    
    
    509.5Selling, general and administrative
expenses
    
    
    2.3
    
    
    
    352.4
    
    
    
    60.2
    
    
    
    (4.0
    )
    
    
    410.9Restructuring charges
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Operating (loss) profit from
continuing operations
    
    
    (2.3
    )
    
    
    61.5
    
    
    
    39.1
    
    
    
    
    
    
    
    98.3Interest expense
    
    
    18.9
    
    
    
    0.7
    
    
    
    0.5
    
    
    
    (10.5
    )
    
    
    9.6Interest income
    
    
    
    
    
    
    (16.4
    )
    
    
    (2.8
    )
    
    
    10.5
    
    
    
    (8.7
    )Equity in earnings of subsidiaries
    
    
    (77.5
    )
    
    
    (33.3
    )
    
    
    
    
    
    
    110.8
    
    
    
    Earnings from continuing operations
before income taxes and minority
interest
    
    
    56.3
    
    
    
    110.5
    
    
    
    41.4
    
    
    
    (110.8
    )
    
    
    97.4(Benefit) provision for income taxes
    
    
    (7.5
    )
    
    
    33.1
    
    
    
    5.9
    
    
    
    
    
    
    
    31.5Earnings from continuing operations
before minority interest
    
    
    63.8
    
    
    
    77.4
    
    
    
    35.5
    
    
    
    (110.8
    )
    
    
    65.9Minority interest, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (2.2
    )
    
    
    
    
    
    
    (2.2
    )Net earnings from continuing
operations
    
    
    63.8
    
    
    
    77.4
    
    
    
    33.3
    
    
    
    (110.8
    )
    
    
    63.7Earnings from discontinued
operations, net of income taxes and
minority interest
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Net earnings
    
    $
    63.8
    
    
    $
    77.5
    
    
    $
    33.3
    
    
    $
    (110.8
    )
    
    $
    63.8
 26 Weeks Ended July 29, 2006Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,278.1
    
    
    $
    415.9
    
    
    $
    (293.4
    )
    
    $
    1,400.6Cost of sales
    
    
    
    
    
    
    859.4
    
    
    
    328.3
    
    
    
    (286.9
    )
    
    
    900.8Gross margin
    
    
    
    
    
    
    418.7
    
    
    
    87.6
    
    
    
    (6.5
    )
    
    
    499.8Selling, general and administrative expenses
    
    
    2.3
    
    
    
    344.3
    
    
    
    52.5
    
    
    
    (6.5
    )
    
    
    392.6Restructuring charges
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Operating (loss) profit from continuing operations
    
    
    (2.3
    )
    
    
    74.1
    
    
    
    35.1
    
    
    
    
    
    
    
    106.9Interest expense
    
    
    18.2
    
    
    
    0.6
    
    
    
    0.5
    
    
    
    (9.9
    )
    
    
    9.4Interest income
    
    
    
    
    
    
    (18.8
    )
    
    
    (1.1
    )
    
    
    9.9
    
    
    
    (10.0
    )Equity in earnings of subsidiaries
    
    
    (81.7
    )
    
    
    (27.9
    )
    
    
    
    
    
    
    109.6
    
    
    
    Earnings from continuing operations before income taxes and minority
interest
    
    
    61.2
    
    
    
    120.2
    
    
    
    35.7
    
    
    
    (109.6
    )
    
    
    107.5(Benefit) provision for income taxes
    
    
    (7.3
    )
    
    
    38.2
    
    
    
    5.9
    
    
    
    
    
    
    
    36.8Earnings from continuing operations before minority interest
    
    
    68.5
    
    
    
    82.0
    
    
    
    29.8
    
    
    
    (109.6
    )
    
    
    70.7Minority interest, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    (0.9
    )Net earnings from continuing operations
    
    
    68.5
    
    
    
    82.0
    
    
    
    28.9
    
    
    
    (109.6
    )
    
    
    69.8Loss from discontinued operations, net of income taxes and minority
interest
    
    
    
    
    
    
    (0.3
    )
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.3
    )Net earnings
    
    $
    68.5
    
    
    $
    81.7
    
    
    $
    27.9
    
    
    $
    (109.6
    )
    
    $
    68.5
 19




---



##### 



Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    166.4
    
    
    $
    161.0
    
    
    $
    
    
    
    $
    327.4Restricted cash
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Inventories
    
    
    
    
    
    
    294.3
    
    
    
    81.4
    
    
    
    (5.7
    )
    
    
    370.0Current deferred income taxes
    
    
    
    
    
    
    14.2
    
    
    
    2.6
    
    
    
    
    
    
    
    16.8Prepaid expenses
    
    
    0.6
    
    
    
    39.4
    
    
    
    6.5
    
    
    
    
    
    
    
    46.5Other current assets
    
    
    49.6
    
    
    
    259.7
    
    
    
    71.3
    
    
    
    (355.7
    )
    
    
    24.9Current assets of discontinued operations
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    0.8Total current assets
    
    
    50.2
    
    
    
    774.8
    
    
    
    324.8
    
    
    
    (361.4
    )
    
    
    788.4Property and Equipment:Land
    
    
    
    
    
    
    5.7
    
    
    
    
    
    
    
    
    
    
    
    5.7Property, buildings and equipment
    
    
    
    
    
    
    1,162.1
    
    
    
    160.9
    
    
    
    
    
    
    
    1,323.0Accumulated depreciation and amortization
    
    
    
    
    
    
    (767.9
    )
    
    
    (100.7
    )
    
    
    
    
    
    
    (868.6
    )Property and equipment, net
    
    
    
    
    
    
    399.9
    
    
    
    60.2
    
    
    
    
    
    
    
    460.1Intangible assets, net
    
    
    
    
    
    
    85.1
    
    
    
    9.6
    
    
    
    
    
    
    
    94.7Deferred income taxes
    
    
    
    
    
    
    41.2
    
    
    
    5.8
    
    
    
    
    
    
    
    47.0Goodwill
    
    
    
    
    
    
    34.7
    
    
    
    5.5
    
    
    
    
    
    
    
    40.2Other assets
    
    
    1,393.6
    
    
    
    536.8
    
    
    
    0.8
    
    
    
    (1,905.2
    )
    
    
    26.0Total Assets
    
    $
    1,443.8
    
    
    $
    1,872.5
    
    
    $
    406.7
    
    
    $
    (2,266.6
    )
    
    $
    1,456.4LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    
    
    
    $
    0.3Notes payable
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Accounts payable
    
    
    
    
    
    
    116.5
    
    
    
    68.8
    
    
    
    (21.0
    )
    
    
    164.3Accrued expenses
    
    
    202.6
    
    
    
    214.1
    
    
    
    61.6
    
    
    
    (340.4
    )
    
    
    137.9Current liabilities of discontinued
operations
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    1.5Total current liabilities
    
    
    202.6
    
    
    
    332.4
    
    
    
    132.4
    
    
    
    (361.4
    )
    
    
    306.0Long-term debt
    
    
    480.8
    
    
    
    
    
    
    
    11.1
    
    
    
    (291.0
    )
    
    
    200.9Other liabilities
    
    
    2.2
    
    
    
    157.7
    
    
    
    19.4
    
    
    
    
    
    
    
    179.3Minority interest
    
    
    
    
    
    
    
    
    
    
    11.5
    
    
    
    
    
    
    
    11.5Commitments and contingenciesTotal shareowners equity
    
    
    758.2
    
    
    
    1,382.4
    
    
    
    232.3
    
    
    
    (1,614.2
    )
    
    
    758.7Total Liabilities and Shareowners
Equity
    
    $
    1,443.8
    
    
    $
    1,872.5
    
    
    $
    406.7
    
    
    $
    (2,266.6
    )
    
    $
    1,456.4
 20




---



##### 



Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    332.1
    
    
    $
    69.8
    
    
    $
    
    
    
    $
    401.9Short-term investments
    
    
    
    
    
    
    38.3
    
    
    
    0.7
    
    
    
    
    
    
    
    39.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Inventories
    
    
    
    
    
    
    288.6
    
    
    
    66.8
    
    
    
    (4.7
    )
    
    
    350.7Current deferred income taxes
    
    
    
    
    
    
    14.6
    
    
    
    5.5
    
    
    
    
    
    
    
    20.1Prepaid expenses
    
    
    0.6
    
    
    
    37.5
    
    
    
    6.0
    
    
    
    
    
    
    
    44.1Other current assets
    
    
    35.4
    
    
    
    56.8
    
    
    
    54.4
    
    
    
    (126.1
    )
    
    
    20.5Current assets of discontinued operations
    
    
    
    
    
    
    1.1
    
    
    
    2.3
    
    
    
    
    
    
    
    3.4Total current assets
    
    
    36.0
    
    
    
    769.0
    
    
    
    207.5
    
    
    
    (130.8
    )
    
    
    881.7Property and Equipment:Land
    
    
    
    
    
    
    7.7
    
    
    
    
    
    
    
    
    
    
    
    7.7Property, buildings and equipment
    
    
    
    
    
    
    1,072.1
    
    
    
    144.8
    
    
    
    
    
    
    
    1,216.9Accumulated depreciation and amortization
    
    
    
    
    
    
    (747.7
    )
    
    
    (85.8
    )
    
    
    
    
    
    
    (833.5
    )Property and equipment, net
    
    
    
    
    
    
    332.1
    
    
    
    59.0
    
    
    
    
    
    
    
    391.1Intangible assets, net
    
    
    
    
    
    
    42.1
    
    
    
    (0.1
    )
    
    
    
    
    
    
    42.0Deferred income taxes
    
    
    
    
    
    
    23.6
    
    
    
    5.8
    
    
    
    
    
    
    
    29.4Goodwill
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,248.1
    
    
    
    438.4
    
    
    
    1.5
    
    
    
    (1,668.6
    )
    
    
    19.4Noncurrent assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    
    
    
    
    
    1.3Total Assets
    
    $
    1,284.1
    
    
    $
    1,611.1
    
    
    $
    275.0
    
    
    $
    (1,799.4
    )
    
    $
    1,370.8LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.4
    
    
    $
    0.5
    
    
    $
    
    
    
    $
    0.9Notes payable
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Accounts payable
    
    
    
    
    
    
    136.8
    
    
    
    75.0
    
    
    
    (57.2
    )
    
    
    154.6Accrued expenses
    
    
    102.3
    
    
    
    145.2
    
    
    
    6.8
    
    
    
    (73.6
    )
    
    
    180.7Current liabilities of discontinued operations
    
    
    
    
    
    
    2.4
    
    
    
    0.4
    
    
    
    
    
    
    
    2.8Total current liabilities
    
    
    102.3
    
    
    
    284.8
    
    
    
    84.7
    
    
    
    (130.8
    )
    
    
    341.0Long-term debt
    
    
    480.5
    
    
    
    0.3
    
    
    
    4.0
    
    
    
    (283.1
    )
    
    
    201.7Other liabilities
    
    
    1.9
    
    
    
    100.5
    
    
    
    15.5
    
    
    
    
    
    
    
    117.9Minority interest
    
    
    
    
    
    
    
    
    
    
    10.8
    
    
    
    
    
    
    
    10.8Commitments and contingenciesTotal shareowners equity
    
    
    699.4
    
    
    
    1,225.5
    
    
    
    160.0
    
    
    
    (1,385.5
    )
    
    
    699.4Total Liabilities and Shareowners Equity
    
    $
    1,284.1
    
    
    $
    1,611.1
    
    
    $
    275.0
    
    
    $
    (1,799.4
    )
    
    $
    1,370.8
 21




---



##### 



Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    239.4
    
    
    $
    132.0
    
    
    $
    
    
    
    $
    371.4Short-term investments
    
    
    
    
    
    
    90.0
    
    
    
    
    
    
    
    
    
    
    
    90.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Inventories
    
    
    
    
    
    
    282.8
    
    
    
    83.5
    
    
    
    (4.4
    )
    
    
    361.9Current deferred income taxes
    
    
    
    
    
    
    13.2
    
    
    
    2.4
    
    
    
    
    
    
    
    15.6Prepaid expenses
    
    
    0.6
    
    
    
    40.2
    
    
    
    5.7
    
    
    
    
    
    
    
    46.5Other current assets
    
    
    42.3
    
    
    
    15.3
    
    
    
    57.9
    
    
    
    (97.4
    )
    
    
    18.1Current assets of discontinued operations
    
    
    
    
    
    
    1.0
    
    
    
    0.1
    
    
    
    
    
    
    
    1.1Total current assets
    
    
    42.9
    
    
    
    681.9
    
    
    
    283.6
    
    
    
    (101.8
    )
    
    
    906.6Property and Equipment:Land
    
    
    
    
    
    
    6.6
    
    
    
    
    
    
    
    
    
    
    
    6.6Property, buildings and equipment
    
    
    
    
    
    
    1,096.7
    
    
    
    148.4
    
    
    
    
    
    
    
    1,245.1Accumulated depreciation and amortization
    
    
    
    
    
    
    (741.4
    )
    
    
    (89.1
    )
    
    
    
    
    
    
    (830.5
    )Property and equipment, net
    
    
    
    
    
    
    361.9
    
    
    
    59.3
    
    
    
    
    
    
    
    421.2Intangible assets, net
    
    
    
    
    
    
    39.6
    
    
    
    
    
    
    
    
    
    
    
    39.6Deferred income taxes
    
    
    
    
    
    
    31.3
    
    
    
    6.4
    
    
    
    
    
    
    
    37.7Goodwill
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,315.4
    
    
    
    460.2
    
    
    
    1.3
    
    
    
    (1,760.5
    )
    
    
    16.4Total Assets
    
    $
    1,358.3
    
    
    $
    1,580.8
    
    
    $
    350.6
    
    
    $
    (1,862.3
    )
    
    $
    1,427.4LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.4
    
    
    $
    
    
    
    $
    
    
    
    $
    0.4Notes payable
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Accounts payable
    
    
    
    
    
    
    146.6
    
    
    
    59.5
    
    
    
    (20.5
    )
    
    
    185.6Accrued expenses
    
    
    175.4
    
    
    
    32.3
    
    
    
    63.8
    
    
    
    (81.3
    )
    
    
    190.2Current liabilities of discontinued operations
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    2.1Total current liabilities
    
    
    175.4
    
    
    
    181.4
    
    
    
    125.3
    
    
    
    (101.8
    )
    
    
    380.3Long-term debt
    
    
    480.7
    
    
    
    0.1
    
    
    
    4.0
    
    
    
    (283.1
    )
    
    
    201.7Other liabilities
    
    
    2.1
    
    
    
    115.2
    
    
    
    15.3
    
    
    
    
    
    
    
    132.6Minority interest
    
    
    
    
    
    
    
    
    
    
    12.7
    
    
    
    
    
    
    
    12.7Commitments and contingenciesTotal shareowners equity
    
    
    700.1
    
    
    
    1,284.1
    
    
    
    193.3
    
    
    
    (1,477.4
    )
    
    
    700.1Total Liabilities and Shareowners Equity
    
    $
    1,358.3
    
    
    $
    1,580.8
    
    
    $
    350.6
    
    
    $
    (1,862.3
    )
    
    $
    1,427.4
 22




---



##### 



26 Weeks Ended August 4, 2007Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    63.8
    
    
    $
    77.5
    
    
    $
    33.3
    
    
    $
    (110.8
    )
    
    $
    63.8Earnings from discontinued operations, net of income taxes
and minority interest
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Adjustments for non-cash items included in net earnings:Loss on impairment of and disposal of assets
    
    
    
    
    
    
    4.1
    
    
    
    0.2
    
    
    
    
    
    
    
    4.3Depreciation and amortization
    
    
    0.6
    
    
    
    42.2
    
    
    
    7.5
    
    
    
    
    
    
    
    50.3Share-based compensation expense
    
    
    
    
    
    
    6.4
    
    
    
    (0.2
    )
    
    
    
    
    
    
    6.2Deferred income taxes
    
    
    
    
    
    
    (6.7
    )
    
    
    2.8
    
    
    
    
    
    
    
    (3.9
    )Minority interest, net of income taxes
    
    
    
    
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    2.2Income tax benefit from share-based compensation
    
    
    
    
    
    
    2.5
    
    
    
    
    
    
    
    
    
    
    
    2.5Excess tax benefit from share-based compensation
    
    
    
    
    
    
    (2.4
    )
    
    
    
    
    
    
    
    
    
    
    (2.4
    )Accretion of investments
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (0.6
    )Changes in working capital:Inventories
    
    
    
    
    
    
    (11.5
    )
    
    
    4.2
    
    
    
    1.3
    
    
    
    (6.0
    )Prepaid expenses and other current assets
    
    
    (7.3
    )
    
    
    (30.1
    )
    
    
    (13.5
    )
    
    
    49.4
    
    
    
    (1.5
    )Accounts payable
    
    
    
    
    
    
    (28.9
    )
    
    
    9.1
    
    
    
    (0.5
    )
    
    
    (20.3
    )Accrued expenses
    
    
    27.2
    
    
    
    (12.8
    )
    
    
    (2.9
    )
    
    
    (50.2
    )
    
    
    (38.7
    )Other assets and liabilities, net
    
    
    (71.4
    )
    
    
    (27.8
    )
    
    
    (7.2
    )
    
    
    113.2
    
    
    
    6.8Net cash (used in) provided by discontinued operations
    
    
    
    
    
    
    (0.3
    )
    
    
    0.1
    
    
    
    
    
    
    
    (0.2
    )Cash flow provided by operating activities
    
    
    12.9
    
    
    
    11.5
    
    
    
    35.6
    
    
    
    2.4
    
    
    
    62.4Investing Activities:Capital expenditures
    
    
    
    
    
    
    (86.3
    )
    
    
    (6.7
    )
    
    
    
    
    
    
    (93.0
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    1.6Acquisition of businesses, net of cash acquired
    
    
    
    
    
    
    (93.2
    )
    
    
    
    
    
    
    
    
    
    
    (93.2
    )Purchases of investments
    
    
    
    
    
    
    (6.1
    )
    
    
    
    
    
    
    
    
    
    
    (6.1
    )Sales and maturities of investments
    
    
    
    
    
    
    96.7
    
    
    
    
    
    
    
    
    
    
    
    96.7Cash flow used in investing activities
    
    
    
    
    
    
    (87.3
    )
    
    
    (6.7
    )
    
    
    
    
    
    
    (94.0
    )Financing Activities:Repayment of debt
    
    
    
    
    
    
    (3.2
    )
    
    
    (2.1
    )
    
    
    
    
    
    
    (5.3
    )Issuances of common stock
    
    
    7.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.8Purchases of common stock
    
    
    (20.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20.7
    )Excess tax benefit from share-based compensation
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    
    
    
    
    2.4Contributions by / distributions to parent
    
    
    
    
    
    
    
    
    
    
    2.4
    
    
    
    (2.4
    )
    
    
    Dividends to parent
    
    
    
    
    
    
    3.6
    
    
    
    (3.6
    )
    
    
    
    
    
    
    Distributions to minority owners
    
    
    
    
    
    
    
    
    
    
    (2.4
    )
    
    
    
    
    
    
    (2.4
    )Cash flow (used in) provided by financing activities
    
    
    (12.9
    )
    
    
    2.8
    
    
    
    (5.7
    )
    
    
    (2.4
    )
    
    
    (18.2
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    5.8
    
    
    
    
    
    
    
    5.8(Decrease)/increase in cash and cash equivalents
    
    
    
    
    
    
    (73.0
    )
    
    
    29.0
    
    
    
    
    
    
    
    (44.0
    )Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    239.4
    
    
    
    132.0
    
    
    
    
    
    
    
    371.4Cash and cash equivalents, end of quarter
    
    $
    
    
    
    $
    166.4
    
    
    $
    161.0
    
    
    $
    
    
    
    $
    327.4
 23




---



##### 



26 Weeks Ended July 29, 2006Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    68.5
    
    
    $
    81.7
    
    
    $
    27.9
    
    
    $
    (109.6
    )
    
    $
    68.5Loss from discontinued operations, net of income taxes
and minority interest
    
    
    
    
    
    
    0.3
    
    
    
    1.0
    
    
    
    
    
    
    
    1.3Adjustments for non-cash items included in net earnings:Loss on impairment of and disposal of assets
    
    
    
    
    
    
    4.2
    
    
    
    0.6
    
    
    
    
    
    
    
    4.8Depreciation and amortization
    
    
    
    
    
    
    38.7
    
    
    
    6.2
    
    
    
    
    
    
    
    44.9Amortization of deferred financing costs
    
    
    0.4
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.5Share-based compensation expense
    
    
    
    
    
    
    5.0
    
    
    
    0.5
    
    
    
    
    
    
    
    5.5Deferred income taxes
    
    
    
    
    
    
    (0.4
    )
    
    
    1.5
    
    
    
    
    
    
    
    1.1Minority interest, net of income taxes
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9Income tax benefit from share-based compensation
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Accretion of investments
    
    
    
    
    
    
    (1.6
    )
    
    
    
    
    
    
    
    
    
    
    (1.6
    )Changes in working capital:Inventories
    
    
    
    
    
    
    (17.3
    )
    
    
    (2.6
    )
    
    
    2.1
    
    
    
    (17.8
    )Prepaid expenses and other current assets
    
    
    (7.3
    )
    
    
    (14.8
    )
    
    
    (29.1
    )
    
    
    42.8
    
    
    
    (8.4
    )Accounts payable
    
    
    
    
    
    
    (23.6
    )
    
    
    9.0
    
    
    
    (0.4
    )
    
    
    (15.0
    )Accrued expenses
    
    
    50.8
    
    
    
    18.8
    
    
    
    (9.1
    )
    
    
    (44.5
    )
    
    
    16.0Other assets and liabilities, net
    
    
    (81.0
    )
    
    
    (31.8
    )
    
    
    1.8
    
    
    
    109.6
    
    
    
    (1.4
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (0.8
    )
    
    
    (2.7
    )
    
    
    
    
    
    
    (3.5
    )Cash flow provided by operating activities
    
    
    31.4
    
    
    
    58.9
    
    
    
    5.9
    
    
    
    
    
    
    
    96.2Investing Activities:Capital expenditures
    
    
    
    
    
    
    (49.3
    )
    
    
    (3.5
    )
    
    
    
    
    
    
    (52.8
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    3.2Intangible asset additions
    
    
    
    
    
    
    (15.1
    )
    
    
    
    
    
    
    
    
    
    
    (15.1
    )Purchases of investments
    
    
    
    
    
    
    (89.2
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    (89.9
    )Sales and maturities of investments
    
    
    
    
    
    
    111.0
    
    
    
    0.5
    
    
    
    
    
    
    
    111.5Investment in subsidiaries
    
    
    
    
    
    
    (1.5
    )
    
    
    
    
    
    
    1.5
    
    
    
    Cash flow used in investing activities
    
    
    
    
    
    
    (40.9
    )
    
    
    (3.7
    )
    
    
    1.5
    
    
    
    (43.1
    )Financing Activities:Repayment of debt
    
    
    
    
    
    
    (0.2
    )
    
    
    (1.9
    )
    
    
    
    
    
    
    (2.1
    )Payment of deferred financing costs
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Issuances of common stock
    
    
    25.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25.1Purchases of common stock
    
    
    (56.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56.5
    )Excess tax benefits from share-based compensation
    
    
    
    
    
    
    4.0
    
    
    
    
    
    
    
    
    
    
    
    4.0Distributions to minority owners
    
    
    
    
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.0
    )Contributions by / distributions to parent
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    (1.5
    )
    
    
    Net cash provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    1.2Cash flow (used in) provided by financing activities
    
    
    (31.4
    )
    
    
    3.6
    
    
    
    (0.2
    )
    
    
    (1.5
    )
    
    
    (29.5
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Increase in cash and cash equivalents
    
    
    
    
    
    
    21.6
    
    
    
    2.1
    
    
    
    
    
    
    
    23.7Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    310.5
    
    
    
    67.7
    
    
    
    
    
    
    
    378.2Cash and cash equivalents, end of quarter
    
    $
    
    
    
    $
    332.1
    
    
    $
    69.8
    
    
    $
    
    
    
    $
    401.9
 24




---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward Looking Statements
  Overview
 Abaete for Payless ® ® ®
   25




---



##### 



TM
   Second Quarter Results
   Acquisitions
  26




---



##### 




    
    Payless ShoeSource  focusing on democratizing fashion and design in footwear and
accessories through the Payless retail store chain;
    
    Stride Rite  centering on lifestyle-branded footwear and high quality childrens
footwear sold primarily through wholesaling arrangements and more than 300 Stride Rite
store locations; and,
    
    Collective Licensing International  specializing in brand management and global
licensing of its expanding portfolio of youth lifestyle and high quality fashion athletic
brands.
 New Accounting Standards
   Review Of Operations
  Net Earnings
  27




---



##### 



Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    65.6
    
    
    
    65.4
    
    
    
    64.3
    
    
    
    64.3Gross margin
    
    
    34.4
    
    
    
    34.6
    
    
    
    35.7
    
    
    
    35.7Selling, general and administrative expense
    
    
    28.7
    
    
    
    27.4
    
    
    
    28.8
    
    
    
    28.0Operating profit from continuing operations
    
    
    5.7
    
    
    
    7.2
    
    
    
    6.9
    
    
    
    7.7Interest expense (income), net
    
    
    0.1
    
    
    
    (0.1
    )
    
    
    0.1
    
    
    
    Earnings from continuing operations before
income taxes and minority interest
    
    
    5.6
    
    
    
    7.3
    
    
    
    6.8
    
    
    
    7.7Effective income tax rate*
    
    
    32.8
    
    
    
    34.0
    
    
    
    32.3
    
    
    
    34.2Earnings from continuing operations before
minority interest
    
    
    3.7
    
    
    
    4.8
    
    
    
    4.6
    
    
    
    5.0Minority interest, net of income taxes
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    Net earnings from continuing operations
    
    
    3.5
    
    
    
    4.7
    
    
    
    4.5
    
    
    
    5.0Earnings (loss) from discontinued operations,
net of income taxes and minority interest
    
    
    0.1
    
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )Net earnings
    
    
    3.6
    %
    
    
    4.6
    %
    
    
    4.5
    %
    
    
    4.9
    %
 
 *
    
    Percent of pre-tax earnings Net Sales
   Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006Net sales
    
    
    (1.0
    )%
    
    
    1.8
    %
    
    
    1.9
    %
    
    
    0.9
    %Same-store sales
    
    
    (1.4
    )
    
    
    2.2
    
    
    
    1.8
    
    
    
    1.3Average selling price per unit
    
    
    1.2
    
    
    
    12.9
    
    
    
    1.7
    
    
    
    13.0Unit volume
    
    
    (2.4
    )
    
    
    (9.7
    )
    
    
    0.3
    
    
    
    (10.8
    )Footwear average selling price per unit
    
    
    1.8
    
    
    
    12.3
    
    
    
    2.0
    
    
    
    11.7Footwear unit volume
    
    
    (2.8
    )
    
    
    (8.3
    )
    
    
    0.1
    
    
    
    (8.4
    )Non-footwear average selling price per unit
    
    
    (3.5
    )
    
    
    7.4
    
    
    
    (1.8
    )
    
    
    7.3Non-footwear unit volume
    
    
    (0.1
    )
    
    
    (17.1
    )
    
    
    1.2
    
    
    
    (20.5
    )
   Cost of Sales
  28




---



##### 



Selling, General and Administrative Expenses
     Interest (Income) Expense
  Second Quarter
    
    
    First Six Months(dollars in millions)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Interest expense
    
    $
    4.8
    
    
    $
    4.5
    
    
    $
    9.6
    
    
    $
    9.4Interest income
    
    
    (4.0
    )
    
    
    (5.2
    )
    
    
    (8.7
    )
    
    
    (10.0
    )Interest expense, net
    
    $
    0.8
    
    
    $
    (0.7
    )
    
    $
    0.9
    
    
    $
    (0.6
    )
  Income Taxes
  Minority Interest, Net of Income Taxes
  29




---



##### 



Discontinued Operations
  International Segment Operating Results
  Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006Revenues from external customers
    
    $
    107.4
    
    
    $
    101.5
    
    
    $
    198.7
    
    
    $
    182.9Operating profit from continuing operations
    
    
    12.9
    
    
    
    12.8
    
    
    
    18.6
    
    
    
    17.4
   Store Activity
  Second Quarter
    
    First Six Months2007
    
    2006
    
    2007
    
    2006Beginning of period
    
    
    4,564
    
    
    
    4,602
    
    
    
    4,572
    
    
    
    4,605Stores opened
    
    
    35
    
    
    
    38
    
    
    
    73
    
    
    
    90Stores closed
    
    
    (39
    )
    
    
    (56
    )
    
    
    (85
    )
    
    
    (111
    )Ending store count
    
    
    4,560
    
    
    
    4,584
    
    
    
    4,560
    
    
    
    4,584
  Liquidity and Capital Resources
    30




---



##### 



Cash Flow Provided by Operating Activities
  Cash Flow Used in Investing Activities
  Cash Flow Used in Financing Activities
  First Six Months2007
    
    
    2006(dollars in millions, shares in thousands)
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    SharesStock repurchase program
    
    $
    19.7
    
    
    
    595
    
    
    $
    56.0
    
    
    
    2,351Employee stock purchase, deferred compensation
and stock incentive plans
    
    
    1.0
    
    
    
    27
    
    
    
    0.5
    
    
    
    24$
    20.7
    
    
    
    622
    
    
    $
    56.5
    
    
    
    2,375
    31




---



##### 



Year
    
    Percentage2008
    
    
    104.125
    %2009
    
    
    102.750
    %2010
    
    
    101.375
    %2011 and thereafter
    
    
    100.000
    %
   Financial Commitments
  (dollars in millions)Years 1-5
    
    $
    2.5Years 6-10
    
    
    2.8Years 11-15
    
    
    3.0
    Financial Condition Ratios
  August 4,
    
    July 29,
    
    February 3,2007
    
    2006
    
    2007Current Ratio
    
    
    2.6
    
    
    
    2.6
    
    
    
    2.4Debt-capitalization Ratio*
    
    
    21.1
    %
    
    
    22.7
    %
    
    
    22.6
    %
 
 *
    
    Debt-to-capitalization has been computed by dividing total debt by
capitalization. Total debt is defined as long-term debt including current
maturities, notes payable and borrowings under the revolving line of
credit. Capitalization is defined as 32




---



##### 



total debt and shareowners equity.
The debt-to-capitalization ratio, including the present value of future
minimum rental payments under operating leases as debt and as
capitalization, was 62.8%, 62.9% and 63.5%, respectively, for the periods
referred to above. Critical Accounting Policies
      
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Currency Risk
   33




---



##### 



ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   th th
 34




---



##### 



ITEM 1A. RISK FACTORS
  Consumer Trends and Our Wholesale Business
  Retention of Major License
  35




---



##### 



Intellectual Property Risk
  There are risks associated with our acquisitions.
    
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities
  ApproximateDollar ValueTotal Number of
    
    of Shares thatShares Purchased
    
    May Yet BeTotal Number
    
    Average
    
    as Part of Publicly
    
    Purchased Underof Shares
    
    Price
    
    Announced Plans
    
    the Plans orPurchased(1)
    
    Paid per
    
    or Programs
    
    ProgramsPeriod
    
    (in thousands)
    
    Share
    
    (in thousands)
    
    (in millions)05/06/07  06/02/07
    
    
    14
    
    
    $
    35.91
    
    
    
    
    
    
    $
    274.106/03/07  07/07/07
    
    
    141
    
    
    
    32.35
    
    
    
    139
    
    
    
    269.607/08/07  08/04/07
    
    
    4
    
    
    
    30.23
    
    
    
    2
    
    
    
    269.6Total
    
    
    159
    
    
    $
    32.61
    
    
    
    141
    
    
    $
    269.6
 
 (1)
    
    Includes an aggregate of approximately eighteen thousand shares of our common
stock that was repurchased in connection with our employee stock purchase and
stock incentive plans.(2)
    
    In 2001, our Board of Directors approved the repurchase of our common
stock having a value of up to $250 million in the aggregate pursuant to the
Program. On March 2, 2007, our Board of Directors authorized an aggregate of
$250 million of share repurchases. The timing and amount of share repurchases,
if any, are limited by the terms of our Credit Agreement and Senior Subordinated
Notes. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  36




---



##### 



ITEM 6. EXHIBITS
 (a) Exhibits:
 Number
    
    Description31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Chief Executive
Officer and President*31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Senior Vice President,
Chief Financial Officer and Treasurer*32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief Executive
Officer and President*32.2
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Senior Vice President,
Chief Financial Officer and Treasurer*
 
 *
    
    Filed herewith 37




---



##### 



SIGNATURES
  COLLECTIVE BRANDS, INC.Date: September 12, 2007
    
    By:
    
    /s/ Matthew E. RubelMatthew E. RubelChief Executive Officer
and President(Principal Executive Officer)Date: September 12, 2007
    
    By:
    
    /s/ Ullrich E. PorzigUllrich E. PorzigSenior Vice President  ChiefFinancial Officer and Treasurer(Principal Financial and Accounting Officer)
 38