##### Table of Contents



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 May 1, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 1-14770
 
 COLLECTIVE BRANDS, INC.
  Delaware
State or other jurisdiction of 
incorporation of organization
    
    43-1813160
(I.R.S. Employer
Identification No.)3231 Southeast Sixth Avenue, Topeka, Kansas
(Address of principal executive offices)
    
    66607-2207
(Zip Code)
 (785) 233-5171
 o o
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



COLLECTIVE BRANDS, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED MAY 1, 2010
INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements. (unaudited)Condensed Consolidated Statements of Earnings for the 13 Weeks Ended May 1, 2010 and May 2, 2009.
    
    3Condensed Consolidated Balance Sheets as of May 1, 2010, May 2, 2009 and January 30, 2010.
    
    4Condensed Consolidated Statements of Equity and Comprehensive Income for the 13 Weeks Ended May 1, 2010
and May 2, 2009.
    
    5Condensed Consolidated Statements of Cash Flows for the 13 Weeks Ended May 1, 2010 and May 2, 2009.
    
    6Notes to Condensed Consolidated Financial Statements.
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
    29Item 4. Controls and Procedures.
    
    30PART II  OTHER INFORMATIONItem 1. Legal Proceedings.
    
    30Item 1A. Risk Factors.
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
    
    31Item 4. Reserved.
    
    31Item 6. Exhibits.
    
    31Signatures.Certification pursuant to Section 302 of the CEO, President and Chairman of the BoardCertification pursuant to Section 302 of the Division SVP, CFO and TreasurerCertification pursuant to Section 906 of the CEO, President and Chairman of the BoardCertification pursuant to Section 906 of the Division SVP, CFO and Treasurer
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
 13 Weeks EndedMay 1,
    
    
    May 2,2010
    
    
    2009Net sales
    
    $
    878.8
    
    
    $
    862.9Cost of sales
    
    
    542.1
    
    
    
    553.1Gross margin
    
    
    336.7
    
    
    
    309.8Selling, general and administrative expenses
    
    
    255.1
    
    
    
    249.3Operating profit from continuing operations
    
    
    81.6
    
    
    
    60.5Interest expense
    
    
    13.4
    
    
    
    16.4Interest income
    
    
    (0.2
    )
    
    
    (0.6
    )Loss on early extinguishment of debt
    
    
    0.8
    
    
    
    Net earnings from continuing operations before income taxes
    
    
    67.6
    
    
    
    44.7Provision for income taxes
    
    
    11.6
    
    
    
    6.4Net earnings from continuing operations
    
    
    56.0
    
    
    
    38.3Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (0.1
    )Net earnings
    
    
    56.0
    
    
    
    38.2Net earnings attributable to noncontrolling interests
    
    
    (1.8
    )
    
    
    (0.2
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    54.2
    
    
    $
    38.0Basic earnings per share attributable to Collective Brands, Inc.
common shareholders:Earnings from continuing operations
    
    $
    0.84
    
    
    $
    0.59Loss from discontinued operations
    
    
    
    
    
    
    Basic earnings per share attributable to Collective Brands, Inc.
common shareholders:
    
    $
    0.84
    
    
    $
    0.59Diluted earnings per share attributable to Collective Brands, Inc.
common shareholders:Earnings from continuing operations
    
    $
    0.83
    
    
    $
    0.59Loss from discontinued operations
    
    
    
    
    
    
    Diluted earnings per share attributable to Collective Brands, Inc.
common shareholders:
    
    $
    0.83
    
    
    $
    0.59Basic weighted average shares outstanding
    
    
    63.4
    
    
    
    63.1Diluted weighted average shares outstanding
    
    
    64.6
    
    
    
    63.1
  3




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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 May 1,
    
    
    May 2,
    
    
    January 30,2010
    
    
    2009
    
    
    2010ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    352.4
    
    
    $
    260.8
    
    
    $
    393.5Accounts receivable, net of
allowance for doubtful accounts
and returns reserve as of May
1, 2010, May 2, 2009 and
January 30, 2010 of $5.4, $4.8 and $5.5, respectively
    
    
    116.6
    
    
    
    99.4
    
    
    
    95.5Inventories
    
    
    467.4
    
    
    
    480.7
    
    
    
    442.9Current deferred income taxes
    
    
    38.3
    
    
    
    34.5
    
    
    
    42.1Prepaid expenses
    
    
    61.3
    
    
    
    57.0
    
    
    
    48.9Other current assets
    
    
    19.8
    
    
    
    20.3
    
    
    
    21.7Current assets of discontinued
operations
    
    
    
    
    
    
    0.8
    
    
    
    0.5Total current assets
    
    
    1,055.8
    
    
    
    953.5
    
    
    
    1,045.1Property and Equipment:Land
    
    
    6.9
    
    
    
    8.6
    
    
    
    7.0Property, buildings and equipment
    
    
    1,421.0
    
    
    
    1,476.6
    
    
    
    1,403.1Accumulated depreciation and
amortization
    
    
    (975.6
    )
    
    
    (971.4
    )
    
    
    (945.9
    )Property and equipment, net
    
    
    452.3
    
    
    
    513.8
    
    
    
    464.2Intangible assets, net
    
    
    441.2
    
    
    
    441.0
    
    
    
    445.5Goodwill
    
    
    279.8
    
    
    
    281.6
    
    
    
    279.8Deferred income taxes
    
    
    7.2
    
    
    
    5.0
    
    
    
    6.5Other assets
    
    
    43.9
    
    
    
    41.5
    
    
    
    43.2Total Assets
    
    $
    2,280.2
    
    
    $
    2,236.4
    
    
    $
    2,284.3LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    6.1
    
    
    $
    7.1
    
    
    $
    6.9Accounts payable
    
    
    225.3
    
    
    
    144.7
    
    
    
    195.9Accrued expenses
    
    
    161.0
    
    
    
    190.1
    
    
    
    181.8Current liabilities of discontinued
operations
    
    
    
    
    
    
    1.9
    
    
    
    1.3Total current liabilities
    
    
    392.4
    
    
    
    343.8
    
    
    
    385.9Long-term debt
    
    
    763.6
    
    
    
    885.9
    
    
    
    842.4Deferred income taxes
    
    
    65.2
    
    
    
    52.4
    
    
    
    65.5Other liabilities
    
    
    226.2
    
    
    
    262.0
    
    
    
    226.3Noncurrent
liabilities of discontinued operations
    
    
    
    
    
    
    0.3
    
    
    
    0.3Commitments and contingencies (Note 11)Equity:Collective Brands, Inc.
shareowners equity
    
    
    802.9
    
    
    
    667.0
    
    
    
    735.2Noncontrolling interests
    
    
    29.9
    
    
    
    25.0
    
    
    
    28.7Total equity
    
    
    832.8
    
    
    
    692.0
    
    
    
    763.9Total Liabilities and Equity
    
    $
    2,280.2
    
    
    $
    2,236.4
    
    
    $
    2,284.3
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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
 AND COMPREHENSIVE INCOME
 (UNAUDITED)
  Collective Brands, Inc. ShareownersOutstanding
    
    
    Additional
    
    
    
    
    
    
    Accumulated Other
    
    
    Non-Common
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    controlling
    
    
    
    
    
    
    ComprehensiveStock
    
    
    Capital

    
    Earnings

    
    Loss

    
    Interests

    
    Total

    
    IncomeBalance at January 31, 2009
    
    $
    0.7
    
    
    $
    17.8
    
    
    $
    639.4
    
    
    $
    (35.6
    )
    
    $
    23.7
    
    
    $
    646.0Net earnings
    
    
    
    
    
    
    
    
    
    
    38.0
    
    
    
    
    
    
    
    0.2
    
    
    
    38.2
    
    
    $
    38.2Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    (0.8
    )
    
    
    0.8
    
    
    
    0.8Net change in fair value of derivative,
net of taxes of $0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9
    
    
    
    0.9Changes in unrecognized amounts of
pension benefits, net of taxes of $0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    0.5
    
    
    
    0.5Issuances of common stock under
stock plans
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Purchases of common stock
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Amortization of unearned nonvested shares
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2Stock option expense
    
    
    
    
    
    
    2.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.8Contributions from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.7
    
    
    
    2.7Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.8
    )
    
    
    (0.8
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40.4Comprehensive loss attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Comprehensive income attributable to
Collective Brands, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    41.0Balance at May 2, 2009
    
    $
    0.7
    
    
    $
    21.5
    
    
    $
    677.4
    
    
    $
    (32.6
    )
    
    $
    25.0
    
    
    $
    692.0Balance at January 30, 2010
    
    $
    0.7
    
    
    $
    34.7
    
    
    $
    722.1
    
    
    $
    (22.3
    )
    
    $
    28.7
    
    
    $
    763.9Net earnings
    
    
    
    
    
    
    
    
    
    
    54.2
    
    
    
    
    
    
    
    1.8
    
    
    
    56.0
    
    
    $
    56.0Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.3
    
    
    
    0.7
    
    
    
    4.0
    
    
    
    4.0Net change in fair value of derivatives,
net of taxes of $1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    1.8
    
    
    
    1.8Changes in unrecognized amounts of
pension benefits, net of taxes of $0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    0.7
    
    
    
    0.7Issuances of common stock under
stock plans
    
    
    
    
    
    
    7.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.8Purchases of common stock
    
    
    
    
    
    
    (4.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.5
    )Amortization of unearned nonvested shares
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6Stock option expense
    
    
    
    
    
    
    2.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.8Contributions from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    0.7Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.0
    )
    
    
    (2.0
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62.5Comprehensive income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.5
    )Comprehensive income attributable to
Collective Brands, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    60.0Balance at May 1, 2010
    
    $
    0.7
    
    
    $
    42.4
    
    
    $
    776.3
    
    
    $
    (16.5
    )
    
    $
    29.9
    
    
    $
    832.8
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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  13 Weeks EndedMay 1,
    
    
    May 2,2010
    
    
    2009Operating Activities:Net earnings
    
    $
    56.0
    
    
    $
    38.2Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    0.1Adjustments for non-cash items included in net earnings:Loss on disposal of assets
    
    
    1.0
    
    
    
    0.8Depreciation and amortization
    
    
    34.3
    
    
    
    34.8Provision for losses on accounts receivable
    
    
    0.6
    
    
    
    0.2Share-based compensation expense
    
    
    4.8
    
    
    
    4.4Deferred income taxes
    
    
    1.9
    
    
    
    (0.5
    )Loss on extinguishment of debt
    
    
    0.8
    
    
    
    Other, net
    
    
    
    
    
    
    (0.1
    )Changes in working capitalAccounts receivable
    
    
    (21.6
    )
    
    
    (1.4
    )Inventories
    
    
    (23.0
    )
    
    
    11.9Prepaid expenses and other current assets
    
    
    (11.4
    )
    
    
    7.2Accounts payable
    
    
    32.1
    
    
    
    (27.6
    )Accrued expenses
    
    
    (19.5
    )
    
    
    (9.3
    )Changes in other assets and liabilities, net
    
    
    (2.8
    )
    
    
    (1.0
    )Contributions to pension plans
    
    
    
    
    
    
    (0.7
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    0.4Cash flow provided by operating activities
    
    
    53.2
    
    
    
    57.4Investing Activities:Capital expenditures
    
    
    (19.8
    )
    
    
    (26.7
    )Cash flow used in investing activities
    
    
    (19.8
    )
    
    
    (26.7
    )Financing Activities:Repayment of debt
    
    
    (79.7
    )
    
    
    (20.2
    )Issuances of common stock
    
    
    7.8
    
    
    
    0.2Purchases of common stock
    
    
    (4.5
    )
    
    
    (0.5
    )Contributions by noncontrolling interests
    
    
    0.7
    
    
    
    2.7Distribution to noncontrolling interests
    
    
    (2.0
    )
    
    
    (0.8
    )Cash flow used in financing activities
    
    
    (77.7
    )
    
    
    (18.6
    )Effect of exchange rate changes on cash
    
    
    3.2
    
    
    
    (0.6
    )(Decrease) increase in cash and cash equivalents
    
    
    (41.1
    )
    
    
    11.5Cash and cash equivalents, beginning of year
    
    
    393.5
    
    
    
    249.3Cash and cash equivalents, end of quarter
    
    $
    352.4
    
    
    $
    260.8Supplemental cash flow information:Interest paid
    
    $
    16.5
    
    
    $
    19.6Income taxes paid
    
    $
    4.6
    
    
    $
    0.1Non-cash investing and financing activities:Accrued capital expenditures
    
    $
    10.0
    
    
    $
    12.3Accrued intangible asset expenditures
    
    $
    0.4
    
    
    $
    
  6




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##### Table of Contents



COLLECTIVE BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Note 1
 Interim Results
   Note 2
 Intangible Assets and Goodwill
  May 1,
    
    
    May 2,
    
    
    January 30,(dollars in millions)
    
    2010
    
    
    2009
    
    
    2010Intangible assets subject to amortization:Favorable lease rights:Gross carrying amount
    
    $
    30.4
    
    
    $
    32.6
    
    
    $
    30.4Less: accumulated amortization
    
    
    (23.3
    )
    
    
    (22.4
    )
    
    
    (22.2
    )Carrying amount, end of period
    
    
    7.1
    
    
    
    10.2
    
    
    
    8.2Customer relationships:Gross carrying amount
    
    
    76.3
    
    
    
    76.3
    
    
    
    76.3Less: accumulated amortization
    
    
    (39.3
    )
    
    
    (25.6
    )
    
    
    (36.5
    )Carrying amount, end of period
    
    
    37.0
    
    
    
    50.7
    
    
    
    39.8Trademarks and other intangible assets:Gross carrying amount
    
    
    38.9
    
    
    
    19.3
    
    
    
    38.5Less: accumulated amortization
    
    
    (7.3
    )
    
    
    (4.7
    )
    
    
    (6.5
    )Carrying amount, end of period
    
    
    31.6
    
    
    
    14.6
    
    
    
    32.0Total carrying amount of intangible assets
subject to amortization
    
    
    75.7
    
    
    
    75.5
    
    
    
    80.0Indefinite-lived trademarks
    
    
    365.5
    
    
    
    365.5
    
    
    
    365.5Total intangible assets
    
    $
    441.2
    
    
    $
    441.0
    
    
    $
    445.5
  13 Weeks EndedMay 1,
    
    
    May 2,(dollars in millions)
    
    2010
    
    
    2009Amortization expense on intangible assets
    
    $
    4.7
    
    
    $
    4.7
 7




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##### Table of Contents



Year
    

    AmountRemainder of 2010
    
    $
    12.52011
    
    
    13.52012
    
    
    11.12013
    
    
    9.62014
    
    
    8.2
  May 1,
    
    
    May 2,
    
    
    January 30,(dollars in millions)
    
    2010
    
    
    2009
    
    
    2010Stride Rite Wholesale
    
    $
    239.6
    
    
    $
    241.4
    
    
    $
    239.6Payless Domestic
    
    
    40.2
    
    
    
    40.2
    
    
    
    40.2Total
    
    $
    279.8
    
    
    $
    281.6
    
    
    $
    279.8
 Note 3
 Long-Term Debt
  May 1,
    
    
    May 2,
    
    
    January 30,(dollars in millions)
    
    2010
    
    
    2009
    
    
    2010Term Loan Facility (1)
    
    $
    593.7
    
    
    $
    696.6
    
    
    $
    673.4Senior subordinated notes (2)
    
    
    173.8
    
    
    
    195.3
    
    
    
    173.7Revolving loan facility (3)
    
    
    
    
    
    
    
    
    
    
    Capital-lease obligations
    
    
    1.0
    
    
    
    1.1
    
    
    
    1.0Other long-term debt
    
    
    1.2
    
    
    
    
    
    
    
    1.2Total debt
    
    
    769.7
    
    
    
    893.0
    
    
    
    849.3Less: current maturities of long-term debt
    
    
    6.1
    
    
    
    7.1
    
    
    
    6.9Long-term debt
    
    $
    763.6
    
    
    $
    885.9
    
    
    $
    842.4
 
 (1)
    
    As of May 1, 2010, May 2, 2009 and January 30, 2010, the
fair value of the Companys Term Loan was $587.0 million,
$536.4 million and $653.2 million, respectively, based on
market conditions and perceived risks as of those dates.(2)
    
    As of May 1, 2010, May 2, 2009 and January 30,
2010, the fair value of the Companys senior subordinated
notes was $179.8 million, $163.3 million and $178.5 million,
respectively, based on trading activity as of those dates.(3)
    
    As of May 1, 2010, the Companys borrowing base
on its revolving loan facility was $264.9 million less $29.9
million in outstanding letters of credit, or $235.0 million.
The variable interest rate, including the applicable variable
margin at May 1, 2010, was 1.22%.   Note 4
 Derivatives
    8




---



##### Table of Contents



Fair ValueLocation on Condensed
    
    May 1,
    
    May 2,
    
    January 30,(dollars in millions)
    
    Consolidated Balance Sheet
    
    2010
    
    2009
    
    2010Interest rate contract
    
    Other liabilities
    
    $
    4.3
    
    
    $
    20.1
    
    
    $
    5.4Interest rate contract
    
    Accrued expenses
    
    $
    7.7
    
    
    $
    
    
    
    $
    10.0Foreign currency contracts
    
    Accrued expenses
    
    $
    0.4
    
    
    $
    
    
    
    $
    0.1Foreign currency contracts
    
    Other current assets
    
    $
    
    
    
    $
    
    
    
    $
    0.1
  Loss Recognized in OCI on
    
    
    
    
    
    Loss Reclassified from AOCI intoDerivative
    
    
    
    
    
    Earnings13 Weeks Ended
    
    
    
    
    
    13 Weeks EndedLocation on CondensedMay 1,
    
    May 2,
    
    Consolidated Statement of
    
    May 1,
    
    May 2,(dollars in millions)
    
    2010
    
    2009
    
    Earnings
    
    2010
    
    2009Interest rate contract
    
    $
    (0.2
    )
    
    $
    (1.3
    )
    
    Interest expense
    
    $
    (2.2
    )
    
    $
    (2.2
    )Foreign currency contracts
    
    $
    (0.3
    )
    
    $
    
    
    
    Cost of sales
    
    $
    (0.1
    )
    
    $
    
  Note 5
 Fair Value Measurements
     9




---



##### Table of Contents



Estimated Fair Value MeasurementsSignificant
    
    SignificantQuoted Prices in
    
    Observable
    
    UnobservableActive Markets
    
    Other Inputs
    
    Inputs(dollars in millions)
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    Total Fair ValueAs of May 1, 2010:Financial Assets:Money market funds
    
    $
    244.4
    
    
    $
    
    
    
    $
    
    
    
    $
    244.4Financial Liabilities:Interest rate contract(1)
    
    $
    
    
    
    $
    12.0
    
    
    $
    
    
    
    $
    12.0Foreign currency contracts(2)
    
    $
    
    
    
    $
    0.4
    
    
    $
    
    
    
    $
    0.4As of May 2, 2009:Financial Assets:Money market funds
    
    $
    183.1
    
    
    $
    
    
    
    $
    
    
    
    $
    183.1Financial Liabilities:Interest rate contract(1)
    
    $
    
    
    
    $
    20.1
    
    
    $
    
    
    
    $
    20.1As of January 30, 2010:Financial Assets:Money market funds
    
    $
    301.3
    
    
    $
    
    
    
    $
    
    
    
    $
    301.3Foreign currency contracts(2)
    
    $
    
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.1Financial Liabilities:Interest rate contract(1)
    
    $
    
    
    
    $
    15.4
    
    
    $
    
    
    
    $
    15.4Foreign currency contracts(2)
    
    $
    
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.1
 
 (1)
    
    The fair value of the interest rate contract is determined using a
mark-to-market valuation technique based on an observable interest rate
yield curve and adjusting for credit risk.(2)
    
    The fair value of the foreign currency contracts are determined
using a mark-to-market technique based on observable foreign currency
exchange rates and adjusting for credit risk. Note 6
 Pension Plans
  Payless Plan
  13 Weeks EndedMay 1,
    
    
    May 2,(dollars in millions)
    
    2010
    
    
    2009Components of pension expense:Service cost
    
    $
    0.2
    
    
    $
    0.2Interest cost
    
    
    0.5
    
    
    
    0.6Amortization of prior service cost
    
    
    0.4
    
    
    
    0.4Amortization of actuarial loss
    
    
    0.3
    
    
    
    0.1Total
    
    $
    1.4
    
    
    $
    1.3
 10




---



##### Table of Contents



PLG Plan
  13 Weeks EndedMay 1,
    
    
    May 2,(dollars in millions)
    
    2010
    
    
    2009Components of pension expense:Interest cost
    
    $
    1.1
    
    
    $
    1.1Expected return on net assets
    
    
    (1.2
    )
    
    
    (0.9
    )Amortization of actuarial loss
    
    
    0.3
    
    
    
    0.4Total
    
    $
    0.2
    
    
    $
    0.6
 Note 7
 Share-Based Compensation
  11




---



##### Table of Contents



13 Weeks EndedMay 1,
    
    
    May 2,2010
    
    
    2009Stock-settled SARs(1):Vest in installments over 3 years
    
    
    720,125
    
    
    
    1,468,959Cliff vest after 3 years
    
    
    12,200
    
    
    
    462,200Nonvested shares and share units:Vest in installments over 3 years
    
    
    313,363
    
    
    
    335,959Vest in installments over 2 years
    
    
    77,231
    
    
    
    Performance grant  vest in installments over 3 years(2)
    
    
    77,227
    
    
    
    Phantom nonvested shares  vest in installments over 3 years
    
    
    18,033
    
    
    
    13,743Cash-settled SARs:Vest in installments over 3 years
    
    
    19,497
    
    
    
    43,800Cliff vest after 3 years
    
    
    
    
    
    
    3,500
 
 (1)
    
    All of the stock-settled SARs issued by the Company in 2010 contain
an appreciation cap, which limits the appreciation for which shares of
common stock will be granted to 125% of the fair market value of the
underlying common stock on the grant date of the SAR, meaning that the
maximum shares issuable under a SAR is 0.56 shares per SAR.
Therefore, the maximum number of shares that can be issued under the
2010 grants are 400,069 shares that vest in installments over 3 years
and 6,778 shares that cliff vest after 3 years. Prior to 2010, the
appreciation cap was 200%, meaning that the maximum shares issuable
under a SAR was 0.67 shares per SAR. Therefore, the maximum number of
shares that can be issued under the 2009 grants are 979,306 shares
that vest in installments over 3 years and 308,133 shares that cliff
vest after 3 years.(2)
    
    Certain nonvested shares are subject to a performance
condition for vesting. The performance grant vests only if the
performance condition is met. As of May 1, 2010, the Company has
assessed the likelihood that the performance condition will be met and
has recorded the related expense based on the estimated outcome.   13 Weeks EndedMay 1,
    
    
    May 2,(dollars in millions)
    
    2010
    
    
    2009Cost of sales
    
    $
    1.2
    
    
    $
    1.1Selling, general and administrative expenses
    
    
    3.6
    
    
    
    3.3Share-based compensation expense before income taxes
    
    
    4.8
    
    
    
    4.4Tax benefit
    
    
    (1.8
    )
    
    
    (1.7
    )Share-based compensation expense after income taxes
    
    $
    3.0
    
    
    $
    2.7
  Note 8
 Income Taxes
  12




---



##### Table of Contents



Note 9
 Earnings Per Share
  13 Weeks EndedMay 1,
    
    
    May 2,(dollars in millions, except per share amounts; shares in thousands)
    
    2010
    
    
    2009Net earnings attributable to Collective Brands, Inc. from continuing operations
    
    $
    54.2
    
    
    $
    38.1Less: net earnings allocated to participating securities(1)
    
    
    0.8
    
    
    
    0.5Net earnings available to common shareholders from continuing operations
    
    $
    53.4
    
    
    $
    37.6Weighted average shares outstanding  basic
    
    
    63,421
    
    
    
    63,054Net effect of dilutive stock options
    
    
    395
    
    
    
    Net effect of dilutive SARs
    
    
    806
    
    
    
    Weighted average shares outstanding  diluted
    
    
    64,622
    
    
    
    63,054Basic earnings per share attributable to common shareholders from continuing operations
    
    $
    0.84
    
    
    $
    0.59Diluted earnings per share attributable to common shareholders from continuing operations
    
    $
    0.83
    
    
    $
    0.59
 
 (1)
    
    Net earnings allocated to participating securities is calculated based upon a
weighted average percentage of participating securities in relation to total shares outstanding.  Note
10  Segment Reporting
  (i)
    
    The Payless Domestic reporting segment is comprised primarily of domestic retail stores
under the Payless ShoeSource name, the Companys sourcing unit and Collective Licensing.(ii)
    
    The Payless International reporting segment is comprised of international retail stores
under the Payless ShoeSource name in Canada, the South American Region, the Central
American Region, Puerto Rico, and the U.S. Virgin Islands, as well as franchising
arrangements under the Payless ShoeSource name.(iii)
    
    The PLG Wholesale reporting segment consists of PLGs global wholesale operations.(iv)
    
    The PLG Retail reporting segment consists of PLGs owned Stride Rite Childrens stores,
Stride Rite Outlet stores and Sperry Top-Sider retail stores.
  13




---



##### Table of Contents



13 Weeks EndedMay 1,
    
    
    May 2,(dollars in millions)
    
    2010
    
    
    2009Reporting segment revenues from external customers:Payless Domestic
    
    $
    546.6
    
    
    $
    570.8Payless International
    
    
    100.0
    
    
    
    84.8PLG Wholesale
    
    
    173.4
    
    
    
    148.8PLG Retail
    
    
    58.8
    
    
    
    58.5Total revenues from external customers
    
    $
    878.8
    
    
    $
    862.9Reporting segment operating profit from continuing operations:Payless Domestic
    
    $
    49.3
    
    
    $
    42.2Payless International
    
    
    7.1
    
    
    
    1.8PLG Wholesale
    
    
    23.3
    
    
    
    14.3PLG Retail
    
    
    1.9
    
    
    
    2.2Total operating profit from continuing operations
    
    $
    81.6
    
    
    $
    60.5
 May 1,
    
    
    May 2,
    
    
    January 30,(dollars in millions)
    
    2010
    
    
    2009
    
    
    2010Reporting segment total assets:Payless Domestic
    
    $
    1,138.2
    
    
    $
    1,125.1
    
    
    $
    1,151.1Payless International
    
    
    215.3
    
    
    
    175.9
    
    
    
    201.5PLG Wholesale
    
    
    860.4
    
    
    
    854.0
    
    
    
    866.3PLG Retail
    
    
    66.3
    
    
    
    81.4
    
    
    
    65.4Reporting segment total assets
    
    $
    2,280.2
    
    
    $
    2,236.4
    
    
    $
    2,284.3
 Note
11  Commitments and Contingencies
  American Eagle Outfitters and Retail Royalty Co. v. Payless ShoeSource, Inc.
  14




---



##### Table of Contents



Note 12  Impact of Recently Issued Accounting Standards
   Note 13  Related Party Transactions
  Note 14  Subsidiary Guarantors of Senior Notes  Condensed Consolidating Financial
Information
     15




---



##### Table of Contents



13 Weeks Ended May 1, 2010Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    777.9
    
    
    $
    363.1
    
    
    $
    (262.2
    )
    
    $
    878.8Cost of sales
    
    
    
    
    
    
    501.8
    
    
    
    281.2
    
    
    
    (240.9
    )
    
    
    542.1Gross margin
    
    
    
    
    
    
    276.1
    
    
    
    81.9
    
    
    
    (21.3
    )
    
    
    336.7Selling, general and administrative expenses
    
    
    0.9
    
    
    
    217.9
    
    
    
    57.6
    
    
    
    (21.3
    )
    
    
    255.1Operating (loss) profit from continuing operations
    
    
    (0.9
    )
    
    
    58.2
    
    
    
    24.3
    
    
    
    
    
    
    
    81.6Interest expense
    
    
    7.0
    
    
    
    9.6
    
    
    
    
    
    
    
    (3.2
    )
    
    
    13.4Interest income
    
    
    
    
    
    
    (3.4
    )
    
    
    
    
    
    
    3.2
    
    
    
    (0.2
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    0.8Equity in earnings of subsidiaries
    
    
    (59.3
    )
    
    
    (22.7
    )
    
    
    
    
    
    
    82.0
    
    
    
    Earnings from continuing operations before income taxes
    
    
    51.4
    
    
    
    73.9
    
    
    
    24.3
    
    
    
    (82.0
    )
    
    
    67.6(Benefit) provision for income taxes
    
    
    (2.8
    )
    
    
    14.6
    
    
    
    (0.2
    )
    
    
    
    
    
    
    11.6Net earnings
    
    
    54.2
    
    
    
    59.3
    
    
    
    24.5
    
    
    
    (82.0
    )
    
    
    56.0Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (1.8
    )
    
    
    
    
    
    
    (1.8
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    54.2
    
    
    $
    59.3
    
    
    $
    22.7
    
    
    $
    (82.0
    )
    
    $
    54.2
 13 Weeks Ended May 2, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    788.6
    
    
    $
    278.2
    
    
    $
    (203.9
    )
    
    $
    862.9Cost of sales
    
    
    
    
    
    
    529.5
    
    
    
    206.1
    
    
    
    (182.5
    )
    
    
    553.1Gross margin
    
    
    
    
    
    
    259.1
    
    
    
    72.1
    
    
    
    (21.4
    )
    
    
    309.8Selling, general and administrative expenses
    
    
    0.5
    
    
    
    214.7
    
    
    
    55.5
    
    
    
    (21.4
    )
    
    
    249.3Operating (loss) profit from continuing operations
    
    
    (0.5
    )
    
    
    44.4
    
    
    
    16.6
    
    
    
    
    
    
    
    60.5Interest expense
    
    
    6.4
    
    
    
    11.9
    
    
    
    0.1
    
    
    
    (2.0
    )
    
    
    16.4Interest income
    
    
    
    
    
    
    (2.6
    )
    
    
    
    
    
    
    2.0
    
    
    
    (0.6
    )Equity in earnings of subsidiaries
    
    
    (42.4
    )
    
    
    (15.8
    )
    
    
    
    
    
    
    58.2
    
    
    
    Earnings from continuing operations before income taxes
    
    
    35.5
    
    
    
    50.9
    
    
    
    16.5
    
    
    
    (58.2
    )
    
    
    44.7(Benefit) provision for income taxes
    
    
    (2.5
    )
    
    
    8.4
    
    
    
    0.5
    
    
    
    
    
    
    
    6.4Net earnings from continuing operations
    
    
    38.0
    
    
    
    42.5
    
    
    
    16.0
    
    
    
    (58.2
    )
    
    
    38.3Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Net earnings
    
    
    38.0
    
    
    
    42.4
    
    
    
    16.0
    
    
    
    (58.2
    )
    
    
    38.2Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.2
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    38.0
    
    
    $
    42.4
    
    
    $
    15.8
    
    
    $
    (58.2
    )
    
    $
    38.0
 16




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##### Table of Contents



As of May 1, 2010Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    196.5
    
    
    $
    155.9
    
    
    $
    
    
    
    $
    352.4Accounts receivable, net
    
    
    
    
    
    
    102.5
    
    
    
    23.1
    
    
    
    (9.0
    )
    
    
    116.6Inventories
    
    
    
    
    
    
    376.7
    
    
    
    99.9
    
    
    
    (9.2
    )
    
    
    467.4Current deferred income taxes
    
    
    
    
    
    
    31.0
    
    
    
    7.3
    
    
    
    
    
    
    
    38.3Prepaid expenses
    
    
    13.6
    
    
    
    35.2
    
    
    
    12.5
    
    
    
    
    
    
    
    61.3Other current assets
    
    
    
    
    
    
    252.8
    
    
    
    205.7
    
    
    
    (438.7
    )
    
    
    19.8Total current assets
    
    
    13.6
    
    
    
    994.7
    
    
    
    504.4
    
    
    
    (456.9
    )
    
    
    1,055.8Property and Equipment:Land
    
    
    
    
    
    
    6.9
    
    
    
    
    
    
    
    
    
    
    
    6.9Property, buildings and equipment
    
    
    
    
    
    
    1,218.4
    
    
    
    202.6
    
    
    
    
    
    
    
    1,421.0Accumulated depreciation and amortization
    
    
    
    
    
    
    (843.2
    )
    
    
    (132.4
    )
    
    
    
    
    
    
    (975.6
    )Property and equipment, net
    
    
    
    
    
    
    382.1
    
    
    
    70.2
    
    
    
    
    
    
    
    452.3Intangible assets, net
    
    
    
    
    
    
    406.1
    
    
    
    35.1
    
    
    
    
    
    
    
    441.2Goodwill
    
    
    
    
    
    
    141.8
    
    
    
    138.0
    
    
    
    
    
    
    
    279.8Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    7.2
    
    
    
    
    
    
    
    7.2Other assets
    
    
    1,436.5
    
    
    
    995.9
    
    
    
    2.8
    
    
    
    (2,391.3
    )
    
    
    43.9Total Assets
    
    $
    1,450.1
    
    
    $
    2,920.6
    
    
    $
    757.7
    
    
    $
    (2,848.2
    )
    
    $
    2,280.2LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    6.1
    
    
    $
    
    
    
    $
    
    
    
    $
    6.1Accounts payable
    
    
    
    
    
    
    156.0
    
    
    
    164.3
    
    
    
    (95.0
    )
    
    
    225.3Accrued expenses
    
    
    7.5
    
    
    
    470.9
    
    
    
    40.2
    
    
    
    (357.6
    )
    
    
    161.0Current liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total current liabilities
    
    
    7.5
    
    
    
    633.0
    
    
    
    204.5
    
    
    
    (452.6
    )
    
    
    392.4Long-term debt
    
    
    636.7
    
    
    
    587.6
    
    
    
    88.3
    
    
    
    (549.0
    )
    
    
    763.6Deferred income taxes
    
    
    
    
    
    
    63.3
    
    
    
    1.9
    
    
    
    
    
    
    
    65.2Other liabilities
    
    
    3.0
    
    
    
    207.0
    
    
    
    16.7
    
    
    
    (0.5
    )
    
    
    226.2Commitments and contingenciesEquity:Collective Brands, Inc. shareowners equity
    
    
    802.9
    
    
    
    1,429.7
    
    
    
    416.4
    
    
    
    (1,846.1
    )
    
    
    802.9Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    29.9
    
    
    
    
    
    
    
    29.9Total equity
    
    
    802.9
    
    
    
    1,429.7
    
    
    
    446.3
    
    
    
    (1,846.1
    )
    
    
    832.8Total Liabilities and Equity
    
    $
    1,450.1
    
    
    $
    2,920.6
    
    
    $
    757.7
    
    
    $
    (2,848.2
    )
    
    $
    2,280.2
 17




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##### Table of Contents



As of May 2, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    179.6
    
    
    $
    81.2
    
    
    $
    
    
    
    $
    260.8Accounts receivable, net
    
    
    
    
    
    
    87.6
    
    
    
    19.0
    
    
    
    (7.2
    )
    
    
    99.4Inventories
    
    
    
    
    
    
    411.8
    
    
    
    78.0
    
    
    
    (9.1
    )
    
    
    480.7Current deferred income taxes
    
    
    
    
    
    
    30.3
    
    
    
    4.2
    
    
    
    
    
    
    
    34.5Prepaid expenses
    
    
    3.2
    
    
    
    45.7
    
    
    
    8.1
    
    
    
    
    
    
    
    57.0Other current assets
    
    
    
    
    
    
    262.4
    
    
    
    95.8
    
    
    
    (337.9
    )
    
    
    20.3Current assets of discontinued operations
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    0.8Total current assets
    
    
    3.2
    
    
    
    1,018.2
    
    
    
    286.3
    
    
    
    (354.2
    )
    
    
    953.5Property and Equipment:Land
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    8.6Property, buildings and equipment
    
    
    
    
    
    
    1,296.3
    
    
    
    180.3
    
    
    
    
    
    
    
    1,476.6Accumulated depreciation and amortization
    
    
    
    
    
    
    (857.5
    )
    
    
    (113.9
    )
    
    
    
    
    
    
    (971.4
    )Property and equipment, net
    
    
    
    
    
    
    447.4
    
    
    
    66.4
    
    
    
    
    
    
    
    513.8Intangible assets, net
    
    
    
    
    
    
    418.4
    
    
    
    22.6
    
    
    
    
    
    
    
    441.0Goodwill
    
    
    
    
    
    
    143.6
    
    
    
    138.0
    
    
    
    
    
    
    
    281.6Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    5.0Other assets
    
    
    1,297.6
    
    
    
    652.3
    
    
    
    2.6
    
    
    
    (1,911.0
    )
    
    
    41.5Total Assets
    
    $
    1,300.8
    
    
    $
    2,679.9
    
    
    $
    520.9
    
    
    $
    (2,265.2
    )
    
    $
    2,236.4LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    7.1
    
    
    $
    25.7
    
    
    $
    (25.7
    )
    
    $
    7.1Accounts payable
    
    
    
    
    
    
    105.1
    
    
    
    80.2
    
    
    
    (40.6
    )
    
    
    144.7Accrued expenses
    
    
    152.5
    
    
    
    287.8
    
    
    
    37.7
    
    
    
    (287.9
    )
    
    
    190.1Current liabilities of discontinued operations
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Total current liabilities
    
    
    152.5
    
    
    
    401.9
    
    
    
    143.6
    
    
    
    (354.2
    )
    
    
    343.8Long-term debt
    
    
    478.4
    
    
    
    689.6
    
    
    
    9.6
    
    
    
    (291.7
    )
    
    
    885.9Deferred income taxes
    
    
    
    
    
    
    50.3
    
    
    
    2.1
    
    
    
    
    
    
    
    52.4Other liabilities
    
    
    2.9
    
    
    
    241.9
    
    
    
    17.2
    
    
    
    
    
    
    
    262.0Noncurrent liabilities of discontinued operations
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Commitments and contingenciesEquity:Collective Brands, Inc. shareowners equity
    
    
    667.0
    
    
    
    1,295.9
    
    
    
    323.4
    
    
    
    (1,619.3
    )
    
    
    667.0Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    25.0
    
    
    
    
    
    
    
    25.0Total equity
    
    
    667.0
    
    
    
    1,295.9
    
    
    
    348.4
    
    
    
    (1,619.3
    )
    
    
    692.0Total Liabilities and Equity
    
    $
    1,300.8
    
    
    $
    2,679.9
    
    
    $
    520.9
    
    
    $
    (2,265.2
    )
    
    $
    2,236.4
 18




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##### Table of Contents



As of January 30, 2010Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCash and cash equivalents
    
    $
    
    
    
    $
    279.8
    
    
    $
    113.7
    
    
    $
    
    
    
    $
    393.5Accounts receivable, net
    
    
    
    
    
    
    85.7
    
    
    
    17.5
    
    
    
    (7.7
    )
    
    
    95.5Inventories
    
    
    
    
    
    
    350.9
    
    
    
    99.9
    
    
    
    (7.9
    )
    
    
    442.9Current deferred income taxes
    
    
    
    
    
    
    34.6
    
    
    
    7.5
    
    
    
    
    
    
    
    42.1Prepaid expenses
    
    
    10.8
    
    
    
    28.5
    
    
    
    9.6
    
    
    
    
    
    
    
    48.9Other current assets
    
    
    
    
    
    
    263.4
    
    
    
    120.6
    
    
    
    (362.3
    )
    
    
    21.7Current assets of discontinued operations
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    0.5Total current assets
    
    
    10.8
    
    
    
    1,043.4
    
    
    
    368.8
    
    
    
    (377.9
    )
    
    
    1,045.1Property and Equipment:Land
    
    
    
    
    
    
    7.0
    
    
    
    
    
    
    
    
    
    
    
    7.0Property, buildings and equipment
    
    
    
    
    
    
    1,207.8
    
    
    
    195.3
    
    
    
    
    
    
    
    1,403.1Accumulated depreciation and amortization
    
    
    
    
    
    
    (820.3
    )
    
    
    (125.6
    )
    
    
    
    
    
    
    (945.9
    )Property and equipment, net
    
    
    
    
    
    
    394.5
    
    
    
    69.7
    
    
    
    
    
    
    
    464.2Intangible assets, net
    
    
    
    
    
    
    409.2
    
    
    
    36.3
    
    
    
    
    
    
    
    445.5Goodwill
    
    
    
    
    
    
    141.8
    
    
    
    138.0
    
    
    
    
    
    
    
    279.8Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    6.5
    
    
    
    
    
    
    
    6.5Other assets
    
    
    1,377.7
    
    
    
    733.5
    
    
    
    2.7
    
    
    
    (2,070.7
    )
    
    
    43.2Total Assets
    
    $
    1,388.5
    
    
    $
    2,722.4
    
    
    $
    622.0
    
    
    $
    (2,448.6
    )
    
    $
    2,284.3LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    6.9
    
    
    $
    
    
    
    $
    
    
    
    $
    6.9Accounts payable
    
    
    
    
    
    
    159.2
    
    
    
    117.9
    
    
    
    (81.2
    )
    
    
    195.9Accrued expenses
    
    
    193.3
    
    
    
    248.2
    
    
    
    32.2
    
    
    
    (291.9
    )
    
    
    181.8Current liabilities of discontinued operations
    
    
    
    
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    1.3Total current liabilities
    
    
    193.3
    
    
    
    415.6
    
    
    
    150.1
    
    
    
    (373.1
    )
    
    
    385.9Long-term debt
    
    
    457.0
    
    
    
    666.5
    
    
    
    29.7
    
    
    
    (310.8
    )
    
    
    842.4Deferred income taxes
    
    
    
    
    
    
    63.6
    
    
    
    1.9
    
    
    
    
    
    
    
    65.5Other liabilities
    
    
    3.0
    
    
    
    205.8
    
    
    
    18.0
    
    
    
    (0.5
    )
    
    
    226.3Noncurrent liabilities of discontinued operations
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Commitments and contingenciesEquity:Collective Brands, Inc. shareowners equity
    
    
    735.2
    
    
    
    1,370.6
    
    
    
    393.6
    
    
    
    (1,764.2
    )
    
    
    735.2Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    28.7
    
    
    
    
    
    
    
    28.7Total equity
    
    
    735.2
    
    
    
    1,370.6
    
    
    
    422.3
    
    
    
    (1,764.2
    )
    
    
    763.9Total Liabilities and Equity
    
    $
    1,388.5
    
    
    $
    2,722.4
    
    
    $
    622.0
    
    
    $
    (2,448.6
    )
    
    $
    2,284.3
 19




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##### Table of Contents



13 Weeks Ended May 1, 2010Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    54.2
    
    
    $
    59.3
    
    
    $
    24.5
    
    
    $
    (82.0
    )
    
    $
    56.0Adjustments for non-cash items included in net earnings
    
    
    0.1
    
    
    
    38.3
    
    
    
    5.0
    
    
    
    
    
    
    
    43.4Changes in working capital
    
    
    (9.0
    )
    
    
    3.8
    
    
    
    (37.9
    )
    
    
    (0.3
    )
    
    
    (43.4
    )Other, net
    
    
    (48.6
    )
    
    
    (87.8
    )
    
    
    51.3
    
    
    
    82.3
    
    
    
    (2.8
    )Cash flow (used in) provided by operating activities
    
    
    (3.3
    )
    
    
    13.6
    
    
    
    42.9
    
    
    
    
    
    
    
    53.2Investing Activities:Capital expenditures
    
    
    
    
    
    
    (17.2
    )
    
    
    (2.6
    )
    
    
    
    
    
    
    (19.8
    )Cash flow used in investing activities
    
    
    
    
    
    
    (17.2
    )
    
    
    (2.6
    )
    
    
    
    
    
    
    (19.8
    )Financing Activities:Net repayment of debt
    
    
    
    
    
    
    (79.7
    )
    
    
    
    
    
    
    
    
    
    
    (79.7
    )Net issuances of common stock
    
    
    3.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.3Net distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (1.3
    )
    
    
    
    
    
    
    (1.3
    )Cash flow used in financing activities
    
    
    3.3
    
    
    
    (79.7
    )
    
    
    (1.3
    )
    
    
    
    
    
    
    (77.7
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    3.2(Decrease) increase in cash and cash equivalents
    
    
    
    
    
    
    (83.3
    )
    
    
    42.2
    
    
    
    
    
    
    
    (41.1
    )Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    279.8
    
    
    
    113.7
    
    
    
    
    
    
    
    393.5Cash and cash equivalents, end of quarter
    
    $
    
    
    
    $
    196.5
    
    
    $
    155.9
    
    
    $
    
    
    
    $
    352.4
 13 Weeks Ended May 2, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    38.0
    
    
    $
    42.4
    
    
    $
    16.0
    
    
    $
    (58.2
    )
    
    $
    38.2Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Adjustments for non-cash items included in net earnings
    
    
    0.8
    
    
    
    35.5
    
    
    
    3.3
    
    
    
    
    
    
    
    39.6Changes in working capital
    
    
    1.7
    
    
    
    14.4
    
    
    
    (30.9
    )
    
    
    (4.4
    )
    
    
    (19.2
    )Other, net
    
    
    (39.2
    )
    
    
    (14.6
    )
    
    
    (2.3
    )
    
    
    54.8
    
    
    
    (1.3
    )Cash flow provided by (used in) operating activities
    
    
    1.3
    
    
    
    77.8
    
    
    
    (13.9
    )
    
    
    (7.8
    )
    
    
    57.4Investing Activities:Capital expenditures
    
    
    
    
    
    
    (20.7
    )
    
    
    (6.0
    )
    
    
    
    
    
    
    (26.7
    )Cash flow used in investing activities
    
    
    
    
    
    
    (20.7
    )
    
    
    (6.0
    )
    
    
    
    
    
    
    (26.7
    )Financing Activities:Net repayment of debt or notes
    
    
    (1.0
    )
    
    
    (19.2
    )
    
    
    
    
    
    
    
    
    
    
    (20.2
    )Net purchases of common stock
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Net contribution from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    1.9Net distributions to parent
    
    
    
    
    
    
    
    
    
    
    (3.5
    )
    
    
    3.5
    
    
    
    Cash flow used in financing activities
    
    
    (1.3
    )
    
    
    (19.2
    )
    
    
    (1.6
    )
    
    
    3.5
    
    
    
    (18.6
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (4.9
    )
    
    
    4.3
    
    
    
    (0.6
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    37.9
    
    
    
    (26.4
    )
    
    
    
    
    
    
    11.5Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    141.7
    
    
    
    107.6
    
    
    
    
    
    
    
    249.3Cash and cash equivalents, end of quarter
    
    $
    
    
    
    $
    179.6
    
    
    $
    81.2
    
    
    $
    
    
    
    $
    260.8
 20




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 Forward Looking Statements
  Overview
  
    
    Our Business  a general description of our business, our strategy and the impact of
new federal legislation.
    
    Consolidated Review of Operations  an analysis of our consolidated results of
operations for the 13 weeks ended May 1, 2010 and May 2, 2009 as presented in our Condensed
Consolidated Financial Statements.
    
    Reporting Segment Review of Operations  an analysis of our results of operations for
the 13 weeks ended May 1, 2010 and May 2, 2009 as presented in our Condensed Consolidated
Financial Statements for our four reporting segments: Payless Domestic, Payless
International, PLG Wholesale and PLG Retail.
    
    Liquidity and Capital Resources  an analysis of cash flows, aggregate financial
commitments and certain financial condition ratios.
    
    Critical Accounting Policies  an update since January 30, 2010 of our discussion of
our critical accounting policies that involve a higher degree of judgment or complexity.
This section also includes the impact of new accounting standards.
 21




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##### Table of Contents



Our Business
 ® ® ® ®
 Payless
 ® ® ® TM
  PLG
 ®
 ® ®
 Impact of New Federal Legislation
  22




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##### Table of Contents



Consolidated Review of Operations
  First Quarter2010
    
    
    2009Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    61.7
    
    
    
    64.1Gross margin
    
    
    38.3
    
    
    
    35.9Selling, general and administrative expense
    
    
    29.0
    
    
    
    28.9Operating profit from continuing operations
    
    
    9.3
    
    
    
    7.0Interest expense, net
    
    
    1.4
    
    
    
    1.8Loss on early extinguishment of debt
    
    
    0.1
    
    
    
    Net earnings from continuing operations before income taxes
    
    
    7.8
    
    
    
    5.2Effective income tax rate*
    
    
    17.2
    
    
    
    14.3Net earnings from continuing operations
    
    
    6.4
    
    
    
    4.4Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    Net earnings
    
    
    6.4
    
    
    
    4.4Net earnings attributable to noncontrolling interests
    
    
    (0.2
    )
    
    
    Net earnings attributable to Collective Brands, Inc.
    
    
    6.2
    %
    
    
    4.4
    %
 
 *
    
    Percent of pre-tax earnings Net Earnings Attributable to Collective Brands, Inc.
  Net Sales
   First Quarter2010
    
    2009Same-store sales
    
    
    (1.2
    )%
    
    
    (4.8
    )%Average selling price per unit
    
    
    (1.4
    )
    
    
    8.3Unit volume
    
    
    (0.6
    )
    
    
    (12.3
    )Footwear average selling price per unit
    
    
    0.2
    
    
    
    10.7Footwear unit volume
    
    
    (3.9
    )
    
    
    (14.9
    )Non-footwear average selling price per unit
    
    
    5.6
    
    
    
    7.2Non-footwear unit volume
    
    
    10.8
    
    
    
    (2.5
    )
  Cost of Sales
  23




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##### Table of Contents



Gross Margin
  Selling, General and Administrative Expenses
  Interest Expense (Income)
  First Quarter(dollars in millions)
    
    2010
    
    
    2009Interest expense
    
    $
    13.4
    
    
    $
    16.4Interest income
    
    
    (0.2
    )
    
    
    (0.6
    )Interest expense, net
    
    $
    13.2
    
    
    $
    15.8
  Loss on Early Extinguishment of Debt
  Income Taxes
     American Jobs and Closing Tax Loopholes Act
 24




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##### Table of Contents



Net Earnings Attributable to Noncontrolling Interests
  Non-GAAP Financial Measures
   First Quarter(dollars in millions)
    
    2010
    
    
    2009Net earnings
    
    $
    56.0
    
    
    $
    38.2Loss from discontinued operations, net of tax
    
    
    
    
    
    
    0.1Provision for income taxes
    
    
    11.6
    
    
    
    6.4Net interest expense (including loss on early extinguishment of debt)
    
    
    14.0
    
    
    
    15.8Depreciation and amortization
    
    
    33.6
    
    
    
    34.0EBITDA
    
    $
    115.2
    
    
    $
    94.5
   First Quarter(dollars in millions)
    
    2010
    
    
    2009Cash flow provided by operating activities
    
    $
    53.2
    
    
    $
    57.4Less: Capital expenditures
    
    
    19.8
    
    
    
    26.7Free cash flow
    
    $
    33.4
    
    
    $
    30.7
  First Quarter(dollars in millions)
    
    2010
    
    2009Total debt
    
    $
    769.7
    
    
    $
    893.0Less: cash and cash equivalents
    
    
    352.4
    
    
    
    260.8Net debt
    
    $
    417.3
    
    
    $
    632.2
  Reporting Segment Review of Operations
 We operate our business using four reporting segments: Payless Domestic, Payless International, PLG
Wholesale and PLG Retail. We evaluate the performance of our reporting segments based on segment
revenues from external customers and segment operating profit from continuing operations as a
measure of overall performance of the Company. The following table reconciles reporting segment
 25




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##### Table of Contents



First QuarterMay 1,
    
    
    May 2,(dollars in millions)
    
    2010
    
    
    2009Reporting segment revenues from external customers:Payless Domestic
    
    $
    546.6
    
    
    $
    570.8Payless International
    
    
    100.0
    
    
    
    84.8PLG Wholesale
    
    
    173.4
    
    
    
    148.8PLG Retail
    
    
    58.8
    
    
    
    58.5Total revenues from external customers
    
    $
    878.8
    
    
    $
    862.9Reporting segment operating profit from continuing operations:Payless Domestic
    
    $
    49.3
    
    
    $
    42.2Payless International
    
    
    7.1
    
    
    
    1.8PLG Wholesale
    
    
    23.3
    
    
    
    14.3PLG Retail
    
    
    1.9
    
    
    
    2.2Total operating profit from continuing operations
    
    $
    81.6
    
    
    $
    60.5
  Payless
    
    
    PaylessDomestic
    
    
    International
    
    
    PLG Retail
    
    
    TotalFirst Quarter 2010:Beginning store count
    
    
    3,827
    
    
    
    643
    
    
    
    363
    
    
    
    4,833Stores opened
    
    
    13
    
    
    
    5
    
    
    
    13
    
    
    
    31Stores closed
    
    
    (9
    )
    
    
    (3
    )
    
    
    
    
    
    
    (12
    )Ending store count
    
    
    3,831
    
    
    
    645
    
    
    
    376
    
    
    
    4,852First Quarter 2009:Beginning store count
    
    
    3,900
    
    
    
    622
    
    
    
    355
    
    
    
    4,877Stores opened
    
    
    19
    
    
    
    11
    
    
    
    2
    
    
    
    32Stores closed
    
    
    (29
    )
    
    
    (3
    )
    
    
    (1
    )
    
    
    (33
    )Ending store count
    
    
    3,890
    
    
    
    630
    
    
    
    356
    
    
    
    4,876
 Payless Domestic Segment Operating Results
  First QuarterPercent change(dollars in millions)
    
    2010
    
    2009
    
    2010 vs. 2009Revenues from external customers
    
    $
    546.6
    
    
    $
    570.8
    
    
    
    (4.2
    )%Operating profit from continuing operations
    
    $
    49.3
    
    
    $
    42.2
    
    
    
    16.8
    %Operating profit from continuing operations as %
of revenues from external customers
    
    
    9.0
    %
    
    
    7.4
    %
   26




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##### Table of Contents



Payless International Segment Operating Results
  First QuarterPercent change(dollars in millions)
    
    2010
    
    2009
    
    2010 vs. 2009Revenues from external customers
    
    $
    100.0
    
    
    $
    84.8
    
    
    
    17.9
    %Operating profit from continuing operations
    
    $
    7.1
    
    
    $
    1.8
    
    
    
    294.4
    %Operating profit from continuing operations as %
of revenues from external customers
    
    
    7.1
    %
    
    
    2.1
    %
   PLG Wholesale Segment Operating Results
  First QuarterPercent change(dollars in millions)
    
    2010
    
    2009
    
    2010 vs. 2009Revenues from external customers
    
    $
    173.4
    
    
    $
    148.8
    
    
    
    16.5
    %Operating profit from continuing operations
    
    $
    23.3
    
    
    $
    14.3
    
    
    
    62.9
    %Operating profit from continuing operations as %
of revenues from external customers
    
    
    13.4
    %
    
    
    9.6
    %
   PLG Retail Segment Operating Results
  First QuarterPercent change(dollars in millions)
    
    2010
    
    2009
    
    2010 vs. 2009Revenues from external customers
    
    $
    58.8
    
    
    $
    58.5
    
    
    
    0.5
    %Operating profit from continuing operations
    
    $
    1.9
    
    
    $
    2.2
    
    
    
    (13.6
    )%Operating profit from continuing operations as %
of revenues from external customers
    
    
    3.2
    %
    
    
    3.8
    %
  27




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##### Table of Contents



Liquidity and Capital Resources
     Cash Flow Provided by Operating Activities
  Cash Flow Used in Investing Activities
  Cash Flow Used in Financing Activities
  First Quarter2010
    
    
    2009(dollars in millions, shares in thousands)
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    SharesStock repurchase program(1)
    
    $
    2.8
    
    
    
    125
    
    
    $
    
    
    
    
    Employee stock purchase, deferred compensation
and stock incentive plans
    
    
    1.7
    
    
    
    74
    
    
    
    0.5
    
    
    
    50$
    4.5
    
    
    
    199
    
    
    $
    0.5
    
    
    
    50
 
 (1)
    
    All amounts represent share repurchases as a result of consideration from stock
option exercises.   28




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##### Table of Contents



Contractual Obligations
  Financial Condition Ratios
  May 1,
    
    May 2,
    
    January 30,2010
    
    2009
    
    2010Debt-capitalization Ratio*
    
    
    49.0
    %
    
    
    56.3
    %
    
    
    53.6
    %
 
 *
    
    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 loan facility. Capitalization is defined as total
debt and equity. The debt-to-capitalization ratio, including the
present value of future minimum rental payments under operating
leases as debt and as capitalization, was 69.7%, 74.3% and 72.3%,
respectively, for the periods referred to above. Critical Accounting Policies
  New Accounting Standards
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Currency Risk
   29




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  American Eagle Outfitters and Retail Royalty Co. v. Payless ShoeSource, Inc.
  30




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##### Table of Contents



ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Issuer Purchases of Equity Securities
  Total Number ofShares Purchased
    
    
    Approximate Dollar Value ofTotal Number
    
    
    Average
    
    
    as Part of Publicly
    
    
    Shares that May Yet Beof Shares
    
    
    Price
    
    
    Announced Plans
    
    
    Purchased Under the Plans orPurchased(1)
    
    
    Paid per
    
    
    or Programs
    
    
    ProgramsPeriod
    
    (in thousands)
    
    
    Share
    
    
    (in thousands) (3)
    
    
    (in millions)01/31/10  2/27/10
    
    
    3
    
    
    $
    20.15
    
    
    
    
    
    
    $
    236.302/28/10  04/03/10
    
    
    193
    
    
    
    22.17
    
    
    
    125
    
    
    
    233.504/04/10  05/01/10
    
    
    3
    
    
    
    23.09
    
    
    
    
    
    
    
    233.5Total
    
    
    199
    
    
    $
    22.16
    
    
    
    125
    
    
    $
    233.5
    (2)
 
 (1)
    
    Includes an aggregate of approximately 74 thousand shares of our common stock that was repurchased in connection
with our employee stock purchase and stock incentive plans.(2)
    
    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.(3)
    
    All amounts represent share repurchases as a result of consideration from stock option exercises. 
 ITEM 4. RESERVED
 
 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, President and
Chairman of the Board*31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Division 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, President and
Chairman of the Board*32.2
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Division Senior
Vice President  Chief Financial Officer and Treasurer*
 
 *
    
    Filed herewith 31




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##### Table of Contents



SIGNATURES
  COLLECTIVE BRANDS, INC.Date: June 2, 2010
    By:
    /s/ Matthew E. RubelMatthew E. RubelChief Executive Officer, President
and
 Chairman of the Board

(Principal Executive Officer) Date: June 2, 2010
    By:
    /s/ Douglas G. BoessenDouglas G. BoessenDivision Senior Vice President 
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer) 32