##### 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 October 31, 2009
 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. LOGO)
 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
 þ o
 o 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 OCTOBER 31, 2009
INDEX
  
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements. (unaudited)Condensed Consolidated Statements of Earnings for the 13 Weeks and 39 Weeks Ended October 31, 2009 and November
1, 2008.
    
    
    3Condensed Consolidated Balance Sheets as of October 31, 2009, November 1, 2008 and January 31, 2009.
    
    
    4Condensed Consolidated Statements of Equity and Comprehensive Income for the 39 Weeks Ended October 31, 2009 and
November 1, 2008.
    
    
    5Condensed Consolidated Statements of Cash Flows for the 39 Weeks Ended October 31, 2009 and November 1, 2008.
    
    
    6Notes to Condensed Consolidated Financial Statements.
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
    
    35Item 4. Controls and Procedures.
    
    
    35PART II  OTHER INFORMATIONItem 1. Legal Proceedings.
    
    
    36Item 1A. Risk Factors.
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
    
    
    38Item 6. Exhibits.
    
    
    38Signatures.
    
    
    39Certification 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 TreasurerEX-31.1EX-31.2EX-32.1EX-32.2
  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 Ended
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    867.0
    
    
    $
    862.7
    
    
    $
    2,566.2
    
    
    $
    2,706.8Cost of sales
    
    
    555.2
    
    
    
    564.0
    
    
    
    1,668.9
    
    
    
    1,820.2Gross margin
    
    
    311.8
    
    
    
    298.7
    
    
    
    897.3
    
    
    
    886.6Selling, general and administrative expenses
    
    
    250.8
    
    
    
    245.1
    
    
    
    743.5
    
    
    
    768.1Restructuring charges
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.2Operating profit from continuing operations
    
    
    61.0
    
    
    
    53.5
    
    
    
    153.8
    
    
    
    118.3Interest expense
    
    
    14.8
    
    
    
    19.9
    
    
    
    46.4
    
    
    
    57.7Interest income
    
    
    (0.2
    )
    
    
    (2.7
    )
    
    
    (1.0
    )
    
    
    (6.5
    )Net earnings from continuing operations before income taxes
    
    
    46.4
    
    
    
    36.3
    
    
    
    108.4
    
    
    
    67.1Provision (benefit) for income taxes
    
    
    8.2
    
    
    
    (12.9
    )
    
    
    13.1
    
    
    
    (13.4
    )Net earnings from continuing operations
    
    
    38.2
    
    
    
    49.2
    
    
    
    95.3
    
    
    
    80.5(Loss) earnings from discontinued operations, net of income taxes
    
    
    (0.1
    )
    
    
    0.1
    
    
    
    (0.2
    )
    
    
    (0.4
    )Net earnings
    
    
    38.1
    
    
    
    49.3
    
    
    
    95.1
    
    
    
    80.1Net earnings attributable to noncontrolling interests
    
    
    (1.2
    )
    
    
    (1.8
    )
    
    
    (1.5
    )
    
    
    (4.8
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    36.9
    
    
    $
    47.5
    
    
    $
    93.6
    
    
    $
    75.3Basic earnings per share attributable to Collective Brands, Inc.
common shareholders:Earnings from continuing operations
    
    $
    0.58
    
    
    $
    0.74
    
    
    $
    1.47
    
    
    $
    1.19Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic earnings per share attributable to Collective Brands, Inc.
common shareholders:
    
    $
    0.58
    
    
    $
    0.74
    
    
    $
    1.47
    
    
    $
    1.19Diluted earnings per share attributable to Collective Brands, Inc.
common shareholders:Earnings from continuing operations
    
    $
    0.57
    
    
    $
    0.74
    
    
    $
    1.46
    
    
    $
    1.19Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted earnings per share attributable to Collective Brands, Inc.
common shareholders:
    
    $
    0.57
    
    
    $
    0.74
    
    
    $
    1.46
    
    
    $
    1.19Basic weighted average shares outstanding
    
    
    63.2
    
    
    
    63.0
    
    
    
    63.1
    
    
    
    62.9Diluted weighted average shares outstanding
    
    
    63.7
    
    
    
    63.0
    
    
    
    63.3
    
    
    
    62.9
  3




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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
  October 31,
    
    
    November 1,
    
    
    January 31,2009
    
    
    2008
    
    
    2009ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    470.7
    
    
    $
    523.6
    
    
    $
    249.3Accounts receivable, net of allowance for doubtful accounts
and returns reserve as of October 31, 2009, November 1, 2008 and
January 31, 2009 of $5.0, $5.3 and $4.2, respectively
    
    
    82.9
    
    
    
    89.1
    
    
    
    97.5Inventories
    
    
    403.2
    
    
    
    467.6
    
    
    
    492.0Current deferred income taxes
    
    
    32.2
    
    
    
    45.6
    
    
    
    35.6Prepaid expenses
    
    
    49.8
    
    
    
    74.8
    
    
    
    58.7Other current assets
    
    
    26.3
    
    
    
    37.1
    
    
    
    25.3Current assets of discontinued operations
    
    
    0.7
    
    
    
    0.9
    
    
    
    1.3Total current assets
    
    
    1,065.8
    
    
    
    1,238.7
    
    
    
    959.7Property and Equipment:Land
    
    
    7.0
    
    
    
    8.6
    
    
    
    8.6Property, buildings and equipment
    
    
    1,415.7
    
    
    
    1,486.8
    
    
    
    1,458.6Accumulated depreciation and amortization
    
    
    (949.0
    )
    
    
    (952.1
    )
    
    
    (945.8
    )Property and equipment, net
    
    
    473.7
    
    
    
    543.3
    
    
    
    521.4Intangible assets, net
    
    
    431.3
    
    
    
    539.4
    
    
    
    446.0Goodwill
    
    
    280.1
    
    
    
    324.0
    
    
    
    281.6Deferred income taxes
    
    
    5.8
    
    
    
    0.2
    
    
    
    1.7Other assets
    
    
    42.4
    
    
    
    40.1
    
    
    
    40.9Total Assets
    
    $
    2,299.1
    
    
    $
    2,685.7
    
    
    $
    2,251.3LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    7.1
    
    
    $
    222.3
    
    
    $
    24.8Notes payable
    
    
    0.9
    
    
    
    
    
    
    
    Accounts payable
    
    
    140.2
    
    
    
    186.5
    
    
    
    173.8Accrued expenses
    
    
    194.5
    
    
    
    208.2
    
    
    
    202.7Current liabilities of discontinued operations
    
    
    1.7
    
    
    
    1.8
    
    
    
    1.9Total current liabilities
    
    
    344.4
    
    
    
    618.8
    
    
    
    403.2Long-term debt
    
    
    882.5
    
    
    
    909.7
    
    
    
    888.4Deferred income taxes
    
    
    55.2
    
    
    
    116.0
    
    
    
    49.2Other liabilities
    
    
    248.0
    
    
    
    243.8
    
    
    
    264.2Noncurrent liabilities of discontinued operations
    
    
    0.3
    
    
    
    
    
    
    
    0.3Commitments and contingencies (Note 14)Equity:Collective Brands, Inc. shareowners equity
    
    
    741.7
    
    
    
    776.1
    
    
    
    622.3Noncontrolling interests
    
    
    27.0
    
    
    
    21.3
    
    
    
    23.7Total equity
    
    
    768.7
    
    
    
    797.4
    
    
    
    646.0Total Liabilities and Equity
    
    $
    2,299.1
    
    
    $
    2,685.7
    
    
    $
    2,251.3
  4




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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
    
    
    Income (Loss)
    
    
    Interests
    
    
    Total
    
    
    IncomeBalance at February 2, 2008
    
    $
    0.7
    
    
    $
    
    
    
    $
    708.1
    
    
    $
    (5.9
    )
    
    $
    17.2
    
    
    $
    720.1Net earnings
    
    
    
    
    
    
    
    
    
    
    75.3
    
    
    
    
    
    
    
    4.8
    
    
    
    80.1
    
    
    $
    80.1Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18.8
    )
    
    
    (0.5
    )
    
    
    (19.3
    )
    
    
    (19.3
    )Net change in fair value of derivative,
net of taxes of $2.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.4
    
    
    
    
    
    
    
    3.4
    
    
    
    3.4Changes in unrecognized amounts of
pension benefits, net of taxes of $0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    
    
    
    
    
    1.3
    
    
    
    1.3Issuances of common stock under stock plans
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.8Purchases of common stock
    
    
    
    
    
    
    (1.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.7
    )Amortization of unearned nonvested shares
    
    
    
    
    
    
    5.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.2Stock option expense
    
    
    
    
    
    
    7.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.7Contributions from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.4
    
    
    
    3.4Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.6
    )
    
    
    (3.6
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65.5Comprehensive income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.3
    )Comprehensive income attributable to
Collective Brands, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    61.2Balance at November 1, 2008
    
    $
    0.7
    
    
    $
    12.0
    
    
    $
    783.4
    
    
    $
    (20.0
    )
    
    $
    21.3
    
    
    $
    797.4Balance at January 31, 2009
    
    $
    0.7
    
    
    $
    17.8
    
    
    $
    639.4
    
    
    $
    (35.6
    )
    
    $
    23.7
    
    
    $
    646.0Net earnings
    
    
    
    
    
    
    
    
    
    
    93.6
    
    
    
    
    
    
    
    1.5
    
    
    
    95.1
    
    
    $
    95.1Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.0
    
    
    
    0.5
    
    
    
    9.5
    
    
    
    9.5Net change in fair value of derivatives,
net of taxes of $1.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.6
    
    
    
    
    
    
    
    2.6
    
    
    
    2.6Changes in unrecognized amounts of
pension benefits, net of taxes of $1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    1.8
    
    
    
    1.8Issuances of common stock under
stock plans
    
    
    
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.9Purchases of common stock
    
    
    
    
    
    
    (2.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.3
    )Amortization of unearned nonvested
shares
    
    
    
    
    
    
    3.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.6Stock option expense
    
    
    
    
    
    
    8.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.2Contributions from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.5
    
    
    
    5.5Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.2
    )
    
    
    (4.2
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109.0Comprehensive income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.0
    )Comprehensive income attributable to
Collective Brands, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    107.0Balance at October 31, 2009
    
    $
    0.7
    
    
    $
    30.2
    
    
    $
    733.0
    
    
    $
    (22.2
    )
    
    $
    27.0
    
    
    $
    768.7
  5




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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 39 Weeks EndedOctober 31,
    
    
    November 1,2009
    
    
    2008Operating Activities:Net earnings
    
    $
    95.1
    
    
    $
    80.1Loss from discontinued operations, net of income taxes
    
    
    0.2
    
    
    
    0.4Adjustments for non-cash items included in net earnings:Loss on disposal of assets
    
    
    8.3
    
    
    
    5.6Depreciation and amortization
    
    
    107.5
    
    
    
    105.9Provision for losses on accounts receivable
    
    
    2.1
    
    
    
    2.2Share-based compensation expense
    
    
    12.5
    
    
    
    12.4Deferred income taxes
    
    
    2.4
    
    
    
    (21.3
    )Other, net
    
    
    (0.1
    )
    
    
    Changes in working capital:Accounts receivable
    
    
    14.4
    
    
    
    (4.8
    )Inventories
    
    
    92.9
    
    
    
    (2.6
    )Prepaid expenses and other current assets
    
    
    17.2
    
    
    
    9.0Accounts payable
    
    
    (32.3
    )
    
    
    (8.6
    )Accrued expenses
    
    
    (3.9
    )
    
    
    17.5Changes in other assets and liabilities, net
    
    
    (11.2
    )
    
    
    6.7Contributions to pension plans
    
    
    (2.5
    )
    
    
    (4.7
    )Net cash provided by discontinued operations
    
    
    0.2
    
    
    
    Cash flow provided by operating activities
    
    
    302.8
    
    
    
    197.8Investing Activities:Capital expenditures
    
    
    (61.2
    )
    
    
    (107.5
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    2.1Cash flow used in investing activities
    
    
    (61.2
    )
    
    
    (105.4
    )Financing Activities:Proceeds from notes payable
    
    
    0.9
    
    
    
    Proceeds from revolving loan facility
    
    
    
    
    
    
    215.0Repayment of debt
    
    
    (23.9
    )
    
    
    (5.5
    )Payment of deferred financing costs
    
    
    
    
    
    
    (0.1
    )Issuances of common stock
    
    
    2.9
    
    
    
    0.8Purchases of common stock
    
    
    (2.3
    )
    
    
    (1.7
    )Contributions by noncontrolling interests
    
    
    5.5
    
    
    
    3.4Distribution to noncontrolling interests
    
    
    (4.2
    )
    
    
    (3.6
    )Cash flow (used in) provided by financing activities
    
    
    (21.1
    )
    
    
    208.3Effect of exchange rate changes on cash
    
    
    0.9
    
    
    
    (9.6
    )Increase in cash and cash equivalents
    
    
    221.4
    
    
    
    291.1Cash and cash equivalents, beginning of year
    
    
    249.3
    
    
    
    232.5Cash and cash equivalents, end of quarter
    
    $
    470.7
    
    
    $
    523.6Supplemental cash flow information:Interest paid
    
    $
    49.5
    
    
    $
    54.0Income taxes paid
    
    $
    11.7
    
    
    $
    13.1Non-cash investing and financing activities:Accrued capital additions
    
    $
    11.0
    
    
    $
    12.7
  6




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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 Note 1  Interim Results
   Note 2  Exit Costs
    Total Costs Incurred as of
    
    
    Accrual Balance as of
    
    
    39 Weeks Ended October 31, 2009
    
    
    Accrual Balance as of(dollars in millions)
    
    October 31, 2009
    
    
    January 31, 2009
    
    
    Costs Incurred
    
    
    Cash Payments
    
    
    October 31, 2009Employee severance costs
    
    $
    16.4
    
    
    $
    5.7
    
    
    $
    
    
    
    $
    (4.3
    )
    
    $
    1.4Contract termination and other costs
    
    
    2.5
    
    
    
    1.0
    
    
    
    
    
    
    
    (0.5
    )
    
    
    0.5Total
    
    $
    18.9
    
    
    $
    6.7
    
    
    $
    
    
    
    $
    (4.8
    )
    
    $
    1.9
 7




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##### Table of Contents



Note 3  Discontinued Operations
  Note 4  Inventories
  Note 5  Intangible Assets and Goodwill
  October 31,
    
    
    November 1,
    
    
    January 31,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009Intangible assets subject to amortization:Favorable lease rights:Gross carrying amount
    
    $
    32.5
    
    
    $
    64.5
    
    
    $
    33.2Less: accumulated amortization
    
    
    (23.6
    )
    
    
    (52.7
    )
    
    
    (22.3
    )Carrying amount, end of period
    
    
    8.9
    
    
    
    11.8
    
    
    
    10.9Customer relationships:Gross carrying amount
    
    
    76.3
    
    
    
    76.3
    
    
    
    76.3Less: accumulated amortization
    
    
    (32.9
    )
    
    
    (18.1
    )
    
    
    (22.0
    )Carrying amount, end of period
    
    
    43.4
    
    
    
    58.2
    
    
    
    54.3Trademarks and other intangible assets:Gross carrying amount
    
    
    19.4
    
    
    
    21.4
    
    
    
    21.5Less: accumulated amortization
    
    
    (5.9
    )
    
    
    (5.7
    )
    
    
    (6.2
    )Carrying amount, end of period
    
    
    13.5
    
    
    
    15.7
    
    
    
    15.3Total carrying amount of intangible assets subject to amortization
    
    
    65.8
    
    
    
    85.7
    
    
    
    80.5Indefinite-lived trademarks
    
    
    365.5
    
    
    
    453.7
    
    
    
    365.5Total intangible assets
    
    $
    431.3
    
    
    $
    539.4
    
    
    $
    446.0
  13 Weeks Ended
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Amortization expense on intangible assets
    
    $
    4.6
    
    
    $
    4.8
    
    
    $
    13.9
    
    
    $
    16.2
  Year
    

    AmountRemainder of 2009
    

    $
    4.92010
    

    
    15.62011
    

    
    12.62012
    

    
    10.22013
    

    
    8.6
 8




---



##### Table of Contents



October 31,
    
    
    November 1,
    
    
    January 31,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009PLG Wholesale
    
    $
    239.9
    
    
    $
    241.8
    
    
    $
    241.4Payless Domestic
    
    
    40.2
    
    
    
    40.2
    
    
    
    40.2PLG Retail
    
    
    
    
    
    
    42.0
    
    
    
    Total
    
    $
    280.1
    
    
    $
    324.0
    
    
    $
    281.6
  Note 6  Long-Term Debt
  October 31,
    
    
    November 1,
    
    
    January 31,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009Term Loan Facility (1)
    
    $
    693.1
    
    
    $
    717.8
    
    
    $
    715.9Senior Subordinated Notes (2)
    
    
    195.5
    
    
    
    198.1
    
    
    
    196.2Revolving Loan Facility (3)
    
    
    
    
    
    
    215.0
    
    
    
    Capital-lease obligations
    
    
    1.0
    
    
    
    1.1
    
    
    
    1.1Total debt
    
    
    889.6
    
    
    
    1,132.0
    
    
    
    913.2Less: current maturities of long-term debt
    
    
    7.1
    
    
    
    222.3
    
    
    
    24.8Long-term debt
    
    $
    882.5
    
    
    $
    909.7
    
    
    $
    888.4
 
 (1)
    
    As of October 31, 2009, the fair value of the Companys Term Loan Facility
was $661.9 million based on current market conditions and perceived risks.(2)
    
    As of October 31, 2009, the fair value of the Companys Senior Subordinated Notes
was $199.0 million based on recent trading activity.(3)
    
    As of October 31, 2009, the Companys borrowing base on its Revolving Loan
Facility was $322.0 million less $84.6 million in outstanding letters of credit, or $237.4
million. The variable interest rate including the applicable variable margin at October 31, 2009,
was 1.28%.  Note 7  Derivatives
    Fair ValueLocation on Condensed
    
    
    October 31,
    
    
    November 1,
    
    
    January 31,(dollars in millions)
    
    Consolidated Balance Sheet
    
    
    2009
    
    
    2008
    
    
    2009Interest rate contract
    
    Other liabilities
    
    $
    17.1
    
    
    $
    18.1
    
    
    $
    21.5Foreign currency contracts
    
    Accrued expenses
    
    $
    0.2
    
    
    $
    
    
    
    $
    
 9




---



##### Table of Contents



Loss Recognized in AOCI on
    
    
    
    
    
    
    Loss Reclassified from AOCI intoDerivative
    
    
    
    
    
    
    Earnings13 Weeks Ended
    
    
    Location on Condensed
    
    
    13 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    Consolidated Statement of
    
    
    October 31,
    
    
    November 1,(dollars in millions)
    
    2009
    
    
    2008
    
    
    Earnings
    
    
    2009
    
    
    2008Interest rate contract
    
    $
    (1.9
    )
    
    $
    (4.0
    )
    
    Interest expense
    
    $
    (2.5
    )
    
    $
    (1.5
    )Foreign currency contracts
    
    $
    
    
    
    $
    
    
    
    Cost of sales
    
    $
    (0.3
    )
    
    $
    
 Loss Recognized in AOCI on
    
    
    
    
    
    
    Loss Reclassified from AOCI intoDerivative
    
    
    
    
    
    
    Earnings39 Weeks Ended
    
    
    Location on Condensed
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    Consolidated Statement of
    
    
    October 31,
    
    
    November 1,(dollars in millions)
    
    2009
    
    
    2008
    
    
    Earnings
    
    
    2009
    
    
    2008Interest rate contract
    
    $
    (4.4
    )
    
    $
    (1.0
    )
    
    Interest expense
    
    $
    (7.1
    )
    
    $
    (4.4
    )Foreign currency contracts
    
    $
    (0.5
    )
    
    $
    
    
    
    Cost of sales
    
    $
    (0.4
    )
    
    $
    
  Note 8  Fair Value Measurements
  Level 1: observable inputs such as quoted prices in active markets
 Level 2: inputs other than the quoted prices in active markets that are observable either
directly or indirectly
 Level 3: unobservable inputs in which there is little or no market data, which requires the
Company to develop its own assumptions
  Estimated Fair Value MeasurementsSignificantQuoted Prices in
    
    
    Significant
    
    
    UnobservableActive Markets
    
    
    Observable Other
    
    
    Inputs(dollars in millions)
    
    (Level 1)
    
    
    Inputs (Level 2)
    
    
    (Level 3)
    
    
    Total Fair ValueFinancial assets:Money market funds
    
    $
    365.9
    
    
    $
    
    
    
    $
    
    
    
    $
    365.9Financial liabilities:Interest rate contract
    
    $
    
    
    
    $
    17.1
    
    
    $
    
    
    
    $
    17.1Foreign currency contracts
    
    $
    
    
    
    $
    0.2
    
    
    $
    
    
    
    $
    0.2
 Note 9  Pension Plans
  10




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##### Table of Contents



Payless Plan
  13 Weeks Ended
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Components of pension expense:Service cost
    
    $
    0.2
    
    
    $
    0.1
    
    
    $
    0.5
    
    
    $
    0.3Interest cost
    
    
    0.6
    
    
    
    0.6
    
    
    
    1.8
    
    
    
    1.8Amortization of prior service cost
    
    
    0.4
    
    
    
    0.4
    
    
    
    1.2
    
    
    
    1.2Amortization of actuarial loss
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    0.6Total
    
    $
    1.3
    
    
    $
    1.3
    
    
    $
    3.9
    
    
    $
    3.9
 PLG Plan
  13 Weeks Ended
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Components of pension expense:Interest cost
    
    $
    1.1
    
    
    $
    1.1
    
    
    $
    3.3
    
    
    $
    3.3Expected return on net assets
    
    
    (0.9
    )
    
    
    (1.3
    )
    
    
    (2.7
    )
    
    
    (3.7
    )Amortization of actuarial loss
    
    
    0.5
    
    
    
    
    
    
    
    1.4
    
    
    
    Total
    
    $
    0.7
    
    
    $
    (0.2
    )
    
    $
    2.0
    
    
    $
    (0.4
    )
 11




---



##### Table of Contents



Note 10  Share-Based Compensation
   13 Weeks Ended
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,2009
    
    
    2008
    
    
    2009
    
    
    2008Stock-settled SARs (in number of SARs)(1):Vest in installments over 3 years
    
    
    2,834
    
    
    
    104,139
    
    
    
    1,477,387
    
    
    
    652,194Cliff vest after 3 years
    
    
    53,891
    
    
    
    144,048
    
    
    
    516,591
    
    
    
    463,728Nonvested shares and share units:Performance grant  vests in installments over 3 years(2)
    
    
    
    
    
    
    13,849
    
    
    
    
    
    
    
    24,477Vest in installments over 3 years
    
    
    1,000
    
    
    
    8,974
    
    
    
    338,303
    
    
    
    276,923Cliff vest after 3 years
    
    
    2,015
    
    
    
    8,300
    
    
    
    2,015
    
    
    
    12,225Phantom nonvested shares  vests in installments over 3 years
    
    
    
    
    
    
    
    
    
    
    15,074
    
    
    
    Cash-settled SARs:Vest in installments over 3 years
    
    
    
    
    
    
    
    
    
    
    50,150
    
    
    
    5,250Cliff vest after 3 years
    
    
    
    
    
    
    4,000
    
    
    
    3,500
    
    
    
    12,500
 
 (1)
    
    All of the stock-settled SARs issued by the Company to-date contain
an appreciation cap, which limits the appreciation for which shares of
common stock will be granted to 200% 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 0.67 shares per SAR.(2)
    
    Certain nonvested shares were subject to a performance condition
for vesting. These nonvested shares were cancelled, by mutual agreement
and without monetary consideration, in the fourth quarter of 2008. As
such, the Company did not recognize expense associated with these awards
for the 13 weeks or 39 weeks ended October 31, 2009.  13 Weeks Ended
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of sales
    
    $
    0.9
    
    
    $
    1.0
    
    
    $
    3.1
    
    
    $
    3.1Selling, general and administrative expenses
    
    
    2.8
    
    
    
    2.9
    
    
    
    9.4
    
    
    
    9.3Share-based compensation expense before income taxes
    
    
    3.7
    
    
    
    3.9
    
    
    
    12.5
    
    
    
    12.4Tax benefit
    
    
    (1.4
    )
    
    
    (1.4
    )
    
    
    (4.8
    )
    
    
    (4.7
    )Share-based compensation expense after income taxes
    
    $
    2.3
    
    
    $
    2.5
    
    
    $
    7.7
    
    
    $
    7.7
  Note 11  Income Taxes
  12




---



##### Table of Contents



Note 12  Earnings per Share
   13 Weeks Ended
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,(dollars in millions, except per share amounts; shares in thousands)
    
    2009
    
    

    2008
    
    
    2009
    
    
    2008Net earnings attributable to Collective Brands, Inc. from continuing operations
    
    $
    37.0
    
    
    $
    47.4
    
    
    $
    93.8
    
    
    $
    75.7Less: net earnings allocated to participating securities(1)
    
    
    0.5
    
    
    
    0.5
    
    
    
    1.2
    
    
    
    1.1Net earnings available to common shareholders from continuing operations
    
    $
    36.5
    
    
    $
    46.9
    
    
    $
    92.6
    
    
    $
    74.6Weighted average shares outstanding  basic
    
    
    63,188
    
    
    
    63,017
    
    
    
    63,120
    
    
    
    62,896Net effect of dilutive stock options
    
    
    183
    
    
    
    3
    
    
    
    61
    
    
    
    1Net effect of dilutive SARs
    
    
    286
    
    
    
    
    
    
    
    98
    
    
    
    Weighted average shares outstanding  diluted
    
    
    63,657
    
    
    
    63,020
    
    
    
    63,279
    
    
    
    62,897Basic earnings per share attributable to Collective Brands, Inc.
common shareholders from continuing operations
    
    $
    0.58
    
    
    $
    0.74
    
    
    $
    1.47
    
    
    $
    1.19Diluted earnings per share attributable to Collective Brands, Inc.
common shareholders from continuing operations
    
    $
    0.57
    
    
    $
    0.74
    
    
    $
    1.46
    
    
    $
    1.19
 
 (1)
    
    Net earnings allocated to participating securities is calculated based upon a weighted
average percentage of participating securities in relation to total shares outstanding.  13




---



##### Table of Contents



Note 13  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
International, LP (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 is comprised of PLGs global wholesale operations.(iv)
    
    The PLG Retail reporting segment is comprised of PLGs specialty stores and outlet
stores.
  13 Weeks Ended
    
    
    39 Weeks EndedOctober 31,
    
    
    November 1,
    
    
    October 31,
    
    
    November 1,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues from external customers:Payless Domestic
    
    $
    578.1
    
    
    $
    553.7
    
    
    $
    1,695.7
    
    
    $
    1,729.6Payless International
    
    
    110.0
    
    
    
    111.4
    
    
    
    298.5
    
    
    
    332.7PLG Wholesale
    
    
    111.6
    
    
    
    132.1
    
    
    
    398.1
    
    
    
    473.2PLG Retail
    
    
    67.3
    
    
    
    65.5
    
    
    
    173.9
    
    
    
    171.3Revenues from external customers
    
    $
    867.0
    
    
    $
    862.7
    
    
    $
    2,566.2
    
    
    $
    2,706.8Operating profit from continuing operations:Payless Domestic
    
    $
    44.5
    
    
    $
    29.2
    
    
    $
    110.8
    
    
    $
    30.4Payless International
    
    
    11.2
    
    
    
    12.3
    
    
    
    17.4
    
    
    
    41.0PLG Wholesale
    
    
    0.1
    
    
    
    4.4
    
    
    
    21.7
    
    
    
    40.9PLG Retail
    
    
    5.2
    
    
    
    7.6
    
    
    
    3.9
    
    
    
    6.0Operating profit from continuing operations
    
    $
    61.0
    
    
    $
    53.5
    
    
    $
    153.8
    
    
    $
    118.3
 October 31,
    
    
    November 1,
    
    
    January 31,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009Operating segment total assets:Payless Domestic
    
    $
    1,216.4
    
    
    $
    1,396.3
    
    
    $
    1,109.1Payless International
    
    
    193.4
    
    
    
    199.5
    
    
    
    173.6PLG Wholesale
    
    
    821.3
    
    
    
    975.2
    
    
    
    894.7PLG Retail
    
    
    68.0
    
    
    
    114.7
    
    
    
    73.9Operating segment total assets
    
    $
    2,299.1
    
    
    $
    2,685.7
    
    
    $
    2,251.3
 Note 14  Commitments and Contingencies
 adidas America, Inc. and adidas-Salomon AG v. Payless ShoeSource, Inc.
 th
 14




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##### Table of Contents



th
   th
    In the Matter of Certain Foam Footwear
  American Eagle Outfitters and Retail Royalty Co. v. Payless ShoeSource, Inc.
  15




---



##### Table of Contents



Note 15  Impact of Recently Issued Accounting Standards
      16




---



##### Table of Contents



Note 16  Related Party Transactions
  Note 17  Subsequent Events
 17




---



##### Table of Contents



Note 18  Subsidiary Guarantors of Senior Notes  Condensed Consolidating Financial
Information
     18




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##### Table of Contents



13 Weeks Ended October 31, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    766.0
    
    
    $
    297.7
    
    
    $
    (196.7
    )
    
    $
    867.0Cost of sales
    
    
    
    
    
    
    519.1
    
    
    
    205.2
    
    
    
    (169.1
    )
    
    
    555.2Gross margin
    
    
    
    
    
    
    246.9
    
    
    
    92.5
    
    
    
    (27.6
    )
    
    
    311.8Selling, general and administrative expenses
    
    
    0.5
    
    
    
    212.0
    
    
    
    65.9
    
    
    
    (27.6
    )
    
    
    250.8Operating (loss) profit from continuing operations
    
    
    (0.5
    )
    
    
    34.9
    
    
    
    26.6
    
    
    
    
    
    
    
    61.0Interest expense
    
    
    5.9
    
    
    
    10.5
    
    
    
    
    
    
    
    (1.6
    )
    
    
    14.8Interest income
    
    
    
    
    
    
    (1.8
    )
    
    
    
    
    
    
    1.6
    
    
    
    (0.2
    )Equity in earnings of subsidiaries
    
    
    (41.0
    )
    
    
    (22.3
    )
    
    
    
    
    
    
    63.3
    
    
    
    Earnings from continuing operations before income taxes
    
    
    34.6
    
    
    
    48.5
    
    
    
    26.6
    
    
    
    (63.3
    )
    
    
    46.4(Benefit) provision for income taxes
    
    
    (2.3
    )
    
    
    7.4
    
    
    
    3.1
    
    
    
    
    
    
    
    8.2Net earnings from continuing operations
    
    
    36.9
    
    
    
    41.1
    
    
    
    23.5
    
    
    
    (63.3
    )
    
    
    38.2Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Net earnings
    
    
    36.9
    
    
    
    41.0
    
    
    
    23.5
    
    
    
    (63.3
    )
    
    
    38.1Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (1.2
    )
    
    
    
    
    
    
    (1.2
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    36.9
    
    
    $
    41.0
    
    
    $
    22.3
    
    
    $
    (63.3
    )
    
    $
    36.9
 39 Weeks Ended October 31, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    2,298.9
    
    
    $
    858.1
    
    
    $
    (590.8
    )
    
    $
    2,566.2Cost of sales
    
    
    
    
    
    
    1,579.1
    
    
    
    609.6
    
    
    
    (519.8
    )
    
    
    1,668.9Gross margin
    
    
    
    
    
    
    719.8
    
    
    
    248.5
    
    
    
    (71.0
    )
    
    
    897.3Selling, general and administrative expenses
    
    
    1.6
    
    
    
    633.1
    
    
    
    179.8
    
    
    
    (71.0
    )
    
    
    743.5Operating (loss) profit from continuing operations
    
    
    (1.6
    )
    
    
    86.7
    
    
    
    68.7
    
    
    
    
    
    
    
    153.8Interest expense
    
    
    18.6
    
    
    
    33.3
    
    
    
    0.1
    
    
    
    (5.6
    )
    
    
    46.4Interest income
    
    
    
    
    
    
    (6.6
    )
    
    
    
    
    
    
    5.6
    
    
    
    (1.0
    )Equity in earnings of subsidiaries
    
    
    (106.6
    )
    
    
    (62.4
    )
    
    
    
    
    
    
    169.0
    
    
    
    Earnings from continuing operations before income taxes
    
    
    86.4
    
    
    
    122.4
    
    
    
    68.6
    
    
    
    (169.0
    )
    
    
    108.4(Benefit) provision for income taxes
    
    
    (7.2
    )
    
    
    15.6
    
    
    
    4.7
    
    
    
    
    
    
    
    13.1Net earnings from continuing operations
    
    
    93.6
    
    
    
    106.8
    
    
    
    63.9
    
    
    
    (169.0
    )
    
    
    95.3Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Net earnings
    
    
    93.6
    
    
    
    106.6
    
    
    
    63.9
    
    
    
    (169.0
    )
    
    
    95.1Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (1.5
    )
    
    
    
    
    
    
    (1.5
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    93.6
    
    
    $
    106.6
    
    
    $
    62.4
    
    
    $
    (169.0
    )
    
    $
    93.6
 19




---



##### Table of Contents



13 Weeks Ended November 1, 2008Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    762.2
    
    
    $
    295.3
    
    
    $
    (194.8
    )
    
    $
    862.7Cost of sales
    
    
    
    
    
    
    533.7
    
    
    
    203.2
    
    
    
    (172.9
    )
    
    
    564.0Gross margin
    
    
    
    
    
    
    228.5
    
    
    
    92.1
    
    
    
    (21.9
    )
    
    
    298.7Selling, general and administrative
expenses
    
    
    (0.1
    )
    
    
    204.5
    
    
    
    62.6
    
    
    
    (21.9
    )
    
    
    245.1Restructuring charges
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Operating profit from continuing
operations
    
    
    0.1
    
    
    
    23.9
    
    
    
    29.5
    
    
    
    
    
    
    
    53.5Interest expense
    
    
    4.4
    
    
    
    15.5
    
    
    
    
    
    
    
    
    
    
    
    19.9Interest income
    
    
    
    
    
    
    (2.4
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (2.7
    )Equity in earnings of subsidiaries
    
    
    (49.2
    )
    
    
    (26.5
    )
    
    
    
    
    
    
    75.7
    
    
    
    Earnings from continuing operations
before income taxes
    
    
    44.9
    
    
    
    37.3
    
    
    
    29.8
    
    
    
    (75.7
    )
    
    
    36.3(Benefit) provision for income taxes
    
    
    (2.6
    )
    
    
    (11.8
    )
    
    
    1.5
    
    
    
    
    
    
    
    (12.9
    )Net earnings from continuing operations
    
    
    47.5
    
    
    
    49.1
    
    
    
    28.3
    
    
    
    (75.7
    )
    
    
    49.2Net earnings from discontinued
operations, net of income taxes
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Net earnings
    
    
    47.5
    
    
    
    49.2
    
    
    
    28.3
    
    
    
    (75.7
    )
    
    
    49.3Net earnings attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (1.8
    )
    
    
    
    
    
    
    (1.8
    )Net earnings attributable to
Collective Brands, Inc.
    
    $
    47.5
    
    
    $
    49.2
    
    
    $
    26.5
    
    
    $
    (75.7
    )
    
    $
    47.5
 39 Weeks Ended November 1, 2008Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    2,404.4
    
    
    $
    897.0
    
    
    $
    (594.6
    )
    
    $
    2,706.8Cost of sales
    
    
    
    
    
    
    1,730.9
    
    
    
    623.1
    
    
    
    (533.8
    )
    
    
    1,820.2Gross margin
    
    
    
    
    
    
    673.5
    
    
    
    273.9
    
    
    
    (60.8
    )
    
    
    886.6Selling, general and administrative
expenses
    
    
    0.5
    
    
    
    644.7
    
    
    
    183.7
    
    
    
    (60.8
    )
    
    
    768.1Restructuring charges
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Operating (loss) profit from
continuing operations
    
    
    (0.5
    )
    
    
    28.6
    
    
    
    90.2
    
    
    
    
    
    
    
    118.3Interest expense
    
    
    13.1
    
    
    
    44.7
    
    
    
    
    
    
    
    (0.1
    )
    
    
    57.7Interest income
    
    
    
    
    
    
    (4.7
    )
    
    
    (1.9
    )
    
    
    0.1
    
    
    
    (6.5
    )Equity in earnings of subsidiaries
    
    
    (80.5
    )
    
    
    (78.1
    )
    
    
    
    
    
    
    158.6
    
    
    
    Earnings from continuing operations
before income taxes
    
    
    66.9
    
    
    
    66.7
    
    
    
    92.1
    
    
    
    (158.6
    )
    
    
    67.1(Benefit) provision for income taxes
    
    
    (8.4
    )
    
    
    (14.2
    )
    
    
    9.2
    
    
    
    
    
    
    
    (13.4
    )Net earnings from continuing operations
    
    
    75.3
    
    
    
    80.9
    
    
    
    82.9
    
    
    
    (158.6
    )
    
    
    80.5Loss from discontinued operations, net
of income taxes
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    
    
    (0.4
    )Net earnings
    
    
    75.3
    
    
    
    80.5
    
    
    
    82.9
    
    
    
    (158.6
    )
    
    
    80.1Net earnings attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (4.8
    )
    
    
    
    
    
    
    (4.8
    )Net earnings attributable to
Collective Brands, Inc.
    
    $
    75.3
    
    
    $
    80.5
    
    
    $
    78.1
    
    
    $
    (158.6
    )
    
    $
    75.3
 20




---



##### Table of Contents



As of October 31, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    364.0
    
    
    $
    106.7
    
    
    $
    
    
    
    $
    470.7Accounts receivable, net
    
    
    
    
    
    
    71.0
    
    
    
    15.2
    
    
    
    (3.3
    )
    
    
    82.9Inventories
    
    
    
    
    
    
    323.0
    
    
    
    84.2
    
    
    
    (4.0
    )
    
    
    403.2Current deferred income taxes
    
    
    
    
    
    
    27.8
    
    
    
    4.4
    
    
    
    
    
    
    
    32.2Prepaid expenses
    
    
    7.9
    
    
    
    33.0
    
    
    
    8.9
    
    
    
    
    
    
    
    49.8Other current assets
    
    
    
    
    
    
    256.9
    
    
    
    105.1
    
    
    
    (335.7
    )
    
    
    26.3Current assets of discontinued operations
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    0.7Total current assets
    
    
    7.9
    
    
    
    1,076.4
    
    
    
    324.5
    
    
    
    (343.0
    )
    
    
    1,065.8Property and Equipment:Land
    
    
    
    
    
    
    7.0
    
    
    
    
    
    
    
    
    
    
    
    7.0Property, buildings and equipment
    
    
    
    
    
    
    1,221.6
    
    
    
    194.1
    
    
    
    
    
    
    
    1,415.7Accumulated depreciation and amortization
    
    
    
    
    
    
    (825.0
    )
    
    
    (124.0
    )
    
    
    
    
    
    
    (949.0
    )Property and equipment, net
    
    
    
    
    
    
    403.6
    
    
    
    70.1
    
    
    
    
    
    
    
    473.7Intangible assets, net
    
    
    
    
    
    
    411.0
    
    
    
    20.3
    
    
    
    
    
    
    
    431.3Goodwill
    
    
    
    
    
    
    142.1
    
    
    
    138.0
    
    
    
    
    
    
    
    280.1Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    5.8
    
    
    
    
    
    
    
    5.8Other assets
    
    
    1,380.1
    
    
    
    695.8
    
    
    
    3.0
    
    
    
    (2,036.5
    )
    
    
    42.4Total Assets
    
    $
    1,388.0
    
    
    $
    2,728.9
    
    
    $
    561.7
    
    
    $
    (2,379.5
    )
    
    $
    2,299.1LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    7.1
    
    
    $
    5.2
    
    
    $
    (5.2
    )
    
    $
    7.1Notes payable
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9Accounts payable
    
    
    
    
    
    
    87.7
    
    
    
    98.1
    
    
    
    (45.6
    )
    
    
    140.2Accrued expenses
    
    
    164.7
    
    
    
    287.8
    
    
    
    34.2
    
    
    
    (292.2
    )
    
    
    194.5Current liabilities of discontinued operations
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    
    
    
    
    1.7Total current liabilities
    
    
    164.7
    
    
    
    384.3
    
    
    
    138.4
    
    
    
    (343.0
    )
    
    
    344.4Long-term debt
    
    
    478.6
    
    
    
    686.0
    
    
    
    9.5
    
    
    
    (291.6
    )
    
    
    882.5Deferred income taxes
    
    
    
    
    
    
    53.5
    
    
    
    1.7
    
    
    
    
    
    
    
    55.2Other liabilities
    
    
    3.0
    
    
    
    227.1
    
    
    
    17.9
    
    
    
    
    
    
    
    248.0Noncurrent liabilities of discontinued operations
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Commitments and contingenciesEquity:Collective Brands, Inc. shareowners equity
    
    
    741.7
    
    
    
    1,377.7
    
    
    
    367.2
    
    
    
    (1,744.9
    )
    
    
    741.7Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    27.0
    
    
    
    
    
    
    
    27.0Total equity
    
    
    741.7
    
    
    
    1,377.7
    
    
    
    394.2
    
    
    
    (1,744.9
    )
    
    
    768.7Total Liabilities and Equity
    
    $
    1,388.0
    
    
    $
    2,728.9
    
    
    $
    561.7
    
    
    $
    (2,379.5
    )
    
    $
    2,299.1
 21




---



##### Table of Contents



As of November 1, 2008Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    404.1
    
    
    $
    119.5
    
    
    $
    
    
    
    $
    523.6Accounts receivable, net
    
    
    
    
    
    
    87.4
    
    
    
    10.8
    
    
    
    (9.1
    )
    
    
    89.1Inventories
    
    
    
    
    
    
    393.9
    
    
    
    78.5
    
    
    
    (4.8
    )
    
    
    467.6Current deferred income taxes
    
    
    
    
    
    
    42.6
    
    
    
    3.0
    
    
    
    
    
    
    
    45.6Prepaid expenses
    
    
    
    
    
    
    67.1
    
    
    
    7.7
    
    
    
    
    
    
    
    74.8Other current assets
    
    
    64.5
    
    
    
    269.1
    
    
    
    92.0
    
    
    
    (388.5
    )
    
    
    37.1Current assets of discontinued operations
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Total current assets
    
    
    64.5
    
    
    
    1,265.1
    
    
    
    311.5
    
    
    
    (402.4
    )
    
    
    1,238.7Property and Equipment:Land
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    8.6Property, buildings and equipment
    
    
    
    
    
    
    1,319.4
    
    
    
    167.4
    
    
    
    
    
    
    
    1,486.8Accumulated depreciation and amortization
    
    
    
    
    
    
    (843.4
    )
    
    
    (108.7
    )
    
    
    
    
    
    
    (952.1
    )Property and equipment, net
    
    
    
    
    
    
    484.6
    
    
    
    58.7
    
    
    
    
    
    
    
    543.3Intangible assets, net
    
    
    
    
    
    
    519.1
    
    
    
    20.3
    
    
    
    
    
    
    
    539.4Goodwill
    
    
    
    
    
    
    185.9
    
    
    
    138.1
    
    
    
    
    
    
    
    324.0Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Other assets
    
    
    1,458.7
    
    
    
    635.3
    
    
    
    1.9
    
    
    
    (2,055.8
    )
    
    
    40.1Total Assets
    
    $
    1,523.2
    
    
    $
    3,090.0
    
    
    $
    530.7
    
    
    $
    (2,458.2
    )
    
    $
    2,685.7LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    222.3
    
    
    $
    
    
    
    $
    
    
    
    $
    222.3Accounts payable
    
    
    
    
    
    
    123.1
    
    
    
    116.8
    
    
    
    (53.4
    )
    
    
    186.5Accrued expenses
    
    
    263.3
    
    
    
    251.2
    
    
    
    26.2
    
    
    
    (332.5
    )
    
    
    208.2Current liabilities of discontinued operations
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    1.8Total current liabilities
    
    
    263.3
    
    
    
    598.4
    
    
    
    143.0
    
    
    
    (385.9
    )
    
    
    618.8Long-term debt
    
    
    481.2
    
    
    
    710.5
    
    
    
    9.6
    
    
    
    (291.6
    )
    
    
    909.7Deferred income taxes
    
    
    
    
    
    
    115.8
    
    
    
    0.2
    
    
    
    
    
    
    
    116.0Other liabilities
    
    
    2.6
    
    
    
    223.8
    
    
    
    17.4
    
    
    
    
    
    
    
    243.8Commitments and contingenciesEquity:Collective Brands, Inc. shareowners equity
    
    
    776.1
    
    
    
    1,441.5
    
    
    
    339.2
    
    
    
    (1,780.7
    )
    
    
    776.1Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    21.3
    
    
    
    
    
    
    
    21.3Total equity
    
    
    776.1
    
    
    
    1,441.5
    
    
    
    360.5
    
    
    
    (1,780.7
    )
    
    
    797.4Total Liabilities and Equity
    
    $
    1,523.2
    
    
    $
    3,090.0
    
    
    $
    530.7
    
    
    $
    (2,458.2
    )
    
    $
    2,685.7
 22




---



##### Table of Contents



As of January 31, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    141.7
    
    
    $
    107.6
    
    
    $
    
    
    
    $
    249.3Accounts receivable, net
    
    
    
    
    
    
    87.6
    
    
    
    14.7
    
    
    
    (4.8
    )
    
    
    97.5Inventories
    
    
    
    
    
    
    416.0
    
    
    
    80.5
    
    
    
    (4.5
    )
    
    
    492.0Current deferred income taxes
    
    
    
    
    
    
    31.6
    
    
    
    4.0
    
    
    
    
    
    
    
    35.6Prepaid expenses
    
    
    0.7
    
    
    
    51.3
    
    
    
    6.7
    
    
    
    
    
    
    
    58.7Other current assets
    
    
    
    
    
    
    273.2
    
    
    
    81.3
    
    
    
    (329.2
    )
    
    
    25.3Current assets of discontinued operations
    
    
    
    
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    1.3Total current assets
    
    
    0.7
    
    
    
    1,002.7
    
    
    
    294.8
    
    
    
    (338.5
    )
    
    
    959.7Property and Equipment:Land
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    8.6Property, buildings and equipment
    
    
    
    
    
    
    1,287.8
    
    
    
    170.8
    
    
    
    
    
    
    
    1,458.6Accumulated depreciation and amortization
    
    
    
    
    
    
    (836.3
    )
    
    
    (109.5
    )
    
    
    
    
    
    
    (945.8
    )Property and equipment, net
    
    
    
    
    
    
    460.1
    
    
    
    61.3
    
    
    
    
    
    
    
    521.4Intangible assets, net
    
    
    
    
    
    
    422.2
    
    
    
    23.8
    
    
    
    
    
    
    
    446.0Goodwill
    
    
    
    
    
    
    143.6
    
    
    
    138.0
    
    
    
    
    
    
    
    281.6Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    1.7Other assets
    
    
    1,251.9
    
    
    
    636.2
    
    
    
    3.5
    
    
    
    (1,850.7
    )
    
    
    40.9Total Assets
    
    $
    1,252.6
    
    
    $
    2,664.8
    
    
    $
    523.1
    
    
    $
    (2,189.2
    )
    
    $
    2,251.3LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    24.8
    
    
    $
    30.0
    
    
    $
    (30.0
    )
    
    $
    24.8Accounts payable
    
    
    
    
    
    
    110.6
    
    
    
    96.2
    
    
    
    (33.0
    )
    
    
    173.8Accrued expenses
    
    
    148.3
    
    
    
    293.8
    
    
    
    36.0
    
    
    
    (275.4
    )
    
    
    202.7Current liabilities of discontinued operations
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Total current liabilities
    
    
    148.3
    
    
    
    431.1
    
    
    
    162.2
    
    
    
    (338.4
    )
    
    
    403.2Long-term debt
    
    
    479.3
    
    
    
    691.2
    
    
    
    9.6
    
    
    
    (291.7
    )
    
    
    888.4Deferred income taxes
    
    
    
    
    
    
    49.2
    
    
    
    
    
    
    
    
    
    
    
    49.2Other liabilities
    
    
    2.7
    
    
    
    244.4
    
    
    
    17.1
    
    
    
    
    
    
    
    264.2Noncurrent liabilities of discontinued operations
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Commitments and contingenciesEquity:Collective Brands, Inc. shareowners equity
    
    
    622.3
    
    
    
    1,248.6
    
    
    
    310.5
    
    
    
    (1,559.1
    )
    
    
    622.3Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    23.7
    
    
    
    
    
    
    
    23.7Total equity
    
    
    622.3
    
    
    
    1,248.6
    
    
    
    334.2
    
    
    
    (1,559.1
    )
    
    
    646.0Total Liabilities and Equity
    
    $
    1,252.6
    
    
    $
    2,664.8
    
    
    $
    523.1
    
    
    $
    (2,189.2
    )
    
    $
    2,251.3
 23




---



##### Table of Contents



39 Weeks Ended October 31, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    93.6
    
    
    $
    106.6
    
    
    $
    63.9
    
    
    $
    (169.0
    )
    
    $
    95.1Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Adjustments for non-cash items included in net earnings
    
    
    2.3
    
    
    
    116.2
    
    
    
    14.2
    
    
    
    
    
    
    
    132.7Changes in working capital
    
    
    9.2
    
    
    
    131.3
    
    
    
    (27.3
    )
    
    
    (24.9
    )
    
    
    88.3Other, net
    
    
    (104.7
    )
    
    
    (59.9
    )
    
    
    (7.3
    )
    
    
    158.4
    
    
    
    (13.5
    )Cash flow provided by operating activities
    
    
    0.4
    
    
    
    294.4
    
    
    
    43.5
    
    
    
    (35.5
    )
    
    
    302.8Investing Activities:Capital expenditures
    
    
    
    
    
    
    (48.6
    )
    
    
    (12.6
    )
    
    
    
    
    
    
    (61.2
    )Dividends received from related parties
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    (0.6
    )
    
    
    Cash flow used in investing activities
    
    
    
    
    
    
    (48.6
    )
    
    
    (12.0
    )
    
    
    (0.6
    )
    
    
    (61.2
    )Financing Activities:Net repayment of debt or notes payable, including deferred financing costs
    
    
    (1.0
    )
    
    
    (22.9
    )
    
    
    (23.9
    )
    
    
    24.8
    
    
    
    (23.0
    )Net issuances of common stock
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Net contribution from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    
    
    
    
    
    1.3Net distributions to parent
    
    
    
    
    
    
    (0.6
    )
    
    
    (10.7
    )
    
    
    11.3
    
    
    
    Cash flow used in financing activities
    
    
    (0.4
    )
    
    
    (23.5
    )
    
    
    (33.3
    )
    
    
    36.1
    
    
    
    (21.1
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    222.3
    
    
    
    (0.9
    )
    
    
    
    
    
    
    221.4Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    141.7
    
    
    
    107.6
    
    
    
    
    
    
    
    249.3Cash and cash equivalents, end of quarter
    
    $
    
    
    
    $
    364.0
    
    
    $
    106.7
    
    
    $
    
    
    
    $
    470.7
 39 Weeks Ended November 1, 2008Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    75.3
    
    
    $
    80.5
    
    
    $
    82.9
    
    
    $
    (158.6
    )
    
    $
    80.1Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Adjustments for non-cash items included in net earnings
    
    
    2.2
    
    
    
    88.7
    
    
    
    13.9
    
    
    
    
    
    
    
    104.8Changes in working capital
    
    
    18.8
    
    
    
    (7.6
    )
    
    
    (17.3
    )
    
    
    16.6
    
    
    
    10.5Other, net
    
    
    (95.4
    )
    
    
    (45.5
    )
    
    
    0.9
    
    
    
    142.0
    
    
    
    2.0Cash flow provided by operating activities
    
    
    0.9
    
    
    
    116.5
    
    
    
    80.4
    
    
    
    
    
    
    
    197.8Investing Activities:Capital expenditures
    
    
    
    
    
    
    (96.1
    )
    
    
    (11.4
    )
    
    
    
    
    
    
    (107.5
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    2.1Cash flow used in investing activities
    
    
    
    
    
    
    (94.0
    )
    
    
    (11.4
    )
    
    
    
    
    
    
    (105.4
    )Financing Activities:Net proceeds from debt or notes payable, including deferred financing costs
    
    
    
    
    
    
    209.4
    
    
    
    
    
    
    
    
    
    
    
    209.4Net purchases of common stock
    
    
    (0.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Net distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.2
    )Net contributions by (distributions to) parent
    
    
    
    
    
    
    102.7
    
    
    
    (102.7
    )
    
    
    
    
    
    
    Cash flow (used in) provided by provided by financing activities
    
    
    (0.9
    )
    
    
    312.1
    
    
    
    (102.9
    )
    
    
    
    
    
    
    208.3Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (9.6
    )
    
    
    
    
    
    
    (9.6
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    334.6
    
    
    
    (43.5
    )
    
    
    
    
    
    
    291.1Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    69.5
    
    
    
    163.0
    
    
    
    
    
    
    
    232.5Cash and cash equivalents, end of quarter
    
    $
    
    
    
    $
    404.1
    
    
    $
    119.5
    
    
    $
    
    
    
    $
    523.6
 24




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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 key 2009 events.
    
    Consolidated Review of Operations  an analysis of our consolidated results of
operations for the third quarter and first nine months ended October 31, 2009 and November
1, 2008 as presented in our Condensed Consolidated Financial Statements.
    
    Reporting Segment Review of Operations  an analysis of our results of operations for
the third quarter and nine months ended October 31, 2009 and November 1, 2008 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 31, 2009 of the 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.
 25




---



##### Table of Contents



Our Business
 ® ® ® ®
 Payless
 ® ® ®
  PLG
 ®
 ® ®
 Key 2009 Events
   26




---



##### Table of Contents



Consolidated Review of Operations
  Third Quarter
    
    
    First Nine Months2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    64.0
    
    
    
    65.4
    
    
    
    65.0
    
    
    
    67.2Gross margin
    
    
    36.0
    
    
    
    34.6
    
    
    
    35.0
    
    
    
    32.8Selling, general and administrative expense
    
    
    28.9
    
    
    
    28.4
    
    
    
    29.0
    
    
    
    28.4Operating profit from continuing operations
    
    
    7.1
    
    
    
    6.2
    
    
    
    6.0
    
    
    
    4.4Interest expense, net
    
    
    1.7
    
    
    
    2.0
    
    
    
    1.8
    
    
    
    1.9Net earnings from continuing operations before income taxes
    
    
    5.4
    
    
    
    4.2
    
    
    
    4.2
    
    
    
    2.5Effective income tax rate*
    
    
    17.7
    
    
    
    (35.5
    )
    
    
    12.1
    
    
    
    (20.0
    )Net earnings from continuing operations
    
    
    4.4
    
    
    
    5.7
    
    
    
    3.7
    
    
    
    3.0Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings
    
    
    4.4
    
    
    
    5.7
    
    
    
    3.7
    
    
    
    3.0Net earnings attributable to noncontrolling interests
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (0.2
    )Net earnings attributable to Collective Brands, Inc.
    
    
    4.3
    %
    
    
    5.5
    %
    
    
    3.6
    %
    
    
    2.8
    %
 
 *
    
    Percent of pre-tax earnings Net Earnings Attributable to Collective Brands, Inc.
   Net Sales
   Third Quarter
    
    First Nine Months2009
    
    2008
    
    2009
    
    2008Same-store sales
    
    
    3.1
    %
    
    
    (3.2
    )%
    
    
    (3.1
    )%
    
    
    (2.8
    )%Average selling price per unit
    
    
    1.6
    
    
    
    4.7
    
    
    
    1.8
    
    
    
    4.0Unit volume
    
    
    1.4
    
    
    
    (7.4
    )
    
    
    (8.0
    )
    
    
    (6.3
    )Footwear average selling price per unit
    
    
    3.0
    
    
    
    6.3
    
    
    
    7.1
    
    
    
    5.2Footwear unit volume
    
    
    (0.7
    )
    
    
    (9.4
    )
    
    
    (10.4
    )
    
    
    (7.8
    )Non-footwear average selling price per unit
    
    
    3.1
    
    
    
    4.8
    
    
    
    4.7
    
    
    
    2.7Non-footwear unit volume
    
    
    8.1
    
    
    
    (0.3
    )
    
    
    1.4
    
    
    
    0.2
 27




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##### Table of Contents



The Oprah
Winfrey Show
   Cost of Sales
   Gross Margin
   Selling, General and Administrative Expenses
   28




---



##### Table of Contents



Interest Expense (Income)
  Third Quarter
    
    
    First Nine Months(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Interest expense
    
    $
    14.8
    
    
    $
    19.9
    
    
    $
    46.4
    
    
    $
    57.7Interest income
    
    
    (0.2
    )
    
    
    (2.7
    )
    
    
    (1.0
    )
    
    
    (6.5
    )Interest expense, net
    
    $
    14.6
    
    
    $
    17.2
    
    
    $
    45.4
    
    
    $
    51.2
  Income Taxes
      Net Earnings Attributable to Noncontrolling Interests
  Reporting Segment Review of Operations
  29




---



##### Table of Contents



Third Quarter
    
    
    First Nine Months(in millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues from external customers:Payless Domestic
    
    $
    578.1
    
    
    $
    553.7
    
    
    $
    1,695.7
    
    
    $
    1,729.6Payless International
    
    
    110.0
    
    
    
    111.4
    
    
    
    298.5
    
    
    
    332.7PLG Wholesale
    
    
    111.6
    
    
    
    132.1
    
    
    
    398.1
    
    
    
    473.2PLG Retail
    
    
    67.3
    
    
    
    65.5
    
    
    
    173.9
    
    
    
    171.3Revenues from external customers
    
    $
    867.0
    
    
    $
    862.7
    
    
    $
    2,566.2
    
    
    $
    2,706.8Operating profit from continuing operations:Payless Domestic
    
    $
    44.5
    
    
    $
    29.2
    
    
    $
    110.8
    
    
    $
    30.4Payless International
    
    
    11.2
    
    
    
    12.3
    
    
    
    17.4
    
    
    
    41.0PLG Wholesale
    
    
    0.1
    
    
    
    4.4
    
    
    
    21.7
    
    
    
    40.9PLG Retail
    
    
    5.2
    
    
    
    7.6
    
    
    
    3.9
    
    
    
    6.0Operating profit from continuing operations
    
    $
    61.0
    
    
    $
    53.5
    
    
    $
    153.8
    
    
    $
    118.3
  Payless
    
    
    Payless
    
    
    PLGDomestic
    
    
    International
    
    
    Retail
    
    
    TotalThird Quarter 2009Beginning store count
    
    
    3,864
    
    
    
    639
    
    
    
    360
    
    
    
    4,863Stores opened
    
    
    4
    
    
    
    6
    
    
    
    4
    
    
    
    14Stores closed
    
    
    (22
    )
    
    
    (8
    )
    
    
    (1
    )
    
    
    (31
    )Ending store count
    
    
    3,846
    
    
    
    637
    
    
    
    363
    
    
    
    4,846First Nine Months 2009Beginning store count
    
    
    3,900
    
    
    
    622
    
    
    
    355
    
    
    
    4,877Stores opened
    
    
    26
    
    
    
    34
    
    
    
    11
    
    
    
    71Stores closed
    
    
    (80
    )
    
    
    (19
    )
    
    
    (3
    )
    
    
    (102
    )Ending store count
    
    
    3,846
    
    
    
    637
    
    
    
    363
    
    
    
    4,846Third Quarter 2008Beginning store count
    
    
    3,941
    
    
    
    606
    
    
    
    351
    
    
    
    4,898Stores opened
    
    
    13
    
    
    
    9
    
    
    
    3
    
    
    
    25Stores closed
    
    
    (29
    )
    
    
    (3
    )
    
    
    (1
    )
    
    
    (33
    )Ending store count
    
    
    3,925
    
    
    
    612
    
    
    
    353
    
    
    
    4,890First Nine Months 2008Beginning store count
    
    
    3,954
    
    
    
    598
    
    
    
    340
    
    
    
    4,892Stores opened
    
    
    84
    
    
    
    22
    
    
    
    21
    
    
    
    127Stores closed
    
    
    (113
    )
    
    
    (8
    )
    
    
    (8
    )
    
    
    (129
    )Ending store count
    
    
    3,925
    
    
    
    612
    
    
    
    353
    
    
    
    4,890
 Payless Domestic Segment Operating Results
  30




---



##### Table of Contents



Third Quarter
    
    First Nine MonthsPercent change
    
    
    
    
    
    
    
    
    
    Percent change(dollars in millions)
    
    2009
    
    2008
    
    2008 to 2009
    
    2009
    
    2008
    
    2008 to 2009Revenues from external customers
    
    $
    578.1
    
    
    $
    553.7
    
    
    
    4.4
    %
    
    $
    1,695.7
    
    
    $
    1,729.6
    
    
    
    (2.0)
    %Operating profit from continuing operations
    
    $
    44.5
    
    
    $
    29.2
    
    
    
    52.4
    %
    
    $
    110.8
    
    
    $
    30.4
    
    
    
    264.5
    %Operating profit from continuing operations
as % of revenues from external customers
    
    
    7.7
    %
    
    
    5.3
    %
    
    
    
    
    
    
    6.5
    %
    
    
    1.8
    %
     Payless International Segment Operating Results
  Third Quarter
    
    First Nine MonthsPercent change
    
    
    
    
    
    
    
    
    
    Percent change(dollars in millions)
    
    2009
    
    2008
    
    2008 to 2009
    
    2009
    
    2008
    
    2008 to 2009Revenues from external customers
    
    $
    110.0
    
    
    $
    111.4
    
    
    
    (1.3)
    %
    
    $
    298.5
    
    
    $
    332.7
    
    
    
    (10.3)
    %Operating profit from continuing operations
    
    $
    11.2
    
    
    $
    12.3
    
    
    
    (8.9)
    %
    
    $
    17.4
    
    
    $
    41.0
    
    
    
    (57.6)
    %Operating profit from continuing operations
as % of revenues from external customers
    
    
    10.2
    %
    
    
    11.0
    %
    
    
    
    
    
    
    5.8
    %
    
    
    12.3
    %
     31




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##### Table of Contents



PLG Wholesale Segment Operating Results
  Third Quarter
    
    First Nine MonthsPercent change
    
    
    
    
    
    
    
    
    
    Percent change(dollars in millions)
    
    2009
    
    2008
    
    2008 to 2009
    
    2009
    
    2008
    
    2008 to 2009Revenues from external customers
    
    $
    111.6
    
    
    $
    132.1
    
    
    
    (15.5)
    %
    
    $
    398.1
    
    
    $
    473.2
    
    
    
    (15.9)
    %Operating profit from continuing operations
    
    $
    0.1
    
    
    $
    4.4
    
    
    
    (97.7)
    %
    
    $
    21.7
    
    
    $
    40.9
    
    
    
    (46.9)
    %Operating profit from continuing operations
as % of revenues from external customers
    
    
    0.1
    %
    
    
    3.3
    %
    
    
    
    
    
    
    5.5
    %
    
    
    8.6
    %
      PLG Retail Segment Operating Results
  Third Quarter
    
    First Nine MonthsPercent change
    
    
    
    
    
    
    
    
    
    Percent change(dollars in millions)
    
    2009
    
    2008
    
    2008 to 2009
    
    2009
    
    2008
    
    2008 to 2009Revenues from external customers
    
    $
    67.3
    
    
    $
    65.5
    
    
    
    2.7
    %
    
    $
    173.9
    
    
    $
    171.3
    
    
    
    1.5
    %Operating profit from continuing operations
    
    $
    5.2
    
    
    $
    7.6
    
    
    
    (31.6
    )%
    
    $
    3.9
    
    
    $
    6.0
    
    
    
    (35.0
    )%Operating profit from continuing operations
as % of revenues from external customers
    
    
    7.7
    %
    
    
    11.6
    %
    
    
    
    
    
    
    2.2
    %
    
    
    3.5
    %
   32




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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 Nine Months2009
    
    2008(dollars in millions, shares in thousands)
    
    Dollars
    
    Shares
    
    Dollars
    
    SharesEmployee stock purchase, deferred compensation
and stock incentive plans
    
    $
    2.3
    
    
    
    159
    
    
    $
    1.7
    
    
    
    135
   33




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##### Table of Contents



Contractual Obligations
  Financial Condition Ratios
  October 31,
    
    November 1,
    
    January 31,2009
    
    2008
    
    2009Debt-capitalization ratio*
    
    
    53.7
    %
    
    
    58.7
    %
    
    
    58.6
    %
 
 *
    
    Debt-capitalization ratio 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-capitalization ratio, including the present value of
future minimum rental payments under operating leases as
debt and as capitalization, was 71.9%, 73.8% and 75.7%,
respectively, for the periods referred to above. Critical Accounting Policies
   Goodwill BalanceReporting Segment
    
    Reporting Unit
    
    (in millions)PLG Wholesale
    
    PLG Wholesale
    
    
    $
    239.9Payless Domestic
    
    Collective Licensing
    
    
    
    34.3Payless Domestic
    
    Payless Domestic
    
    
    
    5.9Total
    
    
    
    
    
    $
    280.1
   (dollars in millions)
    
    Potential Impairment ChargeDecrease of 100 basis points in royalty rate
    
    $
    25Decrease of 100 basis points in average growth rate
    
    
    8Increase of 100 basis points in the discount rate
    
    
    8
 34




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##### Table of Contents



New Accounting Standards
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Currency Risk
   
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   35




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  adidas America, Inc. and adidas-Salomon AG v. Payless ShoeSource, Inc.
 th th
   th
   36




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##### Table of Contents



In the Matter of Certain Foam Footwear
  American Eagle Outfitters and Retail Royalty Co. v. Payless ShoeSource, Inc.
  
 ITEM 1A. RISK FACTORS
  37




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##### Table of Contents



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)08/01/09  08/29/09
    
    
    20
    
    
    $
    14.48
    
    
    
    
    
    
    $
    204.808/30/09  10/03/09
    
    
    65
    
    
    
    17.38
    
    
    
    54
    
    
    
    203.810/04/09  10/31/09
    
    
    4
    
    
    
    17.70
    
    
    
    
    
    
    
    203.8Total
    
    
    89
    
    
    $
    16.74
    
    
    
    54
    
    
    $
    203.8

(2)
 
 (1)
    
    Includes an aggregate of approximately eighty-nine 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. 
 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 38




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##### Table of Contents



SIGNATURES
  COLLECTIVE BRANDS, INC.Date: December 3, 2009
    By:
    /s/ Matthew E. RubelMatthew E. RubelChief Executive Officer, President and 
Chairman of the Board
(Principal Executive Officer)Date: December 3, 2009
    By:
    /s/ Douglas G. BoessenDouglas G. BoessenDivision Senior Vice President -
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer) 39