##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended October 29, 2005
 Commission File Number 1-14770
 PAYLESS SHOESOURCE, INC.
  DELAWARE
    
    43-1813160(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 3231 SOUTHEAST SIXTH AVENUE, TOPEKA, KANSAS
    
    66607-2207(Address of principal executive offices)
    
    (Zip Code)
 
  þ o
  þ o
  o þ




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1  FINANCIAL STATEMENTSITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4  CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1  LEGAL PROCEEDINGSITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 5  OTHER INFORMATIONITEM 6  EXHIBITSSIGNATURESCertification Pursuant to Rule 13a-14(a)/15d-14(a) of CEO & PresidentCertification Pursuant to Rule 13a-14(a)/15d-14(a) of SVP, CFO & TreasurerCertification Pursuant to 18 U.S.C. 1350 of CEO & PresidentCertification Pursuant to 18 U.S.C. 1350 of SVP, CFO & Treasurer    Table of Contents  
  
  
 (dollars in millions)
    
    October 29,
    
    
    October 30,
    
    
    January 29,2005
    
    
    2004
    
    
    2005ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    405.4
    
    
    $
    216.2
    
    
    $
    289.6Marketable securities, available for sale
    
    
    
    
    
    
    9.0
    
    
    
    5.0Restricted cash
    
    
    2.0
    
    
    
    18.5
    
    
    
    3.0Inventories
    
    
    342.7
    
    
    
    361.7
    
    
    
    345.3Current deferred income taxes
    
    
    18.2
    
    
    
    26.8
    
    
    
    21.9Other current assets
    
    
    63.5
    
    
    
    66.8
    
    
    
    56.6Current assets of discontinued operations
    
    
    2.4
    
    
    
    17.9
    
    
    
    8.5Total current assets
    
    
    834.2
    
    
    
    716.9
    
    
    
    729.9Property and Equipment:Land
    
    
    7.7
    
    
    
    8.0
    
    
    
    8.0Property, buildings and equipment
    
    
    1,192.8
    
    
    
    1,216.9
    
    
    
    1,186.9Accumulated depreciation and amortization
    
    
    (811.4
    )
    
    
    (802.4
    )
    
    
    (772.6
    )Property and equipment, net
    
    
    389.1
    
    
    
    422.5
    
    
    
    422.3Favorable leases, net
    
    
    19.0
    
    
    
    22.7
    
    
    
    21.7Deferred income taxes
    
    
    24.0
    
    
    
    35.2
    
    
    
    36.4Goodwill, net
    
    
    5.9
    
    
    
    5.9
    
    
    
    5.9Other assets
    
    
    21.0
    
    
    
    25.7
    
    
    
    23.5Noncurrent assets of discontinued operations
    
    
    
    
    
    
    8.1
    
    
    
    0.1Total Assets
    
    $
    1,293.2
    
    
    $
    1,237.0
    
    
    $
    1,239.8LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of debt
    
    $
    1.6
    
    
    $
    3.5
    
    
    $
    0.3Notes payable
    
    
    2.0
    
    
    
    18.5
    
    
    
    3.0Accounts payable
    
    
    140.2
    
    
    
    106.0
    
    
    
    160.3Accrued expenses
    
    
    160.8
    
    
    
    164.6
    
    
    
    159.7Current liabilities of discontinued operations
    
    
    5.0
    
    
    
    5.9
    
    
    
    15.0Total current liabilities
    
    
    309.6
    
    
    
    298.5
    
    
    
    338.3Long-term debt
    
    
    204.2
    
    
    
    202.1
    
    
    
    204.3Other liabilities
    
    
    99.5
    
    
    
    87.4
    
    
    
    93.6Noncurrent liabilities of discontinued operations
    
    
    
    
    
    
    8.5
    
    
    
    Minority interest
    
    
    9.5
    
    
    
    7.5
    
    
    
    8.6Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    Total shareowners equity
    
    
    670.4
    
    
    
    633.0
    
    
    
    595.0Total Liabilities and Shareowners Equity
    
    $
    1,293.2
    
    
    $
    1,237.0
    
    
    $
    1,239.8
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##### Table of Contents



(dollars and shares in millions, except per share)
    
    13 Weeks Ended
    
    
    39 Weeks EndedOctober 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004Net sales
    
    $
    666.9
    
    
    $
    661.4
    
    
    $
    2,056.0
    
    
    $
    2,049.3Cost of sales
    
    
    448.4
    
    
    
    460.3
    
    
    
    1,358.0
    
    
    
    1,411.9Gross margin
    
    
    218.5
    
    
    
    201.1
    
    
    
    698.0
    
    
    
    637.4Selling, general and administrative expenses
    
    
    183.8
    
    
    
    175.7
    
    
    
    581.4
    
    
    
    545.6Restructuring charges
    
    
    1.2
    
    
    
    3.9
    
    
    
    1.9
    
    
    
    17.6Operating profit from continuing operations
    
    
    33.5
    
    
    
    21.5
    
    
    
    114.7
    
    
    
    74.2Interest expense
    
    
    4.7
    
    
    
    5.5
    
    
    
    14.6
    
    
    
    16.7Interest income
    
    
    (3.2
    )
    
    
    (1.2
    )
    
    
    (7.5
    )
    
    
    (3.5
    )Earnings from continuing operations before
income taxes and minority interest
    
    
    32.0
    
    
    
    17.2
    
    
    
    107.6
    
    
    
    61.0Provision for income taxes
    
    
    9.3
    
    
    
    4.9
    
    
    
    31.9
    
    
    
    15.1Earnings from continuing operations before
minority interest
    
    
    22.7
    
    
    
    12.3
    
    
    
    75.7
    
    
    
    45.9Minority interest, net of income taxes
    
    
    (0.8
    )
    
    
    0.2
    
    
    
    (0.3
    )
    
    
    4.3Net earnings from continuing operations
    
    
    21.9
    
    
    
    12.5
    
    
    
    75.4
    
    
    
    50.2Loss from discontinued operations, net of
income taxes and minority interest
    
    
    
    
    
    
    (5.9
    )
    
    
    (3.4
    )
    
    
    (25.7
    )Net earnings
    
    $
    21.9
    
    
    $
    6.6
    
    
    $
    72.0
    
    
    $
    24.5Basic earnings per share:Earnings from continuing operations
    
    $
    0.32
    
    
    $
    0.19
    
    
    $
    1.12
    
    
    $
    0.74Loss from discontinued operations
    
    
    
    
    
    
    (0.09
    )
    
    
    (0.05
    )
    
    
    (0.38
    )Basic earnings per share
    
    $
    0.32
    
    
    $
    0.10
    
    
    $
    1.07
    
    
    $
    0.36Diluted earnings per share:Earnings from continuing operations
    
    $
    0.32
    
    
    $
    0.19
    
    
    $
    1.11
    
    
    $
    0.74Loss from discontinued operations
    
    
    
    
    
    
    (0.09
    )
    
    
    (0.05
    )
    
    
    (0.38
    )Diluted earnings per share
    
    $
    0.32
    
    
    $
    0.10
    
    
    $
    1.06
    
    
    $
    0.36Basic Weighted Average Shares Outstanding
    
    
    67.7
    
    
    
    68.0
    
    
    
    67.4
    
    
    
    68.0Diluted Weighted Average Shares Outstanding
    
    
    68.1
    
    
    
    68.0
    
    
    
    67.6
    
    
    
    68.0
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(dollars in millions)
    
    39 Weeks EndedOctober 29, 2005
    
    
    October 30, 2004Operating Activities:Net earnings
    
    $
    72.0
    
    
    $
    24.5Loss from discontinued operation, net of
income taxes and minority interest
    
    
    (3.4
    )
    
    
    (25.7
    )Net earnings from continuing operations
    
    
    75.4
    
    
    
    50.2Adjustments for non-cash items included
in net earnings from continuing operations:Restructuring charges
    
    
    
    
    
    
    12.0Loss on impairment and disposal of assets
    
    
    6.8
    
    
    
    6.6Depreciation and amortization
    
    
    68.3
    
    
    
    71.2Amortization of deferred financing costs
    
    
    0.9
    
    
    
    0.9Amortization of unearned restricted stock
    
    
    0.8
    
    
    
    0.5Deferred income taxes
    
    
    16.4
    
    
    
    (12.9
    )Minority interest, net of income taxes
    
    
    0.3
    
    
    
    (4.3
    )Income tax benefit (charge) of stock
option exercises
    
    
    1.2
    
    
    
    (0.1
    )Changes in working capital:Inventories
    
    
    3.3
    
    
    
    15.7Other current assets
    
    
    (5.5
    )
    
    
    (5.1
    )Accounts payable
    
    
    (17.5
    )
    
    
    (23.7
    )Accrued expenses
    
    
    8.3
    
    
    
    41.0Other assets and liabilities, net
    
    
    7.4
    
    
    
    5.7Net cash (used in) provided by discontinued
operations
    
    
    (7.2
    )
    
    
    0.5Cash flow provided by operating activities
    
    
    158.9
    
    
    
    158.2Investing Activities:Payments for capital expenditures
    
    
    (49.6
    )
    
    
    (82.0
    )Dispositions of property and equipment
    
    
    0.8
    
    
    
    Restricted cash
    
    
    1.0
    
    
    
    15.0Purchases of marketable securities
    
    
    
    
    
    
    (13.0
    )Sales of marketable securities
    
    
    5.0
    
    
    
    14.0Cash flow used in investing activities
    
    
    (42.8
    )
    
    
    (66.0
    )Financing Activities:Repayment of notes payable
    
    
    (1.0
    )
    
    
    (15.0
    )Issuance of debt
    
    
    1.2
    
    
    
    2.4Payment of deferred financing costs
    
    
    
    
    
    
    (0.2
    )Repayment of debt
    
    
    (0.2
    )
    
    
    (0.7
    )Issuances of common stock
    
    
    14.6
    
    
    
    1.5Purchases of common stock
    
    
    (16.8
    )
    
    
    (2.3
    )Contributions by minority owners
    
    
    0.9
    
    
    
    1.9Cash flow used in financing activities
    
    
    (1.3
    )
    
    
    (12.4
    )Effect of exchange rate changes on cash
    
    
    1.0
    
    
    
    (0.3
    )Increase in cash and cash equivalents
    
    
    115.8
    
    
    
    79.5Cash and cash equivalents, beginning of year
    
    
    289.6
    
    
    
    136.7Cash and cash equivalents, end of period
    
    $
    405.4
    
    
    $
    216.2Supplemental cash flow information:Interest paid
    
    $
    19.7
    
    
    $
    20.8Income taxes paid
    
    $
    18.7
    
    
    $
    1.6Non-cash investing and operating activities:Accrued capital additions
    
    $
    5.1
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Accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccrualBalance as of
    
    
    2005 Charges
    
    
    
    
    
    
    Balance as ofTotal Charges
    
    
    January 29,
    
    
    Costs
    
    
    Accrual
    
    
    
    
    
    
    October 29,(dollars in millions)
    
    to Date
    
    
    2005
    
    
    Incurred
    
    
    Adjustments
    
    
    Cash Payments
    
    
    2005Employee severance costs
    
    $
    9.0
    
    
    $
    4.2
    
    
    $
    
    
    
    $
    (0.3
    )
    
    $
    (2.9
    )
    
    $
    1.0Contract termination costs
    
    
    26.3
    
    
    
    17.6
    
    
    
    
    
    
    
    5.0
    
    
    
    (16.7
    )
    
    
    5.9Other exit costs
    
    
    5.0
    
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    (1.2
    )
    
    
    1.240.3
    
    
    $
    21.8
    
    
    
    2.4
    
    
    $
    4.7
    
    
    $
    (20.8
    )
    
    $
    8.1Asset impairments and net
disposal losses
    
    
    35.0
    
    
    
    
    
    
    
    0.3Total Charges
    
    $
    75.3
    
    
    
    
    
    
    $
    2.7
 5




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Thirteen Weeks Ended October 30, 2004
 Payless
    
    Payless
    
    Payless(dollars in millions)
    
    Domestic
    
    International
    
    ConsolidatedNet sales
    
    $
    23.7
    
    
    $
    2.1
    
    
    $
    25.8Loss from discontinued operations before income taxes and minority interest
    
    
    (5.4
    )
    
    
    (1.1
    )
    
    
    (6.5
    )Benefit for income taxes
    
    
    (2.1
    )
    
    
    
    
    
    
    (2.1
    )Loss from discontinued operations before minority interest
    
    
    (3.3
    )
    
    
    (1.1
    )
    
    
    (4.4
    )Minority interest, net of income taxes
    
    
    
    
    
    
    0.5
    
    
    
    0.5Loss on disposal of discontinued operations, net of income taxes
of $0.8 and $0.0, respectively, and minority interest
of $0.0 and $0.6, respectively
    
    
    (1.1
    )
    
    
    (0.9
    )
    
    
    (2.0
    )Loss from discontinued operations, net of income taxes and minority interest
    
    $
    (4.4
    )
    
    $
    (1.5
    )
    
    $
    (5.9
    )
 Thirty-nine Weeks Ended October 29, 2005
 Payless
    
    Payless
    
    Payless(dollars in millions)
    
    Domestic
    
    International
    
    ConsolidatedLoss on disposal of discontinued operations before income taxes
    
    $
    (5.5
    )
    
    $
    
    
    
    $
    (5.5
    )Benefit for income taxes
    
    
    (2.1
    )
    
    
    
    
    
    
    (2.1
    )Loss from discontinued operations, net of income taxes
    
    $
    (3.4
    )
    
    $
    
    
    
    $
    (3.4
    )
 6




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Thirty-nine Weeks Ended October 30, 2004
 Payless
    
    Payless
    
    Payless(dollars in millions)
    
    Domestic
    
    International
    
    ConsolidatedNet sales
    
    $
    80.6
    
    
    $
    7.0
    
    
    $
    87.6Loss from discontinued operations before income taxes and minority interest
    
    
    (11.0
    )
    
    
    (5.0
    )
    
    
    (16.0
    )(Benefit) provision for income taxes
    
    
    (4.5
    )
    
    
    0.3
    
    
    
    (4.2
    )Loss from discontinued operations before minority interest
    
    
    (6.5
    )
    
    
    (5.3
    )
    
    
    (11.8
    )Minority interest, net of income taxes
    
    
    
    
    
    
    2.1
    
    
    
    2.1Loss on disposal of discontinued operations, net of income taxes
of $6.4 and $0.0, respectively, and minority interest
of $0.0 and $4.0, respectively
    
    
    (10.0
    )
    
    
    (6.0
    )
    
    
    (16.0
    )Loss from discontinued operations, net of income taxes and minority interest
    
    $
    (16.5
    )
    
    $
    (9.2
    )
    
    $
    (25.7
    )
  October 29, 2005
 Payless
    
    Payless
    
    Payless(dollars in millions)
    
    Domestic
    
    International
    
    ConsolidatedAssetsCurrent assets:Current deferred income taxes
    
    $
    1.9
    
    
    $
    
    
    
    $
    1.9Other current assets
    
    
    0.5
    
    
    
    
    
    
    
    0.5Total current assets of discontinued operations
    
    $
    2.4
    
    
    $
    
    
    
    $
    2.4LiabilitiesCurrent liabilities:Accrued expenses
    
    $
    5.0
    
    
    $
    
    
    
    $
    5.0Total current liabilities of discontinued operations
    
    $
    5.0
    
    
    $
    
    
    
    $
    5.0
 October 30, 2004
 Payless
    
    Payless
    
    Payless(dollars in millions)
    
    Domestic
    
    International
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    0.2
    
    
    $
    0.7
    
    
    $
    0.9Inventories
    
    
    13.0
    
    
    
    1.2
    
    
    
    14.2Current deferred income taxes
    
    
    0.2
    
    
    
    
    
    
    
    0.2Other current assets
    
    
    2.4
    
    
    
    0.2
    
    
    
    2.6Total current assets of discontinued operations
    
    $
    15.8
    
    
    $
    2.1
    
    
    $
    17.9Property and equipment, net
    
    $
    1.1
    
    
    $
    
    
    
    $
    1.1Deferred income taxes
    
    
    6.5
    
    
    
    
    
    
    
    6.5Other assets
    
    
    0.1
    
    
    
    0.4
    
    
    
    0.5Total non-current assets of discontinued operations
    
    $
    7.7
    
    
    $
    0.4
    
    
    $
    8.1LiabilitiesCurrent liabilities:Accounts payable
    
    $
    4.4
    
    
    $
    0.3
    
    
    $
    4.7Accrued expenses
    
    
    0.9
    
    
    
    0.3
    
    
    
    1.2Total current liabilities of discontinued operations
    
    $
    5.3
    
    
    $
    0.6
    
    
    $
    5.9Other liabilities
    
    $
    8.4
    
    
    $
    0.1
    
    
    $
    8.5Total non-current liabilities of discontinued operations
    
    $
    8.4
    
    
    $
    0.1
    
    
    $
    8.5
 7




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January 29, 2005
 Payless
    
    Payless
    
    Payless(dollars in millions)
    
    Domestic
    
    International
    
    ConsolidatedAssetsCurrent assets:Current deferred income taxes
    
    $
    5.6
    
    
    $
    
    
    
    $
    5.6Other current assets
    
    
    2.9
    
    
    
    
    
    
    
    2.9Total current assets of discontinued operations
    
    $
    8.5
    
    
    $
    
    
    
    $
    8.5Other assets
    
    
    0.1
    
    
    
    
    
    
    
    0.1Total non-current assets of discontinued operations
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.1LiabilitiesCurrent liabilities:Accounts payable
    
    $
    0.2
    
    
    $
    
    
    
    $
    0.2Accrued expenses
    
    
    14.8
    
    
    
    
    
    
    
    14.8Total current liabilities of discontinued operations
    
    $
    15.0
    
    
    $
    
    
    
    $
    15.0
    (dollars in millions, except per share amounts)
    
    13 Weeks Ended
    
    
    39 Weeks EndedOctober 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004Net earnings:As reported
    
    $
    21.9
    
    
    $
    6.6
    
    
    $
    72.0
    
    
    $
    24.5Add: Total stock-based employee compensation expense included in
net earnings as reported, net of related income taxes
    
    
    0.1
    
    
    
    0.2
    
    
    
    3.2
    
    
    
    0.8Less: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related
income taxes
    
    
    1.2
    
    
    
    0.8
    
    
    
    5.9
    
    
    
    2.7Pro forma
    
    $
    20.8
    
    
    $
    6.0
    
    
    $
    69.3
    
    
    $
    22.6Diluted earnings per share:As reported
    
    $
    0.32
    
    
    $
    0.10
    
    
    $
    1.06
    
    
    $
    0.36Pro forma
    
    $
    0.30
    
    
    $
    0.09
    
    
    $
    1.02
    
    
    $
    0.33Basic earnings per share:As reported
    
    $
    0.32
    
    
    $
    0.10
    
    
    $
    1.07
    
    
    $
    0.36Pro forma
    
    $
    0.30
    
    
    $
    0.09
    
    
    $
    1.03
    
    
    $
    0.33
  8




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(dollars in millions)
    
    October 29, 2005
    
    
    October 30, 2004
    
    
    January 29, 2005Gross carrying amount
    
    $
    76.0
    
    
    $
    80.4
    
    
    $
    78.2Less: accumulated amortization
    
    
    (57.0
    )
    
    
    (57.6
    )
    
    
    (56.5
    )Carrying amount, end of period
    
    $
    19.0
    
    
    $
    22.7
    
    
    $
    21.7
  (dollars in millions)
    
    13 Weeks Ended
    
    39 Weeks EndedOctober 29, 2005
    
    October 30, 2004
    
    October 29, 2005
    
    October 30, 2004Amortization
expense on
favorable leases
    
    $
    0.8
    
    
    $
    1.0
    
    
    $
    2.6
    
    
    $
    3.1
  Year
    
    AmountRemainder of 2005
    
    $
    0.92006
    
    
    3.12007
    
    
    2.72008
    
    
    2.42009
    
    
    2.1
   9




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Year
    
    Percentage2008
    
    
    104.125
    %2009
    
    
    102.750
    %2010
    
    
    101.375
    %2011 and thereafter
    
    
    100.000
    %
    (dollars in millions)
    
    13 Weeks Ended
    
    
    39 Weeks EndedOctober 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004Components of pension expense:Service cost
    
    $
    0.2
    
    
    $
    0.3
    
    
    $
    0.6
    
    
    $
    0.7Interest cost
    
    
    0.2
    
    
    
    0.4
    
    
    
    0.8
    
    
    
    1.0Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.2Amortization of actuarial loss
    
    
    0.1
    
    
    
    
    
    
    
    0.2
    
    
    
    0.2Total
    
    $
    0.5
    
    
    $
    0.7
    
    
    $
    1.7
    
    
    $
    2.1
    (dollars in millions)
    
    13 Weeks Ended
    
    
    39 Weeks EndedOctober 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004Net earnings
    
    $
    21.9
    
    
    $
    6.6
    
    
    $
    72.0
    
    
    $
    24.5Foreign currency translation adjustments
    
    
    2.5
    
    
    
    5.2
    
    
    
    3.6
    
    
    
    4.4Total comprehensive income
    
    $
    24.4
    
    
    $
    11.8
    
    
    $
    75.6
    
    
    $
    28.9
  10




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(dollars and shares in millions, except per share)
    
    13 Weeks Ended
    
    
    39 Weeks EndedOctober 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004Diluted Computation:Net earnings from continuing operations
    
    $
    21.9
    
    
    $
    12.5
    
    
    $
    75.4
    
    
    $
    50.2Weighted average common shares outstanding
    
    
    67.7
    
    
    
    68.0
    
    
    
    67.4
    
    
    
    68.0Net effect of dilutive stock options and unearned
restricted stock based on the treasury stock method
    
    
    0.4
    
    
    
    
    
    
    
    0.2
    
    
    
    Outstanding shares for diluted earnings per share
    
    
    68.1
    
    
    
    68.0
    
    
    
    67.6
    
    
    
    68.0Diluted earnings per share from continuing operations
    
    $
    0.32
    
    
    $
    0.19
    
    
    $
    1.11
    
    
    $
    0.74Basic Computation:Net earnings from continuing operations
    
    $
    21.9
    
    
    $
    12.5
    
    
    $
    75.4
    
    
    $
    50.2Weighted average common shares outstanding
    
    
    67.7
    
    
    
    68.0
    
    
    
    67.4
    
    
    
    68.0Basic earnings per share from continuing operations
    
    $
    0.32
    
    
    $
    0.19
    
    
    $
    1.12
    
    
    $
    0.74
   11




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##### Table of Contents



Operating Profit from Continuing OperationsAs previously(dollars in millions)
    
    reported
    
    
    Adjustment
    
    
    As restatedThirty-nine weeks ended October 30, 2004:Payless Domestic
    
    $
    62.0
    
    
    $
    8.6
    
    
    $
    70.6Payless International
    
    
    12.2
    
    
    
    (8.6
    )
    
    
    3.6$
    74.2
    
    
    $
    
    
    
    $
    74.2
  (dollars in millions)
    
    Payless Domestic
    
    Payless International
    
    Payless ConsolidatedThirteen weeks ended October 29, 2005:Revenues from external customers
    
    $
    576.3
    
    
    $
    90.6
    
    
    $
    666.9Operating profit from continuing
operations
    
    
    23.5
    
    
    
    10.0
    
    
    
    33.5Thirty-nine weeks ended October 29, 2005:Revenues from external customers
    
    $
    1,793.5
    
    
    $
    262.5
    
    
    $
    2,056.0Operating profit from continuing
operations
    
    
    92.5
    
    
    
    22.2
    
    
    
    114.7Total assets
    
    
    1,128.7
    
    
    
    164.5
    
    
    
    1,293.2Thirteen weeks ended October 30, 2004:Revenues from external customers
    
    $
    579.2
    
    
    $
    82.2
    
    
    $
    661.4Operating profit from continuing
operations
    
    
    16.5
    
    
    
    5.0
    
    
    
    21.5Thirty-nine weeks ended October 30,
2004 (as restated):Revenues from external customers
    
    $
    1,811.2
    
    
    $
    238.1
    
    
    $
    2,049.3Operating profit from continuing
operations
    
    
    70.6
    
    
    
    3.6
    
    
    
    74.2Total assets
    
    
    1,056.0
    
    
    
    181.0
    
    
    
    1,237.0
      12




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13




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##### Table of Contents



14




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    285.6
    
    
    $
    119.8
    
    
    $
    
    
    
    $
    405.4Restricted cash
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Inventories
    
    
    
    
    
    
    283.3
    
    
    
    61.7
    
    
    
    (2.3
    )
    
    
    342.7Current deferred income taxes
    
    
    
    
    
    
    18.2
    
    
    
    
    
    
    
    
    
    
    
    18.2Other current assets
    
    
    26.3
    
    
    
    93.1
    
    
    
    20.1
    
    
    
    (76.0
    )
    
    
    63.5Current assets of discontinued operations
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    
    
    
    
    2.4Total current assets
    
    
    26.3
    
    
    
    682.6
    
    
    
    203.6
    
    
    
    (78.3
    )
    
    
    834.2Property and Equipment:Land
    
    
    
    
    
    
    7.7
    
    
    
    
    
    
    
    
    
    
    
    7.7Property, buildings and equipment
    
    
    
    
    
    
    1,053.8
    
    
    
    139.0
    
    
    
    
    
    
    
    1,192.8Accumulated depreciation and amortization
    
    
    
    
    
    
    (736.3
    )
    
    
    (75.1
    )
    
    
    
    
    
    
    (811.4
    )Property and equipment, net
    
    
    
    
    
    
    325.2
    
    
    
    63.9
    
    
    
    
    
    
    
    389.1Favorable leases, net
    
    
    
    
    
    
    19.0
    
    
    
    
    
    
    
    
    
    
    
    19.0Deferred income taxes
    
    
    
    
    
    
    13.6
    
    
    
    10.4
    
    
    
    
    
    
    
    24.0Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,148.8
    
    
    
    445.4
    
    
    
    1.7
    
    
    
    (1,574.9
    )
    
    
    21.0Total assets
    
    $
    1,175.1
    
    
    $
    1,491.7
    
    
    $
    279.6
    
    
    $
    (1,653.2
    )
    
    $
    1,293.2LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.4
    
    
    $
    1.2
    
    
    $
    
    
    
    $
    1.6Notes payable
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Accounts payable
    
    
    
    
    
    
    131.4
    
    
    
    73.2
    
    
    
    (64.4
    )
    
    
    140.2Accrued expenses
    
    
    22.5
    
    
    
    138.3
    
    
    
    13.9
    
    
    
    (13.9
    )
    
    
    160.8Current liabilities of discontinued operations
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    
    
    
    
    5.0Total current liabilities
    
    
    22.5
    
    
    
    275.1
    
    
    
    90.3
    
    
    
    (78.3
    )
    
    
    309.6Long-term debt
    
    
    480.3
    
    
    
    0.7
    
    
    
    6.4
    
    
    
    (283.2
    )
    
    
    204.2Other liabilities
    
    
    1.9
    
    
    
    85.3
    
    
    
    12.3
    
    
    
    
    
    
    
    99.5Minority interest
    
    
    
    
    
    
    
    
    
    
    9.5
    
    
    
    
    
    
    
    9.5Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareowners equity
    
    
    670.4
    
    
    
    1,130.6
    
    
    
    161.1
    
    
    
    (1,291.7
    )
    
    
    670.4Total liabilities and shareowners equity
    
    $
    1,175.1
    
    
    $
    1,491.7
    
    
    $
    279.6
    
    
    $
    (1,653.2
    )
    
    $
    1,293.2
 15




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    158.2
    
    
    $
    58.0
    
    
    $
    
    
    
    $
    216.2Marketable securities, available for sale
    
    
    
    
    
    
    9.0
    
    
    
    
    
    
    
    
    
    
    
    9.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    18.5
    
    
    
    
    
    
    
    18.5Inventories
    
    
    
    
    
    
    295.7
    
    
    
    69.2
    
    
    
    (3.2
    )
    
    
    361.7Current deferred income taxes
    
    
    
    
    
    
    26.8
    
    
    
    
    
    
    
    
    
    
    
    26.8Other current assets
    
    
    14.1
    
    
    
    63.4
    
    
    
    40.0
    
    
    
    (50.7
    )
    
    
    66.8Current assets of discontinued operations
    
    
    
    
    
    
    15.6
    
    
    
    2.3
    
    
    
    
    
    
    
    17.9Total current assets
    
    
    14.1
    
    
    
    568.7
    
    
    
    188.0
    
    
    
    (53.9
    )
    
    
    716.9Property and Equipment:Land
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    
    
    
    
    8.0Property, buildings and equipment
    
    
    
    
    
    
    1,081.0
    
    
    
    135.9
    
    
    
    
    
    
    
    1,216.9Accumulated depreciation and amortization
    
    
    
    
    
    
    (737.8
    )
    
    
    (64.6
    )
    
    
    
    
    
    
    (802.4
    )Property and equipment, net
    
    
    
    
    
    
    351.2
    
    
    
    71.3
    
    
    
    
    
    
    
    422.5Favorable leases, net
    
    
    
    
    
    
    22.7
    
    
    
    
    
    
    
    
    
    
    
    22.7Deferred income taxes
    
    
    
    
    
    
    24.5
    
    
    
    10.7
    
    
    
    
    
    
    
    35.2Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,106.1
    
    
    
    444.5
    
    
    
    1.6
    
    
    
    (1,526.5
    )
    
    
    25.7Non-current assets of discontinued operations
    
    
    
    
    
    
    7.7
    
    
    
    0.4
    
    
    
    
    
    
    
    8.1Total assets
    
    $
    1,120.2
    
    
    $
    1,425.2
    
    
    $
    272.0
    
    
    $
    (1,580.4
    )
    
    $
    1,237.0LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    1.1
    
    
    $
    2.4
    
    
    $
    
    
    
    $
    3.5Notes payable
    
    
    
    
    
    
    
    
    
    
    18.5
    
    
    
    
    
    
    
    18.5Accounts payable
    
    
    
    
    
    
    80.7
    
    
    
    65.7
    
    
    
    (40.4
    )
    
    
    106.0Accrued expenses
    
    
    3.1
    
    
    
    150.9
    
    
    
    24.1
    
    
    
    (13.5
    )
    
    
    164.6Current liabilities of discontinued operations
    
    
    
    
    
    
    5.3
    
    
    
    0.6
    
    
    
    
    
    
    
    5.9Total current liabilities
    
    
    3.1
    
    
    
    238.0
    
    
    
    111.3
    
    
    
    (53.9
    )
    
    
    298.5Long-term debt
    
    
    480.0
    
    
    
    1.1
    
    
    
    4.0
    
    
    
    (283.0
    )
    
    
    202.1Other liabilities
    
    
    1.5
    
    
    
    103.7
    
    
    
    14.6
    
    
    
    (32.4
    )
    
    
    87.4Non-current liabilities of discontinued operations
    
    
    
    
    
    
    8.4
    
    
    
    0.1
    
    
    
    
    
    
    
    8.5Minority interest
    
    
    
    
    
    
    
    
    
    
    7.5
    
    
    
    
    
    
    
    7.5Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareowners equity
    
    
    635.6
    
    
    
    1,074.0
    
    
    
    134.5
    
    
    
    (1,211.1
    )
    
    
    633.0Total liabilities and shareowners equity
    
    $
    1,120.2
    
    
    $
    1,425.2
    
    
    $
    272.0
    
    
    $
    (1,580.4
    )
    
    $
    1,237.0
 16




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    210.8
    
    
    $
    78.8
    
    
    $
    
    
    
    $
    289.6Marketable securities, available for sale
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    
    
    
    
    5.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    3.0Inventories
    
    
    
    
    
    
    277.1
    
    
    
    71.0
    
    
    
    (2.8
    )
    
    
    345.3Current deferred income taxes
    
    
    
    
    
    
    21.9
    
    
    
    
    
    
    
    
    
    
    
    21.9Other current assets
    
    
    16.8
    
    
    
    50.6
    
    
    
    50.1
    
    
    
    (60.9
    )
    
    
    56.6Current assets of discontinued operations
    
    
    
    
    
    
    8.5
    
    
    
    
    
    
    
    
    
    
    
    8.5Total current assets
    
    
    16.8
    
    
    
    573.9
    
    
    
    202.9
    
    
    
    (63.7
    )
    
    
    729.9Property and Equipment:Land
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    
    
    
    
    8.0Property, buildings and equipment
    
    
    
    
    
    
    1,051.3
    
    
    
    135.6
    
    
    
    
    
    
    
    1,186.9Accumulated depreciation and amortization
    
    
    
    
    
    
    (705.7
    )
    
    
    (66.9
    )
    
    
    
    
    
    
    (772.6
    )Property and equipment, net
    
    
    
    
    
    
    353.6
    
    
    
    68.7
    
    
    
    
    
    
    
    422.3Favorable leases, net
    
    
    
    
    
    
    21.7
    
    
    
    
    
    
    
    
    
    
    
    21.7Deferred income taxes
    
    
    
    
    
    
    25.1
    
    
    
    11.3
    
    
    
    
    
    
    
    36.4Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,067.1
    
    
    
    439.9
    
    
    
    1.9
    
    
    
    (1,485.4
    )
    
    
    23.5Non-current assets of discontinued operations
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Total assets
    
    $
    1,083.9
    
    
    $
    1,420.2
    
    
    $
    284.8
    
    
    $
    (1,549.1
    )
    
    $
    1,239.8LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    
    
    
    $
    0.3Notes payable
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    3.0Accounts payable
    
    
    
    
    
    
    122.0
    
    
    
    77.4
    
    
    
    (39.1
    )
    
    
    160.3Accrued expenses
    
    
    7.2
    
    
    
    156.9
    
    
    
    20.2
    
    
    
    (24.6
    )
    
    
    159.7Current liabilities of discontinued operations
    
    
    
    
    
    
    15.0
    
    
    
    
    
    
    
    
    
    
    
    15.0Total current liabilities
    
    
    7.2
    
    
    
    294.2
    
    
    
    100.6
    
    
    
    (63.7
    )
    
    
    338.3Long-term debt
    
    
    480.2
    
    
    
    0.9
    
    
    
    6.4
    
    
    
    (283.2
    )
    
    
    204.3Other liabilities
    
    
    1.5
    
    
    
    82.8
    
    
    
    13.7
    
    
    
    (4.4
    )
    
    
    93.6Minority interest
    
    
    
    
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    8.6Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareowners equity
    
    
    595.0
    
    
    
    1,042.3
    
    
    
    155.5
    
    
    
    (1,197.8
    )
    
    
    595.0Total liabilities and shareowners equity
    
    $
    1,083.9
    
    
    $
    1,420.2
    
    
    $
    284.8
    
    
    $
    (1,549.1
    )
    
    $
    1,239.8
 17




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    608.2
    
    
    $
    188.7
    
    
    $
    (130.0
    )
    
    $
    666.9Cost of sales
    
    
    
    
    
    
    430.6
    
    
    
    145.6
    
    
    
    (127.8
    )
    
    
    448.4Gross Margin
    
    
    
    
    
    
    177.6
    
    
    
    43.1
    
    
    
    (2.2
    )
    
    
    218.5Selling, general and administrative expense
    
    
    1.1
    
    
    
    159.9
    
    
    
    25.0
    
    
    
    (2.2
    )
    
    
    183.8Restructuring charges
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    1.2Operating (loss) profit from continuing operations
    
    
    (1.1
    )
    
    
    16.5
    
    
    
    18.1
    
    
    
    
    
    
    
    33.5Interest expense
    
    
    8.1
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    (3.9
    )
    
    
    4.7Interest income
    
    
    
    
    
    
    (6.8
    )
    
    
    (0.3
    )
    
    
    3.9
    
    
    
    (3.2
    )Equity in earnings of subsidiaries
    
    
    (27.8
    )
    
    
    (7.3
    )
    
    
    
    
    
    
    35.1
    
    
    
    Earnings from continuing operations before income
taxes and minority interest
    
    
    18.6
    
    
    
    30.4
    
    
    
    18.1
    
    
    
    (35.1
    )
    
    
    32.0(Benefit) provision for income taxes
    
    
    (3.3
    )
    
    
    2.6
    
    
    
    10.0
    
    
    
    
    
    
    
    9.3Earnings from continuing operations before
minority interest
    
    
    21.9
    
    
    
    27.8
    
    
    
    8.1
    
    
    
    (35.1
    )
    
    
    22.7Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.8
    )Net earnings from continuing operations
    
    
    21.9
    
    
    
    27.8
    
    
    
    7.3
    
    
    
    (35.1
    )
    
    
    21.9Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings
    
    $
    21.9
    
    
    $
    27.8
    
    
    $
    7.3
    
    
    $
    (35.1
    )
    
    $
    21.9
 18




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    611.6
    
    
    $
    163.9
    
    
    $
    (114.1
    )
    
    $
    661.4Cost of sales
    
    
    
    
    
    
    442.3
    
    
    
    130.0
    
    
    
    (112.0
    )
    
    
    460.3Gross Margin
    
    
    
    
    
    
    169.3
    
    
    
    33.9
    
    
    
    (2.1
    )
    
    
    201.1Selling, general and administrative expense
    
    
    0.8
    
    
    
    145.1
    
    
    
    31.9
    
    
    
    (2.1
    )
    
    
    175.7Restructuring charges
    
    
    
    
    
    
    3.9
    
    
    
    
    
    
    
    
    
    
    
    3.9Operating (loss) profit from continuing operations
    
    
    (0.8
    )
    
    
    20.3
    
    
    
    2.0
    
    
    
    
    
    
    
    21.5Interest expense
    
    
    6.9
    
    
    
    0.1
    
    
    
    0.8
    
    
    
    (2.3
    )
    
    
    5.5Interest income
    
    
    
    
    
    
    (2.9
    )
    
    
    (0.6
    )
    
    
    2.3
    
    
    
    (1.2
    )Equity in (earnings) loss of subsidiaries
    
    
    (11.8
    )
    
    
    3.2
    
    
    
    
    
    
    
    8.6
    
    
    
    Earnings (loss) from continuing operations before
income taxes and minority interest
    
    
    4.1
    
    
    
    19.9
    
    
    
    1.8
    
    
    
    (8.6
    )
    
    
    17.2(Benefit) provision for income taxes
    
    
    (2.5
    )
    
    
    3.7
    
    
    
    3.7
    
    
    
    
    
    
    
    4.9Earnings (loss) from continuing operations before
minority interest
    
    
    6.6
    
    
    
    16.2
    
    
    
    (1.9
    )
    
    
    (8.6
    )
    
    
    12.3Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Net earnings (loss) from continuing operations
    
    
    6.6
    
    
    
    16.2
    
    
    
    (1.7
    )
    
    
    (8.6
    )
    
    
    12.5Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    (4.4
    )
    
    
    (1.5
    )
    
    
    
    
    
    
    (5.9
    )Net earnings (loss)
    
    $
    6.6
    
    
    $
    11.8
    
    
    $
    (3.2
    )
    
    $
    (8.6
    )
    
    $
    6.6
 19




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,882.9
    
    
    $
    546.6
    
    
    $
    (373.5
    )
    
    $
    2,056.0Cost of sales
    
    
    
    
    
    
    1,293.3
    
    
    
    430.5
    
    
    
    (365.8
    )
    
    
    1,358.0Gross Margin
    
    
    
    
    
    
    589.6
    
    
    
    116.1
    
    
    
    (7.7
    )
    
    
    698.0Selling, general and administrative expense
    
    
    3.4
    
    
    
    507.5
    
    
    
    78.2
    
    
    
    (7.7
    )
    
    
    581.4Restructuring charges
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Operating (loss) profit from continuing operations
    
    
    (3.4
    )
    
    
    80.2
    
    
    
    37.9
    
    
    
    
    
    
    
    114.7Interest expense
    
    
    23.3
    
    
    
    0.9
    
    
    
    1.0
    
    
    
    (10.6
    )
    
    
    14.6Interest income
    
    
    
    
    
    
    (17.0
    )
    
    
    (1.1
    )
    
    
    10.6
    
    
    
    (7.5
    )Equity in earnings of subsidiaries
    
    
    (89.2
    )
    
    
    (25.9
    )
    
    
    
    
    
    
    115.1
    
    
    
    Earnings from continuing operations before income
taxes and minority interest
    
    
    62.5
    
    
    
    122.2
    
    
    
    38.0
    
    
    
    (115.1
    )
    
    
    107.6(Benefit) provision for income taxes
    
    
    (9.5
    )
    
    
    29.6
    
    
    
    11.8
    
    
    
    
    
    
    
    31.9Earnings from continuing operations before
minority interest
    
    
    72.0
    
    
    
    92.6
    
    
    
    26.2
    
    
    
    (115.1
    )
    
    
    75.7Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.3
    )Net earnings from continuing operations
    
    
    72.0
    
    
    
    92.6
    
    
    
    25.9
    
    
    
    (115.1
    )
    
    
    75.4Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    (3.4
    )
    
    
    
    
    
    
    
    
    
    
    (3.4
    )Net earnings
    
    $
    72.0
    
    
    $
    89.2
    
    
    $
    25.9
    
    
    $
    (115.1
    )
    
    $
    72.0
 20




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,901.5
    
    
    $
    492.0
    
    
    $
    (344.2
    )
    
    $
    2,049.3Cost of sales
    
    
    
    
    
    
    1,345.8
    
    
    
    403.9
    
    
    
    (337.8
    )
    
    
    1,411.9Gross Margin
    
    
    
    
    
    
    555.7
    
    
    
    88.1
    
    
    
    (6.4
    )
    
    
    637.4Selling, general and administrative expense
    
    
    1.8
    
    
    
    455.4
    
    
    
    94.8
    
    
    
    (6.4
    )
    
    
    545.6Restructuring charges
    
    
    
    
    
    
    17.0
    
    
    
    0.6
    
    
    
    
    
    
    
    17.6Operating (loss) profit from continuing operations
    
    
    (1.8
    )
    
    
    83.3
    
    
    
    (7.3
    )
    
    
    
    
    
    
    74.2Interest expense
    
    
    19.6
    
    
    
    0.4
    
    
    
    3.5
    
    
    
    (6.8
    )
    
    
    16.7Interest income
    
    
    
    
    
    
    (7.9
    )
    
    
    (2.4
    )
    
    
    6.8
    
    
    
    (3.5
    )Equity in (earnings) loss of subsidiaries
    
    
    (38.4
    )
    
    
    12.1
    
    
    
    
    
    
    
    26.3
    
    
    
    Earnings (loss) from continuing operations before
income taxes and minority interest
    
    
    17.0
    
    
    
    78.7
    
    
    
    (8.4
    )
    
    
    (26.3
    )
    
    
    61.0(Benefit) provision for income taxes
    
    
    (7.5
    )
    
    
    23.8
    
    
    
    (1.2
    )
    
    
    
    
    
    
    15.1Earnings from continuing operations before
minority interest
    
    
    24.5
    
    
    
    54.9
    
    
    
    (7.2
    )
    
    
    (26.3
    )
    
    
    45.9Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    4.3
    
    
    
    
    
    
    
    4.3Net earnings from continuing operations
    
    
    24.5
    
    
    
    54.9
    
    
    
    (2.9
    )
    
    
    (26.3
    )
    
    
    50.2Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    (16.5
    )
    
    
    (9.2
    )
    
    
    
    
    
    
    (25.7
    )Net earnings (loss)
    
    $
    24.5
    
    
    $
    38.4
    
    
    $
    (12.1
    )
    
    $
    (26.3
    )
    
    $
    24.5
 21




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    72.0
    
    
    $
    89.2
    
    
    $
    25.9
    
    
    $
    (115.1
    )
    
    $
    72.0Loss from discontinued operations, net of
income taxes and minority interest
    
    
    
    
    
    
    (3.4
    )
    
    
    
    
    
    
    
    
    
    
    (3.4
    )Net earnings from continuing operations
    
    
    72.0
    
    
    
    92.6
    
    
    
    25.9
    
    
    
    (115.1
    )
    
    
    75.4Adjustments for non-cash items included in
earnings from continuing operations:Loss on impairment of and disposal of assets
    
    
    
    
    
    
    6.5
    
    
    
    0.3
    
    
    
    
    
    
    
    6.8Depreciation and amortization
    
    
    
    
    
    
    60.9
    
    
    
    7.4
    
    
    
    
    
    
    
    68.3Amortization of deferred financing costs
    
    
    0.1
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    0.9Amortization of unearned restricted stock
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.8Deferred income taxes
    
    
    
    
    
    
    15.2
    
    
    
    1.2
    
    
    
    
    
    
    
    16.4Minority interest, net of income taxes
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    0.3Income tax benefit of stock option exercises
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2Changes in working capital:Inventories
    
    
    
    
    
    
    (6.2
    )
    
    
    10.0
    
    
    
    (0.5
    )
    
    
    3.3Other current assets
    
    
    (9.5
    )
    
    
    (42.5
    )
    
    
    31.4
    
    
    
    15.1
    
    
    
    (5.5
    )Accounts payable
    
    
    
    
    
    
    13.2
    
    
    
    (5.4
    )
    
    
    (25.3
    )
    
    
    (17.5
    )Accrued expenses
    
    
    15.3
    
    
    
    (11.2
    )
    
    
    (6.5
    )
    
    
    10.7
    
    
    
    8.3Other assets and liabilities, net
    
    
    (77.7
    )
    
    
    (29.5
    )
    
    
    (0.5
    )
    
    
    115.1
    
    
    
    7.4Net cash used in discontinued operations
    
    
    
    
    
    
    (7.2
    )
    
    
    
    
    
    
    
    
    
    
    (7.2
    )Cash flow provided by operating activities
    
    
    2.2
    
    
    
    92.6
    
    
    
    64.1
    
    
    
    
    
    
    
    158.9Investing Activities:Capital expenditures
    
    
    
    
    
    
    (47.0
    )
    
    
    (2.6
    )
    
    
    
    
    
    
    (49.6
    )Dispositions of property and equipment
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    0.8Restricted cash
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    1.0Sales of marketable securities
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    
    
    
    
    5.0Investment in subsidiaries
    
    
    
    
    
    
    23.6
    
    
    
    
    
    
    
    (23.6
    )
    
    
    Cash flow used in investing activities from
continuing operations
    
    
    
    
    
    
    (17.6
    )
    
    
    (1.6
    )
    
    
    (23.6
    )
    
    
    (42.8
    )Financing Activities:Issuance of notes payable
    
    
    
    
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.0
    )Issuance of debt
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    1.2Repayment of debt
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Issuances of common stock
    
    
    14.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.6Purchases of common stock
    
    
    (16.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.8
    )Distributions to parents
    
    
    
    
    
    
    
    
    
    
    (23.6
    )
    
    
    23.6
    
    
    
    Contributions by minority owners
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9Cash flow used in financing activities from
continuing operations
    
    
    (2.2
    )
    
    
    (0.2
    )
    
    
    (22.5
    )
    
    
    23.6
    
    
    
    (1.3
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    1.0Increase in cash and cash equivalents
    
    
    
    
    
    
    74.8
    
    
    
    41.0
    
    
    
    
    
    
    
    115.8Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    210.8
    
    
    
    78.8
    
    
    
    
    
    
    
    289.6Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    285.6
    
    
    $
    119.8
    
    
    $
    
    
    
    $
    405.4
 22




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings (loss)
    
    $
    24.5
    
    
    $
    38.4
    
    
    $
    (12.1
    )
    
    $
    (26.3
    )
    
    $
    24.5Loss from discontinued operations, net of
income taxes and minority interest
    
    
    
    
    
    
    (16.5
    )
    
    
    (9.2
    )
    
    
    
    
    
    
    (25.7
    )Net earnings from continuing operations
    
    
    24.5
    
    
    
    54.9
    
    
    
    (2.9
    )
    
    
    (26.3
    )
    
    
    50.2Adjustments for non-cash items included in
earnings from continuing operations:Non-cash component of restructuring charges
    
    
    
    
    
    
    12.0
    
    
    
    
    
    
    
    
    
    
    
    12.0Loss on impairment of and disposal of assets
    
    
    
    
    
    
    5.5
    
    
    
    1.1
    
    
    
    
    
    
    
    6.6Depreciation and amortization
    
    
    
    
    
    
    62.6
    
    
    
    8.6
    
    
    
    
    
    
    
    71.2Amortization of deferred financing costs
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Amortization of unearned restricted stock
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5Deferred income taxes
    
    
    
    
    
    
    (6.6
    )
    
    
    (6.3
    )
    
    
    
    
    
    
    (12.9
    )Income tax charge of stock option exercises
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Minority interest, net of tax
    
    
    
    
    
    
    
    
    
    
    (4.3
    )
    
    
    
    
    
    
    (4.3
    )Changes in working capital:Inventories
    
    
    
    
    
    
    12.8
    
    
    
    3.9
    
    
    
    (1.0
    )
    
    
    15.7Other current assets
    
    
    (7.5
    )
    
    
    8.5
    
    
    
    (1.5
    )
    
    
    (4.6
    )
    
    
    (5.1
    )Accounts payable
    
    
    
    
    
    
    (3.6
    )
    
    
    (32.0
    )
    
    
    11.6
    
    
    
    (23.7
    )Accrued expenses
    
    
    (4.4
    )
    
    
    42.8
    
    
    
    8.1
    
    
    
    (6.0
    )
    
    
    41.0Other assets and liabilities, net
    
    
    (12.2
    )
    
    
    (23.6
    )
    
    
    15.2
    
    
    
    26.3
    
    
    
    5.7Cash flow provided by (used in) discontinued
operations
    
    
    
    
    
    
    2.5
    
    
    
    (2.0
    )
    
    
    
    
    
    
    0.5Cash flow provided by (used in) operating
activities
    
    
    0.8
    
    
    
    168.7
    
    
    
    (12.1
    )
    
    
    
    
    
    
    158.2Investing Activities:Capital expenditures
    
    
    
    
    
    
    (75.1
    )
    
    
    (6.9
    )
    
    
    
    
    
    
    (82.0
    )Restricted cash
    
    
    
    
    
    
    
    
    
    
    15.0
    
    
    
    
    
    
    
    15.0Purchases of marketable securities
    
    
    
    
    
    
    (13.0
    )
    
    
    
    
    
    
    
    
    
    
    (13.0
    )Sale of marketable securities
    
    
    
    
    
    
    14.0
    
    
    
    
    
    
    
    
    
    
    
    14.0Investment in subsidiaries
    
    
    
    
    
    
    (2.9
    )
    
    
    
    
    
    
    2.9
    
    
    
    Cash flow (used in) provided by investing
activities from continuing operations
    
    
    
    
    
    
    (77.0
    )
    
    
    8.1
    
    
    
    2.9
    
    
    
    (66.0
    )Financing Activities:Repayment on notes payable
    
    
    
    
    
    
    
    
    
    
    (15.0
    )
    
    
    
    
    
    
    (15.0
    )Issuance of debt
    
    
    
    
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    2.4Payment of deferred financing costs
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Repayment of debt
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    
    
    
    
    (0.7
    )Issuances of common stock
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5Purchases of common stock
    
    
    (2.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.3
    )Contributions by parents
    
    
    
    
    
    
    
    
    
    
    2.9
    
    
    
    (2.9
    )
    
    
    Contributions by minority owners
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    1.9Cash flow used in financing activities from
continuing operations
    
    
    (0.8
    )
    
    
    (0.9
    )
    
    
    (7.8
    )
    
    
    (2.9
    )
    
    
    (12.4
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.3
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    90.8
    
    
    
    (11.3
    )
    
    
    
    
    
    
    79.5Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    67.4
    
    
    
    69.3
    
    
    
    
    
    
    
    136.7Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    158.2
    
    
    $
    58.0
    
    
    $
    
    
    
    $
    216.2
 23




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24




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##### Table of Contents



Third Quarter
    
    First Nine Months2005
    
    2004
    
    2005
    
    2004Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    67.2
    
    
    
    69.6
    
    
    
    66.1
    
    
    
    68.9Gross margin
    
    
    32.8
    
    
    
    30.4
    
    
    
    33.9
    
    
    
    31.1Selling, general and administrative expense
    
    
    27.6
    
    
    
    26.6
    
    
    
    28.3
    
    
    
    26.6Restructuring charges
    
    
    0.2
    
    
    
    0.5
    
    
    
    0.1
    
    
    
    0.9Operating profit from continuing operations
    
    
    5.0
    
    
    
    3.3
    
    
    
    5.5
    
    
    
    3.6Interest expense
    
    
    0.7
    
    
    
    0.9
    
    
    
    0.7
    
    
    
    0.8Interest income
    
    
    (0.5
    )
    
    
    (0.2
    )
    
    
    (0.3
    )
    
    
    (0.2
    )Earnings from continuing operations before income
taxes and minority interest
    
    
    4.8
    
    
    
    2.6
    
    
    
    5.1
    
    
    
    3.0Effective income tax rate*
    
    
    29.1
    %
    
    
    28.5
    %
    
    
    29.6
    %
    
    
    24.8
    %Earnings from continuing operations before minority
interest
    
    
    3.4
    
    
    
    1.9
    
    
    
    3.7
    
    
    
    2.2Minority interest, net of income taxes
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    0.2Net earnings from continuing operations
    
    
    3.3
    
    
    
    1.9
    
    
    
    3.7
    
    
    
    2.4Loss from discontinued operations, net of income taxes
and minority interest
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.2
    )
    
    
    (1.3
    )Net earnings
    
    
    3.3
    %
    
    
    1.0
    %
    
    
    3.5
    %
    
    
    1.2
    %
 
 *
    
    Percent of pre-tax earnings 25




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##### Table of Contents



Third Quarter
    
    First Nine Months2005
    
    2004
    
    2005
    
    2004Net Sales
    
    
    0.8
    %
    
    
    (2.6
    )%
    
    
    0.3
    %
    
    
    0.2
    %Same-store Sales
    
    
    3.0
    
    
    
    (2.8
    )
    
    
    2.4
    
    
    
    (0.3
    )Average selling price per unit
    
    
    8.6
    
    
    
    9.0
    
    
    
    6.7
    
    
    
    8.4Unit volume
    
    
    (6.9
    )
    
    
    (11.5
    )
    
    
    (5.9
    )
    
    
    (7.8
    )Footwear average selling price per unit
    
    
    3.8
    
    
    
    9.9
    
    
    
    4.1
    
    
    
    5.4Footwear unit volume
    
    
    (1.4
    )%
    
    
    (12.4
    )%
    
    
    (2.7
    )%
    
    
    (5.4
    )%
          26




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27




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##### Table of Contents



Cash Flow Provided by Operating Activities
  Cash Flow Used in Investing Activities
  Cash Flow Used in Financing Activities
    Year
    
    Percentage2008
    
    
    104.125
    %2009
    
    
    102.750
    %2010
    
    
    101.375
    %2011 and thereafter
    
    
    100.000
    %
  28




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##### Table of Contents



Financial Commitments
 
   October 29, 2005
    
    October 30, 2004
    
    January 29, 2005Current Ratio
    
    
    2.7
    
    
    
    2.4
    
    
    
    2.2Debt-Capitalization Ratio*
    
    
    23.6
    %
    
    
    26.1
    %
    
    
    25.9
    %
 
 *
    
    Debt-to-capitalization has been computed by dividing total debt by capitalization. Total
debt is defined as long-term debt including current maturities, notes payable and borrowings
under the revolving line of credit. Capitalization is defined as total debt and shareowners
equity. The debt-to-capitalization ratio, including the present value of future minimum rental
payments under operating leases as debt and as capitalization, was 63.5%, 67.0% and 67.3%
respectively, for the periods referred to above.   Third Quarter
    
    First Nine Months2005
    
    2004
    
    2005
    
    2004Beginning of period
    
    
    4,625
    
    
    
    5,072
    
    
    
    4,640
    
    
    
    5,042Stores opened
    
    
    38
    
    
    
    78
    
    
    
    110
    
    
    
    226Stores closed
    
    
    (37
    )
    
    
    (128
    )
    
    
    (124
    )
    
    
    (246
    )Ending store count
    
    
    4,626
    
    
    
    5,022
    
    
    
    4,626
    
    
    
    5,022
     29




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##### Table of Contents



30




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##### Table of Contents



Total Number of Shares
    
    Approximate Dollar Value ofPurchased as Part of
    
    Shares that May Yet BeTotal Number of
    
    
    
    
    
    Publicly Announced
    
    Purchased Under the Plans orShares Purchased(1)
    
    Average Price Paid
    
    Plans or Programs(2)
    
    Programs(3)Period
    
    (in Thousands)
    
    per Share
    
    (in Thousands)
    
    (in Millions)07/31/05  08/27/05
    
    
    30
    
    
    $
    18.60
    
    
    
    27
    
    
    $
    235.708/28/05  10/01/05
    
    
    129
    
    
    
    17.48
    
    
    
    126
    
    
    
    233.510/02/05  10/29/05
    
    
    682
    
    
    
    17.03
    
    
    
    679
    
    
    
    221.9Total
    
    
    841
    
    
    $
    17.15
    
    
    
    832
    
    
    $
    221.9
 (1)
    
    We repurchased an aggregate of 8,809 shares of our common stock in connection with our employee
stock purchase and stock incentive plans.(2)
    
    In 2001, our Board of Directors approved the repurchase of our common stock having a value of
up to $250 million in the aggregate pursuant to the Program.(3)
    
    The timing and amount of share repurchases, if any, are limited by the terms of the Companys
Credit Agreement and Senior Subordinated Notes. 31




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##### Table of Contents



SEGMENT REPORTING FOOTNOTE
  Operating Profit from Continuing OperationsAs previously(dollars in millions)
    
    reported
    
    
    Adjustment
    
    
    As restatedThirteen weeks ended May 1, 2004:Payless Domestic
    
    $
    25.2
    
    
    $
    5.0
    
    
    $
    30.2Payless International
    
    
    2.7
    
    
    
    (5.0
    )
    
    
    (2.3
    )$
    27.9
    
    
    $
    
    
    
    $
    27.9Thirteen weeks ended July 31, 2004:Payless Domestic
    
    $
    19.8
    
    
    $
    3.6
    
    
    $
    23.4Payless International
    
    
    4.5
    
    
    
    (3.6
    )
    
    
    0.9$
    24.3
    
    
    $
    
    
    
    $
    24.3Twenty-six weeks ended July 31, 2004:Payless Domestic
    
    $
    45.5
    
    
    $
    8.6
    
    
    $
    54.1Payless International
    
    
    7.2
    
    
    
    (8.6
    )
    
    
    (1.4
    )$
    52.7
    
    
    $
    
    
    
    $
    52.7Thirty-nine weeks ended October 30, 2004:Payless Domestic
    
    $
    62.0
    
    
    $
    8.6
    
    
    $
    70.6Payless International
    
    
    12.2
    
    
    
    (8.6
    )
    
    
    3.6$
    74.2
    
    
    $
    
    
    
    $
    74.2Fiscal year ended January 29, 2005:Payless Domestic
    
    $
    44.9
    
    
    $
    8.6
    
    
    $
    53.5Payless International
    
    
    16.6
    
    
    
    (8.6
    )
    
    
    8.0$
    61.5
    
    
    $
    
    
    
    $
    61.5
 32




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##### Table of Contents



GUARANTOR FOOTNOTE
   
 (dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    88.2
    
    
    $
    33.1
    
    
    $
    
    
    
    $
    121.3Marketable securities, available for sale
    
    
    
    
    
    
    4.0
    
    
    
    
    
    
    
    
    
    
    
    4.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    33.5
    
    
    
    
    
    
    
    33.5Inventories
    
    
    
    
    
    
    347.9
    
    
    
    80.2
    
    
    
    (5.9
    )
    
    
    422.2Current deferred income taxes
    
    
    
    
    
    
    16.6
    
    
    
    0.1
    
    
    
    
    
    
    
    16.7Other current assets
    
    
    9.0
    
    
    
    55.1
    
    
    
    38.8
    
    
    
    (38.0
    )
    
    
    64.9Current assets of discontinued operations
    
    
    
    
    
    
    22.1
    
    
    
    5.3
    
    
    
    
    
    
    
    27.4Total current assets
    
    
    9.0
    
    
    
    533.9
    
    
    
    191.0
    
    
    
    (43.9
    )
    
    
    690.0Property and Equipment:Land
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    
    
    
    
    8.0Buildings and leasehold improvements
    
    
    
    
    
    
    610.5
    
    
    
    72.0
    
    
    
    
    
    
    
    682.5Furniture, fixtures and equipment
    
    
    
    
    
    
    448.9
    
    
    
    55.3
    
    
    
    
    
    
    
    504.2Property under capital leases
    
    
    
    
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    4.6Total property and equipment
    
    
    
    
    
    
    1,072.0
    
    
    
    127.3
    
    
    
    
    
    
    
    1,199.3Accumulated depreciation and amortization
    
    
    
    
    
    
    (721.2
    )
    
    
    (56.2
    )
    
    
    
    
    
    
    (777.4
    )Property and equipment, net
    
    
    
    
    
    
    350.8
    
    
    
    71.1
    
    
    
    
    
    
    
    421.9Favorable leases, net
    
    
    
    
    
    
    26.9
    
    
    
    
    
    
    
    
    
    
    
    26.9Deferred income taxes
    
    
    
    
    
    
    26.7
    
    
    
    7.0
    
    
    
    
    
    
    
    33.7Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,091.5
    
    
    
    434.5
    
    
    
    0.7
    
    
    
    (1,505.0
    )
    
    
    21.7Non-current assets of discontinued operations
    
    
    
    
    
    
    18.6
    
    
    
    9.6
    
    
    
    
    
    
    
    28.2Total assets
    
    $
    1,100.5
    
    
    $
    1,397.3
    
    
    $
    279.4
    
    
    $
    (1,548.9
    )
    
    $
    1,228.3LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.9
    
    
    $
    
    
    
    $
    
    
    
    $
    0.9Notes payable
    
    
    
    
    
    
    
    
    
    
    33.5
    
    
    
    
    
    
    
    33.5Accounts payable
    
    
    
    
    
    
    88.4
    
    
    
    66.2
    
    
    
    (28.1
    )
    
    
    126.5Accrued expenses
    
    
    2.9
    
    
    
    134.8
    
    
    
    18.2
    
    
    
    (15.8
    )
    
    
    140.1Current liabilities of discontinued operations
    
    
    
    
    
    
    4.4
    
    
    
    1.6
    
    
    
    
    
    
    
    6.0Total current liabilities
    
    
    2.9
    
    
    
    228.5
    
    
    
    119.5
    
    
    
    (43.9
    )
    
    
    307.0Long-term debt
    
    
    479.8
    
    
    
    1.8
    
    
    
    4.0
    
    
    
    (283.0
    )
    
    
    202.6Other liabilities
    
    
    
    
    
    
    128.7
    
    
    
    13.4
    
    
    
    (56.3
    )
    
    
    85.8Non-current liabilities of discontinued operations
    
    
    
    
    
    
    4.6
    
    
    
    0.1
    
    
    
    
    
    
    
    4.7Minority interest
    
    
    
    
    
    
    
    
    
    
    13.1
    
    
    
    
    
    
    
    13.1Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareowners equity
    
    
    617.8
    
    
    
    1,033.7
    
    
    
    129.3
    
    
    
    (1,165.7
    )
    
    
    615.1Total liabilities and shareowners equity
    
    $
    1,100.5
    
    
    $
    1,397.3
    
    
    $
    279.4
    
    
    $
    (1,548.9
    )
    
    $
    1,228.3
 33




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    651.4
    
    
    $
    161.5
    
    
    $
    (120.6
    )
    
    $
    692.3Cost of sales
    
    
    
    
    
    
    457.1
    
    
    
    136.8
    
    
    
    (118.4
    )
    
    
    475.5Gross Margin
    
    
    
    
    
    
    194.3
    
    
    
    24.7
    
    
    
    (2.2
    )
    
    
    216.8Selling, general and administrative expense
    
    
    0.5
    
    
    
    162.9
    
    
    
    27.2
    
    
    
    (2.2
    )
    
    
    188.4Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating (loss) profit from continuing operations
    
    
    (0.5
    )
    
    
    31.4
    
    
    
    (2.5
    )
    
    
    
    
    
    
    28.4Interest expense
    
    
    6.2
    
    
    
    0.3
    
    
    
    1.1
    
    
    
    (2.2
    )
    
    
    5.4Interest income
    
    
    
    
    
    
    (2.3
    )
    
    
    (0.9
    )
    
    
    2.2
    
    
    
    (1.0
    )Equity in (earnings) loss of subsidiaries
    
    
    (18.4
    )
    
    
    1.8
    
    
    
    
    
    
    
    16.6
    
    
    
    Earnings (loss) from continuing operations before
income taxes and minority interest
    
    
    11.7
    
    
    
    31.6
    
    
    
    (2.7
    )
    
    
    (16.6
    )
    
    
    24.0(Benefit) provision for income taxes
    
    
    (2.4
    )
    
    
    10.6
    
    
    
    (0.2
    )
    
    
    
    
    
    
    8.0Earnings (loss) from continuing operations before
minority interest
    
    
    14.1
    
    
    
    21.0
    
    
    
    (2.5
    )
    
    
    (16.6
    )
    
    
    16.0Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    1.9Net earnings (loss) from continuing operations
    
    
    14.1
    
    
    
    21.0
    
    
    
    (0.6
    )
    
    
    (16.6
    )
    
    
    17.9Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    (2.6
    )
    
    
    (1.2
    )
    
    
    
    
    
    
    (3.8
    )Net earnings (loss)
    
    $
    14.1
    
    
    $
    18.4
    
    
    $
    (1.8
    )
    
    $
    (16.6
    )
    
    $
    14.1
 34




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    14.1
    
    
    $
    18.4
    
    
    $
    (1.8
    )
    
    $
    (16.6
    )
    
    $
    14.1Loss from discontinued operations, net of
income taxes and minority interest
    
    
    
    
    
    
    (2.6
    )
    
    
    (1.2
    )
    
    
    
    
    
    
    (3.8
    )Net earnings from continuing operations
    
    
    14.1
    
    
    
    21.0
    
    
    
    (0.6
    )
    
    
    (16.6
    )
    
    
    17.9Adjustments for non-cash items included in
earnings from continuing operations:Loss on impairment of and disposal of assets
    
    
    
    
    
    
    2.6
    
    
    
    0.2
    
    
    
    
    
    
    
    2.8Depreciation and amortization
    
    
    
    
    
    
    21.8
    
    
    
    2.8
    
    
    
    
    
    
    
    24.6Amortization of deferred financing costs
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Amortization of unearned restricted stock
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Deferred income taxes
    
    
    
    
    
    
    1.4
    
    
    
    (2.2
    )
    
    
    
    
    
    
    (0.8
    )Minority interest, net of tax
    
    
    
    
    
    
    
    
    
    
    (1.9
    )
    
    
    
    
    
    
    (1.9
    )Changes in working capital:Inventories
    
    
    
    
    
    
    (39.4
    )
    
    
    (10.3
    )
    
    
    1.7
    
    
    
    (48.0
    )Other current assets
    
    
    (2.4
    )
    
    
    16.8
    
    
    
    (1.2
    )
    
    
    (17.3
    )
    
    
    (4.1
    )Accounts payable
    
    
    
    
    
    
    4.1
    
    
    
    (31.0
    )
    
    
    23.9
    
    
    
    (3.0
    )Accrued expenses
    
    
    (4.6
    )
    
    
    26.7
    
    
    
    2.5
    
    
    
    (8.3
    )
    
    
    16.3Other assets and liabilities, net
    
    
    (6.8
    )
    
    
    (10.6
    )
    
    
    7.7
    
    
    
    16.6
    
    
    
    6.9Cash flow (used in) provided by discontinued
operations
    
    
    
    
    
    
    (5.7
    )
    
    
    0.2
    
    
    
    
    
    
    
    (5.5
    )Cash flow provided by (used in) operating
activities
    
    
    0.5
    
    
    
    38.9
    
    
    
    (33.8
    )
    
    
    
    
    
    
    5.6Investing Activities:Capital expenditures
    
    
    
    
    
    
    (23.8
    )
    
    
    (2.4
    )
    
    
    
    
    
    
    (26.2
    )Purchase of marketable securities
    
    
    
    
    
    
    (4.0
    )
    
    
    
    
    
    
    
    
    
    
    (4.0
    )Sales of marketable securities
    
    
    
    
    
    
    10.0
    
    
    
    
    
    
    
    
    
    
    
    10.0Cash flow used in investing activities from
continuing operations
    
    
    
    
    
    
    (17.8
    )
    
    
    (2.4
    )
    
    
    
    
    
    
    (20.2
    )Financing Activities:Payment of deferred financing costs
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Repayment of debt
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Issuances of common stock
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Purchases of common stock
    
    
    (0.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.7
    )Cash flow used in financing activities from
continuing operations
    
    
    (0.5
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (0.8
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    20.8
    
    
    
    (36.2
    )
    
    
    
    
    
    
    (15.4
    )Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    67.4
    
    
    
    69.3
    
    
    
    
    
    
    
    136.7Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    88.2
    
    
    $
    33.1
    
    
    $
    
    
    
    $
    121.3
 35




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    125.1
    
    
    $
    49.9
    
    
    $
    
    
    
    $
    175.0Marketable securities, available for sale
    
    
    
    
    
    
    9.0
    
    
    
    
    
    
    
    
    
    
    
    9.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    33.5
    
    
    
    
    
    
    
    33.5Inventories
    
    
    
    
    
    
    327.7
    
    
    
    73.8
    
    
    
    (3.3
    )
    
    
    398.2Current deferred income taxes
    
    
    
    
    
    
    22.4
    
    
    
    0.7
    
    
    
    
    
    
    
    23.1Other current assets
    
    
    11.6
    
    
    
    68.5
    
    
    
    36.8
    
    
    
    (48.7
    )
    
    
    68.2Current assets of discontinued operations
    
    
    
    
    
    
    16.9
    
    
    
    3.7
    
    
    
    
    
    
    
    20.6Total current assets
    
    
    11.6
    
    
    
    569.6
    
    
    
    198.4
    
    
    
    (52.0
    )
    
    
    727.6Property and Equipment:Land
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    
    
    
    
    8.0Buildings and leasehold improvements
    
    
    
    
    
    
    602.2
    
    
    
    68.3
    
    
    
    
    
    
    
    670.5Furniture, fixtures and equipment
    
    
    
    
    
    
    462.0
    
    
    
    61.4
    
    
    
    
    
    
    
    523.4Property under capital leases
    
    
    
    
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    4.6Total property and equipment
    
    
    
    
    
    
    1,076.8
    
    
    
    129.7
    
    
    
    
    
    
    
    1,206.5Accumulated depreciation and amortization
    
    
    
    
    
    
    (733.3
    )
    
    
    (60.5
    )
    
    
    
    
    
    
    (793.8
    )Property and equipment, net
    
    
    
    
    
    
    343.5
    
    
    
    69.2
    
    
    
    
    
    
    
    412.7Favorable leases, net
    
    
    
    
    
    
    24.3
    
    
    
    
    
    
    
    
    
    
    
    24.3Deferred income taxes
    
    
    
    
    
    
    25.4
    
    
    
    8.5
    
    
    
    
    
    
    
    33.9Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,097.7
    
    
    
    431.0
    
    
    
    0.9
    
    
    
    (1,503.1
    )
    
    
    26.5Non-current assets of discontinued operations
    
    
    
    
    
    
    10.4
    
    
    
    1.6
    
    
    
    
    
    
    
    12.0Total assets
    
    $
    1,109.3
    
    
    $
    1,410.1
    
    
    $
    278.6
    
    
    $
    (1,555.1
    )
    
    $
    1,242.9LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.8
    
    
    $
    
    
    
    $
    
    
    
    $
    0.8Notes payable
    
    
    
    
    
    
    
    
    
    
    33.5
    
    
    
    
    
    
    
    33.5Accounts payable
    
    
    
    
    
    
    87.5
    
    
    
    80.0
    
    
    
    (41.0
    )
    
    
    126.5Accrued expenses
    
    
    7.2
    
    
    
    139.0
    
    
    
    16.7
    
    
    
    (11.0
    )
    
    
    151.9Current liabilities of discontinued operations
    
    
    
    
    
    
    4.1
    
    
    
    0.8
    
    
    
    
    
    
    
    4.9Total current liabilities
    
    
    7.2
    
    
    
    231.4
    
    
    
    131.0
    
    
    
    (52.0
    )
    
    
    317.6Long-term debt
    
    
    479.9
    
    
    
    1.6
    
    
    
    5.6
    
    
    
    (283.0
    )
    
    
    204.1Other liabilities
    
    
    0.3
    
    
    
    118.8
    
    
    
    12.9
    
    
    
    (50.6
    )
    
    
    81.4Non-current liabilities of discontinued operations
    
    
    
    
    
    
    9.8
    
    
    
    0.1
    
    
    
    
    
    
    
    9.9Minority interest
    
    
    
    
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    8.0Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareowners equity
    
    
    621.9
    
    
    
    1,048.5
    
    
    
    121.0
    
    
    
    (1,169.5
    )
    
    
    621.9Total liabilities and shareowners equity
    
    $
    1,109.3
    
    
    $
    1,410.1
    
    
    $
    278.6
    
    
    $
    (1,555.1
    )
    
    $
    1,242.9
 36




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    638.5
    
    
    $
    166.6
    
    
    $
    (109.5
    )
    
    $
    695.6Cost of sales
    
    
    
    
    
    
    446.4
    
    
    
    137.1
    
    
    
    (107.4
    )
    
    
    476.1Gross Margin
    
    
    
    
    
    
    192.1
    
    
    
    29.5
    
    
    
    (2.1
    )
    
    
    219.5Selling, general and administrative expense
    
    
    0.5
    
    
    
    147.4
    
    
    
    35.7
    
    
    
    (2.1
    )
    
    
    181.5Restructuring charges
    
    
    
    
    
    
    13.1
    
    
    
    0.6
    
    
    
    
    
    
    
    13.7Operating (loss) profit from continuing operations
    
    
    (0.5
    )
    
    
    31.6
    
    
    
    (6.8
    )
    
    
    
    
    
    
    24.3Interest expense
    
    
    6.5
    
    
    
    
    
    
    
    1.6
    
    
    
    (2.3
    )
    
    
    5.8Interest income
    
    
    
    
    
    
    (2.7
    )
    
    
    (0.9
    )
    
    
    2.3
    
    
    
    (1.3
    )Equity in (earnings) loss of subsidiaries
    
    
    (8.2
    )
    
    
    7.1
    
    
    
    
    
    
    
    1.1
    
    
    
    Earnings (loss) from continuing operations before
income taxes and minority interest
    
    
    1.2
    
    
    
    27.2
    
    
    
    (7.5
    )
    
    
    (1.1
    )
    
    
    19.8(Benefit) provision for income taxes
    
    
    (2.6
    )
    
    
    9.5
    
    
    
    (4.7
    )
    
    
    
    
    
    
    2.2Earnings (loss) from continuing operations before
minority interest
    
    
    3.8
    
    
    
    17.7
    
    
    
    (2.8
    )
    
    
    (1.1
    )
    
    
    17.6Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    2.2
    
    
    
    
    
    
    
    2.2Net earnings (loss) from continuing operations
    
    
    3.8
    
    
    
    17.7
    
    
    
    (0.6
    )
    
    
    (1.1
    )
    
    
    19.8Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    (9.5
    )
    
    
    (6.5
    )
    
    
    
    
    
    
    (16.0
    )Net earnings (loss)
    
    $
    3.8
    
    
    $
    8.2
    
    
    $
    (7.1
    )
    
    $
    (1.1
    )
    
    $
    3.8
 37




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,289.9
    
    
    $
    328.1
    
    
    $
    (230.1
    )
    
    $
    1,387.9Cost of sales
    
    
    
    
    
    
    903.5
    
    
    
    273.9
    
    
    
    (225.8
    )
    
    
    951.6Gross Margin
    
    
    
    
    
    
    386.4
    
    
    
    54.2
    
    
    
    (4.3
    )
    
    
    436.3Selling, general and administrative expense
    
    
    1.0
    
    
    
    310.3
    
    
    
    62.9
    
    
    
    (4.3
    )
    
    
    369.9Restructuring charges
    
    
    
    
    
    
    13.1
    
    
    
    0.6
    
    
    
    
    
    
    
    13.7Operating (loss) profit from continuing operations
    
    
    (1.0
    )
    
    
    63.0
    
    
    
    (9.3
    )
    
    
    
    
    
    
    52.7Interest expense
    
    
    12.7
    
    
    
    0.3
    
    
    
    2.7
    
    
    
    (4.5
    )
    
    
    11.2Interest income
    
    
    
    
    
    
    (5.0
    )
    
    
    (1.8
    )
    
    
    4.5
    
    
    
    (2.3
    )Equity in (earnings) loss of subsidiaries
    
    
    (26.6
    )
    
    
    8.9
    
    
    
    
    
    
    
    17.7
    
    
    
    Earnings (loss) from continuing operations before
income taxes and minority interest
    
    
    12.9
    
    
    
    58.8
    
    
    
    (10.2
    )
    
    
    (17.7
    )
    
    
    43.8(Benefit) provision for income taxes
    
    
    (5.0
    )
    
    
    20.1
    
    
    
    (4.9
    )
    
    
    
    
    
    
    10.2Earnings (loss) from continuing operations before
minority interest
    
    
    17.9
    
    
    
    38.7
    
    
    
    (5.3
    )
    
    
    (17.7
    )
    
    
    33.6Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    4.1Net earnings (loss) from continuing operations
    
    
    17.9
    
    
    
    38.7
    
    
    
    (1.2
    )
    
    
    (17.7
    )
    
    
    37.7Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    (12.1
    )
    
    
    (7.7
    )
    
    
    
    
    
    
    (19.8
    )Net earnings (loss)
    
    $
    17.9
    
    
    $
    26.6
    
    
    $
    (8.9
    )
    
    $
    (17.7
    )
    
    $
    17.9
 38




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings (loss)
    
    $
    17.9
    
    
    $
    26.6
    
    
    $
    (8.9
    )
    
    $
    (17.7
    )
    
    $
    17.9Loss from discontinued operations, net of
income taxes and minority interest
    
    
    
    
    
    
    (12.1
    )
    
    
    (7.7
    )
    
    
    
    
    
    
    (19.8
    )Net earnings from continuing operations
    
    
    17.9
    
    
    
    38.7
    
    
    
    (1.2
    )
    
    
    (17.7
    )
    
    
    37.7Adjustments for non-cash items included in
earnings from continuing operations:Non-cash component of restructuring charges
    
    
    
    
    
    
    13.7
    
    
    
    
    
    
    
    
    
    
    
    13.7Loss on impairment of and disposal of assets
    
    
    
    
    
    
    4.0
    
    
    
    0.7
    
    
    
    
    
    
    
    4.7Depreciation and amortization
    
    
    
    
    
    
    41.7
    
    
    
    5.8
    
    
    
    
    
    
    
    47.5Amortization of deferred financing costs
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    0.5Amortization of unearned restricted stock
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4Deferred income taxes
    
    
    
    
    
    
    (3.1
    )
    
    
    (4.1
    )
    
    
    
    
    
    
    (7.2
    )Minority interest, net of tax
    
    
    
    
    
    
    
    
    
    
    (4.1
    )
    
    
    
    
    
    
    (4.1
    )Changes in working capital:Inventories
    
    
    
    
    
    
    (19.2
    )
    
    
    (3.4
    )
    
    
    (0.9
    )
    
    
    (23.5
    )Other current assets
    
    
    (5.0
    )
    
    
    3.4
    
    
    
    0.3
    
    
    
    (6.6
    )
    
    
    (7.9
    )Accounts payable
    
    
    
    
    
    
    3.6
    
    
    
    (17.1
    )
    
    
    11.0
    
    
    
    (2.5
    )Accrued expenses
    
    
    (0.3
    )
    
    
    33.1
    
    
    
    1.1
    
    
    
    (3.5
    )
    
    
    30.4Other assets and liabilities, net
    
    
    (13.0
    )
    
    
    (7.7
    )
    
    
    3.9
    
    
    
    17.7
    
    
    
    0.9Cash flow provided by (used in) discontinued
operations
    
    
    
    
    
    
    3.1
    
    
    
    (2.0
    )
    
    
    
    
    
    
    1.1Cash flow provided by (used in) operating
activities
    
    
    
    
    
    
    111.8
    
    
    
    (20.1
    )
    
    
    
    
    
    
    91.7Investing Activities:Capital expenditures
    
    
    
    
    
    
    (52.1
    )
    
    
    (4.1
    )
    
    
    
    
    
    
    (56.2
    )Purchases of marketable securities
    
    
    
    
    
    
    (9.0
    )
    
    
    
    
    
    
    
    
    
    
    (9.0
    )Sale of marketable securities
    
    
    
    
    
    
    10.0
    
    
    
    
    
    
    
    
    
    
    
    10.0Investment in subsidiaries
    
    
    
    
    
    
    (2.3
    )
    
    
    
    
    
    
    2.3
    
    
    
    Cash flow used in investing activities from
continuing operations
    
    
    
    
    
    
    (53.4
    )
    
    
    (4.1
    )
    
    
    2.3
    
    
    
    (55.2
    )Financing Activities:Issuance of debt
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    1.6Payment of deferred financing costs
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Repayment of debt
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Issuances of common stock
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.0Purchases of common stock
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.0
    )Contributions by parents
    
    
    
    
    
    
    
    
    
    
    2.3
    
    
    
    (2.3
    )
    
    
    Contributions by minority owners
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    1.5Cash flow (used in) provided by financing
activities from continuing operations
    
    
    
    
    
    
    (0.7
    )
    
    
    5.4
    
    
    
    (2.3
    )
    
    
    2.4Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (0.6
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    57.7
    
    
    
    (19.4
    )
    
    
    
    
    
    
    38.3Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    67.4
    
    
    
    69.3
    
    
    
    
    
    
    
    136.7Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    125.1
    
    
    $
    49.9
    
    
    $
    
    
    
    $
    175.0
 39




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    158.2
    
    
    $
    58.0
    
    
    $
    
    
    
    $
    216.2Marketable securities, available for sale
    
    
    
    
    
    
    9.0
    
    
    
    
    
    
    
    
    
    
    
    9.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    18.5
    
    
    
    
    
    
    
    18.5Inventories
    
    
    
    
    
    
    295.7
    
    
    
    69.2
    
    
    
    (3.2
    )
    
    
    361.7Current deferred income taxes
    
    
    
    
    
    
    26.8
    
    
    
    
    
    
    
    
    
    
    
    26.8Other current assets
    
    
    14.1
    
    
    
    63.4
    
    
    
    40.0
    
    
    
    (50.7
    )
    
    
    66.8Current assets of discontinued operations
    
    
    
    
    
    
    15.6
    
    
    
    2.3
    
    
    
    
    
    
    
    17.9Total current assets
    
    
    14.1
    
    
    
    568.7
    
    
    
    188.0
    
    
    
    (53.9
    )
    
    
    716.9Property and Equipment:Land
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    
    
    
    
    8.0Buildings and leasehold improvements
    
    
    
    
    
    
    607.3
    
    
    
    76.0
    
    
    
    
    
    
    
    683.3Furniture, fixtures and equipment
    
    
    
    
    
    
    469.1
    
    
    
    59.9
    
    
    
    
    
    
    
    529.0Property under capital leases
    
    
    
    
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    4.6Total property and equipment
    
    
    
    
    
    
    1,089.0
    
    
    
    135.9
    
    
    
    
    
    
    
    1,224.9Accumulated depreciation and amortization
    
    
    
    
    
    
    (737.8
    )
    
    
    (64.6
    )
    
    
    
    
    
    
    (802.4
    )Property and equipment, net
    
    
    
    
    
    
    351.2
    
    
    
    71.3
    
    
    
    
    
    
    
    422.5Favorable leases, net
    
    
    
    
    
    
    22.7
    
    
    
    
    
    
    
    
    
    
    
    22.7Deferred income taxes
    
    
    
    
    
    
    24.5
    
    
    
    10.7
    
    
    
    
    
    
    
    35.2Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,106.1
    
    
    
    444.5
    
    
    
    1.6
    
    
    
    (1,526.5
    )
    
    
    25.7Non-current assets of discontinued operations
    
    
    
    
    
    
    7.7
    
    
    
    0.4
    
    
    
    
    
    
    
    8.1Total assets
    
    $
    1,120.2
    
    
    $
    1,425.2
    
    
    $
    272.0
    
    
    $
    (1,580.4
    )
    
    $
    1,237.0LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    1.1
    
    
    $
    2.4
    
    
    $
    
    
    
    $
    3.5Notes payable
    
    
    
    
    
    
    
    
    
    
    18.5
    
    
    
    
    
    
    
    18.5Accounts payable
    
    
    
    
    
    
    80.7
    
    
    
    65.7
    
    
    
    (40.4
    )
    
    
    106.0Accrued expenses
    
    
    3.1
    
    
    
    150.9
    
    
    
    24.1
    
    
    
    (13.5
    )
    
    
    164.6Current liabilities of discontinued operations
    
    
    
    
    
    
    5.3
    
    
    
    0.6
    
    
    
    
    
    
    
    5.9Total current liabilities
    
    
    3.1
    
    
    
    238.0
    
    
    
    111.3
    
    
    
    (53.9
    )
    
    
    298.5Long-term debt
    
    
    480.0
    
    
    
    1.1
    
    
    
    4.0
    
    
    
    (283.0
    )
    
    
    202.1Other liabilities
    
    
    1.5
    
    
    
    103.7
    
    
    
    14.6
    
    
    
    (32.4
    )
    
    
    87.4Non-current liabilities of discontinued operations
    
    
    
    
    
    
    8.4
    
    
    
    0.1
    
    
    
    
    
    
    
    8.5Minority interest
    
    
    
    
    
    
    
    
    
    
    7.5
    
    
    
    
    
    
    
    7.5Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareowners equity
    
    
    635.6
    
    
    
    1,074.0
    
    
    
    134.5
    
    
    
    (1,211.1
    )
    
    
    633.0Total liabilities and shareowners equity
    
    $
    1,120.2
    
    
    $
    1,425.2
    
    
    $
    272.0
    
    
    $
    (1,580.4
    )
    
    $
    1,237.0
 40




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    1,901.5
    
    
    $
    492.0
    
    
    $
    (344.2
    )
    
    $
    2,049.3Cost of sales
    
    
    
    
    
    
    1,345.8
    
    
    
    403.9
    
    
    
    (337.8
    )
    
    
    1,411.9Gross Margin
    
    
    
    
    
    
    555.7
    
    
    
    88.1
    
    
    
    (6.4
    )
    
    
    637.4Selling, general and administrative expense
    
    
    1.8
    
    
    
    455.4
    
    
    
    94.8
    
    
    
    (6.4
    )
    
    
    545.6Restructuring charges
    
    
    
    
    
    
    17.0
    
    
    
    0.6
    
    
    
    
    
    
    
    17.6Operating (loss) profit from continuing operations
    
    
    (1.8
    )
    
    
    83.3
    
    
    
    (7.3
    )
    
    
    
    
    
    
    74.2Interest expense
    
    
    19.6
    
    
    
    0.4
    
    
    
    3.5
    
    
    
    (6.8
    )
    
    
    16.7Interest income
    
    
    
    
    
    
    (7.9
    )
    
    
    (2.4
    )
    
    
    6.8
    
    
    
    (3.5
    )Equity in (earnings) loss of subsidiaries
    
    
    (38.4
    )
    
    
    12.1
    
    
    
    
    
    
    
    26.3
    
    
    
    Earnings (loss) from continuing operations before
income taxes and minority interest
    
    
    17.0
    
    
    
    78.7
    
    
    
    (8.4
    )
    
    
    (26.3
    )
    
    
    61.0(Benefit) provision for income taxes
    
    
    (7.5
    )
    
    
    23.8
    
    
    
    (1.2
    )
    
    
    
    
    
    
    15.1Earnings (loss) from continuing operations before
minority interest
    
    
    24.5
    
    
    
    54.9
    
    
    
    (7.2
    )
    
    
    (26.3
    )
    
    
    45.9Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    4.3
    
    
    
    
    
    
    
    4.3Net earnings (loss) from continuing operations
    
    
    24.5
    
    
    
    54.9
    
    
    
    (2.9
    )
    
    
    (26.3
    )
    
    
    50.2Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    (16.5
    )
    
    
    (9.2
    )
    
    
    
    
    
    
    (25.7
    )Net earnings (loss)
    
    $
    24.5
    
    
    $
    38.4
    
    
    $
    (12.1
    )
    
    $
    (26.3
    )
    
    $
    24.5
 41




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##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    24.5
    
    
    $
    38.4
    
    
    $
    (12.1
    )
    
    $
    (26.3
    )
    
    $
    24.5Loss from discontinued operations, net of
income taxes and minority interest
    
    
    
    
    
    
    (16.5
    )
    
    
    (9.2
    )
    
    
    
    
    
    
    (25.7
    )Net earnings from continuing operations
    
    
    24.5
    
    
    
    54.9
    
    
    
    (2.9
    )
    
    
    (26.3
    )
    
    
    50.2Adjustments for non-cash items included in
earnings from continuing operations:Non-cash component of restructuring charges
    
    
    
    
    
    
    12.0
    
    
    
    
    
    
    
    
    
    
    
    12.0Loss on impairment of and disposal of assets
    
    
    
    
    
    
    5.5
    
    
    
    1.1
    
    
    
    
    
    
    
    6.6Depreciation and amortization
    
    
    
    
    
    
    62.6
    
    
    
    8.6
    
    
    
    
    
    
    
    71.2Amortization of deferred financing costs
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Amortization of unearned restricted stock
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5Deferred income taxes
    
    
    
    
    
    
    (6.6
    )
    
    
    (6.3
    )
    
    
    
    
    
    
    (12.9
    )Income tax charge of stock option exercises
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Minority interest, net of tax
    
    
    
    
    
    
    
    
    
    
    (4.3
    )
    
    
    
    
    
    
    (4.3
    )Changes in working capital:Inventories
    
    
    
    
    
    
    12.8
    
    
    
    3.9
    
    
    
    (1.0
    )
    
    
    15.7Other current assets
    
    
    (7.5
    )
    
    
    8.5
    
    
    
    (1.5
    )
    
    
    (4.6
    )
    
    
    (5.1
    )Accounts payable
    
    
    
    
    
    
    (3.6
    )
    
    
    (31.7
    )
    
    
    11.6
    
    
    
    (23.7
    )Accrued expenses
    
    
    (4.4
    )
    
    
    42.8
    
    
    
    8.6
    
    
    
    (6.0
    )
    
    
    41.0Other assets and liabilities, net
    
    
    (12.2
    )
    
    
    (23.6
    )
    
    
    15.2
    
    
    
    26.3
    
    
    
    5.7Cash flow provided by (used in) discontinued
operations
    
    
    
    
    
    
    2.5
    
    
    
    (2.0
    )
    
    
    
    
    
    
    0.5Cash flow provided by (used in) operating
activities from continuing operations
    
    
    0.8
    
    
    
    168.7
    
    
    
    (11.3
    )
    
    
    
    
    
    
    158.2Investing Activities:Capital expenditures
    
    
    
    
    
    
    (75.1
    )
    
    
    (6.9
    )
    
    
    
    
    
    
    (82.0
    )Restricted cash
    
    
    
    
    
    
    
    
    
    
    15.0
    
    
    
    
    
    
    
    15.0Purchase of marketable securities
    
    
    
    
    
    
    (13.0
    )
    
    
    
    
    
    
    
    
    
    
    (13.0
    )Sale of marketable securities
    
    
    
    
    
    
    14.0
    
    
    
    
    
    
    
    
    
    
    
    14.0Investment in subsidiaries
    
    
    
    
    
    
    (2.9
    )
    
    
    
    
    
    
    2.9
    
    
    
    Cash flow used in investing activities from
continuing operations
    
    
    
    
    
    
    (77.0
    )
    
    
    8.1
    
    
    
    2.9
    
    
    
    (66.0
    )Financing Activities:Repayment on notes payable
    
    
    
    
    
    
    
    
    
    
    (15.0
    )
    
    
    
    
    
    
    (15.0
    )Issuance of debt
    
    
    
    
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    2.4Payment of deferred financing costs
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Repayment of debt
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    
    
    
    
    (0.7
    )Issuances of common stock
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5Purchases of common stock
    
    
    (2.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.3
    )Contributions by parents
    
    
    
    
    
    
    
    
    
    
    2.9
    
    
    
    (2.9
    )
    
    
    Contributions by minority owners
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    1.9Cash flow (used in) provided by financing
activities from continuing operations
    
    
    (0.8
    )
    
    
    (0.9
    )
    
    
    (7.8
    )
    
    
    (2.9
    )
    
    
    (12.4
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.3
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    90.8
    
    
    
    (11.3
    )
    
    
    
    
    
    
    79.5Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    67.4
    
    
    
    69.3
    
    
    
    
    
    
    
    136.7Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    158.2
    
    
    $
    58.0
    
    
    $
    
    
    
    $
    216.2
 42




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    210.8
    
    
    $
    78.8
    
    
    $
    
    
    
    $
    289.6Marketable securities
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    
    
    
    
    5.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    3.0Inventories
    
    
    
    
    
    
    277.1
    
    
    
    71.0
    
    
    
    (2.8
    )
    
    
    345.3Current deferred income taxes
    
    
    
    
    
    
    21.9
    
    
    
    
    
    
    
    
    
    
    
    21.9Other current assets
    
    
    16.8
    
    
    
    50.6
    
    
    
    50.1
    
    
    
    (60.9
    )
    
    
    56.6Current assets of discontinued operations
    
    
    
    
    
    
    8.5
    
    
    
    
    
    
    
    
    
    
    
    8.5Total current assets
    
    
    16.8
    
    
    
    573.9
    
    
    
    202.9
    
    
    
    (63.7
    )
    
    
    729.9Property and Equipment:Land
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    
    
    
    
    8.0Buildings and leasehold improvements
    
    
    
    
    
    
    597.1
    
    
    
    76.2
    
    
    
    
    
    
    
    673.3Furniture, fixtures and equipment
    
    
    
    
    
    
    450.4
    
    
    
    59.4
    
    
    
    
    
    
    
    509.8Property under capital leases
    
    
    
    
    
    
    3.8
    
    
    
    
    
    
    
    
    
    
    
    3.8Total property and equipment
    
    
    
    
    
    
    1,059.3
    
    
    
    135.6
    
    
    
    
    
    
    
    1,194.9Accumulated depreciation and amortization
    
    
    
    
    
    
    (705.7
    )
    
    
    (66.9
    )
    
    
    
    
    
    
    (772.6
    )Property and equipment, net
    
    
    
    
    
    
    353.6
    
    
    
    68.7
    
    
    
    
    
    
    
    422.3Favorable leases, net
    
    
    
    
    
    
    21.7
    
    
    
    
    
    
    
    
    
    
    
    21.7Deferred income taxes
    
    
    
    
    
    
    25.1
    
    
    
    11.3
    
    
    
    
    
    
    
    36.4Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,067.1
    
    
    
    439.9
    
    
    
    1.9
    
    
    
    (1,485.4
    )
    
    
    23.5Non-current assets of discontinued operations
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Total assets
    
    $
    1,083.9
    
    
    $
    1,420.2
    
    
    $
    284.8
    
    
    $
    (1,549.1
    )
    
    $
    1,239.8LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    
    
    
    $
    0.3Notes payable
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    3.0Accounts payable
    
    
    
    
    
    
    122.0
    
    
    
    77.4
    
    
    
    (39.1
    )
    
    
    160.3Accrued expenses
    
    
    7.2
    
    
    
    156.9
    
    
    
    20.2
    
    
    
    (24.6
    )
    
    
    159.7Current liabilities of discontinued operations
    
    
    
    
    
    
    15.0
    
    
    
    
    
    
    
    
    
    
    
    15.0Total current liabilities
    
    
    7.2
    
    
    
    294.2
    
    
    
    100.6
    
    
    
    (63.7
    )
    
    
    338.3Long-term debt
    
    
    480.2
    
    
    
    0.9
    
    
    
    6.4
    
    
    
    (283.2
    )
    
    
    204.3Other liabilities
    
    
    1.5
    
    
    
    82.8
    
    
    
    13.7
    
    
    
    (4.4
    )
    
    
    93.6Minority interest
    
    
    
    
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    8.6Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total shareowners equity
    
    
    595.0
    
    
    
    1,042.3
    
    
    
    155.5
    
    
    
    (1,197.8
    )
    
    
    595.0Total liabilities and shareowners equity
    
    $
    1,083.9
    
    
    $
    1,420.2
    
    
    $
    284.8
    
    
    $
    (1,549.1
    )
    
    $
    1,239.8
 43




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    2,457.0
    
    
    $
    652.5
    
    
    $
    (453.0
    )
    
    $
    2,656.5Cost of sales
    
    
    
    
    
    
    1,752.3
    
    
    
    530.6
    
    
    
    (446.0
    )
    
    
    1,836.9Gross Margin
    
    
    
    
    
    
    704.7
    
    
    
    121.9
    
    
    
    (7.0
    )
    
    
    819.6Selling, general and administrative expense
    
    
    2.4
    
    
    
    639.0
    
    
    
    98.8
    
    
    
    (7.0
    )
    
    
    733.2Restructuring charges
    
    
    
    
    
    
    24.4
    
    
    
    0.5
    
    
    
    
    
    
    
    24.9Operating (loss) profit from continuing operations
    
    
    (2.4
    )
    
    
    41.3
    
    
    
    22.6
    
    
    
    
    
    
    
    61.5Interest expense
    
    
    26.9
    
    
    
    0.6
    
    
    
    4.1
    
    
    
    (9.5
    )
    
    
    22.1Interest income
    
    
    
    
    
    
    (11.8
    )
    
    
    (3.0
    )
    
    
    9.5
    
    
    
    (5.3
    )Equity in earnings of subsidiaries
    
    
    (17.0
    )
    
    
    (16.5
    )
    
    
    
    
    
    
    33.5
    
    
    
    (Loss) earnings from continuing operations before
income taxes and minority interest
    
    
    (12.3
    )
    
    
    69.0
    
    
    
    21.5
    
    
    
    (33.5
    )
    
    
    44.7(Benefit) provision for income taxes
    
    
    (10.3
    )
    
    
    24.6
    
    
    
    (1.1
    )
    
    
    
    
    
    
    13.2(Loss) earnings from continuing operations before
minority interest
    
    
    (2.0
    )
    
    
    44.4
    
    
    
    22.6
    
    
    
    (33.5
    )
    
    
    31.5Minority interest, net of income tax
    
    
    
    
    
    
    
    
    
    
    3.6
    
    
    
    
    
    
    
    3.6Net (loss) earnings from continuing operations
    
    
    (2.0
    )
    
    
    44.4
    
    
    
    26.2
    
    
    
    (33.5
    )
    
    
    35.1Loss from discontinued operations, net of income
taxes and minority interest
    
    
    
    
    
    
    (27.4
    )
    
    
    (9.7
    )
    
    
    
    
    
    
    (37.1
    )Net (loss) earnings
    
    $
    (2.0
    )
    
    $
    17.0
    
    
    $
    16.5
    
    
    $
    (33.5
    )
    
    $
    (2.0
    )
 44




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net (loss) earnings
    
    $
    (2.0
    )
    
    $
    17.0
    
    
    $
    16.5
    
    
    $
    (33.5
    )
    
    $
    (2.0
    )Loss from discontinued operations, net of
income taxes and minority interest
    
    
    
    
    
    
    (27.4
    )
    
    
    (9.7
    )
    
    
    
    
    
    
    (37.1
    )Net earnings from continuing operations
    
    
    (2.0
    )
    
    
    44.4
    
    
    
    26.2
    
    
    
    (33.5
    )
    
    
    35.1Adjustments for non-cash items included in net
(loss) earnings from continuing operations:Non-cash component of restructuring charges
    
    
    
    
    
    
    10.8
    
    
    
    
    
    
    
    
    
    
    
    10.8Loss on impairment of and disposal of assets
    
    
    
    
    
    
    4.6
    
    
    
    2.4
    
    
    
    
    
    
    
    7.0Depreciation and amortization
    
    
    
    
    
    
    82.3
    
    
    
    12.3
    
    
    
    
    
    
    
    94.6Amortization of deferred financing costs
    
    
    0.6
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.9Amortization of unearned restricted stock
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    0.7Deferred income taxes
    
    
    
    
    
    
    (2.3
    )
    
    
    (4.1
    )
    
    
    
    
    
    
    (6.4
    )Minority interest, net of tax
    
    
    
    
    
    
    
    
    
    
    (3.6
    )
    
    
    
    
    
    
    (3.6
    )Changes in working capital:Inventories
    
    
    
    
    
    
    31.4
    
    
    
    1.0
    
    
    
    (1.4
    )
    
    
    31.0Other current assets
    
    
    (10.2
    )
    
    
    21.3
    
    
    
    (8.3
    )
    
    
    5.6
    
    
    
    8.4Accounts payable
    
    
    
    
    
    
    37.7
    
    
    
    (19.9
    )
    
    
    12.9
    
    
    
    30.7Accrued expenses
    
    
    (0.3
    )
    
    
    48.8
    
    
    
    3.9
    
    
    
    (17.1
    )
    
    
    35.3Other assets and liabilities, net
    
    
    21.7
    
    
    
    (60.0
    )
    
    
    (0.1
    )
    
    
    44.5
    
    
    
    6.1Cash flow provided by (used in) discontinued
operations
    
    
    
    
    
    
    7.6
    
    
    
    (1.0
    )
    
    
    
    
    
    
    6.6Cash flow provided by operating activities
from continuing operations
    
    
    9.8
    
    
    
    227.6
    
    
    
    8.8
    
    
    
    11.0
    
    
    
    257.2Investing Activities:Capital expenditures
    
    
    
    
    
    
    (96.0
    )
    
    
    (8.9
    )
    
    
    
    
    
    
    (104.9
    )Dispositions of property and equipment
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    3.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    30.5
    
    
    
    
    
    
    
    30.5Purchase of marketable securities
    
    
    
    
    
    
    (13.0
    )
    
    
    
    
    
    
    
    
    
    
    (13.0
    )Sale of marketable securities
    
    
    
    
    
    
    18.0
    
    
    
    
    
    
    
    
    
    
    
    18.0Investment in subsidiaries
    
    
    
    
    
    
    5.5
    
    
    
    
    
    
    
    (5.5
    )
    
    
    Cash flow used in investing activities from
continuing operations
    
    
    
    
    
    
    (82.5
    )
    
    
    21.6
    
    
    
    (5.5
    )
    
    
    (66.4
    )Financing Activities:Issuances of notes payable
    
    
    
    
    
    
    
    
    
    
    (30.5
    )
    
    
    
    
    
    
    (30.5
    )Issuance of debt
    
    
    
    
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    2.4Payment of deferred financing costs
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Repayments of debt
    
    
    
    
    
    
    (1.5
    )
    
    
    
    
    
    
    
    
    
    
    (1.5
    )Issuances of common stock
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6Purchases of common stock
    
    
    (11.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11.4
    )Contributions by parents
    
    
    
    
    
    
    
    
    
    
    5.5
    
    
    
    (5.5
    )
    
    
    Contributions by minority owners
    
    
    
    
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    3.7Cash flow (used in) provided by financing
activities from continuing operations
    
    
    (9.8
    )
    
    
    (1.7
    )
    
    
    (18.9
    )
    
    
    (5.5
    )
    
    
    (35.9
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (2.0
    )
    
    
    
    
    
    
    (2.0
    )Increase in cash and cash equivalents
    
    
    
    
    
    
    143.4
    
    
    
    9.5
    
    
    
    
    
    
    
    152.9Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    67.4
    
    
    
    69.3
    
    
    
    
    
    
    
    136.7Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    210.8
    
    
    $
    78.8
    
    
    $
    
    
    
    $
    289.6
 45




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    229.9
    
    
    $
    73.4
    
    
    $
    
    
    
    $
    303.3Restricted cash
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Inventories
    
    
    
    
    
    
    304.8
    
    
    
    84.1
    
    
    
    (5.0
    )
    
    
    383.9Current deferred income taxes
    
    
    
    
    
    
    20.9
    
    
    
    
    
    
    
    
    
    
    
    20.9Other current assets
    
    
    26.3
    
    
    
    51.8
    
    
    
    50.7
    
    
    
    (71.9
    )
    
    
    56.9Current assets of discontinued operations
    
    
    
    
    
    
    4.8
    
    
    
    
    
    
    
    
    
    
    
    4.8Total current assets
    
    
    26.3
    
    
    
    612.2
    
    
    
    210.2
    
    
    
    (76.9
    )
    
    
    771.8Property and Equipment:Land
    
    
    
    
    
    
    8.3
    
    
    
    
    
    
    
    
    
    
    
    8.3Buildings and leasehold improvements
    
    
    
    
    
    
    586.3
    
    
    
    76.5
    
    
    
    
    
    
    
    662.8Furniture, fixtures and equipment
    
    
    
    
    
    
    461.7
    
    
    
    61.1
    
    
    
    
    
    
    
    522.8Property under capital leases
    
    
    
    
    
    
    3.8
    
    
    
    
    
    
    
    
    
    
    
    3.8Property, buildings and equipment
    
    
    
    
    
    
    1,060.1
    
    
    
    137.6
    
    
    
    
    
    
    
    1,197.7Accumulated depreciation and amortization
    
    
    
    
    
    
    (715.8
    )
    
    
    (70.0
    )
    
    
    
    
    
    
    (785.8
    )Property and equipment, net
    
    
    
    
    
    
    344.3
    
    
    
    67.6
    
    
    
    
    
    
    
    411.9Favorable leases, net
    
    
    
    
    
    
    20.8
    
    
    
    
    
    
    
    
    
    
    
    20.8Deferred income taxes
    
    
    
    
    
    
    24.4
    
    
    
    11.2
    
    
    
    
    
    
    
    35.6Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,090.1
    
    
    
    459.6
    
    
    
    1.8
    
    
    
    (1,528.4
    )
    
    
    23.1Total assets
    
    $
    1,116.4
    
    
    $
    1,467.2
    
    
    $
    290.8
    
    
    $
    (1,605.3
    )
    
    $
    1,269.1LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.3
    
    
    $
    1.2
    
    
    $
    
    
    
    $
    1.5Notes payable
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Accounts payable
    
    
    
    
    
    
    143.0
    
    
    
    70.4
    
    
    
    (43.6
    )
    
    
    169.8Accrued expenses
    
    
    10.8
    
    
    
    159.9
    
    
    
    20.8
    
    
    
    (33.3
    )
    
    
    158.2Current liabilities of discontinued operations
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    
    
    
    
    5.0Total current liabilities
    
    
    10.8
    
    
    
    308.2
    
    
    
    94.4
    
    
    
    (76.9
    )
    
    
    336.5Long-term debt
    
    
    480.2
    
    
    
    0.8
    
    
    
    6.4
    
    
    
    (283.1
    )
    
    
    204.3Other liabilities
    
    
    1.5
    
    
    
    82.2
    
    
    
    19.9
    
    
    
    (7.8
    )
    
    
    95.8Minority interest
    
    
    
    
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    8.6Total shareowners equity
    
    
    623.9
    
    
    
    1,076.0
    
    
    
    161.5
    
    
    
    (1,237.5
    )
    
    
    623.9Total liabilities and shareowners equity
    
    $
    1,116.4
    
    
    $
    1,467.2
    
    
    $
    290.8
    
    
    $
    (1,605.3
    )
    
    $
    1,269.1
 46




---



##### Table of Contents



(dollars in millions)
    
    Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    267.7
    
    
    $
    93.3
    
    
    $
    
    
    
    $
    361.0Restricted cash
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Inventories
    
    
    
    
    
    
    291.3
    
    
    
    74.3
    
    
    
    (3.7
    )
    
    
    361.9Current deferred income taxes
    
    
    
    
    
    
    22.3
    
    
    
    0.1
    
    
    
    
    
    
    
    22.4Other current assets
    
    
    23.1
    
    
    
    82.2
    
    
    
    21.7
    
    
    
    (70.2
    )
    
    
    56.8Current assets of discontinued operations
    
    
    
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    2.9Total current assets
    
    
    23.1
    
    
    
    666.4
    
    
    
    191.4
    
    
    
    (73.9
    )
    
    
    807.0Property and Equipment:Land
    
    
    
    
    
    
    7.7
    
    
    
    
    
    
    
    
    
    
    
    7.7Buildings and leasehold improvements
    
    
    
    
    
    
    577.6
    
    
    
    76.8
    
    
    
    
    
    
    
    654.4Furniture, fixtures and equipment
    
    
    
    
    
    
    469.6
    
    
    
    61.5
    
    
    
    
    
    
    
    531.1Property under capital leases
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    
    
    
    
    3.7Property, buildings and equipment
    
    
    
    
    
    
    1,058.6
    
    
    
    138.3
    
    
    
    
    
    
    
    1,196.9Accumulated depreciation and amortization
    
    
    
    
    
    
    (724.6
    )
    
    
    (73.3
    )
    
    
    
    
    
    
    (797.9
    )Property and equipment, net
    
    
    
    
    
    
    334.0
    
    
    
    65.0
    
    
    
    
    
    
    
    399.0Favorable leases, net
    
    
    
    
    
    
    19.9
    
    
    
    
    
    
    
    
    
    
    
    19.9Deferred income taxes
    
    
    
    
    
    
    23.7
    
    
    
    11.4
    
    
    
    
    
    
    
    35.1Goodwill, net
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    
    
    
    
    5.9Other assets
    
    
    1,124.6
    
    
    
    456.8
    
    
    
    1.8
    
    
    
    (1,560.7
    )
    
    
    22.5Total assets
    
    $
    1,147.7
    
    
    $
    1,506.7
    
    
    $
    269.6
    
    
    $
    (1,634.6
    )
    
    $
    1,289.4LIABILITIES AND SHAREOWNERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    0.4
    
    
    $
    1.2
    
    
    $
    
    
    
    $
    1.6Notes payable
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Accounts payable
    
    
    
    
    
    
    124.6
    
    
    
    68.9
    
    
    
    (45.6
    )
    
    
    147.9Accrued expenses
    
    
    8.3
    
    
    
    164.1
    
    
    
    19.7
    
    
    
    (28.3
    )
    
    
    163.8Current liabilities of discontinued operations
    
    
    
    
    
    
    6.2
    
    
    
    
    
    
    
    
    
    
    
    6.2Total current liabilities
    
    
    8.3
    
    
    
    295.3
    
    
    
    91.8
    
    
    
    (73.9
    )
    
    
    321.5Long-term debt
    
    
    480.3
    
    
    
    0.7
    
    
    
    6.4
    
    
    
    (283.1
    )
    
    
    204.3Other liabilities
    
    
    1.9
    
    
    
    83.9
    
    
    
    12.3
    
    
    
    (0.1
    )
    
    
    98.0Minority interest
    
    
    
    
    
    
    
    
    
    
    8.4
    
    
    
    
    
    
    
    8.4Commitments and contingenciesTotal shareowners equity
    
    
    657.2
    
    
    
    1,126.8
    
    
    
    150.7
    
    
    
    (1277.5
    )
    
    
    657.2Total liabilities and shareowners equity
    
    $
    1,147.7
    
    
    $
    1,506.7
    
    
    $
    269.6
    
    
    $
    (1,634.6
    )
    
    $
    1,289.4
 47




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##### Table of Contents



Number
    
    Description31.1
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Chief Executive Officer and President*31.2
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Senior Vice President, Chief Financial Officer and Treasurer*32.1
    
    Certification Pursuant to 18 U.S.C. 1350 of the Chief Executive Officer and President*32.2
    
    Certification Pursuant to 18 U.S.C. 1350 of the Senior Vice President, Chief Financial Officer and Treasurer*
 
 *
    
    Filed herewith 48




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##### Table of Contents



PAYLESS SHOESOURCE, INC.Date: December 7, 2005
    
    By:
    
    /s/ Matthew E. RubelMatthew E. RubelChief Executive Officer and President(Principal Executive Officer)Date: December 7, 2005
    
    By:
    
    /s/ Ullrich E. PorzigUllrich E. PorzigSenior Vice PresidentChief Financial Officer and Treasurer(Principal Financial and Accounting Officer)
 49