##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended May 2, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 Commission File Number: 1-14770
 
 COLLECTIVE BRANDS, INC.
  Delaware
    
    43-1813160State or other jurisdiction of 
incorporation or organization
    
    (I.R.S. Employer
Identification No.)3231 Southeast Sixth Avenue, Topeka, Kansas
    
    66607-2207(Address of principal executive offices)
    
    (Zip Code)
 (785) 233-5171
 þ o
 o o
  Large accelerated filer
þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



COLLECTIVE BRANDS, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED MAY 2, 2009
INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements. (unaudited)Condensed Consolidated Statements of Earnings for the 13 Weeks Ended May 2, 2009 and May 3, 2008
    
    
    3Condensed Consolidated Balance Sheets as of May 2, 2009, May 3, 2008 and January 31, 2009
    
    
    4Condensed Consolidated Statements of Equity and Comprehensive Income for the 13 Weeks Ended May 2, 2009 and May 3, 2008
    
    
    5Condensed Consolidated Statements of Cash Flows for the 13 Weeks Ended May 2, 2009 and May 3, 2008
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    32PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 4. Submission of Matters to a Vote of Security Holders
    
    
    35Item 6. Exhibits
    
    
    36SignaturesCertification pursuant to Section 302 of the CEO, President and Chairman of the BoardCertification pursuant to Section 302 of the Division SVP, CFO and TreasurerCertification pursuant to Section 906 of the CEO, President and Chairman of the BoardCertification pursuant to Section 906 of the Division SVP, CFO and TreasurerEX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 (UNAUDITED)
  13 Weeks EndedMay 2,
    
    
    May 3,2009
    
    
    2008Net sales
    
    $
    862.9
    
    
    $
    932.4Cost of sales
    
    
    553.1
    
    
    
    627.3Gross margin
    
    
    309.8
    
    
    
    305.1Selling, general and administrative expenses
    
    
    249.3
    
    
    
    263.8Restructuring charges
    
    
    
    
    
    
    0.1Operating profit from continuing operations
    
    
    60.5
    
    
    
    41.2Interest expense
    
    
    16.4
    
    
    
    18.5Interest income
    
    
    (0.6
    )
    
    
    (1.3
    )Net earnings from continuing operations before income taxes
    
    
    44.7
    
    
    
    24.0Provision for income taxes
    
    
    6.4
    
    
    
    2.3Net earnings from continuing operations
    
    
    38.3
    
    
    
    21.7Loss from discontinued operations, net of income taxes
    
    
    (0.1
    )
    
    
    (0.4
    )Net earnings
    
    
    38.2
    
    
    
    21.3Net earnings attributable to noncontrolling interests
    
    
    (0.2
    )
    
    
    (1.6
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    38.0
    
    
    $
    19.7Basic and diluted earnings per share attributable to Collective Brands, Inc.
common shareholders:Earnings from continuing operations
    
    $
    0.59
    
    
    $
    0.31Loss from discontinued operations
    
    
    
    
    
    
    (0.01
    )Basic and diluted earnings per share attributable to Collective Brands, Inc.
common shareholders:
    
    $
    0.59
    
    
    $
    0.30Basic and diluted weighted average shares outstanding
    
    
    63.1
    
    
    
    62.8
  3




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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
  May 2,
    
    
    May 3,
    
    
    January 31,2009
    
    
    2008
    
    
    2009ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    260.8
    
    
    $
    231.4
    
    
    $
    249.3Accounts receivable, net of allowance for doubtful accounts
and returns reserve as of May 2, 2009, May 3, 2008 and
January 31, 2009 of $4.8, $5.3 and $4.2, respectively
    
    
    99.4
    
    
    
    111.7
    
    
    
    97.5Inventories
    
    
    480.7
    
    
    
    481.5
    
    
    
    492.0Current deferred income taxes
    
    
    34.5
    
    
    
    36.5
    
    
    
    35.6Prepaid expenses
    
    
    57.0
    
    
    
    63.1
    
    
    
    58.7Other current assets
    
    
    20.3
    
    
    
    40.5
    
    
    
    25.3Current assets of discontinued operations
    
    
    0.8
    
    
    
    1.0
    
    
    
    1.3Total current assets
    
    
    953.5
    
    
    
    965.7
    
    
    
    959.7Property and Equipment:Land
    
    
    8.6
    
    
    
    9.3
    
    
    
    8.6Property, buildings and equipment
    
    
    1,476.6
    
    
    
    1,467.5
    
    
    
    1,458.6Accumulated depreciation and amortization
    
    
    (971.4
    )
    
    
    (920.8
    )
    
    
    (945.8
    )Property and equipment, net
    
    
    513.8
    
    
    
    556.0
    
    
    
    521.4Intangible assets, net
    
    
    441.0
    
    
    
    553.3
    
    
    
    446.0Goodwill
    
    
    281.6
    
    
    
    321.7
    
    
    
    281.6Deferred income taxes
    
    
    5.0
    
    
    
    1.1
    
    
    
    1.7Other assets
    
    
    41.5
    
    
    
    44.2
    
    
    
    40.9Total Assets
    
    $
    2,236.4
    
    
    $
    2,442.0
    
    
    $
    2,251.3LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    7.1
    
    
    $
    7.4
    
    
    $
    24.8Accounts payable
    
    
    144.7
    
    
    
    196.2
    
    
    
    173.8Accrued expenses
    
    
    190.1
    
    
    
    210.4
    
    
    
    202.7Current liabilities of discontinued operations
    
    
    1.9
    
    
    
    1.9
    
    
    
    1.9Total current liabilities
    
    
    343.8
    
    
    
    415.9
    
    
    
    403.2Long-term debt
    
    
    885.9
    
    
    
    913.1
    
    
    
    888.4Deferred income taxes
    
    
    52.4
    
    
    
    115.2
    
    
    
    49.2Other liabilities
    
    
    262.0
    
    
    
    249.4
    
    
    
    264.2Noncurrent liabilities of discontinued operations
    
    
    0.3
    
    
    
    
    
    
    
    0.3Commitments and contingencies (Note 15)Equity:Collective Brands, Inc. shareowners equity
    
    
    667.0
    
    
    
    730.2
    
    
    
    622.3Noncontrolling interests
    
    
    25.0
    
    
    
    18.2
    
    
    
    23.7Total equity
    
    
    692.0
    
    
    
    748.4
    
    
    
    646.0Total Liabilities and Equity
    
    $
    2,236.4
    
    
    $
    2,442.0
    
    
    $
    2,251.3
  4




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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
 AND COMPREHENSIVE INCOME
 (UNAUDITED)
  Collective Brands, Inc. ShareownersOutstanding
    
    
    Additional
    
    
    
    
    
    
    Accumulated Other
    
    
    Non-Common
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    controlling
    
    
    
    
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Interests
    
    
    Total
    
    
    IncomeBalance at February 2, 2008
    
    $
    0.7
    
    
    $
    
    
    
    $
    708.1
    
    
    $
    (5.9
    )
    
    $
    17.2
    
    
    $
    720.1Net earnings
    
    
    
    
    
    
    
    
    
    
    19.7
    
    
    
    
    
    
    
    1.6
    
    
    
    21.3
    
    
    $
    21.3Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.0
    )
    
    
    0.1
    
    
    
    (0.9
    )
    
    
    (0.9
    )Net change in fair value of derivative,
net of taxes of $2.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    3.7
    
    
    
    3.7Changes in unrecognized amounts of
pension benefits, net of taxes of $0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    0.4
    
    
    
    0.4Issuances of common stock under stock plans
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Purchases of common stock
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Amortization of unearned nonvested shares
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.8Stock option expense
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.7Contributions from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.5Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.2
    )
    
    
    (1.2
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24.5Comprehensive income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.7
    )Comprehensive income attributable to
Collective Brands, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    22.8Balance at May 3, 2008
    
    $
    0.7
    
    
    $
    4.5
    
    
    $
    727.8
    
    
    $
    (2.8
    )
    
    $
    18.2
    
    
    $
    748.4Balance at January 31, 2009
    
    $
    0.7
    
    
    $
    17.8
    
    
    $
    639.4
    
    
    $
    (35.6
    )
    
    $
    23.7
    
    
    $
    646.0Net earnings
    
    
    
    
    
    
    
    
    
    
    38.0
    
    
    
    
    
    
    
    0.2
    
    
    
    38.2
    
    
    $
    38.2Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    (0.8
    )
    
    
    0.8
    
    
    
    0.8Net change in fair value of derivative,
net of taxes of $0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9
    
    
    
    0.9Changes in unrecognized amounts of
pension benefits, net of taxes of $0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    0.5
    
    
    
    0.5Issuances of common stock under
stock plans
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Purchases of common stock
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Amortization of unearned nonvested
shares
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.2Stock option expense
    
    
    
    
    
    
    2.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.8Contributions from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.7
    
    
    
    2.7Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.8
    )
    
    
    (0.8
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40.4Comprehensive loss attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Comprehensive income attributable to
Collective Brands, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    41.0Balance at May 2, 2009
    
    $
    0.7
    
    
    $
    21.5
    
    
    $
    677.4
    
    
    $
    (32.6
    )
    
    $
    25.0
    
    
    $
    692.0
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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  13 Weeks EndedMay 2,
    
    
    May 3,2009
    
    
    2008Operating Activities:Net earnings
    
    $
    38.2
    
    
    $
    21.3Loss from discontinued operations, net of income taxes
    
    
    0.1
    
    
    
    0.4Adjustments for non-cash items included in net earnings:Loss on disposal of assets
    
    
    0.8
    
    
    
    1.7Depreciation and amortization
    
    
    34.8
    
    
    
    35.1Provision for losses on accounts receivable
    
    
    0.2
    
    
    
    0.5Share-based compensation expense
    
    
    4.4
    
    
    
    4.1Deferred income taxes
    
    
    (0.5
    )
    
    
    (13.9
    )Other, net
    
    
    (0.1
    )
    
    
    Changes in working capital, exclusive of the effects of acquisitions:Accounts receivable
    
    
    (1.4
    )
    
    
    (26.2
    )Inventories
    
    
    11.9
    
    
    
    (11.8
    )Prepaid expenses and other current assets
    
    
    7.2
    
    
    
    21.2Accounts payable
    
    
    (27.6
    )
    
    
    (0.2
    )Accrued expenses
    
    
    (9.3
    )
    
    
    10.3Changes in other assets and liabilities, net
    
    
    (1.0
    )
    
    
    4.0Contributions to pension plans
    
    
    (0.7
    )
    
    
    (1.6
    )Net cash provided by discontinued operations
    
    
    0.4
    
    
    
    Cash flow provided by operating activities
    
    
    57.4
    
    
    
    44.9Investing Activities:Capital expenditures
    
    
    (26.7
    )
    
    
    (42.7
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    0.2Cash flow used in investing activities
    
    
    (26.7
    )
    
    
    (42.5
    )Financing Activities:Repayment of debt
    
    
    (20.2
    )
    
    
    (1.8
    )Payment of deferred financing costs
    
    
    
    
    
    
    (0.1
    )Issuances of common stock
    
    
    0.2
    
    
    
    0.3Purchases of common stock
    
    
    (0.5
    )
    
    
    (0.3
    )Contributions by noncontrolling interests
    
    
    2.7
    
    
    
    0.5Distribution to noncontrolling interests
    
    
    (0.8
    )
    
    
    (1.2
    )Cash flow used in financing activities
    
    
    (18.6
    )
    
    
    (2.6
    )Effect of exchange rate changes on cash
    
    
    (0.6
    )
    
    
    (0.9
    )Increase (decrease) in cash and cash equivalents
    
    
    11.5
    
    
    
    (1.1
    )Cash and cash equivalents, beginning of year
    
    
    249.3
    
    
    
    232.5Cash and cash equivalents, end of quarter
    
    $
    260.8
    
    
    $
    231.4Supplemental cash flow information:Interest paid
    
    $
    19.6
    
    
    $
    14.9Income taxes paid
    
    $
    0.1
    
    
    $
    16.5Non-cash investing and financing activities:Accrued capital additions
    
    $
    12.3
    
    
    $
    20.1
  6




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##### Table of Contents



COLLECTIVE BRANDS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 Note 1  Interim Results
  Note 2  Exit Costs
    Total Costs Incurred as
    
    
    Accrual Balance as of
    
    
    13 Weeks Ended May 2, 2009
    
    
    Accrual Balance as of(dollars in millions)
    
    of May 2, 2009
    
    
    January 31, 2009
    
    
    Costs Incurred
    
    
    Cash Payments
    
    
    May 2, 2009Employee severance costs
    
    $
    16.4
    
    
    $
    5.7
    
    
    $
    
    
    
    $
    
    
    
    $
    5.7Contract termination and other costs
    
    
    2.5
    
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    1.0Total
    
    $
    18.9
    
    
    $
    6.7
    
    
    $
    
    
    
    $
    
    
    
    $
    6.7
 Note 3  Discontinued Operations
  Note 4  Inventories
  7




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##### Table of Contents



Note 5  Intangible Assets
  May 2,
    
    
    May 3,
    
    
    January 31,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009Intangible assets subject to amortization:Favorable lease rights:Gross carrying amount
    
    $
    32.6
    
    
    $
    69.6
    
    
    $
    33.2Less: accumulated amortization
    
    
    (22.4
    )
    
    
    (55.3
    )
    
    
    (22.3
    )Carrying amount, end of period
    
    
    10.2
    
    
    
    14.3
    
    
    
    10.9Customer relationships:Gross carrying amount
    
    
    76.3
    
    
    
    75.8
    
    
    
    76.3Less: accumulated amortization
    
    
    (25.6
    )
    
    
    (10.5
    )
    
    
    (22.0
    )Carrying amount, end of period
    
    
    50.7
    
    
    
    65.3
    
    
    
    54.3Trademarks and other intangible assets:Gross carrying amount
    
    
    19.3
    
    
    
    21.4
    
    
    
    21.5Less: accumulated amortization
    
    
    (4.7
    )
    
    
    (4.4
    )
    
    
    (6.2
    )Carrying amount, end of period
    
    
    14.6
    
    
    
    17.0
    
    
    
    15.3Total carrying amount of intangible assets
subject to amortization
    
    
    75.5
    
    
    
    96.6
    
    
    
    80.5Indefinite-lived trademarks
    
    
    365.5
    
    
    
    456.7
    
    
    
    365.5Total intangible assets
    
    $
    441.0
    
    
    $
    553.3
    
    
    $
    446.0
  13 Weeks EndedMay 2,
    
    May 3,(dollars in millions)
    
    2009
    
    2008Amortization expense on intangible assets
    
    $
    4.7
    
    
    $
    5.9
  Year
    
    AmountRemainder of 2009
    
    $
    14.72010
    
    
    15.52011
    
    
    12.62012
    
    
    10.22013
    
    
    8.7
 8




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##### Table of Contents



Note 6  Goodwill
   May 2,
    
    
    May 3,
    
    
    January 31,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009Stride Rite Wholesale
    
    $
    241.4
    
    
    $
    239.5
    
    
    $
    241.4Payless Domestic
    
    
    40.2
    
    
    
    40.2
    
    
    
    40.2Stride Rite Retail
    
    
    
    
    
    
    42.0
    
    
    
    Total
    
    $
    281.6
    
    
    $
    321.7
    
    
    $
    281.6
 Note 7  Long-Term Debt
  May 2,
    
    
    May 3,
    
    
    January 31,(dollars in millions)
    
    2009
    
    
    2008
    
    
    2009Term Loan Facility (1)
    
    $
    696.6
    
    
    $
    721.4
    
    
    $
    715.9Senior subordinated notes (2)
    
    
    195.3
    
    
    
    197.9
    
    
    
    196.2Revolving
loan facility
(3)
    
    

    
    
    
    
    
    
    
    

    Capital-lease obligations
    
    
    1.1
    
    
    
    1.2
    
    
    
    1.1Total debt
    
    
    893.0
    
    
    
    920.5
    
    
    
    913.2Less: current maturities of long-term debt
    
    
    7.1
    
    
    
    7.4
    
    
    
    24.8Long-term debt
    
    $
    885.9
    
    
    $
    913.1
    
    
    $
    888.4
 
 (1)
    
    As of May 2, 2009, the fair value of the Companys Term Loan was $536.4 million
based on a current market conditions and perceived risks.(2)
    
    As of May 2, 2009, the fair value of the Companys senior subordinated notes was
$163.3 million based on recent trading activity.(3)
    
    As of May 2, 2009, the Companys borrowing base on its revolving loan facility
was $315.9 million less $84.0 million in outstanding letters of credit, or $231.9 million. The
variable interest rate including the applicable variable margin at May 2, 2009, was 2.01%.  Note 8  Derivative
  Fair ValueLocation on Condensed
    
    May 2,
    
    May 3,
    
    January 31,(dollars in millions)
    
    Consolidated Balance Sheet
    
    2009
    
    2008
    
    2009Interest rate contract
    
    Other liabilities
    
    $
    20.1
    
    
    $
    17.4
    
    
    $
    21.5
 9




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##### Table of Contents



Gain (Loss) Recognized in OCI on
    
    
    
    
    
    Gain (Loss) Reclassified from AOCIDerivative
    
    
    
    
    
    into Earnings13 Weeks Ended
    
    Location on Condensed
    

    13 Weeks EndedMay 2,
    
    May 3,
    
    Consolidated Statement of
    
    May 2,
    
    May 3,(dollars in millions)
    
    2009
    
    2008
    
    Earnings
    
    2009
    
    2008Interest rate contract
    
    $
    (1.3
    )
    
    $
    2.4
    
    
    Interest expense
    
    $
    (2.2
    )
    
    $
    (1.3
    )
  Note 9  Pension Plans
  Payless Plan
  13 Weeks EndedMay 2,
    
    
    May 3,(dollars in millions)
    
    2009
    
    
    2008Components of pension expense:Service cost
    
    $
    0.2
    
    
    $
    0.1Interest cost
    
    
    0.6
    
    
    
    0.6Amortization of prior service cost
    
    
    0.4
    
    
    
    0.4Amortization of actuarial loss
    
    
    0.1
    
    
    
    0.2Total
    
    $
    1.3
    
    
    $
    1.3
 Stride Rite Plan
  13 Weeks EndedMay 2,
    
    
    May 3,(dollars in millions)
    
    2009
    
    
    2008Components of pension expense:Interest cost
    
    $
    1.1
    
    
    $
    1.1Expected return on net assets
    
    
    (0.9
    )
    
    
    (1.2
    )Amortization of actuarial loss
    
    
    0.4
    
    
    
    Total
    
    $
    0.6
    
    
    $
    (0.1
    )
 Note 10  Share-Based Compensation
  10




---



##### Table of Contents



13 Weeks EndedMay 2,
    
    May 3,2009
    
    2008Stock-settled SARs(1):Vest in installments over 3 years
    
    
    1,468,959
    
    
    
    508,170Cliff vest after 3 years
    
    
    462,200
    
    
    
    309,600Nonvested Shares and Share Units:Performance grant  vests in installments over 3 years(2)
    
    
    
    
    
    
    4,755Vest in installments over 3 years
    
    
    335,959
    
    
    
    265,949Cliff vest after 3 years
    
    
    
    
    
    
    1,425Phantom nonvested shares  vests in installments over 3 years
    
    
    13,743
    
    
    
    Cash-settled SARs:Vest in installments over 3 years
    
    
    43,800
    
    
    
    2,800Cliff vest after 3 years
    
    
    3,500
    
    
    
    8,000
 
 (1)
    
    All of the stock-settled SARs issued by the Company to-date
contain an appreciation cap, which limits the appreciation for which
shares of common stock will be granted to 200% of the fair market
value of the underlying common stock on the grant date of the SAR.(2)
    
    Certain nonvested shares are subject to a performance
condition for vesting. The performance grant vests only if the
performance condition is met. As of May 2, 2009, the Company has
assessed the likelihood that the performance conditions will be met
and has recorded the related expense based on the estimated outcome.  13 Weeks EndedMay 2,
    
    
    May 3,(dollars in millions, except per share amounts)
    
    2009
    
    
    2008Cost of sales
    
    $
    1.1
    
    
    $
    1.0Selling, general and administrative expenses
    
    
    3.3
    
    
    
    3.1Share-based compensation expense before income taxes
    
    
    4.4
    
    
    
    4.1Tax benefit
    
    
    (1.7
    )
    
    
    (1.5
    )Share-based compensation expense after income taxes
    
    $
    2.7
    
    
    $
    2.6Effect on:Basic and diluted earnings per share attributable to Collective Brands, Inc. common shareholders
    
    $
    0.04
    
    
    $
    0.04
  Note 11  Income Taxes
    11




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##### Table of Contents



Note 12  Earnings Per Share
 ,
  13 Weeks EndedMay 2,
    
    
    May 3,(dollars in millions, except per share amounts; shares in thousands)
    
    2009
    
    
    2008Net earnings attributable to Collective Brands, Inc. from continuing operations
    
    $
    38.1
    
    
    $
    20.1Less: net earnings allocated to participating securities1
    
    
    0.5
    
    
    
    0.3Net earnings available to common shareholders from continuing operations
    
    $
    37.6
    
    
    $
    19.8Weighted average shares outstanding  basic
    
    
    63,054
    
    
    
    62,818Net effect of dilutive stock options
    
    
    
    
    
    
    Net effect of dilutive SARs
    
    
    
    
    
    
    Weighted average shares outstanding  diluted
    
    
    63,054
    
    
    
    62,818Basic and diluted earnings per share attributable to common shareholders from continuing operations
    
    $
    0.59
    
    
    $
    0.31
 
 1
    
    Net earnings allocated to participating securities is calculated based upon a weighted average percentage of participating securities in relation to total shares outstanding.  Note 13  Segment Reporting
  (i)
    
    The Payless Domestic reporting segment is comprised primarily of domestic retail stores
under the Payless ShoeSource name, the Companys sourcing unit and Collective
International, LP (Collective Licensing).
 12




---



##### Table of Contents



(ii)
    
    The Payless International reporting segment is comprised of international retail stores
under the Payless ShoeSource name in Canada, the South American Region, the Central
American Region, Puerto Rico, and the U.S. Virgin Islands as well as the franchising
arrangements under the Payless ShoeSource name.(iii)
    
    The Stride Rite Wholesale reporting segment is comprised of Stride Rites global
wholesale operations.(iv)
    
    The Stride Rite Retail reporting segment is comprised of Stride Rites retail stores
and outlet stores.
  Payless
    
    Payless
    
    Stride Rite(dollars in millions)
    
    Domestic
    
    International
    
    Wholesale
    
    Stride Rite Retail
    
    Consolidated13 weeks ended May 2, 2009Revenues from external customers
    
    $
    570.8
    
    
    $
    84.8
    
    
    $
    148.8
    
    
    $
    58.5
    
    
    $
    862.9Operating profit from continuing operations
    
    
    42.2
    
    
    
    1.8
    
    
    
    14.3
    
    
    
    2.2
    
    
    
    60.5Operating segment total assets
    
    $
    1,125.1
    
    
    $
    175.9
    
    
    $
    854.0
    
    
    $
    81.4
    
    
    $
    2,236.413 weeks ended May 3, 2008Revenues from external customers
    
    $
    588.5
    
    
    $
    104.3
    
    
    $
    182.5
    
    
    $
    57.1
    
    
    $
    932.4Operating profit from continuing operations
    
    
    5.1
    
    
    
    11.4
    
    
    
    23.1
    
    
    
    1.6
    
    
    
    41.2Operating segment total assets
    
    $
    1,124.7
    
    
    $
    209.1
    
    
    $
    1,012.3
    
    
    $
    95.9
    
    
    $
    2,442.0As of January 31, 2009Operating segment total assets
    
    $
    1,109.1
    
    
    $
    173.6
    
    
    $
    894.7
    
    
    $
    73.9
    
    
    $
    2,251.3
 Note 14  Fair Value Measurements
     13




---



##### Table of Contents



Estimated Fair Value MeasurementsSignificant
    
    SignificantQuoted Prices in
    
    Observable
    
    UnobservableActive Markets
    
    Other Inputs
    
    Inputs(dollars in millions)
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    Total Fair ValueAs of May 2, 2009:Financial Assets:Money market funds
    
    $
    183.1
    
    
    $
    
    
    
    $
    
    
    
    $
    183.1Financial Liabilities:Interest rate contract
    
    $
    
    
    
    $
    20.1
    
    
    $
    
    
    
    $
    20.1As of May 3, 2008:Financial Assets:Money market funds
    
    $
    142.6
    
    
    $
    
    
    
    $
    
    
    
    $
    142.6Financial Liabilities:Interest rate contract
    
    $
    
    
    
    $
    17.4
    
    
    $
    
    
    
    $
    17.4As of January 31, 2009:Financial Assets:Money market funds
    
    $
    173.7
    
    
    $
    
    
    
    $
    
    
    
    $
    173.7Financial Liabilities:Interest rate contract
    
    $
    
    
    
    $
    21.5
    
    
    $
    
    
    
    $
    21.5
 Note 15  Commitments and Contingencies
 th th
   th
 14




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15




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##### Table of Contents



Note 16  Impact of Recently Issued Accounting Standards
    16




---



##### Table of Contents



Note 17  Related Party Transactions
  Note 18  Subsidiary Guarantors of Senior Notes  Condensed Consolidating Financial Information
   17




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18




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##### Table of Contents



13 Weeks Ended May 2, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    788.6
    
    
    $
    278.2
    
    
    $
    (203.9
    )
    
    $
    862.9Cost of sales
    
    
    
    
    
    
    529.5
    
    
    
    206.1
    
    
    
    (182.5
    )
    
    
    553.1Gross margin
    
    
    
    
    
    
    259.1
    
    
    
    72.1
    
    
    
    (21.4
    )
    
    
    309.8Selling, general and administrative expenses
    
    
    0.5
    
    
    
    214.7
    
    
    
    55.5
    
    
    
    (21.4
    )
    
    
    249.3Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating (loss) profit from continuing operations
    
    
    (0.5
    )
    
    
    44.4
    
    
    
    16.6
    
    
    
    
    
    
    
    60.5Interest expense
    
    
    6.4
    
    
    
    11.9
    
    
    
    0.1
    
    
    
    (2.0
    )
    
    
    16.4Interest income
    
    
    
    
    
    
    (2.6
    )
    
    
    
    
    
    
    2.0
    
    
    
    (0.6
    )Equity in earnings of subsidiaries
    
    
    (42.4
    )
    
    
    (15.8
    )
    
    
    
    
    
    
    58.2
    
    
    
    Earnings from continuing operations before income taxes
    
    
    35.5
    
    
    
    50.9
    
    
    
    16.5
    
    
    
    (58.2
    )
    
    
    44.7(Benefit) provision for income taxes
    
    
    (2.5
    )
    
    
    8.4
    
    
    
    0.5
    
    
    
    
    
    
    
    6.4Net earnings from continuing operations
    
    
    38.0
    
    
    
    42.5
    
    
    
    16.0
    
    
    
    (58.2
    )
    
    
    38.3Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Net earnings
    
    
    38.0
    
    
    
    42.4
    
    
    
    16.0
    
    
    
    (58.2
    )
    
    
    38.2Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.2
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    38.0
    
    
    $
    42.4
    
    
    $
    15.8
    
    
    $
    (58.2
    )
    
    $
    38.0
 13 Weeks Ended May 3, 2008Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    834.4
    
    
    $
    281.3
    
    
    $
    (183.3
    )
    
    $
    932.4Cost of sales
    
    
    
    
    
    
    594.2
    
    
    
    198.1
    
    
    
    (165.0
    )
    
    
    627.3Gross margin
    
    
    
    
    
    
    240.2
    
    
    
    83.2
    
    
    
    (18.3
    )
    
    
    305.1Selling, general and administrative expenses
    
    
    0.3
    
    
    
    222.9
    
    
    
    58.9
    
    
    
    (18.3
    )
    
    
    263.8Restructuring charges
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Operating (loss) profit from continuing operations
    
    
    (0.3
    )
    
    
    17.2
    
    
    
    24.3
    
    
    
    
    
    
    
    41.2Interest expense
    
    
    4.4
    
    
    
    14.2
    
    
    
    
    
    
    
    (0.1
    )
    
    
    18.5Interest income
    
    
    
    
    
    
    (0.4
    )
    
    
    (1.0
    )
    
    
    0.1
    
    
    
    (1.3
    )Equity in earnings of subsidiaries
    
    
    (21.5
    )
    
    
    (20.5
    )
    
    
    
    
    
    
    42.0
    
    
    
    Earnings from continuing operations before income taxes
    
    
    16.8
    
    
    
    23.9
    
    
    
    25.3
    
    
    
    (42.0
    )
    
    
    24.0(Benefit) provision for income taxes
    
    
    (2.9
    )
    
    
    2.0
    
    
    
    3.2
    
    
    
    
    
    
    
    2.3Net earnings from continuing operations
    
    
    19.7
    
    
    
    21.9
    
    
    
    22.1
    
    
    
    (42.0
    )
    
    
    21.7Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    
    
    (0.4
    )Net earnings
    
    
    19.7
    
    
    
    21.5
    
    
    
    22.1
    
    
    
    (42.0
    )
    
    
    21.3Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (1.6
    )
    
    
    
    
    
    
    (1.6
    )Net earnings attributable to Collective Brands, Inc.
    
    $
    19.7
    
    
    $
    21.5
    
    
    $
    20.5
    
    
    $
    (42.0
    )
    
    $
    19.7
 19




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##### Table of Contents



As of May 2, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    179.6
    
    
    $
    81.2
    
    
    $
    
    
    
    $
    260.8Accounts receivable, net
    
    
    
    
    
    
    87.6
    
    
    
    19.0
    
    
    
    (7.2
    )
    
    
    99.4Inventories
    
    
    
    
    
    
    411.8
    
    
    
    78.0
    
    
    
    (9.1
    )
    
    
    480.7Current deferred income taxes
    
    
    
    
    
    
    30.3
    
    
    
    4.2
    
    
    
    
    
    
    
    34.5Prepaid expenses
    
    
    3.2
    
    
    
    45.7
    
    
    
    8.1
    
    
    
    
    
    
    
    57.0Other current assets
    
    
    
    
    
    
    262.4
    
    
    
    95.8
    
    
    
    (337.9
    )
    
    
    20.3Current assets of discontinued operations
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    0.8Total current assets
    
    
    3.2
    
    
    
    1,018.2
    
    
    
    286.3
    
    
    
    (354.2
    )
    
    
    953.5Property and Equipment:Land
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    8.6Property, buildings and equipment
    
    
    
    
    
    
    1,296.3
    
    
    
    180.3
    
    
    
    
    
    
    
    1,476.6Accumulated depreciation and amortization
    
    
    
    
    
    
    (857.5
    )
    
    
    (113.9
    )
    
    
    
    
    
    
    (971.4
    )Property and equipment, net
    
    
    
    
    
    
    447.4
    
    
    
    66.4
    
    
    
    
    
    
    
    513.8Intangible assets, net
    
    
    
    
    
    
    418.4
    
    
    
    22.6
    
    
    
    
    
    
    
    441.0Goodwill
    
    
    
    
    
    
    143.6
    
    
    
    138.0
    
    
    
    
    
    
    
    281.6Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    5.0Other assets
    
    
    1,297.6
    
    
    
    652.3
    
    
    
    2.6
    
    
    
    (1,911.0
    )
    
    
    41.5Total Assets
    
    $
    1,300.8
    
    
    $
    2,679.9
    
    
    $
    520.9
    
    
    $
    (2,265.2
    )
    
    $
    2,236.4LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    7.1
    
    
    $
    25.7
    
    
    $
    (25.7
    )
    
    $
    7.1Accounts payable
    
    
    
    
    
    
    105.1
    
    
    
    80.2
    
    
    
    (40.6
    )
    
    
    144.7Accrued expenses
    
    
    152.5
    
    
    
    287.8
    
    
    
    37.7
    
    
    
    (287.9
    )
    
    
    190.1Current liabilities of discontinued operations
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Total current liabilities
    
    
    152.5
    
    
    
    401.9
    
    
    
    143.6
    
    
    
    (354.2
    )
    
    
    343.8Long-term debt
    
    
    478.4
    
    
    
    689.6
    
    
    
    9.6
    
    
    
    (291.7
    )
    
    
    885.9Deferred income taxes
    
    
    
    
    
    
    50.3
    
    
    
    2.1
    
    
    
    
    
    
    
    52.4Other liabilities
    
    
    2.9
    
    
    
    241.9
    
    
    
    17.2
    
    
    
    
    
    
    
    262.0Noncurrent liabilities of discontinued operations
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Commitments and contingencies
Equity:Collective Brands, Inc. shareowners equity
    
    
    667.0
    
    
    
    1,295.9
    
    
    
    323.4
    
    
    
    (1,619.3
    )
    
    
    667.0Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    25.0
    
    
    
    
    
    
    
    25.0Total equity
    
    
    667.0
    
    
    
    1,295.9
    
    
    
    348.4
    
    
    
    (1,619.3
    )
    
    
    692.0Total Liabilities and Equity
    
    $
    1,300.8
    
    
    $
    2,679.9
    
    
    $
    520.9
    
    
    $
    (2,265.2
    )
    
    $
    2,236.4
 20




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As of May 3, 2008Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    129.8
    
    
    $
    101.6
    
    
    $
    
    
    
    $
    231.4Accounts receivable, net
    
    
    
    
    
    
    97.1
    
    
    
    18.6
    
    
    
    (4.0
    )
    
    
    111.7Inventories
    
    
    
    
    
    
    407.3
    
    
    
    81.0
    
    
    
    (6.8
    )
    
    
    481.5Current deferred income taxes
    
    
    
    
    
    
    33.6
    
    
    
    2.9
    
    
    
    
    
    
    
    36.5Prepaid expenses
    
    
    
    
    
    
    54.8
    
    
    
    8.3
    
    
    
    
    
    
    
    63.1Other current assets
    
    
    54.5
    
    
    
    299.4
    
    
    
    82.0
    
    
    
    (395.4
    )
    
    
    40.5Current assets of discontinued operations
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    1.0Total current assets
    
    
    54.5
    
    
    
    1,023.0
    
    
    
    294.4
    
    
    
    (406.2
    )
    
    
    965.7Property and Equipment:Land
    
    
    
    
    
    
    9.3
    
    
    
    
    
    
    
    
    
    
    
    9.3Property, buildings and equipment
    
    
    
    
    
    
    1,290.2
    
    
    
    177.3
    
    
    
    
    
    
    
    1,467.5Accumulated depreciation and amortization
    
    
    
    
    
    
    (808.5
    )
    
    
    (112.3
    )
    
    
    
    
    
    
    (920.8
    )Property and equipment, net
    
    
    
    
    
    
    491.0
    
    
    
    65.0
    
    
    
    
    
    
    
    556.0Intangible assets, net
    
    
    
    
    
    
    526.6
    
    
    
    26.7
    
    
    
    
    
    
    
    553.3Goodwill
    
    
    
    
    
    
    183.6
    
    
    
    138.1
    
    
    
    
    
    
    
    321.7Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1.1
    
    
    
    
    
    
    
    1.1Other assets
    
    
    1,400.2
    
    
    
    661.2
    
    
    
    2.1
    
    
    
    (2,019.3
    )
    
    
    44.2Total Assets
    
    $
    1,454.7
    
    
    $
    2,885.4
    
    
    $
    527.4
    
    
    $
    (2,425.5
    )
    
    $
    2,442.0LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    7.4
    
    
    $
    
    
    
    $
    
    
    
    $
    7.4Accounts payable
    
    
    
    
    
    
    127.7
    
    
    
    103.3
    
    
    
    (34.8
    )
    
    
    196.2Accrued expenses
    
    
    240.9
    
    
    
    305.1
    
    
    
    35.8
    
    
    
    (371.4
    )
    
    
    210.4Current liabilities of discontinued operations
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Total current liabilities
    
    
    240.9
    
    
    
    442.1
    
    
    
    139.1
    
    
    
    (406.2
    )
    
    
    415.9Long-term debt
    
    
    481.1
    
    
    
    714.1
    
    
    
    11.0
    
    
    
    (293.1
    )
    
    
    913.1Deferred income taxes
    
    
    
    
    
    
    114.0
    
    
    
    1.2
    
    
    
    
    
    
    
    115.2Other liabilities
    
    
    2.5
    
    
    
    228.5
    
    
    
    18.4
    
    
    
    
    
    
    
    249.4Commitments and contingenciesEquity:Collective Brands, Inc. shareowners equity
    
    
    730.2
    
    
    
    1,386.7
    
    
    
    339.5
    
    
    
    (1,726.2
    )
    
    
    730.2Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    18.2
    
    
    
    
    
    
    
    18.2Total equity
    
    
    730.2
    
    
    
    1,386.7
    
    
    
    357.7
    
    
    
    (1,726.2
    )
    
    
    748.4Total Liabilities and Equity
    
    $
    1,454.7
    
    
    $
    2,885.4
    
    
    $
    527.4
    
    
    $
    (2,425.5
    )
    
    $
    2,442.0
 21




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##### Table of Contents



As of January 31, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCash and cash equivalents
    
    $
    
    
    
    $
    141.7
    
    
    $
    107.6
    
    
    $
    
    
    
    $
    249.3Accounts receivable, net
    
    
    
    
    
    
    87.6
    
    
    
    14.7
    
    
    
    (4.8
    )
    
    
    97.5Inventories
    
    
    
    
    
    
    416.0
    
    
    
    80.5
    
    
    
    (4.5
    )
    
    
    492.0Current deferred income taxes
    
    
    
    
    
    
    31.6
    
    
    
    4.0
    
    
    
    
    
    
    
    35.6Prepaid expenses
    
    
    0.7
    
    
    
    51.3
    
    
    
    6.7
    
    
    
    
    
    
    
    58.7Other current assets
    
    
    
    
    
    
    273.2
    
    
    
    81.3
    
    
    
    (329.2
    )
    
    
    25.3Current assets of discontinued operations
    
    
    
    
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    1.3Total current assets
    
    
    0.7
    
    
    
    1,002.7
    
    
    
    294.8
    
    
    
    (338.5
    )
    
    
    959.7Property and Equipment:Land
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    8.6Property, buildings and equipment
    
    
    
    
    
    
    1,287.8
    
    
    
    170.8
    
    
    
    
    
    
    
    1,458.6Accumulated depreciation and amortization
    
    
    
    
    
    
    (836.3
    )
    
    
    (109.5
    )
    
    
    
    
    
    
    (945.8
    )Property and equipment, net
    
    
    
    
    
    
    460.1
    
    
    
    61.3
    
    
    
    
    
    
    
    521.4Intangible assets, net
    
    
    
    
    
    
    422.2
    
    
    
    23.8
    
    
    
    
    
    
    
    446.0Goodwill
    
    
    
    
    
    
    143.6
    
    
    
    138.0
    
    
    
    
    
    
    
    281.6Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    1.7Other assets
    
    
    1,251.9
    
    
    
    636.2
    
    
    
    3.5
    
    
    
    (1,850.7
    )
    
    
    40.9Total Assets
    
    $
    1,252.6
    
    
    $
    2,664.8
    
    
    $
    523.1
    
    
    $
    (2,189.2
    )
    
    $
    2,251.3LIABILITIES AND EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    24.8
    
    
    $
    30.0
    
    
    $
    (30.0
    )
    
    $
    24.8Accounts payable
    
    
    
    
    
    
    110.6
    
    
    
    96.2
    
    
    
    (33.0
    )
    
    
    173.8Accrued expenses
    
    
    148.3
    
    
    
    293.8
    
    
    
    36.0
    
    
    
    (275.4
    )
    
    
    202.7Current liabilities of discontinued operations
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Total current liabilities
    
    
    148.3
    
    
    
    431.1
    
    
    
    162.2
    
    
    
    (338.4
    )
    
    
    403.2Long-term debt
    
    
    479.3
    
    
    
    691.2
    
    
    
    9.6
    
    
    
    (291.7
    )
    
    
    888.4Deferred income taxes
    
    
    
    
    
    
    49.2
    
    
    
    
    
    
    
    
    
    
    
    49.2Other liabilities
    
    
    2.7
    
    
    
    244.4
    
    
    
    17.1
    
    
    
    
    
    
    
    264.2Noncurrent liabilities of discontinued operations
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.3Commitments and contingenciesEquity:Collective Brands, Inc. shareowners equity
    
    
    622.3
    
    
    
    1,248.6
    
    
    
    310.5
    
    
    
    (1,559.1
    )
    
    
    622.3Noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    23.7
    
    
    
    
    
    
    
    23.7Total equity
    
    
    622.3
    
    
    
    1,248.6
    
    
    
    334.2
    
    
    
    (1,559.1
    )
    
    
    646.0Total Liabilities and Equity
    
    $
    1,252.6
    
    
    $
    2,664.8
    
    
    $
    523.1
    
    
    $
    (2,189.2
    )
    
    $
    2,251.3
 22




---



##### Table of Contents



13 Weeks Ended May 2, 2009Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    38.0
    
    
    $
    42.4
    
    
    $
    16.0
    
    
    $
    (58.2
    )
    
    $
    38.2Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Adjustments for non-cash items included in net earnings
    
    
    0.8
    
    
    
    35.5
    
    
    
    3.3
    
    
    
    
    
    
    
    39.6Changes in working capital
    
    
    1.7
    
    
    
    14.4
    
    
    
    (30.9
    )
    
    
    (4.4
    )
    
    
    (19.2
    )Other, net
    
    
    (39.2
    )
    
    
    (14.6
    )
    
    
    (2.3
    )
    
    
    54.8
    
    
    
    (1.3
    )Cash flow provided by (used in) operating activities
    
    
    1.3
    
    
    
    77.8
    
    
    
    (13.9
    )
    
    
    (7.8
    )
    
    
    57.4Investing Activities:Capital expenditures
    
    
    
    
    
    
    (20.7
    )
    
    
    (6.0
    )
    
    
    
    
    
    
    (26.7
    )Cash flow used in investing activities
    
    
    
    
    
    
    (20.7
    )
    
    
    (6.0
    )
    
    
    
    
    
    
    (26.7
    )Financing Activities:Net repayment of debt or notes payable, including deferred financing costs
    
    
    (1.0
    )
    
    
    (19.2
    )
    
    
    
    
    
    
    
    
    
    
    (20.2
    )Net (purchases) issuances of common stock
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Net contribution from (distributions to) noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    1.9Net contributions by (distributions to) parent
    
    
    
    
    
    
    
    
    
    
    (3.5
    )
    
    
    3.5
    
    
    
    Cash flow used in financing activities
    
    
    (1.3
    )
    
    
    (19.2
    )
    
    
    (1.6
    )
    
    
    3.5
    
    
    
    (18.6
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (4.9
    )
    
    
    4.3
    
    
    
    (0.6
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    37.9
    
    
    
    (26.4
    )
    
    
    
    
    
    
    11.5Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    141.7
    
    
    
    107.6
    
    
    
    
    
    
    
    249.3Cash and cash equivalents, end of quarter
    
    $
    
    
    
    $
    179.6
    
    
    $
    81.2
    
    
    $
    
    
    
    $
    260.8
 13 Weeks Ended May 3, 2008Parent
    
    
    Guarantor
    
    
    Non-guarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating Activities:Net earnings
    
    $
    19.7
    
    
    $
    21.5
    
    
    $
    22.1
    
    
    $
    (42.0
    )
    
    $
    21.3Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.4Adjustments for non-cash items included in net earnings
    
    
    0.8
    
    
    
    22.2
    
    
    
    4.5
    
    
    
    
    
    
    
    27.5Changes in working capital
    
    
    6.4
    
    
    
    10.5
    
    
    
    (23.6
    )
    
    
    
    
    
    
    (6.7
    )Other, net
    
    
    (26.9
    )
    
    
    43.9
    
    
    
    (59.1
    )
    
    
    44.5
    
    
    
    2.4Cash flow provided by (used in) operating activities
    
    
    
    
    
    
    98.5
    
    
    
    (56.1
    )
    
    
    2.5
    
    
    
    44.9Investing Activities:Capital expenditures
    
    
    
    
    
    
    (39.4
    )
    
    
    (3.3
    )
    
    
    
    
    
    
    (42.7
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Cash flow used in investing activities
    
    
    
    
    
    
    (39.2
    )
    
    
    (3.3
    )
    
    
    
    
    
    
    (42.5
    )Financing Activities:Net repayment of debt or notes payable, including deferred financing costs
    
    
    
    
    
    
    (59.0
    )
    
    
    57.9
    
    
    
    (0.8
    )
    
    
    (1.9
    )Net contribution from (distributions to) noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (0.7
    )
    
    
    
    
    
    
    (0.7
    )Net contributions by (distributions to) parent
    
    
    
    
    
    
    62.3
    
    
    
    (60.6
    )
    
    
    (1.7
    )
    
    
    Cash flow provided by (used in) provided by financing activities
    
    
    
    
    
    
    3.3
    
    
    
    (3.4
    )
    
    
    (2.5
    )
    
    
    (2.6
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    (2.3
    )
    
    
    1.4
    
    
    
    
    
    
    
    (0.9
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    60.3
    
    
    
    (61.4
    )
    
    
    
    
    
    
    (1.1
    )Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    69.5
    
    
    
    163.0
    
    
    
    
    
    
    
    232.5Cash and cash equivalents, end of quarter
    
    $
    
    
    
    $
    129.8
    
    
    $
    101.6
    
    
    $
    
    
    
    $
    231.4
 23




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
  Overview
  
    
    Our Business  a general description of our business, our strategy and key 2009 events.
    
    Consolidated Review of Operations  an analysis of our consolidated results of
operations for the 13 weeks ended May 2, 2009 and May 3, 2008 as presented in our Condensed
Consolidated Financial Statements.
    
    Reporting Segment Review of Operations  an analysis of our results of operations for
the 13 weeks ended May 2, 2009 and May 3, 2008 as presented in our Condensed Consolidated
Financial Statements for our four reporting segments: Payless Domestic, Payless
International, Stride Rite Retail and Stride Rite Wholesale.
    
    Liquidity and Capital Resources  an analysis of cash flows, aggregate financial
commitments and certain financial condition ratios.
    
    Critical Accounting Policies  an update since January 31, 2009 of our discussion of our
critical accounting policies that involve a higher degree of judgment or complexity. This
section also includes the impact of new accounting standards.
 24




---



##### Table of Contents



Our Business
  Payless
   Stride Rite
   Key 2009 Events
   25




---



##### Table of Contents



Consolidated Review of Operations
  First Quarter2009
    
    2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    64.1
    
    
    
    67.3Gross margin
    
    
    35.9
    
    
    
    32.7Selling, general and administrative expense
    
    
    28.9
    
    
    
    28.3Operating profit from continuing operations
    
    
    7.0
    
    
    
    4.4Interest expense, net
    
    
    1.8
    
    
    
    1.9Net earnings from continuing operations before income taxes
    
    
    5.2
    
    
    
    2.5Effective income tax rate*
    
    
    14.3
    
    
    
    9.6Net earnings from continuing operations
    
    
    4.4
    
    
    
    2.3Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (0.1
    )Net earnings
    
    
    4.4
    
    
    
    2.2Net earnings attributable to noncontrolling interests
    
    
    
    
    
    
    (0.1
    )Net earnings attributable to Collective Brands, Inc.
    
    
    4.4
    %
    
    
    2.1
    %
 
 *
    
    Percent of pre-tax earnings Net Earnings Attributable to Collective Brands, Inc.
  Net Sales
   First Quarter2009
    
    2008Same-store sales
    
    
    (4.8
    )%
    
    
    (5.4
    )%Average selling price per unit
    
    
    8.3
    
    
    
    2.6Unit volume
    
    
    (12.3
    )
    
    
    (7.5
    )Footwear average selling price per unit
    
    
    10.7
    
    
    
    3.8Footwear unit volume
    
    
    (14.9
    )
    
    
    (8.8
    )Non-footwear average selling price per unit
    
    
    7.2
    
    
    
    (0.5
    )Non-footwear unit volume
    
    
    (2.5
    )
    
    
    (1.9
    )
  26




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##### Table of Contents



Cost of Sales
  Gross Margin
  Selling, General and Administrative Expenses
   Interest Expense (Income)
  First Quarter(dollars in millions)
    
    2009
    
    
    2008Interest expense
    
    $
    16.4
    
    
    $
    18.5Interest income
    
    
    (0.6
    )
    
    
    (1.3
    )Interest expense, net
    
    $
    15.8
    
    
    $
    17.2
  Income Taxes
     27




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##### Table of Contents



Net Earnings Attributable to Noncontrolling Interests
  Discontinued Operations
  Reporting Segment Review of Operations
  First Quarter(in millions)
    
    2009
    
    
    2008Revenues from external customers:Payless Domestic
    
    $
    570.8
    
    
    $
    588.5Payless International
    
    
    84.8
    
    
    
    104.3Stride Rite Wholesale
    
    
    148.8
    
    
    
    182.5Stride Rite Retail
    
    
    58.5
    
    
    
    57.1Revenues from external customers
    
    $
    862.9
    
    
    $
    932.4Operating profit from continuing operations:Payless Domestic
    
    $
    42.2
    
    
    $
    5.1Payless International
    
    
    1.8
    
    
    
    11.4Stride Rite Wholesale
    
    
    14.3
    
    
    
    23.1Stride Rite Retail
    
    
    2.2
    
    
    
    1.6Operating profit from continuing operations
    
    $
    60.5
    
    
    $
    41.2
  Payless
    
    
    Payless
    
    
    Stride RiteDomestic
    
    
    International
    
    
    Retail
    
    
    TotalFirst Quarter 2009Beginning store count
    
    
    3,900
    
    
    
    622
    
    
    
    355
    
    
    
    4,877Stores opened
    
    
    19
    
    
    
    11
    
    
    
    2
    
    
    
    32Stores closed
    
    
    (29
    )
    
    
    (3
    )
    
    
    (1
    )
    
    
    (33
    )Ending store count
    
    
    3,890
    
    
    
    630
    
    
    
    356
    
    
    
    4,876First Quarter 2008Beginning store count
    
    
    3,954
    
    
    
    598
    
    
    
    340
    
    
    
    4,892Stores opened
    
    
    51
    
    
    
    10
    
    
    
    12
    
    
    
    73Stores closed
    
    
    (49
    )
    
    
    (2
    )
    
    
    (4
    )
    
    
    (55
    )Ending store count
    
    
    3,956
    
    
    
    606
    
    
    
    348
    
    
    
    4,910
 Payless Domestic Segment Operating Results
  28




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First QuarterPercent increase (decrease)(dollars in millions)
    
    2009
    
    2008
    
    2008 to 2009Revenues from external customers
    
    $
    570.8
    
    
    $
    588.5
    
    
    
    (3.0
    )%Operating profit from continuing operations
    
    $
    42.2
    
    
    $
    5.1
    
    
    
    727.5
    %Operating profit from continuing operations as %
of revenues from external customers
    
    
    7.4
    %
    
    
    0.9
    %
   Payless International Segment Operating Results
  First QuarterPercent decrease(dollars in millions)
    
    2009
    
    2008
    
    2008 to 2009Revenues from external customers
    
    $
    84.8
    
    
    $
    104.3
    
    
    
    (18.7)
    %Operating profit from continuing operations
    
    $
    1.8
    
    
    $
    11.4
    
    
    
    (84.2)
    %Operating profit from continuing operations as %
of revenues from external customers
    
    
    2.1
    %
    
    
    10.9
    %
   Stride Rite Wholesale Segment Operating Results
   First QuarterPercent decrease(dollars in millions)
    
    2009
    
    2008
    
    2008 to 2009Revenues from external customers
    
    $
    148.8
    
    
    $
    182.5
    
    
    
    (18.5
    )%Operating profit from continuing operations
    
    $
    14.3
    
    
    $
    23.1
    
    
    
    (38.1
    )%Operating profit from continuing operations as %
of revenues from external customers
    
    
    9.6
    %
    
    
    12.7
    %
  29




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Stride Rite Retail Segment Operating Results
  First QuarterPercent increase(dollars in millions)
    
    2009
    
    2008
    
    2008 to 2009Revenues from external customers
    
    $
    58.5
    
    
    $
    57.1
    
    
    
    2.5
    %Operating profit from continuing operations
    
    $
    2.2
    
    
    $
    1.6
    
    
    
    37.5
    %Operating profit from continuing operations as %
of revenues from external customers
    
    
    3.8
    %
    
    
    2.8
    %
   Liquidity and Capital Resources
      Cash Flow Provided by Operating Activities
  30




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##### Table of Contents



Cash Flow Used in Investing Activities
  Cash Flow Used in Financing Activities
  First Quarter2009
    
    2008(dollars in millions, shares in thousands)
    
    Dollars
    
    Shares
    
    Dollars
    
    SharesEmployee stock purchase, deferred compensation
and stock incentive plans
    
    $
    0.5
    
    
    
    50
    
    
    $
    0.3
    
    
    
    22
   Contractual Obligations
  Financial Condition Ratios
  May 2,
    
    May 3,
    
    January 31,2009
    
    2008
    
    2009Debt-capitalization Ratio*
    
    
    56.3
    %
    
    
    55.2
    %
    
    
    58.6
    %
 
 *
    
    Debt-to-capitalization has been computed by dividing total debt
by capitalization. Total debt is defined as long-term debt
including current maturities, notes payable and borrowings under
the revolving loan facility. Capitalization is defined as total
debt and equity. The debt-to-capitalization ratio, including the
present value of future minimum rental payments under operating
leases as debt and as capitalization, was 74.3%, 73.5% and 75.7%,
respectively, for the periods referred to above. Critical Accounting Policies
  New Accounting Standards
  31




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Currency Risk
   
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  32




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  th th
   th
     33




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ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Issuer Purchases of Equity Securities
  ApproximateDollar ValueTotal Number of
    
    of Shares thatShares Purchased
    
    May Yet BeTotal Number
    
    Average
    
    as Part of Publicly
    
    Purchased Underof Shares
    
    Price
    
    Announced Plans
    
    the Plans orPurchased(1)
    
    Paid per
    
    or Programs
    
    ProgramsPeriod
    
    (in thousands)
    
    Share
    
    (in thousands)
    
    (in millions)02/01/09
 2/28/09
    
    
    9
    
    
    $
    11.27
    
    
    
    
    
    
    $
    204.803/01/09
 04/04/09
    
    
    35
    
    
    
    9.90
    
    
    
    
    
    
    
    204.804/05/09
 05/02/09
    
    
    6
    
    
    
    11.13
    
    
    
    
    
    
    
    204.8Total
    
    
    50
    
    
    $
    10.29
    
    
    
    
    
    
    $
    204.8
    (2)
 
 (1)
    
    Includes an aggregate of approximately fifty thousand shares of our common stock that
was repurchased in connection with our employee stock purchase and stock incentive plans.(2)
    
    On March 2, 2007 our Board of Directors authorized an aggregate of $250 million of share
repurchases. The timing and amount of share repurchases, if any, are limited by the terms of
our Credit Agreement and Senior Subordinated Notes. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 (a)
    
    The Annual Meeting of Stockholders of the Registrant was held on May 21, 2009.(b)
    
    At the Annual Meeting of Stockholders of the Registrant held on May 21, 2009, action was
taken with respect to the election of three directors of the Registrant: 54,037,915 shares
were voted for Mylle H. Mangum while authority was withheld with respect to 6,109,918 shares,
57,899,869 shares were voted for John F. McGovern while authority was withheld with respect to
2,247,964 shares, and 57,877,344 shares were voted for D. Scott Olivet while authority was
withheld with respect to 2,270,489 shares. Other directors whose term of office continued
after the meeting include: Matthew E. Rubel, Daniel Boggan Jr., Michael A. Weiss, Judith K.
Hofer, Matthew A. Ouimet, Robert F. Moran and Robert C. Wheeler.(c)
    
    Stockholders ratified the appointment of Deloitte & Touche LLP as the Companys independent
registered public accounting firm: 59,918,730 votes in favor, 196,507 votes against and 32,596
votes abstaining.
 35




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##### Table of Contents



(d)
    
    Stockholders approved amendments to and restatement of the 2006 Collective Brands, Inc. Stock
Incentive Plan: 50,596,255 votes in favor, 3,431,534 votes against and 1,160,331 votes
abstaining.
 
 ITEM 6. EXHIBITS
 (a) Exhibits:
 Number
    
    Description31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer, President andChairman of the Board*31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Division SeniorVice President -Chief Financial Officer and Treasurer*32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer, President andChairman of the Board*32.2
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Division SeniorVice President  Chief Financial Officer and Treasurer*
 
 *
    
    Filed herewith 36




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##### Table of Contents



SIGNATURES
   Date: June 4, 2009
    
    By: /s/ Matthew E. RubelMatthew E. RubelChief Executive Officer,
President and Chairman of the
Board 
(Principal Executive
Officer)Date: June 4, 2009
    
    By:/s/ Douglas G. BoessenDouglas G. BoessenDivision Senior Vice
President -
Chief Financial Officer and Treasurer

(Principal Financial and Accounting
Officer)
 37