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EXCEL - IDEA: XBRL DOCUMENT - COLLECTIVE BRANDS, INC. | Financial_Report.xls |
EX-32.1 - EX-32.1 - COLLECTIVE BRANDS, INC. | c64221exv32w1.htm |
EX-31.1 - EX-31.1 - COLLECTIVE BRANDS, INC. | c64221exv31w1.htm |
EX-32.2 - EX-32.2 - COLLECTIVE BRANDS, INC. | c64221exv32w2.htm |
EX-31.2 - EX-31.2 - COLLECTIVE BRANDS, INC. | c64221exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 30, 2011
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.
(Exact name of registrant as specified in its charter)
Delaware | 43-1813160 | |
State or other jurisdiction of | (I.R.S. Employer | |
incorporation of organization | Identification No.) | |
3231 Southeast Sixth Avenue, Topeka, Kansas | 66607-2207 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code (785) 233-5171
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). YES
þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
Common Stock, $.01 par value
61,554,169 shares as of May 18, 2011
61,554,169 shares as of May 18, 2011
COLLECTIVE BRANDS, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED APRIL 30, 2011
INDEX
FORM 10-Q
FOR THE FISCAL QUARTER ENDED APRIL 30, 2011
INDEX
2
Table of Contents
PART I FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
COLLECTIVE BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(dollars and shares in millions, except per share)
(UNAUDITED)
(dollars and shares in millions, except per share)
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
2011 | 2010 | |||||||
Net sales |
$ | 869.0 | $ | 878.8 | ||||
Cost of sales |
559.1 | 542.1 | ||||||
Gross margin |
309.9 | 336.7 | ||||||
Selling, general and administrative expenses |
267.5 | 255.1 | ||||||
Operating profit |
42.4 | 81.6 | ||||||
Interest expense |
10.9 | 13.4 | ||||||
Interest income |
(0.1 | ) | (0.2 | ) | ||||
Loss on early extinguishment of debt |
| 0.8 | ||||||
Net earnings before income taxes |
31.6 | 67.6 | ||||||
Provision for income taxes |
3.4 | 11.6 | ||||||
Net earnings |
28.2 | 56.0 | ||||||
Net earnings attributable to noncontrolling interests |
(1.8 | ) | (1.8 | ) | ||||
Net earnings attributable to Collective Brands, Inc. |
$ | 26.4 | $ | 54.2 | ||||
Earnings per share attributable to Collective Brands, Inc. common shareholders: |
||||||||
Basic |
$ | 0.43 | $ | 0.84 | ||||
Diluted |
$ | 0.42 | $ | 0.83 | ||||
Weighted average shares outstanding: |
||||||||
Basic |
60.7 | 63.4 | ||||||
Diluted |
61.7 | 64.6 |
See Notes to Condensed Consolidated Financial Statements.
3
Table of Contents
COLLECTIVE BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(dollars in millions)
(UNAUDITED)
(dollars in millions)
April 30, | May 1, | January 29, | ||||||||||
2011 | 2010 | 2011 | ||||||||||
ASSETS |
||||||||||||
Current Assets: |
||||||||||||
Cash and cash equivalents |
$ | 270.4 | $ | 352.4 | $ | 324.1 | ||||||
Accounts receivable, net of allowance for doubtful accounts
and returns reserve as of April 30, 2011, May 1, 2010 and
January 29, 2011 of $6.8, $5.4 and $6.0, respectively |
146.4 | 116.6 | 114.4 | |||||||||
Inventories |
575.9 | 467.4 | 531.7 | |||||||||
Deferred income taxes |
30.3 | 38.3 | 30.7 | |||||||||
Prepaid expenses |
61.1 | 61.3 | 55.1 | |||||||||
Other current assets |
20.1 | 19.8 | 22.2 | |||||||||
Total current assets |
1,104.2 | 1,055.8 | 1,078.2 | |||||||||
Property and Equipment: |
||||||||||||
Land |
6.7 | 6.9 | 6.7 | |||||||||
Property, buildings and equipment |
1,458.8 | 1,421.0 | 1,444.6 | |||||||||
Accumulated depreciation and amortization |
(1,042.0 | ) | (975.6 | ) | (1,019.0 | ) | ||||||
Property and equipment, net |
423.5 | 452.3 | 432.3 | |||||||||
Intangible assets, net |
425.0 | 441.2 | 428.4 | |||||||||
Goodwill |
279.8 | 279.8 | 279.8 | |||||||||
Deferred income taxes |
10.5 | 7.2 | 10.1 | |||||||||
Other assets |
40.6 | 43.9 | 39.7 | |||||||||
Total Assets |
$ | 2,283.6 | $ | 2,280.2 | $ | 2,268.5 | ||||||
LIABILITIES AND EQUITY |
||||||||||||
Current Liabilities: |
||||||||||||
Current maturities of long-term debt |
$ | 5.1 | $ | 6.1 | $ | 5.1 | ||||||
Accounts payable |
295.2 | 225.3 | 287.4 | |||||||||
Accrued expenses |
158.2 | 161.0 | 184.4 | |||||||||
Total current liabilities |
458.5 | 392.4 | 476.9 | |||||||||
Long-term debt |
658.2 | 763.6 | 659.4 | |||||||||
Deferred income taxes |
65.4 | 65.2 | 65.4 | |||||||||
Other liabilities |
211.9 | 226.2 | 212.4 | |||||||||
Commitments and contingencies (Note 11) |
||||||||||||
Equity: |
||||||||||||
Collective Brands, Inc. shareowners equity |
859.0 | 802.9 | 822.9 | |||||||||
Noncontrolling interests |
30.6 | 29.9 | 31.5 | |||||||||
Total equity |
889.6 | 832.8 | 854.4 | |||||||||
Total Liabilities and Equity |
$ | 2,283.6 | $ | 2,280.2 | $ | 2,268.5 | ||||||
See Notes to Condensed Consolidated Financial Statements.
4
Table of Contents
COLLECTIVE BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
AND COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in millions)
AND COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in millions)
Collective Brands, Inc. Shareowners | ||||||||||||||||||||||||||||
Outstanding | Additional | Accumulated Other | Non- | |||||||||||||||||||||||||
Common | Paid-in | Retained | Comprehensive | controlling | Total | Comprehensive | ||||||||||||||||||||||
Stock | Capital | Earnings | Loss | Interests | equity | Income | ||||||||||||||||||||||
Balance at January 30, 2010 |
$ | 0.7 | $ | 34.7 | $ | 722.1 | $ | (22.3 | ) | $ | 28.7 | $ | 763.9 | |||||||||||||||
Net earnings |
| | 54.2 | | 1.8 | 56.0 | $ | 56.0 | ||||||||||||||||||||
Translation adjustments |
| | | 3.3 | 0.7 | 4.0 | 4.0 | |||||||||||||||||||||
Net change in fair value of derivatives,
net of taxes of $1.2 |
| | | 1.8 | | 1.8 | 1.8 | |||||||||||||||||||||
Changes in unrecognized amounts of
pension benefits, net of taxes of $0.3 |
| | | 0.7 | | 0.7 | 0.7 | |||||||||||||||||||||
Issuances of common stock under
stock plans |
| 7.8 | | | | 7.8 | ||||||||||||||||||||||
Purchases of common stock |
| (4.5 | ) | | | | (4.5 | ) | ||||||||||||||||||||
Amortization of unearned nonvested shares |
| 1.6 | | | | 1.6 | ||||||||||||||||||||||
Share-based compensation expense |
| 2.8 | | | | 2.8 | ||||||||||||||||||||||
Contributions from noncontrolling interests |
| | | | 0.7 | 0.7 | ||||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | (2.0 | ) | (2.0 | ) | ||||||||||||||||||||
Comprehensive income |
62.5 | |||||||||||||||||||||||||||
Comprehensive income attributable to
noncontrolling interests |
(2.5 | ) | ||||||||||||||||||||||||||
Comprehensive income attributable to
Collective Brands, Inc. |
$ | 60.0 | ||||||||||||||||||||||||||
Balance at May 1, 2010 |
$ | 0.7 | $ | 42.4 | $ | 776.3 | $ | (16.5 | ) | $ | 29.9 | $ | 832.8 | |||||||||||||||
Balance at January 29, 2011 |
$ | 0.6 | $ | (2.5 | ) | $ | 834.9 | $ | (10.1 | ) | $ | 31.5 | $ | 854.4 | ||||||||||||||
Net earnings |
| | 26.4 | | 1.8 | 28.2 | $ | 28.2 | ||||||||||||||||||||
Translation adjustments |
| | | 7.7 | 0.3 | 8.0 | 8.0 | |||||||||||||||||||||
Net change in fair value of derivatives,
net of taxes of $0.6 |
| | | 1.2 | | 1.2 | 1.2 | |||||||||||||||||||||
Changes in unrecognized amounts of
pension benefits, net of taxes of $0.3 |
| | | 0.8 | | 0.8 | 0.8 | |||||||||||||||||||||
Issuances of common stock under
stock plans |
| 1.7 | | | | 1.7 | ||||||||||||||||||||||
Purchases of common stock |
| (1.9 | ) | (2.5 | ) | | | (4.4 | ) | |||||||||||||||||||
Amortization of unearned nonvested shares |
| 1.8 | | | | 1.8 | ||||||||||||||||||||||
Share-based compensation expense |
| 0.9 | | | | 0.9 | ||||||||||||||||||||||
Distributions to noncontrolling interests |
| | | | (3.0 | ) | (3.0 | ) | ||||||||||||||||||||
Comprehensive income |
38.2 | |||||||||||||||||||||||||||
Comprehensive income attributable to
noncontrolling interests |
(2.1 | ) | ||||||||||||||||||||||||||
Comprehensive income attributable to
Collective Brands, Inc. |
$ | 36.1 | ||||||||||||||||||||||||||
Balance at April 30, 2011 |
$ | 0.6 | $ | | $ | 858.8 | $ | (0.4 | ) | $ | 30.6 | $ | 889.6 | |||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
5
Table of Contents
COLLECTIVE BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in millions)
(UNAUDITED)
(dollars in millions)
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
2011 | 2010 | |||||||
Operating Activities: |
||||||||
Net earnings |
$ | 28.2 | $ | 56.0 | ||||
Adjustments for non-cash items included in net earnings: |
||||||||
Loss on disposal of assets |
2.2 | 1.0 | ||||||
Depreciation and amortization |
33.2 | 34.3 | ||||||
Provision for losses on accounts receivable |
0.2 | 0.6 | ||||||
Share-based compensation expense |
3.5 | 4.8 | ||||||
Deferred income taxes |
(0.7 | ) | 1.9 | |||||
Loss on extinguishment of debt |
| 0.8 | ||||||
Changes in working capital |
||||||||
Accounts receivable |
(30.3 | ) | (21.6 | ) | ||||
Inventories |
(41.2 | ) | (23.0 | ) | ||||
Prepaid expenses and other current assets |
(4.0 | ) | (11.4 | ) | ||||
Accounts payable |
(3.4 | ) | 32.1 | |||||
Accrued expenses |
(25.4 | ) | (19.5 | ) | ||||
Changes in other assets and liabilities, net |
(3.6 | ) | (2.8 | ) | ||||
Cash flow (used in) provided by operating activities |
(41.3 | ) | 53.2 | |||||
Investing Activities: |
||||||||
Capital expenditures |
(10.8 | ) | (19.8 | ) | ||||
Cash flow used in investing activities |
(10.8 | ) | (19.8 | ) | ||||
Financing Activities: |
||||||||
Repayment of debt |
(1.3 | ) | (79.7 | ) | ||||
Issuances of common stock |
1.7 | 7.8 | ||||||
Purchases of common stock |
(4.4 | ) | (4.5 | ) | ||||
Contributions by noncontrolling interests |
| 0.7 | ||||||
Distribution to noncontrolling interests |
(3.0 | ) | (2.0 | ) | ||||
Cash flow used in financing activities |
(7.0 | ) | (77.7 | ) | ||||
Effect of exchange rate changes on cash |
5.4 | 3.2 | ||||||
Decrease in cash and cash equivalents |
(53.7 | ) | (41.1 | ) | ||||
Cash and cash equivalents, beginning of year |
324.1 | 393.5 | ||||||
Cash and cash equivalents, end of quarter |
$ | 270.4 | $ | 352.4 | ||||
Supplemental cash flow information: |
||||||||
Interest paid |
$ | 13.9 | $ | 16.5 | ||||
Income taxes paid |
$ | 6.2 | $ | 4.6 | ||||
Non-cash investing activities: |
||||||||
Accrued capital expenditures |
$ | 23.0 | $ | 10.0 |
See Notes to Condensed Consolidated Financial Statements.
6
Table of Contents
COLLECTIVE BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(UNAUDITED)
Note 1 Interim Results
These unaudited Condensed Consolidated Financial Statements of Collective Brands, Inc., a Delaware
corporation, and subsidiaries (the Company) have been prepared in accordance with the
instructions to Form 10-Q of the United States Securities and Exchange Commission (SEC) and
should be read in conjunction with the Notes to the Consolidated Financial Statements (pages
61-103) in the Companys 2010 Annual Report on Form 10-K. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, these unaudited Condensed Consolidated Financial
Statements are fairly presented and all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the results for the interim periods have been
included; however, certain items included in these statements are based upon estimates for the
entire year. The Condensed Consolidated Balance Sheet as of January 29, 2011 has been derived from
the audited financial statements at that date.
The Companys operations in the Central and South American Regions operate as consolidated joint
ventures in which the Company maintains a 60% ownership interest. The reporting period for
operations in the Central and South American Regions is a December 31 year-end. The Central
American Region is comprised of operations in Costa Rica, the Dominican Republic, El Salvador,
Guatemala, Honduras, Jamaica, Nicaragua, Panama and Trinidad & Tobago. The South American Region
is comprised of operations in Colombia and Ecuador. The effects of the one-month lag for the
operations in the Central and South American Regions are not significant to the Companys financial
position and results of operations. All intercompany amounts have been eliminated. The results
for the thirteen week period ended April 30, 2011 are not necessarily indicative of the results
that may be expected for the entire fifty-two week fiscal year ending January 28, 2012.
Note 2 Intangible Assets and Goodwill
The following is a summary of the Companys intangible assets:
April 30, | May 1, | January 29, | ||||||||||
(dollars in millions) | 2011 | 2010 | 2011 | |||||||||
Intangible assets subject to amortization: |
||||||||||||
Favorable lease rights: |
||||||||||||
Gross carrying amount |
$ | 24.8 | $ | 30.4 | $ | 24.8 | ||||||
Less: accumulated amortization |
(20.2 | ) | (23.3 | ) | (19.8 | ) | ||||||
Carrying amount, end of period |
4.6 | 7.1 | 5.0 | |||||||||
Customer relationships: |
||||||||||||
Gross carrying amount |
74.2 | 76.3 | 74.2 | |||||||||
Less: accumulated amortization |
(47.3 | ) | (39.3 | ) | (45.2 | ) | ||||||
Carrying amount, end of period |
26.9 | 37.0 | 29.0 | |||||||||
Trademarks and other intangible assets: |
||||||||||||
Gross carrying amount |
38.5 | 38.9 | 38.5 | |||||||||
Less: accumulated amortization |
(10.5 | ) | (7.3 | ) | (9.6 | ) | ||||||
Carrying amount, end of period |
28.0 | 31.6 | 28.9 | |||||||||
Carrying amount of intangible assets subject to amortization |
59.5 | 75.7 | 62.9 | |||||||||
Indefinite-lived trademarks |
365.5 | 365.5 | 365.5 | |||||||||
Total intangible assets |
$ | 425.0 | $ | 441.2 | $ | 428.4 | ||||||
Amortization expense on intangible assets is as follows:
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
(dollars in millions) | 2011 | 2010 | ||||||
Amortization expense on intangible assets |
$ | 3.4 | $ | 4.7 |
7
Table of Contents
The Company expects amortization expense for the remainder of 2011 and the following four
years to be as follows (in millions):
Year | Amount | |
Remainder of 2011
|
$10.1 | |
2012 | 11.1 | |
2013 | 9.5 | |
2014 | 8.1 | |
2015 | 5.9 |
The following presents the carrying amount of goodwill, by reporting segment:
April 30, | May 1, | January 29, | ||||||||||
(dollars in millions) | 2011 | 2010 | 2011 | |||||||||
PLG Wholesale |
$ | 239.6 | $ | 239.6 | $ | 239.6 | ||||||
Payless Domestic |
40.2 | 40.2 | 40.2 | |||||||||
Total |
$ | 279.8 | $ | 279.8 | $ | 279.8 | ||||||
Note 3 Long-Term Debt
The following is a summary of the Companys long-term debt and capital lease obligations:
April 30, | May 1, | January 29, | ||||||||||
(dollars in millions) | 2011 | 2010 | 2011 | |||||||||
Term Loan Facility (1)
|
$ | 488.1 | $ | 593.7 | $ | 489.4 | ||||||
Senior subordinated notes (2)
|
174.2 | 173.8 | 174.1 | |||||||||
Revolving loan facility (3)
|
| | | |||||||||
Capital-lease obligations
|
1.0 | 1.0 | 1.0 | |||||||||
Other long-term debt
|
| 1.2 | | |||||||||
Total debt
|
663.3 | 769.7 | 664.5 | |||||||||
Less: current maturities of long-term debt
|
5.1 | 6.1 | 5.1 | |||||||||
Long-term debt
|
$ | 658.2 | $ | 763.6 | $ | 659.4 | ||||||
(1) | As of April 30, 2011, May 1, 2010 and January 29, 2011, the fair value of the Companys Term Loan was $488.1 million, $587.0 million and $489.4 million, respectively, based on market conditions and perceived risks as of those dates. | |
(2) | As of April 30, 2011, May 1, 2010 and January 29, 2011, the fair value of the Companys senior subordinated notes was $178.1 million, $179.8 million and $177.8 million, respectively, based on trading activity as of those dates. | |
(3) | As of April 30, 2011, the Companys borrowing base on its revolving loan facility was $264.9 million less $29.9 million in outstanding letters of credit, or $235.0 million. The variable interest rate, including the applicable variable margin at April 30, 2011, was 1.15%. |
As of April 30, 2011, the Company was in compliance with all of its debt covenants related to
its outstanding debt.
Note 4 Derivatives
The Company has entered into an interest rate contract for an initial amount of $540 million to
hedge a portion of its variable rate $725 million term loan facility (interest rate contract).
The interest rate contract provides for a fixed interest rate of approximately 7.75%, portions of
which mature on a series of dates through 2012. As of April 30, 2011, the Company has hedges
remaining on $220 million of its $488.1 million outstanding Term Loan Facility balance.
The Company has also entered into a series of forward contracts to hedge a portion of certain
foreign currency purchases (foreign currency contracts). The foreign currency contracts provide
for a fixed exchange rate and mature over a series of dates through October 2011. As of April 30,
2011, the Company has hedged $15.5 million of its forecasted foreign currency purchases.
The interest rate and foreign currency contracts are designated as cash flow hedging instruments.
The change in the fair value of the interest rate and foreign currency contracts are recorded as a
component of accumulated other comprehensive income (AOCI) and reclassified into earnings in the
periods in which earnings are impacted by the hedged item. The following table presents the fair
value of the Companys hedging portfolio related to its interest rate contract and foreign currency
contracts:
8
Table of Contents
Fair Value | ||||||||||||||
Location on Condensed | April 30, | May 1, | January 29, | |||||||||||
(dollars in millions) | Consolidated Balance Sheet | 2011 | 2010 | 2011 | ||||||||||
Interest rate contract
|
Other liabilities | $ | 0.6 | $ | 4.3 | $ | 1.3 | |||||||
Interest rate contract
|
Accrued expenses | $ | 4.1 | $ | 7.7 | $ | 6.1 | |||||||
Foreign currency contracts
|
Accrued expenses | $ | 0.9 | $ | 0.4 | $ | 0.4 | |||||||
Foreign currency contracts
|
Other current assets | $ | 0.2 | $ | | $ | 0.1 |
It is the Companys policy to enter into derivative instruments with terms that match the
underlying exposure being hedged. As such, the Companys derivative instruments are considered
highly effective, and the net gain or loss from hedge ineffectiveness is not significant.
Realized gains or losses on the hedging instruments occur when a portion of the hedge settles
or if it is probable that the forecasted transaction will not occur. The impact of the derivative
instruments on the Condensed Consolidated Financial Statements is as follows:
Loss Recognized in OCI on | Loss Reclassified from AOCI into | |||||||||||||||||
Derivatives | Earnings | |||||||||||||||||
13 Weeks Ended | Location on Condensed | 13 Weeks Ended | ||||||||||||||||
April 30, | May 1, | Consolidated Statement of | April 30, | May 1, | ||||||||||||||
(dollars in millions) | 2011 | 2010 | Earnings | 2011 | 2010 | |||||||||||||
Interest rate contract |
$ | (0.2 | ) | $ | (0.2 | ) | Interest expense | $ | (1.6 | ) | $ | (2.2 | ) | |||||
Foreign currency contracts |
$ | (0.2 | ) | $ | (0.3 | ) | Cost of sales | $ | | $ | (0.1 | ) |
The Company expects $4.1 million of the fair value of the interest rate contract and $0.7
million of the fair value of the foreign currency contracts recorded in AOCI to be recognized in
earnings during the next 12 months. These amounts may vary based on actual changes to LIBOR and
foreign currency exchange rates.
Note 5 Fair Value Measurements
The Companys estimates of the fair value for financial assets and financial liabilities are based
on the framework established in the fair value accounting guidance. The framework is based on the
inputs used in valuation, gives the highest priority to quoted prices in active markets, and
requires that observable inputs be used in the valuations when available. The three levels of the
hierarchy are as follows:
Level 1: observable inputs such as quoted prices in active markets | ||
Level 2: inputs other than the quoted prices in active markets that are observable either directly or indirectly | ||
Level 3: unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions |
9
Table of Contents
The following table presents financial assets and financial liabilities that the Company measures
at fair value on a recurring basis. The Company has classified these financial assets and
liabilities in accordance with the fair value hierarchy:
Estimated Fair Value Measurements | ||||||||||||||||
Significant | Significant | |||||||||||||||
Quoted Prices in | Observable | Unobservable | ||||||||||||||
Active Markets | Other Inputs | Inputs | ||||||||||||||
(dollars in millions) | (Level 1) | (Level 2) | (Level 3) | Total Fair Value | ||||||||||||
As of April 30, 2011: |
||||||||||||||||
Financial Assets: |
||||||||||||||||
Money market funds |
$ | 149.3 | $ | | $ | | $ | 149.3 | ||||||||
Foreign currency contracts(2) |
$ | | $ | 0.2 | $ | | $ | 0.2 | ||||||||
Financial Liabilities: |
||||||||||||||||
Interest rate contract(1) |
$ | | $ | 4.7 | $ | | $ | 4.7 | ||||||||
Foreign currency contracts(2) |
$ | | $ | 0.9 | $ | | $ | 0.9 | ||||||||
As of May 1, 2010: |
||||||||||||||||
Financial Assets: |
||||||||||||||||
Money market funds |
$ | 244.4 | $ | | $ | | $ | 244.4 | ||||||||
Financial Liabilities: |
||||||||||||||||
Interest rate contract(1) |
$ | | $ | 12.0 | $ | | $ | 12.0 | ||||||||
Foreign currency contracts(2) |
$ | | $ | 0.4 | $ | | $ | 0.4 | ||||||||
As of January 29, 2011: |
||||||||||||||||
Financial Assets: |
||||||||||||||||
Money market funds |
$ | 174.8 | $ | | $ | | $ | 174.8 | ||||||||
Foreign currency contracts(2) |
$ | | $ | 0.1 | $ | | $ | 0.1 | ||||||||
Financial Liabilities: |
||||||||||||||||
Interest rate contract(1) |
$ | | $ | 7.4 | $ | | $ | 7.4 | ||||||||
Foreign currency contracts(2) |
$ | | $ | 0.4 | $ | | $ | 0.4 |
(1) | The fair value of the interest rate contract is determined using a mark-to-market valuation technique based on an observable interest rate yield curve and adjusting for credit risk. | |
(2) | The fair value of the foreign currency contracts are determined using a mark-to-market technique based on observable foreign currency exchange rates and adjusting for credit risk. |
Note 6 Pension Plans
The Company has a pension plan that covers a select group of management employees (Payless Plan),
a pension plan that covers certain PLG employees (PLG Plan) and a pension plan that covers
certain employees in Asia (Asia Plan). To calculate pension expense, the Company uses
assumptions to estimate the total benefits ultimately payable to each management employee and
allocates this cost to service periods.
Payless Plan
The Payless Plan is a nonqualified, supplementary account balance defined benefit plan for a select
group of management employees. The plan is an unfunded, noncontributory plan. The components of
pension expense for the plan were:
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
(dollars in millions) | 2011 | 2010 | ||||||
Components of pension expense: |
||||||||
Service cost |
$ | 0.2 | $ | 0.2 | ||||
Interest cost |
0.5 | 0.5 | ||||||
Amortization of prior service cost |
0.4 | 0.4 | ||||||
Amortization of actuarial loss |
0.4 | 0.3 | ||||||
Total |
$ | 1.5 | $ | 1.4 | ||||
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PLG Plan
The PLG Plan is a noncontributory defined benefit pension plan covering certain eligible PLG
associates. The components of pension expense for the plan were:
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
(dollars in millions) | 2011 | 2010 | ||||||
Components of pension expense: |
||||||||
Interest cost |
$ | 1.2 | $ | 1.1 | ||||
Expected return on net assets |
(1.3 | ) | (1.2 | ) | ||||
Amortization of actuarial loss |
0.3 | 0.3 | ||||||
Total |
$ | 0.2 | $ | 0.2 | ||||
Asia Plan
The Asia Plan is a nonqualified, supplementary account balance defined benefit plan for a select
group of employees in Asia. The plan is an unfunded, noncontributory plan. The components of
pension expense for the plan were not significant for the thirteen weeks ended April 30, 2011 and
May 1, 2010.
Note 7 Share-Based Compensation
Under its equity incentive plans, the Company currently grants share appreciation vehicles
consisting of stock-settled stock appreciation rights (stock-settled SARs), cash-settled stock
appreciation rights (cash-settled SARs), as well as full value vehicles in the form of nonvested
shares and nonvested share units ( nonvested shares and nonvested share units) and phantom stock
units (phantom nonvested share units).
11
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The number of shares for grants made in the thirteen weeks ended April 30, 2011 and May 1, 2010 are
as follows:
April 30, 2011 | May 1, 2010 | |||||||||||||||
Maximum share | Maximum Share | |||||||||||||||
Share units | equivalents | Share units | equivalents | |||||||||||||
Stock-settled SARs(1): |
||||||||||||||||
Vest in installments over 3 years |
213,141 | 118,412 | 720,125 | 400,069 | ||||||||||||
Cliff vest after 3 years |
| | 12,200 | 6,778 |
(1) | All of the stock-settled SARs issued by the Company in the periods presented contain an appreciation cap, which limits the appreciation for which shares of common stock will be granted. The appreciation cap is limited to 125% of the fair market value of the underlying common stock on the grant date of the SAR, meaning that the maximum shares issuable under a SAR is 0.56 shares per SAR. |
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
2011 | 2010 | |||||||
Nonvested shares and nonvested share units: |
||||||||
Vest in installments over 3 years |
| 313,363 | ||||||
Vest in installments over 2 years |
| 77,231 | ||||||
Cliff vest after 3 years |
156,687 | | ||||||
Performance grant vest in installments over 3 years(2) |
131,078 | 77,227 | ||||||
Performance grant cliff vest after 3 years(2) |
92,583 | | ||||||
Phantom nonvested share units: |
||||||||
Vest in installments over 3 years |
| 18,033 | ||||||
Cliff vest after 3 years |
1,350 | | ||||||
Performance grant vest in installments over 3 years(2) |
450 | | ||||||
Performance grant cliff vest after 3 years(2) |
6,584 | | ||||||
Cash-settled SARs: |
||||||||
Vest in installments over 3 years |
| 19,497 |
(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 April 30, 2011, the Company has assessed the likelihood that the performance condition will be met and has recorded the related expense based on the estimated outcome. |
The total fair value of share grants for the 13 weeks ended April 30, 2011 and May 1, 2010 is
$9.5 million and $17.0 million, respectively.
Total share-based compensation expense is summarized as follows:
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
(dollars in millions) | 2011 | 2010 | ||||||
Cost of sales |
$ | 0.9 | $ | 1.2 | ||||
Selling, general and administrative expenses |
2.6 | 3.6 | ||||||
Share-based compensation expense before income taxes |
3.5 | 4.8 | ||||||
Tax benefit |
(1.3 | ) | (1.8 | ) | ||||
Share-based compensation expense after income taxes |
$ | 2.2 | $ | 3.0 | ||||
Included in this amount is $0.4 million of expense that was recognized as a result of the
grants made in 2011. No amount of share-based compensation was capitalized. As of April
30, 2011, the Company had unrecognized compensation expense related to nonvested awards of $23.8
million, which is expected to be recognized over a weighted average period of 1.1 years.
Note 8 Income Taxes
The Companys effective income tax rate on continuing operations was 10.8% during the thirteen
weeks ended April 30, 2011, compared to 17.2% during the thirteen weeks ended May 1, 2010. The
Company recorded $2.2 million of favorable discrete events in the thirteen weeks ended April 30,
2011 and $1.9 million of favorable discrete events in the thirteen weeks ended May 1, 2010. The
Company expects its effective tax rate to differ from the U.S. statutory rate principally due to
the impact of its operations conducted in
12
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jurisdictions with rates lower than the U.S. statutory
rate and the on-going implementation of tax efficient business initiatives. The favorable
difference in the overall effective tax rate for 2011 compared to 2010 is due to a decrease in the
proportion of pre-tax income in relatively high tax rate jurisdictions as well as an increase in
the proportion of income in relatively lower tax rate jurisdictions.
The Company has unrecognized tax benefits, inclusive of related interest and penalties, of $59.1
million and $66.5 million as of April 30, 2011 and May 1, 2010, respectively. The portion of the
unrecognized tax benefits that would impact the effective income tax rate if recognized are $27.2
million and $40.5 million, respectively.
The Company anticipates that it is reasonably possible that the total amount of unrecognized tax
benefits at April 30, 2011 will decrease by up to $25.9 million within the next twelve months. To
the extent these tax benefits are recognized, the effective rate would be favorably impacted in the
period of recognition by up to $6.5 million. The potential reduction primarily relates to
potential settlements of on-going examinations with tax authorities and the potential lapse of the
statutes of limitations in relevant tax jurisdictions.
The Companys U.S. federal income tax returns have been examined by the Internal Revenue Service
through 2007. The Companys income tax returns in Hong Kong are open for examination from 2002
through present. The Company has certain state and foreign income tax returns in the process of
examination or administrative appeal.
Note 9 Earnings Per Share
Basic earnings per share is computed by dividing net earnings available to common shareholders by
the weighted average number of shares of common stock outstanding during the period. Diluted
earnings per share include the effect of conversions of stock options and stock-settled SARs. For
all years presented, the Company used the two-class method to calculate earnings per share.
Earnings per share has been computed as follows:
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
(dollars in millions, except per share amounts; shares in thousands) | 2011 | 2010 | ||||||
Net earnings attributable to Collective Brands, Inc. |
$ | 26.4 | $ | 54.2 | ||||
Less: net earnings allocated to participating securities(1) |
0.3 | 0.8 | ||||||
Net earnings available to common shareholders |
$ | 26.1 | $ | 53.4 | ||||
Weighted average shares outstanding basic |
60,655 | 63,421 | ||||||
Net effect of dilutive stock options |
195 | 395 | ||||||
Net effect of dilutive stock-settled SARs |
840 | 806 | ||||||
Weighted average shares outstanding diluted |
61,690 | 64,622 | ||||||
Basic earnings per share attributable to common shareholders |
$ | 0.43 | $ | 0.84 | ||||
Diluted earnings per share attributable to common shareholders |
$ | 0.42 | $ | 0.83 |
(1) | Net earnings allocated to participating securities is calculated based upon a weighted average percentage of participating securities in relation to total shares outstanding. |
The Company excluded approximately 3.1 million stock options and stock-settled SARs from the
calculation of diluted earnings per share for the thirteen weeks ended April 30, 2011 and
approximately 1.9 million stock options and stock-settled SARs from the calculation of diluted
earnings per share for the thirteen weeks ended May 1, 2010 because to include them would have been
antidilutive. Certain grants that are subject to performance conditions for vesting are considered
antidilutive if the performance conditions are not met as of the end of the reporting period.
Note 10 Segment Reporting
The Company has four reporting segments: (i) Payless Domestic, (ii) Payless International, (iii)
PLG Wholesale and (iv) PLG Retail. The Company has defined its reporting segments as follows:
(i) | The Payless Domestic reporting segment is comprised primarily of domestic retail stores under the Payless ShoeSource name, the Companys sourcing unit and Collective Licensing. | ||
(ii) | The Payless International reporting segment is comprised of international retail stores under the Payless ShoeSource name in Canada, the South American Region, the Central American Region, Puerto Rico, and the U.S. Virgin Islands, as well as franchising arrangements under the Payless ShoeSource name. | ||
(iii) | The PLG Wholesale reporting segment consists of PLGs global wholesale operations. | ||
(iv) | The PLG Retail reporting segment consists of PLGs owned Stride Rite childrens stores, PLGs outlet stores, store-in-stores at select Macys Department Stores and Sperry Top-Sider retail stores. |
13
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Payless Internationals operations in the Central American and South American Regions are operated
as joint ventures in which the Company maintains a 60% ownership interest. Noncontrolling interest
represents the Companys joint venture partners share of net earnings or losses on applicable
international operations. Certain management costs for services performed by Payless Domestic and
certain royalty fees and sourcing fees charged by Payless Domestic are allocated to the Payless
International segment. These total costs and fees amounted to $8.8 million and $8.8 million during
the thirteen weeks ended April 30, 2011 and May 1, 2010, respectively. The reporting period for
operations in the Central and South American Regions use a December 31 year-end. The effect of this
one-month lag on the Companys financial position and results of operations is not significant.
All intercompany amounts have been eliminated. Information on the Companys reporting segments is
as follows:
13 Weeks Ended | ||||||||
April 30, | May 1, | |||||||
(dollars in millions) | 2011 | 2010 | ||||||
Reporting segment net sales: |
||||||||
Payless Domestic |
$ | 498.4 | $ | 546.6 | ||||
Payless International |
97.5 | 100.0 | ||||||
PLG Wholesale |
212.5 | 173.4 | ||||||
PLG Retail |
60.6 | 58.8 | ||||||
Total net sales |
$ | 869.0 | $ | 878.8 | ||||
Reporting segment operating profit: |
||||||||
Payless Domestic |
$ | 13.0 | $ | 49.3 | ||||
Payless International |
3.0 | 7.1 | ||||||
PLG Wholesale |
25.3 | 23.3 | ||||||
PLG Retail |
1.1 | 1.9 | ||||||
Total operating profit |
$ | 42.4 | $ | 81.6 | ||||
April 30, | May 1, | January 29, | ||||||||||
(dollars in millions) | 2011 | 2010 | 2011 | |||||||||
Reporting segment total assets: |
||||||||||||
Payless Domestic |
$ | 1,039.9 | $ | 1,138.2 | $ | 1,039.3 | ||||||
Payless International |
253.3 | 215.3 | 258.4 | |||||||||
PLG Wholesale |
916.3 | 860.4 | 905.3 | |||||||||
PLG Retail |
74.1 | 66.3 | 65.5 | |||||||||
Total assets |
$ | 2,283.6 | $ | 2,280.2 | $ | 2,268.5 | ||||||
Note 11 Commitments and Contingencies
There are no pending legal proceedings other than ordinary and routine litigation incidental to the
business to which the Company is a party or of which its property is subject, none of which the
Company expects to have a material impact on its financial position, results of operations and cash
flows.
Note 12 Impact of Recently Issued Accounting Standards
In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06 Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
(ASU No. 2010-06). Certain provisions of ASU No. 2010-06 are effective for fiscal years
beginning after December 15, 2010. These provisions, which amended Subtopic 820-10, require the
Company to present as separate line items all purchases, sales, issuances, and settlements of
financial instruments valued using significant unobservable inputs (Level 3) in the reconciliation
for fair value measurements. The adoption of this provision did not have a material impact on the
Companys Condensed Consolidated Financial Statements.
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU
2011-04), which is effective for annual reporting periods beginning after December 15, 2011. This
guidance amends certain accounting and disclosure requirements related to fair value measurements.
The Company is currently evaluating ASU 2011-04 and has not yet determined the impact the adoption
will have on the Companys Condensed Consolidated Financial Statements.
Note 13 Related Party Transactions
The Company maintains banking relationships with certain financial institutions that are affiliated
with some of the Companys Latin America joint venture partners. Total deposits in these financial
institutions as of April 30, 2011, May 1, 2010 and January 29, 2011
14
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were $5.2 million, $8.5 million
and $12.7 million, respectively. Total borrowings with these financial institutions as of May 1,
2010 were $1.2 million. There were no borrowings with these financial institutions as of April 30,
2011 and January 29, 2011.
Note 14 Subsidiary Guarantors of Senior Notes Condensed Consolidating Financial
Information
The Company has issued Notes guaranteed by all of its domestic subsidiaries (the Guarantor
Subsidiaries). The Guarantor Subsidiaries are direct or indirect wholly owned domestic
subsidiaries of the Company. The guarantees are full and unconditional and joint and several.
The following supplemental financial information sets forth, on a consolidating basis, the
Condensed Consolidating Statements of Earnings for the Company (the Parent Company), for the
Guarantor Subsidiaries and for the Companys Non-Guarantor Subsidiaries (the Non-guarantor
Subsidiaries) and total Condensed Consolidated Collective Brands, Inc. and Subsidiaries for the
thirteen week periods ended April 30, 2011, and May 1, 2010, Condensed Consolidating Balanced
Sheets as of April 30, 2011, May 1, 2010, and January 29, 2011, and the Condensed Consolidating
Statements of Cash Flows for the thirteen week periods ended April 30, 2011, and May 1, 2010. With
the exception of operations in the Central and South American Regions in which the Company has a
60% ownership interest, the Non-guarantor Subsidiaries are direct or indirect wholly-owned
subsidiaries of the Guarantor Subsidiaries. The equity investment for each subsidiary is recorded
by its parent within other assets.
The Non-guarantor Subsidiaries are made up of the Companys operations in the Central and South
American Regions, Canada, Mexico, Germany, the Netherlands, the United Kingdom, Ireland, Australia,
Bermuda, Saipan and Puerto Rico and the Companys sourcing organization in Hong Kong, Taiwan,
China, Vietnam, Indonesia and Brazil. The operations in the Central and South American Regions use
a December 31 year-end. Operations in the Central and South American Regions are included in the
Companys results on a one-month lag relative to results from other regions. The effect of this
one-month lag on the Companys financial position and results of operations is not significant.
Under the indenture governing the Notes, the Companys subsidiaries in Singapore are designated as
unrestricted subsidiaries. The effect of these subsidiaries on the Companys financial position
and results of operations and cash flows is not significant. The Companys subsidiaries in
Singapore are included in the Non-guarantor Subsidiaries.
15
Table of Contents
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS
(dollars in millions)
(dollars in millions)
13 Weeks Ended April 30, 2011 | ||||||||||||||||||||
Parent | Guarantor | Non-guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | | $ | 772.6 | $ | 388.6 | $ | (292.2 | ) | $ | 869.0 | |||||||||
Cost of sales |
| 522.7 | 302.8 | (266.4 | ) | 559.1 | ||||||||||||||
Gross margin |
| 249.9 | 85.8 | (25.8 | ) | 309.9 | ||||||||||||||
Selling, general and administrative expenses |
1.0 | 227.3 | 65.0 | (25.8 | ) | 267.5 | ||||||||||||||
Operating (loss) profit |
(1.0 | ) | 22.6 | 20.8 | | 42.4 | ||||||||||||||
Interest expense |
12.8 | 7.1 | | (9.0 | ) | 10.9 | ||||||||||||||
Interest income |
| (9.1 | ) | | 9.0 | (0.1 | ) | |||||||||||||
Equity in earnings of subsidiaries |
(35.3 | ) | (16.1 | ) | | 51.4 | | |||||||||||||
Earnings before income taxes |
21.5 | 40.7 | 20.8 | (51.4 | ) | 31.6 | ||||||||||||||
(Benefit) provision for income taxes |
(4.9 | ) | 5.4 | 2.9 | | 3.4 | ||||||||||||||
Net earnings |
26.4 | 35.3 | 17.9 | (51.4 | ) | 28.2 | ||||||||||||||
Net earnings attributable to noncontrolling interests |
| | (1.8 | ) | | (1.8 | ) | |||||||||||||
Net earnings attributable to Collective Brands, Inc. |
$ | 26.4 | $ | 35.3 | $ | 16.1 | $ | (51.4 | ) | $ | 26.4 | |||||||||
13 Weeks Ended May 1, 2010 | ||||||||||||||||||||
Parent | Guarantor | Non-guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | | $ | 777.9 | $ | 363.1 | $ | (262.2 | ) | $ | 878.8 | |||||||||
Cost of sales |
| 501.8 | 281.2 | (240.9 | ) | 542.1 | ||||||||||||||
Gross margin |
| 276.1 | 81.9 | (21.3 | ) | 336.7 | ||||||||||||||
Selling, general and administrative expenses |
0.9 | 217.9 | 57.6 | (21.3 | ) | 255.1 | ||||||||||||||
Operating (loss) profit |
(0.9 | ) | 58.2 | 24.3 | | 81.6 | ||||||||||||||
Interest expense |
7.0 | 9.6 | | (3.2 | ) | 13.4 | ||||||||||||||
Interest income |
| (3.4 | ) | | 3.2 | (0.2 | ) | |||||||||||||
Loss on early extinguishment of debt |
| 0.8 | | | 0.8 | |||||||||||||||
Equity in earnings of subsidiaries |
(59.3 | ) | (22.7 | ) | | 82.0 | | |||||||||||||
Earnings before income taxes |
51.4 | 73.9 | 24.3 | (82.0 | ) | 67.6 | ||||||||||||||
(Benefit) provision for income taxes |
(2.8 | ) | 14.6 | (0.2 | ) | | 11.6 | |||||||||||||
Net earnings |
54.2 | 59.3 | 24.5 | (82.0 | ) | 56.0 | ||||||||||||||
Net earnings attributable to noncontrolling interests |
| | (1.8 | ) | | (1.8 | ) | |||||||||||||
Net earnings attributable to Collective Brands, Inc. |
$ | 54.2 | $ | 59.3 | $ | 22.7 | $ | (82.0 | ) | $ | 54.2 | |||||||||
16
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CONDENSED CONSOLIDATING BALANCE SHEET
(dollars in millions)
(dollars in millions)
As of April 30, 2011 | ||||||||||||||||||||
Parent | Guarantor | Non-guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS |
||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents
|
$ | | $ | 113.7 | $ | 156.7 | $ | | $ | 270.4 | ||||||||||
Accounts receivable, net
|
| 133.9 | 30.1 | (17.6 | ) | 146.4 | ||||||||||||||
Inventories
|
| 457.6 | 131.5 | (13.2 | ) | 575.9 | ||||||||||||||
Current deferred income taxes
|
| 22.7 | 7.6 | | 30.3 | |||||||||||||||
Prepaid expenses
|
33.3 | 15.0 | 12.8 | | 61.1 | |||||||||||||||
Other current assets
|
| 276.6 | 172.9 | (429.4 | ) | 20.1 | ||||||||||||||
Total current assets
|
33.3 | 1,019.5 | 511.6 | (460.2 | ) | 1,104.2 | ||||||||||||||
Property and Equipment: |
||||||||||||||||||||
Land
|
| 6.7 | | | 6.7 | |||||||||||||||
Property, buildings and equipment
|
| 1,238.0 | 220.8 | | 1,458.8 | |||||||||||||||
Accumulated depreciation and amortization
|
| (894.8 | ) | (147.2 | ) | | (1,042.0 | ) | ||||||||||||
Property and equipment, net
|
| 349.9 | 73.6 | | 423.5 | |||||||||||||||
Intangible assets, net
|
| 396.8 | 28.2 | | 425.0 | |||||||||||||||
Goodwill
|
| 143.0 | 136.8 | | 279.8 | |||||||||||||||
Deferred income taxes
|
| | 10.5 | | 10.5 | |||||||||||||||
Other assets
|
1,578.7 | 933.9 | 12.1 | (2,484.1 | ) | 40.6 | ||||||||||||||
Total Assets
|
$ | 1,612.0 | $ | 2,843.1 | $ | 772.8 | $ | (2,944.3 | ) | $ | 2,283.6 | |||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||
Current Liabilities: |
||||||||||||||||||||
Current maturities of long-term debt
|
$ | | $ | 5.1 | $ | | $ | | $ | 5.1 | ||||||||||
Accounts payable
|
| 138.1 | 237.0 | (79.9 | ) | 295.2 | ||||||||||||||
Accrued expenses
|
112.9 | 384.2 | 35.0 | (373.9 | ) | 158.2 | ||||||||||||||
Total current liabilities
|
112.9 | 527.4 | 272.0 | (453.8 | ) | 458.5 | ||||||||||||||
Long-term debt
|
637.1 | 483.0 | 37.1 | (499.0 | ) | 658.2 | ||||||||||||||
Deferred income taxes
|
| 64.1 | 1.3 | | 65.4 | |||||||||||||||
Other liabilities
|
3.0 | 192.2 | 16.7 | | 211.9 | |||||||||||||||
Commitments and contingencies |
||||||||||||||||||||
Equity: |
||||||||||||||||||||
Collective Brands, Inc. shareowners equity
|
859.0 | 1,576.4 | 415.1 | (1,991.5 | ) | 859.0 | ||||||||||||||
Noncontrolling interests
|
| | 30.6 | | 30.6 | |||||||||||||||
Total equity
|
859.0 | 1,576.4 | 445.7 | (1,991.5 | ) | 889.6 | ||||||||||||||
Total Liabilities and Equity
|
$ | 1,612.0 | $ | 2,843.1 | $ | 772.8 | $ | (2,944.3 | ) | $2,283.6 | ||||||||||
17
Table of Contents
CONDENSED CONSOLIDATING BALANCE SHEET
(dollars in millions)
(dollars in millions)
As of May 1, 2010 | ||||||||||||||||||||
Parent | Guarantor | Non-guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS |
||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 196.5 | $ | 155.9 | $ | | $ | 352.4 | ||||||||||
Accounts receivable, net |
| 102.5 | 23.1 | (9.0 | ) | 116.6 | ||||||||||||||
Inventories |
| 376.7 | 99.9 | (9.2 | ) | 467.4 | ||||||||||||||
Current deferred income taxes |
| 31.0 | 7.3 | | 38.3 | |||||||||||||||
Prepaid expenses |
13.6 | 35.2 | 12.5 | | 61.3 | |||||||||||||||
Other current assets |
| 252.8 | 205.7 | (438.7 | ) | 19.8 | ||||||||||||||
Total current assets |
13.6 | 994.7 | 504.4 | (456.9 | ) | 1,055.8 | ||||||||||||||
Property and Equipment: |
||||||||||||||||||||
Land |
| 6.9 | | | 6.9 | |||||||||||||||
Property, buildings and equipment |
| 1,218.4 | 202.6 | | 1,421.0 | |||||||||||||||
Accumulated depreciation and amortization |
| (843.2 | ) | (132.4 | ) | | (975.6 | ) | ||||||||||||
Property and equipment, net |
| 382.1 | 70.2 | | 452.3 | |||||||||||||||
Intangible assets, net |
| 406.1 | 35.1 | | 441.2 | |||||||||||||||
Goodwill |
| 141.8 | 138.0 | | 279.8 | |||||||||||||||
Deferred income taxes |
| | 7.2 | | 7.2 | |||||||||||||||
Other assets |
1,436.5 | 995.9 | 2.8 | (2,391.3 | ) | 43.9 | ||||||||||||||
Total Assets |
$ | 1,450.1 | $ | 2,920.6 | $ | 757.7 | $ | (2,848.2 | ) | $ | 2,280.2 | |||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||
Current Liabilities: |
||||||||||||||||||||
Current maturities of long-term debt |
$ | | $ | 6.1 | $ | | $ | | $ | 6.1 | ||||||||||
Accounts payable |
| 156.0 | 164.3 | (95.0 | ) | 225.3 | ||||||||||||||
Accrued expenses |
7.5 | 470.9 | 40.2 | (357.6 | ) | 161.0 | ||||||||||||||
Current liabilities of discontinued operations |
| | | | | |||||||||||||||
Total current liabilities |
7.5 | 633.0 | 204.5 | (452.6 | ) | 392.4 | ||||||||||||||
Long-term debt |
636.7 | 587.6 | 88.3 | (549.0 | ) | 763.6 | ||||||||||||||
Deferred income taxes |
| 63.3 | 1.9 | | 65.2 | |||||||||||||||
Other liabilities |
3.0 | 207.0 | 16.7 | (0.5 | ) | 226.2 | ||||||||||||||
Noncurrent liabilities of discontinued operations |
| | | | | |||||||||||||||
Commitments and contingencies |
||||||||||||||||||||
Equity: |
||||||||||||||||||||
Collective Brands, Inc. shareowners equity |
802.9 | 1,429.7 | 416.4 | (1,846.1 | ) | 802.9 | ||||||||||||||
Noncontrolling interests |
| | 29.9 | | 29.9 | |||||||||||||||
Total equity |
802.9 | 1,429.7 | 446.3 | (1,846.1 | ) | 832.8 | ||||||||||||||
Total Liabilities and Equity |
$ | 1,450.1 | $ | 2,920.6 | $ | 757.7 | $ | (2,848.2 | ) | $ | 2,280.2 | |||||||||
18
Table of Contents
CONDENSED CONSOLIDATING BALANCE SHEET
(dollars in millions)
(dollars in millions)
As of January 29, 2011 | ||||||||||||||||||||
Parent | Guarantor | Non-guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS |
||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 122.4 | $ | 201.7 | $ | | $ | 324.1 | ||||||||||
Accounts receivable, net |
| 103.4 | 21.2 | (10.2 | ) | 114.4 | ||||||||||||||
Inventories |
| 418.5 | 122.5 | (9.3 | ) | 531.7 | ||||||||||||||
Current deferred income taxes |
| 23.1 | 7.6 | | 30.7 | |||||||||||||||
Prepaid expenses |
28.4 | 15.8 | 10.9 | | 55.1 | |||||||||||||||
Other current assets |
| 276.9 | 150.9 | (405.6 | ) | 22.2 | ||||||||||||||
Total current assets |
28.4 | 960.1 | 514.8 | (425.1 | ) | 1,078.2 | ||||||||||||||
Property and Equipment: |
||||||||||||||||||||
Land |
| 6.7 | | | 6.7 | |||||||||||||||
Property, buildings and equipment |
| 1,233.1 | 211.5 | | 1,444.6 | |||||||||||||||
Accumulated depreciation and amortization |
| (878.5 | ) | (140.5 | ) | | (1,019.0 | ) | ||||||||||||
Property and equipment, net |
| 361.3 | 71.0 | | 432.3 | |||||||||||||||
Intangible assets, net |
| 399.4 | 29.0 | | 428.4 | |||||||||||||||
Goodwill |
| 142.9 | 136.9 | | 279.8 | |||||||||||||||
Deferred income taxes |
| | 10.1 | | 10.1 | |||||||||||||||
Other assets |
1,538.6 | 916.4 | 22.1 | (2,437.4 | ) | 39.7 | ||||||||||||||
Total Assets |
$ | 1,567.0 | $ | 2,780.1 | $ | 783.9 | $ | (2,862.5 | ) | $ | 2,268.5 | |||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||
Current Liabilities: |
||||||||||||||||||||
Current maturities of long-term debt |
$ | | $ | 5.1 | $ | | $ | | $ | 5.1 | ||||||||||
Accounts payable |
| 140.0 | 237.1 | (89.7 | ) | 287.4 | ||||||||||||||
Accrued expenses |
103.8 | 376.4 | 32.9 | (328.7 | ) | 184.4 | ||||||||||||||
Total current liabilities |
103.8 | 521.5 | 270.0 | (418.4 | ) | 476.9 | ||||||||||||||
Long-term debt |
637.0 | 484.3 | 67.1 | (529.0 | ) | 659.4 | ||||||||||||||
Deferred income taxes |
| 64.0 | 1.4 | | 65.4 | |||||||||||||||
Other liabilities |
3.3 | 191.9 | 17.2 | | 212.4 | |||||||||||||||
Commitments and contingencies |
||||||||||||||||||||
Equity: |
||||||||||||||||||||
Collective Brands, Inc. shareowners equity |
822.9 | 1,518.4 | 396.7 | (1,915.1 | ) | 822.9 | ||||||||||||||
Noncontrolling interests |
| | 31.5 | | 31.5 | |||||||||||||||
Total equity |
822.9 | 1,518.4 | 428.2 | (1,915.1 | ) | 854.4 | ||||||||||||||
Total Liabilities and Equity |
$ | 1,567.0 | $ | 2,780.1 | $ | 783.9 | $ | (2,862.5 | ) | $ | 2,268.5 | |||||||||
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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(dollars in millions)
(dollars in millions)
13 Weeks Ended April 30, 2011 | ||||||||||||||||||||
Parent | Guarantor | Non-guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Operating Activities: |
||||||||||||||||||||
Net earnings |
$ | 26.4 | $ | 35.3 | $ | 17.9 | $ | (51.4 | ) | $ | 28.2 | |||||||||
Adjustments for non-cash items included in net earnings |
0.1 | 32.5 | 5.8 | | 38.4 | |||||||||||||||
Changes in working capital |
4.2 | (70.0 | ) | (38.2 | ) | (0.3 | ) | (104.3 | ) | |||||||||||
Other, net |
(28.0 | ) | (27.8 | ) | 0.5 | 51.7 | (3.6 | ) | ||||||||||||
Cash flow provided by (used in) operating activities |
2.7 | (30.0 | ) | (14.0 | ) | | (41.3 | ) | ||||||||||||
Investing Activities: |
||||||||||||||||||||
Capital expenditures |
| (7.4 | ) | (3.4 | ) | | (10.8 | ) | ||||||||||||
Cash flow used in investing activities |
| (7.4 | ) | (3.4 | ) | | (10.8 | ) | ||||||||||||
Financing Activities: |
||||||||||||||||||||
Net proceeds (repayments) of debt |
| 28.7 | (30.0 | ) | | (1.3 | ) | |||||||||||||
Net purchases of common stock |
(2.7 | ) | | | | (2.7 | ) | |||||||||||||
Net distributions to noncontrolling interests |
| | (3.0 | ) | | (3.0 | ) | |||||||||||||
Cash flow
(used in) provided by financing activities |
(2.7 | ) | 28.7 | (33.0 | ) | | (7.0 | ) | ||||||||||||
Effect of exchange rate changes on cash |
| | 5.4 | | 5.4 | |||||||||||||||
Decrease in cash and cash equivalents |
| (8.7 | ) | (45.0 | ) | | (53.7 | ) | ||||||||||||
Cash and cash equivalents, beginning of year |
| 122.4 | 201.7 | | 324.1 | |||||||||||||||
Cash and cash equivalents, end of quarter |
$ | | $ | 113.7 | $ | 156.7 | $ | | $ | 270.4 | ||||||||||
13 Weeks Ended May 1, 2010 | ||||||||||||||||||||
Parent | Guarantor | Non-guarantor | ||||||||||||||||||
Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Operating Activities: |
||||||||||||||||||||
Net earnings |
$ | 54.2 | $ | 59.3 | $ | 24.5 | $ | (82.0 | ) | $ | 56.0 | |||||||||
Adjustments for non-cash items included in net earnings |
0.1 | 38.3 | 5.0 | | 43.4 | |||||||||||||||
Changes in working capital |
(9.0 | ) | 3.8 | (37.9 | ) | (0.3 | ) | (43.4 | ) | |||||||||||
Other, net |
(48.6 | ) | (87.8 | ) | 51.3 | 82.3 | (2.8 | ) | ||||||||||||
Cash flow (used in) provided by operating activities |
(3.3 | ) | 13.6 | 42.9 | | 53.2 | ||||||||||||||
Investing Activities: |
||||||||||||||||||||
Capital expenditures |
| (17.2 | ) | (2.6 | ) | | (19.8 | ) | ||||||||||||
Cash flow used in investing activities |
| (17.2 | ) | (2.6 | ) | | (19.8 | ) | ||||||||||||
Financing Activities: |
||||||||||||||||||||
Net repayment of debt or notes |
| (79.7 | ) | | | (79.7 | ) | |||||||||||||
Net issuances of common stock |
3.3 | | | | 3.3 | |||||||||||||||
Net distributions to noncontrolling interests |
| | (1.3 | ) | | (1.3 | ) | |||||||||||||
Cash flow
provided by (used in) financing activities |
3.3 | (79.7 | ) | (1.3 | ) | | (77.7 | ) | ||||||||||||
Effect of exchange rate changes on cash |
| | 3.2 | | 3.2 | |||||||||||||||
(Decrease) increase in cash and cash equivalents |
| (83.3 | ) | 42.2 | | (41.1 | ) | |||||||||||||
Cash and cash equivalents, beginning of year |
| 279.8 | 113.7 | | 393.5 | |||||||||||||||
Cash and cash equivalents, end of quarter |
$ | | $ | 196.5 | $ | 155.9 | $ | | $ | 352.4 | ||||||||||
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report contains forward-looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, products, future store openings and
closings, international expansion opportunities, possible strategic initiatives, new business
concepts, capital expenditure plans, fashion trends, consumer spending patterns and similar
matters. Statements including the words expects, anticipates, intends, plans, believes,
seeks, or variations of such words and similar expressions are forward-looking statements. We
note that a variety of factors could cause actual results and experience to differ materially from
the anticipated results or expectations expressed in our forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development and results of our business
include, but are not limited to, the following: litigation including intellectual property and
employment matters; the inability to renew material leases, licenses or contracts upon their
expiration on acceptable terms; changes in consumer spending patterns; changes in consumer
preferences and overall economic conditions; the impact of increasing
competitive pressure from mass market discount and off-price retailers; changes in
weather patterns; the financial condition of the suppliers and manufacturers; changes in existing
or potential duties, tariffs or quotas and the application thereof; changes in relationships
between the United States and foreign countries, changes in relationships between Canada and
foreign countries; economic and political instability in foreign countries, or restrictive actions
by the governments of foreign countries in which suppliers and manufacturers from whom we source
are located or in which we operate stores or otherwise do business; changes in trade, intellectual
property, customs and/or tax laws; fluctuations in currency exchange rates; availability of
suitable store locations on acceptable terms; the ability to terminate leases on acceptable terms;
the risk that we will not be able to integrate recently acquired businesses successfully, or that
such integration will take longer than anticipated; expected cost savings or synergies from
acquisitions will not be achieved or unexpected costs will be incurred; customers will not be
retained or that disruptions from acquisitions will harm relationships with customers, employees
and suppliers; costs and other expenditures in excess of those projected for environmental
investigation and remediation or other legal proceedings; the ability to hire and retain
associates; performance of other parties in strategic alliances; general economic, business and
social conditions in the countries from which we source products, supplies or have or intend to
open stores; performance of partners in joint ventures or franchised operations; the ability to
comply with local laws in foreign countries; threats or acts of terrorism or war; strikes, work
stoppages and/or slowdowns by unions that play a significant role in the manufacture, distribution
or sale of product; congestion at major ocean ports; changes in commodity prices such as oil; and
changes in the value of the dollar relative to the Chinese Yuan and other currencies. For more
complete discussion of these and other risks that could impact our forward-looking statements,
please refer to our 2010 Annual Report on Form 10-K for the fiscal year ended January 29, 2011,
including the discussion contained under Risk Factors. We do not undertake any obligation to
release publicly any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Overview
The following Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) is intended to help the reader understand Collective Brands, Inc., our operations and our
present business environment. MD&A is provided as a supplement to, and should be read in
connection with, our Condensed Consolidated Financial Statements and the accompanying notes thereto
included under Part I Item 1 of this report. MD&A should also be read in conjunction with our
Consolidated Financial Statements as of January 29, 2011, and for the year then ended, and the
related MD&A, both of which are contained on our Form 10-K for the year ended January 29, 2011.
MD&A includes the following sections:
| Our Business a brief description of our business and key 2011 events. | ||
| Consolidated Review of Operations an analysis of our consolidated results of operations for the 13 weeks ended April 30, 2011 and May 1, 2010 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 April 30, 2011 and May 1, 2010 as presented in our Condensed Consolidated Financial Statements for our four reporting segments: Payless Domestic, Payless International, PLG Wholesale and PLG Retail. | ||
| Liquidity and Capital Resources an analysis of cash flows, aggregate financial commitments and certain financial condition ratios. | ||
| Critical Accounting Policies an update, since January 29, 2011, of our discussion of our critical accounting policies that involve a higher degree of judgment or complexity. This section also includes the impact of new accounting standards. |
21
Table of Contents
Our Business
Collective Brands, Inc. consists of three lines of business: Payless ShoeSource (Payless),
Collective Brands Performance + Lifestyle Group (PLG), and Collective Licensing. We operate a
hybrid business model that includes retail, wholesale, licensing and franchising businesses.
Payless is one of the largest footwear retailers in the Western Hemisphere and is dedicated to
democratizing fashion and design in footwear and accessories and inspiring fun, fashion
possibilities for the family at a great value. PLG markets products at wholesale and retail for
children and adults under brand names that include Saucony®, Sperry Top-Sider®, Stride Rite® and
Keds®. Collective Licensing is a youth lifestyle marketing and global licensing business within
the Payless Domestic segment.
We measure the performance of our business using several metrics, but rely primarily on net sales,
same-stores sales, operating profit from continuing operations, adjusted earnings before interest,
income taxes, depreciation and amortization (Adjusted EBITDA), net debt and free cash flow (see
Non-GAAP Financial Measures section). We also measure the performance of our business using our
reporting segments net sales and operating profit (see Reporting Segment Review of Operations
section).
Key 2011 Events
During the first quarter of 2011, weak retail sales in North America drove down our overall
results. Sales in our Payless Domestic segment decreased $48.2 million from the first quarter of
2010. At the same time, we had continued strong sales in
our PLG Wholesale segment and in Payless Latin America. As we examined our performance, there are two
major causal factors which affected many U.S. mass market retailers including us:
| unusually cold weather in the northern tier of the United States and Canada | ||
| a downturn in the economic conditions facing a segment of our core consumer base |
In the northern half of the U.S., significantly colder and wetter weather in March and April
negated the expected benefit of a later, and presumably warmer, Easter holiday. Sales in our
northern stores, which make up almost half of Payless North American retail sales, generated about
two-thirds of our sales decline for that region. The colder weather was also evidenced by sandal
sales which were nearly $30 million below last year, representing over 50% of the Payless North
America retail sales decline.
We saw a continued decline in traffic, and this was a difficult quarter for many of our core Payless
consumers. During the quarter, gas prices rose 25% while food price inflation increased, limiting
dollars available for discretionary spending. In addition, while the unemployment rate improved
slightly from last year among African-Americans and Hispanics, two of our core customer groups, it
remained persistently high. The combination of weather and
economic pressure on the consumer effectively eliminated much of the spike in Easter sales we
typically experience.
Going forward, we plan to increase our promotional activity and messaging. On a very targeted
basis, we will focus moderated price increases and deeper promotions to those zones which are most
price sensitive especially our childrens shoes and talk to that compelling, promotional
value. We will further expand our direct marketing promotions, so more price sensitive consumers
can take advantage of coupon offers. We will utilize our new markdown optimization tool to take
markdowns earlier in the product lifecycle, and we will implement a Hot Deal of the Week program,
providing a significant discount on a single style each week we are not on a buy one, get one half off promotion.
In addition, we are in the process of selectively expanding assortments to better serve specific
customer segments in unique stores. Approximately 1,800 stores, in one of five groups, will
each receive new styles, targeted at consumers in their specific trade area. This
targeted test program will hit stores for back to school. As these pricing and assortment
changes are rolled out, we will continually monitor their effectiveness and make sure they are
delivering the planned results.
Footwear product costs were
higher in the first quarter of 2011 on like products by approximately
6% as several initiatives helped to mitigate costs such as:
| continuing to move more product sourcing outside of China and to less expensive facilities and regions within China. By the end of 2011, we expect to have 25% of production moved to outside of China; and | ||
| utilizing combined procurement and value engineering in product design. |
To mitigate cost increases we cannot offset, we intend to manage operating expenses and raise
prices selectively within the Collective Brands portfolio as consumer demand elasticity and
competitive conditions allow. In the second and third quarters of 2011, we anticipate like
footwear year-over-year costs to increase over 10%.
22
Table of Contents
If the economic condition of certain segments of our core customer base does not improve, our
financial results may continue to be negatively impacted. Continued underperformance increases the
potential for impairments of long-lived assets, goodwill and other intangible assets.
Consolidated Review of Operations
The following table presents the components of costs and expenses, as a percent of net sales, for
the first quarter ended April 30, 2011 (2011) and May 1, 2010 (2010):
First Quarter | ||||||||
2011 | 2010 | |||||||
Net sales |
100.0 | % | 100.0 | % | ||||
Cost of sales |
64.3 | 61.7 | ||||||
Gross margin |
35.7 | 38.3 | ||||||
Selling, general and administrative expense |
30.8 | 29.0 | ||||||
Operating profit |
4.9 | 9.3 | ||||||
Interest expense, net |
1.3 | 1.4 | ||||||
Loss on early extinguishment of debt |
| 0.1 | ||||||
Net earnings before income taxes |
3.6 | 7.8 | ||||||
Effective income tax rate* |
10.8 | 17.2 | ||||||
Net earnings |
3.2 | 6.4 | ||||||
Net earnings attributable to noncontrolling interests |
(0.2 | ) | (0.2 | ) | ||||
Net earnings attributable to Collective Brands, Inc. |
3.0 | % | 6.2 | % | ||||
* | Percent of pre-tax earnings |
Net Earnings Attributable to Collective Brands, Inc.
First quarter 2011 net earnings attributable to Collective Brands, Inc. was $26.4 million, or $0.42
per diluted share, down 51% versus first quarter 2010 results of $54.2 million, or $0.83 per
diluted share. The decrease in net earnings attributable to Collective Brands, Inc. was primarily
driven by decreased gross margins and increased selling, general and administrative expenses.
Net Sales
Other than total net sales, the table below summarizes net sales information for our retail stores.
Stores operated under franchise agreements are excluded from these calculations. Same-store sales
are calculated on a weekly basis and exclude liquidation sales. If a store is open the entire week
in each of the two years being compared, its sales are included in the same-store sales calculation
for the week. Our Payless and Stride Rite childrens e-commerce businesses are considered stores
in this calculation.
Percent increases (decreases) are as follows:
First Quarter | ||||||||
2011 | 2010 | |||||||
Total net sales |
(1.1 | )% | 1.8 | % | ||||
Same-store sales |
(7.4 | ) | (1.2 | ) | ||||
Average selling price per unit |
4.1 | (1.4 | ) | |||||
Unit volume |
(10.7 | ) | (0.6 | ) | ||||
Footwear average selling price per unit |
8.4 | 0.2 | ||||||
Footwear unit volume |
(14.6 | ) | (3.9 | ) | ||||
Non-footwear average selling price per unit |
(5.3 | ) | 5.6 | |||||
Non-footwear unit volume |
1.0 | 10.8 |
Please refer to Reporting Segment Review of Operations below for the further details on the
changes in net sales for each of our reporting units.
Cost of Sales
Cost of sales was $559.1 million in the 2011 first quarter, up 3.1% from $542.1 million in the 2010
first quarter. The increase in cost of sales from 2010 to 2011 is primarily due to the impact of
higher product costs and a greater mix of wholesale products, which have higher cost of sales than
our retail products.
23
Table of Contents
Gross Margin
Gross margin rate for the first quarter of 2011 was 35.7%, compared to a gross margin rate of 38.3%
in the first quarter of 2010. The gross margin rate decreased
principally due to lower sales, higher product
costs, and a greater mix of wholesale sales, which generate lower gross margins than retail.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses were $267.5 million in the first quarter of
2011, an increase of 4.9% from $255.1 million in the first quarter of 2010. As a percentage of net
sales, SG&A expenses were 30.8% of net sales in the first quarter of 2011 versus 29.0% in the first
quarter of 2010. The increase in SG&A expenses for the first quarter of 2011 compared to 2010 is
primarily due to continued marketing and sales investments in the PLG Wholesale reporting segment,
the timing of certain marketing investments in the Payless Domestic reporting segment and new
stores in the Payless International and PLG Retail segments.
Interest Expense (Income)
Interest income and expense components were:
First Quarter | ||||||||
(dollars in millions) | 2011 | 2010 | ||||||
Interest expense |
$ | 10.9 | $ | 13.4 | ||||
Interest income |
(0.1 | ) | (0.2 | ) | ||||
Interest expense, net |
$ | 10.8 | $ | 13.2 | ||||
The decline in interest expense in the first quarter of 2011 from the first quarter of 2010 is
primarily a result of less outstanding debt. The decline in interest income in the first quarter
of 2011 from the first quarter of 2010 is primarily a result of a lower invested cash balance.
Loss on Early Extinguishment of Debt
The loss on early extinguishment of debt relates to the acceleration of deferred debt costs on our
Term Loan Facility in proportion to the $79.7 million extinguished in the first quarter of 2010.
Income Taxes
Our effective income tax rate on continuing operations was 10.8% during the first quarter of 2011
as compared to 17.2% in the first quarter of 2010. We recorded $2.2 million of favorable discrete
events in the thirteen weeks ended April 30, 2011 and $1.9 million of favorable discrete events in
the thirteen weeks ended May 1, 2010. The favorable difference in the overall effective tax rate
for 2011 compared to 2010 is due to a decrease in the proportion of pre-tax income in relatively
high tax rate jurisdictions as well as an increase in the proportion of income in relatively lower
tax rate jurisdictions.
We have unrecognized tax benefits, inclusive of related interest and penalties, of $59.1 million
and $66.5 million as of April 30, 2011 and May 1, 2010, respectively. The portion of the
unrecognized tax benefits that would impact the effective income tax rate if recognized are $27.2
million and $40.5 million, respectively.
We anticipate that it is reasonably possible that the total amount of unrecognized tax benefits at
April 30, 2011 will decrease by up to $25.9 million within the next twelve months. To the extent
these tax benefits are recognized, the effective rate would be favorably impacted in the period of
recognition by up to $6.5 million. The potential reduction primarily relates to potential
settlements of on-going examinations with tax authorities and the potential lapse of the statutes
of limitations in relevant tax jurisdictions.
Our Condensed Consolidated Balance Sheet as of April 30, 2011 includes deferred tax assets, net of
related valuation allowances, of approximately $159.3 million. In assessing the future realization
of these assets, we concluded it is more likely than not the assets will be realized. This
conclusion was based in large part upon managements belief that we will generate sufficient
quantities of taxable income from operations in future years in the appropriate tax jurisdictions.
If our near-term forecasts are not achieved, we may be required to record additional valuation
allowances against our deferred tax assets. This could have a material impact on our financial
position and results of operations in a particular period.
Net Earnings Attributable to Noncontrolling Interests
Net earnings attributable to noncontrolling interests represent our joint venture partners share
of net earnings or losses on applicable international operations.
24
Table of Contents
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to assess performance. These measures are
included as a complement to results provided in accordance with GAAP because we believe these
non-GAAP financial measures help us explain underlying
performance trends in our business and provide useful information to both management and investors.
These measures should be considered in addition to results prepared in accordance with GAAP, but
should not be considered a substitute for or superior to GAAP results.
We use adjusted earnings before interest, income taxes, depreciation and amortization (adjusted
EBITDA) as a non-GAAP performance measure because we believe it reflects the Companys core
operating performance by excluding the impact of the effect of financing and investing activities
by eliminating the effects of interest, depreciation and amortization costs. The following table
presents the reconciliation of net earnings to non-GAAP adjusted EBITDA:
First Quarter | ||||||||
(dollars in millions) | 2011 | 2010 | ||||||
Net earnings |
$ | 28.2 | $ | 56.0 | ||||
Provision for income taxes |
3.4 | 11.6 | ||||||
Net interest expense (including loss on early extinguishment of debt) |
10.8 | 14.0 | ||||||
Depreciation and amortization |
32.6 | 33.6 | ||||||
Adjusted EBITDA |
$ | 75.0 | $ | 115.2 | ||||
The decrease in adjusted EBITDA in the first quarter of 2011 compared to the first quarter of
2010 is primarily driven by lower gross margins and an increase in selling, general and
administrative expenses.
We also use free cash flow, defined as cash flow provided by operating activities less capital
expenditures, as a non-GAAP performance measure because we believe it provides useful information
about our liquidity, our ability to make investments and to service debt. The following table
presents our calculation of free cash flow:
First Quarter | ||||||||
(dollars in millions) | 2011 | 2010 | ||||||
Cash flow (used in) provided by operating activities |
$ | (41.3 | ) | $ | 53.2 | |||
Less: Capital expenditures |
10.8 | 19.8 | ||||||
Free cash flow |
$ | (52.1 | ) | $ | 33.4 | |||
The decrease in free cash flow is primarily related to a decline in cash flow provided by
operating activities as a result of changes in accounts payable, lower earnings, and increases in
inventory. During the first quarter of 2010, we extended payment terms with our merchandise
vendors and accordingly experienced a one-time favorable impact to operating cash flows.
Finally, we use net debt, defined as total debt less cash and cash equivalents, as a non-GAAP
performance measure as we believe it provides useful information about the relationship between our
long-term debt obligations and our cash and cash equivalents balance at a point in time. The
following table presents our calculation of net debt:
First Quarter | ||||||||
(dollars in millions) | 2011 | 2010 | ||||||
Total debt |
$ | 663.3 | $ | 769.7 | ||||
Less: cash and cash equivalents |
270.4 | 352.4 | ||||||
Net debt |
$ | 392.9 | $ | 417.3 | ||||
Net debt decreased in the first quarter of 2011 compared to the first quarter of 2010
primarily due to the decrease in total debt as a result of debt repayments in 2010, which were
funded by cash provided by operations.
Reporting Segment Review of Operations
We operate our business using four reporting segments: Payless Domestic, Payless International, PLG
Wholesale and PLG Retail. We evaluate the performance of our reporting segments based on segment
net sales and segment operating profit. The following table reconciles reporting segment net sales
to consolidated net sales and reporting segment operating profit to our consolidated operating
profit for the first quarter of 2011 and 2010:
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First Quarter | ||||||||
April 30, | May 1, | |||||||
(dollars in millions) | 2011 | 2010 | ||||||
Reporting segment net sales: |
||||||||
Payless Domestic |
$ | 498.4 | $ | 546.6 | ||||
Payless International |
97.5 | 100.0 | ||||||
PLG Wholesale |
212.5 | 173.4 | ||||||
PLG Retail |
60.6 | 58.8 | ||||||
Total net sales |
$ | 869.0 | $ | 878.8 | ||||
Reporting segment operating profit: |
||||||||
Payless Domestic |
$ | 13.0 | $ | 49.3 | ||||
Payless International |
3.0 | 7.1 | ||||||
PLG Wholesale |
25.3 | 23.3 | ||||||
PLG Retail |
1.1 | 1.9 | ||||||
Total operating profit |
$ | 42.4 | $ | 81.6 | ||||
The following table presents the change in store count during the first quarter of 2011 and
2010 by reporting segment. We consider a store relocation to be both a store opening and a store
closing.
Payless | Payless | |||||||||||||||
Domestic | International | PLG Retail | Total | |||||||||||||
First Quarter 2011: |
||||||||||||||||
Beginning store count |
3,794 | 667 | 383 | 4,844 | ||||||||||||
Stores opened |
13 | 4 | 4 | 21 | ||||||||||||
Stores closed |
(19 | ) | (1 | ) | (4 | ) | (24 | ) | ||||||||
Ending store count |
3,788 | 670 | 383 | 4,841 | ||||||||||||
First Quarter 2010: |
||||||||||||||||
Beginning store count |
3,827 | 643 | 363 | 4,833 | ||||||||||||
Stores opened |
13 | 5 | 13 | 31 | ||||||||||||
Stores closed |
(9 | ) | (3 | ) | | (12 | ) | |||||||||
Ending store count |
3,831 | 645 | 376 | 4,852 | ||||||||||||
As of April 30, 2011, we franchised 79 Payless and 10 PLG Retail stores compared to 13 Payless
stores as of May 1, 2010. These stores are not reflected in the table above.
The total square footage for our retail stores as of April 30, 2011 and May 1, 2010 was
approximately 14.6 million and 14.7 million, respectively. These square footage numbers do not
include our franchised stores.
Payless Domestic Segment Operating Results
The Payless Domestic reporting segment is comprised primarily of operations from the domestic
retail stores under the Payless ShoeSource name, the Companys sourcing operations and Collective
Licensing.
First Quarter | ||||||||||||
Percent change | ||||||||||||
(dollars in millions) | 2011 | 2010 | 2011 vs. 2010 | |||||||||
Net sales |
$ | 498.4 | $ | 546.6 | (8.8 | )% | ||||||
Operating profit |
$ | 13.0 | $ | 49.3 | (73.6 | )% | ||||||
Operating profit as % of net sales |
2.6 | % | 9.0 | % |
For the first quarter of 2011, net sales for the Payless Domestic reporting segment decreased
8.8% or $48.2 million, to $498.4 million, from the first quarter of 2010. The decrease in net
sales from 2010 to 2011 is primarily due to lower comparable store sales and fewer stores. The
sales declines were primarily sandals, athletics, and childrens departments offset, in part, by
gains in fitness, boots, and womens casuals.
As a percentage of net sales, operating profit decreased to 2.6% for the first quarter of 2011
compared to 9.0% in the first quarter of 2010. The percentage decrease is principally due to the
deleveraging of fixed costs as a result of the decline in net sales as well as higher product
costs.
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Payless International Segment Operating Results
Our Payless International reporting segment includes retail operations under the Payless ShoeSource
name in Canada, the Central and South American Regions, Puerto Rico and the U.S. Virgin Islands, as
well as franchising arrangements under the Payless ShoeSource name. For all periods presented, our
franchising operations were not significant.
First Quarter | ||||||||||||
Percent change | ||||||||||||
(dollars in millions) | 2011 | 2010 | 2011 vs. 2010 | |||||||||
Net sales |
$ | 97.5 | $ | 100.0 | (2.5 | )% | ||||||
Operating profit |
$ | 3.0 | $ | 7.1 | (57.7 | )% | ||||||
Operating profit as % of net sales |
3.1 | % | 7.1 | % |
For the first quarter of 2011, net sales for the Payless International reporting segment
decreased 2.5% or $2.5 million, to $97.5 million, from the first quarter of 2010. Significant
sales declines in Canada, primarily due to unfavorable weather, drove the sales decline. This
decline was offset by comparable store sales gains in Latin America.
As a percentage of net sales, operating profit decreased to 3.1% for the first quarter of 2011
compared to 7.1% in the first quarter of 2010. The percentage decrease is primarily due to the
deleveraging of fixed costs in Canada due to the decline in net sales.
PLG Wholesale Segment Operating Results
The PLG Wholesale reporting segment is comprised of PLGs wholesale operations, which primarily
includes sales from the Stride Rite, Sperry Top-Sider, Saucony and Keds brands.
First Quarter | ||||||||||||
Percent change | ||||||||||||
(dollars in millions) | 2011 | 2010 | 2011 vs. 2010 | |||||||||
Net sales |
$ | 212.5 | $ | 173.4 | 22.5 | % | ||||||
Operating profit |
$ | 25.3 | $ | 23.3 | 8.6 | % | ||||||
Operating profit as % of net sales |
11.9 | % | 13.4 | % |
For the first quarter of 2011, net sales for the PLG Wholesale reporting segment increased
22.5% or $39.1 million, to $212.5 million, from the first quarter of 2010. The increase in net
sales is due to increases in all four brands, led by Sperry Top-Sider and Saucony.
As a percentage of net sales, operating profit decreased to 11.9% for the first quarter of 2011
compared to 13.4% in the first quarter of 2010. The percentage decrease was primarily due higher
product costs in the first quarter of 2011 compared to the first quarter of 2010.
PLG Retail Segment Operating Results
The PLG Retail reporting segment consists of PLGs owned Stride Rite childrens stores, PLGs
outlet stores, store-in-stores at select Macys Department Stores and Sperry Top-Sider retail
stores.
First Quarter | ||||||||||||
Percent change | ||||||||||||
(dollars in millions) | 2011 | 2010 | 2011 vs. 2010 | |||||||||
Net sales |
$ | 60.6 | $ | 58.8 | 3.1 | % | ||||||
Operating profit |
$ | 1.1 | $ | 1.9 | (42.1 | )% | ||||||
Operating profit as % of net sales |
1.8 | % | 3.2 | % |
For the first quarter of 2011, net sales for the PLG Retail reporting segment increased 3.1%
or $1.8 million, to $60.6 million, from the first quarter of 2010. The increase in revenues from
external customers was primarily due to an increase in the number of stores, partially offset by
lower comparable store sales.
As a percentage of net sales, operating profit decreased to 1.8% for the first quarter of 2011
compared to 3.2% in the first quarter of 2010. The percentage decrease was primarily due the
impact of higher product costs and a less favorable channel mix in 2011 compared to 2010.
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Liquidity and Capital Resources
We ended the first quarter of 2011 with a cash and cash equivalents balance of $270.4 million, a
decrease of $82.0 million from the 2010 first quarter. The year-to-year decrease was due primarily
to debt repayments, capital expenditures and share repurchases, partially offset by cash generated
from operations.
As of April 30, 2011, our foreign subsidiaries and joint ventures had $150.7 million in cash
located in financial institutions outside of the United States. A portion of this cash represents
undistributed earnings of our foreign subsidiaries, which are indefinitely
reinvested. In the event of a distribution to the U.S., those earnings could be subject to U.S.
federal and state income taxes, net of foreign tax credits.
As of April 30, 2011, the borrowing base on our Revolving Loan Facility was $264.9 million less
$29.9 million in outstanding letters of credit, or $235.0 million. The variable interest rate
including the applicable variable margin at April 30, 2011 was 1.15%. We had no borrowings on our
Revolving Loan Facility at any time during the first quarter of 2011.
We are subject to financial covenants under our Loan Facilities. We have a financial covenant
under our Term Loan Facility agreement that requires us to maintain, on the last day of each fiscal
quarter, a total leverage ratio of not more than 4.0 to 1. As of April 30, 2011, our leverage
ratio, as defined in our Term Loan Facility agreement, was 1.9 to 1 and we were in compliance with
all of our covenants. We expect, based on our current financial projections, to be in compliance
with our covenants on our Loan Facilities for the next twelve months. Further, we believe that our
liquid assets, cash generated from operations and amounts available under our Revolving Loan
Facility will provide us with sufficient funds for capital expenditures and other operating
activities for at least the next twelve months.
Cash Flow (Used in) Provided by Operating Activities
Cash flow used in operations was $41.3 million in the first three months of 2011, compared with
cash flow provided by operations of $53.2 million in the same period in 2010. The decrease in cash
flow from operations in the first quarter of 2011 as compared to the first quarter of 2010 is
primarily due to changes in accounts payable, lower earnings, and increases in inventory. During
the first quarter of 2010, we extended payment terms with our merchandise vendors and accordingly
experienced a one-time favorable impact to operating cash flows.
Cash Flow Used in Investing Activities
Our capital expenditures totaled $10.8 million during the first three months of 2011, compared with
$19.8 million for the same period in 2010. The decrease in capital expenditures was primarily due
to the timing of payments for certain technology and store investments in 2011 compared to 2010.
Total capital expenditures in 2011 are expected to be approximately $105 million compared to $98
million in 2010. We intend to use internal cash and cash flow from operations to finance all of
these expenditures.
Cash Flow Used in Financing Activities
We have made the following common stock repurchases:
First Quarter | ||||||||||||||||
2011 | 2010 | |||||||||||||||
(dollars in millions, shares in thousands) | Dollars | Shares | Dollars | Shares | ||||||||||||
Stock repurchase program |
$ | 2.0 | 93 | $ | 2.8 | 125 | ||||||||||
Employee stock purchase, deferred compensation
and stock incentive plans |
2.4 | 118 | 1.7 | 74 | ||||||||||||
$ | 4.4 | 211 | $ | 4.5 | 199 | |||||||||||
Under the terms of our Credit Facilities, we are restricted on the amount of common stock we
may repurchase. This limit may increase or decrease on a quarterly basis based upon our net
earnings.
Contractual Obligations
For a discussion of our other contractual obligations, see a discussion of future commitments under
Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, in
our Form 10-K for the fiscal year ended January 29, 2011. There have been no significant
developments with respect to our contractual obligations since January 29, 2011.
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Financial Condition Ratios
A summary of key financial information for the periods indicated is as follows:
April 30, | May 1, | January 29, | ||||||||||
2011 | 2010 | 2011 | ||||||||||
Debt-capitalization Ratio* |
43.6 | % | 49.0 | % | 44.7 | % |
* | 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 65.5%, 69.7% and 66.7%, respectively, for the periods referred to above. |
Critical Accounting Policies
For more information regarding our critical accounting policies, estimates and judgments, see the
discussion under Managements Discussion and Analysis of Financial Condition and Results of
Operations in our Form 10-K for the year ended January 29, 2011. There have been no changes to our
critical accounting policies since January 29, 2011.
New Accounting Standards
See Note 12 of the Condensed Consolidated Financial Statements for new accounting standards,
including the expected dates of adoption and estimated effects on our Condensed Consolidated
Financial Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Interest on our senior secured Revolving Loan Facility, which is entirely comprised of a revolving
line of credit, is based on the London Inter-Bank Offered Rate (LIBOR) plus a variable margin of
0.875% to 1.5%, or the base rate, as defined in the credit agreement. There are no outstanding
borrowings on the revolving line of credit at April 30, 2011; however, if we were to borrow against
our revolving line of credit, borrowing costs may fluctuate depending upon the volatility of LIBOR.
On August 24, 2007, we entered into an interest rate contract for $540 million to hedge a portion
of our variable rate Term Loan Facility. The interest rate contract provides for a fixed interest
rate of approximately 7.75%, portions of which mature on a series of dates over the next five
years. The unhedged portion of the Term Loan Facility is subject to interest rate risk depending
on the volatility of LIBOR. As of April 30, 2011, a 100 basis point increase in LIBOR on the
unhedged portion of the Companys debt, which totals $268.1 million, would impact pretax interest
expense by approximately $2.7 million annually or approximately $0.7 million per quarter.
Foreign Currency Risk
We have operations in foreign countries; therefore, our cash flows in U.S. dollars are impacted by
fluctuations in foreign currency exchange rates. We adjust our retail prices, when possible, to
reflect changes in exchange rates to mitigate this risk. To further mitigate this risk, we may,
from time to time, enter into forward contracts to purchase or sell foreign currencies.
A significant percentage of our footwear is sourced from the Peoples Republic of China (the
PRC). The national currency of the PRC, the Yuan, is currently not a freely convertible
currency. The value of the Yuan depends to a large extent on the PRC governments policies and
upon the PRCs domestic and international economic and political developments. During 2005, the
PRC government adopted an exchange rate system based on a trade-weighted basket of foreign
currencies of the PRCs main trading partners. Under this managed float policy, the exchange
rate of the Yuan may shift each day up to 0.5% in either direction from the previous days close,
and as a result, the valuation of the Yuan may increase incrementally over time should the PRC
central bank allow it to do so, which could significantly increase the cost of the products we
source from the PRC. As of April 29, 2011, the last day of trading in our quarter, the exchange
rate was 6.50 Yuan per U.S. dollar compared to 6.82 Yuan per U.S. dollar at the end of our first
quarter 2010 and 6.57 Yuan per U.S. dollar at the end of our 2010 fiscal year.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management is responsible for establishing disclosure controls and procedures that are designed
to ensure that information required to be disclosed in our periodic Securities Exchange Act of 1934
reports is recorded, processed, summarized and reported within the time periods specified in the
Securities Exchange Commissions (SEC) rules and forms and that such information is
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accumulated
and communicated to our management, including the Chief Executive Officer and the Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosures.
As of the end of the period covered by this Form 10-Q, we carried out an evaluation, under the
supervision and with the participation of our principal executive officer and principal financial
officer, of the effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our principal executive officer and principal financial
officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) are effective and designed to ensure that
information required to be disclosed in periodic reports filed with the SEC is recorded, processed,
summarized and reported within the time period specified. Our principal executive officer and
principal financial officer also concluded that our controls and procedures were effective in
ensuring that information required to be disclosed by us in the reports that we file or submit
under the Act is accumulated and communicated to management including our principal executive
officer and
principal financial officer, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the first quarter of
fiscal year 2011 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings other than ordinary, routine litigation incidental to the
business to which the Company is a party or of which its property is subject, none of which the
Company expects to have a material impact on its financial position, results of operations or cash
flows.
ITEM 1A. RISK FACTORS
For more information regarding our risk factors, see Item 1A in our Form 10-K for the year ended
January 29, 2011. There have been no changes to the risk factors disclosed in our 2010 Annual
Report on Form 10-K, other than the addition of the following risk factor:
Our Payless Domestic Reporting Segment is Heavily Influenced by the Economic Condition of our Core
Customer Base
Our Payless Domestic reporting segment is highly dependant on the disposable income of our core
customer base. High unemployment and rising prices for staple products like gasoline and food are
factors that have a particularly negative impact on the disposable income of our core customer
base. If the economic condition of certain segments of our core
customer base does not improve, our financial results may
be negatively impacted. Also, any deterioration in the general economic conditions for our core customer base
could adversely affect our business.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information about purchases by us (and our affiliated purchasers)
during the quarter ended April 30, 2011, of equity securities that are registered by us pursuant to
Section 12 of the Exchange Act:
Total Number of | ||||||||||||||||
Shares Purchased | Approximate Dollar Value of | |||||||||||||||
Total Number | Average | as Part of Publicly | Shares that May Yet Be | |||||||||||||
of Shares | Price | Announced Plans | Purchased Under the Plans or | |||||||||||||
Purchased(1) | Paid per | or Programs | Programs | |||||||||||||
Period | (in thousands) | Share | (in thousands) (3) | (in millions) | ||||||||||||
01/30/11 2/26/11 |
3 | $ | 21.85 | | $ | 139.0 | ||||||||||
02/27/11 04/02/11 |
165 | 20.83 | 53 | 137.9 | ||||||||||||
04/03/11 04/30/11 |
43 | 21.83 | 40 | 137.0 | ||||||||||||
Total |
211 | $ | 21.04 | 93 | $ | 137.0 | (2) | |||||||||
(1) | Includes an aggregate of approximately 118 thousand shares of our common stock that was repurchased in connection with our employee stock purchase and stock incentive plans. | |
(2) | On March 2, 2007 our Board of Directors authorized an aggregate of $250 million of share repurchases. The timing and amount of share repurchases, if any, are limited by the terms of our Credit Agreement and Senior Subordinated Notes. | |
(3) | All amounts represent share repurchases as a result of consideration from stock option exercises. |
ITEM 4. RESERVED
ITEM 6. EXHIBITS
(a) | Exhibits: |
Number | Description | |
31.1
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer, President and Chairman of the Board* | |
31.2
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Division Senior Vice President -Chief Financial Officer and Treasurer* | |
32.1
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer, President and Chairman of the Board* | |
32.2
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Division Senior Vice President Chief Financial Officer and Treasurer* | |
101
|
The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Statements of Earnings (Unaudited) for the 13 Weeks Ended April 30, 2011 and May 1, 2010; (ii) the Condensed Consolidated Balance Sheets (Unaudited) as of April 30, 2011, May 1, 2010 and January 29, 2011; (iii) the Condensed Consolidated Statements of Equity and Comprehensive Income (Unaudited) for the 13 Weeks Ended April 30, 2011 and May 1, 2010; (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited) for the 13 Weeks Ended April 30, 2011 and May 1, 2010; and (v) the Notes to the Condensed Consolidated Financial Statements (Unaudited), tagged as blocks of text.** |
* | Filed herewith | |
** | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
COLLECTIVE BRANDS, INC. |
||||
Date: May 25, 2011 | By: | /s/ Matthew E. Rubel | ||
Matthew E. Rubel | ||||
Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer) |
||||
Date: May 25, 2011 | By: | /s/ Douglas G. Boessen | ||
Douglas G. Boessen | ||||
Division Senior Vice President - Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
||||
32