Note 16 – 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 Company’s Non-Guarantor Subsidiaries (the “Non-guarantor Subsidiaries”) and total Condensed Consolidated Collective Brands, Inc. and Subsidiaries (“Consolidated”) for the thirteen and twenty-six weeks ended July 28, 2012 and July 30, 2011

•

The Condensed Consolidated Statements of Comprehensive Income for the thirteen and twenty-six weeks ended July 28, 2012 and July 30, 2011,

•

The Condensed Consolidating Balance Sheets as of July 28, 2012, July 30, 2011, and January 28, 2012, and;

•

The Condensed Consolidating Statements of Cash Flows for the twenty-six weeks ended July 28, 2012 and July 30, 2011.

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 Company’s 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 Company’s 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 and are included in the Company’s results on a one-month lag relative to results from other regions. The effect of this one-month lag on the Company’s financial position and results of operations is not significant.

Under the indenture governing the Notes, the Company’s subsidiaries in Singapore are designated as unrestricted subsidiaries. The effect of these subsidiaries on the Company’s financial position and results of operations and cash flows is not significant. The Company’s subsidiaries in Singapore are included in the Non-guarantor Subsidiaries.

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

(dollars in millions)

13 Weeks Ended July 28, 2012

Parent
Company

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

Net sales

—

747.4

423.8

(285.2

)

886.0

Cost of sales

—

516.5

354.2

(279.8

)

590.9

Gross margin

—

230.9

69.6

(5.4

)

295.1

Selling, general and administrative expenses

1.3

235.1

42.9

(5.4

)

273.9

Operating (loss) profit

(1.3

)

(4.2

)

26.7

—

21.2

Interest expense

11.7

5.1

0.1

(9.4

)

7.5

Interest income

—

(9.0

)

(0.6

)

9.4

(0.2

)

Equity in earnings of subsidiaries

(22.7

)

(24.0

)

—

46.7

—

Earnings before income taxes

9.7

23.7

27.2

(46.7

)

13.9

Provision for income taxes

—

1.0

1.4

—

2.4

Net earnings

9.7

22.7

25.8

(46.7

)

11.5

Net earnings attributable to noncontrolling interests

—

(1.8

)

—

(1.8

)

Net earnings attributable to Collective Brands, Inc.

9.7

22.7

24.0

(46.7

)

9.7

26 Weeks Ended July 28, 2012

Parent
Company

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

Net sales

—

1,535.3

786.5

(523.7

)

1,798.1

Cost of sales

—

1,027.9

663.1

(513.1

)

1,177.9

Gross margin

—

507.4

123.4

(10.6

)

620.2

Selling, general and administrative expenses

2.5

474.6

83.3

(10.6

)

549.8

Operating (loss) profit

(2.5

)

32.8

40.1

—

70.4

Interest expense

23.4

11.0

0.2

(18.8

)

15.8

Interest income

—

(18.0

)

(1.1

)

18.8

(0.3

)

Equity in earnings of subsidiaries

(68.8

)

(34.7

)

—

103.5

—

Earnings before income taxes

42.9

74.5

41.0

(103.5

)

54.9

Provision for income taxes

—

5.7

3.7

—

9.4

Net earnings

42.9

68.8

37.3

(103.5

)

45.5

Net earnings attributable to noncontrolling interests

—

(2.6

)

—

(2.6

)

Net earnings attributable to Collective Brands, Inc.

42.9

68.8

34.7

(103.5

)

42.9

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

(dollars in millions)

13 Weeks Ended July 28, 2012

Parent
Company

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

Comprehensive income:

Net earnings

9.7

22.7

25.8

(46.7

)

11.5

Other comprehensive income:

Translation adjustments

—

(3.3

)

—

(3.3

)

Change in fair value of derivatives

—

0.3

—

0.3

Income tax impact of change in fair value of derivatives

—

(0.1

)

—

(0.1

)

Change in unrecognized pension benefits

—

1.5

—

1.5

Equity in other comprehensive income of subsidiaries

(1.5

)

(3.2

)

—

4.7

—

Other comprehensive loss, net

(1.5

)

(1.5

)

(3.3

)

4.7

(1.6

)

Comprehensive income

8.2

21.2

22.5

(42.0

)

9.9

Comprehensive loss attributable to noncontrolling interests

—

(1.7

)

—

(1.7

)

Comprehensive income attributable to Collective Brands, Inc.

8.2

21.2

20.8

(42.0

)

8.2

26 Weeks Ended July 28, 2012

Parent
Company

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

Comprehensive income:

Net earnings

42.9

68.8

37.3

(103.5

)

45.5

Other comprehensive income:

Translation adjustments

—

0.8

—

0.8

Change in fair value of derivatives

—

0.9

—

0.9

Change in unrecognized pension benefits

—

3.2

—

3.2

Equity in other comprehensive income of subsidiaries

4.4

0.3

—

(4.7

)

—

Other comprehensive income, net

4.4

0.8

(4.7

)

4.9

Comprehensive income

47.3

73.2

38.1

(108.2

)

50.4

Comprehensive loss attributable to noncontrolling interests

—

(3.1

)

—

(3.1

)

Comprehensive income attributable to Collective Brands, Inc.

47.3

73.2

35.0

(108.2

)

47.3

CONDENSED CONSOLIDATING STATEMENT OF (LOSS) EARNINGS

(dollars in millions)


	13 Weeks Ended July 30, 2011
	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	720.6		$	375.3		$	(213.5	)	$	882.4
Cost of sales		—			565.3			324.4			(215.8	)		673.9

Gross margin		—			155.3			50.9			2.3			208.5
Selling, general and administrative expenses		1.0			235.5			22.1			2.3			260.9
Impairment of goodwill		—			10.0			—			—			10.0

Operating (loss) profit		(1.0	)		(90.2	)		28.8			—			(62.4	)
Interest expense		12.8			6.1			0.2			(9.1	)		10.0
Interest income		—			(9.1	)		(0.1	)		9.1			(0.1	)
Equity in earnings of subsidiaries		23.6			(17.7	)		—			(5.9	)		—

(Loss) earnings before income taxes		(37.4	)		(69.5	)		28.7			5.9			(72.3	)
(Benefit) provision for income taxes		(2.4	)		(45.9	)		9.3			—			(39.0	)

Net (loss) earnings		(35.0	)		(23.6	)		19.4			5.9			(33.3	)
Net earnings attributable to noncontrolling interests		—			—			(1.7	)		—			(1.7	)

Net (loss) earnings attributable to Collective Brands, Inc.	$	(35.0	)	$	(23.6	)	$	17.7		$	5.9		$	(35.0	)


	26 Weeks Ended July 30, 2011
	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	1,493.2		$	763.9		$	(505.7	)	$	1,751.4
Cost of sales		—			1,088.0			627.2			(482.2	)		1,233.0

Gross margin		—			405.2			136.7			(23.5	)		518.4
Selling, general and administrative expenses		2.0			462.8			87.1			(23.5	)		528.4
Impairment of goodwill		—			10.0			—			—			10.0

Operating (loss) profit		(2.0	)		(67.6	)		49.6			—			(20.0	)
Interest expense		25.6			13.2			0.2			(18.1	)		20.9
Interest income		—			(18.2	)		(0.1	)		18.1			(0.2	)
Equity in earnings of subsidiaries		(11.7	)		(33.8	)		—			45.5			—

(Loss) earnings before income taxes		(15.9	)		(28.8	)		49.5			(45.5	)		(40.7	)
(Benefit) provision for income taxes		(7.3	)		(40.5	)		12.2			—			(35.6	)

Net (loss) earnings		(8.6	)		11.7			37.3			(45.5	)		(5.1	)
Net earnings attributable to noncontrolling interests		—			—			(3.5	)		—			(3.5	)

Net (loss) earnings attributable to Collective Brands, Inc.	$	(8.6	)	$	11.7		$	33.8		$	(45.5	)	$	(8.6	)

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME

(dollars in millions)


	13 Weeks Ended July 30, 2011
	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations		Consolidated
Comprehensive (loss) income:
Net (loss) earnings	$	(35.0	)	$	(23.6	)	$	19.4		$	5.9	$	(33.3	)
Other comprehensive income:
Translation adjustments		—			—			(1.4	)		—		(1.4	)
Change in fair value of derivatives		—			2.6			—			—		2.6
Income tax impact of change in fair value of derivatives		—			(1.1	)		—			—		(1.1	)
Change in unrecognized pension benefits		—			1.7			—			—		1.7
Income tax impact of change in unrecognized pension benefits		—			(0.6	)		—			—		(0.6	)
Equity in other comprehensive income of subsidiaries		0.9			(1.7	)		—			0.8		—

Other Comprehensive income (loss), net		0.9			0.9			(1.4	)		0.8		1.2

Comprehensive (loss) income		(34.1	)		(22.7	)		18.0			6.7		(32.1	)
Comprehensive loss attributable to noncontrolling interests		—			—			(2.0	)		—		(2.0	)

Comprehensive (loss) income attributable to Collective Brands, Inc.	$	(34.1	)	$	(22.7	)	$	16.0		$	6.7	$	(34.1	)


	26 Weeks Ended July 30, 2011
	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Comprehensive (loss) income:
Net (loss) earnings	$	(8.6	)	$	11.7		$	37.3		$	(45.5	)	$	(5.1	)
Other comprehensive income:
Translation adjustments		—			—			6.6			—			6.6
Change in fair value of derivatives		—			4.4			—			—			4.4
Income tax impact of change in fair value of derivatives		—			(1.7	)		—			—			(1.7	)
Change in unrecognized pension benefits		—			2.8			—			—			2.8
Income tax impact of change in unrecognized pension benefits		—			(0.9	)		—			—			(0.9	)
Equity in other comprehensive income of subsidiaries		10.6			6.0			—			(16.6	)		—

Other Comprehensive income (loss), net		10.6			10.6			6.6			(16.6	)		11.2

Comprehensive (loss) income		2.0			22.3			43.9			(62.1	)		6.1
Comprehensive loss attributable to noncontrolling interests		—			—			(4.1	)		—			(4.1	)

Comprehensive (loss) income attributable to Collective Brands, Inc.	$	2.0		$	22.3		$	39.8		$	(62.1	)	$	2.0

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in millions)

As of July 28, 2012

Parent
Company

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

ASSETS

Current Assets:

Cash and cash equivalents

—

38.8

151.5

—

190.3

Accounts receivable, net

—

170.5

39.3

(20.8

)

189.0

Inventories

—

498.9

137.7

(12.2

)

624.4

Current deferred income taxes

—

6.7

—

6.7

Prepaid expenses

35.6

21.4

11.7

—

68.7

Other current assets

—

354.5

123.3

(456.3

)

21.5

Total current assets

35.6

1,084.1

470.2

(489.3

)

1,100.6

Property and equipment, net

—

283.7

64.6

—

348.3

Intangible assets, net

—

354.8

24.4

—

379.2

Goodwill

—

133.5

136.3

—

269.8

Deferred income taxes

—

12.8

—

12.8

Other assets

1,477.0

958.9

25.7

(2,433.4

)

28.2

Total Assets

1,512.6

2,815.0

734.0

(2,922.7

)

2,138.9

LIABILITIES AND EQUITY

Current Liabilities:

Current maturities of long-term debt

—

5.1

—

5.1

Other current liabilities

217.0

533.3

221.1

(489.3

)

482.1

Total current liabilities

217.0

538.4

221.1

(489.3

)

487.2

Long-term debt

587.6

501.6

7.8

(494.7

)

602.3

Deferred income taxes

—

119.8

0.9

—

120.7

Other liabilities

4.4

178.5

15.2

—

198.1

Commitments and contingencies

Equity:

Collective Brands, Inc. shareowners’ equity

703.6

1,476.7

462.0

(1,938.7

)

703.6

Noncontrolling interests

—

27.0

—

27.0

Total equity

703.6

1,476.7

489.0

(1,938.7

)

730.6

Total Liabilities and Equity

1,512.6

2,815.0

734.0

(2,922.7

)

2,138.9

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in millions)


	As of July 30, 2011
	Parent Company		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	70.3	$	164.5	$	—		$	234.8
Accounts receivable, net		—		159.3		31.6		(19.1	)		171.8
Inventories		—		457.7		132.1		(4.8	)		585.0
Current deferred income taxes		—		22.1		14.4		—			36.5
Prepaid expenses		35.6		14.4		9.8		—			59.8
Other current assets		—		355.2		147.7		(482.6	)		20.3

Total current assets		35.6		1,079.0		500.1		(506.5	)		1,108.2

Property and equipment, net		—		312.9		70.5		—			383.4
Intangible assets, net		—		363.4		27.3		—			390.7
Goodwill		—		133.5		136.3		—			269.8
Deferred income taxes		—		—		6.8		—			6.8
Other assets		1,558.7		971.1		21.2		(2,511.6	)		39.4

Total Assets	$	1,594.3	$	2,859.9	$	762.2	$	(3,018.1	)	$	2,198.3

LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt	$	—	$	5.1	$	—	$	—		$	5.1
Other current liabilities		137.5		591.5		241.9		(506.5	)		464.4

Total current liabilities		137.5		596.6		241.9		(506.5	)		469.5

Long-term debt		637.1		501.7		36.4		(518.2	)		657.0
Deferred income taxes		—		37.0		3.6		—			40.6
Other liabilities		3.2		166.9		16.0		—			186.1
Commitments and contingencies
Equity:
Collective Brands, Inc. shareowners’ equity		816.5		1,557.7		435.7		(1,993.4	)		816.5
Noncontrolling interests		—		—		28.6		—			28.6

Total equity		816.5		1,557.7		464.3		(1,993.4	)		845.1

Total Liabilities and Equity	$	1,594.3	$	2,859.9	$	762.2	$	(3,018.1	)	$	2,198.3

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in millions)


	As of January 28, 2012
	Parent Company		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	46.3	$	135.0	$	—		$	181.3
Accounts receivable, net		—		127.9		36.7		(18.6	)		146.0
Inventories		—		434.0		124.1		5.3			563.4
Current deferred income taxes		—		—		7.2		—			7.2
Prepaid expenses		35.6		16.3		9.6		—			61.5
Other current assets		—		356.0		160.3		(494.5	)		21.8

Total current assets		35.6		980.5		472.9		(507.8	)		981.2

Property and equipment, net		—		302.3		67.1		—			369.4
Intangible assets, net		—		358.7		26.0		—			384.7
Goodwill		—		133.5		136.3		—			269.8
Deferred income taxes		—		—		10.7		—			10.7
Other assets		1,409.9		979.5		25.7		(2,383.7	)		31.4

Total Assets	$	1,445.5	$	2,754.5	$	738.7	$	(2,891.5	)	$	2,047.2

LIABILITIES AND EQUITY
Current Liabilities:
Current maturities of long-term debt	$	—	$	5.1	$	—	$	—		$	5.1
Other current liabilities		209.7		532.2		205.3		(508.6	)		438.6

Total current liabilities		209.7		537.3		205.3		(508.6	)		443.7

Long-term debt		587.5		504.2		7.9		(494.8	)		604.8
Deferred income taxes		—		121.3		1.1		—			122.4
Other liabilities		3.5		183.2		16.1		—			202.8
Commitments and contingencies
Equity:
Collective Brands, Inc. shareowners’ equity		644.8		1,408.5		479.6		(1,888.1	)		644.8
Noncontrolling interests		—		—		28.7		—			28.7

Total equity		644.8		1,408.5		508.3		(1,888.1	)		673.5

Total Liabilities and Equity	$	1,445.5	$	2,754.5	$	738.7	$	(2,891.5	)	$	2,047.2

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(dollars in millions)

26 Weeks Ended July 28, 2012

Parent
Company

Guarantor
Subsidiaries

Non-guarantor
Subsidiaries

Eliminations

Consolidated

Operating Activities:

Net earnings

42.9

68.8

37.3

(103.5

)

45.5

Adjustments for non-cash items included in net earnings

0.1

54.6

11.0

—

65.7

Changes in working capital

7.3

(107.3

)

31.9

0.8

(67.3

)

Other, net

(57.9

)

10.4

(54.5

)

102.7

0.7

Cash flow (used in) provided by operating activities

(7.6

)

26.5

25.7

—

44.6

Investing Activities:

Capital expenditures

—

(31.4

)

(9.3

)

—

(40.7

)

Cash flow used in investing activities

—

(31.4

)

(9.3

)

—

(40.7

)

Financing Activities:

Net (repayments) proceeds of debt or notes payable

—

(2.6

)

—

(2.6

)

Net issuances of common stock

7.6

—

7.6

Net distributions to noncontrolling interests

—

(4.8

)

—

(4.8

)

Cash flow provided by (used in) financing activities

7.6

(2.6

)

(4.8

)

—

0.2

Effect of exchange rate changes on cash

—

4.9

—

4.9

(Decrease) increase in cash and cash equivalents

—

(7.5

)

16.5

—

9.0

Cash and cash equivalents, beginning of year

—

46.3

135.0

—

181.3

Cash and cash equivalents, end of quarter

—

38.8

151.5

—

190.3


	26 Weeks Ended July 30, 2011
	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Operating Activities:
Net (loss) earnings	$	(8.6	)	$	11.7		$	37.3		$	(45.5	)	$	(5.1	)
Adjustments for non-cash items included in net earnings		0.2			110.1			13.2			—			123.5
Changes in working capital		26.5			(97.1	)		(41.0	)		(6.7	)		(118.3	)
Other, net		(1.7	)		(41.3	)		(32.1	)		52.2			(22.9	)

Cash flow provided by (used in) operating activities		16.4			(16.6	)		(22.6	)		—			(22.8	)

Investing Activities:
Capital expenditures		—			(32.9	)		(9.4	)		—			(42.3	)

Cash flow used in investing activities		—			(32.9	)		(9.4	)		—			(42.3	)

Financing Activities:
Net repayments of debt or notes payable		—			(2.6	)		—			—			(2.6	)
Net purchases of common stock		(16.4	)		—			—			—			(16.4	)
Net distributions to noncontrolling interests		—			—			(7.0	)		—			(7.0	)

Cash flow used in financing activities		(16.4	)		(2.6	)		(7.0	)		—			(26.0	)
Effect of exchange rate changes on cash		—			—			1.8			—			1.8

Decrease in cash and cash equivalents		—			(52.1	)		(37.2	)		—			(89.3	)
Cash and cash equivalents, beginning of year		—			122.4			201.7			—			324.1

Cash and cash equivalents, end of quarter	$	—		$	70.3		$	164.5		$	—		$	234.8