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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________________________________
FORM 10-K
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended February 1, 2014January 30, 2016
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from             to             
Commission File No. 1-3083
_____________________________________________________ 
Genesco Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-0211340
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
Genesco Park, 1415 Murfreesboro Road
Nashville, Tennessee
 37217-2895
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (615) 367-7000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class 
Name of Exchange
on which Registered
Common Stock, $1.00 par value
Preferred Share Purchase Rights
 
New York
New York
Securities Registered Pursuant to Section 12(g) of the Act:
Employees’ Subordinated Convertible Preferred Stock
________________________________________________________ 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  x    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ¨    No  x
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  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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  x    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x¨
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.
 
Large accelerated filerx  Accelerated filer¨
    
Non-accelerated filer
¨    (Do not check if smaller reporting company)
  Smaller reporting company¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes  ¨    No  x
The aggregate market value of common stock held by nonaffiliates of the registrant as of August 3, 2013,1, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $1,738,000,0001,539,000,000. The market value calculation was determined using a per share price of $72.48,$64.69, the price at which the common stock was last sold on the New York Stock Exchange on such date. For purposes of this calculation, shares held by nonaffiliates excludes only those shares beneficially owned by officers, directors, and shareholders owning 10% or more of the outstanding common stock (and, in each case, their immediate family members and affiliates).
As of March 14, 2014,11, 2016, 23,923,21021,312,624 shares of the registrant’s common stock were outstanding.

Documents Incorporated by Reference
Portions of Genesco’s Annual Report to Shareholders for the fiscal year ended February 1, 2014 are incorporated into Part II by reference.
Portions of the proxy statement for the June 26, 201423, 2016 annual meeting of shareholders are incorporated into Part III by reference.



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PART I

ITEM 1, BUSINESS
General
Genesco Inc. ("Genesco" or the “Company”) is a leading retailer and wholesaler of branded footwear, apparel and accessories with net sales for Fiscal 20142016 of $2.62$3.02 billion. During Fiscal 2014,2016, the Company operated five reportable business segments (not including corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz, Shi by Journeys, Little Burgundy, acquired in the fourth quarter of Fiscal 2016, and Underground by Journeys retail footwear chains, cataloge-commerce operations and e-commerce operations;catalog; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Lids Sports Group, comprised of (a) headwear and accessory stores under the Lids® name and other names in the U.S., Puerto Rico and Canada, (b) the Lids Locker Room and Lids Clubhouse businesses, consisting of sports-oriented fan shops featuring a broad array of licensed merchandise such as apparel, hats and accessories, sports decor and novelty products, operating under various trade names, (c) licensed team merchandise departments in Macy's department stores operated under the name Locker Room by Lids and on macys.com under a license agreement with Macy's, (d) e-commerce operations and (e) an athletic team dealer business operating as Lids Team Sports;Sports, which was sold in the fourth quarter of Fiscal 2016; (iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, cataloge-commerce operations and e-commerce operationscatalog and wholesale distribution of products under the Johnston & Murphy and Trask brands; and (v) Licensed Brands, comprised of Dockers® footwear, sourced and marketed under a license from Levi Strauss & Company; SureGrip®Footwear, occupational footwear primarily sold directly to consumers; and other brands.
At February 1, 2014,January 30, 2016, the Company operated 2,5682,852 retail footwear, headwear and sports apparel and accessory stores and leased departments located primarily throughout the United States and in Puerto Rico, but also including 110151 headwear and sports apparel and accessory stores and 3882 footwear stores in Canada and 99125 footwear stores in the United Kingdom, and the Republic of Ireland.Ireland and Germany. It currently plans to open a total of approximately 344130 new retail stores including 175 leased departments, and to close 47approximately 56 retail stores in Fiscal 2015.2017. At February 1, 2014,January 30, 2016, Journeys Group operated 1,1681,222 stores, including 174 Journeys Kidz, 50 Shi by Journeys and 117 Underground by Journeys; Schuh Group operated 99 stores;125 stores, Lids Sports Group operated 1,1331,332 stores including 930 Lids stores, 177 Lids Locker Room and Clubhouse stores and 26 Locker Room by Lids leased departments, and Johnston & Murphy Group operated 168173 retail shops and factory stores.
The following table sets forth certain additional information concerning the Company’s retail footwear, headwear and sports apparel and accessory stores and leased departments during the five most recent fiscal years:
 
Fiscal
2010
 
Fiscal
2011
 
Fiscal
2012
 
Fiscal
2013
 
Fiscal
2014
Fiscal
2012
 
Fiscal
2013
 
Fiscal
2014
 
Fiscal
2015
 
Fiscal
2016
Retail Stores         
Retail Stores and Leased Departments         
Beginning of year2,234
 2,276
 2,309
 2,387
 2,459
2,309
 2,387
 2,459
 2,568
 2,824
Opened during year61
 53
 70
 104
 183
70
 104
 183
 273
 81
Acquired during year38
 58
 85
 33
 15
85
 33
 15
 56
 37
Closed during year(57) (78) (77) (65) (89)(77) (65) (89) (73) (90)
End of year2,276
 2,309
 2,387
 2,459
 2,568
2,387
 2,459
 2,568
 2,824
 2,852

The Company also designs, sources, markets and distributes footwear under its own Johnston & Murphy brand, the recently relaunched Trask brand, the licensed Dockers® brand and other brands that the Company licenses for men's footwear to over 1,0001,275 retail accounts in the United States, including a number of leading department, discount, and specialty stores.
Shorthand references to fiscal years (e.g., “Fiscal 2014”2016”) refer to the fiscal year ended on the Saturday nearest January 31st in the named year (e.g., February 1, 2014)January 30, 2016). The terms "Company," "Genesco," "we," "our" or "us" as used herein and unless otherwise stated or indicated by context refer to Genesco Inc. and its subsidiaries. All information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is referred to in Item 1 of this report, is incorporated by such reference in Item 1. This report contains forward-looking statements. Actual results may vary materially and adversely from the expectations reflected in these statements. For a discussion of some of the factors that may lead to different results, see Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Available Information
The Company files reports with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and other reports from time to time. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F. Street, NE, Washington, DC 20549. The public may obtain

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information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an electronic filer and the SEC maintains an Internetinternet site at http://www.sec.gov that contains the reports, proxy and information statements, and other information filed electronically. The Company’s website address is http://www.genesco.com. The Company’s website address is provided as an inactive textual reference only. The Company makes available free of charge through the website annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Copies of the charters of each of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, as well as the Company’s Corporate Governance Guidelines and Code of Ethics along with position descriptions for the BoardCompany's board of Directorsdirectors (the "Board of Directors" or the "Board") and Board committees are also available free of charge through the website. The information provided on the Company’s website is not part of this report, and is therefore not incorporated by reference unless such information is otherwise specifically incorporated elsewhere in this report.
Segments
Journeys Group
The Journeys Group segment, including Journeys, Journeys Kidz, Shi by Journeys, Little Burgundy and Underground by Journeys retail stores, catalog and e-commerce operations, accounted for approximately 41% of the Company’s net sales in Fiscal 2014.2016. For Fiscal 2014,2016, same store sales decreased 2%increased 5%, comparable direct sales increased 18% and comparable sales, including both store and direct sales, decreased 1%increased 5% from the prior fiscal year. Operating incomeEarnings from operations attributable to Journeys Group was $97.4$126.2 million in Fiscal 2014,2016, with an operating margin of 9.0%10.1%. The Company believes that the Journeys Group’s distinctive store formats, its mix of well-known brands and new product introductions, and its experienced management team provide significant competitive advantages for the Journeys Group.
At February 1, 2014,January 30, 2016, Journeys Group operated 1,1681,222 stores, including 174200 Journeys Kidz stores, 5046 Shi by Journeys stores, 36 Little Burgundy stores and 11798 Underground by Journeys stores averaging approximately 1,8751,925 square feet, throughout the United States and in Puerto Rico and Canada, selling footwear and accessories for young men, women and children.

Journeys retail footwear stores target customers in the 13 to 22 year age group through the use of youth-oriented decor and multi-channel media. Journeys stores carry predominately branded merchandise across a wide range of prices. The Journeys Kidz retail footwear stores sell footwear and accessories primarily for younger children ages five to 12. Shi by Journeys retail footwear stores sell footwear and accessories to a target customer group consisting of fashion-conscious women in their early 20’s to mid 30’s. Little Burgundy retail footwear stores sell footwear and accessories to fashion-oriented men and women in the 18 to 34 age group ranging from students to young professionals. Underground by Journeys retail footwear stores sell footwear and accessories primarily for men and women in the 20 to 35 age group. In Fiscal 2014,2016, the Journeys Group added eleven40 net new stores, which includes 36 Little Burgundy stores acquired in Fiscal 2016, and plans to open approximately 1763 net new stores in Fiscal 2015.2017.

Lids Sports Group
The Lids Sports Group segment, as described above, accounted for approximately 31%32% of the Company’s net sales in Fiscal 2014. Same2016. For Fiscal 2016, same store sales for Lids Sports Group decreased 1% for Fiscal 2014, whileincreased 3%, comparable direct sales increased 26% from the prior fiscal year. Comparable46% and comparable sales, including both store and direct sales, were flat for Fiscal 2014. Operating incomeincreased 6% from the prior fiscal year. Earnings from operations attributable to Lids Sports Group was $63.7$17.0 million in Fiscal 2014,2016, with an operating margin of 7.8%1.7%.
At February 1, 2014,January 30, 2016, Lids Sports Group operated 1,1331,332 stores, including 930919 Lids stores, 177228 Lids Locker Room and Clubhouse stores and 26185 Locker Room by Lids leased departments, averaging approximately 1,2001,175 square feet, throughout the United States and in Puerto Rico and Canada. Lids Sports Group added 80 net27 new stores and leased departments but closed 59 stores and leased departments in Fiscal 2014, including 15 acquired stores,2016, and plans to open or acquire approximately 260one net new storesstore in Fiscal 2015, which includes 175Locker Room by Lids leased departments in Macy's department stores.2017.
The core headwear stores and kiosks, located in malls, airports, street-level stores and factory outlet stores throughout the United States and in Puerto Rico and Canada, target customers in the early-teens to mid-20’s age group. In general, the stores offer headwear from an assortment of college, MLB, NBA, NFL and NHL teams, as well as other specialty fashion categories. The Lids Locker Room and Lids Clubhouse stores, operating under a number of trade names, located in malls and other locations primarily in the United States and Canada, target sports fans of all ages. These stores offer headwear, apparel, accessories and novelties representing an assortment of college and professional teams. The Locker Room by Lids leased departments in Macy's department stores offer headwear, apparel, accessories and novelties representing an assortment of college and professional teams specific to that particular Macy's department store geographic location.



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Schuh Group
The Schuh Group segment, including e-commerce operations, accounted for approximately 14% of the Company’s net sales in Fiscal 2014.2016. For Fiscal 2014,2016, same store sales decreased 9%increased 1%, comparable direct sales decreased 4%increased 13% and comparable sales, including both store and direct sales, decreased 8%increased 3%. Operating incomeEarnings from operations attributable to Schuh Group was $3.1$19.1 million in Fiscal 2014,2016, with an operating margin of 0.8%4.7%. Operating incomeEarnings from operations for Schuh included $11.7$1.5 million in compensation expense related to a deferred purchase price obligation in connection with the Company's acquisition of Schuh during Fiscal 2012. For additional information, see Note 2 to the Consolidated Financial Statements included in Item 8.
At February 1, 2014,January 30, 2016, Schuh Group operated 95115 Schuh stores, averaging approximately 5,000 square feet, which include both street-level and mall locations in the United Kingdom, and the Republic of Ireland.Ireland and Germany. Schuh Group opened its first Schuh Kids store in Fiscal 2013. As of February 1, 2014,January 30, 2016, Schuh Group operated fourten Schuh Kids stores averaging 2,4252,675 square feet. Schuh Group opened seven17 net new stores in Fiscal 20142016 and plans to open approximately 127 net new Schuh and Schuh Kids stores in Fiscal 2015.2017. Schuh stores target men and women in the 15 to 30 age group, selling a broad range of branded casual and athletic footwear along with a meaningful private label offering.
Johnston & Murphy Group
The Johnston & Murphy Group segment, including retail stores, catalog and e-commerce operations and wholesale distribution, accounted for approximately 9% of the Company’s net sales in Fiscal 2014.2016. Same store sales for Johnston & Murphy retail operations increased 7%5%, comparable direct sales increased 15%11% and comparable sales, including both store and direct sales, increased 8%6% for Fiscal 2014. Operating income2016. Earnings from operations attributable to Johnston & Murphy Group was $17.6$17.8 million in Fiscal 2014,2016, with an operating margin of 7.2%6.4%. AllThe majority of the Johnston & Murphy wholesale sales are of the Genesco-owned Johnston & Murphy brand, and all of the group’s retail sales are of Johnston & Murphy branded products.
Johnston & Murphy Retail Operations. At February 1, 2014,January 30, 2016, Johnston & Murphy operated 168173 retail shops and factory stores throughout the United States and in Canada averaging approximately 1,8251,875 square feet and selling footwear, apparel and accessories primarily for men in the 35 to 55 age group, targeting business and professional customers. Women’s footwear and accessories are sold in select Johnston & Murphy locations. Johnston & Murphy retail shops are located primarily in better malls and airports nationwide and sell a broad range of men’s dress and casual footwear, apparel and accessories. The Company also sells Johnston & Murphy products directly to consumers through an e-commerce website and a direct mail catalog. Retail prices for Johnston & Murphy footwear generally range from $100 to $275. Total footwear accounted for 66%65% of total Johnston & Murphy retail sales in Fiscal 2014,2016, with the balance consisting primarily of apparel and accessories. Johnston & Murphy Group added eleventhree net new shops and factory stores including two in Canada, and plans to open approximately eightthree net new shops and factory stores in Fiscal 2015.2017.

Johnston & Murphy Wholesale Operations. Johnston & Murphy men’s and women's footwear and accessories are sold at wholesale, primarily to better department and independent specialty stores. Johnston & Murphy’s wholesale customers offer the brand’s footwear for dress, dress casual, and casual occasions, with the majority of styles offered in these channels selling from $100 to $165.$195. Additionally, the Company recently relaunchedoffers the Trask brand, with men's and women's footwear and leather accessories offered primarily through better independent retailers and department stores, an e-commerce website and catalog. Suggested retail prices for Trask footwear range from $195 to $495.
Licensed Brands
The Licensed Brands segment accounted for approximately 4% of the Company’s net sales in Fiscal 2014. Operating income2016. Earnings from operations attributable to Licensed Brands was $10.6$9.2 million in Fiscal 2014,2016, with an operating margin of 9.7%8.4%. Licensed Brands sales areinclude footwear marketed under the Dockers® brand, for which Genesco has had the exclusive men’s footwear license in the United States since 1991. See “Licenses”. Dockers footwear is marketed to men aged 30 to 55 through many of the same national retail chains that carry Dockers slacks and sportswear and in department and specialty stores across the country. Suggested retail prices for Dockers footwear generally range from $50 to $90. The Company acquired Keuka Footwear in the third quarter of Fiscal 2011 and subsequently launched its SureGrip Footwear line of slip-resistant, occupational footwear within the Licensed Brands segment from that base. The Company sources and distributes the SureGrip line to employees in the hospitality, healthcare, and other industries. The Company also sells footwear under other licenses and in March 2015 entered into a License Agreement to source and distribute certain men's and women's footwear under the G.H. Bass trademark and related marks.
For further information on the Company’s business segments, see Note 14 to the Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data" and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


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Manufacturing and Sourcing
The Company relies on independent third-party manufacturers for production of its footwear products sold at wholesale. The Company sources footwear and accessory products from foreign manufacturers located in Bangladesh, Brazil, Cambodia, Canada, China, Dominican Republic, El Salvador, France, Germany, Hong Kong, India, Indonesia, Italy, Korea, Mexico, Netherlands, Pakistan,Portugal, Peru, ThailandRomania, Taiwan and Vietnam. The Company’s retail operations source primarily branded products from third parties, who source primarily overseas.
Competition
Competition is intense in the footwear, headwear, sports apparel and accessory industries. The Company’s retail footwear, headwear, sports apparel and accessory competitors range from small, locally owned stores to regional and national department stores, discount stores, specialty chains and online retailers. The Company also competes with hundreds of footwear wholesale operations in the United States and throughout the world, most of which are relatively small, specialized operations, but some of which are large, more diversified companies. Some of the Company’s competitors have resources that are not available to the Company. The Company’s success depends upon its ability to remain competitive with respect to the key factors of style, price, quality, comfort, brand loyalty, customer service, store location and atmosphere and the ability to offer distinctive products.
Licenses
The Company owns its Johnston & Murphy®, H.S. Trask®, Keuka® and SureGrip® brands and owns or licenses the trade names of its retail concepts either directly or through wholly-owned subsidiaries. The Dockers® brand footwear line, introduced in Fiscal 1993, is sold under a license agreement granting the Company the exclusive right to sell men’s footwear under the trademark in the United States, Canada and Mexico and in certain other Latin American countries. The Dockers license agreement as amended, expireshas been renewed for a term expiring on November 30, 2015, subject to extension for an additional 3-year term if certain conditions are met.2018. Net sales of Dockers products were approximately $85$78 million in Fiscal 20142016 and approximately $84$82 million in Fiscal 2013.2015. The Company licenses certain of its footwear brands, mostly in foreign markets. License royalty income was not material in Fiscal 2014.2016.
Wholesale Backlog
Most of the orders in the Company’s wholesale divisions are for delivery within 150 days. Because most of the Company’s business is at-once, the backlog at any one time is not necessarily indicative of future sales. As of March 1, 2014,February 27, 2016, the Company’s wholesale operations had a backlog of orders, including unconfirmed customer purchase orders, amounting to approximately $57.4$32.8 million, compared to approximately $46.1$56.3 million on March 2, 2013.February 28, 2015. The backlog for Fiscal 2015 included Lids Team Sports, which the Company sold in the fourth quarter of Fiscal 2016. The backlog is somewhat seasonal, reaching a peak in the spring. The Company maintains in-stock programs for selected product lines with anticipated high volume sales.
Employees
Genesco had approximately 22,25027,500 employees at February 1, 2014,January 30, 2016, approximately 120130 of whom were employed in corporate staff departments and the balance in operations. Retail stores employ a substantial number of part-time employees, and approximately 13,05018,275 of the Company’s employees were part-time.
Properties
At February 1, 2014, the Company operated 2,568 retail footwear, headwear and sports apparel and accessory stores and leased departments throughout the United States and in Puerto Rico, Canada, the United Kingdom and the Republic of Ireland. New shopping center store leases in the United States, Puerto Rico and Canada typically are for a term of approximately 10 years. Store leases in the United Kingdom and the Republic of Ireland typically have terms of between 10 and 20 years. Both typically provide for rent based on a percentage of sales against a fixed minimum rent based on the square footage leased.part-time at January 30, 2016.

Seasonality
The Company's business is seasonal with the Company's investment in inventory and accounts receivable normally reaching peaks in the spring and fall of each year.year and a significant portion of the Company's net sales and operating earnings generated during the fourth quarter.
Properties
At January 30, 2016, the Company operated 2,852 retail footwear, headwear and sports apparel and accessory stores and leased departments throughout the United States and in Puerto Rico, Canada, the United Kingdom, the Republic of Ireland and Germany. New shopping center store leases in the United States, Puerto Rico and Canada typically are for a term of approximately 10 years. New store leases in the United Kingdom, the Republic of Ireland and Germany typically have terms of between 10 and 15 years. Both typically provide for rent based on a percentage of sales against a fixed minimum rent based on the square footage leased.

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The general location, use and approximate size of the Company’s principal properties are set forth below:
 
Location Owned/LeasedSegment Use 
Approximate Area
Square Feet
  
Lebanon, TN OwnedJourneys Group Distribution warehouse 320,000
   
Indianapolis, IN LeasedLids Sports Group Distribution warehouse and administrative offices 311,600
  
Nashville, TN LeasedVarious Executive & footwear operations offices 306,455
 
Indianapolis, IN LeasedLeased/SubleasedLids Sports Group Distribution warehouse and manufacturing 271,825
 **
Bathgate, Scotland OwnedSchuh Group Distribution warehouse 244,644
Indianapolis, INLeasedLids Sports GroupDistribution warehouse and administrative offices195,080
  
Chapel Hill, TN OwnedLicensed Brands Distribution warehouse 182,000
   
Fayetteville, TN OwnedJohnston & Murphy Group Distribution warehouse 178,500
   
Zionsville, INOwnedLids Sports GroupAdministrative offices150,000
Deans Industrial Estate, Livingston, Scotland OwnedSchuh Group Distribution warehouse and administrative offices 106,813
Lake Katrine, NYLeasedLids Sports GroupDistribution warehouse and administrative offices73,000
   
Nashville, TN OwnedJourneys Group Distribution warehouse 63,000
   
Houston Industrial Estate, Livingston, ScotlandLeasedSchuh GroupDistribution warehouse51,012
Mississauga, Ontario, Canada LeasedLids Sports Group Distribution warehousewarehouses 28,392
Anderson, INLeasedLids Sports GroupDistribution Warehouse18,463
Indianapolis, INLeasedLids Sports GroupAdministrative offices17,217
Tigard, ORLeasedLids Sports GroupAdministrative offices7,23143,611
  
*The Company occupies approximately 85% of the building and subleases the remainder of the building.
**The Company occupies approximately 25% of the building and subleases the remainder of the building.

The lease on the Company’s Nashville office expires in April 2017, with an option to renew for an additional five years. The lease on the Indianapolis office expires in May 2015. The Company believes that all leases of properties that are material to its operations may be renewed, or that alternative properties are available, on terms not materially less favorable to the Company than existing leases.
Environmental Matters
The Company’s former manufacturing operations and the sites of those operations as well as the sites of its current operations are subject to numerous federal, state, and local laws and regulations relating to human health and safety and the environment. These laws and regulations address and regulate, among other matters, wastewater discharge, air quality and the generation, handling, storage, treatment, disposal, and transportation of solid and hazardous wastes and releases of hazardous substances into the environment. In addition, third parties and governmental agencies in some cases have the power under such laws and regulations to require remediation of environmental conditions and, in the case of governmental agencies, to impose fines and penalties. Several of the facilities owned by the Company (currently or in the past) are located in industrial areas and have historically been used for extensive periods for industrial operations such as tanning, dyeing, and manufacturing. Some of these operations used materials and generated wastes that would be considered regulated substances under current

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environmental laws and regulations. The Company currently is involved in certain administrative and judicial environmental proceedings relating to the Company’s former facilities. See Item 3, Legal Proceedings"Legal Proceedings" and Note 13.13 to the Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data".


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ITEM 1A, RISK FACTORS
Our business is subject to significant risks. You should carefully consider the risks and uncertainties described below and the other information in this Form 10-K, including our consolidated financial statementsConsolidated Financial Statements and the notes to those statements. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we do not presently know about or that we currently consider immaterial may also affect our business operations and financial performance. If any of the events described below actually occur, our business, financial condition or results of operations could be adversely affected in a material way. This could cause the trading price of our stock to decline, perhaps significantly, and you may lose part or all of your investment.
Poor economic conditions and other factors can affect consumer spending and may significantly harm our business, affecting our financial condition, liquidity, and results of operations.
The success of our business depends to a significant extent upon the level of consumer spending. A number of factors may affect the level of consumer spending on merchandise that we offer, including, among other things:
general economic, industry and weather conditions;
energy costs, which affect gasoline and home heating prices;
the level of consumer debt;
pricing of products;
interest rates;
tax rates, refunds and policies;
war, terrorism and other hostilities; and
consumer confidence in future economic conditions.

Adverse economic conditions and any related decrease in consumer demand for discretionary items could have a material adverse effect on our business, results of operations and financial condition. The merchandise we sell generally consists of discretionary items. Reduced consumer confidence and spending may result in reduced demand for discretionary items and may force us to take inventory markdowns, decreasing sales and making expense leverage difficult to achieve. Demand can also be influenced by other factors beyond our control. For example, sales in the Lids Sports Group segment have historically been affected by developments in team sports, and could be adversely impacted by player strikes or other interruptions, as well as by the performance and reputation of certain teams.teams and players.
Moreover, while the Company believes that its operating cash flows and its borrowing capacity under committed lines of credit will be more than adequate for its anticipated cash requirements, if the economy were to experience a renewed downturn, or if one or more of the Company’s revolving credit banks were to fail to honor its commitments under the Company’s credit lines, the Company could be required to modify its operations for decreased cash flow or to seek alternative sources of liquidity, and such alternative sources might not be available to the Company.
Our business involves a degree of fashion risk.
The majority of our businesses serve a fashion-conscious customer base and depend upon the ability of our buyers and merchandisers to react to fashion trends, to purchase inventory that reflects such trends, and to manage our inventories appropriately in view of the potential for sudden changes in fashion, consumer taste, or in consumer taste.other drivers of demand, including the performance and popularity of individual sports teams and athletes. Failure to continue to execute any of these activities successfully could result in adverse consequences, including lower sales, product margins, operating income and cash flows.
Our business and results of operations are subject to a broad range of uncertainties arising out of world and domestic events.
Our business and results of operations are subject to uncertainties arising out of world and domestic events, which may impact not only consumer demand, but also our ability to obtain the products we sell, most of which are produced outside the countries in which we operate. These uncertainties may include a global economic slowdown, changes in consumer

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spending or travel, increase in gasoline and natural gas prices, and the economic consequences of natural disasters, military action or terrorist activities and increased regulatory and compliance burdens related to governmental actions in response to a variety of factors, including but not limited to national security and anti-terrorism concerns and concerns about climate

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change. Any future events arising as a result of terrorist activity or other world events may have a material impact on our business, including the demand for and our ability to source products, and consequently on our results of operations and financial condition.
The increasing scope of our non-U.S. operations exposes our performance to risks including foreign economic conditions and exchange rate fluctuations.
Our performance depends in part on general economic conditions affecting all countries in which we do business. We are dependent on foreign manufacturers for the products we sell, and our inventory is subject to cost and availability of foreign materials and labor. In addition to the other risks disclosed herein, demand for our product offering in our non-U.S. operations is also subject to local market conditions. As a result, there can be no assurance that Schuh's or our Canadian operations' future performance will not be adversely affected by economic conditions in itstheir markets.
As we expand our international operations, we also increase our exposure to exchange rate fluctuations. Sales from stores outside the U.S. are denominated in the currency of the country in which these operations or stores are located and changes in foreign exchange rates affect the translation of the sales and earnings of these businesses into U.S. dollars for financial reporting purposes. Additionally, inventory purchase agreements may also be denominated in the currency of the country where the vendor resides.
Our business is intensely competitive and increased or new competition could have a material adverse effect on us.
The retail footwear, headwear, sports apparel and accessory markets are intensely competitive. We currently compete against a diverse group of retailers, including other regional and national specialty stores, department and discount stores, small independents and e-commerce retailers, which sell products similar to and often identical to those we sell. Our branded businesses, selling footwear at wholesale, also face intense competition, both from other branded wholesale vendors and from private label initiatives of their retailer customers. A number of different competitive factors could have a material adverse effect on our business, results of operations and financial condition, including:
increased operational efficiencies of competitors;
competitive pricing strategies;
expansion by existing competitors;
entry by new competitors into markets in which we currently operate; and
adoption by existing retail competitors of innovative store formats or sales methods.
Use of social media may adversely impact our reputation or subject us to fines or other penalties.
There has been a substantial increase in the use of social media platforms and similar devices, including blogs, social media websites, and other forms of internet-based communications, which allow individuals access to a broad audience of consumers and other interested persons. As laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us, our associates or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our reputation or subject us to fines or other penalties.

Consumers value readily available information concerning retailers and their goods and services and often act on such information without further investigation and without regard to its accuracy. Information concerning us may be posted on social media platforms and similar devices at any time and may be adverse to our reputation or business. The harm may be immediate without affording us an opportunity for redress or correction. Damage to our reputation could result in declines in customer loyalty and sales, affect our vendor relationships, development opportunities and associate retention and otherwise adversely affect our business.

If we are unsuccessful in establishing and protecting our intellectual property, the value of our brands could be adversely affected.
Our ability to remain competitive is dependent upon our continued ability to secure and protect trademarks, patents and other intellectual property rights in the U.S. and internationally for all of our lines of business. We rely on a combination of trade secret, patent, trademark, copyright and other laws, license agreements and other contractual provisions and technical measures to protect our intellectual property rights; however, some countries’ laws do not protect intellectual property rights to the same extent U.S. laws do.

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Our business could be significantly harmed if we are not able to protect our intellectual property, or if a court found us to be infringing on other persons’ intellectual property rights. Any future intellectual property lawsuits or threatened lawsuits in which we are involved, either as a plaintiff or as a defendant, could cost us a significant amount of time and money and distract management’s attention from operating our business. If we do not prevail on any intellectual property claims, then we may have to change our manufacturing processes, products or trade names, any of which could reduce our profitability.

We are dependent on third-party vendors for the merchandise we sell.
We do not manufacture the merchandise we sell. This means that our product supply is subject to the ability and willingness of third-party suppliers to deliver merchandise we order on time and in the quantities and of the quality we need. In addition, a material portion of our retail footwear sales consists of products marketed under brands, belonging to unaffiliated vendors, which have fashion significance to our customers. Our core retail hat and sports apparel businesses are dependent upon products bearing sports and other logos, each generally controlled by a single licensee/vendor. If those vendors were to decide not to sell to us or to limit the availability of their products to us, or if they become unable because of economic conditions, work stoppages, strikes, political unrest, raw materials supply disruptions, or any other reason to supply us with products, we could be unable to offer our customers the products they wish to buy and could lose their business to competitors. Additionally, manufacturers are required to remain in compliance with certain wage, labor and environment-related laws and regulations. Delayed compliance or complete failure to comply with such laws and regulations by our vendors could adversely affect our ability to obtain products generally or at favorable costs, affecting our overall ability to maintain and manage inventory levels.
An increase in the cost or a disruption in the flow of our imported products may significantly decrease our sales and profits.
Merchandise originally manufactured and imported from overseas makes up a large proportion of our total inventory. A disruption in the shipping of our imported merchandise or an increase in the cost of those products may significantly decrease our sales and profits. We may be unable to meet our customers’ demands or pass on price increases to our customers. In addition, if imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet demand. Products from alternative sources may also be of lesser quality or more expensive than those we currently import. Risks associated with our reliance on imported products include:


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disruptions in the shipping and importation of imported products because of factors such as:
raw material shortages, work stoppages, strikes and political unrest;
problems with oceanic shipping, including shipping container shortages;shortages and delays in ports;
increased customs inspections of import shipments or other factors that could result in penalties causing delays in shipments;
economic crises, natural disasters, international disputes and wars; and
increases in the cost of purchasing or shipping foreign merchandise resulting from:
imposition of additional cargo or safeguard measures;
denial by the United States of “most favored nation” trading status to or the imposition of quotas or other restriction on imports from a foreign country from which we purchase goods;
import duties, import quotas and other trade sanctions; and
increases in shipping rates.

A significant amount of the inventory we sell is imported from the People’s Republic of China, which has historically been subject to efforts to increase duty rates or to impose restrictions on imports of certain products.
A small portion of the products we buy abroad areis priced in foreign currencies and, therefore, we are affected by fluctuating currency exchange rates. In the past, we have entered into foreign currency exchange contracts with major financial institutions to hedge these fluctuations. We might not be able to effectively protect ourselves in the future against currency rate fluctuations, and our financial performance could suffer as a result. Even dollar-denominated foreign purchases may be affected by currency fluctuations, as suppliers seek to reflect appreciation in the local currency against the dollar in the price of the products that they provide. You should read Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information about our foreign currency exchange rate exposure and hedging activities.


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Increased operating costs could have an adverse effect on our results.
Increased operating costs, including those resulting from potential increases in the minimum wage or wage increases reflecting competition in relevant labor markets, store occupancy costs, and other expense items, including healthcare costs, may reduce our operating margin and, by making it more difficult to identify new store locations that we believe will meet our investment return requirements, slow our growth. In addition, other employment and healthcare law changes may increase the cost of provided retirement, pension and healthcare benefits expenses. Increases in the Company’s overall employment costs could have a material adverse effect on the Company’s business, results of operations and financial and competitive position.
The operation of the Company’s business is heavily dependent on its information systems.
We depend on a variety of information technology systems for the efficient functioning of our business and security of information. Much information essential to our business is maintained electronically, including competitively sensitive information and potentially sensitive personal information about customers and employees. Our insurance policies may not provide coverage for security breaches and similar incidents or may have coverage limits which may not be adequate to reimburse us for losses caused by security breaches. We also rely on certain hardware and software vendors to maintain and periodically upgrade many of these systems so that they can continue to support our business. The software programs supporting many of our systems were licensed to the Company by independent software developers. The inability of these developers or the Company to continue to maintain and upgrade these information systems and software programs could disrupt or reduce the efficiency of our operations. In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations or leave the Company vulnerable to security breaches.
We also rely heavily on our information technology staff. If we cannot meet our staffing needs in this area, we may not be able to fulfill our technology initiatives or to provide maintenance on existing systems.
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to fraud or theft, subject us to potential liability and potentially disrupt our business.
As a retailer who accepts payments using a variety of methods, including credit and debit cards, PayPal, and gift cards, the Company is subject to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. The regulatory environment related to information security and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs or accelerate these costs, For certain payment methods, including credit and debit cards, we pay interchange and other fees, which could increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could disrupt our business.
The payment methods that we offer also subject us to potential fraud and theft by persons who seek to obtain unauthorized access to or exploit any weaknesses that may exist in the payment systems. The payment card industry established October 1, 2015 as the date on which it shifted liability for certain transactions to retailers who are not able to accept EMV card transactions. The Company did not implement the EMV technology and receive certification prior to October 1, 2015, and accordingly may be liable for costs incurred by payment card issuing banks and other third parties as a result of fraudulent use of credit card information improperly obtained from information captured by us until such time as the technology has been implemented and certified. The Company expects to complete the implementation and receive certification in its third quarter of Fiscal 2018.
A privacy breach could have a material adverse effect on the Company's business and reputation.
We rely heavily on digital technologies for the successful operation of our business, including electronic messaging, digital marketing efforts and the collection and retention of customer data and employee information. We also rely on third parties to process credit card transactions, perform online e-commerce and social media activities and retain data relating to the Company’s financial position and results of operations, strategic initiatives and other important information. Despite the security measures we have in place, our facilities and systems and those of our third-party service providers may be vulnerable to cyber-security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. Any misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information, whether by us or by our third-party service providers, could adversely affect our business

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and operations, including loss of sales generated through our websites, severely damaging our reputation and our relationships with our customers, suppliers, employees and investors and expose us to risks of litigation and liability.

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In addition, we may incur significant remediation costs in the event of a cyber-security breach or incident, including liability for stolen customer or employee information, repairing system damage or providing credit monitoring or other benefits to affected customers or employees. We may also incur increased costs to comply with various applicable laws or industry standards regarding use and/or unauthorized disclosure of personal information. These and other cyber-security-related compliance, prevention and remediation costs may adversely impact our financial condition and results of operations.
The loss of, or disruption in, one of our distribution centers and other factors affecting the distribution of merchandise, could have a material adverse effect on our business and operations.
Each of our operations uses a single distribution center to handle all or a significant amount of its merchandise. Most of our operations’ inventory is shipped directly from suppliers to theirour operations' distribution centers, where the inventory is then processed, sorted and shipped to our stores or to our wholesale customers. We depend on the orderly operation of this receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective management of the distribution centers. Although we believe that our receiving and distribution process is efficient and well positioned to support our current business and our expansion plans, we cannot offer assurance that we have anticipated all of the changing demands whichthat our expanding operations will impose on our receiving and distribution system, or that events beyond our control, such as disruptions in operations due to fire or other catastrophic events, labor disagreements or shipping problems (whether in our own or in our third party vendors’ or carriers’ businesses), will not result in delays in the delivery of merchandise to our stores or to our wholesale customers.customers or retail customers (e-commerce). In addition, we add capacity to distribution centers by either leasing or building new distribution centers or adding capacity at existing centers. Failure to execute on these initiatives may cause disruption in our business. We also make changes in our distribution processes from time to time in an effort to improve efficiency and maximize capacity, etc.capacity. We cannot assure that these changes will not result in unanticipated delays or interruptions in distribution. We depend upon UPS for shipment of a significant amount of merchandise. An interruption in service by UPS for any reason could cause temporary disruptions in our business, a loss of sales and profits, and other material adverse effects.
Our freight cost is impacted by changes in fuel prices through surcharges. Fuel prices and surcharges affect freight cost both on inbound freight from vendors to our distribution centers and outbound freight from our distribution centers to our stores and wholesale customers. Increases in fuel prices and surcharges and other factors may increase freight costs and thereby increase our cost of goods sold.
Any acquisitions we make or new businesses we launch, as well as any dispositions of assets or businesses, involve a degree of risk.
Acquisitions have been a component of the Company’s growth strategy in recent years and we expect that we may continue to engage in acquisitions or launch new businesses to grow our revenues and meet our other strategic objectives. If any future acquisitions are not successfully integrated with our business, our ongoing operations could be adversely affected. Additionally, acquisitions or new businesses may not achieve desired profitability objectives or result in any anticipated successful expansion of the businesses or concepts.concepts, causing lower than expected earnings and cash flow and potentially requiring impairment of goodwill and other intangibles. Although we review and analyze assets or companies we acquire, such reviews are subject to uncertainties and may not reveal all potential risks. Additionally, although we attempt to obtain protective contractual provisions, such as representations, warranties and indemnities, in connection with acquisitions, we cannot offer assurance that we can obtain such provisions in our acquisitions or that they will fully protect us from unforeseen costs of, or liabilities associated with, the acquisitions. We may also incur significant costs and diversion of management time and attention in connection with pursuing possible acquisitions even if the acquisition is not ultimately consummated.

Additionally, we may decide to divest assets or businesses that are no longer material to our core business. Following such divestitures, we may incur liabilities relating to our previous ownership of the assets or business that we sell. Any required payments on retained liabilities or indemnification obligations with respect to past or future asset or business divestitures could have a material adverse effect on our business or results of operations.

Further, acquisitions and dispositions are often structured such that the purchase price paid or received by us, as applicable, is subject to post-closing adjustments, whether as a result of net working capital adjustments, contingent payments (i.e., earn-outs) or otherwise. Any such adjustments could result in a material change in the consideration paid to or received by us, as applicable, in such transactions.




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We face a number of risks in opening new stores.
As part of our long-term growth strategy, we expect to open new stores, both in regional malls, where most of the operational experience of our U.S. businesses lies, and in other venues including outlet centers, major city street locations, airports and tourist destinations. We cannot offer assurances that we will be able to open as many stores as we have planned, that any new store will achieve similar operating results to those of our existing stores or that new stores opened in markets in which we operate will not have a material adverse effect on the revenues and profitability of our existing stores. The success of our planned expansion will be dependent upon numerous factors, many of which are beyond our control, including the following:
our ability to identify suitable markets and individual store sites within those markets;
the competition for suitable store sites;
our ability to negotiate favorable lease terms for new stores and renewals (including rent and other costs) with landlords;

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our ability to obtain governmental and other third-party consents, permits and licenses needed to construct and operate our stores;
the ability to build and remodel stores on schedule and at acceptable cost;
the availability of employees to staff new stores and our ability to hire, train, motivate and retain store personnel;
the effect of changes to laws and regulations, including minimum wage, over-time, and employee benefits laws on store expenses;
the availability of adequate management and financial resources to manage an increased number of stores;
our ability to adapt our distribution and other operational and management systems to an expanded network of stores; and
our ability to attract customers and generate sales sufficient to operate new stores profitably.profitably; and
the effect of changes in consumer shopping patterns, including an accelerated shift to online shopping at the expense of in-store shopping, during the term of a lease.

Additionally, the results we expect to achieve during each fiscal quarter are dependent upon opening new stores on schedule. If we fall behind, we will lose expected sales and earnings between the planned opening date and the actual opening and may further complicate the logistics of opening stores, possibly resulting in additional delays.delays, seasonally inappropriate product assortments, and other undesirable conditions.

Our results of operations are subject to seasonal and quarterly fluctuations, which could have a material adverse effect on the market price of our stock.
Our business is seasonal, with a significant portion of our net sales and operating income generated during the fourth quarter, which includes the holiday shopping season. Because of this seasonality, we have limited ability to compensate for shortfalls in fourth quarter sales or earnings by changes in our operations or strategies in other quarters. A significant shortfall in results for the fourth quarter of any year could have a material adverse effect on our annual results of operations and on the market price of our stock. Our quarterly results of operations also may fluctuate significantly based on such factors as:
the timing of new store openings and renewals;
the amount of net sales contributed by new and existing stores;
the timing of certain holidays and sales events;
changes in our merchandise mix;
general economic, industry and weather conditions that affect consumer spending; and
actions of competitors, including promotional activity.

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Changes in our effective income tax rate could adversely affect our net earnings.
A number of factors influence our effective income tax rate, including changes in tax law, tax treaties, interpretation of existing laws, and our ability to sustain our reporting positions on examination. Changes in any of those factors could change our effective tax rate, which could adversely affect our net earnings. In addition, our operations outside of the United States may cause greater volatility in our effective tax rate.

A failure to increase sales at our existing stores and in our e-commerce businesses may adversely affect our stock price and impact our results of operations.
A number of factors have historically affected, and will continue to affect, our comparable sales results, including:
consumer trends, such as less disposable income due to the impact of economic conditions and tax policies;
the lack of new fashion trends to drive demand in certain of our businesses;
competition;
timing of holidays including sales tax holidays and the timing of tax refunds;
general regional and national economic conditions;
inclement weather;
changes in our merchandise mix;
our ability to distribute merchandise efficiently to our stores;
timing and type of sales events, promotional activities or other advertising;
other external events beyond our control;
our ability to adapt to changing customer preferences in the ways they digitally shop;
new merchandise introductions; and

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our ability to execute our business strategy effectively.

Our comparable sales have fluctuated in the past, and we believe such fluctuations may continue. The unpredictability of our comparable sales may cause our revenue and results of operations to vary from quarter to quarter, and an unanticipated change in revenues or operating income may cause our stock price to fluctuate significantly.

We are subject to regulatory proceedings and litigation and to regulatory changes that could have an adverse effect on our financial condition and results of operations.
We are party to certain lawsuits, governmental investigations, and regulatory proceedings, including the suits and proceedings arising out of alleged environmental contamination relating to historical operations of the Company and various suits involving current operations as disclosed in Item 3, "Legal Proceedings" and Note 13 to the Consolidated Financial Statements. If these or similar matters are resolved against us, our results of operations, our cash flows, or our financial condition could be adversely affected. The costs of defending such lawsuits and responding to such investigations and regulatory proceedings may be substantial and their potential to distract management from day-to-day business is significant. Moreover, with retail operations in 50 states, Puerto Rico, Canada, the United Kingdom, and the Republic of Ireland and Germany, we are subject to federal, state, provincial, territorial, local and foreign regulations, which impose costs and risks on our business. Numerous states and municipalities as well as the federal government of the U.S. are proposing or implementing changes to minimum wage, overtime, employee leave, and other requirements that will increase costs. Changes in regulations could make compliance more difficult and costly, and violations could result in liability for damages or penalties.



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If we lose key members of management or are unable to attract and retain the talent required for our business, our operating results could suffer.
Our performance depends largely on the efforts and abilities of members of our management team. Our executives have substantial experience and expertise in our business and have made significant contributions to our growth and success. The unexpected future loss of services of one or more key members of our management team could have an adverse effect on our business. In addition, future performance will depend upon our ability to attract, retain and motivate qualified employees, including store personnel and field management. If we are unable to do so, our ability to meet our operating goals may be compromised. Finally, our stores are decentralized, are managed through a network of geographically dispersed management personnel and historically experience a high degree of turnover. If we are for any reason unable to maintain appropriate controls on store operations due to turnover or other reasons, including the ability to control losses resulting from inventory and cash shrinkage, our sales and operating margins may be adversely affected. There can be no assurance that we will be able to attract and retain the personnel we need in the future.

Goodwill recorded with acquisitions is subject to impairment which could reduce the Company's profitability.

Deterioration in the Company’s market value, whether related to the Company’s operating performance or to disruptions in the equity markets or deterioration in the operating performance of the business unit with which goodwill is associated, could require the Company to recognize the impairment of some or all of the $288.1$281.4 million of goodwill on its Consolidated Balance Sheets at February 1, 2014,January 30, 2016, resulting in the reduction of net assets and a corresponding non-cash charge to earnings in the amount of the impairment.

In connection with acquisitions, the Company records goodwill on its Consolidated Financial Statements.Balance Sheets. This asset is not amortized but is subject to an impairment test at least annually, which consists of either a qualitative assessment on a reporting unit level, or a two-step impairment test if necessary, that is based on projected future cash flows from the acquired business discounted at a rate commensurate with the risk the Company considers to be inherent in its current business model. The Company performs the impairment test annually as of the close of its fiscal year, or more frequently if events or circumstances indicate that the value of the asset might be impaired.

As a resultPension funding and costs are dependent upon several economic assumptions which if changed may cause our future earnings and cash flow to fluctuate significantly.

The impact of the various acquisitions comprising the Lids Team Sports team dealer business, the Company carries goodwill at a value of $14.2 millionour pension plan on its Consolidated Balance Sheets related to such acquisitions. The Company foundour U.S. generally accepted accounting principles earnings may be volatile in that the result of its annual impairment test, which valued the business at approximately $3.9 million in excess of its carrying value, indicated no impairment at that time. The Company may determine in future impairment tests that some or all of the carrying value of the goodwill may not be recoverable. Such a finding would require a write-off of the amount of expense we record for our pension plan may materially change from year to year because those calculations are sensitive to funding levels as well as changes in several key economic assumptions, including interest rates, rates of return on plan assets, and other actuarial assumptions including participant mortality estimates. Changes in these factors also affect our plan funding, cash flow and shareholders’ equity. In addition, the carrying value that is impaired, which would reducefunding of our pension plan may be subject to changes caused by legislative or regulatory actions.

We will make contributions to fund the Company's profitabilitypension plan when considered necessary or advantageous to do so. The macro-economic factors discussed above, including the return on assets and the minimum funding requirements established by government funding or taxing authorities, or established by other agreement, may influence future funding requirements. A significant decline in the period of the impairment charge. Holding all other assumptions constant as of the measurement date, the Company noted that an increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the Lids Team Sports business by $5.9 million. Furthermore, the Company noted that a decreaseassets in projected annual revenue by one percent would reduce the fair value of the Lids Team Sports business by $0.4 million. However, ifour pension plan, or other assumptions do not remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount. Since the maximum non-cash goodwill impairment charge would be $14.2 million, the Company does not believe that any impairment charge related thereto would be material; however, there

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can be no assurance that anyadverse changes to our pension plan could require us to make significant funding contributions and affect cash flows in future goodwill impairment will not have a material adverse effect on the Company's financial position.periods.

ITEM 1B, UNRESOLVED STAFF COMMENTS
None.

ITEM 2, PROPERTIES
See Item 1, Business"BusinessProperties.Properties".


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ITEM 3, LEGAL PROCEEDINGS

Environmental Matters

New York State Environmental Matters
In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) and the Company entered into a consent order whereby the Company assumed responsibility for conducting a remedial investigation and feasibility study (“RIFS”) and implementing an interim remedial measure (“IRM”) with regard to the site of a knitting mill operated by a former subsidiary of the Company from 1965 to 1969. The Company undertook the IRM and RIFS voluntarily, without admitting liability or accepting responsibility for any future remediation of the site. The Company has completed the IRM and the RIFS. In the course of preparing the RIFS, the Company identified remedial alternatives with estimated undiscounted costs ranging from $0.0$0.0 million to $24.0$24.0 million,, excluding amounts previously expended or provided for by the Company. The United States Environmental Protection Agency (“EPA”), which has assumed primary regulatory responsibility for the site from NYSDEC, issued a Record of Decision in September 2007. The Record of Decision requiresspecified a remedy of a combination of groundwater extraction and treatment and in-sitein site chemical oxidation at an estimated present cost of approximately $10.7 million.oxidation.

In July 2009, the Company agreed to a Consent Order with the EPA requiring the Company to perform certain remediation actions, operations, maintenance and monitoring at the site. In September 2009, a Consent Judgment embodying the Consent Order was filed in the U.S. District Court for the Eastern District of New York.    

In September 2015, the EPA adopted an amendment to the 2007 Record of Decision by eliminating the separate ground-water extraction and treatment systems and the use of in-situ oxidation from the remedy adopted in the 2007 Record of Decision. The amendment provides for the continued operation and maintenance of the existing wellhead treatment systems on wells operated by the Village of Garden City, New York (the "Village"),.

The Village has additionally asserted that the Company is liable for the costs associated with enhanced treatment required by the impact of the groundwater plume from the site on two public water supply wells, including historical total costs ranging from approximately $1.8$1.8 million to in excess of $2.5$2.5 million,, and future operation and maintenance costs which the Village estimates at $126,400$126,400 annually while the enhanced treatment continues. On December 14, 2007, the Village filed a complaint (the "Village Lawsuit") against the Company and the owner of the property under the Resource Conservation and Recovery Act (“RCRA”), the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) as well as a number of state law theories in the U.S. District Court for the Eastern District of New York, seeking an injunction requiring the defendants to remediate contamination from the site and to establish their liability for future costs that may be incurred in connection with it, which the complaint alleges could exceed $41$41 million,, undiscounted, over a 70-year70-year period.

The Company has not verified the estimates of either historic or future costs asserted byin the Village Lawsuit, but believes that an estimate of future costs based on a 70-year70-year remediation period is unreasonable given the expected remedial period reflected in the EPA's Record of Decision. On May 23, 2008, the Company filed a motion to dismiss the Village's complaintVillage Lawsuit on grounds including applicable statutes of limitation and preemption of certain claims by the NYSDEC's and the EPA's diligent prosecution of remediation. On January 27, 2009, the Court granted the motion to dismiss all counts of the plaintiff's complaint except for the CERCLA claim and a state law claim for indemnity for costs incurred after November 27, 2000. On September 23, 2009, on a motion for reconsideration by the Village, the Court reinstated the claims for injunctive relief under RCRA and for equitable relief under certain of the state law theories.

The Company intendsand the Village have reached an agreement in principle providing for the Village to continue to defendoperate and maintain the action ifwell head treatment systems in accordance with the Record of Decision and to release its claims against the Company asserted in the Village Lawsuit in exchange for a lump-sum payment by the Company. The agreement in principle is subject to the issuance by EPA of Statement of Work under the amended Record of Decision that is acceptable to the Company and the Village and to the execution by both parties of definitive documentation incorporating the agreement in principle. While there can be no assurance that a definitive agreement incorporating the agreement in principle will be concluded, the Company does not expect that such an acceptable settlement agreement, cannot be reached.the Village Lawsuit, or the implementation of the amended Record of Decision would have a material effect on its financial condition or results of operations.

In April 2015, the Company received from EPA a Notice of Potential Liability and Demand for Costs pursuant to CERCLA regarding the site in Gloversville, New York of a former leather tannery operated by the Company and by other, unrelated parties. The Notice demanded payment of approximately $2.2 million of response costs claimed by EPA to have been incurred to conduct assessments and removal activities at the site. The Company has requested additional information on the basis for EPA's assertion that the Company is a potentially responsible party with regard to the site and is assessing the claims asserted in the notice. The Company's environmental insurance carrier is providing coverage of the matter subject

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to a $500,000 self-insured retention and the other terms and conditions of the insurance policy, subject to a standard reservation of rights.

Whitehall Environmental Matters
The Company has performed sampling and analysis of soil, sediments, surface water, groundwater and waste management areas at the Company's former Volunteer Leather Company facility in Whitehall, Michigan.

In October 2010, the Company and the Michigan Department of Natural Resources and Environment entered into a Consent Decree providing for implementation of a remedial Work Plan for the facility site designed to bring the site into compliance with applicable regulatory standards. The Work Plan's implementation is substantially complete and the Company expects, based on its present understanding of the condition of the site, that its future obligations with respect to the site will be

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limited to periodic monitoring and that future costs related to the site should not have a material effect on its financial condition or results of operations.

Accrual for Environmental Contingencies
Related to all outstanding environmental contingencies, the Company had accrued $11.9$14.5 million as of January 30, 2016, $14.1 million as of January 31, 2015 and $11.9 million as of February 1, 2014, $11.9 million as of February 2, 2013 and $13.0 million as of January 28, 2012.2014. All such provisions reflect the Company's estimates of the most likely cost (undiscounted, including both current and noncurrent portions) of resolving the contingencies, based on facts and circumstances as of the time they were made. There is no assurance that relevant facts and circumstances will not change, necessitating future changes to the provisions. Such contingent liabilities are included in the liability arising from provision for discontinued operations on the accompanying Consolidated Balance Sheets because it relates to former facilities operated by the Company. The Company has made pretax accruals for certain of these contingencies, including approximately $0.5$0.8 million reflected in Fiscal 2014, $0.82016, $2.8 million reflected in Fiscal 20132015 and $1.8$0.5 million reflected in Fiscal 2012.2014. These charges are included in provision for discontinued operations, net in the Consolidated Statements of Operations and represent changes in estimates.

Other Matters
On December 10, 2010, the Company announced that it had suffered a criminal intrusion into the portion of its computer network that processes payments for transactions in certain of its retail stores. Visa, Inc., MasterCard Worldwide and American Express Travel Related Services Company, Inc. have asserted claims totaling approximately $15.6$15.6 million in connection with the intrusion and the claims of two of the claimants have been collected by withholding payment card receivables of the Company. In the fourth quarter of Fiscal 2013, the Company recorded a $15.4$15.4 million charge to earnings in connection with the disputed liability. On March 7, 2013, the Company filed an action in the U.S. District Court for the Middle District of Tennessee against Visa U.S.A. Inc., Visa Inc. and Visa International Service Association seeking to recover $13.3$13.3 million in non-compliance fines and issuer reimbursement assessments collected from the Company in connection with the intrusion. The Company does not currently expect any future claims in connection with the intrusion to have a material effect on its financial condition, cash flows, or results of operations.

On January 5, 2012, a patent infringement action against the Company and numerous other defendants was filed in the U.S. District Court for the Eastern District of Texas, GeoTag, Inc. v. Circle K Store, Inc., et al., alleging that features of certain of the Company's e-commerce websites infringe U.S. Patent No. 5,930,474, entitled “Internet Organizer for Accessing Geographically and Topically Based Information.” The plaintiff sought relief including damages for the alleged infringement, costs, expenses and pre- and post-judgment interest and injunctive relief. Pursuant to a settlement agreement, the matter was dismissed on February 28, 2014. The settlement did not have a material effect on its financial condition or results of operations.

On June 13, 2012, a former vendor of a subsidiary of the Company filed an action, Perfect Curve, Inc. v. Hat World, Inc., in U.S. District Court in Massachusetts, alleging patent, trademark, trade dress, and copyright infringement against the subsidiary based on the sale of a line of products developed by the subsidiary. The parties reached agreement to settle the matter and the action was dismissed pursuant to a Stipulated Dismissal dated March 13, 2014. The settlement did not have a material effect on its financial condition or results of operations.

On May 14, 2012, a putative class and collective action, Maro v. Hat World, Inc., was filed in the U.S. District Court for the Northern District of Illinois. The action alleges that the Company failed to pay the plaintiff and other, similarly situated retail store employees of Hat World, Inc., for time spent making bank deposits of store collections, and seeks to recover unpaid wages, liquidated damages, statutory penalties, attorney's fees, and costs pursuant to the federal Fair Labor Standards Act, the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. On January 15, 2014, the court dismissed the Maro case with prejudice, based on the plaintiffs' failure to prosecute. On July 16, 2012 and July 30, 2012, additional putative class and collective actions, Chavez v. Hat World, Inc. and Dismukes v. Hat World, Inc., were filed in the same court, alleging that certain Hat World employees were misclassified as exempt from overtime pay, and seeking similar relief. The Chavez and Dismukes actions have been consolidated. The parties have reached an agreement in principle to resolve the matter, subject to documentation and court approval. The Company does not expect the matter or its settlement as proposed to have a material effect on its financial condition or results of operations.

On August 30, 2012, a former employee of a Company subsidiary filed a putative class and collective action, Kershner v. Hat World, Inc., in the Philadelphia, Pennsylvania Court of Common Pleas alleging violations of the Pennsylvania Minimum Wage Act by the subsidiary. The Company has reached an agreement to resolve the matter, subject to approval by the court. On February 10, 2014, the court granted preliminary approval of the proposed settlement. The Company does not expect the matter or its settlement as proposed to have a material effect on its financial condition or results of operations.


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On May 23, 2013, a former employee of the Company filed an action, Everett v. Genesco Inc., in the U.S. District Court for the Middle District of Florida alleging violations of the Fair Labor Standards Act, seeking designation as a collective action and the award of allegedly unpaid minimum wages, overtime pay, liquidated damages, penalties, interest, attorneys' fees, and other relief. The Company disputes the material allegations in the action and intends to defend it.

On May 17, 2013, a former employee filed a putative class and representative action, Garcia v. Genesco, Inc., in the Superior Court of California for the County of Ventura, alleging various claims under the California Labor Code, including failure to provide meal and rest periods, failure to timely pay wages, failure to provide accurate itemized wage statements, and unfair competition and violation of the Private Attorneys’ General Act of 2004, and seeking unspecified damages and penalties. On August 30, 2013, the Company removed the action to the United States District Court for the Central District of California. Subsequently, the Company reached an agreement to settle the matter. The court granted final approval of the settlement on May 8, 2015 and dismissed the case.

On April 30, 2015, an employee of a subsidiary of the Company filed an action, Stewart v. Hat World, Inc., et al., under the California Labor Code Private Attorneys General Act on behalf of herself, the State of California, and other non-exempt, hourly-paid employees of the subsidiary in California, seeking unspecified damages and penalties for various alleged violations of the California Labor Code, including failure to pay for all hours worked, minimum wage and overtime violations, failure to provide required meal and rest periods, failure to timely pay wages, failure to provide complete and accurate wage statements, and failure to provide full reimbursement of business-related costs and expenses incurred in the course of employment. The Company disputes the material allegations in the complaint and is defendingintends to defend the matter.




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On March 3, 2016, plaintiffs filed an action Lacey, et al. v. Genesco Inc., in the U.S. District Court for the Western District of Pennsylvania, alleging that certain of the Company's internet websites are inaccessible to the blind, in violation of the Americans With Disabilities Act. The suit seeks injunctive relief and attorneys' fees. The Company is investigating the allegations in the complaint.

In addition to the matters specifically described in this Item 3, Legal Proceedings,"Legal Proceedings", the Company is a party to other legal and regulatory proceedings and claims arising in the ordinary course of its business. While management does not believe that the Company's liability with respect to any of these other matters is likely to have a material effect on its financial position, cash flows, or results of operations,statements, legal proceedings are subject to inherent uncertainties and unfavorable rulings could have a material adverse impact on the Company's business and results of operations.financial statements.


ITEM 4, MINE SAFETY DISCLOSURES
Not applicable.


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ITEM 4A, EXECUTIVE OFFICERS OF THE REGISTRANT
The officers of the Company are generally elected at the first meeting of the boardBoard of directorsDirectors following the annual meeting of shareholders and hold office until their successors have been chosen and qualified.qualified or until their earlier resignation or removal. The name, age and office of each of the Company’s executive officers and certain information relating to the business experience of each are set forth below:

Robert J. Dennis, 60,62, Chairman, President and Chief Executive Officer. Mr. Dennis joined the Company in 2004 as chief executive officer of the Company’s acquired Hat World business. Mr. Dennis was named senior vice president of the Company in June 2004 and executive vice president and chief operating officer, with oversight responsibility for all the Company’s operating divisions, in October 2005. Mr. Dennis was named president of the Company in October 2006 and chief executive officer in August 2008. Mr. Dennis was named chairman in February 2010, which became effective April 1, 2010. Mr. Dennis joined Hat World in 2001 from Asbury Automotive, where he was employed in senior management roles beginning in 1998. Mr. Dennis was with McKinsey and Company, an international consulting firm, from 1984 to 1997, and became a partner in 1990.

James S. Gulmi,Mimi Eckel Vaughn, 68,49, Senior Vice President - Finance and Chief Financial OfficerOfficer.. Mr. Gulmi Ms. Vaughn joined the Company in 1971September 2003 as a financial analyst, appointed assistant treasurer in 1974 and named treasurer in 1979. He was elected a vice president of strategy and business development. She was named senior vice president, strategy and business development in 1983October 2006, senior vice president of strategy and assumed the responsibilities ofshared services in April 2009 and senior vice president - finance and chief financial officer in 1986. Mr. GulmiFebruary 2015. Prior to joining the Company, Ms. Vaughn was appointed seniorexecutive vice president—financepresident of business development and marketing, and acting chief financial officer from 2000 to 2001 for Link2Gov Corporation in January 1996.Nashville. From 1993 to 1999, she was a consultant at McKinsey and Company in Atlanta.

Jonathan D. Caplan, 6062, Senior Vice President. Mr. Caplan rejoined the Company in 2002 as chief executive officer of the branded group and president of Johnston & Murphy and was named senior vice president of the Company in November 2003. Mr. Caplan first joined the Company in June 1982 and served as president of Genesco’s Laredo-Code West division from December 1985 to May 1992. After that time, Mr. Caplan was president of Stride Rite’s Children’s Group and then its Ked’s Footwear division, from 1992 to 1996. He was vice president, New Business Development and Strategy, for Service Merchandise Corporation from 1997 to 1998. Prior to rejoining Genesco in October 2002, Mr. Caplan served as president and chief executive officer of Hi-Tec Sports North America beginning in 1998.

James C. Estepa, 62,64, Senior Vice President. Mr. Estepa joined the Company in 1985 and in February 1996 was named vice president operations of Genesco Retail, which included the Jarman Shoe Company, Journeys, Boot Factory and General Shoe Warehouse. Mr. Estepa was named senior vice president operations of Genesco Retail in June 1998. He was named president of Journeys in March 1999. Mr. Estepa was named senior vice president of the Company in April 2000. He was named president and chief executive officer of the Genesco Retail Group in 2001, assuming additional responsibilities of overseeing the Company's former Underground Station segment.
Kenneth J. Kocher, 48, Senior Vice President. Mr. Kocher joined Hat World in 1997 as chief financial officer and was named president in October 2005. He was named senior vice president of the Company in October 2006 in addition to continuing his role as president of Hat World. Prior to joining Hat World, he served as a controller with several companies and was a certified public accountant with Edie Bailley, a public accounting firm.
Roger G. Sisson, 50,52, Senior Vice President, Secretary and General Counsel. Mr. Sisson joined the Company in 1994 as assistant general counsel and was elected secretary in February 1994. He was named general counsel in January 1996. Mr. Sisson was named1996, vice president in November 2003. He was named2003, and senior vice president in October 2006.

Mimi Eckel Vaughn,Parag D. Desai, 47,41, Senior Vice President of Strategy and Shared Services. Ms. VaughnMr. Desai joined the Company in September 20032014 as vice president of strategy and business development. She was named senior vice president, strategy and business development in October 2006 and senior vice president of strategy and shared services in April 2009.services. Prior to joining the Company, Ms. Vaughn was executive vice president ofMr. Desai spent 14 years with McKinsey and Company, including seven years as a partner. Prior to joining McKinsey, Mr. Desai also held business development and marketing,technology positions at Outpace Systems and acting chief financial officer from 2000 to 2001 for Link2Gov Corporation in Nashville. From 1993 to 1999, she was a consultant at McKinsey and Company in Atlanta.Booz Allen & Hamilton.

Paul D. Williams, 59,61, Vice President and Chief Accounting Officer. Mr. Williams joined the Company in 1977, was named director of corporate accounting and financial reporting in 1993 and chief accounting officer in April 1995. He was named vice president in October 2006.

Matthew N. Johnson, 49,51, Vice President and Treasurer. Mr. Johnson joined the Company in 1993 as manager, corporate finance and was elected assistant treasurer in December 1993. He was elected treasurer in June 1996. He was named vice president finance in October 2006 and renamed treasurer in April 2011 after a period of service as chief financial officer of one of the Company's divisions. Prior to joining the Company, Mr. Johnson was a vice president in the corporate and institutional banking division of The First National Bank of Chicago.


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PART II

ITEM 5, MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company’s common stock is listed on the New York Stock Exchange (Symbol: GCO). The following table sets forth for the periods indicated the high and low sales prices of the common stock as shown in the New York Stock Exchange Composite Transactions listed in the Wall Street Journal.
Fiscal Year ended February 2January 31
 
High LowHigh Low
2013 1st Quarter$78.97
 $60.02
2015 1st Quarter$80.52
 $68.52
2nd Quarter78.78
 55.65
82.98
 70.87
3rd Quarter74.93
 55.40
89.58
 71.24
4th Quarter63.26
 50.33
82.89
 69.53

Fiscal Year ended February 1January 30
 
High LowHigh Low
2014 1st Quarter$64.39
 $56.87
2016 1st Quarter$74.74
 $65.59
2nd Quarter75.84
 61.79
70.47
 61.07
3rd Quarter73.45
 60.03
65.78
 54.03
4th Quarter79.32
 65.70
66.16
 50.64

There were approximately 2,6752,500 common shareholders of record on March 14, 2014.11, 2016.
The Company has not paid cash dividends in respect of its common stockCommon Stock since 1973. The Company’s ability to pay cash dividends in respect of its common stock is subject to various restrictions. See Notes 6 and 8 to the Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data" and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Sources of Liquidity” for information regarding restrictions on dividends and redemptions of capital stock.
Recent Sales of Unregistered Securities
None.
Issuer Purchases




















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Table of Equity SecuritiesContents

Repurchases (shown in 000's except share and per share amounts):
None.
ISSUER PURCHASES OF EQUITY SECURITIES
     
Period(a) Total Number of Shares Purchased(b) Average Price Paid per Share(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands)
     
November 2015    
  11-1-15 to 11-28-15
$
$
     
December 2015    
  11-29-15 to 12-26-15
$

$
     
January 2016    
  12-27-15 to 1-30-16251,000
$63.24
251,000
$84,128

Share repurchases were made pursuant to the share repurchase program described under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company expects to implement the balance of the repurchase program through purchases made from time to time either in the open market or through private transactions, in accordance with the regulations of the SEC and other applicable legal requirements.

Equity Compensation Plan Information

Refer to Part III, Item 12.12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters".

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ITEM 6, SELECTED FINANCIAL DATA
Financial Summary
 
In Thousands except per common share data,Fiscal Year End
financial statistics and other data2014 2013 2012 2011 2010
In Thousands except per common share data, Financial Statistics and Other Data (End of Year)Fiscal Year End
2016 2015 2014 2013 2012
Results of Operations Data                  
Net sales$2,624,972
 $2,604,817
 $2,291,987
 $1,789,839
 $1,574,352
$3,022,234
 $2,859,844
 $2,624,972
 $2,604,817
 $2,291,987
Depreciation and amortization67,135
 63,697
 53,737
 47,738
 47,462
79,011
 74,326
 67,135
 63,697
 53,737
Earnings from operations163,435
 169,863
 161,485
 87,228
 60,374
151,251
 167,266
 163,435
 169,863
 161,485
Earnings from continuing operations before income taxes
158,860
 164,832
 156,393
 86,106
 50,440
Earnings from continuing operations before income taxes151,533
 156,989
 158,860
 164,832
 156,393
Earnings from continuing operations92,982
 112,897
 93,451
 55,244
 29,059
95,381
 99,373
 92,982
 112,897
 93,451
Provision for discontinued operations, net(329) (462) (1,025) (1,336) (273)(812) (1,648) (329) (462) (1,025)
Net earnings$92,653
 $112,435
 $92,426
 $53,908
 $28,786
$94,569
 $97,725
 $92,653
 $112,435
 $92,426
Per Common Share Data                  
Earnings from continuing operations                  
Basic$3.99
 $4.78
 $3.89
 $2.30
 $1.31
$4.17
 $4.23
 $3.99
 $4.78
 $3.89
Diluted3.94
 4.69
 3.83
 2.27
 1.28
4.15
 4.19
 3.94
 4.69
 3.83
Discontinued operations                  
Basic(0.01) (0.02) (0.05) (0.06) (0.02)(0.04) (0.07) (0.01) (0.02) (0.05)
Diluted(0.02) (0.01) (0.04) (0.05) (0.01)(0.04) (0.07) (0.02) (0.01) 0.04
Net earnings                  
Basic3.98
 4.76
 3.84
 2.24
 1.29
4.13
 4.16
 3.98
 4.76
 3.84
Diluted3.92
 4.68
 3.79
 2.22
 1.27
4.11
 4.12
 3.92
 4.68
 3.79
Balance Sheet Data         
Balance Sheet and Cash Flow Data         
Total assets$1,439,284
 $1,326,072
 $1,229,761
 $960,507
 $863,525
$1,541,483
 $1,583,087
 $1,439,284
 $1,326,072
 $1,229,761
Long-term debt33,730
 50,682
 40,704
 
 
112,058
 29,155
 33,730
 50,682
 40,704
Non-redeemable preferred stock1,305
 3,924
 4,957
 5,183
 5,220
1,077
 1,274
 1,305
 3,924
 4,957
Common equity914,885
 817,936
 721,774
 620,038
 577,299
954,079
 995,533
 914,885
 817,936
 721,774
Capital expenditures98,456
 71,737
 49,456
 29,299
 33,825
100,652
 103,111
 98,456
 71,737
 49,456
Financial Statistics                  
Earnings from operations as a percent of net sales6.2% 6.5% 7.0% 4.9% 3.8%5.0% 5.8% 6.2% 6.5% 7.0%
Book value per share (common equity divided by common shares outstanding)$38.25
 $34.09
 $29.74
 $26.19
 $23.98
$43.70
 $41.43
 $38.25
 $34.09
 $29.74
Working capital (in thousands)$451,297
 $407,073
 $291,990
 $279,595
 $280,621
$476,469
 $441,742
 $451,297
 $407,073
 $291,990
Current ratio2.5
 2.5
 2.0
 2.2
 2.7
2.5
 2.1
 2.5
 2.5
 2.0
Percent long-term debt to total capitalization3.5% 5.8% 5.3% % %10.5% 2.8% 3.5% 5.8% 5.3%
Other Data (End of Year)                  
Number of retail outlets*2,568
 2,459
 2,387
 2,309
 2,276
2,852
 2,824
 2,568
 2,459
 2,387
Number of employees22,250
 22,700
 21,475
 15,200
 13,925
27,500
 27,325
 22,250
 22,700
 21,475
*Includes 36 Little Burgundy stores added in Fiscal 2016 that were acquired on November 3, 2015, 185, 190 and 26 Locker Room by Lids leased departments in Macy's stores in Fiscal 2016, 2015 and 2014, respectively, and 75 Schuh stores and concessions added in Fiscal 2012 that were acquired on June 23, 2011, 48 Sports Avenue stores in Fiscal 2011 acquired October 8, 2010, and 37 Sports Fan Attic stores in Fiscal 2010 acquired November 3, 2009.2011.




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Reflected in earnings from continuing operations for Fiscal 2012 was $7.4 million in acquisition related expenses. See Note 2 to the Consolidated Financial Statements for additional information.
Reflected in earnings from continuing operations for Fiscal 2016 was a gain of $4.7 million from the sale of Lids Team Sports, for Fiscal 2015 was a charge of $7.1 million for an indemnification asset write-off and for Fiscal 2012 was $7.4 million in acquisition-related expenses.
Also reflected in earnings from continuing operations for Fiscal 2016, 2015, 2014, 2013 2012, 2011 and 20102012 were asset impairment and other charges of $7.9 million, $2.3 million, $1.3 million, $17.0 million $2.7 million, $8.6 million and $13.4$2.7 million, respectively. See Note 3 to the Consolidated Financial Statements for additional information regarding these charges.
Long-term debt includes current obligations. In January 2014,December 2015, the Company entered into the first amendment to the third amended and restated credit agreement in the aggregate principal amount of $400.0 million. During Fiscal 2010, the Company entered into separate exchange agreements whereby it acquired and retired all $86.2 million in aggregate principal amount of its Debentures due June 15, 2023 in exchange for the issuance of 4,552,824 shares of its common stock. As a result of the exchange agreements and conversions, the Company recognized a loss on the early retirement of debt of $5.5 million reflected in earnings from continuing operations.agreement. See Note 6 to the Consolidated Financial Statements for additional information regarding the Company’s debt.
The Company has not paid dividends on its Common Stock since 1973. See Notes 6 and 8 to the Consolidated Financial Statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Sources of Liquidity” for a description of limitations on the Company’s ability to pay dividends.


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ITEM 7, MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This discussion and the notes to the Consolidated Financial Statements, as well as Item 1, Business,"Business", include certain forward-looking statements, which include statements regarding our intent, belief or expectations and all statements other than those made solely with respect to historical fact. Actual results could differ materially from those reflected by the forward-looking statements in this discussion and a number of factors may adversely affect the forward lookingforward-looking statements and the Company’s future results, liquidity, capital resources or prospects. These include, but are not limited to, the amountlevel and timing of required accruals relatedpromotional activity necessary to the earn-out bonus potentially payable to Schuh management based on the achievement of certain performance objectives,maintain inventories at appropriate levels, the timing and amount of non-cash asset impairments related to retail store fixed assets or toand intangible assets of acquired businesses, the impact of post-closing adjustments and payments related to asset and business acquisitions and divestitures, the effectiveness of our omnichannel initiatives, weakness in the consumer economy and retail industry, competition in the Company’s markets, inability of customers to obtain credit, fashion trends that affect the sales or product margins of the Company’s retail product offerings, changes in buying patterns by significant wholesale customers, bankruptcies or deterioration in financial condition of significant wholesale customers or the inability of wholesale customers or consumers to obtain credit, disruptions in product supply or distribution, unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs, and other factors affecting the cost of products, the Company’s ability to continue to complete and integrate acquisitions, expand its business and diversify its product base, and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons.comparisons, and the performance of athletic teams, the participants in major sporting events such as the Super Bowl and World Series, developments with respect to certain individual athletes, and other sports-related events or changes that may affect period-to-period comparisons in the Company's Lids Sports Group retail business. Additional factors that could affect the Company’s prospects and cause differences from expectations include the ability to build, open, staff and support additional retail stores and to renew leases in existing stores and control occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected expense levels, deterioration in the performance of individual businesses or of the Company’s market value relative to its book value, resulting in impairments of fixed assets or intangible assets or other adverse financial consequences, unexpected changes to the market for the Company’s shares, variations from expected pension-related charges caused by conditions in the financial markets, and the cost and outcome of litigation, investigations and environmental matters involving the Company. For a full discussion of additional risk factors, see Item 1A, Risk Factors."Risk Factors".
Overview
Description of Business
The Company’s business includes the design and sourcing, marketing and distribution of footwear and accessories through retail stores, including Journeys®, Journeys Kidz®, Shi by Journeys®, Little Burgundy®, Underground by Journeys® and Johnston & Murphy® in the U.S., Puerto Rico and Canada and through Schuh® stores in the United Kingdom, and the Republic of Ireland and Germany, and through e-commerce websites and catalogs, and at wholesale, primarily under the Company’s Johnston & Murphy brand, the recently relaunched Trask brand, the licensed Dockers® brand, and other brands that the Company licenses for men’s footwear. The Company’s wholesale footwear brands are distributed to more than 1,0001,275 retail accounts in the United States, including a number of leading department, discount, and specialty stores. The Company’s business also includes Lids Sports, which operates (i) headwear and accessory stores under the Lids® name and other names in the U.S., Puerto Rico and Canada, (ii) the Lids Locker Room and Lids Clubhouse businesses, consisting of sports-oriented fan shops featuring a broad array of licensed merchandise such as apparel, hats and accessories, sports decor and novelty products, operating under various trade names, (iii) licensed team merchandise departments in Macy's department stores operated under the name Locker Room by Lids and on macys.com under a license agreement with Macy's, and (iv) e-commerce operations and (v) an athletic team dealer business operating as Lids Team Sports.operations. Including both the footwear businesses and the Lids Sports business, at February 1, 2014,January 30, 2016, the Company operated 2,5682,852 retail stores and leased departments in the U.S., Puerto Rico, Canada, the United Kingdom, and the Republic of Ireland.Ireland and Germany.
During Fiscal 2014,2016, the Company operated five reportable business segments (not including corporate): (i) Journeys Group, comprised of Journeys, Journeys Kidz, Shi by Journeys, Little Burgundy and Underground by Journeys retail footwear chains, cataloge-commerce operations and e-commerce operations;catalog; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Lids Sports Group, comprised as described in the preceding paragraph;paragraph plus an athletic team dealer business operating as Lids Team Sports which was sold in the fourth quarter of Fiscal 2016; (iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, cataloge-commerce operations and e-commerce operationscatalog and wholesale distribution of products under the Johnston & Murphy and Trask brands; and (v) Licensed Brands, comprised of Dockers® Footwear, sourced and marketed under a license from Levi Strauss & Company; SureGrip®Footwear, occupational footwear primarily sold directly to consumers; and other brands.  


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The Journeys retail footwear stores sell footwear and accessories primarily for 13 to 22 year old men and women. The stores average approximately 1,9752,025 square feet. The Journeys Kidz retail footwear stores sell footwear primarily for younger children, ages five to 12. These stores average approximately 1,4251,450 square feet. Shi by Journeys retail footwear stores sell footwear and accessories to fashion-conscious women in their early 20’s to mid 30’s. These stores average approximately 2,1252,150 square feet. The Underground by Journeys retail footwear stores sell footwear and accessories primarily for men and women in the 20 to 35 age group. These stores average approximately 1,8251,850 square feet. The Journeys Group stores are

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primarily in malls and factory outlet centers throughout the United States, Puerto Rico and Canada. The Company's Canadian subsidiary acquired the Little Burgundy retail footwear chain in Canada during the fourth quarter of Fiscal 2016. Little Burgundy is being operated under the Journeys Group. Little Burgundy retail footwear stores sell footwear and accessories to fashion-oriented men and women in the 18 to 34 age group ranging from students to young professionals. These stores average approximately 1,900 square feet. With the 36 Little Burgundy stores, Journeys Group now operates 3175 stores in Canada. Journeys also sells footwear and accessories through direct-to-consumer catalog and e-commerce operations.
The Schuh retail footwear stores sell a broad range of branded casual and athletic footwear along with a meaningful private label offering primarily for 15 to 30 year old men and women. The stores, which average approximately 5,000 square feet, include both street-level and mall locations in the United Kingdom, and the Republic of Ireland.Ireland and Germany. During the third quarter of Fiscal 2013, the Schuh Group opened its first Schuh Kids store. As of February 1, 2014,January 30, 2016, the Company has opened fourten Schuh Kids stores that sell footwear primarily for younger children, ages five to 12, and average 2,4252,675 square feet. The Schuh Group also sells footwear through e-commerce operations.
The Lids Sports Group includes stores and kiosks, primarily under the Lids banner, that sell licensed and branded headwear to men and women primarily in the early-teens to mid-20’s age group. The Lids store locations average approximately 875 square feet and are primarily in malls, airports, street-level stores and factory outlet centers throughout the United States, Puerto Rico and Canada. The Lids Sports Group also operates Lids Locker Room and Lids Clubhouse stores under a number of trade names, selling licensed sports headwear, apparel and accessories to sports fans of all ages in locations averaging approximately 3,0502,825 square feet in malls and other locations primarily in the United States. The Lids Sports Group operates 110151 stores in Canada. The Lids Sports Group also operates Locker Room by Lids leased departments in Macy's department stores selling headwear, apparel, accessories and novelties from an assortment of college and professional teams specific to that particular Macy's department storestores' geographic location.locations. As of January 30, 2016, the Company had 185 Locker Room by Lids leased departments averaging approximately 650 square feet. The Lids Sports Group also sells headwear and accessories through e-commerce operations. In addition, the Lids Sports Group operatesoperated Lids Team Sports, an athletic team dealer business.business that was sold in the fourth quarter of Fiscal 2016.
Johnston & Murphy retail shops sell a broad range of men’s footwear, apparel and accessories. Women’s footwear and accessories are sold in select Johnston & Murphy retail locations. Johnston & Murphy shops average approximately 1,5251,550 square feet and are located primarily in better malls and in airports throughout the United States and in Canada. Johnston & Murphy opened its first store in Canada during the fourth quarter of Fiscal 2012. As of February 1, 2014,January 30, 2016, Johnston & Murphy operated seven stores in Canada. The Company also has license and distribution agreements for wholesale and retail sales of Johnston & Murphy products in various non - U.S. jurisdictions. The Company also sells Johnston & Murphy footwear and accessories in factory stores, averaging approximately 2,3502,400 square feet, located in factory outlet malls, and through a direct -to-consumer catalog and e-commerce operations. In addition, Johnston & Murphy shoes are distributed through the Company’s wholesale operations to better department and independent specialty stores. Additionally, the Company recently relaunchedsells the Trask brand, with men's and women's footwear and leather accessories distributed to better independent retailers and department stores.
The Licensed Brands segment markets casual and dress casual footwear under the licensed Dockers® brand to men aged 30 to 55 through many of the same national retail chains that carry Dockers slacks and sportswear and in department and specialty stores across the country. The Company entered into an exclusive license with Levi Strauss & Co. to market men’s footwear in the United States under the Dockers brand name in 1991. Levi Strauss & Co. and the Company have subsequently added additional territories, including Canada and Mexico and certain other Latin American countries. The Dockers license agreement washas been renewed on July 23, 2012 for a term expiring November 30, 2015, subject to extension for an additional 3-year term if certain conditions are met.2018. The Company acquired Keuka Footwear in the third quarter of Fiscal 2011 and subsequently launched its SureGrip® Footwear line of slip-resistant, occupational footwear from that base. The Company sources and distributes the SureGrip line to employees in the hospitality, healthcare, and other industries. The Company also sells footwear under other licenses and in March 2015 entered into a License Agreement to source and distribute certain men's and women's footwear under the G.H. Bass trademark and related marks.



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Strategy
The Company’s long-term strategy has been to seek organic growth by: 1) increasing the Company’s store base, 2) increasing retail square footage, 3) improving comparable sales, both in stores and digital commerce, 4) increasing operating margin and 5) enhancing the value of its brands. Most of the additional stores planned in North America are currently planned to be Lids Locker Room, Lids Clubhouse, Journeys Kidz and Johnston & Murphy stores, all of which management considers to be underpenetrated in many markets.
To further supplement its organic growth potential, the Company has made acquisitions, including the acquisition of the Schuh Group in June 2011 and several smaller acquisitions of businesses in the Lids Sports Group's markets, and expects to consider acquisition opportunities, either to augment its existing businesses or to enter new businesses that it considers compatible with its existing businesses, core expertise and strategic profile. Acquisitions involve a number of risks, including, among others, inaccurate valuation of the acquired business, the assumption of undisclosed liabilities, the failure to integrate the acquired business appropriately, and distraction of management from existing businesses. The Company seeks to mitigate these risks by applying appropriate financial metrics in its valuation analysis and developing and executing plans for due diligence and integration that are appropriate to each acquisition. The Company also seeks appropriate opportunities to

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extend existing brands and retail concepts. For example, the Schuh Group opened its first Schuh Kids store in Scotland during the third quarter of Fiscal 2013. The Company typically tests such extensions on a relatively small scale to determine their viability and to refine their strategies and operations before making significant, long-term commitments.
More generally, the Company attempts to develop strategies to mitigate the risks it views as material, including those discussed under the caption “Forward Looking Statements,” above, and those discussed in Item 1A, Risk Factors."Risk Factors". Among the most important of these factors are those related to consumer demand. Conditions in the economy can affect demand, resulting in changes in sales and, as prices are adjusted to drive sales and manage inventories, in gross margins. Because fashion trends influencing many of the Company’s target customers can change rapidly, the Company believes that its ability to react quickly to those changes has been important to its success. Even when the Company succeeds in aligning its merchandise offerings with consumer preferences, those preferences may affect results by, for example, driving sales of products with lower average selling prices or products which are more widely available in the marketplace and thus more subject to competitive pressures than the Company's typical offering. Moreover, economic factors, such as the relatively high level ofpersistent unemployment and any future economic contraction and changes in tax policy,policies, may reduce the consumer’s disposable income or his or her willingness to purchase discretionary items, and thus may reduce demand for the Company’s merchandise, regardless of the Company’s skill in detecting and responding to fashion trends. The Company believes its experience and discipline in merchandising and the buying power associated with its relative size and importance in the industry segments in which it competes are important to its ability to mitigate risks associated with changing customer preferences and other changes in consumer demand.
Summary of Results of Operations
The Company’s net sales increased 0.8%5.7% during Fiscal 20142016 compared to Fiscal 2013.2015. The increase reflected a 4%6% increase in Journeys Group sales, an 8% increase in Lids Sports Group sales an 11%and a 7% increase in Johnston & Murphy Group sales, while Schuh Group and a 1% increase in Licensed Brands sales offset by a 3% decrease in Journeys Group sales and a 2% decrease in Schuh Group sales. Included in Fiscal 2013 was a 53rd week compared to a 52-week yearremained flat for Fiscal 2014. Excluding the 53rd week from Fiscal 2013, sales would have increased 2.2% for Fiscal 2014.2016. Gross margin decreased as a percentage of net sales duringfrom 49.0% in Fiscal 2014,2015 to 47.8% in Fiscal 2016, reflecting gross margin decreases as a percentage of net sales in Schuh Group, Lids Sports Group and Licensed Brands,Johnston & Murphy Group, partially offset by increased gross margin in Journeys Group and Johnston & Murphy Group. Selling and administrative expenses increased as a percentage of net sales duringin Journeys Group and Licensed Brands. Selling and administrative expenses decreased as a percentage of net sales from 43.0% in Fiscal 20142015 to 42.5% in allFiscal 2016, reflecting decreased expenses as a percentage of the Company's business segments exceptnet sales in Schuh Group, Lids Sports Group and Johnston & Murphy Group, partially offset by increased expenses as a percentage of net sales in Journeys Group and Licensed Brands. Earnings from operations decreased as a percentage of net sales from 6.5%5.8% in Fiscal 20132015 to 6.2%5.0% in Fiscal 2014,2016, reflecting decreased earnings in Journeys Group, SchuhLids Sports Group and Lids Sports Group,Licensed Brands, partially offset by improved earnings from operations in Journeys Group, Schuh Group and Johnston & Murphy Group and Licensed Brands.Group.

Significant Developments

Schuh AcquisitionSale of Lids Team Sports Business
On June 23, 2011,January 19, 2016, the Company, through its newly-formed, wholly-owned subsidiary Genesco (UK) Limited (“Genesco UK”), completed the acquisition of all the outstanding shares of Schuh Group Ltd. (“Schuh”) for a total purchase price of approximately £100.0 million, less £29.5 million outstanding under existing Schuh credit facilities, which remain in place, less a £1.9 million working capital adjustment and plus £6.2 million net cash acquired, with £5.0 million withheld that was paid in June 2013. The Company financed the acquisition with borrowings under its existing credit facility and the balance from cash on hand. The purchase agreement also provides for deferred purchase price payments totaling £25 million, payable in installments of £15 million and £10 million on the third and fourth anniversaries of the closing, respectively, subject to the payees’ not having terminated their employment with Schuh under certain specified circumstances. This amount will be recorded as compensation expense and not reported as a component of the cost of the acquisition.

Headquartered in Scotland, Schuh is a specialty retailer of casual and athletic footwear sold through 99 retail stores in the United Kingdom and the Republic of Ireland as of February 1, 2014. The Company completed the acquisition in ordersale of the assets of the Lids Team Sports business, which has operated within its Lids Sports Group segment, to enhance its strategic development and prospects for growth and provideBSN Sports, LLC. The Company recognized a gain on the Company with an established retail presence in the United Kingdom and improved insight into global fashion trends.sale estimated at $4.7 million, net of transaction-related expenses before tax. The results of Schuh’s operations for Fiscal 2014 include net sales of $364.7 millionLids Team Sports is not a strategic shift that will have a major effect on operations and operating earnings of $3.1 million. Thefinancial results, of Schuh's operations for Fiscal 2013 include net sales of $370.5 million and operating earnings of $11.2 million. The results of Schuh's operations for the fiscal year from the date of acquisition through January 28, 2012, including net sales of $212.3 million and operating earnings of $11.7 million, havetherefore this business has not been includedpresented as a discontinued operation in the Company's Consolidated Financial Statements for the fiscal year ended January 28, 2012. During the fiscal year ended January 28, 2012, the Company expensed $7.4 million in costs related to the acquisition. These costs were recorded as selling and administrative expenses on the Consolidated Statement of Operations. Compensation expense related to the Schuh acquisition deferred purchase price obligation was $11.7 million,Statements.


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$12.1Pursuant to the purchase agreement, on March 18, 2016, the buyer submitted a proposed adjustment of $2.4 million to the purchase price based upon a final calculation of certain working capital items as of the closing date. The Company is reviewing the proposed adjustment and $7.2 million in Fiscal 2014, 2013 and 2012, respectively. This expensethe adjustment is includedreflected in the operating earningsConsolidated Financial Statements as having occurred in the fourth quarter of Fiscal 2016.

Indemnification Asset Write-off
During the third quarter of Fiscal 2015, the Company recorded a pretax charge of $7.1 million for the write-off of an indemnification asset related to formerly uncertain tax positions that were taken by Schuh Group segment.at the time of the Company's acquisition of Schuh, which were favorably resolved during the third quarter of Fiscal 2015.
Other
Change in EVA Incentive Plan
Under the Company's EVA Incentive Plan, bonus awards in excess of a specified cap in any one year were retained and paid over three subsequent years, subject to reduction or elimination by deteriorating financial performance and historically were subject to forfeiture if the participant voluntarily resigns from employment with the Company. As a result, the bonus awards were subject to service conditions that resulted in recognition of expense over the period of service by the respective employee. During the first quarter of Fiscal 2015, the Company amended the plan to remove the future service requirement for the payment of the retained bonuses. As a result, the bonus expense that would have been deferred under the previous plan terms is now recognized in the first year of service. The Company recorded a $5.7 million charge to earnings in the first quarter of Fiscal 2015 in connection with the amendment related to bonus amounts previously deferred to future years.

Acquisitions
During Fiscal 2016, the Company completed the acquisition of Little Burgundy, a small retail footwear chain in Canada for a total purchase price of $35.1 million. The stores acquired are operated within the Journeys Group. During Fiscal 2015, the Company completed acquisitions of primarily small retail chains and one small wholesale business for a total purchase price of $34.9 million. In Fiscal 2014, and 2013, the Company completed other acquisitions of primarily small retail chains for a total purchase price of $13.6 million and $23.8 million, respectively.million. The stores acquired will bein Fiscal 2015 and 2014 are operated within the Lids Sports Group.

Network Intrusion
On December 10, 2010, the Company announced that it had suffered a criminal intrusion into the portion of its computer network that processes payments for transactions The wholesale business acquired in certain of its retail stores. Visa, Inc., MasterCard Worldwide and American Express Travel Related Services Company, Inc. have asserted claims totaling approximately $15.6 million in connection with the intrusion and the claims of two of the claimants have been collected by withholding payment card receivables of the Company. In the fourth quarter of Fiscal 2013, the Company recorded a $15.4 million charge to earnings in connection with the disputed liability. On March 7, 2013, the Company filed an action in the U.S. District Court for the Middle District of Tennessee against Visa U.S.A. Inc., Visa Inc. and Visa International Service Association seeking to recover $13.3 million in non-compliance fines and issuer reimbursement assessments collected from the Company in connection with the intrusion. The Company does not currently expect any future claims in connection with the intrusion to have a material effect on its financial condition, cash flows, or results of operations.2015 was operated within Lids Team Sports which was sold January 19, 2016.
Asset Impairment and Other Charges
The Company recorded a pretax charge to earnings of $1.3$7.9 million in Fiscal 2016, including $3.1 million for retail store asset impairments, $2.5 million for asset write-downs, $2.2 million for network intrusion expenses and $0.1 million for other legal matters.

The Company recorded a pretax charge to earnings of $2.3 million in Fiscal 2015, including $3.1 million for network intrusion expenses, $1.9 million for retail store asset impairments and $0.7 million for other legal matters, partially offset by a $3.4 million gain on a lease termination of a Lids store.

The Company recorded a pretax charge to earnings of $1.3 million in Fiscal 2014, including $3.3$3.3 million for network intrusion expenses, $2.4$2.4 million for other legal matters, $2.3$2.3 million for retail store asset impairments and $1.6 million for a lease termination, partially offset by an $(8.3)$8.3 million gain on the lease termination of a New York City Journeys store.

The Company recorded a pretax charge to earnings of $17.0 million in Fiscal 2013, including $15.6 million for network intrusion expenses, $1.4 million for retail store asset impairments and $0.1 million for other legal matters.
The Company recorded a pretax charge to earnings of $2.7 million in Fiscal 2012, including $1.1 million for retail store asset impairments, $0.9 million for other legal matters and $0.7 million for network intrusion expenses.
Postretirement Benefit Liability Adjustments
The return on pension plan assets was $12.3a loss of $4.4 million for Fiscal 2014,2016, compared to an expected return of $6.7$5.8 million. The discount rate used to measure benefit obligations increased from 4.00%3.55% to 4.40%4.30% in Fiscal 2014.2016. As a result of the increase in the return on plan assetsdiscount rate and a change in the increased discount rate,mortality table, partially offset by lower than expected asset returns, the pension liability reflected in the Consolidated Balance Sheets decreased to $9.2$10.0 million compared to $20.5$22.2 million inat the end of Fiscal 2013.2015. There was aan decrease in the pension liability adjustment of $9.5$9.8 million (net of tax) in accumulated other comprehensive income in equity. Depending upon future interest rates and returns on plan assets and other factors, there can be no assurance that additional adjustments in future periods will not be required.

Discontinued Operations
In Fiscal 2016, Fiscal 2015 and Fiscal 2014, the Company recorded an additional charge to earnings of $0.5$1.3 million ($0.3 ($0.8 million net of tax), $2.7 million ($1.6 million net of tax) and $0.5 million ($0.3 million net of tax), respectively, reflected in discontinued operations, primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company. For additional information, see NoteNotes 3 and 13 to the Consolidated Financial Statements.
In Fiscal 2013, the Company recorded an additional charge to earnings of $0.8 million ($0.5 million net of tax) reflected in discontinued operations primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company. For additional information, see Note 13 to the Consolidated Financial Statements.
In Fiscal 2012, the Company recorded an additional charge to earnings of $1.7 million ($1.0 million net of tax) reflected in discontinued operations, including $1.8 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company, offset by a $0.1 million gain for excess provisions to prior discontinued operations. For additional information, see Note 13 to the Consolidated Financial Statements.







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Critical Accounting Policies
Inventory Valuation
As discussed in Note 1 to the Consolidated Financial Statements, the Company values its inventories at the lower of cost or market.
In its footwear wholesale operations and its Schuh Group segment, and its Lids Sports Group wholesale operations, except for the Anaconda Sports wholesale division, cost is determined using the first-in, first-out ("FIFO") method. Market value is determined using a system of analysis which evaluates inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and selling prices reflected in future orders.orders for footwear wholesale. The Company provides reserves when the inventory has not been marked down to market value based on current selling prices or when the inventory is not turning and is not expected to turn at levels satisfactory to the Company.
The Lids Sports Group retail segment and its Anaconda Sports wholesale division employemploys the moving average cost method for valuing inventories and applyapplies freight using an allocation method. The Company provides a valuation allowance for slow-moving inventory based on negative margins and estimated shrink based on historical experience and specific analysis, where appropriate.
In its retail operations, other than the Schuh Group and Lids Sports Group retail segments, the Company employs the retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories.
Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on, markups, markdowns, and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, the Company employs the retail inventory method in multiple subclasses of inventory with similar gross margins, and analyzes markdown requirements at the stock number level based on factors such as inventory turn, average selling price, and inventory age. In addition, the Company accrues markdowns as necessary. These additional markdown accruals reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to provide markdown support. In addition to markdown provisions, the Company maintains provisions for shrinkage and damaged goods based on historical rates.
Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends, and overall economic conditions. Failure to make appropriate conclusions regarding these factors may result in an overstatement or understatement of inventory value. A change of 10% from the recorded provisions for markdowns, shrinkage and damaged goods would have changed inventory by $1.1$1.5 million at February 1, 2014.January 30, 2016.
Impairment of Long-Lived Assets
As discussed in Note 1 to the Consolidated Financial Statements, the Company periodically assesses the realizability of its long-lived assets, other than goodwill, and evaluates such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets.
The goodwill impairment test involves performing a qualitative assessment, on a reporting unit level, based on current circumstances. If the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a two-step impairment test will not be performed. However, if the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a two-step impairment test is performed. Alternatively, the Company may elect to bypass the qualitative assessment and proceed directly to the two-step impairment test, on a reporting unit level. The first step is a comparison of the fair value and carrying value of the business unit with which the goodwill is associated. The Company estimates fair value using the best information available, and computes the fair value derived by an income approach utilizing discounted cash flow projections. The income approach uses a projection of a reporting unit’s estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions. A key assumption in the Company’s fair value estimate is the weighted average cost of capital utilized for discounting its cash flow projections in its income approach. The Company believes the rate it used in its annual test, which iswas completed inat the end of fourth quarter, each year, was consistent with the risks inherent in its business and with industry discount rates. The projection uses management’s best estimates of economic and market conditions over the projected period including growth

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rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant

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estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements.
If the carrying value of the business unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. Specifically, the Company would allocate the fair value to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference.

As a result of the various acquisitions comprising the Lids Team Sports team dealer business, the Company carries goodwill at a value of $14.2 million on its Consolidated Balance Sheets related to such acquisitions. The Company found that the result of its annual impairment test, which valued the business at approximately $3.9 million in excess of its carrying value, indicated no impairment at that time. The Company may determine in future impairment tests that some or all of the carrying value of the goodwill may not be recoverable. Such a finding would require a write-off of the amount of the carrying value that is impaired, which would reduce the Company's profitability in the period of the impairment charge. Holding all other assumptions constant as of the measurement date, the Company noted that an increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the Lids Team Sports business by $5.9 million. Furthermore, the Company noted that a decrease in projected annual revenue by one percent would reduce the fair value of the Lids Team Sports business by $0.4 million. However, if other assumptions do not remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount. Since the maximum non-cash goodwill impairment charge would be $14.2 million, the Company does not believe that any impairment charge related thereto would be material.
Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters, including those disclosed in Note 13 to the Company’s Consolidated Financial Statements. The Company has made pretax accruals for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2016, $2.8 million reflected in Fiscal 2015 and $0.5 million reflected in Fiscal 2014, $0.8 million reflected in Fiscal 2013 and $1.8 million reflected in Fiscal 2012.2014. These charges are included in provision for discontinued operations, net in the Consolidated Statements of Operations because they relate to former facilities operated by the Company. The Company monitors these matters on an ongoing basis and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as management deems necessary in view of changes in available information. Changes in estimates of liability are reported in the periods when they occur. Consequently, management believes that its reserveaccrued liability in relation to each proceeding is a best estimate of probable loss connected to the proceeding, or in cases in which no best estimate is possible, the minimum amount in the range of estimated losses, based upon its analysis of the facts and circumstances as of the close of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in environmental proceedings in particular, there can be no assurance that future developments will not require additional reserves,provisions, that some or all reservesliabilities will be adequate or that the amounts of any such additional reservesprovisions or any such inadequacy will not have a material adverse effect upon the Company’s financial condition or results of operations.
Revenue Recognition
Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales and value added taxes. Catalog and internet sales are recorded at time of delivery to the customer and are net of estimated returns and exclude sales and value added taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Shipping and handling costs charged to customers are included in net sales. Estimated returns are based on historical returns and claims. Actual amounts of markdowns have not differed materially from estimates. Actual returns and claims in any future period may differ from historical experience.
Income Taxes
As part of the process of preparing Consolidated Financial Statements, the Company is required to estimate its income taxes in each of the tax jurisdictions in which it operates. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within the Consolidated Balance Sheets. The Company then assesses the

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likelihood that its deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. To the extent the Company believes that recovery of an asset is at risk, valuation allowances are established. To the extent valuation allowances are established or increased in a period, the Company includes an expense within the tax provision in the Consolidated Statements of Operations. These deferred tax valuation allowances may be released in future years when management considers that it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, management will need to periodically evaluate whether or not all available evidence, such as future taxable income and reversal of temporary differences, tax planning strategies, and recent results of operations, provides sufficient positive evidence to offset any other potential negative evidence that may exist at such time. In the event the deferred tax valuation allowance is released, the Company would record an income tax benefit for the portion or all of the deferred tax valuation allowance released. At February 1, 2014,January 30, 2016, the Company had a deferred tax valuation allowance of $3.8$3.4 million.
Income tax reserves for uncertain tax positions are determined using the methodology required by the Income Tax Topic of the Accounting Standards Codification (“Codification”). This methodology requires companies to assess each income

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tax position taken using a two step process. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may be subject to change or varying interpretation. If the Company’s determinations and estimates prove to be inaccurate, the resulting adjustments could be material to its future financial results. See Note 9 to the Company’s Consolidated Financial Statements for additional information regarding income taxes.
The Company recorded an effective income tax rate of 41.5%37.1% for Fiscal 20142016 compared to 31.5%36.7% for 2013.Fiscal 2015 and 41.5% for Fiscal 2014. The effective tax rate for Fiscal 2016 benefited from increased foreign earnings and lowering of foreign tax rates combined with a release of $1.3 million in valuation allowance on foreign net operating losses no longer required. The tax rate for Fiscal 20132015 was lower than Fiscal 2014 primarily due to thea $7.0 million reversal of charges previously recorded charges related to formerly uncertain tax positions duethat were recorded by Schuh at the time of the purchase by the Company, which were favorably resolved during Fiscal 2015. Related to the expiration of the applicable statutes of limitations and a settlement with a state tax authority more favorable than anticipated related to othersame uncertain tax positions.position, the Company wrote off a $7.1 million indemnification asset during Fiscal 2015.
Postretirement Benefits Plan Accounting
Full-time employees who had at least 1,000 hours of service in calendar year 2004, except employees in the Lids Sports Group and Schuh Group segments, are covered by a defined benefit pension plan. The Company froze the defined benefit pension plan effective January 1, 2005. The Company also provides certain former employees with limited medical and life insurance benefits. The Company funds at least the minimum amount required by the Employee Retirement Income Security Act.
As required by the Compensation – Retirement Benefits Topic of the Codification, the Company is required to recognize the overfunded or underfunded status of postretirement benefit plans as an asset or liability in their Consolidated Balance Sheets and to recognize changes in that funded status in accumulated other comprehensive loss, net of tax, in the year in which the changes occur.
The Company accounts for the defined benefitrecognizes pension plans using the Compensation-Retirement Benefits Topic of the Codification. As permitted under this topic, pension expense is recognized on an accrual basis over employees’ approximate service periods. The calculation of pension expense and the corresponding liability requires the use of a number of critical assumptions, including the expected long-term rate of return on plan assets and the assumed discount rate, as well as the recognition of actuarial gains and losses. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions.
Long Term Rate of Return Assumption – Pension expense increases as the expected rate of return on pension plan assets decreases. The Company estimates that the pension plan assets will generate a long-term rate of return of 7.75%6.35%. To develop this assumption, the Company considered historical asset returns, the current asset allocation and future expectations of asset returns. The expected long-term rate of return on plan assets is based on a long-term investment policy of 50% U.S. equities, 13% international equities, 35% U.S. fixed income securities and 2% cash equivalents. For Fiscal 2014,2016, if the expected rate of return had been decreased by 1%, net pension expense would have increased by $0.9 million, and if the expected rate of return had been increased by 1%, net pension expense would have decreased by $0.9 million.
Discount Rate – Pension liability and future pension expense increase as the discount rate is reduced. The Company discounted future pension obligations using a rate of 4.40%4.30%, 4.00%3.55% and 4.35%4.40% for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. The discount rate at February 1, 2014January 30, 2016 was determined based on a yield curve of high quality corporate bonds with cash flows matching the Company’s plans’ expected benefit payments. For Fiscal 2014,2016, if the discount rate had been increased by 0.5%, net pension expense would have decreased by $0.6$0.7 million, and if the discount rate had been decreased by 0.5%,

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net pension expense would have increased by $0.6$0.7 million. In addition, if the discount rate had been increased by 0.5%, the projected benefit obligation would have decreased by $6.1$6.9 million and the accumulated benefit obligation would have decreased by $6.1$6.9 million. If the discount rate had been decreased by 0.5%, the projected benefit obligation would have been increased by $6.8$7.7 million and the accumulated benefit obligation would have increased by $6.8$7.7 million.
Amortization of Gains and Losses – The Company utilizes a calculated value of assets, which is an averaging method that recognizes changes in the fair values of assets over a period of five years. At the end of Fiscal 2014,2016, the Company had unrecognized actuarial losses of $27.1$21.4 million. Accounting principles generally accepted in the United States require that the Company recognize a portion of these losses when they exceed a calculated threshold. These losses might be recognized as a component of pension expense in future years and would be amortized over the average future service of employees, which is currently approximately sixnine years. Future changes in plan asset returns, assumed discount rates and various other

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factors related to the pension plan will impact future pension expense and liabilities, including increasing or decreasing unrecognized actuarial gains and losses.
The Company recognized expense for its defined benefit pension plans of $4.4$3.9 million, $4.3$2.6 million and $2.8$4.4 million in Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. The Company’s pension expense is expected to decrease in Fiscal 20152017 by approximately $1.5$3.9 million due to a smaller actuarial loss to be amortized.amortized, resulting from a higher discount rate and experience study updates. Additionally, the amortization period for gains and losses has increased due to the experience study updates.
Comparable Sales
During Fiscal 2013, the Company revised its presentation of comparable sales to include its e-commerce and direct mail catalog businesses. Prior year comparable sales have been adjusted to conform to the current year presentation. For purposes of this report, "comparable sales" are sales from stores open longer than one year, beginning in the fifty-third week of a store’s operation (which we refer to in this report as "same store sales"), and sales from websites operated longer than one year and direct mail catalog sales (which we refer to in this report as "comparable direct sales"). Temporarily closed stores are excluded from the comparable sales calculation for every full week of the store closing. Expanded stores are excluded from the comparable sales calculation until the fifty-third week of operation in the expanded format. Current year foreign exchange rates are applied to both current year and prior year comparable sales to achieve a consistent basis for comparison.

Results of Operations—Fiscal 20142016 Compared to Fiscal 20132015
The Company’s net sales for Fiscal 2014 (52 weeks)2016 increased 0.8%5.7% to $2.62$3.02 billion from $2.60$2.86 billion in Fiscal 2013 (53 weeks).2015. The increase in net sales was a result of increased sales in Journeys Group, Lids Sports Group and Johnston & Murphy Group, while Schuh Group and Licensed Brands offset by decreased sales in Journeys and Schuh Groups. Net salesremained flat for Fiscal 2013 included an estimated $35.2 million of sales due to the fifty-third week.2016. Gross margin was flat at $1.30increased 3.1% to $1.44 billion in Fiscal 2016 from $1.40 billion in Fiscal 2015, but decreased as a percentage of net sales from 49.9%49.0% in Fiscal 2015 to 49.5%,47.8% in Fiscal 2016, primarily reflecting decreased gross margin as a percentage of net sales in the Schuh Group, Lids Sports Group, Schuh Group and Licensed Brands,Johnston & Murphy Group, offset slightly by increased gross margin as a percentage of net sales in the Journeys Group and Johnston & Murphy Groups.Licensed Brands. Selling and administrative expenses in Fiscal 20142016 increased 2.0%4.3% from Fiscal 2013 and increased2015 but decreased as a percentage of net sales from 42.7%43.0% to 43.2%42.5%, primarily reflecting expense increasesdecreases in all the Company's business segments exceptSchuh Group, Lids Sports Group and Johnston & Murphy Group, partially offset by increased expenses in Journeys Group and Licensed Brands. The Company records buying and merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.
Earnings from continuing operations before income taxes (“pretax earnings”) for Fiscal 20142016 were $158.9$151.5 million, compared to $164.8$157.0 million for Fiscal 2013.2015. Pretax earnings for Fiscal 20142016 included asset impairment and other charges of $1.3$7.9 million, including $3.3$3.1 million for retail store asset impairments, $2.5 million for asset write-downs, $2.2 million for expenses related to the computer network intrusion announced in December 2010 $2.4and $0.1 million for other legal matters, $2.3 million for retail store asset impairments and $1.6 million for a lease termination offset by an $(8.3) million gain on the lease termination of a New York City Journeys store.matters. Pretax earnings for Fiscal 20132016 also included a gain of $4.7 million on the sale of Lids Team Sports and $1.5 million in expense related to the deferred purchase price obligation related to the Schuh acquisition. Pretax earnings for Fiscal 2015 included asset impairment and other charges of $17.0$2.3 million, including $15.5$3.1 million for expenses related to the computer network intrusion, $1.4$1.9 million for retail store asset impairments and $0.1$0.7 million for other legal matters.matters, partially offset by a $3.4 million gain on a lease termination. Pretax earnings for Fiscal 2015 also included an indemnification asset write-off of $7.1 million related to formerly uncertain tax positions that were taken by Schuh at the time of the purchase by the Company, which were favorably resolved during the year and $7.3 million in expense related to the deferred purchase price obligation related to the Schuh acquisition.
Net earnings for Fiscal 20142016 were $92.7$94.6 million ($3.924.11 diluted earnings per share) compared to $112.4$97.7 million ($4.684.12 diluted earnings per share) for Fiscal 2013.2015. Net earnings for Fiscal 2014 includes $0.32016 included a $0.8 million ($0.020.03 diluted loss per share) charge to earnings (net of tax), primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company. Net earnings for Fiscal 2013 includes $0.52015 included a $1.6 million ($0.010.07 diluted loss per share) charge to earnings (net of tax), primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company. The Company recorded an effective federal income tax rate of 41.5%37.1% for Fiscal 20142016 compared to 31.5%36.7% for Fiscal 2013. Fiscal 2013's lower2015. The effective tax rate reflects thefor Fiscal 2016 benefited from increased foreign earnings and lowering of foreign tax rates combined with a release of $1.3 million in valuation allowance on foreign net operating losses no longer required. The tax rate for Fiscal 2015 was lower primarily due to a $7.0 million reversal of charges previously recorded charges related to formerly uncertain tax positions due tothat were taken by Schuh at the expirationtime of the applicable statutes of limitations and a settlement with a state tax

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authority more favorable than anticipated related to other uncertain tax positions.purchase by the Company, which were favorably resolved during Fiscal 2015. See Note 9 to the Consolidated Financial Statements for additional information.

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Journeys Group
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2014 2013 2016 2015 
(dollars in thousands)  (dollars in thousands)  
Net sales$1,082,241
 $1,111,490
 (2.6)%$1,251,637
 $1,179,476
 6.1%
Earnings from operations$97,377
 $109,953
 (11.4)%$126,248
 $114,784
 10.0%
Operating margin9.0% 9.9%  10.1% 9.7%  

Net sales from Journeys Group decreased 2.6%increased 6.1% to $1.08$1.25 billion for Fiscal 20142016 from $1.11$1.18 billion for Fiscal 2013.2015. The decreaseincrease reflects primarily a 2% decrease5% increase in comparable sales which includes a 5% increase in same store sales and an 18% increase in comparable direct sales, and a 1% decrease in comparable sales, including both store and direct sales. The comparable store sales decrease reflected a 3% decrease in footwear unit comparable sales partially offset by a 1% increase in the average price per pair of shoes. Total unit sales decreased 4% during the same period. The store count for Journeys Group was 1,168 stores at the end of Fiscal 2014, including 174 Journeys Kidz stores, 50 Shi by Journeys stores, 117 Underground by Journeys stores and 31 Journeys stores in Canada, compared to 1,157 stores at the end of Fiscal 2013, including 156 Journeys Kidz stores, 51 Shi by Journeys stores, 130 Underground by Journeys stores and 24 Journeys stores in Canada.
Journeys Group earnings from operations for Fiscal 2014 decreased 11.4% to $97.4 million, compared to $110.0 million for Fiscal 2013. The decrease in earnings from operations was primarily due to decreased net sales and to increased expenses as a percentage of net sales, reflecting negative leverage from negative comparable sales, partially offset by decreased bonus accruals.
Schuh Group
 Fiscal Year Ended 
%
Change
 2014 2013 
 (dollars in thousands)  
Net sales$364,732
 $370,480
 (1.6)%
Earnings from operations$3,063
 $11,209
 (72.7)%
Operating margin0.8% 3.0%  

Net sales from the Schuh Group decreased 1.6% to $364.7 million for Fiscal 2014, compared to $370.5 million for Fiscal 2013. The sales decrease reflects a 9% decrease in same store sales, a 4% decrease in comparable direct sales, an 8% decrease in comparable sales, including both store and direct sales, and a $2.1 million decrease in sales from changes in exchange rates, partially offset by a 13% increase in average Journeys stores operated (i.e. the sum of the number of stores open on the first day of the fiscal year and the last day of each fiscal month during the year divided by thirteen). The comparable store sales increase reflected a 4% increase in average price per pair of shoes, while footwear unit comparable sales remained flat. The store count for Journeys Group was 1,222 stores at the end of Fiscal 2016, including 200 Journeys Kidz stores, 46 Shi by Journeys stores, 98 Underground by Journeys stores, 39 Journeys stores in Canada and 36 Little Burgundy stores in Canada, acquired in the fourth quarter of Fiscal 2016, compared to 1,182 stores at the end of Fiscal 2015, including 189 Journeys Kidz stores, 49 Shi by Journeys stores, 110 Underground by Journeys stores and 35 Journeys stores in Canada.
Journeys Group earnings from operations for Fiscal 2016 increased 10.0% to $126.2 million, compared to $114.8 million for Fiscal 2015. The increase in earnings from operations was primarily due to increased net sales and increased gross margin as a percentage of net sales, reflecting higher initial margins due to changes in sales mix.
Schuh Group
 Fiscal Year Ended 
%
Change
 2016 2015 
 (dollars in thousands)  
Net sales$405,674
 $406,947
 (0.3)%
Earnings from operations$19,124
 $10,110
 89.2 %
Operating margin4.7% 2.5%  

Net sales from the Schuh Group decreased 0.3% to $405.7 million for Fiscal 2016, compared to $406.9 million for Fiscal 2015. The sales decrease reflects primarily a decrease of $33.0 million in sales due to the depreciation of the British Pound, offset by a 12% increase in average stores operated and a 3% increase in comparable sales which includes a 1% increase in same store sales and a 13% increase in comparable direct sales. Schuh Group operated 99125 stores, including fourten Schuh Kids stores at the end of Fiscal 20142016 compared to 79108 stores, including threesix Schuh Kids stores and 13 concessions at the end of Fiscal 2013.2015.
Schuh Group earnings from operations were $3.1increased 89.2% to $19.1 million in Fiscal 2016 compared to $10.1 million for Fiscal 2014 compared to $11.22015. Earnings included $1.5 million for Fiscal 2013. Earnings included $11.72016 and $7.3 million this year and $12.1 million last yearfor Fiscal 2015 in compensation expense related to a deferred purchase price obligation in connection with the acquisition.Schuh acquisition in Fiscal 2014. Earnings also included $13.1$11.8 million this year and $15.8 million last yearfor Fiscal 2015 related to accruals for a contingent bonus payment for Schuh employees provided for in the Schuh acquisition. The increase in earnings from operations was primarily due to decreased expenses as a percentage of net sales, reflecting the decreases in deferred purchase price expense and contingent bonus expense this year werereferred to above. The decrease in expense more than offset bythe decreased gross margin and negative leverage from the negative comparable sales. The decreased gross marginas a percentage of net sales, which reflected increased shipping and warehouse expense and increased promotional activity and changes in product mix. See Note 2 to the Consolidated Financial Statements for additional information related to the Schuh acquisition.activity.





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Lids Sports Group
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2014 2013 2016 2015 
(dollars in thousands)  (dollars in thousands)  
Net sales$820,996
 $791,255
 3.8 %$975,504
 $902,661
 8.1 %
Earnings from operations$63,748
 $82,867
 (23.1)%$17,040
 $48,970
 (65.2)%
Operating margin7.8% 10.5%  1.7% 5.4%  

Net sales from the Lids Sports Group increased 3.8%8.1% to $821.0$975.5 million for Fiscal 20142016 from $791.3$902.7 million for Fiscal 2013.2015. The increase primarily reflects a 6% increase in comparable sales, reflecting a 3% increase in same store sales and a 46% increase in comparable direct sales for Fiscal 2016 and a 2% increase in average Lids Sports Group stores operated. Same store sales decreased 1%, comparable direct sales increased 26% and comparable sales, including both store and direct sales, were flat for Fiscal 2014.operated, excluding leased departments. The comparable sales decreaseincrease reflected a 2% decrease14% increase in comparable store hat units sold while the average price per hat was flat.decreased 7% reflecting aggressive promotional activity to clear excess inventory positions throughout the year. Lids Sports Group operated 1,1331,332 stores at the end of Fiscal 2014,2016, including 110113 Lids stores in Canada, 177228 Lids Locker Room and Clubhouse stores, which include 38 Locker Room stores in Canada, and 26185 Locker Room by Lids leased departments at Macy's, compared to 1,0531,364 stores at the end of Fiscal 2013,2015 including 98117 Lids stores in Canada and 144242 Lids Locker Room and Clubhouse stores.stores, which include 37 Locker Room stores in Canada, and 190 Locker Room by Lids leased departments at Macy's.
Lids Sports Group earnings from operations for Fiscal 20142016 decreased 23.1%65.2% to $63.7$17.0 million compared to $82.9$49.0 million for Fiscal 2013.2015. The decrease in operating income was primarily due to decreased gross margin as a percentage of net sales, reflecting increased promotional activity, and changes in productsales mix and to increased expenses as a percentage of net sales, primarily reflecting negative leverage due to negative same store sales.shipping and warehouse expenses.

Johnston & Murphy Group
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2014 2013 2016 2015 
(dollars in thousands)  (dollars in thousands)  
Net sales$245,941
 $221,860
 10.9%$278,681
 $259,675
 7.3%
Earnings from operations$17,638
 $15,696
 12.4%$17,761
 $14,856
 19.6%
Operating margin7.2% 7.1%  6.4% 5.7%  

Johnston & Murphy Group net sales increased 10.9%7.3% to $245.9$278.7 million for Fiscal 20142016 from $221.9$259.7 million for Fiscal 2013.2015. The increase reflected primarily a 7%6% increase in comparable sales which includes a 5% increase in same store sales a 15%and an 11% increase in comparable direct sales, and an 8% increase in comparable sales, including both store and direct sales, an 8% increase in Johnston & Murphy wholesale sales, a 5%1% increase in average stores operated for Johnston & Murphy retail operations and additional sales for the recently relaunched Trask brand.an 8% increase in Johnston & Murphy wholesale sales. Unit sales for the Johnston & Murphy wholesale business increased 8%6% in Fiscal 2014,2016 while the average price per pair of shoes was flat for the same period. Retail operations accounted for 71.9%71.7% of the Johnston & Murphy Group's sales in Fiscal 2014, up2016, down slightly from 71.7%72.0% in Fiscal 2013.2015. The comparable sales increase in Fiscal 20142016 reflects a 5%4% increase in the average price per pair of shoes for Johnston & Murphy retail operations primarily associated with increased sales of higher-priced dress shoes and increased pricesa 1% increase in the casual lines and footwear unit comparable sales increased 3%.sales. The store count for Johnston & Murphy retail operations at the end of Fiscal 20142016 included 168173 Johnston & Murphy shops and factory stores, including seven stores in Canada, compared to 157170 Johnston & Murphy shops and factory stores, including fiveseven stores in Canada, at the end of Fiscal 2013.2015.
Johnston & Murphy earnings from operations for Fiscal 20142016 increased 12.4%19.6% to $17.6$17.8 million from $15.7$14.9 million for Fiscal 2013,2015, primarily due to increased net sales and increased gross margin as a percentage of net sales, reflecting increased initial margins, offset by increaseddecreased expenses as a percentage of net sales, due primarily to decreased advertising expenses associated with the relaunch of the Trask brand.and occupancy costs.




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Licensed Brands
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2014 2013 2016 2015 
(dollars in thousands)  (dollars in thousands)  
Net sales$109,780
 $108,498
 1.2%$109,826
 $110,115
 (0.3)%
Earnings from operations$10,614
 $10,078
 5.3%$9,236
 $10,459
 (11.7)%
Operating margin9.7% 9.3%  8.4% 9.5%  

Licensed Brands’ net sales increased 1.2%decreased 0.3% to $109.8 million for Fiscal 20142016 from $108.5$110.1 million for Fiscal 2013.2015. The small sales increasedecrease reflects an increase indecreased sales of Dockers Footwear, offset by increased sales of SureGrip Footwear and Chaps Footwear. The sales decrease in Dockers Footwear partially offset by decreased sales ofreflects weakness in the Chaps line of footwear.department store channel. Unit sales for Dockers Footwear decreased 1%6% for Fiscal 2014,2016, while the average price per pair of shoes increased 2% for the same period.
Licensed Brands’ earnings from operations for Fiscal 2014 increased 5.3%2016 decreased 11.7%, from $10.1$10.5 million for Fiscal 20132015 to $10.6$9.2 million, primarily due to increased net sales and decreased expenses as a percentage of net sales, reflecting decreased bonus accruals.start-up costs for the launch of the Bass footwear line and increased compensation and bad debt expenses.
Corporate, Interest Expenses and Other Charges
Corporate and other expense for Fiscal 20142016 was $29.0$38.2 million compared to $59.9$31.9 million for Fiscal 2013.2015. Corporate expense in Fiscal 20142016 included $1.3$7.9 million in asset impairment and other charges, primarily for network intrusion expenses, retail store asset impairments, asset write-downs, network intrusion expenses and other legal matters and a lease termination, partially offset by a gain on another lease termination.matters. Corporate expense in Fiscal 20132015 included $17.0$2.3 million in asset impairment and other charges, primarily for network intrusion expenses, retail store asset impairments and other legal matters.matters, partially offset by a gain on a lease termination. Excluding the charges listed above, corporate and other expense decreasedincreased primarily due to increased compensation expense and professional fees, partially offset by decreased bonus accruals.foreign exchange losses.
InterestNet interest expense decreased 9.5%increased 36.4% from $5.1$3.2 million in Fiscal 20132015 to $4.6$4.4 million in Fiscal 20142016 primarily due to lower interest onincreased revolver borrowings compared to the U.K. debt resulting from paymentsprevious year as a result of the U.K. debt during Fiscal 2014share repurchase program, Little Burgundy acquisition and Fiscal 2013.

increased borrowings to fund the Schuh contingent bonus and deferred purchase price payments.

Results of Operations—Fiscal 20132015 Compared to Fiscal 20122014
The Company’s net sales for Fiscal 2013 (53 weeks)2015 increased 13.6%8.9% to $2.60$2.86 billion from $2.29$2.62 billion in Fiscal 2012 (52 weeks).2014. The increase in net sales was a result of the inclusion of Schuh Group for the full year in Fiscal 2013, an estimated $35.2 million impact of sales for the fifty-third week and an increase in comparable sales in the Journeys Group, Schuh Group and Johnston & Murphy Group, combined with increased sales in Licensed Brands, offset by decreased comparable sales in Lids Sports Group.across all of the Company's business segments. Gross margin increased 13.1%7.8% to $1.40 billion in Fiscal 2015 from $1.30 billion in Fiscal 2013 from $1.15 billion in Fiscal 2012,2014, but decreased as a percentage of net sales from 50.1%49.5% in Fiscal 2014 to 49.9%,49.0% in Fiscal 2015, primarily reflecting decreased gross margin as a percentage of net sales in the Schuh Group, Lids Sports Group and Johnston & Murphy Groups,Group, offset slightly by increased gross margin as a percentage of net sales in the Journeys Group and Schuh Groups, while Licensed Brands' gross margin was flat.Brands. Selling and administrative expenses in Fiscal 20132015 increased 13.0%8.5% from Fiscal 20122014 but decreased as a percentage of net sales from 42.9%43.2% to 42.7%43.0%, primarily reflecting expense leveragedecreases in theJourneys Group and Schuh Group, partially offset by increased expenses in Lids Sports Group, Johnston & Murphy Group and Journeys Groups due to positive comparable sales in the Journeys and Johnston & Murphy Groups and increased wholesale sales in the Johnston & Murphy Group.Licensed Brands. The Company records buying and merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs.
Pretax earnings for Fiscal 20132015 were $164.8$157.0 million, compared to $156.4$158.9 million for Fiscal 2012.2014. Pretax earnings for Fiscal 20132015 included asset impairment and other charges of $17.0$2.3 million, including $15.5$3.1 million for expenses related to the computer network intrusion announced in December 2010, $1.4$1.9 million for retail store asset impairments and $0.1$0.7 million for other legal matters.matters, partially offset by a $3.4 million gain on a lease termination. Pretax earnings for Fiscal 20122015 also included an indemnification asset write-off of $7.1 million related to formerly uncertain tax positions that were taken by Schuh at the time of the purchase by the Company, which were favorably resolved during the year and $7.3 million in expense related to the deferred purchase price obligation related to the Schuh acquisition. Pretax earnings for Fiscal 2014 included asset impairment and other charges of $2.7$1.3 million, including $1.1 million for retail store asset impairments, $0.9 million for other legal matters and $0.7$3.3 million for expenses related to the computer network intrusion.intrusion announced in December 2010, $2.4 million for other legal matters, $2.3 million for retail store asset impairments and $1.6 million for a lease termination partially offset by an $(8.3) million gain on the lease termination of a New York City Journeys store. Pretax earnings for Fiscal 2014 also include $11.7 million in expense related to the deferred purchase price obligation related to the Schuh acquisition.

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Net earnings for Fiscal 20132015 were $112.4$97.7 million ($4.684.12 diluted earnings per share) compared to $92.4$92.7 million ($3.793.92 diluted earnings per share) for Fiscal 2012.2014. Net earnings for Fiscal 2013 includes $0.52015 included a $1.6 million ($0.010.07 diluted loss per share) charge to earnings (net of tax), primarily for anticipated costs of environmental remedial alternatives related to former

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facilities operated by the Company. Net earnings for Fiscal 2012 includes $1.02014 included a $0.3 million ($0.040.02 diluted loss per share) charge to earnings (net of tax), including $1.1 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company, offset by a $0.1 million gain for excess provisions to prior discontinued operations.Company. The Company recorded an effective federal income tax rate of 31.5%36.7% for Fiscal 20132015 compared to 40.2%41.5% for Fiscal 2012. This year’s lower effective2014. The tax rate of 31.5% reflects thefor Fiscal 2015 was lower primarily due to a $7.0 million reversal of charges previously recorded related to formerly uncertain tax positions due tothat were taken by Schuh at the expirationtime of the applicable statutes of limitations and a settlement with a state tax authority more favorable than anticipated related to other uncertain tax positions.purchase by the Company, which were favorably resolved during Fiscal 2015. See Note 9 to the Consolidated Financial Statements for additional information.
Journeys Group
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2013 2012 2015 2014 
(dollars in thousands)  (dollars in thousands)  
Net sales$1,111,490
 $1,020,116
 9.0%$1,179,476
 $1,082,241
 9.0%
Earnings from operations$109,953
 $89,045
 23.5%$114,784
 $97,377
 17.9%
Operating margin9.9% 8.7%  9.7% 9.0%  

Net sales from Journeys Group increased 9.0% to $1.11$1.18 billion for Fiscal 20132015 from $1.02$1.08 billion for Fiscal 2012.2014. The increase reflects primarily an 8% increase in comparable sales which includes a 6%7% increase in same store sales an 8%and a 30% increase in comparable direct sales, and a 6%1% increase in comparable sales, including both storeaverage Journeys stores operated (i.e. the sum of the number of stores open on the first day of the fiscal year and direct sales.the last day of each fiscal month during the year divided by thirteen). The comparable store sales increase reflected a 6% increase in footwear unit comparable sales while the average price per pair of shoes offset by a 1% decrease in footwear unit comparable sales. Total unit sales increased 2% during the same period.remained flat. The store count for Journeys Group was 1,1571,182 stores at the end of Fiscal 2013,2015, including 156189 Journeys Kidz stores, 5149 Shi by Journeys stores, 130110 Underground by Journeys stores and 2435 Journeys stores in Canada, compared to 1,1541,168 stores at the end of Fiscal 2012,2014, including 152174 Journeys Kidz stores, 5350 Shi by Journeys stores, 137117 Underground by Journeys stores and 1331 Journeys stores in Canada.
Journeys Group earnings from operations for Fiscal 20132015 increased 23.5%17.9% to $110.0$114.8 million, compared to $89.0$97.4 million for Fiscal 2012.2014. The increase in earnings from operations was primarily due to increased net sales, increased gross margin as a percentage of net sales, reflecting lower markdowns, and to decreased expenses as a percentage of net sales, reflecting positive leverage of store related costs, including occupancy costs and depreciation.from positive comparable sales.
Schuh Group
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2013 2012 2015 2014 
(dollars in thousands)  (dollars in thousands)  
Net sales$370,480
 $212,262
 74.5%$406,947
 $364,732
 11.6%
Earnings from operations$11,209
 $11,711
 (4.3)%$10,110
 $3,063
 230.1%
Operating margin3.0% 5.5% 2.5% 0.8%  

Net sales from the Schuh Group increased 74.5%11.6% to $370.5$406.9 million for Fiscal 2013,2015, compared to $212.3$364.7 million for Fiscal 2012. Net sales for Schuh Group in Fiscal 2012 included sales only for the seven months after the Company acquired Schuh on June 23, 2011.2014. The sales increase also reflects primarily a 7% increase in average stores operated, an increase of $12.2 million in sales due to the appreciation of the British Pound and a 1% increase in comparable sales which includes a 1% decrease in same store sales and a 13%12% increase in comparable direct sales and an 8% increase in comparable sales, including both store and direct sales for the seven months ended February 2, 2013.sales. Schuh Group operated 79108 stores, including threesix Schuh Kids stores and 13 concessions at the end of Fiscal 20132015 compared to 6499 stores, and 14 concessionsincluding four Schuh Kids stores at the end of Fiscal 2012.2014.
Schuh Group earnings from operations were $11.2increased to $10.1 million in Fiscal 2015 compared to $3.1 million for Fiscal 2013 compared to2014. Earnings included $7.3 million for Fiscal 2015 and $11.7 million for Fiscal 2012. The earnings included $12.1 million this year and $7.2 million last year2014 in compensation expense related to a deferred purchase price obligation in connection with the acquisition. The earningsEarnings also included $15.8$11.8 million this yearfor Fiscal 2015 and $4.9$13.1 million last yearfor Fiscal 2014 related to accruals for a contingent bonus payment for Schuh employees provided for in the Schuh acquisition. The decreaseincrease in earnings isfrom operations was primarily due to increased net sales and decreased expenses as a percentage of net sales, reflecting the increasedecreases in expense associated with both the deferred purchase price expense and contingent bonus payment. See Note 2 to the Consolidated Financial Statements for additional information related to the Schuh acquisition.

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expense referred to above. The decrease in expense more than offset the decreased gross margin as a percentage of net sales, which reflected increased shipping and warehouse expense and increased markdowns.
Lids Sports Group
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2013 2012 2015 2014 
(dollars in thousands)  (dollars in thousands)  
Net sales$791,255
 $759,324
 4.2 %$902,661
 $820,996
 9.9 %
Earnings from operations$82,867
 $86,037
 (3.7)%$48,970
 $63,748
 (23.2)%
Operating margin10.5% 11.3%  5.4% 7.8%  

Net sales from the Lids Sports Group increased 4.2%9.9% to $791.3$902.7 million for Fiscal 20132015 from $759.3$821.0 million for Fiscal 2012.2014. The increase primarily reflects a 3%6% increase in average Lids Sports Group stores operated. Sameoperated, excluding leased departments, and a 2% increase in comparable sales, reflecting a 1% increase in same store sales decreased 4%,and a 14% increase in comparable direct sales increased 9% and comparable sales, including both store and direct sales, decreased 3% for Fiscal 2013.2015. The comparable sales decreaseincrease reflected a 1% decrease in average price per hat and a 1% decrease2% increase in comparable store hat units sold. The comparable sales decrease reflectssold while the current popularity of adjustable "snap-back"average price per hat styles, which have displaced some demand for fitted merchandise. Management believes that the relative ease of merchandising non-fitted hats has enabled a variety of non-headwear retailers to carry the adjustable styles, increasing competition in the category.remained flat. Lids Sports Group operated 1,0531,364 stores at the end of Fiscal 2013,2015, including 98117 Lids stores in Canada, and 144242 Lids Locker Room and Clubhouse stores, which include 37 Locker Room stores in Canada, and 190 Locker Room by Lids leased departments at Macy's, compared to 1,0021,133 stores at the end of Fiscal 2012,2014, including 82110 Lids stores in Canada and 120177 Lids Locker Room and Clubhouse stores.stores, and 26 Locker Room by Lids leased departments at Macy's.
Lids Sports Group earnings from operations for Fiscal 20132015 decreased 3.7%23.2% to $82.9$49.0 million compared to $86.0$63.7 million for Fiscal 2012.2014. The decrease in operating income was primarily due to decreased gross margin as a percentage of net sales, reflecting promotional activity, increased shipping and warehouse expenses and changes in sales mix, and to increased expenses as a percentage of net sales, primarily reflecting negative leverage dueincreased occupancy and central expenses to negative comparable sales and lower gross margin due to lowered prices in the snap-back category.support growth initiatives.
Johnston & Murphy Group
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2013 2012 2015 2014 
(dollars in thousands)  (dollars in thousands)  
Net sales$221,860
 $201,725
 10.0%$259,675
 $245,941
 5.6 %
Earnings from operations$15,696
 $13,743
 14.2%$14,856
 $17,638
 (15.8)%
Operating margin7.1% 6.8%  5.7% 7.2%  

Johnston & Murphy Group net sales increased 10.0%5.6% to $221.9$259.7 million for Fiscal 20132015 from $201.7$245.9 million for Fiscal 2012.2014. The increase reflected primarily a 3%5% increase in average stores operated for Johnston & Murphy retail operations, a 1% increase in comparable sales which includes a 1% increase in same store sales and a 13% increase1% decrease in comparable direct sales, and a 4% increase in comparable sales, including both store and direct sales, and a 21% increase in Johnston & Murphy wholesale sales slightly offset by a 1% decrease in average stores operated for Johnston & Murphy retail operations.sales. Unit sales for the Johnston & Murphy wholesale business increased 25%3% in Fiscal 2013, while2015 and the average price per pair of shoes decreased 3%increased 1% for the same period. Retail operations accounted for 71.7%71.8% of the Johnston & Murphy Group's sales in Fiscal 2013,2015, down slightly from 74.3%71.9% in Fiscal 2012.2014. The comparable sales increase in Fiscal 20132015 reflects a 4%3% increase in the average price per pair of shoes for Johnston & Murphy retail operations, primarily associated with increased sales of higher-priced dress shoes, while footwear unit comparable sales were flat.decreased 3%. The store count for Johnston & Murphy retail operations at the end of Fiscal 20132015 included 157170 Johnston & Murphy shops and factory stores, including fiveseven stores in Canada, compared to 153168 Johnston & Murphy shops and factory stores, including one storeseven stores in Canada, at the end of Fiscal 2012.2014.
Johnston & Murphy earnings from operations for Fiscal 2013 increased 14.2%2015 decreased 15.8% to $15.7$14.9 million from $13.7$17.6 million for Fiscal 2012,2014, primarily due to decreased gross margin as a percentage of net sales, reflecting higher markdowns and increased shipping and warehouse expenses, and to increased expenses as a percentage of net sales.



sales, due primarily to increased advertising expenses, occupancy costs and selling salaries.


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Licensed Brands
 
Fiscal Year Ended 
%
Change
Fiscal Year Ended 
%
Change
2013 2012 2015 2014 
(dollars in thousands)  (dollars in thousands)  
Net sales$108,498
 $97,444
 11.3%$110,115
 $109,780
 0.3 %
Earnings from operations$10,078
 $9,451
 6.6%$10,459
 $10,614
 (1.5)%
Operating margin9.3% 9.7%  9.5% 9.7%  

Licensed Brands’ net sales increased 11.3%0.3% to $108.5$110.1 million for Fiscal 20132015 from $97.4$109.8 million for Fiscal 2012.2014. The small sales increase reflects $5.6 million of increased sales from Dockers Footwear as well as increasedan increase in sales of SureGrip Footwear, and the Chaps linemostly offset by decreased sales of footwear.Dockers Footwear. Unit sales for Dockers Footwear increased 4%decreased 6% for Fiscal 2013 and2015, while the average price per pair of shoes increased 3%4% for the same period.
Licensed Brands’ earnings from operations for Fiscal 2013 increased 6.6%2015 decreased 1.5%, from $9.5$10.6 million for Fiscal 20122014 to $10.1$10.5 million, primarily due to increased expenses as a percentage of net sales, partially offset by higher bonus accruals.reflecting license agreement expense and increased compensation and depreciation expenses.
Corporate, Interest Expenses and Other Charges
Corporate and other expense for Fiscal 20132015 was $59.9$31.9 million compared to $48.5$29.0 million for Fiscal 2012.2014. Corporate expense in Fiscal 20132015 included $17.0$2.3 million in asset impairment and other charges, primarily for network intrusion expenses, retail store asset impairments and other legal matters.matters, partially offset by a gain on a lease termination. Corporate expense in Fiscal 20122014 included $2.7$1.3 million in asset impairment and other charges, primarily for network intrusion expenses, retail store asset impairments, other legal matters and network intrusion expenses and $7.4 million in acquisition related expenses.a lease termination, partially offset by a gain on another lease termination. Excluding the charges listed above, corporate and other expense increased primarily due to increases inincreased bonus expense as a result of the reversal of bonus accruals professional fees, restricted stock expense and salary expense.last year.
InterestNet interest expense decreased 0.6%29.5% from $5.2$4.6 million in Fiscal 20122014 to $5.1$3.2 million in Fiscal 2013.2015 primarily due to lower average borrowings under the Company's Credit Facility.


Liquidity and Capital Resources
The following table sets forth certain financial data at the dates indicated.
 
Feb. 1, 2014 Feb. 2, 2013 Jan. 28, 2012Jan. 30, 2016 Jan. 31, 2015 Feb. 1, 2014
(dollars in millions)(dollars in millions)
Cash and cash equivalents$59.4
 $59.8
 $53.8
$133.3
 $112.9
 $59.4
Working capital$451.3
 $407.1
 $292.0
$476.5
 $441.7
 $451.3
Long-term debt (includes current maturities)$33.7
 $50.7
 $40.7
$112.1
 $29.2
 $33.7
Working Capital
The Company’s business is seasonal, with the Company’s investment in inventory and accounts receivable normally reaching peaks in the spring and fall of each year. Historically, cash flow from operations has been generated principally in the fourth quarter of each fiscal year.
Cash provided by operating activities was $145.1 million in Fiscal 2016 compared to $189.8 million in Fiscal 2015. The $44.7 million decrease from operating activities from Fiscal 2015 reflects a decrease in cash flow from changes in other accrued liabilities and other assets and liabilities combined, accounts payable and prepaids and other current assets of $52.7 million, $25.1 million and $9.1 million, respectively, partially offset by a $58.8 million increase in cash flow from changes in inventory.
The $52.7 million decrease in cash flow from other accrued liabilities and other assets and liabilities combined reflects the Schuh contingent bonus, deferred purchase price and other acquisition related payments and an increase in income tax payments this year versus last year. The $25.1 million decrease in cash flow from accounts payable reflects changes in buying patterns and payment terms negotiated with individual vendors and is related to the reduction in inventory. The $9.1 million decrease in cash flow from prepaids and other current assets reflects changes in prepaid taxes and increased

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prepaid rent from store growth. The $58.8 million increase in cash flow from inventory reflects a reduction in Lids Sports Group inventory, partially offset primarily by an increase in Journeys Group inventory.
The $27.8 million decrease in inventories at January 30, 2016 from January 31, 2015 levels reflects decreases in Lids Sports Group, partially offset by increased inventory in Journeys Group, Johnston & Murphy Group and Licensed Brands.
Accounts receivable at January 30, 2016 increased $6.7 million compared to January 31, 2015 due to increased footwear wholesale sales and the Company's processing of payroll for former Lids Team Sports employees during a transitional period following the sale of the Lids Team Sports business, for which the Company is due reimbursement as a result of the sale of that business.
Cash provided by operating activities was $189.8 million in Fiscal 2015 compared to $140.0 million in Fiscal 2014 compared to $123.2 million in Fiscal 2013.2014. The $16.8$49.8 million increase from operating activities from Fiscal 20132014 reflects an increase in cash flow from changes in inventory, prepaids and other current assets and accounts payable of $37.8$27.4 million, partially offset by decreased earnings of $19.8 million.$9.1 million and $7.8 million, respectively, and to increased earnings. The $37.8$27.4 million increase in cash flow from inventory reflects a reduction in Journeys Group inventory.
The $9.1 million increase in cash flow from prepaids and other current assets reflected changes in prepaid income taxes. The $7.8 million increase in cash flow from accounts payable reflects changes in buying patterns and payment terms negotiated with individual vendors.
The $58.4$31.0 million increase in inventories at January 31, 2015 from February 1, 2014 from February 2, 2013 levels reflects increases in Lids Sports Group and Johnston & Murphy retail inventory, reflectingresulting from a net increase of 231 Lids Sports Group stores and leased departments, slower than expected holiday sales and a 6.4% increase in square footage, and increased wholesale inventory in Licensed Brands and Lids Team Sports.Sports and Johnston & Murphy.
Accounts receivable at February 1, 2014January 31, 2015 increased $3.7$1.3 million compared to February 2, 2013, due primarily to increased wholesale sales in the Licensed Brands business and increased tenant allowance and other receivables in retail.
Cash provided by operating activities was $123.2 million in Fiscal 2013 compared to $145.0 million in Fiscal 2012. The $21.8 million decrease from operating activities from Fiscal 2012 reflects a decrease in cash flow from changes in accounts receivable, inventory, accounts payable, prepaids and other current assets and other accrued liabilities of $8.8 million, $18.7

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million, $16.8 million, $9.8 million and $16.0 million, respectively, partially offset by improved earnings and a $43.8 million increase from changes in other assets and liabilities. The $8.8 million decrease in cash flow from accounts receivable was due to increased footwear wholesale sales. The $18.7 million decrease in cash flow from inventory reflects increases in retail inventory, reflecting slower than expected sales, and increased inventory in Licensed Brands. The $9.8 million decrease in cash flow from prepaids and other current assets was due to changes in prepaid income taxes. The $16.8 million decrease in cash flow from accounts payable reflects changes in buying patterns and payment terms negotiated with individual vendors. The $16.0 million decrease in cash flow from other accrued liabilities reflects decreased bonus accruals and decreased income tax accruals in Fiscal 2013 compared to Fiscal 2012. The $43.8 million increase in cash flow from other assets and liabilities reflects increased accruals for the deferred purchase price and bonus earn-out related to Schuh and an increase in the bonus bank liability and a decrease in long-term receivables related to the network intrusion.
The $61.0 million increase in inventories at February 2, 2013 from January 28, 2012 levels reflects increases in retail inventory, reflecting slower than expected sales and a 5.5% increase in square footage, and increased inventory in Licensed Brands to support growth initiatives.
Accounts receivable at February 2, 2013 increased $5.8 million compared to January 28, 2012, due primarily to increased wholesale sales reflecting growth in the Johnston & Murphy wholesale business and Licensed Brands business.1, 2014.
Sources of Liquidity
The Company has three principal sources of liquidity: cash from operations, cash and cash equivalents on hand and the Credit FacilityFacilities discussed below. The Company believes that cash and cash equivalents on hand, cash from operations and availability under its Credit FacilityFacilities will be sufficient to cover its working capital and capital expenditures for the foreseeable future.
On January 31, 2014,December 4, 2015, the Company entered into athe First Amendment to the Third Amended and Restated Credit Agreement dated as of January 31, 2014 (the “Credit Facility”) by the among the company, certain subsidiaries of the Company party thereto, as other Borrowers,with the lenders party thereto and Bank of America, N.A., as agent, providing for a revolving credit facility in the aggregate principal amount of $400.0 million, including a $70.0$70.0 million sublimit for the issuance of letters of credit and a domestic swingline subfacility of up to $40.0 million, a revolving credit subfacility for the benefit of GCO Canada, Inc. in an aggregate amount not to exceed $25.0$70.0 million, which includes a $5.0 million sublimit for the issuance of letters of credit, and revolving credit subfacility for the benefit of Genesco (UK) Limited in an aggregate amount not to exceed $50.0 million, which includes a $10.0 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $10.0 million. The facility has a five-year term.term from January 31, 2014. Any swingline loans and any letters of credit and borrowings under the Canadian facilities will reduce the availability under the Credit Facility on a dollar-for-dollar basis.
The Company has the option, from time to time, to increase the availability under the Credit Facility by an aggregate amount of up to $150.0 million subject to, among other things, the receipt of commitments for the increased amount. In connection with this increased facility, the Canadian revolving credit facility may be increased up to no more than $40.085.0 million.
Genesco (UK) Limited has a one-time option to increase the availability of its subfacility under the Credit Facility by an additional amount of up to $50.0 million.
The aggregate amount of the loans made and letters of credit issued under the Credit Facility shall at no time exceed the lesser of the facility amount ($400.0 million or, if increased as described above, up to $550.0 million or $600.0 million, respectively) or the "Borrowing Base", which generally is based on 90% of eligible inventory plus 85% of eligible wholesale receivables (50% of eligible wholesale receivables of the Lids Team Sports business) plus 90% of eligible credit card and debit card receivables less applicable reserves (the "Loan Cap"). The relevant assets of Genesco (UK) Limited will be included in the Borrowing Base if the additional $50.0 million sublimit increase is exercised, provided that amounts borrowed by Genesco (UK) Limited based solely on its own borrowing base will be limited to $50.0 million and the total outstanding to Genesco (UK) Limited will not exceed 30% of the Loan Cap.

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The Credit Facility also provides that a first-in, last-out tranche could be added to the revolving credit facility at the option of the Company subject to, among other things, the receipt of commitments for such tranche. For additional information on the Company’s Credit Facility, see Note 6 to the Consolidated Financial Statements included in Item 8, Financial"Financial Statements and Supplementary Data.Data".
In connection with theMay 2015, Schuh acquisition, SchuhGroup Limited entered into an amendeda Form of Amended and restated Senior TermRestated Facilities Agreement and Working Capital Facility Letter (collectively,("UK Credit Facilities") which replaced the “UK Credit Facilities”), which provide forformer A, B and C term loans with a new Facility A of up to £29.5£17.5 million (a £15.5 and a Facility B of £11.6 million A term loan and £14.0 (which was the former Facility C loan) as well as provided an additional revolving credit facility, Facility C, of £22.5 million B term loan) and a working capital facility of £5.0 million.£2.5 million. The Working Capital Facility Letter was allowed to lapse in June 2012. The A term loan bears interest at LIBOR plus 2.50%1.8% per annum.annum with quarterly payments through April 2017. The Facility B term loan bears interest at LIBOR plus 3.75%2.5% per annum.annum with quarterly payments through September 2019. The Company is not required to make any payments on the B term loan until it expires October 31, 2015, unless the Company’s Schuh Group segment has Excess Cash Flow

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(as defined in the UK Credit Facilities). The Company paid less than £0.1 million, £4.8 million and £4.5 million on the B term loan in Fiscal 2014, 2013 and 2012, respectively.

In November 2013, Schuh Group Limited entered into an Amended and Restated Facilities Agreement to provide for an additional term loan of up to £12.5 million ("Facility C term loan"). The C term loan bears interest at LIBOR plus 2.50%2.2% per annum.annum and expires in September 2019.

There were $33.7$28.9 million in UK term loans and $24.8 million in UK revolver loans outstanding at February 1, 2014.January 30, 2016. The UK Credit Facilities containscontain certain covenants at the Schuh level including a minimum interest coverage covenant initially set at 4.25x and increasing toof 4.50x in January 2012 and thereafter, a maximum leverage covenant initially set at 2.75x2.25x declining over time at various rates to 2.25x1.75x beginning in July 2012April 2017 and a minimum cash flow coverage of 1.10x.1.00x. The Company was in compliance with all the covenants at February 1, 2014.January 30, 2016. The UK Credit Facilities are secured by a pledge of all the assets of Schuh and its subsidiaries.
Revolving
The Company's revolving credit borrowings averaged $38.5$49.6 million during Fiscal 20142016 and $30.5$17.3 million during Fiscal 2013,2015, as cash on hand, cash generated from operations and revolver borrowings primarily funded seasonal working capital requirements, capital expenditures and stock repurchases for Fiscal 2014.2016 and Fiscal 2015, along with the acquisition of Little Burgundy in Fiscal 2016.
There were $14.5$13.5 million of letters of credit outstanding and no$58.3 million of revolver borrowings outstanding, including $22.1 million (£15.6 million) related to Genesco (UK) Limited and $36.2 million (C$51.0 million) related to GCO Canada, under the Credit Facility at February 1, 2014.January 30, 2016. The Company is not required to comply with any financial covenants under the Credit Facility unless Excess Availability (as defined in the Credit Agreement) is less than the greater of $25.0 million or 10.0% of the Loan Cap. If and during such time as Excess Availability is less than the greater of $25.0 million or 10.0% of the Loan Cap, the Credit Facility requires the Company to meet a minimum fixed charge coverage ratio of (a) an amount equal to consolidated EBITDA less capital expenditures and taxes paid in cash, in each case for such period, to (b) fixed charges for such period, of not less than 1.0:1.0. Excess Availability was $358.0279.3 million at February 1, 2014.January 30, 2016. Because Excess Availability exceeded $25.0 million or 10.0% of the Loan Cap, the Company was not required to comply with this financial covenant at February 1, 2014.January 30, 2016.
The Credit Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts and to agreements which would have a material adverse effect if breached, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts and change in control.
The Company’s Credit Facility prohibits the payment of dividends and other restricted payments unless as of the date of the making of any Restricted Payment (as defined in the Credit Facility) or consummation of any Acquisition (as defined in the Credit Facility), (a) no Default (as defined in the Credit Facility) or Event of Default (as defined in the Credit Facility)exists or would arise after giving effect to such Restricted Payment or Acquisition, and (b) either (i) the Borrowers (as defined in the Credit Facility) have pro forma projected Excess Availability for the following six month period equal to or greater than 25% of the Loan Cap, after giving pro forma effect to such Restricted Payment or Acquisition, or (ii) (A) the Borrowers have pro forma projected Excess Availability for the following six month period of less than 25% of the Loan Cap but equal to or greater than 15% of the Loan Cap, after giving pro forma effect to the Restricted Payment or Acquisition, and (B) the Fixed Charge Coverage Ratio (as defined in the Credit Facility), on a pro-forma basis for the twelve months preceding such Restricted Payment or Acquisition, will be equal to or greater than 1.0:1.0 and (c) after giving effect to such Restricted Payment or Acquisition, the Company and the other Borrowers under the Credit Facility are Solvent (as defined in the Credit Facility). Notwithstanding the foregoing, the company may make cash dividends on preferred stock up to $500,000 in any fiscal year absent a continuing Event of Default. The Company’s management does not expect availability under the Credit Facility to fall below the requirements listed above during Fiscal 2015. The Company’s UK Credit Facilities prohibit the payment of any dividends by Schuh or its subsidiaries to the Company.2017.
The Company issued a mandatory notice of redemption effective April 30, 2013, to its holders of Subordinated Serial Preferred Stock $2.30 Series 1, $4.75 Series 3 and $4.75 Series 4, and on its $1.50 Subordinated Cumulative Preferred Stock during the first quarter of Fiscal 2014. The total cost of the redemption was $1.5 million. As a result, all of these preferred issues of stock were either converted to common stock or redeemed in the first quarter of Fiscal 2014 and there are no outstanding shares remaining. Therefore, there is no longer an annual dividend requirement.Off-Balance Sheet Arrangements





None.


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Contractual Obligations
The following tables set forth aggregate contractual obligations and commitments as of February 1, 2014.January 30, 2016.
 
(in thousands)Payments Due by Period
          
 Contractual ObligationsTotal 
Less than 1
year
 
1 - 3
years
 
3 - 5
years
 
More
than 5
years
Capital Lease Obligations$11
 $1
 $3
 $3
 $4
Long-Term Debt Obligations(1)
33,730
 6,793
 16,439
 4,117
 6,381
Operating Lease Obligations1,306,479
 235,049
 405,584
 284,021
 381,825
Purchase Obligations(2)
621,533
 621,533
 
 
 
Long-Term Obligations – Schuh(3)
104,844
 25,800
 78,368
 553
 123
Other Long-Term Liabilities1,254
 176
 351
 351
 376
Total Contractual Obligations(4)
$2,067,851
 $889,352
 $500,745
 $289,045
 $388,709
(in thousands)Payments Due by Period
          
 Contractual ObligationsTotal 
Less than 1
year
 
1 - 3
years
 
3 - 5
years
 
More
than 5
years
Long-Term Debt Obligations$112,058
 $14,182
 $63,308
 $34,568
 $
Operating Lease Obligations1,297,902
 238,660
 387,144
 295,662
 376,436
Purchase Obligations(1)
678,582
 678,582
 
 
 
Long-Term Obligations – Schuh(2)
2,939
 984
 1,501
 454
 
Other Long-Term Liabilities1,134
 176
 351
 351
 256
Total Contractual Obligations(3)
$2,092,615
 $932,584
 $452,304
 $331,035
 $376,692
 
(in thousands)Amount of Commitment Expiration Per PeriodAmount of Commitment Expiration Per Period
                  
Commercial Commitments
Total Amounts
Committed
 
Less than 1
year
 
1 - 3
years
 
3 - 5
years
 
More
than 5
years
Total Amounts
Committed
 
Less than 1
year
 
1 - 3
years
 
3 - 5
years
 
More
than 5
years
Letters of Credit$14,466
 $14,466
 $
 $
 $
$13,519
 $13,519
 $
 $
 $
Total Commercial Commitments$14,466
 $14,466
 $
 $
 $
$13,519
 $13,519
 $
 $
 $

(1) Excludes interest on revolver borrowings due to uncertainty of timing of payments.
(2) OpenRepresents open purchase orders for inventory.
(3)(2) Includes deferred purchase price payments and earn-out bonus payments related to the Schuh acquisition and interest on the UK term loans.debt. For additional information, see Notes 2 andNote 6 to the Consolidated Financial Statements included in Item 8.8, "Financial Statements and Supplementary Data".
(4)(3) Excludes unrecognized tax benefits of $10.7$10.2 million due to their uncertain nature in timing of payments, if any.

The total accrued benefit liability for pension and other postretirement benefit plans as of January 30, 2016, was $16.8 million. This amount is impacted by, among other items, pension expense, funding levels, plan amendments, changes in plan demographics and assumptions, and the investment return on plan assets. Because the accrued liability does not represent expected liquidity needs, the Company did not include this amount in the contractual obligations table. There is no requirement for the Company to make a pension plan contribution. See Note 10 to the Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data".
Capital Expenditures
Capital expenditures were $98.5$100.7 million, $71.7$103.1 million and $49.5$98.5 million for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. The $26.8$2.4 million increasedecrease in Fiscal 20142016 capital expenditures as compared to Fiscal 2013 reflected an increase2015 is primarily due to decreases in retail store capital expenditures due to the construction of 183 new stores and leased departments openedLids Sports Group partially offset by increased retail capital expenditures in Fiscal 2014, compared to 104 stores in Fiscal 2013.Journeys Group. The $22.2$4.6 million increase in Fiscal 20132015 capital expenditures as compared to Fiscal 20122014 reflected an increase in retail store capital expendituresprimarily due to themajor capital projects related to a fit-out of a new distribution center and construction of 104a new stores opened in Fiscal 2013, compared to 70 stores in Fiscal 2012, and increased major renovations due to lease renewals.office building.
Total capital expenditures in Fiscal 20152017 are expected to be approximately $149$125 million to $135 million. These include retail capital expenditures of approximately $134$114 million to $124 million to open approximately 2540 Journeys stores, including 510 in Canada, 2545 Journeys Kidz stores, 15two Little Burgundy stores, nine Schuh stores, including three Schuh Kids 11stores, nine Johnston & Murphy shops and factory stores, and 26825 Lids Sports Group stores, and leased departments, including 4520 Lids stores, with 155 stores in Canada, 48and 5 Lids Locker Room and Lids Clubhouse stores, and 175 Locker Room by Lids leased departments in Macy's department stores, and to complete approximately 164231 major store renovations. The planned amount of capital expenditures in Fiscal 20152017 for wholesale operations and other purposes is approximately $15$11 million, including approximately $8$5.6 million for new systems to improve customer service and support the Company’s growth.systems.
Future Capital Needs
The Company expects that cash on hand and cash provided by operations and borrowings under its Credit FacilityFacilities will be sufficient to support seasonal working capital, and capital expenditure requirements and share repurchases during Fiscal 2015.2017. The approximately $7.3$11.4 million of costs associated with discontinued operations that are expected to be paid during the next twelve months are expected to be funded from cash on hand, cash generated from operations and borrowings under the Credit FacilityFacilities during Fiscal 2015.


2017.

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The Company had total available cash and cash equivalents of $59.4$133.3 million and $59.8$112.9 million as of February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, respectively, of which approximately $39.4$24.1 million and $38.5$25.2 million was held by the Company's foreign subsidiaries as of February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, respectively. The Company's strategic plan does not require the repatriation of foreign cash in order to fund its operations in the U.S., and it is the Company's current intention to permanently reinvest its foreign cash and cash equivalents outside of the U.S. If the Company were to repatriate foreign cash to the U.S., it would be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations as a result of the repatriation.
Common Stock Repurchases
Pursuant to its Board-approved share repurchase program, the Company repurchased 2,383,384 shares at a cost of $144.9 million during Fiscal 2016, of which $7.2 million was not paid in the fourth quarter but included in other accrued liabilities in the Consolidated Balance Sheets. The Company has repurchased 663,200 shares in the first quarter of Fiscal 2017, through March 29, 2016, at a cost of $43.2 million. The Company has $40.9 million remaining as of March 29, 2016 under its current $100.0 million share repurchase authorization. The Company repurchased 64,709 shares at a cost of $4.6 million during Fiscal 2015. The Company repurchased 337,665 shares of common stock at a cost of $20.7 million during Fiscal 2014. During the third quarter of Fiscal 2014, the Company's board of directors increased the share repurchase authorization to $75.0 million. Shares repurchased during the third quarter of Fiscal 2014, at a cost of $9.5 million, will be applied to the new repurchase authorization. Therefore, the Company has $65.5 million remaining under its current $75.0 million share repurchase authorization. The Company repurchased 645,904 shares at a cost of $37.6 million during Fiscal 2013. The Company did not repurchase any shares during Fiscal 2012.
Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters, including those disclosed in Item 3, "Legal Proceedings" and Note 13 to the Company’s Consolidated Financial Statements. The Company has made pretax accruals for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2016, $2.8 million reflected in Fiscal 2015 and $0.5 million reflected in Fiscal 2014, $0.8 million reflected in Fiscal 2013 and $1.8 million reflected in Fiscal 2012.2014. These charges are included in provision for discontinued operations, net in the Consolidated Statements of Operations because they relate to former facilities operated by the Company. The Company monitors these matters on an ongoing basis and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as management deems necessary in view of changes in available information. Changes in estimates of liability are reported in the periods when they occur. Consequently, management believes that its reserveaccrued liability in relation to each proceeding is a best estimate of the probable loss connected to the proceeding, or in cases in which no best estimate is possible, the minimum amount in the range of estimated losses, based upon its analysis of the facts and circumstances as of the close of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in environmental proceedings in particular, there can be no assurance that future developments will not require additional reserves,provisions, that some or all reservesliabilities may not be adequate or that the amounts of any such additional reservesprovisions or any such inadequacy will not have a material adverse effect upon the Company’s financial condition or results of operations.
Financial Market Risk
The following discusses the Company’s exposure to financial market risk related to changes in interest rates.risk.
Outstanding Debt of the Company – The Company has $33.7$28.9 million of outstanding U.K. term loans at a weighted average interest rate of 3.40%2.78% as of February 1, 2014.January 30, 2016. A 100 basis point adverse changeincrease in interest rates would increase annual interest expense by $0.3 million on the $33.7$28.9 million term loans. The Company has $24.8 million of outstanding U.K. revolver borrowings at a weighted average interest rate of 2.78% as of January 30, 2016. A 100 basis point increase in interest rates would increase annual interest expense by $0.2 million on the $24.8 million revolver borrowings. The Company has $58.3 million of outstanding U.S. revolver borrowings at a weighted average interest rate of 2.12% as of January 30, 2016. A 100 basis point increase in interest rates would increase annual interest expense by $0.6 million on the $58.3 million revolver borrowings.
Cash and Cash Equivalents – The Company’s cash and cash equivalent balances are invested in financial instruments with original maturities of three months or less. The Company did not have significant exposure to changing interest rates on invested cash at February 1, 2014.January 30, 2016. As a result, the Company considers the interest rate market risk implicit in these investments at February 1, 2014January 30, 2016 to be low.
Summary – Based on the Company’s overall market interest rate exposure at January 30, 2016, the Company believes that the effect, if any, of reasonably possible near-term changes in interest rates on the Company’s consolidated financial position, results of operations or cash flows for Fiscal 2017 would not be material.
Accounts Receivable – The Company’s accounts receivable balance at February 1, 2014January 30, 2016 is concentrated primarily in two of its footwear wholesale businesses, which sell primarily to department stores and independent retailers across the United States and its Lids Team Sports wholesale business, which sells primarily to colleges and high school athletic teams and their fan bases. Including bothStates. In the footwear wholesale and Lids Team Sports wholesale businesses, threeone customer accounted for 9%, two other customers each accounted for 5% and no8% while all other customercustomers accounted for more than 4%7% or less of the Company’s total trade receivables balance as of February 1, 2014.January

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30, 2016. The Company monitors the credit quality of its customers and establishes an allowance for doubtful accounts based upon factors surrounding credit risk of specific customers, historical trends and other information, as well as customer specific factors; however, credit risk is affected by conditions or occurrences within the economy and the retail industry, as well as company-specific information.
SummaryForeign Currency Exchange RiskBased onThe Company is exposed to translation risk because certain of its foreign operations utilize the Company’s overall market interest rate exposure at February 1, 2014,local currency as their functional currency and those financial results must be translated into United States dollars. As currency exchange rates fluctuate, translation of the Company believes thatCompany's financial statements of foreign businesses into United States dollars affects the effect, if any,comparability of reasonably possible near-term changes in interest rates on the Company’s consolidated financial position, results of operations or cash flows for Fiscal 2015 would not be material.

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between years.
New Accounting Principles
In February 2013,2016, the Financial Accounting Standards BoardFASB issued ASU 2016-02, "Leases" ("FASB"ASU 2016-02") issued Accounting Standards Update (“ASU”) No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“AOCI”), which sets forth additional disclosure requirements for items reclassified out of AOCI. The standard's core principle is to increase transparency and into net income,comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information. The standard is effective for annualfiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which would be the beginning of our Fiscal 2020 or February 2019. Early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on its Consolidated Financial Statements and related disclosures and is expecting a material impact because the Company is party to a significant number of lease contracts.

In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"). ASU 2015-17 requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and may be applied either prospectively or retrospectively. Early adoption is permitted. As of January 30, 2016, the Company has $29.0 million of current deferred tax assets that will be reclassed to noncurrent deferred tax assets on its Consolidated Balance Sheets. The change to noncurrent classification could have a significant impact on our working capital. The Company is currently assessing which transition method will be adopted.

In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03"). In August 2015, the FASB issued ASU 2015-15, "Presentation and Subsequent measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements" ("ASU 2015-15"). ASU 2015-03 will require that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the debt. ASU 2015-15 allows an entity to present debt issuance costs associated with a revolving line of credit arrangement as an asset, regardless of whether a balance is outstanding. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03 or ASU 2015-15. These ASU's are effective for annual reporting periods beginning after December 15, 2012.2015, including interim periods within that reporting period, with early adoption permitted. ASU 2015-03 will require the Company to reclassify its deferred financing costs associated with its long-term debt from other noncurrent assets to long-term debt on a retrospective basis. The Company adopteddoes not expect the new standards to impact the Company's results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2013-022014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry-specific requirements and merges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. ASU 2014-09 was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, however, in August 2015, the first quarterFASB deferred this ASU for one year, which would be the beginning of our Fiscal 2014 by presenting amounts reclassified out2019 or February 2018. The amendment is to be applied either retrospectively to each prior reporting period presented or with the cumulative effect recognized at the date of AOCIinitial adoption as a separate disclosure in Note 1an adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets on the balance sheet). Early adoption is not permitted. The Company is currently assessing the impact the adoption of ASU 2014-09 will have on its Consolidated Financial Statements. Amounts reclassified out of AOCI wereStatements and related to amortization of net actuarial loss associated with the Company's pension and postretirement plans.disclosures, including which transition method will be adopted.
Inflation
The Company does not believe inflation has had a material impact on sales or operating results during periods covered in this discussion.


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ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company incorporates by reference the information regarding market risk appearing under the heading “Financial Market Risk” in Item 7, Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations."


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ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
 
  
 Page
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements


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Report of Independent Registered Public Accounting Firm
On Internal Control over Financial Reporting
The Board of Directors and Shareholders
Genesco Inc.
We have audited Genesco Inc. and Subsidiaries' internal control over financial reporting as of February 1, 2014,January 30, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992(2013 Framework) (the COSO criteria). Genesco Inc. and Subsidiaries' management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Genesco Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of February 1, 2014,January 30, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Genesco Inc. and Subsidiaries as of February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, and the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three fiscal years in the period ended February 1, 2014,January 30, 2016, and our report dated April 2, 2014March 30, 2016 expressed an unqualified opinion thereon. Our audits also included the financial statement schedule listed in the Index at Item 15.

 /s/ Ernst & Young LLP
Nashville, Tennessee 
April 2, 2014March 30, 2016 


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Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
The Board of Directors and Shareholders
Genesco Inc.
We have audited the accompanying consolidated balance sheets of Genesco Inc. and Subsidiaries (the “Company”) as of February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, and the related consolidated statements of operations, comprehensive income, cash flows and equity for each of the three fiscal years in the period ended February 1, 2014.January 30, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Genesco Inc. and Subsidiaries at February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended February 1, 2014,January 30, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of February 1, 2014,January 30, 2016, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992(2013 Framework), and our report dated April 2, 2014March 30, 2016 expressed an unqualified opinion thereon.

 /s/ Ernst & Young LLP
Nashville, Tennessee 
April 2, 2014March 30, 2016 


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Genesco Inc.
and Subsidiaries
Consolidated Balance Sheets
In Thousands, except share amounts
 
As of Fiscal Year EndAs of Fiscal Year End
AssetsFebruary 1, 2014 February 2, 2013January 30, 2016 January 31, 2015
Current Assets:
Cash and cash equivalents$59,447
 $59,795
$133,288
 $112,867
Accounts receivable, net of allowances of $4,420 at February 1,   
2014 and $6,082 at February 2, 201352,646
 48,214
Accounts receivable, net of allowances of $2,960 at January 30,   
2016 and $4,191 at January 31, 201547,265
 55,263
Inventories567,261
 505,344
529,758
 598,145
Deferred income taxes23,089
 23,725
28,965
 28,293
Prepaids and other current assets54,432
 45,193
60,810
 53,090
Total current assets756,875
 682,271
800,086
 847,658
      
Property and equipment:      
Land6,169
 6,128
8,038
 7,653
Buildings and building equipment20,474
 20,390
51,768
 32,872
Computer hardware, software and equipment131,110
 120,757
183,985
 164,512
Furniture and fixtures173,992
 148,903
209,337
 192,078
Construction in progress35,623
 8,702
16,190
 25,587
Improvements to leased property335,287
 318,376
359,591
 349,087
Property and equipment, at cost702,655
 623,256
828,909
 771,789
Accumulated depreciation(422,618) (381,587)(505,581) (466,037)
Property and equipment, net280,037
 241,669
323,328
 305,752
Deferred income taxes3,342
 18,731
959
 31
Goodwill288,100
 273,827
281,385
 296,865
Trademarks, net of accumulated amortization of $4,312 at   
February 1, 2014 and $3,350 at February 2, 201377,571
 77,408
Other intangibles, net of accumulated amortization of $20,645 at   
February 1, 2014 and $17,220 at February 2, 20139,082
 11,598
Trademarks, net of accumulated amortization of $5,039 at   
January 30, 2016 and $5,054 at January 31, 201586,740
 82,263
Other intangibles, net of accumulated amortization of $15,947 at   
January 30, 2016 and $23,389 at January 31, 20153,569
 11,585
Other noncurrent assets24,277
 20,568
45,416
 38,933
Total Assets$1,439,284
 $1,326,072
$1,541,483
 $1,583,087

















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Genesco Inc.
and Subsidiaries
Consolidated Balance Sheets
In Thousands, except share amounts


As of Fiscal Year EndAs of Fiscal Year End
Liabilities and EquityFebruary 1, 2014 February 2, 2013January 30, 2016 January 31, 2015
Current Liabilities:      
Accounts payable$145,483
 $118,350
$154,241
 $176,307
Accrued employee compensation49,078
 55,241
23,666
 88,030
Accrued other taxes26,247
 25,985
24,508
 33,965
Accrued income taxes2,188
 2,096
16,349
 12,921
Current portion – long-term debt6,793
 5,675
14,182
 13,152
Other accrued liabilities68,526
 60,659
79,282
 71,036
Provision for discontinued operations7,263
 7,192
11,389
 10,505
Total current liabilities305,578
 275,198
323,617
 405,916
Long-term debt26,937
 45,007
97,876
 16,003
Pension liability9,223
 20,514
9,957
 22,184
Deferred rent and other long-term liabilities175,311
 157,407
149,020
 135,953
Provision for discontinued operations4,112
 4,159
4,230
 4,254
Total liabilities521,161
 502,285
584,700
 584,310
Commitments and contingent liabilities

 



 

Equity      
Non-redeemable preferred stock1,305
 3,924
1,077
 1,274
Common equity:      
Common stock, $1 par value:      
Authorized: 80,000,000 shares      
Issued/Outstanding:      
February 1, 2014 – 24,407,724/23,919,260   
February 2, 2013 – 24,484,915/23,996,45124,408
 24,485
January 30, 2016 – 22,322,799/21,834,335   
January 31, 2015 – 24,515,362/24,026,89822,323
 24,515
Additional paid-in capital190,568
 170,360
224,004
 208,888
Retained earnings734,533
 669,189
768,222
 820,563
Accumulated other comprehensive loss(16,767) (28,241)(42,613) (40,576)
Treasury shares, at cost (488,464 shares)(17,857) (17,857)(17,857) (17,857)
Total Genesco equity916,190
 821,860
955,156
 996,807
Noncontrolling interest – non-redeemable1,933
 1,927
1,627
 1,970
Total equity918,123
 823,787
956,783
 998,777
Total Liabilities and Equity$1,439,284
 $1,326,072
$1,541,483
 $1,583,087


The accompanying Notes are an integral part of these Consolidated Financial StatementsStatements.







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Genesco Inc.
and Subsidiaries
Consolidated Statements of Operations
In Thousands, except per share amounts
 
Fiscal YearFiscal Year
 2014
2013
2012
 2016
2015
2014
Net sales $2,624,972
$2,604,817
$2,291,987
 $3,022,234
$2,859,844
$2,624,972
Cost of sales 1,325,922
1,306,200
1,143,632
 1,578,768
1,459,433
1,325,922
Selling and administrative expenses 1,134,274
1,111,717
984,193
 1,284,322
1,230,864
1,134,274
Asset impairments and other, net 1,341
17,037
2,677
 7,893
2,281
1,341
Earnings from operations 163,435
169,863
161,485
 151,251
167,266
163,435
Gain on sale of Lids Team Sports (4,685)

Indemnification asset write-off 
7,050

Interest expense, net:    
Interest expense 4,641
5,126
5,157
 4,414
3,337
4,641
Interest income (66)(95)(65) (11)(110)(66)
Total interest expense, net 4,575
5,031
5,092
 4,403
3,227
4,575
Earnings from continuing operations before income taxes 158,860
164,832
156,393
 151,533
156,989
158,860
Income tax expense 65,878
51,935
62,942
 56,152
57,616
65,878
Earnings from continuing operations 92,982
112,897
93,451
 95,381
99,373
92,982
Provision for discontinued operations, net (329)(462)(1,025) (812)(1,648)(329)
Net Earnings $92,653
$112,435
$92,426
 $94,569
$97,725
$92,653
    
Basic earnings per common share:    
Continuing operations $3.99
$4.78
$3.89
 $4.17
$4.23
$3.99
Discontinued operations (0.01)(0.02)(0.05) (0.04)(0.07)(0.01)
Net earnings $3.98
$4.76
$3.84
 $4.13
$4.16
$3.98
Diluted earnings per common share:    
Continuing operations $3.94
$4.69
$3.83
 $4.15
$4.19
$3.94
Discontinued operations (0.02)(0.01)(0.04) (0.04)(0.07)(0.02)
Net earnings $3.92
$4.68
$3.79
 $4.11
$4.12
$3.92

The accompanying Notes are an integral part of these Consolidated Financial Statements.


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Genesco Inc.
and Subsidiaries
Consolidated Statements of Comprehensive Income
In Thousands, except as noted

 Fiscal Year
 201420132012
Net earnings$92,653
$112,435
$92,426
Other comprehensive income (loss):   
Gain (loss) on foreign currency forward contract,   
net of tax of $0.0 million for each period
42
(35)
Pension liability adjustment net of tax of $6.2 million   
  and $2.4 million for 2014 and 2013, respectively, and   
  net of tax benefit of $3.1 million for 20129,510
3,657
(4,670)
Postretirement liability adjustment net of tax benefit of   
  $0.3 million for 2014 and $0.1 million for 2013 and 2012(542)(79)(109)
Foreign currency translation adjustments2,506
1,105
(3,847)
Total other comprehensive income (loss)11,474
4,725
(8,661)
Comprehensive Income$104,127
$117,160
$83,765
 Fiscal Year
 201620152014
Net earnings$94,569
$97,725
$92,653
Other comprehensive income (loss):   
Pension liability adjustment net of tax of $6.3 million,   
  $4.0 million and $6.2 million for 2016, 2015 and   
  2014, respectively9,756
(6,343)9,510
Postretirement liability adjustment net of tax of $0.4   
  million, $0.4 million and $0.3 million in 2016, 2015   
  and 2014, respectively666
(644)(542)
Foreign currency translation adjustments(12,459)(16,822)2,506
Total other comprehensive (loss) income(2,037)(23,809)11,474
Comprehensive Income$92,532
$73,916
$104,127

The accompanying Notes are an integral part of these Consolidated Financial Statements.


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Genesco Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
In Thousands
Fiscal YearFiscal Year
2014
2013
2012
2016
2015
2014
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net earnings$92,653
$112,435
$92,426
$94,569
$97,725
$92,653
Adjustments to reconcile net earnings to net cash  
provided by operating activities:  
Depreciation and amortization67,135
63,697
53,737
79,011
74,326
67,135
Amortization of deferred note expense and debt discount801
792
708
820
692
801
Deferred income taxes14,983
(17,618)9,661
(2,125)5,212
14,983
Provision for losses on accounts receivable(525)1,325
2,004
Provision for (recoveries on) accounts receivable637
390
(525)
Indemnification asset write-off
7,050

Impairment of long-lived assets2,347
1,396
1,119
3,125
1,890
2,347
Restricted stock and share-based compensation12,295
10,508
7,660
Restricted stock expense13,758
13,392
12,295
Provision for discontinued operations543
796
1,692
1,333
2,711
543
Tax benefit of stock options and restricted stock exercised(3,784)(4,820)(4,744)
Gain on sale of Lids Team Sports(4,685)

Tax benefit of stock options and restricted stock(150)(3,061)(3,784)
Other1,301
1,327
1,005
3,708
894
1,301
Effect on cash from changes in working capital and other  
assets and liabilities, before acquisitions: 
assets and liabilities, net of acquisitions/dispositions: 
Accounts receivable(3,684)(5,821)3,011
(6,669)(1,325)(3,684)
Inventories(58,386)(61,049)(42,324)27,827
(30,955)(58,386)
Prepaids and other current assets(8,885)(4,524)5,286
(8,879)179
(8,885)
Accounts payable19,850
(17,953)(1,201)2,505
27,646
19,850
Other accrued liabilities(10,093)(6,624)9,384
(70,890)52,694
(10,093)
Other assets and liabilities13,448
49,343
5,536
11,223
(59,696)13,448
Net cash provided by operating activities139,999
123,210
144,960
145,118
189,764
139,999
CASH FLOWS FROM INVESTING ACTIVITIES:  
Capital expenditures(98,456)(71,737)(49,456)(100,652)(103,111)(98,456)
Acquisitions, net of cash acquired(13,567)(23,818)(92,985)(35,063)(34,918)(13,567)
Proceeds from asset sales75
81
27
Proceeds from asset sales and sale of business59,915
336
75
Net cash used in investing activities(111,948)(95,474)(142,414)(75,800)(137,693)(111,948)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Payments of capital leases(2)(2)(22)
Payments of long-term debt(6,428)(13,581)(25,321)(24,920)(31,583)(6,428)
Proceeds from issuance of long-term debt15,124


27,417
26,253
15,124
Borrowings under revolving credit facility402,200
439,600
299,800
401,276
280,950
402,200
Payments on revolving credit facility(429,900)(416,900)(294,800)(311,067)(280,950)(429,900)
Tax benefit of stock options and restricted stock exercised3,784
4,820
4,744
Tax benefit of stock options and restricted stock150
3,061
3,784
Shares repurchased(20,676)(37,650)
(137,648)(4,635)(20,676)
Change in overdraft balances6,025
(2,925)2,931
(600)3,489
6,025
Redemption of preferred shares(1,462)



(1,462)
Dividends paid on non-redeemable preferred stock(33)(147)(193)

(33)
Exercise of stock options and issue shares - Employee Stock Purchase Plan3,230
4,965
9,820
Additions to deferred note cost(655)

Exercise of stock options1,442
2,009
3,230
Other(1,788)4
(939)(2,950)(43)(1,790)
Net cash used in financing activities(29,926)(21,816)(3,980)(47,555)(1,449)(29,926)
Effect of foreign exchange rate fluctuations on cash1,527
85
(710)(1,342)2,798
1,527
Net (Decrease) Increase in Cash and Cash Equivalents(348)6,005
(2,144)
Net Increase (Decrease) in Cash and Cash Equivalents20,421
53,420
(348)
Cash and cash equivalents at beginning of period59,795
53,790
55,934
112,867
59,447
59,795
Cash and cash equivalents at end of period$59,447
$59,795
$53,790
$133,288
$112,867
$59,447
Supplemental Cash Flow Information: 
Net cash paid for:  
Interest$3,769
$4,391
$4,789
$3,408
$2,632
$3,769
Income taxes52,618
81,607
50,254
58,940
42,816
52,618
The accompanying Notes are an integral part of these Consolidated Financial Statements.

4750

Table of Contents

Genesco Inc.
and Subsidiaries
Consolidated Statements of Equity

In ThousandsTotal Non-Redeemable Preferred Stock
 
Common
Stock

 
Additional
Paid-In
Capital

 
Retained
Earnings

 
Accumulated
Other
Comprehensive Loss

 
Treasury
Shares

 
Non Controlling
Interest
Non-Redeemable

 
Total
Equity

Total Non-Redeemable Preferred Stock
 
Common
Stock

 
Additional
Paid-In
Capital

 
Retained
Earnings

 
Accumulated
Other
Comprehensive Loss

 
Treasury
Shares

 
Non Controlling
Interest
Non-Redeemable

 
Total
Equity

Balance January 29, 2011$5,183
 $24,163
 $131,910
 $506,127
 $(24,305) $(17,857) $2,503
 $627,724
Net earnings
 
 
 92,426
 
 
 
 92,426
Other comprehensive loss
 
 
 
 (8,661) 
 
 (8,661)
Dividends paid on non-redeemable preferred stock
 
 
 (193) 
 
 
 (193)
Exercise of stock options
 390
 9,297
 
 
 
 
 9,687
Issue shares – Employee Stock Purchase Plan
 3
 130
 
 
 
 
 133
Employee and non-employee restricted stock
 
 7,659
 
 
 
 
 7,659
Share-based compensation
 
 1
 
 
 
 
 1
Restricted stock issuance
 304
 (304) 
 
 
 
 
Restricted shares withheld for taxes
 (93) (4,034) 
 
 
 
 (4,127)
Tax benefit of stock options and               
restricted stock exercises
 
 4,585
 
 
 
 
 4,585
Shares repurchased
 
 
 
 
 
 
 
Other(226) (9) 235
 
 
 
 
 
Noncontrolling interest – loss
 
 
 
 
 
 (254) (254)
Balance January 28, 20124,957
 24,758
 149,479
 598,360
 (32,966) (17,857) 2,249
 728,980
Net earnings
 
 
 112,435
 
 
 
 112,435
Other comprehensive income
 
 
 
 4,725
 
 
 4,725
Dividends paid on non-redeemable preferred stock
 
 
 (147) 
 
 
 (147)
Exercise of stock options
 224
 4,584
 
 
 
 
 4,808
Issue shares – Employee Stock Purchase Plan
 2
 155
 
 
 
 
 157
Employee and non-employee restricted stock
 
 10,508
 
 
 
 
 10,508
Restricted stock issuance
 194
 (194) 
 
 
 
 
Restricted shares withheld for taxes
 (76) 
 (4,455) 
 
 
 (4,531)
Tax benefit of stock options and               
restricted stock exercises
 
 4,820
 
 
 
 
 4,820
Shares repurchased
 (646) 
 (37,004) 
 
 
 (37,650)
Other(1,033) 29
 1,008
 
 
 
 
 4
Noncontrolling interest – loss
 
 
 
 
 
 (322) (322)
Balance February 2, 20133,924
 24,485
 170,360
 669,189
 (28,241) (17,857) 1,927
 823,787
$3,924
 $24,485
 $170,360
 $669,189
 $(28,241) $(17,857) $1,927
 $823,787
Net earnings
 
 
 92,653
 
 
 
 92,653

 
 
 92,653
 
 
 
 92,653
Other comprehensive income
 
 
 
 11,474
 
 
 11,474

 
 
 
 11,474
 
 
 11,474
Dividends paid on non-redeemable preferred stock
 
 
 (33) 
 
 
 (33)
 
 
 (33) 
 
 
 (33)
Exercise of stock options
 130
 2,904
 
 
 
 
 3,034

 130
 2,904
 
 
 
 
 3,034
Issue shares – Employee Stock Purchase Plan
 3
 193
 
 
 
 
 196

 3
 193
 
 
 
 
 196
Employee and non-employee restricted stock
 
 12,295
 
 
 
 
 12,295

 
 12,295
 
 
 
 
 12,295
Restricted stock issuance
 214
 (214) 
 
 
 
 

 214
 (214) 
 
 
 
 
Restricted shares withheld for taxes
 (105) 105
 (6,938) 
 
 
 (6,938)
 (105) 105
 (6,938) 
 
 
 (6,938)
Tax benefit of stock options and                              
restricted stock exercises
 
 3,784
 
 
 
 
 3,784
restricted stock exercised
 
 3,784
 
 
 
 
 3,784
Shares repurchased
 (338)��
 (20,338) 
 
 
 (20,676)
 (338) 
 (20,338) 
 
 
 (20,676)
Redemption of preferred shares(1,462) 
 
 
 
 
 
 (1,462)(1,462) 
 
 
 
 
 
 (1,462)
Other(1,157) 19
 1,141
 
 
 
 
 3
(1,157) 19
 1,141
 
 
 
 
 3
Noncontrolling interest – income
 
 
 
 
 
 6
 6
Noncontrolling interest – gain
 
 
 
 
 
 6
 6
Balance February 1, 2014$1,305
 $24,408
 $190,568
 $734,533
 $(16,767) $(17,857) $1,933
 $918,123
1,305
 24,408
 190,568
 734,533
 (16,767) (17,857) 1,933
 918,123
Net earnings
 
 
 97,725
 
 
 
 97,725
Other comprehensive loss
 
 
 
 (23,809) 
 
 (23,809)
Exercise of stock options
 69
 1,749
 
 
 
 
 1,818
Issue shares – Employee Stock Purchase Plan
 3
 188
 
 
 
 
 191
Employee and non-employee restricted stock
 
 13,392
 
 
 
 
 13,392
Restricted stock issuance
 202
 (202) 
 
 
 
 
Restricted shares withheld for taxes
 (88) 88
 (7,125) 
 
 
 (7,125)
Tax benefit of stock options and              
restricted stock exercised
 
 3,061
 
 
 
 
 3,061
Shares repurchased
 (65) 
 (4,570) 
 
 
 (4,635)
Other(31) (14) 44
 
 
 
 
 (1)
Noncontrolling interest – gain
 
 
 
 
 
 37
 37
Balance January 31, 20151,274
 24,515
 208,888
 820,563
 (40,576) (17,857) 1,970
 998,777
Net earnings
 
 
 94,569
 
 
 
 94,569
Other comprehensive loss
 
 
 
 (2,037) 
 
 (2,037)
Exercise of stock options
 35
 1,273
 
 
 
 
 1,308
Issue shares – Employee Stock Purchase Plan
 3
 131
 
 
 
 
 134
Employee and non-employee restricted stock
 
 13,758
 
 
 
 
 13,758
Restricted stock issuance
 239
 (239) 
 
 
 
 
Restricted shares withheld for taxes
 (66) 66
 (4,408) 
 
 
 (4,408)
Tax benefit of stock options and              
restricted stock exercised
 
 (90) 
 
 
 
 (90)
Shares repurchased
 (2,383) 
 (142,502) 
 
 
 (144,885)
Other(197) (20) 217
 
 
 
 
 
Noncontrolling interest – loss
 
 
 
 
 
 (343) (343)
Balance January 30, 2016$1,077
 $22,323
 $224,004
 $768,222
 $(42,613) $(17,857) $1,627
 $956,783
The accompanying Notes are an integral part of these Consolidated Financial Statements.


4851

Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements



Note 1
Summary of Significant Accounting Policies
Nature of Operations
The Company'sGenesco Inc. and its subsidiaries (collectively the "Company") business includes the design and sourcing, marketing and distribution of footwear and accessories through retail stores in the U.S., Puerto Rico and Canada primarily under the Journeys, Journeys Kidz, Shi by Journeys, Little Burgundy, Underground by Journeys and Johnston & Murphy banners and under the Schuh banner in the United Kingdom, and the Republic of Ireland;Ireland and Germany; through e-commerce websites including journeys.com, journeyskidz.com, shibyjourneys.com, schuh.co.uk, littleburgundyshoes.com, johnstonmurphy.com and trask.com and catalogs, and at wholesale, primarily under the Company's Johnston & Murphy brand, the recently relaunched Trask brand, the licensed Dockers brand and other brands that the Company licenses for footwear, and the Company's SureGrip® line of slip-resistant, occupational footwear. The Company's business also includes Lids Sports Group, which operates headwear and accessory stores in the U.S. and Canada primarily under the Lids, Hat World and Hat Shack banners; the Lids Locker Room and Lids Clubhouse businesses, consisting of sports-oriented fan shops featuring a broad array of licensed merchandise such as apparel, hats and accessories, sports decor and novelty products, operating under various trade names; licensed team merchandise departments in Macy's department stores operated under the name of Locker Room by Lids and on macys.com, under a license agreement with Macy's; andcertain e-commerce operations including lids.com, lids.ca, lidslockerroom.com, lidsclubhouse.com and lidsclubhouse.com; and an athletic team dealer business operating as Lids Team Sports.shop.neweracap.com. Including both the footwear businesses and the Lids Sports Group business, at February 1, 2014,January 30, 2016, the Company operated 2,5682,852 retail stores and leased departments in the U.S., Puerto Rico, Canada, the United Kingdom, and the Republic of Ireland.Ireland and Germany.
During Fiscal 2014,2016, the Company operated five reportable business segments (not including corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz, Shi by Journeys, Little Burgundy and Underground by Journeys retail footwear chains, cataloge-commerce operations and e-commerce operations;catalog; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Lids Sports Group, comprised as described in the preceding paragraph;paragraph plus an athletic team dealer business operating as Lids Team Sports which was sold in the fourth quarter of Fiscal 2016; (iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, catalog and e-commerce operations, catalog and wholesale distribution of products under the Johnston & Murphy and Trask brands; and (v) Licensed Brands, comprised of Dockers® Footwear, sourced and marketed under a license from Levi Strauss & Company; SureGrip®Footwear, occupational footwear primarily sold directly to consumers; and other brands.  

Principles of Consolidation
All subsidiaries are consolidated in the consolidated financial statements. All significant intercompany transactions and accounts have been eliminated.
Fiscal Year
The Company’s fiscal year ends on the Saturday closest to January 31. As a result, Fiscal 20142016 was a 52-week year with 364 days, Fiscal 2013 was a 53-week year with 371 days and Fiscal 20122015 was a 52-week year with 364 days and Fiscal 2014 was a 52-week year with 364 days. Fiscal 2016 ended on January 30, 2016, Fiscal 2015 ended on January 31, 2015 and Fiscal 2014 ended on February 1, 2014, Fiscal 2013 ended on February 2, 2013 and Fiscal 2012 ended on January 28, 2012.


2014.


4952

Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant areas requiring management estimates or judgments include the following key financial areas:

Inventory Valuation
The Company values its inventories at the lower of cost or market.

In its footwear wholesale operations and its Schuh Group segment, and its Lids Sports Group wholesale operations, except for the Anaconda Sports wholesale division, cost is determined using the FIFO method. Market value is determined using a system of analysis which evaluates inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and selling prices reflected in future orders.orders for footwear wholesale. The Company provides reserves when the inventory has not been marked down to market value based on current selling prices or when the inventory is not turning and is not expected to turn at levels satisfactory to the Company.

The Lids Sports Group retail segment and its Anaconda Sports wholesale division employemploys the moving average cost method for valuing inventories and applyapplies freight using an allocation method. The Company provides a valuation allowance for slow-moving inventory based on negative margins and estimated shrink based on historical experience and specific analysis, where appropriate.

In its retail operations, other than the Schuh Group and Lids Sports Group retail segments, the Company employs the retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories.

Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on, markups, markdowns, and shrinkage. These judgments and estimates, coupled with the
fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, the Company employs the retail inventory method in multiple subclasses of inventory with similar gross margins, and analyzes markdown requirements at the stock number level based on factors such as inventory turn, average selling price, and inventory age. In addition, the Company accrues markdowns as necessary. These additional markdown accruals reflect all of the above factors as well as current agreements to return
products to vendors and vendor agreements to provide markdown support. In addition to markdown provisions, the Company maintains provisions for shrinkage and damaged goods based on historical rates.





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Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends, and overall economic conditions. Failure to make appropriate conclusions regarding these factors may result in an overstatement or understatement of inventory value.

Impairment of Long-Lived Assets
The Company periodically assesses the realizability of its long-lived assets, other than goodwill, and evaluates such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets. See also Notes 3 and 5.
The goodwill impairment test involves performing a qualitative assessment, on a reporting unit level, based on current circumstances. If the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a two-step impairment test will not be performed. However, if the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a two-step impairment test is performed. Alternatively, the Company may elect to bypass the qualitative assessment and proceed directly to the two-step impairment test, on a reporting unit level. The first step is a comparison of the fair value and carrying value of the business unit with which the goodwill is associated. The Company estimates fair value using the best information available, and computes the fair value derived by an income approach utilizing discounted cash flow projections. The income approach uses a projection of a reporting unit’s estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions. A key assumption in the Company’s fair value estimate is the weighted average cost of capital utilized for discounting its cash flow projections in its income approach. The Company believes the rate it used in its latest annual test, which was completed inat the end of the fourth quarter, was consistent with the risks inherent in its business and with industry discount rates. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures.
Otherexpenditures.Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss. The amount of impairment is determined by comparing the implied fair value of reporting
unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination.




51

Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

Specifically, the Company would allocate the fair value of the reporting unit to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill.



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Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference.

Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters. The Company has made pretax accruals for certain of these contingencies, including approximately $0.8 million in Fiscal 2016, $2.8 million in Fiscal 2015 and $0.5 million in Fiscal 2014, $0.8 million in Fiscal 2013 and $1.8 million in Fiscal 2012.2014. These charges are included in provision for discontinued operations, net in the Consolidated Statements of Operations because they relate to former facilities operated by the Company. The Company monitors these matters on an ongoing basis and, on a quarterly basis, management reviews the Company’s reserves and accruals, adjusting provisions as management deems necessary in view of changes in available information. Changes in estimates of liability are reported in the periods when they occur. Consequently, management believes that its reserveaccrued liability in relation to each proceeding is a best estimate of probable loss connected to the proceeding, or in cases in which no best estimate is possible, the minimum amount in the range of estimated losses, based upon its analysis of the facts and circumstances as of the close of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in environmental proceedings in particular, there can be no assurance that future developments will not require additional reserves,provisions, that some or all reservesliabilities will be adequate or that the amounts of any such additional reservesprovisions or any such inadequacy will not have a material adverse effect upon the Company’s financial condition, cash flows, or results of operations. See also Notes 3 and 13.

Revenue Recognition
Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales and value added taxes. Catalog and internet sales are recorded at estimated time of delivery to the customer and are net of estimated returns and exclude sales and value added taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Shipping and handling costs charged to customers are included in net sales. Estimated returns are based on historical returns and claims. Actual amounts of markdowns have not differed materially from estimates. Actual returns and claims in any future period may differ from historical experience.

Income Taxes
As part of the process of preparing the Consolidated Financial Statements, the Company is required to estimate its income taxes in each of the tax jurisdictions in which it operates. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within the Consolidated Balance Sheets. The Company then assesses the likelihood that its deferred tax assets will be recovered from future taxable income or other sources. Actual results could differ from this assessment if adequate taxable income is not




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Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

generated in future periods. To the extent the Company believes that recovery of an asset is at risk, valuation allowances are established. To the extent valuation allowances are established or increased in a period, the Company includes an expense within the tax provision in the Consolidated Statements of Operations. These deferred tax valuation allowances may be released in future years when management considers that it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, management will need to periodically evaluate whether or not all available evidence, such as future taxable income and reversal of temporary differences, tax planning strategies, and recent results of operations, provides sufficient positive evidence to offset any potential negative evidence that may exist at such time. In the event the deferred tax valuation allowance is released, the Company would record an income tax benefit for the portion or all of the deferred tax valuation allowance released. At February 1, 2014,January 30, 2016, the Company had a deferred tax valuation allowance of $3.83.4 million.

Income tax reserves for uncertain tax positions are determined using the methodology required by the Income Tax Topic of the Accounting Standards Codification ("Codification"). This methodology requires companies to assess each income tax position taken using a two step process. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may be subject to change or varying interpretation. If the Company’s determinations and estimates prove to be inaccurate, the resulting adjustments could be material to its future financial results.

The Company recorded an effective income tax rate of 37.1% for Fiscal 2016 compared to 36.7% for Fiscal 2015 and 41.5% for Fiscal 2014 compared to 31.5%2014. The effective tax rate for Fiscal 20132016 benefited from increased foreign earnings and 40.2% for Fiscal 2012.lowering of foreign tax rates combined with a release of $1.3 million in valuation allowance on foreign net operating losses no longer required. The tax rate for Fiscal 20132015 was lower compared tothan Fiscal 2014 and Fiscal 2012 primarily due to thea $7.0 million reversal of charges previously recorded charges related to formerly uncertain tax positions duethat were recorded by Schuh at the time of the purchase by the Company, which were favorably resolved during Fiscal 2015. Related to the expiration of the applicable statutes of limitations and a settlement with a state tax authority more favorable than anticipated related to othersame uncertain tax positions. position, the Company wrote off a $7.1 million indemnification asset during Fiscal 2015.

Postretirement Benefits Plan Accounting
Full-time employees who had at least 1,0001000 hours of service in calendar year 2004, except employees in the Lids Sports Group and Schuh Group segments, are covered by a defined benefit pension plan. The Company froze the defined benefit pension plan effective January 1, 2005. The Company also provides certain former employees with limited medical and life insurance benefits. The Company funds at least the minimum amount required by the Employee Retirement Income Security Act.








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Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

As required by the Compensation – Retirement Benefits Topic of the Codification, the Company is required to recognize the overfunded or underfunded status of postretirement benefit plans as an asset or liability, respectively, in their Consolidated Balance Sheets and to recognize changes in that funded status in accumulated other comprehensive loss, net of tax, in the year in which the changes occur.

The Company accounts for the defined benefitrecognizes pension plans using the Compensation-Retirement Benefits Topic of the Codification. As permitted under this topic, pension expense is recognized on an accrual basis over employees’ approximate service periods. The calculation of pension expense
and the corresponding liability requires the use of a number of critical assumptions, including the expected long-term rate of return on plan assets and the assumed discount rate, as well as the recognition of actuarial gains and losses. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions.

The Company utilizes a calculated value of assets, which is an averaging method that recognizes changes in the fair values of assets over a period of five years. Accounting principles generally accepted in the United States require that the Company recognize a portion of these losses when they exceed a calculated threshold. These losses might be recognized as a component of pension expense in future years and would be amortized over the average future service of employees, which is currently approximately nine years.

Cash and Cash Equivalents
The Company had total available cash and cash equivalents of $59.4$133.3 million and $59.8$112.9 million as of February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, respectively, of which approximately $24.1 million and $25.2 million was held by the Company's foreign subsidiaries as of January 30, 2016 and January 31, 2015, respectively. IncludedThe Company's strategic plan does not require the repatriation of foreign cash in order to fund its operations in the U.S., and it is the Company's current intention to permanently reinvest its foreign cash and cash equivalents outside of the U.S. If the Company were to repatriate foreign cash to the U.S., it would be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations as a result of the repatriation. There were no cash equivalents included in cash and cash equivalents at February 1, 2014January 30, 2016 and February 2, 2013 are cash equivalents of $0.0 million and $0.2 million, respectively.January 31, 2015. Cash equivalents are highly-liquid financial instruments having an original maturity of three months or less.
At February 1, 2014,January 30, 2016, substantially all of the Company’s domestic cash was invested in deposit accounts at FDIC-insured banks. The majority of payments due from banks for domestic customer credit card transactions process within 24 - 48 hours and are accordingly classified as cash and cash equivalents in the Consolidated Balance Sheets.

At February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, outstanding checks drawn on zero-balance accounts at certain domestic banks exceeded book cash balances at those banks by approximately $42.145.0 million and $36.145.6 million, respectively. These amounts are included in accounts payable in the Consolidated Balance Sheets.





57

Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

Concentration of Credit Risk and Allowances on Accounts Receivable
The Company’s footwear wholesale businesses sell primarily to independent retailers and department stores across the United States. Receivables arising from these sales are not collateralized. Customer credit risk is affected by conditions or occurrences within the economy and the retail industry as well as by customer specific factors. The Company’s Lids Team Sports wholesale business sells primarily to colleges and high school athletic teams and their fan bases. Including bothIn the footwear wholesale and Lids Team Sports wholesale businesses, three customers eachone customer accounted for 5%9% of the Company’s total trade receivables balance while noand two other customercustomers each accounted for more than8% of the Company's total trade receivables balance, while all other customers accounted for 4%7% or less of the Company’s total trade receivables balance as of February 1, 2014.January 30, 2016.

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information, as well as customer specific factors. The Company also establishes allowances for sales returns, customer deductions and co-op advertising based on specific circumstances, historical trends and projected probable outcomes.


54

Table of Contents

Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized over the estimated useful life of related assets. Depreciation and amortization expense are computed principally by the straight-line method over the following estimated useful lives:

Buildings and building equipment20-45 years
Computer hardware, software and equipment3-10 years
Furniture and fixtures10 years

Depreciation expense related to property and equipment was approximately $76.2 million, $71.0 million and $63.9 million for Fiscal 2016, 2015 and 2014, respectively.

Leases
Leasehold improvements and properties under capital leases are amortized on the straight-line method over the shorter of their useful lives or their related lease terms and the charge to earnings is included in selling and administrative expenses in the Consolidated Statements of Operations.

Certain leases include rent increases during the initial lease term. For these leases, the Company recognizes the related rental expense on a straight-line basis over the term of the lease (which
includes any rent holidays and the pre-opening period of construction, renovation, fixturing and merchandise placement) and records the difference between the amounts charged to operations and amounts paid as deferred rent.

The Company occasionally receives reimbursements from landlords to be used towards construction of the store the Company intends to lease. Leasehold improvements are recorded at their gross costs including items reimbursed by landlords. The reimbursements are amortized as a reduction of rent expense over the initial lease term.

Note 1

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Summary of Significant Accounting Policies, Continued

The Consolidated Balance Sheets include asset retirement obligations related to leases of $10.6 million and $9.8 million as of January 30, 2016 and January 31, 2015, respectively.

Acquisitions
Acquisitions are accounted for using the Business Combinations Topic of the Codification. The total purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values at acquisition.

Goodwill and Other Intangibles
Under the provisions of the Intangibles – Goodwill and Other Topic of the Codification, goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually during the fourth quarter, for impairment. The Company will update the tests between annual tests if events or
circumstances occur that would more likely than not reduce the fair value of the business unit with which the goodwill is associated below its carrying amount. It is also required that intangible assets with finite lives be amortized over their respective lives to their estimated residual values, and reviewed for impairment in accordance with the Property, Plant and Equipment Topic of the Codification.

Intangible assets of the Company with indefinite lives are primarily goodwill and identifiable trademarks net of amortization, acquired in connection with the acquisition of Little Burgundy in December 2015, Schuh Group Ltd. in
June 2011, and Hat World Corporation in April 2004.2004 and various other small acquisitions. The Consolidated Balance Sheets include goodwill of $182.4180.9 million for the Lids Sports Group, $104.990.3 million for the Schuh Group, $9.4 million for Journeys Group and $0.8 million for Licensed Brands at January 30, 2016, and $200.1 million for the Lids Sports Group, $96.0 million for the Schuh Group and $0.8 million for Licensed Brands at February 1, 2014, and $172.3 million for the Lids Sports Group, $100.7 million for the Schuh Group and $0.8 million for Licensed Brands at February 2, 2013.January 31, 2015. The Company tests for impairment of intangible assets with an indefinite life, relying on a number of factors including operating results, business plans, projected future cash flows and observable market data. The impairment test for identifiable assets not subject to amortization consists of a comparison of the fair value of the

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and Subsidiaries
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Note 1
Summary of Significant Accounting Policies, Continued

intangible asset with its carrying amount. The Company has not recorded an impairment charge for intangible assets.

In connection with acquisitions, the Company records goodwill on its Consolidated Financial Statements.Balance Sheets. This asset is not amortized but is subject to an impairment test at least annually, based on projected future cash flows from the acquired business discounted at a rate commensurate with the risk the Company considers to be inherent in its current business model. The Company performs the impairment test annually as of the close of its fiscal year, or more frequently if events or circumstances indicate that the value of the asset might be impaired.

As a result of the various acquisitions comprising the Lids Team Sports team dealer business, the Company carries goodwill at a value of $14.2 million on its Consolidated Balance Sheets related to such acquisitions. The Company found that the result of its annualhas not recorded an impairment test, which valued the business at approximately $3.9 million in excess of its carrying value, indicated no impairment at that time. The Company may determine in future impairment tests that some or all of the carrying value of the goodwill may not be recoverable. Such a finding would require a write-off of the amount of the carrying value that is impaired, which would reduce the Company's profitability in the period of the impairment charge. Holding all other assumptions constant as of the measurement date, the Company noted that an increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the Lids Team Sports business by $5.9 million. Furthermore, the Company noted that a decrease in projected annual revenue by one percent would reduce the fair value of the Lids Team Sports business by $0.4 million. However, if other assumptions do not remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount.charge for goodwill.

Identifiable intangible assets of the Company with finite lives are trademarks, customer lists, in-place leases, non-compete agreements and a vendor contract. They are subject to amortization based upon
their estimated useful lives. Finite-lived intangible assets are evaluated for impairment using a process


Note 1

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Notes to Consolidated Financial Statements


Summary of Significant Accounting Policies, Continued

similar to that used to evaluate other definite-lived long-lived assets, a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount
by which the carrying value exceeds the fair value of the asset.
Fair Value of Financial Instruments
The carrying amounts and fair values of the Company’s financial instruments at February 1, 2014January 30, 2016 and February 2, 2013January 31, 2015 are:
 
In thousands
February 1,
2014
 February 2, 2013
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
U.S. Revolver Borrowings$
 $
 $27,700
 $27,742
UK Term Loans33,730
 33,840
 22,982
 22,982



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Summary of Significant Accounting Policies, Continued
In thousandsJanuary 30, 2016 January 31, 2015
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
U.S. Revolver Borrowings$58,344
 $58,480
 $
 $
UK Term Loans28,896
 28,901
 29,155
 29,126
UK Revolver Borrowings24,818
 24,630
 
 

Debt fair values were determined using a discounted cash flow analysis based on current market interest rates for similar types of financial instruments and would be classified in Level 2 as defined in Note 5.

Carrying amounts reported on the Consolidated Balance Sheets for cash, cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturity of these instruments.

Cost of Sales
For the Company’s retail operations, the cost of sales includes actual product cost, the cost of transportation to the Company’s warehouses from suppliers and the cost of transportation from the Company’s warehouses to the stores. Additionally, the cost of its distribution facilities allocated to its retail operations is included in cost of sales.

For the Company’s wholesale operations, the cost of sales includes the actual product cost and the cost of transportation to the Company’s warehouses from suppliers.

Selling and Administrative Expenses
Selling and administrative expenses include all operating costs of the Company excluding (i) those related to the transportation of products from the supplier to the warehouse, (ii) for its retail operations, those related to the transportation of products from the warehouse to the store and (iii) costs of its distribution facilities which are allocated to its retail operations. Wholesale and unallocated retail costs
of distribution are included in selling and administrative expenses in the amounts of $8.79.6 million, $8.2$9.1 million and $9.2$8.7 million for Fiscal 2016, 2015 and 2014, 2013respectively.

EVA Incentive Plan
Under the Company's EVA Incentive Plan, bonus awards in excess of a specified cap in any one year are retained and 2012, respectively.paid over three subsequent years, subject to reduction or elimination by deteriorating financial performance and historically were subject to forfeiture if the participant voluntarily resigns
Note 1

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Notes to Consolidated Financial Statements


Summary of Significant Accounting Policies, Continued

from employment with the Company. As a result, the bonus awards were subject to service conditions that resulted in recognition of expense over the period of service by the respective employee. During
the first quarter of Fiscal 2015, the Company amended the plan to remove the future service requirement for the payment of the retained bonuses. As a result, the bonus expense that would have been deferred
under the previous plan terms is now recognized in the first year of service. The Company recorded a $5.7 million charge to earnings in the first quarter of Fiscal 2015 in connection with the amendment related to bonus amounts previously deferred to future years.

Gift Cards
The Company has a gift card program that began in calendar 1999 for its Lids Sports Group operations and calendar 2000 for its footwear operations. The gift cards issued to date do not expire. As such, the Company recognizes income when: (i) the gift card is redeemed by the customer; or (ii) the likelihood of the gift card being redeemed by the customer for the purchase of goods in the future is remote and there are no related escheat laws (referred to as “breakage”). The gift card breakage rate is based
upon historical redemption patterns and income is recognized for unredeemed gift cards in proportion to those historical redemption patterns.

Gift card breakage is recognized in revenues each period. Gift card breakage recognized as revenue was $0.81.2 million, $0.7$1.0 million and $0.6$0.8 million for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. The Consolidated Balance Sheets include an accrued liability for gift cards of $14.416.9 million and $13.115.8 million at February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, respectively.

Buying, Merchandising and Occupancy Costs
The Company records buying, merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin. Retail occupancy costs recorded in selling and administrative expense were $381.6$432.9 million, $359.3$413.6 million and $314.6$381.6 million for Fiscal 2016, 2015 and 2014, 2013 and 2012, respectively.


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Summary of Significant Accounting Policies, Continued

Shipping and Handling Costs
Shipping and handling costs related to inventory purchased from suppliers are included in the cost of inventory and are charged to cost of sales in the period that the inventory is sold. All other shipping and handling costs are charged to cost of sales in the period incurred except for wholesale and unallocated retail costs of distribution, which are included in selling and administrative expenses on the Consolidated Statements of Operations.

Preopening Costs
Costs associated with the opening of new stores are expensed as incurred, and are included in selling and administrative expenses on the Consolidated Statements of Operations.

Store Closings and Exit Costs
From time to time, the Company makes strategic decisions to close stores or exit locations or activities. Under the provisions of the Property, Plant, and Equipment Topic of the Codification, which the

Note 1

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Summary of Significant Accounting Policies, Continued

Company adopted in the first quarter of Fiscal 2015, the definition of a discontinued operation was amended. A discontinued operation may include a component of an entity or a group of components
of an entity that represent a strategic shift that has or will have a major effect on an entity's operation or financial results. If stores or operating activities to be closed or exited constitute a component or
group of components as defined bythat represent a strategic shift in the Property, Plant and Equipment Topic of the Codification, and will not result in a migration of customers and cash flows,Company's operations, these closures will be considered discontinued operations when the related assets meet the criteria to be classified as held for sale, or at the cease-use date, whichever occurs first.operations. The results of operations of discontinued operations are
presented retroactively, net of tax, as a separate component on the Consolidated Statements of Operations, if material individually or cumulatively.Operations. In each of the years presented, no store closings meetinghave met the discontinued operations criteria have been material individually or cumulatively.criteria.

Assets related to planned store closures or other exit activities are reflected as assets held for sale and recorded at the lower of carrying value or fair value less costs to sell when the required criteria, as
defined by the Property, Plant and Equipment Topic of the Codification, are satisfied. Depreciation ceases on the date that the held for sale criteria are met.

Assets related to planned store closures or other exit activities that do not meet the criteria to be classified as held for sale are evaluated for impairment in accordance with the Company’s normal impairment policy, but with consideration given to revised estimates of future cash flows. In any event, the remaining depreciable useful lives are evaluated and adjusted as necessary.

Exit costs related to anticipated lease termination costs, severance benefits and other expected charges are accrued for and recognized in accordance with the Exit or Disposal Cost Obligations Topic of the Codification.

Advertising Costs
Advertising costs are predominantly expensed as incurred. Advertising costs were $56.973.7 million, $48.3$67.0 million and $42.5$56.9 million for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. Direct response advertising costs for catalogs are capitalized in accordance with the Other Assets and Deferred Costs Topic for Capitalized Advertising Costs of the Codification. Such costs are amortized over the estimated future period as revenues are realized from such advertising, not to exceed six months.



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Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

The Consolidated Balance Sheets include prepaid assets for direct response advertising costs of $2.3 million and $1.42.0 million at February 1, 2014January 30, 2016 and February 2, 2013.$2.3 million at January 31, 2015.

Consideration to Resellers
In its wholesale businesses, the Company does not have any written buy-down programs with retailers, but the Company has provided certain retailers with markdown allowances for obsolete and slow moving products that are in the retailer’s inventory. The Company estimates these allowances and provides for
them as reductions to revenues at the time revenues are recorded. Markdowns are negotiated with retailers and changes are made to the estimates as agreements are reached. Actual amounts for markdowns have not differed materially from estimates.




Note 1

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Summary of Significant Accounting Policies, Continued

Cooperative Advertising
Cooperative advertising funds are made available to most of the Company’s wholesale footwear customers. In order for retailers to receive reimbursement under such programs, the retailer must meet
specified advertising guidelines and provide appropriate documentation of expenses to be reimbursed. The Company’s cooperative advertising agreements require that wholesale customers present
documentation or other evidence of specific advertisements or display materials used for the Company’s products by submitting the actual print advertisements presented in catalogs, newspaper inserts or other
advertising circulars, or by permitting physical inspection of displays. Additionally, the Company’s cooperative advertising agreements require that the amount of reimbursement requested for such
advertising or materials be supported by invoices or other evidence of the actual costs incurred by the retailer. The Company accounts for these cooperative advertising costs as selling and administrative
expenses, in accordance with the Revenue Recognition Topic for Customer Payments and Incentives of the Codification.

Cooperative advertising costs recognized in selling and administrative expenses were $3.23.4 million, $3.5$3.3 million and $3.3$3.2 million for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. During Fiscal 2014, 20132016, 2015 and 2012,2014, the Company’s cooperative advertising reimbursements paid did not exceed the fair value of the benefits received under those agreements.

Vendor Allowances
From time to time, the Company negotiates allowances from its vendors for markdowns taken or expected to be taken. These markdowns are typically negotiated on specific merchandise and for specific amounts. These specific allowances are recognized as a reduction in cost of sales in the
period in which the markdowns are taken. Markdown allowances not attached to specific inventory on hand or already sold are applied to concurrent or future purchases from each respective vendor.

The Company receives support from some of its vendors in the form of reimbursements for cooperative advertising and catalog costs for the launch and promotion of certain products. The reimbursements are agreed upon with vendors and represent specific, incremental, identifiable costs incurred by the Company in selling the vendor’s specific products. Such costs and the related reimbursements are accumulated and monitored on an individual vendor basis, pursuant to the respective cooperative advertising agreements with vendors. Such cooperative advertising reimbursements are recorded as a reduction of selling and administrative expenses in the same period in which the associated expense is

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Note 1
Summary of Significant Accounting Policies, Continued

incurred. If the amount of cash consideration received exceeds the costs being reimbursed, such excess amount would be recorded as a reduction of cost of sales.

Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses were $2.86.4 million, $3.8$4.1 million and $3.0$2.8 million for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. During Fiscal 2014, 20132016, 2015 and 2012,2014, the Company’s cooperative advertising reimbursements received were not in excess of the costs incurred.

Environmental Costs
Environmental expenditures relating
Note 1

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Notes to current operations are expensed or capitalized as appropriate. Expenditures relating to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated and are evaluated independentlyConsolidated Financial Statements


Summary of any future claims for recovery. Generally, the timing of these accruals coincides with completion of a feasibility study or the Company's commitment to a formal plan of action. Costs of future expenditures for environmental remediation obligations are not discounted to their present value.Significant Accounting Policies, Continued

Earnings Per Common Share
Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if securities to issue common stock were exercised or converted to common stock (see Note 11).

Foreign Currency Translation
The functional currency of the Company's foreign operations is the applicable local currency. The translation of the applicable foreign currency into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date. Income and expense accounts are translated at monthly average exchange rates. The unearned gains and losses resulting from such translation are included as a separate component of accumulated other comprehensive loss within shareholders' equity. Gains and losses from certain foreign currency transactions are reported as an item of income and resulted in a net loss of $2.7 million, $2.4 million and $2.7 million for Fiscal 2016, 2015 and 2014, respectively.

Share-Based Compensation
The Company has share-based compensation covering certain members of management and non-employee directors. The Company recognizes compensation expense for share-based payments based on the fair value of the awards as required by the Compensation - Stock Compensation Topic of the Codification. The Company has not granted any stock options since the first quarter of Fiscal 2008.
The fair value of employee restricted stock is determined based on the closing price of the Company's stock on the date of grant. The benefits of tax deductions in excess orof recognized compensation expense are reported as a financing cash flow (see Note 12).

Other Comprehensive Income
The Comprehensive Income Topic of the Codification requires, among other things, the Company’s pension liability adjustment, postretirement liability adjustment unrealized gains or losses on foreign currency forward contracts and foreign currency translation adjustments to be included in other comprehensive income net of tax. Accumulated other comprehensive loss at February 1, 2014January 30, 2016 consisted
of $16.513.0 million of cumulative pension liability adjustment, net of tax, a cumulative post retirement liability adjustment of $0.9 million, net of tax, offset byand a cumulative foreign currency translation adjustment of $0.628.7 million.











Note 1

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and Subsidiaries
Notes to Consolidated Financial Statements


Note 1
Summary of Significant Accounting Policies, Continued

The following table summarizes the components of accumulated other comprehensive loss for the year ended February 1, 2014:January 30, 2016:

 Foreign Currency TranslationUnrecognized Pension/Postretirement Benefit CostsTotal Accumulated Other Comprehensive Income (Loss) Foreign Currency TranslationUnrecognized Pension/Postretirement Benefit CostsTotal Accumulated Other Comprehensive Income (Loss)
(In thousands)    
Balance February 2, 2013 $(1,931)$(26,310)$(28,241)
Balance January 31, 2015 $(16,247)$(24,329)$(40,576)
Other comprehensive income (loss) before reclassifications:    
Foreign currency translation adjustment 2,506

2,506
 (9,875)
(9,875)
Net actuarial gain 
8,581
8,581
Loss on intra-entity foreign currency transactions  
(long-term investment nature) (2,584)
(2,584)
Net actuarial loss 
12,065
12,065
Amounts reclassified from AOCI:    
Amortization of net actuarial loss (1) 
6,257
6,257
 
5,137
5,137
Amortization reclassified from AOCI, before tax 
6,257
6,257
 
5,137
5,137
Income tax expense 
5,870
5,870
 
6,780
6,780
Current period other comprehensive income, net of tax 2,506
8,968
11,474
Balance February 1, 2014 $575
$(17,342)$(16,767)
Current period other comprehensive income (loss), net of tax (12,459)10,422
(2,037)
Balance January 30, 2016 $(28,706)$(13,907)$(42,613)

(1) Amount is included in net periodic benefit cost, which is recorded in selling and administrative expense on the Consolidated Statements of Operations.

Business Segments
The Segment Reporting Topic of the Codification requires that companies disclose “operating segments” based on the way management disaggregates the Company’s operations for making internal operating decisions (see Note 14).

New Accounting Principles
In February 2013,2016, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“AOCI”), which sets forth additional disclosure requirements for items reclassified out of AOCI2016-02, "Leases". The standard's core principle is to increase transparency and into net income,comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information. The standard is effective for annualfiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which would be the beginning of our Fiscal 2020 or February 2019. Early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on its Consolidated Financial Statements and related disclosures and is expecting a material impact because the Company is party to a significant number of lease contracts.


Note 1

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and Subsidiaries
Notes to Consolidated Financial Statements


Summary of Significant Accounting Policies, Continued

In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes". ASU 2015-17 requires that all deferred tax assets and liabilities, along with any related valuation
allowance, be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and may be applied either prospectively or retrospectively. Early adoption is permitted. As of January 30, 2016, the Company has $29.0 million of current deferred tax assets that will be reclassed to noncurrent deferred tax assets on its Consolidated Balance Sheets. The change to noncurrent classification could have a significant impact on our working capital. The Company is currently assessing which transition method will be adopted.

In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs". In August 2015, the FASB issued ASU 2015-15, "Presentation and Subsequent measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements". ASU 2015-03 will require that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the debt. ASU 2015-15 allows an entity to present debt issuance costs associated with a revolving line of credit arrangement as an asset, regardless of whether a balance is outstanding. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03 or ASU 2015-15. These ASU's are effective for annual reporting periods beginning after December 15, 2012.2015, including interim periods within that reporting period, with early adoption permitted. ASU 2015-03 will require the Company to reclassify its deferred financing costs associated with its long-term debt from other noncurrent assets to long-term debt on a retrospective basis. The Company adopteddoes not expect the new standards to impact the Company's results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2013-022014-09, "Revenue from Contracts with Customers (Topic 606)". ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry-specific requirements and merges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. ASU 2014-09 was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, however, in August 2015, the first quarterFASB deferred this ASU for one year, which would be the beginning of our Fiscal 2014 by presenting amounts reclassified out2019 or February 2018. The amendment is to be applied either retrospectively to each prior reporting period presented or with the cumulative effect recognized at the date of AOCIinitial adoption as a separate disclosure
in Note 1an adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets on the balance sheet). Early adoption is not permitted. The Company is currently assessing the impact the adoption of ASU 2014-09 will have on its Consolidated Financial Statements. Amounts reclassified out of AOCI wereStatements and related to amortization of net actuarial loss associated with the Company's pension and postretirement plans.

disclosures, including which transition method will be adopted.


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 Note 2
Acquisitions, and Intangible Assets and Sale of Business

Schuh AcquisitionAcquisitions
On June 23, 2011,During Fiscal 2016, the Company through its newly-formed, wholly-owned subsidiary Genesco (UK) Limited (“Genesco UK”), completed the acquisition of all the outstanding shares of Schuh Group Ltd. (“Schuh”)Little Burgundy, a small retail footwear chain in Canada for a total purchase price of approximately £100.0 million, less £29.5 million outstanding under existing Schuh credit facilities, which remain in place, less$35.1 million. The stores acquired are operated within the Journeys Group. During Fiscal 2015, the Company completed acquisitions of primarily small retail chains and one small wholesale business for a £1.9 million working capital adjustment and plus £6.2 million net cash acquired, with £5.0 million withheld that was paid in June 2013. The Company financed the acquisition with borrowings under its existing credit facility and the balance from cash on hand. The purchase agreement also provides for deferredtotal purchase price payments totaling £25 million, payable in installments of £15 million and £10 million on$34.9 million. In Fiscal 2014, the third and fourth anniversaries of the closing, respectively, subject to the payees’ not having terminated their employment with Schuh under certain specified circumstances. This amount will be recorded as compensation expense and not reported as a component of the cost of the acquisition.

Headquartered in Scotland, Schuh is a specialty retailer of casual and athletic footwear sold through 99 retail stores in the United Kingdom and the Republic of Ireland as of February 1, 2014. The Company completed the acquisition in order to enhance its strategic development and prospectsother acquisitions of primarily small retail chains for growth and provide the Company with an established retail presence in the United Kingdom and improved insight into global fashion trends. The resultsa total purchase price of Schuh's operations for Fiscal 2014 include net sales of $364.7 million and operating earnings of $3.1$13.6 million. The results of Schuh’s operations for Fiscal 2013 include net sales of $370.5 million and operating earnings of $11.2 million. The results of Schuh's operations for the fiscal year from the date of acquisition through January 28, 2012, including net sales of $212.3 million and operating earnings of $11.7 million, have been included in the Company's Consolidated Financial Statements for the fiscal year ended January 28, 2012. During the fiscal year ended January 28, 2012, the Company expensed $7.4 million in costs related to the acquisition. These costs were recorded as selling and administrative expenses on the Consolidated Statement of Operations. Compensation expense related to the Schuh acquisition deferred purchase price obligation was $11.7 million, $12.1 million and $7.2 millionstores acquired in Fiscal 2015 and 2014 2013 and 2012, respectively. This expense is includedare operated within the Lids Sports Group. The wholesale business acquired in the operating earnings for the Schuh Group segment.Fiscal 2015 was operated within Lids Team Sports which was sold January 19, 2016.
















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Notes to Consolidated Financial Statements


Note 2
Acquisitions and Intangible Assets, Continued

The acquisition has been accounted for using the purchase method in accordance with the Business Combinations Topic of the Codification. Accordingly, the total purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at acquisition as follows (amounts in thousands):

At June 23, 2011
Cash$24,836
Accounts receivable4,673
Inventories32,179
Other current assets7,565
Property and equipment30,314
Other non-current assets6,977
Deferred taxes4,197
Trademarks27,224
Other intangibles4,995
Goodwill102,907
Accounts payable(16,196)
Other current liabilities(24,718)
Long-term debt (includes current portion)(62,562)
Other non-current liabilities(26,637)
Net Assets Acquired$115,754


The trademarks acquired include the concept names and are deemed to have an indefinite life. Other intangibles include a $1.7 million customer list, a $2.5 million asset to reflect the adjustment of acquired leases to market and a vendor contract of $0.8 million. The weighted average amortization period for the asset to adjust acquired leases to market is 2.7 years. The weighted average amortization period for customer lists is 4.6 years.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition of Schuh includes the expected purchasing synergies and other benefits that result from combining the Schuh business with the Company, improved insight into global fashion trends, any intangible assets that do not qualify for separate recognition and an acquired assembled workforce. The goodwill related to the Schuh acquisition is not deductible for tax purposes.







63


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and Subsidiaries
Notes to Consolidated Financial Statements


Note 2
Acquisitions and Intangible Assets, Continued

The following pro forma information presents the results of operations of the Company as if the Schuh acquisition had taken place at the beginning of Fiscal 2011 or January 31, 2010. Pro forma adjustments have been made to reflect additional interest expense from the $89.0 million in debt associated with the acquisition, interest expense on the acquired debt, amortization of intangible assets and the related income tax effects. Pro forma earnings for the twelve months ended January 28, 2012 have been adjusted to exclude $7.4 million of costs related to the acquisition.
 
Twelve Months Ended -
Pro forma

In thousands, except per share dataJanuary 28, 2012
Net sales$2,384,267
Earnings from continuing operations96,845
Earnings per share: 
Basic$4.03
Diluted$3.97

The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have occurred had the Schuh acquisition occurred at the beginning of Fiscal 2011.
Intangible Assets
Other intangibles by major classes were as follows:
 
LeasesCustomer ListsOther*TotalLeasesCustomer ListsOther*Total
In thousands
Feb. 1,
2014

Feb. 2,
2013

Feb. 1,
2014

Feb. 2,
2013

Feb. 1,
2014

Feb. 2,
2013

Feb. 1,
2014

Feb. 2,
2013

Jan. 30, 2016
Jan. 31,
2015

Jan. 30, 2016
Jan. 31,
2015

Jan. 30, 2016
Jan. 31,
2015

Jan. 30, 2016
Jan. 31,
2015

Gross other intangibles$13,104
$12,584
$14,381
$14,116
$2,242
$2,118
$29,727
$28,818
$14,841
$13,616
$2,622
$18,244
$2,053
$3,114
$19,516
$34,974
Accumulated amortization(11,997)(10,800)(7,354)(5,312)(1,294)(1,108)(20,645)(17,220)(12,637)(12,301)(2,264)(9,424)(1,046)(1,664)(15,947)(23,389)
Net Other Intangibles$1,107
$1,784
$7,027
$8,804
$948
$1,010
$9,082
$11,598
$2,204
$1,315
$358
$8,820
$1,007
$1,450
$3,569
$11,585
 
*Includes non-compete agreements, vendor contract and backlog.

The amortization of intangibles, including trademarks, was $3.22.9 million, $3.43.3 million and $3.2 million for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. The amortization of intangibles, including trademarks, will be $2.80.9 million, $2.10.2 million, $1.60.2 million, $1.00.1 million and $0.90.1 million for Fiscal 2015, 2016, 2017, 2018, 2019, 2020 and 2019,2021, respectively.


Sale of Business
On January 19, 2016, the Company completed the sale of the assets of the Lids Team Sports business, which has operated within its Lids Sports Group segment, to BSN Sports, LLC. The Company recognized a gain on the sale estimated at $(4.7) million, net of transaction-related expenses before tax. The results of operations for Lids Team Sports is not a strategic shift that will have a major effect on operations and financial results, and therefore this business has not been presented as a discontinued operation in the Company's Consolidated Financial Statements.
Pursuant to the purchase agreement, on March 18, 2016, the buyer submitted a proposed adjustment of $2.4 million to the purchase price based upon a final calculation of certain working capital items as of the closing date. The Company is reviewing the proposed adjustment and the adjustment is reflected in the Consolidated Financial Statements as having occurred in the fourth quarter of Fiscal 2016.

6467


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 3
Asset Impairments and Other Charges and Discontinued Operations

Asset Impairments and Other Charges
In accordance with Company policy, assets are determined to be impaired when the revised estimated future cash flows are insufficient to recover the carrying costs. Impairment charges represent the excess of the carrying value over the estimated fair value of those assets.
Asset impairment charges are reflected as a reduction of the net carrying value of property and equipment, and in asset impairment and other, net in the accompanying Consolidated Statements of Operations.

The Company recorded a pretax charge to earnings of $7.9 million in Fiscal 2016, including $3.1 million for retail store asset impairments, $2.5 millionfor asset write-downs, $2.2 million for network intrusion expenses and $0.1 million for other legal matters.

The Company recorded a pretax charge to earnings of $2.3 million in Fiscal 2015, including $3.1 million for network intrusion expenses, $1.9 million for retail store asset impairments and $0.7 million for other legal matters, partially offset by a $(3.4) million gain on a lease termination of a Lids store.
The Company recorded a pretax charge to earnings of $1.3 million in Fiscal 2014, including $3.3 million for network intrusion expenses, $2.4$2.4 million for other legal matters, $2.3 million for retail store asset impairments and $1.6 million for a lease termination, partially offset by an $(8.3) million gain on the lease termination of a New York City Journeys store.

The Company recorded a pretax charge to earnings of $17.0 million in Fiscal 2013, including $15.6 million for network intrusion expenses, $1.4 million for retail store asset impairments and $0.1 million for other legal matters.
The Company recorded a pretax charge to earnings of $2.7 million in Fiscal 2012, including $1.1 million for retail store asset impairments, $0.9 million for other legal matters and $0.7 million for network intrusion expenses.
Discontinued Operations
In Fiscal 2016, Fiscal 2015 and Fiscal 2014, the Company recorded an additional charge to earnings of $0.5$1.3 million ($0.3 ($0.8 million net of tax), $2.7 million ($1.6 million net of tax) and $0.5 million ($0.3 million net of tax), respectively, reflected in discontinued operations, primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company (see Note 13).
In Fiscal 2013, the Company recorded an additional charge to earnings of $0.8 million ($0.5 million net of tax) reflected in discontinued operations, primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company (see Note 13).
In Fiscal 2012, the Company recorded an additional charge to earnings of $1.7 million ($1.0 million net of tax) reflected in discontinued operations, including $1.8 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company, offset by a $0.1 million gain for excess provisions to prior discontinued operations (see Note 13).


















6568


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 3
Asset Impairments and Other Charges and Discontinued Operations, Continued


Accrued Provision for Discontinued Operations  
In thousands
Facility
Shutdown
Costs

Facility
Shutdown
Costs

Balance January 29, 2011$15,035
Additional provision Fiscal 20121,692
Charges and adjustments, net(4,210)
Balance January 28, 201212,517
Additional provision Fiscal 2013796
Charges and adjustments, net(1,962)
Balance February 2, 201311,351
$11,351
Additional provision Fiscal 2014543
543
Charges and adjustments, net(519)(519)
Balance February 1, 2014*11,375
Balance February 1, 201411,375
Additional provision Fiscal 20152,711
Charges and adjustments, net673
Balance January 31, 201514,759
Additional provision Fiscal 20161,333
Charges and adjustments, net(473)
Balance January 30, 2016*15,619
Current provision for discontinued operations7,263
11,389
Total Noncurrent Provision for Discontinued Operations
$4,112
$4,230
 
*Includes a $11.914.5 million environmental provision, including $7.810.9 million in current provision for discontinued operations.

Note 4
Inventories
 
In thousands
February 1,
2014

 February 2, 2013
January 30, 2016
 January 31, 2015
Raw materials$26,115
 $24,223
$469
 $32,941
Wholesale finished goods64,357
 57,161
58,773
 65,785
Retail merchandise476,789
 423,960
470,516
 499,419
Total Inventories$567,261
 505,344
$529,758
 $598,145


6669


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 5
Fair Value
The Fair Value Measurements and Disclosures Topic of the Codification defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. This Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following table presents the Company’s assets and liabilities measured at fair value on a nonrecurring basis as of February 1, 2014January 30, 2016 aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):
 
 
Long-Lived Assets
Held and Used

 Level 1
 Level 2
 Level 3
 Impairment Charges
Measured as of May 4, 2013$191
 $
 $
 $191
 $1,208
Measured as of August 3, 201393
 
 
 93
 209
Measured as of November 2, 2013514
 
 
 514
 350
Measured as of February 1, 2014448
 
 
 448
 580
Total Asset Impairment Fiscal 2014        $2,347
 
Long-Lived Assets
Held and Used

 Level 1
 Level 2
 Level 3
 Impairment Charges
Measured as of May 2, 2015$67
 $
 $
 $67
 $766
Measured as of August 1, 2015632
 
 
 632
 931
Measured as of October 31, 2015200
 
 
 200
 90
Measured as of January 30, 2016538
 
 
 538
 1,338
Total Asset Impairment Fiscal 2016        $3,125

In accordance with the Property, Plant and Equipment Topic of the Codification, the Company recorded $2.33.1 million of impairment charges as a result of the fair value measurement of its long-lived assets held and used and tested on a nonrecurring basis during the twelve months ended February1, 2014.January 30, 2016. These charges are reflected in asset impairments and other, net on the Consolidated Statements of Operations.
The Company used a discounted cash flow model to estimate the fair value of these long-lived assets. Discount rate and growth rate assumptions are derived from current economic conditions, expectations of management and projected trends of current operating results. As a result, the Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy.


6770


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 6
Long-Term Debt
 
In thousands
February 1,
2014
 
February 2,
2013
January 30, 2016 January 31, 2015
Revolver borrowings$
 $27,700
$58,344
 $
UK term loans33,730
 22,982
28,896
 29,155
UK revolver borrowings24,818
 
Total long-term debt33,730
 50,682
112,058
 29,155
Current portion6,793
 5,675
14,182
 13,152
Total Noncurrent Portion of Long-Term Debt$26,937
 $45,007
$97,876
 $16,003

Long-term debt maturing during each of the next five years ending in January each year is $6.814.2 million, $14.43.2 million, $2.160.1 million, $2.134.6 million and $2.10.0 million, respectively, and $6.2 million thereafter.respectively.

The Company did not have anyhad $58.3 million of revolver borrowings outstanding under the Credit Facility at February 1, 2014January 30, 2016, which includes $22.1 million (£15.6 million) related to Genesco (UK) Limited and $36.2 million (C$51.0 million) related to GCO Canada, and had $33.728.9 million (£20.4 million) in term loans outstanding and $24.8 million (£17.5 million) in revolver loans outstanding under the U.K. Credit Facilities (described below) at February 1, 2014.January 30, 2016. The Company had outstanding letters of credit of $14.513.5 million under the Credit Facility at February 1, 2014.January 30, 2016. These letters of credit support product purchases and lease and insurance indemnifications.
Credit Facility:

On January 31, 2014,December 4, 2015, the Company entered into athe First Amendment to the Third Amended and Restated Credit Agreement, dated as of January 31, 2014 (the “Credit Facility”) by and among the Company, certain subsidiaries of the Company party thereto, as other borrowers, the lenders party thereto and Bank of America, N.A., as agent (the "Agent"). The Credit Facility provides revolving credit in the aggregate principal amount of $400.0 million and replaces the previous $375.0 million revolving credit facility. The Credit Facility expires January 31, 2019.

Deferred financing costs incurred of $1.6 million related to the Credit Facility were capitalized and are being amortized over five years. In addition, the remaining deferred financing costs of $1.5 million related to the previous Amendmentamendment are being amortized over five years. These costs are included in other non-current assets on the Consolidated Balance Sheets.

The material terms of the Credit Facility are as follows:

Availability
The Credit Facility is a revolving credit facility in the aggregate principal amount of $400.0 million, including a $70.0 million sublimit for the issuance of letters of credit and a domestic swingline subfacility of up to $40.0 million, a revolving credit subfacility for the benefit of GCO Canada, Inc. in an aggregate amount not to exceed $25.0$70.0 million, which includes a $5.0 million sublimit for the issuance of letters of credit, and revolving credit subfacility for the benefit of Genesco (UK) Limited in an aggregate amount not to exceed $50.0 million, which includes a $10.0 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $10.0 million. The facility has a five-year term. Any


6871


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 6
Long-Term Debt, Continued

amount not to exceed $50.0 million, which includes a $10.0 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $10.0 million. Any swingline loans and any letters of credit and borrowings under the Canadian facilities and UK facilities will reduce the availability under the Credit Facility on a dollar-for-dollar basis.
The Company has the option, from time to time, to increase the availability under the Credit Facility by an aggregate amount of up to $150.0 million subject to, among other things, the receipt of commitments for the increased amount. In connection with this increased facility, the Canadian revolving credit facility may be increased up to no more than $40.085.0 million.
Genesco (UK) Limited has a one-time option to increase the availability of its subfacility under the Credit Facility by an additional amount of up to $50.0 million.
The aggregate amount of the loans made and letters of credit issued under the Credit Facility shall at no time exceed the lesser of the facility amount ($400.0 million or, if increased as described above, up to $550.0 million or $600.0 million, respectively) or the "Borrowing Base", which generally is based on 90% of eligible inventory plus 85% of eligible wholesale receivables (50% of eligible wholesale receivables of the Lids Team Sports business) plus 90% of eligible credit card and debit card receivables less applicable reserves (the "Loan Cap"). The relevant assets of Genesco (UK) Limited will be included in the Borrowing Base if the additional $50.0 million sublimit increase is exercised, provided that amounts borrowed by Genesco (UK) Limited based solely on its own borrowing base will be limited to $50.0 million and the total outstanding to Genesco (UK) Limited will not exceed 30% of the Loan Cap.
The Credit Facility also provides that a first-in, last-out tranche could be added to the revolving credit facility at the option of the Company subject to, among other things, the receipt of commitments for such tranche.
Collateral
The loans and other obligations under the Credit Facility are secured by a perfected first priority lien and security interest in all tangible and intangible assets and excludes real estate and leaseholds of the Company and certain subsidiaries of the Company, including a pledge of 65% of the Company's interest in Genesco (UK) Limited. The assets of Genesco (UK) Limited will not be pledged as collateral unless the additional $50.0 million sublimit increase is exercised and once pledged, will only serve to secure the obligations of GCO Canada, Inc. and Genesco (UK) Limited and their respective subsidiaries.
Interest and Fees
The Company’s borrowings under the Credit Facility bear interest at varying rates that, at the Company’s option, can be based on:
Domestic Facility:
(a) adjusted LIBOR plus the applicable margin (as defined and based on average Excess Availability during the prior quarter), or (b) the domestic Base Rate (defined as the higher of (i) the Bank of America prime rate, (ii) the federal funds rate plus 0.50% or (iii) LIBOR for an interest period of thirty days plus 1.0%) plus the applicable margin.



6972


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 6
Long-Term Debt, Continued
Canadian Sub-Facility:
(a) For loans made in Canadian dollars, the bankers’ acceptances (“BA”) rate plus the applicable margin, or (b) the Canadian Prime Rate (defined as the highest of the (i) Bank of America Canadian Prime Rate, (ii) the Bank of America (Canada Branch) overnight rate plus 0.50%, and (iii) the BA rate for a one month interest period plus 1.0%) plus the applicable margin.

(a) For loans made in U.S. dollars, LIBOR plus the applicable margin, or (b) the U.S. Index Rate (defined as the highest of the (i) Bank of America (Canada branch) U.S. dollar base rate, (ii) the Federal Funds rate plus 0.50%, and (iii) LIBOR for an interest period of thirty days plus 1.0%) plus the applicable margin.

UK Sub-Facility:
adjusted LIBOR plus the applicable margin.margin, plus any mandating cost, if applicable

Swingline Loans:
Domestic swingline loans - domestic Base Rate plus the applicable margin.
UK swingline loans - UK Base Rate (being the "base rate" of the local Bank of America branch in the jurisdiction of the currency chosen) plus the applicable margin.

The initial applicable margin for Base Rate loans and U.S. Index rate loans and Canadian Prime Rate loans iswas 0.50% and the initial applicable margin for LIBOR loans, BA equivalent loans and UK swingline loans iswas 1.50%. Thereafter, the applicable margin will beis subject to adjustment based on “Excess Availability” for the prior quarter. The term “Excess Availability” means, as of any given date, the excess (if any) of the Loan Cap (being the lesser of the total commitments and the Borrowing Base) over the outstanding credit extensions under the Credit Facility.

Interest on the Company’s borrowings is payable monthly in arrears for domestic Base Rate loans (including domestic swingline loans), U.S. Index rate loans, Canadian Prime Rate loans and UK swingline loans and at the end of each interest rate period (but not less often than quarterly) for LIBOR loans and BA equivalent loans.

The Company is also required to pay a commitment fee on the actual daily unused portions of the Credit Facility at a rate of  0.25% per annum.

Currency
Loans to GCO Canada, Inc. may be made in U.S. dollars or Canadian dollars. Loans to Genesco (UK) Limited may be made in U.S. dollars, Euros, Pounds Sterling or any other freely transferable currencies approved by the Agent and applicable lenders.
Certain Covenants
The Company is not required to comply with any financial covenants unless Excess Availability is less than the greater of $25.0 million or 10.0% of the Loan Cap. If and during such time as Excess Availability is less than the greater of $25.0 million or 10.0% of the Loan Cap, the Credit Facility requires the

7073


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 6
Long-Term Debt, Continued

Company to meet a minimum fixed charge coverage ratio of (a) an amount equal to consolidated EBITDA less capital expenditures and taxes paid in cash, in each case for such period, to (b) fixed charges for such period, of not less than 1.0:1.0. Excess Availability was $358.0279.3 million at February 1,January 30,
2014.2016. Because Excess Availability exceeded $25.0 million or 10.0% of the Loan Cap, the Company was not required to comply with this financial covenant at February 1, 2014.January 30, 2016.

The Credit Facility also permits the Company to incur up to $500.0 million of senior debt provided that certain terms and conditions are met.

In addition, the Credit Facility contains certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, loans and investments, acquisitions, dividends and other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations, prepayments or material amendments of other indebtedness and other matters customarily restricted in such agreements.
Cash Dominion
The Credit Facility also contains cash dominion provisions that apply in the event that the Company’s Excess Availability is less than the greater of $30.0 million or 12.5% of the Loan Cap or there is an event of default under the Credit Facility.
Events of Default
The Credit Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts and to agreements which would have a material adverse effect if breached, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts and change in control.

Certain of the lenders under the Credit Facility or their affiliates have provided and may in the future provide certain commercial banking, financial advisory, and investment banking services in the ordinary course of business for the Company, its subsidiaries and certain of its affiliates, for which they receive customary fees and commissions.
U.K. Credit Facility
In connection with theMay 2015, Schuh acquisition, SchuhGroup Limited entered into an amendeda Form of Amended and restated Senior TermRestated Facilities Agreement and Working Capital Facility Letter (collectively,("UK Credit Facilities") which replaced the “UK Credit Facilities”)
which provide forformer A, B and C term loans with a new Facility A of up to £29.5£17.5 million (a £15.5 and a Facility B of £11.6 million A term loan and £14.0 (which was the former Facility C loan) as well as provided an additional revolving credit facility, Facility C, of £22.5 million B term loan) and a working capital facility of £5.0 million.£2.5 million. The Working Capital Facility Letter was allowed to lapse in June 2012. The A term loan bears interest at LIBOR plus 2.50%1.8% per annum.annum with quarterly payments through April 2017. The Facility B term loan bears interest at LIBOR plus 3.75%2.5% per annum.annum with quarterly payments through September 2019. The Company is not required to make any payments on the B term loan until itFacility C bears interest at LIBOR plus 2.2% per annum and expires October 31, 2015, unless the Company’s Schuh Group segment has Excess Cash Flow (as defined in the UK Credit Facilities). The Company paid less than£0.1 million, £4.8 million and £4.5 million on the B term loan in Fiscal 2014, 2013 and 2012, respectively.September 2019.



7174


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 6
Long-Term Debt, Continued

In November 2013, Schuh Group Limited entered into an Amended and Restated Facilities Agreement to provide for an additional term loan of up to £12.5 million ("C term loan"). The C term loan bears interest at LIBOR plus 2.50% per annum and expires September 30, 2019.

The UK Credit Facilities contain certain covenants at the Schuh level including a minimum interest coverage covenant initially set at 4.25x and increasing to 4.50x in January 2012of 4.50x and thereafter, a maximum leverage covenant initially set at 2.75x2.25x declining over time at various rates to 2.25x1.75x beginning in July 2012April 2017 and a minimum cash flow coverage of 1.10x.1.00x. The Company was in compliance with all the covenants at February 1, 2014.January 30, 2016. The UK Credit Facilities are secured by a pledge of all the assets of Schuh and its subsidiaries.


72


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 7
Commitments Under Long-Term Leases
Operating Leases
The Company leases its office space and all of its retail store locations, certain distribution centers and transportation equipment under various noncancelable operating leases. The leases have varying terms and expire at various dates through 2030. The store leases in the United States, Puerto Rico and Canada typically have initial terms of approximately 10 years. The stores leases in the United Kingdom, and the Republic of Ireland and Germany typically have initial terms of between 10 and 20 years. Generally, most of the leases require the Company to pay taxes, insurance, maintenance costs and contingent rentals based on sales. Approximately 3%2% of the Company’s leases contain renewal options.
Rental expense under operating leases of continuing operations was:
 
In thousands2014 2013 20122016 2015 2014
Minimum rentals$227,880
 $215,516
 $192,175
$255,083
 $250,077
 $227,880
Contingent rentals9,667
 14,786
 12,918
11,044
 9,217
 9,667
Sublease rentals(663) (667) (686)(825) (852) (663)
Total Rental Expense$236,884
 $229,635
 $204,407
$265,302
 $258,442
 $236,884

Minimum rental commitments payable in future years are:
 
Fiscal YearsIn thousandsIn thousands
2015$235,049
2016216,870
2017188,714
$238,660
2018157,295
209,050
2019126,726
178,094
2020156,260
2021139,402
Later years381,825
376,436
Total Minimum Rental Commitments$1,306,479
$1,297,902

For leases that contain predetermined fixed escalations of the minimum rentals, the related rental expense is recognized on a straight-line basis and the cumulative expense recognized on the straight-line basis in excess of the cumulative payments is included in deferred rent and other long-term liabilities on the Consolidated Balance Sheets. The Company occasionally receives reimbursements from landlords to be used towards construction of the store the Company intends to lease. Leasehold improvements are recorded at their gross costs including items reimbursed by landlords. The

75


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 7
Commitments Under Long-Term Leases, Continued

reimbursements are recorded as deferred rent and amortized as a reduction of rent expense over the initial lease term. Tenant allowances of $24.225.4 million and $20.023.5 million for Fiscal 20142016 and 2013,2015, respectively, and deferred rent of $41.648.0 million and $37.945.0 million for Fiscal 20142016 and 2013,2015, respectively, are included in deferred rent and other long-term liabilities on the Consolidated Balance Sheets.







73


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 8
Equity
Non-Redeemable Preferred Stock
 
 
Shares
Authorized
 Number of Shares Amounts in Thousands 
Common
Convertible
Ratio
 
No. of
Votes per share
 
Shares
Authorized
 Number of Shares Amounts in Thousands 
Common
Convertible
Ratio
 
No. of
Votes per share
Class (In order of preference)*  2014 2013 2012 2014 2013 2012    2016 2015 2014 2016 2015 2014  
Subordinated Serial Preferred (Cumulative)                          
Aggregate 3,000,000** 
 
 
 
 
 
 N/A  N/A 3,000,000** 
 
 
 
 
 
 N/A  N/A
$2.30 Series 1 64,368  
 16,203
 30,368
 $
 $648
 $1,215
 .83  1 64,368  
 
 
 $
 $
 $
 .83  1
$4.75 Series 3 40,449  
 7,398
 11,643
 
 740
 1,164
 2.11  2 40,449  
 
 
 
 
 
 2.11  2
$4.75 Series 4 53,764  
 3,247
 3,397
 
 325
 340
 1.52  1 53,764  
 
 
 
 
 
 1.52  1
Series 6 800,000  
 
 
 
 
 
 100 800,000  
 
 
 
 
 
 100
$1.50 Subordinated Cumulative Preferred 5,000,000  
 30,067
 30,067
 
 902
 902
 1 5,000,000  
 
 
 
 
 
 1
 
 56,915
 75,475
 
 2,615
 3,621
  
 
 
 
 
 
 
Employees’ Subordinated Convertible Preferred 5,000,000  46,069
 46,852
 47,922
 1,382
 1,405
 1,437
 1.00*** 1 5,000,000  38,196
 44,836
 46,069
 1,146
 1,345
 1,382
 1.00*** 1
Stated Value of Issued Shares       1,382
 4,020
 5,058
        1,146
 1,345
 1,382
 
Employees’ Preferred Stock Purchase Accounts       (77) (96) (101)        (69) (71) (77) 
Total Non-Redeemable Preferred Stock       $1,305
 $3,924
 $4,957
        $1,077
 $1,274
 $1,305
 

*    In order of preference for liquidation and dividends.

**The Company’s charter permits the board of directors** The Company's charter permits the Board of Directors to issue Subordinated Serial Preferred Stock in as many series, each with as many shares and such rights and preferences as the board may designate.

Stock in as many series, each with as many shares and such rights and preferences as the
board my designate.
*** Also convertible into one share of $1.50$1.50 Subordinated Cumulative Preferred Stock.







7476


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 8
Equity, Continued
Preferred Stock Transactions
 
In thousands
Non-Redeemable
Preferred Stock
 
Non-Redeemable
Employees’
Preferred Stock
 
Employees’
Preferred
Stock
Purchase
Accounts
 
Total
Non-Redeemable
Preferred Stock
Non-Redeemable
Preferred Stock
 
Non-Redeemable
Employees’
Preferred Stock
 
Employees’
Preferred
Stock
Purchase
Accounts
 
Total
Non-Redeemable
Preferred Stock
Balance January 29, 2011$3,816
 $1,476
 $(109) $5,183
Other(195) (39) 8
 (226)
Balance January 28, 20123,621
 1,437
 (101) 4,957
Other(1,006) (32) 5
 (1,033)
Balance February 2, 20132,615
 1,405
 (96) 3,924
$2,615
 $1,405
 $(96) $3,924
Preferred stock redemptions(1,462) 
 
 (1,462)(1,462) 
 
 (1,462)
Other stock conversions(1,153) (23) 19
 (1,157)(1,153) (23) 19
 (1,157)
Balance February 1, 2014$
 $1,382
 (77) $1,305

 1,382
 (77) 1,305
Other stock conversions
 (37) 6
 (31)
Balance January 31, 2015
 1,345
 (71) 1,274
Other stock conversions
 (199) 2
 (197)
Balance January 30, 2016$
 $1,146
 (69) $1,077
Subordinated Serial Preferred Stock (Cumulative):

The Company issued a notice of mandatory redemption effective April 30, 2013, to its holders of Subordinated Serial Preferred Stock $2.30 Series 1, $4.75 Series 3 and $4.75 Series 4 during the first quarter of Fiscal 2014. The Series 1 preferred stock was redeemed at $40 per share plus accumulated dividends. During Fiscal 2014, 13,713 shares of Series 1 preferred stock were converted to common stock and 2,490 shares of Series 1 preferred stock were redeemed. The Series 3 and 4 preferred stocks were redeemed at $100 per share plus accumulated dividends. During Fiscal 2014, 6,046 shares of Series 3 preferred stock were converted to common stock and 1,352 shares of Series 3 preferred stock were redeemed. During Fiscal 2014, 3,247 shares of Series 4 preferred stock were redeemed. The total cost of the redemption for Series 1, 3 and 4 preferred stock was $0.6 million in Fiscal 2014.

The Company’s shareholders’ rights plan grants to common shareholders the right to purchase, at a specified exercise price, a fraction of a share of subordinated serial preferred stock, Series 6, in the event of an acquisition of, or an announced tender offer for, 15% or more of the Company’s outstanding common stock. Upon any such event, each right also entitles the holder (other than the person making such acquisition or tender offer) to purchase, at the exercise price, shares of common stock having a market value of twice the exercise price. In the event the Company is acquired in a transaction in which the Company is not the surviving corporation, each right would entitle its holder to purchase, at the exercise price, shares of the acquiring company having a market value of twice the exercise price. The rights expire in March 2020, are redeemable under certain circumstances for $.01 per right and are subject to exchange for one share of common stock or an equivalent amount of preferred stock at any time after the event whichthat makes the rights exercisable and before a majority of the Company’s common stock is acquired.






7577


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 8
Equity, Continued

$1.50 Subordinated Cumulative Preferred Stock:

The Company issued a notice of mandatory redemption effective April 30, 2013, to its holders of $1.50 Subordinated Cumulative Preferred Stock during the first quarter of Fiscal 2014. The $1.50 Subordinated Cumulative Preferred Stock was redeemed at $30 per share plus accumulated dividends. During Fiscal 2014, 30,067 shares of $1.50 Subordinated Cumulative Preferred Stock were redeemed. The total cost of the redemption for the $1.50 Subordinated Cumulative Preferred Stock was $0.9 million in Fiscal 2014.

Employees’ Subordinated Convertible Preferred Stock:
Stated and liquidation values are 88 times the average quarterly per share dividend paid on common stock for the previous eight quarters (if any), but in no event less than $30 per share.
Common Stock:
Common stock-$1 par value. Authorized: 80,000,000 shares; issued: February 1, 2014January 30, 201624,407,72422,322,799 shares; February 2, 2013January 31, 201524,484,91524,515,362 shares. There were 488,464 shares held in treasury at February 1, 2014January 30, 2016 and February 2, 2013.January 31, 2015. Each outstanding share is entitled to one vote. At February 1, 2014,January 30, 2016, common shares were reserved as follows: 46,06938,196 shares for conversion of preferred stock; 60,00026,696 shares for the 1996 Stock Incentive Plan;
70,854 shares for the 2005 Stock Incentive Plan; 1,204,662473,092 shares for the 2009 Amended and Restated Stock Incentive Plan; and 310,292305,134 shares for the Genesco Employee Stock Purchase Plan.Plan, as amended (the "ESPP"), which was terminated December 31, 2015. The remaining securities for the ESPP were removed from registration by means of a post-effective amendment filed in March 2016.

For the year ended January 30, 2016, 35,542 shares of common stock were issued for the exercise of stock options at an average weighted exercise price of $36.81, for a total of $1.3 million; 219,404 shares of common stock were issued as restricted shares as part of the Amended and Restated 2009 Genesco Inc. Equity Incentive Plan (the "2009 Plan"); 2,470 shares of common stock were issued for the purchase of shares under the ESPP at an average weighted market price of $54.22, for a total of $0.1 million; 19,769 shares were issued to directors for no consideration; 65,783 shares were withheld for taxes on restricted stock vested in Fiscal 2016; 27,221 shares of restricted stock were forfeited in Fiscal 2016; and 6,640 shares were issued in miscellaneous conversions of Employees’ Subordinated Convertible Preferred Stock. In addition, the Company repurchased and retired 2,383,384 shares of common stock at an average weighted market price of $60.79 for a total of $144.9 million.

For the year ended January 31, 2015, 68,616 shares of common stock were issued for the exercise of stock options at an average weighted exercise price of $26.49, for a total of $1.8 million; 185,416 shares of common stock were issued as restricted shares as part of the 2009 Plan; 2,688 shares of common stock were issued for the purchase of shares under the ESPP at an average weighted market price of $71.01, for a total of $0.2 million; 16,396 shares were issued to directors for no consideration; 88,003 shares were withheld for taxes on restricted stock vested in Fiscal 2015; 13,999 shares of restricted stock were forfeited in Fiscal 2015; and 1,233 shares were issued in miscellaneous conversions of Employees’ Subordinated Convertible Preferred


78


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 8
Equity, Continued

Stock. In addition, the Company repurchased and retired 64,709 shares of common stock at an average weighted market price of $71.63 for a total of $4.6 million.

For the year ended February 1, 2014, 130,051 shares of common stock were issued for the exercise of stock options at an average weighted exercise price of $23.33, for a total of $3.0 million; 199,392 shares of common stock were issued as restricted shares as part of the 2009 Amended and Restated Equity Incentive Plan; 3,146 shares of common stock were issued for the purchase of shares under the Employee Stock Purchase PlanESPP at an average weighted market price of $62.30, for a total of $0.2 million; 14,435 shares were issued to directors for no consideration; 105,193 shares were withheld for taxes on restricted stock vested in Fiscal 2014; 6,279 shares of restricted stock were forfeited in Fiscal 2014; and 24,922 shares were issued in miscellaneous conversions of Series 1, 3, and Employees’ Subordinated Convertible Preferred Stock. The 130,051 options exercised were all fixed stock options (see Note 12). In addition, the Company repurchased and retired 337,665 shares of common stock at an average weighted market price of $61.23$61.23 for a total of $20.7 million.

For the year ended February 2, 2013, 223,618 shares of common stock were issued for the exercise of stock options at an average weighted exercise price of $21.50, for a total of $4.8 million; 194,232 shares of common stock were issued as restricted shares as part of the 2009 Amended and Restated Equity Incentive Plan; 2,463 shares of common stock were issued for the purchase of shares under the Employee Stock Purchase Plan at an average weighted market price of $63.84, for a total of $0.2 million; 10,224 shares were issued to directors for no consideration; 75,552 shares were withheld for taxes on restricted stock vested in Fiscal 2013; 4,020 shares of restricted stock were forfeited in Fiscal 2013; and 22,028 shares were issued in miscellaneous conversions of Series 1, 3, 4 and Employees’ Subordinated Convertible Preferred Stock. The 223,618 options exercised were all fixed stock options (see Note 12).

76


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 8
Equity, Continued

In addition, the Company repurchased and retired 645,904 shares of common stock at an average weighted market price of $58.29 for a total of $37.6$20.7 million.

For the year ended January 28, 2012, 390,357 shares of common stock were issued for the exercise of stock options at an average weighted exercise price of $24.82, for a total of $9.7 million; 289,407 shares of common stock were issued as restricted shares as part of the 2009 Equity Incentive Plan; 2,717 shares of common stock were issued for the purchase of shares under the Employee Stock Purchase Plan at an average weighted market price of $48.95, for a total of $0.1 million; 14,643 shares were issued to directors for no consideration; 93,089 shares were withheld for taxes on restricted stock vested in Fiscal 2012; 14,081 shares of restricted stock were forfeited in Fiscal 2012; and 5,238 shares were issued in miscellaneous conversions of Series 1, 3, 4 and Employees’ Subordinated Convertible Preferred Stock. The 390,357 options exercised were all fixed stock options (see Note 12).
Restrictions on Dividends and Redemptions of Capital Stock:

The Company’s charter provides that no dividends may be paid and no shares of capital stock acquired for value if there are dividend or redemption arrearages on any senior or equally ranked stock. Exchanges of subordinated serial preferred stock for common stock or other stock junior to such exchanged stock are permitted.

The Company’s Credit Facility prohibits the payment of dividends and other restricted payments unless as of the date of the making of any Restricted Payment or consummation of any Acquisition, (a) no Default or Event of Default exists or would arise after giving effect to such Restricted Payment or Acquisition, and (b) either (i) the Borrowers have pro forma projected Excess Availability for the following six month period equal to or greater than 25% of the Loan Cap, after giving pro forma effect to such Restricted Payment or Acquisition, or (ii) (A) the Borrowers have pro forma projected Excess Availability for the following six month period of less than 25% of the Loan Cap but equal to or greater than 15% of the Loan Cap, after giving pro forma effect to the Restricted Payment or Acquisition, and (B) the Fixed Charge Coverage Ratio, on a pro forma basis for the twelve months preceding such Restricted Payment or Acquisition, will be equal to or greater than 1.0:1.0, and (c) after giving effect to such Restricted Payment or Acquisition, the Borrowers are Solvent. The Company’s management does not expect availability under the Credit Facility to fall below the requirements listed above during Fiscal 2015.2016. The Company’s UK Credit Facility prohibits the payment of any dividends by Schuh or its subsidiaries to the Company.

The Company issued a mandatory notice of redemption effective April 30, 2013, to its holders of Subordinated Serial Preferred Stock $2.30 Series 1, $4.75 Series 3 and $4.75 Series 4 and on its $1.50 Subordinated Cumulative Preferred Stock during the first quarter of Fiscal 2014. The total cost of the redemption was $1.5 million. As a result, all of these preferred issues of stock were either converted to common stock or redeemed in Fiscal 2014, and there are no outstanding shares remaining. Therefore, there is no longer an annual dividend requirement. Dividends paid during Fiscal 2014 were less than $0.1 million.


7779


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 8
Equity, Continued
Changes in the Shares of the Company’s Capital Stock
 
Common
Stock
 
Non-
Redeemable
Preferred
Stock
 
Employees’
Preferred
Stock
Common
Stock
 
Non-
Redeemable
Preferred
Stock
 
Employees’
Preferred
Stock
Issued at January 29, 201124,162,634
 79,306
 49,192
Exercise of options390,357
 
 
Issue restricted stock304,050
 
 
Issue shares—Employee Stock Purchase Plan2,717
 
 
Shares repurchased0
 
 
Other(101,932) (3,831) (1,270)
Issued at January 28, 201224,757,826
 75,475
 47,922
Exercise of options223,618
 
 
Issue restricted stock204,456
 
 
Issue shares—Employee Stock Purchase Plan2,463
 
 
Shares repurchased(645,904) 
 
Other(57,544) (18,560) (1,070)
Issued at February 2, 201324,484,915
 56,915
 46,852
24,484,915
 56,915
 46,852
Exercise of options130,051
 
 
130,051
 
 
Issue restricted stock213,827
 
 
213,827
 
 
Issue shares—Employee Stock Purchase Plan3,146
 
 
3,146
 
 
Shares repurchased(337,665) 
 
(337,665) 
 
Other(86,550) (56,915) (783)(86,550) (56,915) (783)
Issued at February 1, 201424,407,724
 
 46,069
24,407,724
 
 46,069
Exercise of options68,616
 
 
Issue restricted stock185,416
 
 
Issue shares—Employee Stock Purchase Plan2,688
 
 
Shares repurchased(64,709) 
 
Other(84,373) 
 (1,233)
Issued at January 31, 201524,515,362
 
 44,836
Exercise of options35,542
 
 
Issue restricted stock219,404
 
 
Issue shares—Employee Stock Purchase Plan2,470
 
 
Shares repurchased(2,383,384) 
 
Other(66,595) 
 (6,640)
Issued at January 30, 201622,322,799
 
 38,196
Less shares repurchased and held in treasury488,464
 
 
488,464
 
 
Outstanding at February 1, 201423,919,260
 
 46,069
Outstanding at January 30, 201621,834,335
 
 38,196


7880


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 9
Income Taxes

The components of earnings from continuing operations before income taxes is comprised of the following:

In thousands2014 2013 20122016 2015 2014
United States$152,832
 $152,457
 $139,174
$136,178
 $150,682
 $152,832
Foreign6,028
 12,375
 17,219
15,355
 6,307
 6,028
Total Earnings from Continuing Operations before Income Taxes$158,860
 $164,832
 $156,393
$151,533
 $156,989
 $158,860

Income tax expense from continuing operations is comprised of the following:
 
In thousands2014 2013 20122016 2015 2014
Current          
U.S. federal$35,463
 $50,859
 $42,103
$46,515
 $43,146
 $35,463
International7,293
 9,853
 2,226
3,542
 292
 7,293
State8,139
 8,841
 8,952
8,220
 8,966
 8,139
Total Current Income Tax Expense50,895
 69,553
 53,281
58,277
 52,404
 50,895
Deferred          
U.S. federal14,078
 (7,924) 5,579
(1,249) 4,422
 14,078
International(1,813) (6,379) 4,370
868
 636
 (1,813)
State2,718
 (3,315) (288)(1,744) 154
 2,718
Total Deferred Income Tax Expense (Benefit)14,983
 (17,618) 9,661
(2,125) 5,212
 14,983
Total Income Tax Expense – Continuing Operations$65,878
 $51,935
 $62,942
$56,152
 $57,616
 $65,878

Discontinued operations were recorded net of income tax benefitexpense (benefit) of approximately $(0.2)(0.5) million, $(0.3)(1.1) million and $(0.7)(0.2) million in Fiscal 2014, 20132016, 2015 and 2012,2014, respectively.

As a result of the exercise of stock options and vesting of restricted stock during Fiscal 2014, 20132016, 2015 and 2012,2014, the Company realized an additional income tax benefit of approximately $3.80.2 million, $4.83.1 million and $4.63.8 million, respectively. These tax benefits are reflected as an adjustment to additional paid-in capital.




7981


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 9
Income Taxes, Continued
 Deferred tax assets and liabilities are comprised of the following: 
February 1, February 2,January 30, January 31,
In thousands2014 20132016 2015
Identified intangibles$(28,468) $(28,076)$(29,763) $(30,923)
Prepaids(3,063) (2,943)(3,390) (3,135)
Convertible bonds(3,001) (3,001)(1,799) (2,402)
Tax over book depreciation
 (2,028)
Total deferred tax liabilities(34,532) (34,020)(34,952) (38,488)
Options448
 965
101
 229
Deferred rent4,986
 5,847
5,119
 4,494
Pensions4,253
 8,321
4,409
 9,721
Expense accruals15,673
 16,766
9,577
 14,185
Uniform capitalization costs13,750
 12,539
14,644
 14,369
Book over tax depreciation2,839
 13,783
9,778
 
Provisions for discontinued operations and restructurings4,731
 4,745
6,111
 5,983
Inventory valuation2,115
 2,015
3,954
 3,816
Tax net operating loss and credit carryforwards2,396
 3,535
2,493
 2,030
Allowances for bad debts and notes761
 1,598
378
 711
Deferred compensation and restricted stock6,606
 6,382
6,706
 6,933
Other4,320
 3,500
3,825
 4,853
Gross deferred tax assets62,878
 79,996
67,095
 67,324
Deferred tax asset valuation allowance(3,771) (3,541)(3,352) (4,411)
Deferred tax asset net of valuation allowance59,107
 76,455
63,743
 62,913
Net Deferred Tax Assets$24,575
 $42,435
$28,791
 $24,425
The deferred tax balances have been classified in the Consolidated Balance Sheets as follows:
 
2014 20132016 2015
Net current asset$23,089
 $23,725
$28,965
 $28,293
Net non-current asset3,342
 18,731
959
 31
Net non-current liability(1,856) (21)(1,133) (3,899)
Net Deferred Tax Assets$24,575
 $42,435
$28,791
 $24,425











8082


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 9
Income Taxes, Continued
Reconciliation of the United States federal statutory rate to the Company’s effective tax rate from continuing operations is as follows:
 
2014 2013 20122016 2015 2014
U. S. federal statutory rate of tax35.00 % 35.00 % 35.00 %35.00 % 35.00 % 35.00 %
State taxes (net of federal tax benefit)4.62
 3.11
 3.62
2.82
 3.80
 4.62
Foreign rate differential(1.24) (1.98) (1.71)(2.60) (1.56) (1.24)
Change in valuation allowance0.05
 (0.17) 0.60
(0.58) 0.57
 0.05
Permanent items2.18
 1.85
 2.27
2.19
 2.13
 2.18
Uncertain federal, state and foreign tax positions0.21
 (5.73) 
1.23
 (3.06) 0.21
Other0.65
 (0.57) 0.47
(1.00) (0.18) 0.65
Effective Tax Rate41.47 % 31.51 % 40.25 %37.06 % 36.70 % 41.47 %

The provision for income taxes resulted in an effective tax rate for continuing operations of 41.47%37.06% for Fiscal 2014,2016, compared with an effective tax rate of 31.51%36.70% for Fiscal 2013.2015. The tax rate for Fiscal 20132016 was lowerhigher primarily due to the reversal of previously recorded charges related to formerly uncertain tax positions due tothat were taken by Schuh at the expirationtime of the applicable statutespurchase by the Company which the Company resolved favorably during the third quarter of limitations and a settlement with a state tax authority more favorable than anticipated related to other uncertain tax positions.Fiscal 2015.

As of January 30, 2016, January 31, 2015 and February 1, 2014, February 2, 2013 and January 28, 2012, the Company had a federal net operating loss carryforward, which was assumed in one of the prior year acquisitions, of $1.31.0 million, $1.51.2 million and $1.6$1.3 million, respectively, which expire in fiscal years 2025 through 2030.

As of January 30, 2016, January 31, 2015 and February 1, 2014, February 2, 2013 and January 28, 2012, the Company had state net operating loss carryforwards of $0.00.5 million, $0.10.0 million and $0.10.0 million, respectively, which expire in fiscal years 20162019 through 20312036.

As of January 30, 2016, January 31, 2015 and February 1, 2014, February 2, 2013 and January 28, 2012, the Company had state tax credits of $0.7$0.6 million,, $0.9 $0.4 million and $0.60.7 million, respectively. These credits expire in fiscal years 20142017 through 20192024.

As of January 30, 2016, January 31, 2015 and February 1, 2014, February 2, 2013 and January 28, 2012, the Company had foreign tax credits of $0.0 million, $0.0 million and $0.1 million, respectively. These credits will expire in fiscal year 2022.

As of February 1, 2014, February 2, 2013 and January 28, 2012, the Company had foreign net operating losses of $7.4 million, $7.5 million, $10.46.8 million and $28.8$7.5 million, respectively, which have no expiration.

As of February 1, 2014, as part of the Schuh acquisition,January 30, 2016, the Company has provided a valuation allowance of approximately $3.83.4 million on deferred tax assets associated primarily with foreign net operating losses and foreign fixed assets for which management has determined it is more likely than not that the deferred tax assets will not be realized. The

$1.0 million net decrease in the valuation allowance during Fiscal 2016 from the $4.4 million provided for as of January 31, 2015 relates to decreases of $1.3 million in foreign net operating losses on which a valuation allowance is no longer required, partially offset by increases of $0.3 million in fixed asset-related deferred tax assets that will more likely than not never be realized. Management believes that it is more likely than not that the remaining deferred tax assets will be fully realized.


8183


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 9
Income Taxes, Continued

not that the deferred tax assets will not be realized. The $0.3 million net increase in the valuation allowance during Fiscal 2014 from the $3.5 million provided for as of February 2, 2013 determined in
accordance with the Income Tax Topic of the Codification relates to foreign net operating losses arising in Fiscal 2012 and increases in fixed asset-related deferred tax assets that will more likely than not
never be realized. Management believes that it is more likely than not that the remaining deferred tax assets will be fully realized.

As of February 1, 2014,January 30, 2016, the Company has not provided for withholding or United States federal income taxes on approximately $26.447.1 million of accumulated undistributed earnings of its foreign subsidiaries as they are considered by management to be permanently reinvested. If these undistributed earnings were not considered to be permanently reinvested, the related U.S. tax liability may be reduced by foreign income taxes paid on those earnings. BecauseThe determination of the complexities involved with the hypothetical tax calculation, a determinationamount of the unrecognized deferred tax liability related to these undistributed earningstemporary differences is not practicable.practicable at this time as this could be significantly impacted by the source location and amount of the distribution, the underlying tax rate already paid on the earnings, foreign withholding taxes and the opportunity to use foreign tax credits.
The methodology in the Income Tax Topic of the Codification prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured in order to determine the tax benefit to be recognized in the financial statements.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for Fiscal 2014, 20132016, 2015 and 2012.2014.
 
In thousands2014 2013 20122016 2015 2014
Unrecognized Tax Benefit – Beginning of Period$10,437
 $20,467
 $14,167
$3,997
 $10,960
 $10,437
Gross Increases (Decreases) – Tax Positions in a Prior Period139
 (2,464) (29)9,328
 231
 139
Gross Increases – Tax Positions in a Current Period1,452
 133
 6,986
Gross Increases (Decreases) – Tax Positions in a Current Period1,403
 (287) 1,452
Settlements(340) (449) (533)
 
 (340)
Lapse of Statutes of Limitations(728) (7,250) (124)(89) (6,907) (728)
Unrecognized Tax Benefit – End of Period$10,960
 $10,437
 $20,467
$14,639
 $3,997
 $10,960

The amount of unrecognized tax benefits as of January 30, 2016, January 31, 2015 and February 1, 2014 February 2, 2013 and January 28, 2012, which would impact the annual effective rate if recognized were $1.33.9 million, $2.42.7 million and $12.61.3 million, respectively. The Company believes it is reasonably possible that there will be a $0.19.4 million decrease in the gross tax liability for uncertain tax positions within the next 12 months based upon expected changes in tax accounting methods and the expiration of statutes of limitation.

The Company recognizes interest expense and penalties related to the above unrecognized tax benefits within income tax expense on the Consolidated Statements of Operations. Related to the uncertain tax benefits noted above, the Company recorded interest and penalties of approximately $(0.1)0.6 million





82


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 9
Income Taxes, Continued

expense and $(0.1) million, respectively, during Fiscal 2014, $(1.2) million expense and $0.1 million, respectively, during Fiscal 2013 and $0.5 millionexpense and $0.0 million, benefit, respectively, during Fiscal 2012.2016, $(0.1) million and $0.0 million benefit, respectively, during Fiscal 2015 and $(0.1) million and $(0.1) million benefit, respectively, during Fiscal 2014. The Company recognized a liability for accrued interest and penalties of $0.91.5 million and $0.1 million, respectively, as of February 1, 2014,January 30, 2016, $1.10.8 million and $0.20.1 million, respectively, as of February 2, 2013January 31, 2015 and $2.3$0.9 million and $0.2$0.1 million, respectively, as of January 28, 2012.February 1, 2014. The long-term portion of the unrecognized tax benefits and related accrued interest and penalties are included in deferred rent and other long-term liabilities on the Consolidated Balance Sheets.




84


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 9
Income Taxes, Continued
Income tax reserves are determined using the methodology required by the Income Tax Topic of the Codification.

The Company and its subsidiaries file income tax returns in federal and in many state and local jurisdictions as well as foreign jurisdictions. With few exceptions, the Company's U.S. federal and state and local income tax returns for fiscal years ended January 29, 2011February 2, 2013 and beyond remain subject to examination. In addition, the Company has subsidiaries in various foreign jurisdictions that have statutes of limitation generally ranging from two to six years. The Company is currently under audit by the Internal Revenue Service for Fiscal 2013 and 2014.

Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans
Defined Benefit Pension Plans
The Company previously sponsored a non-contributory, defined benefit pension plan. As of January 1, 1996, the Company amended the plan to change the pension benefit formula to a cash balance formula from the then existing benefit calculation based upon years of service and final average pay. The benefits accrued under the old formula were frozen as of December 31, 1995. Upon retirement, the participant will receive this accrued benefit payable as an annuity. In addition, the participant will receive as a lump sum (or annuity if desired) the amount credited to the participant’s cash balance account under the new formula. Effective January 1, 2005, the Company froze the defined benefit cash balance plan which prevents any new entrants into the plan as of that date as well as affects the amounts credited to the participants’ accounts as discussed below.

Under the cash balance formula, beginning January 1, 1996, the Company credits each participants’ account annually with an amount equal to 4% of the participant’s compensation plus 4% of the participant’s compensation in excess of the Social Security taxable wage base. Beginning December 31, 1996 and annually thereafter, the account balance of each active participant was credited with 7% interest calculated on the sum of the balance as of the beginning of the plan year and 50% of the amounts credited to the account, other than interest, for the plan year. The account balance of each participant who was inactive would be credited with interest at the lesser of 7% or the 30 year Treasury rate. Under the frozen plan, each participants’ cash balance plan account will be credited annually only with interest at the 30 year Treasury rate, not to exceed 7%, until the participant retires. The amount credited each year will be based on the rate at the end of the prior year.




83


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued

Other Postretirement Benefit Plans
The Company provides health care benefits for early retirees and life insurance benefits for certain retirees not covered by collective bargaining agreements. Under the health care plan, early retirees are eligible for benefits until age 65. Employees who meet certain requirements are eligible for life insurance benefits upon retirement. The Company accrues such benefits during the period in which the employee renders service.




85


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Obligations and Funded Status
Change in Benefit Obligation
 
Pension Benefits Other BenefitsPension Benefits Other Benefits
In thousands2014 2013 2014 20132016 2015 2016 2015
Benefit obligation at beginning of year$119,126
 $118,644
 $4,487
 $3,908
$125,764
 $111,133
 $6,886
 $5,714
Service cost350
 350
 428
 356
450
 450
 821
 526
Interest cost4,584
 4,961
 159
 157
4,263
 4,664
 245
 226
Plan participants’ contributions
 
 86
 74

 
 124
 101
Benefits paid(9,000) (9,038) (436) (221)(8,841) (9,027) (341) (839)
Actuarial (gain) loss(3,927) 4,209
 990
 213
(21,346) 18,544
 (154) 1,158
Benefit Obligation at End of Year$111,133
 $119,126
 $5,714
 $4,487
$100,290
 $125,764
 $6,826
 $6,886
Change in Plan Assets
 
Pension Benefits Other BenefitsPension Benefits Other Benefits
In thousands2014 2013 2014 20132016 2015 2016 2015
Fair value of plan assets at beginning of year$98,612
 $96,443
 
 
$103,580
 $101,910
 
 
Actual gain on plan assets12,298
 11,207
 
 
Actual gain (loss) on plan assets(4,406) 10,697
 
 
Employer contributions
 
 350
 147

 
 217
 738
Plan participants’ contributions
 
 86
 74

 
 124
 101
Benefits paid(9,000) (9,038) (436) (221)(8,841) (9,027) (341) (839)
Fair Value of Plan Assets at End of Year$101,910
 $98,612
 
 
$90,333
 $103,580
 
 
Funded Status at End of Year$(9,223) $(20,514) $(5,714) $(4,487)$(9,957) $(22,184) $(6,826) $(6,886)
 
Amounts recognized in the Consolidated Balance Sheets consist of:
 
Pension Benefits Other BenefitsPension Benefits Other Benefits
In thousands2014 2013 2014 20132016 2015 2016 2015
Noncurrent assets$
 $
 $
 $
Current liabilities
 
 (208) (160)$
 $
 $(274) $(247)
Noncurrent liabilities(9,223) (20,514) (5,506) (4,327)(9,957) (22,184) (6,552) (6,639)
Net Amount Recognized$(9,223) $(20,514) $(5,714) $(4,487)$(9,957) $(22,184) $(6,826) $(6,886)










8486


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued

Amounts recognized in accumulated other comprehensive income consist of:
 
Pension Benefits Other BenefitsPension Benefits Other Benefits
In thousands2014 2013 2014 20132016 2015 2016 2015
Prior service cost$
 $
 $
 $
Net loss27,147
 42,879
 1,459
 566
$21,415
 $37,518
 $1,417
 $2,515
Total Recognized in Accumulated Other Comprehensive Loss$27,147
 $42,879
 $1,459
 $566
$21,415
 $37,518
 $1,417
 $2,515
 
Amounts for projected and accumulated benefit obligation and fair value of plan assets are as follows:
In thousandsFebruary 1,
2014
 February 2, 2013January 30, 2016 January 31, 2015
Projected benefit obligation$111,133
 $119,126
$100,290
 $125,764
Accumulated benefit obligation111,133
 119,126
100,290
 125,764
Fair value of plan assets101,910
 98,612
90,333
 103,580
Components of Net Periodic Benefit Cost
Net Periodic Benefit Cost
 
Pension Benefits Other BenefitsPension Benefits Other Benefits
In thousands2014 2013 2012 2014 2013 20122016 2015 2014 2016 2015 2014
Service cost$350
 $350
 $250
 $428
 $356
 $166
$450
 $450
 $350
 $821
 $526
 $428
Interest cost4,584
 4,961
 5,597
 159
 157
 174
4,263
 4,664
 4,584
 245
 226
 159
Expected return on plan assets(6,654) (7,003) (7,807) 
 
 
(5,785) (6,069) (6,654) 
 
 
Amortization:                      
Prior service cost
 4
 4
 
 
 

 
 
 
 
 
Losses6,160
 6,032
 4,728
 97
 84
 79
4,948
 3,546
 6,160
 189
 102
 97
Net amortization$6,160
 $6,036
 $4,732
 $97
 $84
 $79
$4,948
 $3,546
 $6,160
 $189
 $102
 $97
Net Periodic Benefit Cost$4,440
 $4,344
 $2,772
 $684
 $597
 $419
$3,876
 $2,591
 $4,440
 $1,255
 $854
 $684
Reconciliation of Accumulated Other Comprehensive Income
 
Pension Benefits Other BenefitsPension Benefits Other Benefits
In thousands2014 20142016 2016
Net loss (gain)$(9,571) $990
Net loss$(11,155) $(910)
Amortization of prior service cost
 

 
Amortization of net actuarial loss(6,160) (97)(4,948) (189)
Total Recognized in Other Comprehensive Income$(15,731) $893
$(16,103) $(1,099)
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income$(11,291) $1,577
$(12,227) $156






8587


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year
are $3.90.9 million and $0.0 million, respectively. The estimated net loss for the other postretirement benefit plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $0.1 million.

Weighted-average assumptions used to determine benefit obligations
 
Pension Benefits Other BenefitsPension Benefits Other Benefits
2014 2013 2014 20132016 2015 2016 2015
Discount rate4.40% 4.00% 4.40% 4.01%4.30% 3.55% 4.04% 3.31%
Rate of compensation increaseNA
 NA
 
 
NA
 NA
 
 

For Fiscal 20142016 and 2013,2015, the discount rate was based on a yield curve of high quality corporate bonds with cash flows matching the Company’s planned expected benefit payments.
Weighted-average assumptions used to determine net periodic benefit costs
 
Pension Benefits Other BenefitsPension Benefits Other Benefits
2014 2013 2012 2014 2013 20122016 2015 2014 2016 2015 2014
Discount rate4.00% 4.35% 5.25% 4.01% 4.17% 5.25%3.55% 4.40% 4.00% 3.31% 4.40% 4.01%
Expected long-term rate of return on plan assets7.75% 7.75% 8.25% 
 
 
6.35% 6.75% 7.75% 
 
 
Rate of compensation increaseNA
 NA
 NA
 
 
 
NA
 NA
 NA
 
 
 

The weighted average discount rate used to measure the benefit obligation for the pension plan increased from 4.00%3.55% to 4.40%4.30% from Fiscal 20132015 to Fiscal 2014.2016. The increase in the rate decreased the accumulated benefit obligation by $3.97.5 million and decreased the projected benefit obligation by $3.97.5 million. The weighted average discount rate used to measure the benefit obligation for the pension plan decreased from 4.35%4.40% to 4.00%3.55% from Fiscal 20122014 to Fiscal 2013.2015. The decrease in the rate increased the accumulated benefit obligation by $4.311.4 million and increased the projected benefit obligation by $4.311.4 million.

To develop the expected long-term rate of return on assets assumption, the Company considered historical asset returns, the current asset allocation and future expectations. Considering this information, the Company selected a 7.75%6.35% long-term rate of return on assets assumption.
Assumed health care cost trend rates
 
2014 20132016 2015
Health care cost trend rate assumed for next year8.0% 7.0%7.5% 8.0%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)5% 5%5% 5%
Year that the rate reaches the ultimate trend rate2019
 2017
2021
 2020


8688


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
The effect on disclosed information of one percentage point change in the assumed health care cost trend rate for each future year is shown below.
 
In thousands
1% Increase
in Rates
 
1% Decrease
in Rates
1% Increase
in Rates
 
1% Decrease
in Rates
Aggregated service and interest cost$134
 $106
$248
 $195
Accumulated postretirement benefit obligation$626
 $735
$1,086
 $888
Plan Assets
The Company’s pension plan weighted average asset allocations as of February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, by asset category are as follows:
 
Plan AssetsPlan Assets
February 1, 2014 February 2, 2013January 30, 2016 January 31, 2015
Asset Category      
Equity securities65% 66%64% 63%
Debt securities35% 34%36% 37%
Other0% 0%
Total100% 100%100% 100%

The investment strategy of the Trusttrust is to ensure over the long-term an asset pool, that when combined with Company contributions, will support benefit obligations to participants, retirees and beneficiaries. Investment management responsibilities of plan assets are delegated to outside investment advisers and overseen by an Investment Committee comprised of members of the Company’s senior management that are appointed by the Board of Directors. The Company has an investment policy that provides direction on the implementation of this strategy.

The investment policy establishes a target allocation for each asset class and investment manager. The actual asset allocation versus the established target is reviewed at least quarterly and is maintained within a +/- 5% range of the target asset allocation. Target allocations are 50% domestic equity, 13% international equity, 35% fixed income and 2% cash investments.

All investments are made solely in the interest of the participants and beneficiaries for the exclusive purposes of providing benefits to such participants and their beneficiaries and defraying the expenses related to administering the Trusttrust as determined by the Investment Committee. All assets shall be properly diversified to reduce the potential of a single security or single sector of securities having a disproportionate impact on the portfolio.

The Committee utilizes an outside investment consultant and investment managers to implement its various investment strategies. Performance of the managers is reviewed quarterly and the investment objectives are consistently evaluated.



8789


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued

At February 1, 2014January 30, 2016 and February 2, 2013,January 31, 2015, there were no Company related assets in the plan.
Generally, quoted market prices are used to value pension plan assets. Equities, some fixed income securities, publicly traded investment funds and U.S. government obligations are valued at the closing price reported on the active market on which the individual security is traded.

The following tables present the pension plan assets by level within the fair value hierarchy as of February 1, 2014January 30, 2016 and February 2, 2013.January 31, 2015. 
February 1, 2014Level 1 Level 2 Level 3 Total
January 30, 2016 (In thousands)Level 1 Level 2 Level 3 Total
Equity Securities:              
International securities$13,026
 $
 $
 $13,026
$11,464
 $
 $
 $11,464
U.S. securities53,187
 
 
 53,187
46,012
 
 
 46,012
Fixed Income Securities35,481
 
 
 35,481
32,573
 
 
 32,573
Other:              
Cash Equivalents235
 
 
 235
291
 
 
 291
Other (includes receivables and payables)(19) 
 
 (19)(7) 
 
 (7)
Total Pension Plan Assets$101,910
 $
 $
 $101,910
$90,333
 $
 $
 $90,333
February 2, 2013Level 1 Level 2 Level 3 Total
January 31, 2015 (In thousands)Level 1 Level 2 Level 3 Total
Equity Securities:              
International securities$13,757
 $
 $
 $13,757
$12,266
 $
 $
 $12,266
U.S. securities51,011
 
 
 51,011
53,074
 
 
 53,074
Fixed Income Securities33,633
 
 
 33,633
38,034
 
 
 38,034
Other:              
Cash Equivalents235
 
 
 235
232
 
 
 232
Other (includes receivables and payables)(24) 
 
 (24)(26) 
 
 (26)
Total Pension Plan Assets$98,612
 $
 $
 $98,612
$103,580
 $
 $
 $103,580
Cash Flows
Return of Assets
There was no return of assets from the plan to the Company in Fiscal 20142016 and no plan assets are projected to be returned to the Company in Fiscal 2015.2017.
Contributions
There was no Employee Retirement Income Security Act of 1974, as amended ("ERISA") cash requirement for the plan in 20132015 and none is projected to be required in 2014.2016. It is the Company’s policy to contribute enough cash to maintain at least an 80% funding level.





8890


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Estimated Future Benefit Payments
Expected benefit payments from the trust, including future service and pay, are as follows:
 
Estimated future payments
Pension
Benefits
($ in millions)
 
Other
Benefits
($ in millions)
Pension
Benefits
($ in millions)
 
Other
Benefits
($ in millions)
2014$8.7
 $0.2
20158.5
 0.2
20168.3
 0.2
$8.2
 $0.3
20178.1
 0.3
7.9
 0.3
20188.0
 0.3
7.8
 0.3
2019 – 202336.7
 1.8
20197.6
 0.4
20207.5
 0.4
2021 – 202534.1
 1.9
Section 401(k) Savings Plan
The Company has a Section 401(k) Savings Plan available to employees who have completed one full year of service and are age 21 or older.

Since January 1, 2005, the Company has matched 100% of each employee’s contribution of up to 3% of salary and 50% of the next 2% of salary. In addition, for those employees hired before December 31, 2004, who were eligible for the Company’s cash balance retirement plan before it was frozen, the Company annually makes an additional contribution of 2 1/2 % of salary to each employee’s account. In calendar 2005 and future years, participants are immediately vested in their contributions and the Company’s matching contribution plus actual earnings thereon. The contribution expense to the Company for the matching program was approximately $6.0 million for Fiscal 2016, $5.5 million for Fiscal 2015 and $5.0 million for Fiscal 2014, 2014.$5.3 million for Fiscal 2013 and $4.2 million for Fiscal 2012.


8991


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 11
Earnings Per Share

For the Year Ended
February 1, 2014
 
For the Year Ended
February 2, 2013
 
For the Year Ended
January 28, 2012
For the Year Ended
January 30, 2016
 
For the Year Ended
January 31, 2015
 
For the Year Ended
February 1, 2014
(In thousands, except
per share amounts)
Income
(Numerator)
 
Shares
(Denominator)
 
Per-Share
Amount
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per-Share
Amount
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per-Share
Amount
Income
(Numerator)
 
Shares
(Denominator)
 
Per-Share
Amount
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per-Share
Amount
 
Income
(Numerator)
 
Shares
(Denominator)
 
Per-Share
Amount
Earnings from continuing operations$92,982
     $112,897
     $93,451
    $95,381
     $99,373
     $92,982
    
Less: Preferred stock dividends and income from participating securities(33)     (147)     (3,338)    
     
     (33)    
Basic EPS from continuing operations                                  
Income from continuing operations available to common shareholders92,949
 23,297
 $3.99
 112,750
 23,584
 $4.78
 90,113
 23,179
 $3.89
95,381
 22,880
 $4.17
 99,373
 23,507
 $4.23
 92,949
 23,297
 $3.99
Effect of Dilutive Securities from continuing operations                                  
Plus: Income from participating securities
     
     43
    
Options and restricted stock  272
     372
     283
    76
     155
     272
  
Convertible
preferred
stock(1)

 
   88
 34
   141
 55
  
Employees’
preferred
stock(2)
  46
     47
     48
  
Employees’
preferred
stock(1)
  44
     46
     46
  
Diluted EPS from continuing operations                                  
Income from continuing operations available to common shareholders plus assumed conversions$92,949
 23,615
 $3.94
 $112,838
 24,037
 $4.69
 $90,297
 23,565
 $3.83
$95,381
 23,000
 $4.15
 $99,373
 23,708
 $4.19
 $92,949
 23,615
 $3.94

(1)As a result of the Company issuing a notice of mandatory redemption to the holders of Series 1, 3 and 4 preferred stock in the first quarter of Fiscal 2014, there were no remaining convertible preferred stock of that series outstanding as of February 1, 2014. Therefore, convertible preferred stocks were not included in diluted earnings per share for Fiscal 2014. The amount of the dividend on the convertible preferred stock per common share obtainable on conversion of the convertible preferred stock was less than basic earnings per share for Series 1, 3 and 4 preferred stocks for Fiscal 2013 and 2012. Therefore, conversion of these convertible preferred stocks were included in diluted earnings per share for Fiscal 2013 and 2012.
(2)
The Company’s Employees’ Subordinated Convertible Preferred Stock is convertible one for one to the Company’s common stock. Because there are no dividends paid on this stock, these shares are assumed to be converted.

All outstanding options to purchase shares of common stock at the end of Fiscal 2014, 20132016, 2015 and 20122014 were included in the computation of diluted earnings per share because the options’ exercise prices were less than the average market priceimpact of the common shares.doing so was dilutive.

The weighted shares outstanding reflects the effect of stock buy back programs.the Company's Board-approved share repurchase program. The Company repurchased 337,6652,383,384 shares at a cost of $20.7144.9 million during Fiscal 2014.2016, of which $7.2 million was not paid in the fourth quarter but included in other accrued liabilities in the Consolidated Balance Sheets. The Company has $65.5repurchased 663,200 shares in the first quarter of Fiscal 2017, through March 29, 2016, at a cost of $43.2 million. The Company has $40.9 million remaining as of March 29, 2016 under its current $75.0100.0 million share repurchase authorization. The Company repurchased 645,90464,709 shares at a cost of $37.7$4.6 million during Fiscal 2013.2015. The Company did not repurchase anyrepurchased 337,665 shares at a cost of $20.7 million during Fiscal 2012.2014.





9092


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements



Note 12
Share-Based Compensation Plans

The Company’s stock-based compensation plans, as of February 1, 2014,January 30, 2016, are described below. The Company recognizes compensation expense for share-based payments based on the fair value of the awards as required by the Compensation – Stock Compensation Topic of the Codification.

Stock Incentive Plans
The Company has two fixed stock incentive plans. Under the 2009 Amended and Restated Equity Incentive Plan, (the “2009 Plan”), effective as of June 22, 2011, the Company may grant options, restricted shares, performance awards and other stock-based awards to its employees, consultants and directors for up to 2.5 million shares of common stock. Under the 2005 Equity Incentive Plan (the “2005 Plan”), effective as of June 23, 2005, the Company was permitted to grant options, restricted shares and other stock-based awards to its employees and consultants as well as directors for up to 2.5 million shares of common stock. There will be no future awards under the 2005 Equity Incentive Plan. Under both plans, the exercise price of each option equals the market price of the Company’s stock on the date of grant, and an option’s maximum term is 10 years. Options granted under both plans primarily vest 25% per year over four years.

For Fiscal 2014, 20132016, 2015 and 2012,2014, the Company recognizeddid not recognize any stock option related share-based compensation of $0.0, $0.0 and less than $1,000, respectively, for its fixed stock incentive plans includedas all such amounts were fully recognized in selling and administrative expenses in the accompanying Consolidated Statements of Operations.earlier periods. The Company did not capitalize any share-based compensation cost.

The Compensation—Stock Compensation Topic of the Codification requires that the cash flows resulting from tax benefits for tax deductions in excess of the compensation cost recognized for those options (excess tax benefit) be classified as financing cash flows. Accordingly, the Company classified excess tax benefits of $3.80.2 million, $4.83.1 million and $4.73.8 million as financing cash inflows rather than as operating cash inflows on its Consolidated Statement of Cash Flows for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively.

The Company did not grant any fixed stock options in Fiscal 2014, 20132016, 2015 or 2012.2014.
















9193


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements



Note 12
Share-Based Compensation Plans, Continued
A summary of fixed stock option activity and changes for Fiscal 2014, 20132016, 2015 and 20122014 is presented below:
 
Options 
Weighted-Average
Exercise Price
 
Weighted-Average
Remaining
Contractual Term
 
Aggregate Intrinsic
Value (in
thousands)(1)
Options 
Weighted-Average
Exercise Price
 
Weighted-Average
Remaining
Contractual Term
 
Aggregate Intrinsic
Value (in
thousands)(1)
Outstanding, January 29, 2011877,130
 $24.75
  
Granted
 
  
Exercised(390,357) 24.82
  
Forfeited
 
  
Outstanding, January 28, 2012486,773
 $24.70
  
Granted
 
  
Exercised(223,618) 21.50
  
Forfeited
 
  
Outstanding, February 2, 2013263,155
 $27.43
  
Outstanding, February 3, 2013263,155
 $27.43
    
Granted
 
  
 
    
Exercised(130,051) 23.33
  (130,051) 23.33
    
Forfeited(2,250) 17.50
  (2,250) 17.50
    
Outstanding, February 1, 2014130,854
 $31.67
 1.58 $5,045
130,854
 $31.67
    
Exercisable, February 1, 2014130,854
 $31.67
 1.58 $5,045
Granted
 
    
Exercised(68,616) 26.49
    
Forfeited
 
    
Outstanding, January 31, 201562,238
 $37.38
    
Granted
 
    
Exercised(35,542) 36.81
    
Forfeited0
 
    
Outstanding, January 30, 201626,696
 $38.13
 0.7343
 $748
Exercisable, January 30, 201626,696
 $38.13
 0.7343
 $748

(1)Based upon the difference between the closing market price of the Company’s common stock on the last trading day of the year and the grant price of in-the-money options.
(1) Based upon the difference between the closing market price of the Company’s common stock on the last trading day of the year and the grant price of in-the-money options.

The total intrinsic value, which represents the difference between the underlying stock’s market price and the option’s exercise price, of options exercised during Fiscal 2014, 20132016, 2015 and 20122014 was $6.10.9 million, $11.53.4 million and $10.36.1 million, respectively.

As of February 1, 2014,January 30, 2016, the Company does not have any nonvested options ofunder its fixed stock incentive plans.
 
As of February 1, 2014,January 30, 2016, there was no unrecognized compensation costs related to stock options under the 2009 Plan. Cash received from option exercises under all share-based payment arrangements for Fiscal 2014, 20132016, 2015 and 20122014 was $3.01.3 million, $4.81.8 million and $9.73.0 million, respectively.
Restricted Stock Incentive Plans
Director Restricted Stock
The 2009 Plan permits grants to non-employee directors on such terms as the Company's boardBoard of directorsDirectors may approve. Restricted stock awards were made to independent directors on the date of the annual meeting of shareholders in each of Fiscal 2014, 20132016, 2015 and 2012.2014. The shares granted in each award vested on the first anniversary of the grant date, subject to the director's continued service through that date. The boardBoard of directorsDirectors also approved a grant of 365 additional shares in Fiscal 2014 and 336 additional shares in Fiscal 2013 to a newly elected director each year on the annual meeting date in Fiscal 2014 on the same terms as the Fiscal 2014




9294


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 12
Share-Based Compensation Plans, Continued

Fiscal 2014 and 2013 on the same terms as the Fiscal 2014 and 2013 grant to all outsideindependent directors. In all cases, the director is restricted from selling, transferring,
pledging or assigning the shares for three years from the grant date unless he or she earlier leaves the board.

The Fiscal 20122016, 2015 and 2014 grants were valued at $70,000 for each director$97,500, $97,500 and Fiscal 2013 and 2014 grants were each valued at $80,000$80,000, respectively, per director based on the average closing price of the stock for the first five trading days of the month in which they were granted and vested on the first anniversary of the grant date. For Fiscal 2014, 20132016, 2015 and 2012,2014, the Company issued 9,28012,978 shares, 9,88811,592 shares and 14,6439,280 shares, respectively, of director restricted stock.

In addition, the 2009 Plan permits an outside director to elect irrevocably to receive all or a specified portion of his annual retainers for board membership and any committee chairmanship for the following fiscal year in a number of shares of restricted stock (the "Retainer Stock"). Shares of the Retainer Stock are granted as of the first business day of the fiscal year as to which the election is effective, subject to forfeiture to the extent not earned upon the outside director's ceasing to serve as a director or committee chairman during such fiscal year. Once the shares are earned, the director is restricted from selling, transferring, pledging or assigning the shares for an additional three years. For Fiscal 2016, 2015 and 2014, the Company issued 6,791 shares, 4,804 shares and 4,790 shares, respectively, of Retainer Stock.

For Fiscal 2014, 20132016, 2015 and 2012,2014, the Company recognized $1.01.4 million, $0.91.1 million and $0.81.0 million, respectively, of director restricted stock related share-based compensation in selling and administrative expenses in the accompanying Consolidated Statements of Operations.

Employee Restricted Stock
Under the 2009 Plan, the Company issued 199,392219,404 shares, 194,232185,416 shares and 289,407199,392 shares of employee restricted stock in Fiscal 2014, 20132016, 2015 and 2012,2014, respectively. Shares of employee restricted stock issued in Fiscal 2012, 20132016, 2015 and 2014 primarily vest 25% per year over four years, provided that on such date the grantee has remained continuously employed by the Company since the date of grant. The fair value of employee restricted stock is charged against income as compensation cost over the vesting period. Compensation cost recognized in selling and administrative expenses in the accompanying Consolidated Statements of Operations for these shares was $11.312.4 million, $9.612.3 million and $6.911.3 million for Fiscal 2014, 20132016, 2015 and 2012,2014, respectively.


9395


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 12
Share-Based Compensation Plans, Continued

A summary of the status of the Company’s nonvested shares of its employee restricted stock as of February 1, 2014January 30, 2016 is presented below:
 
Nonvested Restricted SharesShares 
Weighted-Average
Grant-Date
Fair Value
Shares 
Weighted-Average
Grant-Date
Fair Value
Nonvested at January 29, 2011818,119
 $23.95
Granted289,407
 45.14
Vested(227,691) 22.58
Withheld for federal taxes(93,089) 22.42
Forfeited(14,081) 27.38
Nonvested at January 28, 2012772,665
 32.41
Granted194,232
 57.58
Vested(195,203) 29.95
Withheld for federal taxes(75,552) 29.97
Forfeited(3,360) 38.96
Nonvested at February 2, 2013692,782
 40.59
692,782
 $40.59
Granted199,392
 65.11
199,392
 65.11
Vested(199,428) 34.31
(199,428) 34.31
Withheld for federal taxes(105,193) 34.42
(105,193) 34.42
Forfeited(6,279) 46.48
(6,279) 46.48
Nonvested at February 1, 2014581,274
 $52.21
581,274
 52.21
Granted185,416
 80.85
Vested(177,694) 44.77
Withheld for federal taxes(88,003) 45.27
Forfeited(13,999) 65.71
Nonvested at January 31, 2015486,994
 66.70
Granted219,404
 66.43
Vested(141,795) 60.08
Withheld for federal taxes(65,783) 60.62
Forfeited(27,221) 69.31
Nonvested at January 30, 2016471,599
 $69.26

As of February 1, 2014,January 30, 2016, there was $23.125.2 million of total unrecognized compensation costs related to nonvested share-based compensation arrangements for restricted stock discussed above. That cost is expected to be recognized over a weighted average period of 1.251.76 years.
Employee Stock Purchase Plan
The Company ended the ESPP in Fiscal 2016. The shares issued under the ESPP for Fiscal 2016 will be the last shares issued. Under the Employee Stock Purchase Plan,ESPP, the Company iswas authorized to issue up to 1.0 million shares of common stock to qualifying full-time employees whose total annual base salary iswas less than $90,000, effective October 1, 2002. Prior to October 1, 2002, the total annual base salary was limited to $100,000. Under the terms of the Plan, employees could choose each year to have up to 15% of their annual base earnings or $8,500, whichever is lower, withheld to purchase the Company’s common stock. The purchase price of the stock was 85% of the closing market price of the stock on either the exercise date or the grant date, whichever was less. The Company’s board of directors amended the Company’s Employee Stock Purchase PlanESPP effective October 1, 2005 to provide that participants may acquire shares under the PlanESPP at a 5% discount from fair market value on the last day of the Plan year.ESPP year rather than a 15% discount prior to the amendment. Employees can choose each year to have up to 15% of their annual base earnings or $9,500, whichever is lower, withheld to purchase the Company’s common stock. Under the Compensation – Stock Compensation Topic of the Codification, shares issued under the PlanESPP as amended are non-compensatory. Under the Plan,ESPP, the Company sold 3,1462,470 shares, 2,4632,688 shares and 2,7173,146 shares to employees in Fiscal 2014, 20132016, 2015 and 2012,2014, respectively.



9496


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 13
Legal Proceedings

Environmental Matters
New York State Environmental Matters
In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) and the Company entered into a consent order whereby the Company assumed responsibility for conducting a remedial investigation and feasibility study (“RIFS”) and implementing an interim remedial measure (“IRM”) with regard to the site of a knitting mill operated by a former subsidiary of the Company from 1965 to 1969. The Company undertook the IRM and RIFS voluntarily, without admitting liability or accepting responsibility for any future remediation of the site. The Company has completed the IRM and the RIFS. In the course of preparing the RIFS, the Company identified remedial alternatives with estimated undiscounted costs ranging from $0.0 million to $24.0 million, excluding amounts previously expended or provided for by the Company. The United States Environmental Protection Agency (“EPA”), which has assumed primary regulatory responsibility for the site from NYSDEC, issued a Record of Decision in September 2007. The Record of Decision requiresspecified a remedy of a combination
of groundwater extraction and treatment and in-sitein site chemical oxidation at an estimated present cost of approximately $10.7 million.oxidation.

In July 2009, the Company agreed to a Consent Order with the EPA requiring the Company to perform certain remediation actions, operations, maintenance and monitoring at the site. In September 2009, a Consent Judgment embodying the Consent Order was filed in the U.S. District Court for the Eastern District of New York.    

In September 2015, the EPA adopted an amendment to the 2007 Record of Decision by eliminating the separate ground-water extraction and treatment systems and the use of in-situ oxidation from the remedy adopted in the 2007 Record of Decision. The amendment provides for the continued operation and maintenance of the existing wellhead treatment systems on wells operated by the Village of Garden City, New York (the "Village"),.

The Village has additionally asserted that the Company is liable for the costs associated with enhanced treatment required by the impact of the groundwater plume from the site on two public water supply wells, including historical total costs ranging from approximately $1.8 million to in excess of $2.5 million, and future operation and maintenance costs which the Village estimates at $126,400 annually while the enhanced treatment continues. On December 14, 2007, the Village filed a complaint (the "Village Lawsuit") against the Company and the owner of the property under the Resource Conservation and Recovery Act (“RCRA”), the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) as well as a number of state law theories in the U.S. District Court for the Eastern District of New York, seeking an injunction requiring the defendants to remediate contamination from the site and to establish their liability for future costs that may be incurred in connection with it, which the complaint alleges could exceed $41 million, undiscounted, over a 70-year period.

The Company has not verified the estimates of either historic or future costs asserted byin the Village Lawsuit, but believes that an estimate of future costs based on a 70-year remediation period is unreasonable given the expected remedial period reflected in the EPA's Record of Decision.


97


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 13
Legal Proceedings, Continued

On May 23, 2008, the Company filed a motion to dismiss the Village's complaintVillage Lawsuit on grounds including applicable statutes of limitation and preemption of certain claims by the NYSDEC's and the EPA's diligent prosecution of remediation. On January 27, 2009, the Court granted the motion to dismiss all counts of the plaintiff's complaint except for the CERCLA claim and a state law claim for indemnity for costs incurred after November 27, 2000. On September 23, 2009, on a motion for reconsideration by the Village, the Court reinstated the claims for injunctive relief under RCRA and for equitable relief under certain of the state law theories.

The Company intendsand the Village have reached an agreement in principle providing for the Village to continue to defendoperate and maintain the action ifwell head treatment systems in accordance with the Record of Decision and to release its claims against the Company asserted in the Village Lawsuit in exchange for a lump-sum payment by the Company. The agreement in principle is subject to the issuance by EPA of Statement of Work under the amended Record of Decision that is acceptable to the Company and the Village and to the execution by both parties of definitive documentation incorporating the agreement in principle. While there can be no assurance that a definitive agreement incorporating the agreement in principle will be concluded, the Company does not expect that such an acceptable settlement agreement, cannot be reached.

95

Tablethe Village Lawsuit, or the implementation of Contentsthe amended Record of Decision would have a material effect on its financial condition or results of operations.

Genesco Inc.
In April 2015, the Company received from EPA a Notice of Potential Liability and Subsidiaries
NotesDemand for Costs pursuant to Consolidated Financial Statements


Note 13
Legal Proceedings, ContinuedCERCLA regarding the site in Gloversville, New York of a former leather tannery operated by the Company and by other, unrelated parties. The Notice demanded payment of approximately $2.2 million of response costs claimed by EPA to have been incurred to conduct assessments and removal activities at the site. The Company has requested additional information on the basis for EPA's assertion that the Company is a potentially responsible party with regard to the site and is assessing the claims asserted in the notice. The Company's environmental insurance carrier is providing coverage of the matter subject to a $500,000 self-insured retention and the other terms and conditions of the insurance policy, subject to a standard reservation of rights.

Whitehall Environmental Matters
The Company has performed sampling and analysis of soil, sediments, surface water, groundwater and waste management areas at the Company's former Volunteer Leather Company facility in Whitehall, Michigan.

In October 2010, the Company and the Michigan Department of Natural Resources and Environment entered into a Consent Decree providing for implementation of a remedial Work Plan for the facility site designed to bring the site into compliance with applicable regulatory standards. The Work Plan's implementation is substantially complete and the Company expects, based on its present understanding of the condition of the site, that its future obligations with respect to the site will be limited to periodic monitoring and that future costs related to the site should not have a material effect on its financial condition or results of operations.



98


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements



Note 13
Legal Proceedings, Continued

Accrual for Environmental Contingencies
Related to all outstanding environmental contingencies, the Company had accrued $11.914.5 million as of February 1, 2014,January 30, 2016, $14.1 million as of January 31, 2015 and $11.9 million as of February 2, 2013 and $13.0 million as of January 28, 2012.1, 2014. All such provisions reflect the Company's estimates of the most likely cost (undiscounted, including both current and noncurrent portions) of resolving the contingencies, based on facts and circumstances as of the time they were made. There is no assurance that relevant facts and circumstances will not change, necessitating future changes to the provisions. Such contingent liabilities are included in the liability
arising from provision for discontinued operations on the accompanying Consolidated Balance Sheets because it relates to former facilities operated by the Company. The Company has made pretax accruals for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2016, $2.8 million reflected in Fiscal 2015 and $0.5 million reflected in Fiscal 2014, $0.8 million reflected in Fiscal 2013 and $1.8 million reflected in Fiscal 2012.2014. These charges are included
in provision for discontinued operations, net in the Consolidated Statements of Operations and represent changes in estimates.

Other Matters
On December 10, 2010, the Company announced that it had suffered a criminal intrusion into the portion of its computer network that processes payments for transactions in certain of its retail stores. Visa, Inc., MasterCard Worldwide and American Express Travel Related Services Company, Inc. have asserted claims totaling approximately $15.6 million in connection with the intrusion and the claims of two of the claimants have been collected by withholding payment card receivables of the Company. In the fourth quarter of Fiscal 2013, the Company recorded a $15.4 million charge to earnings in connection with the disputed liability. On March 7, 2013, the Company filed an action in the U.S. District Court for the Middle District of Tennessee against Visa U.S.A. Inc., Visa Inc. and Visa International Service Association seeking to recover $13.3 million in non-compliance fines and issuer reimbursement assessments collected from the Company in connection with the intrusion. The Company does not currently expect any future claims in connection with the intrusion to have a material effect on its financial condition, cash flows, or results of operations.





96


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 13
Legal Proceedings, Continued

On January 5, 2012, a patent infringement action against the Company and numerous other defendants was filed in the U.S. District Court for the Eastern District of Texas, GeoTag, Inc. v. Circle K Store, Inc., et al., alleging that features of certain of the Company's e-commerce websites infringe U.S. Patent No. 5,930,474, entitled “Internet Organizer for Accessing Geographically and Topically Based Information.” The plaintiff sought relief including damages for the alleged infringement, costs, expenses and pre- and post-judgment interest and injunctive relief. Pursuant to a settlement agreement, the matter was dismissed on February 28, 2014. The settlement did not have a material effect on its financial condition or results of operations.

On June 13, 2012, a former vendor of a subsidiary of the Company filed an action, Perfect Curve, Inc. v. Hat World, Inc., in U.S. District Court in Massachusetts, alleging patent, trademark, trade dress, and copyright infringement against the subsidiary based on the sale of a line of products developed by the subsidiary. The parties reached agreement to settle the matter and the action was dismissed pursuant to a Stipulated Dismissal dated March 13, 2014. The settlement did not have a material effect on its financial condition or results of operations.

On May 14, 2012, a putative class and collective action, Maro v. Hat World, Inc., was filed in the U.S. District Court for the Northern District of Illinois. The action alleges that the Company failed to pay
the plaintiff and other, similarly situated retail store employees of Hat World, Inc., for time spent making bank deposits of store collections, and seeks to recover unpaid wages, liquidated damages, statutory penalties, attorney's fees, and costs pursuant to the federal Fair Labor Standards Act, the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. On January 15, 2014, the court dismissed the Maro case with prejudice, based on the plaintiffs' failure to prosecute. On July 16, 2012 and July 30, 2012, additional putative class and collective actions, Chavez v. Hat World, Inc. and Dismukes v. Hat World, Inc., were filed in the same court, alleging that certain Hat World employees were misclassified as exempt from overtime pay, and seeking similar relief. The Chavez and Dismukes actions have been consolidated. The parties have reached an agreement in principle to resolve the matter, subject to documentation and court approval. The Company does not expect the matter or its settlement as proposed to have a material effect on its financial condition or results of operations.

On August 30, 2012, a former employee of a Company subsidiary filed a putative class and collective action, Kershner v. Hat World, Inc., in the Philadelphia, Pennsylvania Court of Common Pleas alleging violations of the Pennsylvania Minimum Wage Act by the subsidiary. The Company has reached an agreement to resolve the matter, subject to approval by the court. On February 10, 2014, the court granted preliminary approval of the proposed settlement. The Company does not expect the matter or its settlement as proposed to have a material effect on its financial condition or results of operations.

On May 23, 2013, a former employee of the Company filed an action, Everett v. Genesco Inc., in the U.S. District Court for the Middle District of Florida alleging violations of the Fair Labor Standards Act, seeking designation as a collective action and the award of allegedly unpaid minimum wages, overtime pay, liquidated damages, penalties, interest, attorneys' fees, and other relief. The Company disputes the material allegations in the action and intends to defend it.


97


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 13
Legal Proceedings, Continued

On May 17, 2013, a former employee filed a putative class and representative action, Garcia v. Genesco, Inc., in the Superior Court of California for the County of Ventura, alleging various claims under the California Labor Code, including failure to provide meal and rest periods, failure to timely pay wages, failure to provide accurate itemized wage statements, and unfair competition and violation of the Private Attorneys’ General Act of 2004, and seeking unspecified damages and penalties. On August 30, 2013, the Company removed the action to the United States District Court for the Central District of California. Subsequently, the Company reached an agreement to settle the matter. The court granted final approval of the settlement on May 8, 2015 and dismissed the case.

On April 30, 2015, an employee of a subsidiary of the Company filed an action, Stewart v. Hat World, Inc., et al., under the California Labor Code Private Attorneys General Act on behalf of herself, the State of California, and other non-exempt, hourly-paid employees of the subsidiary in California, seeking unspecified damages and penalties for various alleged violations of the California Labor Code, including failure to pay for all hours worked, minimum wage and overtime violations, failure to provide

99


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 13
Legal Proceedings, Continued

required meal and rest periods, failure to timely pay wages, failure to provide complete and accurate wage statements, and failure to provide full reimbursement of business-related costs and expenses incurred in the course of employment. The Company disputes the material allegations in the complaint and is defendingintends to defend the matter.

On March 3, 2016, plaintiffs filed an action Lacey, et al. v. Genesco Inc., in the U.S. District Court for the Western District of Pennsylvania, alleging that certain of the Company's internet websites are inaccessible to the blind, in violation of the Americans With Disabilities Act. The suit seeks injunctive relief and attorneys' fees. The Company is investigating the allegations in the complaint.

In addition to the matters specifically described in this Note, the Company is a party to other legal and regulatory proceedings and claims arising in the ordinary course of its business. While management does not believe that the Company's liability with respect to any of these other matters is likely to have a material effect on its financial position, cash flows, or results of operations,statements, legal proceedings are subject to inherent uncertainties and unfavorable rulings could have a material adverse impact on the Company's business and resultsfinancial statements.

100


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 14
Business Segment Information

During Fiscal 2014,2016, the Company operated five reportable business segments (not including corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz, Shi by Journeys, Little Burgundy and Underground by Journeys retail footwear chains, cataloge-commerce operations and e-commerce operations;catalog; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Lids Sports Group, comprised primarily of the Lids, Hat World and Hat Shack retail headwear stores, the Lids Locker Room and Lids Clubhouse fan shops (operated under various trade names), licensed team merchandise departments in Macy's department stores operated under the name of Locker Room by Lids under a license agreement with Macy's, thecertain e-commerce operations and an athletic team dealer business operating as Lids Team Sports business and certain e-commerce operations;which was sold in the fourth quarter of Fiscal 2016; (iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, catalog and e-commerce operations, catalog and wholesale distribution of products under the Johnston & Murphy and Trask brands; and (v) Licensed Brands, comprised of Dockers® Footwear, sourced and marketed under a license from Levi Strauss &
Company; SureGrip® Footwear, occupational footwear primarily sold directly to consumers; and other brands.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The Company's reportable segments are based on management's organization of the segments in order to make operating decisions and assess performance along types of products sold. Journeys Group, Schuh Group and Lids Sports Group sell primarily branded products from other companies while Johnston & Murphy Group and Licensed Brands sell primarily the Company's owned and licensed
brands.




98


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 14
Business Segment Information, Continued

Corporate assets include cash, domestic prepaid rent expense, prepaid income taxes, deferred income taxes, deferred note expense and corporate fixed assets. The Company charges allocated retail costs of distribution to each segment. The Company does not allocate certain costs to each segment in order
to make decisions and assess performance. These costs include corporate overhead, interest expense, interest income, asset impairment charges and other, including major litigation and major lease terminations.

















101


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements




Note 14
Business Segment Information, Continued
Fiscal 2014             
Fiscal 2016             
Journeys
Group    
 Schuh Group 
Lids Sports
Group
 
Johnston
& Murphy
Group
 
Licensed
Brands
 
Corporate
& Other
 Consolidated
Journeys
Group    
 Schuh Group 
Lids Sports
Group
 
Johnston
& Murphy
Group
 
Licensed
Brands
 
Corporate
& Other
 Consolidated
In thousands   
Sales$1,082,241
 $364,732
 $821,779
 $245,941
 $109,989
 $1,282
 $2,625,964
$1,251,637
 $405,674
 $976,372
 $278,681
 $110,655
 $912
 $3,023,931
Intercompany sales


 (783) 
 (209) 
 (992)


 (868) 
 (829) 
 (1,697)
Net sales to external customers$1,082,241
 $364,732
 $820,996
 $245,941
 $109,780
 $1,282
 $2,624,972
$1,251,637
 $405,674
 $975,504
 $278,681
 $109,826
 $912
 $3,022,234
Segment operating income (loss)$97,377
 $3,063
 $63,748
 $17,638
 $10,614
 $(27,664) $164,776
$126,248
 $19,124
 $17,040
 $17,761
 $9,236
 $(30,265) $159,144
Asset Impairments and other*
 
 
 
 
 (1,341) (1,341)
 
 
 
 
 (7,893) (7,893)
Earnings (loss) from operations97,377
 3,063
 63,748
 17,638
 10,614
 (29,005) 163,435
126,248
 19,124
 17,040
 17,761
 9,236
 (38,158) 151,251
Gain on sale of Lids Team Sports
 
 
 
 
 4,685
 4,685
Interest expense
 
 
 
 
 (4,641) (4,641)
 
 
 
 
 (4,414) (4,414)
Interest income
 
 
 
 
 66
 66

 
 
 
 
 11
 11
Earnings (loss) from continuing
operations before income taxes
$97,377
 $3,063
 $63,748
 $17,638
 $10,614
 $(33,580) $158,860
$126,248
 $19,124
 $17,040
 $17,761
 $9,236
 $(37,876) $151,533
                          
Total assets**$298,105
 $268,514
 $574,664
 $97,532
 $50,955
 $149,514
 $1,439,284
$349,021
 $241,924
 $517,284
 $118,913
 $50,718
 $263,623
 $1,541,483
Depreciation and amortization19,400
 11,339
 28,345
 4,002
 468
 3,581
 67,135
22,504
 14,814
 30,196
 5,677
 911
 4,909
 79,011
Capital expenditures20,223
 29,673
 35,193
 9,178
 1,452
 2,737
 98,456
33,251
 19,065
 37,396
 7,796
 774
 2,370
 100,652

 *Asset Impairments and other includes a $3.1 million charge for asset impairments, of which $2.7 million is in the Lids Sports Group and $0.4 million is in the Schuh Group, a $2.5 million charge for asset write-downs, a $2.2 million charge for network intrusion costs and a $0.1 million charge for other legal matters.

**Total assets for the Lids Sports Group, Schuh Group, Journeys Group and Licensed Brands include $180.9 million, $90.3 million, $9.4 million and $0.8 million of goodwill, respectively. Goodwill for Lids Sports Group primarily decreased $19.2 million due to the sale of Lids Team Sports in the fourth quarter of Fiscal 2016. Goodwill for Schuh Group decreased by $5.7 million due to foreign currency translation adjustment. Goodwill for Journeys Group increased $9.4 million due to the acquisition of Little Burgundy in the fourth quarter of Fiscal 2016. Of the Company's $323.3 million of long-lived assets, $64.7 million and $18.3 million relate to long-lived assets in the United Kingdom and Canada, respectively.















102


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements




Note 14
Business Segment Information, Continued
Fiscal 2015             
 
Journeys
Group    
 Schuh Group 
Lids Sports
Group
 
Johnston
& Murphy
Group
 
Licensed
Brands
 
Corporate
& Other
 Consolidated
In thousands      
Sales$1,179,476
 406,947
 $903,451
 $259,675
 $110,896
 $970
 $2,861,415
Intercompany sales
 
 (790) 
 (781) 
 (1,571)
Net sales to external customers$1,179,476
 $406,947
 $902,661
 $259,675
 $110,115
 $970
 $2,859,844
Segment operating income (loss)$114,784
 $10,110
 $48,970
 $14,856
 $10,459
 $(29,632) $169,547
Asset Impairments and other*
 
 
 
 
 (2,281) (2,281)
Earnings (loss) from operations114,784
 10,110
 48,970
 14,856
 10,459
 (31,913) 167,266
Indemnification asset write-off
 
 
 
 
 (7,050) (7,050)
Interest expense
 
 
 
 
 (3,337) (3,337)
Interest income
 
 
 
 
 110
 110
Earnings (loss) from continuing
operations before income taxes
$114,784
 $10,110
 $48,970
 $14,856
 $10,459
 $(42,190) $156,989
Total assets**$292,536
 246,570
 $660,833
 $109,791
 $47,066
 $226,291
 $1,583,087
Depreciation and amortization20,785
 14,114
 29,711
 4,935
 725
 4,056
 74,326
Capital expenditures26,180
 21,382
 43,013
 8,196
 979
 3,361
 103,111

*Asset Impairments and other includes a $1.9 million charge for asset impairments, of which $1.7 million is in the Lids Sports Group and $0.2 million is in the Johnston & Murphy Group, a $3.1 million charge for network intrusion costs and a $0.7 million charge for other legal matters, partially offset by a gain of $(3.4) million on a lease termination of a Lids store.

**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $200.1 million, $96.0 million and $0.8 million of goodwill, respectively. Goodwill for Lids Sports Group includes $17.7 million of additions in Fiscal 2015 resulting from several small acquisitions and the Schuh Group goodwill decreased by $8.9 million due to foreign currency translation adjustment. Of the Company's $305.8 million of long-lived assets, $63.9 million and $14.6 million relate to long-lived assets in the United Kingdom and Canada, respectively.


103


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 14
Business Segment Information, Continued
Fiscal 2014             
 
Journeys
Group    
 Schuh Group 
Lids Sports
Group
 
Johnston
& Murphy
Group
 
Licensed
Brands
 
Corporate
& Other
 Consolidated
In thousands      
Sales$1,082,241
 $364,732
 $821,779
 $245,941
 $109,989
 $1,282
 $2,625,964
Intercompany sales
 
 (783) 
 (209) 
 (992)
Net sales to external customers$1,082,241
 $364,732
 $820,996
 $245,941
 $109,780
 $1,282
 $2,624,972
Segment operating income (loss)$97,377
 $3,063
 $63,748
 $17,638
 $10,614
 $(27,664) $164,776
Asset Impairments and other*
 
 
 
 
 (1,341) (1,341)
Earnings (loss) from operations97,377
 3,063
 63,748
 17,638
 10,614
 (29,005) 163,435
Interest expense
 
 
 
 
 (4,641) (4,641)
Interest income
 
 
 
 
 66
 66
Earnings (loss) from continuing
operations before income taxes
$97,377
 $3,063
 $63,748
 $17,638
 $10,614
 $(33,580) $158,860
Total assets**$298,105
 $268,514
 $574,664
 $97,532
 $50,955
 $149,514
 $1,439,284
Depreciation and amortization19,400
 11,339
 28,345
 4,002
 468
 3,581
 67,135
Capital expenditures20,223
 29,673
 35,193
 9,178
 1,452
 2,737
 98,456

*Asset Impairments and other includes a $2.3 million charge for asset impairments, of which $1.4 million is in the Lids Sports Group, $0.6 million is in the Journeys Group and $0.3 million is in the Johnston & Murphy Group, a $3.3 million charge for network intrusion costs, a $2.4 million charge for other legal matters and a $1.6 million charge for a lease termination, partially offset by a gain of $(8.3) million for the lease termination of a New York City Journeys store.

**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $182.4 million, $104.9$104.9 million and $0.8 million of goodwill, respectively. Goodwill for the Lids Sports Group includes $10.1$10.1 million of additions in Fiscal 2014 resulting from small acquisitions and the Schuh Group goodwill increased by $4.2 million due to foreign currency translation adjustment.











99


Genesco Inc.
long-lived assets, $66.9 million and Subsidiaries
Notes$15.1 million relate to Consolidated Financial Statements


Note 14
Business Segment Information, Continued
Fiscal 2013             
 
Journeys
Group    
 Schuh Group 
Lids Sports
Group
 
Johnston
& Murphy
Group
 
Licensed
Brands
 
Corporate
& Other
 Consolidated
In thousands      
Sales$1,111,490
 370,480
 $793,016
 $221,870
 $108,808
 $1,234
 $2,606,898
Intercompany sales
 
 (1,761) (10) (310) 
 (2,081)
Net sales to external customers$1,111,490
 $370,480
 $791,255
 $221,860
 $108,498
 $1,234
 $2,604,817
Segment operating income (loss)$109,953
 $11,209
 $82,867
 $15,696
 $10,078
 $(42,903) $186,900
Asset Impairments and other*
 
 
 
 
 (17,037) (17,037)
Earnings (loss) from operations109,953
 11,209
 82,867
 15,696
 10,078
 (59,940) 169,863
Interest expense
 
 
 
 
 (5,126) (5,126)
Interest income
 
 
 
 
 95
 95
Earnings (loss) from continuing
operations before income taxes
$109,953
 $11,209
 $82,867
 $15,696
 $10,078
 $(64,971) $164,832
Total assets**$280,396
 231,323
 $519,006
 $89,505
 $43,212
 $162,630
 $1,326,072
Depreciation and amortization20,190
 10,040
 26,892
 3,738
 366
 2,471
 63,697
Capital expenditures21,852
 16,873
 21,448
 6,680
 1,255
 3,629
 71,737
*Asset Impairments and other includes a $1.4 million charge for asset impairments, of which $0.9 million islong-lived assets in the Lids Sports Group, $0.4 million is in the Journeys Group,United Kingdom and $0.1 million is in the Johnston & Murphy Group, a $15.6 million charge for network intrusion costs and a $0.1 million charge for other legal matters.

**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $172.3 million, $100.7 million and $0.8 million of goodwill,Canada, respectively. Goodwill for Lids Sports Group includes $13.2 million of additions in Fiscal 2013 resulting from small acquisitions and the Schuh Group goodwill increased by $0.8 million due to foreign currency translation adjustment.


100104


Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements


Note 14
Business Segment Information, Continued
Fiscal 2012             
 
Journeys
Group    
 Schuh Group 
Lids Sports
Group
 
Johnston
& Murphy
Group
 
Licensed
Brands
 
Corporate
& Other
 Consolidated
In thousands      
Sales$1,020,116
 $212,262
 $759,671
 $201,725
 $97,721
 $1,116
 $2,292,611
Intercompany sales
 
 (347) 
 (277) 
 (624)
Net sales to external customers$1,020,116
 $212,262
 $759,324
 $201,725
 $97,444
 $1,116
 $2,291,987
Segment operating income (loss)$89,045
 $11,711
 $86,037
 $13,743
 $9,451
 $(45,825) $164,162
Asset Impairments and other*
 
 
 
 
 (2,677) (2,677)
Earnings (loss) from operations89,045
 11,711
 86,037
 13,743
 9,451
 (48,502) 161,485
Interest expense
 
 
 
 
 (5,157) (5,157)
Interest income
 
 
 
 
 65
 65
Earnings (loss) from continuing
operations before income taxes
$89,045
 $11,711
 $86,037
 $13,743
 $9,451
 $(53,594) $156,393
Total assets**$259,331
 $205,313
 $489,512
 $79,321
 $34,974
 $161,310
 $1,229,761
Depreciation and amortization20,742
 4,602
 22,541
 3,538
 285
 2,029
 53,737
Capital expenditures11,125
 7,406
 24,497
 1,894
 718
 3,816
 49,456

*Asset Impairments and other includes a $1.1 million charge for asset impairments, of which $0.6 million is in the Journeys Group, $0.3 million is in the Lids Sports Group and $0.2 million is in the Johnston & Murphy Group, a $0.7 million charge for network intrusion costs and a $0.9 million charge for other legal matters.

**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $159.1 million, $99.9 million and $0.8 million of goodwill, respectively. Goodwill for the Lids Sports Group includes $6.5 million of additions in Fiscal 2012 resulting from small acquisitions and the Schuh Group goodwill is due to the acquisition of Schuh in the second quarter of Fiscal 2012 of $102.9 million which has been decreased by $3.0 million due to foreign currency translation adjustment.



101


Note 15
Quarterly Financial Information (Unaudited)
 
(In thousands,  1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year
except per share amounts) 2014 2013 2014 2013 2014 2013 
2014(a)
 2013 
2014(b)
 2013 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Net sales $591,388
  $600,144
  $574,746
  $543,522
  $666,332
  $664,458
  $792,506
  $796,693
  $2,624,972
 $2,604,817
 $660,597
  $628,825
  $655,525
  $615,474
  $773,898
  $722,915
  $932,214
  $892,630
  $3,022,234
 $2,859,844
Gross margin 298,437
  306,906
  282,808
  273,059
  332,161
  334,412
  385,644
  384,240
  1,299,050
 1,298,617
 326,333
  315,944
  320,091
  301,745
  373,886
  358,489
  423,156
  424,233
  1,443,466
 1,400,411
Earnings from continuing operations before income taxes 24,685
(1) 
35,886
(3) 
14,388
(5) 
14,638
(7) 
45,789
(8) 
52,907
(9) 
73,998
(11) 
61,401
(13) 
158,860
 164,832
 15,609
(1) 
23,017
(3) 
11,568
(5) 
9,302
(7) 
50,720
(9) 
38,619
(11) 
73,636
(13) 
86,051
(15) 
151,533
 156,989
Earnings from continuing operations 14,509
   
21,754
  8,465
   
10,009
 27,796
   
42,221
  42,212
  38,913
  92,982
 112,897
 9,945
   
14,098
  7,593
   
4,768
 32,855
   
28,750
  44,988
  51,757
  95,381
 99,373
Net earnings 14,410
(2) 
21,577
(4) 
8,340
(6)  
9,968
 27,750
 42,127
(10) 
42,153
(12) 
38,763
(14) 
92,653
 112,435
 9,878
(2) 
13,973
(4) 
7,520
(6)  
4,694
(8) 
32,507
(10) 
28,662
(12) 
44,664
(14) 
50,396
(16) 
94,569
 97,725
Diluted earnings per common share:                                        
Continuing operations 0.61
  0.88
  0.36
  0.41
 1.18
  1.76
  1.79
  1.64
  3.94
 4.69
 0.42
  0.60
  0.32
  0.20
 1.43
  1.21
  2.07
  2.18
  4.15
 4.19
Net earnings 0.61
  0.87
  0.35
 0.40
 1.18
  1.76
  1.79
  1.63
  3.92
 4.68
 0.42
  0.59
  0.32
 0.20
 1.42
  1.21
  2.06
  2.12
  4.11
 4.12
 
(1)
Includes a net asset impairment and other charge of $1.32.6 million (see Note 3). (a) 13 week period vs. 14
(2)
Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 3). weeks in prior period.
(3)
Includes a net asset impairment and other chargecredit of $0.1(1.1) million (see Note 3). (b) 52 week period vs. 53
(4)
Includes a loss of $0.20.1 million, net of tax, from discontinued operations (see Note 3). weeks in prior period.
(5)
Includes a net asset impairment and other creditcharge of $(7.1)1.2 million (see Note 3).
(6)Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 3).
(7)
Includes a net asset impairment and other charge of $0.41.4 million (see Note 3).
(8)
Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 3).
(9)Includes a net asset impairment and other charge of $1.5$0.2 million (see Note 3).
(9)(10)
Includes a loss of $0.3 million, net of tax, from discontinued operations (see Note 3).
(11)Includes a net asset impairment and other charge of $0.4$1.0 million (see Note 3).
(10)
Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 3).
(11)
Includes a net asset impairment and other charge of $5.6 million (see Note 3).
(12)
Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 3).
(13)
Includes a net asset impairment and other charge of $16.13.9 million (see Note 3) and a gain of $(4.7) million on the sale of Lids Team Sports (see Note 2).
(14)
Includes a loss of $0.3 million, net of tax, from discontinued operations (see Note 3).
(15)
Includes a net asset impairment and other charge of $1.0 million (see Note 3).
(14)(16)
Includes a loss of $0.2$1.4 million, net of tax, from discontinued operations (see Note 3).



102105


ITEM 9, CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

ITEM 9A, CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
We have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers who certify the Company's financial reports and to other members of senior management and Board of Directors.
Based on their evaluation as of February 1, 2014,January 30, 2016, the principal executive officer and principal financial officer of the Company have concluded that the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to the Company's management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Management’s annual report on internal control over financial reporting.
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of February 1, 2014.January 30, 2016. In making this assessment, management used the criteria set forth in Internal Control – Integrated Framework (1992)(2013) drafted by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management believes that, as of February 1, 2014,January 30, 2016, the Company’s internal control over financial reporting was effective based on those criteria.
Ernst & Young LLP, the independent registered public accounting firm who also audited the Company’s Consolidated Financial Statements, has issued an attestation report on the Company’s effectiveness of internal control over financial reporting which is included herein.
Changes in internal control over financial reporting.
There were no changes in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that have materially affected or are reasonable likely to materially affect the Company's internal control over financial reporting.

ITEM 9B, OTHER INFORMATION
Not applicable.


103106


PART III

ITEM 10, DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Certain information required by this item is incorporated herein by reference to the sections entitled “Election of Directors,” “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2014,23, 2016, to be filed with the Securities and Exchange Commission. Pursuant to General Instruction G(3), certain information concerning the executive officers of the Company appears under the captionItem 4A, “Executive Officers of the Registrant” in this report following Item 4, "Mine Safety Disclosures" of Part I.
The Company has a code of ethics (the “Code of Ethics”) that applies to all of its directors, officers (including its chief executive officer, chief financial officer and chief accounting officer) and employees. The Company has made the Code of Ethics available and intends to post any legally required amendments to, or waivers of, such Code of Ethics on its website at http://www.genesco.com. Our website address is provided as an inactive textual reference only. The information provided on our website is not a part of this report, and therefore is not incorporated herein by reference.

ITEM 11, EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to the sections entitled “Director Compensation,” “Compensation Committee Report” and “Executive Compensation” in the Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2014,23, 2016, to be filed with the Securities and Exchange Commission.

ITEM 12, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Certain information required by this item is incorporated herein by reference to the section entitled “Security Ownership of Officers, Directors and Principal Shareholders” in the Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2014,23, 2016, to be filed with the Securities and Exchange Commission.

The following table provides certain information as of February 1, 2014January 30, 2016 with respect to our equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION*
 
Plan Category
(a)
Number of
securities
to be issued
upon exercise of
outstanding options,
warrants and rights
 
(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
 
(c)
Number of securities
remaining available for
future issuance under  equity
compensation plans
(excluding securities
reflected in column (a)) (1)
(a)
Number of
securities
to be issued
upon exercise of
outstanding options,
warrants and rights
 
(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
 
(c)
Number of securities
remaining available for
future issuance under  equity
compensation plans
(excluding securities
reflected in column (a)) (1)
Equity compensation plans approved by security holders130,854
 $31.67
 1,514,954
26,696
 $38.13
 778,226
Equity compensation plans not approved by security holders
 
 

 
 
Total130,854
 $31.67
 1,514,954
26,696
 $38.13
 778,226

(1)Such shares may be issued as restricted shares or other forms of stock-based compensation pursuant to our stock incentive plans.
*For additional information concerning our equity compensation plans, see the discussion in Note 1 in the Notes to Consolidated Financial Statements—Summary of Significant Accounting Policies – Share-Based Compensation and Note 12 Share-Based Compensation Plans.

ITEM 13, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference to the section entitled “Election of Directors” in the Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2014,23, 2016, to be filed with the Securities and Exchange Commission.

ITEM 14, PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated herein by reference to the section entitled “Audit Matters” in the Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2014,23, 2016, to be filed with the Securities and Exchange Commission.

104107


PART IV
 
ITEM 15, EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements
The following consolidated financial statements of Genesco Inc. and Subsidiaries (the "Company") are filed as part of this report under Item 8, Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Financial Statements
Consolidated Balance Sheets, February 1, 2014January 30, 2016 and February 2, 2013January 31, 2015
Consolidated Statements of Operations, each of the three fiscal years ended 2014, 20132016, 2015 and 20122014
Consolidated Statements of Comprehensive Income, each of the three fiscal years ended 2014, 20132016, 2015 and 20122014
Consolidated Statements of Cash Flows, each of the three fiscal years ended 2014, 20132016, 2015 and 20122014
Consolidated Statements of Equity, each of the three fiscal years ended 2014, 20132016, 2015 and 20122014
Notes to Consolidated Financial Statements
Financial Statement Schedules
Schedule 2 — Valuation and Qualifying Accounts, each of the three fiscal years ended 2014, 20132016, 2015 and 20122014
All other schedules are omitted because the required information is either not applicable or is presented in the financial statements or related notes. These schedules begin on page 111.114.
Exhibits
 (2)   a.Agreement and Plan of Merger, dated as of February 5, 2004, by and among Genesco Inc., HWC Merger Sub, Inc. and Hat World Corporation. Incorporated by reference to Exhibit (2)a to the current report on Form 8-K filed April 9, 2004 (File No. 1-3083).
  b.Stock Purchase Agreement, dated December 9, 2006, by and among Hat World, Inc., Hat Shack, Inc. and all the shareholders of Hat Shack, Inc. Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed December 12, 2006 (File No. 1-3083).
  c.Sale and Purchase Agreement, dated as of June 23, 2011, by and among Genesco Inc., Schuh Group Limited, Genesco (UK) Limited and the persons listed on Schedule 1 thereto. (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits from this agreement are omitted, but will be provided supplementally to the Commission upon request.) Incorporated by reference to Exhibit 2.1 to the current report on Form 8-K filed June 28, 2011 (File No. 1-3083).
  d.£25 million Loan Note Instrument of Genesco (UK) Limited dated June 23, 2011. Incorporated by reference to Exhibit 2.2 to the current report on Form 8-K filed June 28, 2011 (File No. 1-3083).
 (3)   a.Amended and Restated Bylaws of Genesco Inc. Incorporated by reference to Exhibit 3.199.2 to the current report on Form 8-K filed December 19, 2007November 12, 2015 (File No. 1-3083).
  b.Restated Charter of Genesco Inc., as amended. Incorporated by reference to Exhibit 1 to the Genesco Inc. Registration Statement on Form 8-A/A filed with the SEC on May 1, 2003 (File No.1-3083).
 (4)   a.Second Amended and Restated Rights Agreement dated as of April 18, 2010. Incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed April 9, 2010 (File No. 1-3083).
  b.Form of Certificate for the Common Stock. Incorporated by reference to Exhibit 3 to the Genesco Inc. Registration Statement on Form 8-A/A filed with the SEC on May 1, 2003 (File No.1-3083).

105108


 (10)  a.First Amendment to Third Amended and Restated Credit Agreement, dated as of January 31, 2014,December 4, 2015, by and among Genesco Inc., certain subsidiaries of the Genesco Inc. party thereto, as other domestic borrowers,Other Domestic Borrowers, GCO Canada Inc., Genesco (UK) Limited, the lenders party thereto and Bank of America, N.A., as Agent. Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed February 5, 2014December 7, 2015 (File No. 1-3083).
  b.Amendment and Restatement Agreement dated November 1, 2013 between Schuh Group Limited as Parent and others as Borrowers and Guarantors, Lloyds Bank PLC as Arranger, Agent and Security Trustee. Incorporated by reference to Exhibit (10) b. to the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2014 (File No. 1-3083).
  c.Form of Split-Dollar Insurance Agreement with Executive Officers. Incorporated by reference to Exhibit (10)a to the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 1997 (File No.1-3083).
  d.1996 Stock Incentive Plan Amended and Restated as of October 24, 2007. Form of Option Agreement. Incorporated by reference to Exhibit (10)c to the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2007 (File No.1-3083).
e.Genesco Inc. 2005 Equity Incentive Plan Amended and Restated as of October 24, 2007. Incorporated by reference to Exhibit (10)d to the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2008 (File No.1-3083).
  f.e.Genesco Inc. 2009 Equity Incentive Plan. Incorporated by reference to Exhibit A to the Company’s definitive proxy statement dated May 15, 2009. Amended and Restated Genesco Inc. 2009 Equity Incentive Plan. Incorporated by reference to Exhibit A to the Company’s definitive proxy statement dated May 13, 2011.
  g.f.Amended and Restated EVA Incentive Compensation Plan. Incorporated by reference to Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2011May 3, 2014 (File No. 1-3083).
  h.Amended and Restated EVA Incentive Compensation Plan. Incorporated by reference to Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 28, 2012 (File No. 1-3083).
i.g.Form of Incentive Stock Option Agreement. Incorporated by reference to Exhibit (10)c to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005 (File No.1-3083).
  j.h.Form of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit (10)d to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005 (File No.1-3083).
  k.i.Form of Restricted Share Award Agreement for Executive Officers. Incorporated by reference to Exhibit (10)e to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005 (File No.1-3083).
  l.j.Form of Restricted Share Award Agreement for Officers and Employees. Incorporated by reference to Exhibit (10)f to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005 (File No.1-3083).
  m.k.Form of Restricted Share Award Agreement. Incorporated by reference to Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended August 1, 2009 (File No. 1-3083).
  n.l.Form of Indemnification Agreement For Directors. Incorporated by reference to Exhibit (10)m to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 1993 (File No.1-3083).
  o.m.Form of Non-Executive Director Indemnification Agreement. Incorporated by reference to Exhibit (10.1) to the current report on Form 8-K filed November 3, 2008 (File No. 1-3083).
  p.n.Form of Officer Indemnification Agreement. Incorporated by reference to Exhibit (10.2) to the Company’s Quarterly Report on Form 10-Q for the quarter ended November 1, 2008 (File No.1-3083).
  q.Supplemental Pension Agreement dated as of October 18, 1988 between the Company and William S. Wire II, as amended January 9, 1993. Incorporated by reference to Exhibit (10)p to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 1993 (File No.1-3083).
r.Deferred Compensation Trust Agreement dated as of February 27, 1991 between the Company and NationsBank of Tennessee for the benefit of William S. Wire, II, as amended January 9, 1993. Incorporated by reference to Exhibit (10)q to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 1993 (File No.1-3083).
s.o.Form of Employment Protection Agreement between the Company and certain executive officers dated as of February 26, 1997. Incorporated by reference to Exhibit (10)p to the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 1997 (File No.1-3083).

106


  t.p.First Amendment to Form of Employment Protection Agreement. Incorporated by reference to Exhibit (10)s to the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010 (File No.1-3083).
  u.q.EmploymentTransition Agreement dated as of March 29, 2010February 23, 2016 between the Company and Hal N. Pennington. Incorporated by reference to Exhibit (10)t to the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2010 (File No.1-3083).Kenneth Kocher.
  v.r.Trademark License Agreement, dated August 9, 2000, between Levi Strauss & Co. and Genesco Inc. Incorporated by reference to Exhibit (10.1) to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2004 (File No.1-3083).*
  w.s.Amendment No. 1 (Renewal) to Trademark License Agreement, dated October 18, 2004, between Levi Strauss & Co. and Genesco Inc. Incorporated by reference to Exhibit (10.2) to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2004 (File No.1-3083).*

109


  x.t.Amendment No. 2 (Renewal) to Trademark License Agreement, dated November 1, 2006, between Levi Strauss & Co. and Genesco. Inc. Incorporated by reference to Exhibit (10.1) to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 28, 2006 (File No.1-3083).*
  y.u.Amendment No. 4 (Renewal) to Trademark License Agreement, dated May 15, 2009, between Levi Strauss & Co. and Genesco Inc. Incorporated by reference to Exhibit (10)b to the Company’s Quarterly Report on Form 10-Q for the quarter ended August 1, 2009 (File No.1-3083).*
  z.v.Amendment No. 5 (Renewal) to Trademark License Agreement, dated July 23, 2012, between Levi Strauss & Co. and Genesco Inc. Incorporated by reference to Exhibit (10.1) to the Company’s Current Report on Form 8-K filed July 25, 2012 (File No. 1-3083).*
  aa.w.Genesco Inc. Deferred Income Plan dated as of July 1, 2000. Incorporated by reference to Exhibit (10)p to the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2005. Amended and Restated Deferred Income Plan dated August 22, 2007. Incorporated by reference to Exhibit (10)r to the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2008 (File No.1-3083).
  bb.Non-Employee Director and Named Executive Officer Compensation. Incorporated by reference to Exhibit (10)b to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005 (File No.1-3083).
cc.x.The Schuh Group Limited 2015 Management Bonus Scheme. Incorporated by reference to Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 30, 2011 (File No.1-3083).
  dd.1996 Employee Stock Purchase Plan. Incorporated by reference to Registration Statement on Form S-8 filed September 14, 1995 (File No. 333-62653).
ee.Amended and Restated Genesco Employee Stock Purchase Plan dated August 22, 2007. Incorporated by reference to Exhibit (10)u to the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2008 (File No.1-3083).
ff.y.Basic Form of Exchange Agreement (Restricted Stock). Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed April 29, 2009 (File No. 1-3083).
  gg.z.Basic Form of Exchange Agreement (Unrestricted Stock). Incorporated by reference to Exhibit 10.2 to the current report on Form 8-K filed April 29, 2009 (File No. 1-3083).
  hh.aa.Form of Conversion Agreement. Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed November 2, 2009 (File No. 1-3083).
  ii.bb.Form of Conversion Agreement. Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed November 6, 2009 (File No. 1-3083).
  jj.cc.Settlement Agreement, dated as of March 3, 2008, by and among UBS Securities LLC and UBS Loan Finance LLC, The Finish Line, Inc. and Headwind, Inc. and Genesco Inc. Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed March 4, 2008 (File No. 1-3083).
 (21) Subsidiaries of the Company
 (23) Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm included on page 109.112.
 (24) Power of Attorney
 (31.1) Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

107


 (31.2) Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 (32.1) Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 (32.2) Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 (99)Financial Statements and Report of Independent Registered Public Accounting Firm with respect to the Genesco Employee Stock Purchase Plan being filed herein in lieu of filing Form 11-K pursuant to Rule 15d-21(filed with the Original Filing).
101.INS XBRL Instance Document
 101.SCH XBRL Schema Document
 101.CAL XBRL Calculation Linkbase Document
 101.DEF XBRL Definition Linkbase Document
 101.LAB XBRL Label Linkbase Document
 101.PRE XBRL Presentation Linkbase Document
Exhibits (10)c through (10)m,k, (10)so through (10)uq and (10)aaw through (10)eex are Management Contracts or Compensatory Plans or Arrangements required to be filed as Exhibits to this Form 10-K.
 

110


*Certain information has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been granted with respect to the omitted portion.
A copy of any of the above described exhibits will be furnished to the shareholders upon written request, addressed to Director, Corporate Relations, Genesco Inc., Genesco Park, Room 498, P.O. Box 731, Nashville, Tennessee 37202-0731, accompanied by a check in the amount of $15.00 payable to Genesco Inc.

108111


Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration statement (Form S-8 No. 033-62653)333-08463) of Genesco Inc.,
(2) Registration statement (Form S-8 No. 333-08463)333-104908) of Genesco Inc.,
(3) Registration statement (Form S-8 No. 333-104908)333-40249) of Genesco Inc.,
(4) Registration statement (Form S-8 No. 333-40249)333-128201) of Genesco Inc.,
(5) Registration statement (Form S-8 No. 333-128201) of Genesco Inc.,
(6) Registration statement (Form S-8 No. 333-160339) of Genesco Inc., and
(7)(6) Registration statement (Form S-8 No. 333-180463) of Genesco Inc., and
(8) Registration statement (Form S-3 No. 333-109019) of Genesco Inc.,
of our reports dated April 2, 2014,March 30, 2016, with respect to the consolidated financial statements and schedule of Genesco Inc. and Subsidiaries and the effectiveness of internal control over financial reporting of Genesco Inc. and Subsidiaries included in this Annual Report (Form 10-K) of Genesco Inc. for the year ended February 1, 2014.
We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-62653) pertaining to the 1996 Employee Stock Purchase Plan of Genesco Inc. of our report dated April 2, 2014, with respect to the financial statements of the Genesco Inc. Employee Stock Purchase Plan included as an exhibit to this Annual Report (Form 10-K) of Genesco Inc. for the year ended February 1, 2014.January 30, 2016.

 /s/ Ernst & Young LLP
Nashville, Tennessee 
April 2, 2014March 30, 2016 


109112


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
GENESCO INC.
  
By: /s/James S. GulmiMimi Eckel Vaughn
   
  James S. GulmiMimi Eckel Vaughn
  Senior Vice President – Finance and
  Chief Financial Officer
Date: April 2, 2014March 30, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 2nd30th day of April, 2014.March, 2016.
 
/s/Robert J. Dennis Chairman, President, Chief Executive Officer
Robert J. Dennis and a Director
  (Principal Executive Officer)
/s/James S. GulmiMimi Eckel Vaughn Senior Vice President – Finance and
James S. GulmiMimi Eckel Vaughn Chief Financial Officer
  (Principal Financial Officer)
   
/s/Paul D. Williams Vice President and Chief Accounting Officer
Paul D. Williams (Principal Accounting Officer)
   
Directors:  
   
Joanna Barsh* Matthew C. DiamondMarty G. Dickens *
   
James S. Beard* Marty G. DickensThurgood Marshall, Jr. *
   
Leonard L. Berry * Thurgood Marshall, Jr.Kathleen Mason *
   
William F. Blaufuss, Jr.* Kathleen Mason *Kevin P. McDermott*
   
James W. Bradford* David M. Tehle*
   
Matthew C. Diamond *  
*By/s/Roger G. Sisson    
 Roger G. Sisson
 Attorney-In-Fact




110113


Genesco Inc.
and Subsidiaries
Financial Statement Schedule
February 1, 2014January 30, 2016

111114


Schedule 2
Genesco Inc.
and Subsidiaries
Valuation and Qualifying Accounts
Year Ended January 30, 2016
In Thousands
Beginning
Balance
 
Charged
to Profit
and Loss
 
Increases
(Decreases)
 
Ending
Balance
Reserves deducted from assets in the balance sheet:       
Accounts Receivable Allowances$4,191
 $637
 $(1,868)  $2,960
Year Ended January 31, 2015
In Thousands
Beginning
Balance
 
Charged
to Profit
and Loss
 
Increases
(Decreases)
 
Ending
Balance
Reserves deducted from assets in the balance sheet:       
Accounts Receivable Allowances$4,420
 $390
 $(619) $4,191
Year Ended February 1, 2014

 
In Thousands
Beginning
Balance
 
Charged
to Profit
and Loss
 
Increases
(Decreases)
 
Ending
Balance
Reserves deducted from assets in the balance sheet:       
Accounts Receivable Allowances$6,082
 $(525) $(1,137) $4,420
Year Ended February 2, 2013
In Thousands
Beginning
Balance
 
Charged
to Profit
and Loss
 
Increases
(Decreases)
 
Ending
Balance
Reserves deducted from assets in the balance sheet:       
Accounts Receivable Allowances$6,900
 $1,325
 $(2,143) $6,082
Year Ended January 28, 2012
In Thousands
Beginning
Balance
 
Charged
to Profit
and Loss
 
Increases
(Decreases)
 
Ending
Balance
Reserves deducted from assets in the balance sheet:       
Accounts Receivable Allowances$3,301
 $2,004
 $1,595
 $6,900






112115