Effective as of February 2, 2019, Genesco Inc. (the "Company”) completed the sale of its Lids Sports Group to FanzzLids Holdings, LLC, a holding company controlled and operated by affiliates of Ames Watson, LLC. The following unaudited pro forma condensed consolidated financial information is based on our historical consolidated financial statements adjusted to give the effect of the sale of the Lids Sports Group business. For the year ended February 2, 2019, the Lids Sports Group business will be reflected in our consolidated financial statements as discontinued operations.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of November 3, 2018 is presented as if the sale of the Lids Sports Group occurred on November 3, 2018. The Unaudited Pro Forma Consolidated Statements of Operations for the nine months ended November 3, 2018 and for the years ended February 3, 2018, January 28, 2017 and January 30, 2016, are presented in each case giving effect to the sale of the Lid Sports Group business.
The pro forma condensed consolidated financial statements are based on information currently available including certain assumptions and adjustments that the Company believes are reasonable. They are presented for informational purposes only and do not necessarily represent what our financial position and results of operations would have been had the sale of the Lids Sports Group business occurred on the dates above, or to project our financial performance for any future period. The unaudited pro forma condensed consolidated financial information and the related notes should be read in conjunction with our audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2018 and the Company's Quarterly Report on Form 10-Q for the nine months ended November 3, 2018.
The unaudited pro forma consolidated financial statements include information, statements, and assumptions that are or may be considered “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “may,” “should,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan” or similar expressions. Statements that describe objectives, plans, or goals also are forward-looking statements. These forward-looking statements involve risks and uncertainties, and actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018 and in the Company’s other filings with the Securities and Exchange Commission, which are available at http://www.sec.gov. For any forward-looking statements contained herein, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and the Company undertakes no obligation to update publicly or revise any forward-looking statements in light of new information or future events.
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| | | | | | | | | |
| Genesco Inc. and Subsidiaries |
| Proforma Condensed Consolidated Statements of Operations |
| In Thousands |
| (Unaudited) |
| | | | |
| | Nine Months Ended November 3, 2018 |
| | | Sale of | Proforma |
| | Genesco | Lids Sports | Genesco |
| | As Reported | Group | Cont Ops |
| Net sales | $ | 2,011,920 |
| $ | (498,858 | ) | $ | 1,513,062 |
|
| Cost of sales | 1,015,522 |
| (233,853 | ) | 781,669 |
|
| Selling and administrative expenses | 968,265 |
| (269,505 | ) | 698,760 |
|
| Asset impairments and other, net | 9,149 |
| (7,558 | ) | 1,591 |
|
| Earnings from operations | 18,984 |
| 12,058 |
| 31,042 |
|
| Other components of net periodic benefit cost | 17 |
| — |
| 17 |
|
| Interest expense, net: | | |
|
| Interest expense | 3,144 |
| — |
| 3,144 |
|
| Interest income | (176 | ) | — |
| (176 | ) |
| Total interest expense, net | 2,968 |
| — |
| 2,968 |
|
| Earnings from continuing operations before income taxes | 15,999 |
| 12,058 |
| 28,057 |
|
| Income tax expense | 3,621 |
| 3,072 |
| 6,693 |
|
| Earnings from continuing operations | $ | 12,378 |
| $ | 8,986 |
| $ | 21,364 |
|
|
| | | | | | | | | |
| Genesco Inc. and Subsidiaries |
| Proforma Condensed Consolidated Statements of Operations |
| In Thousands |
| (Unaudited) |
| | | | |
| | Year Ended February 3, 2018 |
| | | Sale of | Proforma |
| | Genesco | Lids Sports | Genesco |
| | As Reported | Group | Cont Ops |
| Net sales | $ | 2,907,016 |
| $ | (779,469 | ) | $ | 2,127,547 |
|
| Cost of sales | 1,490,894 |
| (374,730 | ) | 1,116,164 |
|
| Selling and administrative expenses | 1,321,319 |
| (392,108 | ) | 929,211 |
|
| Goodwill impairment | 182,211 |
| (182,211 | ) | — |
|
| Asset impairments and other, net | 8,841 |
| (1,068 | ) | 7,773 |
|
| Earnings (loss) from operations | (96,249 | ) | 170,648 |
| 74,399 |
|
| Interest expense, net: | | |
|
| Interest expense | 5,420 |
| — |
| 5,420 |
|
| Interest income | (8 | ) | — |
| (8 | ) |
| Total interest expense, net | 5,412 |
| — |
| 5,412 |
|
| Earnings (loss) from continuing operations before income taxes | (101,661 | ) | 170,648 |
| 68,987 |
|
| Income tax expense | 9,769 |
| 22,511 |
| 32,280 |
|
| Earnings (loss) from continuing operations | $ | (111,430 | ) | $ | 148,137 |
| $ | 36,707 |
|
|
| | | | | | | | | |
| Genesco Inc. and Subsidiaries |
| Proforma Condensed Consolidated Statements of Operations |
| In Thousands |
| (Unaudited) |
| | | | |
| | Year Ended January 28, 2017 |
| | | Sale of | Proforma |
| | Genesco | Lids Sports | Genesco |
| | As Reported | Group | Cont Ops |
| Net sales | $ | 2,868,341 |
| $ | (847,510 | ) | $ | 2,020,831 |
|
| Cost of sales | 1,450,815 |
| (405,903 | ) | 1,044,912 |
|
| Selling and administrative expenses | 1,276,368 |
| (400,324 | ) | 876,044 |
|
| Asset impairments and other, net | (802 | ) | (4,773 | ) | (5,575 | ) |
| Earnings (loss) from operations | 141,960 |
| (36,510 | ) | 105,450 |
|
| Gain on sale of SureGrip Footwear | (12,297 | ) | — |
| (12,297 | ) |
| Gain on sale of Lids Team Sports | (2,404 | ) | 2,404 |
| — |
|
| Interest expense, net: | | |
|
| Interest expense | 5,294 |
| — |
| 5,294 |
|
| Interest income | (47 | ) | — |
| (47 | ) |
| Total interest expense, net | 5,247 |
| — |
| 5,247 |
|
| Earnings (loss) from continuing operations before income taxes | 151,414 |
| (38,914 | ) | 112,500 |
|
| Income tax expense (benefit) | 53,555 |
| (13,782 | ) | 39,773 |
|
| Earnings (loss) from continuing operations | $ | 97,859 |
| $ | (25,132 | ) | $ | 72,727 |
|
|
| | | | | | | | | |
| Genesco Inc. and Subsidiaries |
| Proforma Condensed Consolidated Statements of Operations |
| In Thousands |
| (Unaudited) |
| | | | |
| | Year Ended January 30, 2016 |
| | | Sale of | Proforma |
| | Genesco | Lids Sports | Genesco |
| | As Reported | Group | Cont Ops |
| Net sales | $ | 3,022,234 |
| $ | (975,504 | ) | $ | 2,046,730 |
|
| Cost of sales | 1,578,768 |
| (527,956 | ) | 1,050,812 |
|
| Selling and administrative expenses | 1,284,322 |
| (429,767 | ) | 854,555 |
|
| Asset impairments and other, net | 7,893 |
| (5,153 | ) | 2,740 |
|
| Earnings (loss) from operations | 151,251 |
| (12,628 | ) | 138,623 |
|
| Gain on sale of Lids Team Sports | (4,685 | ) | 4,685 |
| — |
|
| Interest expense, net: | | |
|
| Interest expense | 4,414 |
| — |
| 4,414 |
|
| Interest income | (11 | ) | — |
| (11 | ) |
| Total interest expense, net | 4,403 |
| — |
| 4,403 |
|
| Earnings (loss) from continuing operations before income taxes | 151,533 |
| (17,313 | ) | 134,220 |
|
| Income tax expense (benefit) | 56,152 |
| (6,773 | ) | 49,379 |
|
| Earnings (loss) from continuing operations | $ | 95,381 |
| $ | (10,540 | ) | $ | 84,841 |
|
|
| | | | | | | | | | | | | |
| Genesco Inc. and Subsidiaries |
| Proforma Condensed Consolidated Balance Sheet |
| In Thousands |
| (Unaudited) |
| | | | | | |
| | November 3, 2018 |
| | | Sale of | | | Proforma |
| | Genesco | Lids Sports | Proforma | | Genesco |
| Assets | As Reported | Group (a) | Adjustments | Notes | Cont Ops |
| Current Assets: | | | | | |
| Cash and cash equivalents | $ | 53,423 |
| $ | — |
| $ | 104,991 |
| (b) | $ | 158,414 |
|
| Account receivable, net of allowances | 48,364 |
| (8,382 | ) | — |
| | 39,982 |
|
| Inventories | 666,166 |
| (211,493 | ) | — |
| | 454,673 |
|
| Prepaids and other current assets | 75,149 |
| (14,990 | ) | 21,443 |
| (c) | 81,602 |
|
| Total current assets | 843,102 |
| (234,865 | ) | 126,434 |
|
| 734,671 |
|
| | | | | |
|
|
| Property and equipment: | | | | |
|
|
| Land | 7,951 |
| (17 | ) | — |
| | 7,934 |
|
| Building and building equipment | 82,381 |
| (51 | ) | — |
| | 82,330 |
|
| Computer hardware, software and equipment | 231,920 |
| (96,673 | ) | — |
| | 135,247 |
|
| Furniture and Fixtures | 181,813 |
| (52,894 | ) | — |
| | 128,919 |
|
| Construction in progress | 18,376 |
| (5,145 | ) | — |
| | 13,231 |
|
| Improvements to leased property | 440,935 |
| (100,940 | ) | — |
| | 339,995 |
|
| Property and equipment, at cost | 963,376 |
| (255,720 | ) | — |
| | 707,656 |
|
| Accumulated depreciation | (601,498 | ) | 179,665 |
| — |
| | (421,833 | ) |
| Property and equipment, net | 361,878 |
| (76,055 | ) | — |
| | 285,823 |
|
| Deferred income taxes | 25,015 |
| — |
| 8,837 |
| (c) | 33,852 |
|
| Goodwill | 92,396 |
| — |
| — |
| | 92,396 |
|
| Trademarks, net of accumulated amortization | 79,372 |
| (48,658 | ) | — |
| | 30,714 |
|
| Other intangibles, net of accumulated amortization | 1,253 |
| (239 | ) | — |
| | 1,014 |
|
| Other noncurrent assets | 27,697 |
| — |
| — |
| | 27,697 |
|
| Total Assets | $ | 1,430,713 |
| $ | (359,817 | ) | $ | 135,271 |
| | $ | 1,206,167 |
|
|
| | | | | | | | | | | | | |
| Genesco Inc. and Subsidiaries |
| Proforma Condensed Consolidated Balance Sheet |
| In Thousands |
| (Unaudited) |
| | | | | | |
| | November 3, 2018 |
| | | Sale of | | | Proforma |
| | Genesco | Lids Sports | Proforma | | Genesco |
| Liabilities and Equity | As Reported | Group | Adjustments | Notes | Cont Ops |
| Current Liabilities | | | | | |
| Accounts payable | $ | 257,504 |
| $ | (80,229 | ) | $ | — |
| | $ | 177,275 |
|
| Accrued employee compensation | 31,534 |
| (2,818 | ) | — |
| | 28,716 |
|
| Accrued other taxes | 16,459 |
| (4,941 | ) | 4,941 |
| (d) | 16,459 |
|
| Accrued income taxes | 69 |
| — |
| — |
| | 69 |
|
| Current portion - long-term debt | 9,325 |
| — |
| — |
| | 9,325 |
|
| Other accrued liabilities | 56,931 |
| (16,727 | ) | — |
| | 40,204 |
|
| Provision for discontinued operations | 470 |
| — |
| — |
| | 470 |
|
| Total current liabilities | 372,292 |
| (104,715 | ) | 4,941 |
| | 272,518 |
|
| Long-term debt | 72,455 |
| — |
| — |
| | 72,455 |
|
| Pension liability | — |
| — |
| — |
| | — |
|
| Deferred rent and other long-term liabilities | 142,462 |
| (24,680 | ) | — |
| | 117,782 |
|
| Provision for discontinued operations | 1,743 |
| — |
| — |
| | 1,743 |
|
| Total liabilities | 588,952 |
| (129,395 | ) | 4,941 |
| | 464,498 |
|
| Equity: | | | | |
|
|
| Non-redeemable preferred stock | 1,061 |
| — |
| — |
| | 1,061 |
|
| Common equity: | | | | |
|
|
| Common stock | 20,681 |
| — |
| — |
| | 20,681 |
|
| Additional paid-in capital | 260,709 |
| — |
| — |
| | 260,709 |
|
| Retained earnings | 617,923 |
| — |
| (97,794 | ) | (e) | 520,129 |
|
| Accumulated other comprehensive loss | (43,054 | ) | — |
| — |
| | (43,054 | ) |
| Treasury shares, at cost | (17,857 | ) | — |
| — |
| | (17,857 | ) |
| Total Genesco equity | 839,463 |
| — |
| (97,794 | ) | | 741,669 |
|
| Noncontrolling interest - non-redeemable | 2,298 |
| (2,298 | ) | — |
| | — |
|
| Total equity | 841,761 |
| (2,298 | ) | (97,794 | ) | | 741,669 |
|
| Total Liabilities and Equity | $ | 1,430,713 |
| $ | (131,693 | ) | $ | (92,853 | ) | | $ | 1,206,167 |
|
| | | | | | |
| (a) These adjustments reflect the elimination of the assets and liabilities of the Lids Sports Group business. |
| (b) Reflects estimated net cash proceeds from the sale of Lids Sports Group of $105.0 million, representing the gross sales price of $100.0 million net of certain purchase price adjustments and estimated transaction costs and also includes rent reimbursements. |
| (c) Represents adjustments for the estimated taxes receivable on the loss associated with the sale of Lids Sports Group. Taxes on the loss were calculated using a statutory rate of 24.07%. |
| (d) These adjustments reflect the Company's retention of certain tax related liabilities otherwise part of the Lids Sports Group businesses. |
| (e) Represents the estimated after-tax loss on the sale of the Lids Sports Group business of $97.8 million, which was calculated as follows: |
| | | | | | |
| (in thousands) | | | | | |
| Estimated proceeds, net of transaction costs | $ | 104,991 |
|
Assets of the Lids Sports Group business (1) | (359,817 | ) |
| Liabilities of the Lids Sports Group business | 124,454 |
|
| Minority interest associated with the Lids Sports Group business | 2,298 |
|
| Pretax loss on sale of the Lids Sports Group business | (128,074 | ) |
| Taxes on sale of the Lids Sports Group business at the combined jurisdictional statutory tax rate of 24.07% | (30,280 | ) |
| After-tax loss on sale of the Lids Sports Group business | $ | (97,794 | ) |
| | |
(1) Excludes the Lids Sports Group corporate headquarters which were not sold as part of the sale of Lids Sports Group. |
