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[GENESCO LOGO]
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(Mark One) FORM 10-K/A
[x]
Annual Report Pursuant To
Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended
February 1, 1997
[ ] Transition Report Pursuant To
Section 13 or 15(d) of the
Securities Exchange Act of 1934
Securities and Exchange Commission
Washington, D.C. 20549
Commission File No. 1-3083
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GENESCO INC.
A Tennessee Corporation
I.R.S. No. 62-0211340
Genesco Park
1415 Murfreesboro Road
Nashville, Tennessee 37217-2895
Telephone 615/367-7000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
EXCHANGES ON WHICH TITLE
TITLE REGISTERED
Common Stock, $1.00 par value New York and Chicago
Preferred Share Purchase Rights New York and Chicago
10 3/8% Senior Notes due 2003 New York
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
Subordinated Serial Preferred Stock, Series 1
Employees' Subordinated Convertible Preferred Stock
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Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K 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]
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the June
26, 1996 annual meeting of shareholders are
incorporated into Part III by reference.
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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 and (2) has
been subject to such filing requirements for
the past 90 days. Yes x No
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Common Shares Outstanding April
18, 1997 - 25,014,551 Aggregate
market value on April 18, 1997
of the voting stock held by
nonaffiliates of the registrant
was approximately $270,000,000.
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TABLE OF CONTENTS
Page
PART I
* Item 1. Business 3
* Item 2. Properties 8
** Item 3. Legal Proceedings 9
* Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
* Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 14
** Item 6. Selected Financial Data 15
** Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
** Item 8. Financial Statements and Supplementary Data 27
* Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 64
PART III
* Item 10. Directors and Executive Officers of the Registrant 64
* Item 11. Executive Compensation 64
* Item 12. Security Ownership of Certain Beneficial Owners and Management 64
* Item 13. Certain Relationships and Related Transactions 66
PART IV
*** Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 67
*These items have not been amended and are included herein for convenience of
reference only.
**These items have been amended and restated in their entirety.
***Only Exhibits 11 and 27 have been amended and restated in their entirety.
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PART I
ITEM 1, BUSINESS
GENERAL
Genesco Inc. ("Genesco" or the "Company") manufactures, markets and distributes
branded men's and women's shoes and boots. The Company's owned and licensed
footwear brands sold through both wholesale and retail channels of distribution
include Johnston & Murphy, Dockers and Nautica shoes and Laredo, Code West and
Larry Mahan boots.
Products of Genesco are sold at wholesale to more than 4,000 retailers,
including a number of leading department, discount and specialty stores, and at
retail through the Company's own network of 504 retail shoe stores and leased
shoe departments. Genesco products are supplied from the Company's own
manufacturing facilities as well as a variety of overseas and domestic sources.
Genesco operates in one business segment, footwear. References to Fiscal 1993,
1994, 1995 or 1996 are to the Company's fiscal year ended on January 31 of each
such year. Reference to Fiscal 1997 refers to the Company's fiscal year ended
February 1, 1997. For further information on the Company's business segment, see
Note 17 to the Consolidated Financial Statements included in Item 8 and
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Prior to its discontinuation pursuant to the 1995 Restructuring
(defined below), the Company's business included operations in a men's apparel
segment. 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.
In response to the continued weakening of the western boot market, the Company
approved a plan, ("the Manufacturing Restructuring"), in the third quarter of
Fiscal 1997 to realign its manufacturing operations as part of an overall
strategy to focus on marketing and global sourcing. The plan includes closing
the Company's Hohenwald, Tennessee western boot plant by July 1997.
In response to worsening trends in the Company's men's apparel business and in
response to a strategic review of its footwear operations, the Company's board
of directors approved a plan (the "1995 Restructuring") designed to focus the
Company on its core footwear businesses by selling or liquidating four
businesses, two of which constituted its entire men's apparel segment.
The 1995 Restructuring provided for the following:
1995 Restructuring Charge
- Liquidation of the University Brands children's shoe business,
- Sale of the Mitre Sports soccer business, and
- Facility consolidation costs and permanent work force reductions.
1995 Restructuring Provision
- Liquidation of The Greif Companies men's tailored clothing business, and
- Sale of the GCO Apparel Corporation tailored clothing manufacturing
business.
The transactions provided for in the 1995 Restructuring were substantially
complete as of January 31, 1996. The divestiture of the University Brands
business was completed in February
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1995. The operations of The Greif Companies have ceased, its inventories and
equipment have been liquidated and its last major remaining long-term lease
liability was resolved in June 1995. The Company's GCO Apparel Corporation was
sold in June 1995. The Company's Mitre Sports soccer business was sold in August
1995.
See Note 2 to the Consolidated Financial Statements and "Significant
Developments" in Management's Discussion and Analysis of Financial Condition and
Results of Operations for information regarding the restructurings and the
financial effects thereof.
FOOTWEAR
Wholesale
The Company distributes its footwear products at wholesale to more than 4,000
retailers, including independent shoe merchants, department stores, mail order
houses and other retailers. Substantially all of the Company's wholesale
footwear sales are Genesco-owned or -licensed brands.
Johnston & Murphy. High-quality men's shoes have been sold under the Johnston &
Murphy brand for more than 100 years. The Company believes Johnston & Murphy
traditionally-styled dress shoes and contemporary dress casual shoes enjoy a
reputation for quality craftsmanship, durability and comfort. Representative
suggested retail prices for traditional Johnston & Murphy shoes are $135 to
$240. In keeping with the overall trend toward casual lifestyle dressing, the
Company has continued to expand the product line to include more casual and
dress casual men's shoes with representative suggested retail prices ranging
from $98 to $135. The Company has also expanded its contemporary dress casual
offerings of European-styled men's dress shoes with representative suggested
retail prices of $175 to $240. Johnston & Murphy shoes are sold through fine
department stores, men's specialty stores, and company owned Johnston & Murphy
retail shops.
Laredo, Code West and Larry Mahan. Since 1976 the Company has manufactured
traditional western-style boots for men, women and children. Laredo boots are
targeted to people who wear boots for both work and recreation and are sold
primarily through independent retail outlets, which are predominantly western
boot shops. Representative suggested retail prices for Laredo boots are $65 to
$150. In 1988 the Company created the Code West brand to enter the fashion
segment of the boot market. Code West styles are western-influenced fashion and
contemporary boots for men and women and are offered with distinctive detailing
and non-traditional colors. Code West boots, sold primarily through department
stores, boutiques and western boot shops, have representative suggested retail
prices of $110 to $150. In 1997 the Company introduced a new boot under the
Larry Mahan label. This line features western-styling handcrafted 3/4 welt
construction and is targeted towards the premium boot category. Larry Mahan
boots are sold internationally as well as through better western retailers
across the United States. Representative suggested retail prices for Larry Mahan
boots are $150 to $375.
Dockers Footwear. In 1991 Levi Strauss & Co. granted the Company the exclusive
license to market footwear under the Dockers brand name in the United States.
Dockers shoes are marketed through many of the same stores that carry Dockers
slacks and sportswear. Representative suggested retail prices for Dockers
footwear are $49 to $79.
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Nautica Footwear. Genesco acquired the exclusive worldwide license to market
Nautica footwear in 1991. In 1992 the Company introduced a new line of casual
footwear under the Nautica label, targeted at young, active, upper-income
consumers and designed to complement Nautica sportswear. The Company introduced
a boys' line of Nautica footwear and an athletic line of Nautica footwear,
Nautica Competition, in the Fall of Fiscal 1997. Representative suggested retail
prices of Nautica footwear are $39 to $170.
Retail
At February 1, 1997 the Company operated 504 stores and leased departments
throughout the United States and Puerto Rico selling footwear for men, women or
both. The following table sets forth certain information concerning the
Company's footwear retailing operations:
RETAIL STORES LEASED DEPARTMENTS
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JAN. 31, FEB. 1, JAN. 31, FEB. 1,
1996 1997 1996 1997
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Johnston & Murphy........................... 108 110 7 9
Jarman...................................... 135 143 82 85
Journeys.................................... 92 117 - -
Hardy....................................... 1 1 - -
Boot Factory................................ 29 29 - -
General Shoe Warehouse...................... 7 7 2 3
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Total............................... 372 407 91 97
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The following table sets forth certain additional information concerning the
Company's retail stores and leased departments during the five most recent
fiscal years:
FISCAL FISCAL FISCAL FISCAL FISCAL
1993 1994 1995 1996 1997
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Retail Stores and Leased Departments
Beginning of year 575 540 518 498 463
Opened during year 24 26 52 21 55
Closed during year (59) (48) (72) (56) (14)
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End of year 540 518 498 463 504
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Gross Retail Area at end of year 721 698 682 625 699
(square feet in thousands)
During Fiscal 1997 Genesco opened 48 stores and 7 leased departments and closed
13 stores and 1 leased department. The Company is planning to open 92 stores and
leased departments and to close 25 stores and leased departments in Fiscal 1998.
Actual store closings and store openings will depend upon store operating
results, the availability of suitable locations, lease negotiations, staffing
and other factors.
Johnston & Murphy. Johnston & Murphy's retail outlets sell a broad range of
men's dress and casual footwear and accessories to affluent business and
professional consumers. Johnston & Murphy stores carry predominantly Johnston &
Murphy brand shoes. Of the 110 Johnston & Murphy stores at February 1, 1997, 20
were factory outlet stores.
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Jarman. The Company's Jarman stores and the Jarman leased departments target
male consumers ages 25 to 45 and sell footwear in the middle price ranges. Most
shoes sold in Jarman stores are branded merchandise of other shoe companies.
Jarman leased departments, all of which are located in department stores of a
major, unaffiliated retail company, carry primarily branded merchandise of other
shoe companies and do not operate under the Jarman trade name.
Journeys. Journeys stores target shoe buyers in the 13-22 year age group with
fashion merchandise, using popular music videos and youth-oriented decor to
attract their customer base. Journeys stores carry predominantly branded
merchandise of other shoe companies.
Boot Factory; General Shoe Warehouse. The Company's 29 Boot Factory outlet
stores, located primarily in the southeastern United States, sells a full work
and outdoor assortment of branded boots of other companies and the Company's
Laredo and Code West lines of boots. General Shoe Warehouse stores, located
primarily in the southeastern United States, sell mainly factory damaged,
overrun and close-out footwear products.
Manufacturing and Sourcing
The Company sources its footwear product from its own domestic manufacturing
facilities and from a variety of overseas and domestic sources. The Company
imports shoes, component parts and raw materials from the Far East, Latin
America and Europe. During Fiscal 1997 Genesco manufactured footwear in four
facilities in the southeastern United States. In April 1997 the Company's
Hohenwald boot manufacturing facility ceased operations. During Fiscal 1997
approximately 66% of the footwear products manufactured by the Company were
men's, 26% were women's and 8% were children's. Approximately 82% of the
Company-manufactured footwear products were sold at wholesale, and 18% at retail
through stores and leased departments operated by the Company. The estimated
productive capacity of the U.S. footwear plants was approximately 87% utilized
in Fiscal 1997. The Company believes that its ability to manufacture footwear in
its own plants can provide better quality assurance with respect to certain
products and, in some cases, reduce inventory risks and long lead times
associated with imported footwear. The Company balances these considerations
against the cost advantage of importing footwear products.
The Company also conducts leather tanning and finishing operations in two
manufacturing facilities located in Michigan and Tennessee. Approximately 3% of
tanned leather products sold in Fiscal 1997 were for internal use, and the
balance was sold to military boot manufacturers and other unaffiliated
customers.
MEN'S APPAREL
On November 3, 1994 the Company's board of directors approved a plan to exit the
entire men's apparel segment. See Note 2 to the Consolidated Financial
Statements and "Significant Developments" in Management's Discussion and
Analysis of Financial Condition and Results of Operations for information
regarding the plan and the financial effects thereof.
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COMPETITION
The Company operates in a highly competitive market in footwear. Retail footwear
competitors range from small, locally-owned shoe stores to regional and national
department and discount stores and specialty chains. The Company competes with
hundreds of footwear wholesale and manufacturing operations in the United States
and throughout the world, most of which are relatively smaller, specialized
operations but some of which are larger, more diversified companies.
Manufacturers in foreign countries with lower labor costs have a significant
price advantage.
LICENSES
The Company owns its Johnston & Murphy, Laredo and Code West footwear brands.
The Nautica and Dockers brand footwear lines, introduced in Fiscal 1993, are
sold under license agreements which expire January 31, 2002 and June 30, 2001,
respectively, with a renewal option that extends Nautica until 2007. The Larry
Mahan boots, which were introduced in Fiscal 1997, are sold under a license
agreement whose initial term expires January 31, 2000 with renewal options that
extend through 2025. Licensed products are generally designed by the Company and
submitted to the licensor for approval.
The Company's renewal options under its license agreements for footwear brands
are generally conditioned upon the Company's meeting certain minimum sales
requirements.
Sales of licensed products were approximately $52 million in Fiscal 1997 and
approximately $37 million in the previous year.
The Company licenses certain of its footwear brands, mostly in foreign markets.
License royalty income was not material in Fiscal 1997.
RAW MATERIALS
Genesco is not dependent upon any single source of supply for any major raw
material. In Fiscal 1997 the Company experienced no significant shortages of raw
materials in its principal businesses. The Company considers its available raw
material sources to be adequate.
BACKLOG
On March 31, 1997, the Company's footwear wholesale operations (including
leather tanning operations), which accounted for 39% of sales in Fiscal 1997,
had a backlog of orders, including unconfirmed customer purchase orders,
amounting to approximately $29.4 million, compared to approximately $33.1
million on March 31, 1996. The decrease in the backlog of orders is due to (i)
decrease in orders for tanned leather from manufacturers of military boots due
to delays in awarding long-term footwear contracts by the Department of Defense
and (ii) a decrease in orders in the boot business due to the continued weakness
in the western boot market. Most orders are for delivery within 90 days.
Therefore, the backlog at any one time is not necessarily indicative of future
sales for an extended period of time. The backlog is somewhat seasonal, reaching
a peak in the spring. Footwear companies maintain in-stock programs for selected
anticipated high volume styles.
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EMPLOYEES
Genesco had approximately 4,050 employees at February 1, 1997 including
approximately 1,045 part-time employees. Retail shoe stores employ a substantial
number of part-time employees during peak selling seasons. Approximately 95
employees of the Company's tanning operations are covered by a collective
bargaining agreement, which will expire May 31, 1998. Of the Company's 4,050
employees, approximately 3,950 were employed in footwear and 100 in corporate
staff departments.
PROPERTIES
The Company operates five manufacturing and five warehousing facilities, most
all of which are leased, aggregating approximately 1,500,000 square feet. The
ten facilities are located in three states in the United States.
The Company's executive offices and the offices of its footwear operations are
in a 295,000 square foot leased building in Nashville, Tennessee.
See the discussion of the footwear segment for information regarding the
Company's retail stores. New shopping center store leases typically are for a
term of seven to 10 years and new factory outlet leases typically are for a term
of five years and both typically provide for rent based on a percentage of sales
against a fixed minimum rent based on the square footage leased. The Company's
leased departments are operated under agreements which are generally terminable
by department stores upon short notice.
Leases on the Company's plants, offices and warehouses expire from 1997 to 2018,
not including renewal options. The Company believes that all leases (other than
long-term leases) of properties that are material to its operations may be
renewed on terms not materially less favorable to the Company than existing
leases. See Note 10 to the Consolidated Financial Statements included in Item 8
for information about commitments under capital and operating leases.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, local and foreign laws, regulations
and ordinances that (i) govern activities which may have adverse environmental
effects, such as discharges to air or water as well as the handling and disposal
of solid and hazardous wastes, or (ii) impose liability for the costs of
cleaning up, and damages resulting from, past spillage, disposal or other
releases of hazardous substances (together, "Environmental Laws"). The Company
uses and generates, and in the past has used and generated, certain substances
and wastes that are regulated or may be deemed hazardous under applicable
Environmental Laws. The Company is and has been involved in several proceedings
regarding sites of former operations alleged to be contaminated and sites with
respect to which it is alleged that the Company sent certain waste material in
the past. See Item 3, "Legal Proceedings," for a discussion of certain of such
pending matters.
ITEM 2, PROPERTIES
See Item 1.
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ITEM 3, LEGAL PROCEEDINGS
New York State Environmental Proceedings
The Company is a defendant in two separate civil actions filed by the State of
New York; one against the City of Gloversville, New York, and 33 other private
defendants and the other against the City of Johnstown, New York, and 14 other
private defendants. In addition, third party complaints and cross claims have
been filed against numerous other entities, including the Company, in both
actions. These actions arise out of the alleged disposal of certain hazardous
material directly or indirectly in municipal landfills. The complaints allege
that the defendants, together with other contributors to the municipal
landfills, are liable under a federal environmental statute and certain common
law theories for the costs of investigating and performing remedial actions
required to be taken with respect to the landfills and damages to the natural
resources.
In March 1997, the Company accepted an offer to settle the Johnstown action for
a payment of $31,000 and is now awaiting entry of an acceptable consent order
and dismissal of that action. The Company remains a defendant in the
Gloversville action. The environmental authorities have issued decisions
selecting plans of remediation with respect to the Gloversville site with a
total estimated cost of approximately $10.0 million.
The Company has filed answers to the complaint in the Gloversville case denying
liability and asserting numerous defenses. Because of uncertainties related to
the ability or willingness of the other defendants, including the municipalities
involved, to pay a portion of future remediation costs, the availability of
State funding to pay a portion of future remediation costs, the insurance
coverage available to the various defendants, the applicability of joint and
several liability and the basis for contribution claims among the defendants,
management is presently unable to predict the outcome or to estimate the extent
of liability the Company may incur with respect to the Gloversville action.
The Company has received notice from the New York State Department of
Environmental Conservation (the "Department") that it deems remedial action to
be necessary with respect to certain contaminants in the vicinity of a knitting
mill operated by a former subsidiary of the Company from 1965 to 1969, and that
it considers the Company a potentially responsible party. The Department and the
Company have discussed a consent order whereby the Company would assume
responsibility for conducting a remedial investigation and feasibility study
("RIFS") and implementing an interim remediation measure with regard to the
site, without admitting liability or accepting responsibility for any future
remediation of the site. The Company believes that it has adequately reserved
for the costs of conducting the RIFS and implementing the interim remedial
measure contemplated by the proposed consent order, but there is no assurance
that it will be able to enter into an acceptable consent order along the lines
proposed, or that such a consent order would ultimately resolve the matter. The
owner of the site has advised the Company that it intends to hold the Company
responsible for any required remediation or other damages incident to the
contamination. The Company has not ascertained what responsibility, if any, it
has for any contamination in connection with the facility or what other parties
may be liable in that connection and is unable to predict whether its liability,
if any, will have a material effect on its financial condition or results of
operations.
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Whitehall Environmental Sampling
The Michigan Department of Environmental Quality ("MDEQ") has performed sampling
and analysis of soil, sediments, surface water, groundwater and waste management
areas at the Company's Volunteer Leather Company facility in Whitehall,
Michigan. MDEQ advised the Company that it would review the results of the
analysis for possible referral to the EPA for action under the Comprehensive
Environmental Response Compensation and Liability Act. However, the Company is
cooperating with MDEQ and has been advised by MDEQ that no EPA referral is
presently contemplated. Neither MDEQ nor the EPA has threatened or commenced any
enforcement action. In response to the testing data, the Company submitted and
MDEQ approved a work plan, pursuant to which a hydrogeological study was
completed and submitted to MDEQ in March 1996. Additional studies regarding
wastes on-site, groundwater and adjoining lake sediments have been performed and
will serve as a basis for the Company's remedial action plan for the site. The
Company is presently unable to determine whether the implementation of the plan
will have a material effect on its financial condition or results of operations.
Preferred Shareholder Action
On January 7, 1993, 23 former holders of the Company's series 2, 3 and 4
subordinated serial preferred stock filed a civil action against the Company and
certain officers in the United States District Court for the Southern District
of New York. The plaintiffs allege that the defendants misrepresented and failed
to disclose material facts to representatives of the plaintiffs in connection
with exchange offers which were made by the Company to the plaintiffs and other
holders of the Company's series 1, 2, 3 and 4 subordinated serial preferred
stock from June 23, 1988 to August 1, 1988. The plaintiffs contend that had they
been aware of the misrepresentations and omissions, they would not have agreed
to exchange their shares pursuant to the exchange offers. The plaintiffs allege
breach of fiduciary duty and fraudulent and negligent misrepresentations and
seek damages in excess of $10 million, costs, attorneys' fees, interest and
punitive damages in an unspecified amount.
By order dated December 2, 1993, the U.S. District Court denied a motion for
judgment on the pleadings filed on behalf of all defendants. On July 6, 1994,
the court denied a motion for partial summary judgment filed on behalf of the
plaintiffs. On September 6, 1996, the court granted the defendants' motion for
summary judgment regarding certain alleged misrepresentations by one of the
Company's officers and the plaintiffs' motion regarding the existence and breach
of fiduciary duties owed by the Company to the plaintiffs. The court's order
stated that the plaintiffs must show that the breach caused damages to be
entitled to a recovery on that count. It denied the defendants' and plaintiffs'
motions for summary judgment in other respects.
In April 1997, the parties to the litigation entered into a settlement agreement
providing for the issuance of shares of the Company's common stock to the
plaintiffs in exchange for dismissal of the lawsuit and the execution of mutual
general releases by the parties. In addition to a cash payment which the
Company's directors and officers liability insurance carrier has agreed to
contribute to the settlement, the Company expects to issue shares of stock
sufficient to yield net proceeds of $6.7 million to the plaintiffs in a block
trade to occur immediately upon the issuance. The $6.7 million settlement was
reflected in earnings in the fourth quarter of Fiscal 1997 and a liability at
February 1, 1997. In addition, the portion of the settlement to be paid by the
Company's directors and officers liability insurance carrier was reflected as a
liability and a receivable at February 1, 1997.
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Texas Interference Action
On October 6, 1995, a prior holder of a license to manufacture and market
western boots and other products under a trademark now licensed to the Company
filed an action in the District Court of Dallas County, Texas against the
Company and a contract manufacturer alleging tortious interference with a
business relationship, breach of contract, tortious interference with a
contract, breach of a confidential relationship and civil conspiracy based on
the Company's entry into the license. The Company filed an answer denying all
the material allegations of the plaintiff's complaint. The Company is unable to
predict whether the outcome of the litigation will have a material effect on its
financial condition or results of operations.
ITEM 4, SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of Fiscal 1997.
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EXECUTIVE OFFICERS OF GENESCO
The officers of the Company are generally elected at the first meeting of the
board of directors following the annual meeting of shareholders and hold office
until their successors have been chosen and qualify. 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:
DAVID M. CHAMBERLAIN, 53, Chairman. Mr. Chamberlain was elected chairman as of
February 1, 1995. He served as president from October 1994 until October 1996
and as chief executive officer from October 1994 until January 1997. Mr.
Chamberlain joined Shaklee Corporation, a manufacturer and marketer of consumer
products, in 1983 as president and chief operating officer, was elected a
director in 1983 and served as chief executive officer from 1985 until 1993. He
was chairman of Shaklee Corporation from 1989 until May 1994, when he became a
partner in Consumer Focus Partners, a California venture capital firm. Prior to
1983 he was senior vice president and group executive of Nabisco Brands Ltd.,
Canada. He has been a director of Genesco since 1989.
BEN T. HARRIS, 53, President and Chief Executive Officer of Genesco. Mr. Harris
joined the Company in 1967 and in 1980 was named manager of the leased
department division of the Jarman Shoe Company. In 1991, he was named president
of the Jarman Shoe Company. In 1995, he was named president of Retail Footwear,
which included the Jarman Shoe Company, Journeys, Boot Factory and General Shoe
Warehouse. He was named executive vice president - operations in January 1996.
He was named president and chief operating officer and a director of the Company
as of November 1, 1996. He was named chief executive officer as of February 1,
1997.
T. NEALE ATTENBOROUGH, 37, Executive Vice President - Operations; President -
Wholesale Operations. Mr. Attenborough joined the Company in 1994 as president
of Laredo Boot company. During the Company's restructuring program, Mr.
Attenborough oversaw the management of Genesco's now divested Mitre Sports
International business. He was named executive vice-president - operations in
January 1996. He was named president of Genesco's wholesale operations as of
November 1, 1996 and will oversee the Company's Johnston & Murphy, Dockers
Footwear, Nautica Footwear, Volunteer Leather and Laredo, Code West and Larry
Mahan divisions. Before joining the Company, Mr. Attenborough was a vice
president of the recreational products division at Boston Whaler Inc.
JAMES S. GULMI, 51, Senior Vice President - Finance and Chief Financial Officer.
Mr. Gulmi was employed by Genesco in 1971 as a financial analyst, appointed
assistant treasurer in 1974 and named treasurer in 1979. He was elected a vice
president in 1983 and assumed the responsibilities of chief financial officer in
1986. He was again elected treasurer in February 1995. He was appointed senior
vice president - finance in January 1996.
JAMES W. BOSCAMP, 47, Senior Vice President. Mr. Boscamp joined the Company in
1991 as president of Nautica Footwear. He was appointed senior vice president of
the Company in January 1996. Before joining the Company, Mr. Boscamp was
executive vice president, marketing at Munsingwear.
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FOWLER H. LOW, 65, Senior Vice President. Mr. Low has 41 years of experience in
the footwear industry, including 34 years with Genesco. He rejoined Genesco in
1984 after serving as vice president of sales and marketing for G. H. Bass, a
division of Chesebrough-Pond's Inc. He was appointed president of the footwear
manufacturing and wholesale group in 1988 and was appointed chairman of Johnston
& Murphy in February 1991. He was appointed senior vice president of the Company
in January 1996.
STEVEN E. LITTLE, 55, Vice President - Administration. Mr. Little has served in
various human resources and operations management roles during his 32 year
tenure with Genesco. Mr. Little was named vice president - human resources in
1994 and assumed his present responsibilities in December 1994.
ROGER G. SISSON, 33, Secretary and General Counsel. Mr. Sisson joined the
Company in January 1994 as assistant general counsel and was elected secretary
in February 1994. He was named general counsel in January 1996. Before joining
the Company, Mr. Sisson was associated with the firm of Boult, Cummings, Conners
& Berry for approximately six years.
MATTHEW N. JOHNSON, 32, Treasurer. Mr. Johnson joined the Company in April 1993
as manager, corporate finance and was elected assistant treasurer in December
1993. He was elected treasurer in June 1996. Prior to joining the Company, he
was a vice president in the corporate and institutional banking division of The
First National Bank of Chicago.
PAUL D. WILLIAMS, 42, 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.
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PART II
ITEM 5, MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange (Symbol:
GCO) and the Chicago Stock Exchange. 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 January 31
1996 1st Quarter 4 2
2nd Quarter 4 1/2 3
3rd Quarter 4 7/8 3 3/4
4th Quarter 4 1/4 2 7/8
Fiscal Year ended February 1
1997 1st Quarter 6 3/4 3 3/4
2nd Quarter 8 1/8 5 5/8
3rd Quarter 10 6 5/8
4th Quarter 11 1/8 8 3/8
There were approximately 11,000 common shareholders of record on February 1,
1997.
See Notes 9 and 11 to the Consolidated Financial Statements included in Item 8
for information regarding restrictions on dividends and redemptions of capital
stock.
14
15
ITEM 6, SELECTED FINANCIAL DATA
FINANCIAL SUMMARY
IN THOUSANDS EXCEPT PER COMMON SHARE DATA,
- -------------------------------------------------------------------------------------------------------------------
FISCAL YEAR END
---------------------------------------------------------
FINANCIAL STATISTICS AND OTHER DATA 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS DATA
Net sales $461,348 $434,575 $462,901 $467,891 $430,127
Depreciation and amortization 7,747 7,354 9,254 10,723 9,719
Operating income (loss)* 34,627 16,127 3,479 (2,968) 27,415
Pretax earnings (loss) 10,132 (3,756) (17,757) (29,788) 7,638
Earnings (loss) before discontinued operations,
extraordinary loss and cumulative effect of
change in accounting principle 10,554 (3,781) (18,514) (27,888) 2,640
Discontinued operations (150) 13,852 (62,678) (23,891) 7,053
Loss on early retirement of debt (net of tax) -0- -0- -0- 240 583
Cumulative effect of change in accounting
for postretirement benefits -0- -0- -0- 2,273 -0-
- -------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 10,404 $ 10,071 $ (81,192) $(54,292) $ 9,110
===================================================================================================================
PER COMMON SHARE DATA
Earnings (loss) before discontinued operations,
extraordinary loss and postretirement benefits
Primary $ .40 $ (.17) $ (.77) $ (1.17) $ .10
Fully diluted .40 (.16) (.77) (1.17) .10
Discontinued operations
Primary (.01) .57 (2.58) (.99) .30
Fully diluted (.01) .55 (2.58) (.99) .30
Extraordinary loss
Primary .00 .00 .00 (.01) (.02)
Fully diluted .00 .00 .00 (.01) (.02)
Postretirement benefits
Primary .00 .00 .00 (.09) .00
Fully diluted .00 .00 .00 (.09) .00
Net earnings (loss)
Primary .39 .40 (3.35) (2.26) .38
Fully diluted .39 .39 (3.35) (2.26) .38
===================================================================================================================
BALANCE SHEET DATA
Total assets $221,654 $197,806 $243,878 $309,386 $317,868
Long-term debt 75,000 75,000 75,000 90,000 54,000
Capital leases 1,485 2,697 12,400 15,253 14,901
Non-redeemable preferred stock 7,944 7,958 7,943 8,064 8,305
Common shareholders' equity 45,846 25,947 21,450 90,659 146,746
Additions to plant, equipment and capital leases 14,640 8,564 5,750 8,356 10,132
===================================================================================================================
FINANCIAL STATISTICS
Operating income (loss) as a percent of net sales 7.5% 3.7% 0.8% (0.6%) 6.4%
Book value per share $ 1.82 $ 1.04 $ .87 $ 3.73 $ 6.33
Working capital $108,795 $108,135 $100,731 $160,094 $168,875
Current ratio 2.6 3.2 2.2 3.3 3.5
Percent long-term debt to total capital 58.7% 69.6% 74.8% 51.6% 30.8%
===================================================================================================================
OTHER DATA (END OF YEAR)
Number of retail outlets 504 463 498 518 540
Number of employees 4,050 3,750 5,400 6,950 6,550
===================================================================================================================
*Represents operating income of the footwear business segment.
Reflected in the earnings for Fiscal 1997 and 1996 were restructuring and other
charges of $1.7 million and $15.1 million, respectively. See Note 2 to the
Consolidated Financial Statements for additional information regarding these
charges. Also reflected in the earnings for Fiscal 1997 was a $6.7 million
litigation settlement.
Reflected in the loss for Fiscal 1995 and Fiscal 1994 was a restructuring charge
of $22.1 million and $12.3 million, respectively. See Note 2 to the Consolidated
Financial Statements for additional information regarding these charges.
Long-term debt and capital leases include current payments. On February 1, 1993,
the Company issued $75 million of 10 3/8% senior notes due 2003. The Company
used $54 million of the proceeds to repay all of its outstanding long-term debt.
The Company has not paid dividends on its Common Stock since 1973. See Note 11
to the Consolidated Financial Statements for a description of limitations on the
Company's ability to pay dividends.
15
16
ITEM 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion includes certain forward-looking statements. Actual
results could differ materially from those reflected by the forward-looking
statements in the discussion and a number of factors may adversely affect future
results, liquidity and capital resources. These factors include softness in the
general retail environment, the timing and acceptance of products being
introduced to the market, international trade developments affecting Chinese and
other foreign sourcing of products, as discussed in greater detail below, the
outcome of various litigation and environmental contingencies, including those
discussed in Note 16 to the Consolidated Financial Statements, the solvency of
the retail customers of the Company, the level of margins achievable in the
marketplace and the ability to minimize operating expenses. They also include
possible continued weakening of the western boot market, which has experienced a
somewhat prolonged down cycle, resulting in declining sales and some erosion of
the boot division's retail customer base. Continued weakness could require
further adjustments to manufacturing capacity and other measures. Although the
Company believes it has the business strategy and resources needed for improved
operations, future revenue and margin trends cannot be reliably predicted and
the Company may alter its business strategies during Fiscal 1998.
SIGNIFICANT DEVELOPMENTS
LITIGATION SETTLEMENT
As discussed in Note 16 to the Consolidated Financial Statements, on April 28,
1997, the Company entered into an agreement settling a lawsuit by certain
preferred shareholders who had challenged the value they received for shares of
preferred stock acquired for common stock issued by the Company to the
plaintiffs in a 1988 exchange transaction. The agreement provided for issuance
of shares of common stock as additional consideration to the plaintiffs for the
shares acquired in 1988. The Company initially accounted for the issuance of the
shares, which had a market value of $6.7 million when the settlement was
ultimately consummated in June 1997, as a capital transaction in the second
quarter of Fiscal 1998, in the same manner that it accounted for the shares
originally issued to the plaintiffs in the 1988 exchange. After discussions with
the staff of the Securities and Exchange Commission, the Company has revised its
Consolidated Financial Statements at and for the fiscal year ended February 1,
1997, to reflect a net expense in the fourth quarter of Fiscal 1997 and a
liability at February 1, 1997 equal to the $6.7 million market value of the
shares issued in the settlement. In addition, the portion of the settlement to
be paid by the Company's directors and officers liability insurance carrier was
reflected as a liability and a receivable at February 1, 1997. The liability was
satisfied by the issuance of 525,495 shares of stock and the payment of cash by
the Company's directors and officers liability insurance carrier in June 1997.
FISCAL YEAR
For the year ended February 1, 1997 ("Fiscal 1997"), the Company changed its
fiscal year end to the Saturday closest to January 31. As a result, Fiscal 1997
had 367 days, while Fiscal 1996 and 1995 had 365 days. Fiscal Years 1997, 1996
and 1995 ended on February 1, 1997, January 31, 1996 and January 31, 1995,
respectively.
MANUFACTURING RESTRUCTURING
In response to the continued weakening of the western boot market, the Company
approved a plan, (the "Manufacturing Restructuring"), in the third quarter of
Fiscal 1997 to realign its manufacturing operations as part of an overall
strategy to focus on marketing and global sourcing. The plan includes closing
the Company's Hohenwald, Tennessee, western boot plant by July 1997, which the
Company closed in April 1997, with the elimination of approximately 190 jobs. In
connection with the adoption
16
17
of the plan, the Company recorded a charge to earnings of $1.7 million including
$0.5 million in asset write-downs of the plant and excess equipment to estimated
market value and $1.2 million of other costs. Included in other costs is
employee severance, facility shutdown and lease costs.
FISCAL 1995 RESTRUCTURING
In response to worsening trends in the Company's men's apparel business and in
response to a strategic review of its footwear operations, the Company's board
of directors approved a plan (the "1995 Restructuring") designed to focus the
Company on its core footwear businesses by selling or liquidating four
businesses, two of which constituted its entire men's apparel segment.
The 1995 Restructuring provided for the following:
1995 Restructuring Charge
- Liquidation of the University Brands children's shoe business,
- Sale of the Mitre Sports soccer business, and
- Facility consolidation costs and permanent work force reductions.
1995 Restructuring Provision
- Liquidation of The Greif Companies men's tailored clothing business, and
- Sale of the GCO Apparel Corporation tailored clothing manufacturing
business.
The transactions provided for in the 1995 Restructuring were substantially
complete as of January 31, 1996 and the Company does not expect any material
future adjustments arising from the completion of the 1995 Restructuring. The
1995 Restructuring Charge, as adjusted, provided for the elimination of 464 jobs
in footwear operations to be divested or consolidated and in staff positions to
be eliminated, of which 457 jobs had been eliminated as of January 31, 1996. The
divestiture of the University Brands business was completed in February 1995.
The operations of The Greif Companies have ceased, its inventories and equipment
have been liquidated and its last major remaining long-term lease liability was
resolved in June 1995. The Company's GCO Apparel Corporation was sold in June
1995. The Company's Mitre Sports soccer business was sold in August 1995.
International Trade Developments
Manufacturers in China have become major suppliers to Genesco and other footwear
companies in the United States. In Fiscal 1998 the Company expects to import
approximately 28% of inventory purchases from China. In addition to the products
the Company imports directly, a significant amount of the products purchased by
the Company from other suppliers have been imported from China. China's most
favored nation trading status was renewed for an additional year in June 1996,
and a congressional effort to reverse the renewal failed in July. Additionally,
the US did not impose threatened trade sanctions against China in connection
with a dispute over inadequate protection of intellectual property in China.
Thus, while disruptions of supply from China related to trade disputes do not
appear to constitute a substantial threat to the Company's business and
prospects in the immediate future, China's trading status remains controversial
and there can be no assurance that a subsequent failure by the U.S. to grant the
annual extension of most favored nation status to China or other disruptions in
the Company's ability to import shoes from China will not occur, or that any
such disruption would not have a material adverse effect on the Company's
operations.
RESULTS OF OPERATIONS - FISCAL 1997 COMPARED TO FISCAL 1996
The Company's net sales from ongoing operations for the fiscal year ended
February 1, 1997 increased 14.2% from the previous year. The Company's total net
sales (including both ongoing operations and, for the fiscal year ended January
31, 1996, $30.8 million of sales from the operations divested as part of the
1995 Restructuring) increased 6.2%. Total gross margin for the year increased
8.2% and increased as a percentage of net sales from 39.8% to 40.5%. Selling and
administrative expenses
17
18
increased 3.2% from the previous year but decreased as a percentage of net sales
from 35.6% to 34.6%. Pretax earnings for the fiscal year ended February 1, 1997
were $10.1 million, compared to a pretax loss of $3.8 million for the fiscal
year ended January 31, 1996. Pretax earnings for Fiscal 1997 included the $1.7
million Manufacturing Restructuring charge and a $6.7 million litigation
settlement charge. The pretax loss for Fiscal 1996 included a $14.1 million net
increase in the 1995 Restructuring Charge, a $978,000 charge for impaired assets
due to the implementation of SFAS No. 121 and recognition of a $1.8 million gain
from the favorable resolution of a claim relating to import duties. The Company
reported net earnings of $10.4 million ($0.39 per share) for Fiscal 1997
compared to net earnings of $10.1 million ($0.40 per share) for Fiscal 1996.
Fiscal 1996 net earnings included, in addition to the 1995 Restructuring Charge
adjustment and the charge for impaired assets, a positive adjustment of $13.9
million to the 1995 Restructuring Provision.
Footwear Retail
Fiscal Year Ended %
-------------------
1997 1996 Change
---- ---- ------
(In Thousands)
Net Sales...............................................$ 283,546 $ 243,303 16.5%
Operating Income........................................$ 26,519 $ 17,881* 48.3%
Operating Margin........................................ 9.4% 7.3%
*Includes $978,000 charge for impaired assets.
Primarily due to an increase in comparable store sales of approximately 12%, net
sales from footwear retail operations increased 16.5% for Fiscal 1997 compared
to Fiscal 1996. The average price per pair increased 5% and unit sales increased
14% for Fiscal 1997.
The Company's comparable store sales and store count at the end of the period
were as follows:
Store Count
Fiscal Year End
----------------
Comp Sales 1997 1996
---------- ---- ----
Jarman Retail +8% 143 135
Jarman Lease +10% 85 82
Journeys +26% 118 93
Johnston & Murphy (including factory stores) +11% 119 115
Other Outlet Stores -3% 39 38
Total Retail +12% 504 463
The Jarman Lease comparable store increase was aided by a 5% increase in the
average square footage due to remodeling while the other outlet store decline
was due to the weakness in demand for western boot products.
Gross margin as a percentage of net sales decreased from 49.2% to 48.9%,
primarily from increased markdowns to stimulate sales in the Company's boot
outlets and changes in product mix to more branded products. Operating expenses
increased 10.7%, primarily due to increased selling salaries, advertising and
rent expense and increased divisional management expenses to support new store
growth, but decreased as a percentage of net sales from 41.5% to 39.4%.
18
19
Operating income for Fiscal 1997 was up 40.6% compared to Fiscal 1996,
excluding the $978,000 charge for impaired assets, due to increased sales and
the lower expenses as a percentage of sales.
Footwear Wholesale & Manufacturing
Fiscal Year Ended %
-----------------
1997 1996 Change
---- ---- ------
(In Thousands)
Net Sales...............................................$177,802 $ 191,272 (7.0)%
Net Sales - Ongoing.....................................$177,802 $ 160,609 10.7%
Operating Income (Loss)*................................$ 8,108 $ (1,754) NA
Operating Margin....................................... 4.6% (0.9)%
*Includes restructuring charges of $1.7 million in Fiscal 1997 and $14.1 million
in Fiscal 1996.
Net sales from footwear wholesale and manufacturing operations were $13.5
million (7.0%) lower in Fiscal 1997 than in Fiscal 1996, reflecting primarily
the absence of sales in Fiscal 1997 from the operations divested as part of the
1995 Restructuring. Sales from ongoing operations were up 10.7%, reflecting
primarily increased men's branded footwear sales, which more than offset the
continuing trend of decreased sales of western boots, primarily attributable to
lower unit sales. The increase in branded sales was aided by an increase in
product assortment by key retailers.
Gross margin for Fiscal 1997 decreased 8.9%, primarily from the absence of the
gross margins of the divested operations, and decreased as a percentage of net
sales from 27.8% to 27.2%. Gross margin for ongoing operations increased 10.0%
due to increased sales but decreased as a percentage of sales from 27.4% to
27.2%. The decline in margin as a percentage of sales is due to underabsorbed
overhead resulting from a reduced level of production in the Company's western
boot plants. In response to the continued weakness in the western boot market
and the resulting underabsorbed overhead, the Company announced in the third
quarter of Fiscal 1997 a decision to close its Hohenwald, Tennessee plant. See
"Significant Developments - Manufacturing Restructuring Charge" above. The plant
ceased operations in April 1997.
Operating expenses decreased 10.9% and decreased as a percentage of net sales
from 22.7% to 21.7%, reflecting primarily the absence of the expenses
attributable to the operations divested in the 1995 Restructuring. Ongoing
operations expenses increased 16.5% and increased as a percentage of sales from
20.7% to 21.7%, primarily due to (i) higher advertising expenses including
advertising associated with the introduction of the Larry Mahan boot brand and
(ii) higher divisional administrative expenses to support the growth in the
branded businesses as well as the Larry Mahan boot brand and (iii) higher
royalty expenses from higher royalty rates.
Included in operating income for Fiscal 1997 is a $1.7 million restructuring
charge and included in operating income for Fiscal 1996 is a one-time gain of
$1.8 million from the favorable resolution of a claim relating to import duties
and a $14.1 million restructuring charge. Operating income before restructuring
and other charges and the import duty claim decreased 11.8%, primarily due to
lower earnings in the Company's western boot business reflecting the continued
weakness of the western boot market and costs associated with the introduction
of the Larry Mahan brand.
19
20
Corporate and Interest Expenses
Corporate and other expenses for Fiscal 1997 were $15.8 million compared to
$10.2 million for Fiscal 1996, an increase of 54%. Included in corporate and
other expenses for Fiscal 1997 is a litigation settlement of $6.7 million. The
decrease in corporate expenses of 12%, excluding the litigation settlement, is
attributable primarily to decreased bonus accruals due to changes in the
structure of the Company's bonus plan.
Interest expense decreased $114,000, or 1%, from last year, while interest
income increased $790,000 from last year due to increased short-term investments
related to the cash generated from the 1995 Restructuring. There were no
borrowings under the Company's revolving credit facility during Fiscal 1997,
while borrowings averaged $181,000 during Fiscal 1996.
Other Income
Operating results of businesses divested pursuant to the 1995 Restructuring are
included in the Company's sales, gross margin and selling and administrative
expenses for Fiscal 1996. The net operating losses incurred by these operations
subsequent to the decision to divest were charged against the restructuring
reserves established to provide for such losses. The elimination of these losses
from the Company's results of operations for Fiscal 1996 is presented as other
income in the Consolidated Earnings Statement. Such operating losses totalled
$1.3 million for Fiscal 1996. Also included in other income for Fiscal 1996 is a
$1.8 million gain from the favorable resolution of a claim relating to import
duties and a $0.5 million provision for environmental litigation.
RESULTS OF OPERATIONS - FISCAL 1996 COMPARED TO FISCAL 1995
The Company's total net sales (including both ongoing operations and the
operations divested as part of the 1995 Restructuring) for the fiscal year ended
January 31, 1996 decreased 6.1% from Fiscal 1995, reflecting lower sales from
the divested operations. Net sales from ongoing operations increased 4.4% from
Fiscal 1995. Total gross margin for Fiscal 1996 decreased 0.1% but increased as
a percentage of net sales from 37.4% to 39.8%. Selling and administrative
expenses decreased 7.0% and decreased as a percentage of net sales from 35.9% to
35.6%. The pretax loss for Fiscal 1996 was $3.8 million, compared to a pretax
loss of $17.8 million for Fiscal 1995. The pretax loss for Fiscal 1996 included
a $14.1 million net increase in the 1995 Restructuring Charge, and a $978,000
charge for impaired assets due to the implementation of SFAS No. 121 (see
"Changes in Accounting Principles" and Note 1 to the Consolidated Financial
Statements) and recognition of a $1.8 million gain from the favorable resolution
of a claim relating to import duties. Fiscal 1995 pretax loss included the $22.1
million 1995 Restructuring Charge and recognition of $4.9 million of additional
gain on the sale in 1987 of the Company's Canadian operations following the
settlement of certain claims arising out of that transaction. The Company
reported net earnings of $10.1 million ($0.40 per share) for Fiscal 1996
compared to a net loss of $81.2 ($3.35 per share) for Fiscal 1995. Fiscal 1996
net earnings included, in addition to the 1995 Restructuring Charge adjustment
and the charge for impaired assets, a positive adjustment of $13.9 million to
the 1995 Restructuring Provision. Fiscal 1995 net loss included, in addition to
the 1995 Restructuring Charge, $58.1 million for the adjusted 1995 Restructuring
Provision. See Note 2 to the Consolidated Financial Statements and "Significant
Developments - Fiscal 1995 Restructuring."
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21
Footwear Retail
Fiscal Year Ended %
--------------------------
1996 1995 Change
----------- ----------- ------
(In Thousands)
Net Sales.............................................. $ 243,303 $ 234,448 3.8%
Operating Income*...................................... $ 17,881 $ 16,925 5.6%
Operating Margin....................................... 7.3% 7.2%
*Includes a $978,000 charge for impaired assets in Fiscal 1996 and a $236,000
restructuring charge in Fiscal 1995.
Primarily due to an increase in comparable store sales of approximately 6%, net
sales from footwear retail operations increased 3.8% for Fiscal 1996 compared to
Fiscal 1995, despite the operation of 6% fewer stores in Fiscal 1996. The
average price per pair for Fiscal 1996 increased 8% as compared to Fiscal 1995,
while unit sales were down 4%, because of heavy discounting during Fiscal 1995
in connection with the closing of 39 retail stores as part of a restructuring
plan adopted in the fourth quarter of Fiscal 1994 (the "1994 Restructuring").
Gross margin as a percentage of net sales decreased from 50.5% to 49.2%,
primarily from price pressures on branded products and changes in product mix to
more branded products as well as increased markdowns to stimulate sales in the
Company's boot outlets. Operating expenses decreased approximately 1%, primarily
due to the operation of fewer stores as a result of the 1994 Restructuring and
decreased as a percentage of net sales from 43.7% to 41.5%. In addition to the
operation of fewer stores, expenses were down due to job eliminations as part of
the 1995 Restructuring and lower selling salaries.
During the third quarter of Fiscal 1996, the Company implemented SFAS No. 121
resulting in a $978,000 charge to retail earnings. See "Changes in Accounting
Principles."
Footwear Wholesale & Manufacturing
Fiscal Year Ended %
-----------------------
1996 1995 Change
------ ------ ------
(In Thousands)
Net Sales.............................................. $ 191,272 $ 228,453 (16.3)%
Operating Loss*........................................ $ (1,754) $ (13,446) (87.0)%
Operating Margin....................................... (0.9)% (5.9)%
*Includes a $14.1 million restructuring charge in Fiscal 1996 and a $20.6
million restructuring charge in Fiscal 1995.
21
22
Net sales from footwear wholesale and manufacturing operations were $37.2
million (16.3%) lower in Fiscal 1996 than in Fiscal 1995, reflecting primarily
lower sales from the operations divested as part of the 1995 Restructuring.
Sales from ongoing operations were up 4.5%, reflecting primarily increased men's
branded footwear and tanned leather sales, which more than offset the continuing
trend of decreased sales of western boots, primarily attributable to lower
selling prices.
Gross margin as a percentage of net sales increased from 23.9% to 27.8%,
primarily from improved manufacturing utilization including efficiencies
resulting from the closing of a footwear plant in February 1995 as part of the
1995 Restructuring.
Operating expenses decreased 14.6%, primarily from the divestiture of University
Brands in January 1995 and Mitre Sports in August 1995, but increased as a
percentage of net sales from 22.2% to 22.7%, primarily because of the lower
sales in operations to be divested and increased bad debt and royalty expenses.
For Fiscal 1995, the University Brands and Mitre Sports businesses that were
disposed of in the 1995 Restructuring had net sales of $74.8 million and
operating loss before Restructuring Provision of $0.2 million. The operating
loss is for the nine months ended October 31, 1994 since the operating results
subsequent to October 31, 1994 were charged against the Restructuring Provision.
Included in operating income for Fiscal 1996 is a one-time gain of $1.8 million
from the favorable resolution of a claim relating to import duties and a $14.1
million restructuring charge. Included in operating income for Fiscal 1995 is
$20.6 million restructuring charge and a $1.3 million provision for
environmental litigation. The increase in operating income before restructuring
and other charges and the import duty claim, excluding $0.2 million of divested
operations' operating loss for Fiscal 1995, is due primarily to increased sales
of men's branded products and tanned leather and to improvements in gross margin
and expense reductions due to the 1995 Restructuring.
Discontinued Operations
On November 3, 1994, in response to worsening trends in the Company's men's
apparel business, the Company's board of directors approved a plan to exit the
men's apparel business. See "Significant Developments-Fiscal 1995 Restructuring"
and Note 2 to the Consolidated Financial Statements for information regarding
the discontinuation of this business segment. Net sales and operating loss of
the men's apparel segment in Fiscal 1995 prior to the decision to discontinue
were $81.8 million and $4.5 million, respectively.
Corporate and Interest Expenses
Corporate and other expenses in Fiscal 1996 were $10.2 million, compared to
$14.2 million in Fiscal 1995, a decrease of approximately 28%. Included in
Fiscal 1995's corporate and other expenses is $2.3 million of severance costs,
$1.3 million of which related to the 1995 Restructuring. The decrease in
corporate expenses, excluding the severance costs, is attributable primarily to
lower professional fees.
Interest expense decreased $1.6 million, or 14%, from Fiscal 1995 because of a
decrease in borrowings, while interest income increased $682,000 from Fiscal
1995 due to increased short-term investments. Borrowings under the Company's
revolving credit facility during Fiscal 1996 averaged $181,000 compared to
average borrowings of $28.4 million during Fiscal 1995.
22
23
Other Income
Operating results of footwear businesses to be divested pursuant to the 1995
Restructuring are included in the Company's net sales, cost of sales and selling
and administrative expenses. The net operating losses or gains incurred by these
operations subsequent to the decision to divest are charged against the
restructuring reserves established to provide for such losses or gains. The
elimination of these losses from the Company's results of operations for Fiscal
1996 is presented as other income in the Consolidated Earnings Statement. Such
operating losses totaled $1.3 million in Fiscal 1996. Such operating losses
totaled $5.5 million for Fiscal 1995 which included operating results of stores
identified for closure pursuant to the 1994 Restructuring. Also included in
other income for Fiscal 1996 is a $1.8 million gain from the favorable
resolution of a claim relating to import duties and a $0.5 million provision
for environmental litigation.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain financial data at the dates indicated.
All dollar amounts are in millions.
Feb. 1, January 31,
---------------------
1997 1996 1995
------- -------- -------
Cash and short-term investments...........................$ 43.4 $ 35.6 $ 10.2
Working capital...........................................$ 108.8 $ 108.1 $ 100.7
Long-term debt (includes current maturities)..............$ 75.0 $ 75.0 $ 75.0
Current ratio............................................. 2.6x 3.2x 2.2x
Working Capital
The Company's business is somewhat seasonal, with the Company's investment in
inventory and accounts receivable normally reaching peaks in the spring and fall
of each year. Cash flow from operations is ordinarily generated principally in
the fourth quarter of each fiscal year.
Cash provided by operating activities was $22.4 million in Fiscal 1997, compared
to $22.7 million in Fiscal 1996 and $22.5 million in Fiscal 1995. The $0.3
million reduction in cash flow from operating activities for Fiscal 1997
compared to Fiscal 1996 reflects primarily the absence of cash flows from the
liquidation of assets included in the 1995 Restructuring and the additional
working capital needed to support new store growth. The Company has added a net
of 41 stores in Fiscal 1997 while there was a net reduction of 35 stores in
Fiscal 1996. The $0.2 million improvement in cash flow from operating activities
for Fiscal 1996 compared to Fiscal 1995 reflects primarily cash inflows from the
liquidation of assets included in the 1995 Restructuring and lower seasonal
requirements from the disposition of businesses included in the 1995
Restructuring.
An $11.0 million increase in inventories from January 31, 1996 levels reflected
in the Consolidated Cash Flows Statement reflects planned increases in retail
inventory to support the net increase of 41 stores from January 31, 1996 and
increases in men's branded wholesale inventory to support growth in those
businesses. A $6.3 million decrease in inventories from January 31, 1995 levels
reflected in the Consolidated Cash Flows Statement was primarily due to
liquidation of inventories in connection with the 1995 Restructuring, while the
$2.0 million increase in ongoing inventories compared with January 31, 1995
reflects the growth of certain existing lines of footwear in anticipation of
higher sales.
23
24
As reflected in the Consolidated Cash Flows Statement, accounts receivable at
February 1, 1997 increased $0.3 million compared to January 31, 1996 primarily
due to increased sales of men's branded footwear and the introduction of the
Larry Mahan boot brand. Accounts receivable at February 1, 1997 were $1.7
million less than at January 31, 1996 primarily due to increased provisions for
bad debts relating to western boot customers. Accounts receivable at January 31,
1996 were $15.5 million less than at January 31, 1995 primarily from collection
of receivables in the operations being divested in the 1995 Restructuring.
Ongoing accounts receivable at January 31, 1996 were $55,000 more than January
31, 1995.
Cash provided (or used) due to changes in accounts payable and accrued
liabilities in the Consolidated Cash Flows Statement at February 1, 1997 and
January 31, 1996 and 1995 are as follows:
Fiscal Year Ended
-----------------------------------------
(In Thousands) 1997 1996 1995
--------- ----------- -----------
Accounts payable..................................................$10,625 $ (3,655) $ (2,204)
Accrued liabilities............................................. (1,665) (9,369) (4,754)
--------- ---------- ----------
$ 8,960 $(13,024) $ (6,958)
======== ======== =========
The fluctuations in accounts payable for Fiscal 1997 from Fiscal 1996 are due to
changes in buying patterns, payment terms negotiated with individual vendors and
changes in inventory levels, while the decrease in accounts payable for Fiscal
1996 from Fiscal 1995 relates primarily to the divestitures associated with the
1995 Restructuring.
The change in accrued liabilities in Fiscal 1997 was due primarily to payment of
bonuses and to payment of severance costs and liabilities related to the
Restructurings. The change in accrued liabilities in Fiscal 1996 was due to
payment of severance costs and liabilities related to the Restructurings. The
change in accrued liabilities in Fiscal 1995 was due primarily to payments of
severance costs, liabilities and leases related to the Restructurings.
There were no revolving credit borrowings during Fiscal 1997, as cash generated
from operations and cash on hand funded seasonal working capital requirements
and capital expenditures. There were only minimal revolving credit borrowings
during Fiscal 1996 as cash generated from the 1995 Restructuring more than
offset seasonal working capital increases in the remaining operations. On
January 5, 1996, the Company entered into a revolving credit agreement with two
banks providing for loans or letters of credit of up to $35 million. The
agreement, as amended October 31, 1996, expires January 5, 1999. The revolving
credit agreement was amended to increase the annual capital expenditure limit to
$16.0 million for Fiscal 1997 and $25.0 million thereafter, subject to possible
carryforwards from the previous year of up to $2.0 million if less is spent in
the current year.
Capital Expenditures
Capital expenditures were $14.6 million in Fiscal 1997, $8.6 million in Fiscal
1996 and $5.8 million in Fiscal 1995. The $6.0 million increase in Fiscal 1997
capital expenditures as compared to Fiscal 1996 resulted primarily from the net
increase of 41 new retail stores in Fiscal 1997. The $2.8 million increase in
Fiscal 1996 capital expenditures as compared to Fiscal 1995 resulted from
leasehold improvements to the corporate office building for new tenants due to
the downsizing of the Company, an increase in retail store renovations and an
increase in purchases of production equipment.
24
25
Total capital expenditures in Fiscal 1998 are expected to be approximately $26.4
million. These include expected retail expenditures of $16.4 million to open
approximately 92 new retail stores and to complete 44 major store renovations.
Capital expenditures for wholesale and manufacturing operations and other
purposes are expected to be approximately $10.0 million, including approximately
$6.0 million for new systems to improve customer service and support the
Company's growth.
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 16 to the
Consolidated Financial Statements. The Company has made provisions for certain
of these contingencies, including provisions of $150,000 and $500,000 in
discontinued operations in fiscal 1997 and fiscal 1996, respectively, and
$500,000 and $1,300,000 reflected in fiscal 1996 and 1995, respectively. The
Company monitors these proceedings on an ongoing basis and at least quarterly
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 reserve in
relation to each proceeding is a reasonable estimate of the probable loss
connected to the proceeding, or in cases in which no reasonable estimate is
possible, the minimum amount in the range of estimated losses, based upon its
analysis of the facts as of the close of the most recent fiscal quarter. Because
of uncertainties and risks inherent in litigation generally and in environmental
proceedings in particular, however, there can be no assurance that future
developments will not require additional reserves to be set aside, that some or
all reserves may not be inadequate or that the amounts of any such additional
reserves or any such inadequacy will not have a material adverse effect upon the
Company's financial condition or results of operations.
Future Capital Needs
The Company expects that cash on hand and cash provided by operations will be
sufficient to fund all of its capital expenditures through Fiscal 1998, although
the Company may borrow from time to time to support seasonal working capital
requirements. The approximately $5.4 million of costs associated with the 1994
Restructuring, 1995 Restructuring and the Manufacturing Restructuring that are
expected to be incurred during the next twelve months are also expected to be
funded from cash on hand and from cash generated from operations.
There were $8 million of letters of credit outstanding under the revolving
credit agreement at February 1, 1997, leaving availability under the revolving
credit agreement of $27 million.
The restricted payments covenant contained in the indenture under which the
Company's 10 3/8% senior notes were issued prohibits the Company from declaring
dividends on the Company's capital stock, except from a pool of available net
earnings and the proceeds of stock sales. At February 1, 1997, that pool was in
a $98.0 million deficit position. The aggregate of annual dividend requirements
on the Company's 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 is $301,000. The Company currently has dividend arrearages in the amount
of $978,000 and is unable to predict when dividends may be reinstated.
On November 7, 1994, Standard & Poor's announced that it had lowered the rating
of the 10 3/8% Notes to B from B+ based on its concern that Genesco's ongoing
business operations will not provide the earnings and cash flow generation
reflective of a B+ senior credit rating. On January 30, 1996, Moody's confirmed
their B2 senior debt rating of Genesco's 10 3/8% Notes which ended a review of
Genesco's rating initiated by Moody's on November 10, 1995. According to
Standard & Poor's, a
25
26
debt instrument rated B has a greater vulnerability to default than debt rated
BB, but currently has the capacity to meet interest and principal payments.
According to Moody's, the assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small with respect to a debt instrument rated B. Ratings are not a
recommendation to purchase, hold or sell long-term debt of the Company, inasmuch
as ratings do not comment as to market price or suitability for particular
investors and may be subject to revision or withdrawal at any time by the
assigning rating agency.
FOREIGN CURRENCY
The Company does not believe that its foreign currency risk is material to its
operations. Most purchases by the Company from foreign sources are denominated
in US dollars. To the extent that import transactions are denominated in other
currencies, it is the Company's practice to hedge its risks through the purchase
of forward foreign exchange contracts. Any gains or losses from such
transactions offset gains and losses from the underlying hedged transactions.
CHANGES IN ACCOUNTING PRINCIPLES
The Company implemented Statement of Financial Accounting Standards (SFAS) 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" in the third quarter of Fiscal 1996. This statement establishes
accounting standards for determining impairment of long-lived assets. The
Company periodically assesses the realizability of its long-lived assets 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 carrying amount. During the third
quarter, the Company identified certain retail stores that were impaired because
of a history of and current period cash flow losses in these specific stores. An
impairment loss of $978,000 was recognized for these retail stores and is
included in the "Restructuring and other charges" line on the income statement
for the twelve months ended January 31, 1996.
Changes in the economic environment have historically affected the Company's
results of operations, therefore the Company limits the amount of deferred tax
assets it recognizes to an amount no greater than the amount of tax refunds the
Company could claim as loss carrybacks. For additional information, see Note 12
to the Consolidated Financial Statements.
INFLATION
The Company does not believe inflation during periods covered in this discussion
has had a material impact on sales or operating results.
26
27
ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants 28
Consolidated Balance Sheet, February 1, 1997 and January 31, 1996 29
Consolidated Earnings, each of the three fiscal years ended 1997, 1996 and 1995 30
Consolidated Cash Flows, each of the three fiscal years ended
1997, 1996 and 1995 31
Consolidated Shareholders' Equity, each of the three fiscal years ended
1997, 1996 and 1995 32
Notes to Consolidated Financial Statements 33
27
28
February 25, 1997, except as to Note 19 which is as of October 31, 1997
To the Board of Directors and
Shareholders of Genesco Inc.
Report of Independent Accountants
---------------------------------
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 as financial statements and financial statement
schedules on page 67, after the restatement described in Note 19, present
fairly, in all material respects, the financial position of Genesco Inc. and its
subsidiaries at February 1, 1997 and January 31, 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
February 1, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/Price Waterhouse LLP
Nashville, Tennessee
28
29
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheet
In Thousands
AS OF FISCAL YEAR END
- -----------------------------------------------------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and short-term investments $ 43,375 $ 35,550
Accounts receivable 34,389 32,135
Inventories 95,884 84,930
Other current assets 4,509 4,317
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 178,157 156,932
- -----------------------------------------------------------------------------------------------------------------------
Plant, equipment and capital leases, net 34,471 28,552
Other noncurrent assets 9,026 12,322
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 221,654 $ 197,806
=======================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 65,331 $ 43,686
Provision for discontinued operations 3,263 3,899
Current payments on capital leases 768 1,212
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 69,362 48,797
- -----------------------------------------------------------------------------------------------------------------------
Long-term debt 75,000 75,000
Capital leases 717 1,485
Other long-term liabilities 11,172 25,265
Provision for discontinued operations 11,613 13,354
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 167,864 163,901
- -----------------------------------------------------------------------------------------------------------------------
Contingent liabilities (see Note 16) - -
SHAREHOLDERS' EQUITY
Non-redeemable preferred stock 7,944 7,958
Common shareholders' equity:
Par value of issued shares 25,195 24,844
Additional paid-in capital 122,615 121,715
Accumulated deficit (84,107) (94,511)
Minimum pension liability adjustment -0- (8,244)
Treasury shares, at cost (17,857) (17,857)
- -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 53,790 33,905
- -----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 221,654 $ 197,806
=======================================================================================================================
The accompanying Notes are an integral part of these Financial Statements.
29
30
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Earnings
In Thousands, except per share amounts
- ----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR
------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<C
Net sales $ 461,348 $ 434,575 $ 462,901
Cost of sales 274,273 261,743 289,961
Selling and administrative expenses 159,518 154,567 166,156
Restructuring and other charges 1,693 15,124 22,114
- ----------------------------------------------------------------------------------------------------------------------
Earnings (loss) from operations before
other income and expenses 25,864 3,141 (15,330)
- ----------------------------------------------------------------------------------------------------------------------
Other expenses (income):
Interest expense 10,289 10,403 12,031
Interest income (1,548) (758) (76)
Litigation settlement 6,700 -0- -0-
Gain on divestiture -0- -0- (4,900)
Other expense (income) 291 (2,748) (4,628)
- ----------------------------------------------------------------------------------------------------------------------
Total other (income) expenses, net 15,732 6,897 2,427
- ----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes and discontinued operations 10,132 (3,756) (17,757)
Income taxes (benefit) (422) 25 757
- ----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before discontinued operations 10,554 (3,781) (18,514)
Discontinued operations:
Operating loss -0- -0- (4,540)
Excess provision (provision) for future losses (150) 13,852 (58,138)
- ----------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 10,404 $ 10,071 $ (81,192)
======================================================================================================================
Earnings (loss) per common share:
Before discontinued operations $ .40 $ (.17) $ (.77)
Discontinued operations $ (.01) $ .57 $ (2.58)
Net earnings (loss) $ .39 $ .40 $ (3.35)
======================================================================================================================
The accompanying Notes are an integral part of these Financial Statements.
30
31
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Cash Flows
In Thousands
- -----------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR
------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net earnings (loss) $ 10,404 $ 10,071 $(81,192)
Noncash charges (credits) to earnings:
(Excess) provision for loss on discontinued operations 150 (13,852) 58,138
Restructuring charge 1,693 14,147 22,114
Depreciation and amortization 7,747 7,354 9,254
Impairment of long-lived assets -0- 978 -0-
Provision for environmental liabilities -0- 500 700
Provision for deferred income taxes (415) -0- 1,404
Litigation settlement 6,700 -0- -0-
Gain on divestiture -0- -0- (4,900)
Provision for losses on accounts receivable 2,060 1,799 813
Other 699 548 376
Effect on cash of changes in working capital and other assets and liabilities:
Accounts receivable (314) 15,466 44
Inventories (10,954) 6,280 25,458
Other current assets (192) 165 100
Accounts payable and accrued liabilities 8,960 (13,024) (6,958)
Other assets and liabilities (4,136) (7,780) (2,881)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 22,402 22,652 22,470
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (14,631) (8,564) (5,750)
Proceeds from businesses divested and asset sales 76 18,763 8,032
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (14,555) 10,199 2,282
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net borrowings (repayments) under
revolving credit agreement -0- -0- (15,000)
Net change in short-term borrowings -0- 2,522 (69)
Payments on capital leases (1,220) (9,703) (2,852)
Exercise of options and warrants and employee stock purchases 1,202 23 6
Other (4) (378) (227)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (22) (7,536) (18,142)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOW 7,825 25,315 6,610
Cash and short-term investments at
beginning of year 35,550 10,235 3,625
- ----------------------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 43,375 $ 35,550 $ 10,235
==================================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid (received) for:
Interest $ 9,887 $ 9,146 $ 11,227
Income taxes (42) (802) (2,457)
The accompanying Notes are an integral part of these Financial Statements.
31
32
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Shareholders' Equity
In Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN MINIMUM TOTAL
NON-REDEEMABLE ADDITIONAL CURRENCY PENSION SHARE-
PREFERRED COMMON PAID-IN ACCUMULATED TREASURY TRANSLATION LIABILITY HOLDERS'
STOCK STOCK CAPITAL (DEFICIT) STOCK ADJUSTMENTS ADJUSTMENT EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 31, 1994 $ 8,064 $ 24,793 $ 121,634 $ (23,241) $ (17,857) $ (4,706) $ (9,964) $ 98,723
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of options -0- 2 4 -0- -0- -0- -0- 6
Translation adjustments:
Year-to-date adjustments -0- -0- -0- -0- -0- 2,136 -0- 2,136
Realized in FY 1995 restructuring -0- -0- -0- -0- -0- 2,570 -0- 2,570
Net loss -0- -0- -0- (81,192) -0- -0- -0- (81,192)
Minimum pension liability adjustment -0- -0- -0- -0- -0- -0- 7,351 7,351
Other (121) 37 32 (149) -0- -0- -0- (201)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 31, 1995 $ 7,943 $ 24,832 $ 121,670 $(104,582) $ (17,857) $ -0- $ (2,613) $ 29,393
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of options -0- 8 15 -0- -0- -0- -0- 23
Net earnings -0- -0- -0- 10,071 -0- -0- -0- 10,071
Minimum pension liability adjustment -0- -0- -0- -0- -0- -0- (5,631) (5,631)
Other 15 4 30 -0- -0- -0- -0- 49
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 31, 1996 $ 7,958 $ 24,844 $ 121,715 $ (94,511) $ (17,857) $ -0- $ (8,244) $ 33,905
- -----------------------------------------------------------------------------------------------------------------------------------
Exercise of options -0- 187 455 -0- -0- -0- -0- 642
Issue shares - Employee Stock Purchase Plan -0- 161 399 -0- -0- -0- -0- 560
Net earnings -0- -0- -0- 10,404 -0- -0- -0- 10,404
Minimum pension liability adjustment -0- -0- -0- -0- -0- -0- 8,244 8,244
Other (14) 3 46 -0- -0- -0- -0- 35
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE FEBRUARY 1, 1997 $ 7,944 $ 25,195 $ 122,615 $ (84,107) $ (17,857) $ -0- $ -0- $ 53,790
===================================================================================================================================
See Note 11 for additional information regarding each series of preferred stock.
The accompanying Notes are an integral part of these Financial Statements.
32
33
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company's businesses include the manufacture or sourcing, marketing and
distribution of footwear under the Johnston & Murphy, Laredo, Code West, Larry
Mahan, Dockers and Nautica brands, the tanning and distribution of leather by
the Volunteer Leather division and the operation of Jarman, Journeys, Johnston &
Murphy, Boot Factory and General Shoe Warehouse retail footwear stores.
BASIS OF PRESENTATION
All subsidiaries are included in the consolidated financial statements. All
significant intercompany transactions and accounts have been eliminated.
The preparation of financial statements in conformity with 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.
FISCAL YEAR
For the year ended February 1, 1997 ("Fiscal 1997"), the Company changed its
fiscal year end to the Saturday closest to January 31. As a result, Fiscal 1997
had 367 days, while Fiscal 1996 and 1995 had 365 days. Fiscal Years 1997, 1996
and 1995 ended on February 1, 1997, January 31, 1996 and January 31, 1995,
respectively.
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain reclassifications have been made to conform prior years' data to the
current presentation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, cash equivalents, trade receivables and trade
payables approximate fair value because of the short maturity of these financial
instruments. The fair value of the Company's $75.0 million 10 3/8% senior notes
is estimated based on the quoted market price as of February 1, 1997 which is
$76.1 million (see Note 9).
CASH AND SHORT-TERM INVESTMENTS
Included in cash and short-term investments at February 1, 1997 and January 31,
1996, are short-term investments of $38.1 million and $32.0 million,
respectively. Short-term investments are highly-liquid debt instruments having
an original maturity of three months or less.
INVENTORIES
Inventories of wholesaling and manufacturing companies are stated at the lower
of cost or market, with cost determined principally by the first-in, first-out
method. Retail inventories are determined by the retail method.
33
34
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
PLANT, EQUIPMENT AND CAPITAL LEASES
Plant, equipment and capital leases 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.
The Company implemented Statement of Financial Accounting Standards (SFAS) 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" in the third quarter of Fiscal 1996. This statement establishes
accounting standards for determining impairment of long-lived assets. The
Company periodically assesses the realizability of its long-lived assets 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 carrying amount. During the third
quarter of Fiscal 1996, the Company identified certain retail stores that were
impaired because of a history of and current period cash flow losses in these
specific stores. An impairment loss of $978,000 was recognized for these retail
stores and is included in the "Restructuring and other charges" line on the
income statement for the year ended January 31, 1996.
HEDGING CONTRACTS
In order to reduce exposure to foreign currency exchange rate fluctuations in
connection with inventory purchase commitments, the Company enters into foreign
currency forward exchange contracts for Italian Lira. At February 1, 1997 and
January 31, 1996, the Company had approximately $18.8 million and $4.9 million,
respectively, of such contracts outstanding. Forward exchange contracts have an
average term of approximately five months. Gains and losses arising from these
contracts offset gains and losses from the underlying hedged transactions. The
Company monitors the credit quality of the major national and regional financial
institutions with whom it enters into such contracts.
POSTRETIREMENT BENEFITS
Substantially all full-time employees are covered by a defined benefit pension
plan. 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.
In accordance with SFAS 106, postretirement benefits such as life insurance and
health care are accrued over the period the employee provides services to the
Company.
ENVIRONMENTAL COSTS
Environmental expenditures relating 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 independently 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.
34
35
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INCOME TAXES
Deferred income taxes are provided for all temporary differences and operating
loss and tax credit carryforwards limited, in the case of deferred tax assets,
to the amount of taxes recoverable from taxes paid in the current or prior
years.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing earnings, adjusted for
preferred dividend requirements (1997 - $301,000; 1996 - $302,000; 1995 -
$302,000), by average common and common stock equivalents outstanding during the
period.
STOCK-BASED COMPENSATION PLANS
The Company applies APB Opinion 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized other than for
its restricted stock options. (see Note 15).
35
36
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
RESTRUCTURINGS
MANUFACTURING RESTRUCTURING
In response to the continued weakening of the western boot market, the Company
approved a plan, ("the Manufacturing Restructuring"), in the third quarter of
Fiscal 1997 to realign its manufacturing operations as part of an overall
strategy to focus on marketing and global sourcing. The plan includes closing
the Company's Hohenwald, Tennessee western boot plant by July 1997 with the
elimination of approximately 190 jobs. In connection with the adoption of the
plan, the Company recorded a charge to earnings of $1.7 million including $0.5
million in asset write-downs of the plant and excess equipment to estimated
market value and $1.2 million of other costs. Included in other costs is
employee severance, facility shutdown and lease costs.
FISCAL 1995 RESTRUCTURING
In response to worsening trends in the Company's men's apparel business and in
response to a strategic review of its footwear operations, the Company's board
of directors approved a plan (the "1995 Restructuring") designed to focus the
Company on its core footwear businesses by selling or liquidating four
businesses, two of which constituted its entire men's apparel segment.
The 1995 Restructuring provided for the following:
1995 Restructuring Charge
- Liquidation of the University Brands children's shoe business,
- Sale of the Mitre Sports soccer business, and
- Facility consolidation costs and permanent work force reductions.
1995 Restructuring Provision
- Liquidation of The Greif Companies men's tailored clothing business, and
- Sale of the GCO Apparel Corporation tailored clothing manufacturing
business.
In connection with the 1995 Restructuring, the Company took a combined charge of
$90.7 million in the third quarter of Fiscal 1995, of which $22.1 million (the
"1995 Restructuring Charge") related to University Brands and Mitre and facility
consolidation costs and permanent work force reductions and $68.6 million (the
"1995 Restructuring Provision") related to Greif and GCO Apparel, which
constituted the entire men's apparel segment of the Company's business, and is,
therefore, treated for financial reporting purposes as a provision for
discontinued operations.
In the fourth quarter of Fiscal 1995, the 1995 Restructuring Provision was
positively adjusted by $10.5 million reducing the $68.6 million provision for
future losses of discontinued operations to $58.1 million. The adjustment
reflected the favorable consequences of a transfer, not anticipated at the time
the provision was recorded, of a licensing agreement for men's apparel to
another manufacturer. The transfer resulted in realization of inventory and
accounts receivable balances on more favorable terms than anticipated,
assumption of piece goods commitments by other manufacturers and cancellation of
minimum royalty requirements under the transferred license.
36
37
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
RESTRUCTURINGS, CONTINUED
In the first quarter of Fiscal 1996, the Company took an additional
restructuring charge of $14.1 million relating to the 1995 Restructuring. The
additional restructuring charge reflected the lowering of anticipated proceeds
from the sale of the Mitre Sports soccer business. In addition, the 1995
Restructuring Provision was adjusted by an additional reversal of $12.7 million.
The reversal reflected primarily (1) an agreement during the quarter providing
for the resolution of a long-term lease liability on terms more favorable than
were anticipated when the 1995 Restructuring Provision was established, (2)
better than anticipated realization of inventories and accounts receivable as
the remaining Greif inventory was liquidated in the first quarter of Fiscal 1996
and (3) lower than anticipated union pension liability, which the pension fund
determined and announced to the Company during the quarter.
Throughout the remainder of Fiscal 1996, the Company recognized additional
reductions to the 1995 Restructuring Charge and Provision of $1.7 million as
actual events differed from the original estimates.
The transactions provided for in the 1995 Restructuring were substantially
complete as of January 31, 1996 and the Company does not expect any material
future adjustments arising from the completion of the 1995 Restructuring. The
1995 Restructuring Charge, as adjusted, provided for the elimination of 464 jobs
in footwear operations to be divested or consolidated and in staff positions to
be eliminated, of which 457 jobs had been eliminated as of January 31, 1996. The
divestiture of the University Brands business was completed in February 1995.
The operations of The Greif Companies have ceased, its inventories and equipment
have been liquidated and its last major remaining long-term lease liability was
resolved in June 1995. The Company's GCO Apparel Corporation was sold in June
1995. The Company's Mitre Sports soccer business was sold in August 1995 with
cash proceeds to the Company of approximately $19.1 million, including repayment
of intercompany balances.
The operating results of the men's apparel segment prior to the decision to
discontinue, classified as discontinued operations in the consolidated earnings
statement, are shown below:
- ------------------------------------------------------------------------------
YEAR ENDED JANUARY 31,
----------------------
IN THOUSANDS 1995
- ------------------------------------------------------------------------------
Net sales $ 81,777
Cost of sales and expenses 86,317
- ------------------------------------------------------------------------------
Pretax loss (4,540)
Income tax expense (benefit) -0-
- ------------------------------------------------------------------------------
Net Loss $ (4,540)
==============================================================================
37
38
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
RESTRUCTURINGS, CONTINUED
Discontinued operations' sales subsequent to the decision to discontinue were
$20.0 million for Fiscal 1996.
Net sales for Mitre and University Brands for Fiscal 1996 and 1995 were $30.8
million and $76.0 million, respectively. Operating loss for Mitre and University
Brands before the restructuring provisions for Fiscal 1995 was $304,000.
Operating results of footwear businesses divested pursuant to the 1995
Restructuring are included in the Company's sales, cost of sales and selling and
administrative expenses. The net operating losses incurred by these operations
subsequent to the decision to divest are charged against the restructuring
reserves established to provide for such losses. The elimination of these losses
from the Company's results of operations for Fiscal 1996 is presented as other
income in the Consolidated Earnings Statement. Such operating losses totalled
$1.3 million for Fiscal 1996. Such operating losses totalled $5.5 million for
Fiscal 1995 which included operating results of stores identified for closure
pursuant to the 1994 Restructuring.
NOTE 3
ACCOUNTS RECEIVABLE
- ------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- ------------------------------------------------------------------------------
Trade accounts receivable $ 32,721 $ 33,068
Miscellaneous receivables 6,960 3,263
- ------------------------------------------------------------------------------
Total receivables 39,681 36,331
Allowance for bad debts (3,353) (2,065)
Other allowances (1,939) (2,131)
- ------------------------------------------------------------------------------
NET ACCOUNTS RECEIVABLE $ 34,389 $ 32,135
==============================================================================
The Company's footwear wholesaling business sells primarily to independent
retailers and department stores across the United States. Receivables arising
from these sales are not collateralized. Credit risk is affected by conditions
or occurrences within the economy and the retail industry. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
No single customer accounted for more than 8% of the Company's trade receivables
balance as of February 1, 1997.
38
39
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 4
INVENTORIES
- --------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- --------------------------------------------------------------------------------------------------------------
Raw materials $ 8,870 $ 9,229
Work in process 3,333 3,792
Finished goods 29,270 22,935
Retail merchandise 54,411 48,974
- --------------------------------------------------------------------------------------------------------------
TOTAL INVENTORIES $ 95,884 $ 84,930
==============================================================================================================
NOTE 5
PLANT, EQUIPMENT AND CAPITAL LEASES, NET
- --------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- --------------------------------------------------------------------------------------------------------------
Plant and equipment:
Land $ 241 $ 75
Buildings and building equipment 2,552 2,799
Machinery, furniture and fixtures 37,522 32,927
Construction in progress 3,130 1,114
Improvements to leased property 42,734 39,195
Capital leases:
Land 60 60
Buildings 1,904 2,195
Machinery, furniture and fixtures 7,285 7,392
- --------------------------------------------------------------------------------------------------------------
Plant, equipment and capital leases, at cost 95,428 85,757
Accumulated depreciation and amortization:
Plant and equipment (53,241) (50,355)
Capital leases (7,716) (6,850)
- --------------------------------------------------------------------------------------------------------------
NET PLANT, EQUIPMENT AND CAPITAL LEASES $ 34,471 $ 28,552
==============================================================================================================
39
40
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 6
OTHER NONCURRENT ASSETS
- ---------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- ---------------------------------------------------------------------------------------------------------------
Other noncurrent assets:
Pension plan asset $ 4,750 $ 8,051
Investments and long-term receivables 1,792 1,772
Deferred tax asset 415 -0-
Deferred note expense 2,069 2,499
- ---------------------------------------------------------------------------------------------------------------
TOTAL OTHER NONCURRENT ASSETS $ 9,026 $ 12,322
===============================================================================================================
NOTE 7
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
- ---------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- ---------------------------------------------------------------------------------------------------------------
Trade accounts payable $ 22,730 $ 12,105
Accrued liabilities:
Employee compensation 9,471 10,733
Litigation 10,700 -0-
Interest 4,017 3,992
Taxes other than income taxes 3,118 3,361
Insurance 3,089 4,381
Other 12,206 9,114
- ---------------------------------------------------------------------------------------------------------------
TOTAL ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $ 65,331 $ 43,686
===============================================================================================================
At February 1, 1997, outstanding checks drawn on certain domestic banks
exceeded book cash balances by approximately $4.5 million. These amounts are
included in trade accounts payable.
40
41
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 8
PROVISION FOR DISCONTINUED OPERATIONS AND RESTRUCTURING RESERVES
- ------------------------------------------------------------------------------------------------------------------------------
PROVISION FOR DISCONTINUED OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE FACILITY
RELATED SHUTDOWN
IN THOUSANDS COSTS COSTS OTHER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1996 $15,222 $ 10 $ 2,021 $17,253
Charges and adjustments, net (1,866) (10) (501) (2,377)
- ------------------------------------------------------------------------------------------------------------------------------
Balance February 1, 1997 13,356 -0- 1,520 14,876
Current portion 1,743 -0- 1,520 3,263
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT PROVISION FOR
DISCONTINUED OPERATIONS $11,613 $ -0- $ -0- $11,613
==============================================================================================================================
RESTRUCTURING RESERVES
- ------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE FACILITY
RELATED SHUTDOWN
IN THOUSANDS COSTS COSTS OTHER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1996 $ 956 $ 1,666 $ 382 $ 3,004
Manufacturing restructuring 748 451 -0- 1,199
Charges and adjustments, net (1,032) (480) (13) (1,525)
- ------------------------------------------------------------------------------------------------------------------------------
Balance February 1, 1997 672 1,637 369 2,678
Current portion (included in accounts
payable and accrued liabilities) 672 1,106 369 2,147
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT RESTRUCTURING RESERVES
(INCLUDED IN OTHER LONG-TERM LIABILITIES) $ -0- $ 531 $ -0- $ 531
==============================================================================================================================
41
42
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 9
LONG-TERM DEBT
- -------------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- -------------------------------------------------------------------------------------------------------------------
10 3/8% senior notes due February 2003 $75,000 $75,000
REVOLVING CREDIT AGREEMENTS:
On January 5, 1996, the Company entered into a revolving credit agreement with
two banks providing for loans or letters of credit of up to $35 million. The
agreement, as amended October 31, 1996, expires January 5, 1999. This agreement
replaced a $50 million revolving credit agreement providing for loans or
letters of credit. Outstanding letters of credit at February 1, 1997 were $8
million.
Under the revolving credit agreement, the Company may borrow at the prime rate
or LIBOR plus 2.0% which may be changed if the Company's debt rating is
improved. Facility fees are 0.5% per annum on each bank's committed amount or
$35.0 million. The new credit agreement requires the Company to meet certain
financial ratios and covenants, including minimum tangible net worth, fixed
charge coverage, debt to equity and interest coverage ratios. The Company is
required by the credit agreement to reduce the outstanding principal balance of
the revolving loans to zero for 45 consecutive days during each period
beginning on December 15 of any Fiscal Year and ending on April 15 of the
following Fiscal Year. The revolving credit agreement, as amended, contains
other covenants which restrict the payment of dividends and other payments with
respect to capital stock. In addition, annual capital expenditures are limited
to $25.0 million for Fiscal 1998 and thereafter subject to possible
carryforwards from the previous year of up to $2.0 million if less is spent in
the current year. The Company was in compliance with the financial covenants
contained in the revolving credit agreement at February 1, 1997.
10 3/8% SENIOR NOTES DUE 2003:
On February 1, 1993, the Company issued $75 million of 10 3/8% senior notes due
February 1, 2003.
The fair value of the Company's 10 3/8% senior notes, based on the quoted
market price on February 1, 1997, is $76.1 million.
The indenture under which the notes were issued limits the incurrence of
indebtedness, the making of restricted payments, the restricting of subsidiary
dividends, transactions with affiliates, liens, sales of assets and
transactions involving mergers, sales or consolidations.
42
43
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 10
COMMITMENTS UNDER LONG-TERM LEASES
- -------------------------------------------------------------------------------
CAPITAL LEASES
Future minimum lease payments under capital leases at February 1, 1997,
together with the present value of the minimum lease payments, are:
- -------------------------------------------------------------------------------------------------------------------
FISCAL YEARS IN THOUSANDS
- -------------------------------------------------------------------------------------------------------------------
1998 $ 865
1999 400
2000 139
2001 139
2002 109
Later years 79
- -------------------------------------------------------------------------------------------------------------------
Total minimum payments 1,731
Interest discount amount 246
- -------------------------------------------------------------------------------------------------------------------
Total present value of minimum payments 1,485
Current portion 768
- -------------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT PORTION $ 717
===================================================================================================================
OPERATING LEASES
Rental expense under operating leases of continuing operations was:
IN THOUSANDS 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Minimum rentals $18,719 $17,942 $18,678
Contingent rentals 10,270 8,776 8,234
Sublease rentals (1,035) (754) (478)
- -------------------------------------------------------------------------------------------------------------------
TOTAL RENTAL EXPENSE $27,954 $25,964 $26,434
===================================================================================================================
Minimum rental commitments payable in future years are:
- -------------------------------------------------------------------------------------------------------------------
FISCAL YEARS IN THOUSANDS
- -------------------------------------------------------------------------------------------------------------------
1998 $19,404
1999 17,325
2000 14,542
2001 10,419
2002 7,215
Later years 19,733
- -------------------------------------------------------------------------------------------------------------------
TOTAL MINIMUM RENTAL COMMITMENTS $88,638
===================================================================================================================
Most leases provide for the Company to pay real estate taxes and other expenses
and contingent rentals based on sales. Approximately 12% of the Company's
leases contain renewal options.
43
44
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 11
SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
NON-REDEEMABLE PREFERRED STOCK
Number of Shares Amounts in Thousands Common
Shares ----------------------- ----------------------- Convertible No.of
Class Authorized 1997 1996 1995 1997 1996 1995 Ratio Votes
- --------------------------------------------------------------------------------------------------------------------------------
Subordinated Serial Preferred (Cumulative)
$2.30 Series 1 64,368 37,123 37,233 37,233 $1,485 $1,489 $1,489 .83 1
$4.75 Series 3 40,449 19,469 19,632 19,632 1,947 1,963 1,963 2.11 2
$4.75 Series 4 53,764 16,412 16,412 16,412 1,641 1,641 1,641 1.52 1
Series 6 400,000 -0- -0- -0- -0- -0- -0- 1
$1.50 Subordinated Cumulative Preferred 5,000,000 30,017 30,017 30,017 901 901 901
- -------------------------------------------------------------------------------------------------------------------------------
103,021 103,294 103,294 5,974 5,994 5,994
Employees' Subordinated
Convertible Preferred 5,000,000 80,313 80,313 80,313 2,409 2,410 2,410 1.00* 1
- -------------------------------------------------------------------------------------------------------------------------------
Stated Value of Issued Shares 8,383 8,404 8,404
Employees' Preferred Stock Purchase Accounts (439) (446) (461)
- -------------------------------------------------------------------------------------------------------------------------------
Total Non-Redeemable Preferred Stock $7,944 $7,958 $7,943
===============================================================================================================================
* Also convertible into one share of $1.50 Subordinated Cumulative Preferred
Stock
PREFERRED STOCK TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------
IN THOUSANDS
EMPLOYEES'
NON-REDEEMABLE PREFERRED TOTAL
NON-REDEEMABLE EMPLOYEES' STOCK NON-REDEEMABLE
PREFERRED PREFERRED PURCHASE PREFERRED
STOCK STOCK ACCOUNTS STOCK
- ------------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1994 $5,993 $2,544 $(473) $8,064
- ------------------------------------------------------------------------------------------------------------------------------
Conversion of employees' preferred into $1.50 preferred 3 (3) -0- -0-
Conversion of employees' preferred into common -0- (122) -0- (122)
Other (2) (9) 12 1
- ------------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1995 5,994 2,410 (461) 7,943
- ------------------------------------------------------------------------------------------------------------------------------
Other -0- -0- 15 15
- ------------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1996 5,994 2,410 (446) 7,958
Other (20) (1) 7 (14)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE FEBRUARY 1, 1997 $5,974 $2,409 $(439) $7,944
==============================================================================================================================
SUBORDINATED SERIAL PREFERRED STOCK (CUMULATIVE):
Stated and redemption values for Series 1 are $40 per share and for Series 3
and 4 are each $100 per share; liquidation value for Series 1--$40 per share
plus accumulated dividends and for Series 3 and 4--$100 per share plus
accumulated dividends.
44
45
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 11
SHAREHOLDERS' EQUITY, CONTINUED
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, 10% 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 August
2000, 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 which makes the rights exercisable
and before a majority of the Company's common stock is acquired.
$1.50 SUBORDINATED CUMULATIVE PREFERRED STOCK:
Stated and liquidation values and redemption price--$30 per share.
EMPLOYEES' SUBORDINATED CONVERTIBLE PREFERRED STOCK:
Stated and liquidation values--$30 per share.
COMMON STOCK:
Common stock-$1 par value. Authorized: 40,000,000 shares; issued: February 1,
1997--25,194,504 shares; January 31, 1996--24,844,036 shares. There were
488,464 shares held in treasury at February 1, 1997 and January 31, 1996. Each
outstanding share is entitled to one vote. At February 1, 1997, common shares
were reserved as follows: 177,101 shares for conversion of preferred stock;
1,366,388 shares for the 1987 Stock Option Plan; 1,100,000 shares for the 1996
Stock Option Plan; 200,000 shares for executive stock options; 120,434 shares
for the Restricted Stock Plan for Directors; and 756,919 shares for the Genesco
Employee Stock Purchase Plan.
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.
45
46
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 11
SHAREHOLDERS' EQUITY, CONTINUED
- -------------------------------------------------------------------------------
The February 1, 1993 indenture, under which the Company's 10 3/8% senior notes
due 2003 were issued, limits the payment of dividends and redemptions of
capital stock to the sum of $10 million plus (i) 50% of Consolidated Net Income
(as defined) after April 30, 1993 and (ii) the aggregate Net Proceeds (as
defined) received from the issuance or sale of capital stock after February 1,
1993. At February 1, 1997, the Company was in a deficit position of $98.0
million in its ability to pay dividends.
Due to the above restrictions, the Company suspended dividends in the fourth
quarter of Fiscal 1994 and now has cumulative dividend arrearages in the amount
of $277,494 for Series 1, $300,553 for Series 3, $253,360 for Series 4, and
$146,333 for $1.50 Subordinated Cumulative Preferred Stock.
CHANGES IN THE SHARES OF THE COMPANY'S CAPITAL STOCK
- ---------------------------------------------------------------------------------------------------------------------------
NON-
REDEEMABLE EMPLOYEES'
COMMON PREFERRED PREFERRED
STOCK STOCK STOCK
- ---------------------------------------------------------------------------------------------------------------------------
Issued at January 31, 1994 24,792,641 103,244 84,791
- ---------------------------------------------------------------------------------------------------------------------------
Other 39,486 50 (4,478)
- ---------------------------------------------------------------------------------------------------------------------------
Issued at January 31, 1995 24,832,127 103,294 80,313
- ---------------------------------------------------------------------------------------------------------------------------
Exercise of options 7,625 -0- -0-
Other 4,284 -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
Issued at January 31, 1996 24,844,036 103,294 80,313
- ---------------------------------------------------------------------------------------------------------------------------
Exercise of options 186,712 -0- -0-
Issue shares - Employee Stock Purchase Plan 161,329 -0- -0-
Other 2,427 (273) -0-
- ---------------------------------------------------------------------------------------------------------------------------
Issued at February 1, 1997 25,194,504 103,021 80,313
Less treasury shares 488,464 -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT FEBRUARY 1, 1997 24,706,040 103,021 80,313
===========================================================================================================================
46
47
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
INCOME TAXES
- ---------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) is comprised of the following:
- ---------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
Current
U.S. federal $ (70) $ -0- $(1,693)
Foreign 41 25 741
State 22 -0- 10
Deferred
U.S. federal (415) -0- 1,699
Foreign -0- -0- -0-
State -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------
TOTAL INCOME TAX EXPENSE (BENEFIT) $ (422) $ 25 $ 757
===============================================================================================================
47
48
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
INCOME TAXES, CONTINUED
Deferred tax assets and liabilities are comprised of the following:
FEBRUARY 1, JANUARY 31,
IN THOUSANDS 1997 1996
- ---------------------------------------------------------------
Pensions $ (1,049) $ (885)
Other (219) (346)
- ---------------------------------------------------------------
Gross deferred tax liabilities (1,268) (1,231)
- ---------------------------------------------------------------
Net operating loss carryforwards 18,433 25,399
Net capital loss carryforwards 8,013 11,180
Provisions for discontinued operations
and restructurings 7,685 8,437
Inventory valuation 1,685 1,743
Expense accruals 7,836 6,581
Allowances for bad debts and notes 1,802 1,711
Uniform capitalization costs 2,206 1,937
Depreciation 2,106 2,105
Pensions 201 692
Leases 126 176
Other 763 2,047
Tax credit carryforwards 2,649 1,200
- ---------------------------------------------------------------
Gross deferred tax assets 53,505 63,208
- ---------------------------------------------------------------
Deferred tax asset valuation allowance (51,822) (61,977)
- ---------------------------------------------------------------
NET DEFERRED TAX ASSETS $ 415 $ -0-
===============================================================
The Company has net operating loss carryfowards available to offset future U.S.
taxable income of approximately $47.9 million expiring in 2010 and 2011. The
Company also has capital loss carryforwards available to offset future U.S.
capital gains of approximately $20.8 million expiring in 2001.
Reconciliation of the United States federal statutory rate to the Company's
effective tax rate is as follows:
- ----------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------
U. S. federal statutory rate of tax 34.00 % 34.00 % (34.00)%
State taxes (net of federal tax benefit) 4.50 4.50 -0-
Deferred tax valuation allowance (38.50) (38.50) -0-
Operating losses with no current tax benefit -0- -0- 34.00
Other (2.9) .01 -0-
- ----------------------------------------------------------------------------------------
EFFECTIVE TAX RATE (2.9)% .01 % .00 %
========================================================================================
48
49
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 13
EMPLOYEE RETIREMENT BENEFITS
RETIREMENT PLAN
The Company sponsors a non-contributory, defined benefit pension plan. Effective
January 1, 1996, the Company amended the plan to change the pension benefit
formula to a cash balance formula from the 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 their cash balance account under the new formula.
Under the amended plan, 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 will be 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 is inactive will be credited
with interest at the lesser of 7% or the 30 year Treasury interest rate.
EMPLOYEE RETIREMENT BENEFITS
PENSION EXPENSE
- --------------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996 1995
- --------------------------------------------------------------------------------------------
Service cost of benefits earned during the year $ 1,490 $ 1,914 $ 2,309
Interest on projected benefit obligation 6,437 6,621 6,430
Actual return on plan assets (12,505) (12,522) (933)
Deferral of current period asset gains (losses) 6,601 7,089 (4,256)
Amortization of prior service cost (146) 388 388
Amortization of net loss 1,257 171 1,385
Amortization of transition obligation 983 983 983
- --------------------------------------------------------------------------------------------
TOTAL PENSION EXPENSE $ 4,117 $ 4,644 $ 6,306
============================================================================================
ACTUARIAL ASSUMPTIONS
- --------------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------
Weighted average discount rate 7.50% 7.00%
Salary progression rate 5.00% 5.00%
Expected long-term rate of return on plan assets 9.50% 9.50%
- --------------------------------------------------------------------------------------
49
50
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 13
EMPLOYEE RETIREMENT BENEFITS, CONTINUED
The weighted average discount rate used to measure the benefit obligation
increased from 7.00% to 7.50% from Fiscal 1996 to Fiscal 1997. The increase in
the rate decreased the accumulated benefit obligation by $4.4 million and
decreased the projected benefit obligation by $5.4 million. The weighted average
discount rate used to measure the benefit obligation decreased from 8.50% to
7.00% from Fiscal 1995 to Fiscal 1996. The decrease in the rate increased the
accumulated benefit obligation by $12.1 million and increased the projected
benefit obligation by $15.7 million.
The following table sets forth the funded status of the plan as of the
measurement date (December 31) for the respective fiscal year:
FUNDED STATUS
- -----------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- -----------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $82,534 $83,833
Non-vested benefit obligation 1,309 1,242
- -----------------------------------------------------------------------------------------
Accumulated benefit obligation $83,843 $85,075
=========================================================================================
Projected benefit obligation
for services rendered to date $91,350 $99,058
Plan assets at fair value, primarily
cash equivalents, common stock, notes and
real estate 81,077 68,550
- -----------------------------------------------------------------------------------------
PROJECTED BENEFIT OBLIGATION IN EXCESS OF
PLAN ASSETS $10,273 $30,508
=========================================================================================
At February 1, 1997 and January 31, 1996, there were no Company related assets
in the plan. The pension plan assets are invested primarily in common stocks,
mutual funds, domestic bond funds and cash equivalent securities.
BALANCE SHEET EFFECT
SFAS No. 87 requires the Company to recognize a pension liability ($2.8 million
for 1997 and $16.5 million for 1996) equal to the amount by which the actuarial
present value of the accumulated benefit obligation ($83.8 million for 1997 and
$85.1 million for 1996) exceeds the fair value of the retirement plan's assets
($81.1 million for 1997 and $68.6 million for 1996). A corresponding amount is
recognized as an intangible asset to the extent of the unamortized prior service
cost and unamortized transition obligation. Any excess of the pension liability
above the intangible pension asset is recorded as a separate component and
reduction of shareholders' equity. In 1997, this resulted in the recording of an
intangible asset of $4.8 million and a minimum pension liability of zero in
shareholders' equity. In the prior year, an intangible asset of $8.1 million and
a reduction to shareholders' equity of $8.2 million was recorded in the
Company's balance sheet. The decrease in the charge to shareholders' equity from
$8.2 million in Fiscal 1996 to $-0- in Fiscal 1997 results from a higher than
expected return on plan assets and the increase in the weighted average discount
rate.
50
51
GENESCO, INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 13
EMPLOYEE RETIREMENT BENEFITS, CONTINUED
A reconciliation of the plan's funded status to amounts recognized in the
Company's balance sheet follows:
- -----------------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- -----------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets $(10,273) $(30,508)
Unamortized transition obligation 4,914 5,897
Unrecognized net actuarial losses 9,060 22,227
Unrecognized prior service cost (1,717) 2,154
- -----------------------------------------------------------------------------------------------
Prepaid (Accrued) pension cost 1,984 (230)
Amount reflected as an intangible asset* (4,750) (8,051)
Amount reflected as minimum pension liability
adjustment** -0- (8,244)
- -----------------------------------------------------------------------------------------------
AMOUNT REFLECTED AS PENSION LIABILITY*** $ (2,766) $(16,525)
===============================================================================================
* Included in other non-current assets in the balance sheet.
** Included as a component of shareholders' equity in the balance sheet.
*** Included in other long-term liabilities in the balance sheet.
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.
Concurrent with the January 1, 1996 amendment to the pension plan (discussed
previously), the Company amended the 401(k) savings plan to make matching
contributions equal to 50% of each employee's contribution of up to 5% of
salary. Matching funds vest after five years of service with the Company. Years
of service earned prior to the adoption of this change contribute toward the
vesting requirement. For Fiscal 1997, the contribution expense to the Company
for the matching program was approximately $1.1 million.
51
52
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 14
OTHER BENEFIT PLANS
Prior to Fiscal 1996, the Company contributed to a multiemployer pension plan
applicable to all hourly-paid employees of its tailored clothing division
covered by collective bargaining agreements. As a result of the Company's
decision to liquidate The Greif Companies men's tailored clothing business, the
Company provided for its estimated union pension withdrawal liability (see Note
2). Pension costs and amounts contributed to the plan during Fiscal 1995 were
$1.8 million.
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 limited 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.
Postretirement benefit expense was $258,000, $256,000 and $217,000 for Fiscal
1997, 1996 and 1995, respectively. The components of postretirement benefit
expense follow:
- --------------------------------------------------------------------------------
IN THOUSANDS 1997 1996 1995
- --------------------------------------------------------------------------------
Service cost of benefits earned during the year $ 83 $ 64 $ 70
Interest cost on accumulated postretirement benefits 175 192 147
- --------------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COST $258 $256 $217
================================================================================
52
53
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 14
OTHER BENEFIT PLANS, CONTINUED
The funded status of the plan and amounts recognized in the financial statements
at February 1, 1997 and January 31, 1996 were as follows:
- -------------------------------------------------------------------------------------
IN THOUSANDS 1997 1996
- -------------------------------------------------------------------------------------
Postretirement benefit liability at beginning of year $ 2,693 $ 1,929
Net periodic postretirement benefit cost 258 256
Cash expenditures for benefits (771) (162)
Loss due to actual experience 475 376
Increase (decrease) in liability due to change in discount rate (111) 294
- -------------------------------------------------------------------------------------
Postretirement benefit liability 2,544 2,693
Unrecognized net loss (653) (289)
- -------------------------------------------------------------------------------------
POSTRETIREMENT BENEFIT LIABILITY RECOGNIZED
IN FINANCIAL STATEMENTS $ 1,891 $ 2,404
=====================================================================================
The weighted average discount rate used to determine the APBO at January 31,
1996 was 7% and 7.5% at February 1, 1997. The increase in the rate resulted in
an unrecognized gain of $111,000. The weighted average discount rate decreased
from 8.5% to 7.0% resulting in an unrecognized loss of $294,000 in Fiscal 1996.
The APBO was determined using an assumed annual increase in the health care cost
trend rate of 9.75% for Fiscal 1997. The trend rate is assumed to decrease
gradually to 5.0% by Fiscal 2013. A one percentage point increase in the assumed
health care cost trend rate would increase the APBO by approximately $200,000
and increase the aggregate of the service and interest cost components of net
periodic postretirement benefit expense for the fiscal year by approximately
$27,000.
53
54
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 15
STOCK OPTION PLANS
The Company's stock-based compensation plans, as of February 1, 1997, are
described below. The Company applies APB Opinion 25 and related Interpretations
in accounting for its plans. Accordingly, no compensation cost has been
recognized other than for its restricted stock options. The compensation cost
that has been charged against income for its restricted plans was $980,000 for
1997. The compensation cost that has been charged against shareholders' equity
for its directors' restricted stock plan was $35,000 and $30,000 for 1997 and
1996, respectively. Had compensation cost for all of the Company's stock-based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans consistent with the methodology prescribed by FAS
123, the Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below:
1997 1996
------- -------
Net Income As reported $10,404 $10,071
Pro forma 10,394 9,981
Primary EPS As reported $ 0.39 $ 0.40
Pro forma $ 0.39 $ 0.39
FIXED STOCK OPTIONS
The Company has three fixed option plans. Under the 1987 Stock Option Plan, the
Company may grant options to its management personnel for up to 2.2 million
shares of common stock. Under the 1996 Stock Incentive Plan, the Company may
grant options to its officers and other key employees of and consultants to the
Company for up to 1.2 million shares of common stock, which includes 100,000
shares reserved for issuance to outside directors. 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 vest 25% at the end of each year with the exception of shares
granted February 20, 1995 which vest 20% at the end of each year and the 100,000
shares granted to the chief executive officer under the 1987 Plan which vested
after one year.
With regard to the 100,000 shares reserved for issuance to outside directors, an
automatic grant of restricted stock will be given to outside directors on the
date of the annual meeting of shareholders at which an outside director is first
elected and on the date of every third annual meeting of shareholders of the
Company thereafter. The outside director restricted stock shall vest with
respect to one-third of the shares each year. Once the shares have vested, the
director is restricted from selling, transferring, pledging or assigning the
shares for an additional two years. There were 1,993 shares of restricted stock
issued to directors for Fiscal 1997.
54
55
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 15
STOCK OPTION PLANS, CONTINUED
Under the 1996 Stock Incentive Plan, shares of restricted stock may be issued
either alone, in addition to or in tandem with other awards granted under the
Plan and/or cash awards made outside the Plan. To encourage stock ownership by
key management employees, the Company has instituted a program allowing the
chief executive officer, eight other executive officers and two high-level
operating division employees to elect to receive part or all of their target
awards under the Fiscal 1997 plan in the form of nonqualified stock options. The
options were granted March 15, 1996. As of the grant date, the participants were
permitted to elect to relinquish irrevocably all or a portion of the target
award under the plan in exchange for a ten-year option to purchase shares of
common stock at the closing price of the stock on the grant date. The option is
to become exercisable one year from the date on which entitlement to the award
under the plan for Fiscal 1997 is determined by the Company. Compensation cost
charged against income for these options was $873,000 for Fiscal 1997.
The third fixed option plan is the executive stock option plan which granted
100,000 shares to the chief executive officer. The exercise price of these
shares is equal to the market price of the Company's stock on the date of grant,
the maximum term is 10 years and the options vested after six months.
The fair value of each option granted in the fixed with the following weighted
option plans described above is estimated on the date of grant using the
Black-Scholes option-pricing model -average assumptions used for grants in 1996
and 1997, respectively: expected volatility of 48 and 50 percent; risk-free
interest rates of 5.9 and 6.1 percent; and expected lives of six years for all
plans.
A summary of the status of the Company's fixed stock option plans as of February
1, 1997 and January 31, 1996 and 1995 and changes during the years ending on
those dates is presented below:
1997 1996 1995
---------------------------- ------------------------------ -----------------------------
SHARES WEIGHTED-AVERAGE SHARES WEIGHTED-AVERAGE SHARES WEIGHTED-AVERAGE
FIXED OPTIONS (000) EXERCISE PRICE (000) EXERCISE PRICE (000) EXERCISE PRICE
- ------------- ---------- ---------------- ---------- ---------------- ---------- ----------------
Outstanding at beginning of year 1,525,150 $3.35 1,431,475 $3.31 1,284,075 $6.35
Granted 1,346,883 6.48 245,000 3.47 1,191,875 2.36
Exercised (186,712) 3.44 (7,625) 2.91 (1,875) 3.38
Forfeited (69,150) 3.24 (143,700) 3.14 (1,042,600) 5.96
---------- ---------- ----------
Outstanding at end of year 2,616,171 4.96 1,525,150 3.35 1,431,475 3.31
========== ========== ==========
Options exercisable at year-end 970,571 784,772 425,225
Weighted-average fair value of
options granted during the year $ 3.58 $ 1.89 --
The following table summarizes information about fixed stock options outstanding
at February 1, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- ----------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 2/1/97 CONTRACTUAL LIFE EXERCISE PRICE AT 2/1/97 EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ------------ ----------------
$1.875 - 2.75 825,038 7.9 years $ 2.25 540,196 $2.32
3.375 - 5.00 1,218,133 8.6 4.54 260,000 3.80
5.50 - 7.75 128,500 6.2 7.07 70,375 6.87
9.00 - 11.00 444,500 8.9 10.55 100,000 9.00
--------- -------
$1.875 - 11.00 2,616,171 6.7 4.96 970,571 3.73
========= =======
55
56
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 15
STOCK OPTION PLANS, CONTINUED
RESTRICTED STOCK OPTIONS
On January 10, 1997, 200,000 shares of restricted stock with a zero exercise
price were granted to the chairman under the 1996 Stock Incentive Plan. The
stock price at the date of grant was $9 per share. The restrictions would lapse
for one third of the shares on January 31, 1998 if the chairman is employed by
the Company on that date. The restrictions would lapse for another one third of
the shares on January 31, 1999 if (1) the chairman remains on the board of the
Company and serves as chairman or in such other capacity as the board may
request through that date and (2) the Company's common stock trades at or above
$12.50 per share for 20 consecutive trading days during Fiscal 1999. The
restrictions would lapse for the last one third of the shares on January 31,
2000 if (1) the chairman remains on the board of the Company and serves as
chairman or in such other capacity as the board may request through that date
and (2) the Company's common stock trades at or above $15.00 per share for 20
consecutive trading days during Fiscal 2000. Compensation cost charged against
income for these options was $107,000 in Fiscal 1997.
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Stock Purchase Plan, the Company is authorized to issue up to
1.0 million shares of common stock to those full-time employees whose total
annual base salary is less than $100,000. Under the terms of the Plan, employees
can choose each year to have up to 15 percent of their annual base earnings
withheld to purchase the Company's common stock. The purchase price of the stock
is 85 percent of the closing market price of the stock on either the exercise
date or the grant date, whichever is less. Approximately 15 percent of eligible
employees have participated in the Plan in the last 2 years. Under the Plan, the
Company sold 4,284 shares and 161,329 shares to employees in 1996 and 1997,
respectively. Compensation cost is recognized for the fair value of the
employees' purchase rights, which was estimated using the Black-Scholes model
with the following assumptions for 1996 and 1997, respectively: an expected life
of 1 year for both years; expected volatility of 68 and 52 percent; and
risk-free interest rates of 5.7 percent for both years. The weighted-average
fair value of those purchase rights granted in 1996 and 1997 was $1.73 and
$3.26, respectively.
STOCK PURCHASE PLANS
Stock purchase accounts arising out of sales to employees prior to 1972 under
certain employee stock purchase plans amounted to $448,000 and $454,000 at
February 1, 1997 and January 31, 1996, respectively, and were secured at
February 1, 1997, by 21,112 employees' preferred shares and 325 common shares.
Payments on stock purchase accounts under the stock purchase plans have been
indefinitely deferred. No further sales under these plans are contemplated.
56
57
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 16
LEGAL PROCEEDINGS
New York State Environmental Proceedings
The Company is a defendant in two separate civil actions filed by the State of
New York; one against the City of Gloversville, New York, and 33 other private
defendants and the other against the City of Johnstown, New York, and 14 other
private defendants. In addition, third party complaints and cross claims have
been filed against numerous other entities, including the Company, in both
actions. These actions arise out of the alleged disposal of certain hazardous
material directly or indirectly in municipal landfills. The complaints allege
that the defendants, together with other contributors to the municipal
landfills, are liable under a federal environmental statute and certain common
law theories for the costs of investigating and performing remedial actions
required to be taken with respect to the landfills and damages to the natural
resources.
In March 1997, the Company accepted an offer to settle the Johnstown action for
a payment of $31,000 and is now awaiting entry of an acceptable consent order
and dismissal of that action. The Company remains a defendant in the
Gloversville action. The environmental authorities have issued decisions
selecting plans of remediation with respect to the Gloversville site with a
total estimated cost of approximately $10.0 million.
The Company has filed answers to the complaint in the Gloversville case denying
liability and asserting numerous defenses. Because of uncertainties related to
the ability or willingness of the other defendants, including the municipalities
involved, to pay a portion of future remediation costs, the availability of
State funding to pay a portion of future remediation costs, the insurance
coverage available to the various defendants, the applicability of joint and
several liability and the basis for contribution claims among the defendants,
management is presently unable to predict the outcome or to estimate the extent
of liability the Company may incur with respect to the Gloversville action.
57
58
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 16
LEGAL PROCEEDINGS, CONTINUED
The Company has received notice from the New York State Department of
Environmental Conservation (the "Department") that it deems remedial action to
be necessary with respect to certain contaminants in the vicinity of a knitting
mill operated by a former subsidiary of the Company from 1965 to 1969, and that
it considers the Company a potentially responsible party. The Department and the
Company have discussed a consent order whereby the Company would assume
responsibility for conducting a remedial investigation and feasibility study
("RIFS") and implementing an interim remediation measure with regard to the
site, without admitting liability or accepting responsibility for any future
remediation of the site. The Company believes that it has adequately reserved
for the costs of conducting the RIFS and implementing the interim remedial
measure contemplated by the proposed consent order, but there is no assurance
that it will be able to enter into an acceptable consent order along the lines
proposed, or that such a consent order would ultimately resolve the matter. The
owner of the site has advised the Company that it intends to hold the Company
responsible for any required remediation or other damages incident to the
contamination. The Company has not ascertained what responsibility, if any, it
has for any contamination in connection with the facility or what other parties
may be liable in that connection and is unable to predict whether its liability,
if any, will have a material effect on its financial condition or results of
operations.
Whitehall Environmental Sampling
The Michigan Department of Environmental Quality ("MDEQ") has performed sampling
and analysis of soil, sediments, surface water, groundwater and waste management
areas at the Company's Volunteer Leather Company facility in Whitehall,
Michigan. MDEQ advised the Company that it would review the results of the
analysis for possible referral to the EPA for action under the Comprehensive
Environmental Response Compensation and Liability Act. However, the Company is
cooperating with MDEQ and has been advised by MDEQ that no EPA referral is
presently contemplated. Neither MDEQ nor the EPA has threatened or commenced any
enforcement action. In response to the testing data, the Company submitted and
MDEQ approved a work plan, pursuant to which a hydrogeological study was
completed and submitted to MDEQ in March 1996. Additional studies regarding
wastes on-site, groundwater and adjoining lake sediments have been performed and
will serve as a basis for the Company's remedial action plan for the site. The
Company is presently unable to determine whether the implementation of the plan
will have a material effect on its financial condition or results of operations.
58
59
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 16
LEGAL PROCEEDINGS, CONTINUED
Preferred Shareholder Action
On January 7, 1993, 23 former holders of the Company's series 2, 3 and 4
subordinated serial preferred stock filed a civil action against the Company and
certain officers in the United States District Court for the Southern District
of New York. The plaintiffs allege that the defendants misrepresented and failed
to disclose material facts to representatives of the plaintiffs in connection
with exchange offers which were made by the Company to the plaintiffs and other
holders of the Company's series 1, 2, 3 and 4 subordinated serial preferred
stock from June 23, 1988 to August 1, 1988. The plaintiffs contend that had they
been aware of the misrepresentations and omissions, they would not have agreed
to exchange their shares pursuant to the exchange offers. The plaintiffs allege
breach of fiduciary duty and fraudulent and negligent misrepresentations and
seek damages in excess of $10 million, costs, attorneys' fees, interest and
punitive damages in an unspecified amount.
By order dated December 2, 1993, the U.S. District Court denied a motion for
judgment on the pleadings filed on behalf of all defendants. On July 6, 1994,
the court denied a motion for partial summary judgment filed on behalf of the
plaintiffs. On September 6, 1996, the court granted the defendants' motion for
summary judgment regarding certain alleged misrepresentations by one of the
Company's officers and the plaintiffs' motion regarding the existence and breach
of fiduciary duties owed by the Company to the plaintiffs. The court's order
stated that the plaintiffs must show that the breach caused damages to be
entitled to a recovery on that count. It denied the defendants' and plaintiffs'
motions for summary judgment in other respects.
In April 1997, the parties to the litigation entered into a settlement agreement
providing for the issuance of shares of the Company's common stock to the
plaintiffs in exchange for dismissal of the lawsuit and the execution of mutual
general releases by the parties. In addition to a cash payment which the
Company's directors and officers liability insurance carrier has agreed to
contribute to the settlement, the Company expects to issue shares of stock
sufficient to yield net proceeds of $6.7 million to the plaintiffs in a block
trade to occur immediately upon the issuance. The $6.7 million settlement was
reflected in earnings in the fourth quarter of Fiscal 1997 and a liability at
February 1, 1997. In addition, the portion of the settlement to be paid by the
Company's directors and officers liability insurance carrier was reflected as a
liability and a receivable at February 1, 1997.
Texas Interference Action
On October 6, 1995, a prior holder of a license to manufacture and market
western boots and other products under a trademark now licensed to the Company
filed an action in the District Court of Dallas County, Texas against the
Company and a contract manufacturer alleging tortious interference with a
business relationship, breach of contract, tortious interference with a
contract, breach of a confidential relationship and civil conspiracy based on
the Company's entry into the license. The Company filed an answer denying all
the material allegations of the plaintiff's complaint. The Company is unable to
predict whether the outcome of the litigation will have a material effect on its
financial condition or results of operations.
59
60
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 17
BUSINESS SEGMENT INFORMATION
- ---------------------------------------------------------------------------------
IN THOUSANDS 1997 1996 1995
- ---------------------------------------------------------------------------------
SALES TO UNAFFILIATED CUSTOMERS:
Footwear (shoes and accessories):
Retail $ 283,546 $ 243,303 $ 234,448
Wholesale and manufacturing 177,802 191,272 228,453
- ---------------------------------------------------------------------------------
TOTAL SALES $ 461,348 $ 434,575 $ 462,901
=================================================================================
PRETAX EARNINGS (LOSS):
Footwear (shoes and accessories):
Retail $ 26,519 $ 17,881(2) $ 16,925(4)
% of applicable sales 9.4% 7.3% 7.2%
Wholesale and manufacturing 8,108(1) (1,754)(3) (13,446)(4)
% of applicable sales 4.6% (0.9)% (5.9)%
- ---------------------------------------------------------------------------------
Operating income 34,627 16,127 3,479
% of total sales 7.5% 3.7% 0.8%
Corporate expenses:
Interest expense (8,741) (9,645) (11,955)
Litigation settlement (6,700) -0- -0-
Other corporate expenses (9,054) (10,238) (14,181)(4)
Gain on divestiture -0- -0- 4,900
- ---------------------------------------------------------------------------------
TOTAL PRETAX EARNINGS (LOSS) $ 10,132 $ (3,756) $ (17,757)
% OF TOTAL SALES 2.2% (0.9)% (3.8)%
=================================================================================
(1) Includes a restructuring charge in Fiscal 1997 of $1.7 million.
(2) Includes an asset impairment loss of $978,000.
(3) Includes a restructuring charge in Fiscal 1996 of $14.1 million.
(4) Includes a restructuring charge in Fiscal 1995 as follows: Footwear Retail
$236,000, Footwear Wholesale and Manufacturing $20.6 million and Corporate
$1.3 million.
60
61
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 17
BUSINESS SEGMENT INFORMATION, CONTINUED
- --------------------------------------------------------------------------------
IN THOUSANDS 1997 1996 1995
- --------------------------------------------------------------------------------
ASSETS:
Footwear:
Retail $ 78,721 $ 67,482 $ 69,287
Wholesale and manufacturing 79,424 74,290 115,601
- --------------------------------------------------------------------------------
Total footwear 158,145 141,772 184,888
Men's apparel -0- -0- 28,984
Corporate assets 63,509 56,034 30,006
- --------------------------------------------------------------------------------
TOTAL ASSETS $221,654 $197,806 $243,878
================================================================================
DEPRECIATION AND AMORTIZATION:
Footwear:
Retail $ 4,811 $ 4,755 $ 4,735
Wholesale and manufacturing 1,866 1,691 2,759
- --------------------------------------------------------------------------------
Total footwear 6,677 6,446 7,494
Men's apparel -0- -0- 1,305
Corporate 1,070 908 455
- --------------------------------------------------------------------------------
TOTAL DEPRECIATION AND AMORTIZATION $ 7,747 $ 7,354 $ 9,254
================================================================================
ADDITIONS TO PLANT, EQUIPMENT
AND CAPITAL LEASES:
Footwear:
Retail $ 11,151 $ 4,364 $ 3,181
Wholesale and manufacturing 2,948 2,514 2,129
- --------------------------------------------------------------------------------
Total footwear 14,099 6,878 5,310
Men's apparel -0- 9 198
Corporate 541 1,677 242
- --------------------------------------------------------------------------------
TOTAL ADDITIONS TO PLANT, EQUIPMENT
AND CAPITAL LEASES $ 14,640 $ 8,564 $ 5,750
================================================================================
61
62
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 18
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1ST QUARTER 2ND QUARTER 3RD QUARTER
--------------------- --------------------- ------------------------
IN THOUSANDS 1997 1996 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 100,219 $ 93,225 $ 102,955 $ 109,600 $ 124,109 $111,994
Gross margin 40,588 35,537 40,813 42,499 51,188 45,292
Pretax earnings (loss) 501 (13,322)(1) 2,101 (1,179)(3) 5,993 (5) 4,238(6)
Earnings (loss) before
discontinued operations 966 (13,331) 2,073 (1,185) 5,903 4,231
Net earnings (loss) 966 (678)(2) 2,073 514 (4) 5,903 4,231
Earnings (loss) per common share:
Before discontinued operations .04 (.55) .08 (.05) .23 .17
Net earnings (loss) .04 (.03) .08 .02 .23 .17
=======================================================================================================================
4TH QUARTER FISCAL YEAR
------------------------ ---------------------
IN THOUSANDS 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------
Net sales $ 134,065 $ 119,756 $ 461,348 $ 434,575
Gross margin 54,486 49,504 187,075 172,832
Pretax earnings (loss) 1,387(7) 6,507(8) 10,132 (3,756)
Earnings (loss) before
discontinued operations 1,462 6,504 10,554 (3,781)
Net earnings (loss) 1,462 6,004 10,404 10,071
Earnings (loss) per common share:
Before discontinued operations .05 .26 .40 (.17)
Net earnings (loss) .05 .24 .39 .40
========================================================================================
(1) Includes a restructuring charge of $14.1 million (see Note 2).
(2) Includes excess provision for discontinued operations of $12.7 million (see
Note 2).
(3) Includes a restructuring charge of $2.2 million (see Note 2).
(4) Includes excess provision for discontinued operations of $1.7 million (see
Note 2).
(5) Includes a restructuring charge of $1.7 million (see Note 2).
(6) Includes a restructuring credit of $1.2 million and a $978,000 charge for
impaired assets (see Note 2).
(7) Includes a litigation settlement charge of $6.7 million (see Note 16).
(8) Includes a restructuring credit of $1.0 million (see Note 2).
62
63
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 19
FINANCIAL RESTATEMENT
The financial statements for Fiscal 1997 have been restated to reflect a $6.7
million litigation settlement more fully described under Preferred Shareholder
Action in Note 16. The impact of the restatement is to reduce earnings before
income taxes and discontinued operations from $16.7 million to $10.1 million and
net earnings from $17.1 million to $10.4 million.
The impact of the restatement reduces primary earnings per share on earnings
before income taxes and discontinued operations from $0.66 to $0.40 and net
earnings per share from $0.66 to $0.39. The impact of the restatement reduces
fully-diluted earnings per share on earnings before income taxes and
discontinued operations from $0.65 to $0.40 and net earnings per share from
$0.65 to $0.39.
63
64
ITEM 9, CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10, DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company incorporates by reference the (i) information regarding directors of
the Company appearing under the heading "Information Concerning Nominees" to be
included in the Company's proxy statement relating to the annual meeting of
shareholders scheduled for June 25, 1997 (the "Proxy Statement") and (ii)
information regarding compliance by persons subject to Section 16(a) of the
Securities Exchange Act of 1934 appearing under the heading "Compliance with
Beneficial Ownership Reporting Rules" to be included in the Proxy Statement.
Information regarding the executive officers of the Company appears under the
heading "Executive Officers of Genesco" in this report following Item 4 of Part
I.
ITEM 11, EXECUTIVE COMPENSATION
The Company incorporates by reference the (i) information regarding the
compensation of directors of the Company to appear under the heading "Director
Compensation" in the Proxy Statement and (ii) information regarding the
compensation of the Company's executive officers to appear under the heading
"Executive Compensation" in the Proxy Statement.
ITEM 12, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding beneficial ownership of the Company's voting securities by
(i) the Company's directors, (ii) certain executive officers and (iii) the
officers and directors of the Company as a group is incorporated by reference to
the Proxy Statement.
The following information regarding beneficial ownership on March 31, 1997
(except as indicated) of the Company's voting securities is furnished with
respect to each person or group of persons acting together who, as of such date,
was known by the Company to be the beneficial owner of more than five percent of
any class of the Company's voting securities. Beneficial ownership of the shares
consists of sole voting and investment power except as otherwise noted.
CLASS OF NO. OF PERCENT OF
NAME AND ADDRESS STOCK* SHARES CLASS
- ---------------- -------- ----- ----------
Pioneering Management Corporation Common 1,654,000(1) 6.6
60 State Street
Boston, MA 02109
64
65
CLASS OF NO. OF PERCENT OF
NAME AND ADDRESS STOCK* SHARES CLASS
- ---------------- -------- ------ ----------
Jeannie Bussetti Series 1 3,000 8.1
12 Carteret Drive
Pomona, NY 10970
Joseph Bussetti Series 1 2,000 5.4
52 South Lilburn Drive
Garnerville, NY 10923
Ronald R. Bussetti Series 1 2,000 5.4
12 Carteret Drive
Pomona, NY 10970
S. Robert Weltz, Jr. Series 1 2,308 6.2
415 Hot Springs Road
Santa Barbara, CA 93108
Estate of Hyman Fuhrman, Deceased Series 3 1,081 5.6
c/o Sylvia Fuhrman
3801 South Ocean Drive
Hollywood, FL 33020
Clinton Grossman Series 3 1,965(2) 10.1
3200 Park Avenue
Apt. 7A-1
Bridgeport, CT 06604
Hazel Grossman Series 3 1,074 5.5
30 Argyle Ave., Apt. 209
Riverside, RI 02915
Roselyn Grossman Series 3 1,965(2) 10.1
3200 Park Avenue
Apt. 7A-1
Bridgeport, CT 06604
65
66
CLASS OF NO. OF PERCENT OF
NAME AND ADDRESS STOCK* SHARES CLASS
- ---------------- -------- ------ ----------
Stanley Grossman Series 3 1,965(2) 10.1
3200 Park Avenue
Apt. 7A-1
Bridgeport, CT 06604
Michael Miller, Trustee Series 4 5,605 34.2
Under Will of David Evins
c/o Bloom Hochberg & Co., Inc.
450 7th Avenue
New York, NY 10123
Mathew Evins Series 4 2,571 15.7
c/o Evins Communications Ltd.
635 Madison Ave.
New York, NY 10022
Melissa Evins Series 4 2,893 17.6
417 East 57th Street
New York, NY 10022
Reed Evins Series 4 2,418 14.7
417 East 57th Street
Apt. 32B
New York, NY 10022
James H. Cheek, Jr. Subordinated 2,413 8.0
221 Evelyn Avenue Cumulative
Nashville, TN 37205 Preferred
- --------------------
* See Note 11 to the Consolidated Financial Statements included in Item 8 and
under the heading "Voting Securities" included in the Company's Proxy Statement
for a more complete description of each class of stock.
(1) This information is from an Amendment to Schedule 13G dated January 22,
1997.
(2) Owned by a trust of which Roselyn Grossman, Stanley Grossman and Clinton
Grossman are trustees.
ITEM 13, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company incorporates by reference information appearing under the heading
"Certain Relationships and Related Transactions" included in the Company's Proxy
Statement.
66
67
PART IV
ITEM 14, EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
The following are included in Item 8.
Report of Independent Accountants
Consolidated Balance Sheet, February 1, 1997 and January 31, 1996
Consolidated Earnings, each of the three fiscal years ended 1997, 1996 and 1995
Consolidated Cash Flows, each of the three fiscal years ended 1997, 1996 and
1995
Consolidated Shareholders' Equity, each of the three fiscal years ended 1997,
1996 and 1995
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES
II -Reserves, each of the three fiscal years ended 1997, 1996 and 1995
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 72.
EXHIBITS
(3) a. By-laws of Genesco Inc. Incorporated by reference to Exhibit
(3)a to the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1995.
b. Restated Charter of Genesco Inc. Incorporated by reference to
Exhibit (3)b to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1993.
(4) Indenture dated as of February 1, 1993 between the Company and United
States Trust Company of New York relating to 10 3/8% Senior Notes due
2003. Incorporated by reference to Exhibit (4) to the Company's
Annual Report on Form 10-K for the fiscal year ended January 31,
1993.
(10) a. Form of Split-Dollar Insurance Agreement with Executive
Officers.
b. Key Executives Stock Option Plan and Form of Stock Option
Agreement. Incorporated by reference to Exhibit (10)c to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1993.
c. Form of Officers and Key Executives Change-in-Control Employment
Agreement. Incorporated by reference to Exhibit (10)d to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1993.
d. 1987 Stock Option Plan and Form of Stock Option Agreement.
Incorporated by reference to Exhibit (10)e to the Company's
Annual Report on Form 10-K for the fiscal year ended January 31,
1993.
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68
e. 1996 Stock Incentive Plan. Incorporated by reference to
Registration Statement on Form S-8 filed July 19, 1996 (File No.
33-08463).
f. Description of Adjustable Life Insurance Plan for Key Executive
Officers. Incorporated by reference to pages 23-24 under the
heading "Executive Compensation Life and Medical Insurance
Plans" in the Company's proxy statement dated May 6, 1992.
g. 1997 Management Incentive Compensation Plan. Incorporated by
reference to Exhibit (10)g to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1996.
h. 1998 Management Incentive Compensation Plan.
i. Other Executive Officer Personal Benefits. Incorporated by
reference to pages 10-17 under the heading "Executive
Compensation" in the Company's proxy statement dated May 6,
1992.
j. Restricted Stock Plan For Directors. Incorporated by reference
to Exhibit (10)k to the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1992.
k. 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.
l. Loan Agreement dated as of January 5, 1996 among the Company and
NationsBank of North Carolina, N.A. and First National Bank of
Chicago. Incorporated by reference to Exhibit (10)k to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1996. First Amendment to Loan Agreement dated as of
October 31, 1996. Incorporated by reference to Exhibit (10) k to
the Company's Quarterly Report of Form 10-Q for the quarter
ended October 31, 1996.
m. 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 of Form 10-K for the fiscal year ended
January 31, 1993.
n. 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 of Form 10-K for the fiscal year ended January 31,
1993.
o. Shareholder Rights Agreement dated as of August 8, 1990 between
the Company and Chicago Trust Company of New York. First
Amendment to the Rights Agreement dated as of August 8, 1990.
Incorporated by reference to Registration Statement on Form 8-A
filed August 15, 1990 (File No. 1-3083).
p. Form of Employment Protection Agreement between the Company and
certain executive officers dated as of February 26, 1997.
q. Nonqualified Stock Option Agreement as amended and restated
through December 21, 1994 between the Company and David M.
Chamberlain. Incorporated by reference to Exhibit (10)x to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1995.
r. Nonqualified Stock Option Agreement dated as of December 21,
1994 between the Company and David M. Chamberlain. Incorporated
by reference to Exhibit (10)y to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1995.
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69
(11) Computation of earnings per share.
(21) Subsidiaries of the Company.
(23) Consent of Independent Accountants included on page 70.
(24) Power of Attorney.
(27) Financial Data Schedule
(99) Financial Statements and Report of Independent Accountants with
respect to the Genesco Employee Stock Purchase Plan being filed
herein in lieu of filing Form 11-K pursuant to Rule 15d-21.
Exhibits (10)a through (10)k and (10)p through (10)r are Management Contracts or
Compensatory Plans or Arrangements required to be filed as Exhibits to this Form
10-K.
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.
REPORTS ON FORM 8-K
None.
69
70
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 2-86509 and
33-52858) and the Registration Statements on Form S-8 (Nos. 2-61487, 2-70824,
33-15835, 33-30828, 33-35329, 33-50248, 33-62653 and 33-08463) of Genesco Inc.
of our report dated February 25, 1997, except as to Note 19 which is as of
October 31, 1997, appearing on page 28 of this Form 10-K/A. We also consent to
the incorporation by reference in the Registration Statement on Form S-8 (No.
33-62653) of Genesco Inc. of our report dated April 10, 1997 appearing on page 1
of the January 31, 1997 Genesco Employee Stock Purchase Plan Financial
Statements.
/s/ PRICE WATERHOUSE LLP
Nashville, Tennessee
November 6, 1997
70
71
SIGNATURES
Pursuant to the requirements of Section 13 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. Gulmi
----------------------------------------
James S. Gulmi
Senior Vice President - Finance
Date: November 6, 1997
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 sixth day of November, 1997.
/s/ Ben T. Harris President and Chief Executive Officer
- ------------------------------ and a Director
Ben T. Harris
/s/ James S. Gulmi Senior Vice President - Finance
- ------------------------------ (Principal Financial Officer)
James S. Gulmi
/s/ Paul D. Williams Chief Accounting Officer
- ------------------------------
Paul D. Williams
Directors:
David M. Chamberlain* Kathleen Mason*
W. Lipscomb Davis, Jr.* William A. Williamson, Jr.*
John Diebold* William S. Wire, II*
Harry D. Garber* Gary M. Witkin*
Joel C. Gordon*
*By /s/ Roger G. Sisson
-----------------------
Roger G. Sisson
Attorney-In-Fact
71