Grupo Catalana Occidente
Annual Report 2009

Plain-text annual report

T h e B u s i n e s s o f G e n e s c o Founded in 1924, Nashville, Tennessee-based Genesco Inc. (NYSE: GCO) is a leading retailer of branded footwear, of licensed and branded headwear, of licensed sports apparel and accessories and wholesaler of branded footwear. It operates more than 2,275 footwear, headwear and sports apparel and accessory retail stores in the United States, Puerto Rico and Canada, principally under the names Journeys,® Journeys Kidz,® Shi by Journeys,™ Johnston & Murphy,® Underground Station,® Hat World,® Lids,® Hat Shack,® Hat Zone,® Head Quarters, Cap Connection,™ Lids Locker Room and Sports Fan-Attic.® Genesco also designs, sources, markets and distributes footwear under its own Johnston & Murphy brand and under the licensed Dockers® brand. Genesco relies on independent third party manufacturers for production of its footwear products sold at wholesale. Table of Contents Business of Genesco ......................................................................................................... 1 Financial Highlights ........................................................................................................... 2 Securities Information ........................................................................................................ 2 Total Return to Shareholders ............................................................................................. 3 Shareholders’ Message .................................................................................................... 4 Brand Profiles .................................................................................................................... 6 Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................................................................ 20 Financial Summary ......................................................................................................... 39 Management’s Responsibility for Financial Statements .................................................... 40 Report of Independent Registered Public Accounting Firm ............................................... 41 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting ..................................................................... 42 Consolidated Balance Sheets .......................................................................................... 43 Consolidated Statements of Operations ........................................................................... 44 Consolidated Statements of Cash Flows .......................................................................... 45 Consolidated Statements of Shareholders’ Equity ............................................................ 46 Notes to Consolidated Financial Statements .................................................................... 47 Corporate Information ...................................................................................................... 85 Board of Directors ........................................................................................................... 86 Corporate Officers ........................................................................................................... 86 Genesco’s Retail Network ................................................................................................ 87 This annual report contains certain forward-looking statements. Actual results could be materially different. For discussion of some of the factors that could adversely affect future results, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the material under the caption “Risk Factors” in the Company’s annual report on form 10-K for Fiscal 2010 filed with the Securities and Exchange Commission. 1 f i n a n c i a l h i G h l i G h T s For THe FISCAL YeAr: Net Sales Earnings From Continuing Operations Net Earnings Diluted Earnings Per Common Share From Continuing Operations Diluted Net Earnings Per Share AT YeAr end: Working Capital Long-Term Debt Shareholders’ Equity Shares Outstanding Book Value Per Share Approximate Number of Common Shareholders of Record 2010 2009 % CHANGE $ 1,574,352,000 $ 1,551,562,000 $ $ $ $ 29,086,000 28,813,000 1.31 1.30 $ 280,415,000 $ -0- $ 582,313,000 24,074,000 $ 23.97 3,400 $ $ $ $ $ $ $ $ 156,219,000 150,756,000 6.72 6.49 259,137,000 113,735,000 449,755,000 19,244,000 23.10 4,700 1 % (81)% (81)% (81)% (80)% 8 % (100)% 29 % 25 % 4 % s e c u r i T i e s i n f o r m aT i o n C O M M O N S T O C K : N E W Y O R K A N D C H I C A G O S T O C K E x C H A N G E S Quarter ended May 2 Quarter ended August 1 Quarter ended October 31 Quarter ended January 30 Approximate number of common shareholders of record: 3,400 Fiscal 2010 Fiscal 2009 Fiscal 2008 High 23.26 26.51 29.69 29.71 Low 11.31 17.51 19.73 23.11 High 33.50 31.91 38.74 25.08 Low 18.76 20.33 18.99 10.37 High 51.30 54.15 52.06 45.67 Low 34.57 47.09 41.00 24.98 CREDITS: RETAIL PHOTOS: ©CHun Y. LAI. ALL RIgHTS RESERvED. PERmISSIOn IS REquIRED fOR AnY OTHER REPRODuCTIOn OR DISTRIbuTIOn. LIfESTYLE AnD PRODuCT SHOTS PROvIDED bY gEnESCO OPERATIng DIvISIOnS. PAgE 4 PHOTO: DAnA THOmAS 2 T o Ta l r e T u r n T o s h a r e h o l d e r s INCLUDES REINVESTMENT OF DIVIDENDS The graph below compares the cumulative total shareholder return on the Company’s common stock for the last five fiscal years with the cumulative total return of (i) the S&P 500 Index and (ii) the S&P 1500 Footwear Index. The graph assumes the investment of $100 in the Company’s common stock, the S&P 500 Index and the S&P 1500 Footwear Index at the market close on January 31, 2005 and the reinvestment monthly of all dividends. c o m pa r i s o n o f 5 Y e a r c u m u l aT i v e T o Ta l r e T u r n 3 5 0 3 0 0 2 5 0 2 0 0 15 0 10 0 5 0 0 FYe 05 GENESCO INC. S&P 500 INDEx S&P 1500 FOOTWEAR INDEx FYe 06 FYe 07 FYe 08 FYe 09 FYe 10 Genesco Inc. S&P 500 Index S&P 1500 Footwear Index* Base Period FYe 05 $ 100.00 100.00 100.00 Index returns Years ended FYe 06 $ 136.17 111.63 104.25 FYe 07 $ 144.89 128.37 130.20 FYe 08 $ 118.72 126.05 151.79 FYe 09 $ 60.48 76.43 96.25 FYe 10 $ 92.61 101.76 143.66 * The S&P 1500 Footwear Index consists of Crocs Inc., Deckers Outdoor Corp., Iconix Brand Group, Inc., K-Swiss Inc., Nike Inc., Skechers U.S.A. Inc., Timberland Co. and Wolverine World Wide. 3 S H A r e H o L d e r S ’ M e S S A g e To our shareholders: We started Fiscal 2010 aware of the challenges inherent in one of the sharpest and most protracted economic downturns in memory. But we were also convinced that such an economic climate presented genuine opportunities for a healthy company like ours, and we resolved to make the most of them. THe YeAr While our sales reflected generally weak demand, we were pleased with the results we were able to produce through prudent management. Our divisional operators managed their businesses with tremendous skill, keeping inventories and expenses under control and using their slower rate of growth to generate cash. bOb DE n n IS We ended the year in a strong financial position, much improved from where we began. First, we induced the conversion of more than $86 million of convertible notes into equity. Second, through tight control of working capital and an appropriate reduction in capital expenditures, we were able to completely pay down our revolving credit balance. As a result, we ended the year with $82 million in cash and, for the first time in decades, no debt on the balance sheet. In addition to strengthening the balance sheet, careful management of expenses across the Company and improvements in gross margin in many of our businesses produced earnings in excess of both our plans and external expectations for the year. Reflecting our belief that the business climate represented a “glass half full,” we focused on improving our longer term prospects. We reacted to the economic fallout by closing some of our worst performing stores, negotiating lower rents in others, and improving our internal processes to lower store construction costs, which will reduce future depreciation expense. We have learned lessons in this process that should help us to operate more efficiently even when the economy fully recovers. THe FuTure Looking forward, we plan to continue building on three fundamental strategic principles. First, we believe that our defining strength is operating niche consumer businesses that are difficult for others to replicate. We believe our existing businesses meet this test, and we look to continue to grow them wherever possible. We are focused, Company-wide, on efforts to improve our operating margin, which has come in around 5% for the past three years. Given the power of the niche positioning of our businesses, we believe we should be able to achieve operating margins at least in the historical range of 8% to 9% as the economic recovery progresses and we build on the strategic and operational improvements we have made. Second, we continue to look for opportunities that leverage our existing, carefully targeted central support structure and that complement or extend the reach of our existing businesses. Even as we test new geographic markets, we recognize that we can no longer depend on rolling out more and more Journeys and Lids stores as our prime source of longer-term growth. As an example of how we seek to supplement our organic growth, our division formerly known as Hat World has enjoyed particular success, both in acquiring regional chains to enhance the coverage of the original retail hat business of its Lids stores and also in adding compatible lines of business, such as the team dealer operation now known as Lids Team Sports and the chain of retail fan shops now called Lids Locker Room. We have renamed the division “Lids Sports” 4 to reflect the new strategic position that these additions have given it. Our goal is to have sports-oriented customers think of Lids as a primary resource, whether they are thinking of the teams they play for or the teams they root for. We continue actively to pursue opportunities to grow each of the three major components of this division through acquisitions. Additionally, we are open to similar opportunities for the Journeys Group, Johnston & Murphy Group, and Licensed Brands to acquire businesses that complement their existing operations or leverage their skill sets. As our third and final strategic principle, we intend to maintain an entrepreneurial environment where growth-oriented leaders and their businesses can thrive. We achieve this by driving down responsibility and accountability into our divisions and rewarding these operating business units using EVA-based performance measures. We seek to encourage responsible entrepreneurship in our operations by offering an uncapped annual incentive based upon improving profits and asset utilization, with appropriate “banking” and recapture provisions in case of deterioration in subsequent years, to discourage excessive risk taking and an overly short-term focus. With this overall approach, we attract and retain talented managers willing to “bet on themselves.” A large measure of our success during Fiscal 2010 is a reflection of the Company’s outstanding management team, whose talent, experience, and commitment are unparalleled. I salute the entire team, and am fortunate to have them as colleagues. Finally, I want to recognize our retiring chairman, Hal Pennington. The current strength of Genesco, which has become even more evident in the past year, bears witness to Hal’s focus as CEO on improving the Company’s strategic position. Most important, Hal’s integrity and character and his commitment to Genesco throughout his more than 48 years with the Company have made him a model of leadership and have left a permanent imprint on Genesco’s special culture. I am honored to follow him as Genesco’s chairman and look forward to continuing to draw on his experience and insight in the year ahead. We enter Fiscal 2011 with good momentum, well positioned to capitalize on what we hope is an improving economy. I am confident that our leadership team and employees are united in their commitment in building on the foundation we laid in Fiscal 2010. I look forward to reporting to you on our progress. Robert J. Dennis Chairman, President and Chief Executive Officer Genesco Inc. EVA® Genesco has been an EVA company since 1999. EVA advances the analysis of operating performance one step beyond profitability by taking efficiency in capital usage into account. Essentially, EVA recognizes that companies create the most wealth for their shareholders by making the greatest possible profit with the fewest possible net assets. In fiscal 2010 we did not exceed our annual EVA improvement goal. Because everyone at Genesco recognizes the link between EVA improvement, shareholders wealth creation (and, not insignificantly, our own incentive compensation), we are committed to continue growing earnings while tightly managing assets, to meet or exceed our EVA improvement goals. EVA is a registered trademark of Stern Stewart & Co 5 6 Hat World, Inc. is comprised of three businesses – the LIDS retail headwear stores, the LIDS Locker Room specialty fan retail chain, and the LIDS Team Sports wholesale team sports business. Operating out of Indianapolis, Indiana, the two retail businesses make up more than 900 mall-based, airport, street level and factory outlet locations nationwide, and in Canada and Puerto Rico. LIDS retail stores offer officially-licensed and branded college, major professional sports teams, as well as other specialty fashion categories all in the latest styles and colors. The company also operates smaller headwear retail brands Hat World and Hat Shack. LIDS Locker Room is a mall-based retailer of sports headwear, apparel, accessories, and novelties, and also operates Sports Fan-Attic stores. Most LIDS and LIDS Locker Room stores also offer custom embroidery capability. In addition, licensed LIDS stores operate in Hong Kong and China. LIDS Team Sports is a full-service team uniform and apparel dealer, custom screen printer, embroidery and sporting goods distributor. Hat World, Inc. also operates Internet sites www.lids.com, www.lids.ca and www.lidsteamsports.com. 7 8 Journeys is a leader in the teen specialty retail scene, with 819 stores in all 50 states, Puerto Rico, U.S. Virgin Islands and most recently Canada. Journeys uses fashion savvy and merchandising science to keep in step with the fast-paced footwear and accessories market for 13- to 22-year-old guys and girls. Journeys offers a wide variety of trendy, relevant brands that cater to teens who seek the hottest, new styles. The Journeys store is more than a retail environment; it’s an extension of the teen lifestyle. From the plasma TVs playing exclusive content and the latest music videos, to our visual merchandising strategy and promotions, to our employees whose image and style reflect our customers’ lifestyle and attitude; the Journeys store is designed to stay relevant and engage our core customer. In addition, Journeys reaches its customers through www.journeys.com, a mobile website, catalog, national advertising, strategic cross-promotions, social media – facebook.com/journeys, twitter.com/journeysshoes, youtube.com/journeysshoes, and an annual music and action sports tour – the Journeys Backyard BBQ (journeysbbq.com). Journeys – An Attitude You Can Wear! 9 Launched in 2001 as an extension of the highly successful Journeys footwear retail concept, Journeys Kidz is a unique branded kids’ footwear retailer, targeting customers 5 to 12 years old with trendy footwear styles and accessories. Whether it’s the skateboard-style footwear display, the Playstation terminals, or the TVs playing cartoons and music, Journeys Kidz has a visually exciting atmosphere that is both fun for kids and functional for parents. In addition to 150 stores, Journeys Kidz reaches its customers through www.journeyskidz.com, catalog, mobile website, brand promotions, consumer contests and strategic partnerships. 10 11 Shi by Journeys is a brand extension from the Company’s successful Journeys division. Shi by Journeys caters to fashionable women from their early 20s to mid 30s, and is designed to continue to serve the Journeys female customer as she matures and her fashion tastes evolve. With 56 stores across the United States, this specialty store features fashionable branded and private label footwear and accessories relevant to the lifestyle of its trendy customer. Shi by Journeys reaches its customers through www.shibyjourneys.com, national advertising, a mobile website and a direct mail catalog. 12 13 14 Underground Station is a mall-based specialty retail concept with 170 stores located across the United States. Underground Station services the footwear and accessory needs of young men and women ages 20–35 who are culturally diverse, fashion conscious and lead a lifestyle influenced by trendy, street fashion. In addition to stores that are designed to reflect the core consumer’s lifestyle, Underground Station reaches its target market through undergroundstation.com, facebook.com/undergroundstation, a seasonal product newsletter and strategic endemic and non-endemic cross promotions. 15 16 Craftsmanship, innovation and style are the hallmarks of the Johnston & Murphy brand. Johnston & Murphy continues to appeal to successful, affluent men with a broad array of footwear, apparel, luggage, leather goods and accessories. In addition, Johnston & Murphy continues to expand its collection of women’s footwear, handbags, outerwear and accessories designed to appeal to stylish, affluent women. At Johnston & Murphy, world-class service is the defining element of the shopping experience, combining a warm and inviting store environment with a commitment to understand the needs of our consumers and continually exceed their expectations in both product and service. The brand strives to position itself in stores in better malls and airports across America. The brand also sells merchandise and promotes its stores through a direct mail catalog, the internet at www.johnstonmurphy.com and through premier specialty and department stores nationwide as well as internationally. 17 The Licensed Brands division is composed primarily of footwear marketed under the Dockers Footwear name, for which Genesco has had the exclusive men’s footwear license in the U.S. since 1991. Designed with an emphasis on style and performance, Dockers Footwear has become a leader in men’s dress casual and casual shoes. Marketed under license from Levi Strauss & Co., Dockers remains one of the nation’s most recognized brand names. It is the quintessential source for casual, authentic and stylish apparel and footwear. The brand has evolved into a full lifestyle resource providing superior styling, quality and value. Dockers Footwear is available through many of the same national chains that carry Dockers apparel, and in shoe chains and shoe stores across the country. 18 19 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S forward-looking statements This discussion and the notes to the Consolidated Financial Statements include certain forward-looking statements, which include statements regarding our intent, belief or expectations and all statements other than those made solely with respect to historical fact. Actual results could differ materially from those reflected by the forward-looking statements in this discussion and a number of factors may adversely affect the forward looking statements and the Company’s future results, liquidity, capital resources or prospects. These include continuing weakness in the consumer economy, inability of customers to obtain credit, fashion trends that affect the sales or product margins of the Company’s retail product offerings, changes in buying patterns by significant wholesale customers, bankruptcies or deterioration in financial condition of significant wholesale customers, disruptions in product supply or distribution, unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs, and other factors affecting the cost of products, competition in the Company’s markets and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons. Additional factors that could affect the Company’s prospects and cause differences from expectations include the ability to build, open, staff and support additional retail stores, to renew leases in existing stores and to conduct required remodeling or refurbishment on schedule and at expected expense levels, deterioration in the performance of individual businesses or of the Company’s market value relative to its book value, resulting in impairments of fixed assets or intangible assets or other adverse financial consequences, unexpected changes to the market for our shares, variations from expected pension-related charges caused by conditions in the financial markets, and the outcome of litigation and environmental matters involving the Company. For a discussion of additional risk factors, See Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K. overview d e s c r i p T i o n o f B u s i n e s s The Company is a leading retailer of branded footwear, of licensed and branded headwear and of licensed sports apparel and accessories, operating 2,276 retail footwear, headwear and sports apparel and accessory stores throughout the United States and, in Puerto Rico and Canada as of January 30, 2010. The Company also designs, sources, markets and distributes footwear under its own Johnston & Murphy brand and under the licensed Dockers® brand to more than 900 retail accounts in the United States, including a number of leading department, discount, and specialty stores. The Company operates five reportable business segments (not including corporate): Journeys Group, comprised of the Journeys, Journeys Kidz and Shi by Journeys retail footwear chains, catalog and e-commerce operations; Underground Station Group, comprised of the Underground Station retail footwear chain and e-commerce operations and the Company’s remaining Jarman retail footwear stores; Hat World Group, comprised primarily of the Hat World, Lids, Hat Shack, Hat Zone, Head Quarters, Cap Connection and Lids Locker Room retail headwear stores and e-commerce operations, the Sports Fan-Attic retail licensed sports headwear, apparel and accessory stores acquired in November 2009, and the Impact Sports and Great Plains Sports team dealer businesses acquired in November 2008 and September 2009, respectively; Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, catalog and e-commerce operations and wholesale distribution; and Licensed Brands, comprised primarily of Dockers® Footwear, sourced and marketed under a license from Levi Strauss & Company. The Journeys retail footwear stores sell footwear and accessories primarily for 13- to-22-year-old men and women. The stores average approximately 1,950 square feet. The Journeys Kidz retail footwear stores sell footwear primarily for younger children, ages five to 12. These stores average approximately 1,425 square feet. Shi by Journeys retail footwear stores sell footwear and accessories to fashion-conscious women in their early 20s to mid 30s. These stores average approximately 2,150 square feet. The Underground Station retail footwear stores sell footwear and accessories primarily for men and women in the 20- to-35-age group and in the urban market. The Underground Station Group stores average approximately 1,800 square feet. The Company plans to shorten the average lease life of the Underground Station stores, close certain underperforming stores as the opportunity presents itself, and attempt to secure rent relief on other locations while it assesses the future prospects for the chain. 20 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES The Hat World Group includes stores and kiosks that sell licensed and branded headwear to men and women primarily in the early-teens to mid-20s age group and Sports Fan-Attic stores that sell licensed sports headwear, apparel and accessories to sports fans of all ages. The Hat World store locations average approximately 800 square feet and are primarily in malls, airports, street level stores and factory outlet centers throughout the United States, and in Puerto Rico and Canada. Sports Fan-Attic locations average approximately 3,075 square feet and are in malls primarily in the Southeastern United States. In November 2008, the Company acquired Impact Sports, a team dealer business, as part of the Hat World Group. In September 2009, the Company acquired Great Plains Sports, also a team dealer business, as part of the Hat World Group. In November 2009, the Company acquired Sports Fan-Attic, as part of the Hat World Group. Johnston & Murphy retail shops sell a broad range of men’s footwear, luggage and accessories. Johnston & Murphy introduced a line of women’s footwear and accessories in select Johnston & Murphy retail shops in the fall of 2008. Johnston & Murphy shops average approximately 1,475 square feet and are located primarily in better malls nationwide and in airports. Johnston & Murphy shoes are also distributed through the Company’s wholesale operations to better department and independent specialty stores. In addition, the Company sells Johnston & Murphy footwear and accessories in factory stores, averaging approximately 2,350 square feet, located in factory outlet malls, and through a direct-to-consumer catalog and e-commerce operation. The Company entered into an exclusive license with Levi Strauss & Co. to market men’s footwear in the United States under the Dockers® brand name in 1991. Levi Strauss & Co. and the Company have subsequently added additional territories, including Canada and Mexico and in certain other Latin American countries. The Dockers license agreement was renewed May 15, 2009. The Dockers license agreement, as amended, expires on December 31, 2012. The Company uses the Dockers name to market casual and dress casual footwear to men aged 30 to 55 through many of the same national retail chains that carry Dockers slacks and sportswear and in department and specialty stores across the country. s T r aT e G Y The Company’s long-term strategy for many years has been to seek organic growth by: 1) increasing the Company’s store base, 2) increasing retail square footage, 3) improving comparable store sales, 4) increasing operating margin and 5) enhancing the value of its brands. The pace of the Company’s organic growth may be limited by saturation of its markets and by economic conditions. In Fiscal 2010, the Company slowed the pace of new store openings and focused on inventory management and cash flow in response to the recent economic downturn. The Company has also focused on opportunities provided by the economic climate to negotiate occupancy cost reductions, especially where lease provisions triggered by sales shortfalls or declining occupancy of malls would permit the Company to terminate leases. To supplement its organic growth potential, the Company has made acquisitions and expects to consider acquisition opportunities, either to augment its existing businesses or to enter new businesses that it considers compatible with its existing businesses, core expertise and strategic profile. Acquisitions involve a number of risks, including inaccurate valuation of the acquired business, the assumption of undisclosed liabilities, the failure to integrate the acquired business appropriately, and distraction of management from existing businesses. The Company seeks to mitigate these risks by applying appropriate financial metrics in its valuation analysis and developing and executing plans for due diligence and integration that are appropriate to each acquisition. More generally, the Company attempts to develop strategies to mitigate the risks it views as material, including those discussed under the caption “Forward looking Statements,” above and those discussed in Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K. Among the most important of these factors are those related to consumer demand. Conditions in the external economy can affect demand, resulting in changes in sales and, as prices are adjusted to drive sales and manage inventories, in gross margins. Because fashion trends influencing many of the Company’s target customers (particularly customers of Journeys Group, Underground Station Group and Hat World Group) can change rapidly, the Company believes that its ability to react quickly to those changes has been important to its success. Even when the Company succeeds in aligning its merchandise offerings with consumer 21 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S preferences, those preferences may affect results by, for example, driving sales of products with lower average selling prices. Moreover, economic factors, such as the recession and the current high level of unemployment, may reduce the consumer’s disposable income or his or her willingness to purchase discretionary items, and thus may reduce demand for the Company’s merchandise, regardless of the Company’s skill in detecting and responding to fashion trends. The Company believes its experience and discipline in merchandising and the buying power associated with its relative size in the industry are important to its ability to mitigate risks associated with changing customer preferences and other reductions in consumer demand. s u m m a r Y o f r e s u lT s o f o p e r aT i o n s The Company’s net sales increased 1.5% during Fiscal 2010 compared to Fiscal 2009. The increase was driven primarily by a 15% increase in Hat World Group sales, offset by a 10% decrease in Underground Station Group sales, a 7% decrease in Johnston & Murphy Group sales, a 3% decrease in Licensed Brands sales and a 1% decrease in Journeys Group sales. Gross margin increased as a percentage of net sales during Fiscal 2010, primarily due to margin increases in the Journeys Group, Underground Station Group and Licensed Brands offset by margin decreases in the Hat World Group and Johnston & Murphy Group. Selling and administrative expenses decreased as a percentage of net sales during Fiscal 2010, reflecting the absence of merger-related expenses and expense decreases as a percentage of net sales in the Hat World Group, offset by increases as a percentage of net sales in the Journeys Group, Underground Station Group, Johnston & Murphy Group and Licensed Brands. Last year’s selling and administrative expenses included $8.0 million of expenses related to the terminated merger agreement and related litigation. See the discussion under “Terminated Merger Agreement,” below. Earnings from operations decreased as a percentage of net sales during Fiscal 2010, primarily due to the absence of the gain on the settlement of merger-related litigation, decreased earnings from operations in the Johnston & Murphy Group and Journeys Group, offset by the absence of merger-related expenses this year and increased earnings from operations in the Hat World Group and Licensed Brands as well as a smaller loss in the Underground Station Group. significant developments c h a n G e i n m e T h o d o f a c c o u n T i n G f o r c o n v e r T i B l e s u B o r d i n aT e d d e B e n T u r e s In May 2008, the Financial Accounting Standards Board (“FASB”) updated the Debt Topic, specifically Debt with Conversion and Other Options, of the Codification to require the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The Company adopted this update to the Codification as of February 1, 2009. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar debt instrument without the conversion feature, and the difference between the proceeds for the convertible debt and the amount reflected as a debt liability is then recorded as additional paid-in capital. As a result, the debt is effectively recorded at a discount reflecting its below market coupon interest rate. The debt is subsequently accreted to its par value over its expected life, with the rate of interest that reflects the market rate at issuance being reflected in the Consolidated Statements of Operations. The Company has applied this update to the Codification retrospectively to its Consolidated Financial Statements, as required. The retroactive application of this update to the Codification resulted in the recognition of additional pretax non-cash interest expense for Fiscal 2009 and 2008 of $3.1 and $2.8 million, respectively. For additional information, see Note 2 to the Consolidated Financial Statements. c o n v e r s i o n o f 4 1 / 8 % d e B e n T u r e s On April 29, 2009, the Company entered into separate exchange agreements whereby it acquired and retired $56.4 million in aggregate principal amount ($51.3 million fair value) of its Debentures due June 15, 2023 in exchange for the issuance of 3,066,713 shares of its common stock, which include 2,811,575 shares that were reserved for conversion of the Debentures and 255,138 additional inducement shares, and a cash payment of approximately $0.9 million. The inducement was not deductible for tax purposes. During the fourth quarter of Fiscal 2010, holders of an aggregate of $21.04 million principal amount of its 4 1/8% Convertible Subordinated Debentures were converted to 1,048,764 shares of common stock pursuant to separate conversion agreements which provided for payment of an aggregate of $0.3 million to induce conversion. On November 4, 2009, the Company issued a notice of redemption to the remaining holders of the $8.775 million outstanding 4 1/8% Convertible Subordinated Debentures. As permitted by the Indenture, holders of all except $1,000 in principal amount of the remaining Debentures converted their Debentures to 437,347 shares of common stock prior to the redemption 22 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES date of December 3, 2009. As a result of the exchange agreements and conversions, the Company recognized a loss on the early retirement of debt of $5.5 million in Fiscal 2010, reflected on the Consolidated Statements of Operations. After the exchanges and conversions, there was zero aggregate principal amount of Debentures outstanding. For additional information on the conversion of the Debentures, see Note 8 to the Consolidated Financial Statements. s p o r T s fa n - aT T i c a c q u i s i T i o n In the fourth quarter of Fiscal 2010, the Company’s Hat World subsidiary acquired the assets of Sports Fan-Attic, a retailer of licensed sports headwear, apparel, accessories and novelties, with 37 stores in seven states as of January 30, 2010, for a preliminary purchase price of $13.9 million plus assumed debt of $1.6 million with $4.5 million of that amount withheld until satisfaction of certain closing contingencies. Subsequently, in February 2010, $3.0 million of the $4.5 million was paid. G r e aT p l a i n s s p o r T s a c q u i s i T i o n In the third quarter of Fiscal 2010, the Impact Sports division of Hat World acquired the assets of Great Plains Sports of St. Paul, Minnesota, for a preliminary purchase price of $2.9 million plus assumed debt of $1.1 million with $0.6 million withheld until satisfaction of certain closing contingencies. Great Plains Sports is a dealer of branded athletic and team products for colleges, high schools, corporations and youth organizations and also operates a sporting goods store in St. Paul, Minnesota. s h a r e r e p u r c h a s e p r o G r a m In March 2008, the board authorized up to $100.0 million in stock repurchases primarily funded with the after-tax cash proceeds of the settlement of merger-related litigation discussed above under the heading “Terminated Merger Agreement.” The Company repurchased 4.0 million shares at a cost of $90.9 million during Fiscal 2009. The Company repurchased 85,000 shares at a cost of $2.0 million during Fiscal 2010. In February 2010, the board increased the total repurchase authorization to $35.0 million. T e r m i n aT e d m e r G e r a G r e e m e n T The Company announced in June 2007 that the boards of directors of both Genesco and The Finish Line, Inc. had unanimously approved a definitive merger agreement under which The Finish Line would acquire all of the outstanding common shares of Genesco at $54.50 per share in cash (the “Proposed Merger”). The Finish Line refused to close the Proposed Merger and litigation ensued. The Proposed Merger and related agreement were terminated in March 2008 in connection with an agreement to settle the litigation with The Finish Line and UBS Loan Finance LLC and UBS Securities LLC (collectively, “UBS”) for a cash payment of $175.0 million to the Company and a 12% equity stake in The Finish Line, which the Company received in the first quarter of Fiscal 2009. The Company distributed the 12% equity stake, or 6,518,971 shares of Class A Common Stock of The Finish Line, Inc., on June 13, 2008, to its common shareholders of record on May 30, 2008, as required by the settlement agreement. During Fiscal 2009 and 2008, the Company expensed $8.0 million and $27.6 million, respectively, in merger-related litigation costs. The total merger-related litigation costs for Fiscal 2008 of $27.6 million were tax deductible in Fiscal 2009 and resulted in a permanent tax benefit reflected as a component of income tax expense. For additional information, see the “Merger-Related Litigation” section in Note 15 to the Company’s Consolidated Financial Statements. r e s T r u c T u r i n G a n d o T h e r c h a r G e s The Company recorded a pretax charge to earnings of $13.5 million in Fiscal 2010. The charge reflected in restructuring and other, net included $13.3 million for retail store asset impairments and $0.4 million for lease terminations offset by $0.3 million for other legal matters. Also included in the charge was $0.1 million in excess markdowns related to the lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. The Company recorded a total pretax charge to earnings of $7.7 million in Fiscal 2009. The charge reflected in restructuring and other, net included $8.6 million of charges for retail store asset impairments, $1.6 million for lease terminations and $1.1 million for other legal matters, offset by a $3.8 million gain from a lease termination transaction. Also included in the charge was $0.2 million in excess markdowns related to the store lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. The Company recorded a total pretax charge to earnings of $10.6 million in Fiscal 2008. The charge reflected in restructuring and other, net included $8.7 million of charges for retail store asset impairments and $1.5 million for lease terminations, offset by $0.5 million in excise tax refunds and an antitrust settlement. Also included in the charge was $0.9 million in excess markdowns related to the lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. 23 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S p o s T r e T i r e m e n T B e n e f i T l i a B i l i T Y a d j u s T m e n T s The return on pension plan assets was a gain of $21.2 million for Fiscal 2010 compared to a loss of $28.0 million in Fiscal 2009. The discount rate used to measure benefit obligations decreased from 6.875% to 5.625% in Fiscal 2010. As a result of the increase in return on plan assets partially offset by the decrease in the discount rate, the pension liability decreased to $20.4 million reflected in the Consolidated Balance Sheets compared to $26.0 million in Fiscal 2009. There was a decrease in the pension liability adjustment of $1.2 million (net of tax) in accumulated other comprehensive loss in shareholders’ equity. Depending upon future interest rates and returns on plan assets, and other known and unknown factors, there can be no assurance that additional adjustments in future periods will not be required. d i s c o n T i n u e d o p e r aT i o n s For the year ended January 30, 2010, the Company recorded an additional charge to earnings of $0.5 million ($0.3 million net of tax) reflected in discontinued operations, including $0.8 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.3 million gain for excess provisions to prior discontinued operations. For additional information, see Note 15 to the Consolidated Financial Statements. For the year ended January 31, 2009, the Company recorded an additional charge to earnings of $9.0 million ($5.5 million net of tax) reflected in discontinued operations, including $9.4 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.4 million gain for excess provisions to prior discontinued operations. For additional information, see Note 15 to the Consolidated Financial Statements. For the year ended February 2, 2008, the Company recorded an additional charge to earnings of $2.6 million ($1.6 million net of tax) reflected in discontinued operations, including $2.9 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.3 million gain for excess provisions to prior discontinued operations. For additional information, see Note 15 to the Consolidated Financial Statements. critical accounting policies i n v e n T o r Y v a l u aT i o n As discussed in Note 1 to the Consolidated Financial Statements, the Company values its inventories at the lower of cost or market. In its wholesale operations, cost is determined using the first-in, first-out (FIFO) method. Market is determined using a system of analysis which evaluates inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and selling prices reflected in future orders. The Company provides reserves when the inventory has not been marked down to market based on current selling prices or when the inventory is not turning and is not expected to turn at levels satisfactory to the Company. In its retail operations, other than the Hat World segment, the Company employs the retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories. Inherent in the retail inventory method are subjective judgments and estimates including merchandise mark-on, markups, markdowns, and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, the Company employs the retail inventory method in multiple subclasses of inventory and analyzes markdown requirements at the stock number level based on factors such as inventory turn, average selling price, and inventory age. In addition, the Company accrues markdowns as necessary. These additional markdown accruals reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to provide markdown support. In addition to markdown provisions, the Company maintains provisions for shrinkage and damaged goods based on historical rates. The Hat World segment employs the moving average cost method for valuing inventories and applies freight using an allocation method. The Company provides a valuation allowance for slow-moving inventory based on negative margins and estimated shrink based on historical experience and specific analysis, where appropriate. 24 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends, and overall economic conditions. Failure to make appropriate conclusions regarding these factors may result in an overstatement or understatement of inventory value. A change of 10 percent from the recorded provisions for markdowns, shrinkage and damaged goods would have changed inventory by $1.1 million at January 30, 2010. i m pa i r m e n T o f lo n G - l i v e d a s s e T s As discussed in Note 1 to the Consolidated Financial Statements, 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 the carrying amount. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets. The goodwill impairment test involves a two-step process. The first step is a comparison of the fair value and carrying value of the business unit with which the goodwill is associated. The Company estimates fair value using the best information available, and computes the fair value by an equal weighting of the results derived by a market approach and an income approach utilizing discounted cash flow projections. The income approach uses a projection of a business unit’s estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. If the carrying value of the business unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss. The amount of impairment is determined by comparing the implied fair value of business unit goodwill to the carrying value of the goodwill in the same manner as if the business unit was being acquired in a business combination. Specifically, we would allocate the fair value to all of the assets and liabilities of the business unit, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference. A key assumption in the Company’s fair value estimate is the weighted average cost of capital utilized for discounting its cash flow projections in its income approach. The Company believes the rate it used is consistent with the risks inherent in its business and with industry discount rates. The Company performed sensitivity analyses on its estimated fair value using the income approach. Holding all other assumptions constant as of the measurement date, the Company noted that an increase in the weighted average cost of capital of 100 basis points would not result in impairment of its goodwill. e n v i r o n m e n Ta l a n d o T h e r c o n T i n G e n c i e s The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters, including those disclosed in Note 15 to the Company’s Consolidated Financial Statements. The Company has made provisions for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2010, $9.4 million reflected in Fiscal 2009 and $2.9 million reflected in Fiscal 2008. The Company monitors these matters on an ongoing basis and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as management deems necessary in view of changes in available information. Changes in estimates of liability are reported in the periods when they occur. Consequently, management believes that its reserve in relation to each proceeding is a best estimate of probable loss connected to the proceeding, or in cases in which no best estimate is possible, the minimum amount in the range of estimated losses, based upon its analysis of the facts and circumstances as of the close of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in environmental proceedings in particular, there can be no assurance that future developments will not require additional reserves to be set aside, that some or all reserves will be adequate 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. 25 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S r e v e n u e r e c o G n i T i o n Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales taxes. Catalog and internet sales are recorded at time of delivery to the customer and are net of estimated returns and exclude sales taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Shipping and handling costs charged to customers are included in net sales. Estimated returns and allowances are based on historical returns and allowances. Actual returns and allowances have not differed materially from estimates. Actual returns and allowances in any future period may differ from historical experience. i n c o m e Ta x e s As part of the process of preparing Consolidated Financial Statements, the Company is required to estimate its income taxes in each of the tax jurisdictions in which it operates. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within the Consolidated Balance Sheets. The Company then assesses the likelihood that its deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. To the extent the Company believes that recovery of an asset is at risk, valuation allowances are established. To the extent valuation allowances are established, or increased in a period, the Company includes an expense within the tax provision in the Consolidated Statements of Operations. Income tax reserves are determined using the methodology required by the Income Tax Topic of the FASB Accounting Standards Codification. This methodology was adopted by the Company as of February 4, 2007, and requires companies to assess each income tax position taken using a two step process. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may be subject to change or varying interpretation. If the Company’s determinations and estimates prove to be inaccurate, the resulting adjustments could be material to its future financial results. See Note 11 to the Company’s Consolidated Financial Statements for additional information regarding income taxes. p o s T r e T i r e m e n T B e n e f i T s p l a n a c c o u n T i n G Full-time employees who had at least 1,000 hours of service in calendar year 2004, except employees in the Hat World segment, are covered by a defined benefit pension plan. The Company froze the defined benefit pension plan effective January 1, 2005. The Company also provides certain former employees with limited medical and life insurance benefits. The Company funds at least the minimum amount required by the Employee Retirement Income Security Act. As required by the Compensation-Retirement Benefits Topic of the FASB Accounting Standards Codification, the Company is required to recognize the overfunded or underfunded status of postretirement benefit plans as an asset or liability in their Consolidated Balance Sheets and to recognize changes in that funded status in accumulated other comprehensive loss, net of tax, in the year in which the changes occur. The Company is required to measure the funded status of a plan as of the date of its fiscal year end. The Company adopted the measurement date change as of January 31, 2009. The Company was required to change the measurement date for its defined benefit pension plan and postretirement benefit plan from December 31 to January 31 (end of fiscal year). As a result of this change, pension expense and actuarial gains/losses for the one-month period ended January 31, 2009 were recognized as adjustments to retained earnings and accumulated other comprehensive loss, respectively. The after-tax charge to retained earnings was $0.1 million. The adoption of the measurement date provision had no effect on the Company’s Consolidated Statements of Operations for Fiscal 2009 or any prior period presented. The Company accounts for the defined benefit pension plans using the Compensation-Retirement Benefits Topic of the FASB Accounting Standards Codification. As permitted under this topic, pension expense is recognized on an accrual basis over employees’ approximate service periods. The calculation of pension expense and the corresponding liability 26 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES requires the use of a number of critical assumptions, including the expected long-term rate of return on plan assets and the assumed discount rate, as well as the recognition of actuarial gains and losses. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions. LO N G T E R M R AT E O F R E T U R N A S S U M P T I O N – Pension expense increases as the expected rate of return on pension plan assets decreases. The Company estimates that the pension plan assets will generate a long-term rate of return of 8.25%. To develop this assumption, the Company considered historical asset returns, the current asset allocation and future expectations of asset returns. The expected long-term rate of return on plan assets is based on a long- term investment policy of 50% U.S. equities, 13% international equities, 35% U.S. fixed income securities and 2% cash equivalents. For Fiscal 2010, if the expected rate of return had been decreased by 1%, net pension expense would have increased by $1.0 million, and if the expected rate of return had been increased by 1%, net pension expense would have decreased by $1.0 million. D I S C O U N T R AT E – Pension liability and future pension expense increase as the discount rate is reduced. The Company discounted future pension obligations using a rate of 5.625%, 6.875% and 5.875% for Fiscal 2010, 2009 and 2008, respectively. The discount rate at January 30, 2010 was determined based on a yield curve of high quality corporate bonds with cash flows matching the Company’s plans’ expected benefit payments. For Fiscal 2010, if the discount rate had been increased by 0.5%, net pension expense would have decreased by $0.5 million, and if the discount rate had been decreased by 0.5%, net pension expense would have increased by $0.5 million. In addition, if the discount rate had been increased by 0.5%, the projected benefit obligation would have decreased by $4.4 million and the accumulated benefit obligation would have decreased by $4.4 million. If the discount rate had been decreased by 0.5%, the projected benefit obligation would have been increased by $4.8 million and the accumulated benefit obligation would have increased by $4.8 million. A M O R T I Z AT I O N O F G A I N S A N D LO S S E S – The Company utilizes a calculated value of assets, which is an averaging method that recognizes changes in the fair values of assets over a period of five years. At the end of Fiscal 2010, the Company had unrecognized actuarial losses of $47.7 million. Accounting principles generally accepted in the United States require that the Company recognize a portion of these losses when they exceed a calculated threshold. These losses might be recognized as a component of pension expense in future years and would be amortized over the average future service of employees, which is currently approximately six years. Future changes in plan asset returns, assumed discount rates and various other factors related to the pension plan will impact future pension expense and liabilities, including increasing or decreasing unrecognized actuarial gains and losses. The Company recognized expense for its defined benefit pension plans of $0.2 million, $1.4 million and $3.1 million in Fiscal 2010, 2009 and 2008, respectively. The Company’s board of directors approved freezing the Company’s defined pension benefit plan effective January 1, 2005. The Company’s pension expense is expected to increase in Fiscal 2011 by approximately $2.4 million due to a larger actuarial loss to be amortized. s h a r e - B a s e d c o m p e n s aT i o n The Company has share-based compensation plans covering certain members of management and non-employee directors. The Company recognizes compensation expense for share-based payments based on the fair value of the awards as required by the Compensation – Stock Compensation Topic of the FASB Accounting Standards Codification. For Fiscal 2010, 2009 and 2008, share-based compensation expense was $0.5 million, $1.7 million and $3.2 million, respectively. For Fiscal 2010, 2009 and 2008, restricted stock expense was $6.5 million, $6.3 million and $4.6 million, respectively. The benefits of tax deductions in excess of recognized compensation expense are reported as a financing cash flow. The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option pricing model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense, including expected stock price volatility. The Company bases expected volatility on historical term structures. The Company bases the risk free rate on an interest rate for a bond with a maturity commensurate with the expected term estimate. The Company estimates the expected term of stock options using historical exercise and employee termination experience. The Company does not currently pay a dividend on common stock. The fair value of employee restricted stock is determined based on the closing price of the Company’s stock on the date of the grant. 27 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S In addition to the key assumptions used in the Black-Scholes model, the estimated forfeiture rate at the time of valuation (which is based on historical experience for similar options) is a critical assumption, as it reduces expense ratably over the vesting period. Share-based compensation expense is recorded based on a 2% expected forfeiture rate and is adjusted annually for actual forfeitures. The Company reviews the expected forfeiture rate annually to determine if that percent is still reasonable based on historical experience. The Company believes its estimates are reasonable in the context of actual (historical) experience. See Note 14 to the Consolidated Financial Statements for additional information regarding the Company’s share-based compensation plans. comparable store sales Comparable store sales begin in the fifty-third week of a store’s operation. Temporarily closed stores are excluded from the comparable store sales calculation for every full week of the store closing. Expanded stores are excluded from the comparable store sales calculation until the fifty-third week of operation in the expanded format. Unless otherwise specified, e-commerce and catalog sales are excluded from comparable store sales calculations. results of operations – fiscal 2010 compared to fiscal 2009 The Company’s net sales for Fiscal 2010 increased 1.5% to $1.57 billion from $1.55 billion in Fiscal 2009. The increase in net sales was a result of a higher number of stores in operation and an increase in comparable store sales in the Hat World Group, offset by lower sales in the Journeys Group, reflecting negative comparable store sales of 3%, lower sales in the Underground Station Group stores, reflecting fewer stores in operation and negative comparable store sales, lower sales in the Johnston & Murphy Group, reflecting generally challenging economic conditions and a difficult retail environment, and lower sales in Licensed Brands. Gross margin increased 2.0% to $795.9 million in Fiscal 2010 from $780.0 million in Fiscal 2009 and increased as a percentage of net sales from 50.3% to 50.6%. Selling and administrative expenses in Fiscal 2010 increased 0.7% from Fiscal 2009 but decreased as a percentage of net sales from 46.2% to 45.9%, primarily due to the absence of merger-related expenses and leveraging in the Hat World Group due to positive comparable store sales. Expenses in Fiscal 2009 included $8.0 million in merger-related litigation expenses. The Company records buying and merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs. Earnings from continuing operations before income taxes (“pretax earnings”) for Fiscal 2010 were $50.5 million compared to $250.7 million for Fiscal 2009. Pretax earnings for Fiscal 2010 included restructuring and other charges of $13.5 million including $13.3 million for retail store asset impairments and $0.4 million for lease terminations offset by $0.3 million for other legal matters. Also included in pretax earnings was $0.1 million in excess markdowns related to the lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. Pretax earnings for Fiscal 2010 also included $5.5 million loss on early retirement of debt. Pretax earnings for Fiscal 2009 included a gain of $204.1 million from the settlement of merger-related litigation with The Finish Line and UBS and restructuring and other charges of $7.7 million including $8.6 million for retail store asset impairments, $1.6 million for lease terminations and $1.1 million for other legal matters offset by a $3.8 million gain on a lease termination transaction. Also included in pretax earnings was $0.2 million in excess markdowns related to the lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. Pretax earnings for Fiscal 2009 also included $8.0 million in merger-related expenses. Net earnings for Fiscal 2010 were $28.8 million ($1.30 diluted earnings per share) compared to $150.8 million ($6.49 diluted earnings per share) for Fiscal 2009. Net earnings for Fiscal 2010 includes $0.3 million ($0.01 diluted earnings per share) charge to earnings (net of tax), including $0.5 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.2 million gain for excess provisions to prior discontinued operations. Net earnings for Fiscal 2009 includes a $5.5 million ($0.23 diluted earnings per share) charge to earnings (net of tax), including $5.7 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.2 million gain for excess provisions to prior discontinued operations. The Company recorded an effective federal income tax rate of 42.4% for Fiscal 2010 28 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES compared to 37.7% for Fiscal 2009. This year’s effective tax rate of 42.4% reflects the non-deductibility of certain items incurred in connection with the inducement of the conversion of the 4 1/8% Debentures for common stock this year. Last year’s effective tax rate of 37.7% is primarily attributable to the deduction of prior period merger-related expenses that became deductible upon termination of the Finish Line merger agreement offset by an income tax liability on an increase in value of shares of common stock received in the settlement of litigation with The Finish Line that had no corresponding income in the financial statements. In addition, last year’s effective rate was lower due to a $1.2 million reduction in tax liabilities from an agreement reached on a state income tax contingency. See Notes 11 and 15 to the Consolidated Financial Statements for additional information. JourneYS grouP d o L L A r S I n T H o u S A n d S N e t s a l e s E a r n i n g s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d P e r C e n T 2 0 1 0 2 0 0 9 $ 7 4 9 , 2 0 2 $ 7 6 0 , 0 0 8 $ 4 4 , 2 8 5 $ 4 9 , 0 5 0 6 . 5 % 5 . 9 % C H A n g e 1 . 4 % ( 9 . 7 ) % Net sales from Journeys Group decreased 1.4% to $749 million for Fiscal 2010 from $760.0 million for Fiscal 2009. The decrease reflects primarily a 3% decrease in comparable store sales partially offset by a 3% increase in average Journeys stores operated (i.e., the sum of the number of stores open on the first day of the fiscal year and the last day of each fiscal month during the year divided by thirteen). The comparable store sales decrease reflects a 5% decrease in footwear unit comparable sales offset by a 3% increase in average price per pair of shoes reflecting changes in product mix. Total unit sales decreased 3% during the same period. The store count for Journeys Group was 1,025 stores at the end of Fiscal 2010, including 150 Journeys Kidz stores and 56 Shi by Journeys stores, compared to 1,012 Journeys Group stores at the end of Fiscal 2009, including 141 Journeys Kidz stores and 55 Shi by Journeys stores. Journeys Group earnings from operations for Fiscal 2010 decreased 9.7% to $44.3 million, compared to $49.1 million for Fiscal 2009. Improved gross margin as a percentage of net sales from lower markdowns was more than offset by increased expenses both in dollars and as a percentage of net sales, reflecting negative leverage from negative comparable store sales. underground STATIon grouP d o L L A r S I n T H o u S A n d S N e t s a l e s L o s s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d 2 0 1 0 2 0 0 9 $ 9 9 , 4 5 8 $ 1 1 0 , 9 0 2 $ ( 4 , 5 8 4 ) $ ( 5 , 6 6 0 ) ( 5 . 1 ) % ( 4 . 6 )% P e r C e n T C H A n g e ( 1 0 . 3 ) % 1 9 . 0 % Net sales from the Underground Station Group decreased 10.3% to $99.5 million for Fiscal 2010 from $110.9 million for Fiscal 2009. The decrease reflects a 7% decrease in comparable store sales and a 6% decrease in average Underground Station Group stores operated. The decrease in comparable store sales reflects a 1% decrease in footwear unit comparable sales and a 3% decrease in the average price per pair of shoes, reflecting changes in product mix. Unit sales decreased 5% during Fiscal 2010. Underground Station Group operated 170 stores at the end of Fiscal 2010. The Company had operated 180 Underground Station Group stores at the end of Fiscal 2009. The Company plans to continue to shorten the average lease life of the Underground Station stores, close certain underperforming stores as the opportunity presents itself, and attempt to secure rent relief on other locations while it assesses the future prospects for the chain. Underground Station Group loss from operations for Fiscal 2010 improved to $(4.6) million compared to $(5.7) million for the same period last year. The improvement was due to increased gross margin as a percentage of net sales reflecting improvement in initial mark-on from changes in product mix. HAT WorLd grouP d o L L A r S I n T H o u S A n d S N e t s a l e s E a r n i n g s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n 29 F I S C A L Y e A r e n d e d P e r C e n T 2 0 1 0 2 0 0 9 $ 4 6 5 , 7 7 6 $ 4 0 5 , 4 4 6 $ 4 4 , 0 3 9 $ 3 6 , 6 7 0 9 . 0 % 9 . 5 % C H A n g e 1 4 . 9 % 2 0 . 1 % Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Net sales from the Hat World Group increased 14.9% to $465.8 million for Fiscal 2010 from $405.4 million for Fiscal 2009. The increase reflects primarily a $24.7 million increase in sales related to Impact Sports and Great Plains Sports, a 3% increase in comparable store sales, a 2% increase in average stores operated and $11.7 million in sales from the newly acquired Sports Fan-Attic business. The comparable store sales increase reflected a 4% increase in average price per hat from higher prices in Major League Baseball products and branded action headwear, offset by a 1% decrease in comparable store headwear units sold, primarily from weakness in NCAA and NFL products. Hat World Group operated 921 stores at the end of Fiscal 2010, including 60 stores in Canada and 37 Sports Fan-Attic stores, compared to 885 stores at the end of Fiscal 2009, including 50 stores in Canada. Hat World Group earnings from operations for Fiscal 2010 increased 20.1% to $44.0 million compared to $36.7 million for Fiscal 2009. The increase in operating income was primarily due to increased net sales and decreased expenses as a percentage of net sales primarily reflecting leverage from positive comparable store sales. JoHnSTon & MurPHY grouP d o L L A r S I n T H o u S A n d S N e t s a l e s E a r n i n g s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d 2 0 1 0 2 0 0 9 $ 1 6 6 , 0 7 9 $ 1 7 7 , 9 6 3 5 , 4 8 4 $ 1 0 , 0 6 9 $ 5 . 7 % 3 . 3 % P e r C e n T C H A n g e ( 6 . 7 ) % ( 4 5 . 5 ) % Johnston & Murphy Group net sales decreased 6.7% to $166.1 million for Fiscal 2010 from $178.0 million for Fiscal 2009, reflecting primarily an 8% decrease in comparable store sales and an 11% decrease in Johnston & Murphy wholesale sales, partially offset by a 3% increase in average stores operated for Johnston & Murphy retail operations. Unit sales for the Johnston & Murphy wholesale business decreased 2% in Fiscal 2010 and the average price per pair of shoes decreased 10% for the same period. Retail operations accounted for 75.4% of Johnston & Murphy Group sales in Fiscal 2010, up from 74.2% in Fiscal 2009. The comparable store sales decrease in Fiscal 2010 reflects a 7% decrease in footwear unit comparable sales and a 4% decrease in average price per pair of shoes, primarily due to changes in product mix. The store count for Johnston & Murphy retail operations at the end of Fiscal 2010 included 160 Johnston & Murphy shops and factory stores compared to 157 Johnston & Murphy shops and factory stores at the end of Fiscal 2009. Johnston & Murphy earnings from operations for Fiscal 2010 decreased 45.5% to $5.5 million from $10.1 million for Fiscal 2009, primarily due to decreased net sales, decreased gross margin as a percentage of net sales, reflecting changes in product mix and lower full priced wholesale sales, and increased expenses as a percentage of net sales, reflecting negative leverage from the decrease in comparable store sales. LICenSed BrAndS d o L L A r S I n T H o u S A n d S N e t s a l e s E a r n i n g s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d P e r C e n T 2 0 1 0 2 0 0 9 $ 9 3 , 1 9 4 $ 9 6 , 5 6 1 $ 1 2 , 3 7 2 $ 1 1 , 9 2 5 1 2 . 3 % 1 3 . 3 % C H A n g e ( 3 . 5 ) % 3 . 7 % Licensed Brands’ net sales decreased 3.5% to $93.2 million for Fiscal 2010 from $96.6 million for Fiscal 2009. The sales decrease reflects a 5% decrease in sales of Dockers Footwear offset by increased sales from a new line of footwear introduced in the third quarter last year that the Company is sourcing under a different brand with limited distribution. Unit sales for Dockers Footwear decreased 1% for Fiscal 2010 and the average price per pair of shoes decreased 3% for the same period. Licensed Brands’ earnings from operations for Fiscal 2010 increased 3.7%, from $11.9 million for Fiscal 2009 to $12.4 million, primarily due to increased gross margin as a percentage of net sales, reflecting decreased product costs and changes in product mix. 30 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES c o r p o r aT e , i n T e r e s T e x p e n s e s a n d o T h e r c h a r G e s Corporate and other expense for Fiscal 2010 was $46.7 million compared to income of $157.6 million for Fiscal 2009. Corporate expense in Fiscal 2010 included $13.5 million in restructuring and other charges, primarily for retail store asset impairments and lease terminations offset by other legal matters. Corporate expense for Fiscal 2010 also included $5.5 million for the loss on early retirement of debt. Corporate and other costs of sales for Fiscal 2010 included $0.1 million in excess markdowns related to lease terminations. Corporate income in Fiscal 2009 included a $204.1 million gain from the settlement of merger-related litigation partially offset by $7.7 million in restructuring and other charges, primarily for retail store asset impairments, lease terminations and other legal matters offset by a gain on a lease termination transaction and $8.0 million in merger-related expenses. Corporate and other costs of sales for Fiscal 2009 included $0.2 million in excess markdowns related to lease terminations. Interest expense decreased 52.0% from $9.2 million in Fiscal 2009 to $4.4 million in Fiscal 2010, due to reduced interest expense on the Company’s 4 1/8% Debentures as a result of retiring $86.2 million in aggregate principal amount of the Debentures during Fiscal 2010. The application of the updated Debt Topic to the Codification resulted in the recognition of additional pretax non-cash interest expense totaling $1.4 million for Fiscal 2010, compared to $3.1 million for Fiscal 2009. Interest income decreased 95.7% to $14,000 from $0.3 million for Fiscal 2009. r e s u l t s o f o p e r a t i o n s – F i s c a l 2 0 0 9 C o m p a r e d t o F i s c a l 2 0 0 8 The Company’s net sales for Fiscal 2009 increased 3.3% to $1.55 billion from $1.50 billion in Fiscal 2008. The increase in net sales was a result of a higher number of stores in operation and an increase in comparable store sales in the Journeys Group and Hat World Group and increased Licensed Brands sales, offset by lower sales in the Underground Station Group stores, reflecting fewer stores in operation and flat comparable store sales, and Johnston & Murphy Group, reflecting generally challenging economic conditions and a difficult retail environment. Gross margin increased 3.8% to $780.0 million in Fiscal 2009 from $751.2 million in Fiscal 2008 and increased as a percentage of net sales from 50.0% to 50.3%. Selling and administrative expenses in Fiscal 2009 increased 2.5% from Fiscal 2008 but decreased as a percentage of net sales from 46.6% to 46.2%, primarily as a result of lower merger-related expenses. Expenses in Fiscal 2009 included $8.0 million of merger-related litigation expenses and Fiscal 2008 included $27.6 million in merger-related litigation expenses. The Company records buying and merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin. Explanations of the changes in results of operations are provided by business segment in discussions following these introductory paragraphs. Pretax earnings for Fiscal 2009 were $250.7 million compared to $29.9 million for Fiscal 2008. Pretax earnings for Fiscal 2009 included a gain of $204.1 million from the settlement of merger-related litigation with The Finish Line and UBS and restructuring and other charges of $7.7 million including $8.6 million for retail store asset impairments, $1.6 million for lease terminations and $1.1 million for other legal matters offset by a $3.8 million gain on a lease termination transaction. Also included in pretax earnings was $0.2 million in excess markdowns related to the store lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. Pretax earnings for Fiscal 2009 also included $8.0 million in merger-related expenses. Pretax earnings for Fiscal 2008 included restructuring and other charges of $10.6 million, including $8.7 million of charges for asset impairments and $1.5 million for lease terminations, offset by $0.5 million in excise tax refunds and an antitrust settlement. Also included in pretax earnings was $0.9 million in excess markdowns related to the Underground Station Group store lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. Pretax earnings for Fiscal 2008 also included $27.6 million in expenses relating to the merger agreement with The Finish Line and a $0.5 million gain from insurance proceeds relating to Hurricane Katrina. Net earnings for Fiscal 2009 were $150.8 million ($6.49 diluted earnings per share) compared to $5.2 million ($0.22 diluted earnings per share) for Fiscal 2008. Net earnings for Fiscal 2009 includes $5.5 million ($0.23 diluted earnings per share) charge to earnings (net of tax), including $5.7 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.2 million gain for excess provisions to prior discontinued operations. Net earnings for Fiscal 2008 included $1.6 million ($0.07 diluted earnings 31 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S per share) charge to earnings (net of tax), including $1.8 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.2 million gain for excess provisions to prior discontinued operations. The Company recorded an effective federal income tax rate of 37.7% for Fiscal 2009 compared to 77.4% for Fiscal 2008. The variance in the effective tax rate for Fiscal 2009 compared to Fiscal 2008 is primarily attributable to transaction costs incurred in the prior period that were deductible in the later period, as well as to issues related to the settlement of merger-related litigation. See Notes 11 and 15 to the Consolidated Financial Statements for additional information. JourneYS grouP d o L L A r S I n T H o u S A n d S N e t s a l e s E a r n i n g s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d P e r C e n T 2 0 0 9 2 0 0 8 $ 7 6 0 , 0 0 8 $ 7 1 3 , 3 6 6 $ 4 9 , 0 5 0 $ 5 1 , 0 9 7 7 . 2 % 6 . 5 % C H A n g e 6 . 5 % ( 4 . 0 ) % Net sales from Journeys Group increased 6.5% to $760.0 million for Fiscal 2009 from $713.4 million for Fiscal 2008. The increase reflects primarily a 9% increase in average Journeys stores operated and a 1% increase in comparable store sales. The comparable store sales increase reflects a 1% increase in footwear unit comparable sales and a 1% increase in average price per pair of shoes reflecting changes in product mix. Total unit sales increased 7% during the same period. The store count for Journeys Group was 1,012 stores at the end of Fiscal 2009, including 141 Journeys Kidz stores and 55 Shi by Journeys stores, compared to 967 Journeys Group stores at the end of Fiscal 2008, including 115 Journeys Kidz stores and 47 Shi by Journeys stores. Journeys Group earnings from operations for Fiscal 2009 decreased 4.0% to $49.1 million, compared to $51.1 million for Fiscal 2008. The decrease was primarily attributable to increased expenses as a percentage of net sales, reflecting increased rent from new stores, lease renewals and relocation from smaller, volume constrained locations to bigger stores, as well as increased bonus accruals based on improved performance for bonus purposes. underground STATIon grouP d o L L A r S I n T H o u S A n d S N e t s a l e s L o s s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d 2 0 0 9 $ 1 1 0 , 9 0 2 $ ( 5 , 6 6 0 ) $ ( 7 , 7 1 0 ) 2 0 0 8 $ 124,002 ( 5 . 1 ) % ( 6 . 2 ) % P e r C e n T C H A n g e ( 1 0 . 6 ) % 2 6 . 6 % Net sales from the Underground Station Group decreased 10.6% to $110.9 million for Fiscal 2009 from $124.0 million for Fiscal 2008. The decrease reflects a 14% decrease in average Underground Station Group stores operated related to the Company’s strategy of closing Jarman stores and the plan announced in May 2007 to close or convert up to 49 Underground Station Group stores. Unit sales decreased 7% during Fiscal 2009. Comparable store sales were flat for Underground Station Group for the year. The flat comparable store sales reflect a 6% increase in footwear unit comparable sales, offset by a 4% decrease in the average price per pair of shoes, reflecting changes in product mix in part due to more women’s and children’s products, and increased markdowns. Underground Station Group operated 180 stores at the end of Fiscal 2009. The Company had operated 192 Underground Station Group stores at the end of Fiscal 2008. The Company plans to continue to shorten the average lease life of the Underground Station stores, close certain underperforming stores as the opportunity presents itself, and attempt to secure rent relief on other locations while it assesses the future prospects for the chain. Underground Station Group loss from operations for Fiscal 2009 improved to $(5.7) million compared to $(7.7) million for the same period last year. The improvement was due to decreased expenses as a percentage of net sales from store closings and actions taken for improved expense control. 32 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES HAT WorLd grouP d o L L A r S I n T H o u S A n d S N e t s a l e s E a r n i n g s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d P e r C e n T 2 0 0 9 2 0 0 8 $ 4 0 5 , 4 4 6 $ 3 7 8 , 9 1 3 $ 3 6 , 6 7 0 $ 3 1 , 9 8 7 9 . 0 % 8 . 4 % C H A n g e 7 . 0 % 1 4 . 6 % Net sales from the Hat World Group increased 7.0% to $405.4 million for Fiscal 2009 from $378.9 million for Fiscal 2008. The increase reflects primarily a 5% increase in average stores operated and a 2% increase in comparable store sales. Hat World Group operated 885 stores at the end of Fiscal 2009, including 50 stores in Canada, compared to 862 stores at the end of Fiscal 2008, including 34 stores in Canada. Hat World Group earnings from operations for Fiscal 2009 increased 14.6% to $36.7 million compared to $32.0 million for Fiscal 2008. The increase in operating income was primarily due to increased net sales and increased gross margin as a percentage of net sales primarily reflecting fewer off-priced sales, increased vendor discounts and growth in higher margin areas. JoHnSTon & MurPHY grouP d o L L A r S I n T H o u S A n d S N e t s a l e s E a r n i n g s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d 2 0 0 9 2 0 0 8 $ 1 7 7 , 9 6 3 $ 1 9 2 , 4 8 7 $ 1 0 , 0 6 9 $ 1 9 , 8 0 7 1 0 . 3 % 5 . 7 % P e r C e n T C H A n g e ( 7 . 5 ) % ( 4 9 . 2 ) % Johnston & Murphy Group net sales decreased 7.5% to $178.0 million for Fiscal 2009 from $192.5 million for Fiscal 2008, reflecting primarily a 10% decrease in comparable store sales and a 7% decrease in Johnston & Murphy wholesale sales, partially offset by a 2% increase in average stores operated for Johnston & Murphy retail operations. Unit sales for the Johnston & Murphy wholesale business decreased 11% in Fiscal 2009, while the average price per pair of shoes increased 3% for the same period. Retail operations accounted for 74.2% of Johnston & Murphy Group sales in Fiscal 2009, unchanged from Fiscal 2008. The comparable store sales decrease in Fiscal 2009 reflects a 12% decrease in footwear unit comparable sales and a 1% decrease in average price per pair of shoes, primarily due to changes in product mix and increased markdowns. The store count for Johnston & Murphy retail operations at the end of Fiscal 2009 included 157 Johnston & Murphy shops and factory stores compared to 154 Johnston & Murphy shops and factory stores at the end of Fiscal 2008. Johnston & Murphy earnings from operations for Fiscal 2009 decreased 49.2% to $10.1 million from $19.8 million for Fiscal 2008, primarily due to decreased net sales, decreased gross margin as a percentage of net sales, reflecting changes in product mix and increased markdowns, and increased expenses as a percentage of net sales, reflecting negative leverage from the decrease in comparable store sales. LICenSed BrAndS d o L L A r S I n T H o u S A n d S N e t s a l e s E a r n i n g s f r o m o p e r a t i o n s O p e r a t i n g m a r g i n F I S C A L Y e A r e n d e d P e r C e n T 2 0 0 9 2 0 0 8 $ 9 6 , 5 6 1 $ 9 2 , 7 0 6 $ 1 1 , 9 2 5 $ 1 0 , 9 7 6 1 1 . 8 % 1 2 . 3 % C H A n g e 4 . 2 % 8 . 6 % Licensed Brands’ net sales increased 4.2% to $96.6 million for Fiscal 2009 from $92.7 million for Fiscal 2008. The sales increase reflects a 5% increase in sales of Dockers Footwear. Unit sales for Dockers Footwear increased 4% for Fiscal 2009 and the average price per pair of shoes increased 1% for the same period. Licensed Brands’ earnings from operations for Fiscal 2009 increased 8.6%, from $11.0 million for Fiscal 2008 to $11.9 million, primarily due to increased net sales and decreased expenses as a percentage of net sales. 33 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S c o r p o r aT e , i n T e r e s T e x p e n s e s a n d o T h e r c h a r G e s Corporate and other for Fiscal 2009 had income of $157.6 million compared to expenses of $64.3 million for Fiscal 2008. Corporate income in Fiscal 2009 included a $204.1 million gain from the settlement of merger-related litigation partially offset by $7.7 million in restructuring and other charges, primarily for retail store asset impairments, lease terminations and other legal matters offset by a gain on a lease termination transaction and $8.0 million in merger- related expenses. Corporate and other costs of sales for Fiscal 2009 included $0.2 million in excess markdowns related to lease terminations. Corporate expenses in Fiscal 2008 included $27.6 million in merger-related expenses and a $0.5 million gain from insurance proceeds relating to Hurricane Katrina. Corporate and other expenses for Fiscal 2008 also included $9.7 million of restructuring and other charges, primarily for asset impairments and lease terminations, offset by excise tax refunds and an antitrust settlement. Corporate and other cost of sales for Fiscal 2008 included $0.9 million in excess markdowns related to Underground Station Group lease terminations. Interest expense decreased 23.3% from $12.0 million in Fiscal 2008 to $9.2 million in Fiscal 2009, due to the cash received from the merger-related litigation settlement and improved operating cash flow, which decreased average revolver borrowings from $65.9 million in Fiscal 2008 to $27.7 million in Fiscal 2009. Interest income increased from $0.1 million in Fiscal 2008 to $0.3 million in Fiscal 2009, due to the increase in average short-term investments as a result of the proceeds from the settlement of merger-related litigation. L i q u i d i t y a n d C a p i t a l r e s o u r c e s The following table sets forth certain financial data at the dates indicated. d o L L A r S I n M I L L I o n S C a s h a n d c a s h e q u i v a l e n t s W o r k i n g c a p i t a l L o n g - t e r m d e b t W o r k i n G c a p i Ta l j a n . 3 0 J A N . 3 1 F E B . 2 2 0 1 0 $ 82.1 $ 280.4 -0- $ 2 0 0 9 $ 1 7 . 7 $ 2 5 9 . 1 $ 1 1 3 . 7 2 0 0 8 $ 1 7 . 7 $ 2 3 8 . 1 $ 1 4 7 . 3 The Company’s business is seasonal, with the Company’s investment in inventory and accounts receivable normally reaching peaks in the spring and fall of each year. Historically, cash flow from operations has been generated principally in the fourth quarter of each fiscal year. Cash provided by operating activities was $142.1 million in Fiscal 2010 compared to $179.1 million in Fiscal 2009. The $37.0 million decrease in cash flow from operating activities from last year reflects primarily the receipt of $175.0 million of cash proceeds of the merger-related litigation settlement in Fiscal 2009, offset by an increase in cash flow from changes in inventory, accounts payable, other accrued liabilities and prepaids and other current assets of $27.4 million, $19.5 million, $19.4 million and $16.2 million, respectively. The $27.4 million increase in cash flow from inventory reflected efforts to reduce inventory in order to align inventory growth with sales growth, especially in the Johnston & Murphy Group. The $19.5 million increase in cash flow from accounts payable reflected changes in buying patterns, including actions taken to reduce inventory in the prior year, and payment terms negotiated with individual vendors. The $19.4 million increase in cash flow from other accrued liabilities reflected Fiscal 2009 reduction in accrued professional fees related to the terminated merger agreement and reduction in income taxes plus a Fiscal 2010 additional accrual related to environmental insurance. The $16.2 million increase in cash flow from prepaids and other current assets was due to decreased prepaid income taxes compared to Fiscal 2009. The $24.0 million decrease in inventories at January 30, 2010 from January 31, 2009 levels reflects a decrease in inventory, primarily wholesale, due to efforts to align inventory growth with sales growth and increased wholesale inventory last year due to timing of Chinese New Year. Accounts receivable at January 30, 2010 increased $2.3 million compared to January 31, 2009, due primarily to increased wholesale sales in the fourth quarter of Fiscal 2010 which includes sales of the newly acquired Great Plains Sports team dealer business and slower overall accounts receivable turn. 34 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES Cash provided by operating activities was $179.1 million in Fiscal 2009 compared to $23.9 million in Fiscal 2008. The $155.2 million increase in cash flow from operating activities from Fiscal 2008 reflects primarily the receipt of $175.0 million of cash proceeds of the merger-related litigation settlement and changes in inventory of $36.2 million, offset by a decrease in cash flow from changes in other accrued liabilities, prepaids and other current assets and accounts payable of $16.8 million, $10.9 million and $7.6 million, respectively. The $36.2 million increase in cash flow from inventory reflected efforts to reduce inventory in order to align inventory growth with sales growth. The $16.8 million decrease in cash flow from other accrued liabilities was due to a reduction in accrued professional fees related to the terminated merger agreement and a reduction in accrued income taxes due to the Company being in a prepaid income tax position at the end of the year, offset by increased bonus accruals. The $10.9 million decrease in cash flow from prepaids and other current assets was due to increased prepaid income taxes. The $7.6 million decrease in cash flow from accounts payable reflected changes in buying patterns, including actions taken to reduce inventory, and payment terms negotiated with individual vendors. The $3.3 million increase in inventories at January 31, 2009 from February 2, 2008 levels reflects an increase in wholesale inventory due to an inability to react quickly to the economic conditions as well as increases in inventory to support spring shipments, offset by a decrease in retail inventory due to efforts to align inventory growth with sales growth offset by inventory purchased to support the net increase of 59 stores in Fiscal 2009. Accounts receivable at January 31, 2009 decreased $2.2 million compared to February 2, 2008, due primarily to decreased wholesale sales in the fourth quarter of Fiscal 2009 and lower tenant allowance receivables from the slow down in store openings. Cash provided (used) due to changes in accounts payable and accrued liabilities are as follows: F I S C A L Y e A r e n d e d I n T H o u S A n d S A c c o u n t s p a y a b l e A c c r u e d l i a b i l i t i e s 2 0 1 0 2 0 0 9 $ 1 1 , 4 4 1 $ ( 8 , 0 7 1 ) $ ( 4 3 0 ) ( 9 2 3 ) ( 1 7 , 6 9 4 ) 1 , 6 6 1 2 0 0 8 $ 1 3 , 1 0 2 $ ( 2 5 , 7 6 5 ) $ ( 1 , 3 5 3 ) The fluctuations in cash provided (used) due to changes in accounts payable for Fiscal 2010 from Fiscal 2009 and for Fiscal 2009 from Fiscal 2008 are due to changes in buying patterns, including actions taken to reduce inventory in the prior year, and payment terms negotiated with individual vendors. The change in cash provided (used) due to changes in accrued liabilities for Fiscal 2010 from Fiscal 2009 was due primarily to Fiscal 2009 reduction in accrued professional fees related to the terminated merger agreement and reduction in income taxes plus a Fiscal 2010 additional accrual related to environmental insurance, and the change in accrued liabilities for Fiscal 2009 from Fiscal 2008 was due primarily to a reduction in accrued professional fees and expenses related to the terminated merger agreement and a reduction in accrued taxes due to the Company being in a prepaid tax position, offset by higher bonus accruals. The Company has a revolving credit facility (the “Credit Facility”) entered into on December 1, 2006, in the aggregate principal amount of $200.0 million, with a $20.0 million swingline loan sublimit and a $70.0 million sublimit for the issuance of standby letters of credit, and has a five-year term. Revolving credit borrowings averaged $15.4 million during Fiscal 2010 and $27.7 million during Fiscal 2009, as cash generated from operations primarily funded seasonal working capital requirements and capital expenditures for Fiscal 2010. 35 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S c o n T r a c T u a l o B l i G aT i o n s The following tables set forth aggregate contractual obligations and commitments as of January 30, 2010. PAY M e n T S d u e BY P e r I o d L e S S T H A n 1 1– 3 3 – 5 T H A n 5 M o r e I n T H o u S A n d S Capital Lease Obligations Operating Lease Obligations Purchase Obligations(1) Other Long-Term Liabilities Total Contractual obligations(2) c o m m e r c i a l c o m m i T m e n T s $ Y e A r T o TA L Y e A r S 99 $ 141 $ Y e A r S 13 264,327 -0- 550 $ 1,268,791 $ 458,360 $ 298,995 $ 246,546 $ 264,890 246,174 -0- 369 298,572 -0- 397 167,739 290,324 198 976,812 290,324 1,514 26 $ 3 $ Y e A r S A M o u n T o F C o M M I T M e n T e x P I r AT I o n P e r P e r I o d T o TA L A M o u n T S L e S S T H A n 1 1– 3 3 – 5 M o r e T H A n 5 Y e A r S I n T H o u S A n d S Letters of Credit Total Commercial Commitments C o M M I T T e d $ $ 10,995 $ 10,995 $ Y e A r Y e A r S Y e A r S 10,995 $ 10,995 $ -0- $ -0- $ -0- $ -0- $ -0- -0- (1) Open purchase orders for inventory. (2) Excludes unrecognized tax benefits of $17.2 million due to their uncertain nature in timing of payments. c a p i Ta l e x p e n d i T u r e s Capital expenditures were $33.8 million, $49.4 million and $80.7 million for Fiscal 2010, 2009 and 2008, respectively. The $15.6 million decrease in Fiscal 2010 capital expenditures as compared to Fiscal 2009 resulted primarily from the decrease in retail store capital expenditures due to 61 new store openings in Fiscal 2010, excluding 38 acquired stores, compared to 102 new store openings in Fiscal 2009 and a lower amount of full major renovations. The $31.3 million decrease in Fiscal 2009 capital expenditures as compared to Fiscal 2008 resulted primarily from the decrease in retail store capital expenditures due to 102 new store openings in Fiscal 2009 compared to 229 new store openings in Fiscal 2008. Total capital expenditures in Fiscal 2011 are expected to be approximately $45.0 million. These include retail capital expenditures of approximately $33.2 million to open approximately 12 Journeys stores, three Journeys Kidz stores, nine Johnston & Murphy shops and factory stores and 45 Hat World Group stores including 15 stores in Canada and five Sports Fan-Attic stores and to complete approximately 171 major store renovations. Due to current economic conditions, the Company intends to be more selective with respect to new store locations. The Company will continue to open stores at a slower pace in 2011. The planned amount of capital expenditures in Fiscal 2011 for wholesale operations and other purposes is approximately $11.8 million, including approximately $6.2 million for new systems to improve customer service and support the Company’s growth. f u T u r e c a p i Ta l n e e d s The Company expects that cash on hand and cash provided by operations will be sufficient to support seasonal working capital requirements and capital expenditures, although the Company may borrow under its Credit Facility from time to time to support seasonal working capital requirements during Fiscal 2011. The approximately $9.4 million of costs associated with discontinued operations that are expected to be paid during the next twelve months are expected to be funded from cash on hand and borrowings under the Credit Facility during Fiscal 2011. There were $11.0 million of letters of credit outstanding and no revolver borrowings outstanding under the Credit Facility at January 30, 2010. Net availability under the facility was $180.0 million. The Company is not required to comply with any financial covenants under the facility unless Adjusted Excess Availability (as defined in the Amended and Restated Credit Agreement) is less than 10% of the total commitments under the credit facility (currently $20.0 million). If and during such time as Adjusted Excess Availability is less than such amount, the credit facility requires the Company to meet a minimum fixed charge coverage ratio (EBITDA less capital expenditures less cash taxes divided by cash interest expense and scheduled payments of principal indebtedness) of 1.0 to 1.0. Adjusted Excess Availability was $180.0 million at 36 m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S Genesco inc. AND SUBSIDIARIES January 30, 2010. Because Adjusted Excess Availability exceeded $20.0 million, the Company was not required to comply with this financial covenant at January 30, 2010. The Credit Facility prohibits the payment of dividends and other restricted payments (including stock repurchases) unless after such dividend or restricted payment (i) availability is between $30.0 million and $50.0 million, the fixed charge coverage is greater than 1.0 to 1.0 or (ii) availability under the credit facility exceeds $50.0 million. The Company’s management does not expect availability under the Credit Facility to fall below $50.0 million during Fiscal 2011. 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 $198,000. c o mm on sT ock repur c h a s e s In March 2008, the board authorized up to $100.0 million in stock repurchases primarily funded with the after-tax cash proceeds of the settlement of the merger-related litigation with The Finish Line and UBS. See Notes 3 and 15 to the Consolidated Financial Statements. The Company did not repurchase any shares during Fiscal 2008. The Company repurchased 4.0 million shares at a cost of $90.9 million during Fiscal 2009. The Company repurchased 85,000 shares at a cost of $2.0 million during Fiscal 2010. In total, the Company has repurchased 12.2 million shares at a cost of $196.3 million from all authorizations as of January 30, 2010. In February 2010, the board increased the total repurchase authorization to $35.0 million. e n v i r o n m e n t a l a n d o t h e r c o n t i n g e n c i e s The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters, including those disclosed in Note 15 to the Company’s Consolidated Financial Statements. The Company has made accruals for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2010, $9.4 million reflected in Fiscal 2009 and $2.9 million reflected in Fiscal 2008. The Company monitors these matters on an ongoing basis and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as management deems necessary in view of changes in available information. Changes in estimates of liability are reported in the periods when they occur. Consequently, management believes that its 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 and circumstances as of the close of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in environmental proceedings in particular, there can be no assurance that future developments will not require additional reserves to be set aside, that some or all reserves may not be adequate 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. f i n a n c i a l m a r k e t r i s k The following discusses the Company’s exposure to financial market risk related to changes in interest rates and foreign currency exchange rates. O U T S TA N D I N G D E B T O F T H E C O M PA N Y – The Company does not have any outstanding debt as of January 30, 2010. C A S H A N D C A S H E Q U I V A L E N T S – The Company’s cash and cash equivalent balances are invested in financial instruments with original maturities of three months or less. The Company did not have significant exposure to changing interest rates on invested cash at January 30, 2010. As a result, the Company considers the interest rate market risk implicit in these investments at January 30, 2010 to be low. F O R E I G N C U R R E N C Y E x C H A N G E R AT E R I S K - Most purchases by the Company from foreign sources are denominated in U.S. 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 when the purchases are material. At January 30, 2010, the Company had $0.6 million of forward foreign exchange contracts for Euro. The Company’s policy is not to speculate in derivative instruments for profit on the exchange rate price fluctuation and it does not hold any derivative instruments for trading purposes. Derivative instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. The unrealized loss 37 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s d i s c u s s i o n a n d a n a lY s i s O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S on contracts outstanding at January 30, 2010 was less than $0.1 million based on current spot rates. As of January 30, 2010, a 10% adverse change in foreign currency exchange rates from market rates would decrease the fair value of the contracts by approximately $0.1 million. A C C O U N T S R E C E I V A B L E – The Company’s accounts receivable balance at January 30, 2010 is primarily concentrated in two of its wholesale businesses, which sell primarily to department stores and independent retailers across the United States. One customer accounted for 20% and no other customer accounted for more than 10% of the Company’s trade receivables balance as of January 30, 2010. The Company monitors the credit quality of its customers and establishes an allowance for doubtful accounts based upon factors surrounding credit risk of specific customers, historical trends and other information, as well as customer specific factors; however, credit risk is affected by conditions or occurrences within the economy and the retail industry, as well as company-specific information. S U M M A R Y – Based on the Company’s overall market interest rate and foreign currency rate exposure at January 30, 2010, the Company believes that the effect, if any, of reasonably possible near-term changes in interest rates or foreign currency exchange rates on the Company’s consolidated financial position, results of operations or cash flows for Fiscal 2011 would not be material. new accounting principles In June 2009, the FASB established the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. The Company adopted the Codification effective for its third quarter ended October 31, 2009, and accordingly, all subsequent public filings will reference the Codification as the sole source of authoritative literature. In December 2008, the FASB updated the Compensation – Retirement Benefits Topic of the Codification to require more detailed disclosures about the assets of a defined benefit pension or other postretirement plan and is effective for fiscal years ending after December 15, 2009 (Fiscal 2010 for the Company). The Company adopted this updated guidance as of January 30, 2010 and it did not have a significant impact on its results of operations or financial position. See Note 12 to the Consolidated Financial Statements. inflation The Company does not believe inflation has had a material impact on sales or operating results during periods covered in this discussion. 38 f i n a n c i a l s u m m a r Y Genesco inc. AND SUBSIDIARIES f is c al Year s 20 06 Thr ouGh 2 0 09 have B een resTaTed To reflecT adjusTmenTs ThaT are furTher discus sed in no T es 1 a nd 2 To The consol idaTed financial sTaTemenTs. In THouSAndS exCePT Per CoMMon SHAre dATA, FInAnCIAL STATISTICS And oTHer dATA r e s u l t s o f o p e r a t i o n s d a t a Net Sales Depreciation Earnings from operations Earnings from continuing operations before income taxes Earnings from continuing operations (Provision for) earnings from discontinued operations, net Net earnings P e r C o m m o n S h a r e d a t a Earnings from continuing operations Basic Diluted Discontinued operations Basic Diluted Net earnings Basic Diluted B a l a n c e S h e e t d a t a Total assets Long-term debt Non-redeemable preferred stock Common shareholders’ equity Capital expenditures F i n a n c i a l S t a t i s t i c s Earnings from operations 2010 2009 2008 2007 2006 FISCAL YeAr end $ 1,574,352 $ 1,551,562 $ 1,502,119 $ 1,460,478 $ 1,283,876 34,622 109,835 40,306 117,849 46,757 259,626 47,033 60,422 45,114 41,821 $ $ $ 50,488 29,086 250,714 156,219 29,920 6,774 108,535 66,713 100,101 61,190 (273) 28,813 $ (5,463) 150,756 $ (1,603) 5,171 $ (601) 66,112 $ 60 61,250 1.35 $ 1.31 8.11 $ 6.72 .29 $ .29 2.93 $ 2.61 (.02) (.01) 1.33 1.30 (.28) (.23) 7.83 6.49 (.07) (.07) .22 .22 (.02) (.02) 2.91 2.59 2.67 2.38 .00 .00 2.67 2.38 863,652 $ -0- 5,220 577,093 33,825 816,063 $ 113,735 5,203 444,552 49,420 801,685 $ 147,271 5,338 420,778 80,662 729,048 $ 98,390 6,602 405,040 73,287 685,697 92,711 6,695 350,005 56,946 as a percent of net sales 3.8% 16.7% 2.8% 8.1% 8.6% Book value per share (common shareholders’ equity divided by common shares outstanding) Working capital (in thousands) Current ratio Percent long-term debt to total capitalization o t h e r d a t a ( e n d o f Ye a r ) Number of retail outlets* Number of employees $ $ 23.97 $ 280,415 $ 2.7 0.0% 23.10 $ 259,137 $ 2.9 20.2% 18.46 $ 238,093 $ 2.6 25.7% 17.81 $ 200,330 $ 2.5 19.3% 15.05 184,986 2.2 20.6% 2,276 13,925 2,234 13,775 2,175 13,950 2,009 12,750 1,773 11,100 * Includes 37 Sports Fan-Attic stores in Fiscal 2010 acquired November 3, 2009 and 49 Hat Shack stores in Fiscal 2007 acquired January 11, 2007. See Note 4 to the Consolidated Financial Statements. Reflected in earnings from continuing operations for Fiscal 2009 was a $204.1 million gain on the settlement of merger-related litigation. Reflected in earnings from continuing operations for Fiscal 2009 and 2008 were $8.0 million and $27.6 million, respectively, in merger-related costs and litigation expenses. These expenses were deductible for tax purposes in Fiscal 2009. See Notes 3 and 15 to the Consolidated Financial Statements for additional information regarding these charges. Reflected in earnings from continuing operations for Fiscal 2010, 2009, 2008, 2007 and 2006 were restructuring and other charges of $13.4 million, $7.5 million, $9.7 million, $1.1 million and $2.3 million, respectively. See Note 5 to the Consolidated Financial Statements for additional information regarding these charges. Long-term debt includes current obligations. During Fiscal 2010, the Company entered into separate exchange agreements whereby it acquired and retired all $86.2 million in aggregate principal amount of its Debentures due June 15, 2023 in exchange for the issuance of 4,552,824 shares of its common stock. As a result of the exchange agreements and conversions, the Company recognized a loss on the early retirement of debt of $5.5 million reflected in earnings from continuing operations. In December 2006, the Company entered into an amended and restated credit agreement in the aggregate principal amount of $200.0 million. See Note 8 to the Consolidated Financial Statements for additional information regarding the Company’s debt. The Company has not paid dividends on its Common Stock since 1973. See Notes 8 and 10 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Future Capital Needs” for a description of limitations on the Company’s ability to pay dividends. 39 Genesco inc. AND SUBSIDIARIES m a n a G e m e n T ’ s r e s p o n s i B i l i T Y F O R F I N A N C I A L S TAT E M E N T S Genesco inc. and consolidaTed suBsidiaries The consolidated financial statements presented in this report are the responsibility of management and have been prepared in conformity with U.S. generally accepted accounting principles. Some of the amounts included in the financial information are necessarily based on the estimates and judgments of management, which are based on currently available information and management’s view of current conditions and circumstances. An independent registered public accounting firm audits the Company’s consolidated financial statements and the effectiveness of internal control over financial reporting in accordance with the standards established by the Public Company Accounting Oversight Board. The audit committee of the board of directors, composed entirely of directors who are not employees of the Company, meets regularly with management, internal audit and the independent registered public accounting firm to review accounting, control, auditing and financial reporting matters. Internal audit and the independent auditors have full and free access to the audit committee and meet (with and without management present) to discuss appropriate matters. James S. Gulmi Senior Vice President – Finance Chief Financial Officer and Treasurer Paul D. Williams Vice President Chief Accounting Officer 40 r e p o r T o f i n d e p e n d e n T r e G i s T e r e d p u B l i c a c c o u n T i n G f i r m Genesco inc. AND SUBSIDIARIES The Board of direcTors and shareholders Genesco inc. We have audited the accompanying consolidated balance sheets of Genesco Inc. and Subsidiaries (the “Company”) as of January 30, 2010 and January 31, 2009, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three fiscal years in the period ended January 30, 2010. 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 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Genesco Inc. and Subsidiaries at January 30, 2010 and January 31, 2009, and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended January 30, 2010, in conformity with U.S. generally accepted accounting principles. As discussed in Notes 1 and 11 to the consolidated financial statements, in fiscal 2008 the Company changed its method of accounting for income tax contingencies. As discussed in Note 2, the Company adopted the update to the Debt Topic, specifically Debt with Conversion and Other Options, as of February 1, 2009. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of January 30, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 31, 2010 expressed an unqualified opinion thereon. Nashville, Tennessee March 31, 2010 41 Genesco inc. AND SUBSIDIARIES r e p o r T o f i n d e p e n d e n T r e G i s T e r e d p u B l i c a c c o u n T i n G f i r m O N I N T E R N A L C O N T R O L O V E R F I N A N C I A L R E P O R T I N G The Board of direcTors and shareholders Genesco inc. We have audited Genesco Inc.’s internal control over financial reporting as of January 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Genesco Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Genesco Inc. maintained, in all material respects, effective internal control over financial reporting as of January 30, 2010, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Genesco Inc. as of January 30, 2010 and January 31, 2009, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three fiscal years in the period ended January 30, 2010 and our report dated March 31, 2010 expressed an unqualified opinion thereon. Nashville, Tennessee March 31, 2010 42 c o n s o l i d aT e d B a l a n c e s h e e T s I n T H o u S A n d S , e xC e P T S H A r e A M o u n T S A S S e T S C u r r e n t A s s e t s Cash and cash equivalents Accounts receivable, net of allowances of $3,232 at January 30, 2010 and $3,052 at January 31, 2009 Inventories Deferred income taxes Prepaids and other current assets To t a l c u r r e n t a s s e t s Property and equipment: Land Buildings and building equipment Computer hardware, software and equipment Furniture and fixtures Construction in progress Improvements to leased property Property and equipment, at cost Accumulated depreciation Property and equipment, net Deferred income taxes Goodwill Trademarks Other intangibles, net of accumulated amortization of $8,795 at January 30, 2010 and $7,956 at January 31, 2009 Other noncurrent assets Total assets L I A B I L I T I e S A n d S H A r e H o L d e r S ’ e q u I T Y C u r r e n t L i a b i l i t i e s Acounts payable Accrued employee compensation Accrued other taxes Accrued income taxes Other accrued liabilities Provision for discontinued operations Total current liabilities Long-term debt Pension liability Deferred rent and other long-term liabilities Provision for discontinued operations Total liabilities Commitments and contingent liabilities shareholders’ equity Non-redeemable preferred stock Common shareholders’ equity: Common stock, $1 par value: Authorized: 80,000,000 shares Issued/Outstanding: January 30, 2010 – 24,562,693/24,074,229 January 31, 2009 – 19,731,979/19,243,515 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury shares, at cost Total shareholders’ equity Total liabilities and shareholders’ equity The accompanying Notes are an integral part of these Consolidated Financial Statements. 43 Genesco inc. AND SUBSIDIARIES A S o F F I S C A L Y e A r e n d 2010 2 0 0 9 $ 82,148 $ 17,672 27,217 290,974 17,314 32,419 23,744 306,078 15,083 35,542 450,072 398,119 4,863 17,992 86,239 101,923 3,196 277,624 491,837 4,863 17,990 79,255 99,954 7,044 274,613 483,719 (275,544) (244,038) 216,293 13,545 118,995 52,799 3,670 8,278 239,681 5,302 111,680 51,455 2,376 7,450 $ 863,652 $ 816,063 $ 92,699 $ 73,143 15,043 15,780 11,570 -0- 40,979 9,366 169,657 -0- 20,402 85,232 6,048 11,254 634 28,727 9,444 138,982 113,735 25,968 81,499 6,124 281,339 366,308 5,220 5,203 24,563 146,981 452,210 (28,804) (17,857) 582,313 19,732 49,780 423,595 (30,698) (17,857) 449,755 $ 863,652 $ 816,063  FISCAL YeAr 2009 2010 2008 $ 1,574,352 $ 1,551,562 $ 1,502,119 750,904 699,692 778,482 722,087 771,580 716,931 -0- 13,361 60,422 5,518 (204,075) 7,500 259,626 -0- 4,430 (14) 4,416 50,488 21,402 29,086 (273) 28,813 $ 1.35 $ (.02) $ 1.33 $ 1.31 $ (.01) $ 1.30 $ 9,234 (322) 8,912 250,714 94,495 156,219 (5,463) 150,756 $ 8.11 $ (.28) $ 7.83 $ 6.72 $ (.23) $ 6.49 $ -0- 9,702 41,821 -0- 12,045 (144) 11,901 29,920 23,146 6,774 (1,603) 5,171 .29 (.07) .22 .29 (.07) .22 $ $ $ $ $ $ $ Genesco inc. AND SUBSIDIARIES c o n s o l i d aT e d s TaT e m e n T s o f o p e r aT i o n s In THouSAndS, exCePT Per SHAre AMounTS Net sales Cost of sales Selling and administrative expenses Gain from settlement of merger- related litigation Restructuring and other, net Earnings from operations Loss on early retirement of debt Interest expense, net: Interest expense Interest income Total interest expense, net Earnings from continuing operations before income taxes Income tax expense Earnings from continuing operations Provision for discontinued operations, net n e t e a r n i n g s Basic earnings per common share: Continuing operations Discontinued operations Net earnings Diluted earnings per common share: Continuing operations Discontinued operations Net earnings The accompanying Notes are an integral part of these Consolidated Financial Statements. 44 c o n s o l i d aT e d s TaT e m e n T s o f c a s h f lo W s In THouSAndS Cash Flows from operating Activities: Net earnings Tax benefit of stock options exercised Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation Amortization of deferred note expense and debt discount Loss on early retirement of debt Receipt of Finish Line stock Deferred income taxes Provision for losses on accounts receivable Impairment of long-lived assets Share-based compensation and restricted stock Provision for discounted operations Other Effect on cash of changes in working capital and other assets and liabilities, net of acquisitions: Accounts receivable Inventories Prepaids and other current assets Accounts payable Other accrued liabilities Other assets and liabilities Net cash provided by operating activities Cash Flows from Investing Activities: Capital expenditures Acquisitions, net of cash acquired Proceeds from sale of property and equipment Net cash used in investing activities Cash Flows from Financing Activities: Payments of long-term debt Payments of capital leases Borrowings under revolving credit facility Payments on revolving credit facility Tax benefit of stock options and restricted stock exercised Shares repurchased Change in overdraft balances Dividends paid on non-redeemable preferred stock Exercise of stock options and issue shares – Employee Stock Purchase Plan Other Net cash (used in) provided by financing activities net (decrease) Increase in Cash and Cash equivalents Cash and cash equivalents at beginning of year Genesco inc. AND SUBSIDIARIES FISCAL YeAr 2010 2009 2008 $ 28,813 $ 150,756 $ -0- (157) 5,171 (694) 47,033 2,022 5,518 46,757 3,905 -0- -0- (29,075) 3,680 415 13,314 6,969 452 2,152 6,649 1,079 8,570 8,031 9,006 1,845 45,114 3,653 -0- -0- (13,784) 137 8,722 7,851 2,633 1,805 (2,251) 2,156 (349) (3,330) (39,511) 24,027 3,154 11,441 1,661 (13,052) (8,071) (17,694) (6,304) 11,728 142,096 179,103 (2,174) (430) (923) 6,722 23,943 (33,825) (11,719) 13 (49,420) (80,662) (4,484) 16 (34) 6 (45,531) (53,888) (80,690) (2,623) (181) (1,330) (184) -0- (210) 197,400 295,400 365,000 (229,700) (332,100) (319,000) -0- -0- 3,102 (198) 499 (388) 157 (90,903) 2,420 (198) 694 -0- 10,649 (217) 1,492 -0- 795 -0- (32,089) (125,246) 57,711 64,476 17,672 (31) 964 17,703 16,739 Cash and cash equivalents at end of year $ 82,148 $ 17,672 $ 17,703 S u p p l e m e n t a l C a s h F l o w I n f o r m a t i o n : Net cash paid for: Interest $ 1,596 $ 5,493 $ 8,107 Income taxes 13,386 91,833 37,560 The accompanying Notes are an integral part of these Consolidated Financial Statements. 45 Genesco inc. AND SUBSIDIARIES c o n s o l i d aT e d s TaT e m e n T s o f s h a r e h o l d e r s ’ e q u i T Y In THouSAndS Balance February 3, 2007 (as adjusted, see note 2) $ Cumulative effect of change in ToTAL non-redeeMABLe PreFerred SToCk 6,602 CoMMon SToCk 23,230 $ $ AddITIonAL PAId-In CAPITAL 119,506 $ ACCuMuLATed oTHer reTAIned CoMPreHenSIve LoSS eArnIngS (21,327) $ 301,487 $ ToTAL TreASurY CoMPreHenSIve SHAreHoLderS’ equITY InCoMe $ 411,641 SToCk (17,857) accounting principle (see Note 11) Net earnings Dividends paid on non-redeemable preferred stock Exercise of stock options Issue shares – employee stock purchase plan Employee and non-employee restricted stock Share-based compensation Restricted shares withheld for taxes Tax benefit of stock options exercised Conversion of series 3 preferred stock Conversion of series 4 preferred stock Gain on foreign currency forward contracts (net of tax of $0.0 million) Pension liability adjustment (net of tax of $2.7 million) Postretirement liability adjustment (net of tax of $0.4 million) Foreign currency translation adjustment Other Comprehensive income Balance February 2, 2008 Net earnings Dividends paid on non-redeemable preferred stock Dividend declared – Finish Line stock Exercise of stock options Issue shares – employee stock purchase plan Shares repurchased Restricted stock issuance Employee and non-employee restricted stock Share-based compensation Restricted shares withheld for taxes Tax benefit of stock options and restricted stock exercised Adjustment of measurement date provision of Retirement Benefit Topic (net of tax of $0.0 million) Loss on foreign currency forward contracts (net of tax of $0.2 million) Pension liability adjustment (net of tax benefit of $8.5 million) Postretirement liability adjustment (net of tax of $0.1 million) Foreign currency translation adjustment Other Comprehensive income Balance January 31, 2009 Net earnings Dividends paid on non-redeemable preferred stock Exercise of stock options Issue shares – employee stock purchase plan Employee and non-employee restricted stock Share-based compensation Restricted stock issuance Restricted shares withheld for taxes Tax expense of stock options and restricted stock exercised Shares repurchased Conversion of 4 1/8% debentures Loss on foreign currency forward contracts (net of tax of $0.1 million) Pension liability adjustment (net of tax of $0.6 million) Postretirement liability adjustment (net of tax of $0.0 million) Foreign currency translation adjustment Other Comprehensive income Balance January 30, 2010 -0- -0- -0- -0- -0- -0- -0- -0- -0- (533) (561) -0- -0- -0- -0- (170) 5,338 -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- (135) 5,203 -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- 17 -0- -0- -0- 33 5 -0- -0- (19) -0- 11 9 -0- -0- -0- -0- 16 -0- -0- (4,260) 5,171 -0- 551 206 4,621 3,230 (887) 694 522 552 -0- -0- -0- -0- 184 (217) -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- 37 4,131 644 505 -0- 23,285 -0- 129,179 -0- 302,181 150,756 (16,010) -0- -0- -0- 83 -0- -0- 1,355 (198) (29,075) -0- 2 (4,000) 416 53 (86,903) (416) -0- -0- (53) 6,341 1,690 (1,092) -0- (563) -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- $ -0- 5,171 (4,260) 5,171 -0- -0- -0- -0- -0- -0- -0- -0- -0- (217) 584 211 4,621 3,230 (906) 694 -0- -0- 37 37 4,131 4,131 -0- -0- -0- 644 505 -0- 10,488 426,116 -0- $ 150,756 $ (17,857) -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- (275) 644 505 30 150,756 (198) (29,075) 1,438 55 (90,903) -0- 6,341 1,690 (1,145) (563) (69) (275) -0- -0- -0- -0- -0- (1) -0- -0- -0- -0- -0- 136 (69) -0- -0- (275) -0- (13,355) -0- (13,355) (13,355) -0- -0- -0- 119 (1,177) -0- -0- -0- -0- 119 (1,177) -0- $ 136,068 19,732 -0- 49,780 -0- 423,595 28,813 (30,698) -0- (17,857) -0- $ 28,813 -0- 28 4 -0- -0- 405 (65) -0- (85) 4,553 -0- -0- -0- -0- (9) -0- 372 95 6,528 441 (405) (1,156) (658) (1,942) 93,933 -0- -0- -0- -0- (7) (198) -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- (157) 1,151 14 886 -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- $ 119 (1,177) -0- 449,755 28,813 (198) 400 99 6,528 441 -0- (1,221) (658) (2,027) 98,486 -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- (157) (157) 1,151 1,151 14 886 -0- 30,707 14 886 1 $ 5,220 $ 24,563 $ 146,981 $ 452,210 $ (28,804) $ (17,857) $ 582,313 The accompanying Notes are an integral part of these Consolidated Financial Statements. 46 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies n aT u r e o f o p e r aT i o n s The Company’s businesses include the design or sourcing, marketing and distribution of footwear, principally under the Johnston & Murphy and Dockers brands and the operation at January 30, 2010 of 2,276 Journeys, Journeys Kidz, Shi by Journeys, Johnston & Murphy, Underground Station, Hat World, Lids, Hat Shack, Hat Zone, Head Quarters, Cap Connection, Lids Locker Room and Sports Fan-Attic retail footwear, headwear and licensed sports apparel and accessory stores. In November 2008, the Company acquired Impact Sports and in September 2009, the Company acquired Great Plains Sports, both dealers of branded athletic and team products for college and high school teams, as part of the Hat World Group. In November 2009, the Company acquired Sports Fan-Attic, a retailer of licensed sports headwear, apparel, accessories and novelties, with 37 stores, as part of the Hat World Group. p r i n c i p l e s o f c o n s o l i d aT i o n All subsidiaries are consolidated in the consolidated financial statements. All significant intercompany transactions and accounts have been eliminated. f i s c a l Y e a r The Company’s fiscal year ends on the Saturday closest to January 31. As a result, Fiscal 2010 was a 52-week year with 364 days, Fiscal 2009 was a 52-week year with 364 days and Fiscal 2008 was a 52-week year with 364 days. Fiscal 2010 ended on January 30, 2010, Fiscal 2009 ended on January 31, 2009 and Fiscal 2008 ended on February 2, 2008. f i n a n c i a l s TaT e m e n T r e c l a s s i f i c aT i o n s Certain reclassifications have been made to conform prior years’ data to the current year presentation. In the Fiscal 2009 and 2008 Consolidated Statements of Operations, bank fees totaling approximately $3.6 million and $3.3 million, respectively, were reclassified from interest expense to selling, general and administrative expenses. u s e o f e s T i m aT e s The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant areas requiring management estimates or judgments include the following key financial areas: I N V E N T O R Y V A L U AT I O N The Company values its inventories at the lower of cost or market. In its wholesale operations, cost is determined using the first-in, first-out (“FIFO”) method. Market is determined using a system of analysis which evaluates inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and selling prices reflected in future orders. The Company provides reserves when the inventory has not been marked down to market based on current selling prices or when the inventory is not turning and is not expected to turn at levels satisfactory to the Company. In its retail operations, other than the Hat World segment, the Company employs the retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories. Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on, markups, markdowns, and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, the Company employs the retail inventory method in multiple subclasses of inventory with similar gross margins, and analyzes markdown requirements at the stock number level based on factors such as inventory turn, average selling price, and inventory age. In addition, the Company accrues markdowns as necessary. These additional markdown accruals reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to provide markdown support. In addition to markdown provisions, the Company maintains provisions for shrinkage and damaged goods based on historical rates. 47 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies, continued The Hat World segment employs the moving average cost method for valuing inventories and applies freight using an allocation method. The Company provides a valuation allowance for slow-moving inventory based on negative margins and estimated shrink based on historical experience and specific analysis, where appropriate. Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends, and overall economic conditions. Failure to make appropriate conclusions regarding these factors may result in an overstatement or understatement of inventory value. I M PA I R M E N T O F LO N G - L I V E D A S S E T S 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 the carrying amount. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets. See also Notes 5 and 7. The goodwill impairment test involves a two-step process. The first step is a comparison of the fair value and carrying value of the reporting unit with which the goodwill is associated. The Company estimates fair value using the best information available, and computes the fair value by an equal weighting of the results arrived by a market approach and an income approach utilizing discounted cash flow projections. The income approach uses a projection of a business unit’s estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. Specifically, the Company would allocate the fair value to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference. A key assumption in the Company’s fair value estimate is the weighted average cost of capital utilized for discounting its cash flow projections in its income approach. The Company believes the rate it used in its annual test was consistent with the risks inherent in its business and with industry discount rates. E N V I R O N M E N TA L A N D O T H E R C O N T I N G E N C I E S The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters, including those disclosed in Note 15. The Company has made pretax accruals for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2010, $9.4 million reflected in Fiscal 2009 and $2.9 million reflected in Fiscal 2008. These charges are included in provision for discontinued operations, net in the Consolidated Statements of Operations (see Note 5). The Company monitors these matters on an ongoing basis and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as management deems necessary in view of changes in available information. Changes in estimates of liability are reported in the periods when they occur. Consequently, management believes that its reserve in relation to each proceeding is a best estimate of probable loss connected to the proceeding, or in cases in which no best estimate is possible, the minimum amount in the range of estimated losses, based upon its analysis of the facts and circumstances as of the close of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in environmental proceedings in particular, there can be no assurance that future 48 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies, continued developments will not require additional reserves to be set aside, that some or all reserves will be adequate 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. R E V E N U E R E C O G N I T I O N Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales taxes. Catalog and internet sales are recorded at time of delivery to the customer and are net of estimated returns and exclude sales taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Shipping and handling costs charged to customers are included in net sales. Estimated returns are based on historical returns and claims. Actual amounts of markdowns have not differed materially from estimates. Actual returns and claims in any future period may differ from historical experience. I N C O M E TA x E S As part of the process of preparing Consolidated Financial Statements, the Company is required to estimate its income taxes in each of the tax jurisdictions in which it operates. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within the Consolidated Balance Sheets. The Company then assesses the likelihood that its deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. To the extent the Company believes that recovery of an asset is at risk, valuation allowances are established. To the extent valuation allowances are established or increased in a period, the Company includes an expense within the tax provision in the Consolidated Statements of Operations. Income tax reserves are determined using the methodology required by the Income Tax Topic of the FASB Accounting Standards Codification. This methodology was adopted by the Company as of February 4, 2007, and requires companies to assess each income tax position taken using a two step process. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may be subject to change or varying interpretation. If the Company’s determinations and estimates prove to be inaccurate, the resulting adjustments could be material to its future financial results. P O S T R E T I R E M E N T B E N E F I T S P L A N A C C O U N T I N G Full-time employees who had 1,000 hours of service in calendar year 2004, except employees in the Hat World Segment, are covered by a defined benefit pension plan. The Company froze the defined benefit pension plan effective January 1, 2005. The Company also provides certain former employees with limited medical and life insurance benefits. The Company funds at least the minimum amount required by the Employee Retirement Income Security Act. As required by the Compensation-Retirement Benefits Topic of the FASB Accounting Standards Codification, the Company is required to recognize the overfunded or underfunded status of postretirement benefit plans as an asset or liability in their Consolidated Balance Sheets and to recognize changes in that funded status in accumulated other comprehensive loss, net of tax, in the year in which the changes occur. The Company is required to measure the funded status of a plan as of the date of its fiscal year end. The Company adopted the measurement date change as of January 31, 2009. The Company was required to change the measurement date for its defined benefit pension plan and postretirement benefit plan from December 31 to January 31 (end of fiscal year). As a result of this change, pension expense and actuarial gains/losses for the one-month period ended January 31, 2009 were recognized as adjustments to retained earnings and accumulated other comprehensive loss, respectively. The after-tax charge to retained earnings was $0.1 million. The adoption of the measurement date provision had no effect on the Company’s Consolidated Statements of Operations for Fiscal 2009 or any prior period presented. 49 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies, continued The Company accounts for the defined benefit pension plans using the Compensation-Retirement Benefits Topic of the FASB Accounting Standards Codification. As permitted under this topic, pension expense is recognized on an accrual basis over employees’ approximate service periods. The calculation of pension expense and the corresponding liability requires the use of a number of critical assumptions, including the expected long-term rate of return on plan assets and the assumed discount rate, as well as the recognition of actuarial gains and losses. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions. S H A R E - B A S E D C O M P E N S AT I O N The Company has share-based compensation plans covering certain members of management and non-employee directors. The Company recognizes compensation expense for share-based payments based on the fair value of the awards as required by the Compensation – Stock Compensation Topic of the FASB Accounting Standards Codification. For Fiscal 2010, 2009 and 2008, share-based compensation expense was $0.5 million, $1.7 million and $3.2 million, respectively. For Fiscal 2010, 2009 and 2008, restricted stock expense was $6.5 million, $6.3 million and $4.6 million, respectively. The benefits of tax deductions in excess of recognized compensation expense are reported as a financing cash flow. The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option pricing model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense, including expected stock price volatility. The Company bases expected volatility on historical stock prices for a period that is commensurate with the expected term estimate. The Company bases the risk free rate on an interest rate for a bond with a maturity commensurate with the expected term estimate. The Company estimates the expected term of stock options using historical exercise and employee termination experience. The Company does not currently pay a dividend on common stock. The fair value of employee restricted stock is determined based on the closing price of the Company’s stock on the date of the grant. In addition to the key assumptions used in the Black-Scholes model, the estimated forfeiture rate at the time of valuation (which is based on historical experience for similar options) is a critical assumption, as it reduces expense ratably over the vesting period. Share-based compensation expense is recorded based on a 2% expected forfeiture rate and is adjusted annually for actual forfeitures. The Company reviews the expected forfeiture rate annually to determine if that percent is still reasonable based on historical experience. The Company believes its estimates are reasonable in the context of actual (historical) experience. c a s h a n d c a s h e q u i v a l e n T s Included in cash and cash equivalents at January 30, 2010 and January 31, 2009 are cash equivalents of $62.7 million and $0.1 million, respectively. Cash equivalents are highly-liquid financial instruments having an original maturity of three months or less. The Company’s $62.7 million of cash equivalents was invested in a U.S. government money market fund which invests exclusively in high-quality, short-term securities that are issued or guaranteed by the U.S. government or by U.S. government agencies and instrumentalities. Uninsured cash balances were $6.3 million as of January 30, 2010. The majority of payments due from banks for customer credit card transactions process within 24–48 hours and are accordingly classified as cash and cash equivalents. At January 30, 2010 and January 31, 2009 outstanding checks drawn on zero-balance accounts at certain domestic banks exceeded book cash balances at those banks by approximately $31.9 million and $28.8 million, respectively. These amounts are included in accounts payable. c o n c e n T r aT i o n o f c r e d i T r i s k a n d a l lo W a n c e s o n a c c o u n T s r e c e i v a B l e The Company’s footwear wholesale businesses sell primarily to independent retailers and department stores across the United States. Receivables arising from these sales are not collateralized. Customer credit risk is affected by conditions or occurrences within the economy and the retail industry as well as by customer specific factors. One customer accounted for 20% of the Company’s trade receivables balance and no other customer accounted for more than 10% of the Company’s trade receivables balance as of January 30, 2010. 50 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies, continued The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information, as well as customer specific factors. The Company also establishes allowances for sales returns, customer deductions and co-op advertising based on specific circumstances, historical trends and projected probable outcomes. p r o p e r T Y a n d e q u i p m e n T Property and equipment are recorded at cost and depreciated or amortized over the estimated useful life of related assets. Depreciation and amortization expense are computed principally by the straight-line method over the following estimated useful lives: BUILDINGS AND BUILDING EQUIPMENT 20–45 YEARS COMPUTER HARDWARE, SOFTWARE AND EQUIPMENT 3–10 YEARS FURNITURE AND FIxTURES 10 YEARS l e a s e s Leasehold improvements and properties under capital leases are amortized on the straight-line method over the shorter of their useful lives or their related lease terms and the charge to earnings is included in selling and administrative expenses in the Consolidated Statements of Operations. Certain leases include rent increases during the initial lease term. For these leases, the Company recognizes the related rental expense on a straight-line basis over the term of the lease (which includes any rent holidays and the pre- opening period of construction, renovation, fixturing and merchandise placement) and records the difference between the amounts charged to operations and amounts paid as deferred rent. The Company occasionally receives reimbursements from landlords to be used towards construction of the store the Company intends to lease. Leasehold improvements are recorded at their gross costs including items reimbursed by landlords. The reimbursements are amortized as a reduction of rent expense over the initial lease term. G o o d W i l l a n d o T h e r i n Ta n G i B l e s Under the provisions of the Intangibles – Goodwill and Other Topic of the FASB Accounting Standards Codification, goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually, during the fourth quarter, for impairment. The Company will update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of the business unit with which the goodwill is associated below its carrying amount. It is also required that intangible assets with finite lives be amortized over their respective lives to their estimated residual values, and reviewed for impairment in accordance with the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification. Intangible assets of the Company with indefinite lives are primarily goodwill and identifiable trademarks acquired in connection with the acquisition of Hat World Corporation in April 2004, Hat Shack, Inc. in January 2007, Impact Sports in November 2008, Great Plains Sports in September 2009 and Sports Fan-Attic in November 2009. The Consolidated Balance Sheets include goodwill for the Hat World Group of $119.0 million at January 30, 2010 and $111.7 million at January 31, 2009, respectively. The Company tests for impairment of intangible assets with an indefinite life, at a minimum on an annual basis, relying on a number of factors including operating results, business plans, projected future cash flows and observable market data. The impairment test for identifiable assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying amount. The Company has not had an impairment charge for intangible assets. Identifiable intangible assets of the Company with finite lives are primarily in-place leases and customer lists. They are subject to amortization based upon their estimated useful lives. Finite-lived intangible assets are evaluated for impairment using a process similar to that used to evaluate other definite-lived long-lived assets, a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset. 51 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies, continued fa i r v a l u e o f f i n a n c i a l i n s T r u m e n T s The carrying amounts and fair values of the Company’s financial instruments at January 30, 2010 and January 31, 2009 are: fa i r v a l u e s I n T H o u S A n d S Fixed Rate Long-Term Debt Revolver Borrowings J A n u A r Y 3 0 , 2 0 1 0 J A N U A R Y 3 1 , 2 0 0 9 C A r r Y I n g A M o u n T -0- $ -0- FA I r v A L u e -0- -0- $ C A R R Y I N G A M O U N T $ 86,220 32,300 FA I R V A L U E $ 77,518 29,186 Carrying amounts reported on the Consolidated Balance Sheets for cash, cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturity of these instruments. The fair value of the Company’s long-term debt in Fiscal 2009 was based on a valuation using the Discounted Cash Flow method. c o s T o f s a l e s For the Company’s retail operations, the cost of sales includes actual product cost, the cost of transportation to the Company’s warehouses from suppliers and the cost of transportation from the Company’s warehouses to the stores. Additionally, the cost of its distribution facilities allocated to its retail operations is included in cost of sales. For the Company’s wholesale operations, the cost of sales includes the actual product cost and the cost of transportation to the Company’s warehouses from suppliers. s e l l i n G a n d a d m i n i s T r aT i v e e x p e n s e s Selling and administrative expenses include all operating costs of the Company excluding (i) those related to the transportation of products from the supplier to the warehouse, (ii) for its retail operations, those related to the transportation of products from the warehouse to the store and (iii) costs of its distribution facilities which are allocated to its retail operations. Wholesale and unallocated retail costs of distribution are included in selling and administrative expenses in the amounts of $4.8 million, $4.2 million and $3.8 million for Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively. G i f T c a r d s The Company has a gift card program that began in calendar 1999 for its Hat World operations and calendar 2000 for its footwear operations. The gift cards issued to date do not expire. As such, the Company recognizes income when: (i) the gift card is redeemed by the customer; or (ii) the likelihood of the gift card being redeemed by the customer for the purchase of goods in the future is remote and there are no related escheat laws (referred to as “breakage”). The gift card breakage rate is based upon historical redemption patterns and income is recognized for unredeemed gift cards in proportion to those historical redemption patterns. Gift card breakage is recognized in revenues each period. Gift card breakage recognized as revenue was $0.7 million, $0.5 million and $0.3 million for Fiscal 2010, 2009 and 2008, respectively. The Consolidated Balance Sheets include an accrued liability for gift cards of $7.9 million and $7.5 million at January 30, 2010 and January 31, 2009, respectively. B u Y i n G , m e r c h a n d i s i n G a n d o c c u pa n c Y c o s T s The Company records buying, merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin. s h i p p i n G a n d h a n d l i n G c o s T s Shipping and handling costs related to inventory purchased from suppliers are included in the cost of inventory and are charged to cost of sales in the period that the inventory is sold. All other shipping and handling costs are charged to cost of sales in the period incurred except for wholesale and unallocated retail costs of distribution, which are included in selling and administrative expenses. 52 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies, continued p r e o p e n i n G c o s T s Costs associated with the opening of new stores are expensed as incurred, and are included in selling and administrative expenses on the accompanying Consolidated Statements of Operations. s T o r e c lo s i n G s a n d e x i T c o s T s From time to time, the Company makes strategic decisions to close stores or exit locations or activities. If stores or operating activities to be closed or exited constitute components, as defined by the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification, and will not result in a migration of customers and cash flows, these closures will be considered discontinued operations when the related assets meet the criteria to be classified as held for sale, or at the cease-use date, whichever occurs first. The results of operations of discontinued operations are presented retroactively, net of tax, as a separate component on the Consolidated Statements of Operations, if material individually or cumulatively. To date, no store closings meeting the discontinued operations criteria have been material individually or cumulatively. Assets related to planned store closures or other exit activities are reflected as assets held for sale and recorded at the lower of carrying value or fair value less costs to sell when the required criteria, as defined by the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification, are satisfied. Depreciation ceases on the date that the held for sale criteria are met. Assets related to planned store closures or other exit activities that do not meet the criteria to be classified as held for sale are evaluated for impairment in accordance with the Company’s normal impairment policy, but with consideration given to revised estimates of future cash flows. In any event, the remaining depreciable useful lives are evaluated and adjusted as necessary. Exit costs related to anticipated lease termination costs, severance benefits and other expected charges are accrued for and recognized in accordance with the Exit or Disposal Cost Obligations Topic of the FASB Accounting Standards Codification. a d v e r T i s i n G c o s T s Advertising costs are predominantly expensed as incurred. Advertising costs were $33.8 million, $34.8 million and $33.7 million for Fiscal 2010, 2009 and 2008, respectively. Direct response advertising costs for catalogs are capitalized in accordance with the Other Assets and Deferred Costs Topic for Capitalized Advertising Costs of the FASB Accounting Standards Codification. Such costs are amortized over the estimated future revenues realized from such advertising, not to exceed six months. The Consolidated Balance Sheets include prepaid assets for direct response advertising costs of $1.3 million and $1.2 million at January 30, 2010 and January 31, 2009, respectively. c o n s i d e r aT i o n T o r e s e l l e r s The Company does not have any written buy-down programs with retailers, but the Company has provided certain retailers with markdown allowances for obsolete and slow moving products that are in the retailer’s inventory. The Company estimates these allowances and provides for them as reductions to revenues at the time revenues are recorded. Markdowns are negotiated with retailers and changes are made to the estimates as agreements are reached. Actual amounts for markdowns have not differed materially from estimates. c o o p e r aT i v e a d v e r T i s i n G Cooperative advertising funds are made available to all of the Company’s wholesale customers. In order for retailers to receive reimbursement under such programs, the retailer must meet specified advertising guidelines and provide appropriate documentation of expenses to be reimbursed. The Company’s cooperative advertising agreements require that wholesale customers present documentation or other evidence of specific advertisements or display materials used for the Company’s products by submitting the actual print advertisements presented in catalogs, newspaper inserts or other advertising circulars, or by permitting physical inspection of displays. Additionally, the Company’s cooperative advertising agreements require that the amount of reimbursement requested for such advertising or materials be 53 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies, continued supported by invoices or other evidence of the actual costs incurred by the retailer. The Company accounts for these cooperative advertising costs as selling and administrative expenses, in accordance with the Revenue Recognition Topic for Customer Payments and Incentives of the FASB Accounting Standards Codification. Cooperative advertising costs recognized in selling and administrative expenses were $2.8 million, $2.6 million and $3.3 million for Fiscal 2010, 2009 and 2008, respectively. During Fiscal 2010, 2009 and 2008, the Company’s cooperative advertising reimbursements paid did not exceed the fair value of the benefits received under those agreements. v e n d o r a l lo W a n c e s From time to time, the Company negotiates allowances from its vendors for markdowns taken or expected to be taken. These markdowns are typically negotiated on specific merchandise and for specific amounts. These specific allowances are recognized as a reduction in cost of sales in the period in which the markdowns are taken. Markdown allowances not attached to specific inventory on hand or already sold are applied to concurrent or future purchases from each respective vendor. The Company receives support from some of its vendors in the form of reimbursements for cooperative advertising and catalog costs for the launch and promotion of certain products. The reimbursements are agreed upon with vendors and represent specific, incremental, identifiable costs incurred by the Company in selling the vendor’s specific products. Such costs and the related reimbursements are accumulated and monitored on an individual vendor basis, pursuant to the respective cooperative advertising agreements with vendors. Such cooperative advertising reimbursements are recorded as a reduction of selling and administrative expenses in the same period in which the associated expense is incurred. If the amount of cash consideration received exceeds the costs being reimbursed, such excess amount would be recorded as a reduction of cost of sales. Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses were $3.6 million, $4.0 million and $4.3 million for Fiscal 2010, 2009 and 2008, respectively. During Fiscal 2010, 2009 and 2008, the Company’s cooperative advertising reimbursements received were not in excess of the costs incurred. e n v i r o n m e n Ta l c o s T s 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. e a r n i n G s p e r c o m m o n s h a r e Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities to issue common stock were exercised or converted to common stock (see Note 13). o T h e r c o m p r e h e n s i v e i n c o m e The Comprehensive Income Topic of the FASB Accounting Standards Codification requires, among other things, the Company’s pension liability adjustment, postretirement liability adjustment, unrealized gains or losses on foreign currency forward contracts and foreign currency translation adjustments to be included in other comprehensive income net of tax. Accumulated other comprehensive loss at January 30, 2010 consisted of $28.9 million of cumulative pension liability adjustments, net of tax, a cumulative net loss of $0.2 million on foreign currency forward contracts, net of tax, offset by a foreign currency translation adjustment of $0.3 million. 54 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 1: summary of significant accounting policies, continued B u s i n e s s s e G m e n T s The Segment Reporting Topic of the FASB Accounting Standards Codification, requires that companies disclose “operating segments” based on the way management disaggregates the Company’s operations for making internal operating decisions (see Note 16). d e r i v aT i v e i n s T r u m e n T s a n d h e d G i n G a c T i v i T i e s The Derivatives and Hedging Topic of the FASB Accounting Standards Codification requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheet and to measure those instruments at fair value. Under certain conditions, a derivative may be specifically designated as a fair value hedge or a cash flow hedge. The accounting for changes in the fair value of a derivative are recorded each period in current earnings or in other comprehensive income depending on the intended use of the derivative and the resulting designation. The Company has entered into a small amount of foreign currency forward exchange contracts in order to reduce exposure to foreign currency exchange rate fluctuations in connection with inventory purchase commitments for its Johnston & Murphy Group. Derivative instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged. The settlement terms of the forward contracts correspond with the expected payment terms for the merchandise inventories. As a result, there is no hedge ineffectiveness to be reflected in earnings. The notional amount of such contracts outstanding at January 30, 2010 was $0.6 million. There were no contracts outstanding at January 31, 2009. Forward exchange contracts have an average remaining term of approximately six months. The loss based on spot rates under these contracts at January 30, 2010 was less than $0.1 million. For the year ended January 30, 2010, the Company recorded an unrealized loss on foreign currency forward contracts of $0.3 million in accumulated other comprehensive loss, before taxes. The Company monitors the credit quality of the major national and regional financial institutions with which it enters into such contracts. The Company estimates that the majority of net hedging losses related to forward exchange contracts will be reclassified from accumulated other comprehensive loss into earnings through higher cost of sales over the succeeding year. n e W a c c o u n T i n G p r i n c i p l e s In June 2009, the FASB established the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. The Company adopted the Codification effective for its third quarter ended October 31, 2009, and accordingly, all subsequent public filings will reference the Codification as the sole source of authoritative literature. In December 2008, the FASB updated the Compensation-Retirement Benefits Topic of the Codification to require more detailed disclosures about the assets of a defined benefit pension or other postretirement plan and is effective for fiscal years ending after December 15, 2009 (Fiscal 2010 for the Company). The Company adopted this updated guidance as of January 30, 2010 and it did not have a significant impact on its results of operations or financial position (see Note 12). note 2: change in method of accounting for convertible subordinated debentures In May 2008, the FASB updated the Debt Topic, specifically Debt with Conversion and Other Options, of the Codification to require the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The Company adopted this update to the Codification as of February 1, 2009. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar debt instrument without the conversion feature, and the difference between the proceeds for the convertible debt and the amount reflected as a debt liability is then recorded as additional paid-in capital. As a result, the debt is 55 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 2: change in method of accounting for convertible subordinated debentures, continued effectively recorded at a discount reflecting its below market coupon interest rate. The debt is subsequently accreted to its par value over its expected life, with the rate of interest that reflects the market rate at issuance being reflected in the Consolidated Statements of Operations. Upon adoption, the Company measured the fair value of the Company’s $86.2 million 4 1/8% Convertible Subordinated Debentures issued in June 2003, using an interest rate that the Company could have obtained at the date of issuance for similar debt instruments. Based on this analysis, the Company determined that the fair value of the debentures was approximately $66.6 million as of the issuance date, a reduction of approximately $19.6 million in the carrying value of the debentures, of which $11.5 million was recorded as additional paid-in capital, $7.4 million was recorded as a deferred tax liability and $0.7 million as a reduction to deferred note expense. In accordance with this update to the Codification, the Company is required to allocate a portion of the $2.9 million of debt issuance costs that were directly related to the issuance of the debentures between a liability component and an equity component as of the issuance date. Based on this analysis, the Company reclassified approximately $0.7 million from deferred note expense as discussed above. The retroactive application of this update to the Codification resulted in the recognition of additional pretax non-cash interest expense for Fiscal 2009 and Fiscal 2008 of $3.1 million and $2.8 million, respectively and a change to February 3, 2007 retained earnings balance of $5.1 million. The following table sets forth the effect of the retrospective application of this update to the Codification on certain previously reported line items: In THouSAndS ConSoLIdATed STATeMenT oF oPerATIonS: Interest expense* Income taxes Net earnings Diluted earnings per common share: Continuing operations Net earnings TWeLve MonTHS ended JAnuArY 31, 2009 TWeLve MonTHS ended FeBruArY 2, 2008 AS PrevIouSLY rePorTed AdJuSTMenT AS AdJuSTed AS PrevIouSLY rePorTed AdJuSTMenT AS AdJuSTed $ 6,166 95,683 152,636 $ 3,068 (1,188) (1,880) $ 9,234 94,495 150,756 $ 9,230 24,247 6,885 $ 2,815 $ 12,045 23,146 5,171 (1,101) (1,714) $ $ 6.72 6.49 $ $ .00 .00 $ $ 6.72 6.49 $ $ 0.36 0.29 $ (0.07) $ $ (0.07) $ 0.29 0.22 *Previously reported interest expense for Fiscal 2009 and 2008 was adjusted for bank fees reclassed of $3,566 and $3,340, respectively. See Note 1. 56 n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 2: change in method of accounting for convertible subordinated debentures, continued Genesco inc. AND SUBSIDIARIES In THouSAndS ConSoLIdATed BALAnCe SHeeTS: Noncurrent deferred income taxes Other noncurrent assets Total Assets Long-term debt Total Liabilities Additional paid-in capital Retained earnings Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity TWeLve MonTHS ended JAnuArY 31, 2009 AS PrevIouSLY rePorTed AdJuSTMenT AS AdJuSTed $ 7,132 7,584 818,027 $ (1,830) $ (134) (1,964) 5,302 7,450 816,063 118,520 371,093 (4,785) (4,785) 113,735 366,308 38,230 432,324 446,934 818,027 11,550 (8,729) 2,821 (1,964) 49,780 423,595 449,755 816,063 The amount of interest expense recognized and the effective interest rate for the Company’s convertible debentures were as follows: In THouSAndS Contractual coupon interest Amortization of discount on convertible debentures Interest expense TWeLve MonTHS ended JAnuArY 30, 2010 $ 1,543 JAnuArY 31, 2009 $ 3,557 FeBruArY 2, 2008 $ 3,557 1,465 $ 3,008 3,164 $ 6,721 2,911 $ 6,468 Effective interest rate 8.5% 8.5% 8.5% note 3: Terminated merger agreement The Company announced in June 2007 that the boards of directors of both Genesco and The Finish Line, Inc. had unanimously approved a definitive merger agreement under which The Finish Line would acquire all of the outstanding common shares of Genesco at $54.50 per share in cash (the “Proposed Merger”). The Finish Line refused to close the Proposed Merger and litigation ensued. The Proposed Merger and related agreement were terminated in March 2008 in connection with an agreement to settle the litigation with The Finish Line and UBS Loan Finance LLC and UBS Securities LLC (collectively, “UBS”) for a cash payment of $175.0 million to the Company and a 12% equity stake in The Finish Line, which the Company received in the first quarter of Fiscal 2009. The Company distributed the 12% equity stake, or 6,518,971 shares of Class A Common Stock of The Finish Line, Inc., on June 13, 2008, to its common shareholders of record on May 30, 2008, as required by the settlement agreement. During Fiscal 2009 and 2008, the Company expensed $8.0 million and $27.6 million, respectively, in merger-related litigation costs. The total merger- related litigation costs for Fiscal 2008 of $27.6 million were tax deductible in Fiscal 2009 and resulted in a permanent tax benefit reflected as a component of income tax expense. For additional information, see the “Merger-Related Litigation” section in Note 15. note 4: acquisitions and intangible assets s p o r T s fa n - aT T i c a c q u i s i T i o n In the fourth quarter of Fiscal 2010, the Company’s Hat World subsidiary acquired the assets of Sports Fan-Attic, a retailer of licensed sports headwear, apparel, accessories and novelties, with 37 stores in seven states as of January 30, 2010, for a preliminary purchase price of $13.9 million plus assumed debt of $1.6 million with $4.5 million of that amount withheld until satisfaction of certain closing contingencies. Subsequently, in February 2010, $3.0 million of the $4.5 million was paid. The Company allocated $6.2 million of the purchase price to goodwill. Finite-lived intangibles include $1.4 million for trademarks, a $0.4 million asset and a $1.1 million liability to reflect the adjustment of acquired 57 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 4: acquisitions and intangible assets, continued leases to market and $0.1 million for a non-compete agreement. The weighted average amortization period for the asset to adjust acquired leases to market is 4.7 years. The goodwill related to Sports Fan-Attic is deductible for tax purposes. G r e aT p l a i n s s p o r T s a c q u i s i T i o n In the third quarter of Fiscal 2010, the Impact Sports division of Hat World acquired the assets of Great Plains Sports of St. Paul, Minnesota, for a preliminary purchase price of $2.9 million plus assumed debt of $1.1 million with $0.6 million withheld until satisfaction of certain closing contingencies. Great Plains Sports is a dealer of branded athletic and team products for colleges, high schools, corporations and youth organizations and also operates a sporting goods store in St. Paul, Minnesota. The Company allocated $1.1 million of the purchase price to goodwill. Finite-Lived intangibles include $1.5 million for a customer list and $0.1 million for non-compete agreements. The goodwill related to Great Plains Sports is deductible for tax purposes. i m pa c T s p o r T s a c q u i s i T i o n In the fourth quarter of Fiscal 2009, Hat World acquired the assets of Impact Sports, a dealer of branded athletic and team products for college and high school teams, for a purchase price of $5.1 million plus assumed debt of $1.3 million funded from borrowings under the Credit Facility. The Company allocated $4.0 million of the purchase price to goodwill. Finite-lived intangibles include $1.0 million for customer relationships and $0.2 million for non-compete agreements. The goodwill related to Impact Sports is deductible for tax purposes. Other intangibles by major classes were as follows: LeASeS CuSToMer LISTS non-CoMPeTe AgreeMenTS ToTAL In THouSAndS Gross other intangibles Accumulated amortization net other Intangibles Jan. 30, 2010 $ 9,267 (8,074) $ 1,193 JAn. 31, 2009 $ 8,847 (7,590) $ 1,257 jan. 30, 2010 $ 2,790 (461) $ 2,329 JAn. 31, 2009 $ 1,290 (309) $ 981 jan. 30, 2010 $ 408 (260) $ 148 JAn. 31, 2009 $ 195 (57) $ 138 JAn. 31, 2009 jan. 30, 2010 $ 12,465 $ 10,332 (7,956) $ 3,670 $ 2,376 (8,795) The amortization of intangibles was $0.9 million, $0.8 million and $1.3 million for Fiscal 2010, 2009 and 2008, respectively. The amortization of intangibles will be $1.1 million, $0.9 million, $0.8 million, $0.7 million and $0.6 million for Fiscal 2011, 2012, 2013, 2014 and 2015, respectively. note 5: restructuring and other charges and discontinued operations r e s T r u c T u r i n G a n d o T h e r c h a r G e s In accordance with Company policy, assets are determined to be impaired when the revised estimated future cash flows are insufficient to recover the carrying costs. Impairment charges represent the excess of the carrying value over the fair value of those assets. Asset impairment charges are reflected as a reduction of the net carrying value of property and equipment, and in restructuring and other, net in the accompanying Consolidated Statements of Operations. The Company recorded a pretax charge to earnings of $13.5 million in Fiscal 2010. The charge reflected in restructuring and other, net included $13.3 million for retail store asset impairments and $0.4 million for lease terminations offset by $0.3 million for other legal matters. Also included in the charge was $0.1 million in excess markdowns related to the lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. The Company recorded a total pretax charge to earnings of $7.7 million in Fiscal 2009. The charge reflected in restructuring and other, net included $8.6 million of charges for retail store asset impairments, $1.6 million for lease terminations and $1.1 million for other legal matters, offset by a $3.8 million gain from a lease termination transaction. Also included in the charge was $0.2 million in excess markdowns related to the store lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. The Company recorded a total pretax charge to earnings of $10.6 million in Fiscal 2008. The charge reflected in restructuring and other, net included $8.7 million of charges for retail store asset impairments and $1.5 million for lease terminations, offset by $0.5 million in excise tax refunds and an antitrust settlement. Also included in the charge was $0.9 million in excess markdowns related to the lease terminations which is reflected in cost of sales on the Consolidated Statements of Operations. 58 n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s Genesco inc. AND SUBSIDIARIES note 5: restructuring and other charges and discontinued operations, continued d i s c o n T i n u e d o p e r aT i o n s For the year ended January 30, 2010, the Company recorded an additional charge to earnings of $0.5 million ($0.3 million net of tax) reflected in discontinued operations, including $0.8 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.3 million gain for excess provisions to prior discontinued operations (see Note 15). For the year ended January 31, 2009, the Company recorded an additional charge to earnings of $9.0 million ($5.5 million net of tax) reflected in discontinued operations, including $9.4 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.4 million gain for excess provisions to prior discontinued operations (see Note 15). For the year ended February 2, 2008, the Company recorded an additional charge to earnings of $2.6 million ($1.6 million net of tax) reflected in discontinued operations, including $2.9 million primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by the Company offset by a $0.3 million gain for excess provisions to prior discontinued operations (see Note 15). ACCrued ProvISIon For dISConTInued oPerATIonS In THouSAndS Balance February 2, 2008 Additional provision Fiscal 2009 Charges and adjustments, net Balance January 31, 2009 Additional provision Fiscal 2010 Charges and adjustments, net Balance January 30, 2010* Current provision for discontinued operations Total noncurrent Provision for discontinued operations *Includes a $15.9 million environmental provision, including $9.9 million in current provision for discontinued operations. FACILITY SHuTdoWn $ CoSTS 7,494 9,006 (932) 15,568 452 (606) 15,414 9,366 $ 6,048 note 6: inventories I n T H o u S A n d S Raw materials Wholesale finished goods Retail merchandise Total Inventories note 7: fair value J A n u A r Y 3 0 , $ 2 0 1 0 5,415 22,383 263,176 $ 290,974 $ J A N U A R Y 3 1 , 2 0 0 9 2,059 44,155 259,864 $ 306,078 The Company adopted the Fair Value Measurements and Disclosures Topic of the Codification as of February 3, 2008, with the exception of the application of the topic to non-recurring, nonfinancial assets and liabilities. The adoption did not have a material impact on the Company’s results of operations or financial position. This Topic defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. In February 2008, the FASB issued an amendment to the Fair Value Topic, to delay the effective date for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). The Company adopted the amendment as of February 1, 2009. The Fair Value Measurements and Disclosures Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value 59 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 7: fair value, continued hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: L e v e L 1 – Quoted prices in active markets for identical assets or liabilities. L e v e L 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. L e v e L 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The following table presents the Company’s assets and liabilities measured at fair value on a nonrecurring basis as of January 30, 2010 aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands): Measured as of May 2, 2009 Measured as of August 1, 2009 Measured as of October 31,2009 Measured as of January 30, 2010 Lo n g - L I v e d A S S e T S H e L d A n d u S e d $1,114 $1,430 $1,275 $1,227 L e v e L 1 L e v e L 2 L e v e L 3 $ $ $ $ - - - - $ $ $ $ - - - - $1,114 $1,430 $1,275 $1,227 T o TA L Lo S S e S $4,467 $3,372 $2,594 $2,879 In accordance with the Property, Plant and Equipment Topic of the Codification, the Company recorded $13.3 million of impairment charges as a result of the fair value measurement of its long-lived assets held and used on a nonrecurring basis during the twelve months ended January 30, 2010. These charges are reflected in restructuring and other, net on the Consolidated Statements of Operations. The Company used a discounted cash flow model to estimate the fair value of these long-lived assets at January 30, 2010. Discount rate and growth rate assumptions are derived from current economic conditions, expectations of management and projected trends of current operating results. As a result, the Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy. note 8: long-Term debt I n T H o u S A n d S 4 1/8% convertible subordinated debentures due June 2023 Debt discount on 4 1/8% convertible subordinated debentures Revolver borrowings Total long-term debt Current portion Total noncurrent Portion of Long-Term debt* 2 0 1 0 2 0 0 9 $ -0- $ 86,220 -0- -0- -0- -0- (4,785) 32,300 113,735 -0- $ -0- $ 113,735 *The Company adopted the provisions of the FASB’s Debt with Conversion and Other Options Sub-Topic of the Codification for its Debentures as of February 1, 2009. The impact of the adoption is discussed in more detail in Note 2. Long-term debt maturing during each of the next five years ending January is zero for each year. c r e d i T fa c i l i T Y: On December 1, 2006, the Company entered into an Amended and Restated Credit Agreement (the “Credit Facility”) by and among the Company, certain subsidiaries of the Company party thereto, as other borrowers, the lenders party thereto and Bank of America, N.A., as administrative agent. The Credit Facility expires December 1, 2011. The Credit Facility replaced the Company’s $105.0 million revolving credit facility. 60 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 8: long-Term debt, continued Deferred financing costs incurred of $1.2 million related to the Credit Facility were capitalized and are being amortized over four years. These costs are included in other non-current assets on the Consolidated Balance Sheets. The Company did not have any revolver borrowings outstanding under the Credit Facility at January 30, 2010. The Company had outstanding letters of credit of $11.0 million under the facility at January 30, 2010. These letters of credit support product purchases and lease and insurance indemnifications. The material terms of the Credit Facility are as follows: A V A I L A B I L I T Y The Credit Facility is a revolving credit facility in the aggregate principal amount of $200.0 million, with a $20.0 million swingline loan sublimit and a $70.0 million sublimit for the issuance of standby letters of credit, and has a five-year term. Any swingline loans and letters of credit will reduce the availability under the Credit Facility on a dollar-for-dollar basis. In addition, the Company has an option to increase the availability under the Credit Facility by up to $100.0 million (in increments no less than $25.0 million) subject to, among other things, the receipt of commitments for the increased amount. The aggregate amount of the loans made and letters of credit issued under the Restated Credit Agreement shall at no time exceed the lesser of the facility amount ($200.0 million or, if increased at the Company’s option, up to $300.0 million) or the “Borrowing Base”, which generally is based on 85% of eligible inventory plus 85% of eligible accounts receivable less applicable reserves. C O L L AT E R A L The loans and other obligations under the Credit Facility are secured by substantially all of the presently owned and hereafter acquired non-real estate assets of the Company and certain subsidiaries of the Company. I N T E R E S T A N D F E E S The Company’s borrowings under the Credit Facility bear interest at varying rates that, at the Company’s option, can be based on either: • a base rate generally defined as the sum of the prime rate of Bank of America, N.A. and an applicable margin. • a LIBO rate generally defined as the sum of LIBOR (as quoted on the British Banking Association Telerate Page 3750) and an applicable margin. The initial applicable margin for base rate loans was 0.00%, and the initial applicable margin for LIBOR loans was 1.00%. Thereafter, the applicable margin will be subject to adjustment based on “Excess Availability” for the prior quarter. As of January 30, 2010, the margin for LIBOR loans was 1.00%. The term “Excess Availability” means, as of any given date, the excess (if any) of the Borrowing Base over the outstanding credit extensions under the Credit Facility. Interest on the Company’s borrowings is payable monthly in arrears for base rate loans and at the end of each interest rate period (but not less often than quarterly) for LIBOR loans. The Company is also required to pay a commitment fee on the difference between committed amounts and the aggregate amount (including the aggregate amount of letters of credit) of the credit extensions outstanding under the Credit Facility, which initially was 0.25% per annum, subject to adjustment in the same manner as the applicable margins for interest rates. C E R TA I N C O V E N A N T S The Company is not required to comply with any financial covenants unless Adjusted Excess Availability is less than 10% of the total commitments under the Credit Facility (currently $20.0 million). The term “Adjusted Excess Availability” means, as of any given date, the excess (if any) of (a) the lesser of the total commitments under the Credit Facility and the Borrowing Base over (b) the outstanding credit extensions under the Credit Facility. If and during such time as Adjusted Excess Availability is less than such amount, the Credit Facility requires the Company to meet a minimum fixed charge coverage ratio (EBITDA less capital expenditures less cash taxes divided by cash interest expense and scheduled payments of principal indebtedness) of 1.00 to 1.00. Because Adjusted Excess Availability exceeded $20.0 million, the Company was not required to comply with this financial covenant at January 30, 2010. 61 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 8: long-Term debt, continued In addition, the Credit Facility contains certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, loans and investments, acquisitions, dividends and other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations, prepayments or material amendments of other indebtedness and other matters customarily restricted in such agreements. C A S H D O M I N I O N The Credit Facility also contains cash dominion provisions that apply in the event that the Company’s Adjusted Excess Availability fails to meet certain thresholds or there is an event of default under the Credit Facility. E V E N T S O F D E FA U LT The Credit Facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts and change in control. Certain of the lenders under the Credit Facility or their affiliates have provided, and may in the future provide, certain commercial banking, financial advisory, and investment banking services in the ordinary course of business for the Company, its subsidiaries and certain of its affiliates, for which they receive customary fees and commissions. 4 1 / 8 % c o n v e r T i B l e s u B o r d i n aT e d d e B e n T u r e s d u e 2 0 2 3 : On June 24, 2003 and June 26, 2003, the Company issued a total of $86.3 million of 4 1/8% Convertible Subordinated Debentures (the “Debentures”) due June 15, 2023. The Debentures were convertible at the option of the holders into shares of the Company’s common stock, par value $1.00 per share: (1) in any quarter in which the price of its common stock issuable upon conversion of a Debenture reached 120% or more of the conversion price ($24.07 or more) for 10 of the last 30 trading days of the immediately preceding fiscal quarter, (2) if specified corporate transactions occurred or (3) if the trading price for the Debentures fell below certain thresholds. Upon conversion, the Company would have the right to deliver, in lieu of its common stock, cash or a combination of cash and shares of its common stock. Subject to the above conditions, each $1,000 principal amount of Debentures was convertible into 49.8462 shares (equivalent to a conversion price of $20.06 per share of common stock) subject to adjustment. There were $30,000 of debentures converted to 1,356 shares of common stock during Fiscal 2008. On April 29, 2009, the Company entered into separate exchange agreements whereby it acquired and retired $56.4 million in aggregate principal amount ($51.3 million fair value) of its Debentures due June 15, 2023 in exchange for the issuance of 3,066,713 shares of its common stock, which include 2,811,575 shares that were reserved for conversion of the Debentures and 255,138 additional inducement shares, and a cash payment of approximately $0.9 million. The inducement was not deductible for tax purposes. During the fourth quarter of Fiscal 2010, holders of an aggregate of $21.04 million principal amount of its 4 1/8% Convertible Subordinated Debentures were converted to 1,048,764 shares of common stock pursuant to separate conversion agreements which provided for payment of an aggregate of $0.3 million to induce conversion. On November 4, 2009, the Company issued a notice of redemption to the remaining holders of the $8.775 million outstanding 4 1/8% Convertible Subordinated Debentures. As permitted by the Indenture, holders of all except $1,000 in principal amount of the remaining Debentures converted their Debentures to 437,347 shares of common stock prior to the redemption date of December 3, 2009. As a result of the exchange agreements and conversions, the Company recognized a loss on the early retirement of debt of $5.5 million in Fiscal 2010, reflected on the Consolidated Statements of Operations. After the exchanges and conversions there was zero aggregate principal amount of Debentures outstanding. The Company paid cash interest on the debentures at an annual rate of 4.125% of the principal amount at issuance, payable on June 15 and December 15 of each year, commencing on December 15, 2003. The Company was required to pay contingent interest (in the amounts set forth in the Debentures) to holders of the Debentures during any six-month period from and including an interest payment date to, but excluding, the next interest payment date, commencing with the six-month period ending December 15, 2008, if the average trading price of the Debentures for the five consecutive trading day measurement period immediately preceding the applicable six-month period equaled 120% or more of the 62 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 8: long-Term debt, continued principal amount of the Debentures. This contingency was satisfied during the six-month period ended December 15, 2008. As a result, the Company paid $0.1 million in contingent interest on December 15, 2008. No contingent interest was paid with the June 15, 2009 interest payment. Deferred financing costs of $2.9 million relating to the issuance were initially capitalized and being amortized over seven years. As a result of adoption of the FASB’s Debt with Conversion and Other Options Sub-Topic of the Codification, $0.7 million was reclassified from deferred note expense to additional paid-in capital. Due to the exchanges and conversions, deferred financing costs of $0.3 million were written off and included in loss on early retirement of debt in the Consolidated Statements of Operations. note 9: commitments under long-Term leases o p e r aT i n G l e a s e s The Company leases its office space and all of its retail store locations and transportation equipment under various noncancelable operating leases. The leases have varying terms and expire at various dates through 2024. The store leases typically have initial terms of between 5 and 10 years. Generally, most of the leases require the Company to pay taxes, insurance, maintenance costs and contingent rentals based on sales. Approximately 2% of the Company’s leases contain renewal options. Rental expense under operating leases of continuing operations was: In THouSAndS Minimum rentals Contingent rentals Sublease rentals Total rental expense Minimum rental commitments payable in future years are: FISCAL YeArS 2011 2012 2013 2014 2015 Later years Total minimum rental commitments 2010 $ 159,553 4,780 (652) $ 163,681 2009 $ 156,241 3,722 (763) $ 159,200 2008 $ 145,763 4,221 (806) $ 149,178 In THouSAndS $ 167,739 156,424 142,148 129,605 116,569 264,327 $ 976,812 For leases that contain predetermined fixed escalations of the minimum rentals, the related rental expense is recognized on a straight-line basis and the cumulative expense recognized on the straight-line basis in excess of the cumulative payments is included in deferred rent and other long-term liabilities on the Consolidated Balance Sheets. The Company occasionally receives reimbursements from landlords to be used towards construction of the store the Company intends to lease. Leasehold improvements are recorded at their gross costs including items reimbursed by landlords. The reimbursements are amortized as a reduction of rent expense over the initial lease term. Tenant allowances of $22.1 million and $24.6 million for Fiscal 2010 and 2009, respectively, and deferred rent of $31.1 million and $29.0 million for Fiscal 2010 and 2009, respectively, are included in deferred rent and other long-term liabilities on the Consolidated Balance Sheets. 63 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 10: shareholders’ equity n o n - r e d e e m a B l e p r e f e r r e d s T o c k SHARES NUMBER OF SHARES AMOUNTS IN THOUSANDS ConverTIBLe no oF CoMMon 2010 2009 2008 2010 2009 2008 rATIo voTeS CLASS (IN ORDER OF PREFERENCE)* AUTHORIZED Subordinated Serial Preferred (Cumulative) Aggregate 3,000,000** - 64,368 33,497 40,449 12,326 3,579 53,764 -0- 800,000 - 33,538 12,326 3,579 -0- - - 33,658 $1,340 1,233 12,326 358 3,579 -0- -0- - $1,342 1,233 358 -0- - $1,346 1,233 358 -0- N/A .83 2.11 1.52 $2.30 Series 1 $4.75 Series 3 $4.75 Series 4 Series 6 $1.50 Subordinated Cumulative Preferred N/A 1 2 1 100 1 5,000,000 30,067 79,469 30,017 79,460 30,017 79,580 902 3,833 900 3,833 900 3,837 Employees’ Subordinated Convertible Preferred Stated Value of Issued Shares Employees’ Preferred Stock Purchase Accounts Total non-redeemable preferred stock 5,000,000 50,350 *In order of preference for liquidation and dividends. 50,079 54,825 1,510 5,343 (123) $5,220 1,502 5,335 (132) $5,203 1,645 5,482 (144) $5,338 1.00*** 1 **The Company’s charter permits the board of directors to issue Subordinated Serial Preferred Stock in as many series, each with as many shares and such rights and preferences as the board may designate. ***Also convertible into one share of $1.50 Subordinated Cumulative Preferred Stock. P r e F e r r e d S T o C k T r A n S A C T I o n S In THouSAndS Balance February 3, 2007 Conversion of Series 3 Conversion of Series 4 Other Balance February 2, 2008 Other Balance January 31, 2009 Other Balance january 30, 2010 NON-REDEEMABLE EMPLOYEES’ TOTAL NON-REDEEMABLE EMPLOYEES’ PREFERRED STOCK NON-REDEEMABLE PREFERRED STOCK $5,026 PREFERRED STOCK $1,750 PURCHASE ACOUNTS $(174) PREFERRED STOCK $6,602 (533) (561) (95) 3,837 (4) 3,833 -0- -0- (105) 1,645 (143) 1,502 -0- -0- 30 (144) 12 (132) (533) (561) (170) 5,338 (135) 5,203 -0- $3,833 8 $1,510 9 $(123) 17 $5,220 s u B o r d i n aT e d s e r i a l p r e f e r r e d s T o c k ( c u m u l aT i v e ) : Stated and redemption values for Series 1 are $40 per share and for Series 3 and 4 are each $100 per share plus accumulated dividends; liquidation value for Series 1 is $40 per share plus accumulated dividends and for Series 3 and 4 is $100 per share plus accumulated dividends. The Company’s shareholders’ rights plan grants to common shareholders the right to purchase, at a specified exercise price, a fraction of a share of subordinated serial preferred stock, Series 6, in the event of an acquisition of, or an announced tender offer for, 15% or more of the Company’s outstanding common stock. Upon any such event, each right also entitles the holder (other than the person making such acquisition or tender offer) to purchase, at the exercise price, shares of common stock having a market value of twice the exercise price. In the event the Company is acquired in a transaction in which the Company is not the surviving corporation, each right would entitle its holder to purchase, at the exercise price, shares of the acquiring company having a market value of twice the exercise price. The rights expire in August 2010, 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. 64 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 10: shareholders’ equity, continued $ 1 . 5 0 s u B o r d i n aT e d c u m u l aT i v e p r e f e r r e d s T o c k : Stated and liquidation values and redemption price are 88 times the average quarterly per share dividend paid on common stock for the previous eight quarters (if any), but in no event less than $30 per share plus accumulated dividends. e m p lo Y e e s ’ s u B o r d i n aT e d c o n v e r T i B l e p r e f e r r e d s T o c k : Stated and liquidation values are 88 times the average quarterly per share dividend paid on common stock for the previous eight quarters (if any), but in no event less than $30 per share. c o m m o n s T o c k : Common stock – $1 par value. Authorized: 80,000,000 shares; issued: January 30, 2010 – 24,562,693 shares; January 31, 2009 –19,731,979 shares. There were 488,464 shares held in treasury at January 30, 2010 and January 31, 2009. Each outstanding share is entitled to one vote. At January 30, 2010, common shares were reserved as follows: 109,635 shares for conversion of preferred stock; 815,431 shares for the 1996 Stock Incentive Plan; 180,149 shares for the 2005 Stock Incentive Plan; 817,376 shares for the 2009 Stock Incentive Plan; and 322,848 shares for the Genesco Employee Stock Purchase Plan. For the year ended January 30, 2010, 28,500 shares of common stock were issued for the exercise of stock options at an average weighted market price of $14.04, for a total of $0.4 million; 383,745 shares of common stock were issued as restricted shares as part of the 2009 Equity Incentive Plan; 4,350 shares of common stock were issued for the purchase of shares under the Employee Stock Purchase Plan at an average weighted market price of $22.87, for a total of $0.1 million; 21,204 shares were issued to directors for no consideration; 65,299 shares were withheld for taxes on restricted stock vested in Fiscal 2010; 11,951 shares of restricted stock were forfeited in Fiscal 2010; 4,552,824 shares of common stock were issued in conversions of the Debentures; and 2,341 shares were issued in miscellaneous conversions of Series 1 and Employees’ Subordinated Convertible Preferred Stock. The 28,500 options exercised were all fixed stock options (see Note 14). In addition, the Company repurchased and retired 85,000 shares of common stock at an average weighted market price of $23.84 for a total of $2.0 million. For the year ended January 31, 2009, 82,868 shares of common stock were issued for the exercise of stock options at an average weighted market price of $17.35, for a total of $1.4 million; 397,273 shares of common stock were issued as restricted shares as part of the 2005 Equity Incentive Plan; 1,711 shares of common stock were issued for the purchase of shares under the Employee Stock Purchase Plan at an average weighted market price of $31.81, for a total of $0.1 million; 18,792 shares were issued to directors for no consideration; 52,969 shares were withheld for taxes on restricted stock vested in Fiscal 2009; 5,189 shares of restricted stock were forfeited in Fiscal 2009; and 4,752 shares were issued in miscellaneous conversions of Series 1 and Employees’ Subordinated Convertible Preferred Stock. The 82,868 options exercised were all fixed stock options (see Note 14). In addition, the Company repurchased and retired 4,000,000 shares of common stock at an average weighted market price of $22.73 for a total of $90.9 million. For the year ended February 2, 2008, 32,751 shares of common stock were issued for the exercise of stock options at an average weighted market price of $17.83, for a total of $0.6 million; 3,547 shares of common stock were issued as restricted shares as part of the 2005 Equity Incentive Plan; 4,813 shares of common stock were issued for the purchase of shares under the Employee Stock Purchase Plan at an average weighted market price of $43.82, for a total of $0.2 million; 6,761 shares were issued to directors for no consideration; 19,397 shares were withheld for taxes on restricted stock vested in Fiscal 2008; 686 shares of restricted stock were forfeited in Fiscal 2008; and 26,494 shares were issued in miscellaneous conversions of Series 1, Series 3, Series 4, Employees’ Subordinated Convertible Preferred Stock and Debentures. The 32,751 options exercised were all fixed stock options (see Note 14). r e s T r i c T i o n s o n d i v i d e n d s a n d r e d e m p T i o n s o f c a p i Ta l s T o c k : 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. 65 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 10: shareholders’ equity, continued The Company’s Credit Facility prohibits the payment of dividends and other restricted payments unless after such dividend or restricted payment availability under the Credit Facility exceeds $50.0 million or if availability is between $30.0 million and $50.0 million, the Company’s fixed charge coverage must be greater than 1.0 to 1.0. The Company’s management does not believe its availability under the Credit Facility will fall below $50.0 million during Fiscal 2011. Dividends declared for Fiscal 2010 for the Company’s Subordinated Serial Preferred Stock, $2.30 Series 1, $4.75 Series 3 and $4.75 Series 4, and the Company’s $1.50 Subordinated Cumulative Preferred Stock were $198,000 in the aggregate. C H A n g e S I n T H e S H A r e S o F T H e C o M PA n Y ’ S C A P I TA L S T o C k NON-REDEEMABLE COMMON PREFERRED EMPLOYEES’ PREFERRED Issued at February 3, 2007 Exercise of options Issue restricted stock Issue shares – Employee Stock Purchase Plan Conversion of Series 3 preferred stock Conversion of Series 4 preferred stock Other Issued at February 2, 2008 Exercise of options Issue restricted stock Issue shares – Employee Stock Purchase Plan Shares repurchased Other Issued at January 31, 2009 Exercise of options Issue restricted stock Issue shares – Employee Stock Purchase Plan Conversion of 4 1/8% Debentures Shares repurchased Other Issued at January 30, 2010 Less shares repurchased and held in treasury outstanding at January 30, 2010 STOCK 23,230,458 32,751 3,547 4,813 11,251 8,519 (6,598) 23,284,741 82,868 397,273 1,711 (4,000,000) (34,614) 19,731,979 28,500 404,949 4,350 4,552,824 (85,000) (74,909) 24,562,693 488,464 24,074,229 STOCK 92,906 -0- -0- -0- (5,334) (5,605) (2,387) 79,580 -0- -0- -0- -0- (120) 79,460 -0- -0- -0- -0- -0- 9 79,469 -0- 79,469 STOCK 58,328 -0- -0- -0- -0- -0- (3,503) 54,825 -0- -0- -0- -0- (4,746) 50,079 -0- -0- -0- -0- -0- 271 50,350 -0- 50,350 66 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 11: income Taxes Income tax expense from continuing operations is comprised of the following: I n T H o u S A n d S Current U.S. federal Foreign State Total Current Income Tax Expense Deferred U.S. federal Foreign State Total Deferred Income Tax Expense (Benefit) Total income Tax expense – continuing operations 2 0 1 0 2 0 0 9 2 0 0 8 $ 14,261 1,680 1,781 17,722 4,943 -0- (1,263) 3,680 $ 21,402 $ 73,781 1,837 12,228 87,846 5,429 324 896 6,649 $ 94,495 $ 30,625 1,351 4,954 36,930 (11,655) (230) (1,899) (13,784) $ 23,146 Discontinued operations were recorded net of income tax benefit of approximately ($0.2) million, ($3.5) million and $(1.0) million in Fiscal 2010, 2009 and 2008, respectively. As a result of the exercise of stock options and vesting of restricted stock during Fiscal 2010, 2009 and 2008, the Company realized an additional income tax (expense) benefit of approximately ($0.7) million, ($0.6) million and $0.7 million, respectively. These tax benefits (expenses) are reflected as an adjustment to either additional paid-in capital or deferred tax asset. Deferred tax assets and liabilities are comprised of the following: J A n u A r Y 3 0 , J A N U A R Y 3 1 , I n T H o u S A n d S Identified intangibles Prepaids Convertible bonds Total deferred tax liabilities Options Deferred rent Pensions Expense accruals Uniform capitalization costs Book over tax depreciation Provisions for discontinued operations and restructurings Inventory valuation Tax net operating loss and credit carryforwards Allowances for bad debts and notes Deferred compensation and restricted stock Other Deferred tax assets net deferred Tax Assets 2 0 1 0 $ (20,011) (2,386) (3,011) (25,408) 2,027 10,050 6,434 6,606 6,804 5,444 6,594 3,471 752 592 3,580 3,913 56,267 $ 30,859 The deferred tax balances have been classified in the Consolidated Balance Sheets as follows: Net current asset Net non-current asset net deferred Tax Assets 2 0 1 0 $ 17,314 13,545 $ 30,859 2 0 0 9 $ (20,317) (2,329) (11,879) (34,525) 1,972 9,768 8,595 4,983 4,901 7,909 6,413 3,943 141 517 2,169 3,599 54,910 $ 20,385 2 0 0 9 $ 15,083 5,302 $ 20,385 67 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 11: income Taxes, continued Reconciliation of the United States federal statutory rate to the Company’s effective tax rate from continuing operations is as follows: U.S. federal statutory rate of tax State taxes (net of federal tax benefit) Transaction costs Bond costs Permanent items Other effective Tax rate 2 0 1 0 35.00% 1.05 – 4.7 .75 .89 42.39% 2 0 0 9 35.00% 3.47 (3.68) – 3.28 (.37) 37.70% 2 0 0 8 35.00% 6.40 32.66 – 2.20 1.10 77.36% The provision for income taxes resulted in an effective tax rate for continuing operations of 42.4% for Fiscal 2010, compared with an effective tax rate of 37.7% for Fiscal 2009. The increase in the effective tax rate for Fiscal 2010 was primarily attributable to the non-deductibility of certain items incurred in connection with the inducement of the conversion of the Debentures for common stock this year and by the deduction last year of prior period merger-related expenses that became deductible upon termination of the Finish Line merger agreement. This was offset by an income tax liability on an increase in value of shares of common stock received in the settlement of litigation with The Finish Line that had no corresponding income in the financial statements. In addition, last year’s effective rate was lower due to a $1.2 million reduction in tax liabilities from an agreement reached on a state income tax contingency. As of January 30, 2010, January 31, 2009 and February 2, 2008, the Company had state net operating loss carryforwards of $0.4 million, $0 and $5.8 million, respectively, which expire in fiscal years 2015 through 2030. As of January 30, 2010, January 31, 2009 and February 2, 2008, the Company had state tax credits of $0.1 million, $0.1 million and $0, respectively. These credits expire in fiscal year 2024. As of January 30, 2010, January 31, 2009 and February 2, 2008, the Company had foreign tax credits of $0.4 million, $0.1 million and $0.7 million, respectively. These credits will expire in fiscal year 2020. Management believes a valuation allowance is not necessary because it is more likely than not that the Company will ultimately utilize the credits and other deferred tax assets based on existing carryback ability and expectations as to future taxable income in the jurisdictions in which it operates. As of January 30, 2010, the Company has not provided for withholding or United States federal income taxes on approximately $4.7 million of accumulated undistributed earnings of its foreign Canadian subsidiary as they are considered by management to be permanently reinvested. If these undistributed earnings were not considered to be permanently reinvested, approximately $1.9 million deferred income taxes would have been provided. The methodology in the Income Tax Topic of the Codification prescribes that a company should use a more-likely-than- not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more- likely-than-not recognition threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. The Company adopted this methodology as of February 4, 2007. As a result of the adoption, the Company recognized a $4.3 million increase in the liability for unrecognized tax benefits which, as required, was accounted for as a reduction to the February 4, 2007 balance of retained earnings. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for Fiscal 2010, 2009 and 2008. I n T H o u S A n d S Unrecognized Tax Benefit – Beginning of Period Gross Increases (Decreases) – Tax Positions in a Prior Period Gross Increases – Tax Positions in a Current Period Settlements Lapse of Statues of Limitations unrecognized Tax Benefit – end of period 2 0 1 0 $ 13,456 4,306 327 (445) (640) $ 17,004 68 2 0 0 9 $ 4,899 (214) 10,229 (1,184) (274) $ 13,456 2 0 0 8 $ 8,175 (3,370) 414 (247) (73) $ 4,899 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 11: income Taxes, continued In addition, the following information is required to be provided: • Unrecognized tax benefits were approximately $17.0 million, $13.5 million and $4.9 million as of January 30, 2010, January 31, 2009 and February 2, 2008, respectively. The entire amount of unrecognized tax benefits as of January 30, 2010, January 31, 2009 and February 2, 2008 would impact the annual effective rate if recognized. The amount of unrecognized tax benefits may change during the next twelve months, but the Company does not believe the change, if any, will be material to the Company’s consolidated financial position or results of operations. • The Company recognizes interest expense and penalties related to the above unrecognized tax benefits within income tax expense on the Consolidated Statements of Operations. Related to the uncertain tax benefits noted above, the Company accrued interest and penalties of approximately $0.8 million and ($0.1) million, respectively, during Fiscal 2010, $0.2 million and ($0.3), respectively, during Fiscal 2009 and $0.5 million and $4,000, respectively, during Fiscal 2008. The Company recognized a liability for accrued interest and penalities of $2.3 million and $0.4 million, respectively, as of January 30, 2010 and $1.5 million and $0.5 million, respectively, as of January 31, 2009, included in deferred rent and other long-term liabilities on the Consolidated Balance Sheets. • Income tax reserves are determined using the methodology required by the Income Tax Topic of the Codification. • The Company and its subsidiaries file income tax returns in federal and in many state and local jurisdictions as well as foreign jurisdictions. With a few exceptions, the Company’s state and local income tax returns for fiscal years 2006 and beyond remain subject to examination. In addition, the Company has subsidiaries in various foreign jurisdictions that have statutes of limitation generally ranging from three to six years. The Company is currently under audit by the Internal Revenue Service for Fiscal 2005 through 2009, and has filed a statute waiver for Fiscal 2005. note 12: defined Benefit pension plans and other postretirement Benefit plans d e f i n e d B e n e f i T p e n s i o n p l a n s The Company sponsored a non-contributory, defined benefit pension plan. As of January 1, 1996, the Company amended the plan to change the pension benefit formula to a cash balance formula from the then existing benefit calculation based upon years of service and final average pay. The benefits accrued under the old formula were frozen as of December 31, 1995. Upon retirement, the participant will receive this accrued benefit payable as an annuity. In addition, the participant will receive as a lump sum (or annuity if desired) the amount credited to the participant’s cash balance account under the new formula. Effective January 1, 2005, the Company froze the defined benefit cash balance plan which prevents any new entrants into the plan as of that date as well as affects the amounts credited to the participants’ accounts as discussed below. Under the cash balance formula, beginning January 1, 1996, the Company credited each participants’ account annually with an amount equal to 4% of the participant’s compensation plus 4% of the participant’s compensation in excess of the Social Security taxable wage base. Beginning December 31, 1996 and annually thereafter, the account balance of each active participant was credited with 7% interest calculated on the sum of the balance as of the beginning of the plan year and 50% of the amounts credited to the account, other than interest, for the plan year. The account balance of each participant who was inactive would be credited with interest at the lesser of 7% or the 30 year Treasury rate. Under the frozen plan, each participants’ cash balance plan account will be credited annually only with interest at the 30 year Treasury rate, not to exceed 7%, until the participant retires. The amount credited each year will be based on the rate at the end of the prior year. o T h e r p o s T r e T i r e m e n T B e n e f i T p l a n s 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. 69 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 12: defined Benefit pension plans and other postretirement Benefit plans, continued o B L I g AT I o n S A n d F u n d e d S TAT u S CHAnge In BeneFIT oBLIgATIon In THouSAndS Benefit obligation at beginning of year Service cost Interest cost Adjustment of measurement date* Plan amendments Plan participants’ contributions Benefits paid Actuarial loss or (gain) Benefit obligation at end of Year CHAnge In PLAn ASSeTS In THouSAndS Fair value of plan assets at beginning of year Actual gain (loss) on plan assets Adjustment of measurement date* Employer contributions Plan participants’ contributions Benefits paid fair value of plan assets at end of Year PenSIon BeneFITS oTHer BeneFITS 2010 $ 99,436 250 6,562 -0- -0- -0- (9,319) 12,842 $ 109,771 2009 $ 113,990 250 6,318 (202) (22) -0- (9,224) (11,674) $ 99,436 2010 $ 3,078 120 170 -0- -0- 99 (267) 26 $ 3,226 2009 $ 3,073 134 163 18 -0- 123 (324) (109) $ 3,078 PenSIon BeneFITS oTHer BeneFITS 2010 $ 73,468 21,220 -0- 4,000 -0- (9,319) $ 89,369 2009 $ 107,418 (27,977) (749) 4,000 -0- (9,224) $ 73,468 2010 -0- -0- -0- 168 99 (267) -0- $ $ 2009 -0- -0- -0- 201 123 (324) -0- $ $ funded status at end of Year $ (20,402) $ (25,968) $ (3,226) $ (3,078) *The Company adopted the measurement date change required by the Compensation-Retirement Benefits Topic of the Codification as of January 31, 2009. This update to the Codification required the Company to change the measurement date for its defined benefit pension plan and postretirement benefit plan from December 31 to January 31 (end of fiscal year). As a result of this change, pension expense and actuarial gains/losses for the one-month period ended January 31, 2009 were recognized as adjustments to retained earnings and accumulated other comprehensive loss, respectively, net of tax. Amounts recognized in the Consolidated Balance Sheets consist of: PenSIon BeneFITS oTHer BeneFITS In THouSAndS Noncurrent assets Current liabilities Noncurrent liabilities net amount recognized $ 2010 -0- -0- (20,402) $ (20,402) $ 2009 -0- -0- (25,968) $ (25,968) $ 2010 -0- (278) (2,948) $ (3,226) 2009 $ $ -0- (271) (2,807) (3,078) Amounts recognized in accumulated other comprehensive income consist of: In THouSAndS Prior service cost Net loss Total recognized in accumulated other comprehensive loss PenSIon BeneFITS oTHer BeneFITS 2010 $ 12 47,718 2009 $ 16 49,494 $ 2010 -0- 41 $ 2009 -0- 65 $ 47,730 $ 49,510 $ 41 $ 65 PenSIon BeneFITS In THouSAndS Projected benefit obligation Accumulated benefit obligation Fair value of plan assets JAnuArY 30, JANUARY 31, 2010 $ 109,771 109,771 89,369 2009 $ 99,436 99,436 73,468 70 n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 12: defined Benefit pension plans and other postretirement Benefit plans, continued C o M P o n e n T S o F n e T P e r I o d I C B e n e F I T C o S T Genesco inc. AND SUBSIDIARIES n e T p e r i o d i c B e n e f i T c o s T In THouSAndS Service cost Interest cost Expected return on plan assets Amortization: Prior service cost Losses Net amortization net periodic Benefit cost PENSION BENEFITS 2009 2010 2008 $ 250 $ 250 $ 250 6,451 6,318 6,562 (8,024) (8,354) (8,569) $ OTHER BENEFITS 2009 $ 134 163 -0- 2008 $ 123 159 -0- 2010 120 170 -0- 4 4 8 1,751 3,361 4,418 4,426 3,365 1,755 $ 213 $ 1,364 $ 3,103 -0- 50 50 $ 340 -0- 80 80 $ 377 -0- 93 93 $ 375 r e C o n C I L I AT I o n o F A C C u M u L AT e d o T H e r C o M P r e H e n S I v e I n C o M e In THouSAndS Net loss (gain) Amortization of prior service (cost) credit Amortization of net actuarial loss PenSIon BeneFITS 2010 (24) (4) (1,751) $ oTHer BeneFITS 2010 $ (50) -0- 26 Total recognized in other comprehensive income (1,779) (24) Total recognized in net periodic Benefit cost and other comprehensive income $ (1,566) $ 316 The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $4.5 million and $4,000, respectively. The estimated net loss for the other postretirement benefit plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $0.1 million. W e I g H T e d - A v e r A g e A S S u M P T I o n S u S e d T o d e T e r M I n e B e n e F I T o B L I g AT I o n S Discount rate Rate of compensation increase PenSIon BeneFITS oTHer BeneFITS 2010 5.625% nA 2009 6.875% NA 2010 5.50% - 2009 6.375% - For Fiscal 2010 and 2009, the discount rate was based on a yield curve of high quality corporate bonds with cash flows matching the Company’s plans’ expected benefit payments. For Fiscal 2008, the discount rate was based on a hypothetical portfolio of high quality corporate bonds with cash flows matching the Company’s plans’ expected benefit payments. W e I g H T e d - A v e r A g e A S S u M P T I o n S u S e d T o d e T e r M I n e n e T P e r I o d I C B e n e F I T C o S T S Discount rate Expected long-term rate of return on plan assets Rate of compensation increase PenSIon BeneFITS 2009 2010 6.875% 5.875% 2008 5.75% 2010 oTHer BeneFITS 2009 6.375% 5.875% 5.75% 2008 8.25% nA 8.25% NA 8.25% NA - - - - - - The weighted average discount rate used to measure the benefit obligation for the pension plan decreased from 6.875% to 5.625% from Fiscal 2009 to Fiscal 2010. The decrease in the rate increased the accumulated benefit obligation by $12.3 million and increased the projected benefit obligation by $12.3 million. The weighted average discount rate used to measure the benefit obligation for the pension plan increased from 5.875% to 6.875% from Fiscal 2008 to Fiscal 2009. The increase in the rate decreased the accumulated benefit obligation by $10.0 million and decreased the projected benefit obligation by $10.0 million. 71 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 12: defined Benefit pension plans and other postretirement Benefit plans, continued To develop the expected long-term rate of return on assets assumption, the Company considered historical asset returns, the current asset allocation and future expectations. Considering this information, the Company selected an 8.25% long-term rate of return on assets assumption. A S S u M e d H e A LT H C A r e C o S T T r e n d r AT e S AT d e C e M B e r 3 1 Health care cost trend rate assumed for next year Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) Year that the rate reaches the ultimate trend rate 2010 10% 5% 2020 2009 9% 5% 2013 The effect on disclosed information of one percentage point change in the assumed health care cost trend rate for each future year is shown below. (In THouSAndS) Aggregated service and interest cost Accumulated postretirement benefit obligation P L A n A S S e T S 1% Increase 1% Decrease in Rates $ 45 $ 377 in Rates $ 36 $ 314 The Company’s pension plan weighted average asset allocations as of January 30, 2010 and January 31, 2009, by asset category are as follows: ASSeT CATegorY Equity securities Debt securities Other Total PLAn ASSeTS JAnuArY 30, 2010 63% 36% 1% 100% JANUARY 31, 2009 58% 41% 1% 100% The investment strategy of the trust is to ensure over the long-term an asset pool, that when combined with company contributions, will support benefit obligations to participants, retirees and beneficiaries. Investment management responsibilities of plan assets are delegated to outside investment advisers and overseen by an Investment Committee comprised of members of the Company’s senior management that is appointed by the Board of Directors. The Company has an investment policy that provides direction on the implementation of this strategy. The investment policy establishes a target allocation for each asset class and investment manager. The actual asset allocation versus the established target is reviewed at least quarterly and is maintained within a +/- 5% range of the target asset allocation. Target allocations are 50% domestic equity, 13% international equity, 35% fixed income and 2% cash investments. All investments are made solely in the interest of the participants and beneficiaries for the exclusive purposes of providing benefits to such participants and their beneficiaries and defraying the expenses related to administering the Trust as determined by the Investment Committee. All assets shall be properly diversified to reduce the potential of a single security or single sector of securities having a disproportionate impact on the portfolio. The Committee utilizes an outside investment consultant and a team of investment managers to implement its various investment strategies. Performance of the managers is reviewed quarterly and the investment objectives are consistently evaluated. At January 30, 2010 and January 31, 2009, there were no Company related assets in the plan. Generally, quoted market prices are used to value pension plan assets. Equities, some fixed income securities, publicly traded investment funds and U.S. government obligations are valued at the closing price reported on the active market on which the individual security is traded. 72 n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s Genesco inc. AND SUBSIDIARIES note 12: defined Benefit pension plans and other postretirement Benefit plans, continued The following table presents the pension plan assets by level within the fair value hierarchy as of January 30, 2010. In THouSAndS Equity Securities: Common Stocks Europacific Growth Fund Davis New York Venture Fund Harbor Capital Appreciation Fund Harbor Small Cap Growth Fund Veracity Small Cap Value Fund Debt Securities: Pimco Long Duration Total Return Fund Pimco Total Return Fund Other: Cash Equivalents Other (includes receivables and payables) Total pension plan assets C A S H F Lo W S R E T U R N O F A S S E T S level 1 level 2 level 3 ToTal $ 11,008 11,377 10,851 10,646 6,378 6,299 24,083 8,135 611 (19) $ 89,369 – – – – – – – – – – – – – – – – – – – – – – $ 11,008 11,377 10,851 10,646 6,378 6,299 24,083 8,135 611 (19) $ 89,369 There was no return of assets from the plan to the Company in 2009 and no plan assets are projected to be returned to the Company in 2010. C O N T R I B U T I O N S There was no ERISA cash requirement for the plan in 2009 and none is projected to be required in 2010. However, the Company’s current cash policy is to fund the cost of benefits accruing each year (the “normal cost”) plus an amortization of the unfunded accrued liability. The Company made a $4.0 million contribution in February 2010. E S T I M AT E D F U T U R E B E N E F I T PAY M E N T S Expected benefit payments from the trust, including future service and pay, are as follows: eSTIMATed FuTure PAYMenTS 2010 2011 2012 2013 2014 2015–2019 Pension Benefits ($ in millions) $ 8.5 8.6 8.4 8.4 8.4 40.2 Other Benefits ($ in millions) $ 0.3 0.3 0.3 0.2 0.2 1.1 73 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 12: defined Benefit pension plans and other postretirement Benefit plans, continued s e c T i o n 4 0 1 ( k ) s a v i n G s p l a n 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. Concurrent with freezing the defined benefit pension plan effective January 1, 2005, the Company amended the 401(k) savings plan to change the formula for matching contributions. Beginning January 1, 2005, the Company will match 100% of each employee’s contribution of up to 3% of salary and 50% of the next 2% of salary. In addition, for those employees hired before December 31, 2004, who were eligible for the Company’s cash balance retirement plan before it was frozen, the Company will make an additional contribution of 2 1/2 % of salary to each employee’s account. Participants are vested immediately in the matching contribution of their accounts. The contribution expense to the Company for the matching program was approximately $3.2 million for Fiscal 2010, $3.1 million for Fiscal 2009 and $3.0 million for Fiscal 2008. note 13: earnings per share IN THOUSANDS, InCoMe SHAreS Per-SHAre INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE ExCEPT PER SHARE AMOUNTS (nuMerATor) (denoMInATor) AMounT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT For THe YeAr ended JAnuArY 30, 2010 FOR THE YEAR ENDED JANUARY 31, 2009 FOR THE YEAR ENDED FEBRUARY 2, 2008 Earnings from continuing operations $29,086 $156,219 Less: Preferred stock dividends (198) (198) $6,774 (217) BASIC ePS Income available to common shareholders 28,888 21,471 $1.35 156,021 19,235 $8.11 6,557 22,441 $0.29 effecT of diluTive securiTies Options Convertible preferred stock(1) 4 1/8% Convertible Subordinated Debentures(2) Employees’ preferred stock(3) dILuTed ePS Income available to common shareholders plus assumed 210 267 486 -0- -0- 153 59 -0- -0- 1,911 1,768 4,393 4,298 -0- -0- 51 52 57 conversions $30,799 23,500 $1.31 $160,567 23,911 $6.72 $6,557 22,984 $0.29 (1) The amount of the dividend on the convertible preferred stock per common share obtainable on conversion of the convertible preferred stock is higher than basic earnings per share for Series 4 for Fiscal 2010 and Fiscal 2008, Series 3 for Fiscal 2010 and Fiscal 2008 and Series 1 for Fiscal 2010 and Fiscal 2008. Therefore, conversion of Series 4, Series 3 and Series 1 convertible preferred stock is not reflected in diluted earnings per share for Fiscal 2010 and Fiscal 2008, because it would have been antidilutive. The amount of the dividend on Series 4, Series 3 and Series 1 convertible preferred stock per common share obtainable on conversion of the convertible preferred stock was less than basic earnings per share for Fiscal 2009. Therefore, conversion of Series 4, Series 3 and Series 1 preferred shares were included in diluted earnings per share for Fiscal 2009. The shares convertible to common stock for Series 1, 3 and 4 preferred stock would have been 27,913 and 25,949 and 5,423, respectively, as of January 30, 2010. (2) The amount of the interest on the convertible subordinated debentures for Fiscal 2008 per common share obtainable on conversion is higher than basic earnings per share, therefore the convertible debentures are not reflected in diluted earnings per share for Fiscal 2008 because it was antidilutive. (3) The Company’s Employees’ Subordinated Convertible Preferred Stock is convertible one for one to the Company’s common stock. Because there are no dividends paid on this stock, these shares are assumed to be converted. 74 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 13: earnings per share, continued Options to purchase 12,000 shares of common stock at $32.65 per share, 12,000 shares of common stock at $23.97 per share, 60,752 shares of common stock at $23.54 per share, 325,982 shares of common stock at $24.90 per share, 71,428 shares of common stock at $36.40 per share, 1,945 shares of common stock at $40.05 per share, 103,474 shares of common stock at $38.14 per share, 951 shares of common stock at $37.41 per share and 2,351 shares of common stock at $42.82 per share were outstanding at the end of Fiscal 2010 but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares. Options to purchase 16,000 shares of common stock at $32.65 per share, 334,250 shares of common stock at $24.90 per share, 74,823 shares of common stock at $36.40 per share, 1,945 shares of common stock at $40.05 per share, 107,490 shares of common stock at $38.14 per share, 951 shares of common stock at $37.41 per share and 2,351 shares of common stock at $42.82 per share were outstanding at the end of Fiscal 2009 but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares. Options to purchase 74,918 shares of common stock at $36.40 per share, 2,378 shares of common stock at $40.05 per share, 108,509 shares of common stock at $38.14 per share, 951 shares of common stock at $37.41 per share and 2,351 shares of common stock at $42.82 per share were outstanding at the end of Fiscal 2008 but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares. The weighted shares outstanding reflects the effect of stock buy back programs. In a series of authorizations from Fiscal 1999-2003, the Company’s board of directors authorized the repurchase of up to 7.5 million shares. In June 2006, the board authorized an additional $20.0 million in stock repurchases. In August 2006, the board authorized an additional $30.0 million in stock repurchases. The Company did not repurchase any shares during Fiscal 2008. In March 2008, the board authorized up to $100.0 million in stock repurchases primarily funded with the after-tax cash proceeds of the settlement of merger-related litigation with The Finish Line and UBS (see Notes 3 and 15). The Company repurchased 4.0 million shares at a cost of $90.9 million during Fiscal 2009. The Company repurchased 85,000 shares at a cost of $2.0 million during Fiscal 2010, which was not paid at the end of Fiscal 2010 but included in other accrued liabilities on the Consolidated Balance Sheets. In total, the Company has repurchased 12.2 million shares at a cost of $196.3 million from all authorizations as of January 30, 2010. In February 2010, the board increased the total repurchase authorization to $35.0 million. note 14: shared-Based compensation plans The Company’s stock-based compensation plans, as of January 30, 2010, are described below. The Company recognizes compensation expense for share-based payments based on the fair value of the awards as required by the Compensation – Stock Compensation Topic of the Codification. s T o c k i n c e n T i v e p l a n s The Company has two fixed stock incentive plans. Under the 2009 Equity Incentive Plan (the “2009 Plan”), effective as of June 24, 2009, the Company may grant options, restricted shares, performance awards and other stock-based awards to its employees, consultants and directors for up to 1.2 million shares of common stock. Under the 2005 Equity Incentive Plan (the “2005 Plan”), effective as of June 23, 2005, the Company may grant options, restricted shares and other stock-based awards to its employees and consultants as well as directors for up to 1.0 million shares of common stock. There will be no future awards under the 2005 Equity Incentive Plan. Under both plans, the exercise price of each option equals the market price of the Company’s stock on the date of grant and an option’s maximum term is 10 years. Options granted under both plans vest 25% per year. 75 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 14: shared-Based compensation plans, continued For Fiscal 2010, 2009 and 2008, the Company recognized share-based compensation cost of $0.4 million, $1.7 million and $3.2 million, respectively, for its fixed stock incentive plans included in selling and administrative expenses in the accompanying Consolidated Statements of Operations. The Company did not capitalize any share-based compensation cost. The Compensation-Stock Compensation Topic of the Codification requires that the cash flows resulting from tax benefits for tax deductions in excess of the compensation cost recognized for those options (excess tax benefit) be classified as financing cash flows. Accordingly, the Company classified excess tax benefits of $0.2 million and $0.7 million as financing cash inflows rather than as operating cash inflows on its Consolidated Statement of Cash Flows for Fiscal 2009 and 2008, respectively. The Company did not grant any shares of fixed stock options in Fiscal 2010 or 2009. The Company granted 2,351 shares of fixed stock options in Fiscal 2008. For Fiscal 2008, the Company estimated the fair value of each option award on the date of grant using a Black-Scholes option pricing model. The Company based expected volatility on historical term structures. The Company based the risk free rate on an interest rate for a bond with a maturity commensurate with the expected term estimate. The Company estimated the expected term of stock options using historical exercise and employee termination experience. The Company does not currently pay a dividend. The following table shows the weighted average assumptions used to develop the fair value estimates for Fiscal 2008: Volatility Risk Free Rate Expected Term (years) Dividend Yield F I S C A L Y e A r 2008 35.3% 4.7% 4.7 0.0% A summary of fixed stock option activity and changes for Fiscal 2010, 2009 and 2008 is presented below: WeIgHTed-AverAge reMAInIng SHAreS 1,160,786 exerCISe PrICe $ 23.25 ConTrACTuAL TerM vALue (In THouSAndS)(1) WeIgHTed-AverAge AggregATe InTrInSIC Outstanding, February 3, 2007 Granted Exercised Forfeited 2,351 (32,751) (712) Outstanding, February 2, 2008 1,129,674 Granted Exercised Forfeited Outstanding, January 31, 2009 granted exercised Forfeited outstanding, january 30, 2010 exercisable, january 30, 2010 -0- (82,868) (3,047) 1,043,759 -0- (28,500) (19,679) 995,580 968,223 42.82 17.83 38.14 $ 23.44 - 17.35 31.84 $ 23.90 - 14.04 31.16 $ 24.04 $ 23.64 4.27 4.20 $ 2,597 $ 2,597 (1) Based upon the difference between the closing market price of the Company’s common stock on the last trading day of the year and the grant price of in-the-money options. The total intrinsic value, which represents the difference between the underlying stock’s market price and the option’s exercise price, of options exercised during Fiscal 2010, 2009 and 2008 was $0.4 million, $1.4 million and $0.9 million, respectively. 76 n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 14: shared-Based compensation plans, continued A summary of the status of the Company’s nonvested shares of its fixed stock incentive plans as of January 30, 2010, Genesco inc. AND SUBSIDIARIES is presented below: n o n v e S T e d F I x e d S T o C k o P T I o n S Nonvested at January 31, 2009 Granted Vested Forfeited nonvested at January 30, 2010 S H A r e S 75,384 -0- (28,348) (19,679) 27,357 W e I g H T e d - A v e r A g e g r A n T- d AT e FA I r v A L u e $ 16.29 - 15.50 17.25 $ 16.41 As of January 31, 2010 there were $0.2 million of total unrecognized compensation costs related to nonvested share- based compensation arrangements granted under the stock incentive plans discussed above. That cost is expected to be recognized over a weighted average period of 0.7 years. Cash received from option exercises under all share-based payment arrangements for Fiscal 2010, 2009 and 2008 was $0.4 million, $1.4 million and $0.6 million, respectively. r e s T r i c T e d s T o c k i n c e n T i v e p l a n s D I R E C T O R R E S T R I C T E D S T O C K The 2009 and 2005 Plans permit the board of directors to grant restricted stock to non-employee directors on the date of the annual meeting of shareholders at which an outside director is first elected (“New Director Grants”). The outside director restricted stock so granted is to vest with respect to one-third of the shares each year as long as the director is still serving as a director. Once the shares have vested, the director is restricted from selling, transferring, pledging or assigning the shares for an additional two years. There were no shares issued in New Director Grants in Fiscal 2010, 2009 and 2008. In addition, the 2009 and 2005 Plans permit an outside director to elect irrevocably to receive all or a specified portion of his annual retainers for board membership and any committee chairmanship for the following fiscal year in a number of shares of restricted stock (the “Retainer Stock”). Shares of the Retainer Stock are granted as of the first business day of the fiscal year as to which the election is effective, subject to forfeiture to the extent not earned upon the outside director’s ceasing to serve as a director or committee chairman during such fiscal year. Once the shares are earned, the director is restricted from selling, transferring, pledging or assigning the shares for an additional three years. There were no retainer shares issued in Fiscal 2010 or 2009. In Fiscal 2008, the Company issued 6,761 shares of Retainer Stock. Also pursuant to the 2005 Plan, annually on the date of the annual meeting of shareholders, beginning in Fiscal 2007, each outside director received restricted stock valued at $60,000 based on the average of stock prices for the first five days in the month of the annual meeting of shareholders. The outside director restricted stock vests with respect to one-third of the shares each year as long as the director is still serving as a director. Once the shares vest, the director is restricted from selling, transferring, pledging or assigning the shares for an additional two years. Under the 2009 Plan, director stock awards were made during Fiscal 2010 on substantially the same terms as grants under the 2005 Plan. For Fiscal 2010 and 2009, the Company issued 21,204 shares and 18,792 shares, respectively, of director restricted stock. There were no shares of director restricted stock issued in Fiscal 2008. For Fiscal 2010, 2009 and 2008, the Company recognized $0.4 million, $0.3 million and $0.6 million, respectively, of director restricted stock related share-based compensation in selling and administrative expenses in the accompanying Consolidated Statements of Operations. 77 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 14: shared-Based compensation plans, continued E M P LO Y E E R E S T R I C T E D S T O C K Under the 2009 Plan, the Company issued 383,745 shares of employee restricted stock in Fiscal 2010. Under the 2005 Plan, the Company issued 397,273 shares and 3,547 shares of employee restricted stock in Fiscal 2009 and 2008, respectively. Of the 383,745 shares issued in Fiscal 2010, 359,096 shares and the shares issued in Fiscal 2008 vest 25% per year over four years, provided that on such date the grantee has remained continuously employed by the Company since the date of grant. The additional 24,649 shares issued in Fiscal 2010 and the shares issued in Fiscal 2009 vest one-third per year over three years. The fair value of employee restricted stock is charged against income as compensation cost over the vesting period. Compensation cost recognized in selling and administrative expenses in the accompanying Consolidated Statements of Operations for these shares was $6.2 million, $6.0 million and $4.0 million for Fiscal 2010, 2009 and 2008, respectively. A summary of the status of the Company’s nonvested shares of its employee restricted stock as of January 30, 2010 is presented below: n o n v e S T e d r e S T r I C T e d S H A r e S Nonvested at February 3, 2007 Granted Vested Withheld for federal taxes Forfeited Nonvested at February 2, 2008 Granted Vested Withheld for federal taxes Forfeited Nonvested at January 31, 2009 granted vested Withheld for federal taxes Forfeited nonvested at January 30, 2010 S H A r e S 361,797 3,547 (51,720) (19,397) (976) 293,251 397,273 (124,869) (52,969) (4,353) 508,333 383,745 (138,714) (65,299) (11,951) 676,114 W e I g H T e d - A v e r A g e g r A n T- d AT e FA I r v A L u e 37.23 $ 42.82 37.46 37.47 38.14 37.23 20.79 36.84 36.86 27.42 24.60 19.25 26.70 26.32 25.97 $ 20.94 As of January 30, 2010 there were $10.2 million of total unrecognized compensation costs related to nonvested share- based compensation arrangements for restricted stock discussed above. That cost is expected to be recognized over a weighted average period of 2.4 years. e m p lo Y e e s T o c k p u r c h a s e p l a n Under the Employee Stock Purchase Plan, the Company is authorized to issue up to 1.0 million shares of common stock to qualifying full-time employees whose total annual base salary is less than $90,000, effective October 1, 2002. Prior to October 1, 2002, the total annual base salary was limited to $100,000. Under the terms of the Plan, employees could choose each year to have up to 15% of their annual base earnings or $8,500, whichever is lower, withheld to purchase the Company’s common stock. The purchase price of the stock was 85% of the closing market price of the stock on either the exercise date or the grant date, whichever was less. The Company’s board of directors amended the Company’s Employee Stock Purchase Plan effective October 1, 2005 to provide that participants may acquire shares under the Plan at a 5% discount from fair market value on the last day of the Plan year. Employees can choose each year to have up to 15% of their annual base earnings or $9,500, whichever is lower, withheld to purchase the Company’s common stock. Under the Compensation – Stock Compensation Topic of the Codification, shares issued under the Plan as amended are non-compensatory. No participant contributions were accepted by the Company under the Plan after September 28, 2007 as a result of the Finish Line merger agreement, which was terminated in March 2008. A new “short” plan year began April 1, 2008 and a normal plan year resumed on October 1, 2008. Under the Plan, the Company sold 4,350 shares, 1,711 shares and 4,813 shares to employees in Fiscal 2010, 2009 and 2008, respectively. 78 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 14: shared-Based compensation plans, continued s T o c k p u r c h a s e p l a n s Stock purchase accounts arising out of sales to employees prior to 1972 under certain employee stock purchase plans amounted to $123,000 and $132,000 at January 30, 2010 and January 31, 2009, respectively, and were secured at January 30, 2010, by 6,670 employees’ preferred shares. Payments on stock purchase accounts under the stock purchase plans have been indefinitely deferred. No further sales under these plans are contemplated. note 15: legal proceedings e n v i r o n m e n Ta l m aT T e r s N E W Y O R K S TAT E E N V I R O N M E N TA L M AT T E R S In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) and the Company entered into a consent order whereby the Company assumed responsibility for conducting a remedial investigation and feasibility study (“RIFS”) and implementing an interim remedial measure (“IRM”) with regard to the site of a knitting mill operated by a former subsidiary of the Company from 1965 to 1969. The Company undertook the IRM and RIFS voluntarily, without admitting liability or accepting responsibility for any future remediation of the site. The Company has completed the IRM and the RIFS. In the course of preparing the RIFS, the Company identified remedial alternatives with estimated undiscounted costs ranging from $-0- to $24.0 million, excluding amounts previously expended or provided for by the Company. The United States Environmental Protection Agency (“EPA”), which has assumed primary regulatory responsibility for the site from NYSDEC, issued a Record of Decision in September 2007. The Record of Decision requires a remedy of a combination of groundwater extraction and treatment and in-site chemical oxidation at an estimated present worth cost of approximately $10.7 million. In July 2009, the Company agreed to a Consent Order with the EPA requiring the Company to perform certain remediation actions, operations, maintenance and monitoring at the site. In September 2009, a Consent Judgment embodying the Consent Order was filed in the U.S. District Court for the Eastern District of New York. The Village of Garden City, New York, has asserted that the Company is liable for the costs associated with enhanced treatment required by the impact of the groundwater plume from the site on two public water supply wells, including historical costs ranging from approximately $1.8 million to in excess of $2.5 million, and future operation and maintenance costs which the Village estimates at $126,400 annually while the enhanced treatment continues. On December 14, 2007, the Village filed a complaint against the Company and the owner of the property under the Resource Conservation and Recovery Act (“RCRA”), the Safe Drinking Water Act, and the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) as well as a number of state law theories in the U.S. District Court for the Eastern District of New York, seeking an injunction requiring the defendants to remediate contamination from the site and to establish their liability for future costs that may be incurred in connection with it, which the complaint alleges could exceed $41 million over a 70-year period. The Company has not verified the estimates of either historic or future costs asserted by the Village, but believes that an estimate of future costs based on a 70-year remediation period is unreasonable given the expected remedial period reflected in the EPA’s Record of Decision. On May 23, 2008, the Company filed a motion to dismiss the Village’s complaint on grounds including applicable statutes of limitation and preemption of certain claims by the NYSDEC’s and the EPA’s diligent prosecution of remediation. On January 27, 2009, the Court granted the motion to dismiss all counts of the plaintiff’s complaint except for the CERCLA claim and a state law claim for indemnity for costs incurred after November 27, 2000. On September 23, 2009, on a motion for reconsideration by the Village, the Court reinstated the claims for injunctive relief under RCRA and for equitable relief under certain of the state law theories. In December 2005, the EPA notified the Company that it considers the Company a potentially responsible party (“PRP”) with respect to contamination at two Superfund sites in upstate New York. The sites were used as landfills for process wastes generated by a glue manufacturer, which acquired tannery wastes from several tanners, allegedly including the Company’s Whitehall tannery, for use as raw materials in the gluemaking process. The Company has no records indicating that it ever provided raw materials to the gluemaking operation and has not been able to establish whether the EPA’s substantive allegations are accurate. The Company, together with other tannery PRPs, has entered into cost 79 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 15: legal proceedings, continued sharing agreements and Consent Decrees with the EPA with respect to both sites. Based upon the current estimates of the cost of remediation, the Company’s share is expected to be less than $250,000 in total for the two sites. While there is no assurance that the Company’s share of the actual cost of remediation will not exceed the estimate, the Company does not presently expect that its aggregate exposure with respect to these two landfill sites will have a material adverse effect on its financial condition or results of operations. W H I T E H A L L E N V I R O N M E N TA L M AT T E R S The Company has performed sampling and analysis of soil, sediments, surface water, groundwater and waste management areas at the Company’s former Volunteer Leather Company facility in Whitehall, Michigan. The Company has submitted to the Michigan Department of Environmental Quality (“MDEQ”) and provided for certain costs associated with a remedial action plan (the “Plan”) designed to bring the property into compliance with regulatory standards for non-industrial uses and has subsequently engaged in negotiations regarding the scope of the Plan. The Company estimates that the costs of resolving environmental contingencies related to the Whitehall property range from $3.9 million to $4.4 million, and considers the cost of implementing the Plan, as it is modified in the course of negotiations with the MDEQ, to be the most likely cost within that range. Until the Plan is finally approved by the MDEQ, management cannot provide assurances that no further remediation will be required or that its estimate of the range of possible costs or of the most likely cost of remediation will prove accurate. A C C R U A L F O R E N V I R O N M E N TA L C O N T I N G E N C I E S Related to all outstanding environmental contingencies, the Company had accrued $15.9 million as of January 30, 2010, $16.0 million as of January 31, 2009 and $7.8 million as of February 2, 2008. All such provisions reflect the Company’s estimates of the most likely cost (undiscounted, including both current and noncurrent portions) of resolving the contingencies, based on facts and circumstances as of the time they were made. There is no assurance that relevant facts and circumstances will not change, necessitating future changes to the provisions. Such contingent liabilities are included in the liability arising from provision for discontinued operations on the accompanying Consolidated Balance Sheets. The Company has made pretax accruals for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2010, $9.4 million in Fiscal 2009 and $2.9 million in Fiscal 2008. These charges are included in provision for discontinued operations, net in the Consolidated Statements of Operations. m e r G e r - r e l aT e d l i T i G aT i o n G E n E S C o I n C . V. T H E F I n I S H L I n E , E T A L . U B S S E C U R I T I E S L L C A n D U B S Lo A n F I n A n C E L L C V. G E n E S C o I n C . , ET AL. On June 18, 2007, the Company announced that the boards of directors of Genesco and The Finish Line had unanimously approved a definitive merger agreement under which The Finish Line would acquire all of the outstanding common shares of Genesco at $54.50 per share in cash. On September 21, 2007, the Company filed suit against The Finish Line in Chancery Court in Nashville, Tennessee seeking a court order requiring The Finish Line to consummate the merger with the Company (the “Tennessee Action”). UBS Securities LLC and UBS Loan Finance LLC (collectively, “UBS”) subsequently intervened as a defendant in the Tennessee Action, filed an answer to the amended complaint and a counterclaim asserting fraud against the Company. On November 15, 2007, UBS filed a separate lawsuit in the United States District Court for the Southern District of New York (the “New York Action”), naming the Company and The Finish Line as defendants. In the New York Action, UBS sought a declaration that its commitment to provide The Finish Line with financing for the merger transaction was void and/or could be terminated by UBS because The Finish Line would not be able to provide, prior to the expiration of the financing commitment on April 30, 2008, a valid solvency certificate attesting to the solvency of the combined entities resulting from the merger, which certificate was a condition precedent to the closing of the financing. The Company was named in the New York Action as an interested party. Trial of the Tennessee Action began on December 10, 2007 and concluded on December 18, 2007. On December 27, 2007, the Chancery Court ordered The Finish Line to specifically perform the terms of the Merger Agreement. In its order, the Court rejected UBS’s and The Finish Line’s claims of fraud and misrepresentation and declared that all 80 n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s Genesco inc. AND SUBSIDIARIES note 15: legal proceedings, continued conditions to the Merger Agreement had been met. The Court also declared that The Finish Line had breached the Merger Agreement by not closing the merger. The Court ordered The Finish Line to close the merger pursuant to section 1.2 of the Merger Agreement, to use its reasonable best efforts to take all actions to consummate the merger as required by section 6.4(d) of the Merger Agreement, and to use its reasonable best efforts to obtain financing as per section 6.8(a) of the Merger Agreement. The Court excluded from its order any ruling on the issue of the solvency of the combined company, finding that the issue of solvency was reserved for determination by the New York Court in the New York Action filed by UBS. On March 3, 2008, the Company, The Finish Line, and UBS entered into a definitive agreement for the termination of the merger agreement with The Finish Line and the settlement of all related litigation among The Finish Line and the Company and UBS, including the Tennessee Action and the New York Action. In the settlement agreement, the parties agreed that: (1) the merger agreement between the Company and The Finish Line would be terminated; (2) the financing commitment from UBS to The Finish Line would be terminated; (3) UBS and The Finish Line would pay to the Company an aggregate of $175 million in cash; (4) The Finish Line would transfer to the Company a number of Class A shares of The Finish Line common stock equal to 12.0% of the total post-issuance outstanding shares of The Finish Line common stock which the Company would use its best efforts to distribute to its common shareholders as soon as practicable after the shares’ registration and listing on NASDAQ; (5) the Company and The Finish Line would be subject to a mutual standstill agreement; and (6) the parties would execute customary mutual releases. Stipulations of Dismissal were filed by all parties to both the New York Action and the Tennessee Action, and both Actions were dismissed. The Company distributed the shares of The Finish Line common stock received in the settlement to the Company’s shareholders during the second quarter of Fiscal 2009. c a l i f o r n i a m aT T e r s On June 16, 2008, there was filed in the Superior Court of the State of California, County of Shasta, a putative class action styled Jacobs v. Genesco Inc. et al., alleging violations of the California Labor Code involving payment of wages, failure to provide mandatory meal and rest breaks, and unfair competition, and seeking back pay, penalties and declaratory and injunctive relief. The Company removed the case to the Federal District Court for the Eastern District of California. On September 3, 2008, the court dismissed certain of the plaintiff’s claims, including claims for conversion and punitive damages. On May 5, 2009, the Company and the plaintiff’s counsel reached an agreement in principle to settle the lawsuit on a claims made basis. On January 21, 2010, the court granted preliminary approval of the settlement. The minimum payment by the Company pursuant to the agreement, which remains subject to final court approval, is $398,000; the maximum is $703,000. paT e n T a c T i o n The Company is named as a defendant in Paul Ware and Financial Systems Innovation, L.L.C. v. Abercrombie & Fitch Stores, Inc., et al., filed on June 19, 2007, in the United States District Court for the Northern District of Georgia, against more than 100 retailers. The suit alleges that the defendants have infringed U.S. Patent No. 4,707,592 by using a feature of their retail point of sale registers to generate transaction numbers for credit card purchases. The complaint seeks treble damages in an unspecified amount and attorneys’ fees. The Company has filed an answer denying the substantive allegations in the complaint and asserting certain affirmative defenses. On December 14, 2007, the Company filed a third-party complaint against Datavantage Corporation and MICROS Systems, Inc., its vendor for the technology at issue in the case, seeking indemnification and defense against the infringement allegations in the complaint. On December 27, 2007, the court stayed proceedings in the litigation pending the outcome of a reexamination of the patent by the U. S. Patent and Trademark Office. On September 15, 2008, the patent examiner issued a first Office Action rejecting all of the claims in the patent as being unpatentable over the prior art. On January 21, 2009, the examiner issued a final office action again rejecting all of the claims in the patent. In April 2009, the examiner issued a Notice of Intent to Issue an Ex Parte Reexamination Certificate for the patent. The litigation is in discovery. 81 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 15: legal proceedings, continued o T h e r m aT T e r s In addition to the matters specifically described in this footnote, the Company is a party to other legal and regulatory proceedings and claims arising in the ordinary course of its business. While management does not believe that the Company’s liability with respect to any of these other matters is likely to have a material effect on its financial position or results of operations, legal proceedings are subject to inherent uncertainties and unfavorable rulings could have a material adverse impact on our business and results of operations. note 16: Business segment information The Company operates five reportable business segments (not including corporate): Journeys Group, comprised of the Journeys, Journeys Kidz and Shi by Journeys retail footwear chains, catalog and e-commerce operations; Underground Station Group, comprised of the Underground Station retail footwear chain and e-commerce operations and the remaining Jarman retail footwear stores; Hat World Group, comprised of the Hat World, Lids, Hat Shack, Hat Zone, Head Quarters, Cap Connection and Lids Locker Room retail headwear stores and e-commerce operations, the Sports Fan-Attic retail licensed sports headwear, apparel and accessory stores acquired in November 2009 and the Impact Sports and Great Plains Sports team dealer businesses acquired in November 2008 and September 2009, respectively; Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, catalog and e-commerce operations and wholesale distribution; and Licensed Brands, comprised primarily of Dockers® Footwear sourced and marketed under a license from Levi Strauss & Company. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company’s reportable segments are based on the way management organizes the segments in order to make operating decisions and assess performance along types of products sold. Journeys Group, Underground Station Group and Hat World Group sell primarily branded products from other companies while Johnston & Murphy Group and Licensed Brands sell primarily the Company’s owned and licensed brands. Corporate assets include cash, prepaid income taxes, deferred income taxes, deferred note expense and corporate fixed assets. The Company charges allocated retail costs of distribution to each segment and unallocated retail costs of distribution to the corporate segment. The Company does not allocate certain costs to each segment in order to make decisions and assess performance. These costs include corporate overhead, stock compensation, interest expense, interest income, restructuring charges and other including major litigation and the loss on early retirement of debt. Fiscal 2010 In THouSAndS Sales Intercompany sales underground JoHnSTon JourneYS STATIon HAT WorLd & MurPHY LICenSed CorPorATe grouP grouP grouP grouP BrAndS & oTHer ConSoLIdATed $ 749,202 $ 99,458 $ 465,878 $ 166,081 $ 93,291 $ 643 $ 1,574,553 -0- -0- (102) (2) (97) -0- (201) net sales to external customers $ 749,202 $ 99,458 $ 465,776 $ 166,079 $ 93,194 $ 643 $ 1,574,352 Segment operating income (loss) $ 44,285 $ (4,584) $ 44,039 $ 5,484 $ 12,372 $ (27,813) $ 73,783 Restructuring and other* -0- -0- -0- -0- -0- (13,361) (13,361) earnings (loss) from operations 44,285 (4,584) 44,039 5,484 12,372 (41,174) 60,422 Loss on early retirement of debt Interest expense Interest income earnings (loss) from continuing -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- (5,518) -0- (4,430) -0- 14 (5,518) (4,430) 14 operations before income taxes $ 44,285 $ (4,584) $ 44,039 $ 5,484 $ 12,372 $ (51,108) $ 50,488 Total assets** Depreciation Capital expenditures $ 246,000 $ 28,497 $ 333,634 $ 67,705 $ 27,293 $ 160,523 $ 863,652 23,839 14,664 2,669 158 14,303 13,959 3,891 3,633 174 2,157 64 1,347 47,033 33,825 *Restructuring and other includes a $13.3 million charge for asset impairments, of which $9.5 million is in the Journeys Group, $2.1 million in the Hat World Group, $0.9 million in the Johnston & Murphy Group and $0.8 million in the Underground Station Group. **Total assets for Hat World Group include $119.0 million goodwill. 82 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 16: Business segment information, continued Fiscal 2009 IN THOUSANDS Sales Intercompany sales UNDERGROUND JOHNSTON JOURNEYS STATION HAT WORLD & MURPHY LICENSED CORPORATE GROUP GROUP GROUP GROUP BRANDS & OTHER CONSOLIDATED $ 760,008 $ 110,902 $ 405,446 $ 177,963 $ 96,656 $ 682 $ 1,551,657 -0- -0- -0- -0- (95) -0- (95) net sales to external customers $ 760,008 $ 110,902 $ 405,446 $ 177,963 $ 96,561 $ 682 $ 1,551,562 Segment operating income (loss) $ 49,050 $ (5,660) $ 36,670 $ 10,069 $ 11,925 $ (39,003) $ 63,051 Gain from settlement of merger-related litigation Restructuring and other* -0- -0- -0- -0- -0- -0- -0- -0- -0- 204,075 204,075 -0- (7,500) (7,500) earnings (loss) from operations 49,050 (5,660) 36,670 10,069 11,925 157,572 259,626 Interest expense Interest income earnings (loss) before income taxes -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- (9,234) (9,234) 322 322 from continuing operations $ 49,050 $ (5,660) $ 36,670 $ 10,069 $ 11,925 $ 148,660 $ 250,714 Total assets** Depreciation Capital expenditures $ 270,043 $ 33,790 $ 306,904 $ 82,246 $ 32,070 $ 91,010 $ 816,063 23,417 23,437 3,336 295 13,828 15,705 3,634 6,985 188 300 2,354 2,698 46,757 49,420 * Restructuring and other includes an $8.6 million charge for asset impairments, of which $3.8 million is in the Hat World Group, $3.4 million in the Journeys Group, $1.0 million in the Underground Station Group and $0.4 million in the Johnston & Murphy Group. **Total assets for Hat World Group include $111.7 million goodwill. Fiscal 2008 IN THOUSANDS Sales Intercompany sales UNDERGROUND JOHNSTON JOURNEYS STATION HAT WORLD & MURPHY LICENSED CORPORATE GROUP GROUP GROUP GROUP BRANDS & OTHER CONSOLIDATED $ 713,366 $ 124,002 $ 378,913 $ 192,487 $ 93,064 $ 645 $ 1,502,477 -0- -0- -0- -0- (358) -0- (358) net sales to external customers $ 713,366 $ 124,002 $ 378,913 $ 192,487 $ 92,706 $ 645 $ 1,502,119 Segment operating income (loss) $ 51,097 $ (7,710) $ 31,987 $ 19,807 $ 10,976 $ (54,634) $ 51,523 Restructuring and other* -0- -0- -0- -0- -0- (9,702) (9,702) earnings (loss) from operations 51,097 (7,710) 31,987 19,807 10,976 (64,336) 41,821 Interest expense Interest income earnings (loss) from continuing -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- (12,045) (12,045) 144 144 operations before income taxes $ 51,097 $ (7,710) $ 31,987 $ 19,807 $ 10,976 $ (76,237) $ 29,920 Total assets** Depreciation Capital expenditures $ 278,959 $ 45,734 $ 299,820 $ 72,753 $ 26,055 $ 78,364 $ 801,685 21,222 42,124 4,017 1,701 13,277 27,121 3,421 6,607 153 1,115 3,024 1,994 45,114 80,662 * Restructuring and other includes an $8.7 million charge for asset impairments, of which $4.7 million is in the Underground Station Group, $2.1 million in the Hat World Group, $1.7 million in the Journeys Group and $0.2 million in the Johnston & Murphy Group. **Total assets for Hat World Group include $107.6 million goodwill. 83 Genesco inc. AND SUBSIDIARIES n o T e s T o c o n s o l i d aT e d f i n a n c i a l s TaT e m e n T s note 17: quarterly financial information (unaudited) ( I n T H o u S A n d S , e x C e P T P e r S H A r e A M o u n T S ) Net sales Gross margin Earnings (loss) from continuing operations 1 S T q u A r T e r 2 n d q u A r T e r 3 r d q u A r T e r 2 0 1 0 2 0 0 9 2 0 1 0 2 0 0 9 2 0 1 0 2 0 0 9 4 T H q u A r T e r 2 0 1 0 2 0 0 9 F I S C A L Y e A r 2 0 1 0 2 0 0 9 $370,366 $356,935 $334,658 $353,138 $390,302 $389,767 $479,026 $451,722 $1,574,352 $1,551,562 189,222 181,395 169,945 181,324 200,166 197,914 236,537 219,349 795,870 779,982 before income taxes (5,322)(1) 200,242(3) (3,835)(5) 1,770(6) 17,403(8) 13,010(10) 42,242(11) 35,692(12) 50,488 250,714 Earnings (loss) from continuing operations (5,603) 129,440 (2,663) (5,391) 11,523 8,991 25,829 23,179 29,086 156,219 Net earnings (loss) (5,762)(2) 129,347(4) (2,722) (10,752)(7) 11,443(9) 8,966 25,854 23,195 28,813 150,756 Diluted earnings (loss) per common share: Continuing operations Net earnings (loss) (.30) (.31) 5.14 5.14 (.12) (.13) (.29) (.58) .50 .50 .43 .43 1.08 1.08 1.05 1.05 1.31 1.30 6.72 6.49 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) Includes a net restructuring and other charge of $5.0 million (see Note 5) and a $5.1 million loss on early retirement of debt (see Note 8). Includes a loss of $0.2 million, net of tax, from discontinued operations (see Note 5). Includes a net restructuring and other charge of $2.2 million (see Note 5), a $7.3 million charge for merger-related expenses and a gain from the settlement of merger-related litigation of $204.1 million (see Notes 3 and 15). Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 5). Includes a net restructuring and other charge of $3.3 million (see Note 5). Includes a net restructuring and other charge of $3.3 million (see Note 5) and a $0.3 million charge for merger-related expenses (see Notes 3 and 15). Includes a loss of $5.4 million, net of tax, from discontinued operations (see Note 5). Includes a net restructuring and other charge of $2.6 million (see Note 5). Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 5). Includes a net restructuring and other charge of $2.3 million (see Note 5) and a $0.2 million charge for merger-related expenses (see Notes 3 and 15). Includes a net restructuring and other charge of $2.5 million (see Note 5) and a $0.4 million loss on early retirement of debt (see Note 8). Includes a net restructuring and other credit of $0.3 million (see Note 5) and a $0.2 million charge for merger-related expenses (see Notes 3 and 15). 84 c o r p o r aT e i n f o r m aT i o n Genesco inc. AND SUBSIDIARIES a n n u a l m e e T i n G o f s h a r e h o l d e r s o T h e r i n f o r m aT i o n The annual meeting of shareholders will be held Certifications by the Chief Executive Officer and the Chief Wednesday, June 23, 2010, at 10:00 a.m. CST, at the Financial Officer of the Company pursuant to Section corporate headquarters in Genesco Park, Nashville, 302 of the Sarbanes-Oxley Act of 2002 have been filed Tennessee. c o r p o r aT e h e a d q u a r T e r s Genesco Park 1415 Murfreesboro Road – P.O. Box 731 Nashville, TN 37202-0731 i n d e p e n d e n T a u d i T o r s Ernst & Young LLP 150 Fourth Avenue North Suite 1400 Nashville, Tennessee 37219 T r a n s f e r a G e n T a n d r e G i s T r a r Communications concerning stock transfer, preferred as exhibits of the Company’s 2010 Annual Report on Form 10-K. The Chief Executive Officer has submitted to the New York Stock Exchange (NYSE) the annual CEO certification for fiscal 2010 regarding the Company’s compliance with the NYSE’s corporate governance listing standards. f o r m 1 0 - k Each year Genesco files with the Securities and Exchange Commission a Form 10-K which contains more detailed information. Any shareholder who would like to receive, without charge, a single copy (without exhibits), or who would like to receive extra copies of any Genesco shareholder publication should send a request to: stock dividends, consolidating accounts, change of Claire S. McCall address and lost or stolen stock certificates should be Director, Corporate Relations directed to the transfer agent. When corresponding with Genesco Park, Suite 490 – P.O. Box 731 the transfer agent, shareholders should state the exact Nashville, Tennessee 37202-0731 name(s) in which the stock is registered and certificate (615) 367-8283 number, as well as old and new information about the account. Computershare Phone #: 877-224-0366 Address: Computershare Trust Company, N.A. c o m m o n s T o c k l i s T i n G New York Stock Exchange, Chicago Stock Exchange Symbol: GCO P. O. Box 43078 s h a r e h o l d e r i n f o r m aT i o n Providence, Rhode Island 02940-3078 S h a r e h o l d e r i n f o r m a t i o n m a y b e a c c e s s e d a t Private Couriers/Registered Mail: www.genesco.com Computershare Trust Company, N.A. 250 Royall Street Canton, Massachusetts 02021 Questions & Inquiries via our Website: http://www.computershare.com Hearing Impaired #: TDD: 1-800-952-9245 i n v e s T o r r e l aT i o n s Security analysts, portfolio managers or other investment community representatives should contact: Ja me s S. Gulmi, Senior Vice President – Fina nc e, Chief Financial Officer and Treasurer Genesco Park, Suite 490 – P.O. Box 731 Nashville, Tennessee 37202-0731 (615) 367-8325 85 Genesco inc. AND SUBSIDIARIES B o a r d o f d i r e c T o r s J a m e s s . B e a r d Retired President, Caterpillar Financial Services Corporation Nashville, Tennessee Member of the audit and finance committees r o B e r t J . d e n n i s Chairman, President and Chief Executive Officer Genesco Inc. m at t h e W C . d i a m o n d L e o n a r d L . B e r r y Chairman and Chief Executive Officer Presidential Professor for Teaching Alloy, Inc. Excellence, Distinguished Professor of Marketing New York, New York and Professor of Humanities in Medicine Chairman of the compensation committee and Texas A&M University College Station, Texas Member of the compensation and nominating and governance committees W i L L i a m F. B L a u F u s s , J r . member of the finance committee m a r t y G . d i C k e n s Retired President AT&T – Tennessee Nashville, Tennessee Consultant, Certified Public Accountant Member of the compensation and the nominating Nashville, Tennessee and governance committees Chairman of the audit committee and member of the finance committee J a m e s W. B r a d F o r d Dean, Owen School of Management Vanderbilt University Nashville, Tennessee Chairman of the finance committee and member of the nominating and governance committee r o B e r t V. d a L e Consultant Nashville, Tennessee Chairman of the nominating and governance committee and member of the audit committee c o r p o r aT e o f f i c e r s B e n t. h a r r i s Former Chairman Genesco Inc. k at h L e e n m a s o n President and Chief Executive Officer Tuesday Morning Corporation Dallas, Texas Member of the audit and compensation committees h a L n . P e n n i n G t o n Former Chairman Genesco Inc. r o B e r t J . d e n n i s k e n n e t h J . ko C h e r Chairman, President and Chief Executive Officer Senior Vice President – Hat World/Lids 6 years with Genesco J a m e s s . G u L m i 6 years with Genesco r o G e r G . s i s s o n Senior Vice President – Finance, Chief Financial Officer Senior Vice President, Secretary and General Counsel and Treasurer 38 years with Genesco J o n at h a n d. C a P L a n 16 years with Genesco m i m i e . V a u G h n Senior Vice President of Strategy and Senior Vice President – Genesco Branded 17 years with Genesco J a m e s C . e s t e Pa Shared Services 7 years with Genesco Pa u L d. W i L L i a m s Senior Vice President – Genesco Retail Vice President and Chief Accounting Officer 25 years with Genesco 33 years with Genesco 86 G e n e s c o r e Ta i l s T o r e s A S O F 1 / 3 0 / 1 0 Genesco inc. AND SUBSIDIARIES ALASkA AnCHorAge LIDS (2), JOURNEYS (2) FAIrBAnkS LIDS, JOURNEYS ALABAMA AuBurn HAT SHACK, JOURNEYS BIrMIngHAM HAT SHACK, LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS doTHAn HAT WORLD, JOURNEYS FAIrFIeLd UNDERGROUND STATION FLorenCe LIDS, JOURNEYS FoLeY LIDS, JOHNSTON & MURPHY OUTLET, JOURNEYS, JOURNEYS KIDZ gAdSden HAT SHACK HoMeWood JOURNEYS Hoover JOURNEYS, SHI HunTSvILLe HAT SHACK, LIDS, JOURNEYS (2), UNDERGROUND STATION MoBILe HAT SHACK, JOURNEYS, JOURNEYS KIDZ, UNDERGROUND STATION MonTgoMerY HAT SHACK oxFord HAT SHACK, UNDERGROUND STATION SPAnISH ForT JOURNEYS TuSCALooSA HAT SHACK, JOURNEYS ALBerTA CALgArY LIDS edMonTon CAP CONNECTION (2), LIDS, HEAD QUARTERS (2) MedICIne HAT LIDS red deer LIDS ArkAnSAS FAYeTTevILLe HAT WORLD, JOURNEYS, JOURNEYS KIDZ ForT SMITH HAT WORLD, JOURNEYS HoT SPrIngS JOURNEYS JoneSBoro LIDS, JOURNEYS LITTLe roCk LIDS norTH LITTLe roCk JOURNEYS (2), HAT WORLD, UNDERGROUND STATION PIne BLuFF HAT WORLD, JOURNEYS rogerS LIDS, JOURNEYS ArIzonA CHAndLer JOURNEYS, JOURNEYS KIDZ FLAgSTAFF JOURNEYS, LIDS gILBerT JOURNEYS gLendALe LIDS, JOURNEYS MeSA JOURNEYS (2), JOURNEYS KIDZ, LIDS (2) PHoenIx HAT WORLD, LIDS (2), JOHNSTON & MURPHY SHOP, JOURNEYS(4), JOURNEYS KIDZ, UNDERGROUND STATION (2) PreSCoTT JOURNEYS SCoTTSdALe LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS, JOURNEYS KIDZ SIerrA vISTA LIDS TeMPe LIDS (2), JOURNEYS (2), JOURNEYS KIDZ TuCSon LIDS, JOURNEYS (2), JOURNEYS KIDZ, HAT WORLD, SHI, UNDERGROUND STATION YuMA JOURNEYS BrITISH CoLuMBIA BurnABY LIDS (2) keLoWnA HEAD QUARTERS LAngLeY HEAD QUARTERS nAnAIMo LIDS SurreY LIDS vAnCouver LIDS vICTorIA HEAD QUARTERS WHISTLer LIDS CALIFornIA ALPIne JOURNEYS AnTIoCH LIDS, JOURNEYS ArCAdIA LIDS, JOURNEYS roSevILLe LIDS, JOHNSTON & MURPHY SHOP, deLAWAre JOURNEYS, JOURNEYS KIDZ, SHI dover HAT WORLD, JOURNEYS SACrAMenTo LIDS (3), JOURNEYS (2) neWArk LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS SALInAS LIDS, JOURNEYS BAkerSFIeLd LIDS, JOURNEYS, SAn BernAdIno LIDS, JOURNEYS JOURNEYS KIDZ, SHI BreA LIDS, JOURNEYS BurBAnk LIDS, JOURNEYS SAn Bruno JOURNEYS SAn dIego LIDS (4), JOHNSTON & MURPHY SHOP, JOURNEYS (3) CABAzon JOHNSTON & MURPHY OUTLET SAn FrAnCISCo LIDS (3), JOHNSTON & MURPHY SHOP reHoBoTH BeACH LIDS, JOURNEYS WILMIngTon HAT WORLD, JOURNEYS dISTrICT oF CoLuMBIA WASHIngTon, d.C. LIDS, JOHNSTON & MURPHY SHOP (4) CAMArILLo LIDS, JOHNSTON & MURPHY OUTLET SAn JoSe LIDS (2), JOURNEYS (2), JOURNEYS KIDZ FLorIdA CAnogA PArk LIDS, JOURNEYS CAPIToLA LIDS, JOURNEYS SAn LeAndro LIDS SAn MATeo LIDS, JOURNEYS CArLSBAd LIDS (2), JOHNSTON & MURPHY OUTLET, SAn YSIdro JOURNEYS JOURNEYS, JOURNEYS KIDZ, SAnTA AnA LIDS, JOURNEYS ALTAMonTe SPrIngS LIDS, JOURNEYS, SPORTS FAN-ATTIC AvenTurA LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS SAnTA CLArA HAT WORLD, JOURNEYS, BoCA rATon LIDS, JOHNSTON & MURPHY SHOP, UNDERGROUND STATION CerrIToS LIDS, JOURNEYS CHICo LIDS, JOURNEYS JOURNEYS KIDZ SAnTA MonICA LIDS, JOURNEYS CHuLA vISTA HAT WORLD, JOURNEYS (2), LIDS SAnTA roSA LIDS, JOURNEYS, JOURNEYS KIDZ CITruS HeIgHTS LIDS, JOURNEYS CITY oF InduSTrY JOURNEYS CoMMerCe LIDS, JOURNEYS ConCord LIDS, JOURNEYS SHerMAn oAkS JOURNEYS SIMI vALLeY JOURNEYS SToCkTon JOURNEYS, LIDS TeMeCuLA JOURNEYS CoSTA MeSA JOHNSTON & MURPHY SHOP, THouSAnd oAkS LIDS, JOURNEYS JOURNEYS CuLver CITY LIDS dALY CITY JOURNEYS doWneY LIDS, JOURNEYS eL CAJon LIDS, JOURNEYS eL CenTro LIDS, JOURNEYS eSCondIdo LIDS, JOURNEYS eurekA HAT WORLD, JOURNEYS TrACY HAT WORLD, JOURNEYS TuLAre JOURNEYS TuSTIn LIDS vALenCIA JOURNEYS, LIDS venTurA HAT WORLD, JOURNEYS vICTorvILLe LIDS, JOURNEYS vISALIA LIDS, JOURNEYS, JOURNEYS KIDZ WeST CovInA LIDS, JOURNEYS FAIrFIeLd JOURNEYS, LIDS, UNDERGROUND STATION WeSTMInSTer LIDS, JOURNEYS YuBA CITY LIDS, JOURNEYS CoLorAdo AurorA LIDS (2), JOURNEYS (2), UNDERGROUND STATION BrooMFIeLd LIDS, JOURNEYS JOURNEYS BoYnTon BeACH LIDS, JOURNEYS, UNDERGROUND STATION BrAdenTon LIDS, JOURNEYS BrAndon LIDS, JOURNEYS, JOURNEYS KIDZ, SHI, SPORTS FAN-ATTIC CLeArWATer HAT SHACK, JOURNEYS, JOURNEYS KIDZ, SHI, SPORTS FAN-ATTIC CorAL SPrIngS HAT SHACK, JOURNEYS, UNDERGROUND STATION dAYTonA BeACH LIDS, JOURNEYS, JOURNEYS KIDZ deSTIn LIDS, JOHNSTON & MURPHY OUTLET, JOURNEYS (2) eLLenTon JOURNEYS, JOHNSTON & MURPHY OUTLET eSTero LIDS, JOURNEYS (2), JOHNSTON & MURPHY OUTLET FT. LAuderdALe JOURNEYS FT. MYerS LIDS (3), JOURNEYS (2), UNDERGROUND STATION gAIneSvILLe HAT SHACK, JOURNEYS HIALeAH HAT SHACK JACkSonvILLe HAT SHACK, LIDS, FoLSoM LIDS FreSno LIDS, JOURNEYS gILroY LIDS, JOHNSTON & MURPHY OUTLET gLendALe LIDS HAnFord LIDS, JOURNEYS HAYWArd UNDERGROUND STATION HoLLYWood LIDS IrvIne LIDS LAkeWood LIDS, JOURNEYS, UNDERGROUND STATION Long BeACH LIDS LoS AngeLeS LIDS (3), JOHNSTON & MURPHY SHOP, UNDERGROUND STATION MILPITAS LIDS, JOURNEYS ModeSTo LIDS, JOURNEYS, JOURNEYS KIDZ, SHI MonTCLAIr LIDS, JOURNEYS MonTeBeLLo LIDS, JOURNEYS MonTereY LIDS Moreno vALLeY LIDS, JOURNEYS nATIonAL CITY LIDS, JOURNEYS, JOURNEYS KIDZ, UNDERGROUND STATION neWArk LIDS, JOURNEYS norTHrIdge LIDS, JOURNEYS, JOURNEYS KIDZ, UNDERGROUND STATION CASTLe roCk LIDS, JOHNSTON & MURPHY OUTLET, JOHNSTON & MURPHY SHOP, JOURNEYS (2), JOURNEYS CoLorAdo SPrIngS LIDS(2), JOURNEYS, UNDERGROUND STATION denver LIDS, JOHNSTON & MURPHY SHOP (2), UNDERGROUND STATION (2) JenSen BeACH JOURNEYS kISSIMMee LIDS, JOURNEYS LAke WALeS LIDS, JOURNEYS JOURNEYS (3) FT. CoLLInS JOURNEYS grAnd JunCTIon LIDS, JOURNEYS greeLeY JOURNEYS LAkeWood LIDS, JOURNEYS LITTLeTon HAT WORLD, JOURNEYS (2) LoneTree JOHNSTON & MURPHY SHOP LongMonT JOURNEYS LoveLAnd LIDS, JOURNEYS PueBLo LIDS, JOURNEYS LAkeLAnd HAT WORLD, JOURNEYS, SPORTS FAN-ATTIC MAdeIrA BeACH SPORTS FAN-ATTIC MArY eSTHer HAT SHACK, JOURNEYS, JOURNEYS KIDZ MeLBourne HAT SHACK, JOURNEYS MerrITT ISLAnd LIDS, JOURNEYS MIAMI HAT SHACK, LIDS, JOURNEYS (2), JOURNEYS KIDZ, SPORTS FAN-ATTIC, UNDERGROUND STATION (4), SHI MIAMI BeACH JOURNEYS nAPLeS LIDS, JOURNEYS, JOURNEYS KIDZ SILverTHorne LIDS, JOURNEYS oCALA LIDS WeSTMInSTer LIDS, JOURNEYS, JOURNEYS KIDZ, oCoee LIDS, JOURNEYS, UNDERGROUND STATION UNDERGROUND STATION orAnge PArk LIDS, JOURNEYS orLAndo HAT SHACK, LIDS (5), JOHNSTON & MURPHY SHOP, JOHNSTON & MURPHY OUTLET, JOURNEYS (6), JOURNEYS KIDZ (2), UNDERGROUND STATION (2) ovIedo JOURNEYS onTArIo LIDS, JOURNEYS, JOURNEYS KIDZ ConneCTICuT orAnge LIDS CLInTon JOHNSTON & MURPHY OUTLET PALM deSerT LIDS, JOHNSTON & MURPHY SHOP, dAnBurY LIDS, JOURNEYS, JOURNEYS KIDZ JOURNEYS PALMdALe LIDS, JOURNEYS PAnorAMA CITY LIDS PISMo BeACH JOURNEYS PLeASAnTon LIDS, JOURNEYS rAnCHo CuCAMongA JOURNEYS reddIng JOURNEYS redondo BeACH LIDS rICHMond LIDS rIverSIde LIDS, JOURNEYS FArMIngTon LIDS, JOHNSTON & MURPHY SHOP PALM BeACH gArdenS JOHNSTON & MURPHY SHOP, MAnCHeSTer LIDS, JOURNEYS MerIden LIDS, JOURNEYS MILFord LIDS, JOURNEYS, UNDERGROUND STATION STAMFord JOHNSTON & MURPHY SHOP, JOURNEYS TruMBuLL LIDS, JOURNEYS WATerBurY LIDS, JOURNEYS WATerFord LIDS, JOURNEYS WeSTBrook LIDS WeSTPorT JOHNSTON & MURPHY SHOP JOURNEYS PAnAMA CITY LIDS, JOURNEYS PAnAMA CITY BeACH LIDS, JOURNEYS PeMBroke PIneS LIDS, JOURNEYS, SPORTS FAN-ATTIC PenSACoLA LIDS, JOURNEYS, UNDERGROUND STATION PLAnTATIon LIDS, JOURNEYS PorT CHArLoTTe LIDS, JOURNEYS PorT rICHeY HAT SHACK, JOURNEYS 87 Genesco inc. AND SUBSIDIARIES G e n e s c o r e Ta i l s T o r e s A S O F 1 / 3 0 / 1 0 ST. AuguSTIne JOURNEYS ST. PeTerSBurg JOURNEYS, LIDS, ILLInoIS kAnSAS AurorA LIDS (2), JOHNSTON & MURPHY OUTLET, LAWrenCe LIDS SPORTS FAN-ATTIC, UNDERGROUND STATION JOURNEYS (2), UNDERGROUND STATION MAnHATTAn HAT WORLD, JOURNEYS SAnFord HAT SHACK, JOURNEYS SArASoTA LIDS, JOURNEYS, SPORTS FAN-ATTIC SunrISe LIDS, JOURNEYS, UNDERGROUND STATION TALLAHASSee HAT SHACK, HAT WORLD, LIDS, BLooMIngdALe HAT WORLD, JOURNEYS oLATHe JOURNEYS BLooMIngTon HAT WORLD, JOURNEYS overLAnd PArk LIDS, JOHNSTON & MURPHY SHOP, BoLIngBrook JOURNEYS JOURNEYS CALuMeT CITY LIDS, UNDERGROUND STATION SALInA JOURNEYS JOURNEYS (2), SPORTS FAN-ATTIC, CArBondALe JOURNEYS ToPekA LIDS, JOURNEYS UNDERGROUND STATION CHAMPAIgn LIDS, JOURNEYS WICHITA LIDS (2), JOURNEYS (2), TAMPA HAT SHACK, LIDS (3), JOHNSTON & CHICAgo LIDS (4), JOURNEYS, UNDERGROUND STATION HAnover LIDS, JARMAN SHOE STORE, JOURNEYS HYATTSvILLe LIDS, UNDERGROUND STATION oWIngS MILLS UNDERGROUND STATION queenSToWn JOHNSTON & MURPHY OUTLET SALISBurY HAT WORLD, JOURNEYS ToWSon JOURNEYS WALdorF HAT WORLD, UNDERGROUND STATION WeSTMInSTer JOURNEYS WHeATon HAT SHACK, LIDS, JOURNEYS, UNDERGROUND STATION MURPHY SHOP (2), JOURNEYS (4), JOURNEYS KIDZ, JOHNSTON & MURPHY SHOP (2), SPORTS FAN-ATTIC (3), UNDERGROUND STATION UNDERGROUND STATION vero BeACH JOURNEYS CHICAgo rIdge LIDS, JOURNEYS, WeLLIngTon JOHNSTON & MURPHY SHOP, UNDERGROUND STATION JOURNEYS, LIDS, SPORTS FAN-ATTIC evergreen PArk LIDS, UNDERGROUND STATION WeST PALM BeACH JOURNEYS FAIrvIeW HeIgHTS LIDS, JOURNEYS, JOURNEYS KIDZ kenTuCkY ASHLAnd LIDS, JOURNEYS MASSACHuSeTTS AuBurn LIDS, JOURNEYS BoWLIng green LIDS, JOURNEYS BoSTon LIDS, JOHNSTON & MURPHY SHOP (2) FLorenCe HAT WORLD, JOURNEYS, LIDS KIDS, BrAInTree LIDS, JOURNEYS JOURNEYS KIDZ HeBron JOHNSTON & MURPHY SHOP BroCkTon LIDS, UNDERGROUND STATION BurLIngTon LIDS, JOHNSTON & MURPHY SHOP, LexIngTon HAT WORLD, LIDS, JOURNEYS, JOURNEYS JOURNEYS KIDZ, SHI CAMBrIdge LIDS, JOURNEYS LouISvILLe LIDS (2), JOHNSTON & MURPHY SHOP, CHeSTnuT HILL JOHNSTON & MURPHY SHOP JOURNEYS (2), JOURNEYS KIDZ, UNDERGROUND STATION (2) neWPorT JOURNEYS oWenSBoro JOURNEYS PAduCAH HAT WORLD, JOURNEYS dArTMouTH LIDS, JOURNEYS dedHAM JOHNSTON & MURPHY SHOP eAST BoSTon LIDS, JOHNSTON & MURPHY SHOP (2) FoxBoro JOURNEYS HAnover LIDS, JOURNEYS HoLYoke LIDS, JOURNEYS, JOURNEYS KIDZ , ForSYTH JOURNEYS gurnee LIDS (2), JOURNEYS, SHI JoLIeT LIDS, JOURNEYS, UNDERGROUND STATION LInCoLnWood LIDS, UNDERGROUND STATION LoMBArd LIDS, JOURNEYS MATTeSon HAT WORLD MoLIne HAT WORLD, JOURNEYS norrIdge LIDS, JOURNEYS, UNDERGROUND STATION georgIA ALBAnY LIDS, JOURNEYS ALPHAreTTA HAT SHACK, LIDS, JOURNEYS ATHenS HAT SHACK, JOURNEYS ATLAnTA HAT SHACK (2), LIDS (2), JARMAN SHOE STORE, JOHNSTON & MURPHY SHOP (2), JOURNEYS (3), SPORTS FAN-ATTIC, UNDERGROUND STATION (3) AuguSTA LIDS, JOURNEYS, HAT SHACK, SPORTS FAN-ATTIC, UNDERGROUND STATION BrunSWICk JOURNEYS BuFord HAT SHACK, JOURNEYS, JOURNEYS KIDZ CenTervILLe JOURNEYS CoLuMBuS HAT SHACK, LIDS, JOURNEYS, UNDERGROUND STATION CoMMerCe LIDS, JOURNEYS dALTon JOURNEYS dAWSonvILLe LIDS, JOURNEYS, JOHNSTON & MURPHY OUTLET deCATur LIDS, JARMAN SHOE STORE dougLASvILLe HAT SHACK, JOURNEYS, JOURNEYS KIDZ norTH rIverSIde LIDS, JOURNEYS, LouISIAnA UNDERGROUND STATION ALexAndrIA LIDS, UNDERGROUND STATION norTHBrook JOHNSTON & MURPHY SHOP BATon rouge HAT SHACK, LIDS (2), oAkBrook JOHNSTON & MURPHY SHOP JOHNSTON & MURPHY SHOP, JOURNEYS (2), orLAnd PArk LIDS, LIDS KIDS, JOURNEYS, JOURNEYS KIDZ, UNDERGROUND STATION JOURNEYS KIDZ BoSSIer CITY HAT WORLD, JOURNEYS, PeorIA LIDS, JOURNEYS, JOURNEYS KIDZ UNDERGROUND STATION roCkFord LIDS, JOURNEYS SCHAuMBurg LIDS (2), gonzALeS LIDS greTnA JOURNEYS, LIDS, UNDERGROUND STATION JOHNSTON & MURPHY SHOP, JOURNEYS HouMA JOURNEYS SPrIngFIeLd LIDS, JOURNEYS kenner HAT SHACK, JARMAN SHOE STORE, vernon HILLS LIDS, JOURNEYS JOURNEYS, JOURNEYS KIDZ WeST dundee LIDS, JOURNEYS LAFAYeTTe LIDS, JOURNEYS, JOURNEYS KIDZ duLuTH LIDS, JOURNEYS, SPORTS FAN-ATTIC, IndIAnA UNDERGROUND STATION BLooMIngTon LIDS, JOURNEYS, JOURNEYS KIDZ kenneSAW HAT SHACK, LIDS, JOURNEYS, CLArkSvILLe HAT WORLD, JOURNEYS JOURNEYS KIDZ, SHI, SPORTS FAN-ATTIC edInBurgH LIDS LAWrenCevILLe JOURNEYS, evAnSvILLe LIDS, JOURNEYS, JOURNEYS KIDZ LITHonIA HAT SHACK, JOURNEYS, FT. WAYne HAT WORLD, JOURNEYS, LAke CHArLeS LIDS, JOURNEYS, UNDERGROUND STATION MeTAIrIe JOHNSTON & MURPHY SHOP Monroe LIDS, JOURNEYS, JOURNEYS KIDZ, UNDERGROUND STATION SHrevePorT JOURNEYS SLIdeLL JOURNEYS UNDERGROUND STATION JOURNEYS KIDZ, LIDS KIDS, SHI MACon HAT SHACK, LIDS, JOURNEYS (2), greenWood LIDS, JOURNEYS, JOURNEYS KIDZ, SHI MAIne UNDERGROUND STATION IndIAnAPoLIS HAT WORLD (2), LIDS (2), BAngor LIDS, JOURNEYS MorroW LIDS (2),UNDERGROUND STATION JOHNSTON & MURPHY SHOP (3), JOURNEYS (2), FreePorT LIDS roMe LIDS, JOURNEYS UNDERGROUND STATION (2), SHI kITTerY JOHNSTON & MURPHY OUTLET SAvAnnAH LIDS (2), JOURNEYS (2), kokoMo JOURNEYS SouTH PorTLAnd LIDS, JOURNEYS SPORTS FAN-ATTIC, UNDERGROUND STATION LAFAYeTTe HAT WORLD, JOURNEYS, JOURNEYS KIDZ unIon CITY LIDS, UNDERGROUND STATION MerrILLvILLe LIDS, JOURNEYS, UNDERGROUND STATION MICHIgAn CITY LIDS MAnIToBA WInnIPeg LIDS (2) MArYLAnd vALdoSTA JOURNEYS HAWAII AIeA LIDS, JOURNEYS, JOURNEYS KIDZ HILo LIDS, JOURNEYS HonoLuLu LIDS (3), JOURNEYS, HAT SHACK kAHuLuI LIDS, JOURNEYS kAILuA-konA LIDS kAneoHe LIDS, JOURNEYS LAHAInA LIDS LIHue LIDS WAIkoLoA LIDS IdAHo BoISe JOURNEYS, JOURNEYS KIDZ IdAHo FALLS JOURNEYS TWIn FALLS JOURNEYS MISHAWAkA LIDS, JOURNEYS, JOURNEYS KIDZ, SHI AnnAPoLIS LIDS (2), JOHNSTON & MURPHY SHOP, MunCIe LIDS, JOURNEYS JOURNEYS, JOURNEYS KIDZ PLAInFIeLd LIDS, JOURNEYS BALTIMore LIDS (2), JOHNSTON & MURPHY SHOP (2), HArPer WoodS LIDS, UNDERGROUND STATION rICHMond JOURNEYS Terre HAuTe LIDS, JOURNEYS IoWA AMeS JOURNEYS CedAr FALLS HAT WORLD, JOURNEYS CorALvILLe HAT WORLD, JOURNEYS CounCIL BLuFFS JOURNEYS dAvenPorT HAT WORLD, JOURNEYS deS MoIneS JOURNEYS (2) SIoux CITY JOURNEYS WATerLoo JOURNEYS WeST deS MoIneS JOURNEYS (2) JOURNEYS, JOURNEYS KIDZ, HAT WORLD, HoWeLL LIDS, JOURNEYS UNDERGROUND STATION BeL AIr LIDS, JOURNEYS BeTHeSdA LIDS, JOURNEYS JACkSon HAT WORLD LAnSIng LIDS, JOURNEYS, KOSITCHEK’S LIvonIA JOHNSTON & MURPHY SHOP CoLuMBIA LIDS, JOHNSTON & MURPHY SHOP, MIdLAnd HAT WORLD, JOURNEYS JOURNEYS MuSkegon LIDS, JOURNEYS FrederICk HAT WORLD, JOURNEYS novI LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS, gAITHerSBurg LIDS, JOURNEYS, JOURNEYS KIDZ, SHI UNDERGROUND STATION gLen BurnIe LIDS, JOURNEYS okeMoS HAT WORLD, JOURNEYS PorTAge LIDS, JOURNEYS HAgerSToWn HAT WORLD, JOURNEYS, roSevILLe LIDS, UNDERGROUND STATION JOHNSTON & MURPHY OUTLET SAgInAW HAT WORLD, JOURNEYS 88 LIDS KIDS, SHI HYAnnIS LIDS, JOURNEYS kIngSTon LIDS, JOURNEYS LAneSBoro JOURNEYS Lee JOHNSTON & MURPHY OUTLET LeoMInSTer LIDS, JOURNEYS MArLBoro LIDS, JOURNEYS nATICk LIDS, JOURNEYS, LIDS KIDS, JOHNSTON & MURPHY SHOP, SHI norTH ATTLeBoro LIDS, JOURNEYS PeABodY LIDS, JOURNEYS SAuguS LIDS (2), JOURNEYS SPrIngFIeLd JOURNEYS SWAnSeA LIDS TAunTon LIDS, JOURNEYS WrenTHAM LIDS, JOHNSTON & MURPHY OUTLET, JOURNEYS MICHIgAn Ann ArBor LIDS, JOURNEYS AuBurn HILLS LIDS, JOHNSTON & MURPHY OUTLET, JOURNEYS, JOURNEYS KIDZ, SHI BATTLe Creek HAT WORLD, JOURNEYS BIrCH run JOURNEYS CLInTon ToWnSHIP SHI deArBorn LIDS, JOURNEYS, UNDERGROUND STATION FLInT LIDS, JOURNEYS, JOURNEYS KIDZ ForT grATIoT LIDS, JOURNEYS grAnd rAPIdS LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS grAndvILLe HAT WORLD, JOURNEYS, SHI green oAk ToWnSHIP JOURNEYS G e n e s c o r e Ta i l s T o r e s A S O F 1 / 3 0 / 1 0 SouTHFIeLd HAT ZONE, UNDERGROUND STATION neBrASkA STerLIng HeIgHTS LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS, UNDERGROUND STATION TAYLor LIDS, JOURNEYS, UNDERGROUND STATION TrAverSe CITY LIDS, JOURNEYS TroY LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS (2), UNDERGROUND STATION WeSTLAnd LIDS, JOURNEYS, UNDERGROUND STATION MInneSoTA ALBerTvILLe LIDS, JOURNEYS BLAIne LIDS, JOURNEYS BLooMIngTon LIDS (3), HATWORLD, JOHNSTON & MURPHY SHOP, JOURNEYS, JOURNEYS KIDZ, SHI, UNDERGROUND STATION BrookLYn CenTer JOURNEYS BurnSvILLe LIDS, JOURNEYS, JOURNEYS KIDZ duLuTH LIDS, JOURNEYS eden PrAIrIe JOURNEYS MAnkATo JOURNEYS MAPLe grove JOURNEYS MAPLeWood JOURNEYS MInneTonkA LIDS, JOURNEYS roCHeSTer LIDS, JOURNEYS LInCoLn LIDS, JOURNEYS (2) oMAHA LIDS, JOURNEYS (2) nevAdA HenderSon LIDS, JOURNEYS, JOURNEYS KIDZ LAS vegAS LIDS (8), JOHNSTON & MURPHY OUTLET, JOHNSTON & MURPHY SHOP, JOURNEYS (7), JOURNEYS KIDZ, UNDERGROUND STATION PrIMM JOURNEYS reno JOURNEYS (2), LIDS neW BrunSWICk dIePPe LIDS FrederICTon LIDS ST. JoHn LIDS neW HAMPSHIre ConCord LIDS, JOURNEYS MAnCHeSTer LIDS, JOURNEYS nASHuA LIDS, JOURNEYS neWIngTon LIDS, JOURNEYS norTH ConWAY LIDS, JOURNEYS SALeM LIDS, JOURNEYS neW JerSeY roSevILLe HAT WORLD, JOURNEYS, SHI BrIdgeWATer LIDS, JOHNSTON & MURPHY SHOP, ST. CLoud HAT WORLD, JOURNEYS JOURNEYS ST. PAuL LIDS (2), JOHNSTON & MURPHY SHOP, BurLIngTon UNDERGROUND STATION JOURNEYS KIDZ, GREAT PLAINS WoodBurY JOURNEYS MISSISSIPPI BILoxI HAT SHACK, JOURNEYS, UNDERGROUND STATION greenvILLe JOURNEYS guLFPorT LIDS HATTIeSBurg HAT SHACK, JOURNEYS, JOURNEYS KIDZ JACkSon HAT WORLD, UNDERGROUND STATION MerIdIAn HAT SHACK, JOURNEYS rIdgeLAnd HAT WORLD, JOURNEYS, JOURNEYS KIDZ SouTHAven JOURNEYS TuPeLo LIDS, JOURNEYS MISSourI BrAnSon LIDS, JOURNEYS CAPe gIrArdeAu LIDS, JOURNEYS CHerrY HILL LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS, UNDERGROUND STATION dePTFord LIDS, JOURNEYS, JOURNEYS KIDZ eAST BrunSWICk LIDS, JOURNEYS eATonToWn LIDS, JOURNEYS, JOURNEYS KIDZ, SHI edISon LIDS eLIzABeTH HAT SHACK, LIDS, JOURNEYS, JOURNEYS KIDZ FreeHoLd HAT WORLD, JOURNEYS JACkSon JOURNEYS JerSeY CITY LIDS, JOURNEYS, SHI LAWrenCevILLe LIDS, JOURNEYS, UNDERGROUND STATION LIvIngSTon LIDS, JOURNEYS MArLTon JOHNSTON & MURPHY SHOP MAYS LAndIng LIDS, JOURNEYS, JOURNEYS KIDZ MooreSToWn LIDS, JOURNEYS neWArk JOHNSTON & MURPHY SHOP CHeSTerFIeLd LIDS, JOHNSTON & MURPHY SHOP, PArAMuS LIDS (3), JOURNEYS, JOURNEYS KIDZ, JOURNEYS, JOURNEYS KIDZ, SPORTS FAN-ATTIC CoLuMBIA LIDS, JOURNEYS deS PereS JOURNEYS, JOURNEYS KIDZ, SHI FLorISSAnT UNDERGROUND STATION HAzeLWood LIDS, JOURNEYS IndePendenCe LIDS, JOURNEYS, JOURNEYS KIDZ, SHI JoPLIn HAT WORLD, JOURNEYS kAnSAS CITY LIDS, JOURNEYS oSAge BeACH LIDS, JOURNEYS, JOHNSTON & MURPHY OUTLET UNDERGROUND STATION, SHI roCkAWAY LIDS, JOURNEYS, SHI SHorT HILLS JOHNSTON & MURPHY SHOP TInTon FALLS LIDS, JOHNSTON & MURPHY OUTLET ToMS rIver LIDS, JOURNEYS WoodBrIdge LIDS (2), JOURNEYS, JOURNEYS KIDZ, SHI neW MexICo ALBuquerque LIDS (2), JOURNEYS (2), JOURNEYS KIDZ (2), UNDERGROUND STATION (2), SHI SPrIngFIeLd LIDS, JOURNEYS, JOURNEYS KIDZ ST. Ann HAT ZONE, UNDERGROUND STATION ST. JoSePH LIDS, JOURNEYS ST. LouIS LIDS (3), JOHNSTON & MURPHY SHOP (2), JOURNEYS (2), JOURNEYS KIDZ, SPORTS FAN-ATTIC, CLovIS JOURNEYS FArMIngTon JOURNEYS gALLuP JOURNEYS LAS CruCeS JOURNEYS SAnTA Fe JOURNEYS UNDERGROUND STATION ST. PeTerS LIDS, JOURNEYS, JOURNEYS KIDZ, SHI, neW York Genesco inc. AND SUBSIDIARIES Bronx LIDS JACkSonvILLe LIDS, JOURNEYS, BrookLYn LIDS (2), JOURNEYS, UNDERGROUND STATION UNDERGROUND STATION BuFFALo LIDS, JOURNEYS (2), PInevILLe HAT SHACK, JOURNEYS, SPORTS FAN-ATTIC rALeIgH HAT SHACK, LIDS, JOHNSTON & MURPHY SHOP, UNDERGROUND STATION, LIDS KIDS JOURNEYS (2), JOURNEYS KIDZ, SHI CenTrAL vALLeY LIDS, roCkY MounT LIDS, UNDERGROUND STATION JOHNSTON & MURPHY OUTLET SMITHFIeLd JOURNEYS CLAY JOURNEYS deer PArk LIDS, JOURNEYS deWITT JOURNEYS eLMHurST LIDS, JOURNEYS, WILMIngTon LIDS, JOURNEYS, JOURNEYS KIDZ, SPORTS FAN-ATTIC WInSTon-SALeM LIDS, JOURNEYS, JOURNEYS KIDZ, SHI, SPORTS FAN-ATTIC UNDERGROUND STATION, LIDS KIDS FLuSHIng LIDS gArden CITY LIDS (2), JOHNSTON & MURPHY SHOP, JOURNEYS greeCe JOURNEYS HICkSvILLe LIDS, JOURNEYS HorSeHeAdS LIDS, JOURNEYS norTH dAkoTA BISMArCk LIDS, JOURNEYS FArgo LIDS, JOURNEYS grAnd ForkS LIDS, JOURNEYS MInoT JOURNEYS novA SCoTIA HunTIngTon STATIon JOHNSTON & MURPHY SHOP dArTMouTH LIDS JoHnSon CITY LIDS, JOURNEYS, JOURNEYS KIDZ HALIFAx LIDS kIngSTon JOURNEYS LAke grove LIDS, JOURNEYS, LIDS KIDS, JOURNEYS KIDZ, SHI LAkeWood LIDS MASSAPequA LIDS, JOURNEYS, JOURNEYS KIDZ MIddLeToWn LIDS, JOURNEYS neW HArTFord LIDS, JOURNEYS neW York LIDS (5), JOHNSTON & MURPHY SHOP (2), JOURNEYS (2) nIAgArA FALLS LIDS, JOHNSTON & MURPHY OUTLET, JOURNEYS PLATTSBurgH LIDS, JOURNEYS PougHkeePSIe LIDS, JOURNEYS rIverHeAd LIDS, JOURNEYS roCHeSTer LIDS (2), JOURNEYS, UNDERGROUND STATION roTTerdAM JOURNEYS SArATogA SPrIngS HAT WORLD, JOURNEYS STATen ISLAnd LIDS, JOURNEYS, UNDERGROUND STATION SYrACuSe LIDS, JOURNEYS, JOURNEYS KIDZ vALLeY STreAM LIDS, JOURNEYS vICTor LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS WATerLoo LIDS, JOURNEYS WATerToWn LIDS, JOURNEYS WeST nYACk JOURNEYS, LIDS, UNDERGROUND STATION, SHI WHITe PLAInS LIDS (2), JOURNEYS, UNDERGROUND STATION WILLIAMSvILLe JOURNEYS YorkToWn HeIgHTS JOURNEYS oHIo Akron LIDS (2), JOURNEYS (2) AurorA JOURNEYS BeACHWood JOHNSTON & MURPHY SHOP BeAverCreek JOURNEYS KIDZ, HAT WORLD, JOURNEYS (2) CAnTon LIDS, JOURNEYS, JOURNEYS KIDZ CInCInnATI HAT WORLD, HAT ZONE, LIDS (2), JOHNSTON & MURPHY SHOP, JOURNEYS (4), JOURNEYS KIDZ, UNDERGROUND STATION (2) CLeveLAnd LIDS, JOHNSTON & MURPHY SHOP (2), UNDERGROUND STATION CoLuMBuS HAT WORLD, LIDS (2), JOHNSTON & MURPHY SHOP, JOURNEYS, JOURNEYS KIDZ, SHI, SPORTS FAN-ATTIC, UNDERGROUND STATION dAYTon LIDS (2), JOURNEYS, SHI duBLIn HAT ZONE, JOURNEYS, JOURNEYS KIDZ, SHI eLYrIA LIDS, JOURNEYS FIndLAY JOURNEYS HeATH JOURNEYS JeFFerSonvILLe JOHNSTON & MURPHY OUTLET, JOURNEYS LAnCASTer HAT WORLD, JOURNEYS LIMA LIDS, JOURNEYS MAnSFIeLd HAT WORLD, JOURNEYS MAuMee LIDS, JOURNEYS MenTor LIDS, JOURNEYS Monroe HAT WORLD, JOHNSTON & MURPHY OUTLET nILeS JOURNEYS, HAT WORLD norTH oLMSTed LIDS, JOURNEYS PArMA LIDS, JOURNEYS ASHevILLe LIDS, JOURNEYS, UNDERGROUND STATION rICHMond HeIgHTS UNDERGROUND STATION BurLIngTon JOURNEYS SAnduSkY LIDS, JOURNEYS CArY HAT SHACK, LIDS, JOURNEYS SPrIngFIeLd JOURNEYS CHArLoTTe LIDS (4), JOHNSTON & MURPHY SHOP (3), ST. CLAIrSvILLe HAT WORLD JOURNEYS, SPORTS FAN-ATTIC, STrongSvILLe LIDS, JOHNSTON & MURPHY SHOP, UNDERGROUND STATION (2) JOURNEYS, JOURNEYS KIDZ, SHI ConCord HAT SHACK, LIDS, JOURNEYS (2) ToLedo LIDS, JOURNEYS, SHI, UNDERGROUND STATION durHAM LIDS, JOURNEYS, SPORTS FAN-ATTIC, WeSTLAke JOURNEYS UNDERGROUND STATION YoungSToWn LIDS, JOURNEYS FAYeTTevILLe LIDS, JOURNEYS, JOURNEYS KIDZ, zAneSvILLe HAT WORLD UNDERGROUND STATION gASTonIA HAT WORLD, JOURNEYS, SPORTS FAN-ATTIC okLAHoMA BArTLeSvILLe JOURNEYS LAWTon LIDS, JOURNEYS norMAn LIDS, JOURNEYS okLAHoMA CITY HAT WORLD (2), LIDS, JOURNEYS (3), JOURNEYS KIDZ (2) SHAWnee JOURNEYS SPORTS FAN-ATTIC MonTAnA BILLIngS LIDS, JOURNEYS BozeMAn LIDS MISSouLA JOURNEYS ALBAnY LIDS (3), JOURNEYS, JOURNEYS KIDZ, goLdSBoro JOURNEYS UNDERGROUND STATION, SHI AMHerST HAT WORLD, JOURNEYS AuBurn JOURNEYS greenSBoro HAT SHACK, LIDS, JARMAN SHOE STORE, JOHNSTON & MURPHY SHOP, JOURNEYS, SPORTS FAN-ATTIC, UNDERGROUND STATION BAY SHore LIDS, JOURNEYS, JOURNEYS KIDZ greenvILLe UNDERGROUND STATION HICkorY HAT SHACK, JOURNEYS, SPORTS FAN-ATTIC 89 WAYne LIDS, JOURNEYS, UNDERGROUND STATION norTH CAroLInA Genesco inc. AND SUBSIDIARIES G e n e s c o r e Ta i l s T o r e s A S O F 1 / 3 0 / 1 0 TuLSA LIDS (2), JOURNEYS (2), JOURNEYS KIDZ, SeLInSgrove HAT WORLD CLArkSvILLe HAT WORLD, JOURNEYS LuBBoCk HAT WORLD, JOURNEYS, JOURNEYS KIDZ, SCArBorougH HEAD QUARTERS UNDERGROUND STATION, SHI SPrIngFIeLd LIDS, JOURNEYS CoLLIervILLe LIDS, JOURNEYS UNDERGROUND STATION STATe CoLLege HAT WORLD, JOURNEYS FrAnkLIn HAT WORLD, JOHNSTON & MURPHY SHOP, LuFkIn JOURNEYS STroudSBurg LIDS, JOURNEYS JOURNEYS, JOURNEYS KIDZ, SHI MCALLen LIDS, JARMAN SHOE STORE, JOURNEYS, TAnnerSvILLe JOHNSTON & MURPHY OUTLET, gATLInBurg LIDS JOURNEYS KIDZ, UNDERGROUND STATION JOURNEYS TArenTuM LIDS, JOURNEYS unIonToWn HAT WORLD goodLeTTSvILLe LIDS, JOURNEYS, MerCedeS JOURNEYS, JOHNSTON & MURPHY OUTLET UNDERGROUND STATION MeSquITe LIDS (2), JOURNEYS, JOURNEYS KIDZ, JACkSon HAT WORLD, JOURNEYS UNDERGROUND STATION WASHIngTon HAT WORLD, LIDS, JOURNEYS JoHnSon CITY LIDS, JOURNEYS MIdLAnd LIDS, JOURNEYS, JOURNEYS KIDZ WeST MIFFLIn LIDS (2), JOURNEYS, JOURNEYS KIDZ knoxvILLe HAT WORLD, LIDS, JOURNEYS (3) odeSSA LIDS, JOURNEYS WHITeHALL LIDS, JOURNEYS MeMPHIS JOHNSTON & MURPHY SHOP, PASAdenA JOURNEYS WILkeS-BArre HAT WORLD, JOURNEYS JOURNEYS (2), JOURNEYS KIDZ, PeArLAnd LIDS, JOURNEYS WILLoW grove HAT WORLD, JOURNEYS, SHI WYoMISSIng LIDS, JOURNEYS York JOURNEYS PuerTo rICo AguAdILLA JOURNEYS UNDERGROUND STATION MorrISToWn JOURNEYS MurFreeSBoro HAT WORLD, LIDS, JOURNEYS nASHvILLe LIDS, JOHNSTON & MURPHY OUTLET, PLAno LIDS (2), JOHNSTON & MURPHY SHOP, JOURNEYS PorT ArTHur JOURNEYS round roCk LIDS, JOHNSTON & MURPHY OUTLET, JOHNSTON & MURPHY SHOP, JOURNEYS, JOURNEYS BArCeLoneTA LIDS, JOURNEYS JOURNEYS KIDZ, SHI BAYAMon LIDS (2), JOURNEYS (2), JOURNEYS KIDZ CAguAS LIDS (3), JOURNEYS (2), JOURNEYS KIDZ, SHI CAnovAnAS LIDS, JOURNEYS CAroLInA LIDS, JOURNEYS, SevIervILLe LIDS, JOHNSTON & MURPHY OUTLET, JOURNEYS TexAS SAn AngeLo HAT WORLD, JOURNEYS SAn AnTonIo LIDS (7), JARMAN SHOE STORE, JOHNSTON & MURPHY SHOP (2), JOURNEYS (6), JOURNEYS KIDZ (2), UNDERGROUND STATION (2), SHI SAn MArCoS LIDS, JOHNSTON & MURPHY OUTLET, SHerBrooke LIDS CorPuS CHrISTI LIDS, JOURNEYS, JOURNEYS KIDZ, FAJArdo JOURNEYS guAYAMA JOURNEYS HATILLo LIDS, JOURNEYS HATo reY JOURNEYS HuMACAo LIDS, JOURNEYS ISABeLA LIDS, JOURNEYS MAYAguez LIDS, JOURNEYS (2), JOURNEYS KIDZ PonCe LIDS, JOURNEYS SAn JuAn LIDS, JOURNEYS KIDZ SIerrA BAYAMon JOURNEYS vegA ALTA LIDS, JOURNEYS queBeC LASALLe LIDS LAvAL LIDS rHode ISLAnd ProvIdenCe LIDS (2), JOHNSTON & MURPHY SHOP, ABILene HAT WORLD, JOURNEYS AMArILLo LIDS, JOURNEYS, JOURNEYS KIDZ ArLIngTon LIDS (2), JOURNEYS, JOURNEYS KIDZ, JOURNEYS, JOURNEYS KIDZ, SHI SHerMAn JOURNEYS SPrIng LIDS SHI, UNDERGROUND STATION SugArLAnd LIDS, JOURNEYS, JOURNEYS KIDZ AuSTIn LIDS (3), JOHNSTON & MURPHY SHOP, TeMPLe JOURNEYS JOURNEYS (3), UNDERGROUND STATION TexArkAnA LIDS, JOURNEYS BAYToWn JOURNEYS THe WoodLAndS JOURNEYS, JOURNEYS KIDZ BeAuMonT LIDS, JOURNEYS, JOURNEYS KIDZ, TYLer LIDS, JOURNEYS, UNDERGROUND STATION UNDERGROUND STATION BroWnSvILLe LIDS, JOURNEYS, JOURNEYS KIDZ, vICTorIA JOURNEYS WACo LIDS, JOURNEYS UNDERGROUND STATION WICHITA FALLS LIDS, JOURNEYS CAnuTILLo JOHNSTON & MURPHY OUTLET, JOURNEYS CedAr PArk HAT WORLD, JOURNEYS, JOURNEYS KIDZ CoLLege STATIon HAT WORLD, JOURNEYS Conroe LIDS u.S. vIrgIn ISLAndS ST. THoMAS JOURNEYS uTAH LAYTon JOURNEYS LogAn JOURNEYS SHI, UNDERGROUND STATION MurrAY LIDS, JOURNEYS, JOURNEYS KIDZ CYPreSS JOHNSTON & MURPHY OUTLET, LIDS ogden LIDS, JOURNEYS dALLAS HAT WORLD, LIDS (2), oreM LIDS, JOURNEYS, JOURNEYS KIDZ JOHNSTON & MURPHY SHOP (3), JOURNEYS (3), PArk CITY JOURNEYS JOURNEYS KIDZ, UNDERGROUND STATION (2) Provo JOURNEYS denTon HAT WORLD, JOURNEYS SALT LAke CITY LIDS, JOURNEYS SAndY JOURNEYS, JOURNEYS KIDZ, SHI SouTH CAroLInA AnderSon HAT WORLD, JOURNEYS BLuFFTon JOHNSTON & MURPHY OUTLET, eAgLe PASS JOURNEYS JOURNEYS eL PASo HAT ZONE (2), JOURNEYS (3), ST. george JOURNEYS CHArLeSTon HAT SHACK, LIDS, JOURNEYS, JOURNEYS KIDZ (2), SHI WeST vALLeY CITY JOURNEYS HAT WORLD ForT WorTH HAT WORLD, LIDS, JARMAN SHOE STORE, CoLuMBIA HAT WORLD (2), LIDS, JOURNEYS (3), JOURNEYS (2), UNDERGROUND STATION SPORTS FAN-ATTIC, UNDERGROUND STATION FrIendSWood LIDS, JOURNEYS, FLorenCe HAT WORLD, JOURNEYS JOURNEYS KIDZ, SHI gAFFneY JOURNEYS FrISCo HAT WORLD, JOURNEYS, JOURNEYS KIDZ, SHI verMonT BurLIngTon LIDS, JOURNEYS MAnCHeSTer JOHNSTON & MURPHY OUTLET SouTH BurLIngTon LIDS, JOURNEYS greenvILLe LIDS, LIDS KIDS, JARMAN SHOE STORE, gArLAnd LIDS, JOURNEYS vIrgInIA JOURNEYS, JOURNEYS KIDZ, SPORTS FAN-ATTIC grAPevIne LIDS, JOURNEYS ArLIngTon HAT ZONE, JOHNSTON & MURPHY SHOP, MYrTLe BeACH LIDS (4), JOHNSTON & MURPHY OUTLET, HArLIngen LIDS, JOURNEYS JOURNEYS, UNDERGROUND STATION JOURNEYS (2), SPORTS FAN-ATTIC HouSTon LIDS (8), JOHNSTON & MURPHY SHOP (2), CHArLoTTeSvILLe HAT WORLD, JOURNEYS norTH CHArLeSTon JOURNEYS (2), JOURNEYS (8), JOURNEYS KIDZ (2), CHeSAPeAke HAT WORLD (2), JOURNEYS (2), UNDERGROUND STATION SPORTS FAN-ATTIC (2), UNDERGROUND STATION (5) UNDERGROUND STATION norTH MYrTLe BeACH LIDS HuMBLe LIDS, JOURNEYS, JOURNEYS KIDZ, SHI, CHrISTIAnSBurg HAT WORLD, JOURNEYS SPArTAnBurg LIDS, JOURNEYS, SPORTS FAN-ATTIC, UNDERGROUND STATION CoLonIAL HeIgHTS HAT WORLD, UNDERGROUND STATION HurST LIDS, JOURNEYS UNDERGROUND STATION UNDERGROUND STATION onTArIo BArrIe CAP CONNECTION BeLLevILLe LIDS BrAMPTon LIDS BrAnTFord LIDS BurLIngTon LIDS CAMBrIdge HEAD QUARTERS gueLPH LIDS HAMILTon HEAD QUARTERS kIngSTon LIDS kITCHner LIDS London LIDS (2) MISSISSAugA LIDS (2), HEAD QUARTERS neWMArkeT HEAD QUARTERS nIAgArA FALLS LIDS norTH BAY CAP CONNECTION oSHAWA LIDS oTTAWA LIDS (2) PICkerIng LIDS SArnIA LIDS ST. CATHArIneS LIDS SudBurY LIDS THornHILL LIDS ToronTo HEAD QUARTERS, LIDS (2) vAugHn HEAD QUARTERS WATerLoo LIDS WIndSor HEAD QUARTERS oregon eugene LIDS, JOURNEYS MedFord HAT WORLD, JOURNEYS PorTLAnd LIDS (2), JOURNEYS (2) SALeM LIDS, JOURNEYS TIgArd LIDS, JOURNEYS WoodBurn LIDS, JOURNEYS PennSYLvAnIA ALToonA LIDS, JOURNEYS BenSALeM LIDS, JOURNEYS CAMP HILL HAT WORLD, JOURNEYS JOURNEYS CenTer vALLeY LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS dICkSon CITY JOURNEYS erIe LIDS, JOURNEYS exTon LIDS, JOURNEYS, JOURNEYS KIDZ greenSBurg HAT WORLD, JOURNEYS grove CITY JOHNSTON & MURPHY OUTLET, JOURNEYS HArrISBurg LIDS, JOURNEYS (2) HoMeSTeAd JOURNEYS JoHnSToWn LIDS kIng oF PruSSIA LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS, JOURNEYS KIDZ LAnCASTer LIDS (2), JOHNSTON & MURPHY OUTLET, JOURNEYS LAngHorne LIDS, JOURNEYS, JOURNEYS KIDZ MedIA LIDS, JOURNEYS, UNDERGROUND STATION MonACA HAT WORLD, JOURNEYS MonroevILLe LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS MooSIC LIDS, JOURNEYS norTH WALeS LIDS, JOURNEYS, JOURNEYS KIDZ UNDERGROUND STATION (2) PITTSBurgH LIDS (3), JOHNSTON & MURPHY SHOP (3), JOURNEYS (3), JOURNEYS KIDZ, HAT WORLD PLYMouTH MeeTIng JOURNEYS PoTTSToWn JOHNSTON & MURPHY OUTLET, LIDS SCrAnTon LIDS (2), JOURNEYS PHILAdeLPHIA LIDS (4), JOHNSTON & MURPHY SHOP, SIoux FALLS HAT WORLD, JOURNEYS SouTH dAkoTA rAPId CITY LIDS, JOURNEYS IrvIng LIDS, JOURNEYS, JOURNEYS KIDZ, dAnvILLe HAT SHACK, JOURNEYS UNDERGROUND STATION kATY LIDS, JOURNEYS duLLeS LIDS, JOURNEYS FAIrFAx LIDS, JOHNSTON & MURPHY SHOP, kILLeen HAT WORLD, JOURNEYS, JOURNEYS KIDZ JOURNEYS TenneSSee LAke JACkSon LIDS, JOURNEYS FrederICkSBurg HAT WORLD, JOURNEYS AnTIoCH LIDS, JOURNEYS, JOURNEYS KIDZ, LAredo LIDS, JOURNEYS, JOURNEYS KIDZ, gLen ALLen LIDS, JOURNEYS, UNDERGROUND STATION BArTLeTT LIDS UNDERGROUND STATION UNDERGROUND STATION LeWISvILLe JOURNEYS, JOURNEYS KIDZ HArrISonBurg LIDS, JOURNEYS CHATTAnoogA LIDS (2), JOURNEYS, JOURNEYS KIDZ LongvIeW LIDS, JOURNEYS LeeSBurg JOHNSTON & MURPHY OUTLET 90 G e n e s c o r e Ta i l s T o r e s A S O F 1 / 3 0 / 1 0 Genesco inc. AND SUBSIDIARIES LYnCHBurg HAT WORLD, JOURNEYS MAnASSAS LIDS, JOURNEYS MCLeAn LIDS, JOHNSTON & MURPHY SHOP, JOURNEYS neWPorT neWS HAT WORLD, JOURNEYS, UNDERGROUND STATION norFoLk LIDS (2), JOHNSTON & MURPHY SHOP, JOURNEYS, UNDERGROUND STATION (2) rICHMond HAT WORLD, LIDS, JOURNEYS (3), JOHNSTON & MURPHY SHOP roAnoke LIDS, JOURNEYS SPrIngFIeLd JOURNEYS vIrgInIA BeACH LIDS (2), JOURNEYS (2), JOHNSTON & MURPHY SHOP WILLIAMSBurg LIDS, JOHNSTON & MURPHY OUTLET, JOURNEYS (2) WInCHeSTer LIDS, JOURNEYS WoodBrIdge LIDS, JOURNEYS WASHIngTon AuBurn LIDS, JOURNEYS BeLLevue LIDS, JOHNSTON & MURPHY SHOP BeLLIngHAM LIDS, JOURNEYS BurLIngTon JOURNEYS evereTT LIDS, JOURNEYS kenneWICk LIDS, JOURNEYS, JOURNEYS KIDZ kenT JOURNEYS LYnnWood LIDS, JOURNEYS oLYMPIA LIDS, JOURNEYS, JOURNEYS KIDZ PuYALLuP LIDS, JOURNEYS redMond JOURNEYS SeATTLe LIDS (2), JOURNEYS (2), JOURNEYS KIDZ SILverdALe LIDS, JOURNEYS SPokAne LIDS, JOURNEYS (2) TACoMA LIDS, JOURNEYS TukWILA LIDS TuLALIP LIDS, JOHNSTON & MURPHY OUTLET, JOURNEYS unIon gAP JOURNEYS vAnCouver LIDS, JOURNEYS, JOURNEYS KIDZ WeST vIrgInIA BArBourSvILLe HAT WORLD, JOURNEYS, JOURNEYS KIDZ BrIdgePorT HAT WORLD, JOURNEYS CHArLeSTon LIDS, JOURNEYS, JOURNEYS KIDZ MorgAnToWn HAT WORLD, JOURNEYS PArkerSBurg HAT WORLD, JOURNEYS WISConSIn APPLeTon LIDS, JOURNEYS BArABoo LIDS, JOURNEYS BrookFIeLd LIDS, JOURNEYS eAu CLAIre JOURNEYS gLendALe LIDS, JOURNEYS, JOHNSTON & MURPHY SHOP green BAY LIDS, JOURNEYS greendALe LIDS, JOURNEYS JAneSvILLe LIDS, JOURNEYS LACroSSe JOURNEYS MAdISon LIDS (3), JOURNEYS (2) MILWAukee LIDS, UNDERGROUND STATION oSHkoSH JOURNEYS PLeASAnT PrAIrIe JOHNSTON & MURPHY OUTLET, JOURNEYS rACIne LIDS, JOURNEYS WAuWAToSA HAT WORLD, JOURNEYS WYoMIng CASPer JOURNEYS CHeYenne JOURNEYS 91 GE NESCO INC. | GENESCO PARK | P.O. BOX 731 NASHVI LL E, T ENNES SEE 372 02-0731 | WWW.GENESC O.COM 

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