G E N E S C O | 2 0 1 3 A N N U A L R E P O R T
CORPORATE INFORMATION
Annual Meeting of Shareholders
The annual meeting of shareholders will be held Thursday, June 27, 2013 at 10:00 a.m. CDT, at the corporate headquarters in
Genesco Park, Nashville, Tennessee.
Corporate Headquarters
Genesco Park
1415 Murfreesboro Road – P.O. Box 731
Nashville, Tennessee 37202-0731
Independent Auditors
Ernst & Young
150 Fourth Avenue North, Suite 1400
Nashville, Tennessee 37219
Transfer Agent and Registrar
Communications concerning stock transfer, preferred stock dividends, consolidating accounts, change of address and lost or
stolen stock certificates should be directed to the transfer agent. When corresponding with the transfer agent, shareholders
should state the exact name(s) in which the stock is registered and certificate number, as well as old and new information about
the account.
Computershare Phone: (877) 224-0366
Address:
Computershare Trust Company, N.A.
P. O. Box 43078
Providence, Rhode Island 02940-3078
Private Couriers/Registered Mail:
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
Investor Relations
Security analysts, portfolio managers or other investment community representatives should contact:
James S. Gulmi, Senior Vice President – Finance, Chief Financial Officer
Genesco Park, Suite 490 – P.O. Box 731
Nashville, Tennessee 37202-0731
(615) 367-8325
Other Information
A copy of any exhibits to the Annual Report on Form 10-K will be furnished to shareholders upon written request, addressed to
Director, Corporate Relations, Genesco Inc., Genesco Park, Room 498, P.O. Box 731, Nashville, Tennessee 37202-0731,
accompanied by a check in the amount of $15.00 payable to Genesco Inc.
Certifications by the Chief Executive Officer and the Chief Financial Officer of the Company pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 have been filed as exhibits of the Company’s 2013 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 2013
regarding the Company’s compliance with the NYSE’s corporate governance listing standards.
Common Stock Listing
New York Stock Exchange: GCO
Shareholder Information
Shareholder information may be accessed at www.genesco.com
THE BUSINESS OF GENESCO
Founded in 1924, Nashville, Tennessee-based Genesco Inc. (NYSE: GCO) is a leading retailer of branded footwear, licensed
and branded headwear and accessories and wholesaler of branded footwear. It operates 2,459 footwear and headwear retail
stores in the United States, Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys,
Journeys Kidz, Shi by Journeys, Underground by Journeys, Schuh, Johnston & Murphy, Lids, Locker Room by Lids and on
internet websites, www.journeys.com, www.journeyskidz.com, www.shibyjourneys.com, www.undergroundbyjourneys.com,
www.schuh.co.uk, www.johnstonmurphy.com, www.dockersshoes.com, www.suregrip.com, www.lids.com,
www.lidslockerroom.com, www.lidsteamsports.com and www.lidsclubhouse.com. In addition, Genesco designs, sources,
markets and distributes footwear under its own Johnston & Murphy brand, the licensed Dockers® brand and other brands and
operates the Lids Team Sports team dealer business. Genesco relies primarily on independent third party manufacturers for the
production of its footwear products sold at wholesale.
TOTAL RETURN TO SHAREHOLDERS
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 $100 in the Company’s common stock, the S&P 500 Index and the S&P 1500 Footwear Index at the market
close on January 31, 2008 and the reinvestment monthly of all dividends.
COMPARISON OF CUMULATIVE 5 YEAR TOTAL RETURN
250
200
150
100
50
0
FYE 08
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
FYE 09
FYE 10
FYE 11
FYE 12
FYE 13
Company / Index
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
ANNUAL RETURN PERCENTAGE (%)
Years Ending
Jan 11
53.77
21.26
34.33
Jan 12
69.91
5.33
24.35
Jan 10
53.12
33.14
49.26
Jan 09
-49.06
-39.37
-36.59
Jan 13
1.98
17.60
2.70
Company / Index
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
Base
Period
Jan 08
100
100
100
INDEXED RETURNS ($)
Years Ending
Jan 09
50.94
60.63
63.41
Jan 10
78.00
80.72
94.65
Jan 11
119.95
97.88
127.14
Jan 12
203.81
103.10
158.11
Jan 13
207.85
121.24
162.37
*The S&P 1500 Footwear Index consists of Crocs Inc., Deckers Outdoor Corp., K-Swiss Inc. –CL A, Madden Steven Ltd., Nike Inc. –CL B, Skechers U.S.A.
Inc. and Wolverine World Wide.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 10-K
(Mark One)
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended February 2, 2013
(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
for the transition period from to
Commission File No. 1-3083
_____________________________________________________
Genesco Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
Genesco Park, 1415 Murfreesboro Road
Nashville, Tennessee
(Address of principal executive offices)
62-0211340
(I.R.S. Employer
Identification No.)
37217-2895
(Zip Code)
Registrant’s telephone number, including area code: (615) 367-7000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $1.00 par value
Preferred Share Purchase Rights
Name of Exchange
on which Registered
New York and Chicago
New York and Chicago
Securities Registered Pursuant to Section 12(g) of the Act:
Subordinated Serial Preferred Stock, Series 1
Employees’ Subordinated Convertible Preferred Stock
________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ⌧ No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:3) No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No (cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ⌧ No (cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ⌧
Indicate by check mark whether the registrant is a large accelerated filer; an accelerated filer; a non-accelerated filer; or a
smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer ⌧
Accelerated filer
(cid:3)
Non-accelerated filer (cid:3) (Do not check if smaller reporting company)
Smaller reporting company (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes (cid:3) No ⌧
The aggregate market value of common stock held by nonaffiliates of the registrant as of July 28, 2012, the last business day of
the registrant’s most recently completed second fiscal quarter, was approximately $1,587,000,000. The market value
calculation was determined using a per share price of $65.31, the price at which the common stock was last sold on the New
York Stock Exchange on such date. For purposes of this calculation, shares held by nonaffiliates excludes only those shares
beneficially owned by officers, directors, and shareholders owning 10% or more of the outstanding common stock (and, in each
case, their immediate family members and affiliates).
As of March 15, 2013, 24,010,616 shares of the registrant’s common stock were outstanding.
Documents Incorporated by Reference
Portions of Genesco’s Annual Report to Shareholders for the fiscal year ended February 2, 2013 are incorporated into Part II by
reference.
Portions of the proxy statement for the June 26, 2013 annual meeting of shareholders are incorporated into Part III by
reference.
TABLE OF CONTENTS
PART I
Page
3
8
14
14
15
16
17
18
20
22
39
40
103
103
103
104
104
104
104
104
105
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Item 4A. Executive Officers
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 15. Exhibits and Financial Statement Schedules
PART IV
2
ITEM 1, BUSINESS
General
PART I
Genesco Inc. (“Genesco” or the “Company”) is a leading retailer and wholesaler of branded footwear, apparel and
accessories with net sales for Fiscal 2013 of $2.60 billion. During Fiscal 2013, the Company operated five reportable
business segments (not including corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz, Shi by
Journeys and Underground by Journeys retail footwear chains, catalog and e-commerce operations; (ii) Schuh Group,
acquired in June 2011, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Lids Sports
Group, comprised of (a) headwear and accessory stores under the Lids® name and other names in the U.S., Puerto Rico
and Canada, (b) the Lids Locker Room business, consisting of sports-oriented fan shops featuring a broad array of
licensed merchandise such as apparel, hats and accessories, sports decor and novelty products, (c) the Lids Clubhouse
business, consisting of single team fan shops, (d) e-commerce business and (e) an athletic team dealer business operating
as Lids Team Sports; (iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, e-commerce
and catalog operations and wholesale distribution; and (v) Licensed Brands, comprised of Dockers® footwear, sourced
and marketed under a license from Levi Strauss & Company; SureGrip® Footwear, occupational footwear primarily sold
directly to consumers; and other brands.
At February 2, 2013, the Company operated 2,459 retail footwear, headwear and sports apparel and accessory stores
located primarily throughout the United States and in Puerto Rico, but also including 98 headwear stores and 29
footwear stores in Canada and 79 footwear stores and 13 footwear concessions in the United Kingdom and the Republic
of Ireland. It currently plans to open a total of approximately 165 new retail stores and close 33 retail stores in Fiscal
2014. At February 2, 2013, Journeys Group operated 1,157 stores, including 156 Journeys Kidz, 51 Shi by Journeys and
130 Underground by Journeys; Schuh Group operated 79 stores and 13 concessions; Lids Sports Group operated 1,053
stores and Johnston & Murphy Group operated 157 retail shops and factory stores.
The following table sets forth certain additional information concerning the Company’s retail footwear, headwear and
sports apparel and accessory stores during the five most recent fiscal years:
Retail Stores
Beginning of year
Opened during year
Acquired during year
Closed during year
End of year
Fiscal
2009
Fiscal
2010
Fiscal
2011
Fiscal
2012
Fiscal
2013
2,175
102
—
(43)
2,234
2,234
61
38
(57 )
2,276
2,276
53
58
(78)
2,309
2,309
70
85
(77)
2,387
2,387
104
33
(65 )
2,459
The Company also designs, sources, markets and distributes footwear under its own Johnston & Murphy brand, the
licensed Dockers® brand and other brands that the Company licenses for men’s footwear to over 1,025 retail accounts in
the United States, including a number of leading department, discount, and specialty stores.
Shorthand references to fiscal years (e.g., “Fiscal 2013”) refer to the fiscal year ended on the Saturday nearest
January 31st in the named year (e.g., February 2, 2013). The terms “Company,” “Genesco,” “we,” “our” or “us” as used
herein and unless otherwise stated or indicated by context refer to Genesco Inc. and its subsidiaries. All information
contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is
referred to in Item 1 of this report, is incorporated by such reference in Item 1. This report contains forward-looking
statements. Actual results may vary materially and adversely from the expectations reflected in these statements. For a
discussion of some of the factors that may lead to different results, see Item 1A, “Risk Factors” and Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Available Information
The Company files reports with the Securities and Exchange Commission (“SEC”), including annual reports on Form
10-K, quarterly reports on Form 10-Q and other reports from time to time. The public may read and copy any materials
we file with the SEC at the SEC’s Public Reference Room at 100 F. Street, NE, Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
Company is an electronic filer and the SEC maintains an Internet site at http://www.sec.gov that contains the reports,
proxy and information statements, and other information filed electronically. The Company’s website address is
3
http://www.genesco.com. The Company’s website address is provided as an inactive textual reference only. The
Company makes available free of charge through the website annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such
material is electronically filed with or furnished to the SEC. Copies of the charters of each of the Company’s Audit
Committee, Compensation Committee and Nominating and Corporate Governance Committee, as well as the
Company’s Corporate Governance Guidelines and Code of Ethics along with position descriptions for the Board of
Directors and Board committees are also available free of charge through the website. The information provided on the
Company’s website is not part of this report, and is therefore not incorporated by reference unless such information is
otherwise specifically incorporated elsewhere in this report.
Segments
Journeys Group
The Journeys Group segment, including Journeys, Journeys Kidz, Shi by Journeys and Underground by Journeys retail
stores, catalog and e-commerce operations, accounted for approximately 43% of the Company’s net sales in Fiscal 2013.
Operating income attributable to Journeys Group was $106.9 million in Fiscal 2013, with an operating margin of 9.6%.
The Company believes that the Journeys Group’s distinctive store formats, its mix of well-known brands and new
product introductions, and its experienced management team provide significant competitive advantages for the Journeys
Group.
At February 2, 2013, Journeys Group operated 1,157 stores, including 156 Journeys Kidz stores, 51 Shi by Journeys
stores and 130 Underground by Journeys stores averaging approximately 1,900 square feet, throughout the United States
and in Puerto Rico and Canada, selling footwear and accessories for young men, women and children.
Same store sales increased 6%, comparable direct sales increased 8% and comparable sales, including both store and
direct sales, increased 6% from the prior fiscal year. Journeys stores target customers in the 13 to 22 year age group
through the use of youth-oriented decor and multi-channel media. Journeys stores carry predominately branded
merchandise across a wide range of prices. The Journeys Kidz retail footwear stores sell footwear and accessories
primarily for younger children ages five to 12. Shi by Journeys retail footwear stores sell footwear and accessories to a
target customer group consisting of fashion-conscious women in their early 20’s to mid 30’s. Underground by Journeys
retail footwear stores sell footwear and accessories primarily for men and women in the 20 to 35 age group. In Fiscal
2013, the Journeys Group added three net new stores and plans to open approximately 32 net new stores in Fiscal 2014.
Lids Sports Group
The Lids Sports Group segment, as described above, accounted for approximately 30% of the Company’s net sales in
Fiscal 2013. Operating income attributable to Lids Sports Group was $85.8 million in Fiscal 2013, with an operating
margin of 10.8%.
At February 2, 2013, Lids Sports Group operated 1,053 stores, averaging approximately 1,150 square feet, throughout
the United States and in Puerto Rico and Canada. Lids Sports Group added 51 net new stores in Fiscal 2013, including
33 acquired stores, and plans to open approximately 78 net new stores in Fiscal 2014.
Same store sales for Lids Sports Group decreased 4% for Fiscal 2013, while comparable direct sales increased 9% from
the prior fiscal year. Comparable sales, including both store and direct sales, decreased 3% for Fiscal 2013. The core
headwear stores and kiosks, located in malls, airports, street-level stores and factory outlet stores throughout the United
States and in Puerto Rico and Canada, target customers in the early-teens to mid-20’s age group. In general, the stores
offer headwear from an assortment of college, MLB, NBA, NFL and NHL teams, as well as other specialty fashion
categories. The Lids Locker Room and Lids Clubhouse stores, operating under a number of trade names, located in
malls and other locations primarily in the United States, target sports fans of all ages. These stores offer headwear,
apparel, accessories and novelties from an assortment of college and professional teams. The Clubhouse stores offer
headwear, apparel and accessories for specific college or professional teams.
Schuh Group
The Schuh Group segment, including e-commerce operations, accounted for approximately 14% of the Company’s net
sales in Fiscal 2013. Operating income attributable to Schuh Group was $7.9 million in Fiscal 2013, with an operating
margin of 2.1%. Operating income for Schuh included $12.1 million in compensation expense related to a deferred
purchase price obligation in connection with the acquisition. For additional information, see Note 2 to the Consolidated
Financial Statements included in Item 8.
4
Sames store sales increased 7%, comparable direct sales increased 13% and comparable sales, including both store and
direct sales, increased 8% from July through the end of the prior fiscal year. At February 2, 2013, Schuh Group operated
76 Schuh stores, averaging approximately 4,300 square feet, which include both street-level and mall locations in the
United Kingdom and the Republic of Ireland. Schuh Group opened its first Kids store in Fiscal 2013. As of February 2,
2013, Schuh Group operated three Kids stores averaging 1,075 square feet. The Schuh Group also operated 13 footwear
concessions in Republic apparel stores in the United Kingdom, averaging approximately 1,175 square feet. Schuh Group
plans to open approximately 15 new Schuh stores and close five stores in Fiscal 2014. Schuh stores target men and
women in the 15 to 30 age group selling a broad range of branded casual and athletic footwear along with a meaningful
private label offering.
Johnston & Murphy Group
The Johnston & Murphy Group segment, including retail stores, catalog and e-commerce operations and wholesale
distribution, accounted for approximately 9% of the Company’s net sales in Fiscal 2013. Operating income attributable
to Johnston & Murphy Group was $15.7 million in Fiscal 2013, with an operating margin of 7.1%. All of the Johnston &
Murphy wholesale sales are of the Genesco-owned Johnston & Murphy brand and approximately 99% of the group’s
retail sales are of Johnston & Murphy branded products.
Johnston & Murphy Retail Operations. At February 2, 2013, Johnston & Murphy operated 157 retail shops and factory
stores throughout the United States and in Canada averaging approximately 1,825 square feet and selling footwear,
luggage and accessories primarily for men in the 35 to 55 age group, targeting business and professional customers.
Women’s footwear and accessories are sold in select Johnston & Murphy locations. Johnston & Murphy retail shops are
located primarily in better malls and airports nationwide and sell a broad range of men’s dress and casual footwear and
accessories. The Company also sells Johnston & Murphy products directly to consumers through an e-commerce website
and a direct mail catalog. Same store sales for Johnston & Murphy retail operations increased 3%, comparable direct
sales increased 13% and comparable sales, including both store and direct sales, increased 4% for Fiscal 2013. Retail
prices for Johnston & Murphy footwear generally range from $100 to $275. Total footwear accounted for 65% of total
Johnston & Murphy retail sales in Fiscal 2013, with the balance consisting primarily of apparel and accessories.
Johnston & Murphy Group added nine new shops and factory stores, including four in Canada, and closed five shops
and factory stores in Fiscal 2013, and plans to open approximately 12 net new shops and factory stores in Fiscal 2014.
Johnston & Murphy Wholesale Operations. In addition to Company-owned Johnston & Murphy retail shops and factory
stores, Johnston & Murphy men’s footwear and accessories are sold at wholesale, primarily to better department and
independent specialty stores. Johnston & Murphy’s wholesale customers offer the brand’s footwear for dress, dress
casual, and casual occasions, with the majority of styles offered in these channels selling from $100 to $165.
Licensed Brands
The Licensed Brands segment accounted for approximately 4% of the Company’s net sales in Fiscal 2013. Operating
income attributable to Licensed Brands was $10.1 million in Fiscal 2013, with an operating margin of 9.3%. Licensed
Brands sales are footwear marketed under the Dockers® brand, for which Genesco has had the exclusive men’s footwear
license in the United States since 1991. See “Trademarks and Licenses.” Dockers footwear is marketed to men aged 30
to 55 through many of the same national retail chains that carry Dockers slacks and sportswear and in department and
specialty stores across the country. Suggested retail prices for Dockers footwear generally range from $50 to $90. The
Company acquired Keuka Footwear in the third quarter of Fiscal 2011 and subsequently launched its SureGrip®
Footwear line of slip-resistant, occupational footwear from that base. The Company sources and distributes the SureGrip
line to employees in the hospitality, healthcare, and other industries.
For further information on the Company’s business segments, see Note 14 to the Consolidated Financial Statements
included in Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Manufacturing and Sourcing
The Company relies on independent third-party manufacturers for production of its footwear products sold at wholesale.
The Company sources footwear and accessory products from foreign manufacturers located in Bangladesh, Belgium,
Brazil, Canada, China, Denmark, Dominican Republic, France, India, Indonesia, Ireland, Italy, Korea, Mexico,
Netherlands, Peru, Portugal, Spain, Sweden, Thailand and Vietnam. The Company’s retail operations source primarily
branded products from third parties, who source primarily overseas.
Competition
Competition is intense in the footwear and headwear industry. The Company’s retail footwear and headwear competitors
range from small, locally owned stores to regional and national department stores, discount stores, and specialty chains.
5
The Company also competes with hundreds of footwear wholesale operations in the United States and throughout the
world, most of which are relatively small, specialized operations, but some of which are large, more diversified
companies. Some of the Company’s competitors have resources that are not available to the Company. The Company’s
success depends upon its ability to remain competitive with respect to the key factors of style, price, quality, comfort,
brand loyalty, customer service, store location and atmosphere and the ability to offer distinctive products.
Licenses
The Company owns its Johnston & Murphy brand and owns or licenses the trade names of its retail concepts either
directly or through wholly owned subsidiaries. The Dockers® brand footwear line, introduced in Fiscal 1993, is sold
under a license agreement granting the exclusive right to sell men’s footwear under the trademark in the United States,
Canada and Mexico and in certain other Latin American countries. The Dockers license agreement, as amended, expires
on November 30, 2015, subject to extension for an additional 3-year term if certain conditions are met. Net sales of
Dockers products were approximately $84 million in Fiscal 2013 and approximately $78 million in Fiscal 2012. The
Company licenses certain of its footwear brands, mostly in foreign markets. License royalty income was not material in
Fiscal 2013.
Wholesale Backlog
Most of the orders in the Company’s wholesale divisions are for delivery within 150 days. Because most of the
Company’s business is at-once, the backlog at any one time is not necessarily indicative of future sales. As of March 2,
2013, the Company’s wholesale operations had a backlog of orders, including unconfirmed customer purchase orders,
amounting to approximately $46.1 million, compared to approximately $47.5 million on February 25, 2012. The backlog
is somewhat seasonal, reaching a peak in spring. The Company maintains in-stock programs for selected product lines
with anticipated high volume sales.
Employees
Genesco had approximately 22,700 employees at February 2, 2013, approximately 120 of whom were employed in
corporate staff departments and the balance in operations. Retail footwear and headwear stores employ a substantial
number of part-time employees, and approximately 13,875 of the Company’s employees were part-time.
Properties
At February 2, 2013, the Company operated 2,459 retail footwear, headwear and sports apparel and accessory stores
throughout the United States and in Puerto Rico, Canada, the United Kingdom and the Republic of Ireland. New
shopping center store leases in the United States, Puerto Rico and Canada typically are for a term of approximately 10
years and new factory outlet leases typically are for a term of approximately five years. Store leases in the United
Kingdom and the Republic of Ireland typically have terms of between 10 and 20 years. Both typically provide for rent
based on a percentage of sales against a fixed minimum rent based on the square footage leased.
Seasonality
The Company’s business is seasonal with the Company’s investment in inventory and accounts receivable normally
reaching peaks in the spring and fall of each year.
6
The general location, use and approximate size of the Company’s principal properties are set forth below:
Location
Owned/
Leased
Segment
Use
Approximate
Area
Square Feet
Lebanon, TN
Owned
Journeys Group
Distribution warehouse
320,000
Nashville, TN
Leased
Various
Indianapolis, IN
Leased
Lids Sports Group
Executive & footwear
operations offices
295,000*
Distribution warehouse
and manufacturing
271,825
Chapel Hill, TN
Owned
Licensed Brands
Distribution warehouse
182,000
Fayetteville, TN
Owned
Johnston &
Murphy Group
Distribution warehouse
Indianapolis, IN
Leased
Lids Sports Group
Distribution warehouse
Deans Industrial Estate,
Livingston, Scotland
Owned
Schuh Group
Distribution warehouse
and administrative offices
Indianapolis, IN
Leased
Lids Sports Group
Distribution Warehouse
Lake Katrine, NY
Leased
Lids Sports Group
Distribution warehouse
and administrative offices
Nashville, TN
Owned
Journeys Group
Distribution warehouse
Houston Industrial Estate,
Livingston, Scotland
Leased
Schuh Group
Distribution warehouse
Indianapolis, IN
Leased
Lids Sports Group
Headwear operations
offices
Mississauga, Ontario,
Canada
Leased
Lids Sports Group
Distribution warehouse
Tigard, OR
Leased
Lids Sports Group
Administrative offices
Indianapolis, IN
Leased
Lids Sports Group
Administrative offices
Tampa, FL
Leased
Lids Sports Group
Distribution warehouse
and administrative offices
178,500
152,158
106,813
77,281
68,300
63,000
51,012
43,000
28,392
17,844
13,000
7,112
* The Company occupies approximately 80% of the building and subleases the remainder of the building.
The lease on the Company’s Nashville office expires in April 2017, with an option to renew for an additional five years.
The lease on the Indianapolis headwear office expires in May 2015. The Company believes that all leases of properties that are
material to its operations may be renewed on terms not materially less favorable to the Company than existing leases.
7
Environmental Matters
The Company’s former manufacturing operations and the sites of those operations are subject to numerous federal, state,
and local laws and regulations relating to human health and safety and the environment. These laws and regulations
address and regulate, among other matters, wastewater discharge, air quality and the generation, handling, storage,
treatment, disposal, and transportation of solid and hazardous wastes and releases of hazardous substances into the
environment. In addition, third parties and governmental agencies in some cases have the power under such laws and
regulations to require remediation of environmental conditions and, in the case of governmental agencies, to impose
fines and penalties. Several of the facilities owned by the Company (currently or in the past) are located in industrial
areas and have historically been used for extensive periods for industrial operations such as tanning, dyeing, and
manufacturing. Some of these operations used materials and generated wastes that would be considered regulated
substances under current environmental laws and regulations. The Company currently is involved in certain
administrative and judicial environmental proceedings relating to the Company’s former facilities. See Item 3, Legal
Proceedings and Note 13.
ITEM 1A, RISK FACTORS
Our business is subject to significant risks. You should carefully consider the risks and uncertainties described below
and the other information in this Form 10-K, including our consolidated financial statements and the notes to those
statements. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties
that we do not presently know about or that we currently consider immaterial may also affect our business operations
and financial performance. If any of the events described below actually occur, our business, financial condition or
results of operations could be adversely affected in a material way. This could cause the trading price of our stock to
decline, perhaps significantly, and you may lose part or all of your investment.
Poor economic conditions and other factors can affect consumer spending and may significantly harm our
business, affecting our financial condition, liquidity, and results of operations.
The success of our business depends to a significant extent upon the level of consumer spending. A number of factors
may affect the level of consumer spending on merchandise that we offer, including, among other things:
• general economic, industry and weather conditions;
• energy costs, which affect gasoline and home heating prices;
•
the level of consumer debt;
• pricing of products;
•
•
interest rates;
tax rates, refunds and policies;
• war, terrorism and other hostilities; and
• consumer confidence in future economic conditions.
Adverse economic conditions and any related decrease in consumer demand for discretionary items could have a
material adverse effect on our business, results of operations and financial condition. The merchandise we sell generally
consists of discretionary items. Reduced consumer confidence and spending may result in reduced demand for
discretionary items and may force us to take inventory markdowns, decreasing sales and making expense leverage
difficult to achieve. Demand can also be influenced by other factors beyond our control. For example, sales in the Lids
Sports Group segment have historically been affected by developments in team sports, and could be adversely impacted
by player strikes or other interruptions, as well as by the performance and reputation of certain teams.
Moreover, while the Company believes that its operating cash flows and its borrowing capacity under committed lines of
credit will be more than adequate for its anticipated cash requirements, if the economy were to experience a renewed
downturn, or if one or more of the Company’s revolving credit banks were to fail to honor its commitments under the
Company’s credit lines, the Company could be required to modify its operations for decreased cash flow or to seek
alternative sources of liquidity, and such alternative sources might not be available to the Company.
8
Our business involves a degree of fashion risk.
The majority of our businesses serves a fashion-conscious customer base and depends upon the ability of our buyers and
merchandisers to react to fashion trends, to purchase inventory that reflects such trends, and to manage our inventories
appropriately in view of the potential for sudden changes in fashion or in consumer taste. Failure to continue to execute
any of these activities successfully could result in adverse consequences, including lower sales, product margins,
operating income and cash flows.
Our business and results of operations are subject to a broad range of uncertainties arising out of world and
domestic events.
Our business and results of operations are subject to uncertainties arising out of world and domestic events, which may
impact not only consumer demand, but also our ability to obtain the products we sell, most of which are produced
outside the countries in which we operate. These uncertainties may include a global economic slowdown, changes in
consumer spending or travel, the increase in gasoline and natural gas prices, and the economic consequences of natural
disasters, military action or terrorist activities and increased regulatory and compliance burdens related to governmental
actions in response to a variety of factors, including but not limited to national security and anti-terrorism concerns and
concerns about climate change. Any future events arising as a result of terrorist activity or other world events may have
a material impact on our business, including the demand for and our ability to source products, and consequently on our
results of operations and financial condition.
The increasing scope of our non-U.S. operations exposes our performance to risks including foreign economic
conditions and exchange rate fluctuations.
Our performance depends in part on general economic conditions affecting all countries in which we do business. We
are dependent on foreign manufacturers for the products we sell, and our inventory is subject to cost and availability of
foreign materials and labor. Demand for our product offering in our non-U.S. operations is also subject to local market
conditions. The economic situation in Europe has been unstable, arising from concerns that certain European countries
may default in payments due on their national debt obligations and from related European financial restructuring efforts,
the effects of which could be felt throughout the European Union, including in the U.K. and the Republic of Ireland,
where our Schuh operations are based. While Schuh has performed above our expectations since its acquisition, there
can be no assurance that its future performance will not be adversely affected by economic conditions in its markets.
As we expand our international operations, we also increase our exposure to exchange rate fluctuations. Sales from
stores outside the U.S. are denominated in the currency of the country in which these operations or stores are located and
changes in foreign exchange rates affect the translation of the sales and earnings of these businesses into U.S. dollars for
financial reporting purposes. Additionally, inventory purchase agreements may also be denominated in the currency of
the country where the vendor resides.
Our business is intensely competitive and increased or new competition could have a material adverse effect on
us.
The retail footwear, headwear and accessories markets are intensely competitive. We currently compete against a diverse
group of retailers, including other regional and national specialty stores, department and discount stores, small
independents and e-commerce retailers, which sell products similar to and often identical to those we sell. Our branded
businesses, selling footwear at wholesale, also face intense competition, both from other branded wholesale vendors and
from private label initiatives of their retailer customers. A number of different competitive factors could have a material
adverse effect on our business, results of operations and financial condition, including:
•
increased operational efficiencies of competitors;
• competitive pricing strategies;
• expansion by existing competitors;
• entry by new competitors into markets in which we currently operate; and
• adoption by existing retail competitors of innovative store formats or sales methods.
9
We are dependent on third-party vendors for the merchandise we sell.
We do not manufacture any of the merchandise we sell. This means that our product supply is subject to the ability and
willingness of third-party suppliers to deliver merchandise we order on time and in the quantities and of the quality we
need. In addition, a material portion of our retail footwear sales consists of products marketed under brands, belonging to
unaffiliated vendors, which have fashion significance to our customers. Our core retail hat business is dependent upon
products bearing sports and other logos, each generally controlled by a single licensee/vendor. If those vendors were to
decide not to sell to us or to limit the availability of their products to us, or if they become unable because of economic
conditions or any other reason to supply us with products, we could be unable to offer our customers the products they
wish to buy and could lose their business to competitors.
An increase in the cost or a disruption in the flow of our imported products may significantly decrease our sales
and profits.
Merchandise originally manufactured and imported from overseas makes up a large proportion of our total inventory. A
disruption in the shipping of our imported merchandise or an increase in the cost of those products may significantly
decrease our sales and profits. We may be unable to meet our customers’ demands or pass on price increases to our
customers. In addition, if imported merchandise becomes more expensive or unavailable, the transition to alternative
sources may not occur in time to meet demand. Products from alternative sources may also be of lesser quality or more
expensive than those we currently import. Risks associated with our reliance on imported products include:
• disruptions in the shipping and importation of imported products because of factors such as:
•
raw material shortages, work stoppages, strikes and political unrest;
• problems with oceanic shipping, including shipping container shortages;
•
increased customs inspections of import shipments or other factors causing delays in shipments;
• economic crises, natural disasters, international disputes and wars; and
•
increases in the cost of purchasing or shipping foreign merchandise resulting from:
• denial by the United States of “most favored nation” trading status to or the imposition of quotas or other
restriction on imports from a foreign country from which we purchase goods;
•
•
import duties, import quotas and other trade sanctions; and
increases in shipping rates.
A significant amount of the inventory we sell is imported from the People’s Republic of China, which has historically
been subject to efforts to increase duty rates or to impose restrictions on imports of certain products.
A small portion of the products we buy abroad are priced in foreign currencies and, therefore, we are affected by
fluctuating currency exchange rates. In the past, we have entered into foreign currency exchange contracts with major
financial institutions to hedge these fluctuations. We might not be able to effectively protect ourselves in the future
against currency rate fluctuations, and our financial performance could suffer as a result. Even dollar-denominated
foreign purchases may be affected by currency fluctuations, as suppliers seek to reflect appreciation in the local currency
against the dollar in the price of the products that they provide. You should read “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” for more information about our foreign currency exchange
rate exposure and hedging activities.
The operation of the Company’s business is heavily dependent on its information systems.
We depend on a variety of information technology systems for the efficient functioning of our business and security of
information. Much information essential to our business is maintained electronically, including competitively sensitive
information and potentially sensitive personal information about customers and employees. Security breaches and
incidents, such as the unlawful intrusion into a portion of our networks used to process payment card and check
transactions for certain retail stores that we announced in December 2010, could expose us to liability connected to any
data loss, to higher operational costs related to security enhancements, and to loss of consumer confidence in our retail
concepts and brands. Our insurance policies may not provide coverage for these matters or may have coverage limits
which may not be adequate to reimburse us for losses caused by security breaches. We rely on certain hardware and
software vendors to maintain and periodically upgrade many of these systems so that they can continue to support our
business. The software programs supporting many of our systems were licensed to the Company by independent
software developers. The inability of these developers or the Company to continue to maintain and upgrade these
10
information systems and software programs could disrupt or reduce the efficiency of our operations. In addition, costs
and potential problems and interruptions associated with the implementation of new or upgraded systems and technology
or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations
or leave the Company vulnerable to security breaches.
We also rely heavily on our information technology staff. If we cannot meet our staffing needs in this area, we may not
be able to fulfill our technology initiatives or to provide maintenance on existing systems.
The loss of, or disruption in, one of our distribution centers and other factors affecting the distribution of
merchandise, could have a material adverse effect on our business and operations.
Each of our operations uses a single distribution center to handle all or a significant amount of its merchandise. Most of
our operations’ inventory is shipped directly from suppliers to their distribution centers, where the inventory is then
processed, sorted and shipped to our stores or to our wholesale customers. We depend on the orderly operation of this
receiving and distribution process, which depends, in turn, on adherence to shipping schedules and effective
management of the distribution centers. Although we believe that our receiving and distribution process is efficient and
well positioned to support our current business and our expansion plans, we cannot offer assurance that we have
anticipated all of the changing demands which our expanding operations will impose on our receiving and distribution
system, or that events beyond our control, such as disruptions in operations due to fire or other catastrophic events, labor
disagreements or shipping problems (whether in our own or in our third party vendors’ or carriers’ businesses), will not
result in delays in the delivery of merchandise to our stores or to our wholesale customers. We also make changes in our
distribution processes from time to time in an effort to improve efficiency, maximize capacity, etc. We cannot assure
that these changes will not result in unanticipated delays or interruptions in distribution. We depend upon UPS for
shipment of a significant amount of merchandise. An interruption in service by UPS for any reason could cause
temporary disruptions in our business, a loss of sales and profits, and other material adverse effects.
Our freight cost is impacted by changes in fuel prices through surcharges. Fuel prices and surcharges affect freight cost
both on inbound freight from vendors to our distribution centers and outbound freight from our distribution centers to
our stores and wholesale customers.
Increases in fuel prices and surcharges and other factors may increase freight costs and thereby increase our cost of
goods sold.
Any acquisitions we make or new businesses we launch involve a degree of risk.
Acquisitions have been a component of the Company’s growth strategy in recent years and we expect that we may
continue to engage in acquisitions or launch new businesses to grow our revenues and meet our other strategic
objectives. If any future acquisitions are not successfully integrated with our business, our ongoing operations could be
adversely affected. Additionally, acquisitions or new businesses may not achieve desired profitability objectives or result
in any anticipated successful expansion of the businesses or concepts. Although we review and analyze assets or
companies we acquire, such reviews are subject to uncertainties and may not reveal all potential risks. Additionally,
although we attempt to obtain protective contractual provisions, such as representations, warranties and indemnities, in
connection with acquisitions, we cannot offer assurance that we can obtain such provisions in our acquisitions or that
they will fully protect us from unforeseen costs of the acquisitions. We may also incur significant costs and diversion of
management time and attention in connection with pursuing possible acquisitions even if the acquisition is not ultimately
consummated.
11
We face a number of risks in opening new stores.
As part of our long-term growth strategy, we expect to open new stores, both in regional malls, where most of our
operational experience lies, and in other venues with which we are less familiar, including lifestyle centers, major city
street locations, and tourist destinations. Because of economic conditions and the availability of appropriate locations,
we slowed our pace of new store openings beginning in Fiscal 2010. While we intend to continue to be selective with
respect to new locations, our plans for Fiscal 2014 call for more new stores than we have opened in any year since Fiscal
2008. We increased our net store base by 33 in Fiscal 2011, 78 in Fiscal 2012 and 72 in Fiscal 2013; and currently plan
to increase our net store base by approximately 132 stores in Fiscal 2014. We cannot offer assurances that we will be
able to open as many stores as we have planned, that any new store will achieve similar operating results to those of our
existing stores or that new stores opened in markets in which we operate will not have a material adverse effect on the
revenues and profitability of our existing stores. The success of our planned expansion will be dependent upon numerous
factors, many of which are beyond our control, including the following:
• our ability to identify suitable markets and individual store sites within those markets;
•
the competition for suitable store sites;
• our ability to negotiate favorable lease terms for new stores and renewals (including rent and other costs) with
landlords;
• our ability to obtain governmental and other third-party consents, permits and licenses needed to construct and
operate our stores;
•
•
the ability to build and remodel stores on schedule and at acceptable cost;
the availability of employees to staff new stores and our ability to hire, train, motivate and retain
store personnel;
•
the availability of adequate management and financial resources to manage an increased number of stores;
• our ability to adapt our distribution and other operational and management systems to an expanded network
of stores; and
• our ability to attract customers and generate sales sufficient to operate new stores profitably.
Additionally, the results we expect to achieve during each fiscal quarter are dependent upon opening new stores on
schedule. If we fall behind, we will lose expected sales and earnings between the planned opening date and the actual
opening and may further complicate the logistics of opening stores, possibly resulting in additional delays.
Our results of operations are subject to seasonal and quarterly fluctuations, which could have a material adverse
effect on the market price of our stock.
Our business is highly seasonal, with a significant portion of our net sales and operating income generated during the
fourth quarter, which includes the holiday shopping season. Because of this seasonality, we have limited ability to
compensate for shortfalls in fourth quarter sales or earnings by changes in our operations or strategies in other quarters.
A significant shortfall in results for the fourth quarter of any year could have a material adverse effect on our annual
results of operations and on the market price of our stock. Our quarterly results of operations also may fluctuate
significantly based on such factors as:
•
•
•
the timing of new store openings and renewals;
the amount of net sales contributed by new and existing stores;
the timing of certain holidays and sales events;
• changes in our merchandise mix;
• general economic, industry and weather conditions that affect consumer spending; and
• actions of competitors, including promotional activity.
12
A failure to increase sales at our existing stores and in our e-commerce businesses may adversely affect our stock
price and impact our results of operations.
A number of factors have historically affected, and will continue to affect, our comparable sales results, including:
• consumer trends, such as less disposable income due to the impact of economic conditions and tax policies;
• competition;
•
timing of holidays including sales tax holidays;
• general regional and national economic conditions;
•
inclement weather;
• changes in our merchandise mix;
• our ability to distribute merchandise efficiently to our stores;
•
timing and type of sales events, promotional activities or other advertising;
• other external events beyond our control;
• new merchandise introductions; and
• our ability to execute our business strategy effectively.
Our comparable sales have fluctuated in the past, and we believe such fluctuations may continue. The unpredictability of
our comparable sales may cause our revenue and results of operations to vary from quarter to quarter, and an
unanticipated change in revenues or operating income may cause our stock price to fluctuate significantly.
We are subject to regulatory proceedings and litigation that could have an adverse effect on our financial
condition and results of operations.
We are party to certain lawsuits, governmental investigations, and regulatory proceedings, including the suits and
proceedings arising out of alleged environmental contamination relating to historical operations of the Company and
various suits involving current operations as disclosed in Note 13 to the Consolidated Financial Statements. If these or
similar matters are resolved against us, our results of operations, our cash flows, or our financial condition could be
adversely affected. The costs of defending such lawsuits and responding to such investigations and regulatory
proceedings may be substantial and their potential to distract management from day-to-day business is significant.
Moreover, with retail operations in 50 states, Puerto Rico, Canada, the United Kingdom and the Republic of Ireland, we
are subject to federal, state, provincial, territorial, local and foreign regulations, which impose costs and risks on our
business. Changes in regulations could make compliance more difficult and costly, and violations could result in liability
for damages or penalties.
If we lose key members of management or are unable to attract and retain the talent required for our business,
our operating results could suffer.
Our performance depends largely on the efforts and abilities of members of our management team. Our executives have
substantial experience and expertise in our business and have made significant contributions to our growth and success.
The unexpected future loss of services of one or more key members of our management team could have an adverse
effect on our business. In addition, future performance will depend upon our ability to attract, retain and motivate
qualified employees, including store personnel and field management. If we are unable to do so, our ability to meet our
operating goals may be compromised. Finally, our stores are decentralized, are managed through a network of
geographically dispersed management personnel and historically experience a high degree of turnover. If we are for any
reason unable to maintain appropriate controls on store operations due to turnover or other reasons, including the ability
to control losses resulting from inventory and cash shrinkage, our sales and operating margins may be adversely
affected. There can be no assurance that we will be able to attract and retain the personnel we need in the future.
13
Goodwill recorded with acquisitions is subject to impairment, which could reduce the Company’s profitability.
Deterioration in the Company’s market value, whether related to the Company’s operating performance or to disruptions
in the equity markets or deterioration in the operating performance of the business unit with which goodwill is
associated, could require the Company to recognize the impairment of some or all of the $273.8 million of goodwill on
its Consolidated Balance Sheets at February 2, 2013, resulting in the reduction of net assets and a corresponding non-
cash charge to earnings in the amount of the impairment.
In connection with acquisitions, the Company records goodwill on its Consolidated Financial Statements. This asset is
not amortized but is subject to an impairment test at least annually, which consists of either a qualitative assessment on a
reporting unit level, or a two-step impairment test if necessary, that is based on projected future cash flows from the
acquired business discounted at a rate commensurate with the risk the Company considers to be inherent in its current
business model. The Company performs the impairment test annually as of the close of its fiscal year, or more frequently
if events or circumstances indicate that the value of the asset might be impaired.
As a result of the various acquisitions comprising the Lids Team Sports team dealer business, the Company carries
goodwill at a value of $14.0 million on its Consolidated Balance Sheets related to such acquisitions. The Company
found that the result of its annual impairment test, which valued the business at approximately $2.8 million in excess of
its carrying value, indicated no impairment at that time. The Company may determine in future impairment tests that
some or all of the carrying value of the goodwill may not be recoverable. Such a finding would require a write-off of the
amount of the carrying value that is impaired, which would reduce the Company’s profitability in the period of the
impairment charge. Holding all other assumptions constant as of the measurement date, the Company noted that an
increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the Lids Team Sports
business by $7.4 million. Furthermore, the Company noted that a decrease in projected annual revenue growth by one
percent would reduce the fair value of the Lids Team Sports business by $0.4 million. However, if other assumptions do
not remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount. Since the
maximum non-cash goodwill impairment charge would be $14.0 million, the Company does not believe that any
impairment charge related thereto would be material; however, there can be no assurance that any future goodwill
impairment will not have a material adverse effect on the Company’s financial position.
ITEM 1B, UNRESOLVED STAFF COMMENTS
None.
ITEM 2, PROPERTIES
See Item 1, Business — Properties.
14
ITEM 3, LEGAL PROCEEDINGS
Environmental Matters
New York State Environmental Matters
In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) and the Company
entered into a consent order whereby the Company assumed responsibility for conducting a remedial investigation and
feasibility study (“RIFS”) and implementing an interim remedial measure (“IRM”) with regard to the site of a knitting
mill operated by a former subsidiary of the Company from 1965 to 1969. The Company undertook the IRM and RIFS
voluntarily, without admitting liability or accepting responsibility for any future remediation of the site. The Company
has completed the IRM and the RIFS. In the course of preparing the RIFS, the Company identified remedial alternatives
with estimated undiscounted costs ranging from $0.0 million to $24.0 million, excluding amounts previously expended
or provided for by the Company. The United States Environmental Protection Agency (“EPA”), which has assumed
primary regulatory responsibility for the site from NYSDEC, issued a Record of Decision in September 2007. The
Record of Decision requires a remedy of a combination of groundwater extraction and treatment and in-site chemical
oxidation at an estimated present 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 additionally asserted that the Company is liable for the costs associated with
enhanced treatment required by the impact of the groundwater plume from the site on two public water supply wells,
including historical 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, undiscounted, 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. The Company intends to
continue to defend the action.
Whitehall Environmental Matters
The Company has performed sampling and analysis of soil, sediments, surface water, groundwater and waste
management areas at the Company’s former Volunteer Leather Company facility in Whitehall, Michigan.
In October 2010, the Company and the Michigan Department of Natural Resources and Environment entered into a
Consent Decree providing for implementation of a remedial Work Plan for the facility site designed to bring the site into
compliance with applicable regulatory standards. The Work Plan’s implementation is substantially complete and the
Company expects, based on its present understanding of the condition of the site, that its future obligations with respect
to the site will be limited to periodic monitoring and that future costs related to the site should not have a material effect
on its financial condition or results of operations.
Accrual for Environmental Contingencies
Related to all outstanding environmental contingencies, the Company had accrued $11.9 million as of February 2, 2013,
$13.0 million as of January 28, 2012 and $15.5 million as of January 29, 2011. All such provisions reflect the
Company’s estimates of the most likely cost (undiscounted, including both current and noncurrent portions) of resolving
the contingencies, based on facts and circumstances as of the time they were made. There is no assurance that relevant
facts and circumstances will not change, necessitating future changes to the provisions. Such contingent liabilities are
included in the liability arising from provision for discontinued operations on the accompanying Consolidated Balance
Sheets because they relate to former facilities operated by the Company. The Company has made pretax accruals for
certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2013, $1.8 million reflected in
15
Fiscal 2012 and $2.9 million reflected in Fiscal 2011. These charges are included in provision for discontinued
operations, net in the Consolidated Statements of Operations and represent changes in estimates.
Other Matters
On December 10, 2010, the Company announced that it had suffered a criminal intrusion into the portion of its computer
network that processes payments for transactions in certain of its retail stores. Visa, Inc., MasterCard Worldwide and
American Express Travel Related Services Company, Inc. have asserted claims totaling approximately $15.6 million in
connection with the intrusion and the claims of two of the claimants have been collected by withholding payment card
receivables of the Company. In the fourth quarter of Fiscal 2013, the Company recorded a $15.4 million charge to
earnings in connection with the disputed liability. On March 7, 2013, the Company filed an action in the U.S. District
Court for the Middle District of Tennessee against Visa U.S.A. Inc., Visa Inc. and Visa International Service Association
seeking to recover $13.3 million in non-compliance fines and issuer reimbursement assessments collected from the
Company in connection with the intrusion. The Company does not currently expect any future claims in connection with
the intrusion to have a material effect on its financial condition, cash flows, or results of operations.
On January 5, 2012, a patent infringement action against the Company and numerous other defendants was filed in the
U.S. District Court for the Eastern District of Texas, GeoTag, Inc. v. Circle K Store, Inc., et al., alleging that features of
certain of the Company’s e-commerce websites infringe U.S. Patent No. 5,930,474, entitled “Internet Organizer for
Accessing Geographically and Topically Based Information.” The plaintiff seeks relief including damages for the
alleged infringement, costs, expenses and pre- and post-judgment interest and injunctive relief. The Company disputes
the validity of the claim and is defending the matter.
On June 13, 2012, a former vendor of a subsidiary of the Company filed an action, Perfect Curve, Inc. v. Hat World,
Inc., in U.S. District Court in Massachusetts, alleging patent, trademark, trade dress, and copyright infringement against
the subsidiary based on the sale of a line of products developed by the subsidiary. The Company denies the material
allegations against it and is defending the action.
On May 14, 2012, a putative class and collective action, Maro v. Hat World, Inc., was filed in the U.S. District Court for
the Northern District of Illinois. The action alleges that the Company failed to pay the plaintiff and other, similarly
situated retail store employees of Hat World, Inc., for time spent making bank deposits of store collections, and seeks to
recover unpaid wages, liquidated damages, statutory penalties, attorneys fees, and costs pursuant to the federal Fair
Labor Standards Act, the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. On July 16,
2012 and July 30, 2012, additional putative class and collective actions, Chavez v. Hat World, Inc. and Dismukes v. Hat
World, Inc., were filed in the same court, alleging that certain Hat World employees were misclassified as exempt from
overtime pay, and seeking similar relief. The Chavez and Dismukes actions have been consolidated. The Company
disputes the material allegations in the consolidated action and in Maro and is defending the actions.
On August 30, 2012, a former employee of a Company subsidiary filed a putative class and collective action, Kershner
v. Hat World, Inc., in the Philadelphia, Pennsylvania Court of Common Pleas alleging violations of the Pennsylvania
Minimum Wage Act by the subsidiary. The Company is defending the matter.
In addition to the matters specifically described above, the Company is a party to other legal and regulatory proceedings
and claims arising in the ordinary course of its business. While management does not believe that the Company’s
liability with respect to any of these other matters is likely to have a material effect on its financial position, cash flows,
or results of operations, legal proceedings are subject to inherent uncertainties and unfavorable rulings could have a
material adverse impact on the Company’s business and results of operations.
ITEM 4, MINE SAFETY DISCLOSURES
Not applicable.
16
ITEM 4A, EXECUTIVE OFFICERS
The officers of the Company are generally elected at the first meeting of the board of directors following the annual meeting of
shareholders and hold office until their successors have been chosen and qualified. The name, age and office of each of the
Company’s executive officers and certain information relating to the business experience of each are set forth below:
Robert J. Dennis, 59, Chairman, President and Chief Executive Officer. Mr. Dennis joined the Company in 2004 as chief
executive officer of the Company’s acquired Hat World business. Mr. Dennis was named senior vice president of the Company
in June 2004 and executive vice president and chief operating officer, with oversight responsibility for all the Company’s
operating divisions, in October 2005. Mr. Dennis was named president of the Company in October 2006 and chief executive
officer in August 2008. Mr. Dennis was named chairman in February 2010, which became effective April 1, 2010. Mr. Dennis
joined Hat World in 2001 from Asbury Automotive, where he was employed in senior management roles beginning in 1998.
Mr. Dennis was with McKinsey and Company, an international consulting firm, from 1984 to 1997, and became a partner in
1990.
James S. Gulmi, 67, Senior Vice President – Finance and Chief Financial Officer. Mr. Gulmi joined the Company in 1971 as
a financial analyst, appointed assistant treasurer in 1974 and named treasurer in 1979. He was elected a vice president in 1983
and assumed the responsibilities of chief financial officer in 1986. Mr. Gulmi was appointed senior vice president—finance in
January 1996.
Jonathan D. Caplan, 59, Senior Vice President. Mr. Caplan rejoined the Company in 2002 as chief executive officer of the
branded group and president of Johnston & Murphy and was named senior vice president of the Company in November 2003.
Mr. Caplan first joined the Company in June 1982 and served as president of Genesco’s Laredo-Code West division from
December 1985 to May 1992. After that time, Mr. Caplan was president of Stride Rite’s Children’s Group and then its Ked’s
Footwear division, from 1992 to 1996. He was vice president, New Business Development and Strategy, for Service
Merchandise Corporation from 1997 to 1998. Prior to rejoining Genesco in October 2002, Mr. Caplan served as president and
chief executive officer of Hi-Tec Sports North America beginning in 1998.
James C. Estepa, 61, Senior Vice President. Mr. Estepa joined the Company in 1985 and in February 1996 was named vice
president operations of Genesco Retail, which included the Jarman Shoe Company, Journeys, Boot Factory and General Shoe
Warehouse. Mr. Estepa was named senior vice president operations of Genesco Retail in June 1998. He was named president
of Journeys in March 1999. Mr. Estepa was named senior vice president of the Company in April 2000. He was named
president and chief executive officer of the Genesco Retail Group in 2001, assuming additional responsibilities of overseeing
the Company’s former Underground Station segment.
Kenneth J. Kocher, 47, Senior Vice President. Mr. Kocher joined Hat World in 1997 as chief financial officer and was named
president in October 2005. He was named senior vice president of the Company in October 2006 in addition to continuing his
role as president of Hat World. Prior to joining Hat World, he served as a controller with several companies and was a certified
public accountant with Edie Bailley, a public accounting firm.
Roger G. Sisson, 49, Senior Vice President, Secretary and General Counsel. Mr. Sisson joined the Company in 1994 as
assistant general counsel and was elected secretary in February 1994. He was named general counsel in January 1996.
Mr. Sisson was named vice president in November 2003. He was named senior vice president in October 2006.
Mimi Eckel Vaughn, 46, Senior Vice President of Strategy and Shared Services. Ms. Vaughn joined the Company in
September 2003 as vice president of strategy and business development. She was named senior vice president, strategy and
business development in October 2006 and senior vice president of strategy and shared services in April 2009. Prior to joining
the Company, Ms. Vaughn was executive vice president of business development and marketing, and acting chief financial
officer from 2000 to 2001 for Link2Gov Corporation in Nashville. From 1993 to 1999, she was a consultant at McKinsey and
Company in Atlanta.
Paul D. Williams, 58, Vice President and Chief Accounting Officer. Mr. Williams joined the Company in 1977, was named
director of corporate accounting and financial reporting in 1993 and chief accounting officer in April 1995. He was named vice
president in October 2006.
Matthew N. Johnson, 48, Treasurer. Mr. Johnson joined the Company in 1993 as manager, corporate finance and was elected
assistant treasurer in December 1993. He was elected treasurer in June 1996. He was named vice president finance in October
2006 and renamed treasurer in April 2011. Prior to joining the Company, Mr. Johnson was a vice president in the corporate and
institutional banking division of The First National Bank of Chicago.
17
PART II
ITEM 5, MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company’s common stock is listed on the New York Stock Exchange (Symbol: GCO) and the Chicago Stock Exchange.
The following table sets forth for the periods indicated the high and low sales prices of the common stock as shown in the New
York Stock Exchange Composite Transactions listed in the Wall Street Journal.
Fiscal Year ended January 28
2012 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year ended February 2
2013 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$
$
High
Low
$
44.75
56.84
62.51
64.93
35.76
39.12
39.41
54.32
High
Low
$
78.97
78.78
74.93
63.26
60.02
55.65
55.40
50.33
There were approximately 2,900 common shareholders of record on March 15, 2013.
The Company has not paid cash dividends in respect of its common stock since 1973. The Company’s ability to pay cash
dividends in respect of its common stock is subject to various restrictions. See Notes 6 and 8 to the Consolidated Financial
Statements included in Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Liquidity and Capital Resources – Sources of Liquidity” for information regarding restrictions on dividends
and redemptions of capital stock.
Recent Sales of Unregistered Securities
None.
18
Repurchases (shown in 000s except share and per share amounts):
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number of
Shares Purchased
Average Price
Paid per Share
Maximum
Number (or
Approximate
Dollar Value) of
shares that May
Yet Be Purchased
Under the Plans
or Programs (in
thousands)
Total Number of
shares Purchased as
Part of Publicly
announced Plans or
Programs
November 2012
10-28-12 to 11-24-12
December 2012
11-25-12 to 12-29-12(1)
January 2013
12-30-12 to 2-2-13(1)
—
$ —
—
$ —
151,989
$ 53.17
151,989 $ 58,323
2,804
$ 52.02
2,804 $ 58,177
(1) During the fourth quarter of Fiscal 2013, the Company repurchased shares of common stock under an
existing $75.0 million authorization from the board of directors announced in the third quarter of Fiscal
2011. As of February 2, 2013, the Company had repurchased 299,506 shares at a cost of $16.8 million.
Equity Compensation Plan Information
Refer to Part III, Item 12.
19
ITEM 6, SELECTED FINANCIAL DATA
Financial Summary
In Thousands except per common share data,
Fiscal Year End
financial statistics and other data
Results of Operations Data
Net sales
Depreciation and amortization
Earnings from operations
Earnings from continuing operations
before income taxes
Earnings from continuing operations
Provision for discontinued operations, net
Net earnings
Per Common Share Data
Earnings from continuing operations
Basic
Diluted
Discontinued operations
Basic
Diluted
Net earnings
Basic
Diluted
Balance Sheet Data
Total assets
Long-term debt
Non-redeemable preferred stock
Common equity
Capital expenditures
2013
2012
2011
2010
2009
$ 2,604,817
63,697
167,970
$ 2,291,987
53,737
143,870
$ 1,789,839
47,738
86,083
$ 1,574,352
47,462
60,422
$ 1,551,562
46,833
259,626
$
$
$
$
162,939
110,998
(462)
110,536
4.70
4.62
(0.02)
(0.02)
4.68
4.60
138,778
82,984
(1,025)
81,959
3.56
3.48
(0.04)
(0.05)
3.52
3.43
$ 1,333,789
50,682
3,924
804,667
71,737
$ 1,237,265
40,704
4,957
710,404
49,456
$
$
$
$
$
$
84,961
54,547
(1,336)
53,211
2.34
2.29
(0.06)
(0.05)
2.28
2.24
961,082
—
5,183
619,135
29,299
$
$
$
50,488
29,086
(273)
28,813
1.35
1.31
(0.02)
(0.01)
1.33
1.30
863,652
—
5,220
577,093
33,825
250,714
156,219
(5,463)
150,756
8.11
6.72
(0.28)
(0.23)
7.83
6.49
816,063
113,735
5,203
444,552
49,420
Financial Statistics
Earnings from operations as a percent of
net sales
Book value per share (common equity
divided by common shares outstanding) $
Working capital (in thousands)
$
Current ratio
Percent long-term debt to total
capitalization
Other Data (End of Year)
Number of retail outlets*
Number of employees
6.4%
6.3%
4.8%
3.8%
16.7%
33.53
406,217
2.5
$
$
29.27
290,850
2.0
$
$
26.15
278,692
2.2
$
$
23.97
280,415
2.7
$
$
23.10
259,137
2.9
5.9%
5.4%
—%
—%
20.2%
2,459
22,700
2,387
21,475
2,309
15,200
2,276
13,925
2,234
13,775
*Includes 75 Schuh stores and concessions in Fiscal 2012 acquired June 23, 2011, 48 Sports Avenue stores in Fiscal 2011
acquired October 8, 2010, and 37 Sports Fan Attic stores in Fiscal 2010 acquired November 3, 2009. See Note 2 to the
Consolidated Financial Statements.
20
Reflected in earnings from continuing operations for Fiscal 2012 was $7.4 million in acquisition related expenses. See Note 2
to the Consolidated Financial Statements for additional information.
Reflected in earnings from continuing operations for Fiscal 2009 was a $204.1 million gain on the settlement of
merger-related litigation.
Reflected in earnings from continuing operations for Fiscal 2009 were $8.0 million in merger-related costs and litigation
expenses. These expenses were deductible for tax purposes in Fiscal 2009.
Reflected in earnings from continuing operations for Fiscal 2013, 2012, 2011, 2010 and 2009 were asset impairment and other
charges of $17.0 million, $2.7 million, $8.6 million, $13.4 million and $7.5 million, respectively. See Note 3 to the
Consolidated Financial Statements for additional information regarding these charges.
Long-term debt includes current obligations. In January 2011, the Company entered into the second amended and restated
credit agreement in the aggregate principal amount of $300.0 million. In June 2011, the Company entered into a first
amendment to the second amended and restated credit agreement to raise the aggregate principal amount to $375.0 million.
During Fiscal 2010, the Company entered into separate exchange agreements whereby it acquired and retired all $86.2 million
in aggregate principal amount of its Debentures due June 15, 2023 in exchange for the issuance of 4,552,824 shares of its
common stock. As a result of the exchange agreements and conversions, the Company recognized a loss on the early retirement
of debt of $5.5 million reflected in earnings from continuing operations. See Note 6 to the Consolidated Financial Statements
for additional information regarding the Company’s debt.
The Company has not paid dividends on its Common Stock since 1973. See Notes 6 and 8 to the Consolidated Financial
Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and
Capital Resources – Sources of Liquidity” for a description of limitations on the Company’s ability to pay dividends.
21
ITEM 7, MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward Looking Statements
This discussion and the notes to the Consolidated Financial Statements, as well as Item 1, Business, 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, but are not limited
to, the amount of required accruals related to the earn-out bonus potentially payable to Schuh management based on the
achievement of certain performance objectives, the timing and amount of non-cash asset impairments related to retail
store fixed assets or to intangible assets of acquired businesses, weakness in the consumer economy, competition in the
Company’s markets, inability of customers to obtain credit, fashion trends that affect the sales or product margins of the
Company’s retail product offerings, changes in buying patterns by significant wholesale customers, bankruptcies or
deterioration in financial condition of significant wholesale customers, disruptions in product supply or distribution,
unfavorable trends in fuel costs, foreign exchange rates, foreign labor and materials costs, and other factors affecting the
cost of products, the Company’s ability to continue to complete and integrate acquisitions, expand its business and
diversify its product base and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-
period sales comparisons. Additional factors that could affect the Company’s prospects and cause differences from
expectations include the ability to build, open, staff and support additional retail stores and to renew leases in existing
stores and maintain reductions in occupancy costs achieved in recent lease negotiations, and to conduct required
remodeling or refurbishment on schedule and at expected expense levels, deterioration in the performance of individual
businesses or of the Company’s market value relative to its book value, resulting in impairments of fixed assets or
intangible assets or other adverse financial consequences, unexpected changes to the market for the Company’s shares,
variations from expected pension-related charges caused by conditions in the financial markets, and the outcome of
litigation, investigations and environmental matters involving the Company. For a discussion of additional risk factors,
see Item 1A, Risk Factors.
Overview
Description of Business
The Company’s business includes the design and sourcing, marketing and distribution of footwear and accessories
through retail stores, including Journeys®, Journeys Kidz®, Shi by Journeys®, Underground by Journeys® and
Johnston & Murphy® in the U.S., Puerto Rico and Canada and through Schuh® stores in the United Kingdom and the
Republic of Ireland, and through e-commerce websites and catalogs, and at wholesale, primarily under the Company’s
Johnston & Murphy brand, the licensed Dockers® brand, and other brands that the Company licenses for men’s
footwear. The Company’s wholesale footwear brands are distributed to more than 1,025 retail accounts in the United
States, including a number of leading department, discount, and specialty stores. The Company’s business also includes
Lids Sports, which operates (i) headwear and accessory stores under the Lids® name and other names in the U.S., Puerto
Rico and Canada, (ii) the Lids Locker Room business, consisting of sports-oriented fan shops featuring a broad array of
licensed merchandise such as apparel, hats and accessories, sports decor and novelty products, (iii) the Lids Clubhouse
business, consisting of fan shops, (iv) e-commerce business and (v) an athletic team dealer business operating as Lids
Team Sports. Including both the footwear businesses and the Lids Sports business, at February 2, 2013, the Company
operated 2,459 retail stores in the U.S., Puerto Rico, Canada, the United Kingdom and the Republic of Ireland.
During Fiscal 2013, the Company operated five reportable business segments (not including corporate): (i) Journeys
Group, comprised of the Journeys, Journeys Kidz, Shi by Journeys and Underground by Journeys retail footwear chains,
catalog and e-commerce operations; (ii) Schuh Group, acquired in June 2011, comprised of the Schuh retail footwear
chain and e-commerce operations; (iii) Lids Sports Group, comprised as described in the preceding paragraph;
(iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, e-commerce and catalog operations
and wholesale distribution; and (v) Licensed Brands, comprised of Dockers® Footwear, sourced and marketed under a
license from Levi Strauss & Company; SureGrip® Footwear, occupational footwear primarily sold directly to consumers;
and other footwear brands.
The Journeys retail footwear stores sell footwear and accessories primarily for 13 to 22 year old men and women. The
stores average approximately 1,975 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 20’s to mid 30’s. These stores average
approximately 2,125 square feet. The Underground by Journeys retail footwear stores sell footwear and accessories
primarily for men and women in the 20 to 35 age group. These stores average approximately 1,825 square feet. The
Journeys Group stores are primarily in malls and factory outlet centers throughout the United States, Puerto Rico and
22
Canada. The Journeys Group operates 24 stores in Canada. Journeys also sells footwear and accessories through direct-
to-consumer catalog and e-commerce operations.
The Schuh retail footwear stores sell a broad range of branded casual and athletic footwear along with a meaningful
private label offering primarily for 15 to 30 year old men and women. The stores, which average approximately 4,300
square feet, include both street-level and mall locations in the United Kingdom and the Republic of Ireland. During the
third quarter of Fiscal 2013, the Schuh Group opened its first Schuh Kids store. As of February 2, 2013, the Company
has opened three Schuh Kids stores that sell footwear primarily for younger children, ages five to 12, and average 1,075
square feet. The Schuh Group also operates 13 footwear concessions in Republic apparel stores in the United Kingdom
averaging approximately 1,175 square feet, and sells footwear through e-commerce operations.
The Lids Sports Group includes stores and kiosks, primarily under the Lids banner, that sell licensed and branded
headwear to men and women primarily in the early-teens to mid-20’s age group. The Lids store locations average
approximately 850 square feet and are primarily in malls, airports, street-level stores and factory outlet centers
throughout the United States, Puerto Rico and Canada. The Lids Sports Group also operates Lids Locker Room and Lids
Clubhouse stores under a number of trade names, selling licensed sports headwear, apparel and accessories to sports
fans of all ages in locations averaging approximately 2,975 square feet in malls and other locations primarily in the
United States. The Lids Sports Group operates 98 stores in Canada. The Lids Sports Group also sells headwear and
accessories through e-commerce operations. In addition, the Lids Sports Group operates Lids Team Sports, an athletic
team dealer business.
Johnston & Murphy retail shops sell a broad range of men’s footwear, luggage and accessories. Women’s footwear and
accessories are sold in select Johnston & Murphy retail locations. Johnston & Murphy shops average approximately
1,525 square feet and are located primarily in better malls and in airports throughout the United States and in Canada.
Johnston & Murphy opened its first store in Canada during the fourth quarter of Fiscal 2012. As of February 2, 2013,
Johnston & Murphy operates five stores in Canada. The Company also has license and distribution agreements for
wholesale and retail sales of Johnston & Murphy products in various non - U.S. jurisdictions. The Company also sells
Johnston & Murphy footwear and accessories in factory stores, averaging approximately 2,350 square feet, located in
factory outlet malls, and through an e-commerce operation and a direct-to-consumer catalog. In addition, Johnston &
Murphy shoes are also distributed through the Company’s wholesale operations to better department and independent
specialty stores.
The Licensed Brands segment markets casual and dress casual footwear under the licensed Dockers® brand to men aged
30 to 55 through many of the same national retail chains that carry Dockers slacks and sportswear and in department and
specialty stores across the country. The Company entered into an exclusive license with Levi Strauss & Co. to market
men’s footwear in the United States under the Dockers brand name in 1991. Levi Strauss & Co. and the Company have
subsequently added additional territories, including Canada and Mexico and in certain other Latin American countries.
The Dockers license agreement was renewed July 23, 2012 for a term expiring November 30, 2015, subject to extension
for an additional 3-year term if certain conditions are met. The Company acquired Keuka Footwear in the third quarter
of Fiscal 2011 and subsequently launched its SureGrip® Footwear line of slip-resistant, occupational footwear from that
base. The Company sources and distributes the SureGrip line to employees in the hospitality, healthcare, and
other industries.
Strategy
The Company’s long-term strategy has been to seek organic growth by: 1) increasing the Company’s store base, 2)
increasing retail square footage, 3) improving comparable sales, 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 economic conditions. The Company 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 address potential
saturation of the U.S. market, certain of the Company’s retail businesses have opened retail stores in Canada, beginning
in Fiscal 2011. The Company also opened its first Schuh Kids store in Scotland during the third quarter of Fiscal 2013.
To further supplement its organic growth potential, the Company has made acquisitions, including the acquisition of the
Schuh Group in June 2011 and several smaller acquisitions of businesses in the Lids Sports Group’s markets, and
expects to consider acquisition opportunities, either to augment its existing businesses or to enter new businesses that it
considers compatible with its existing businesses, core expertise and strategic profile. Acquisitions involve a number of
risks, including, among others, inaccurate valuation of the acquired business, the assumption of undisclosed liabilities,
the failure to integrate the acquired business appropriately, and distraction of management from existing businesses. The
23
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.
Among the most important of these factors are those related to consumer demand. Conditions in the economy can affect
demand, resulting in changes in sales and, as prices are adjusted to drive sales and manage inventories, in gross margins.
Because fashion trends influencing many of the Company’s target customers can change rapidly, the Company believes
that its ability to react quickly to those changes has been important to its success. Even when the Company succeeds in
aligning its merchandise offerings with consumer preferences, those preferences may affect results by, for example,
driving sales of products with lower average selling prices or products which are more widely available in the
marketplace and thus more subject to competitive pressures than the Company’s typical offering. Moreover, economic
factors, such as the relatively high level of unemployment and any future economic contraction and changes in tax
policy, may reduce the consumer’s disposable income or his or her willingness to purchase discretionary items, and thus
may reduce demand for the Company’s merchandise, regardless of the Company’s skill in detecting and responding to
fashion trends. The Company believes its experience and discipline in merchandising and the buying power associated
with its relative size and importance in the industry segments in which it competes are important to its ability to mitigate
risks associated with changing customer preferences and other changes in consumer demand.
Summary of Results of Operations
The Company’s net sales increased 13.6% during Fiscal 2013 compared to Fiscal 2012. The increase reflected (i) the
acquisition of the Schuh Group in the second quarter last year, which contributed $370.5 million in sales during Fiscal
2013 compared to $212.3 million in sales during Fiscal 2012, (ii) a 9% increase in Journeys Group sales, (iii) an 11%
increase in Licensed Brands sales, (iv) a 10% increase in Johnston & Murphy Group sales, and (v) a 4% increase in Lids
Sports Group sales. Included in Fiscal 2013 was a 53rd week compared to a 52-week year for Fiscal 2012. Excluding the
53rd week, sales would have increased 12.1% for Fiscal 2013. Gross margin decreased as a percentage of net sales
during Fiscal 2013, reflecting gross margin decreases in Lids Sports Group and Johnston & Murphy Group, partially
offset by increased gross margin in Journeys Group and Schuh Group. Licensed Brands’ gross margin was flat. Selling
and administrative expenses decreased as a percentage of net sales during Fiscal 2013, reflecting expense decreases as a
percentage of net sales in Journeys Group, Lids Sports Group and Johnston & Murphy Group, partially offset by
increased expenses as a percentage of net sales in Schuh Group and Licensed Brands. Earnings from operations
increased as a percentage of net sales during Fiscal 2013, reflecting improved earnings from operations in Journeys
Group and Johnston & Murphy Group, partially offset by decreased earnings in Schuh Group and Licensed Brands.
Earnings as a percentage of net sales were flat in Lids Sports Group.
Significant Developments
Schuh Acquisition
On June 23, 2011, the Company, through its newly-formed, wholly-owned subsidiary Genesco (UK) Limited (“Genesco
UK”), completed the acquisition of all the outstanding shares of Schuh Group Ltd. (“Schuh”) for a total purchase price
of approximately £100.0 million, less £29.5 million outstanding under existing Schuh credit facilities, which remain in
place, less a £1.9 million working capital adjustment and plus £6.2 million net cash acquired, with £5.0 million withheld
and payable in June 2013. The Company financed the acquisition with borrowings under its existing credit facility and
the balance from cash on hand. The purchase agreement also provides for deferred purchase price payments totaling £25
million, payable £15 million and £10 million on the third and fourth anniversaries of the closing, respectively, subject to
the payees’ not having terminated their employment with Schuh under certain specified circumstances. This amount will
be recorded as compensation expense and not reported as a component of the cost of the acquisition.
Headquartered in Scotland, Schuh is a specialty retailer of casual and athletic footwear sold through 79 retail stores in
the United Kingdom and the Republic of Ireland and 13 concessions in Republic apparel stores as of February 2, 2013.
The Company completed the acquisition in order to enhance its strategic development and prospects for growth and
provide the Company with an established retail presence in the United Kingdom and improved insight into global
fashion trends. The results of Schuh’s operations for Fiscal 2013 include net sales of $370.5 million and operating
earnings of $7.9 million, and have been included in the Company’s Consolidated Financial Statements for all of Fiscal
2013. The results of Schuh’s operations for the fiscal year from the date of acquisition through January 28, 2012,
including net sales of $212.3 million and operating earnings of $11.7 million, have been included in the Company’s
Consolidated Financial Statements for the fiscal year ended January 28, 2012. During the fiscal year ended January 28,
2012, the Company expensed $7.4 million in costs related to the acquisition. These costs were recorded as selling and
administrative expenses on the Consolidated Statement of Operations. During Fiscal 2013, compensation expense
24
related to the Schuh acquisition deferred purchase price obligation was $12.1 million, compared to $7.2 million in Fiscal
2012. This expense is included in the operating earnings for the Schuh Group segment.
Other Acquisitions
In Fiscal 2013, the Company completed other acquisitions of small retail chains for a total purchase price of $23.8
million. The stores acquired will be operated within the Lids Sports Group.
Network Intrusion
On December 10, 2010, the Company announced that it had suffered a criminal intrusion into the portion of its computer
network that processes payments for transactions in certain of its retail stores. Visa, Inc., MasterCard Worldwide and
American Express Travel Related Services Company, Inc. have asserted claims totaling approximately $15.6 million in
connection with the intrusion and the claims of two of the claimants have been collected by withholding payment card
receivables of the Company. In the fourth quarter of Fiscal 2013, the Company recorded a $15.4 million charge to
earnings in connection with the disputed liability. On March 7, 2013, the Company filed an action in the U.S. District
Court for the Middle District of Tennessee against Visa U.S.A. Inc., Visa Inc. and Visa International Service Association
seeking to recover $13.3 million in non-compliance fines and issuer reimbursement assessments collected from the
Company in connection with the intrusion. The Company does not currently expect any future claims in connection with
the intrusion to have a material effect on its financial condition, cash flows, or results of operations.
Asset Impairment and Other Charges
The Company recorded a pretax charge to earnings of $17.0 million in Fiscal 2013, including $15.6 million for network
intrusion expenses, $1.4 million for retail store asset impairments, and $0.1 million for other legal matters.
The Company recorded a pretax charge to earnings of $2.7 million in Fiscal 2012, including $1.1 million for retail store
asset impairments, $0.9 million for other legal matters and $0.7 million for network intrusion expenses.
The Company recorded a pretax charge to earnings of $8.6 million in Fiscal 2011, including $7.2 million for retail store
asset impairments, $1.3 million for network intrusion expenses and $0.1 million for other legal matters.
Postretirement Benefit Liability Adjustments
The return on pension plan assets was $11.2 million for Fiscal 2013, compared to an expected return of $7.0 million. The
discount rate used to measure benefit obligations decreased from 4.35% to 4.00% in Fiscal 2013. As a result of the
increase in the return on plan assets, partially offset by the decreased discount rate, the pension liability reflected in the
Consolidated Balance Sheets decreased to $20.5 million compared to $22.2 million in Fiscal 2012. There was a decrease
in the pension liability adjustment of $3.7 million (net of tax) in accumulated other comprehensive income in equity.
Depending upon future interest rates and returns on plan assets and other factors, there can be no assurance that
additional adjustments in future periods will not be required.
Discontinued Operations
In Fiscal 2013, the Company recorded an additional charge to earnings of $0.8 million ($0.5 million net of tax) reflected
in discontinued operations primarily for anticipated costs of environmental remedial alternatives related to former
facilities operated by the Company. For additional information, see Note 13 to the Consolidated Financial Statements.
In Fiscal 2012, the Company recorded an additional charge to earnings of $1.7 million ($1.0 million net of tax) reflected
in discontinued operations, including $1.8 million primarily for anticipated costs of environmental remedial alternatives
related to former facilities operated by the Company, offset by a $0.1 million gain for excess provisions to prior
discontinued operations. For additional information, see Note 13 to the Consolidated Financial Statements.
In Fiscal 2011, the Company recorded an additional charge to earnings of $2.2 million ($1.3 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 $0.7 million gain for excess provisions to prior
discontinued operations. For additional information, see Note 13 to the Consolidated Financial Statements.
25
Critical Accounting Policies
Inventory Valuation
As discussed in Note 1 to the Consolidated Financial Statements, the Company values its inventories at the lower of cost
or market.
In its footwear wholesale operations, its Schuh Group segment and its Lids Sports Group wholesale operations, except
for the Anaconda Sports wholesale division, cost is determined using the first-in, first-out method. Market value is
determined using a system of analysis which evaluates inventory at the stock number level based on factors such as
inventory turn, average selling price, inventory level, and selling prices reflected in future orders. The Company
provides reserves when the inventory has not been marked down to market value based on current selling prices or when
the inventory is not turning and is not expected to turn at levels satisfactory to the Company.
The Lids Sports Group retail segment and its Anaconda Sports wholesale division employ the moving average cost
method for valuing inventories and apply freight using an allocation method. The Company provides a valuation
allowance for slow-moving inventory based on negative margins and estimated shrink based on historical experience
and specific analysis, where appropriate.
In its retail operations, other than the Schuh Group and Lids Sports Group retail segments, the Company employs the
retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory
method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction
of the retail value of inventories.
Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on,
markups, markdowns, and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory
method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure
consistent presentation, the Company employs the retail inventory method in multiple subclasses of inventory with
similar gross margins, and analyzes markdown requirements at the stock number level based on factors such as
inventory turn, average selling price, and inventory age. In addition, the Company accrues markdowns as necessary.
These additional markdown accruals reflect all of the above factors as well as current agreements to return products to
vendors and vendor agreements to provide markdown support. In addition to markdown provisions, the Company
maintains provisions for shrinkage and damaged goods based on historical rates.
Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market
conditions, fashion trends, and overall economic conditions. Failure to make appropriate conclusions regarding these
factors may result in an overstatement or understatement of inventory value. A change of 10 percent from the recorded
provisions for markdowns, shrinkage and damaged goods would have changed inventory by $0.8 million at February 2,
2013.
Impairment of Long-Lived Assets
As discussed in Note 1 to the Consolidated Financial Statements, the Company periodically assesses the realizability of
its long-lived assets, other than goodwill, and evaluates such assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Asset impairment is determined to
exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount.
Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate
conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived
assets.
The goodwill impairment test involves performing a qualitative assessment, on a reporting unit level, based on current
circumstances. If the results of the qualitative assessment indicate that it is more likely than not that the fair value of a
reporting unit is greater than its carrying amount, a two-step impairment test will not be performed. However, if the
results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less
than its carrying amount, then a two-step impairment test is performed. Alternatively, the Company may elect to bypass
the qualitative assessment and proceed directly to the two-step impairment test, on a reporting unit level. The first step is
a comparison of the fair value and carrying value of the business unit with which the goodwill is associated. The
Company estimates fair value using the best information available, and computes the fair value derived by an income
approach utilizing discounted cash flow projections. The income approach uses a projection of a reporting unit’s
estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects
current market conditions. A key assumption in the Company’s fair value estimate is the weighted average cost of
capital utilized for discounting its cash flow projections in its income approach. The Company believes the rate it used in
its annual test, which is completed in the fourth quarter each year, was consistent with the risks inherent in its business
and with industry discount rates. The projection uses management’s best estimates of economic and market conditions
26
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 reporting unit goodwill to the carrying value of the goodwill in the same manner
as if the reporting unit was being acquired in a business combination. Specifically, the Company would allocate the fair
value to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a
hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less
than the recorded goodwill, the Company would record an impairment charge for the difference.
As a result of the various acquisitions comprising the Lids Team Sports team dealer business, the Company carries
goodwill at a value of $14.0 million on its Consolidated Balance Sheets related to such acquisitions. The Company
found that the result of its annual impairment test, which valued the business at approximately $2.8 million in excess of
its carrying value, indicated no impairment at that time. The Company may determine in future impairment tests that
some or all of the carrying value of the goodwill may not be recoverable. Such a finding would require a write-off of the
amount of the carrying value that is impaired, which would reduce the Company’s profitability in the period of the
impairment charge. Holding all other assumptions constant as of the measurement date, the Company noted that an
increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the Lids Team Sports
business by $7.4 million. Furthermore, the Company noted that a decrease in projected annual revenue growth by one
percent would reduce the fair value of the Lids Team Sports business by $0.4 million. However, if other assumptions do
not remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount. Since the
maximum non-cash goodwill impairment charge would be $14.0 million, the Company does not believe that any
impairment charge related thereto would be material.
Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters,
including those disclosed in Note 13 to the Company’s Consolidated Financial Statements. The Company has made
pretax accruals for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2013, $1.8
million reflected in Fiscal 2012 and $2.9 million reflected in Fiscal 2011. These charges are included in provision for
discontinued operations, net in the Consolidated Statements of Operations because they relate to former facilities
operated by the Company. The Company monitors these matters on an ongoing basis and, on a quarterly basis,
management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions, as
management deems necessary in view of changes in available information. Changes in estimates of liability are reported
in the periods when they occur. Consequently, management believes that its 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, 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.
Revenue Recognition
Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales and value added taxes.
Catalog and Internet sales are recorded at time of delivery to the customer and are net of estimated returns and exclude
sales and value of added taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns,
damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer.
Shipping and handling costs charged to customers are included in net sales. Estimated returns are based on historical
returns and claims. Actual amounts of markdowns have not differed materially from estimates. Actual returns and claims
in any future period may differ from historical experience.
Income Taxes
As part of the process of preparing Consolidated Financial Statements, the Company is required to estimate its income
taxes in each of the tax jurisdictions in which it operates. This process involves estimating actual current tax obligations
together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting
purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences
result in deferred tax assets and liabilities, which are included within the Consolidated Balance Sheets. The Company
then assesses the likelihood that its deferred tax assets will be recovered from future taxable income. Actual results could
27
differ from this assessment if adequate taxable income is not generated in future periods. To the extent the Company
believes that recovery of an asset is at risk, valuation allowances are established. To the extent valuation allowances are
established or increased in a period, the Company includes an expense within the tax provision in the Consolidated
Statements of Operations. These deferred tax valuation allowances may be released in future years when management
considers that it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such
a determination, management will need to periodically evaluate whether or not all available evidence, such as future
taxable income and reversal of temporary differences, tax planning strategies, and recent results of operations, provides
sufficient positive evidence to offset any other potential negative evidence that may exist at such time. In the event
the deferred tax valuation allowance is released, the Company would record an income tax benefit for the portion or all
of the deferred tax valuation allowance released. At February 2, 2013, the Company had a deferred tax valuation
allowance of $3.5 million.
Income tax reserves for uncertain tax positions are determined using the methodology required by the Income Tax Topic
of the Accounting Standards Codification (“Codification”). This methodology requires companies to assess each income
tax position taken using a two-step process. A determination is first made as to whether it is more likely than not that the
position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax
position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest
amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain
tax positions require determinations and estimated liabilities to be made based on provisions of the tax law, which may
be subject to change or varying interpretation. If the Company’s determinations and estimates prove to be inaccurate, the
resulting adjustments could be material to its future financial results. See Note 9 to the Company’s Consolidated
Financial Statements for additional information regarding income taxes.
The Company recorded an effective income tax rate of 31.9% for Fiscal 2013 compared to 40.2% for 2012. This year’s
tax rate is lower primarily due to the reversal of charges previously recorded related to uncertain tax positions due to the
expiration of the applicable statutes of limitations and a settlement with a state tax authority more favorable than
anticipated related to other uncertain tax positions.
Postretirement Benefits Plan Accounting
Full-time employees who had at least 1,000 hours of service in calendar year 2004, except employees in the Lids Sports
Group and Schuh Group segments, are covered by a defined benefit pension plan. The Company froze the defined
benefit pension plan effective January 1, 2005. The Company also provides certain former employees with limited
medical and life insurance benefits. The Company funds at least the minimum amount required by the Employee
Retirement Income Security Act.
As required by the Compensation – Retirement Benefits Topic of the Codification, the Company is required to recognize
the overfunded or underfunded status of postretirement benefit plans as an asset or liability in their Consolidated Balance
Sheets and to recognize changes in that funded status in accumulated other comprehensive loss, net of tax, in the year in
which the changes occur.
The Company accounts for the defined benefit pension plans using the Compensation-Retirement Benefits Topic of the
Codification. As permitted under this topic, pension expense is recognized on an accrual basis over employees’
approximate service periods. The calculation of pension expense and the corresponding liability requires the use of a
number of critical assumptions, including the expected long-term rate of return on plan assets and the assumed discount
rate, as well as the recognition of actuarial gains and losses. Changes in these assumptions can result in different expense
and liability amounts, and future actual experience can differ from these assumptions.
Long Term Rate of Return Assumption – Pension expense increases as the expected rate of return on pension plan assets
decreases. The Company estimates that the pension plan assets will generate a long-term rate of return of 7.75%. 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 2013, if the expected rate of return had been decreased by 1%, net pension expense would have increased by $0.9
million, and if the expected rate of return had been increased by 1%, net pension expense would have decreased by $0.9
million.
Discount Rate – Pension liability and future pension expense increase as the discount rate is reduced. The Company
discounted future pension obligations using a rate of 4.00%, 4.35% and 5.25% for Fiscal 2013, 2012 and 2011,
respectively. The discount rate at February 2, 2013 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 2013, if the discount rate
had been increased by 0.5%, net pension expense would have decreased by $0.6 million, and if the discount rate had
been decreased by 0.5%, net pension expense would have increased by $0.6 million. In addition, if the discount rate had
28
been increased by 0.5%, the projected benefit obligation would have decreased by $6.0 million and the accumulated
benefit obligation would have decreased by $6.0 million. If the discount rate had been decreased by 0.5%, the projected
benefit obligation would have been increased by $6.6 million and the accumulated benefit obligation would have
increased by $6.6 million.
Amortization of Gains and Losses – The Company utilizes a calculated value of assets, which is an averaging method
that recognizes changes in the fair values of assets over a period of five years. At the end of Fiscal 2013, the Company
had unrecognized actuarial losses of $42.9 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 $4.3 million, $2.8 million and $2.3 million in
Fiscal 2013, 2012 and 2011, 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 2014
by approximately $0.4 million due to a larger actuarial loss to be amortized.
Share-Based Compensation
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 Codification. For Fiscal 2013, 2012 and
2011, share-based compensation expense was $0.0, less than $1,000 and $0.2 million, respectively. The Company did
not issue any new share-based compensation awards in Fiscal 2013, 2012 or 2011. For Fiscal 2013, 2012 and 2011,
restricted stock expense was $10.5 million, $7.7 million and $7.8 million, respectively. 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. The benefits of
tax deductions in excess of recognized compensation expense are reported as a financing cash flow.
Comparable Sales
During Fiscal 2013, the Company revised its presentation of comparable sales to include its e-commerce and direct mail
catalog businesses. Prior year comparable sales have been adjusted to conform to the current year presentation.
Comparable sales are sales from stores open longer than one year, beginning in the fifty-third week of a store’s
operation, and sales of websites operated longer than one year and direct mail catalog sales. 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.
Results of Operations—Fiscal 2013 Compared to Fiscal 2012
The Company’s net sales for Fiscal 2013 (53 weeks) increased 13.6% to $2.60 billion from $2.29 billion in Fiscal 2012
(52 weeks). The increase in net sales was a result of the inclusion of Schuh Group for the full year in Fiscal 2013, an
estimated $35.2 million impact of sales for the fifty-third week and an increase in comparable sales in the Journeys
Group, Schuh Group and Johnston & Murphy Group, combined with increased sales in Licensed Brands, offset by
decreased comparable sales in Lids Sports Group. Gross margin increased 13.1% to $1.30 billion in Fiscal 2013 from
$1.15 billion in Fiscal 2012, but decreased as a percentage of net sales from 50.1% to 49.8%, primarily reflecting
decreased gross margin as a percentage of net sales in the Lids Sports and Johnston & Murphy Groups, offset slightly by
increased gross margin as a percentage of net sales in the Journeys and Schuh Groups, while Licensed Brands’ gross
margin was flat. Selling and administrative expenses in Fiscal 2013 increased 11.2% from Fiscal 2012 but decreased as a
percentage of net sales from 43.7% to 42.7%, primarily reflecting expense leverage in the Johnston & Murphy, Journeys
and Lids Sports Groups due to positive comparable sales in the Journeys and Johnston & Murphy Groups and increased
wholesale sales in the Johnston & Murphy Group. 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 2013 were $162.9 million,
compared to $138.8 million for Fiscal 2012. Pretax earnings for Fiscal 2013 included asset impairment and other
charges of $17.0 million, including $15.5 million for expenses related to the computer network intrusion announced
in December 2010, $1.4 million for retail store asset impairments and $0.1 million for other legal matters. Pretax
earnings for Fiscal 2012 included asset impairment and other charges of $2.7 million, including $1.1 million for
29
retail store asset impairments, $0.9 million for other legal matters and $0.7 million for expenses related to the computer
network intrusion.
Net earnings for Fiscal 2013 were $110.5 million ($4.60 diluted earnings per share) compared to $82.0 million ($3.43
diluted earnings per share) for Fiscal 2012. Net earnings for Fiscal 2013 includes $0.5 million ($0.02 diluted loss per
share) charge to earnings (net of tax), primarily for anticipated costs of environmental remedial alternatives related to
former facilities operated by the Company. Net earnings for Fiscal 2012 includes $1.0 million ($0.05 diluted loss per
share) charge to earnings (net of tax), including $1.1 million primarily for anticipated costs of environmental remedial
alternatives related to former facilities operated by the Company, offset by a $0.1 million gain for excess provisions to
prior discontinued operations. The Company recorded an effective federal income tax rate of 31.9% for Fiscal 2013
compared to 40.2% for Fiscal 2012. This year’s lower effective tax rate of 31.9% reflects the reversal of charges
previously recorded related to uncertain tax positions due to the expiration of the applicable statutes of limitations and a
settlement with a state tax authority more favorable than anticipated related to other uncertain tax positions. See Note 9
to the Consolidated Financial Statements for additional information.
Journeys Group
Net sales
Earnings from operations
Operating margin
Fiscal Year Ended
2013
2012
(dollars in thousands)
$ 1,111,490
106,929
$
$ 1,020,116
82,452
$
9.6%
8.1%
%
Change
9.0%
29.7%
Net sales from Journeys Group increased 9.0% to $1.11 billion for Fiscal 2013 from $1.02 billion for Fiscal 2012. The
increase reflects primarily a 6% increase in same store sales, an 8% increase in comparable direct sales and a 6%
increase in comparable sales, including both store and direct sales. The comparable store sales increase reflected a 6%
increase in the average price per pair of shoes, offset by a 1% decrease in footwear unit comparable sales. Total unit
sales increased 2% during the same period. The store count for Journeys Group was 1,157 stores at the end of Fiscal
2013, including 156 Journeys Kidz stores, 51 Shi by Journeys stores, 130 Underground by Journeys stores and 24
Journeys stores in Canada, compared to 1,154 stores at the end of Fiscal 2012, including 152 Journeys Kidz stores, 53
Shi by Journeys stores, 137 Underground by Journeys stores and 13 Journeys stores in Canada.
Journeys Group earnings from operations for Fiscal 2013 increased 29.7% to $106.9 million, compared to $82.5 million
for Fiscal 2012. The increase in earnings from operations was primarily due to increased net sales, increased gross
margin as a percentage of net sales, reflecting lower markdowns, and to decreased expenses as a percentage of net sales,
reflecting leverage of store related costs, including occupancy costs and depreciation, and lower bonus accruals.
Schuh Group
Fiscal Year Ended
2013
2012
%
Change
Net sales
Earnings from operations
Operating margin
$
$
(dollars in thousands)
$
$
370,480
7,875
212,262
11,711
2.1%
5.5%
74.5%
(32.8%)
Net sales from the Schuh Group increased 74.5% to $370.5 million for Fiscal 2013, compared to $212.3 million for
Fiscal 2012. Net sales for Schuh Group in Fiscal 2012 included sales only for the seven months after the Company
acquired Schuh on June 23, 2011. The sales increase also reflects a 7% increase in same store sales, a 13% increase in
comparable direct sales and an 8% increase in comparable sales, including both store and direct sales for the seven
months ended February 2, 2013. Schuh Group operated 79 stores, including three Schuh Kids stores, and 13 concessions
at the end of Fiscal 2013 compared to 64 stores and 14 concessions at the end of Fiscal 2012.
Schuh Group earnings from operations were $7.9 million for Fiscal 2013 compared to $11.7 million for Fiscal 2012. The
earnings included $12.1 million this year and $7.2 million last year in compensation expense related to a deferred
purchase price obligation in connection with the acquisition. The earnings also included $15.8 million this year and
$4.9 million last year related to accruals for a contingent bonus payment for Schuh employees provided for in the
Schuh acquisition. The decrease in earnings is due to the increase in expense associated with both the deferred
30
purchase price and contingent bonus payment. See Note 2 to the Consolidated Financial Statements for additional
information related to the Schuh acquisition.
Lids Sports Group
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2013
2012
%
Change
(dollars in thousands)
$
$
791,255
85,794
759,324
82,349
10.8%
10.8%
4.2%
4.2%
Net sales from the Lids Sports Group increased 4.2% to $791.3 million for Fiscal 2013 from $759.3 million for Fiscal
2012. The increase primarily reflects a 3% increase in average Lids Sports Group stores operated. Same store sales
decreased 4%, comparable direct sales increased 9% and comparable sales, including both store and direct sales,
decreased 3% for Fiscal 2013. The comparable sales decrease reflected a 1% decrease in average price per hat and a 1%
decrease in comparable store hat units sold. The comparable sales decrease reflects the current popularity of adjustable
“snap-back” hat styles, which have displaced some demand for fitted merchandise. Management believes that the
relative ease of merchandising non-fitted hats has enabled a variety of non-headwear retailers to carry the adjustable
styles, increasing competition in the category. Lids Sports Group operated 1,053 stores at the end of Fiscal 2013,
including 98 Lids stores in Canada and 144 Lids Locker Room and Clubhouse stores, compared to 1,002 stores at the
end of Fiscal 2012, including 82 Lids stores in Canada and 120 Lids Locker Room and Clubhouse stores.
Lids Sports Group earnings from operations for Fiscal 2013 increased 4.2% to $85.8 million compared to $82.3 million
for Fiscal 2012. The increase in operating income was primarily due to increased net sales and decreased expenses as a
percentage of net sales, primarily reflecting decreased accruals for bonus compensation.
Johnston & Murphy Group
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2013
2012
%
Change
(dollars in thousands)
$
$
221,860
15,737
201,725
13,682
7.1%
6.8%
10.0%
15.0%
Johnston & Murphy Group net sales increased 10.0% to $221.9 million for Fiscal 2013 from $201.7 million for Fiscal
2012. The increase reflected primarily a 3% increase in same store sales, a 13% increase in comparable direct sales and a
4% increase in comparable sales, including both store and direct sales, and a 21% increase in Johnston & Murphy
wholesale sales slightly offset by a 1% decrease in average stores operated (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) for Johnston &
Murphy retail operations. Unit sales for the Johnston & Murphy wholesale business increased 25% in Fiscal 2013, while
the average price per pair of shoes decreased 3% for the same period. Retail operations accounted for 71.7% of the
Johnston & Murphy Group’s sales in Fiscal 2013, down from 74.3% in Fiscal 2012. The comparable sales increase in
Fiscal 2013 reflects a 4% increase in the average price per pair of shoes for Johnston & Murphy retail operations,
primarily associated with increased sales of higher-priced dress shoes, while footwear unit comparable sales were flat.
The store count for Johnston & Murphy retail operations at the end of Fiscal 2013 included 157 Johnston & Murphy
shops and factory stores, including five stores in Canada, compared to 153 Johnston & Murphy shops and factory stores,
including one store in Canada, at the end of Fiscal 2012.
Johnston & Murphy earnings from operations for Fiscal 2013 increased 15.0% to $15.7 million from $13.7 million for
Fiscal 2012, primarily due to increased net sales.
31
Licensed Brands
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2013
2012
%
Change
(dollars in thousands)
$
$
108,498
10,064
97,444
9,456
9.3%
9.7%
11.3%
6.4%
Licensed Brands’ net sales increased 11.3% to $108.5 million for Fiscal 2013 from $97.4 million for Fiscal 2012. The
sales increase reflects $5.6 million of increased sales from Dockers Footwear as well as increased sales of SureGrip
Footwear and the Chaps line of footwear. Unit sales for Dockers Footwear increased 4% for Fiscal 2013 and the average
price per pair of shoes increased 3% for the same period.
Licensed Brands’ earnings from operations for Fiscal 2013 increased 6.4%, from $9.5 million for Fiscal 2012 to $10.1
million, primarily due to increased net sales, partially offset by higher bonus accruals.
Corporate, Interest Expenses and Other Charges
Corporate and other expense for Fiscal 2013 was $58.4 million compared to $55.8 million for Fiscal 2012. Corporate
expense in Fiscal 2013 included $17.0 million in asset impairment and other charges, primarily for network intrusion
expenses, retail store asset impairments and other legal matters. Corporate expense in Fiscal 2012 included $2.7 million
in asset impairment and other charges, primarily for retail store asset impairments, other legal matters and network
intrusion expenses and $7.4 million in acquisition related expenses. Excluding the charges listed above, corporate and
other expense decreased primarily due to lower bonus accruals.
Interest expense decreased 0.6% from $5.2 million in Fiscal 2012 to $5.1 million in Fiscal 2013.
Results of Operations — Fiscal 2012 Compared to Fiscal 2011
The Company’s net sales for Fiscal 2012 increased 28.1% to $2.29 billion from $1.79 billion in Fiscal 2011. The
increase in net sales was a result of an increase in comparable sales in the Lids Sports Group, Journeys Group and
Johnston & Murphy Group, combined with $274.2 million of sales from businesses acquired over the past twelve
months, offset slightly by lower sales in Licensed Brands and Underground Station Group. Gross margin increased
27.8% to $1.15 billion in Fiscal 2012 from $898.1 million in Fiscal 2011 and was down slightly as a percentage of net
sales at 50.1%. Selling and administrative expenses in Fiscal 2012 increased 24.6% from Fiscal 2011 but decreased as a
percentage of net sales from 44.9% to 43.7%, primarily reflecting expense leverage in the Lids Sports Group, Journeys
Group, Johnston & Murphy Group and Underground Station Group due to positive comparable sales and increased
wholesale sales in the Johnston & Murphy Group. 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 2012 were $138.8 million, compared to $85.0 million for Fiscal 2011. Pretax earnings for
Fiscal 2012 included asset impairment and other charges of $2.7 million, including $1.1 million for retail store asset
impairments, $0.9 million for other legal matters and $0.7 million for expenses related to the computer network intrusion
announced in December 2010. Pretax earnings for Fiscal 2011 included asset impairment and other charges of $8.6
million, including $7.2 million for retail store asset impairments, $1.3 million for expenses related to the computer
network intrusion and $0.1 million for other legal matters.
Net earnings for Fiscal 2012 were $82.0 million ($3.43 diluted earnings per share) compared to $53.2 million ($2.24
diluted earnings per share) for Fiscal 2011. Net earnings for Fiscal 2012 includes $1.0 million ($0.05 diluted loss per
share) charge to earnings (net of tax), including $1.1 million primarily for anticipated costs of environmental remedial
alternatives related to former facilities operated by the Company, offset by a $0.1 million gain for excess provisions to
prior discontinued operations. Net earnings for Fiscal 2011 includes $1.3 million ($0.05 diluted loss 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 $0.5 million gain for excess provisions to prior discontinued
operations. The Company recorded an effective federal income tax rate of 40.2% for Fiscal 2012 compared to 35.8% for
Fiscal 2011. Fiscal 2012’s higher effective tax rate of 40.2% reflects transaction costs and deferred purchase price
related to the Schuh acquisition, which are considered permanent differences. Fiscal 2011’s lower effective tax rate of
32
35.8% reflects the net reduction of the Company’s liability for uncertain tax positions of $1.3 million in Fiscal 2011. See
Note 9 to the Consolidated Financial Statements for additional information.
Journeys Group
Net sales
Earnings from operations
Operating margin
Fiscal Year Ended
2012
2011
%
Change
(dollars in thousands)
$
$
$ 1,020,116
82,452
$
898,500
49,642
8.1%
5.5%
13.5%
66.1%
Net sales from Journeys Group increased 13.5% to $1.02 billion for Fiscal 2012 from $898.5 million for Fiscal 2011.
The increase reflects primarily a 14% increase in same store sales, a 28% increase in comparable direct sales and
comparable sales, including both store and direct sales, increase of 14%. The comparable sales increase reflected an
11% increase in footwear unit comparable sales and a 2% increase in the average price per pair of shoes. Total unit sales
increased 11% during the same period. The store count for Journeys Group was 1,154 stores at the end of Fiscal 2012,
including 152 Journeys Kidz stores, 53 Shi by Journeys stores, 137 Underground by Journeys stores and 13 Journeys
stores in Canada, compared to 1,168 stores at the end of Fiscal 2011, including 149 Journeys Kidz stores, 55 Shi by
Journeys stores, 151 Underground by Journeys stores and three Journeys stores in Canada.
Journeys Group earnings from operations for Fiscal 2012 increased 66.1% to $82.5 million, compared to $49.6 million
for Fiscal 2011. The increase in earnings from operations was primarily due to increased net sales and decreased
expenses as a percentage of net sales, reflecting leveraging of occupancy costs, selling salaries and depreciation.
Schuh Group
Net sales
Earnings from operations
Operating margin
Fiscal Year Ended
2012
2011
%
Change
(dollars in thousands)
$
$
212,262
11,711
$
$
5.5%
—
—
—
NM
NM
Net sales from the Schuh Group were $212.3 million for the initial reporting period ended January 28, 2012, beginning
on June 20, 2011. Schuh Group operated 64 stores and 14 concessions at the end of Fiscal 2012.
Schuh Group earnings from operations were $11.7 million for Fiscal 2012. Earnings included $7.2 million in
compensation expense related to a deferred purchase price obligation in connection with the acquisition, as discussed
above. Such expense reduced operating margin for the segment by approximately 340 basis points. See Note 2 to the
Consolidated Financial Statements for additional information related to the Schuh acquisition.
Lids Sports Group
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2012
2011
%
Change
(dollars in thousands)
$
$
759,324
82,349
603,345
56,026
10.8%
9.3%
25.9%
47.0%
Net sales from the Lids Sports Group increased 25.9% to $759.3 million for Fiscal 2012 from $603.3 million for Fiscal
2011. The increase primarily reflects a 12% increase in same store sales, an 11% increase in comparable direct sales and
a comparable sales, including both store and direct sales, increase of 12%, and $59.8 million of sales from businesses
acquired over the past twelve months. The comparable sales increase reflected a 10% increase in comparable store units
sold, primarily reflecting demand which management believes is driven by style trends and a 2% increase in average
price per hat. Lids Sports Group operated 1,002 stores at the end of Fiscal 2012, including 82 stores in Canada and 120
Lids Locker Room stores and Clubhouse stores, compared to 985 stores at the end of Fiscal 2011, including 73 stores in
Canada and 99 Lids Locker Room stores.
33
Lids Sports Group earnings from operations for Fiscal 2012 increased 47.0% to $82.3 million compared to $56.0 million
for Fiscal 2011. The increase in operating income was primarily due to increased headwear sales and decreased expenses
as a percentage of net sales, primarily reflecting leverage in store related expenses from positive comparable sales as
well as for a change in sales mix in the Lids Sports Group. Wholesale sales accounted for 15% of the Lids Sports
Group’s sales in Fiscal 2012 compared to 12% in Fiscal 2011. Wholesale sales normally involve lower expenses
compared to retail stores.
Johnston & Murphy Group
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2012
2011
(dollars in thousands)
$
$
201,725
13,682
185,011
7,595
6.8%
4.1%
%
Change
9.0%
80.1%
Johnston & Murphy Group net sales increased 9.0% to $201.7 million for Fiscal 2012 from $185.0 million for Fiscal
2011. The increase reflected primarily a 10% increase in same store sales, a 16% increase in comparable direct sales and
a comparable sales, including both store and direct sales, increase of 11%, and a 5% increase in Johnston & Murphy
wholesale sales, partially offset by a 2% decrease in average stores operated for Johnston & Murphy retail operations.
Unit sales for the Johnston & Murphy wholesale business increased 4% in Fiscal 2012 and the average price per pair of
shoes increased 1% for the same period. The comparable sales increase in Fiscal 2012 reflects a 3% increase in footwear
unit comparable sales and a 3% increase in average price per pair of shoes, primarily due to changes in product mix. The
comparable sales increase also reflects increased sales of non-footwear categories. Retail operations accounted for
74.3% of Johnston & Murphy Group sales in Fiscal 2012, up from 73.3% in Fiscal 2011. The store count for Johnston &
Murphy retail operations at the end of Fiscal 2012 included 153 Johnston & Murphy shops and factory stores compared
to 156 Johnston & Murphy shops and factory stores at the end of Fiscal 2011.
Johnston & Murphy earnings from operations for Fiscal 2011 increased 80.1% to $13.7 million from $7.6 million for
Fiscal 2011, primarily due to increased net sales, increased gross margin as a percentage of net sales and decreased
expenses as a percentage of net sales. Expenses reflected positive leverage in occupancy and depreciation from the
increase in comparable store sales.
Licensed Brands
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2012
2011
%
Change
(dollars in thousands)
$
$
97,444
9,456
101,644
12,359
9.7%
12.2%
(4.1)%
(23.5)%
Licensed Brands’ net sales decreased 4.1% to $97.4 million for Fiscal 2012 from $101.6 million for Fiscal 2011. The
sales decrease reflects a decrease in sales of Dockers Footwear which management attributes in part to retailers’
increasing emphasis on their private label brands, offset by a $4.9 million increase in sales from the Chaps line of
footwear and Keuka Footwear business, which was acquired in the third quarter of Fiscal 2011. Unit sales for Dockers
Footwear decreased 9% for Fiscal 2012 and the average price per pair of shoes decreased 1% for the same period.
Licensed Brands’ earnings from operations for Fiscal 2012 decreased 23.5%, from $12.4 million for Fiscal 2011 to $9.5
million, primarily due to decreased net sales, decreased gross margins as a percentage of net sales and to increased
expenses as a percentage of net sales, reflecting increased selling and advertising expenses and freight costs.
Corporate, Interest Expenses and Other Charges
Corporate and other expense for Fiscal 2012 was $55.8 million compared to $39.5 million for Fiscal 2011. Corporate
expense in Fiscal 2012 included $2.7 million in asset impairment and other charges, primarily for retail store
asset impairments, other legal matters, network intrusion expenses and $7.4 million in acquisition related expenses.
Corporate expense in Fiscal 2011 included $8.6 million in asset impairment and other charges, primarily for retail
store asset impairments, network intrusion expenses and other legal matters. Excluding the charges listed above,
corporate and other expense increased primarily due to higher bonus accruals reflecting improved financial performance
of the Company.
34
Interest expense increased 356.4% from $1.1 million in Fiscal 2011 to $5.2 million in Fiscal 2012, due to average
revolver borrowings of $49.5 million in Fiscal 2012, primarily in connection with the Schuh acquisition, and acquired
UK term loans totaling $35.7 million as of January 28, 2012, compared to average revolver borrowings of $7.0 million
in Fiscal 2011.
Liquidity and Capital Resources
The following table sets forth certain financial data at the dates indicated.
Cash and cash equivalents
Working capital
Long-term debt (includes current maturities)
Working Capital
Feb. 2,
2013
$
$
$
59.8
406.2
50.7
Jan. 28,
2012
(dollars in millions)
53.8
$
290.9
$
40.7
$
$
$
$
Jan. 29,
2011
55.9
278.7
0.0
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 $123.2 million in Fiscal 2013 compared to $145.0 million in Fiscal 2012. The
$21.8 million decrease from operating activities from Fiscal 2012 reflects a decrease in cash flow from changes in
inventory, accounts payable and other accrued liabilities of $18.7 million, $16.8 million and $16.0 million, respectively,
partially offset by improved earnings and a $28.5 million increase from changes in other assets and liabilities. The $18.7
million decrease in cash flow from inventory reflects increases in retail inventory, reflecting slower than expected sales,
and increased inventory in Licensed Brands. The $16.8 million decrease in cash flow from accounts payable reflects
changes in buying patterns and payment terms negotiated with individual vendors. The $16.0 million decrease in cash
flow from other accrued liabilities reflects decreased bonus accruals and decreased income tax accruals in Fiscal 2013
compared to Fiscal 2012. The $28.5 million increase in cash flow from other assets and liabilities reflects increased
accruals for the deferred purchase price and bonus earn-out related to Schuh and a decrease in long-term receivables
related to the network intrusion.
The $61.0 million increase in inventories at February 2, 2013 from January 28, 2012 levels reflects increases in retail
inventory, reflecting slower than expected sales and a 5.5% increase in square footage, and increased inventory in
Licensed Brands to support growth initiatives.
Accounts receivable at February 2, 2013 increased $5.8 million compared to January 28, 2012, due primarily
to increased wholesale sales reflecting growth in the Johnston & Murphy wholesale business and Licensed
Brands business.
Cash provided by operating activities was $145.0 million in Fiscal 2012 compared to $102.6 million in Fiscal 2011. The
$42.4 million increase in cash flow from operating activities from last year reflects improved earnings and a change in
other assets and liabilities and accounts receivable of $27.1 million and $15.1 million, respectively, offset by a decrease
in cash flow from changes in other accrued liabilities and accounts payable of $32.6 million and $14.8 million,
respectively. The $27.1 million increase in cash flow from other assets and liabilities reflects an increase in the bonus
bank liability, resulting from increased bonuses in Fiscal 2012, and deferred compensation due to the deferred purchase
price and bonus earn-out accruals related to Schuh, partially offset by an increase in long-term receivables related to the
network intrusion. The $15.1 million increase in cash flow from accounts receivable reflects primarily decreased
wholesale sales in Licensed Brands for Fiscal 2012 and the increase in wholesale sales, including the additional sales
in Lids Team Sports, in Fiscal 2011 when compared to Fiscal 2010, which together, contribute to the increase in cash
flow for Fiscal 2012. The $32.6 million decrease in cash flow from other accrued liabilities was due to a reduction in the
growth of current bonus accruals and increased payments related to environmental liabilities. The $14.8 million decrease
in cash flow from accounts payable reflected changes in buying patterns and payment terms negotiated with
individual vendors.
The $42.3 million increase in inventories at January 28, 2012 from January 29, 2011 levels reflects primarily an increase
in Lids retail inventory to support growth and increases in Lids Team Sports inventory to support growth and to improve
customer fulfillment.
35
Accounts receivable at January 28, 2012 decreased $3.0 million compared to January 29, 2011, due primarily to
decreased wholesale sales in Licensed Brands.
Sources of Liquidity
The Company has three principal sources of liquidity: cash from operations, cash and cash equivalents on hand and the
Credit Facility discussed below. The Company believes that cash and cash equivalents on hand, cash from operations
and availability under its Credit Facility will be sufficient to cover its working capital and capital expenditures for the
foreseeable future.
On June 23, 2011, the Company entered into a First Amendment (the “Amendment”) to the Second Amended and
Restated Credit Agreement (the “Credit Facility”) dated January 21, 2011, in the aggregate principal amount of $375.0
million, with a $40.0 million swingline loan sublimit, a $70.0 million sublimit for the issuance of standby letters of
credit and a Canadian sub-facility of up to $8.0 million, which has a five-year term, expiring in January 2016. The
Amendment raised the aggregate principal amount on the Credit Facility to $375.0 million from $300.0 million. Any
swingline loans and any letters of credit and borrowings under the Canadian facility 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 $75.0 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 Credit Facility shall at no time
exceed the lesser of the facility amount ($375.0 million or, if increased at the Company’s option, subject to the receipt of
commitments for the increased amount, up to $450.0 million) or the “Borrowing Base”, which generally is based on
90% of eligible inventory plus 85% of eligible wholesale receivables (50% of eligible wholesale receivables of the Lids
Team Sports business) plus 90% of eligible credit card and debit card receivables less applicable reserves. For additional
information on the Company’s Credit Facility, see Note 6 to the Consolidated Financial Statements included in Item 8.
In connection with the Schuh acquisition, Schuh entered into an amended and restated Senior Term Facilities Agreement
and Working Capital Facility Letter, (collectively, the “UK Credit Facilities”) which provide for term loans of up to
£29.5 million (a £15.5 million A term loan and £14.0 million B term loan) and a working capital facility of £5.0 million.
The Working Capital Facility Letter was allowed to lapse in June 2012. The A term loan bears interest at LIBOR plus
2.50% per annum. The B term loan bears interest at LIBOR plus 3.75% per annum. The Company is not required to
make any payments on the B term loan until it expires October 31, 2015, unless the Company’s Schuh Group segment
has Excess Cash Flow (as defined in the UK Credit Facilities). The Company paid £2.0 million, £2.8 million and
£4.5 million on the B term loan in the fourth quarter of Fiscal 2013, the second quarter of Fiscal 2013 and the fourth
quarter of Fiscal 2012, respectively.
The UK Credit Facilities contains certain covenants at the Schuh level including a minimum interest coverage covenant
initially set at 4.25x and increasing to 4.50x in January 2012 and thereafter, a maximum leverage covenant initially set at
2.75x declining over time at various rates to 2.25x beginning in July 2012 and a minimum cash flow coverage of 1.10x.
The Company was in compliance with all the covenants at February 2, 2013. The UK Credit Facilities are secured by a
pledge of all the assets of Schuh and its subsidiaries.
Revolving credit borrowings averaged $30.5 million during Fiscal 2013 and $49.5 million during Fiscal 2012, as cash on
hand, cash generated from operations and revolver borrowings primarily funded seasonal working capital requirements,
capital expenditures and stock repurchases for Fiscal 2013.
There were $12.3 million of letters of credit outstanding, $27.7 million of revolver borrowings outstanding under the
Credit Facility and $23.0 million in U.K. term loans outstanding at February 2, 2013. The Company is not required to
comply with any financial covenants under the Credit Facility unless Excess Availability (as defined in the First
Amendment to the Second Amended and Restated Credit Agreement) is less than the greater of $27.5 million or 12.5%
of the Loan Cap (as defined in the First Amendment to the Second Amended and Restated Credit Agreement). If and
during such time as Excess Availability is less than the greater of $27.5 million or 12.5% of the Loan Cap, the Credit
Facility requires the Company to meet a minimum fixed charge coverage ratio of (a) an amount equal to consolidated
EBITDA less capital expenditures and taxes paid in cash, in each case for such period, to (b) fixed charges for such
period, of not less than 1.0:1.0. Excess Availability was $292.8 million at February 2, 2013. Because Excess Availability
exceeded $27.5 million or 12.5% of the Loan Cap, the Company was not required to comply with this financial covenant
at February 2, 2013.
The Company’s Credit Facility prohibits the payment of dividends and other restricted payments unless as of the date of
the making of any Restricted Payment (as defined in the Credit Facility) or consummation of any Acquisition (as defined
in the Credit Facility), (a) no Default (as defined in the Credit Facility) or Event of Default (as defined in the Credit
Facility)exists or would arise after giving effect to such Restricted Payment or Acquisition, and (b) either (i) the
Borrowers (as defined in the Credit Facility) have pro forma projected Excess Availability for the following six month
period equal to or greater than 50% of the Loan Cap, after giving pro forma effect to such Restricted Payment or
36
Acquisition, or (ii) (A) the Borrowers have pro forma projected Excess Availability for the following six month period
of less than 50% of the Loan Cap but equal to or greater than 20% of the Loan Cap, after giving pro forma effect to the
Restricted Payment or Acquisition, and (B) the Fixed Charge Coverage Ratio (as defined in the Credit Facility), on a
pro-forma basis for the twelve months preceding such Restricted Payment or Acquisition, will be equal to or greater than
1.0:1.0 and (c) after giving effect to such Restricted Payment or Acquisition, the Borrowers are Solvent (as defined in
the Credit Facility). The Company’s management does not expect availability under the Credit Facility to fall below the
requirements listed above during Fiscal 2014. The Company’s UK Credit Facilities prohibit the payment of any
dividends by Schuh or its subsidiaries to the Company.
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 $0.1 million.
Contractual Obligations
The following tables set forth aggregate contractual obligations and commitments as of February 2, 2013.
(in thousands)
Contractual Obligations
Capital Lease Obligations
Long-Term Debt Obligations(1)
Operating Lease Obligations
Purchase Obligations(2)
Long-Term Obligations – Schuh(3)
Other Long-Term Liabilities
Total Contractual Obligations(4)
(in thousands)
Commercial Commitments
Letters of Credit
Total Commercial Commitments
$
$
$
$
Payments Due by Period
Total
13
50,682
1,255,160
546,995
60,108
1,337
1,914,295
$
$
Less than 1
year
1
5,675
223,495
546,995
8,622
176
784,964
$
$
1 - 3
years
3
45,007
401,661
0
51,486
350
498,507
$
$
3 - 5
years
3
0
287,470
0
0
350
287,823
$
$
Amount of Commitment Expiration Per Period
Total Amounts
Committed
Less than 1
year
1 - 3
years
3 - 5
years
More
than 5
years
6
0
342,534
0
0
461
343,001
More
than 5
years
12,288
12,288
$
$
12,288
12,288
$
$
0
0
$
$
0
0
$
$
0
0
(1) Excludes interest on revolver borrowings due to uncertainty of timing of payments.
(2) Open purchase orders for inventory.
(3) Includes deferred purchase price payments, earn-out bonus payments and retention note payments related to the
Schuh acquisition and interest on the UK term loans. For additional information, see Notes 2 and 6 to the Consolidated
Financial Statements included in Item 8.
(4) Excludes unrecognized tax benefits of $11.1 million due to their uncertain nature in timing of payments, if any.
Capital Expenditures
Capital expenditures were $71.7 million, $49.5 million and $29.3 million for Fiscal 2013, 2012 and 2011, respectively.
The $22.2 million increase in Fiscal 2013 capital expenditures as compared to Fiscal 2012 reflected an increase in retail
store capital expenditures due to the construction of 104 new stores opened in Fiscal 2013, compared to 70 stores in
Fiscal 2012, and increased major renovations due to lease renewals. The $20.2 million increase in Fiscal 2012 capital
expenditures as compared to Fiscal 2011 reflected an increase in retail store capital expenditures due to the construction
of 70 new stores opened in Fiscal 2012, compared to 53 stores in Fiscal 2011 and increased major and minor renovations
due to lease renewals.
Total capital expenditures in Fiscal 2014 are expected to be approximately $119.9 million. These include retail capital
expenditures of approximately $105.8 million to open approximately 32 Journeys stores, including 12 in Canada, 20
Journeys Kidz stores, three Shi by Journeys stores, 15 Schuh stores, 15 Johnston & Murphy shops and factory stores,
including three in Canada, and 80 Lids Sports Group stores, including 30 Lids stores, with 10 stores in Canada, and 50
Lids Locker Room and Clubhouse stores, and to complete approximately 152 major store renovations. The planned
amount of capital expenditures in Fiscal 2014 for wholesale operations and other purposes is approximately $14.1
37
million, including approximately $9.8 million for new systems to improve customer service and support the Company’s
growth.
Future Capital Needs
The Company expects that cash on hand and cash provided by operations and borrowings under its Credit Facility will
be sufficient to support seasonal working capital and capital expenditure requirements during Fiscal 2014. The
approximately $7.2 million of costs associated with discontinued operations that are expected to be paid during the next
twelve months are expected to be funded from cash on hand, cash generated from operations and borrowings under the
Credit Facility during Fiscal 2014.
Common Stock Repurchases
The Company repurchased 645,904 shares at a cost of $37.6 million during Fiscal 2013. The Company has $58.2 million
remaining under its current $75.0 million share repurchase authorization. The Company did not repurchase any shares
during Fiscal 2012. The Company repurchased 863,767 shares at a cost of $24.8 million during Fiscal 2011.
Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters,
including those disclosed in Note 13 to the Company’s Consolidated Financial Statements. The Company has made
pretax accruals for certain of these contingencies, including approximately $0.8 million reflected in Fiscal 2013, $1.8
million reflected in Fiscal 2012 and $2.9 million reflected in Fiscal 2011. These charges are included in provision for
discontinued operations, net in the Consolidated Statements of Operations because they relate to former facilities
operated by the Company. The Company monitors these matters on an ongoing basis and, on a quarterly basis,
management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as
management deems necessary in view of changes in available information. Changes in estimates of liability are reported
in the periods when they occur. Consequently, management believes that its reserve in relation to each proceeding is a
best estimate of the probable loss connected to the proceeding, or in cases in which no best estimate is possible, the
minimum amount in the range of estimated losses, based upon its analysis of the facts and circumstances as of the close
of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in
environmental proceedings in particular, there can be no assurance that future developments will not require additional
reserves, 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.
Financial Market Risk
The following discusses the Company’s exposure to financial market risk related to changes in interest rates and foreign
currency exchange rates.
Outstanding Debt of the Company – The Company has $27.7 million of outstanding revolver borrowings under its
Credit Facility at a weighted average interest rate of 4.50% as of February 2, 2013. A 100 basis point adverse change
in interest rates would increase interest expense by $0.3 million on the $27.7 million revolving credit debt.
The Company has $23.0 million of outstanding U.K. term loans at a weighted average interest rate of 3.42% as of
February 2, 2013. A 100 basis point adverse change in interest rates would increase interest expense by $0.2 million on
the $23.0 million term loans.
Cash and Cash Equivalents – The Company’s cash and cash equivalent balances are invested in financial instruments
with original maturities of three months or less. The Company did not have significant exposure to changing interest
rates on invested cash at February 2, 2013. As a result, the Company considers the interest rate market risk implicit in
these investments at February 2, 2013 to be low.
Foreign Currency Exchange Rate Risk – 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 was the Company’s practice to
hedge its risks through the purchase of forward foreign exchange contracts when the purchases were material. At
February 2, 2013, the Company did not have any forward foreign exchange contracts outstanding.
Accounts Receivable – The Company’s accounts receivable balance at February 2, 2013 is concentrated in two of its
footwear wholesale businesses, which sell primarily to department stores and independent retailers across the United
States and its Lids Team Sports wholesale business, which sells primarily to colleges and high school athletic teams and
their fan bases. Including both footwear wholesale and Lids Team Sports wholesale business receivables, two customers
each accounted for 7% and no other customer accounted for more than 6% of the Company’s total trade receivables
balance as of February 2, 2013. The Company monitors the credit quality of its customers and establishes an allowance
38
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.
Summary – Based on the Company’s overall market interest rate and foreign currency rate exposure at February 2, 2013,
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
2014 would not be material.
New Accounting Principles
In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-05,
an update to the FASB Codification Comprehensive Income Topic, which amends the existing accounting standards
related to the presentation of comprehensive income in a company’s financial statements. This update requires that
all non-owner changes in shareholders’ equity be presented in either a single continuous statement of comprehensive
income or in two separate but consecutive statements. In the two statement approach, the first statement would present
total net earnings and its components followed consecutively by a second statement that should present total
other comprehensive income, the components of other comprehensive income and the total of comprehensive income.
The update does not change the items that must be reported in other comprehensive income and must be applied
retrospectively for all periods presented in the Consolidated Financial Statements. The Company adopted this update
in the first quarter of Fiscal 2013 and has included a separate statement of comprehensive income in its
Consolidated Financial Statements. The adoption did not have a significant impact on the Company’s results of
operations or financial position.
Inflation
The Company does not believe inflation has had a material impact on sales or operating results during periods covered in
this discussion.
ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company incorporates by reference the information regarding market risk appearing under the heading “Financial
Market Risk” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
39
ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Financial Statements
Consolidated Balance Sheets, February 2, 2013 and January 28, 2012
Consolidated Statements of Operations, each of the three fiscal years ended 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income, each of the three fiscal years ended 2013, 2012 and 2011
Consolidated Statements of Cash Flows, each of the three fiscal years ended 2013, 2012 and 2011
Consolidated Statements of Equity, each of the three fiscal years ended 2013, 2012 and 2011
Notes to Consolidated Financial Statements
Page
41
42
43
45
46
47
48
49
40
Report of Independent Registered Public Accounting Firm
On Internal Control over Financial Reporting
The Board of Directors and Shareholders
Genesco Inc.
We have audited Genesco Inc. and Subsidiaries’ internal control over financial reporting as of February 2, 2013, 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. and Subsidiaries’ management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Genesco Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of February 2, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Genesco Inc. and Subsidiaries as of February 2, 2013 and January 28, 2012, and the related
consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three fiscal years in the
period ended February 2, 2013, and our report dated April 3, 2013, expressed an unqualified opinion thereon.
Nashville, Tennessee
April 3, 2013
41
Report of Independent Registered Public Accounting Firm on Financial Statements
The Board of Directors and Shareholders
Genesco Inc.
We have audited the accompanying consolidated balance sheets of Genesco Inc. and Subsidiaries (the “Company”) as of
February 2, 2013 and January 28, 2012, and the related consolidated statements of operations, comprehensive income, cash
flows and equity for each of the three fiscal years in the period ended February 2, 2013. Our audits also included the financial
statement schedule listed in Item 15. These financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Genesco Inc. and Subsidiaries at February 2, 2013 and January 28, 2012, and the consolidated results of their
operations and their cash flows for each of the three fiscal years in the period ended February 2, 2013, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth
therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of February 2, 2013, based on criteria established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and
our report dated April 3, 2013, expressed an unqualified opinion thereon.
Nashville, Tennessee
April 3, 2013
42
Genesco Inc.
and Subsidiaries
Consolidated Balance Sheets
In Thousands, except share amounts
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowances of $6,082 at February 2,
2013 and $6,900 at January 28, 2012
Inventories
Deferred income taxes
Prepaids and other current assets
Total current assets
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, net of accumulated amortization of $3,350 at
February 2, 2013 and $2,246 at January 28, 2012
Other intangibles, net of accumulated amortization of $17,220 at
February 2, 2013 and $13,645 at January 28, 2012
Other noncurrent assets
Total Assets
As of Fiscal Year End
2013
2012
$
59,795
$
53,790
48,214
505,344
23,725
45,193
682,271
6,128
20,390
120,757
148,903
8,702
318,376
623,256
(381,587)
241,669
26,448
273,827
43,713
435,113
22,541
40,155
595,312
6,118
20,260
116,920
127,949
7,158
299,775
578,180
(350,491)
227,689
28,152
259,759
77,408
78,276
11,598
20,568
1,333,789
$
14,808
33,269
1,237,265
$
43
Genesco Inc.
and Subsidiaries
Consolidated Balance Sheets
In Thousands, except share amounts
Liabilities and Equity
Current Liabilities:
Accounts payable
Accrued employee compensation
Accrued other taxes
Accrued income taxes
Current portion – long-term debt
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
Equity
Non-redeemable preferred stock
Common equity:
Common stock, $1 par value:
Authorized: 80,000,000 shares
Issued/Outstanding:
February 2, 2013 – 24,484,915/23,996,451
January 28, 2012 – 24,757,826/24,269,362
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury shares, at cost (488,464 shares)
Total Genesco equity
Noncontrolling interest – non-redeemable
Total equity
Total Liabilities and Equity
$
As of Fiscal Year End
2013
2012
$
118,350
55,078
27,004
2,096
5,675
60,659
7,192
276,054
45,007
20,514
177,537
4,159
523,271
138,938
53,029
26,293
16,390
8,773
52,789
8,250
304,462
31,931
22,201
156,794
4,267
519,655
3,924
4,957
24,485
170,360
655,920
(28,241)
(17,857)
808,591
1,927
810,518
1,333,789
$
24,758
149,479
586,990
(32,966)
(17,857)
715,361
2,249
717,610
1,237,265
$
The accompanying Notes are an integral part of these Consolidated Financial Statements
44
Genesco Inc.
and Subsidiaries
Consolidated Statements of Operations
In Thousands, except per share amounts
2013
Fiscal Year
2012
2011
Net sales
Cost of sales
Selling and administrative expenses
Asset impairments and other, net
Earnings from operations
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
Net Earnings
Basic earnings per common share:
Continuing operations
Discontinued operations
Net earnings
Diluted earnings per common share:
Continuing operations
Discontinued operations
Net earnings
$ 2,604,817 $ 2,291,987 $ 1,789,839
891,764
803,425
8,567
86,083
1,306,470
1,113,340
17,037
167,970
1,144,281
1,001,159
2,677
143,870
5,126
(95)
5,031
162,939
51,941
110,998
(462)
110,536 $
5,157
(65)
5,092
138,778
55,794
82,984
(1,025)
81,959 $
4.70 $
(0.02)
4.68 $
4.62 $
(0.02)
4.60 $
3.56 $
(0.04)
3.52 $
3.48 $
(0.05)
3.43 $
1,130
(8 )
1,122
84,961
30,414
54,547
(1,336 )
53,211
2.34
(0.06 )
2.28
2.29
(0.05 )
2.24
$
$
$
$
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
45
Genesco Inc.
and Subsidiaries
Consolidated Statements of Comprehensive Income
In Thousands, except as noted
Net earnings
Other comprehensive income (loss):
Gain (loss) on foreign currency forward contract,
net of tax of $0.0 million for 2013 and 2012
Fiscal Year
2013
2011
2012
$ 110,536 $ 81,959 $ 53,211
and $0.1 million for 2011
42
(35)
166
Pension liability adjustment net of tax of $2.4 million
and $2.7 million for 2013 and 2011, respectively, and
net of tax benefit of $3.1 million for 2012
Postretirement liability adjustment net of tax
benefit of $0.1 million for each period
Foreign currency translation adjustments
Total other comprehensive income (loss)
Comprehensive Income
3,657
(4,670)
3,921
(79)
1,105
4,725
(131)
543
4,499
$ 115,261 $ 73,298 $ 57,710
(109)
(3,847)
(8,661)
The accompanying Notes are an integral part of these Consolidated Financial Statements.
46
Genesco Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
In Thousands
2013
Fiscal Year
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization
Amortization of deferred note expense and debt discount
Deferred income taxes
Provision for losses on accounts receivable
Impairment of long-lived assets
Restricted stock and share-based compensation
Provision for discontinued operations
Tax benefit of stock options and restricted stock exercised
Other
Effect on cash from changes in working capital and other
assets and liabilities, before 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 asset sales
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital leases
Payments of long-term debt
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 financing activities
Effect of foreign exchange rate fluctuations on cash
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Cash Flow Information:
Net cash paid for:
Interest
Income taxes
$
110,536 $
81,959 $
53,211
63,697
792
(17,831)
1,325
1,396
10,508
796
(4,820)
1,327
(5,821)
(61,049)
(4,524)
(17,953)
(6,908)
51,739
123,210
(71,737)
(23,818)
81
(95,474)
(2)
(13,581)
439,600
(416,900)
4,820
(37,650)
(2,925)
(147)
53,737
708
2,732
2,004
1,119
7,660
1,692
(4,744)
1,005
3,011
(42,324)
5,286
(1,201)
9,046
23,270
144,960
(49,456)
(92,985)
27
(142,414)
(22)
(25,321)
299,800
(294,800)
4,744
—
2,931
(193)
4,965
4
(21,816)
85
6,005
53,790
59,795 $
9,820
(939)
(3,980)
(710)
(2,144)
55,934
53,790 $
47,738
370
(11,866 )
1,081
7,155
8,006
2,203
(1,448 )
1,328
(12,085 )
(44,345 )
(167 )
13,641
41,597
(3,811 )
102,608
(29,299 )
(75,500 )
11
(104,788 )
(104 )
(1,918 )
107,400
(107,400 )
1,448
(26,851 )
4,160
(197 )
2,343
(2,915 )
(24,034 )
—
(26,214 )
82,148
55,934
4,391 $
81,607
4,789 $
50,254
748
24,079
$
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
47
Balance January 30, 2010
Net earnings
Other comprehensive loss
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 benefit of stock options and restricted
stock exercises
Shares repurchased
Other
Noncontrolling interest – loss
Balance January 29, 2011
Net earnings
Other comprehensive loss
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 benefit of stock options and
restricted stock exercises
Other
Noncontrolling interest – loss
Balance January 28, 2012
Net earnings
Other comprehensive income
Dividends paid on non-redeemable preferred stock
Exercise of stock options
Issue shares - Employee Stock Purchase Plan
Employee and non-employee restricted stock
Restricted stock issuance
Restricted shares withheld for taxes
Tax benefit of stock options and
restricted stock exercised
Shares repurchased
Other
Noncontrolling interest – loss
Balance February 2, 2013
Genesco Inc.
and Subsidiaries
Consolidated Statements of Equity
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Treasury
Non Controlling
Interest
Loss
Shares
Non-Redeemable
Total
Equity
$ 24,563
—
—
$ 146,981
—
—
$ 452,210
53,211
—
$
(28,804)
—
4,499
$ (17,857)
—
—
$
Total Non-
Redeemable
Preferred
Stock
5,220
—
—
$
—
—
—
—
—
—
—
—
—
(37)
—
5,183
—
—
—
—
—
—
—
—
—
—
(226)
—
4,957
—
—
—
—
—
—
—
—
—
118
4
—
—
423
(82)
—
(864)
1
—
24,163
—
—
—
390
3
—
—
304
(93)
—
(9)
—
24,758
—
—
—
224
2
—
194
(76)
—
2,105
116
7,796
210
(423)
(2,293)
1,342
(23,961)
37
—
131,910
—
—
—
9,297
130
7,659
1
(304)
(4,034)
4,585
235
—
149,479
—
—
—
4,584
155
10,508
(194)
—
(197)
—
—
—
—
—
—
—
—
—
—
505,224
81,959
—
(193)
—
—
—
—
—
—
—
—
—
586,990
110,536
—
(147)
—
—
—
—
(4,455)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(24,305)
—
(8,661)
—
—
—
—
(17,857)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(32,966)
—
4,725
—
—
—
(17,857)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,503
2,503
—
—
—
—
—
—
—
—
—
—
—
(254)
2,249
—
—
—
—
—
—
—
—
$ 582,313
53,211
4,499
(197)
2,223
120
7,796
210
—
(2,375)
1,342
(24,825)
1
2,503
626,821
81,959
(8,661)
(193)
9,687
133
7,659
1
—
(4,127)
4,585
—
(254)
717,610
110,536
4,725
(147)
4,808
157
10,508
—
(4,531)
—
—
(1,033)
—
3,924
—
(646)
29
—
$ 24,485
4,820
—
1,008
—
$ 170,360
—
(37,004)
—
—
$ 655,920
$
$
—
—
—
—
(28,241)
—
—
—
—
$ (17,857)
$
—
—
—
(322)
1,927
4,820
(37,650)
4
(322)
$ 810,518
The accompanying Notes are an integral part of these Consolidated Financial Statements.
48
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies
Nature of Operations
The Company’s business includes the design and sourcing, marketing and distribution of footwear
and accessories through retail stores in the U.S., Puerto Rico and Canada primarily under the
Journeys, Journeys Kidz, Shi by Journeys, Underground by Journeys and Johnston & Murphy
banners and under the Schuh banner in the United Kingdom and the Republic of Ireland;
through e-commerce websites including journeys.com, journeyskidz.com, shibyjourneys.com,
undergroundbyjourneys.com, schuh.co.uk and johnstonmurphy.com and catalogs, and at wholesale,
primarily under the Company’s Johnston & Murphy brand, the licensed Dockers brand and other
brands that the Company licenses for men’s footwear. The Company’s business also includes Lids
Sports Group, which operates headwear and accessory stores in the U.S. and Canada primarily under
the Lids, Hat World and Hat Shack banners; the Lids Locker Room business, consisting of sports-
oriented fan shops featuring a broad array of licensed merchandise such as apparel, hats and
accessories, sports decor and novelty products, operating primarily under the Lids Locker Room,
Sports Fan-Attic and Sports Avenue banners; certain e-commerce operations and an athletic team
dealer business operating as Lids Team Sports. Including both the footwear businesses and the Lids
Sports Group business, at February 2, 2013, the Company operated 2,459 retail stores in the U.S.,
Puerto Rico, Canada, the United Kingdom and the Republic of Ireland.
During Fiscal 2013, the Company operated five reportable business segments (not including
corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz, Shi by Journeys and
Underground by Journeys retail footwear chains, catalog and e-commerce operations; (ii) Schuh
Group, acquired in June 2011, comprised of the Schuh retail footwear chain and e-commerce
operations; (iii) Lids Sports Group, comprised as described in the preceding paragraph;
(iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, e-commerce
and catalog operations and wholesale distribution; and (v) Licensed Brands, comprised of Dockers®
Footwear, sourced and marketed under a license from Levi Strauss & Company; SureGrip®
Footwear, occupational footwear primarily sold directly to consumers; and other footwear brands.
Principles of Consolidation
All subsidiaries are consolidated in the consolidated financial statements. All significant
intercompany transactions and accounts have been eliminated.
Fiscal Year
The Company’s fiscal year ends on the Saturday closest to January 31. As a result, Fiscal 2013 was a
53-week year with 371 days and each of Fiscal 2012 and Fiscal 2011 was a 52-week year with 364
days. Fiscal 2013 ended on February 2, 2013, Fiscal 2012 ended on January 28, 2012 and Fiscal
2011 ended on January 29, 201l.
Financial Statement Reclassifications
Certain reclassifications have been made to conform prior years’ data to the current year
presentation with respect to segments. The Company integrated the Underground Station operations
into the Journeys Group in the first quarter of Fiscal 2013. The former Underground Station stores
are a subset of Journeys Group under the brand “Underground by Journeys.” Journeys Group
49
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
segment net sales, operating income, total assets, depreciation and amortization and capital
expenditures have been restated by $92.4 million, $(0.3) million, $25.2 million, $1.8 million and
$0.2 million, respectively, for Fiscal 2012 and by $94.4 million, $(3.0) million, $27.8 million, $2.2
million and $1.3 million, respectively, for Fiscal 2011 as a result of combining Underground Station
Group with the Journeys Group segment to conform to current year presentation (See Note 14).
Certain shipping and warehouse expenses have been reclassed from selling and administrative
expenses to cost of sales in Fiscal 2012 and 2011 to conform to the current year presentation. The
reclass to cost of sales from selling and administrative expense for Fiscal 2012 and 2011 was $6.3
million and $3.8 million, respectively.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Significant areas requiring management estimates or judgments include the following key financial
areas:
Inventory Valuation
The Company values its inventories at the lower of cost or market.
In its footwear wholesale operations, its Schuh Group segment and its Lids Sports Group wholesale
operations, except for the Anaconda Sports wholesale division, cost is determined using the first-in,
first-out (“FIFO”) method. Market value is determined using a system of analysis which evaluates
inventory at the stock number level based on factors such as inventory turn, average selling price,
inventory level, and selling prices reflected in future orders. The Company provides reserves when
the inventory has not been marked down to market value based on current selling prices or when the
inventory is not turning and is not expected to turn at levels satisfactory to the Company.
The Lids Sports Group retail segment and its Anaconda Sports wholesale division employ the
moving average cost method for valuing inventories and apply freight using an allocation method.
The Company provides a valuation allowance for slow-moving inventory based on negative margins
and estimated shrink based on historical experience and specific analysis, where appropriate.
In its retail operations, other than the Schuh Group and Lids Sports Group retail segments, the
Company employs the retail inventory method, applying average cost-to-retail ratios to the retail
value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or
market is achieved as markdowns are taken or accrued as a reduction of the retail value of
inventories.
50
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Inherent in the retail inventory method are subjective judgments and estimates, including
merchandise mark-on, markups, markdowns, and shrinkage. These judgments and estimates,
coupled with the fact that the retail inventory method is an averaging process, could produce a range
of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, the Company
employs the retail inventory method in multiple subclasses of inventory with similar gross margins,
and analyzes markdown requirements at the stock number level based on factors such as inventory
turn, average selling price, and inventory age. In addition, the Company accrues markdowns as
necessary. These additional markdown accruals reflect all of the above factors as well as current
agreements to return products to vendors and vendor agreements to provide markdown support. In
addition to markdown provisions, the Company maintains provisions for shrinkage and damaged
goods based on historical rates.
Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments
about current market conditions, fashion trends, and overall economic conditions. Failure to make
appropriate conclusions regarding these factors may result in an overstatement or understatement of
inventory value.
Impairment of Long-Lived Assets
The Company periodically assesses the reliability of its long-lived assets, other than goodwill, and
evaluates such assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if
estimated future cash flows, undiscounted and without interest charges, are less than the carrying
amount. Inherent in the analysis of impairment are subjective judgments about future cash flows.
Failure to make appropriate conclusions regarding these judgments may result in an overstatement
or understatement of the value of long-lived assets. See also Notes 3 and 5.
The goodwill impairment test involves performing a qualitative assessment, on a reporting unit
level, based on current circumstances. If the results of the qualitative assessment indicate that it is
more likely than not that the fair value of a reporting unit is greater than its carrying amount, a two-
step impairment test will not be performed. However, if the results of the qualitative assessment
indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying
amount, and then a two-step impairment test is performed. Alternatively, the Company may elect to
bypass the qualitative assessment and proceed directly to the two-step impairment test, on a
reporting unit level. The first step is a comparison of the fair value and carrying value of the
business unit with which the goodwill is associated. The Company estimates fair value using the
best information available, and computes the fair value derived by an income approach utilizing
discounted cash flow projections. The income approach uses a projection of a reporting unit’s
estimated operating results and cash flows that is discounted using a weighted-average cost of
capital that reflects current market conditions. A key assumption in the Company’s fair value
estimate is the weighted average cost of capital utilized for discounting its cash flow projections in
its income approach. The Company believes the rate it used in its latest annual test, which was
completed in the fourth quarter, was consistent with the risks inherent in its business and with
industry discount rates. The projection uses management’s best estimates of economic and market
conditions over the projected period including growth rates in sales, costs, estimates of future
expected changes in operating margins and cash expenditures.
51
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
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.
Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other
legal matters. The Company has made pretax accruals for certain of these contingencies, including
approximately $0.8 million in Fiscal 2013, $1.8 million in Fiscal 2012 and $2.9 million in Fiscal
2011. These charges are included in provision for discontinued operations, net in the Consolidated
Statements of Operations because they relate to former facilities operated by the Company. The
Company monitors these matters on an ongoing basis and, on a quarterly basis, management reviews
the Company’s reserves and accruals, adjusting provisions as management deems necessary in view
of changes in available information. Changes in estimates of liability are reported in the periods
when they occur. Consequently, management believes that its 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,
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,
cash flows, or results of operations. See also Notes 3 and 8.
Revenue Recognition
Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales and
value added taxes. Catalog and internet sales are recorded at estimated time of delivery to the
customer and are net of estimated returns and exclude sales and value added taxes. Wholesale
revenue is recorded net of estimated returns and allowances for markdowns, damages and
miscellaneous claims when the related goods have been shipped and legal title has passed to the
customer. Shipping and handling costs charged to customers are included in net sales. Estimated
returns are based on historical returns and claims. Actual amounts of markdowns have not differed
materially from estimates. Actual returns and claims in any future period may differ from historical
experience.
52
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Income Taxes
As part of the process of preparing Consolidated Financial Statements, the Company is required to
estimate its income taxes in each of the tax jurisdictions in which it operates. This process involves
estimating actual current tax obligations together with assessing temporary differences resulting
from differing treatment of certain items for tax and accounting purposes, such as depreciation of
property and equipment and valuation of inventories. These temporary differences result in deferred
tax assets and liabilities, which are included within the Consolidated Balance Sheets. The Company
then assesses the likelihood that its deferred tax assets will be recovered from future taxable income.
Actual results could differ from this assessment if adequate taxable income is not generated in future
periods. To the extent the Company believes that recovery of an asset is at risk, valuation allowances
are established. To the extent valuation allowances are established or increased in a period, the
Company includes an expense within the tax provision in the Consolidated Statements of
Operations. These deferred tax valuation allowances may be released in future years when
management considers that it is more likely than not that some portion or all of the deferred tax
assets will be realized. In making such a determination, management will need to periodically
evaluate whether or not all available evidence, such as future taxable income and reversal of
temporary differences, tax planning strategies, and recent results of operations, provides sufficient
positive evidence to offset any potential negative evidence that may exist at such time. In the event
the deferred tax valuation allowance is released, the Company would record an income tax benefit
for the portion or all of the deferred tax valuation allowance released. At February 2, 2013, the
Company had a deferred tax valuation allowance of $3.5 million.
Income tax reserves for uncertain tax positions are determined using the methodology required by
the Income Tax Topic of the Accounting Standards Codification (“Codification”). This methodology
requires companies to assess each income tax position taken using a two step process. A
determination is first made as to whether it is more likely than not that the position will be sustained,
based upon the technical merits, upon examination by the taxing authorities. If the tax position is
expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the
largest amount that is greater than 50% likely to be realized upon ultimate settlement of the
respective tax position. Uncertain tax positions require determinations and estimated liabilities to be
made based on provisions of the tax law, which may be subject to change or varying interpretation.
If the Company’s determinations and estimates prove to be inaccurate, the resulting adjustments
could be material to its future financial results.
The Company recorded an effective income tax rate of 31.9% for Fiscal 2013 compared to 40.2%
for 2012. This year’s tax rate is lower primarily due to the reversal of charges previously recorded
related to uncertain tax positions due to the expiration of the applicable statutes of limitations and a
settlement with a state tax authority more favorable than anticipated related to other uncertain tax
positions. The Company recorded an effective federal income tax rate of 40.2% for Fiscal 2012
compared to 35.8% for Fiscal 2011. Fiscal 2012’s higher effective tax rate of 40.2% reflects
transaction costs and deferred purchase price related to the Schuh acquisition, which are considered
permanent differences. Fiscal 2011’s lower effective tax rate of 35.8% reflects the net reduction of
the Company’s liability for uncertain tax positions of $1.3 million in Fiscal 2011.
53
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Postretirement Benefits Plan Accounting
Full-time employees who had at least 1,000 hours of service in calendar year 2004, except
employees in the Lids Sports Group and Schuh Group segments, are covered by a defined benefit
pension plan. The Company froze the defined benefit pension plan effective January 1, 2005. The
Company also provides certain former employees with limited medical and life insurance benefits.
The Company funds at least the minimum amount required by the Employee Retirement Income
Security Act.
As required by the Compensation – Retirement Benefits Topic of the Codification, the Company is
required to recognize the overfunded or underfunded status of postretirement benefit plans as an
asset or liability in their Consolidated Balance Sheets and to recognize changes in that funded status
in accumulated other comprehensive loss, net of tax, in the year in which the changes occur.
The Company accounts for the defined benefit pension plans using the Compensation-Retirement
Benefits Topic of the Codification. As permitted under this topic, pension expense is recognized on
an accrual basis over employees’ approximate service periods. The calculation of pension expense
and the corresponding liability requires the use of a number of critical assumptions, including the
expected long-term rate of return on plan assets and the assumed discount rate, as well as the
recognition of actuarial gains and losses. Changes in these assumptions can result in different
expense and liability amounts, and future actual experience can differ from these assumptions.
Share-Based Compensation
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 Codification. For Fiscal 2013, 2012 and 2011, share-based compensation expense was $0, less
than $1,000 and $0.2 million, respectively. The Company has not issued any new stock option
awards since the first quarter of Fiscal 2008. For Fiscal 2013, 2012 and 2011, restricted stock
expense was $10.5 million, $7.7 million, and $7.8 million, respectively. 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. The benefits of tax deductions in excess of recognized compensation expense are reported as a
financing cash flow.
Cash and Cash Equivalents
Included in cash and cash equivalents at February 2, 2013 and January 28, 2012 are cash equivalents
of $0.2 million for each year. Cash equivalents are highly liquid financial instruments having an
original maturity of three months or less. At February 2, 2013, substantially all of the Company’s
domestic cash was invested in deposit accounts at FDIC-insured banks. The majority of payments
due from banks for domestic customer credit card transactions process within 24 - 48 hours and are
accordingly classified as cash and cash equivalents.
54
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
At February 2, 2013 and January 28, 2012, outstanding checks drawn on zero-balance accounts at
certain domestic banks exceeded book cash balances at those banks by approximately $36.1 million
and $39.0 million, respectively. These amounts are included in accounts payable.
Concentration of Credit Risk and Allowances on Accounts Receivable
The Company’s footwear wholesale businesses sell primarily to independent retailers and
department stores across the United States. Receivables arising from these sales are not
collateralized. Customer credit risk is affected by conditions or occurrences within the economy and
the retail industry as well as by customer specific factors. The Company’s Lids Team Sports
wholesale business sells primarily to colleges and high school athletic teams and their fan bases.
Including both footwear wholesale and Lids Team Sports wholesale business receivables, two
customers each accounted for 7% of the Company’s total trade receivables balance, while no other
customer accounted for more than 6% of the Company’s total trade receivables balance as of
February 2, 2013.
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.
Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized over the estimated useful
life of related assets. Depreciation and amortization expense are computed principally by the
straight-line method over the following estimated useful lives:
Buildings and building equipment
Computer hardware, software and equipment
Furniture and fixtures
20-45 years
3-10 years
10 years
Leases
Leasehold improvements and properties under capital leases are amortized on the straight-line
method over the shorter of their useful lives or their related lease terms and the charge to earnings is
included in selling and administrative expenses in the Consolidated Statements of Operations.
Certain leases include rent increases during the initial lease term. For these leases, the Company
recognizes the related rental expense on a straight-line basis over the term of the lease (which
includes any rent holidays and the pre-opening period of construction, renovation, fixturing and
merchandise placement) and records the difference between the amounts charged to operations and
amounts paid as deferred rent.
The Company occasionally receives reimbursements from landlords to be used towards construction
of the store the Company intends to lease. Leasehold improvements are recorded at their gross costs
including items reimbursed by landlords. The reimbursements are amortized as a reduction of rent
expense over the initial lease term.
55
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Goodwill and Other Intangibles
Under the provisions of the Intangibles – Goodwill and Other Topic of the Codification, goodwill
and intangible assets with indefinite lives are not amortized, but are tested at least annually, during
the fourth quarter, for impairment. The Company will update the tests between annual tests if events
or circumstances occur that would more likely than not reduce the fair value of the business
unit with which the goodwill is associated below its carrying amount. It is also required that
intangible assets with finite lives be amortized over their respective lives to their estimated residual
values, and reviewed for impairment in accordance with the Property, Plant and Equipment Topic of
the Codification.
Intangible assets of the Company with indefinite lives are primarily goodwill and identifiable
trademarks, net of amortization, acquired in connection with the acquisition of Schuh Group Ltd. in
June 2011 and Hat World Corporation in April 2004. The Consolidated Balance Sheets include
goodwill of $172.3 million for the Lids Sports Group, $100.7 million for the Schuh Group and $0.8
million for Licensed Brands at February 2, 2013 and $159.1 million for the Lids Sports Group,
$99.9 million for the Schuh Group and $0.8 million for Licensed Brands at January 28, 2012. The
Company tests for impairment of intangible assets with an indefinite life, relying on a number of
factors including operating results, business plans, projected future cash flows and observable
market data. The impairment test for identifiable assets not subject to amortization consists of a
comparison of the fair value of the intangible asset with its carrying amount. The Company has not
recorded an impairment charge for intangible assets.
In connection with acquisitions, the Company records goodwill on its Consolidated Financial
Statements. This asset is not amortized but is subject to an impairment test at least annually, based
on projected future cash flows from the acquired business discounted at a rate commensurate with
the risk the Company considers to be inherent in its current business model. The Company performs
the impairment test annually as of the close of its fiscal year, or more frequently if events or
circumstances indicate that the value of the asset might be impaired.
As a result of the various acquisitions comprising the Lids Team Sports team dealer business, the
Company carries goodwill at a value of $14.0 million on its Consolidated Balance Sheets related to
such acquisitions. The Company found that the result of its annual impairment test, which valued the
business at approximately $2.8 million in excess of its carrying value, indicated no impairment at
that time. The Company may determine in future impairment tests that some or all of the carrying
value of the goodwill may not be recoverable. Such a finding would require a write-off of the
amount of the carrying value that is impaired, which would reduce the Company’s profitability in
the period of the impairment charge. Holding all other assumptions constant as of the measurement
date, the Company noted that an increase in the weighted average cost of capital of 100 basis points
would reduce the fair value of the Lids Team Sports business by $7.4 million. Furthermore, the
Company noted that a decrease in projected annual revenue growth by one percent would reduce the
fair value of the Lids Team Sports business by $0.4 million. However, if other assumptions do not
remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount.
56
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Identifiable intangible assets of the Company with finite lives are trademarks, customer lists, in-
place leases, non-compete agreements and a vendor contract. They are subject to amortization based
upon their estimated useful lives. Finite-lived intangible assets are evaluated for impairment using a
process similar to that used to evaluate other definite-lived long-lived assets, a comparison of the
fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the
amount by which the carrying value exceeds the fair value of the asset.
Fair Value of Financial Instruments
The carrying amounts and fair values of the Company’s financial instruments at February 2, 2013 and
January 28, 2012 are:
In thousands
U.S. Revolver Borrowings
UK Term Loans
February 2,
2013
January 28,
2012
Carrying
Amount
27,700
22,982
Fair
Value
27,742
22,982
Carrying
Amount
5,000
35,704
$
Fair
Value
5,021
35,387
Debt fair values were determined using a discounted cash flow analysis based on current market
interest rates for similar types of financial instruments and would be classified in Level 2 as defined
in Note 5.
Carrying amounts reported on the Consolidated Balance Sheets for cash, cash equivalents,
receivables and accounts payable approximate fair value due to the short-term maturity of
these instruments.
Cost of Sales
For the Company’s retail operations, the cost of sales includes actual product cost, the cost of
transportation to the Company’s warehouses from suppliers and the cost of transportation from the
Company’s warehouses to the stores. Additionally, the cost of its distribution facilities allocated to
its retail operations is included in cost of sales.
For the Company’s wholesale operations, the cost of sales includes the actual product cost and the
cost of transportation to the Company’s warehouses from suppliers.
Selling and Administrative Expenses
Selling and administrative expenses include all operating costs of the Company excluding (i) those
related to the transportation of products from the supplier to the warehouse, (ii) for its retail
operations, those related to the transportation of products from the warehouse to the store and (iii)
costs of its distribution facilities which are allocated to its retail operations. Wholesale and
unallocated retail costs of distribution are included in selling and administrative expenses in the
amounts of $8.2 million, $9.2 million and $5.9 million for Fiscal 2013, 2012 and 2011, respectively.
57
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Gift Cards
The Company has a gift card program that began in calendar 1999 for its Lids Sports 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, $0.6 million and $0.7 million for Fiscal 2013, 2012 and 2011, respectively. The
Consolidated Balance Sheets include an accrued liability for gift cards of $13.1 million and $10.4
million at February 2, 2013 and January 28, 2012, respectively.
Buying, Merchandising and Occupancy Costs
The Company records buying, merchandising and occupancy costs in selling and administrative
expense. Because the Company does not include these costs in cost of sales, the Company’s gross
margin may not be comparable to other retailers that include these costs in the calculation of gross
margin.
Shipping and Handling Costs
Shipping and handling costs related to inventory purchased from suppliers are included in the cost of
inventory and are charged to cost of sales in the period that the inventory is sold. All other shipping
and handling costs are charged to cost of sales in the period incurred except for wholesale and
unallocated retail costs of distribution, which are included in selling and administrative expenses.
Preopening Costs
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.
Store Closings and Exit Costs
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 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. In Fiscal 2013, no store closings meeting the discontinued operations criteria have
been material individually or cumulatively.
58
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Assets related to planned store closures or other exit activities are reflected as assets held for sale
and recorded at the lower of carrying value or fair value less costs to sell when the required criteria,
as defined by the Property, Plant and Equipment Topic of the Codification, are satisfied.
Depreciation ceases on the date that the held for sale criteria are met.
Assets related to planned store closures or other exit activities that do not meet the criteria to be
classified as held for sale are evaluated for impairment in accordance with the Company’s normal
impairment policy, but with consideration given to revised estimates of future cash flows. In any
event, the remaining depreciable useful lives are evaluated and adjusted as necessary.
Exit costs related to anticipated lease termination costs, severance benefits and other expected
charges are accrued for and recognized in accordance with the Exit or Disposal Cost Obligations
Topic of the Codification.
Advertising Costs
Advertising costs are predominantly expensed as incurred. Advertising costs were $48.3 million,
$42.5 million and $35.1 million for Fiscal 2013, 2012 and 2011, respectively. Direct response
advertising costs for catalogs are capitalized in accordance with the Other Assets and Deferred Costs
Topic for Capitalized Advertising Costs of the Codification. Such costs are amortized over the
estimated future period as revenues are realized from such advertising, not to exceed six months.
The Consolidated Balance Sheets include prepaid assets for direct response advertising costs of $1.4
million and $1.1 million at February 2, 2013 and January 28, 2012.
Consideration to Resellers
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.
Cooperative Advertising
Cooperative advertising funds are made available to most of the Company’s wholesale footwear
customers. In order for retailers to receive reimbursement under such programs, the retailer must
meet specified advertising guidelines and provide appropriate documentation of expenses to be
reimbursed. The Company’s cooperative advertising agreements require that wholesale customers
present documentation or other evidence of specific advertisements or display materials used for the
Company’s products by submitting the actual print advertisements presented in catalogs, newspaper
inserts or other advertising circulars, or by permitting physical inspection of displays. Additionally,
the Company’s cooperative advertising agreements require that the amount of reimbursement
requested for such advertising or materials be supported by invoices or other evidence of the actual
costs incurred by the retailer.
59
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
The Company accounts for these cooperative advertising costs as selling and administrative
expenses, in accordance with the Revenue Recognition Topic for Customer Payments and Incentives
of the Codification.
Cooperative advertising costs recognized in selling and administrative expenses were $3.5 million,
$3.3 million and $3.2 million for Fiscal 2013, 2012 and 2011, respectively. During Fiscal 2013,
2012 and 2011, the Company’s cooperative advertising reimbursements paid did not exceed the fair
value of the benefits received under those agreements.
Vendor Allowances
From time to time, the Company negotiates allowances from its vendors for markdowns taken or
expected to be taken. These markdowns are typically negotiated on specific merchandise and for
specific amounts. These specific allowances are recognized as a reduction in cost of sales in the
period in which the markdowns are taken. Markdown allowances not attached to specific inventory
on hand or already sold are applied to concurrent or future purchases from each respective vendor.
The Company receives support from some of its vendors in the form of reimbursements for
cooperative advertising and catalog costs for the launch and promotion of certain products. The
reimbursements are agreed upon with vendors and represent specific, incremental, identifiable costs
incurred by the Company in selling the vendor’s specific products. Such costs and the related
reimbursements are accumulated and monitored on an individual vendor basis, pursuant to the
respective cooperative advertising agreements with vendors. Such cooperative advertising
reimbursements are recorded as a reduction of selling and administrative expenses in the same
period in which the associated expense is 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 $3.8 million, $3.0 million and $3.1 million for Fiscal 2013, 2012 and
2011, respectively. During Fiscal 2013, 2012 and 2011, the Company’s cooperative advertising
reimbursements received were not in excess of the costs incurred.
Environmental Costs
Environmental expenditures relating to current operations are expensed or capitalized as appropriate.
Expenditures relating to an existing condition caused by past operations, and which do not
contribute to current or future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable and the costs can be reasonably
estimated and are evaluated independently of any future claims for recovery. Generally, the timing
of these accruals coincides with completion of a feasibility study or the Company’s commitment to a
formal plan of action. Costs of future expenditures for environmental remediation obligations are not
discounted to their present value.
60
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Earnings Per Common Share
Basic earnings per share excludes dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution that could occur if securities to issue common stock
were exercised or converted to common stock (see Note 11).
Other Comprehensive Income
The Comprehensive Income Topic of the Codification requires, among other things, the Company’s
pension liability adjustment, postretirement liability adjustment, unrealized gains or losses on
foreign currency forward contracts and foreign currency translation adjustments to be included in
other comprehensive income net of tax. Accumulated other comprehensive loss at February 2, 2013
consisted of $26.0 million of cumulative pension liability adjustment, net of tax, a cumulative post
retirement liability adjustment of $0.3 million, net of tax, and a cumulative foreign currency
translation adjustment of $1.9 million.
Business Segments
The Segment Reporting Topic of the Codification requires that companies disclose “operating
segments” based on the way management disaggregates the Company’s operations for making
internal operating decisions (see Note 14).
Derivative Instruments and Hedging Activities
The Derivatives and Hedging Topic of the 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. In prior periods, the Company 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.
There were no such contracts outstanding at February 2, 2013 or January 28, 2012. For the year
ended February 2, 2013, the Company recorded an unrealized gain on foreign currency forward
contracts of less than $0.1 million in accumulated other comprehensive loss, before taxes. The
Company monitors the credit quality of the major international, national and regional financial
institutions with which it enters into such contracts.
61
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
New Accounting Principles
In June 2011, FASB issued Accounting Standards Update No. 2011-05, an update to the FASB
Codification Comprehensive Income Topic, which amends the existing accounting standards related
to the presentation of comprehensive income in a company’s financial statements. This update
requires that all non-owner changes in shareholders’ equity be presented in either a single
continuous statement of comprehensive income or in two separate but consecutive statements. In the
two statement approach, the first statement would present total net earnings and its components
followed consecutively by a second statement that should present total other comprehensive income,
the components of other comprehensive income and the total of comprehensive income. The update
does not change the items that must be reported in other comprehensive income and must be applied
retrospectively for all periods presented in the Consolidated Financial Statements. The Company
adopted this update in the first quarter of Fiscal 2013 and has included a separate statement of
comprehensive income in its Consolidated Financial Statements. The adoption did not have a
significant impact on the Company’s results of operations or financial position.
Note 2
Acquisitions and Intangible Assets
Schuh Acquisition
On June 23, 2011, the Company, through its newly-formed, wholly-owned subsidiary Genesco
(UK) Limited (“Genesco UK”), completed the acquisition of all the outstanding shares of Schuh
Group Ltd. (“Schuh”) for a total purchase price of approximately £100.0 million, less £29.5 million
outstanding under existing Schuh credit facilities, which remain in place, less a £1.9 million
working capital adjustment and plus £6.2 million net cash acquired, with £5.0 million withheld and
payable in June 2013. The Company financed the acquisition with borrowings under its existing
credit facility and the balance from cash on hand. The purchase agreement also provides for
deferred purchase price payments totaling £25 million, payable £15 million and £10 million on the
third and fourth anniversaries of the closing, respectively, subject to the payees’ not having
terminated their employment with Schuh under certain specified circumstances. This amount will
be recorded as compensation expense and not reported as a component of the cost of the
acquisition.
Headquartered in Scotland, Schuh is a specialty retailer of casual and athletic footwear sold through
79 retail stores in the United Kingdom and the Republic of Ireland and 13 concessions in Republic
apparel stores as of February 2, 2013. The Company completed the acquisition in order to enhance
its strategic development and prospects for growth and provide the Company with an established
retail presence in the United Kingdom and improved insight into global fashion trends. The results
of Schuh’s operations for Fiscal 2013 include net sales of $370.5 million and operating earnings of
$7.9 million. The results of Schuh’s operations for the fiscal year from the date of acquisition
through January 28, 2012, including net sales of $212.3 million and operating earnings of $11.7
million, have been included in the Company’s Consolidated Financial Statements for the fiscal year
ended January 28, 2012. During the fiscal year ended January 28, 2012, the Company expensed
$7.4 million in costs related to the acquisition. These costs were recorded as selling and
62
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 2
Acquisitions and Intangible Assets, Continued
administrative expenses on the Consolidated Statement of Operations. During Fiscal 2013,
compensation expense related to the Schuh acquisition deferred purchase price obligation was
$12.1 million, compared to $7.2 million in Fiscal 2012. This expense is included in the operating
earnings for the Schuh Group segment.
The acquisition has been accounted for using the purchase method in accordance with the Business
Combinations Topic of the Codification. Accordingly, the total purchase price has been allocated to
the assets acquired and liabilities assumed based on their estimated fair values at acquisition as
follows (amounts in thousands):
At June 23, 2011
Cash
Accounts receivable
Inventories
Other current assets
Property and equipment
Other non-current assets
Deferred taxes
Trademarks
Other intangibles
Goodwill
Accounts payable
Other current liabilities
Long-term debt (includes current portion)
Other non-current liabilities
Net Assets Acquired
$
$
24,836
4,673
32,179
7,565
30,314
6,977
4,197
27,224
4,995
102,907
(16,196)
(24,718)
(62,562)
(26,637)
115,754
The trademarks acquired include the concept names and are deemed to have an indefinite life.
Other intangibles include a $1.7 million customer list, a $2.5 million asset to reflect the adjustment
of acquired leases to market and a vendor contract of $0.8 million. The weighted average
amortization period for the asset to adjust acquired leases to market is 2.7 years. The weighted
average amortization period for customer lists is 4.6 years.
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized
and represents the future economic benefits arising from other assets acquired that could not be
individually identified and separately recognized. Specifically, the goodwill recorded as part of the
acquisition of Schuh includes the expected purchasing synergies and other benefits that result from
combining the Schuh business with the Company, improved insight into global fashion trends, any
intangible assets that do not qualify for separate recognition and an acquired assembled workforce.
The goodwill related to the Schuh acquisition is not deductible for tax purposes.
63
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 2
Acquisitions and Intangible Assets, Continued
The following pro forma information presents the results of operations of the Company as if the
Schuh acquisition had taken place at the beginning of Fiscal 2011 or January 31, 2010. Pro forma
adjustments have been made to reflect additional interest expense from the $89.0 million in debt
associated with the acquisition, interest expense on the acquired debt, amortization of intangible
assets and the related income tax effects. Pro forma earnings for the twelve months ended January
28, 2012 have been adjusted to exclude $7.4 million of costs related to the acquisition.
In thousands, except per share data
Net sales
Earnings from continuing operations
Earnings per share:
Basic
Diluted
$
$
$
Twelve Months Ended
-
Pro forma
January 28, 2012
2,384,267
86,378
Twelve Months Ended
-
Pro forma
January 29, 2011
2,045,473
57,897
3.71
3.62
$
$
2.49
2.44
The pro forma results have been prepared for comparative purposes only and do not purport to be
indicative of the results of operations that would have occurred had the Schuh acquisition occurred
at the beginning of Fiscal 2011.
Intangible Assets
Other intangibles by major classes were as follows:
In thousands
Gross other intangibles
Accumulated amortization
Net Other Intangibles
Leases
Feb. 2,
2013
Jan. 28,
2012
Customer Lists
Feb. 2,
2013
Jan. 28,
2012
$ 12,584 $ 12,390 $ 14,116 $ 14,062 $
(10,800)
$
1,784 $
(9,477)
2,913 $
(5,312)
8,804 $ 10,770 $
(3,292)
Other*
Total
Feb. 2,
2013
2,118 $
(1,108)
1,010 $
Jan. 28,
2012
Feb. 2,
2013
Jan. 28,
2012
2,001 $ 28,818 $ 28,453
(17,220)
(876)
(13,645)
1,125 $ 11,598 $ 14,808
*Includes non-compete agreements, vendor contract and backlog.
The amortization of intangibles, including trademarks, was $3.4 million, $3.2 million and $2.1
million for Fiscal 2013, 2012 and 2011, respectively. The amortization of intangibles, including
trademarks, will be $3.2 million, $2.8 million, $2.0 million, $1.6 million and $1.0 million for Fiscal
2014, 2015, 2016, 2017 and 2018, respectively.
64
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 3
Asset Impairments and Other Charges and Discontinued Operations
Asset Impairments and Other Charges
In accordance with Company policy, assets are determined to be impaired when the revised
estimated future cash flows are insufficient to recover the carrying costs. Impairment charges
represent the excess of the carrying value over the fair value of those assets.
Asset impairment charges are reflected as a reduction of the net carrying value of property and
equipment, and in asset impairment and other, net in the accompanying Consolidated Statements
of Operations.
The Company recorded a pretax charge to earnings of $17.0 million in Fiscal 2013, including $15.6
million for network intrusion expenses, $1.4 million for retail store asset impairments, and $0.1
million for other legal matters.
The Company recorded a pretax charge to earnings of $2.7 million in Fiscal 2012, including $1.1
million for retail store asset impairments, $0.9 million for other legal matters and $0.7 million for
network intrusion expenses.
The Company recorded a pretax charge to earnings of $8.6 million in Fiscal 2011, including $7.2
million for retail store asset impairments, $1.3 million for network intrusion expenses and $0.1
million for other legal matters.
Discontinued Operations
In Fiscal 2013, the Company recorded an additional charge to earnings of $0.8 million ($0.5 million
net of tax) reflected in discontinued operations, primarily for anticipated costs of environmental
remedial alternatives related to former facilities operated by the Company (see Note 13).
In Fiscal 2012, the Company recorded an additional charge to earnings of $1.7 million ($1.0 million
net of tax) reflected in discontinued operations, including $1.8 million primarily for anticipated costs
of environmental remedial alternatives related to former facilities operated by the Company, offset
by a $0.1 million gain for excess provisions to prior discontinued operations (see Note 13).
In Fiscal 2011, the Company recorded an additional charge to earnings of $2.2 million ($1.3 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 $0.7 million gain for excess provisions to prior discontinued operations (see Note 13).
65
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 3
Asset Impairments and Other Charges and Discontinued Operations, Continued
Accrued Provision for Discontinued Operations
In thousands
Balance January 29, 2011
Additional provision Fiscal 2012
Charges and adjustments, net
Balance January 28, 2012
Additional provision Fiscal 2013
Charges and adjustments, net
Balance February 2, 2013*
Current provision for discontinued operations
Total Noncurrent Provision for Discontinued Operations
Facility
Shutdown
Costs
15,035
1,692
(4,210)
12,517
796
(1,962)
11,351
7,192
4,159
$
$
*Includes a $11.9 million environmental provision, including $7.7 million in current provision for
discontinued operations.
Note 4
Inventories
In thousands
Raw materials
Wholesale finished goods
Retail merchandise
Total Inventories
February 2,
2013
$
$
24,223
57,161
423,960
January 28,
2012
30,636
53,453
351,024
$
505,344
$
435,113
66
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 5
Fair Value
The Fair Value Measurements and Disclosures Topic of the Codification defines fair value,
establishes a framework for measuring fair value in accordance with generally accepted accounting
principles and expands disclosures about fair value measurements. This Topic defines fair value as
the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. It also establishes a fair value hierarchy, which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. The standard describes three levels of inputs that may be used to
measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest
level input that is significant to the fair value measurement.
The following table presents the Company’s assets and liabilities measured at fair value on a
nonrecurring basis as of February 2, 2013 aggregated by the level in the fair value hierarchy within
which those measurements fall (in thousands):
Long-Lived
Assets
Held and Used
Measured as of April 28, 2012
Measured as of July 28, 2012
Measured as of October 27, 2012
Measured as of February 2, 2013
$
$
$
$
47
$
54
$
211
$
131
$
Level 1
—
$
Level 2
—
$
Level 3
47
$
Impairment
Charges
46
—
$
—
$
—
$
—
$
—
$
—
$
54
$
211
$
131
$
391
283
676
In accordance with the Property, Plant and Equipment Topic of the Codification, the Company
recorded $1.4 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 February 2,
2013. These charges are reflected in asset impairments and other, net on the Consolidated
Statements of Operations.
The Company used a discounted cash flow model to estimate the fair value of these long-lived
assets. Discount rate and growth rate assumptions are derived from current economic conditions,
expectations of management and projected trends of current operating results. As a result, the
Company has determined that the majority of the inputs used to value its long-lived assets held and
used are unobservable inputs that fall within Level 3 of the fair value hierarchy.
67
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Long-Term Debt
In thousands
Revolver borrowings
UK term loans
Total long-term debt
Current portion
Total Noncurrent Portion of Long-Term Debt
February 2,
2013
January 28,
2012
$
$
27,700
22,982
50,682
5,675
45,007
$
$
5,000
35,704
40,704
8,773
31,931
Long-term debt maturing during each of the next five years ending in January each year is $5.7
million, $5.5 million, $39.5 million, $0.0 million and $0.0 million.
The Company had $27.7 million revolver borrowings outstanding under the Credit Facility at
February 2, 2013 and $23.0 million in term loans outstanding under the U.K. Credit Facilities
(described below) at February 2, 2013. The Company had outstanding letters of credit of $12.3
million under the Credit Facility at February 2, 2013. These letters of credit support product
purchases and lease and insurance indemnifications.
Credit Facility:
On June 23, 2011, the Company entered into a First Amendment (the “Amendment”) to the Second
Amended and Restated Credit Agreement (the “Credit Facility”) dated January 21, 2011 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 and collateral agent. The
Amendment raised the aggregate principal amount on the credit facility to $375.0 million from
$300.0 million. The Credit Facility was amended to permit the Schuh acquisition (see Note 2). The
Credit Facility expires January 21, 2016.
Deferred financing costs incurred of $3.0 million related to the Credit Facility were capitalized and
are being amortized over five years. Deferred financing costs incurred of $0.7 million related to the
Amendment were also capitalized and are being amortized over five years. These costs are included
in other non-current assets on the Consolidated Balance Sheets.
The material terms of the Credit Facility, as amended, are as follows:
Availability
The amended Credit Facility is a revolving credit facility in the aggregate principal amount of
$375.0 million, with a $40.0 million swing line loan sublimit, a $70.0 million sublimit for the
issuance of standby letters of credit and a Canadian sub-facility of up to $8.0 million. The Company
canceled its Tranche A-1 sublimit of up to $30.0 million as of December 27, 2011. The facility has a
five-year term. Any swing line loans and any letters of credit and borrowings under the Canadian
facility 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 $75.0
million subject to, among other things, the receipt of commitments for the increased amount.
68
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Long-Term Debt, Continued
The aggregate amount of the loans made and letters of credit issued under the Credit Facility shall at
no time exceed the lesser of the facility amount ($375.0 million or, if increased at the Company’s
option, subject to the receipt of commitments for the increased amount, up to $450.0 million) or the
“Borrowing Base”, which generally is based on 90% of eligible inventory plus 85% of eligible
wholesale receivables (50% of eligible wholesale receivables of the Lids Team Sports business) plus
90% of eligible credit card and debit card receivables less applicable reserves.
Collateral
The loans and other obligations under the Credit Facility are secured by a perfected first priority lien
and security interest in all tangible and intangible assets and excludes real estate and leaseholds of
the Company and certain subsidiaries of the Company. In addition, with the amendment to the
Credit Facility, the Company pledged 65% of its interest in Genesco (UK) Limited.
Interest and Fees
The Company’s borrowings under the Credit Facility bear interest at varying rates that, at the
Company’s option, can be based on:
Domestic Facility
(a) LIBOR plus the applicable margin (as defined and based on average Excess Availability during
the prior quarter) or (b) the applicable margin plus the higher of (i) the Bank of America prime rate,
(ii) the federal funds rate plus 0.50% or (iii) LIBOR for an interest period of thirty days plus 1.0%.
The initial applicable margin for base rate loans and U.S. Index rate loans is 1.25% and the initial
applicable margin for LIBOR loans and BA (defined below) equivalent loans is 2.25%. Thereafter,
the applicable margin will be subject to adjustment based on “Excess Availability” for the prior
quarter. The term “Excess Availability” means, as of any given date, the excess (if any) of the Loan
Cap (being the lesser of the total commitments and the Borrowing Base) over the outstanding credit
extensions under the Credit Facility.
Interest on the Company’s borrowings is payable monthly in arrears for base rate loans and U.S.
Index rate loans and at the end of each interest rate period (but not less often than quarterly) for
LIBOR loans and BA equivalent loans.
The Company is also required to pay a commitment fee on the actual daily unused portions of the
Credit Facility at a rate of (i) 0.50% per annum if less than 50% of the Credit Facility has been
utilized on average during the immediately preceding fiscal quarter or (ii) 0.375% per annum if 50%
or more of the Credit Facility has been utilized during such fiscal quarter.
Canadian Sub-Facility
(a) For loans made in Canadian dollars, the bankers’ acceptances (“BA”) rate plus the applicable
margin or (b) the Canadian Prime Rate (defined as the highest of the (i) Bank of America Canadian
Prime Rate, (ii) 0.50% plus the Bank of America (Canadian) overnight rate, and (iii) 1.0% plus the
69
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Long-Term Debt, Continued
BA rate for a 30 day interest period) plus the applicable margin for loans made in U.S. dollars,
LIBOR plus the applicable margin or the U.S. Index Rate (defined as the highest of the (i) Bank of
America (Canada branch) U.S. dollar base rate, (ii) the Federal Funds rate plus 0.50%, and
(iii) LIBOR for an interest period of thirty days plus 1.0%) plus the applicable margin.
Certain Covenants
The Company is not required to comply with any financial covenants unless Excess Availability is
less than the greater of $27.5 million or 12.5% of the Loan Cap. If and during such time as Excess
Availability is less than the greater of $27.5 million or 12.5% of the Loan Cap, the Credit Facility
requires the Company to meet a minimum fixed charge coverage ratio of (a) an amount equal to
consolidated EBITDA less capital expenditures and taxes paid in cash, in each case for such period,
to (b) fixed charges for such period, of not less than 1.0:1.0. Excess Availability was $292.8 million
at February 2, 2013. Because Excess Availability exceeded $27.5 million or 12.5% of the Loan Cap,
the Company was not required to comply with this financial covenant at February 2, 2013.
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. The Credit Facility, as amended, permits the Company to incur up to $250.0
million of senior debt provided that certain terms and conditions are met.
Cash Dominion
The Credit Facility also contains cash dominion provisions that apply in the event that the
Company’s Excess Availability is less than the greater of $35.0 million or 15% of the Loan Cap or
there is an event of default under the Credit Facility.
Events of Default
The Credit Facility contains customary events of default, including, without limitation, payment
defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain
other material indebtedness in excess of specified amounts and to agreements which would have a
material adverse effect if breached, certain events of bankruptcy and insolvency, certain ERISA
events, judgments in excess of specified amounts and change in control.
Certain of the lenders under the Credit Facility or their affiliates have provided, and may in the
future provide, certain commercial banking, financial advisory, and investment banking services in
the ordinary course of business for the Company, its subsidiaries and certain of its affiliates, for
which they receive customary fees and commissions.
U.K. Credit Facility
In connection with the Schuh acquisition, Schuh entered into an amended and restated Senior Term
Facilities Agreement and Working Capital Facility Letter, (collectively, the “UK Credit Facilities”)
70
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Long-Term Debt, Continued
which provide for term loans of up to £29.5 million (a £15.5 million A term loan and £14.0 million B
term loan) and a working capital facility of £5.0 million. The Working Capital Facility Letter was
allowed to lapse in June 2012. The A term loan bears interest at LIBOR plus 2.50% per annum. The
B term loan bears interest at LIBOR plus 3.75% per annum. The Company is not required to make
any payments on the B term loan until it expires October 31, 2015, unless the Company’s Schuh
Group segment has Excess Cash Flow (as defined in the UK Credit Facilities). The Company paid
£4.8 million and £4.5 million on the B term loan in Fiscal 2013 and 2012, respectively.
The UK Credit Facilities contains certain covenants at the Schuh level including a minimum interest
coverage covenant initially set at 4.25x and increasing to 4.50x in January 2012 and thereafter, a
maximum leverage covenant initially set at 2.75x declining over time at various rates to 2.25x
beginning in July 2012 and a minimum cash flow coverage of 1.10x. The Company was in
compliance with all the covenants at February 2, 2013. The UK Credit Facilities are secured by a
pledge of all the assets of Schuh and its subsidiaries.
71
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 7
Commitments Under Long-Term Leases
Operating Leases
The Company leases its office space and all of its retail store locations and transportation equipment
under various noncancelable operating leases. The leases have varying terms and expire at various
dates through 2030. The store leases in the United States, Puerto Rico and Canada typically have
initial terms of between 5 and 10 years. The stores leases in the United Kingdom and the Republic of
Ireland typically have initial terms of between 10 and 20 years. Generally, most of the leases require
the Company to pay taxes, insurance, maintenance costs and contingent rentals based on sales.
Approximately 4% 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
$
2013
215,516
14,786
$
2012
192,175
12,918
$
(667)
(686)
2011
167,558
5,827
(642)
$
229,635
$
204,407
$
172,743
Minimum rental commitments payable in future years are:
Fiscal Years
2014
2015
2016
2017
2018
Later years
Total Minimum Rental Commitments
In thousands
223,495
210,019
191,642
159,488
127,982
342,534
1,255,160
$
$
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 recorded as deferred rent and amortized as a reduction of rent expense over the
initial lease term. Tenant allowances of $20.0 million and $17.6 million for Fiscal 2013 and 2012,
respectively, and deferred rent of $37.9 million and $35.2 million for Fiscal 2013 and 2012,
respectively, are included in deferred rent and other long-term liabilities on the Consolidated
Balance Sheets.
72
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity
Non-Redeemable Preferred Stock
Class (In order of
preference)*
Subordinated Serial
Preferred
(Cumulative)
Aggregate
Number of Shares
Amounts in Thousands
Shares
Authorized
2013
2012
2011
2013
2012
2011
Common
Convertible
Ratio
No. of
Votes
per
share
3,000,000 **
—
—
—
—
—
—
N/A
N/A
$2.30 Series 1
64,368
16,203
30,368
33,497
$ 648
$
1,215
$ 1,340
$4.75 Series 3
40,449
7,398 11,643 12,163
740
1,164
1,216
$4.75 Series 4
53,764
3,247
3,397
3,579
325
800,000
—
—
—
—
340
—
358
—
5,000,000
30,067 30,067 30,067
902
56,915 75,475 79,306 2,615
902
3,621
902
3,816
.83
2.11
1.52
1
2
1
100
1
5,000,000
46,852 47,922 49,192 1,405
1,437
1,476
1.00 ***
1
4,020
5,058
5,292
(96)
(101 )
(109)
$ 3,924
$ 4,957
$ 5,183
Series 6
$1.50 Subordinated
Cumulative
Preferred
Employees’
Subordinated
Convertible
Preferred
Stated Value of
Issued Shares
Employees’
Preferred Stock
Purchase Accounts
Total Non-
Redeemable
Preferred Stock
*
**
In order of preference for liquidation and dividends.
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.
73
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity, Continued
Preferred Stock Transactions
In thousands
Balance January 30, 2010
Other
Balance January 29, 2011
Other
Balance January 28, 2012
Other
Balance February 2, 2013
Non-Redeemable
Preferred Stock
3,833
$
Non-Redeemable
Employees’
Preferred Stock
1,510
$
$
(17)
3,816
(195)
3,621
(1,006)
2,615
$
(34)
1,476
(39)
1,437
(32)
1,405
$
$
Subordinated Serial Preferred Stock (Cumulative):
Employees’
Preferred
Stock
Purchase
Accounts
Total
Non-Redeemable
Preferred Stock
5,220
(37)
5,183
(226)
4,957
(1,033)
3,924
(123) $
14
(109)
8
(101)
5
(96) $
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 March 2020, are redeemable under certain circumstances for
$.01 per right and are subject to exchange for one share of common stock or an equivalent amount of
preferred stock at any time after the event which makes the rights exercisable and before a majority
of the Company’s common stock is acquired.
$1.50 Subordinated Cumulative Preferred Stock:
Stated and liquidation values and redemption price 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.
Employees’ Subordinated Convertible Preferred Stock:
Stated and liquidation values are 88 times the average quarterly per share dividend paid on common
stock for the previous eight quarters (if any), but in no event less than $30 per share.
74
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity, Continued
Common Stock:
Common stock- $1 par value. Authorized: 80,000,000 shares; issued: February 2, 2013 – 24,484,915
shares; January 28, 2012 –24,757,826 shares. There were 488,464 shares held in treasury at February
2, 2013 and January 28, 2012. Each outstanding share is entitled to one vote. At February 2, 2013,
common shares were reserved as follows: 80,848 shares for conversion of preferred stock; 186,835
shares for the 1996 Stock Incentive Plan; 76,320 shares for the 2005 Stock Incentive Plan; 1,585,443
shares for the 2009 Amended and Restated Stock Incentive Plan; and 313,438 shares for the Genesco
Employee Stock Purchase Plan.
For the year ended February 2, 2013, 223,618 shares of common stock were issued for the exercise
of stock options at an average weighted exercise price of $21.50, for a total of $4.8 million; 194,232
shares of common stock were issued as restricted shares as part of the 2009 Amended and Restated
Equity Incentive Plan; 2,463 shares of common stock were issued for the purchase of shares under
the Employee Stock Purchase Plan at an average weighted market price of $63.84, for a total of $0.2
million; 10,224 shares were issued to directors for no consideration; 75,552 shares were withheld for
taxes on restricted stock vested in Fiscal 2013; 4,020 shares of restricted stock were forfeited in
Fiscal 2013; and 22,028 shares were issued in miscellaneous conversions of Series 1, 3, 4 and
Employees’ Subordinated Convertible Preferred Stock. The 223,618 options exercised were all fixed
stock options (see Note 12). In addition, the Company repurchased and retired 645,904 shares of
common stock at an average weighted market price of $58.29 for a total of $37.6 million.
For the year ended January 28, 2012, 390,357 shares of common stock were issued for the exercise
of stock options at an average weighted exercise price of $24.82, for a total of $9.7 million; 289,407
shares of common stock were issued as restricted shares as part of the 2009 Amended and Restated
Equity Incentive Plan; 2,717 shares of common stock were issued for the purchase of shares under
the Employee Stock Purchase Plan at an average weighted market price of $48.95, for a total of $0.1
million; 14,643 shares were issued to directors for no consideration; 93,089 shares were withheld for
taxes on restricted stock vested in Fiscal 2012; 14,081 shares of restricted stock were forfeited in
Fiscal 2012; and 5,238 shares were issued in miscellaneous conversions of Series 1, 3, 4 and
Employees’ Subordinated Convertible Preferred Stock. The 390,357 options exercised were all fixed
stock options (see Note 12).
For the year ended January 29, 2011, 118,450 shares of common stock were issued for the exercise
of stock options at an average weighted exercise price of $18.77, for a total of $2.2 million; 404,995
shares of common stock were issued as restricted shares as part of the 2009 Equity Incentive Plan;
4,230 shares of common stock were issued for the purchase of shares under the Employee Stock
Purchase Plan at an average weighted market price of $28.39, for a total of $0.1 million; 17,838
shares were issued to directors for no consideration; 81,731 shares were withheld for taxes on
restricted stock vested in Fiscal 2011; 1,575 shares of restricted stock were forfeited in Fiscal 2011;
and 1,501 shares were issued in miscellaneous conversions of Series 3 and Employees’ Subordinated
Convertible Preferred Stock. The 118,450 options exercised were all fixed stock options (see Note
12). In addition, the Company repurchased and retired 863,767 shares of common stock at an
average weighted market price of $28.74 for a total of $24.8 million.
75
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity, Continued
Restrictions on Dividends and Redemptions of Capital Stock:
The Company’s charter provides that no dividends may be paid and no shares of capital stock
acquired for value if there are dividend or redemption arrearages on any senior or equally ranked
stock. Exchanges of subordinated serial preferred stock for common stock or other stock junior to
such exchanged stock are permitted.
The Company’s Credit Facility prohibits the payment of dividends and other restricted payments
unless as of the date of the making of any Restricted Payment or consummation of any Acquisition,
(a) no Default or Event of Default exists or would arise after giving effect to such Restricted
Payment or Acquisition, and (b) either (i) the Borrowers have pro forma projected Excess
Availability for the following six month period equal to or greater than 50% of the Loan Cap, after
giving pro forma effect to such Restricted Payment or Acquisition, or (ii) (A) the Borrowers have
pro forma projected Excess Availability for the following six month period of less than 50% of the
Loan Cap but equal to or greater than 20% of the Loan Cap, after giving pro forma effect to the
Restricted Payment or Acquisition, and (B) the Fixed Charge Coverage Ratio, on a pro-forma basis
for the twelve months preceding such Restricted Payment or Acquisition, will be equal to or greater
than 1.0:1.0and (c) after giving effect to such Restricted Payment or Acquisition, the Borrowers are
Solvent. The Company’s management does not expect availability under the Credit Facility to fall
below the requirements listed above during Fiscal 2014. The Company’s UK Credit Facility
prohibits the payment of any dividends by Schuh or its subsidiaries to the Company.
Dividends declared for Fiscal 2013 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 $0.1 million in the aggregate.
76
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity, Continued
Changes in the Shares of the Company’s Capital Stock
Issued at January 30, 2010
Exercise of options
Issue restricted stock
Issue shares—Employee Stock Purchase Plan
Shares repurchased
Other
Issued at January 29, 2011
Exercise of options
Issue restricted stock
Issue shares—Employee Stock Purchase Plan
Other
Issued at January 28, 2012
Exercise of options
Issue restricted stock
Issue shares—Employee Stock Purchase Plan
Shares repurchased
Other
Issued at February 2, 2013
Less shares repurchased and held in treasury
Outstanding at February 2, 2013
Common
Stock
24,562,693
118,450
422,833
4,230
(863,767)
(81,805)
24,162,634
390,357
304,050
2,717
(101,932)
24,757,826
223,618
204,456
2,463
(645,904)
(57,544)
24,484,915
488,464
23,996,451
Non-
Redeemable
Preferred
Stock
Employees’
Preferred
Stock
79,469
0
0
0
0
(163)
79,306
0
0
0
(3,831)
75,475
0
0
0
0
(18,560)
56,915
0
56,915
50,350
0
0
0
0
(1,158)
49,192
0
0
0
(1,270)
47,922
0
0
0
0
(1,070)
46,852
0
46,852
77
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Income Taxes
Income tax expense from continuing operations is comprised of the following:
In thousands
Current
U.S. federal
International
State
Total Current Income Tax Expense
Deferred
U.S. federal
International
State
Total Deferred Income Tax Expense (Benefit)
Total Income Tax Expense – Continuing Operations
2013
2012
2011
$
$
$
50,859
10,072
8,841
69,772
(7,445)
(7,148)
(3,238)
(17,831)
51,941
$
$
42,103
2,007
8,952
53,062
(175)
4,370
(1,463)
2,732
55,794
$
35,103
1,474
5,703
42,280
(8,165)
—
(3,701)
(11,866)
30,414
Discontinued operations were recorded net of income tax benefit of approximately $(0.3) million,
$(0.7) million and $(0.9) million in Fiscal 2013, 2012 and 2011, respectively.
As a result of the exercise of stock options and vesting of restricted stock during Fiscal 2013, 2012
and 2011, the Company realized an additional income tax benefit of approximately $4.8 million,
$4.6 million and $1.3 million, respectively. These tax benefits are reflected as an adjustment to
additional paid-in capital.
78
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Income Taxes, Continued
Deferred tax assets and liabilities are comprised of the following:
In thousands
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
Gross deferred tax assets
Deferred tax asset valuation allowance
Deferred tax asset net of valuation allowance
Net Deferred Tax Assets
February 2,
2013
(28,076) $
(2,943)
(3,001)
(34,020)
965
5,847
8,321
24,483
12,539
13,783
4,745
2,015
3,535
1,598
6,382
3,500
87,713
(3,541)
84,172
50,152
$
$
$
January 28,
2012
(28,125)
(2,814)
(3,001)
(33,940)
1,289
7,043
8,936
17,146
9,893
11,756
5,201
2,397
8,306
1,641
5,174
5,460
84,242
(3,790)
80,452
46,512
The deferred tax balances have been classified in the Consolidated Balance Sheets as follows:
Net current asset
Net non-current asset
Net non-current liability
Net Deferred Tax Assets
2013
2012
$
23,725
26,448
(21)
50,152
$
22,541
28,152
(4,181)
46,512
$
$
79
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Income Taxes, Continued
Reconciliation of the United States federal statutory rate to the Company’s effective tax rate from
continuing operations is as follows:
U. S. federal statutory rate of tax
State taxes (net of federal tax benefit)
Foreign rate differential
Change in valuation allowance
Permanent items
Uncertain tax positions
Other
Effective Tax Rate
2013
35.00%
3.17
(1.78)
(0.17)
2.00
(5.80)
(0.54)
31.88%
2012
2011
35.00%
3.53
(1.92)
0.71
2.35
—
0.53
40.20%
35.00%
2.59
—
—
(0.83)
(1.56)
0.60
35.80%
The provision for income taxes resulted in an effective tax rate for continuing operations of 31.88%
for Fiscal 2013, compared with an effective tax rate of 40.20% for Fiscal 2012. The decrease in the
effective tax rate for Fiscal 2013 was primarily attributable to the reversal of charges previously
recorded related to uncertain tax positions due to the expiration of the applicable statutes of
limitations and a settlement with a state tax authority more favorable than anticipated related to other
uncertain tax positions.
As of February 2, 2013 and January 28, 2012, the Company had a federal net operating loss
carryforward, which was assumed in one of the prior year acquisitions, of $1.5 million and $1.6
million, respectively, which expire in fiscal years 2025 through 2030.
As of February 2, 2013, January 28, 2012 and January 29, 2011, the Company had state net
operating loss carryforwards of $0.1 million, $0.1 million and $0.4 million, respectively, which
expire in fiscal years 2016 through 2031.
As of February 2, 2013, January 28, 2012 and January 29, 2011, the Company had state tax credits
of $0.9 million, $0.6 million and $0.5 million, respectively. These credits expire in fiscal years 2014
through 2019.
As of February 2, 2013, January 28, 2012 and January 29, 2011, the Company had foreign tax
credits of $0.0 million, $0.1 million and $0.3 million, respectively. These credits will expire in fiscal
year 2022.
As of February 2, 2013 and January 28, 2012, the Company had foreign net operating losses of $2.4
million and $7.2 million, respectively, which have no expiration.
As of February 2, 2013, as part of the Schuh acquisition, the Company has provided a valuation
allowance of approximately $3.5 million on deferred tax assets associated primarily with foreign
net operating losses and foreign fixed assets for which management has determined it is more likely
80
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Income Taxes, Continued
than not that the deferred tax assets will not be realized. The $0.3 million net decrease in the
valuation allowance during Fiscal 2013 from the $3.8 million provided for as of January 28, 2012
determined in accordance with the Income Tax Topic of the Codification relate to foreign net
operating losses arising in Fiscal 2012 and increases in fixed asset-related deferred tax assets that
will more likely than not never be realized. Management believes that it is more likely than not that
the remaining deferred tax assets will be fully realized.
As of February 2, 2013, the Company has not provided for withholding or United States federal
income taxes on approximately $26.0 million of accumulated undistributed earnings of its foreign
subsidiaries as they are considered by management to be permanently reinvested. If these
undistributed earnings were not considered to be permanently reinvested, the related U.S. tax
liability may be reduced by foreign income taxes paid on those earnings. Because of the
complexities involved with the hypothetical tax calculation, a determination of the unrecognized
deferred tax liability related to these undistributed earnings is not practicable.
The methodology in the Income Tax Topic of the Codification prescribes that a company should use
a more-likely-than-not recognition threshold based on the technical merits of the tax position taken.
Tax positions that meet the more-likely-than-not recognition threshold should be measured in order
to determine the tax benefit to be recognized in the financial statements.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for Fiscal
2013, 2012 and 2011.
In thousands
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 Statutes of Limitations
Unrecognized Tax Benefit – End of Period
$
$
2013
2012
2011
$
20,467
(2,464)
133
(449)
(7,250)
10,437
$
14,167
$
(29)
6,986
(533)
(124)
20,467
$
17,004
(517)
473
(2,605)
(188)
14,167
Unrecognized tax benefits were approximately $10.4 million, $20.5 million and $14.2 million as of
February 2, 2013, January 28, 2012 and January 29, 2011, respectively. The amount of unrecognized
tax benefits as of February 2, 2013, January 28, 2012 and January 29, 2011, which would impact the
annual effective rate if recognized were $2.4 million, $12.6 million and $13.1 million, respectively.
The Company believes it is reasonably possible that there will be a $0.7 million decrease in the
gross tax liability for uncertain tax positions within the next 12 months based upon the expiration of
statutes of limitation.
The Company recognizes interest expense and penalties related to the above unrecognized
tax benefits within income tax expense on the Consolidated Statements of Operations. Related to
the uncertain tax benefits noted above, the Company recorded interest and penalties of
approximately $(1.2) million expense and $0.1 million, respectively, during Fiscal 2013, $0.5
million expense and $0.0 million, respectively, during Fiscal 2012 and $(0.5) million income and
81
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Income Taxes, Continued
$(0.2) million income, respectively, during Fiscal 2011. The Company recognized a liability for
accrued interest and penalties of $1.1 million and $0.2 million, respectively, as of February 2, 2013
and $2.3 million and $0.2 million, respectively, as of January 28, 2012. The long-term portion of
the unrecognized tax benefits and related accrued interest and penalties are included in deferred rent
and other long-term liabilities on the Consolidated Balance Sheets.
Income tax reserves are determined using the methodology required by the Income Tax Topic of the
Codification.
The Company and its subsidiaries file income tax returns in federal and in many state and local
jurisdictions as well as foreign jurisdictions. With few exceptions, the Company’s U.S. federal and
state and local income tax returns for fiscal years ended January 30, 2010 and beyond remain subject
to examination. In addition, the Company has subsidiaries in various foreign jurisdictions that have
statutes of limitation generally ranging from two to six years.
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans
Defined Benefit Pension Plans
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
participant’s 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.
82
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Other Postretirement Benefit Plans
The Company provides health care benefits for early retirees and life insurance benefits for certain
retirees not covered by collective bargaining agreements. Under the health care plan, early retirees
are eligible for benefits until age 65. Employees who meet certain requirements are eligible for life
insurance benefits upon retirement. The Company accrues such benefits during the period in which
the employee renders service.
Obligations and Funded Status
Change in Benefit Obligation
In thousands
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Benefits paid
Actuarial loss
Benefit Obligation at End of Year
Change in Plan Assets
In thousands
Fair value of plan assets at beginning of year
Actual gain on plan assets
Employer contributions
Plan participants’ contributions
Benefits paid
Fair Value of Plan Assets at End of Year
Funded Status at End of Year
$
$
$
$
$
Pension Benefits
Other Benefits
2013
2012
$
$
$
2013
118,644
350
4,961
0
(9,038)
4,209
119,126
2012
110,793
250
5,597
0
(8,805)
10,809
118,644
3,908
356
157
74
(221)
213
4,487
3,480
166
174
71
(242)
259
3,908
$
$
$
Pension Benefits
2013
2012
Other Benefits
2013
2012
$
96,443
11,207
0
0
(9,038)
98,612
(20,514) $
$
$
98,887
6,111
250
0
(8,805)
96,443
(22,201) $
$
$
0
0
147
74
(221)
0
(4,487) $
$
0
0
171
71
(242)
0
(3,908)
83
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Amounts recognized in the Consolidated Balance Sheets consist of:
In thousands
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net Amount Recognized
Pension Benefits
Other Benefits
2013
2012
2013
2012
$
$
0
0
$
0
0
(20,514)
(22,201)
$
0
(160)
(4,327)
$
(20,514) $
(22,201) $
(4,487) $
0
(160)
(3,748)
(3,908)
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
2013
2012
2013
2012
$
$
$
0
42,879
$
4
48,906
$
0
566
42,879
$
48,910
$
566
$
0
437
437
In thousands
Pension Benefits
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
February 2,
2013
119,126
119,126
98,612
$
January 28,
2012
118,644
118,644
96,443
84
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Components of Net Periodic Benefit Cost
Net Periodic Benefit Cost
In thousands
Service cost
Interest cost
Expected return on plan assets
Amortization:
Prior service cost
Losses
Net amortization
Net Periodic Benefit Cost
Pension Benefits
2012
2013
2011
2013
Other Benefits
2012
2011
$
$
$
$
350
4,961
(7,003)
$
250
5,597
(7,807)
$
250
5,897
(8,089)
4
6,032
6,036
4,344
$
$
4
4,728
4,732
2,772
$
$
4
4,235
4,239
2,297
$
$
356
157
—
—
84
84
597
$
$
$
166
174
—
—
79
79
419
$
$
$
144
170
—
—
59
59
373
Reconciliation of Accumulated Other Comprehensive Income
In thousands
Net loss (gain)
Amortization of prior service cost
Amortization of net actuarial (loss) gain
Total Recognized in Other Comprehensive Income
$
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income $
Pension Benefits Other Benefits
2013
2013
$
$
5
(4)
(6,032)
(6,031) $
(1,687) $
(84)
—
213
129
726
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 $6.5 million and $0.0, respectively. The estimated net loss for the other
postretirement benefit plans that will be amortized from accumulated other comprehensive income
into net periodic benefit cost over the next fiscal year is $0.1 million.
Weighted-average assumptions used to determine benefit obligations
Discount rate
Rate of compensation increase
Pension Benefits
2013
4.00%
NA
2012
4.35%
NA
Other Benefits
2013
4.01%
—
2012
4.17%
—
For Fiscal 2013 and 2012, the discount rate was based on a yield curve of high quality corporate
bonds with cash flows matching the Company’s planned expected benefit payments.
85
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Weighted-average assumptions used to determine net periodic benefit costs
Discount rate
Expected long-term rate of return on plan
assets
Rate of compensation increase
Pension Benefits
Other Benefits
2013
4.35%
2012
5.25%
2011
5.625 %
2013
4.17%
2012
5.25%
2011
5.50%
7.75%
NA
8.25%
NA
8.25 %
NA
—
—
—
—
—
—
The weighted average discount rate used to measure the benefit obligation for the pension plan
decreased from 4.35% to 4.00% from Fiscal 2012 to Fiscal 2013. The decrease in the rate increased
the accumulated benefit obligation by $4.3 million and increased the projected benefit obligation by
$4.3 million. The weighted average discount rate used to measure the benefit obligation for the
pension plan decreased from 5.25% to 4.35% from Fiscal 2011 to Fiscal 2012. The decrease in the
rate increased the accumulated benefit obligation by $10.4 million and increased the projected
benefit obligation by $10.4 million.
To develop the expected long-term rate of return on assets assumption, the Company considered
historical asset returns, the current asset allocation and future expectations. Considering this
information, the Company selected a 7.75% long-term rate of return on assets assumption.
Assumed health care cost trend rates
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
2013
2012
7.0 %
5 %
7.5%
5%
2017
2017
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
1% Increase
in Rates
1% Decrease
in Rates
$
$
153
735
$
$
70
578
86
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Plan Assets
The Company’s pension plan weighted average asset allocations as of February 2, 2013 and
January 28, 2012, by asset category are as follows:
Asset Category
Equity securities
Debt securities
Other
Total
Plan Assets
February 2,
2013
January 28,
2012
66%
34%
0%
100%
63%
37%
0%
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 February 2, 2013 and January 28, 2012, 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.
87
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
The following tables present the pension plan assets by level within the fair value hierarchy as of
February 2, 2013 and January 28, 2012.
February 2, 2013
Equity Securities:
International securities
U.S. securities
Fixed Income Securities
Other:
Cash Equivalents
Other (includes receivables and payables)
Total Pension Plan Assets
Level 1
Level 2
Level 3
Total
$
$
13,757
51,011
33,633
235
(24)
$
98,612
$
—
—
—
—
—
—
$
$
—
—
—
—
—
—
$
$
13,757
51,011
33,633
235
(24)
98,612
January 28, 2012
Equity Securities:
International securities
U.S. securities
Fixed Income Securities
Other:
Cash Equivalents
Other (includes receivables and payables)
Total Pension Plan Assets
Level 1
Level 2
Level 3
Total
$
$
11,754
49,321
35,164
267
(63)
$
96,443
$
—
—
—
—
—
—
$
$
—
—
—
—
—
—
$
$
11,754
49,321
35,164
267
(63)
96,443
Cash Flows
Return of Assets
There was no return of assets from the plan to the Company in Fiscal year 2013 and no plan assets are
projected to be returned to the Company in Fiscal 2014.
Contributions
There was no ERISA cash requirement for the plan in 2012 and none is projected to be required in 2013.
It is the Company’s policy to contribute enough cash to maintain at least an 80% funding level.
88
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Estimated Future Benefit Payments
Expected benefit payments from the trust, including future service and pay, are as follows:
Estimated future payments
2013
2014
2015
2016
2017
2018 – 2022
Section 401(k) Savings Plan
Pension
Benefits
($ in millions)
Other
benefits
($ in millions)
$
8.7
8.7
8.4
8.3
8.1
38.1
$
0.2
0.2
0.2
0.2
0.2
1.3
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. Since January 1, 2005, the Company has matched 100% of each
employee’s contribution of up to 3% of salary and 50% of the next 2% of salary. In addition, for
those employees hired before December 31, 2004, who were eligible for the Company’s cash
balance retirement plan before it was frozen, the Company annually makes an additional
contribution of 2 1/2 % of salary to each employee’s account. In calendar 2005 and future years,
participants are immediately vested in their contributions and the Company’s matching contribution
plus actual earnings thereon. The contribution expense to the Company for the matching program
was approximately $5.3 million for Fiscal 2013, $4.2 million for Fiscal 2012 and $3.8 million
for Fiscal 2011.
89
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 11
Earnings Per Share
For the Year Ended
February 2, 2013
For the Year Ended
January 28, 2012
For the Year Ended
January 29, 2011
(In thousands, except
per share amounts)
Income
(Numerator)
Shares
(Denominator)
Per-Share
Amount
Income
(Numerator)
Shares
(Denominator)
Per-Share
Amount
Income
(Numerator)
Shares
(Denominator)
Per-Share
Amount
Earnings from continuing
operations
$
110,998
Less: Preferred stock
dividends
(147)
$
82,984
(193)
$
54,547
(197)
Basic EPS from continuing
operations
Income available to
common shareholders
Effect of Dilutive
Securities from continuing
operations
Options and
restricted stock
Convertible
preferred
stock(1)
Employees’
preferred
stock(2)
Diluted EPS
Income available to
common shareholders plus
assumed conversions
110,851
23,584
$
4.70
82,791
23,234
$
3.56
54,350
23,209
$
2.34
88
372
34
47
141
511
55
48
58
431
26
50
$
110,939
24,037
$
4.62
$
82,932
23,848
$
3.48
$
54,408
23,716
$
2.29
(1) The amount of the dividend on the convertible preferred stock per common share obtainable on conversion of the
convertible preferred stock was less than basic earnings per share for Series 1, 3 and 4 preferred stocks for Fiscal 2013
and 2012. Therefore, conversion of these convertible preferred stocks were included in diluted earnings per share for
Fiscal 2013 and 2012. The amount of the dividend on Series 3 convertible preferred stock per common share obtainable
on conversion of the convertible preferred stock was less than basic earnings for Fiscal 2011. Therefore, conversion of
Series 3 preferred shares were included in diluted earnings per share for Fiscal 2011. The amount of the dividend on
Series 1 and Series 4 convertible preferred stock per common share obtainable on conversion of the preferred stock was
higher than basic earnings for Fiscal 2011. Therefore, conversion of Series 1 and Series 4 preferred shares were not
reflected in diluted earnings per share for Fiscal 2011 because it would have been antidilutive. The shares convertible to
common stock for Series 1, 3 and 4 preferred stock would have been 13,502 and 15,575 and 4,920, respectively, as of
February 2, 2013.
(2) The Company’s Employees’ Subordinated Convertible Preferred Stock is convertible one for one to the Company’s
common stock. Because there are no dividends paid on this stock, these shares are assumed to be converted.
All outstanding options to purchase shares of common stock at the end of Fiscal 2013 and 2012 were
included in the computation of diluted earnings per share because the options’ exercise prices were
less than the average market price of the common shares.
Options to purchase 12,000 shares of common stock at $32.65 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 2011 but were not
90
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 11
Earnings Per Share, Continued
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. The Company
repurchased 645,904 shares at a cost of $37.7 million during Fiscal 2013. The Company has $58.2
million remaining under its current $75.0 million share repurchase authorization. The Company did
not repurchase any shares during Fiscal 2012. The Company repurchased 863,767 shares at a cost of
$24.8 million during Fiscal 2011.
Note 12
Share-Based Compensation Plans
The Company’s stock-based compensation plans, as of February 2, 2013, are described below. The
Company recognizes compensation expense for share-based payments based on the fair value of the
awards as required by the Compensation – Stock Compensation Topic of the Codification.
Stock Incentive Plans
The Company has two fixed stock incentive plans. Under the 2009 Amended and Restated Equity
Incentive Plan (the “2009 Plan”), effective as of June 22, 2011, the Company may grant options,
restricted shares, performance awards and other stock-based awards to its employees, consultants
and directors for up to 2.5 million shares of common stock. Under the 2005 Equity Incentive Plan
(the “2005 Plan”), effective as of June 23, 2005, the Company was permitted to grant options,
restricted shares and other stock-based awards to its employees and consultants as well as directors
for up to 2.5 million shares of common stock. There will be no future awards under the 2005 Equity
Incentive Plan. Under both plans, the exercise price of each option equals the market price of the
Company’s stock on the date of grant and an option’s maximum term is 10 years. Options granted
under both plans vest 25% per year over four years.
For Fiscal 2013, 2012 and 2011, the Company recognized share-based compensation cost of $0.0,
less than $1,000 and $0.2 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 $4.8 million, $4.7 million and $1.4 million as financing cash inflows
rather than as operating cash inflows on its Consolidated Statement of Cash Flows for Fiscal 2013,
2012 and 2011, respectively.
The Company did not grant any fixed stock options in Fiscal 2013, 2012 or 2011.
91
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Share-Based Compensation Plans, Continued
A summary of fixed stock option activity and changes for Fiscal 2013, 2012 and 2011 is presented
below:
Shares
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate Intrinsic
Value (in
thousands)(1)
Outstanding, January 30, 2010
Granted
Exercised
Forfeited
Outstanding, January 29, 2011
Granted
Exercised
Forfeited
Outstanding, January 28, 2012
Granted
Exercised
Forfeited
Outstanding, February 2, 2013
Exercisable, February 2, 2013
$
995,580
0
(118,450 )
0
877,130
0
$
(390,357 )
0
486,773
0
$
(223,618 )
0
263,155
263,155
$
$
24.04
—
18.77
—
24.75
—
24.82
—
24.70
—
21.50
—
27.43
27.43
1.98 $
1.98 $
9,317
9,317
(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 2013, 2012 and 2011 was
$11.5 million, $10.3 million and $2.3 million, respectively.
As of February 2, 2013, the Company does not have any nonvested shares of its fixed stock
incentive plans.
As of February 2, 2013 there was no unrecognized compensation costs related to nonvested share-
based compensation arrangements granted under the stock incentive plans discussed above. Cash
received from option exercises under all share-based payment arrangements for Fiscal 2013, 2012
and 2011 was $4.8 million, $9.7 million and $2.2 million, respectively.
Restricted Stock Incentive Plans
Director Restricted Stock
The 2009 Plan permits grants to non-employee directors on such terms as the board may approve.
Restricted stock awards were made to independent directors on the date of the annual meeting of
shareholders in each of Fiscal 2013, 2012 and 2011. The shares granted in each award vested on the
first anniversary of the grant date, subject to the director’s continued service through that date. The
board also approved a grant of 336 additional shares to a newly elected director on the annual
meeting date in Fiscal 2013 on the same terms as the Fiscal 2013 grant to all outside directors. In all
cases, the director is restricted from selling, transferring, pledging or assigning the shares for three
years from the grant date unless he or she earlier leaves the board.
92
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Share-Based Compensation Plans, Continued
The Fiscal 2011 grants were valued at $60,000 based on the average closing price of the stock for
the first five trading days of the month in which they were granted and vested in three equal annual
installments beginning on the first anniversary of the grant date, subject to the director’s continuing
service. The Fiscal 2012 grants were valued at $70,000 and the Fiscal 2013 grants were valued at
$80,000 on the same basis, and vested on the first anniversary of the grant date. For Fiscal 2013,
2012 and 2011, the Company issued 9,888 shares, 14,643 shares and 17,838 shares, respectively, of
director restricted stock.
For Fiscal 2013, 2012 and 2011, the Company recognized $0.9 million, $0.8 million and $0.5
million, respectively, of director restricted stock related share-based compensation in selling and
administrative expenses in the accompanying Consolidated Statements of Operations.
Employee Restricted Stock
Under the 2009 Plan, the Company issued 194,232 shares, 289,407 and 404,995 shares of employee
restricted stock in Fiscal 2013, 2012 and 2011, respectively. Shares issued in Fiscal 2011, 2012 and
2013 vest 25% per year over four years, provided that on such date the grantee has remained
continuously employed by the Company since the date of grant. The fair value of employee
restricted stock is charged against income as compensation cost over the vesting period.
Compensation cost recognized in selling and administrative expenses in the accompanying
Consolidated Statements of Operations for these shares was $9.6 million, $6.9 million and $7.3
million for Fiscal 2013, 2012 and 2011, respectively.
93
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Share-Based Compensation Plans, Continued
A summary of the status of the Company’s nonvested shares of its employee-restricted stock as of
February 2, 2013 is presented below:
Nonvested Restricted Shares
Nonvested at January 30, 2010
Granted
Vested
Withheld for federal taxes
Forfeited
Nonvested at January 29, 2011
Granted
Vested
Withheld for federal taxes
Forfeited
Nonvested at January 28, 2012
Granted
Vested
Withheld for federal taxes
Forfeited
Nonvested at February 2, 2013
Weighted-Average
Grant-Date
Fair Value
$
Shares
676,114
404,995
(179,684)
(81,731)
(1,575)
818,119
289,407
(227,691)
(93,089)
(14,081)
772,665
194,232
(195,203)
(75,552)
(3,360)
692,782
$
20.94
28.41
23.09
23.15
19.40
23.95
45.14
22.58
22.42
27.38
32.41
57.58
29.95
29.97
38.96
40.59
As of February 2, 2013 there was $21.7 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 2.27 years.
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan, the Company is authorized to issue up to 1.0 million
shares of common stock to 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. Under the Plan, the Company sold 2,463 shares, 2,717
shares and 4,230 shares to employees in Fiscal 2013, 2012 and 2011, respectively.
94
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Share-Based Compensation Plans, Continued
Stock Purchase Plans
Stock purchase accounts arising out of sales to employees prior to 1972 under certain employee
stock purchase plans amounted to $96,000 and $101,000 at February 2, 2013 and January 28, 2012,
respectively, and were secured at February 2, 2013, by 5,245 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 13
Legal Proceedings
Environmental Matters
New York State Environmental Matters
In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) and
the Company entered into a consent order whereby the Company assumed responsibility for
conducting a remedial investigation and feasibility study (“RIFS”) and implementing an interim
remedial measure (“IRM”) with regard to the site of a knitting mill operated by a former subsidiary
of the Company from 1965 to 1969. The Company undertook the IRM and RIFS voluntarily,
without admitting liability or accepting responsibility for any future remediation of the site. The
Company has completed the IRM and the RIFS. In the course of preparing the RIFS, the Company
identified remedial alternatives with estimated undiscounted costs ranging from $0.0 million to
$24.0 million, excluding amounts previously expended or provided for by the Company. The
United States Environmental Protection Agency (“EPA”), which has assumed primary regulatory
responsibility for the site from NYSDEC, issued a Record of Decision in September 2007. The
Record of Decision requires a remedy of a combination of groundwater extraction and treatment and
in-site chemical oxidation at an estimated present 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 additionally asserted that the Company is liable for the
costs associated with enhanced treatment required by the impact of the groundwater plume from the
site on two public water supply wells, including historical 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, undiscounted, over a 70-year period.
95
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Legal Proceedings, Continued
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. The Company intends to continue to defend the action.
Whitehall Environmental Matters
The Company has performed sampling and analysis of soil, sediments, surface water, groundwater
and waste management areas at the Company’s former Volunteer Leather Company facility in
Whitehall, Michigan.
In October 2010, the Company and the Michigan Department of Natural Resources and
Environment entered into a Consent Decree providing for implementation of a remedial Work Plan
for the facility site designed to bring the site into compliance with applicable regulatory standards.
The Work Plan’s implementation is substantially complete and the Company expects, based on its
present understanding of the condition of the site, that its future obligations with respect to the site
will be limited to periodic monitoring and that future costs related to the site should not have a
material effect on its financial condition or results of operations.
Accrual for Environmental Contingencies
Related to all outstanding environmental contingencies, the Company had accrued $11.9 million as
of February 2, 2013, $13.0 million as of January 28, 2012 and $15.5 million as of January 29, 2011.
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 Condensed Consolidated Balance Sheets because it relates to former facilities
operated by the Company. The Company has made pretax accruals for certain of these
contingencies, including approximately $0.8 million reflected in Fiscal 2013, $1.8 million reflected
in Fiscal 2012 and $2.9 million reflected in Fiscal 2011. These charges are included in provision
for discontinued operations, net in the Consolidated Statements of Operations and represent changes
in estimates.
96
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Legal Proceedings, Continued
Other Matters
On December 10, 2010, the Company announced that it had suffered a criminal intrusion into the
portion of its computer network that processes payments for transactions in certain of its retail
stores. Visa, Inc., MasterCard Worldwide and American Express Travel Related Services Company,
Inc. have asserted claims totaling approximately $15.6 million in connection with the intrusion and
the claims of two of the claimants have been collected by withholding payment card receivables of
the Company. In the fourth quarter of Fiscal 2013, the Company recorded a $15.4 million charge to
earnings in connection with the disputed liability. On March 7, 2013, the Company filed an action
in the U.S. District Court for the Middle District of Tennessee against Visa U.S.A. Inc., Visa Inc.
and Visa International Service Association seeking to recover $13.3 million in non-compliance fines
and issuer reimbursement assessments collected from the Company in connection with the intrusion.
The Company does not currently expect any future claims in connection with the intrusion to have a
material effect on its financial condition, cash flows, or results of operations.
On January 5, 2012, a patent infringement action against the Company and numerous other
defendants was filed in the U.S. District Court for the Eastern District of Texas, GeoTag, Inc. v.
Circle K Store, Inc., et al., alleging that features of certain of the Company’s e-commerce websites
infringe U.S. Patent No. 5,930,474, entitled “Internet Organizer for Accessing Geographically and
Topically Based Information.” The plaintiff seeks relief including damages for the alleged
infringement, costs, expenses and pre- and post-judgment interest and injunctive relief. The
Company disputes the validity of the claim and is defending the matter.
On June 13, 2012, a former vendor of a subsidiary of the Company filed an action, Perfect Curve,
Inc. v. Hat World, Inc., in U.S. District Court in Massachusetts, alleging patent, trademark, trade
dress, and copyright infringement against the subsidiary based on the sale of a line of products
developed by the subsidiary. The Company denies the material allegations against it and is
defending the action.
On May 14, 2012, a putative class and collective action, Maro v. Hat World, Inc., was filed in the
U.S. District Court for the Northern District of Illinois. The action alleges that the Company failed to
pay the plaintiff and other, similarly situated retail store employees of Hat World, Inc., for time
spent making bank deposits of store collections, and seeks to recover unpaid wages, liquidated
damages, statutory penalties, attorneys fees, and costs pursuant to the federal Fair Labor Standards
Act, the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. On July
16, 2012 and July 30, 2012, additional putative class and collective actions, Chavez v. Hat World,
Inc. and Dismukes v. Hat World, Inc., were filed in the same court, alleging that certain Hat World
employees were misclassified as exempt from overtime pay, and seeking similar relief. The Chavez
and Dismukes actions have been consolidated. The Company disputes the material allegations in the
consolidated action and in Maro and is defending the actions.
On August 30, 2012, a former employee of a Company subsidiary filed a putative class and
collective action, Kershner v. Hat World, Inc., in the Philadelphia, Pennsylvania Court of Common
Pleas alleging violations of the Pennsylvania Minimum Wage Act by the subsidiary. The Company
is defending the matter.
97
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Legal Proceedings, Continued
In addition to the matters specifically described in this Note, the Company is a party to other legal
and regulatory proceedings and claims arising in the ordinary course of its business. While
management does not believe that the Company’s liability with respect to any of these other matters
is likely to have a material effect on its financial position, cash flows, or results of operations, legal
proceedings are subject to inherent uncertainties and unfavorable rulings could have a material
adverse impact on the Company’s business and results of operations.
Note 14
Business Segment Information
During Fiscal 2013, the Company operated five reportable business segments (not including
corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz, Shi by Journeys and
Underground by Journeys retail footwear chains, catalog and e-commerce operations; (ii) Schuh
Group, acquired in June 2011, comprised of the Schuh retail footwear chain and e-commerce
operations; (iii) Lids Sports Group, comprised primarily of the Lids, Hat World and Hat Shack retail
headwear stores, the Lids Locker Room and Lids Clubhouse fan shops (operated under various trade
names), the Lids Team Sports business and certain e-commerce operations; (iv) Johnston & Murphy
Group, comprised of Johnston & Murphy retail operations, e-commerce and catalog operations and
wholesale distribution; and (v) Licensed Brands, comprised of Dockers® Footwear, sourced and
marketed under a license from Levi Strauss & Company; SureGrip® Footwear, occupational
footwear primarily sold directly to consumers; and other footwear brands.
The accounting policies of the segments are the same as those described in the summary of
significant accounting policies.
The Company’s reportable segments are based on management’s organization of the segments in
order to make operating decisions and assess performance along types of products sold. Journeys
Group, Schuh Group and Lids Sports Group sell primarily branded products from other companies
while Johnston & Murphy Group and Licensed Brands sell primarily the Company’s owned and
licensed brands. As a result of combining the Underground Station Group with Journeys Group in
the first quarter of Fiscal 2013, Journeys Group segment sales, operating income, total assets,
depreciation and amortization and capital expenditures have been restated for Fiscal 2012 and 2011
to conform to the current year presentation.
Corporate assets include cash, domestic prepaid rent expense, prepaid income taxes, deferred
income taxes, deferred note expense and corporate fixed assets. The Company charges allocated
retail costs of distribution to each segment. The Company does not allocate certain costs to each
segment in order to make decisions and assess performance. These costs include corporate overhead,
interest expense, interest income, asset impairment charges and other, including major litigation.
98
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Business Segment Information, Continued
Fiscal 2013
In thousands
Sales
Intercompany sales
Journeys
Group
Schuh
Group
Lids Sports
Group
Johnston
& Murphy
Group
Licensed
Brands
Corporate
& Other
Consolidated
$ 1,111,490
$ 370,480
—
$ 793,016
(1,761)
$ 221,870
(10)
$ 108,808
(310)
$
$
1,234
—
2,606,898
(2,081)
— —
Net sales to external customers
$ 1,111,490
$ 370,480
$ 791,255
$ 221,860
$ 108,498
$
1,234
$
2,604,817
Segment operating income (loss) $ 106,929
Asset Impairments and other*
—
$
7,875
$ 85,794
$
15,737
$ 10,064
$
(41,392)
$
185,007
—
—
—
—
(17,037)
(17,037)
Earnings (loss) from
operations
Interest expense
Interest income
Earnings (loss) from continuing
operations before income taxes
106,929
—
—
7,875
—
—
85,794
—
—
15,737
—
—
10,064
—
—
(58,429)
(5,126)
95
167,970
(5,126)
95
$
106,929
$
7,875
$ 85,794
$
15,737
$ 10,064
$
(63,460)
$
162,939
Total assets**
Depreciation and amortization
Capital expenditures
$
280,396
20,190
21,852
$ 231,323
10,040
16,873
$ 519,006
26,892
21,448
$
89,505
3,738
6,680
$ 43,212
366
1,255
$ 170,347
2,471
3,629
$
1,333,789
63,697
71,737
*Asset Impairments and other includes a $1.4 million charge for asset impairments, of which $0.9 million is in the Lids Sports Group,
$0.4 million is in the Journeys Group and $0.1 million is in the Johnston & Murphy Group, a $15.5 million charge for network intrusion costs and a
$0.1 million charge for other legal matters.
**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $172.3 million, $100.7 million and $0.8 million of goodwill,
respectively. Goodwill for Lids Sports Group includes $13.2 million of additions in Fiscal 2013 resulting from small acquisitions and the Schuh
Group goodwill increased by $0.8 million due to foreign currency translation adjustment.
99
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Business Segment Information, Continued
Fiscal 2012
In thousands
Sales
Intercompany sales
Journeys
Group
Schuh
Group
Lids Sports
Group
Johnston
& Murphy
Group
Licensed
Brands
Corporate
& Other
Consolidated
$ 1,020,116
—
212,262
—
$ 759,671
$ 201,725
—
$
97,721
$
(277)
1,116
—
$ 2,292,611
(624)
(347)
Net sales to external customers
$ 1,020,116
$ 212,262
$ 759,324
$ 201,725
$
97,444
$
1,116
$ 2,291,987
Segment operating income (loss)
$
Asset Impairments and other*
Earnings (loss) from operations
Interest expense
Interest income
Earnings (loss) from continuing
operations before income taxes
Total assets**
Depreciation and amortization
$
$
82,452
—
82,452
—
—
$ 11,711
—
11,711
—
—
$ 82,349
—
82,349
—
—
$ 13,682
—
13,682
—
—
$
9,456
—
9,456
—
—
$
(53,103) $
(2,677)
(55,780)
(5,157)
65
146,547
(2,677)
143,870
(5,157)
65
82,452
$ 11,711
$ 82,349
$ 13,682
$
9,456
$
(60,872) $
138,778
259,331
20,742
11,125
$ 205,313
4,602
7,406
$ 489,512
22,541
24,497
$ 79,321
3,538
1,894
$
34,974
285
718
$ 168,814
2,029
3,816
$ 1,237,265
53,737
49,456
Capital expenditures
*Asset Impairments and other includes a $1.1 million charge for asset impairments, of which $0.6 million is in the Journeys Group, $0.3 million is in
the Lids Sports Group and $0.2 million is in the Johnston & Murphy Group, a $0.7 million charge for network intrusion costs and a $0.9 million
charge for other legal matters.
**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $159.1 million, $99.9 million and $0.8 million of goodwill,
respectively. Goodwill for Lids Sports Group includes $6.5 million of additions in Fiscal 2012 resulting from small acquisitions and the Schuh Group
goodwill is due to the acquisition of Schuh in the second quarter of Fiscal 2012 of $102.9 million which has been decreased by $3.0 million due to
foreign currency translation adjustment.
100
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Business Segment Information, Continued
Fiscal 2011
In thousands
Sales
Intercompany sales
Net sales to external customers
Segment operating income (loss)
Asset Impairments and other*
Earnings (loss) from operations
Interest expense
Interest income
Earnings (loss) from continuing
operations before income taxes
Journeys
Group
Lids Sports
Group
Johnston
& Murphy
Group
Licensed
Brands
Corporate
& Other
Consolidated
$ 898,500
—
$ 898,500
49,642
$
—
49,642
—
—
$ 603,533
$ 185,012
(188)
$ 101,839
(195)
(1)
$
1,339
—
$ 1,790,223
(384)
$ 603,345
$ 56,026
—
56,026
—
—
$ 185,011
7,595
$
—
7,595
—
—
$ 101,644
$ 12,359
—
12,359
—
—
1,339
$
$ (30,972) $
$ 1,789,839
94,650
(8,567)
86,083
(1,130)
8
(8,567)
(39,539)
(1,130)
8
$
49,642
$ 56,026
$
7,595
$ 12,359
$ (40,661) $
84,961
Total assets**
Depreciation and amortization
Capital expenditures
$ 268,335
23,005
7,754
$ 435,016
18,627
17,908
$ 72,393
3,754
1,687
$ 38,152
217
27
$ 147,186
2,135
1,923
$
961,082
47,738
29,299
*Asset Impairments and other includes a $7.2 million charge for asset impairments, of which $5.5 million is in the Journeys Group, $1.0 million is in
the Lids Sports Group and $0.7 million is in the Johnston & Murphy Group, a $1.3 million charge for network intrusion costs and a $0.1 million
charge for other legal matters.
**Total assets for the Lids Sports Group and Licensed Brands include $152.5 million and $0.8 million of goodwill, respectively. Goodwill for the
Lids Sports Group includes $33.5 million of additions in Fiscal 2011 resulting from small acquisitions and the Licensed Brands goodwill is due to the
acquisition of Keuka Footwear in Fiscal 2011.
101
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 15
Quarterly Financial Information (Unaudited)
(In thousands,
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year
except per
share amounts)
Net sales
Gross margin
Earnings from
continuing
operations before
income taxes
Earnings from
continuing
operations
Net earnings
(loss)
Diluted earnings
(loss) per
common share:
Continuing
operations
Net earnings
(loss)
2013
2012
2013
2012
2013
2012
2013(a)
2012
2013(b)
2012
$ 600,144
306,664
$ 481,502
246,786
$ 543,522
273,022
$ 470,591
235,771
$ 664,458
334,348
$ 616,525
310,457
$ 796,693
384,313
$ 723,369
354,692
$ 2,604,817
1,298,347
$
2,291,987
1,147,706
34,890
(1)
25,011
(3)
15,748
(5)
570
(6)
51,077
(8)
44,043
(10)
61,224
(12)
69,154 (14)
162,939
138,778
20,791
14,975
10,561
350
40,969
26,161
38,677
41,498
20,614
(2)
14,793
(4)
10,520
(392)
(7)
40,875
(9)
26,088
(11)
38,527
(13)
41,470
110,998
110,536
0.86
0.85
0.63
0.63
0.44
0.43
0.01
(0.02)
1.71
1.70
1.09
1.09
1.63
1.62
1.72
1.72
4.62
4.60
82,984
81,959
3.48
3.43
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Includes a net asset impairment and other charge of $0.1 million (see Note 3). (a) 14 week period vs. 13
Includes a loss of $0.2 million, net of tax, from discontinued operations (see Note 3). weeks in prior period.
Includes a net asset impairment and other charge of $1.2 million (see Note 3). (b) 53 week period vs. 52
Includes a loss of $0.2 million, net of tax, from discontinued operations (see Note 3). weeks in prior period.
Includes a net asset impairment and other charge of $0.4 million (see Note 3).
Includes a net asset impairment and other charge of $0.4 million (see Note 3).
Includes a loss of $0.7 million, net of tax, from discontinued operations (see Note 3).
Includes a net asset impairment and other charge of $0.4 million (see Note 3).
Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 3).
Includes a net asset impairment and other charge of $0.3 million (see Note 3).
Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 3).
Includes a net asset impairment and other charge of $16.1 million (see Note 3).
Includes a loss of $0.2 million, net of tax, from discontinued operations (see Note 3).
Includes a net asset impairment and other charge of $0.8 million (see Note 3).
102
ITEM 9, CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A, CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
We have established disclosure controls and procedures to ensure that material information relating to the Company, including
its consolidated subsidiaries, is made known to the officers who certify the Company’s financial reports and to other members
of senior management and the Board of Directors.
Based on their evaluation as of February 2, 2013, the principal executive officer and principal financial officer of the Company
have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) were effective to ensure that the information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported
within time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Company’s management,
including the Company’s principal executive officer and principal financial officer, to allow timely decisions regarding
required disclosure.
Management’s report on internal control over financial reporting.
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting
as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of February 2, 2013. In
making this assessment, management used the criteria set forth in Internal Control – Integrated Framework drafted by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management
believes that, as of February 2, 2013, the Company’s internal control over financial reporting is effective based on these
criteria.
Ernst & Young LLP, the independent registered public accounting firm who also audited the Company’s Consolidated
Financial Statements, has issued an attestation report on the Company’s internal control over financial reporting which is
included herein.
Changes in internal control over financial reporting.
There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last
fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over
financial reporting.
ITEM 9B, OTHER INFORMATION
Not applicable.
103
PART III
ITEM 10, DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Certain information required by this item is incorporated herein by reference to the sections entitled “Election of Directors,”
“Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy
statement for its annual meeting of shareholders to be held June 26, 2013, to be filed with the Securities and Exchange
Commission. Pursuant to General Instruction G(3), certain information concerning the executive officers of the Company
appears under the caption “Executive Officers of the Registrant” in this report following Item 4 of Part I.
The Company has a code of ethics (the “Code of Ethics”) that applies to all of its directors, officers (including its chief
executive officer, chief financial officer and chief accounting officer) and employees. The Company has made the Code of
Ethics available and intends to post any legally required amendments to, or waivers of, such Code of Ethics on its website at
http://www.genesco.com. Our website address is provided as an inactive textual reference only. The information provided on
our website is not a part of this report, and therefore is not incorporated herein by reference.
ITEM 11, EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to the sections entitled “Director Compensation,”
“Compensation Committee Report” and “Executive Compensation” in the Company’s definitive proxy statement for its annual
meeting of shareholders to be held June 26, 2013, to be filed with the Securities and Exchange Commission.
ITEM 12, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Certain information required by this item is incorporated herein by reference to the section entitled “Security Ownership of
Officers, Directors and Principal Shareholders” in the Company’s definitive proxy statement for its annual meeting of
shareholders to be held June 26, 2013, to be filed with the Securities and Exchange Commission.
The following table provides certain information as of February 2, 2013 with respect to our equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION*
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
(a)
Number of
securities
to be issued
upon exercise of
outstanding options,
warrants and rights
263,155
—
263,155
$
$
(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(c)
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(1)
27.43
—
27.43
1,898,881
—
1,898,881
(1) Such shares may be issued as restricted shares or other forms of stock-based compensation pursuant to our stock incentive
plans.
*For additional information concerning our equity compensation plans, see the discussion in Note 1 in the Notes to
Consolidated Financial Statements—Summary of Significant Accounting Policies – Share-Based Compensation and Note 12
Share-Based Compensation Plans.
ITEM 13, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference to the section entitled “Election of Directors” in the
Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2013, to be filed with the
Securities and Exchange Commission.
ITEM 14, PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated herein by reference to the section entitled “Audit Matters” in the
Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2013, to be filed with the
Securities and Exchange Commission.
104
ITEM 15, EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
Financial Statements
The following consolidated financial statements of Genesco Inc. and Subsidiaries (the “Company”) are filed as part of this
report under Item 8.
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Financial Statements
Consolidated Balance Sheets, February 2, 2013 and January 28, 2012
Consolidated Statements of Operations, each of the three fiscal years ended 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income, each of the three fiscal years ended 2013, 2012 and 2011
Consolidated Statements of Cash Flows, each of the three fiscal years ended 2013, 2012 and 2011
Consolidated Statements of Equity, each of the three fiscal years ended 2013, 2012 and 2011
Notes to Consolidated Financial Statements
Financial Statement Schedules
Schedule 2 — Valuation and Qualifying Accounts, each of the three fiscal years ended 2013, 2012 and 2011
All other schedules are omitted because the required information is either not applicable or is presented in the financial
statements or related notes. These schedules begin on page 111.
Exhibits
(2)
a.
Agreement and Plan of Merger, dated as of February 5, 2004, by and among Genesco Inc.,
HWC Merger Sub, Inc. and Hat World Corporation. Incorporated by reference to Exhibit (2)a
to the current report on Form 8-K filed April 9, 2004 (File No. 1—3083).
b.
c.
d.
a.
b.
a.
b.
Stock Purchase Agreement, dated December 9, 2006, by and among Hat World, Inc., Hat
Shack, Inc. and all the shareholders of Hat Shack, Inc. Incorporated by reference to Exhibit
10.1 to the current report on Form 8-K filed December 12, 2006 (File No. 1-3083).
Sale and Purchase Agreement, dated as of June 23, 2011, by and among Genesco Inc., Schuh
Group Limited, Genesco (UK) Limited and the persons listed on Schedule 1 thereto.
(Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits from this
agreement are omitted, but will be provided supplementally to the Commission upon request.)
Incorporated by reference to Exhibit 2.1 to the current report on Form 8-K filed June 28, 2011
(File No. 1-3083).
£25 million Loan Note Instrument of Genesco (UK) Limited dated June 23, 2011.
Incorporated by reference to Exhibit 2.2 to the current report on Form 8-K filed June 28, 2011
(File No. 1-3083).
Amended and Restated Bylaws of Genesco Inc. Incorporated by reference to Exhibit 3.1 to
the current report on Form 8-K filed December 19, 2007 (File No. 1-3083).
Restated Charter of Genesco Inc., as amended. Incorporated by reference to Exhibit 1 to the
Genesco Inc. Registration Statement on Form 8-A/A filed with the SEC on May 1, 2003 (File
No.1-3083).
Second Amended and Restated Rights Agreement dated as of April 18, 2010. Incorporated by
reference to Exhibit 4.1 to the current report on Form 8-K filed April 9, 2010 (File No. 1-
3083).
Form of Certificate for the Common Stock. Incorporated by reference to Exhibit 3 to the
Genesco Inc. Registration Statement on Form 8-A/A filed with the SEC on May 1, 2003 (File
No.1-3083).
(3)
(4)
105
(10)
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.
Second Amended and Restated Credit Agreement, dated as of January 21, 2011, by and
among the Genesco Inc., certain subsidiaries of the Genesco Inc.party thereto, as other
domestic borrowers and GCO Canada Inc., the lenders party thereto and Bank of America,
N.A., as administrative agent and collateral agent. Incorporated by reference to Exhibit 10.1
to the current report on Form 8-K filed January 26, 2011 (File No. 1-3083). First Amendment
to Second Amended and Restated Credit Agreement, dated June 23, 2011, by and among
Genesco Inc., certain subsidiaries of Genesco Inc. party thereto, as other domestic borrowers
and GCO Canada Inc., the lenders party thereto and Bank of America, N.A., as administrative
agent and collateral agent. Incorporated by reference to Exhibit 10.1 to the current report on
Form 8-K filed June 28, 2011 (File No. 1-3083).
Form of Split-Dollar Insurance Agreement with Executive Officers. Incorporated by reference
to Exhibit (10)a to the Company’s Annual Report on Form 10-K for the fiscal year ended
February 1, 1997 (File No.1-3083).
1996 Stock Incentive Plan Amended and Restated as of October 24, 2007. Form of Option
Agreement. Incorporated by reference to Exhibit (10)c to the Company’s Annual Report on
Form 10-K for the fiscal year ended February 3, 2007 (File No.1-3083).
Genesco Inc. 2005 Equity Incentive Plan Amended and Restated as of October 24, 2007.
Incorporated by reference to Exhibit (10)d to the Company’s Annual Report on Form 10-K
for the fiscal year ended February 2, 2008 (File No.1-3083).
Genesco Inc. 2009 Equity Incentive Plan. Incorporated by reference to Exhibit A to the
Company’s definitive proxy statement dated May 15, 2009. Amended and Restated Genesco
Inc. 2009 Equity Incentive Plan. Incorporated by reference to Exhibit A to the Company’s
definitive proxy statement dated May 13, 2011.
Amended and Restated EVA Incentive Compensation Plan. Incorporated by reference to
Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended
April 30, 2011. Genesco Inc. Supplemental EVA Incentive Compensation Plan for the Period
July 31, 2011 – January 28, 2012.
Amended and Restated EVA Incentive Compensation Plan. Incorporated by reference to
Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended
April 28, 2012.
Form of Incentive Stock Option Agreement. Incorporated by reference to Exhibit (10)c to the
Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005 (File
No.1-3083).
Form of Non-Qualified Stock Option Agreement. Incorporated by reference to Exhibit (10)d
to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2005
(File No.1-3083).
Form of Restricted Share Award Agreement for Executive Officers. Incorporated by reference
to Exhibit (10)e to the Company’s Quarterly Report on Form 10-Q for the quarter ended
October 29, 2005 (File No.1-3083).
Form of Restricted Share Award Agreement for Officers and Employees. Incorporated by
reference to Exhibit (10)f to the Company’s Quarterly Report on Form 10-Q for the quarter
ended October 29, 2005 (File No.1-3083).
Form of Restricted Share Award Agreement. Incorporated by reference to Exhibit (10)a to the
Company’s Quarterly Report on Form 10-Q for the quarter ended August 1, 2009.
Form of Indemnification Agreement For Directors. Incorporated by reference to Exhibit
(10)m to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31,
1993 (File No.1-3083).
Form of Non-Executive Director Indemnification Agreement. Incorporated by reference to
Exhibit (10.1) to the current report on Form 8-K filed November 3, 2008 (File No. 1-3083).
Form of Officer Indemnification Agreement. Incorporated by reference to Exhibit (10.2) to
the Company’s Quarterly Report on Form 10-Q for the quarter ended November 1, 2008 (File
No.1-3083).
Supplemental Pension Agreement dated as of October 18, 1988 between the Company and
William S. Wire II, as amended January 9, 1993. Incorporated by reference to Exhibit (10)p to
the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 1993 (File
No.1-3083).
Deferred Compensation Trust Agreement dated as of February 27, 1991 between the
Company and NationsBank of Tennessee for the benefit of William S. Wire, II, as amended
January 9, 1993. Incorporated by reference to Exhibit (10)q to the Company’s Annual Report
on Form 10-K for the fiscal year ended January 31, 1993 (File No.1-3083).
106
Form of Employment Protection Agreement between the Company and certain executive
officers dated as of February 26, 1997. Incorporated by reference to Exhibit (10)p to the
Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 1997 (File
No.1-3083).
First Amendment to Form of Employment Protection Agreement. Incorporated by reference
to Exhibit (10)s to the Company’s Annual Report on Form 10-K for the fiscal year ended
January 30, 2010.
Employment Agreement dated as of March 29, 2010 between the Company and Hal N.
Pennington. Incorporated by reference to Exhibit (10)t to the Company’s Annual Report on
Form 10-K for the fiscal year ended January 30, 2010.
Trademark License Agreement, dated August 9, 2000, between Levi Strauss & Co. and
Genesco Inc. Incorporated by reference to Exhibit (10.1) to the Company’s Quarterly Report
on Form 10-Q for the quarter ended October 30, 2004 (File No.1-3083).*
r.
s.
t.
u.
v.
Amendment No. 1 (Renewal) to Trademark License Agreement, dated October 18, 2004,
between Levi Strauss & Co. and Genesco Inc. Incorporated by reference to Exhibit (10.2) to
the Company’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2004 (File
No.1-3083).*
w. Amendment No. 2 (Renewal) to Trademark License Agreement, dated November 1, 2006,
x.
y.
z.
between Levi Strauss & Co. and Genesco. Inc. Incorporated by reference to Exhibit (10.1) to
the Company’s Quarterly Report on Form 10-Q for the quarter ended October 28, 2006 (File
No.1-3083).*
Amendment No. 4 (Renewal) to Trademark License Agreement, dated May 15, 2009,
between Levi Strauss & Co. and Genesco Inc. Incorporated by reference to Exhibit (10)b to
the Company’s Quarterly Report on Form 10-Q for the quarter ended August 1, 2009.*
Amendment No. 5 (Renewal) to Trademark License Agreement, dated July 23, 2012, between
Levi Strauss & Co. and Genesco Inc. Incorporated by reference to Exhibit (10.1) to the
Company’s Current Report on Form 8-K filed July 25, 2012 (File No. 1-3083).*
Genesco Inc. Deferred Income Plan dated as of July 1, 2000. Incorporated by reference to
Exhibit (10)p to the Company’s Annual Report on Form 10-K for the fiscal year ended
January 29, 2005. Amended and Restated Deferred Income Plan dated August 22, 2007.
Incorporated by reference to Exhibit (10)r to the Company’s Annual Report on Form 10-K for
the fiscal year ended February 2, 2008 (File No.1-3083).
aa. Non-Employee Director and Named Executive Officer Compensation. Incorporated by
reference to Exhibit (10)b to the Company’s Quarterly Report on Form 10-Q for the quarter
ended October 29, 2005 (File No.1-3083).
bb. The Schuh Group Limited 2015 Management Bonus Scheme. Incorporated by reference to
Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 30,
2011.
1996 Employee Stock Purchase Plan. Incorporated by reference to Registration Statement on
Form S-8 filed September 14, 1995 (File No. 333-62653).
cc.
dd. Amended and Restated Genesco Employee Stock Purchase Plan dated August 22, 2007.
Incorporated by reference to Exhibit (10)u to the Company’s Annual Report on Form 10-K
for the fiscal year ended February 2, 2008 (File No.1-3083).
ee. Basic Form of Exchange Agreement (Restricted Stock). Incorporated by reference to Exhibit
10.1 to the current report on Form 8-K filed April 29, 2009 (File No. 1-3083).
ff.
Basic Form of Exchange Agreement (Unrestricted Stock). Incorporated by reference to
Exhibit 10.2 to the current report on Form 8-K filed April 29, 2009 (File No. 1-3083).
gg. Form of Conversion Agreement. Incorporated by reference to Exhibit 10.1 to the current
report on Form 8-K filed November 2, 2009 (File No. 1-3083).
hh. Form of Conversion Agreement. Incorporated by reference to Exhibit 10.1 to the current
report on Form 8-K filed November 6, 2009 (File No. 1-3083).
ii.
Settlement Agreement, dated as of March 3, 2008, by and among UBS Securities LLC and
UBS Loan Finance LLC, The Finish Line, Inc. and Headwind, Inc. and Genesco Inc.
Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed March 4,
2008 (File No. 1-3083).
Subsidiaries of the Company.
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm included on
page 109.
Power of Attorney
107
(21)
(23)
(24)
(31.1)
(31.2)
(32.1)
(32.2)
(99)
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Financial Statements and Report of Independent Registered Public Accounting Firm with
respect to the Genesco Employee Stock Purchase Plan being filed herein in lieu of filing Form
11-K pursuant to Rule 15d-21.
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
Exhibits (10)b through (10)l, (10)r through (10)t and (10)z through (10)dd are Management Contracts or Compensatory Plans
or Arrangements required to be filed as Exhibits to this Form 10-K.
*Certain information has been omitted and filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portion.
A copy of any of the above described exhibits will be furnished to the shareholders upon written request, addressed to Director,
Corporate Relations, Genesco Inc., Genesco Park, Room 498, P.O. Box 731, Nashville, Tennessee 37202-0731, accompanied
by a check in the amount of $15.00 payable to Genesco Inc.
108
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on Form S-8 (Registration Nos. 333-62653, 333-
08463, 333-104908, 333-128201, 333-160339 and 333-180463) and in the Registration Statement on Form S-3 (Registration
No. 333-109019) of Genesco Inc. of our reports dated April 3, 2013, with respect to the consolidated financial statements and
schedule of Genesco Inc. and Subsidiaries, and the effectiveness of internal control over financial reporting of Genesco Inc. and
Subsidiaries, included in this Annual Report (Form 10-K) for the year ended February 2, 2013.
We also consent to the incorporation by reference in the Registration Statement on Form S-8 (Registration No. 333-62653)
pertaining to the 1996 Employee Stock Purchase Plan of Genesco Inc. of our report dated April 3, 2013 with respect to the
financial statements of the Genesco Inc. Employee Stock Purchase Plan, included as an exhibit to this Annual Report (Form
10-K) for the year ended February 2, 2013.
Nashville, TN
April 3, 2013
109
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
GENESCO INC.
By:
/s/James S. Gulmi
James S. Gulmi
Senior Vice President – Finance and
Chief Financial Officer
Date: April 3, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on the 3rd day of April, 2013.
Chairman, President, Chief Executive Officer
and a Director
Senior Vice President – Finance and
Chief Financial Officer
(Principal Financial Officer)
Vice President and Chief Accounting Officer
Matthew C. Diamond *
Marty G. Dickens *
Thurgood Marshall, Jr. *
Kathleen Mason *
/s/Robert J. Dennis
Robert J. Dennis
/s/James S. Gulmi
James S. Gulmi
/s/Paul D. Williams
Paul D. Williams
Directors:
James S. Beard*
Leonard L. Berry *
William F. Blaufuss, Jr.*
James W. Bradford*
*By
/s/Roger G. Sisson
Roger G. Sisson
Attorney-In-Fact
110
Schedule 2
Year Ended February 2, 2013
Genesco Inc.
and Subsidiaries
Valuation and Qualifying Accounts
In Thousands
Reserves deducted from assets in the balance sheet:
Accounts Receivable Allowances
Year Ended January 28, 2012
In Thousands
Reserves deducted from assets in the balance sheet:
Accounts Receivable Allowances
Year Ended January 29, 2011
Beginning
Balance
Charged
to Profit
and Loss
Increases
(Decreases)
Ending
Balance
$
6,900
$
1,325
$
(2,143) $
6,082
Beginning
Balance
Charged
to Profit
and Loss
Increases
(Decreases)
Ending
Balance
$
3,301
$
2,004
$
1,595
$
6,900
In Thousands
Reserves deducted from assets in the balance sheet:
Accounts Receivable Allowances
Beginning
Balance
Charged
to Profit
and Loss
Increases
(Decreases)
Ending
Balance
$
3,232
$
1,081
$
(1,012)
$
3,301
111
BOARD OF DIRECTORS
James S. Beard
Retired President, Caterpillar Financial Services Corporation
Jupiter, Florida
Member of the audit and finance committees
Leonard L. Berry
Presidential Professor for Teaching Excellence, Regents Professor, Distinguished Professor of Marketing, and Professor of
Humanities in Medicine, Texas A&M University
College Station, Texas
Member of the compensation and nominating and governance committees
William F. Blaufuss, Jr.
Retired Partner, KPMG LLP
Certified Public Accountant
Nashville, Tennessee
Chairman of the audit committee, member of the finance committee
James W. Bradford
Dean, Owen Graduate School of Management
Vanderbilt University
Nashville, Tennessee
Chairman of the nominating and governance committee, member of the compensation committee
Robert J. Dennis
Chairman, President and Chief Executive Officer
Genesco Inc.
Matthew C. Diamond
President and Chief Executive Officer
Alloy, Inc.
New York, New York
Chairman of the compensation committee, member of the finance committee
Marty G. Dickens
Retired President
AT&T -Tennessee
Nashville, Tennessee
Chairman of the finance committee, member of the audit and the nominating and governance committees
Thurgood Marshall, Jr.
Partner
Bingham McCutchen, LLP
Washington, D.C.
Member of the finance and nominating and governance committees
Kathleen Mason
Director
Dallas, Texas
Member of the audit and compensation committees
112
CORPORATE OFFICERS
Robert J. Dennis
Chairman, President and Chief Executive Officer
9 years with Genesco
James S. Gulmi
Senior Vice President-Finance and Chief Financial Officer
41 years with Genesco
James C. Estepa
Senior Vice President – The Journeys Group
28 years with Genesco
Jonathan D. Caplan
Senior Vice President – Genesco Branded
20 years with Genesco
Kenneth J. Kocher
Senior Vice President – Lids Sports Group
9 years with Genesco
Roger G. Sisson
Senior Vice President, Corporate Secretary and General Counsel
19 years with Genesco
Mimi E. Vaughn
Senior Vice President - Strategy and Shared Services
9 years with Genesco
Paul D. Williams
Vice President and Chief Accounting Officer
36 years with Genesco
Matthew N. Johnson
Vice President and Treasurer
20 years with Genesco
113
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