CORPORATE INFORMATION
Annual Meeting of Shareholders
The annual meeting of shareholders will be held Thursday, June 26, 2014, 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, 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.
Shareholder correspondence should be mailed to:
Computershare
P. O. Box 30170
College Station, Texas 77842-3170
Overnight correspondence should be sent to:
Computershare
211 Quality Circle, Suite 210
College Station, Texas 77845
Questions & Inquiries via Computershare’s website:
www.computershare.com/investor
Computershare Phone: (877) 224-0366
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, Suite 490, 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 2014 Annual Report on Form 10-K.
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 apparel and accessories and wholesaler of branded footwear. It operates 2,568 footwear, headwear
and sports apparel and accessory retail stores and leased departments 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, Lids Clubhouse and on internet websites, www.journeys.com,
www.journeyskidz.com, www.shibyjourneys.com, www.schuh.co.uk, www.johnstonmurphy.com, www.trask.com,
www.dockersshoes.com, www.suregrip.com, www.lids.com, www.lids.ca, www.lidslockerroom.com, www.lidsclubhouse.com
and www.lidsteamsports.com. In addition, Genesco designs, sources, markets and distributes footwear under its own Johnston
& Murphy and Trask brands, the licensed Dockers® brand, SureGrip Footwear, occupational footwear primarily sold directly
to consumers, and other brands, and operates the Lids Team Sports team dealer business. Genesco relies 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, 2009 and the reinvestment monthly of all dividends.
COMPARISON OF CUMULATIVE 5 YEAR TOTAL RETURN
500
400
300
200
100
0
FYE 09
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
FYE 10
FYE 11
FYE 12
FYE 13
FYE 14
ANNUAL RETURN PERCENTAGE
Years Ending
Company / Index
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
Jan 10
53.12
33.14
49.26
Jan 11
53.77
21.26
34.33
Jan 12
69.91
5.33
24.35
Jan 13
1.98
17.60
2.70
Jan 14
11.76
20.31
36.80
Company / Index
Genesco Inc.
S&P 500 Index
S&P 1500 Footwear Index
Base
Period
Jan 09
100
100
100
INDEXED RETURNS
Years Ending
Jan 10
153.12
133.14
149.26
Jan 11
235.45
161.44
200.50
Jan 12
400.06
170.04
249.34
Jan 13
407.99
199.97
256.07
Jan 14
455.97
240.58
350.29
*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 1, 2014
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
New York
Securities Registered Pursuant to Section 12(g) of the Act:
Employees’ Subordinated Convertible Preferred Stock
________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
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
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
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
Non-accelerated filer (Do not check if smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes No
The aggregate market value of common stock held by nonaffiliates of the registrant as of August 3, 2013, the last business day
of the registrant’s most recently completed second fiscal quarter, was approximately $1,738,000,000. The market value
calculation was determined using a per share price of $72.48, the price at which the common stock was last sold on the New
York Stock Exchange on such date. For purposes of this calculation, shares held by nonaffiliates excludes only those shares
beneficially owned by officers, directors, and shareholders owning 10% or more of the outstanding common stock (and, in each
case, their immediate family members and affiliates).
As of March 14, 2014, 23,923,210 shares of the registrant’s common stock were outstanding.
Documents Incorporated by Reference
Portions of Genesco’s Annual Report to Shareholders for the fiscal year ended February 1, 2014 are incorporated into Part II by
reference.
Portions of the proxy statement for the June 26, 2014 annual meeting of shareholders are incorporated into Part III by
reference.
Page
3
8
14
14
14
16
17
18
19
21
39
40
104
104
104
105
105
105
105
106
107
TABLE OF CONTENTS
PART I
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
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Principal Accounting Fees and Services
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 2014 of $2.62 billion. During Fiscal 2014, 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,
comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Lids Sports Group, comprised of
(a) headwear and accessory stores under the Lids® name and other names in the U.S., Puerto Rico and Canada, (b) the
Lids Locker Room and Lids Clubhouse businesses, consisting of sports-oriented fan shops featuring a broad array of
licensed merchandise such as apparel, hats and accessories, sports decor and novelty products, operating under various
trade names, (c) licensed team merchandise departments in Macy's department stores operated under the name Locker
Room by Lids and on macys.com, under a license agreement with Macy's, (d) e-commerce operations and (e) an athletic
team dealer business operating as Lids Team Sports; (iv) Johnston & Murphy Group, comprised of Johnston & Murphy
retail operations, catalog and e-commerce operations and wholesale distribution of products under the Johnston &
Murphy and Trask brands; and (v) Licensed Brands, comprised of Dockers® footwear, sourced and marketed under a
license from Levi Strauss & Company; SureGrip®Footwear, occupational footwear primarily sold directly to consumers;
and other brands.
At February 1, 2014, the Company operated 2,568 retail footwear, headwear and sports apparel and accessory stores and
leased departments located primarily throughout the United States and in Puerto Rico, but also including 110 headwear
stores and 38 footwear stores in Canada and 99 footwear stores in the United Kingdom and the Republic of Ireland. It
currently plans to open a total of approximately 344 new retail stores, including 175 leased departments, and to close 47
retail stores in Fiscal 2015. At February 1, 2014, Journeys Group operated 1,168 stores, including 174 Journeys Kidz, 50
Shi by Journeys and 117 Underground by Journeys; Schuh Group operated 99 stores; Lids Sports Group operated 1,133
stores, including 930 Lids stores, 177 Lids Locker Room and Clubhouse stores and 26 Locker Room by Lids leased
departments, and Johnston & Murphy Group operated 168 retail shops and factory stores.
The following table sets forth certain additional information concerning the Company’s retail footwear, headwear and
sports apparel and accessory stores and leased departments during the five most recent fiscal years:
Retail Stores
Beginning of year
Opened during year
Acquired during year
Closed during year
End of year
Fiscal
2010
Fiscal
2011
Fiscal
2012
Fiscal
2013
Fiscal
2014
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
2,459
183
15
(89 )
2,568
The Company also designs, sources, markets and distributes footwear under its own Johnston & Murphy brand, the
recently relaunched Trask brand, the licensed Dockers® brand and other brands that the Company licenses for men's
footwear to over 1,000 retail accounts in the United States, including a number of leading department, discount, and
specialty stores.
Shorthand references to fiscal years (e.g., “Fiscal 2014”) refer to the fiscal year ended on the Saturday nearest
January 31st in the named year (e.g., February 1, 2014). 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.”
3
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
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 41% of the Company’s net sales in Fiscal 2014.
For Fiscal 2014, same store sales decreased 2%, comparable direct sales increased 18% and comparable sales, including
both store and direct sales, decreased 1% from the prior fiscal year. Operating income attributable to Journeys Group
was $97.4 million in Fiscal 2014, with an operating margin of 9.0%. The Company believes that the Journeys Group’s
distinctive store formats, its mix of well-known brands and new product introductions, and its experienced management
team provide significant competitive advantages for the Journeys Group.
At February 1, 2014, Journeys Group operated 1,168 stores, including 174 Journeys Kidz stores, 50 Shi by Journeys
stores and 117 Underground by Journeys stores averaging approximately 1,875 square feet, throughout the United States
and in Puerto Rico and Canada, selling footwear and accessories for young men, women and children.
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 2014, the Journeys Group added eleven net new stores and plans to
open approximately 17 net new stores in Fiscal 2015.
Lids Sports Group
The Lids Sports Group segment, as described above, accounted for approximately 31% of the Company’s net sales in
Fiscal 2014. Same store sales for Lids Sports Group decreased 1% for Fiscal 2014, while comparable direct sales
increased 26% from the prior fiscal year. Comparable sales, including both store and direct sales, were flat for Fiscal
2014. Operating income attributable to Lids Sports Group was $63.7 million in Fiscal 2014, with an operating margin of
7.8%.
At February 1, 2014, Lids Sports Group operated 1,133 stores, including 930 Lids stores, 177 Lids Locker Room and
Clubhouse stores and 26 Locker Room by Lids leased departments, averaging approximately 1,200 square feet,
throughout the United States and in Puerto Rico and Canada. Lids Sports Group added 80 net new stores and leased
departments in Fiscal 2014, including 15 acquired stores, and plans to open or acquire approximately 260 net new stores
in Fiscal 2015, which includes 175 Locker Room by Lids leased departments in Macy's department stores.
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,
4
apparel, accessories and novelties representing an assortment of college and professional teams. The Locker Room by
Lids leased departments in Macy's department stores offer headwear, apparel, accessories and novelties representing an
assortment of college and professional teams specific to that particular Macy's department store geographic location.
Schuh Group
The Schuh Group segment, including e-commerce operations, accounted for approximately 14% of the Company’s net
sales in Fiscal 2014. For Fiscal 2014, same store sales decreased 9%, comparable direct sales decreased 4% and
comparable sales, including both store and direct sales, decreased 8%. Operating income attributable to Schuh Group
was $3.1 million in Fiscal 2014, with an operating margin of 0.8%. Operating income for Schuh included $11.7 million
in compensation expense related to a deferred purchase price obligation in connection with the Company's acquisition of
Schuh during Fiscal 2012. For additional information, see Note 2 to the Consolidated Financial Statements included in
Item 8.
At February 1, 2014, Schuh Group operated 95 Schuh stores, averaging approximately 5,000 square feet, which include
both street-level and mall locations in the United Kingdom and the Republic of Ireland. Schuh Group opened its first
Schuh Kids store in Fiscal 2013. As of February 1, 2014, Schuh Group operated four Schuh Kids stores averaging 2,425
square feet. Schuh Group opened seven net new stores in Fiscal 2014 and plans to open approximately 12 net new
Schuh and Schuh Kids stores in Fiscal 2015. Schuh stores target men and women in the 15 to 30 age group, selling a
broad range of branded casual and athletic footwear along with a meaningful private label offering.
Johnston & Murphy Group
The Johnston & Murphy Group segment, including retail stores, catalog and e-commerce operations and wholesale
distribution, accounted for approximately 9% of the Company’s net sales in Fiscal 2014. Same store sales for Johnston &
Murphy retail operations increased 7%, comparable direct sales increased 15% and comparable sales, including both
store and direct sales, increased 8% for Fiscal 2014. Operating income attributable to Johnston & Murphy Group was
$17.6 million in Fiscal 2014, with an operating margin of 7.2%. All of the Johnston & Murphy wholesale sales are of the
Genesco-owned Johnston & Murphy brand and all of the group’s retail sales are of Johnston & Murphy branded
products.
Johnston & Murphy Retail Operations. At February 1, 2014, Johnston & Murphy operated 168 retail shops and factory
stores throughout the United States and in Canada averaging approximately 1,825 square feet and selling footwear,
apparel and accessories primarily for men in the 35 to 55 age group, targeting business and professional customers.
Women’s footwear and accessories are sold in select Johnston & Murphy locations. Johnston & Murphy retail shops are
located primarily in better malls and airports nationwide and sell a broad range of men’s dress and casual footwear,
apparel and accessories. The Company also sells Johnston & Murphy products directly to consumers through an e-
commerce website and a direct mail catalog. Retail prices for Johnston & Murphy footwear generally range from $100
to $275. Total footwear accounted for 66% of total Johnston & Murphy retail sales in Fiscal 2014, with the balance
consisting primarily of apparel and accessories. Johnston & Murphy Group added eleven net new shops and factory
stores, including two in Canada, and plans to open approximately eight net new shops and factory stores in Fiscal 2015.
Johnston & Murphy Wholesale Operations. Johnston & Murphy men’s and women's footwear and accessories are sold at
wholesale, primarily to better department and independent specialty stores. Johnston & Murphy’s wholesale customers
offer the brand’s footwear for dress, dress casual, and casual occasions, with the majority of styles offered in these
channels selling from $100 to $165. Additionally, the Company recently relaunched the Trask brand, with men's and
women's footwear and leather accessories offered primarily through better independent retailers and department stores,
an e-commerce website and catalog. Suggested retail prices for Trask footwear range from $195 to $495.
Licensed Brands
The Licensed Brands segment accounted for approximately 4% of the Company’s net sales in Fiscal 2014. Operating
income attributable to Licensed Brands was $10.6 million in Fiscal 2014, with an operating margin of 9.7%. 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 “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.
5
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 Brazil, Canada, China,
Dominican Republic, France, India, Indonesia, Italy, Korea, Mexico, Netherlands, Pakistan, Peru, 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, headwear, sports apparel and accessory industries. The Company’s retail
footwear, headwear, sports apparel and accessory competitors range from small, locally owned stores to regional and
national department stores, discount stores, specialty chains and online retailers. The Company also competes with
hundreds of footwear wholesale operations in the United States and throughout the world, most of which are relatively
small, specialized operations, but some of which are large, more diversified companies. Some of the Company’s
competitors have resources that are not available to the Company. The Company’s success depends upon its ability to
remain competitive with respect to the key factors of style, price, quality, comfort, brand loyalty, customer service, store
location and atmosphere and the ability to offer distinctive products.
Licenses
The Company owns its Johnston & Murphy®, H.S. Trask®, Keuka® and SureGrip® brands and owns or licenses the trade
names of its retail concepts either directly or through wholly-owned subsidiaries. The Dockers® brand footwear line,
introduced in Fiscal 1993, is sold under a license agreement granting the Company the exclusive right to sell men’s
footwear under the trademark in the United States, Canada and Mexico and in certain other Latin American countries.
The Dockers license agreement, as amended, 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 $85 million in Fiscal 2014
and approximately $84 million in Fiscal 2013. The Company licenses certain of its footwear brands, mostly in foreign
markets. License royalty income was not material in Fiscal 2014.
Wholesale Backlog
Most of the orders in the Company’s wholesale divisions are for delivery within 150 days. Because most of the
Company’s business is at-once, the backlog at any one time is not necessarily indicative of future sales. As of March 1,
2014, the Company’s wholesale operations had a backlog of orders, including unconfirmed customer purchase orders,
amounting to approximately $57.4 million, compared to approximately $46.1 million on March 2, 2013. 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 22,250 employees at February 1, 2014, approximately 120 of whom were employed in
corporate staff departments and the balance in operations. Retail stores employ a substantial number of part-time
employees, and approximately 13,050 of the Company’s employees were part-time.
Properties
At February 1, 2014, the Company operated 2,568 retail footwear, headwear and sports apparel and accessory stores and
leased departments throughout the United States and in Puerto Rico, Canada, the United Kingdom and the Republic of
Ireland. New shopping center store leases in the United States, Puerto Rico and Canada typically are for a term of
approximately 10 years. Store leases in the United Kingdom and the Republic of Ireland typically have terms of between
10 and 20 years. Both typically provide for rent based on a percentage of sales against a fixed minimum rent based on
the square footage leased.
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
Lebanon, TN
Indianapolis, IN
Nashville, TN
Owned/Leased
Owned
Segment
Journeys
Group
Leased Lids Sports
Group
Leased Various
Indianapolis, IN
Leased Lids Sports
Bathgate, Scotland
Owned
Group
Schuh
Group
Use
Distribution warehouse
Distribution warehouse and
administrative offices
Executive & footwear
operations offices
Distribution warehouse and
manufacturing
Distribution warehouse
Indianapolis, IN
Chapel Hill, TN
Leased Lids Sports
Group
Distribution warehouse and
administrative offices
Owned Licensed
Brands
Distribution warehouse
Fayetteville, TN
Owned Johnston &
Distribution warehouse
Deans Industrial Estate,
Livingston, Scotland
Lake Katrine, NY
Nashville, TN
Houston Industrial Estate,
Livingston, Scotland
Mississauga, Ontario,
Canada
Anderson, IN
Indianapolis, IN
Tigard, OR
Owned
Murphy
Group
Schuh
Group
Distribution warehouse and
administrative offices
Leased Lids Sports
Group
Distribution warehouse and
administrative offices
Owned
Leased
Journeys
Group
Schuh
Group
Distribution warehouse
Distribution warehouse
Leased Lids Sports
Distribution warehouse
Group
Leased Lids Sports
Group
Leased Lids Sports
Group
Leased Lids Sports
Group
Distribution Warehouse
Administrative offices
Administrative offices
Approximate
Area
Square Feet
320,000
311,600
306,455
*
271,825
244,644
195,080
182,000
178,500
106,813
73,000
63,000
51,012
28,392
18,463
17,217
7,231
*
The Company occupies approximately 85% of the building and subleases the remainder of the building.
The lease on the Company’s Nashville office expires in April 2017, with an option to renew for an additional five years.
The lease on the Indianapolis office expires in May 2015. The Company believes that all leases of properties that are
material to its operations may be renewed, or that alternative properties are available, on terms not materially less
favorable to the Company than existing leases.
Environmental Matters
The Company’s former manufacturing operations and the sites of those operations as well as the sites of its current
operations are subject to numerous federal, state, and local laws and regulations relating to human health and safety and
the environment. These laws and regulations address and regulate, among other matters, wastewater discharge, air
quality and the generation, handling, storage, treatment, disposal, and transportation of solid and hazardous wastes and
releases of hazardous substances into the environment. In addition, third parties and governmental agencies in some
cases have the power under such laws and regulations to require remediation of environmental conditions and, in the
case of governmental agencies, to impose fines and penalties. Several of the facilities owned by the Company (currently
or in the past) are located in industrial areas and have historically been used for extensive periods for industrial
7
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.
Our business involves a degree of fashion risk.
The majority of our businesses serve a fashion-conscious customer base and depend upon the ability of our buyers and
merchandisers to react to fashion trends, to purchase inventory that reflects such trends, and to manage our inventories
appropriately in view of the potential for sudden changes in fashion 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.
8
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, 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. In addition to the other risks disclosed herein, demand for our product offering in our non-
U.S. operations is also subject to local market conditions. As a result, there can be no assurance that Schuh's 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, sports apparel and accessory markets are intensely competitive. We currently compete
against a diverse group of retailers, including other regional and national specialty stores, department and discount
stores, small independents and e-commerce retailers, which sell products similar to and often identical to those we sell.
Our branded businesses, selling footwear at wholesale, also face intense competition, both from other branded wholesale
vendors and from private label initiatives of their retailer customers. A number of different competitive factors could
have a material adverse effect on our business, results of operations and financial condition, including:
• increased operational efficiencies of competitors;
• competitive pricing strategies;
• expansion by existing competitors;
• entry by new competitors into markets in which we currently operate; and
• adoption by existing retail competitors of innovative store formats or sales methods.
We are dependent on third-party vendors for the merchandise we sell.
We do not manufacture the merchandise we sell. This means that our product supply is subject to the ability and
willingness of third-party suppliers to deliver merchandise we order on time and in the quantities and of the quality we
need. In addition, a material portion of our retail footwear sales consists of products marketed under brands, belonging to
unaffiliated vendors, which have fashion significance to our customers. Our core retail hat and sports apparel businesses
are dependent upon products bearing sports and other logos, each generally controlled by a single licensee/vendor. If
those vendors were to decide not to sell to us or to limit the availability of their products to us, or if they become unable
because of economic conditions 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.
9
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.
Increased operating costs could have an adverse effect on our results.
Increased operating costs, including those resulting from potential increases in the minimum wage, store occupancy
costs, and other expense items, may reduce our operating margin and, by making it more difficult to identify new store
locations that we believe will meet our investment return requirements, slow our growth.
The operation of the Company’s business is heavily dependent on its information systems.
We depend on a variety of information technology systems for the efficient functioning of our business and security of
information. Much information essential to our business is maintained electronically, including competitively sensitive
information and potentially sensitive personal information about customers and employees. Our insurance policies may
not provide coverage for security breaches and similar incidents or may have coverage limits which may not be adequate
to reimburse us for losses caused by security breaches. We also rely on certain hardware and software vendors to
maintain and periodically upgrade many of these systems so that they can continue to support our business. The software
programs supporting many of our systems were licensed to the Company by independent software developers. The
inability of these developers or the Company to continue to maintain and upgrade these information systems and
software programs could disrupt or reduce the efficiency of our operations. In addition, costs and potential problems and
interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or
adequate support of existing systems could also disrupt or reduce the efficiency of our operations or leave the Company
vulnerable to security breaches.
10
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.
A privacy breach could have a material adverse effect on the Company's business and reputation.
We rely heavily on digital technologies for the successful operation of our business, including electronic messaging,
digital marketing efforts and the collection and retention of customer data and employee information. We also rely on
third parties to process credit card transactions, perform online e-commerce and social media activities and retain data
relating to the Company’s financial position and results of operations, strategic initiatives and other important
information. Despite the security measures we have in place, our facilities and systems and those of our third-party
service providers, may be vulnerable to cyber-security breaches, acts of vandalism, computer viruses, misplaced or lost
data, programming and/or human errors or other similar events. Any misappropriation, loss or other unauthorized
disclosure of confidential or personally identifiable information, whether by us or by our third-party service providers,
could adversely affect our business and operations, including loss of sales generated through our websites, severely
damaging our reputation and our relationships with our customers, suppliers, employees and investors and expose us to
risks of litigation and liability.
In addition, we may incur significant remediation costs in the event of a cyber-security breach or incident, including
liability for stolen customer or employee information, repairing system damage or providing credit monitoring or other
benefits to affected customers or employees. We may also incur increased costs to comply with various applicable laws
or industry standards regarding use and/or unauthorized disclosure of personal information. These and other cyber-
security-related compliance, prevention and remediation costs may adversely impact our financial condition and results
of operations.
The loss of, or disruption in, one of our distribution centers and other factors affecting the distribution of
merchandise, could have a material adverse effect on our business and operations.
Each of our operations uses a single distribution center to handle all or a significant amount of its merchandise. Most of
our operations’ inventory is shipped directly from suppliers to 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 the
operational experience of our U.S. businesses lies, and in other venues including outlet centers, major city street
locations, airports and tourist destinations. We cannot offer assurances that we will be able to open as many stores as we
have planned, that any new store will achieve similar operating results to those of our existing stores or that new stores
opened in markets in which we operate will not have a material adverse effect on the revenues and profitability of our
existing stores. The success of our planned expansion will be dependent upon numerous factors, many of which are
beyond our control, including the following:
• our ability to identify suitable markets and individual store sites within those markets;
• the competition for suitable store sites;
• our ability to negotiate favorable lease terms for new stores and renewals (including rent and other costs) with
landlords;
• 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 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.
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;
12
• the lack of new fashion trends to drive demand in certain of our businesses;
• competition;
• timing of holidays including sales tax holidays and the timing of tax refunds;
• general regional and national economic conditions;
• inclement weather;
• changes in our merchandise mix;
• our ability to distribute merchandise efficiently to our stores;
• timing and type of sales events, promotional activities or other advertising;
• other external events beyond our control;
• 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.
Goodwill recorded with acquisitions is subject to impairment which could reduce the Company's
profitability.
Deterioration in the Company’s market value, whether related to the Company’s operating performance or to disruptions
in the equity markets or deterioration in the operating performance of the business unit with which goodwill is
associated, could require the Company to recognize the impairment of some or all of the $288.1 million of goodwill on
its Consolidated Balance Sheets at February 1, 2014, resulting in the reduction of net assets and a corresponding non-
cash charge to earnings in the amount of the impairment.
13
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 $14.2 million on its Consolidated Balance Sheets related to such acquisitions. The Company
found that the result of its annual impairment test, which valued the business at approximately $3.9 million in excess of
its carrying value, indicated no impairment at that time. The Company may determine in future impairment tests that
some or all of the carrying value of the goodwill may not be recoverable. Such a finding would require a write-off of the
amount of the carrying value that is impaired, which would reduce the Company's profitability in the period of the
impairment charge. Holding all other assumptions constant as of the measurement date, the Company noted that an
increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the Lids Team Sports
business by $5.9 million. Furthermore, the Company noted that a decrease in projected annual revenue by one percent
would reduce the fair value of the Lids Team Sports business by $0.4 million. However, if other assumptions do not
remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount. Since the maximum
non-cash goodwill impairment charge would be $14.2 million, the Company does not believe that any impairment
charge related thereto would be material; 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.
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 (the "Village"), has additionally asserted that the Company is liable for the costs
associated with enhanced treatment required by the impact of the groundwater plume from the site on two public water
supply wells, including historical total costs ranging from approximately $1.8 million to in excess of $2.5 million, and
future operation and maintenance costs which the Village estimates at $126,400 annually while the enhanced treatment
continues. On December 14, 2007, the Village filed a complaint 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
14
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 if an acceptable settlement agreement cannot be reached.
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 1, 2014,
$11.9 million as of February 2, 2013 and $13.0 million as of January 28, 2012. All such provisions reflect the
Company's estimates of the most likely cost (undiscounted, including both current and noncurrent portions) of resolving
the contingencies, based on facts and circumstances as of the time they were made. There is no assurance that relevant
facts and circumstances will not change, necessitating future changes to the provisions. Such contingent liabilities are
included in the liability arising from provision for discontinued operations on the accompanying Consolidated Balance
Sheets because it relates to former facilities operated by the Company. The Company has made pretax accruals for
certain of these contingencies, including approximately $0.5 million reflected in Fiscal 2014, $0.8 million reflected in
Fiscal 2013 and $1.8 million reflected in Fiscal 2012. 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 sought relief including damages for the
alleged infringement, costs, expenses and pre- and post-judgment interest and injunctive relief. Pursuant to a settlement
agreement, the matter was dismissed on February 28, 2014. The settlement did not have a material effect on its financial
condition or results of operations.
On June 13, 2012, a former vendor of a subsidiary of the Company filed an action, Perfect Curve, Inc. v. Hat World, Inc.,
in U.S. District Court in Massachusetts, alleging patent, trademark, trade dress, and copyright infringement against the
subsidiary based on the sale of a line of products developed by the subsidiary. The parties reached agreement to settle
15
the matter and the action was dismissed pursuant to a Stipulated Dismissal dated March 13, 2014. The settlement did
not have a material effect on its financial condition or results of operations.
On May 14, 2012, a putative class and collective action, Maro v. Hat World, Inc., was filed in the U.S. District Court for
the Northern District of Illinois. The action alleges that the Company failed to pay the plaintiff and other, similarly
situated retail store employees of Hat World, Inc., for time spent making bank deposits of store collections, and seeks to
recover unpaid wages, liquidated damages, statutory penalties, attorney's fees, and costs pursuant to the federal Fair
Labor Standards Act, the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. On January
15, 2014, the court dismissed the Maro case with prejudice, based on the plaintiffs' failure to prosecute. On July 16,
2012 and July 30, 2012, additional putative class and collective actions, Chavez v. Hat World, Inc. and Dismukes v. Hat
World, Inc., were filed in the same court, alleging that certain Hat World employees were misclassified as exempt from
overtime pay, and seeking similar relief. The Chavez and Dismukes actions have been consolidated. The parties have
reached an agreement in principle to resolve the matter, subject to documentation and court approval. The Company
does not expect the matter or its settlement as proposed to have a material effect on its financial condition or results of
operations.
On August 30, 2012, a former employee of a Company subsidiary filed a putative class and collective action, Kershner v.
Hat World, Inc., in the Philadelphia, Pennsylvania Court of Common Pleas alleging violations of the Pennsylvania
Minimum Wage Act by the subsidiary. The Company has reached an agreement to resolve the matter, subject to approval
by the court. On February 10, 2014, the court granted preliminary approval of the proposed settlement. The Company
does not expect the matter or its settlement as proposed to have a material effect on its financial condition or results of
operations.
On May 23, 2013, a former employee of the Company filed an action, Everett v. Genesco Inc., in the U.S. District Court
for the Middle District of Florida alleging violations of the Fair Labor Standards Act, seeking designation as a collective
action and the award of allegedly unpaid minimum wages, overtime pay, liquidated damages, penalties, interest, attorneys'
fees, and other relief. The Company disputes the material allegations in the action and intends to defend it.
On May 17, 2013, a former employee filed a putative class and representative action, Garcia v. Genesco, Inc. in the
Superior Court of California for the County of Ventura, alleging various claims under the California Labor Code, including
failure to provide meal and rest periods, failure to timely pay wages, failure to provide accurate itemized wage statements,
and unfair competition and violation of the Private Attorneys’ General Act of 2004, and seeking unspecified damages and
penalties. On August 30, 2013, the Company removed the action to the United States District Court for the Central District
of California. The Company disputes the material allegations in the complaint and is defending the matter.
In addition to the matters specifically described in this Item 3, Legal Proceedings, the Company is a party to other legal
and regulatory proceedings and claims arising in the ordinary course of its business. While management does not
believe that the Company's liability with respect to any of these other matters is likely to have a material effect on its
financial position, cash flows, or results of operations, 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 OF THE REGISTRANT
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, 60, 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, 68, 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, 60, Senior Vice President. Mr. Caplan rejoined the Company in 2002 as chief executive officer of the
branded group and president of Johnston & Murphy and was named senior vice president of the Company in November 2003.
Mr. Caplan first joined the Company in June 1982 and served as president of Genesco’s Laredo-Code West division from
December 1985 to May 1992. After that time, Mr. Caplan was president of Stride Rite’s Children’s Group and then its Ked’s
Footwear division, from 1992 to 1996. He was vice president, New Business Development and Strategy, for Service
Merchandise Corporation from 1997 to 1998. Prior to rejoining Genesco in October 2002, Mr. Caplan served as president and
chief executive officer of Hi-Tec Sports North America beginning in 1998.
James C. Estepa, 62, Senior Vice President. Mr. Estepa joined the Company in 1985 and in February 1996 was named vice
president operations of Genesco Retail, which included the Jarman Shoe Company, Journeys, Boot Factory and General Shoe
Warehouse. Mr. Estepa was named senior vice president operations of Genesco Retail in June 1998. He was named president of
Journeys in March 1999. Mr. Estepa was named senior vice president of the Company in April 2000. He was named president
and chief executive officer of the Genesco Retail Group in 2001, assuming additional responsibilities of overseeing the
Company's former Underground Station segment.
Kenneth J. Kocher, 48, Senior Vice President. Mr. Kocher joined Hat World in 1997 as chief financial officer and was named
president in October 2005. He was named senior vice president of the Company in October 2006 in addition to continuing his
role as president of Hat World. Prior to joining Hat World, he served as a controller with several companies and was a certified
public accountant with Edie Bailley, a public accounting firm.
Roger G. Sisson, 50, 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, 47, 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, 59, Vice President and Chief Accounting Officer. Mr. Williams joined the Company in 1977, was named
director of corporate accounting and financial reporting in 1993 and chief accounting officer in April 1995. He was named vice
president in October 2006.
Matthew N. Johnson, 49, Vice President and Treasurer. Mr. Johnson joined the Company in 1993 as manager, corporate
finance and was elected assistant treasurer in December 1993. He was elected treasurer in June 1996. He was named vice
president finance in October 2006 and renamed treasurer in April 2011 after a period of service as chief financial officer of one
of the Company's divisions. Prior to joining the Company, Mr. Johnson was a vice president in the corporate and institutional
banking division of The First National Bank of Chicago.
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). The following table sets forth for
the periods indicated the high and low sales prices of the common stock as shown in the New York Stock Exchange Composite
Transactions listed in the Wall Street Journal.
Fiscal Year ended February 2
2013 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year ended February 1
2014 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$
$
High
Low
78.97 $
78.78
74.93
63.26
60.02
55.65
55.40
50.33
High
Low
64.39 $
75.84
73.45
79.32
56.87
61.79
60.03
65.70
There were approximately 2,675 common shareholders of record on March 14, 2014.
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.
Issuer Purchases of Equity Securities
None.
Equity Compensation Plan Information
Refer to Part III, Item 12.
18
ITEM 6, SELECTED FINANCIAL DATA
Financial Summary
In Thousands except per common share
data,
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
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
2014
2013
2012
2011
2010
Fiscal Year End
$ 2,624,972
67,135
163,435
$ 2,604,817
63,697
169,863
$ 2,291,987
53,737
161,485
$ 1,789,839
47,738
87,228
$ 1,574,352
47,462
60,374
$
$
158,860
92,982
164,832
112,897
156,393
93,451
86,106
55,244
(329 )
92,653
(462 )
$ 112,435
$
(1,025 )
92,426
$
(1,336 )
53,908
$
$
3.99
3.94
$
4.78
4.69
$
3.89
3.83
$
2.30
2.27
(0.01 )
(0.02 )
3.98
3.92
(0.02 )
(0.01 )
4.76
4.68
(0.05 )
(0.04 )
3.84
3.79
(0.06 )
(0.05 )
2.24
2.22
50,440
29,059
(273 )
28,786
1.31
1.28
(0.02 )
(0.01 )
1.29
1.27
$ 1,439,284
33,730
1,305
914,885
98,456
$ 1,326,072
50,682
3,924
817,936
71,737
$ 1,229,761
40,704
4,957
721,774
49,456
$
960,507
—
5,183
620,038
29,299
$
863,525
—
5,220
577,299
33,825
6.2 %
6.5 %
7.0 %
4.9 %
3.8 %
$
$
38.25
451,297
2.5
$
34.09
$ 407,073
2.5
$
$
29.74
291,990
2.0
$
$
26.19
279,595
2.2
$
$
23.98
280,621
2.7
3.5 %
5.8 %
5.3 %
— %
— %
2,568
22,250
2,459
22,700
2,387
21,475
2,309
15,200
2,276
13,925
*
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.
19
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 2014, 2013, 2012, 2011 and 2010 were asset impairment and other
charges of $1.3 million, $17.0 million, $2.7 million, $8.6 million and $13.4 million, respectively. See Note 3 to the
Consolidated Financial Statements for additional information regarding these charges.
Long-term debt includes current obligations. In January 2014, the Company entered into the third amended and restated credit
agreement in the aggregate principal amount of $400.0 million. During Fiscal 2010, the Company entered into separate
exchange agreements whereby it acquired and retired all $86.2 million in aggregate principal amount of its Debentures due
June 15, 2023 in exchange for the issuance of 4,552,824 shares of its common stock. As a result of the exchange agreements
and conversions, the Company recognized a loss on the early retirement of debt of $5.5 million reflected in earnings from
continuing operations. 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.
20
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 material costs, and other factors affecting the
cost of products, the Company’s ability to continue to complete and integrate acquisitions, expand its business and
diversify its product base and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-
period sales comparisons. Additional factors that could affect the Company’s prospects and cause differences from
expectations include the ability to build, open, staff and support additional retail stores and to renew leases in existing
stores and control occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected
expense levels, deterioration in the performance of individual businesses or of the Company’s market value relative to its
book value, resulting in impairments of fixed assets or intangible assets or other adverse financial consequences,
unexpected changes to the market for the Company’s shares, variations from expected pension-related charges caused by
conditions in the financial markets, and the 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 recently relaunched Trask brand, the licensed Dockers® brand, and other brands that the
Company licenses for men’s footwear. The Company’s wholesale footwear brands are distributed to more than 1,000
retail accounts in the United States, including a number of leading department, discount, and specialty stores. The
Company’s business also includes Lids Sports, which operates (i) headwear and accessory stores under the Lids® name
and other names in the U.S., Puerto Rico and Canada, (ii) the Lids Locker Room and Lids Clubhouse businesses,
consisting of sports-oriented fan shops featuring a broad array of licensed merchandise such as apparel, hats and
accessories, sports decor and novelty products, operating under various trade names, (iii) licensed team merchandise
departments in Macy's department stores operated under the name Locker Room by Lids and on macys.com under a
license agreement with Macy's, (iv) e-commerce operations and (v) an athletic team dealer business operating as Lids
Team Sports. Including both the footwear businesses and the Lids Sports business, at February 1, 2014, the Company
operated 2,568 retail stores and leased departments in the U.S., Puerto Rico, Canada, the United Kingdom and the
Republic of Ireland.
During Fiscal 2014, the Company operated five reportable business segments (not including corporate): (i) Journeys
Group, comprised of Journeys, Journeys Kidz, Shi by Journeys and Underground by Journeys retail footwear chains,
catalog and e-commerce operations; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce
operations; (iii) Lids Sports Group, comprised as described in the preceding paragraph; (iv) Johnston & Murphy Group,
comprised of Johnston & Murphy retail operations, catalog and e-commerce operations and wholesale distribution of
products under the Johnston & Murphy and Trask brands; and (v) Licensed Brands, comprised of Dockers® Footwear,
sourced and marketed under a license from Levi Strauss & Company; SureGrip®Footwear, occupational footwear
primarily sold directly to consumers; and other brands.
The 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
21
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
Canada. The Journeys Group operates 31 stores in Canada. Journeys also sells footwear and accessories through direct-
to-consumer catalog and e-commerce operations.
The Schuh retail footwear stores sell a broad range of branded casual and athletic footwear along with a meaningful
private label offering primarily for 15 to 30 year old men and women. The stores, which average approximately 5,000
square feet, include both street-level and mall locations in the United Kingdom and the Republic of Ireland. During the
third quarter of Fiscal 2013, the Schuh Group opened its first Schuh Kids store. As of February 1, 2014, the Company
has opened four Schuh Kids stores that sell footwear primarily for younger children, ages five to 12, and average 2,425
square feet. The Schuh Group also sells footwear through e-commerce operations.
The Lids Sports Group includes stores and kiosks, primarily under the Lids banner, that sell licensed and branded
headwear to men and women primarily in the early-teens to mid-20’s age group. The Lids store locations average
approximately 875 square feet and are primarily in malls, airports, street-level stores and factory outlet centers
throughout the United States, Puerto Rico and Canada. The Lids Sports Group also operates Lids Locker Room and Lids
Clubhouse stores under a number of trade names, selling licensed sports headwear, apparel and accessories to sports fans
of all ages in locations averaging approximately 3,050 square feet in malls and other locations primarily in the United
States. The Lids Sports Group operates 110 stores in Canada. The Lids Sports Group also operates Locker Room by
Lids leased departments in Macy's department stores selling headwear, apparel, accessories and novelties from an
assortment of college and professional teams specific to that particular Macy's department store geographic location.
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, apparel 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 1, 2014,
Johnston & Murphy operated seven stores in Canada. The Company also has license and distribution agreements for
wholesale and retail sales of Johnston & Murphy products in various non - U.S. jurisdictions. The Company also sells
Johnston & Murphy footwear and accessories in factory stores, averaging approximately 2,350 square feet, located in
factory outlet malls, and through a direct -to-consumer catalog and e-commerce operations. In addition, Johnston &
Murphy shoes are distributed through the Company’s wholesale operations to better department and independent
specialty stores. Additionally, the Company recently relaunched the Trask brand, with men's and women's footwear and
leather accessories distributed to better independent retailers and department stores.
The Licensed Brands segment markets casual and dress casual footwear under the licensed Dockers® brand to men aged
30 to 55 through many of the same national retail chains that carry Dockers slacks and sportswear and in department and
specialty stores across the country. The Company entered into an exclusive license with Levi Strauss & Co. to market
men’s footwear in the United States under the Dockers brand name in 1991. Levi Strauss & Co. and the Company have
subsequently added additional territories, including Canada and Mexico and certain other Latin American countries. The
Dockers license agreement was renewed on July 23, 2012 for a term expiring November 30, 2015, subject to extension
for an additional 3-year term if certain conditions are met. 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, both in stores and digital commerce, 4) increasing
operating margin and 5) enhancing the value of its brands. Most of the additional stores planned in North America are
currently planned to be Lids Locker Room, Lids Clubhouse, Journeys Kidz and Johnston & Murphy stores, all of which
management considers to be underpenetrated in many markets.
To further supplement its organic growth potential, the Company has made acquisitions, including the acquisition of the
Schuh Group in June 2011 and several smaller acquisitions of businesses in the Lids Sports Group's markets, and expects
to consider acquisition opportunities, either to augment its existing businesses or to enter new businesses that it considers
compatible with its existing businesses, core expertise and strategic profile. Acquisitions involve a number of risks,
including, among others, inaccurate valuation of the acquired business, the assumption of undisclosed liabilities, the
22
failure to integrate the acquired business appropriately, and distraction of management from existing businesses. The
Company seeks to mitigate these risks by applying appropriate financial metrics in its valuation analysis and developing
and executing plans for due diligence and integration that are appropriate to each acquisition. The Company also seeks
appropriate opportunities to extend existing brands and retail concepts. For example, the Schuh Group opened its first
Schuh Kids store in Scotland during the third quarter of Fiscal 2013. The Company typically tests such extensions on a
relatively small scale to determine their viability and to refine their strategies and operations before making significant,
long-term commitments.
More generally, the Company attempts to develop strategies to mitigate the risks it views as material, including those
discussed under the caption “Forward Looking Statements,” above, and those discussed in Item 1A, Risk Factors.
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 0.8% during Fiscal 2014 compared to Fiscal 2013. The increase reflected a 4%
increase in Lids Sports Group sales, an 11% increase in Johnston & Murphy Group sales and a 1% increase in Licensed
Brands sales, offset by a 3% decrease in Journeys Group sales and a 2% decrease in Schuh Group sales. Included in
Fiscal 2013 was a 53rd week compared to a 52-week year for Fiscal 2014. Excluding the 53rd week from Fiscal 2013,
sales would have increased 2.2% for Fiscal 2014. Gross margin decreased as a percentage of net sales during Fiscal
2014, reflecting gross margin decreases in Schuh Group, Lids Sports Group and Licensed Brands, partially offset by
increased gross margin in Journeys Group and Johnston & Murphy Group. Selling and administrative expenses
increased as a percentage of net sales during Fiscal 2014 in all of the Company's business segments except Licensed
Brands. Earnings from operations decreased as a percentage of net sales from 6.5% in Fiscal 2013 to 6.2% in Fiscal
2014, reflecting decreased earnings in Journeys Group, Schuh Group and Lids Sports Group, partially offset by
improved earnings from operations in Johnston & Murphy Group and Licensed Brands.
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
that was paid in June 2013. The Company financed the acquisition with borrowings under its existing credit facility and
the balance from cash on hand. The purchase agreement also provides for deferred purchase price payments totaling £25
million, payable in installments of £15 million and £10 million on the third and fourth anniversaries of the closing,
respectively, subject to the payees’ not having terminated their employment with Schuh under certain specified
circumstances. This amount will be recorded as compensation expense and not reported as a component of the cost of
the acquisition.
Headquartered in Scotland, Schuh is a specialty retailer of casual and athletic footwear sold through 99 retail stores in
the United Kingdom and the Republic of Ireland as of February 1, 2014. The Company completed the acquisition in
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 2014 include net sales of $364.7 million and operating earnings of $3.1 million. The results of Schuh's operations
for Fiscal 2013 include net sales of $370.5 million and operating earnings of $11.2 million. The results of Schuh's
operations for the fiscal year from the date of acquisition through January 28, 2012, including net sales of $212.3 million
23
and operating earnings of $11.7 million, have been included in the Company's Consolidated Financial Statements for the
fiscal year ended January 28, 2012. During the fiscal year ended January 28, 2012, the Company expensed $7.4 million
in costs related to the acquisition. These costs were recorded as selling and administrative expenses on the Consolidated
Statement of Operations. Compensation expense related to the Schuh acquisition deferred purchase price obligation was
$11.7 million, $12.1 million and $7.2 million in Fiscal 2014, 2013 and 2012, respectively. This expense is included in
the operating earnings for the Schuh Group segment.
Other Acquisitions
In Fiscal 2014 and 2013, the Company completed other acquisitions of primarily small retail chains for a total purchase
price of $13.6 million and $23.8 million, respectively. 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 $1.3 million in Fiscal 2014, including $3.3 million for network
intrusion expenses, $2.4 million for other legal matters, $2.3 million for retail store asset impairments and $1.6 million
for a lease termination offset by an $(8.3) million gain on the lease termination of a New York City Journeys store.
The Company recorded a pretax charge to earnings of $17.0 million in Fiscal 2013, including $15.6 million for network
intrusion expenses, $1.4 million for retail store asset impairments and $0.1 million for other legal matters.
The Company recorded a pretax charge to earnings of $2.7 million in Fiscal 2012, including $1.1 million for retail store
asset impairments, $0.9 million for other legal matters and $0.7 million for network intrusion expenses.
Postretirement Benefit Liability Adjustments
The return on pension plan assets was $12.3 million for Fiscal 2014, compared to an expected return of $6.7 million. The
discount rate used to measure benefit obligations increased from 4.00% to 4.40% in Fiscal 2014. As a result of the
increase in the return on plan assets and the increased discount rate, the pension liability reflected in the Consolidated
Balance Sheets decreased to $9.2 million compared to $20.5 million in Fiscal 2013. There was a decrease in the pension
liability adjustment of $9.5 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 2014, the Company recorded an additional charge to earnings of $0.5 million ($0.3 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 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.
24
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 ("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.
Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on,
markups, markdowns, and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory
method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure
consistent presentation, the Company employs the retail inventory method in multiple subclasses of inventory with
similar gross margins, and analyzes markdown requirements at the stock number level based on factors such as
inventory turn, average selling price, and inventory age. In addition, the Company accrues markdowns as necessary.
These additional markdown accruals reflect all of the above factors as well as current agreements to return products to
vendors and vendor agreements to provide markdown support. In addition to markdown provisions, the Company
maintains provisions for shrinkage and damaged goods based on historical rates.
Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market
conditions, fashion trends, and overall economic conditions. Failure to make appropriate conclusions regarding these
factors may result in an overstatement or understatement of inventory value. A change of 10% from the recorded
provisions for markdowns, shrinkage and damaged goods would have changed inventory by $1.1 million at February 1,
2014.
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
25
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 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 $14.2 million on its Consolidated Balance Sheets related to such acquisitions. The Company
found that the result of its annual impairment test, which valued the business at approximately $3.9 million in excess of
its carrying value, indicated no impairment at that time. The Company may determine in future impairment tests that
some or all of the carrying value of the goodwill may not be recoverable. Such a finding would require a write-off of the
amount of the carrying value that is impaired, which would reduce the Company's profitability in the period of the
impairment charge. Holding all other assumptions constant as of the measurement date, the Company noted that an
increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the Lids Team Sports
business by $5.9 million. Furthermore, the Company noted that a decrease in projected annual revenue by one percent
would reduce the fair value of the Lids Team Sports business by $0.4 million. However, if other assumptions do not
remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount. Since the maximum
non-cash goodwill impairment charge would be $14.2 million, the Company does not believe that any impairment
charge related thereto would be material.
Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters,
including those disclosed in Note 13 to the Company’s Consolidated Financial Statements. The Company has made
pretax accruals for certain of these contingencies, including approximately $0.5 million reflected in Fiscal 2014, $0.8
million reflected in Fiscal 2013 and $1.8 million reflected in Fiscal 2012. 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 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
26
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 other potential negative evidence that may exist at such time. In the event the
deferred tax valuation allowance is released, the Company would record an income tax benefit for the portion or all of
the deferred tax valuation allowance released. At February 1, 2014, the Company had a deferred tax valuation allowance
of $3.8 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 41.5% for Fiscal 2014 compared to 31.5% for 2013. The tax
rate for Fiscal 2013 was lower primarily due to the reversal of previously recorded charges 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 2014, 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.
27
Discount Rate – Pension liability and future pension expense increase as the discount rate is reduced. The Company
discounted future pension obligations using a rate of 4.40%, 4.00% and 4.35% for Fiscal 2014, 2013 and 2012,
respectively. The discount rate at February 1, 2014 was determined based on a yield curve of high quality corporate
bonds with cash flows matching the Company’s plans’ expected benefit payments. For Fiscal 2014, 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
been increased by 0.5%, the projected benefit obligation would have decreased by $6.1 million and the accumulated
benefit obligation would have decreased by $6.1 million. If the discount rate had been decreased by 0.5%, the projected
benefit obligation would have been increased by $6.8 million and the accumulated benefit obligation would have
increased by $6.8 million.
Amortization of Gains and Losses – The Company utilizes a calculated value of assets, which is an averaging method
that recognizes changes in the fair values of assets over a period of five years. At the end of Fiscal 2014, the Company
had unrecognized actuarial losses of $27.1 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 $4.4 million, $4.3 million and $2.8 million in
Fiscal 2014, 2013 and 2012, respectively. The Company’s pension expense is expected to decrease in Fiscal 2015 by
approximately $1.5 million due to a smaller actuarial loss to be amortized.
Comparable Sales
During Fiscal 2013, the Company revised its presentation of comparable sales to include its e-commerce and direct mail
catalog businesses. Prior year comparable sales have been adjusted to conform to the current year presentation. For
purposes of this report, "comparable sales" are sales from stores open longer than one year, beginning in the fifty-third
week of a store’s operation (which we refer to in this report as "same store sales"), and sales from websites operated
longer than one year and direct mail catalog sales (which we refer to in this report as "comparable direct sales").
Temporarily closed stores are excluded from the comparable sales calculation for every full week of the store closing.
Expanded stores are excluded from the comparable sales calculation until the fifty-third week of operation in the
expanded format.
Results of Operations—Fiscal 2014 Compared to Fiscal 2013
The Company’s net sales for Fiscal 2014 (52 weeks) increased 0.8% to $2.62 billion from $2.60 billion in Fiscal 2013
(53 weeks). The increase in net sales was a result of increased sales in Lids Sports Group, Johnston & Murphy Group
and Licensed Brands, offset by decreased sales in Journeys and Schuh Groups. Net sales for Fiscal 2013 included an
estimated $35.2 million of sales due to the fifty-third week. Gross margin was flat at $1.30 billion, but decreased as a
percentage of net sales from 49.9% to 49.5%, primarily reflecting decreased gross margin as a percentage of net sales in
the Schuh Group, Lids Sports Group and Licensed Brands, offset slightly by increased gross margin as a percentage of
net sales in the Journeys and Johnston & Murphy Groups. Selling and administrative expenses in Fiscal 2014 increased
2.0% from Fiscal 2013 and increased as a percentage of net sales from 42.7% to 43.2%, primarily reflecting expense
increases in all the Company's business segments except Licensed Brands. The Company records buying and
merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these
costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in
the calculation of gross margin. Explanations of the changes in results of operations are provided by business segment in
discussions following these introductory paragraphs.
Earnings from continuing operations before income taxes (“pretax earnings”) for Fiscal 2014 were $158.9 million,
compared to $164.8 million for Fiscal 2013. Pretax earnings for Fiscal 2014 included asset impairment and other charges
of $1.3 million, including $3.3 million for expenses related to the computer network intrusion announced in December
2010, $2.4 million for other legal matters, $2.3 million for retail store asset impairments and $1.6 million for a lease
termination offset by an $(8.3) million gain on the lease termination of a New York City Journeys store. 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, $1.4 million for retail store asset impairments and $0.1 million for other legal
matters.
28
Net earnings for Fiscal 2014 were $92.7 million ($3.92 diluted earnings per share) compared to $112.4 million ($4.68
diluted earnings per share) for Fiscal 2013. Net earnings for Fiscal 2014 includes $0.3 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 2013 includes $0.5 million ($0.01 diluted loss per
share) charge to earnings (net of tax) primarily for anticipated costs of environmental remedial alternatives related to
former facilities operated by the Company. The Company recorded an effective federal income tax rate of 41.5% for
Fiscal 2014 compared to 31.5% for Fiscal 2013. Fiscal 2013's lower effective tax rate reflects the reversal of previously
recorded charges 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
2014
2013
(dollars in thousands)
%
Change
$ 1,082,241
97,377
$
$ 1,111,490
109,953
$
(2.6 )%
(11.4 )%
9.0 %
9.9 %
Net sales from Journeys Group decreased 2.6% to $1.08 billion for Fiscal 2014 from $1.11 billion for Fiscal 2013. The
decrease reflects primarily a 2% decrease in same store sales, an 18% increase in comparable direct sales and a 1%
decrease in comparable sales, including both store and direct sales. The comparable store sales decrease reflected a 3%
decrease in footwear unit comparable sales partially offset by a 1% increase in the average price per pair of shoes. Total
unit sales decreased 4% during the same period. The store count for Journeys Group was 1,168 stores at the end of Fiscal
2014, including 174 Journeys Kidz stores, 50 Shi by Journeys stores, 117 Underground by Journeys stores and 31
Journeys stores in Canada, compared to 1,157 stores at the end of Fiscal 2013, including 156 Journeys Kidz stores, 51
Shi by Journeys stores, 130 Underground by Journeys stores and 24 Journeys stores in Canada.
Journeys Group earnings from operations for Fiscal 2014 decreased 11.4% to $97.4 million, compared to $110.0 million
for Fiscal 2013. The decrease in earnings from operations was primarily due to decreased net sales and to increased
expenses as a percentage of net sales, reflecting negative leverage from negative comparable sales, partially offset by
decreased bonus accruals.
Schuh Group
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2014
2013
(dollars in thousands)
$
$
364,732
3,063
370,480
11,209
0.8 %
3.0 %
%
Change
(1.6 )%
(72.7 )%
Net sales from the Schuh Group decreased 1.6% to $364.7 million for Fiscal 2014, compared to $370.5 million for
Fiscal 2013. The sales decrease reflects a 9% decrease in same store sales, a 4% decrease in comparable direct sales, an
8% decrease in comparable sales, including both store and direct sales, and a $2.1 million decrease in sales from changes
in exchange rates, partially offset by a 13% increase in average 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). Schuh Group
operated 99 stores, including four Schuh Kids stores at the end of Fiscal 2014 compared to 79 stores, including three
Schuh Kids stores, and 13 concessions at the end of Fiscal 2013.
Schuh Group earnings from operations were $3.1 million for Fiscal 2014 compared to $11.2 million for Fiscal 2013.
Earnings included $11.7 million this year and $12.1 million last year in compensation expense related to a deferred
purchase price obligation in connection with the acquisition. Earnings also included $13.1 million this year and $15.8
million last year related to accruals for a contingent bonus payment for Schuh employees provided for in the Schuh
acquisition. The decreases in deferred purchase price expense and contingent bonus expense this year were offset by
29
decreased gross margin and negative leverage from the negative comparable sales. The decreased gross margin reflected
increased promotional activity and changes in product mix. 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
2014
2013
(dollars in thousands)
$
$
820,996
63,748
791,255
82,867
7.8 %
10.5 %
%
Change
3.8 %
(23.1 )%
Net sales from the Lids Sports Group increased 3.8% to $821.0 million for Fiscal 2014 from $791.3 million for Fiscal
2013. The increase primarily reflects a 6% increase in average Lids Sports Group stores operated. Same store sales
decreased 1%, comparable direct sales increased 26% and comparable sales, including both store and direct sales, were
flat for Fiscal 2014. The comparable sales decrease reflected a 2% decrease in comparable store hat units sold while
average price per hat was flat. Lids Sports Group operated 1,133 stores at the end of Fiscal 2014, including 110 Lids
stores in Canada, 177 Lids Locker Room and Clubhouse stores and 26 Locker Room by Lids leased departments at
Macy's, compared to 1,053 stores at the end of Fiscal 2013, including 98 Lids stores in Canada and 144 Lids Locker
Room and Clubhouse stores.
Lids Sports Group earnings from operations for Fiscal 2014 decreased 23.1% to $63.7 million compared to $82.9 million
for Fiscal 2013. The decrease in operating income was primarily due to decreased gross margin as a percentage of net
sales, reflecting increased promotional activity and changes in product mix, and to increased expenses as a percentage of
net sales, primarily reflecting negative leverage due to negative same store sales.
Johnston & Murphy Group
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2014
2013
(dollars in thousands)
$
$
245,941
17,638
221,860
15,696
7.2 %
7.1 %
%
Change
10.9 %
12.4 %
Johnston & Murphy Group net sales increased 10.9% to $245.9 million for Fiscal 2014 from $221.9 million for Fiscal
2013. The increase reflected primarily a 7% increase in same store sales, a 15% increase in comparable direct sales and
an 8% increase in comparable sales, including both store and direct sales, an 8% increase in Johnston & Murphy
wholesale sales, a 5% increase in average stores operated for Johnston & Murphy retail operations and additional sales
for the recently relaunched Trask brand. Unit sales for the Johnston & Murphy wholesale business increased 8% in
Fiscal 2014, while the average price per pair of shoes was flat for the same period. Retail operations accounted for
71.9% of the Johnston & Murphy Group's sales in Fiscal 2014, up from 71.7% in Fiscal 2013. The comparable sales
increase in Fiscal 2014 reflects a 5% increase in the average price per pair of shoes for Johnston & Murphy retail
operations, primarily associated with increased sales of higher-priced dress shoes and increased prices in the casual lines
and footwear unit comparable sales increased 3%. The store count for Johnston & Murphy retail operations at the end of
Fiscal 2014 included 168 Johnston & Murphy shops and factory stores, including seven stores in Canada, compared to
157 Johnston & Murphy shops and factory stores, including five stores in Canada, at the end of Fiscal 2013.
Johnston & Murphy earnings from operations for Fiscal 2014 increased 12.4% to $17.6 million from $15.7 million for
Fiscal 2013, primarily due to increased net sales and increased gross margin as a percentage of net sales, reflecting
increased initial margins, offset by increased expenses as a percentage of net sales, due primarily to expenses associated
with the relaunch of the Trask brand.
30
Licensed Brands
Fiscal Year Ended
Net sales
Earnings from operations
Operating margin
$
$
2014
2013
(dollars in thousands)
$
$
109,780
10,614
108,498
10,078
9.7 %
9.3 %
%
Change
1.2 %
5.3 %
Licensed Brands’ net sales increased 1.2% to $109.8 million for Fiscal 2014 from $108.5 million for Fiscal 2013. The
sales increase reflects an increase in sales of SureGrip Footwear and Dockers Footwear partially offset by decreased
sales of the Chaps line of footwear. Unit sales for Dockers Footwear decreased 1% for Fiscal 2014, while the average
price per pair of shoes increased 2% for the same period.
Licensed Brands’ earnings from operations for Fiscal 2014 increased 5.3%, from $10.1 million for Fiscal 2013 to $10.6
million, primarily due to increased net sales and decreased expenses as a percentage of net sales, reflecting decreased
bonus accruals.
Corporate, Interest Expenses and Other Charges
Corporate and other expense for Fiscal 2014 was $29.0 million compared to $59.9 million for Fiscal 2013. Corporate
expense in Fiscal 2014 included $1.3 million in asset impairment and other charges, primarily for network intrusion
expenses, retail store asset impairments, other legal matters and a lease termination, partially offset by a gain on another
lease termination. 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. Excluding the charges
listed above, corporate and other expense decreased primarily due to decreased bonus accruals.
Interest expense decreased 9.5% from $5.1 million in Fiscal 2013 to $4.6 million in Fiscal 2014 primarily due to lower
interest on the U.K. debt resulting from payments of the U.K. debt during Fiscal 2014 and Fiscal 2013.
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 49.9%, 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 13.0% from Fiscal 2012 but decreased as a
percentage of net sales from 42.9% to 42.7%, primarily reflecting expense leverage in the Johnston & Murphy and
Journeys 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.
Pretax earnings for Fiscal 2013 were $164.8 million, compared to $156.4 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 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 $112.4 million ($4.68 diluted earnings per share) compared to $92.4 million ($3.79
diluted earnings per share) for Fiscal 2012. Net earnings for Fiscal 2013 includes $0.5 million ($0.01 diluted loss per
31
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 ($0.04 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 31.5% for Fiscal 2013
compared to 40.2% for Fiscal 2012. This year’s lower effective tax rate of 31.5% 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)
%
Change
$ 1,111,490
109,953
$
$ 1,020,116
89,045
$
9.0 %
23.5 %
9.9 %
8.7 %
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 23.5% to $110.0 million, compared to $89.0 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.
Schuh Group
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2013
2012
(dollars in thousands)
$
$
370,480
11,209
212,262
11,711
3.0 %
5.5 %
%
Change
74.5%
(4.3)%
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 $11.2 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 purchase price
and contingent bonus payment. See Note 2 to the Consolidated Financial Statements for additional information related
to the Schuh acquisition.
32
Lids Sports Group
Fiscal Year Ended
Net sales
Earnings from operations
Operating margin
$
$
2013
2012
(dollars in thousands)
$
$
791,255
82,867
759,324
86,037
10.5 %
11.3 %
%
Change
4.2 %
(3.7 )%
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 decreased 3.7% to $82.9 million compared to $86.0 million
for Fiscal 2012. The decrease in operating income was primarily due to increased expenses as a percentage of net sales,
primarily reflecting negative leverage due to negative comparable sales and lower gross margin due to lowered prices in
the snap-back category.
Johnston & Murphy Group
Net sales
Earnings from operations
Operating margin
$
$
Fiscal Year Ended
2013
2012
(dollars in thousands)
$
$
221,860
15,696
201,725
13,743
7.1 %
6.8 %
%
Change
10.0 %
14.2 %
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 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 14.2% to $15.7 million from $13.7 million for
Fiscal 2012, primarily due to increased net sales.
33
Licensed Brands
Fiscal Year Ended
Net sales
Earnings from operations
Operating margin
$
$
2013
2012
(dollars in thousands)
$
$
108,498
10,078
97,444
9,451
9.3 %
9.7 %
%
Change
11.3 %
6.6 %
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 6.6%, 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 $59.9 million compared to $48.5 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 increased primarily due to increases in bonus accruals, professional fees, restricted stock expense and
salary expense.
Interest expense decreased 0.6% from $5.2 million in Fiscal 2012 to $5.1 million in Fiscal 2013.
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)
Feb. 1, 2014
Feb. 2, 2013
(dollars in millions)
Jan. 28, 2012
$
$
$
59.4 $
451.3 $
33.7 $
59.8 $
407.1 $
50.7 $
53.8
292.0
40.7
Working Capital
The Company’s business is seasonal, with the Company’s investment in inventory and accounts receivable normally
reaching peaks in the spring and fall of each year. Historically, cash flow from operations has been generated principally
in the fourth quarter of each fiscal year.
Cash provided by operating activities was $140.0 million in Fiscal 2014 compared to $123.2 million in Fiscal 2013. The
$16.8 million increase from operating activities from Fiscal 2013 reflects an increase in cash flow from changes in
accounts payable of $37.8 million, partially offset by decreased earnings of $19.8 million. The $37.8 million increase in
cash flow from accounts payable reflects changes in buying patterns and payment terms negotiated with individual
vendors.
The $58.4 million increase in inventories at February 1, 2014 from February 2, 2013 levels reflects increases in retail
inventory, reflecting slower than expected sales and a 6.4% increase in square footage, and increased wholesale
inventory in Licensed Brands and Lids Team Sports.
Accounts receivable at February 1, 2014 increased $3.7 million compared to February 2, 2013, due primarily to
increased wholesale sales in the Licensed Brands business and increased tenant allowance and other receivables in retail.
34
Cash provided by operating activities was $123.2 million in Fiscal 2013 compared to $145.0 million in Fiscal 2012. The
$21.8 million decrease from operating activities from Fiscal 2012 reflects a decrease in cash flow from changes in
accounts receivable, inventory, accounts payable, prepaids and other current assets and other accrued liabilities of $8.8
million, $18.7 million, $16.8 million, $9.8 million and $16.0 million, respectively, partially offset by improved earnings
and a $43.8 million increase from changes in other assets and liabilities. The $8.8 million decrease in cash flow from
accounts receivable was due to increased footwear wholesale sales. The $18.7 million decrease in cash flow from
inventory reflects increases in retail inventory, reflecting slower than expected sales, and increased inventory in
Licensed Brands. The $9.8 million decrease in cash flow from prepaids and other current assets was due to changes in
prepaid income taxes. The $16.8 million decrease in cash flow from accounts payable reflects changes in buying
patterns and payment terms negotiated with individual vendors. The $16.0 million decrease in cash flow from other
accrued liabilities reflects decreased bonus accruals and decreased income tax accruals in Fiscal 2013 compared to Fiscal
2012. The $43.8 million increase in cash flow from other assets and liabilities reflects increased accruals for the
deferred purchase price and bonus earn-out related to Schuh and an increase in the bonus bank liability and a decrease in
long-term receivables related to the network intrusion.
The $61.0 million increase in inventories at February 2, 2013 from January 28, 2012 levels reflects increases in retail
inventory, reflecting slower than expected sales and a 5.5% increase in square footage, and increased inventory in
Licensed Brands to support growth initiatives.
Accounts receivable at February 2, 2013 increased $5.8 million compared to January 28, 2012, due primarily to
increased wholesale sales reflecting growth in the Johnston & Murphy wholesale business and Licensed Brands
business.
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 January 31, 2014, the Company entered into a Third Amended and Restated Credit Agreement (the “Credit Facility”)
with the lenders party thereto and Bank of America, N.A., as agent, providing for a revolving credit facility in the
aggregate principal amount of $400.0 million, including a $70.0 million sublimit for the issuance of letters of credit and
a domestic swingline subfacility of up to $40.0 million, a revolving credit subfacility for the benefit of GCO Canada,
Inc. in an aggregate amount not to exceed $25.0 million, which includes a $5.0 million sublimit for the issuance of
letters of credit, and revolving credit subfacility for the benefit of Genesco (UK) Limited in an aggregate amount not to
exceed $50.0 million, which includes a $10.0 million sublimit for the issuance of letters of credit and a swingline
subfacility of up to $10.0 million. The facility has a five-year term. Any swingline loans and any letters of credit and
borrowings under the Canadian facilities will reduce the availability under the Credit Facility on a dollar-for-dollar basis.
The Company has the option, from time to time, to increase the availability under the Credit Facility by an aggregate
amount of up to $150.0 million subject to, among other things, the receipt of commitments for the increased amount. In
connection with this increased facility, the Canadian revolving credit facility may be increased up to no more than $40.0
million.
Genesco (UK) Limited has a one-time option to increase the availability of its subfacility under the Credit Facility by an
additional amount of up to $50.0 million.
The aggregate amount of the loans made and letters of credit issued under the Credit Facility shall at no time exceed the
lesser of the facility amount ($400.0 million or, if increased as described above, up to $550.0 million or $600.0 million,
respectively) or the "Borrowing Base", which generally is based on 90% of eligible inventory plus 85% of eligible
wholesale receivables (50% of eligible wholesale receivables of the Lids Team Sports business) plus 90% of eligible
credit card and debit card receivables less applicable reserves (the "Loan Cap"). The relevant assets of Genesco (UK)
Limited will be included in the Borrowing Base if the additional $50.0 million sublimit increase is exercised, provided
that amounts borrowed by Genesco (UK) Limited based solely on its own borrowing base will be limited to $50.0
million and the total outstanding to Genesco (UK) Limited will not exceed 30% of the Loan Cap.
The Credit Facility also provides that a first-in, last-out tranche could be added to the revolving credit facility at the
option of the Company subject to, among other things, the receipt of commitments for such tranche. For additional
information on the Company’s Credit Facility, see Note 6 to the Consolidated Financial Statements included in Item 8,
Financial Statements and Supplementary Data.
35
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 less than £0.1 million, £4.8 million
and £4.5 million on the B term loan in Fiscal 2014, 2013 and 2012, respectively.
In November 2013, Schuh Group Limited entered into an Amended and Restated Facilities Agreement to provide for an
additional term loan of up to £12.5 million ("C term loan"). The C term loan bears interest at LIBOR plus 2.50% per
annum.
There were $33.7 million in UK term loans outstanding at February 1, 2014. 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 1, 2014. The UK Credit Facilities are secured by a pledge of all the assets of Schuh
and its subsidiaries.
Revolving credit borrowings averaged $38.5 million during Fiscal 2014 and $30.5 million during Fiscal 2013, as cash on
hand, cash generated from operations and revolver borrowings primarily funded seasonal working capital requirements,
capital expenditures and stock repurchases for Fiscal 2014.
There were $14.5 million of letters of credit outstanding and no revolver borrowings outstanding under the Credit
Facility at February 1, 2014. The Company is not required to comply with any financial covenants under the Credit
Facility unless Excess Availability (as defined in the Credit Agreement) is less than the greater of $25.0 million or 10.0%
of the Loan Cap. If and during such time as Excess Availability is less than the greater of $25.0 million or 10.0% of the
Loan Cap, the Credit Facility requires the Company to meet a minimum fixed charge coverage ratio of (a) an amount
equal to consolidated EBITDA less capital expenditures and taxes paid in cash, in each case for such period, to (b) fixed
charges for such period, of not less than 1.0:1.0. Excess Availability was $358.0 million at February 1, 2014. Because
Excess Availability exceeded $25.0 million or 10.0% of the Loan Cap, the Company was not required to comply with
this financial covenant at February 1, 2014.
The Company’s Credit Facility prohibits the payment of dividends and other restricted payments unless as of the date of
the making of any Restricted Payment (as defined in the Credit Facility) or consummation of any Acquisition (as defined
in the Credit Facility), (a) no Default (as defined in the Credit Facility) or Event of Default (as defined in the Credit
Facility)exists or would arise after giving effect to such Restricted Payment or Acquisition, and (b) either (i) the
Borrowers (as defined in the Credit Facility) have pro forma projected Excess Availability for the following six month
period equal to or greater than 25% of the Loan Cap, after giving pro forma effect to such Restricted Payment or
Acquisition, or (ii) (A) the Borrowers have pro forma projected Excess Availability for the following six month period of
less than 25% of the Loan Cap but equal to or greater than 15% of the Loan Cap, after giving pro forma effect to the
Restricted Payment or Acquisition, and (B) the Fixed Charge Coverage Ratio (as defined in the Credit Facility), on a
pro-forma basis for the twelve months preceding such Restricted Payment or Acquisition, will be equal to or greater than
1.0:1.0 and (c) after giving effect to such Restricted Payment or Acquisition, the 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 2015. The Company’s UK Credit Facilities prohibit the payment of any
dividends by Schuh or its subsidiaries to the Company.
The Company issued a mandatory notice of redemption effective April 30, 2013, to its holders of Subordinated Serial
Preferred Stock $2.30 Series 1, $4.75 Series 3 and $4.75 Series 4, and on its $1.50 Subordinated Cumulative Preferred
Stock during the first quarter of Fiscal 2014. The total cost of the redemption was $1.5 million. As a result, all of these
preferred issues of stock were either converted to common stock or redeemed in the first quarter of Fiscal 2014 and there
are no outstanding shares remaining. Therefore, there is no longer an annual dividend requirement.
36
Contractual Obligations
The following tables set forth aggregate contractual obligations and commitments as of February 1, 2014.
(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
11 $
33,730
1,306,479
621,533
104,844
1,254
2,067,851 $
Less than 1
year
1 - 3
years
3 - 5
years
1 $
6,793
235,049
621,533
25,800
176
889,352 $
3 $
16,439
405,584
—
78,368
351
500,745 $
3 $
4,117
284,021
—
553
351
289,045 $
Amount of Commitment Expiration Per Period
Total Amounts
Committed
Less than 1
year
1 - 3
years
3 - 5
years
More
than 5
years
4
6,381
381,825
—
123
376
388,709
More
than 5
years
14,466 $
14,466 $
14,466 $
14,466 $
— $
— $
— $
— $
—
—
(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 and earn-out bonus 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 $10.7 million due to their uncertain nature in timing of payments, if any.
Capital Expenditures
Capital expenditures were $98.5 million, $71.7 million and $49.5 million for Fiscal 2014, 2013 and 2012, respectively.
The $26.8 million increase in Fiscal 2014 capital expenditures as compared to Fiscal 2013 reflected an increase in retail
store capital expenditures due to the construction of 183 new stores and leased departments opened in Fiscal 2014,
compared to 104 stores in Fiscal 2013. 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.
Total capital expenditures in Fiscal 2015 are expected to be approximately $149 million. These include retail capital
expenditures of approximately $134 million to open approximately 25 Journeys stores, including 5 in Canada, 25
Journeys Kidz stores, 15 Schuh stores, including three Schuh Kids, 11 Johnston & Murphy shops and factory stores, and
268 Lids Sports Group stores and leased departments, including 45 Lids stores, with 15 stores in Canada, 48 Lids Locker
Room and Lids Clubhouse stores, and 175 Locker Room by Lids leased departments in Macy's department stores, and to
complete approximately 164 major store renovations. The planned amount of capital expenditures in Fiscal 2015 for
wholesale operations and other purposes is approximately $15 million, including approximately $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 2015. The
approximately $7.3 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 2015.
37
The Company had total available cash and cash equivalents of $59.4 million and $59.8 million as of February 1, 2014
and February 2, 2013, respectively, of which approximately $39.4 million and $38.5 million was held by the Company's
foreign subsidiaries as of February 1, 2014 and February 2, 2013, respectively. The Company's strategic plan does not
require the repatriation of foreign cash in order to fund its operations in the U.S., and it is the Company's current
intention to permanently reinvest its foreign cash and cash equivalents outside of the U.S. If the Company were to
repatriate foreign cash to the U.S., it would be required to accrue and pay U.S. taxes in accordance with applicable U.S.
tax rules and regulations as a result of the repatriation.
Common Stock Repurchases
The Company repurchased 337,665 shares of common stock at a cost of $20.7 million during Fiscal 2014. During the
third quarter of Fiscal 2014, the Company's board of directors increased the share repurchase authorization to $75.0
million. Shares repurchased during the third quarter of Fiscal 2014, at a cost of $9.5 million, will be applied to the new
repurchase authorization. Therefore, the Company has $65.5 million remaining under its current $75.0 million share
repurchase authorization. The Company repurchased 645,904 shares at a cost of $37.6 million during Fiscal 2013. The
Company did not repurchase any shares during Fiscal 2012.
Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters,
including those disclosed in Note 13 to the Company’s Consolidated Financial Statements. The Company has made
pretax accruals for certain of these contingencies, including approximately $0.5 million reflected in Fiscal 2014, $0.8
million reflected in Fiscal 2013 and $1.8 million reflected in Fiscal 2012. 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.
Outstanding Debt of the Company – The Company has $33.7 million of outstanding U.K. term loans at a weighted
average interest rate of 3.40% as of February 1, 2014. A 100 basis point adverse change in interest rates would increase
interest expense by $0.3 million on the $33.7 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 1, 2014. As a result, the Company considers the interest rate market risk implicit in
these investments at February 1, 2014 to be low.
Accounts Receivable – The Company’s accounts receivable balance at February 1, 2014 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 businesses, three customers each
accounted for 5% and no other customer accounted for more than 4% of the Company’s total trade receivables balance
as of February 1, 2014. The Company monitors the credit quality of its customers and establishes an allowance for
doubtful accounts based upon factors surrounding credit risk of specific customers, historical trends and other
information, as well as customer specific factors; however, credit risk is affected by conditions or occurrences within the
economy and the retail industry, as well as company-specific information.
Summary – Based on the Company’s overall market interest rate exposure at February 1, 2014, the Company believes
that the effect, if any, of reasonably possible near-term changes in interest rates on the Company’s consolidated financial
position, results of operations or cash flows for Fiscal 2015 would not be material.
38
New Accounting Principles
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”)
No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“AOCI”), which
sets forth additional disclosure requirements for items reclassified out of AOCI and into net income, and is effective for
annual and interim reporting periods beginning after December 15, 2012. The Company adopted ASU No. 2013-02 in
the first quarter of Fiscal 2014 by presenting amounts reclassified out of AOCI as a separate disclosure in Note 1 to the
Consolidated Financial Statements. Amounts reclassified out of AOCI were related to amortization of net actuarial loss
associated with the Company's pension and postretirement plans.
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 Consolidated Financial Statements
Consolidated Balance Sheets, February 1, 2014 and February 2, 2013
Consolidated Statements of Operations, each of the three fiscal years ended 2014, 2013 and 2012
Consolidated Statements of Comprehensive Income, each of the three fiscal years ended 2014, 2013 and 2012
Consolidated Statements of Cash Flows, each of the three fiscal years ended 2014, 2013 and 2012
Consolidated Statements of Equity, each of the three fiscal years ended 2014, 2013 and 2012
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 1, 2014, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (1992 Framework) (the COSO criteria). Genesco Inc. and Subsidiaries' management is responsible for
maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Genesco Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of February 1, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Genesco Inc. and Subsidiaries as of February 1, 2014 and February 2, 2013, and the related
consolidated statements of operations, comprehensive income, cash flows, and equity for each of the three fiscal years in the
period ended February 1, 2014, and our report dated April 2, 2014 expressed an unqualified opinion thereon. Our audits also
included the financial statement schedule listed in the Index at Item 15.
Nashville, Tennessee
April 2, 2014
/s/ Ernst & Young LLP
41
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
The Board of Directors and Shareholders
Genesco Inc.
We have audited the accompanying consolidated balance sheets of Genesco Inc. and Subsidiaries (the “Company”) as of
February 1, 2014 and February 2, 2013, and the related consolidated statements of operations, comprehensive income, cash
flows and equity for each of the three fiscal years in the period ended February 1, 2014. Our audits also included the financial
statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Genesco Inc. and Subsidiaries at February 1, 2014 and February 2, 2013, and the consolidated results of their
operations and their cash flows for each of the three fiscal years in the period ended February 1, 2014, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth
therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of February 1, 2014, based on criteria established in Internal Control
– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992
Framework), and our report dated April 2, 2014 expressed an unqualified opinion thereon.
Nashville, Tennessee
April 2, 2014
/s/ Ernst & Young LLP
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 $4,420 at February 1,
2014 and $6,082 at February 2, 2013
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 $4,312 at
February 1, 2014 and $3,350 at February 2, 2013
Other intangibles, net of accumulated amortization of $20,645 at
February 1, 2014 and $17,220 at February 2, 2013
Other noncurrent assets
Total Assets
As of Fiscal Year End
February 1,
2014
February 2,
2013
$
59,447 $
59,795
52,646
567,261
23,089
54,432
756,875
6,169
20,474
131,110
173,992
35,623
335,287
702,655
(422,618 )
280,037
3,342
288,100
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
18,731
273,827
77,571
77,408
9,082
24,277
1,439,284 $
11,598
20,568
1,326,072
$
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 1, 2014 – 24,407,724/23,919,260
February 2, 2013 – 24,484,915/23,996,451
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
February 1,
2014
February 2,
2013
$
145,483 $
49,078
26,247
2,188
6,793
68,526
7,263
305,578
26,937
9,223
175,311
4,112
521,161
118,350
55,241
25,985
2,096
5,675
60,659
7,192
275,198
45,007
20,514
157,407
4,159
502,285
1,305
3,924
24,408
190,568
734,533
(16,767 )
(17,857 )
916,190
1,933
918,123
1,439,284 $
24,485
170,360
669,189
(28,241 )
(17,857 )
821,860
1,927
823,787
1,326,072
$
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
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
Fiscal Year
2013
2014
2012
$ 2,624,972 $ 2,604,817 $ 2,291,987
1,143,632
984,193
2,677
161,485
1,306,200
1,111,717
17,037
169,863
1,325,922
1,134,274
1,341
163,435
4,641
(66 )
4,575
158,860
65,878
92,982
(329 )
92,653 $
5,126
(95 )
5,031
164,832
51,935
112,897
(462 )
112,435 $
5,157
(65 )
5,092
156,393
62,942
93,451
(1,025 )
92,426
3.99 $
(0.01 )
3.98 $
3.94 $
(0.02 )
3.92 $
4.78 $
(0.02 )
4.76 $
4.69 $
(0.01 )
4.68 $
3.89
(0.05 )
3.84
3.83
(0.04 )
3.79
$
$
$
$
$
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
Fiscal Year
Net earnings
Other comprehensive income (loss):
Gain (loss) on foreign currency forward contract,
net of tax of $0.0 million for each period
Pension liability adjustment net of tax of $6.2 million
and $2.4 million for 2014 and 2013, respectively, and
net of tax benefit of $3.1 million for 2012
Postretirement liability adjustment net of tax benefit of
$0.3 million for 2014 and $0.1 million for 2013 and
2012
Foreign currency translation adjustments
Total other comprehensive income (loss)
Comprehensive Income
2014
2013
$ 92,653 $ 112,435 $ 92,426
2012
—
42
(35 )
9,510
3,657
(4,670 )
(542 )
2,506
11,474
(109 )
(3,847 )
(8,661 )
$ 104,127 $ 117,160 $ 83,765
(79 )
1,105
4,725
The accompanying Notes are an integral part of these Consolidated Financial Statements.
46
Genesco Inc.
and Subsidiaries
Consolidated Statements of Cash Flows
In Thousands
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
Proceeds from issuance 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
Redemption of preferred shares
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 (Decrease) Increase 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
$
$
The accompanying Notes are an integral part of these Consolidated Financial Statements.
47
Fiscal Year
2013
2014
2012
$
92,653 $
112,435 $
92,426
67,135
801
14,983
(525 )
2,347
12,295
543
(3,784 )
1,301
(3,684 )
(58,386 )
(8,885 )
19,850
(10,093 )
13,448
139,999
(98,456 )
(13,567 )
75
(111,948 )
(2 )
(6,428 )
15,124
402,200
(429,900 )
3,784
(20,676 )
6,025
(1,462 )
(33 )
3,230
(1,788 )
(29,926 )
1,527
(348 )
59,795
59,447 $
63,697
792
(17,618 )
1,325
1,396
10,508
796
(4,820 )
1,327
(5,821 )
(61,049 )
(4,524 )
(17,953 )
(6,624 )
49,343
123,210
(71,737 )
(23,818 )
81
(95,474 )
(2 )
(13,581 )
—
439,600
(416,900 )
4,820
(37,650 )
(2,925 )
—
(147 )
4,965
4
(21,816 )
85
6,005
53,790
59,795 $
53,737
708
9,661
2,004
1,119
7,660
1,692
(4,744 )
1,005
3,011
(42,324 )
5,286
(1,201 )
9,384
5,536
144,960
(49,456 )
(92,985 )
27
(142,414 )
(22 )
(25,321 )
—
299,800
(294,800 )
4,744
—
2,931
—
(193 )
9,820
(939 )
(3,980 )
(710 )
(2,144 )
55,934
53,790
3,769 $
52,618
4,391 $
81,607
4,789
50,254
Genesco Inc.
and Subsidiaries
Consolidated Statements of Equity
Total Non-
Redeemable
Preferred
Stock
5,183 $
—
—
$
Common
Stock
24,163 $
—
—
Additional
Paid-In
Capital
131,910 $
—
—
—
—
—
—
—
—
—
—
—
(226 )
—
4,957
—
—
—
—
—
—
—
—
—
—
(1,033 )
—
3,924
—
—
—
—
—
—
—
—
—
390
3
—
—
304
(93 )
—
—
(9 )
—
24,758
—
—
—
224
2
—
194
(76 )
—
(646 )
29
—
24,485
—
—
—
130
3
—
214
(105 )
—
9,297
130
7,659
1
(304 )
(4,034 )
4,585
—
235
—
149,479
—
—
—
4,584
155
10,508
(194 )
—
4,820
—
1,008
—
170,360
—
—
—
2,904
193
12,295
(214 )
105
Retained
Earnings
506,127 $
92,426
—
(193 )
—
—
—
—
—
—
—
—
—
—
598,360
112,435
—
(147 )
—
—
—
—
(4,455 )
—
(37,004 )
—
—
669,189
92,653
—
(33 )
—
—
—
—
(6,938 )
Accumulated
Other
Comprehensive
Loss
(24,305 ) $
—
(8,661 )
Non
Controlling
Interest
Non-
Redeemable
2,503 $
—
—
Treasury
Shares
(17,857 ) $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(32,966 )
—
4,725
—
—
—
—
(17,857 )
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(28,241 )
—
11,474
—
—
—
—
(17,857 )
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(254 )
2,249
—
—
—
—
—
—
—
—
—
—
—
(322 )
1,927
—
—
—
—
—
—
—
—
In Thousands
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
Shares repurchased
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 exercises
Shares repurchased
Other
Noncontrolling interest – loss
Balance February 2, 2013
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 exercises
Shares repurchased
Redemption of preferred shares
Other
Noncontrolling interest – income
—
—
(1,462 )
(1,157 )
—
1,305 $
—
(338 )
—
19
—
24,408 $
3,784
—
—
1,141
—
190,568 $
—
(20,338 )
—
—
—
734,533 $
—
—
—
—
—
(16,767 ) $
—
—
—
—
—
(17,857 ) $
—
—
—
—
6
1,933 $
Balance February 1, 2014
The accompanying Notes are an integral part of these Consolidated Financial Statements.
$
48
Total
Equity
627,724
92,426
(8,661 )
(193 )
9,687
133
7,659
1
—
(4,127 )
4,585
—
—
(254 )
728,980
112,435
4,725
(147 )
4,808
157
10,508
—
(4,531 )
4,820
(37,650 )
4
(322 )
823,787
92,653
11,474
(33 )
3,034
196
12,295
—
(6,938 )
3,784
(20,676 )
(1,462 )
3
6
918,123
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, schuh.co.uk,
johnstonmurphy.com and trask.com and catalogs, and at wholesale, primarily under the Company's
Johnston & Murphy brand, the recently relaunched Trask brand, the licensed Dockers brand and
other brands that the Company licenses for footwear, and the Company's SureGrip® line of slip-
resistant, occupational footwear. The Company's business also includes Lids Sports Group, which
operates headwear and accessory stores in the U.S. and Canada primarily under the Lids, Hat World
and Hat Shack banners; the Lids Locker Room and Lids Clubhouse businesses, consisting of sports-
oriented fan shops featuring a broad array of licensed merchandise such as apparel, hats and
accessories, sports decor and novelty products, operating under various trade names; licensed team
merchandise departments in Macy's department stores operated under the name of Locker Room by
Lids and on macys.com, under a license agreement with Macy's; certain e-commerce operations
including lids.com, lids.ca, lidslockerroom.com and lidsclubhouse.com; and an athletic team dealer
business operating as Lids Team Sports. Including both the footwear businesses and the Lids Sports
Group business, at February 1, 2014, the Company operated 2,568 retail stores in the U.S., Puerto
Rico, Canada, the United Kingdom and the Republic of Ireland.
During Fiscal 2014, 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, 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, catalog and e-commerce operations and
wholesale distribution of products under the Johnston & Murphy and Trask brands; and (v) Licensed
Brands, comprised of Dockers® Footwear, sourced and marketed under a license from Levi
Strauss & Company; SureGrip®Footwear, occupational footwear primarily sold directly to
consumers; and other brands.
Principles of Consolidation
All subsidiaries are consolidated in the consolidated financial statements. All significant
intercompany transactions and accounts have been eliminated.
Fiscal Year
The Company’s fiscal year ends on the Saturday closest to January 31. As a result, Fiscal 2014 was a 52-
week year with 364 days, Fiscal 2013 was a 53-week year with 371 days and Fiscal 2012 was a 52-week
year with 364 days. Fiscal 2014 ended on February 1, 2014, Fiscal 2013 ended on February 2, 2013 and
Fiscal 2012 ended on January 28, 2012.
49
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Significant areas requiring management estimates or judgments include the following key financial
areas:
Inventory Valuation
The Company values its inventories at the lower of cost or market.
In its footwear wholesale operations, its Schuh Group segment and its Lids Sports Group
wholesale operations, except for the Anaconda Sports wholesale division, cost is determined using
the FIFO method. Market value is determined using a system of analysis which evaluates
inventory at the stock number level based on factors such as inventory turn, average selling price,
inventory level, and selling prices reflected in future orders. 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.
50
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments
about current market conditions, fashion trends, and overall economic conditions. Failure to make
appropriate conclusions regarding these factors may result in an overstatement or understatement
of inventory value.
Impairment of Long-Lived Assets
The Company periodically assesses the realizability of its long-lived assets, other than goodwill,
and evaluates such assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Asset impairment is determined to
exist if estimated future cash flows, undiscounted and without interest charges, are less than the
carrying amount. Inherent in the analysis of impairment are subjective judgments about future
cash flows. Failure to make appropriate conclusions regarding these judgments may result in an
overstatement or understatement of the value of long-lived assets. See also Notes 3 and 5.
The goodwill impairment test involves performing a qualitative assessment, on a reporting unit
level, based on current circumstances. If the results of the qualitative assessment indicate that it is
more likely than not that the fair value of a reporting unit is greater than its carrying amount, a
two-step impairment test will not be performed. However, if the results of the qualitative
assessment indicate that it is more likely than not that the fair value of a reporting unit is less than
its carrying amount, then a two-step impairment test is performed. Alternatively, the Company
may elect to bypass the qualitative assessment and proceed directly to the two-step impairment
test, on a reporting unit level. The first step is a comparison of the fair value and carrying value of
the business unit with which the goodwill is associated. The Company estimates fair value using
the best information available, and computes the fair value derived by an income approach
utilizing discounted cash flow projections. The income approach uses a projection of a reporting
unit’s estimated operating results and cash flows that is discounted using a weighted-average cost
of capital that reflects current market conditions. A key assumption in the Company’s fair value
estimate is the weighted average cost of capital utilized for discounting its cash flow projections in
its income approach. The Company believes the rate it used in its latest annual test, which was
completed 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.
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
51
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
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 of the reporting unit to all of the assets and
liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical
analysis that would calculate the implied fair value of goodwill. 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 $0.5 million in Fiscal 2014, $0.8 million in Fiscal 2013 and $1.8 million
in Fiscal 2012. 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 13.
Revenue Recognition
Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales and
value added taxes. Catalog and internet sales are recorded at estimated time of delivery to the
customer and are net of estimated returns and exclude sales and value added taxes. Wholesale
revenue is recorded net of estimated returns and allowances for markdowns, damages and
miscellaneous claims when the related goods have been shipped and legal title has passed to the
customer. Shipping and handling costs charged to customers are included in net sales. Estimated
returns are based on historical returns and claims. Actual amounts of markdowns have not differed
materially from estimates. Actual returns and claims in any future period may differ from
historical experience.
Income Taxes
As part of the process of preparing the Consolidated Financial Statements, the Company is
required to estimate its income taxes in each of the tax jurisdictions in which it operates. This
process involves estimating actual current tax obligations together with assessing temporary
52
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
differences resulting from differing treatment of certain items for tax and accounting purposes,
such as depreciation of property and equipment and valuation of inventories. These temporary
differences result in deferred tax assets and liabilities, which are included within the Consolidated
Balance Sheets. The Company then assesses the likelihood that its deferred tax assets will be
recovered from future taxable income or other sources. Actual results could differ from this
assessment if adequate taxable income is not generated in future periods. To the extent the
Company believes that recovery of an asset is at risk, valuation allowances are established. To the
extent valuation allowances are established or increased in a period, the Company includes an
expense within the tax provision in the Consolidated Statements of Operations. These deferred tax
valuation allowances may be released in future years when management considers that it is more
likely than not that some portion or all of the deferred tax assets will be realized. In making such a
determination, management will need to periodically evaluate whether or not all available
evidence, such as future taxable income and reversal of temporary differences, tax planning
strategies, and recent results of operations, provides sufficient positive evidence to offset any
potential negative evidence that may exist at such time. In the event the deferred tax valuation
allowance is released, the Company would record an income tax benefit for the portion or all of the
deferred tax valuation allowance released. At February 1, 2014, the Company had a deferred tax
valuation allowance of $3.8 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 41.5% for Fiscal 2014 compared to 31.5%
for Fiscal 2013 and 40.2% for Fiscal 2012. The tax rate for Fiscal 2013 was lower compared to
Fiscal 2014 and Fiscal 2012 primarily due to the reversal of previously recorded charges 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
53
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
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, respectively, in their Consolidated Balance Sheets and to recognize changes in
that funded status in accumulated other comprehensive loss, net of tax, in the year in which the
changes occur.
The Company accounts for the defined 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.
Cash and Cash Equivalents
The Company had total available cash and cash equivalents of $59.4 million and $59.8 million as of
February 1, 2014 and February 2, 2013, respectively. Included in cash and cash equivalents at
February 1, 2014 and February 2, 2013 are cash equivalents of $0.0 million and $0.2 million,
respectively. Cash equivalents are highly-liquid financial instruments having an original maturity of
three months or less.
At February 1, 2014, substantially all of the Company’s domestic cash was invested in deposit
accounts at FDIC-insured banks. The majority of payments due from banks for domestic customer
credit card transactions process within 24 - 48 hours and are accordingly classified as cash and cash
equivalents in the Consolidated Balance Sheets.
At February 1, 2014 and February 2, 2013, outstanding checks drawn on zero-balance accounts at
certain domestic banks exceeded book cash balances at those banks by approximately $42.1 million
and $36.1 million, respectively. These amounts are included in accounts payable in the Consolidated
Balance Sheets.
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
54
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
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 businesses, three customers each
accounted for 5% of the Company’s total trade receivables balance, while no other customer
accounted for more than 4% of the Company’s total trade receivables balance as of February 1,
2014.
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.
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
55
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
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 $182.4 million for the Lids Sports Group, $104.9 million for the Schuh Group and $0.8
million for Licensed Brands at February 1, 2014, and $172.3 million for the Lids Sports Group,
$100.7 million for the Schuh Group and $0.8 million for Licensed Brands at February 2, 2013. 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 $14.2 million on its Consolidated Balance Sheets related to
such acquisitions. The Company found that the result of its annual impairment test, which valued
the business at approximately $3.9 million in excess of its carrying value, indicated no impairment at
that time. The Company may determine in future impairment tests that some or all of the carrying
value of the goodwill may not be recoverable. Such a finding would require a write-off of the
amount of the carrying value that is impaired, which would reduce the Company's profitability in the
period of the impairment charge. Holding all other assumptions constant as of the measurement
date, the Company noted that an increase in the weighted average cost of capital of 100 basis points
would reduce the fair value of the Lids Team Sports business by $5.9 million. Furthermore, the
Company noted that a decrease in projected annual revenue by one percent would reduce the fair
value of the Lids Team Sports business by $0.4 million. However, if other assumptions do not
remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount.
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.
56
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Fair Value of Financial Instruments
The carrying amounts and fair values of the Company’s financial instruments at February 1, 2014 and
February 2, 2013 are:
In thousands
February 1,
2014
Carrying
Amount
Fair
Value
February 2, 2013
Fair
Value
Carrying
Amount
U.S. Revolver Borrowings
UK Term Loans
$
— $
33,730
— $
33,840
27,700 $
22,982
27,742
22,982
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 $8.7 million, $8.2 million and $9.2 million for Fiscal 2014, 2013 and 2012, respectively.
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
57
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
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 $0.8 million, $0.7 million and $0.6 million for Fiscal 2014, 2013 and 2012, respectively. The
Consolidated Balance Sheets include an accrued liability for gift cards of $14.4 million and $13.1
million at February 1, 2014 and February 2, 2013, respectively.
Buying, Merchandising and Occupancy Costs
The Company records buying, merchandising and occupancy costs in selling and administrative
expense. Because the Company does not include these costs in cost of sales, the Company’s gross
margin may not be comparable to other retailers that include these costs in the calculation of gross
margin. Retail occupancy costs recorded in selling and administrative expense were $381.6 million,
$359.3 million and $314.6 million for Fiscal 2014, 2013 and 2012, respectively.
Shipping and Handling Costs
Shipping and handling costs related to inventory purchased from suppliers are included in the cost of
inventory and are charged to cost of sales in the period that the inventory is sold. All other shipping
and handling costs are charged to cost of sales in the period incurred except for wholesale and
unallocated retail costs of distribution, which are included in selling and administrative expenses on
the Consolidated Statements of Operations.
Preopening Costs
Costs associated with the opening of new stores are expensed as incurred, and are included in selling
and administrative expenses on the Consolidated Statements of Operations.
Store Closings and Exit Costs
From time to time, the Company makes strategic decisions to close stores or exit locations or
activities. 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 each of the years presented, no store closings meeting the discontinued
operations criteria have been material individually or cumulatively.
Assets related to planned store closures or other exit activities are reflected as assets held for sale
and recorded at the lower of carrying value or fair value less costs to sell when the required criteria,
58
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
as defined by the Property, Plant and Equipment Topic of the Codification, are satisfied.
Depreciation ceases on the date that the held for sale criteria are met.
Assets related to planned store closures or other exit activities that do not meet the criteria to be
classified as held for sale are evaluated for impairment in accordance with the Company’s normal
impairment policy, but with consideration given to revised estimates of future cash flows. In any
event, the remaining depreciable useful lives are evaluated and adjusted as necessary.
Exit costs related to anticipated lease termination costs, severance benefits and other expected
charges are accrued for and recognized in accordance with the Exit or Disposal Cost Obligations
Topic of the Codification.
Advertising Costs
Advertising costs are predominantly expensed as incurred. Advertising costs were $56.9 million,
$48.3 million and $42.5 million for Fiscal 2014, 2013 and 2012, 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 $2.3
million and $1.4 million at February 1, 2014 and February 2, 2013.
Consideration to Resellers
In its wholesale businesses, the Company does not have any written buy-down programs with
retailers, but the Company has provided certain retailers with markdown allowances for obsolete and
slow moving products that are in the retailer’s inventory. The Company estimates these allowances
and provides for them as reductions to revenues at the time revenues are recorded. Markdowns are
negotiated with retailers and changes are made to the estimates as agreements are reached. Actual
amounts for markdowns have not differed materially from estimates.
Cooperative Advertising
Cooperative advertising funds are made available to most of the Company’s wholesale footwear
customers. In order for retailers to receive reimbursement under such programs, the retailer must
meet specified advertising guidelines and provide appropriate documentation of expenses to be
reimbursed. The Company’s cooperative advertising agreements require that wholesale customers
present documentation or other evidence of specific advertisements or display materials used for the
Company’s products by submitting the actual print advertisements presented in catalogs, newspaper
inserts or other advertising circulars, or by permitting physical inspection of displays. Additionally,
the Company’s cooperative advertising agreements require that the amount of reimbursement
requested for such advertising or materials be supported by invoices or other evidence of the actual
costs incurred by the retailer. The Company accounts for these cooperative advertising costs as
selling and administrative expenses, in accordance with the Revenue Recognition Topic for
Customer Payments and Incentives of the Codification.
59
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Cooperative advertising costs recognized in selling and administrative expenses were $3.2 million,
$3.5 million and $3.3 million for Fiscal 2014, 2013 and 2012, respectively. During Fiscal 2014,
2013 and 2012, 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 $2.8 million, $3.8 million and $3.0 million for Fiscal 2014, 2013 and
2012, respectively. During Fiscal 2014, 2013 and 2012, 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.
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
60
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
earnings per share reflects the potential dilution that could occur if securities to issue common stock
were exercised or converted to common stock (see Note 11).
Share-Based Compensation
The Company has share-based compensation covering certain members of management and non-
employee directors. The Company recognizes compensation expense for share-based payments
based on the fair value of the awards as required by the Compensation - Stock Compensation Topic
of the Codification. The Company has not granted any stock options since the first quarter of Fiscal
2008. The fair value of employee restricted stock is determined based on the closing price of the
Company's stock on the date of grant. The benefits of tax deductions in excess or recognized
compensation expense are reported as a financing cash flow (see Note 12).
Other Comprehensive Income
The Comprehensive Income Topic of the Codification requires, among other things, the Company’s
pension liability adjustment, postretirement liability adjustment, unrealized gains or losses on
foreign currency forward contracts and foreign currency translation adjustments to be included in
other comprehensive income net of tax. Accumulated other comprehensive loss at February 1, 2014
consisted of $16.5 million of cumulative pension liability adjustment, net of tax, a cumulative post
retirement liability adjustment of $0.9 million, net of tax, offset by a cumulative foreign currency
translation adjustment of $0.6 million.
The following table summarizes the components of accumulated other comprehensive loss for the
year ended February 1, 2014:
(In thousands)
Balance February 2, 2013
Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustment
Net actuarial gain
Amounts reclassified from AOCI:
Amortization of net actuarial loss (1)
Amortization reclassified from AOCI, before tax
Income tax expense
Current period other comprehensive income, net of tax
Foreign Currency
Translation
Unrecognized
Pension/Postretire
ment Benefit
Costs
Total Accumulated
Other
Comprehensive
Income (Loss)
$
(1,931 ) $
(26,310 ) $
(28,241 )
2,506
—
—
—
—
2,506
—
8,581
6,257
6,257
5,870
8,968
2,506
8,581
6,257
6,257
5,870
11,474
Balance February 1, 2014
$
575
$
(17,342 ) $
(16,767 )
(1) Amount is included in net periodic benefit cost, which is recorded in selling and administrative expense on
the Consolidated Statements of Operations.
61
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies, Continued
Business Segments
The Segment Reporting Topic of the Codification requires that companies disclose “operating
segments” based on the way management disaggregates the Company’s operations for making
internal operating decisions (see Note 14).
New Accounting Principles
In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income” (“AOCI”), which sets forth additional disclosure
requirements for items reclassified out of AOCI and into net income, and is effective for annual and
interim reporting periods beginning after December 15, 2012. The Company adopted ASU No.
2013-02 in the first quarter of Fiscal 2014 by presenting amounts reclassified out of AOCI as a
separate disclosure in Note 1 to the Consolidated Financial Statements. Amounts reclassified out of
AOCI were related to amortization of net actuarial loss associated with the Company's pension and
postretirement plans.
62
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
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 that was paid
in June 2013. The Company financed the acquisition with borrowings under its existing credit
facility and the balance from cash on hand. The purchase agreement also provides for deferred
purchase price payments totaling £25 million, payable in installments of £15 million and £10 million
on the third and fourth anniversaries of the closing, respectively, subject to the payees’ not having
terminated their employment with Schuh under certain specified circumstances. This amount will be
recorded as compensation expense and not reported as a component of the cost of the acquisition.
Headquartered in Scotland, Schuh is a specialty retailer of casual and athletic footwear sold through
99 retail stores in the United Kingdom and the Republic of Ireland as of February 1, 2014. The
Company completed the acquisition in 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 2014
include net sales of $364.7 million and operating earnings of $3.1 million. The results of Schuh’s
operations for Fiscal 2013 include net sales of $370.5 million and operating earnings of $11.2
million. The results of Schuh's operations for the fiscal year from the date of acquisition through
January 28, 2012, including net sales of $212.3 million and operating earnings of $11.7 million,
have been included in the Company's Consolidated Financial Statements for the fiscal year ended
January 28, 2012. During the fiscal year ended January 28, 2012, the Company expensed $7.4
million in costs related to the acquisition. These costs were recorded as selling and administrative
expenses on the Consolidated Statement of Operations. Compensation expense related to the Schuh
acquisition deferred purchase price obligation was $11.7 million, $12.1 million and $7.2 million in
Fiscal 2014, 2013 and 2012, respectively. This expense is included in the operating earnings for the
Schuh Group segment.
63
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 2
Acquisitions and Intangible Assets, Continued
The acquisition has been accounted for using the purchase method in accordance with the Business
Combinations Topic of the Codification. Accordingly, the total purchase price has been allocated to
the assets acquired and liabilities assumed based on their estimated fair values at acquisition as
follows (amounts in thousands):
At June 23, 2011
Cash
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.
64
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
96,845
4.03
3.97
$
$
$
The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of
operations that would have occurred had the Schuh acquisition occurred at the beginning of Fiscal 2011.
Intangible Assets
Other intangibles by major classes were as follows:
In thousands
Gross other intangibles
Accumulated amortization
Net Other Intangibles
Leases
Feb. 1,
2014
Feb. 2,
2013
Customer Lists
Feb. 1,
2014
Feb. 2,
2013
$ 13,104 $ 12,584 $ 14,381 $ 14,116 $
(11,997 )
(10,800 )
$
1,107 $
1,784 $
(7,354 )
7,027 $
(5,312 )
8,804 $
Other*
Total
Feb. 1,
2014
2,242 $
(1,294 )
948 $
Feb. 2,
Feb. 2,
Feb. 1,
2013
2013
2014
2,118 $ 29,727 $ 28,818
(1,108 )
(17,220 )
(20,645 )
9,082 $ 11,598
1,010 $
*Includes non-compete agreements, vendor contract and backlog.
The amortization of intangibles, including trademarks, was $3.2 million, $3.4 million and $3.2
million for Fiscal 2014, 2013 and 2012, respectively. The amortization of intangibles, including
trademarks, will be $2.8 million, $2.1 million, $1.6 million, $1.0 million and $0.9 million for Fiscal
2015, 2016, 2017, 2018 and 2019, respectively.
65
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 $1.3 million in Fiscal 2014, including $3.3
million for network intrusion expenses, $2.4 million for other legal matters, $2.3 million for retail
store asset impairments and $1.6 million for a lease termination offset by an $(8.3) million gain on
the lease termination of a New York City Journeys store.
The Company recorded a pretax charge to earnings of $17.0 million in Fiscal 2013, including $15.6
million for network intrusion expenses, $1.4 million for retail store asset impairments and $0.1
million for other legal matters.
The Company recorded a pretax charge to earnings of $2.7 million in Fiscal 2012, including $1.1
million for retail store asset impairments, $0.9 million for other legal matters and $0.7 million for
network intrusion expenses.
Discontinued Operations
In Fiscal 2014, the Company recorded an additional charge to earnings of $0.5 million ($0.3 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 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).
66
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
Additional provision Fiscal 2014
Charges and adjustments, net
Balance February 1, 2014*
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
543
(519 )
11,375
7,263
4,112
$
$
*Includes a $11.9 million environmental provision, including $7.8 million in current provision for
discontinued operations.
Note 4
Inventories
In thousands
Raw materials
Wholesale finished goods
Retail merchandise
Total Inventories
$
February 1,
2014
26,115 $
64,357
476,789
February 2,
2013
24,223
57,161
423,960
$
567,261
505,344
67
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 5
Fair Value
The Fair Value Measurements and Disclosures Topic of the Codification defines fair value,
establishes a framework for measuring fair value in accordance with generally accepted accounting
principles and expands disclosures about fair value measurements. This Topic defines fair value as
the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. It also establishes a fair value hierarchy which requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. The standard describes three levels of inputs that may be used to
measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest
level input that is significant to the fair value measurement.
The following table presents the Company’s assets and liabilities measured at fair value on a
nonrecurring basis as of February 1, 2014 aggregated by the level in the fair value hierarchy within
which those measurements fall (in thousands):
Long-Lived
Assets
Held and Used
Level 1
Level 2
Level 3
Measured as of May 4, 2013
$
Measured as of August 3, 2013
Measured as of November 2, 2013
Measured as of February 1, 2014
Total Asset Impairment Fiscal 2014
191 $
93
514
448
— $
—
—
—
— $
—
—
—
Impairment
Charges
1,208
209
350
580
2,347
191 $
93
514
448
$
In accordance with the Property, Plant and Equipment Topic of the Codification, the Company
recorded $2.3 million of impairment charges as a result of the fair value measurement of its long-
lived assets held and used and tested on a nonrecurring basis during the twelve months ended
February1, 2014. 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.
68
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 1,
2014
February 2,
2013
$
$
— $
33,730
33,730
6,793
26,937 $
27,700
22,982
50,682
5,675
45,007
Long-term debt maturing during each of the next five years ending in January each year is $6.8
million, $14.4 million, $2.1 million, $2.1 million and $2.1 million, respectively, and $6.2 million
thereafter.
The Company did not have any revolver borrowings outstanding under the Credit Facility at
February 1, 2014 and had $33.7 million in term loans outstanding under the U.K. Credit Facilities
(described below) at February 1, 2014. The Company had outstanding letters of credit of $14.5
million under the Credit Facility at February 1, 2014. These letters of credit support product
purchases and lease and insurance indemnifications.
Credit Facility:
On January 31, 2014, the Company entered into a Third Amended and Restated Credit Agreement
(the “Credit Facility”) by and among the Company, certain subsidiaries of the Company party
thereto, as other borrowers, the lenders party thereto and Bank of America, N.A., as agent (the
"Agent"). The Credit Facility provides revolving credit in the aggregate principal amount of $400.0
million and replaces the previous $375.0 million revolving credit facility. The Credit Facility expires
January 31, 2019.
Deferred financing costs incurred of $1.6 million related to the Credit Facility were capitalized and
are being amortized over five years. In addition, the remaining deferred financing costs of $1.5
million related to the previous Amendment are being amortized over five years. These costs are
included in other non-current assets on the Consolidated Balance Sheets.
The material terms of the Credit Facility are as follows:
Availability
The Credit Facility is a revolving credit facility in the aggregate principal amount of $400.0 million,
including a $70.0 million sublimit for the issuance of letters of credit and a domestic swingline
subfacility of up to $40.0 million, a revolving credit subfacility for the benefit of GCO Canada, Inc.
in an aggregate amount not to exceed $25.0 million, which includes a $5.0 million sublimit for the
issuance of letters of credit, and revolving credit subfacility for the benefit of Genesco (UK) Limited
in an aggregate amount not to exceed $50.0 million, which includes a $10.0 million sublimit for the
issuance of letters of credit and a swingline subfacility of up to $10.0 million. The facility has a five-
year term. Any
69
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Long-Term Debt, Continued
swingline loans and any letters of credit and borrowings under the Canadian facilities and UK
facilities will reduce the availability under the Credit Facility on a dollar-for-dollar basis.
The Company has the option, from time to time, to increase the availability under the Credit Facility
by an aggregate amount of up to $150.0 million subject to, among other things, the receipt of
commitments for the increased amount. In connection with this increased facility, the Canadian
revolving credit facility may be increased up to no more than $40.0 million.
Genesco (UK) Limited has a one-time option to increase the availability of its subfacility under the
Credit Facility by an additional amount of up to $50.0 million.
The aggregate amount of the loans made and letters of credit issued under the Credit Facility shall at
no time exceed the lesser of the facility amount ($400.0 million or, if increased as described above,
up to $550.0 million or $600.0 million, respectively) or the "Borrowing Base", which generally is
based on 90% of eligible inventory plus 85% of eligible wholesale receivables (50% of eligible
wholesale receivables of the Lids Team Sports business) plus 90% of eligible credit card and debit
card receivables less applicable reserves (the "Loan Cap"). The relevant assets of Genesco (UK)
Limited will be included in the Borrowing Base if the additional $50.0 million sublimit increase is
exercised, provided that amounts borrowed by Genesco (UK) Limited based solely on its own
borrowing base will be limited to $50.0 million and the total outstanding to Genesco (UK) Limited
will not exceed 30% of the Loan Cap.
The Credit Facility also provides that a first-in, last-out tranche could be added to the revolving
credit facility at the option of the Company subject to, among other things, the receipt of
commitments for such tranche.
Collateral
The loans and other obligations under the Credit Facility are secured by a perfected first priority lien
and security interest in all tangible and intangible assets and excludes real estate and leaseholds of
the Company and certain subsidiaries of the Company, including a pledge of 65% of the Company's
interest in Genesco (UK) Limited. The assets of Genesco (UK) Limited will not be pledged as
collateral unless the additional $50.0 million sublimit increase is exercised and once pledged, will
only serve to secure the obligations of GCO Canada, Inc. and Genesco (UK) Limited and their
respective subsidiaries.
Interest and Fees
The Company’s borrowings under the Credit Facility bear interest at varying rates that, at the
Company’s option, can be based on:
Domestic Facility:
(a) LIBOR plus the applicable margin (as defined and based on average Excess Availability during
the prior quarter), or (b) the domestic Base Rate (defined as the higher of (i) the Bank of America
prime rate, (ii) the federal funds rate plus 0.50% or (iii) LIBOR for an interest period of thirty days
plus 1.0%) plus the applicable margin.
70
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Long-Term Debt, Continued
Canadian Sub-Facility:
(a) For loans made in Canadian dollars, the bankers’ acceptances (“BA”) rate plus the applicable
margin, or (b) the Canadian Prime Rate (defined as the highest of the (i) Bank of America Canadian
Prime Rate, (ii) the Bank of America (Canada Branch) overnight rate plus 0.50%, and (iii) the BA
rate for a one month interest period plus 1.0%) plus the applicable margin.
(a) For loans made in U.S. dollars, LIBOR plus the applicable margin, or (b) the U.S. Index Rate
(defined as the highest of the (i) Bank of America (Canada branch) U.S. dollar base rate, (ii) the
Federal Funds rate plus 0.50%, and (iii) LIBOR for an interest period of thirty days plus 1.0%) plus
the applicable margin.
UK Sub-Facility:
LIBOR plus the applicable margin.
Swingline Loans:
Domestic swingline loans - domestic Base Rate plus the applicable margin.
UK swingline loans - UK Base Rate (being the "base rate" of the local Bank of America branch in
the jurisdiction of the currency chosen) plus the applicable margin.
The initial applicable margin for Base Rate loans and U.S. Index rate loans and Canadian Prime Rate
loans is 0.50% and the initial applicable margin for LIBOR loans, BA equivalent loans and UK
swingline loans is 1.50%. 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 domestic Base Rate loans
(including domestic swingline loans), U.S. Index rate loans, Canadian Prime Rate loans and UK
swingline loans and at the end of each interest rate period (but not less often than quarterly) for
LIBOR loans and BA equivalent loans.
The Company is also required to pay a commitment fee on the actual daily unused portions of the
Credit Facility at a rate of 0.25% per annum.
Currency
Loans to GCO Canada, Inc. may be made in U.S. dollars or Canadian dollars. Loans to Genesco
(UK) Limited may be made in U.S. dollars, Euros, Pounds Sterling or any other freely transferable
currencies approved by the Agent and applicable lenders.
Certain Covenants
The Company is not required to comply with any financial covenants unless Excess Availability is
less than the greater of $25.0 million or 10.0% of the Loan Cap. If and during such time as Excess
71
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Long-Term Debt, Continued
Availability is less than the greater of $25.0 million or 10.0% of the Loan Cap, the Credit Facility
requires the
Company to meet a minimum fixed charge coverage ratio of (a) an amount equal to consolidated
EBITDA less capital expenditures and taxes paid in cash, in each case for such period, to (b) fixed
charges for such period, of not less than 1.0:1.0. Excess Availability was $358.0 million at February
1,
2014. Because Excess Availability exceeded $25.0 million or 10.0% of the Loan Cap, the Company
was not required to comply with this financial covenant at February 1, 2014.
The Credit Facility also permits the Company to incur up to $500.0 million of senior debt provided
that certain terms and conditions are met.
In addition, the Credit Facility contains certain covenants that, among other things, restrict
additional indebtedness, liens and encumbrances, loans and investments, acquisitions, dividends and
other restricted payments, transactions with affiliates, asset dispositions, mergers and consolidations,
prepayments or material amendments of other indebtedness and other matters customarily restricted
in such agreements.
Cash Dominion
The Credit Facility also contains cash dominion provisions that apply in the event that the
Company’s Excess Availability is less than the greater of $30.0 million or 12.5% of the Loan Cap or
there is an event of default under the Credit Facility.
Events of Default
The Credit Facility contains customary events of default, including, without limitation, payment
defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain
other material indebtedness in excess of specified amounts and to agreements which would have a
material adverse effect if breached, certain events of bankruptcy and insolvency, certain ERISA
events, judgments in excess of specified amounts and change in control.
Certain of the lenders under the Credit Facility or their affiliates have provided and may in the future
provide certain commercial banking, financial advisory, and investment banking services in the
ordinary course of business for the Company, its subsidiaries and certain of its affiliates, for which
they receive customary fees and commissions.
U.K. Credit Facility
In connection with 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
72
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 6
Long-Term Debt, Continued
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
less than£0.1 million, £4.8 million and £4.5 million on the B term loan in Fiscal 2014, 2013 and
2012, respectively.
In November 2013, Schuh Group Limited entered into an Amended and Restated Facilities
Agreement to provide for an additional term loan of up to £12.5 million ("C term loan"). The C term
loan bears interest at LIBOR plus 2.50% per annum and expires September 30, 2019.
The UK Credit Facilities contain certain covenants at the Schuh level including a minimum interest
coverage covenant initially set at 4.25x and increasing to 4.50x in January 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 1, 2014. The UK Credit Facilities are secured by a
pledge of all the assets of Schuh and its subsidiaries.
73
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 approximately 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 3% 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
2014
2013
2012
$
$
227,880 $
9,667
(663 )
236,884 $
215,516 $
14,786
(667 )
229,635 $
192,175
12,918
(686 )
204,407
Minimum rental commitments payable in future years are:
Fiscal Years
2015
2016
2017
2018
2019
Later years
Total Minimum Rental Commitments
In thousands
235,049
216,870
188,714
157,295
126,726
381,825
1,306,479
$
$
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 $24.2 million and $20.0 million for Fiscal 2014 and 2013,
respectively, and deferred rent of $41.6 million and $37.9 million for Fiscal 2014 and 2013,
respectively, are included in deferred rent and other long-term liabilities on the Consolidated
Balance Sheets.
74
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
$2.30 Series 1
$4.75 Series 3
$4.75 Series 4
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
Number of Shares
Amounts in Thousands
Shares
Authorized
2014
2013
2012
2014
2013
2012
Common
Convertible
Ratio
No. of
Votes
per
share
3,000,000 **
64,368
40,449
53,764
800,000
5,000,000
—
—
—
—
—
—
— 16,203 30,368 $ — $ 648 $ 1,215
1,164
—
340
—
—
—
7,398 11,643
3,397
3,247
—
—
740
325
—
—
—
—
30,067
30,067
—
— 56,915 75,475
—
—
902
2,615
902
3,621
N/A
.83
2.11
1.52
N/A
1
2
1
100
1
5,000,000
46,069
46,852
47,922
1,382
1,405
1,437
1.00 ***
1
1,382
4,020
5,058
(77 )
(96 )
(101 )
$ 1,305
$ 3,924
$ 4,957
*
**
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.
75
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity, Continued
Preferred Stock Transactions
In thousands
Balance January 29, 2011
Other
Balance January 28, 2012
Other
Balance February 2, 2013
Preferred stock redemptions
Other stock conversions
Balance February 1, 2014
Non-Redeemable
Preferred Stock
Non-Redeemable
Employees’
Preferred Stock
Employees’
Preferred
Stock
Purchase
Accounts
Total
Non-Redeemable
Preferred Stock
$
$
3,816 $
(195 )
3,621
(1,006 )
2,615
(1,462 )
(1,153 )
— $
1,476 $
(39 )
1,437
(32 )
1,405
—
(23 )
1,382
(109 ) $
8
(101 )
5
(96 )
—
19
(77 ) $
5,183
(226 )
4,957
(1,033 )
3,924
(1,462 )
(1,157 )
1,305
Subordinated Serial Preferred Stock (Cumulative):
The Company issued a notice of mandatory redemption effective April 30, 2013, to its holders of
Subordinated Serial Preferred Stock $2.30 Series 1, $4.75 Series 3 and $4.75 Series 4 during the first
quarter of Fiscal 2014. The Series 1 preferred stock was redeemed at $40 per share plus
accumulated dividends. During Fiscal 2014, 13,713 shares of Series 1 preferred stock were
converted to common stock and 2,490 shares of Series 1 preferred stock were redeemed. The Series
3 and 4 preferred stocks were redeemed at $100 per share plus accumulated dividends. During
Fiscal 2014, 6,046 shares of Series 3 preferred stock were converted to common stock and 1,352
shares of Series 3 preferred stock were redeemed. During Fiscal 2014, 3,247 shares of Series 4
preferred stock were redeemed. The total cost of the redemption for Series 1, 3 and 4 preferred stock
was $0.6 million in Fiscal 2014.
The Company’s shareholders’ rights plan grants to common shareholders the right to purchase, at a
specified exercise price, a fraction of a share of subordinated serial preferred stock, Series 6, in the
event of an acquisition of, or an announced tender offer for, 15% or more of the Company’s
outstanding common stock. Upon any such event, each right also entitles the holder (other than the
person making such acquisition or tender offer) to purchase, at the exercise price, shares of common
stock having a market value of twice the exercise price. In the event the Company is acquired in a
transaction in which the Company is not the surviving corporation, each right would entitle its holder
to purchase, at the exercise price, shares of the acquiring company having a market value of twice
the exercise price. The rights expire in March 2020, are redeemable under certain circumstances for
$.01 per right and are subject to exchange for one share of common stock or an equivalent amount of
preferred stock at any time after the event which makes the rights exercisable and before a majority
of the Company’s common stock is acquired.
76
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity, Continued
$1.50 Subordinated Cumulative Preferred Stock:
The Company issued a notice of mandatory redemption effective April 30, 2013, to its holders of
$1.50 Subordinated Cumulative Preferred Stock during the first quarter of Fiscal 2014. The $1.50
Subordinated Cumulative Preferred Stock was redeemed at $30 per share plus accumulated
dividends. During Fiscal 2014, 30,067 shares of $1.50 Subordinated Cumulative Preferred Stock
were redeemed. The total cost of the redemption for the $1.50 Subordinated Cumulative Preferred
Stock was $0.9 million in Fiscal 2014.
Employees’ Subordinated Convertible Preferred Stock:
Stated and liquidation values are 88 times the average quarterly per share dividend paid on common
stock for the previous eight quarters (if any), but in no event less than $30 per share.
Common Stock:
Common stock-$1 par value. Authorized: 80,000,000 shares; issued: February 1, 2014 – 24,407,724
shares; February 2, 2013 –24,484,915 shares. There were 488,464 shares held in treasury at February
1, 2014 and February 2, 2013. Each outstanding share is entitled to one vote. At February 1, 2014,
common shares were reserved as follows: 46,069 shares for conversion of preferred stock; 60,000
shares for the 1996 Stock Incentive Plan; 70,854 shares for the 2005 Stock Incentive Plan; 1,204,662
shares for the 2009 Amended and Restated Stock Incentive Plan; and 310,292 shares for the Genesco
Employee Stock Purchase Plan.
For the year ended February 1, 2014, 130,051 shares of common stock were issued for the exercise
of stock options at an average weighted exercise price of $23.33, for a total of $3.0 million; 199,392
shares of common stock were issued as restricted shares as part of the 2009 Amended and Restated
Equity Incentive Plan; 3,146 shares of common stock were issued for the purchase of shares under
the Employee Stock Purchase Plan at an average weighted market price of $62.30, for a total of $0.2
million; 14,435 shares were issued to directors for no consideration; 105,193 shares were withheld
for taxes on restricted stock vested in Fiscal 2014; 6,279 shares of restricted stock were forfeited in
Fiscal 2014; and 24,922 shares were issued in miscellaneous conversions of Series 1, 3 and
Employees’ Subordinated Convertible Preferred Stock. The 130,051 options exercised were all fixed
stock options (see Note 12). In addition, the Company repurchased and retired 337,665 shares of
common stock at an average weighted market price of $61.23 for a total of $20.7 million.
For the year ended February 2, 2013, 223,618 shares of common stock were issued for the exercise
of stock options at an average weighted exercise price of $21.50, for a total of $4.8 million; 194,232
shares of common stock were issued as restricted shares as part of the 2009 Amended and Restated
Equity Incentive Plan; 2,463 shares of common stock were issued for the purchase of shares under
the Employee Stock Purchase Plan at an average weighted market price of $63.84, for a total of $0.2
million; 10,224 shares were issued to directors for no consideration; 75,552 shares were withheld for
taxes on restricted stock vested in Fiscal 2013; 4,020 shares of restricted stock were forfeited in
Fiscal 2013; and 22,028 shares were issued in miscellaneous conversions of Series 1, 3, 4 and
77
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity, Continued
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 Equity Incentive Plan;
2,717 shares of common stock were issued for the purchase of shares under the Employee Stock
Purchase Plan at an average weighted market price of $48.95, for a total of $0.1 million; 14,643
shares were issued to directors for no consideration; 93,089 shares were withheld for taxes on
restricted stock vested in Fiscal 2012; 14,081 shares of restricted stock were forfeited in Fiscal 2012;
and 5,238 shares were issued in miscellaneous conversions of Series 1, 3, 4 and Employees’
Subordinated Convertible Preferred Stock. The 390,357 options exercised were all fixed stock
options (see Note 12).
Restrictions on Dividends and Redemptions of Capital Stock:
The Company’s charter provides that no dividends may be paid and no shares of capital stock
acquired for value if there are dividend or redemption arrearages on any senior or equally ranked
stock. Exchanges of subordinated serial preferred stock for common stock or other stock junior to
such exchanged stock are permitted.
The Company’s Credit Facility prohibits the payment of dividends and other restricted payments
unless as of the date of the making of any Restricted Payment or consummation of any Acquisition,
(a) no Default or Event of Default exists or would arise after giving effect to such Restricted
Payment or Acquisition, and (b) either (i) the Borrowers have pro forma projected Excess
Availability for the following six month period equal to or greater than 25% of the Loan Cap, after
giving pro forma effect to such Restricted Payment or Acquisition, or (ii) (A) the Borrowers have pro
forma projected Excess Availability for the following six month period of less than 25% of the Loan
Cap but equal to or greater than 15% of the Loan Cap, after giving pro forma effect to the Restricted
Payment or Acquisition, and (B) the Fixed Charge Coverage Ratio, on a pro forma basis for the
twelve months preceding such Restricted Payment or Acquisition, will be equal to or greater than
1.0:1.0, and (c) after giving effect to such Restricted Payment or Acquisition, the Borrowers are
Solvent. The Company’s management does not expect availability under the Credit Facility to fall
below the requirements listed above during Fiscal 2015. The Company’s UK Credit Facility
prohibits the payment of any dividends by Schuh or its subsidiaries to the Company.
The Company issued a mandatory notice of redemption effective April 30, 2013, to its holders of
Subordinated Serial Preferred Stock $2.30 Series 1, $4.75 Series 3 and $4.75 Series 4 and on its
$1.50 Subordinated Cumulative Preferred Stock during the first quarter of Fiscal 2014. The total
cost of the redemption was $1.5 million. As a result, all of these preferred issues of stock were either
78
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 8
Equity, Continued
converted to common stock or redeemed in Fiscal 2014, and there are no outstanding shares
remaining. Therefore, there is no longer an annual dividend requirement. Dividends paid during
Fiscal 2014 were less than $0.1 million.
Changes in the Shares of the Company’s Capital Stock
Issued at January 29, 2011
Exercise of options
Issue restricted stock
Issue shares—Employee Stock Purchase Plan
Shares repurchased
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
Exercise of options
Issue restricted stock
Issue shares—Employee Stock Purchase Plan
Shares repurchased
Other
Issued at February 1, 2014
Less shares repurchased and held in treasury
Outstanding at February 1, 2014
Non-
Redeemable
Preferred
Stock
Employees’
Preferred
Stock
79,306
—
—
—
—
(3,831 )
75,475
—
—
—
—
(18,560 )
56,915
—
—
—
—
(56,915 )
—
—
—
49,192
—
—
—
—
(1,270 )
47,922
—
—
—
—
(1,070 )
46,852
—
—
—
—
(783 )
46,069
—
46,069
Common
Stock
24,162,634
390,357
304,050
2,717
0
(101,932 )
24,757,826
223,618
204,456
2,463
(645,904 )
(57,544 )
24,484,915
130,051
213,827
3,146
(337,665 )
(86,550 )
24,407,724
488,464
23,919,260
79
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Income Taxes
The components of earnings from continuing operations before income taxes is comprised of the
following:
In thousands
United States
Foreign
$
Total Earnings from Continuing Operations before Income Taxes $
2014
152,832 $
6,028
158,860 $
2013
152,457 $
12,375
164,832 $
2012
139,174
17,219
156,393
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
2014
2013
2012
$
$
35,463 $
7,293
8,139
50,895
14,078
(1,813 )
2,718
14,983
65,878 $
50,859 $
9,853
8,841
69,553
(7,924 )
(6,379 )
(3,315 )
(17,618 )
51,935 $
42,103
2,226
8,952
53,281
5,579
4,370
(288 )
9,661
62,942
Discontinued operations were recorded net of income tax benefit of approximately $(0.2) million,
$(0.3) million and $(0.7) million in Fiscal 2014, 2013 and 2012, respectively.
As a result of the exercise of stock options and vesting of restricted stock during Fiscal 2014, 2013
and 2012, the Company realized an additional income tax benefit of approximately $3.8 million,
$4.8 million and $4.6 million, respectively. These tax benefits are reflected as an adjustment to
additional paid-in capital.
80
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 1,
2014
February 2,
2013
$
$
(28,468 ) $
(3,063 )
(3,001 )
(34,532 )
448
4,986
4,253
15,673
13,750
2,839
4,731
2,115
2,396
761
6,606
4,320
62,878
(3,771 )
59,107
24,575 $
(28,076 )
(2,943 )
(3,001 )
(34,020 )
965
5,847
8,321
16,766
12,539
13,783
4,745
2,015
3,535
1,598
6,382
3,500
79,996
(3,541 )
76,455
42,435
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
2014
2013
23,089 $
3,342
(1,856 )
24,575 $
23,725
18,731
(21 )
42,435
$
$
81
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 federal, state and foreign tax positions
Other
Effective Tax Rate
2014
2013
2012
35.00 %
4.62
(1.24 )
0.05
2.18
0.21
0.65
41.47 %
35.00 %
3.11
(1.98 )
(0.17 )
1.85
(5.73 )
(0.57 )
31.51 %
35.00 %
3.62
(1.71 )
0.60
2.27
—
0.47
40.25 %
The provision for income taxes resulted in an effective tax rate for continuing operations of 41.47%
for Fiscal 2014, compared with an effective tax rate of 31.51% for Fiscal 2013. The tax rate for
Fiscal 2013 was lower primarily due to the reversal of previously recorded charges 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 1, 2014, February 2, 2013 and January 28, 2012, the Company had a federal net
operating loss carryforward, which was assumed in one of the prior year acquisitions, of $1.3
million, $1.5 million and $1.6 million, respectively, which expire in fiscal years 2025 through 2030.
As of February 1, 2014, February 2, 2013 and January 28, 2012, the Company had state net
operating loss carryforwards of $0.0 million, $0.1 million and $0.1 million, respectively, which
expire in fiscal years 2016 through 2031.
As of February 1, 2014, February 2, 2013 and January 28, 2012, the Company had state tax credits
of $0.7 million, $0.9 million and $0.6 million, respectively. These credits expire in fiscal years 2014
through 2019.
As of February 1, 2014, February 2, 2013 and January 28, 2012, the Company had foreign tax
credits of $0.0 million, $0.0 million and $0.1 million, respectively. These credits will expire in fiscal
year 2022.
As of February 1, 2014, February 2, 2013 and January 28, 2012, the Company had foreign net
operating losses of $7.5 million, $10.4 million and $28.8 million, respectively, which have no
expiration.
As of February 1, 2014, as part of the Schuh acquisition, the Company has provided a valuation
allowance of approximately $3.8 million on deferred tax assets associated primarily with foreign net
82
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Income Taxes, Continued
operating losses and foreign fixed assets for which management has determined it is more likely
than not that the deferred tax assets will not be realized. The $0.3 million net increase in the
valuation allowance during Fiscal 2014 from the $3.5 million provided for as of February 2, 2013
determined in accordance with the Income Tax Topic of the Codification relates to foreign net
operating losses arising in Fiscal 2012 and increases in fixed asset-related deferred tax assets that
will more likely than not never be realized. Management believes that it is more likely than not that
the remaining deferred tax assets will be fully realized.
As of February 1, 2014, the Company has not provided for withholding or United States federal
income taxes on approximately $26.4 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
2014, 2013 and 2012.
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
2014
2013
2012
$
$
10,437 $
139
1,452
(340 )
(728 )
10,960 $
20,467 $
(2,464 )
133
(449 )
(7,250 )
10,437 $
14,167
(29 )
6,986
(533 )
(124 )
20,467
The amount of unrecognized tax benefits as of February 1, 2014, February 2, 2013 and January 28,
2012, which would impact the annual effective rate if recognized were $1.3 million, $2.4 million
and $12.6 million, respectively. The Company believes it is reasonably possible that there will be a
$0.1 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
$(0.1) million expense and $(0.1) million, respectively, during Fiscal 2014, $(1.2) million expense
and $0.1 million, respectively, during Fiscal 2013 and $0.5 million expense and $0.0 million,
respectively, during Fiscal 2012.
83
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 9
Income Taxes, Continued
The Company recognized a liability for accrued interest and penalties of $0.9 million and $0.1
million, respectively, as of February 1, 2014, $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 29, 2011 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 credits each participants’
account annually with an amount equal to 4% of the participant’s compensation plus 4% of the
participant’s compensation in excess of the Social Security taxable wage base. Beginning
December 31, 1996 and annually thereafter, the account balance of each active participant was
credited with 7% interest calculated on the sum of the balance as of the beginning of the plan year
and 50% of the amounts credited to the account, other than interest, for the plan year. The account
balance of each participant who was inactive would be credited with interest at the lesser of 7% or
the 30 year Treasury rate. Under the frozen plan, each participants’ cash balance plan account will be
credited annually only with interest at the 30 year Treasury rate, not to exceed 7%, until the
participant retires. The amount credited each year will be based on the rate at the end of the prior
year.
84
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 (gain) 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
2014
2013
Other Benefits
2014
2013
119,126 $
350
4,584
—
(9,000 )
(3,927 )
111,133 $
118,644 $
350
4,961
—
(9,038 )
4,209
119,126 $
4,487 $
428
159
86
(436 )
990
5,714 $
3,908
356
157
74
(221 )
213
4,487
Pension Benefits
2014
2013
Other Benefits
2014
2013
98,612 $
12,298
—
—
(9,000 )
101,910 $
96,443
11,207
—
—
(9,038 )
98,612
—
—
350
86
(436 )
—
—
—
147
74
(221 )
—
(9,223 ) $
(20,514 ) $
(5,714 ) $
(4,487 )
$
$
$
$
$
Amounts recognized in the Consolidated Balance Sheets consist of:
In thousands
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net Amount Recognized
Pension Benefits
2014
2013
Other Benefits
2014
2013
$
$
— $
—
(9,223 )
— $
—
(20,514 )
— $
(208 )
(5,506 )
(9,223 ) $
(20,514 ) $
(5,714 ) $
—
(160 )
(4,327 )
(4,487 )
85
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Amounts recognized in accumulated other comprehensive income consist of:
In thousands
Prior service cost
Net loss
Total Recognized in Accumulated Other
Comprehensive Loss
Pension Benefits
Other Benefits
2014
2013
2014
2013
— $
27,147
— $
42,879
— $
1,459
27,147
$
42,879
$
1,459
$
—
566
566
$
$
Amounts for projected and accumulated benefit obligation and fair value of plan assets are as follows:
In thousands
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Components of Net Periodic Benefit Cost
Net Periodic Benefit Cost
February 1,
2014
February 2,
2013
$
111,133 $
111,133
101,910
119,126
119,126
98,612
In thousands
Service cost
Interest cost
Expected return on plan assets
Amortization:
Prior service cost
Losses
Net amortization
Net Periodic Benefit Cost
Pension Benefits
2013
2014
2012
2014
Other Benefits
2013
2012
$
350 $
350 $
250 $
4,584
(6,654 )
4,961
(7,003 )
5,597
(7,807 )
—
6,160
6,160 $
4,440 $
4
6,032
6,036 $
4,344 $
4
4,728
4,732 $
2,772 $
$
$
428 $
159
—
—
97
97 $
684 $
356 $
157
—
—
84
84 $
597 $
166
174
—
—
79
79
419
Reconciliation of Accumulated Other Comprehensive Income
In thousands
Net loss (gain)
Amortization of prior service cost
Amortization of net actuarial loss
Total Recognized in Other Comprehensive Income
$
Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income $
86
Pension Benefits Other Benefits
2014
2014
$
(9,571 ) $
—
(6,160 )
(15,731 ) $
(11,291 ) $
990
—
(97 )
893
1,577
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
The estimated net loss and prior service cost for the defined benefit pension plans that will be
amortized from accumulated other comprehensive income into net periodic benefit cost over the
next fiscal year are $3.9 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
2014
Other Benefits
2014
2013
4.40 %
NA
4.00 %
NA
4.40 %
—
4.01 %
—
For Fiscal 2014 and 2013, the discount rate was based on a yield curve of high quality corporate
bonds with cash flows matching the Company’s planned expected benefit payments.
Weighted-average assumptions used to determine net periodic benefit costs
Discount rate
Expected long-term rate of return on plan
assets
Rate of compensation increase
Pension Benefits
2013
2014
2012
2014
Other Benefits
2013
2012
4.00 %
4.35 %
5.25 %
4.01 %
4.17 %
5.25 %
7.75 %
NA
7.75 %
NA
8.25 %
NA
—
—
—
—
—
—
The weighted average discount rate used to measure the benefit obligation for the pension plan
increased from 4.00% to 4.40% from Fiscal 2013 to Fiscal 2014. The increase in the rate decreased
the accumulated benefit obligation by $3.9 million and decreased the projected benefit obligation by
$3.9 million. 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.
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.
87
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
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
2014
2013
8.0 %
5 %
2019
7.0 %
5 %
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
$
$
134 $
626 $
106
735
Plan Assets
The Company’s pension plan weighted average asset allocations as of February 1, 2014 and
February 2, 2013, by asset category are as follows:
Asset Category
Equity securities
Debt securities
Other
Total
Plan Assets
February 1,
2014
February 2,
2013
65 %
35 %
0 %
100 %
66 %
34 %
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 are appointed by the Board of Directors. The Company has an
investment policy that provides direction on the implementation of this strategy.
The investment policy establishes a target allocation for each asset class and investment manager.
The actual asset allocation versus the established target is reviewed at least quarterly and is
maintained within a +/- 5% range of the target asset allocation. Target allocations are 50% domestic
equity, 13% international equity, 35% fixed income and 2% cash investments.
88
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
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 investment managers to implement its
various investment strategies. Performance of the managers is reviewed quarterly and the investment
objectives are consistently evaluated.
At February 1, 2014 and February 2, 2013, there were no Company related assets in the plan.
Generally, quoted market prices are used to value pension plan assets. Equities, some fixed income
securities, publicly traded investment funds and U.S. government obligations are valued at the
closing price reported on the active market on which the individual security is traded.
The following tables present the pension plan assets by level within the fair value hierarchy as of
February 1, 2014 and February 2, 2013.
February 1, 2014
Equity Securities:
International securities
U.S. securities
Fixed Income Securities
Other:
Cash Equivalents
Other (includes receivables and payables)
Total Pension Plan Assets
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
Cash Flows
Return of Assets
Level 1
Level 2
Level 3
Total
13,026 $
53,187
35,481
235
(19 )
101,910 $
— $
—
—
—
—
— $
— $
—
—
—
—
— $
13,026
53,187
35,481
235
(19 )
101,910
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
$
$
$
$
There was no return of assets from the plan to the Company in Fiscal 2014 and no plan assets are
projected to be returned to the Company in Fiscal 2015.
89
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 10
Defined Benefit Pension Plans and Other Postretirement Benefit Plans, Continued
Contributions
There was no Employee Retirement Income Security Act ("ERISA") cash requirement for the plan
in 2013 and none is projected to be required in 2014. It is the Company’s policy to contribute
enough cash to maintain at least an 80% funding level.
Estimated Future Benefit Payments
Expected benefit payments from the trust, including future service and pay, are as follows:
Estimated future payments
2014
2015
2016
2017
2018
2019 – 2023
Pension
Benefits
($ in millions)
$
Other
Benefits
($ in millions)
0.2
0.2
0.2
0.3
0.3
1.8
8.7 $
8.5
8.3
8.1
8.0
36.7
Section 401(k) Savings Plan
The Company has a Section 401(k) Savings Plan available to employees who have completed one
full year of service and are age 21 or older.
Since January 1, 2005, the Company has matched 100% of each employee’s contribution of up to
3% of salary and 50% of the next 2% of salary. In addition, for those employees hired before
December 31, 2004, who were eligible for the Company’s cash balance retirement plan before it was
frozen, the Company annually makes an additional contribution of 2 1/2 % of salary to each
employee’s account. In calendar 2005 and future years, participants are immediately vested in their
contributions and the Company’s matching contribution plus actual earnings thereon. The
contribution expense to the Company for the matching program was approximately $5.0 million for
Fiscal 2014, $5.3 million for Fiscal 2013 and $4.2 million for Fiscal 2012.
90
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 11
Earnings Per Share
(In thousands, except
per share amounts)
Earnings from continuing
operations
Less: Preferred stock
dividends and income from
participating securities
Basic EPS from continuing
operations
Income from continuing
operations available to
common shareholders
Effect of Dilutive
Securities from continuing
operations
Plus: Income from
participating
securities
Options and restricted
stock
Convertible
preferred
stock(1)
Employees’
preferred
stock(2)
Diluted EPS from
continuing operations
Income from continuing
operations available to
common shareholders plus
assumed conversions
For the Year Ended
February 1, 2014
Shares
(Denominator)
Income
(Numerator)
Per-Share
Amount
Income
(Numerator)
Per-Share
Amount
Income
(Numerator)
For the Year Ended
February 2, 2013
Shares
(Denominator)
For the Year Ended
January 28, 2012
Shares
(Denominator)
Per-Share
Amount
$
92,982
$
112,897
$
93,451
(33 )
(147 )
(3,338 )
92,949
23,297
$
3.99
112,750
23,584
$
4.78
90,113
23,179
$
3.89
—
—
272
—
46
—
88
372
34
47
43
141
283
55
48
$
92,949
23,615
$
3.94
$
112,838
24,037
$
4.69
$
90,297
23,565
$
3.83
(1) As a result of the Company issuing a notice of mandatory redemption to the holders of Series 1, 3 and 4 preferred stock
in the first quarter of Fiscal 2014, there were no remaining convertible preferred stock of that series outstanding as of
February 1, 2014. Therefore, convertible preferred stocks were not included in diluted earnings per share for Fiscal
2014. The amount of the dividend on the convertible preferred stock per common share obtainable on conversion of the
convertible preferred stock was less than basic earnings per share for Series 1, 3 and 4 preferred stocks for Fiscal 2013
and 2012. Therefore, conversion of these convertible preferred stocks were included in diluted earnings per share for
Fiscal 2013 and 2012.
(2) The Company’s Employees’ Subordinated Convertible Preferred Stock is convertible one for one to the Company’s
common stock. Because there are no dividends paid on this stock, these shares are assumed to be converted.
All outstanding options to purchase shares of common stock at the end of Fiscal 2014, 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.
The weighted shares outstanding reflects the effect of stock buy back programs. The Company
repurchased 337,665 shares at a cost of $20.7 million during Fiscal 2014. The Company has $65.5
million remaining under its current $75.0 million share repurchase authorization. The Company
repurchased 645,904 shares at a cost of $37.7 million during Fiscal 2013. The Company did not
repurchase any shares during Fiscal 2012.
91
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Share-Based Compensation Plans
The Company’s stock-based compensation plans, as of February 1, 2014, 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 2014, 2013 and 2012, the Company recognized stock option related share-based
compensation of $0.0, $0.0 and less than $1,000, 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 $3.8 million, $4.8 million and $4.7 million as financing cash inflows
rather than as operating cash inflows on its Consolidated Statement of Cash Flows for Fiscal 2014,
2013 and 2012, respectively.
The Company did not grant any fixed stock options in Fiscal 2014, 2013 or 2012.
92
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Share-Based Compensation Plans, Continued
A summary of fixed stock option activity and changes for Fiscal 2014, 2013 and 2012 is presented
below:
Options
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate Intrinsic
Value (in
thousands)(1)
Outstanding, January 29, 2011
Granted
Exercised
Forfeited
Outstanding, January 28, 2012
Granted
Exercised
Forfeited
Outstanding, February 2, 2013
Granted
Exercised
Forfeited
Outstanding, February 1, 2014
Exercisable, February 1, 2014
877,130 $
—
(390,357 )
—
486,773 $
—
(223,618 )
—
263,155 $
—
(130,051 )
(2,250 )
130,854 $
130,854 $
24.75
—
24.82
—
24.70
—
21.50
—
27.43
—
23.33
17.50
31.67
31.67
1.58 $
1.58 $
5,045
5,045
(1) Based upon the difference between the closing market price of the Company’s common stock on the last trading day of
the year and the grant price of in-the-money options.
The total intrinsic value, which represents the difference between the underlying stock’s market
price and the option’s exercise price, of options exercised during Fiscal 2014, 2013 and 2012 was
$6.1 million, $11.5 million and $10.3 million, respectively.
As of February 1, 2014, the Company does not have any nonvested options of its fixed stock
incentive plans.
As of February 1, 2014, there was no unrecognized compensation costs related to stock options
under the 2009 Plan. Cash received from option exercises under all share-based payment
arrangements for Fiscal 2014, 2013 and 2012 was $3.0 million, $4.8 million and $9.7 million,
respectively.
Restricted Stock Incentive Plans
Director Restricted Stock
The 2009 Plan permits grants to non-employee directors on such terms as the Company's board of
directors may approve. Restricted stock awards were made to independent directors on the date of
the annual meeting of shareholders in each of Fiscal 2014, 2013 and 2012. 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 of directors also approved a grant of 365 additional shares in
Fiscal 2014 and 336 additional shares in Fiscal 2013 to a newly elected director each year on the
93
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Share-Based Compensation Plans, Continued
annual meeting date in Fiscal 2014 and 2013 on the same terms as the Fiscal 2014 and 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.
The Fiscal 2012 grants were valued at $70,000 for each director and Fiscal 2013 and 2014 grants
were each valued at $80,000 per director based on the average closing price of the stock for the first
five trading days of the month in which they were granted and vested on the first anniversary of the
grant date. For Fiscal 2014, 2013 and 2012, the Company issued 9,280 shares, 9,888 shares and
14,643 shares, respectively, of director restricted stock.
For Fiscal 2014, 2013 and 2012, the Company recognized $1.0 million, $0.9 million and $0.8
million, respectively, of director restricted stock related share-based compensation in selling and
administrative expenses in the accompanying Consolidated Statements of Operations.
Employee Restricted Stock
Under the 2009 Plan, the Company issued 199,392 shares, 194,232 shares and 289,407 shares of
employee restricted stock in Fiscal 2014, 2013 and 2012, respectively. Shares of employee
restricted stock issued in Fiscal 2012, 2013 and 2014 vest 25% per year over four years, provided
that on such date the grantee has remained continuously employed by the Company since the date of
grant. The fair value of employee restricted stock is charged against income as compensation cost
over the vesting period. Compensation cost recognized in selling and administrative expenses in the
accompanying Consolidated Statements of Operations for these shares was $11.3 million, $9.6
million and $6.9 million for Fiscal 2014, 2013 and 2012, respectively.
94
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 12
Share-Based Compensation Plans, Continued
A summary of the status of the Company’s nonvested shares of its employee restricted stock as of
February 1, 2014 is presented below:
Nonvested Restricted Shares
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
Granted
Vested
Withheld for federal taxes
Forfeited
Nonvested at February 1, 2014
Weighted-Average
Grant-Date
Fair Value
Shares
818,119 $
289,407
(227,691 )
(93,089 )
(14,081 )
772,665
194,232
(195,203 )
(75,552 )
(3,360 )
692,782
199,392
(199,428 )
(105,193 )
(6,279 )
581,274 $
23.95
45.14
22.58
22.42
27.38
32.41
57.58
29.95
29.97
38.96
40.59
65.11
34.31
34.42
46.48
52.21
As of February 1, 2014, there was $23.1 million of total unrecognized compensation costs related to
nonvested share-based compensation arrangements for restricted stock discussed above. That cost is
expected to be recognized over a weighted average period of 1.25 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 3,146 shares, 2,463 shares and
2,717 shares to employees in Fiscal 2014, 2013 and 2012, respectively.
95
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Legal Proceedings
Environmental Matters
New York State Environmental Matters
In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) and
the Company entered into a consent order whereby the Company assumed responsibility for
conducting a remedial investigation and feasibility study (“RIFS”) and implementing an interim
remedial measure (“IRM”) with regard to the site of a knitting mill operated by a former subsidiary
of the Company from 1965 to 1969. The Company undertook the IRM and RIFS voluntarily,
without admitting liability or accepting responsibility for any future remediation of the site. The
Company has completed the IRM and the RIFS. In the course of preparing the RIFS, the Company
identified remedial alternatives with estimated undiscounted costs ranging from $0.0 million to
$24.0 million, excluding amounts previously expended or provided for by the Company. The United
States Environmental Protection Agency (“EPA”), which has assumed primary regulatory
responsibility for the site from NYSDEC, issued a Record of Decision in September 2007. The
Record of Decision 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 (the "Village"), has additionally asserted that the Company is
liable for the costs associated with enhanced treatment required by the impact of the groundwater
plume from the site on two public water supply wells, including historical total costs ranging from
approximately $1.8 million to in excess of $2.5 million, and future operation and maintenance costs
which the Village estimates at $126,400 annually while the enhanced treatment continues. On
December 14, 2007, the Village filed a complaint 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
96
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Legal Proceedings, Continued
under certain of the state law theories. The Company intends to continue to defend the action if an
acceptable settlement agreement cannot be reached.
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 1, 2014, $11.9 million as of February 2, 2013 and $13.0 million as of January 28, 2012.
All such provisions reflect the Company's estimates of the most likely cost (undiscounted, including
both current and noncurrent portions) of resolving the contingencies, based on facts and
circumstances as of the time they were made. There is no assurance that relevant facts and
circumstances will not change, necessitating future changes to the provisions. Such contingent
liabilities are included in the liability arising from provision for discontinued operations on the
accompanying Consolidated Balance Sheets because it relates to former facilities operated by the
Company. The Company has made pretax accruals for certain of these contingencies, including
approximately $0.5 million reflected in Fiscal 2014, $0.8 million reflected in Fiscal 2013 and $1.8
million reflected in Fiscal 2012. 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.
97
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Legal Proceedings, Continued
The Company does not currently expect any future claims in connection with the intrusion to have a
material effect on its financial condition, cash flows, or results of operations.
On January 5, 2012, a patent infringement action against the Company and numerous other
defendants was filed in the U.S. District Court for the Eastern District of Texas, GeoTag, Inc. v.
Circle K Store, Inc., et al., alleging that features of certain of the Company's e-commerce websites
infringe U.S. Patent No. 5,930,474, entitled “Internet Organizer for Accessing Geographically and
Topically Based Information.” The plaintiff sought relief including damages for the alleged
infringement, costs, expenses and pre- and post-judgment interest and injunctive relief. Pursuant to
a settlement agreement, the matter was dismissed on February 28, 2014. The settlement did not
have a material effect on its financial condition or results of operations.
On June 13, 2012, a former vendor of a subsidiary of the Company filed an action, Perfect Curve,
Inc. v. Hat World, Inc., in U.S. District Court in Massachusetts, alleging patent, trademark, trade
dress, and copyright infringement against the subsidiary based on the sale of a line of products
developed by the subsidiary. The parties reached agreement to settle the matter and the action was
dismissed pursuant to a Stipulated Dismissal dated March 13, 2014. The settlement did not have a
material effect on its financial condition or results of operations.
On May 14, 2012, a putative class and collective action, Maro v. Hat World, Inc., was filed in the
U.S. District Court for the Northern District of Illinois. The action alleges that the Company failed to
pay the plaintiff and other, similarly situated retail store employees of Hat World, Inc., for time spent
making bank deposits of store collections, and seeks to recover unpaid wages, liquidated damages,
statutory penalties, attorney's fees, and costs pursuant to the federal Fair Labor Standards Act, the
Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. On January 15,
2014, the court dismissed the Maro case with prejudice, based on the plaintiffs' failure to prosecute.
On July 16, 2012 and July 30, 2012, additional putative class and collective actions, Chavez v. Hat
World, Inc. and Dismukes v. Hat World, Inc., were filed in the same court, alleging that certain Hat
World employees were misclassified as exempt from overtime pay, and seeking similar relief. The
Chavez and Dismukes actions have been consolidated. The parties have reached an agreement in
principle to resolve the matter, subject to documentation and court approval. The Company does not
expect the matter or its settlement as proposed to have a material effect on its financial condition or
results of operations.
On August 30, 2012, a former employee of a Company subsidiary filed a putative class and collective
action, Kershner v. Hat World, Inc., in the Philadelphia, Pennsylvania Court of Common Pleas
alleging violations of the Pennsylvania Minimum Wage Act by the subsidiary. The Company has
reached an agreement to resolve the matter, subject to approval by the court. On February 10, 2014,
the court granted preliminary approval of the proposed settlement. The Company does not expect the
matter or its settlement as proposed to have a material effect on its financial condition or results of
operations.
98
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 13
Legal Proceedings, Continued
On May 23, 2013, a former employee of the Company filed an action, Everett v. Genesco Inc., in the
U.S. District Court for the Middle District of Florida alleging violations of the Fair Labor Standards
Act, seeking designation as a collective action and the award of allegedly unpaid minimum wages,
overtime pay, liquidated damages, penalties, interest, attorneys' fees, and other relief. The Company
disputes the material allegations in the action and intends to defend it.
On May 17, 2013, a former employee filed a putative class and representative action, Garcia v.
Genesco, Inc. in the Superior Court of California for the County of Ventura, alleging various claims
under the California Labor Code, including failure to provide meal and rest periods, failure to timely
pay wages, failure to provide accurate itemized wage statements, and unfair competition and violation
of the Private Attorneys’ General Act of 2004, and seeking unspecified damages and penalties. On
August 30, 2013, the Company removed the action to the United States District Court for the Central
District of California. The Company disputes the material allegations in the complaint and is
defending the matter.
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 2014, 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, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Lids Sports
Group, comprised primarily of the Lids, Hat World and Hat Shack retail headwear stores, the Lids
Locker Room and Lids Clubhouse fan shops (operated under various trade names), licensed team
merchandise departments in Macy's department stores operated under the name of Locker Room by
Lids under a license agreement with Macy's, the Lids Team Sports business and certain e-commerce
operations; (iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations,
catalog and e-commerce operations and wholesale distribution of products under the Johnston &
Murphy and Trask brands; and (v) Licensed Brands, comprised of Dockers® Footwear, sourced and
marketed under a license from Levi Strauss & Company; SureGrip® Footwear, occupational
footwear primarily sold directly to consumers; and other brands.
The accounting policies of the segments are the same as those described in the summary of
significant accounting policies.
99
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Business Segment Information, Continued
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.
Corporate assets include cash, domestic prepaid rent expense, prepaid income taxes, deferred
income taxes, deferred note expense and corporate fixed assets. The Company charges allocated
retail costs of distribution to each segment. The Company does not allocate certain costs to each
segment in order to make decisions and assess performance. These costs include corporate
overhead, interest expense, interest income, asset impairment charges and other, including major
litigation and major lease terminations.
Fiscal 2014
In thousands
Sales
Intercompany sales
Schuh
Group
Journeys
Group
$ 1,082,241 $ 364,732 $ 821,779 $ 245,941 $ 109,989 $
(783 )
Licensed
Brands
(209 )
—
—
—
—
Johnston
& Murphy
Group
Lids
Sports
Group
$ 364,732
$ 820,996
3,063 $ 63,748 $
$ 245,941
$ 109,780
$
17,638 $ 10,614 $
97,377 $
Corporate
& Other
1,282 $
Consolidated
2,625,964
—
(992 )
1,282
$
(27,664 ) $
2,624,972
164,776
—
—
—
—
—
(1,341 )
(1,341 )
97,377
—
—
3,063
—
—
63,748
—
—
17,638
—
—
10,614
—
—
(29,005 )
(4,641 )
66
163,435
(4,641 )
66
$
97,377
$ 63,748
$
$
3,063
$ 298,105 $ 268,514 $ 574,664 $
11,339
29,673
19,400
20,223
28,345
35,193
$ 10,614
$
17,638
97,532 $ 50,955 $
4,002
9,178
468
1,452
(33,580 ) $
149,514 $
3,581
2,737
158,860
1,439,284
67,135
98,456
Net sales to external customers
$ 1,082,241
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
Capital expenditures
*Asset Impairments and other includes a $2.3 million charge for asset impairments, of which $1.4 million is in the Lids Sports Group, $0.6 million is
in the Journeys Group and $0.3 million is in the Johnston & Murphy Group, a $3.3 million charge for network intrusion costs, a $2.4 million charge
for other legal matters and a $1.6 million charge for a lease termination partially offset by a gain of $(8.3) million for the lease termination of a New
York City Journeys store.
**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $182.4 million, $104.9 million and $0.8 million of goodwill,
respectively. Goodwill for Lids Sports Group includes $10.1 million of additions in Fiscal 2014 resulting from small acquisitions and the Schuh Group
goodwill increased by $4.2 million due to foreign currency translation adjustment.
100
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Business Segment Information, Continued
Fiscal 2013
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
Total assets**
Depreciation and amortization
Journeys
Group
$ 1,111,490
—
Lids
Sports
Group
Johnston
& Murphy
Group
Schuh
Group
370,480 $ 793,016 $ 221,870 $ 108,808 $
Licensed
Brands
Corporate
& Other
(1,761 )
$ 1,111,490 $ 370,480 $ 791,255 $ 221,860 $ 108,498 $
(310 )
(10 )
—
Consolidated
1,234 $ 2,606,898
(2,081 )
1,234 $ 2,604,817
—
$
$ 109,953
—
109,953
—
—
$
11,209
—
11,209
—
—
$ 82,867
—
82,867
—
—
$ 15,696
—
15,696
—
—
$
10,078
—
10,078
—
—
(42,903 ) $
186,900
(17,037 )
(59,940 )
(5,126 )
95
(17,037 )
169,863
(5,126 )
95
$ 109,953
$
11,209
$ 82,867
$ 15,696
$
10,078
$
(64,971 ) $
164,832
$ 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
$ 162,630
2,471
3,629
$ 1,326,072
63,697
71,737
Capital expenditures
*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 $15.6 million charge for network intrusion costs and a $0.1 million
charge for other legal matters.
**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $172.3 million, $100.7 million and $0.8 million of goodwill,
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.
101
Genesco Inc.
and Subsidiaries
Notes to Consolidated Financial Statements
Note 14
Business Segment Information, Continued
Fiscal 2012
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
Total assets**
Depreciation and amortization
Capital expenditures
Lids
Journeys
Sports
Group
Group
$ 1,020,116 $ 212,262 $ 759,671 $ 201,725 $ 97,721 $
Johnston
& Murphy
Group
Licensed
Brands
Schuh
Group
Corporate
& Other
—
—
(347 )
—
(277 )
$ 1,020,116 $ 212,262 $ 759,324 $ 201,725 $ 97,444 $
$
89,045 $ 11,711 $ 86,037 $ 13,743 $
9,451 $ (45,825 ) $
—
89,045
—
—
—
11,711
—
—
—
86,037
—
—
—
13,743
—
—
—
9,451
—
—
—
Consolidated
1,116 $ 2,292,611
(624 )
1,116 $ 2,291,987
164,162
(2,677 )
161,485
(5,157 )
65
(2,677 )
(48,502 )
(5,157 )
65
89,045
$ 86,037
$ 11,711
$
156,393
$ 259,331 $ 205,313 $ 489,512 $ 79,321 $ 34,974 $ 161,310 $ 1,229,761
53,737
3,538
49,456
1,894
22,541
24,497
20,742
11,125
2,029
3,816
4,602
7,406
$ (53,594 ) $
285
718
$ 13,743
9,451
$
*Asset Impairments and other includes a $1.1 million charge for asset impairments, of which $0.6 million is in the Journeys Group, $0.3 million is in
the Lids Sports Group and $0.2 million is in the Johnston & Murphy Group, a $0.7 million charge for network intrusion costs and a $0.9 million charge
for other legal matters.
**Total assets for the Lids Sports Group, Schuh Group and Licensed Brands include $159.1 million, $99.9 million and $0.8 million of goodwill,
respectively. Goodwill for the Lids Sports Group includes $6.5 million of additions in Fiscal 2012 resulting from small acquisitions and the Schuh
Group goodwill is due to the acquisition of Schuh in the second quarter of Fiscal 2012 of $102.9 million which has been decreased by $3.0 million due
to foreign currency translation adjustment.
102
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
Diluted earnings
per common
share:
Continuing
operations
Net earnings
2014
$ 591,388
298,437
2013
$ 600,144
306,906
2014
$ 574,746
282,808
2013
$ 543,522
273,059
2014
$ 666,332
332,161
2013
$ 664,458
334,412
2014(a)
$ 792,506
385,644
2013
$ 796,693
384,240
2014(b)
2013
$ 2,624,972 $ 2,604,817
1,299,050 1,298,617
24,685
(1)
35,886
(3)
14,388
(5)
14,638
(7)
45,789
(8)
52,907
(9)
73,998
(11)
61,401
(13)
158,860
164,832
14,509
21,754
(2)
14,410
(4)
21,577
8,465
(6)
8,340
10,009
27,796
42,221
42,212
38,913
92,982
112,897
9,968
27,750
(10)
42,127
(12)
42,153
(14)
38,763
92,653
112,435
0.61
0.88
0.61
0.87
0.36
0.35
0.41
0.40
1.18
1.18
1.76
1.76
1.79
1.79
1.64
1.63
3.94
4.69
3.92
4.68
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Includes a net asset impairment and other charge of $1.3 million (see Note 3). (a) 13 week period vs. 14
Includes a loss of $0.1 million, net of tax, from discontinued operations (see Note 3). weeks in prior period.
Includes a net asset impairment and other charge of $0.1 million (see Note 3). (b) 52 week period vs. 53
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 credit of $(7.1) 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 $0.4 million (see Note 3).
Includes a net asset impairment and other charge of $1.5 million (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 $5.6 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).
103
ITEM 9, CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A, CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
We have established disclosure controls and procedures to ensure that material information relating to the Company, including
its consolidated subsidiaries, is made known to the officers who certify the Company's financial reports and to other members
of senior management and Board of Directors.
Based on their evaluation as of February 1, 2014, the principal executive officer and principal financial officer of the Company
have concluded that the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), were effective to ensure that the information required to be
disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized
and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to
management, including the principal executive and principal financial officers, or persons performing similar functions, as
appropriate, to allow timely decisions regarding required disclosure.
Management’s report on internal control over financial reporting.
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting
as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of February 1, 2014. In
making this assessment, management used the criteria set forth in Internal Control – Integrated Framework (1992) drafted by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management
believes that, as of February 1, 2014, the Company’s internal control over financial reporting was effective based on those
criteria.
Ernst & Young LLP, the independent registered public accounting firm who also audited the Company’s Consolidated Financial
Statements, has issued an attestation report on the Company’s effectiveness of internal control over financial reporting which is
included herein.
Changes in internal control over financial reporting.
There were no changes in the Company's internal control over financial reporting that occurred during the Company's last fiscal
quarter that have materially affected or are reasonable likely to materially affect the Company's internal control over financial
reporting.
ITEM 9B, OTHER INFORMATION
Not applicable.
104
PART III
ITEM 10, DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Certain information required by this item is incorporated herein by reference to the sections entitled “Election of Directors,”
“Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy
statement for its annual meeting of shareholders to be held June 26, 2014, 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, 2014, to be filed with the Securities and Exchange Commission.
ITEM 12, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Certain information required by this item is incorporated herein by reference to the section entitled “Security Ownership of
Officers, Directors and Principal Shareholders” in the Company’s definitive proxy statement for its annual meeting of
shareholders to be held June 26, 2014, to be filed with the Securities and Exchange Commission.
The following table provides certain information as of February 1, 2014 with respect to our equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION*
Plan Category
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
(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)
130,854 $
—
130,854 $
31.67
—
31.67
1,514,954
—
1,514,954
(1) Such shares may be issued as restricted shares or other forms of stock-based compensation pursuant to our stock incentive
plans.
*
For additional information concerning our equity compensation plans, see the discussion in Note 1 in the Notes to
Consolidated Financial Statements—Summary of Significant Accounting Policies – Share-Based Compensation and
Note 12 Share-Based Compensation Plans.
ITEM 13, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated herein by reference to the section entitled “Election of Directors” in the
Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2014, to be filed with the
Securities and Exchange Commission.
105
ITEM 14, PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated herein by reference to the section entitled “Audit Matters” in the
Company’s definitive proxy statement for its annual meeting of shareholders to be held June 26, 2014, to be filed with the
Securities and Exchange Commission.
106
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, Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Financial Statements
Consolidated Balance Sheets, February 1, 2014 and February 2, 2013
Consolidated Statements of Operations, each of the three fiscal years ended 2014, 2013 and 2012
Consolidated Statements of Comprehensive Income, each of the three fiscal years ended 2014, 2013 and 2012
Consolidated Statements of Cash Flows, each of the three fiscal years ended 2014, 2013 and 2012
Consolidated Statements of Equity, each of the three fiscal years ended 2014, 2013 and 2012
Notes to Consolidated Financial Statements
Financial Statement Schedules
Schedule 2 — Valuation and Qualifying Accounts, each of the three fiscal years ended 2014, 2013 and 2012
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)
(3)
(4)
a.
b.
c.
d.
a.
b.
a.
b.
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).
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).
107
(10)
a.
Third Amended and Restated Credit Agreement, dated as of January 31, 2014, by and among
Genesco Inc., certain subsidiaries of the Genesco Inc. party thereto, as other domestic
borrowers, GCO Canada Inc., Genesco (UK) Limited, the lenders party thereto and Bank of
America, N.A., as Agent. Incorporated by reference to Exhibit 10.1 to the current report on
Form 8-K filed February 5, 2014 (File No. 1-3083).
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
q.
r.
s.
Amendment and Restatement Agreement dated November 1, 2013 between Schuh Group
Limited as Parent and others as Borrowers and Guarantors, Lloyds Bank PLC as Arranger,
Agent and Security Trustee.
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 (File No. 1-3083).
Amended and Restated EVA Incentive Compensation Plan. Incorporated by reference to
Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended
April 28, 2012 (File No. 1-3083).
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 (File No. 1-
3083).
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).
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).
108
t.
u.
v.
First Amendment to Form of Employment Protection Agreement. Incorporated by reference to
Exhibit (10)s to the Company’s Annual Report on Form 10-K for the fiscal year ended
January 30, 2010 (File No.1-3083).
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 (File No.1-3083).
Trademark License Agreement, dated August 9, 2000, between Levi Strauss & Co. and
Genesco Inc. Incorporated by reference to Exhibit (10.1) to the Company’s Quarterly Report
on Form 10-Q for the quarter ended October 30, 2004 (File No.1-3083).*
w. 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).*
Amendment No. 2 (Renewal) to Trademark License Agreement, dated November 1, 2006,
between Levi Strauss & Co. and Genesco. Inc. Incorporated by reference to Exhibit (10.1) to
the Company’s Quarterly Report on Form 10-Q for the quarter ended October 28, 2006 (File
No.1-3083).*
Amendment No. 4 (Renewal) to Trademark License Agreement, dated May 15, 2009, between
Levi Strauss & Co. and Genesco Inc. Incorporated by reference to Exhibit (10)b to the
Company’s Quarterly Report on Form 10-Q for the quarter ended August 1, 2009 (File No.1-
3083).*
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).*
x.
y.
z.
aa. Genesco Inc. Deferred Income Plan dated as of July 1, 2000. Incorporated by reference to
Exhibit (10)p to the Company’s Annual Report on Form 10-K for the fiscal year ended
January 29, 2005. Amended and Restated Deferred Income Plan dated August 22, 2007.
Incorporated by reference to Exhibit (10)r to the Company’s Annual Report on Form 10-K for
the fiscal year ended February 2, 2008 (File No.1-3083).
bb. Non-Employee Director and Named Executive Officer Compensation. Incorporated by
reference to Exhibit (10)b to the Company’s Quarterly Report on Form 10-Q for the quarter
ended October 29, 2005 (File No.1-3083).
cc. The Schuh Group Limited 2015 Management Bonus Scheme. Incorporated by reference to
Exhibit (10)a to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 30,
2011 (File No.1-3083).
dd.
1996 Employee Stock Purchase Plan. Incorporated by reference to Registration Statement on
Form S-8 filed September 14, 1995 (File No. 333-62653).
ee. Amended and Restated Genesco Employee Stock Purchase Plan dated August 22, 2007.
Incorporated by reference to Exhibit (10)u to the Company’s Annual Report on Form 10-K for
the fiscal year ended February 2, 2008 (File No.1-3083).
ff.
Basic Form of Exchange Agreement (Restricted Stock). Incorporated by reference to Exhibit
10.1 to the current report on Form 8-K filed April 29, 2009 (File No. 1-3083).
gg. Basic Form of Exchange Agreement (Unrestricted Stock). Incorporated by reference to
Exhibit 10.2 to the current report on Form 8-K filed April 29, 2009 (File No. 1-3083).
hh. Form of Conversion Agreement. Incorporated by reference to Exhibit 10.1 to the current
report on Form 8-K filed November 2, 2009 (File No. 1-3083).
ii.
jj.
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).
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
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
109
(21)
(23)
(24)
(31.1)
(31.2)
(32.1)
(32.2)
(99)
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
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(filed with the Original Filing).
XBRL Instance Document
XBRL Schema Document
XBRL Calculation Linkbase Document
XBRL Definition Linkbase Document
XBRL Label Linkbase Document
XBRL Presentation Linkbase Document
Exhibits (10)c through (10)m, (10)s through (10)u and (10)aa through (10)ee 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 granted with respect to the omitted portion.
A copy of any of the above described exhibits will be furnished to the shareholders upon written request, addressed to Director,
Corporate Relations, Genesco Inc., Genesco Park, Room 498, P.O. Box 731, Nashville, Tennessee 37202-0731, accompanied
by a check in the amount of $15.00 payable to Genesco Inc.
110
We consent to the incorporation by reference in the following Registration Statements:
Consent of Independent Registered Public Accounting Firm
(1) Registration statement (Form S-8 No. 033-62653) of Genesco Inc.,
(2) Registration statement (Form S-8 No. 333-08463) of Genesco Inc.,
(3) Registration statement (Form S-8 No. 333-104908) of Genesco Inc.,
(4) Registration statement (Form S-8 No. 333-40249) of Genesco Inc.,
(5) Registration statement (Form S-8 No. 333-128201) of Genesco Inc.,
(6) Registration statement (Form S-8 No. 333-160339) of Genesco Inc.,
(7) Registration statement (Form S-8 No. 333-180463) of Genesco Inc., and
(8) Registration statement (Form S-3 No. 333-109019) of Genesco Inc.,
of our reports dated April 2, 2014, with respect to the consolidated financial statements and schedule of Genesco Inc. and
Subsidiaries and the effectiveness of internal control over financial reporting of Genesco Inc. and Subsidiaries included in this
Annual Report (Form 10-K) of Genesco Inc. for the year ended February 1, 2014.
We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-62653) pertaining to the
1996 Employee Stock Purchase Plan of Genesco Inc. of our report dated April 2, 2014, with respect to the financial statements
of the Genesco Inc. Employee Stock Purchase Plan included as an exhibit to this Annual Report (Form 10-K) of Genesco Inc.
for the year ended February 1, 2014.
Nashville, Tennessee
April 2, 2014
/s/ Ernst & Young LLP
111
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 2, 2014
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 2nd day of April, 2014.
/s/Robert J. Dennis
Robert J. Dennis
/s/James S. Gulmi
James S. Gulmi
/s/Paul D. Williams
Paul D. Williams
Directors:
Joanna Barsh*
James S. Beard*
Leonard L. Berry *
William F. Blaufuss, Jr.*
James W. Bradford*
*By
/s/Roger G. Sisson
Roger G. Sisson
Attorney-In-Fact
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 *
112
Schedule 2
Year Ended February 1, 2014
Genesco Inc.
and Subsidiaries
Valuation and Qualifying Accounts
In Thousands
Reserves deducted from assets in the balance sheet:
Accounts Receivable Allowances
Year Ended February 2, 2013
In Thousands
Reserves deducted from assets in the balance sheet:
Accounts Receivable Allowances
Year Ended January 28, 2012
Beginning
Balance
Charged
to Profit
and Loss
Increases
(Decreases)
Ending
Balance
$
6,082 $
(525 ) $
(1,137 )
$
4,420
Beginning
Balance
Charged
to Profit
and Loss
Increases
(Decreases)
Ending
Balance
$
6,900 $
1,325 $
(2,143 )
$
6,082
In Thousands
Reserves deducted from assets in the balance sheet:
Accounts Receivable Allowances
Beginning
Balance
Charged
to Profit
and Loss
Increases
(Decreases)
Ending
Balance
$
3,301 $
2,004 $
1,595
$
6,900
113
BOARD OF DIRECTORS
Joanna Barsh
Director Emeritus
McKinsey & Company
New York, New York
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, University Distinguished Professor of Marketing
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
Retired 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.
Nashville, Tennessee
Matthew C. Diamond
Chief Executive Officer
Defy Media, LLC
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
Former President and Chief Executive Officer
Tuesday Morning Corporation
Dallas, Texas
Member of the audit and compensation committees
114
CORPORATE OFFICERS
Robert J. Dennis
Chairman, President and Chief Executive Officer
10 years with Genesco
James S. Gulmi
Senior Vice President - Finance and Chief Financial Officer
42 years with Genesco
James C. Estepa
Senior Vice President - The Journeys Group
29 years with Genesco
Jonathan D. Caplan
Senior Vice President - Genesco Branded
21 years with Genesco
Kenneth J. Kocher
Senior Vice President - Lids Sports Group
10 years with Genesco
Roger G. Sisson
Senior Vice President - Corporate Secretary and General Counsel
20 years with Genesco
Mimi E. Vaughn
Senior Vice President - Strategy and Shared Services
10 years with Genesco
Paul D. Williams
Vice President and Chief Accounting Officer
37 years with Genesco
Matthew N. Johnson
Vice President and Treasurer
21 years with Genesco
Photo Credits: Chun Y. Lai. All rights reserved. Permission is required for any other reproduction or distribution. Schuh
storefront, lifestyle and product shots provided by Genesco operating divisions.
115