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GENESCO
[LOGO]
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(Mark One) FORM 10-K
[X] Annual Report Pursuant To
Section 13 or 15(d) of the
Securities Exchange Act of 1934
[Fee Required]
For the Fiscal Year Ended
January 31, 1996
[ ] Transition Report Pursuant To
Section 13 or 15(d) of the
Securities Exchange Act of 1934
[No Fee Required]
Securities and Exchange Commission
Washington, D.C. 20549
Commission File No. 1-3083
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GENESCO INC.
A Tennessee Corporation
I.R.S. No. 62-0211340
Genesco Park
1415 Murfreesboro Road
Nashville, Tennessee 37217-2895
Telephone 615/367-7000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
EXCHANGES ON WHICH
TITLE REGISTERED
Common Stock, $1.00 par value New York and Chicago
Preferred Share Purchase Rights New York and Chicago
10 3/8% Senior Notes due 2003 New York
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
Subordinated Serial Preferred Stock, Series 1
Employees' Subordinated Convertible Preferred Stock
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the June 26, 1996
annual meeting of shareholders are incorporated into
Part III by reference.
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Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90
days. Yes X No
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Common Shares Outstanding April 19, 1996 - 24,423,172
Aggregate market value on April 19, 1996 of the voting
stock held by nonaffiliates of the registrant was
approximately $135,000,000.
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TABLE OF CONTENTS
Page
PART I
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 8. Financial Statements and Supplementary Data 26
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 62
PART III
Item 10. Directors and Executive Officers of the Registrant 62
Item 11. Executive Compensation 62
Item 12. Security Ownership of Certain Beneficial Owners and Management 62
Item 13. Certain Relationships and Related Transactions 64
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports 65
on Form 8-K
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PART I
ITEM 1, BUSINESS
GENERAL
Genesco Inc. ("Genesco" or the "Company") manufactures, markets and distributes
branded men's and women's shoes and boots. The Company's owned and licensed
footwear brands sold through both wholesale and retail channels of distribution
include Johnston & Murphy, Dockers and Nautica shoes and Laredo, Code West and
Larry Mahan boots.
Products of Genesco's ongoing operations are sold at wholesale to more than
5,000 retailers, including a number of leading department, discount and
specialty stores, and at retail through the Company's own network of 463 retail
shoe stores and leased shoe departments. Genesco products are supplied from
the Company's own manufacturing facilities as well as a variety of overseas and
domestic sources.
Genesco's ongoing operations operate in one business segment, footwear.
References to Fiscal 1992, 1993, 1994, 1995 or 1996 are to the Company's fiscal
year ended on January 31 of each such year. For further information on the
Company's business segment, see Note 19 to the Consolidated Financial
Statements included in Item 8 and Management's Discussion and Analysis of
Financial Condition and Results of Operations. Prior to its discontinuation
pursuant to the 1995 Restructuring (defined below), the Company's business
included operations in a men's apparel segment. All information contained in
Management's Discussion and Analysis of Financial Condition and Results of
Operations which is referred to in Item 1 of this report is incorporated by
such reference in Item 1.
In response to worsening trends in the Company's men's apparel business and in
response to a strategic review of its footwear operations, the Company's board
of directors, on November 3, 1994, approved a plan (the "1995 Restructuring")
designed to focus the Company on its core footwear businesses by selling or
liquidating four businesses, two of which constituted its entire men's apparel
segment.
The 1995 Restructuring provided for the following:
1995 Restructuring Charge
_ Liquidation of the University Brands children's shoe business,
_ Sale of the Mitre Sports soccer business, and
_ Facility consolidation costs and permanent work force reductions.
1995 Restructuring Provision
_ Liquidation of The Greif Companies men's tailored clothing business, and
_ Sale of the GCO Apparel Corporation tailored clothing manufacturing
business.
The transactions provided for in the 1995 Restructuring were substantially
complete as of January 31, 1996 and the Company does not expect any material
future adjustments arising from the completion of the 1995 Restructuring. The
divestiture of the University Brands business was completed in February 1995.
The operations of The Greif Companies have ceased, its inventories and
equipment have been liquidated and its last major remaining long-term lease
liability was resolved in June 1995. The Company's GCO Apparel Corporation was
sold in June 1995. The Company's Mitre Sports soccer business was sold in
August 1995.
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See Note 2 to the Consolidated Financial Statements and "Significant
Developments" in Management's Discussion and Analysis of Financial Condition
and Results of Operations for information regarding the restructuring and the
financial effects thereof.
FOOTWEAR
Wholesale
The Company distributes its footwear products at wholesale to more than 5,000
retailers, including independent shoe merchants, department stores, mail order
houses and other retailers. Substantially all of the Company's wholesale
footwear sales are Genesco-owned or -licensed brands.
Johnston & Murphy. High-quality men's shoes have been sold under the Johnston
& Murphy name for more than 100 years. The Company believes Johnston & Murphy
traditionally-styled dress shoes and contemporary dress casual shoes enjoy a
reputation for quality craftsmanship, durability and comfort. Representative
suggested retail prices for Johnston & Murphy shoes are $135 to $235. Because
the Company believes that the market for casual and contemporary styles will
grow more rapidly than the market for traditional dress styles, in Fiscal 1994
the Company introduced a new J. Murphy line of casual and dress casual men's
shoes aimed at a younger consumer. Representative suggested retail prices for
J. Murphy shoes are $90 to $135. The Company further expanded its high-quality
product offerings in Fiscal 1994 by introducing a new line of contemporary,
European-styled men's dress shoes under the Domani label. Representative
suggested retail prices for Domani shoes are $175 to $225.
Laredo, Code West and Larry Mahan. Since 1976 the Company has manufactured
traditional western-style boots for men, women and children. Laredo boots are
targeted to people who wear boots for both work and recreation and are sold
primarily through independent retail outlets, predominantly western boot shops.
Representative suggested retail prices for Laredo boots are $65 to $150. In
1988 the Company created the Code West brand to enter the fashion segment of
the boot market. Code West styles are western-influenced fashion and
contemporary boots for men and women and are offered with distinctive detailing
and non-traditional colors. Code West boots, sold primarily through department
stores, boutiques and western boot shops, have representative suggested retail
prices of $110 to $150. In 1997 the Company will introduce a new boot under
the Larry Mahan label. This line features western-styling handcrafted 3/4 welt
construction and is targeted towards the premium boot category. Larry Mahan
Boots will be sold internationally as well as through better western retailers
across the United States. Representative suggested retail prices for Larry
Mahan boots will be $150 to $350.
Dockers. In 1991 Levi Strauss & Co. granted the Company the exclusive license
to market footwear under the Dockers brand name in the United States. Dockers
shoes are marketed through many of the same stores that carry Dockers slacks
and sportswear. In the fall of 1994 the Company redesigned the Dockers line
and lowered price points to broaden the appeal of this line of men's casual
shoes. Representative suggested retail prices for Dockers footwear are $59 to
$79.
Nautica. Genesco acquired the exclusive worldwide license to market Nautica
footwear in 1991. In 1992 the Company introduced a new line of casual footwear
under the Nautica label,
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targeted at young, active, upper-income consumers and designed to complement
Nautica sportswear. The Company will introduce a boys' line of Nautica
footwear in the Fall of Fiscal 1997. Representative suggested retail prices of
Nautica footwear are $39 to $150.
Retail
At January 31, 1996 the Company operated 463 stores and leased departments
throughout the United States and Puerto Rico selling footwear for men, women or
both. The following table sets forth certain information concerning the
Company's footwear retailing operations:
RETAIL STORES LEASED DEPARTMENTS
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JAN. 31, JAN. 31, JAN. 31, JAN 31,
1995 1996 1995 1996
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Johnston & Murphy . . . . . . . . . . . . . . . . . . . 109 108 7 7
Jarman . . . . . . . . . . . . . . . . . . . . . . . . 138 135 83 82
Journeys . . . . . . . . . . . . . . . . . . . . . . . 89 92 - -
Hardy . . . . . . . . . . . . . . . . . . . . . . . . 2 1 - -
Boot Factory . . . . . . . . . . . . . . . . . . . . . 33 29 - -
Factory To You . . . . . . . . . . . . . . . . . . . . 10 9 - -
Suits & Shoes . . . . . . . . . . . . . . . . . . . . 6 - - -
University Brands . . . . . . . . . . . . . . . . . . - - 21(1) -
--- --- --- --
Total . . . . . . . . . . . . . . . . . . . . . 387 374 111 89
=== === === ==
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(1) The University Brands leased departments discontinued operations in February
1995 as part of the 1995 Restructuring.
The following table sets forth certain additional information concerning the
Company's retail stores and leased departments during the five most recent
fiscal years:
FISCAL FISCAL FISCAL FISCAL FISCAL
1992 1993 1994 1995 1996
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Retail Stores and Leased Departments
Beginning of year 613 575 540 518 498
Opened during year 26 24 26 52 21
Closed during year (64) (59) (48) (72) (56)
--- --- --- --- ---
End of year 575 540 518 498 463
=== === === === ===
During Fiscal 1996 Genesco opened 21 stores and closed 34 stores and 22 leased
departments, 21 of which related to the Company's University Brands division.
The Company is planning to open 48 stores and to close 15 stores and leased
departments in Fiscal 1997. Actual store closings and store openings will
depend upon store operating results, the availability of suitable locations,
lease negotiations and other factors.
Johnston & Murphy. Johnston & Murphy's retail outlets sell a broad range of
men's dress and casual footwear and accessories to affluent business and
professional consumers. Johnston &
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Murphy stores carry predominantly Johnston & Murphy brand shoes. Of the 108
Johnston & Murphy stores at January 31, 1996, 18 were factory outlet stores.
Jarman. The Company's Jarman stores and the Jarman leased departments target
male consumers ages 25 to 45 and sell footwear in the middle price ranges.
Most shoes sold in Jarman stores are branded merchandise of other shoe
companies. Jarman leased departments, all of which are located in department
stores of a major, unaffiliated retail company, carry primarily branded
merchandise of other shoe companies and do not operate under the Jarman trade
name.
Journeys. Journeys stores target shoe buyers in the 13-22 year age group with
fashion merchandise, using popular music videos and youth oriented decor to
attract their customer base. Journeys stores carry predominantly branded
merchandise of other shoe companies.
Boot Factory; Factory to You. The Company's 29 Boot Factory outlet stores,
located primarily in the southeastern United States, sell primarily the
Company's Laredo and Code West lines of boots. Factory To You stores, located
primarily in the southeastern United States, sell mainly factory damaged,
overrun and close-out footwear products.
Manufacturing and Sourcing
The Company sources its footwear product from its own domestic manufacturing
facilities and from a variety of overseas and domestic sources. The Company
imports shoes, component parts and raw materials from the Far East, Latin
America and Europe. Genesco manufactures footwear in four facilities in the
southeastern United States. During Fiscal 1996, approximately 58% of the
footwear products manufactured by the Company were men's, 36% were women's and
6% were children's. Approximately 82% of the Company-manufactured footwear
products were sold at wholesale, and 18% at retail through stores and leased
departments operated by the Company. The estimated productive capacity of the
U.S. footwear plants was approximately 82% utilized in Fiscal 1996. The
Company believes that its ability to manufacture footwear in its own plants can
provide better quality assurance with respect to certain products and, in some
cases, reduce inventory risks and long lead times associated with imported
footwear. The Company balances these considerations against the cost advantage
of importing footwear products.
The Company also conducts leather tanning and finishing operations in two
manufacturing facilities located in Michigan and Tennessee. Approximately 6%
of tanned leather products sold in Fiscal 1996 were for internal use, and the
balance was sold to military boot manufacturers and other unaffiliated
customers.
MEN'S APPAREL
On November 3, 1994 the Company's board of directors approved a plan to exit
the entire men's apparel segment. See Note 2 to the Consolidated Financial
Statements and "Significant Developments" in Management's Discussion and
Analysis of Financial Condition and Results of Operations for information
regarding the plan and the financial effects thereof.
COMPETITION
The Company operates in a highly competitive market in footwear. Retail
footwear competitors range from small, locally-owned shoe stores to regional
and national department and discount
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stores and specialty chains. The Company competes with hundreds of footwear
wholesale and manufacturing operations in the United States and throughout the
world, most of which are relatively smaller, specialized operations but some of
which are larger, more diversified companies. Manufacturers in foreign
countries with lower labor costs have a significant price advantage.
LICENSES
The Company owns its Johnston & Murphy, Laredo and Code West footwear brands.
The Nautica and Dockers brand footwear lines, introduced in Fiscal 1993, are
sold under license agreements which expire January 31, 2002 and June 30, 2001,
respectively, with a renewal option for Nautica that expires in 2007. The
Larry Mahan boots, which will be introduced in Fiscal 1997, are sold under a
license agreement whose initial term expires January 31, 2000 with renewal
options that extend through 2025. Licensed products are generally designed by
the Company and submitted to the licensor for approval.
The Company's renewal options under its license agreements for footwear brands
are generally conditioned upon the Company's meeting certain minimum sales
requirements. Management expects to be able to further renew the Nautica
license agreement.
Sales of licensed products of ongoing operations were approximately $37 million
in Fiscal 1996 and approximately $31 million in the previous year.
The Company licenses certain of its footwear brands, mostly in foreign markets.
License royalty income was not material in Fiscal 1996.
RAW MATERIALS
Genesco is not dependent upon any single source of supply for any major raw
material. In Fiscal 1996 the Company experienced no significant shortages of
raw materials in its principal businesses. The Company considers its available
raw material sources to be adequate.
BACKLOG
On March 31, 1996, the Company's ongoing footwear wholesale operations
(including leather tanning operations), which accounted for 40% of continuing
operations' sales in Fiscal 1996, had a backlog of orders, including
unconfirmed customer purchase orders, amounting to approximately $33.1 million,
compared to approximately $30.0 million on March 31, 1995. Most orders are for
delivery within 90 days. Therefore, the backlog at any one time is not
necessarily indicative of future sales for an extended period of time. The
backlog is somewhat seasonal, reaching a peak in the spring. Footwear
companies maintain in-stock programs for selected anticipated high volume
styles.
EMPLOYEES
Genesco had approximately 3,750 employees at January 31, 1996 including
approximately 870 part-time employees. Retail shoe stores employ a substantial
number of part-time employees during peak selling seasons. Approximately 90
employees of the Company's tanning operations are covered by a collective
bargaining agreement, which will expire May 31, 1998. Of the Company's 3,750
employees, approximately 3,650 were employed in footwear and 100 in corporate
staff departments. See "Significant Developments - Fiscal 1995 Restructuring"
included in Management's Discussion and Analysis of Financial Condition and
Results of Operations for information regarding the Company's elimination of
all the tailored clothing jobs
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and the job eliminations in footwear operations to be divested or consolidated
and in staff positions to be eliminated.
PROPERTIES
The Company operates six footwear manufacturing and five warehousing
facilities, substantially all of which are leased, aggregating 1,600,000 square
feet. The eleven facilities are located in three states in the United States.
The Company's executive offices and the offices of its footwear operations are
in a 295,000 square foot leased building in Nashville, Tennessee.
See the discussion of the footwear segment for information regarding the
Company's retail stores. New shopping center store leases typically are for a
term of seven to 10 years and new factory outlet leases typically are for a
term of five years and both typically provide for rent based on a percentage of
sales against a fixed minimum rent based on the square footage leased. The
Company's leased departments are operated under agreements which are generally
terminable by department stores upon short notice.
Leases on the Company's plants, offices and warehouses expire from 1996 to
2018, not including renewal options. The Company believes that all leases
(other than long-term leases) of properties that are material to its operations
may be renewed on terms not materially less favorable to the Company than
existing leases. See Note 11 to the Consolidated Financial Statements included
in Item 8 for information about commitments under capital and operating leases.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, local and foreign laws, regulations
and ordinances that (i) govern activities which may have adverse environmental
effects, such as discharges to air or water as well as the handling and
disposal of solid and hazardous wastes, or (ii) impose liability for the costs
of cleaning up, and damages resulting from, past spillage, disposal or other
releases of hazardous substances (together, "Environmental Laws"). The Company
uses and generates, and in the past has used and generated, certain substances
and wastes that are regulated or may be deemed hazardous under applicable
Environmental Laws. The Company is and has been involved in proceedings
regarding several sites with respect to which it is alleged that the Company
sent certain waste material in the past. See Item 3, "Legal Proceedings," for
a discussion of certain of such pending matters.
ITEM 2, PROPERTIES
See Item 1.
ITEM 3, LEGAL PROCEEDINGS
New York State Environmental Proceedings
The Company is a defendant in two separate civil actions filed by the State of
New York; one against the City of Gloversville, New York, and 33 other private
defendants and the other against the City of Johnstown, New York, and 14 other
private defendants. In addition, third party complaints and cross claims have
been filed against numerous other entities, including the Company, in both
actions. These actions arise out of the alleged disposal of certain hazardous
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material directly or indirectly in municipal landfills. The complaints in both
cases allege the defendants, together with other contributors to the municipal
landfills, are liable under a federal environmental statute and certain common
law theories for the costs of investigating and performing remedial actions
required to be taken with respect to the landfills and damages to the natural
resources.
The environmental authorities have issued decisions selecting plans of
remediation with respect to the Johnstown and Gloversville sites which have
total estimated costs of $16.5 million and $28.3 million, respectively.
The Company has filed answers to the complaints in both the Johnstown and
Gloversville cases denying liability and asserting numerous defenses. Because
of uncertainties related to the ability or willingness of the other defendants,
including the municipalities involved, to pay a portion of future remediation
costs, the availability of State funding to pay a portion of future remediation
costs, the insurance coverage available to the various defendants, the
applicability of joint and several liability and the basis for contribution
claims among the defendants, management is presently unable to predict the
outcome or to estimate the extent of liability the Company may incur with
respect to either of the Johnstown or Gloversville actions.
In November 1995 the Company responded to a request for information dated
October 23, 1995 from the New York State Department of Environmental
Conservation (the "Department") regarding the site of a knitting mill operated
by the Company or a former subsidiary from 1965 to 1969. The Company has
received notice from the Department that it deems remedial action to be
necessary with respect to certain contaminants in the vicinity of the facility.
The owner of the site has advised the Company that it intends to hold the
Company responsible for any required remediation or other damages incident to
the contamination. The Company has not ascertained what responsibility, if
any, it has for any contamination in connection with the facility and is unable
to predict whether its liability in this connection, if any, will have a
material effect on its financial condition or results of operations.
Whitehall Environmental Sampling
The Michigan Department of Environmental Quality ("MDEQ") has performed
sampling and analysis of soil, sediments, surface water, groundwater, and waste
management areas at the Company's Volunteer Leather Company facility in
Whitehall, Michigan. MDEQ advised the Company that it would review the results
of the analysis for possible referral to the EPA for action under the
Comprehensive Environmental Response Compensation and Liability Act. However,
the Company is cooperating with MDEQ and has been advised by MDEQ that no EPA
referral is presently contemplated. Neither MDEQ nor the EPA has threatened or
commenced any enforcement action. In response to the testing data, the Company
submitted and MDEQ approved, a work plan. The plan provides, among other
things, for fencing a waste disposal area to reduce the likelihood of human
contact with any hazardous substances which may be in the area, installing an
erosion barrier along a portion of the shore of White Lake adjoining the
facility, and performing testing and analysis to determine what additional
remediation may be necessary. The Company does not believe that the
installation of an erosion barrier and fencing and the testing anticipated by
the conceptual work plan will have a material effect on its financial condition
or results of operations, but is unable to determine whether additional
remediation activities, if any, would have a material effect on its financial
condition or results of operations.
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Michigan Wastewater Permit Litigation
The Company, through its Volunteer Leather division and several other
industrial users of the Muskegon County Wastewater System are plaintiffs in an
action against Muskegon County challenging the ordinance under which wastewater
permits have been issued. The action and a companion case challenging the
provisions of the Company's wastewater permit are pending in the Circuit Court
of Muskegon County, Michigan. The Court has temporarily enjoined the County
from taking any action against the plaintiffs for violations of the ordinance
or the permit, pending the outcome of the litigation. In the event that the
litigation is resolved against the Company, its Whitehall, Michigan tanning
facility would be required to incur certain costs to bring itself into
compliance with the permit and ordinance. Management is currently unable to
predict whether such an outcome will occur and, if it does, the magnitude of
the costs or their materiality to the Company's financial condition or results
of operations.
Preferred Shareholder Action
On January 7, 1993, 23 former holders of the Company's series 2, 3 and 4
subordinated serial preferred stock filed a civil action against the Company
and certain officers in the United States District Court for the Southern
District of New York (the "U.S. District Court Action"). The plaintiffs allege
that the defendants misrepresented and failed to disclose material facts to
representatives of the plaintiffs in connection with exchange offers which were
made by the Company to the plaintiffs and other holders of the Company's series
1, 2, 3 and 4 subordinated serial preferred stock from June 23, 1988 to August
1, 1988. The plaintiffs contend that had they been aware of the
misrepresentations and omissions, they would not have agreed to exchange their
shares pursuant to the exchange offers. The plaintiffs allege breach of
fiduciary duty and fraudulent and negligent misrepresentations and seek damages
in excess of $10 million, costs, attorneys' fees, interest and punitive damages
in an unspecified amount. By order dated December 2, 1993, the U.S. District
Court denied a motion for judgement on the pleadings filed on behalf of all
defendants. On July 6, 1994, the court denied a motion for partial summary
judgement filed on behalf of the plaintiffs. The Company and the individual
defendants intend to defend the U.S. District Court Action vigorously. The
Company is unable to predict if the U.S. District Court Action will have a
material adverse effect on the Company's results of operations or financial
condition.
Texas Interference Action
On October 6, 1995, a prior holder of a license to manufacture and market
western boots and other products under a trademark now licensed to the Company
filed an action in the District Court of Dallas County, Texas against the
Company and a contract manufacturer alleging tortious interference with a
business relationship, breach of contract, tortious interference with a
contract, breach of a confidential relationship and civil conspiracy based on
the Company's entry into the license. The Company filed an answer denying all
the material allegations of the plaintiff's complaint. The Company is unable
to predict whether the outcome of the litigation will have a material effect on
its financial condition or results of operations.
ITEM 4, SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of Fiscal 1996.
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EXECUTIVE OFFICERS OF GENESCO
The officers of the Company are generally elected at the first meeting of the
board of directors following the annual meeting of shareholders and hold office
until their successors have been chosen and qualify. The name, age and office
of each of the Company's executive officers and certain information relating to
the business experience of each are set forth below:
DAVID M. CHAMBERLAIN, 52, Chairman, President and Chief Executive Officer of
Genesco. Mr. Chamberlain was elected president and chief executive officer in
October 1994 and chairman as of February 1, 1995. Mr. Chamberlain joined
Shaklee Corporation, a manufacturer and marketer of consumer products, in 1983
as president and chief operating officer, was elected a director in 1983 and
served as chief executive officer from 1985 until 1993. He was chairman of
Shaklee Corporation from 1989 until May 1994, when he became a partner in
Consumer Focus Partners, a California venture capital firm. Prior to 1983 he
was senior vice president and group executive of Nabisco Brands Ltd., Canada.
He has been a director of Genesco since 1989.
T. NEALE ATTENBOROUGH, 36, Executive Vice President - Operations. Mr.
Attenborough joined the Company in 1994 as president of Laredo Boot company, a
position he retains until a new president is named. During the Company's
restructuring program, Mr. Attenborough oversaw the management of Genesco's now
divested Mitre Sports International business. He was named executive
vice-president - operations in January 1996 and will oversee the Company's
Johnston & Murphy, Dockers Footwear, Laredo Boot Company and manufacturing
operations. Before joining the Company, Mr. Attenborough was a vice president
of the recreational products division at Boston Whaler Inc.
BEN T. HARRIS, 52, Executive Vice President - Operations. Mr. Harris joined
the Company in 1961 and in 1987 was named director of the leased department
division of the Jarman Shoe Company. In 1991, he was named president of the
Jarman Shoe Company. In 1995, he was named president of Retail Footwear, which
includes the Jarman Shoe Company, Journeys, Boot Factory and Factory to You.
He was named executive vice president - operations in January 1996. In
addition to the Company's retail operations, Mr. Harris will also oversee the
Nautica Footwear Division.
JAMES S. GULMI, 50, Senior Vice President - Finance, Treasurer and Chief
Financial Officer. Mr. Gulmi was employed by Genesco in 1971 as a financial
analyst, appointed assistant treasurer in 1974 and named treasurer in 1979. He
was elected a vice president in 1983 and assumed the responsibilities of chief
financial officer in 1986. He was again elected treasurer in February 1995.
He was appointed senior vice president - finance in January 1996.
JAMES W. BOSCAMP, 46, Senior Vice President. Mr. Boscamp joined the Company in
1991 as president of Nautica Footwear. He was appointed senior vice president
of the Company in January 1996. Before joining the Company, Mr. Boscamp was
executive vice president, marketing at Munsingwear.
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FOWLER H. LOW, 64, Senior Vice President. Mr. Low has 40 years of experience
in the footwear industry, including 33 years with Genesco. He rejoined Genesco
in 1984 after serving as vice president of sales and marketing for G. H. Bass,
a division of Chesebrough-Pond's Inc. He was appointed president of the
footwear manufacturing and wholesale group in 1988 and was appointed chairman
of Johnston & Murphy in February 1991. He was appointed senior vice president
in January 1996.
STEVEN E. LITTLE, 54, Vice President - Administration. Mr. Little has served
in various human resources and operations management roles during his 31 year
tenure with Genesco. Mr. Little was named vice president - human resources in
1994 and assumed his present responsibilities in December 1994.
ROGER G. SISSON, 32, Secretary and General Counsel. Mr. Sisson joined the
Company in January 1994 as assistant general counsel and was elected secretary
in February 1994. He was named general counsel in January 1996. Before
joining the Company, Mr. Sisson was associated with the firm of Boult,
Cummings, Conners & Berry for approximately six years.
PAUL D. WILLIAMS, 41, Chief Accounting Officer. Mr. Williams joined the
Company in 1977, was named director of corporate accounting and financial
reporting in 1993 and chief accounting officer in April 1995.
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PART II
ITEM 5, MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange (Symbol:
GCO) and the Chicago Stock Exchange. The following table sets forth for the
periods indicated the high and low sales prices of the common stock as shown in
the New York Stock Exchange Composite Transactions listed in the Wall Street
Journal.
Fiscal Year ended January 31 High Low
- ---------------------------- ---- ----
1994 1st Quarter 11 1/2 8 3/4
2nd Quarter 11 1/2 6 7/8
3rd Quarter 9 1/4 5 3/4
4th Quarter 6 7/8 4
Fiscal Year ended January 31
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1995 1st Quarter 4 7/8 3 5/8
2nd Quarter 4 1/8 2 3/4
3rd Quarter 3 3/8 2 1/8
4th Quarter 2 3/8 1 5/8
Fiscal Year ended January 31
- ----------------------------
1996 1st Quarter 4 2
2nd Quarter 4 1/2 3
3rd Quarter 4 7/8 3 3/4
4th Quarter 4 1/4 2 7/8
There were approximately 12,000 common shareholders of record on January 31
1996.
See Notes 10 and 12 to the Consolidated Financial Statements included in Item 8
for information regarding restrictions on dividends and redemptions of capital
stock.
13
14
ITEM 6. SELECTED FINANCIAL DATA
Financial Summary
In Thousands except Per Common Share Data, Years Ended January 31
---------------------------------------------------------
Financial Statistics and Other Data 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS DATA
Net sales $434,575 $462,901 $467,891 $430,127 $352,475
Depreciation and amortization 7,354 9,254 10,723 9,719 9,109
Operating income (loss)* 16,627 4,820 (2,968) 27,415 13,047
Pretax earnings (loss) (4,256) (17,757) (29,788) 7,638 (3,154)
Earnings (loss) before discontinued operations,
extraordinary loss and cumulative effect of
change in accounting principle (4,281) (18,514) (27,888) 2,640 (4,479)
Discontinued operations 14,352 (62,678) (23,891) 7,053 4,940
Loss on early retirement of debt (net of tax) -0- -0- 240 583 -0-
Cumulative effect of change in accounting
for postretirement benefits -0- -0- 2,273 -0- -0-
- ---------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 10,071 $(81,192) $(54,292) $ 9,110 $ 461
===============================================================================================================
PER COMMON SHARE DATA
Earnings (loss) before discontinued operations,
extraordinary loss and postretirement benefits
Primary $ (.19) $ (.77) $ (1.17) $ .10 $ (.21)
Fully diluted (.18) (.77) (1.17) .10 (.21)
Discontinued operations
Primary .59 (2.58) (.99) .30 .22
Fully diluted .57 (2.58) (.99) .30 .22
Extraordinary loss
Primary .00 .00 (.01) (.02) .00
Fully diluted .00 .00 (.01) (.02) .00
Postretirement benefits
Primary .00 .00 (.09) .00 .00
Fully diluted .00 .00 (.09) .00 .00
Net earnings (loss)
Primary .40 (3.35) (2.26) .38 .01
Fully diluted .39 (3.35) (2.26) .38 .01
===============================================================================================================
BALANCE SHEET DATA
Total assets $197,806 $243,878 $309,386 $317,868 $237,244
Long-term debt 75,000 75,000 90,000 54,000 14,885
Capital leases 2,697 12,400 15,253 14,901 12,099
Non-redeemable preferred stock 7,958 7,943 8,064 8,305 8,330
Common shareholders' equity 25,947 21,450 90,659 146,746 140,834
Additions to plant, equipment and capital leases 8,564 5,750 8,356 10,132 9,341
===============================================================================================================
FINANCIAL STATISTICS
Operating income (loss) as a percent of net sales 3.8% 1.0% (0.6%) 6.4% 3.7%
Book value per share $ 1.04 $ .87 $ 3.73 $ 6.33 $ 6.16
Working capital $108,135 $100,731 $160,094 $168,875 $132,871
Current ratio 3.2 2.2 3.3 3.5 3.8
Percent long-term debt to total capital 69.6% 74.8% 51.6% 30.8% 15.3%
===============================================================================================================
OTHER DATA (END OF YEAR)
Number of retail outlets 463 498 518 540 575
Number of employees 3,750 5,400 6,950 6,550 6,150
===============================================================================================================
*Represents operating income of the footwear business segment.
Reflected in the earnings for Fiscal 1996 were restructuring and other charges
of $15.1 million. See Note 2 to the Consolidated Financial Statements for
additional information regarding these charges.
Reflected in the loss for Fiscal 1995 and Fiscal 1994 was a restructuring
charge of $22.1 million and $12.3 million, respectively. See Note 2 to the
Consolidated Financial Statements for additional information regarding these
charges.
Long-term debt and capital leases include current payments. On February 1,
1993, the Company issued $75 million of 10 3/8% senior notes due 2003. The
Company used $54 million of the proceeds to repay all of its outstanding
long-term debt.
During Fiscal 1992 the Company acquired and cancelled approximately 712,000
shares of Employees Subordinated Convertible Preferred Stock.
The Company has not paid dividends on its Common Stock since 1973. See Note 12
to the Consolidated Financial Statements for a description of limitations on
the Company's ability to pay dividends.
14
15
ITEM 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion includes certain forward-looking statements. Actual
results could differ materially from those reflected by the forward-looking
statements in the discussion and a number of factors may adversely affect
future results, liquidity and capital resources. These factors include
softness in the general retail environment, the timing and acceptance of
products being introduced to the market, international trade developments
affecting Chinese and other foreign sourcing of products, as discussed in
greater detail below, the outcome of various litigation and environmental
contingencies, including those discussed in Item 3, Legal Proceedings and in
Note 18 to the Consolidated Financial Statements, the solvency of the retail
customers of the Company, the level of margins achievable in the marketplace
and the ability to minimize operating expenses. They also include possible
continued weakening of the western boot market, which has experienced a
somewhat prolonged down cycle. Many western boot retailers are thinly
capitalized. Continued weakness in demand for western boots could result in
the failure of those retailers and, consequently, the erosion of the Company's
customer base. Although the Company believes it has the business strategy and
resources needed for improved operations, future revenue and margin trends
cannot be reliably predicted and the Company may alter its business strategies
during Fiscal 1997.
SIGNIFICANT DEVELOPMENTS
Fiscal 1995 Restructuring
In response to worsening trends in the Company's men's apparel business and in
response to a strategic review of its footwear operations, the Company's board
of directors, on November 3, 1994, approved a plan (the "1995 Restructuring")
designed to focus the Company on its core footwear businesses by selling or
liquidating four businesses, two of which constituted its entire men's apparel
segment. The ongoing businesses, after implementation of the 1995
Restructuring, include the manufacture or sourcing, marketing and distribution
of footwear under the Johnston & Murphy, Laredo, Code West, Larry Mahan,
Dockers and Nautica brands, the tanning and distribution of leather by the
Volunteer Leather division and the operation of Jarman, Journeys, Johnston &
Murphy, Boot Factory and Factory To You retail footwear stores.
The 1995 Restructuring provided for the following:
1995 Restructuring Charge
- Liquidation of the University Brands children's shoe business,
- Sale of the Mitre Sports soccer business, and
- Facility consolidation costs and permanent work force reductions.
1995 Restructuring Provision
- Liquidation of The Greif Companies men's tailored clothing business, and
- Sale of the GCO Apparel Corporation tailored clothing manufacturing
business.
In connection with the 1995 Restructuring, the Company recorded a combined
charge of $90.7 million in the third quarter of Fiscal 1995, of which $22.1
million (the "1995 Restructuring Charge") related to University Brands and
Mitre and facility consolidation costs and permanent work force reductions and
$68.6 million (the "1995 Restructuring Provision") related to Greif and GCO
Apparel, which constituted the entire men's apparel segment of the Company's
business, and is therefore treated for financial reporting purposes as a
provision for discontinued operations.
15
16
In the fourth quarter of Fiscal 1995 the 1995 Restructuring Provision was
positively adjusted by $10.5 million, reducing the $68.6 million provision for
future losses of discontinued operations to $58.1 million. The adjustment
reflected the favorable consequences of a transfer, not anticipated at the time
the provision was recorded, of a licensing agreement for men's apparel to
another manufacturer. The transfer resulted in realization of inventory and
accounts receivable balances on more favorable terms than anticipated,
assumption of piece goods commitments by other manufacturers and cancellation
of minimum royalty requirements under the transferred license.
In the first quarter of Fiscal 1996 the Company recorded an additional
restructuring charge of $14.1 million relating to the 1995 Restructuring. The
additional restructuring charge reflected the lowering of anticipated proceeds
from the sale of the Mitre Sports soccer business. In addition, the 1995
Restructuring Provision was adjusted by an additional reversal of $12.7
million. The reversal reflected primarily (1) an agreement during the quarter
providing for the resolution of a long-term lease liability on terms more
favorable than were anticipated when the 1995 Restructuring Provision was
established, (2) better than anticipated realization of inventories and
accounts receivable as the remaining Greif inventory was liquidated in the
first quarter of Fiscal 1996 and (3) lower than anticipated union pension
liability, which the union pension fund determined and announced to the Company
during the quarter.
Throughout the remainder of Fiscal 1996, the Company recognized additional
reductions to the 1995 Restructuring Charge and Provision of $1.7 million as
actual events differed from the original estimates.
The transactions provided for in the 1995 Restructuring were substantially
complete as of January 31, 1996 and the Company does not expect any material
future adjustments arising from the completion of the 1995 Restructuring. The
1995 Restructuring Charge, as adjusted, provided for the elimination of 464
jobs in footwear operations to be divested or consolidated and in staff
positions to be eliminated, of which 457 jobs had been eliminated as of January
31, 1996. The divestiture of the University Brands business was completed in
February 1995. The operations of The Greif Companies have ceased, its
inventories and equipment have been liquidated and its last major remaining
long-term lease liability was resolved in June 1995. The Company's GCO Apparel
Corporation was sold in June 1995. The Company's Mitre Sports soccer business
was sold in August 1995 with cash proceeds to the Company of approximately
$19.1 million, including repayment of intercompany balances.
In the third quarter of Fiscal 1996, the Company recorded a charge of $978,000
from the adoption of a new accounting standard relating to impaired assets
which is included in the "Restructuring and other charges" line on the
Consolidated Earnings Statement. See Note 1 to the Consolidated Financial
Statements.
Revolving Credit Agreement
On January 5, 1996, the Company entered into a revolving credit agreement with
two banks providing for loans or letters of credit of up to $35 million. The
agreement expires January 5, 1999. This agreement replaced a $50 million
revolving credit agreement providing for loans or letters of credit. See
"Liquidity and Capital Resources" and Note 10 to the Consolidated Financial
Statements.
16
17
International Trade Developments
Manufacturers in China have become major suppliers to Genesco and other
footwear companies in the United States. In Fiscal 1997 the Company expects to
import approximately 18% of purchases from China. In addition to the products
the Company imports, many of the Company's suppliers import a significant
amount of their products from China. The United States has threatened trade
sanctions of up to $2 billion if China does not do more to stop piracy and
other intellectual property violations. In addition, annual renewal of China's
most-favored-nation trading status is also under review by the United States.
Failure of the United States government to continue to grant
most-favored-nation's treatment to China would raise duties and significantly
increase the cost of footwear and other products imported from China into the
United States. It could also materially affect the Company's ability to source
those products from other countries, because the Company would have to compete
with other footwear companies, some of whom buy substantially greater
quantities and have substantially greater resources, for productive capacity in
other low-labor cost countries. While the Company's divisions are developing
contingency plans in case of negative developments in Chinese sourcing, there
can be no assurance that such developments would not have a material adverse
effect on the Company's business.
RESULTS OF OPERATIONS - FISCAL 1996 COMPARED TO FISCAL 1995
The Company's net sales from continuing operations (including both ongoing
operations and the operations divested as part of the 1995 Restructuring) for
the fiscal year ended January 31, 1996 decreased 6.1% from the previous year,
reflecting lower sales from the divested operations. Net sales from ongoing
operations increased 4.4% from the previous year. Total gross margin for the
year decreased 0.1% but increased as a percentage of net sales from 37.4% to
39.8%. Selling and administrative expenses decreased 7.0% and decreased as a
percentage of net sales from 35.9% to 35.6%. The pretax loss for Fiscal 1996
was $4,256,000, compared to a pretax loss of $17,757,000 for Fiscal 1995. The
pretax loss for Fiscal 1996 includes a $14.1 million net increase in the 1995
Restructuring Charge, and a $978,000 charge for impaired assets due to the
implementation of SFAS No. 121 (see "Changes in Accounting Principles" and Note
1 to the Consolidated Financial Statements) and recognition of a $1.8 million
gain from the favorable resolution of a claim relating to import duties.
Fiscal 1995 pretax loss includes the $22.1 million 1995 Restructuring Charge
and recognition of $4.9 million of additional gain on the sale in 1987 of the
Company's Canadian operations following the settlement of certain claims
arising out of that transaction. The Company reported net earnings of
$10,071,000 ($0.40 per share) for Fiscal 1996 compared to a net loss of
$81,192,000 ($3.35 per share) for Fiscal 1995. Fiscal 1996 net earnings
includes, in addition to the 1995 Restructuring Charge adjustment and the
charge for impaired assets, a positive adjustment of $14.4 million to the 1995
Restructuring Provision. Fiscal 1995 net loss includes, in addition to the 1995
Restructuring Charge, $58.1 million for the adjusted 1995 Restructuring
Provision. See Note 2 to the Consolidated Financial Statements and
"Significant Developments - Fiscal 1995 Restructuring."
17
18
Footwear Retail
Fiscal Year
Ended January 31, %
-----------------------
1996 1995 Change
-------- -------- ------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . $243,303 $234,448 3.8%
Operating Income before
Restructuring and Other Charges . . . . . . . . $ 18,859 $ 17,161 9.9%
Restructuring and Other Charges . . . . . . . . . $ (978) $ (236) (314.4)%
Operating Income . . . . . . . . . . . . . . . . $ 17,881 $ 16,925 5.6%
Operating Margin . . . . . . . . . . . . . . . . 7.3% 7.2%
Primarily due to an increase in comparable store sales of approximately 6%, net
sales from footwear retail operations increased 3.8% for Fiscal 1996 compared
to Fiscal 1995, despite the operation of 6% fewer stores in Fiscal 1996. The
average price per pair for Fiscal 1996 increased 8% as compared to Fiscal 1995,
while unit sales were down 4%, because of heavy discounting during Fiscal 1995
in connection with the closing of 39 retail stores as part of a restructuring
plan adopted in the fourth quarter of Fiscal 1994 (the "1994 Restructuring").
Gross margin as a percentage of net sales decreased from 50.5% to 49.2%,
primarily from price pressures on branded products and changes in product mix
to more branded products as well as increased markdowns to stimulate sales in
the Company's boot outlets. Operating expenses decreased approximately 1%,
primarily due to the operation of fewer stores as a result of the 1994
Restructuring (see Note 2 to the Consolidated Financial Statements) and
decreased as a percentage of net sales from 43.7% to 41.5%. In addition to the
operation of fewer stores, expenses were down due to job eliminations as part
of the 1995 Restructuring and lower selling salaries.
During the third quarter in Fiscal 1996, the Company implemented SFAS No. 121
resulting in a $978,000 charge to retail earnings. See "Changes in Accounting
Principles."
Footwear Wholesale & Manufacturing
Fiscal Year
Ended January 31, %
------------------------
1996 1995 Change
------- -------- ------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . $ 191,272 $ 228,453 (16.3)%
Operating Income before
Restructuring and Other Charges . . . . . . . . $ 12,892 $ 8,473 52.2%
Restructuring and Other Charges . . . . . . . . . $ (14,146) $ (20,578) 31.3%
Operating Loss . . . . . . . . . . . . . . . . . $ (1,254) $ (12,105) 89.6%
Operating Margin . . . . . . . . . . . . . . . . (0.7)% (5.3)%
Net sales from footwear wholesale and manufacturing operations were $37.2
million (16.3%) lower in Fiscal 1996 than in Fiscal 1995, reflecting primarily
lower sales from the operations divested as part of the 1995 Restructuring.
Sales from ongoing operations were up 4.5%, reflecting primarily increased
men's branded footwear and tanned leather sales, which more than offset the
continuing trend of decreased sales of western boots, primarily attributable to
lower selling prices.
18
19
Gross margin as a percentage of net sales increased from 23.9% to 27.8%,
primarily from improved manufacturing utilization including efficiencies
resulting from the closing of a footwear plant in February 1995 as part of the
1995 Restructuring.
Operating expenses decreased 14.6%, primarily from the divestiture of
University Brands in January 1995 and Mitre Sports in August 1995, but
increased as a percentage of net sales from 22.2% to 22.7%, primarily because
of the lower sales in operations to be divested and increased bad debt and
royalty expenses.
For Fiscal 1995, the University Brands and Mitre Sports businesses that were
disposed of in the 1995 Restructuring had net sales of $74.8 million and
operating loss before Restructuring Provision of $0.2 million. The operating
loss is for the nine months ended October 31, 1994 since the operating results
subsequent to October 31, 1994 were charged against the Restructuring
Provision.
Included in the operating income from ongoing operations before restructuring
and other charges for Fiscal 1996 is a one-time gain of $1.8 million from the
favorable resolution of a claim relating to import duties. The increase in
operating income before restructuring and other charges and the import duty
claim, excluding $0.2 million of divested operations' operating loss for Fiscal
1995, is due primarily to increased sales of men's branded products and tanned
leather and to improvements in gross margin and expense reductions due to the
1995 Restructuring.
Discontinued Operations
On November 3, 1994, in response to worsening trends in the Company's men's
apparel business, the Company's board of directors approved a plan to exit the
men's apparel business. See "Significant Developments-Fiscal 1995
Restructuring" and Note 2 to the Consolidated Financial Statements for
information regarding the discontinuation of this business segment. Net sales
and operating loss of the men's apparel segment in Fiscal 1995 prior to the
decision to discontinue were $81.8 million and $4.5 million, respectively.
Corporate and Interest Expenses
Corporate and other expenses in Fiscal 1996 were $11.2 million, compared to
$15.5 million in Fiscal 1995, a decrease of approximately 28%. Included in
corporate and other expenses in Fiscal 1996 are provisions of $1.0 million for
environmental litigation. Included in Fiscal 1995's corporate and other
expenses are provisions of $1.4 million for environmental litigation and $2.3
million of severance costs, $1.3 million of which related to the 1995
Restructuring. The decrease in corporate expenses, excluding the above
provisions, is attributable primarily to lower professional fees.
Interest expense decreased $1.6 million, or 14%, from last year because of a
decrease in borrowings, while interest income increased $682,000 from last year
due to increased short-term investments. Borrowings under the Company's
revolving credit facility during Fiscal 1996 averaged $181,000 compared to
average borrowings of $28.4 million last year.
Other Income
Operating results of footwear businesses to be divested pursuant to the 1995
Restructuring are included in the Company's net sales, cost of sales and
selling and administrative expenses. The net operating losses or gains
incurred by these operations subsequent to the decision to divest are charged
against the restructuring reserves established to provide for such losses or
gains. The elimination of these losses from the Company's results of
operations for Fiscal 1996 is presented as other income in the Consolidated
Earnings Statement. Such operating losses totaled $1.3 million in Fiscal 1996.
Such operating losses totaled $5.5 million for Fiscal 1995 which included
operating results of stores identified for closure pursuant to the 1994
Restructuring. Also included in other income for Fiscal
19
20
1996 is a $1.8 million gain from the favorable resolution of a claim relating
to import duties and the $1.0 million provision for environmental litigation.
RESULTS OF OPERATIONS - FISCAL 1995 COMPARED TO FISCAL 1994
The Company's net sales from continuing operations for the year ended January
31, 1995 decreased 1.1% from Fiscal 1994. Total gross margin for the year
decreased 1.4% and declined from 37.5% to 37.4% as a percentage of net sales.
Selling and administrative expenses decreased 8.7% and decreased as a
percentage of net sales from 38.9% to 35.9%. The pretax loss in Fiscal 1995
was $17,757,000, compared to a pretax loss of $29,788,000 for Fiscal 1994. The
Company reported a net loss of $81,192,000 ($3.35 per share) for Fiscal 1995
compared to a net loss of $54,292,000 ($2.26 per share) in Fiscal 1994. The
pretax loss for Fiscal 1995 included the $22.1 million 1995 Restructuring
Charge and recognition of $4.9 million of additional gain on the sale in 1987
of the Company's Canadian operations, while the pretax loss for Fiscal 1994
included a $12.3 million restructuring charge in connection with a
restructuring plan adopted at January 31, 1994 (the "1994 Restructuring").
Fiscal 1995 net loss included, in addition to the 1995 Restructuring Charge,
the adjusted $58.1 million 1995 Restructuring Provision while Fiscal 1994
included a $17.1 million provision related to discontinued operations. See
Note 2 to the Consolidated Financial Statements. The net loss in Fiscal 1994
included a $2.3 million ($.09 per share) loss from the cumulative effect of
changes in the method of accounting for postretirement benefits due to the
implementation of Statement of Financial Accounting Standards No. 106. See
Note 15 to the Consolidated Financial Statements. In addition, Fiscal 1994's
net loss included an extraordinary loss of $240,000 ($.01 per share) from the
early retirement of debt.
Footwear Retail
Fiscal Year
Ended January 31, %
------------------------
1995 1994 Change
-------- -------- ------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . $234,448 $ 231,456 1.3%
Operating Income before
Restructuring Charges . . . . . . . . . . . . $ 17,161 $ 4,832 255%
Restructuring Charges . . . . . . . . . . . . . . $ (236) $ (8,673) 97.3%
Operating Income (Loss) . . . . . . . . . . . . . $ 16,925 $ (3,841) -
Operating Margin . . . . . . . . . . . . . . . . 7.2% (1.7)%
Led by an increase in comparable store sales of approximately 4%, net sales
from footwear retail operations increased 1.3% in Fiscal 1995 compared to
Fiscal 1994. The average price per pair increased 3%, while unit sales were
flat from Fiscal 1994, primarily from the operation of fewer stores.
Gross margin as a percentage of net sales increased from 49.3% to 50.5%,
primarily from decreased markdowns. Operating expenses decreased 5.8%,
primarily due to the operation of fewer stores as a result of the 1994
Restructuring (see Note 2 to the Consolidated Financial Statements) and lower
advertising expenses, and decreased as a percentage of net sales from 47.0% to
43.7%. Operating income for Fiscal 1995 does not include operating losses of
the 58 retail stores included in the 1994 Restructuring.
Operating income before restructuring charges in Fiscal 1994, adjusted to
exclude results of the stores included in the 1994 Restructuring, was
$8,178,000. Operating income before restructuring charges of $17,161,000 in
Fiscal 1995 was higher than Fiscal 1994's adjusted operating income due to
improved margins and lower operating expenses.
20
21
Footwear Wholesale & Manufacturing
Fiscal Year
Ended January 31, %
------------------------
1995 1994 Change
-------- -------- ------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . . $ 228,453 $ 236,435 (3.4)%
Operating Income before
Restructuring Charges . . . . . . . . . . . . . $ 8,473 $ 4,115 105.9%
Restructuring Charges . . . . . . . . . . . . . . . $ (20,578) $ (3,242) (534.7)%
Operating Income (Loss) . . . . . . . . . . . . . . $ (12,105) $ 873 -
Operating Margin . . . . . . . . . . . . . . . . . (5.3)% 0.4%
Net sales from footwear wholesale and manufacturing operations were $8.0
million (3.4%) lower in Fiscal 1995 than in Fiscal 1994, reflecting primarily
lower unit sales and selling prices of western boots and, to a lesser extent,
lower sales of tanned leather.
Gross margin as a percentage of net sales decreased from 26.0% to 23.9%,
primarily due to volume-related manufacturing inefficiencies and price
reductions to stimulate sales in the Company's boot operations.
Operating expenses decreased 11.2% and decreased as a percentage of net sales
from 24.2% to 22.2%, primarily because of reduced advertising expenses.
The increase in operating income before restructuring charges was due to lower
operating expenses and a $1.6 million reduction in losses related to the
companies being divested as part of the 1995 Restructuring.
Driven by record sales, western boot production in the first quarter of Fiscal
1994 resulted in positive manufacturing variances in the Company's boot plants.
A sharp decline in the sale of western boots led to a decision in the latter
part of Fiscal 1994 to curtail western boot production. Despite the closing of
a western boot plant in the first quarter of Fiscal 1995 pursuant to the 1994
Restructuring, the lower volume of boots manufactured in Fiscal 1995 resulted
in manufacturing inefficiencies which negatively impacted gross margin. The
1995 Restructuring Charge included a provision to close another boot
manufacturing plant, which closed in January 1995.
For Fiscal 1994, the net sales and operating loss before restructuring
provision of the University Brands and Mitre Sports businesses that were being
disposed of in the 1995 Restructuring were $75,972,000 and $1,729,000,
respectively. For Fiscal 1995, the net sales of the divisions being divested
were $74,818,000. The operating loss before restructuring of $167,000 for
Fiscal 1995 is for the nine months ended October 31, 1994, since the operating
results subsequent to October 31, 1994 were charged against the provision for
restructuring.
Discontinued Operations
On November 3, 1994, in response to worsening trends in the Company's men's
apparel business the Company's board of directors approved a plan to exit the
men's apparel business. See "Significant Developments-Fiscal 1995
Restructuring" and Note 2 to the Consolidated Financial Statements for
information regarding the discontinuation of this business segment. Net sales
and operating loss of the men's apparel segment in Fiscal 1995 prior to the
decision to discontinue were $81.8 million and $4.5 million, respectively.
21
22
Net sales and operating loss of the segment for Fiscal 1994 were $105 million
and $4.9 million, respectively. In addition, there was a $17.1 million
restructuring charge related to the men's apparel segment taken at January 31,
1994 in connection with the 1994 Restructuring.
Corporate and Interest Expenses
Corporate and other expenses in Fiscal 1995 were $15.5 million, compared to
$16.5 million for Fiscal 1994, a decrease of approximately 6%. Included in
corporate and other expenses in Fiscal 1995 are provisions of $1.4 million for
environmental litigation compared to only $500,000 of such provisions in Fiscal
1994. Fiscal 1995 expenses also include $2.3 million of severance costs, $1.3
million of which relate to the 1995 Restructuring, while Fiscal 1994 also
includes $2.5 million of severance costs, $404,000 of which relate to the 1994
Restructuring. Fiscal 1994's expenses also include a provision of $448,000 for
an adverse decision in a lawsuit and a $558,000 gain from the sale of excess
real estate. Excluding the provisions for environmental litigation and the
severance costs, corporate expenses in Fiscal 1995 decreased 13% from Fiscal
1994, due primarily to lower compensation expenses due to layoffs related to
the restructurings and other staff reductions that occurred after the first
quarter of Fiscal 1994.
Net interest expense increased $925,000, or 8%, from Fiscal 1994, because of an
increase in both average borrowings and average interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain financial data at the dates indicated.
All dollar amounts are in millions.
January 31
----------------------------------
1996 1995 1994
------- ------ ------
Cash and short-term investments . . . . . . . . . . . . . . . . . . . $ 35.6 $ 10.2 $ 3.6
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108.1 $ 100.7 $ 160.1
Long-term debt (includes current
maturities)
10 3/8% senior notes . . . . . . . . . . . . . . . . . . . . . $ 75.0 $ 75.0 $ 75.0
Revolving credit debt . . . . . . . . . . . . . . . . . . . . . - - $ 15.0
Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2x 2.2x 3.3x
- ---------------
Working Capital
The Company's business is somewhat seasonal, with the Company's investment in
inventory and accounts receivable reaching peaks in the spring and fall of each
year. Cash flow from operations is generated principally in the fourth quarter
of each fiscal year.
Cash provided by operating activities was $22.7 million in Fiscal 1996,
compared to $22.5 million provided by operating activities in Fiscal 1995 and
$17.4 million of cash used by operating activities in Fiscal 1994. The $0.2
million improvement in cash flow from operating activities for Fiscal 1996 from
Fiscal 1995 reflects primarily cash inflows from the liquidation of assets
included in the 1995 Restructuring and lower seasonal requirements from the
disposition of businesses included in the 1995 Restructuring. The $39.9
million improvement in cash flow from operating activities for Fiscal 1995 from
Fiscal 1994 reflects factors including the cash inflows from the disposal of
assets included in the 1995 Restructuring, lower footwear wholesale inventory
(primarily in the Company's boot business), lower tailored clothing inventory
prior to the decision to liquidate as a result of anticipated lower Greif
sales, reduced raw material purchases and lower inventories from retail store
closings.
22
23
A $6.3 million decrease in inventories from January 31, 1995 levels reflected
in the Consolidated Cash Flows Statement was primarily due to liquidation of
inventories in connection with the 1995 Restructuring, while the $2.0 million
increase in ongoing inventories compared with January 31, 1995 reflects the
growth of certain existing lines of footwear in anticipation of higher sales.
A $25.5 million decrease in inventories reflected in the Consolidated Cash
Flows Statement from January 31, 1994 levels was primarily due to liquidation
of inventories in connection with the 1995 Restructuring, lower footwear
wholesale inventory (primarily boot inventory) and lower retail inventory from
the store closings included in the 1994 Restructuring.
As reflected in the Consolidated Cash Flows Statement, accounts receivable at
January 31, 1996 decreased $15.5 million compared to January 31, 1995,
primarily from collection of receivables in the operations being divested in
the 1995 Restructuring. Ongoing accounts receivable at January 31, 1996 were
$55,000 more than January 31, 1995. Accounts receivable at January 31, 1995
remained flat, with decreases in operations to be divested receivables offset
from increased sales in the men's branded footwear and extended terms to meet
competitive pressures.
Included in the accounts payable and accrued liabilities line in the
Consolidated Cash Flows Statement are the following decreases:
Years Ended January 31,
-----------------------------------------
1996 1995 1994
(In Thousands) --------- ---------- -----------
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ (3,655) $ (2,204) $ (9,907)
Accrued liabilities . . . . . . . . . . . . . . . . . . . . (9,369) (4,754) (787)
-------- --------- ---------
$(13,024) $ (6,958) $ (10,694)
======== ========= =========
The decrease in accounts payable for Fiscal 1996 from Fiscal 1995 relates
primarily to the divestitures associated with the 1995 Restructuring while the
changes in the prior years were due to changes in buying patterns, payment
terms negotiated with individual vendors and changes in inventory levels.
The change in accrued liabilities in Fiscal 1996 was due to payment of
severance costs and liabilities related to the Restructurings. The change in
accrued liabilities in Fiscal 1995 was due primarily to payments of severance
costs, liabilities and leases related to the Restructurings. The change in
accrued liabilities in Fiscal 1994 was due primarily to decreased bonus and tax
accruals relating to the loss in Fiscal 1994.
Revolving credit borrowings during Fiscal 1996 were minimal, as cash generated
from the 1995 Restructuring more than offset seasonal working capital increases
in the remaining operations. Revolving credit agreement borrowings decreased by
$15 million during Fiscal 1995 due to cash generated by the 1995 Restructuring
and the phasedown of the tailored clothing segment under the 1994
Restructuring. The Company expects during Fiscal 1997 to have minimal
borrowings. See Note 10 to the Consolidated Financial Statements.
23
24
Capital Expenditures
Capital expenditures were $8.6 million in Fiscal 1996, $5.8 million in Fiscal
1995 and $7.9 million in Fiscal 1994. The $2.8 million increase in Fiscal 1996
capital expenditures as compared to Fiscal 1995 resulted from leasehold
improvements to the corporate office building for new tenants due to the
downsizing of the Company, an increase in retail renovations and an increase in
purchases of production equipment. The $2.1 million decrease in Fiscal 1995
capital expenditures as compared to Fiscal 1994 resulted from a decrease in
footwear manufacturing expenditures and tailored clothing expenditures.
Total capital expenditures in Fiscal 1997 are expected to be approximately
$13.4 million. These include expected retail store expenditures of $8.5 million
to open 48 new retail stores and to complete 25 major store renovations.
Capital expenditures for wholesale and manufacturing operations and other
operations are expected to be approximately $4.9 million.
Future Capital Needs
The Company expects that cash on hand and cash provided by operations will be
sufficient to fund all of its capital expenditures through Fiscal 1997. The
approximate $6.7 million of costs associated with the 1994 Restructuring and
the 1995 Restructuring that are expected to be incurred during the next twelve
months are also expected to be funded from cash on hand and from cash generated
from operations.
There were $8 million of letters of credit outstanding under the revolving
credit agreement at January 31, 1996, leaving availability under the revolving
credit agreement of $27 million.
The restricted payments covenant contained in the indenture under which the
Company's 10 3/8% senior notes were issued prohibits the Company from declaring
dividends on the Company's capital stock, except from a pool of available net
earnings and the proceeds of stock sales. At January 31, 1996, that pool was
in a $109.7 million deficit position. The aggregate of annual dividend
requirements on the Company's Subordinated Serial Preferred Stock, $2.30 Series
1, $4.75 Series 3 and $4.75 Series 4, and on its $1.50 Subordinated Cumulative
Preferred Stock is $302,000. The Company currently has dividend arrearages in
the amount of $679,190 and is unable to predict when dividends may be
reinstated.
On November 7, 1994, Standard & Poor's announced that it had lowered the rating
of the 10 3/8% Notes to B from B+ based on its concern that Genesco's ongoing
business operations will not provide the earnings and cash flow generation
reflective of a B+ senior credit rating. On January 30, 1996, Moody's
confirmed their B2 senior debt rating of Genesco's 10 3/8% Notes which ended a
review of Genesco's rating initiated by Moody's on November 10, 1995.
According to Standard & Poor's, a debt instrument rated B has a greater
vulnerability to default than debt rated BB, but currently has the capacity to
meet interest and principal payments. According to Moody's, the assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small with respect to a debt
instrument rated B. Ratings are not a recommendation to purchase, hold or sell
long-term debt of the Company, inasmuch as ratings do not comment as to market
price or suitability for particular investors and may be subject to revision or
withdrawal at any time by the assigning rating agency.
24
25
FOREIGN CURRENCY
The Company does not believe that its foreign currency risk is material to its
operations. Most purchases by the Company from foreign sources are denominated
in U.S. dollars. To the extent that import transactions are denominated in
other currencies, it is the Company's practice to hedge its risks through the
purchase of forward foreign exchange contracts. Any gains or losses from such
transactions offset gains and losses from the underlying hedged transactions.
CHANGES IN ACCOUNTING PRINCIPLES
The Company implemented Statement of Financial Accounting Standards (SFAS) 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" in the third quarter of Fiscal 1996. This statement
establishes accounting standards for determining impairment of long-lived
assets. The Company periodically assesses the realizability of its long-lived
assets and evaluates such assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future cash
flows, undiscounted and without interest charges, are less than carrying
amount. During the third quarter, the Company identified certain retail stores
that were impaired because of a history of and current period cash flow losses
in these specific stores. An impairment loss of $978,000 was recognized for
these retail stores and is included in the "Restructuring and other charges"
line on the income statement for the twelve months ended January 31, 1996.
Statement of Financial Accounting Standards 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" was implemented by the Company in
the first quarter of Fiscal 1994. At January 31, 1993, the actuarial present
value of the accumulated benefit obligation was approximately $2,273,000. The
amount of such obligation at the date of implementation could have been
recorded as a loss at the time of adoption of SFAS 106 or charged to earnings
ratably over a period of not more than 20 years. The Company elected to charge
the entire $2,273,000 at the time of adoption and the loss is reflected on the
income statement as a change in accounting principle.
Statement of Financial Accounting Standards 109, "Accounting for Income Taxes"
was also implemented in the first quarter of Fiscal 1994 by the Company.
Implementation of SFAS 109 did not affect the Company's results of operations
but resulted in reclassifications in the balance sheet. Because changes in the
economic environment have historically affected the Company's results of
operations, the Company is limiting the amount of deferred tax assets it
recognizes to an amount no greater than the amount of tax refunds the Company
could claim as loss carrybacks. For additional information, see Note 13 to the
Consolidated Financial Statements.
INFLATION
The Company does not believe inflation during periods covered in this
discussion has had a material impact on sales or operating results.
25
26
ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants 27
Consolidated Balance Sheet, January 31, 1996 and January 31, 1995 28
Consolidated Earnings, each of the three years ended
January 31, 1996 29
Consolidated Cash Flows, each of the three years ended
January 31, 1996 30
Consolidated Shareholders' Equity, each of the three years
ended January 31, 1996 31
Notes to Consolidated Financial Statements 32
26
27
February 27, 1996
To the Board of Directors and
Shareholders of Genesco Inc.
Report of Independent Accountants
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 as financial statements and financial statement
schedules on page 70 present fairly, in all material respects, the financial
position of Genesco Inc. and its subsidiaries at January 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended January 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/Price Waterhouse LLP
Nashville, Tennessee
27
28
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheet
January 31
In Thousands
1996 1995
ASSETS ---- ----
- ------
CURRENT ASSETS
Cash and short-term investments $ 35,550 $ 10,235
Accounts receivable 32,135 32,080
Inventories 84,930 82,905
Other current assets 4,317 4,277
Current assets of operations to be divested -0- 53,891
- -------------------------------------------------------------------------------------------------------------------
Total current assets 156,932 183,388
- -------------------------------------------------------------------------------------------------------------------
Plant, equipment and capital leases, net 28,552 28,073
Other noncurrent assets 12,322 13,773
Noncurrent assets of operations to be
divested -0- 18,644
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 197,806 $ 243,878
===================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Current payments on capital leases $ 1,212 $ 2,343
Accounts payable and accrued liabilities 43,686 61,124
Provision for discontinued operations 3,899 19,190
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 48,797 82,657
- -------------------------------------------------------------------------------------------------------------------
Long-term debt 75,000 75,000
Capital leases 1,485 10,057
Other long-term liabilities 25,265 25,746
Provision for discontinued operations 13,354 21,025
Contingent liabilities - -
SHAREHOLDERS' EQUITY
Non-redeemable preferred stock 7,958 7,943
Common shareholders' equity:
Par value of issued shares 24,844 24,832
Additional paid-in capital 121,715 121,670
Accumulated deficit (94,511) (104,582)
Minimum pension liability adjustment (8,244) (2,613)
Treasury shares, at cost (17,857) (17,857)
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 33,905 29,393
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 197,806 $ 243,878
===================================================================================================================
The accompanying Notes are an integral part of these Financial Statements.
28
29
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Earnings
In Thousands
YEAR ENDED JANUARY 31
-----------------------------------------
1996 1995 1994
---- ---- ----
Net sales $ 434,575 $462,901 $467,891
Cost of sales 261,743 289,961 292,474
Selling and administrative expenses 154,567 166,156 182,046
Restructuring and other charges 15,124 22,114 12,319
- ------------------------------------------------------------------------------------------------------------------
Earnings (loss) from operations before
other income and expenses 3,141 (15,330) (18,948)
- ------------------------------------------------------------------------------------------------------------------
Other expenses (income):
Interest expense 10,403 12,031 11,131
Interest income (758) (76) (101)
Gain on divestiture -0- (4,900) (677)
Other expense (income) (2,248) (4,628) 487
- ------------------------------------------------------------------------------------------------------------------
Total other (income) expenses, net 7,397 2,427 10,840
- ------------------------------------------------------------------------------------------------------------------
Loss before income taxes, discontinued operations,
extraordinary loss and cumulative effect of change in
accounting principle (4,256) (17,757) (29,788)
Income taxes 25 757 (1,900)
- ------------------------------------------------------------------------------------------------------------------
Loss before discontinued operations,
extraordinary loss and cumulative effect of change in
accounting principle (4,281) (18,514) (27,888)
Discontinued operations:
Operating loss -0- (4,540) (6,831)
Excess provision (provision) for future losses 14,352 (58,138) (17,060)
- ------------------------------------------------------------------------------------------------------------------
Earnings (loss) before extraordinary loss and cumulative
effect of change in accounting principle 10,071 (81,192) (51,779)
Extraordinary loss from early retirement of debt -0- -0- (240)
Postretirement benefits* -0- -0- (2,273)
- ------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 10,071 $(81,192) $(54,292)
==================================================================================================================
Earnings (loss) per common share:
Before discontinued operations, extraordinary loss and
cumulative effect of change in accounting principle $ (.19) $ (.77) $ (1.17)
Discontinued operations $ .59 $ (2.58) $ (.99)
Extraordinary loss $ .00 $ .00 $ (.01)
Postretirement benefits* $ .00 $ .00 $ (.09)
Net earnings (loss) $ .40 $ (3.35) $ (2.26)
==================================================================================================================
*Reflects the cumulative effect of changes in the method of accounting for
postretirement benefits due to the implementation of Statement of Financial
Accounting Standards No. 106 (see Note 1).
The accompanying Notes are an integral part of these Financial Statements.
29
30
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Cash Flows
In Thousands
YEAR ENDED JANUARY 31,
---------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net earnings (loss) $ 10,071 $(81,192) $(54,292)
Noncash charges to earnings:
(Excess) provision for loss on discontinued operations (14,352) 58,138 17,060
Restructuring charge 14,147 22,114 12,319
Depreciation and amortization 7,354 9,254 10,723
Impairment of long-lived assets 978 -0- -0-
Provision for environmental liabilities 1,000 700 -0-
Provision for deferred income taxes -0- 1,404 2,308
Gain on divestiture -0- (4,900) (677)
Provision for losses on accounts receivable 1,799 813 1,595
Postretirement benefits -0- -0- 2,273
Other 548 376 1,848
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations before
working capital and other changes 21,545 6,707 (6,843)
Effect on cash of changes in working
capital and other assets and liabilities
net of effect of business acquisitions:
Accounts receivable 15,466 44 4,142
Inventories 6,280 25,458 (3,955)
Other current assets 165 100 (168)
Accounts payable and accrued liabilities (13,024) (6,958) (10,694)
Other assets and liabilities (7,780) (2,881) 112
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations 22,652 22,470 (17,406)
- --------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (8,564) (5,750) (7,929)
Business acquisition -0- -0- (11,376)
Proceeds from businesses divested and asset sales 18,763 8,032 189
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 10,199 2,282 (19,116)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Long-term borrowings -0- -0- 77,016
Net borrowings (repayments) under
revolving credit agreement -0- (15,000) (7,000)
Net change in short-term borrowings 2,522 (69) 69
Payments of long-term debt -0- -0- (32,000)
Payments on capital leases (9,703) (2,852) (2,090)
Exercise of options and warrants 23 6 7,875
Redemption of Mitre U.K. B shares -0- -0- (5,000)
Deferred note expense (397) -0- (3,109)
Preferred dividends paid -0- -0- (232)
Other 19 (227) (199)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (7,536) (18,142) 35,330
- --------------------------------------------------------------------------------------------------------------------
NET CASH FLOW 25,315 6,610 (1,192)
Cash and short-term investments at
beginning of year 10,235 3,625 4,817
- --------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 35,550 $ 10,235 $ 3,625
====================================================================================================================
The accompanying Notes are an integral part of these Financial Statements.
30
31
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Shareholders' Equity
In Thousands
TOTAL FOREIGN MINIMUMTOTAL TOTAL
NON-REDEEMABLE ACCUMULATED CURRENCY PENSION SHARE-
PREFERRED COMMON PAID-IN EARNINGS TREASURY TRANSLATION LIABILITY HOLDERS'
STOCK STOCK CAPITAL (DEFICIT) STOCK ADJUSTMENTS ADJUSTMENT EQUITY
- -------------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1993 $ 8,305 $ 23,658 $ 114,706 $ 31,283 $ (17,857) $ (5,044) $ -0- $ 155,051
- -------------------------------------------------------------------------------------------------------------------------------
Exercise of options and
warrants -0- 1,132 6,743 -0- -0- -0- -0- 7,875
Translation adjustment -0- -0- -0- -0- -0- 338 -0- 338
Net loss -0- -0- -0- (54,292) -0- -0- -0- (54,292)
Preferred dividends -0- -0- -0- (232) -0- -0- -0- (232)
Minimum pension liability
adjustment -0- -0- -0- -0- -0- -0- (9,964) (9,964)
Other (241) 3 185 -0- -0- -0- -0- (53)
- -------------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1994 $ 8,064 $ 24,793 $ 121,634 $ (23,241) $ (17,857) $ (4,706) $(9,964) $ 98,723
- -------------------------------------------------------------------------------------------------------------------------------
Exercise of options -0- 2 4 -0- -0- -0- -0- 6
Translation adjustments:
Year-to-date adjustments -0- -0- -0- -0- -0- 2,136 -0- 2,136
Realized in FY 1995
restructuring -0- -0- -0- -0- -0- 2,570 -0- 2,570
Net loss -0- -0- -0- (81,192) -0- -0- -0- (81,192)
Minimum pension liability
adjustment -0- -0- -0- -0- -0- -0- 7,351 7,351
Other (121) 37 32 (149) -0- -0- -0- (201)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 31, 1995 $ 7,943 $ 24,832 $ 121,670 $(104,582) $ (17,857) $ -0- $(2,613) $ 29,393
- -------------------------------------------------------------------------------------------------------------------------------
Exercise of options -0- 8 15 -0- -0- -0- -0- 23
Net earnings -0- -0- -0- 10,071 -0- -0- -0- 10,071
Minimum pension liability
adjustment -0- -0- -0- -0- -0- -0- (5,631) (5,631)
Other 15 4 30 -0- -0- -0- -0- 49
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 31, 1996 $ 7,958 $ 24,844 $ 121,715 $ (94,511) $ (17,857) $ -0- $(8,244) $ 33,905
===============================================================================================================================
See Note 12 for additional information regarding each series of preferred
stock.
The accompanying Notes are an integral part of these Financial Statements.
31
32
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
All subsidiaries are included in the consolidated financial statements. All
significant intercompany transactions and accounts have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NATURE OF OPERATIONS
The Company's businesses include the manufacture or sourcing, marketing and
distribution of footwear under the Johnston & Murphy, Laredo, Code West, Larry
Mahan, Dockers and Nautica brands, the tanning and distribution of leather by
the Volunteer Leather division and the operation of Jarman, Journeys, Johnston
& Murphy, Boot Factory and Factory To You retail footwear stores.
FISCAL YEAR
The Company's fiscal year ends January 31. For purposes of these financial
statements, the fiscal year ended January 31, 1996 is referred to as "Fiscal
1996" or "1996". Prior fiscal years are referred to in the same manner.
CASH AND SHORT-TERM INVESTMENTS
Included in cash and short-term investments at January 31, 1996, are short-term
investments of $32,000,000. There were no short-term investments at January
31, 1995. Short-term investments are highly-liquid debt instruments having an
original maturity of three months or less.
INVENTORIES
Inventories of wholesaling and manufacturing companies are stated at the lower
of cost or market, with cost determined principally by the first-in, first-out
method. Retail inventories are determined by the retail method.
PLANT, EQUIPMENT AND CAPITAL LEASES
Plant, equipment and capital leases are recorded at cost and depreciated or
amortized over the estimated useful life of related assets. Depreciation and
amortization expense is computed principally by the straight-line method.
32
33
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The Company implemented Statement of Financial Accounting Standards (SFAS) 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" in the third quarter of Fiscal 1996. This statement
establishes accounting standards for determining impairment of long-lived
assets. The Company periodically assesses the realizability of its long-lived
assets and evaluates such assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future cash
flows, undiscounted and without interest charges, are less than carrying
amount. During the third quarter, the Company identified certain retail stores
that were impaired because of a history of and current period cash flow losses
in these specific stores. An impairment loss of $978,000 was recognized for
these retail stores and is included in the "Restructuring and other charges"
line on the income statement for the year ended January 31, 1996.
HEDGING CONTRACTS
In order to reduce exposure to foreign currency exchange rate fluctuations in
connection with inventory purchase commitments, the Company enters into foreign
currency forward exchange contracts for Italian Lira. At January 31, 1996 and
January 31,1995, the Company had approximately $4.9 million and $9.7 million,
respectively, of such contracts outstanding. Forward exchange contracts have
an average term of approximately four months. Gains and losses arising from
these contracts offset gains and losses from the underlying hedged
transactions. The Company monitors the credit quality of the major national
and regional financial institutions with whom it enters into such contracts.
POSTRETIREMENT BENEFITS
Substantially all full-time employees are covered by a defined benefit pension
plan. The Company funds at least the minimum amount required by the Employee
Retirement Income Security Act.
In accordance with SFAS 106, postretirement benefits such as life insurance and
health care are accrued over the period the employee provides services to the
Company.
ENVIRONMENTAL COSTS
Environmental expenditures relating to current operations are expensed or
capitalized as appropriate. Expenditures relating to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be
reasonably estimated and are evaluated independently of any future claims for
recovery. Generally, the timing of these accruals coincides with completion of
a feasibility study or the Company's commitment to a formal plan of action.
33
34
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INCOME TAXES
Deferred income taxes are provided for all temporary differences and operating
loss and tax credit carryforwards limited, in the case of deferred tax assets,
to the amount of taxes recoverable from taxes paid in the current or prior
years.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing earnings, adjusted for
preferred dividend requirements (1996 - $302,000; 1995 - $302,000; 1994 -
$307,000), by average common and common equivalent shares outstanding during
the period.
34
35
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
RESTRUCTURINGS
FISCAL 1995 RESTRUCTURING
In response to worsening trends in the Company's men's apparel business and in
response to a strategic review of its footwear operations, the Company's board
of directors, on November 3, 1994, approved a plan (the "1995 Restructuring")
designed to focus the Company on its core footwear businesses by selling or
liquidating four businesses, two of which constituted its entire men's apparel
segment.
The 1995 Restructuring provided for the following:
1995 Restructuring Charge
- Liquidation of the University Brands children's shoe business,
- Sale of the Mitre Sports soccer business, and
- Facility consolidation costs and permanent work force reductions.
1995 Restructuring Provision
- Liquidation of The Greif Companies men's tailored clothing business, and
- Sale of the GCO Apparel Corporation tailored clothing manufacturing
business.
In connection with the 1995 Restructuring, the Company took a combined charge
of $90.7 million in the third quarter of Fiscal 1995, of which $22.1 million
(the "1995 Restructuring Charge") related to University Brands and Mitre and
facility consolidation costs and permanent work force reductions and $68.6
million (the "1995 Restructuring Provision") related to Greif and GCO Apparel,
which constituted the entire men's apparel segment of the Company's business,
and is therefore treated for financial reporting purposes as a provision for
discontinued operations.
In the fourth quarter of Fiscal 1995 the 1995 Restructuring Provision was
positively adjusted by $10.5 million reducing the $68.6 million provision for
future losses of discontinued operations to $58.1 million. The adjustment
reflected the favorable consequences of a transfer, not anticipated at the time
the provision was recorded, of a licensing agreement for men's apparel to
another manufacturer. The transfer resulted in realization of inventory and
accounts receivable balances on more favorable terms than anticipated,
assumption of piece goods commitments by other manufacturers and cancellation
of minimum royalty requirements under the transferred license.
35
36
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
RESTRUCTURINGS, CONTINUED
In the first quarter of Fiscal 1996 the Company took an additional
restructuring charge of $14.1 million relating to the 1995 Restructuring. The
additional restructuring charge reflected the lowering of anticipated proceeds
from the sale of Mitre Sports soccer business. In addition, the 1995
Restructuring Provision was adjusted by an additional reversal of $12.7
million. The reversal reflected primarily (1) an agreement during the quarter
providing for the resolution of a long-term lease liability on terms more
favorable than were anticipated when the 1995 Restructuring Provision was
established, (2) better than anticipated realization of inventories and
accounts receivable as the remaining Greif inventory was liquidated in the
first quarter of Fiscal 1996 and (3) lower than anticipated union pension
liability, which the pension fund determined and announced to the Company
during the quarter.
Throughout the remainder of Fiscal 1996, the Company recognized additional
reductions to the 1995 Restructuring Charge and Provision of $1.7 million as
actual events differed from the original estimates.
The transactions provided for in the 1995 Restructuring were substantially
complete as of January 31, 1996 and the Company does not expect any material
future adjustments arising from the completion of the 1995 Restructuring. The
1995 Restructuring Charge, as adjusted, provided for the elimination of 464
jobs in footwear operations to be divested or consolidated and in staff
positions to be eliminated, of which 457 jobs had been eliminated as of January
31, 1996. The divestiture of the University Brands business was completed in
February 1995. The operations of The Greif Companies have ceased, its
inventories and equipment have been liquidated and its last major remaining
long-term lease liability was resolved in June 1995. The Company's GCO Apparel
Corporation was sold in June 1995. The Company's Mitre Sports soccer
business was sold in August 1995 with cash proceeds to the Company
of approximately $19.1 million, including repayment of intercompany balances.
In the third quarter of Fiscal 1996, the Company took a charge of $978,000 from
the adoption of a new accounting standard relating to impaired assets which is
included in the "Restructuring and other charges" line on the Consolidated
Earnings Statement. See Note 1 to the Consolidated Financial Statements.
36
37
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
RESTRUCTURINGS, CONTINUED
The operating results of the men's apparel segment prior to the decision to
discontinue, classified as discontinued operations in the consolidated earnings
statement, are shown below:
YEARS ENDED JANUARY 31,
--------------------------
IN THOUSANDS 1995 1994
- --------------------------------------------------------------------------------------------------------------
Net sales $ 81,777 $104,969
Cost of sales and expenses 86,317 109,895
- --------------------------------------------------------------------------------------------------------------
Pretax loss (4,540) (4,926)
Income tax expense (benefit) -0- 1,905
- --------------------------------------------------------------------------------------------------------------
Net Loss $ (4,540) $ (6,831)
==============================================================================================================
Discontinued operations' sales subsequent to the decision to discontinue were
$20.0 million for Fiscal 1996.
Net sales for Mitre and University Brands for Fiscal 1996, 1995 and 1994 were
$30,759,000, $75,975,000 and $76,022,000, respectively. Operating loss for
Mitre and University Brands before the restructuring provisions for Fiscal 1995
and 1994 was $304,000 and $1,703,000, respectively.
Operating results of footwear businesses divested pursuant to the 1995
Restructuring are included in the Company's sales, cost of sales and selling
and administrative expenses. The net operating losses incurred by these
operations subsequent to the decision to divest are charged against the
restructuring reserves established to provide for such losses. The elimination
of these losses from the Company's results of operations for Fiscal 1996 is
presented as other income in the Consolidated Earnings Statement. Such
operating losses totalled $1.3 million for Fiscal 1996. Such operating losses
totalled $5.5 million for Fiscal 1995 which included operating results of
stores identified for closure pursuant to the 1994 Restructuring referred to
below.
FISCAL 1994 RESTRUCTURING
Because of developments in the fourth quarter of Fiscal 1994, the Company
changed operating strategies and made a decision to restructure certain of its
operations and reassessed the recoverability of certain assets (the "1994
Restructuring"). As a result, the Company recorded a charge of $29.4 million,
of which $17.1 million related to the men's apparel segment. This charge
reflected estimated costs of closing certain manufacturing facilities,
effecting permanent work force reductions and closing 58 retail stores. The
provision included $15.8 million in asset write-downs and $13.6 million of
future consolidation costs. The restructuring involved the elimination of
approximately 1,200 jobs (20% of the Company's total work force in Fiscal
1994). Included in the $15.8 million of asset write-downs was $7.7 million
relating to goodwill, of which $6.9 million related to the acquisition of
certain assets of Lamar Manufacturing Company by the Company's GCO Apparel
subsidiary and $800,000 related to the Company's acquisition of certain assets
of Toddler U Inc.
37
38
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 3
ACCOUNTS RECEIVABLE
- ----------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995*
- ----------------------------------------------------------------------------------------------------------
Trade accounts receivable $33,068 $32,401
Miscellaneous receivables 3,263 2,258
- ----------------------------------------------------------------------------------------------------------
Total receivables 36,331 34,659
Allowance for bad debts (2,065) (1,127)
Other allowances (2,131) (1,452)
- ----------------------------------------------------------------------------------------------------------
NET ACCOUNTS RECEIVABLE $32,135 $32,080
==========================================================================================================
* Excludes accounts receivable of divested operations (see Note 5).
NOTE 4
INVENTORIES
- ----------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995*
- ----------------------------------------------------------------------------------------------------------
Raw materials $ 9,229 $ 8,856
Work in process 3,792 2,877
Finished goods 22,935 21,992
Retail merchandise 48,974 49,180
- ----------------------------------------------------------------------------------------------------------
TOTAL INVENTORIES $84,930 $82,905
==========================================================================================================
* Excludes inventories of divested operations (see Note 5).
38
39
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 5
ASSETS OF OPERATIONS TO BE DIVESTED
1995
-------------------------------------------
1996 DISCONTINUED* OTHER**
IN THOUSANDS TOTAL OPERATIONS OPERATIONS TOTAL
- ---------------------------------------------------------------------------------------------------------------
Current assets:
Accounts receivable $ -0- $16,061 $11,018 $27,079
Inventory -0- 11,723 14,435 26,158
Other -0- -0- 654 654
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS $ -0- $27,784 $26,107 $53,891
===============================================================================================================
Noncurrent assets:
Plant and equipment $ -0- $ 947 $ 1,700 $ 2,647
Capitalized lease rights -0- 253 46 299
Goodwill and other intangibles -0- -0- 15,698 15,698
- ---------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT ASSETS $ -0- $ 1,200 $17,444 $18,644
===============================================================================================================
*Includes the assets of The Greif Companies and GCO Apparel Corporation
comprising the men's apparel segment (see Note 2).
**Includes the assets of University Brands and Mitre Sports (see Note 2).
NOTE 6
PLANT, EQUIPMENT AND CAPITAL LEASES, NET
IN THOUSANDS 1996 1995*
- --------------------------------------------------------------------------------------------------------------
Plant and equipment:
Land $ 75 $ 75
Buildings and building equipment 2,799 2,797
Machinery, furniture and fixtures 32,927 30,682
Construction in progress 1,114 672
Improvements to leased property 39,195 37,776
Capital leases:
Land 60 60
Buildings 2,195 2,195
Machinery, furniture and fixtures 7,392 7,627
- --------------------------------------------------------------------------------------------------------------
Plant, equipment and capital leases, at cost 85,757 81,884
Accumulated depreciation and amortization:
Plant and equipment (50,355) (48,131)
Capital leases (6,850) (5,680)
- --------------------------------------------------------------------------------------------------------------
NET PLANT, EQUIPMENT AND CAPITAL LEASES $ 28,552 $ 28,073
==============================================================================================================
* Excludes plant, equipment and capital leases of divested operations (see
Note 5).
39
40
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 7
OTHER ASSETS
IN THOUSANDS 1996 1995
- -----------------------------------------------------------------------------------------------------------
Other current assets:
Prepaid expenses $ 4,317 $ 4,277
- -----------------------------------------------------------------------------------------------------------
TOTAL OTHER CURRENT ASSETS $ 4,317 $ 4,277
===========================================================================================================
Other noncurrent assets:
Pension plan asset $ 8,051 $ 9,422
Investments and long-term receivables 1,772 1,696
Deferred note expense 2,499 2,655
- -----------------------------------------------------------------------------------------------------------
TOTAL OTHER NONCURRENT ASSETS $ 12,322 $ 13,773
===========================================================================================================
NOTE 8
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
IN THOUSANDS 1996 1995
- -----------------------------------------------------------------------------------------------------------
Trade accounts payable $ 12,105 $ 21,128
Accrued liabilities:
Employee compensation 10,733 10,867
Insurance 4,381 5,166
Interest 3,992 4,173
Taxes other than income taxes 3,361 3,370
Other 9,114 16,420
- -----------------------------------------------------------------------------------------------------------
TOTAL ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $ 43,686 $ 61,124
===========================================================================================================
At January 31, 1995, outstanding checks drawn on certain domestic banks
exceeded book cash balances by approximately $3,673,000. These amounts are
included in trade accounts payable.
40
41
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 9
PROVISION FOR DISCONTINUED OPERATIONS AND RESTRUCTURING RESERVES
PROVISION FOR DISCONTINUED OPERATIONS
EMPLOYEE FACILITY OTHER
RELATED SHUTDOWN CONTRACT
IN THOUSANDS COSTS COSTS LIABILITIES OTHER TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1995 $ 25,134 $ 9,405 $ 1,415 $ 4,261 $ 40,215
Charges and adjustments, net (9,912) (9,395) (1,370) (2,285) (22,962)
- -----------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1996 15,222 10 45 1,976 17,253
Current portion 1,868 10 45 1,976 3,899
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT PROVISION FOR
DISCONTINUED OPERATIONS $ 13,354 $ -0- $ -0- $ -0- $ 13,354
=============================================================================================================================
RESTRUCTURING RESERVES
EMPLOYEE FACILITY OTHER
RELATED SHUTDOWN CONTRACT
IN THOUSANDS COSTS COSTS LIABILITIES OTHER TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1995 $ 3,965 $ 3,123 $ 555 $ 3,112 $ 10,755
Charges and adjustments, net (3,009) (1,457) (496) (2,789) (7,751)
- ---------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1996 956 1,666 59 323 3,004
Current portion (included in accounts
payable and accrued liabilities) 956 1,470 59 323 2,808
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT RESTRUCTURING RESERVES
(INCLUDED IN OTHER LONG-TERM
LIABILITIES) $ -0- $ 196 $ -0- $ -0- $ 196
==========================================================================================================================
41
42
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 10
LONG-TERM DEBT
- ---------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995
- ---------------------------------------------------------------------------------------------------------------
10 3/8% senior notes due February 2003 $75,000 $75,000
Current portion -0- -0-
- ---------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT PORTION OF LONG-TERM DEBT $75,000 $75,000
===============================================================================================================
REVOLVING CREDIT AGREEMENTS:
On January 5, 1996, the Company entered into a revolving credit agreement with
two banks providing for loans or letters of credit of up to $35 million. The
agreement expires January 5, 1999. This agreement replaced a $50 million
revolving credit agreement providing for loans or letters of credit.
Outstanding letters of credit at January 31, 1996 were $8 million.
Under the new revolving credit agreement, the Company may borrow at the prime
rate or LIBOR plus 2.0% which may be changed if the Company's debt rating is
improved. Facility fees are 0.5% per annum on each bank's committed amount or
$35,000,000. The new credit agreement requires the Company to meet certain
financial ratios and covenants, including minimum tangible net worth, fixed
charge coverage, debt to equity and interest coverage ratios. The Company is
required by the new credit agreement to reduce the outstanding principal
balance of the revolving loans to zero for 45 consecutive days during each
period beginning on December 15 of any Fiscal Year and ending on April 15 of
the following Fiscal Year (commencing with the period beginning December 15,
1995 and ending on April 15, 1996). The revolving credit agreement contains
other covenants which restricts the payment of dividends and other payments
with respect to capital stock and annual capital expenditures are limited to
$12,000,000 for Fiscal 1997 and $14,000,000 thereafter subject to possible
carryforwards from the previous year of up to $2,000,000 if less is spent in
the current year. The Company was in compliance with the financial covenants
contained in the revolving credit agreement at January 31, 1996.
10 3/8% SENIOR NOTES DUE 2003:
On February 1, 1993, the Company issued $75 million of 10 3/8% senior notes due
February 1, 2003.
The fair value of the Company's 10 3/8% senior notes, based on the quoted
market price on January 31, 1996, is $69,656,250.
The indenture under which the notes were issued limits the incurrence of
indebtedness, the making of restricted payments, the restricting of subsidiary
dividends, transactions with affiliates, liens, sales of assets and
transactions involving mergers, sales or consolidations.
42
43
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 11
COMMITMENTS UNDER LONG-TERM LEASES
CAPITAL LEASES
Future minimum lease payments under capital leases at January 31, 1996,
together with the present value of the minimum lease payments, are:
- --------------------------------------------------------------------------------------------------------------
FISCAL YEARS IN THOUSANDS
- --------------------------------------------------------------------------------------------------------------
1997 $ 1,391
1998 865
1999 400
2000 139
2001 139
Later years 189
- --------------------------------------------------------------------------------------------------------------
Total minimum payments 3,123
Interest discount amount 426
- --------------------------------------------------------------------------------------------------------------
Total present value of minimum payments 2,697
Current portion 1,212
- --------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT PORTION $ 1,485
==============================================================================================================
OPERATING LEASES
Rental expense under operating leases of continuing operations was:
- ---------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
Minimum rentals $17,942 $18,678 $18,501
Contingent rentals 8,776 8,234 7,798
Sublease rentals (754) (478) (480)
- ---------------------------------------------------------------------------------------------------------------
TOTAL RENTAL EXPENSE $25,964 $26,434 $25,819
===============================================================================================================
Minimum rental commitments payable in future years are:
- ---------------------------------------------------------------------------------------------------------------
FISCAL YEARS IN THOUSANDS
- ---------------------------------------------------------------------------------------------------------------
1997 $17,690
1998 16,281
1999 12,963
2000 10,121
2001 6,976
Later years 9,598
- ---------------------------------------------------------------------------------------------------------------
TOTAL MINIMUM RENTAL COMMITMENTS $73,629
===============================================================================================================
Most leases provide for the Company to pay real estate taxes and other expenses
and contingent rentals based on sales. Approximately 12% of the Company's
leases contain renewal options.
43
44
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
SHAREHOLDERS' EQUITY
NON-REDEEMABLE PREFERRED STOCK
NUMBER OF SHARES AMOUNTS IN THOUSANDS
----------------------- ----------------------
JANUARY 31, JANUARY 31, COMMON
SHARES ----------------------- ---------------------- CONVERTIBLE NO. OF
CLASS AUTHORIZED 1996 1995 1994 1996 1995 1994 RATIO VOTES
- ---------------------------------------------------------------------------------------------------------------------------
Subordinated Serial Preferred (Cumulative)
$2.30 Series 1 64,368 37,233 37,233 37,283 $1,489 $1,489 $1,491 .83 1
$4.75 Series 3 40,449 19,632 19,632 19,632 1,963 1,963 1,963 2.11 2
$4.75 Series 4 53,764 16,412 16,412 16,412 1,641 1,641 1,641 1.52 1
Series 6 400,000 -0- -0- -0- -0- -0- -0- 1
$1.50 Subordinated Cumulative Preferred 5,000,000 30,017 30,017 29,917 901 901 898
- ---------------------------------------------------------------------------------------------------------------------------
103,294 103,294 103,244 5,994 5,994 5,993
Employees' Subordinated
Convertible Preferred 5,000,000 80,313 80,313 84,791 2,410 2,410 2,544 1.00* 1
- ---------------------------------------------------------------------------------------------------------------------------
Stated Value of Issued Shares 8,404 8,404 8,537
Employees' Preferred Stock Purchase Accounts (446) (461) (473)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NON-REDEEMABLE PREFERRED STOCK $7,958 $7,943 $8,064
===========================================================================================================================
* Also convertible into one share of $1.50 Subordinated Cumulative Preferred
Stock.
PREFERRED STOCK TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------------------
IN THOUSANDS EMPLOYEES'
NON-REDEEMABLE PREFERRED TOTAL
NON-REDEEMABLE EMPLOYEES' STOCK NON-REDEEMABLE
PREFERRED PREFERRED PURCHASE PREFERRED
STOCK STOCK ACCOUNTS STOCK
- -------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1993 $ 6,044 $ 2,810 $ (549) $ 8,305
- -------------------------------------------------------------------------------------------------------------------------
Conversion of employees' preferred into $1.50 preferred 9 (9) -0- -0-
Conversion of employees' preferred into common -0- (199) -0- (199)
Other (60) (58) 76 (42)
- -------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1994 5,993 2,544 (473) 8,064
- -------------------------------------------------------------------------------------------------------------------------
Conversion of employees' preferred into $1.50 preferred 3 (3) -0- -0-
Conversion of employees' preferred into common -0- (122) -0- (122)
Other (2) (9) 12 1
- -------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1995 5,994 2,410 (461) 7,943
- -------------------------------------------------------------------------------------------------------------------------
Other -0- -0- 15 15
- -------------------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 31, 1996 $ 5,994 $ 2,410 $ (446) $ 7,958
=========================================================================================================================
SUBORDINATED SERIAL PREFERRED STOCK (CUMULATIVE):
Stated and redemption values for Series 1 are $40 per share and for Series 3
and 4 are each $100 per share; liquidation value for Series 1--$40 per share
plus accumulated dividends and for Series 3 and 4--$100 per share plus
accumulated dividends.
44
45
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
SHAREHOLDERS' EQUITY, CONTINUED
The Company's shareholders' rights plan grants to common shareholders the right
to purchase, at a specified exercise price, a fraction of a share of
subordinated serial preferred stock, Series 6, in the event of an acquisition
of, or an announced tender offer for, 10% or more of the Company's outstanding
common stock. Upon any such event, each right also entitles the holder (other
than the person making such acquisition or tender offer) to purchase, at the
exercise price, shares of common stock having a market value of twice the
exercise price. In the event the Company is acquired in a transaction in which
the Company is not the surviving corporation, each right would entitle its
holder to purchase, at the exercise price, shares of the acquiring company
having a market value of twice the exercise price. The rights expire in August
2000, are redeemable under certain circumstances for $.01 per right and are
subject to exchange for one share of common stock or an equivalent amount of
preferred stock at any time after the event which makes the rights exercisable
and before a majority of the Company's common stock is acquired.
$1.50 SUBORDINATED CUMULATIVE PREFERRED STOCK:
Stated and liquidation values and redemption price--$30 per share.
EMPLOYEES' SUBORDINATED CONVERTIBLE PREFERRED STOCK:
Stated and liquidation values--$30 per share.
COMMON STOCK:
Common stock-$1 par value. Authorized: 40,000,000 shares; issued: January 31,
1996--24,844,036 shares; January 31, 1995--24,832,127 shares. There were
488,464 shares held in treasury at January 31, 1996 and 1995. Each outstanding
share is entitled to one vote. At January 31, 1996, common shares were
reserved as follows: 177,536 shares for conversion of preferred stock;
1,553,100 shares for the 1987 Stock Option Plan; 200,000 shares for executive
stock options; 22,427 shares for the Restricted Stock Plan for Directors; and
918,248 shares for the Genesco Employee Stock Purchase Plans.
RESTRICTIONS ON DIVIDENDS AND REDEMPTIONS OF CAPITAL STOCK:
The Company's charter provides that no dividends may be paid and no shares of
capital stock acquired for value if there are dividend or redemption arrearages
on any senior or equally ranked stock. Exchanges of subordinated serial
preferred stock for common stock or other stock junior to such exchanged stock
are permitted.
45
46
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
SHAREHOLDERS' EQUITY, CONTINUED
The February 1, 1993 indenture, under which the Company's 10 3/8% senior notes
due 2003 were issued, limits the payment of dividends and redemptions of
capital stock to the sum of $10 million plus (i) 50% of Consolidated Net Income
(as defined) after April 30, 1993 and (ii) the aggregate Net Proceeds (as
defined) received from the issuance or sale of capital stock after February 1,
1993. At January 31, 1996, the Company was in a deficit position of
$109,655,000 in its ability to pay dividends.
Due to the above restrictions, the Company suspended dividends in the fourth
quarter of Fiscal 1994 and now has cumulative dividend arrearages in the amount
of $192,738 for Series 1, $209,817 for Series 3, $175,403 for Series 4, and
$101,232 for $1.50 Subordinated Cumulative Preferred Stock.
CHANGES IN THE SHARES OF THE COMPANY'S CAPITAL STOCK
NON-
REDEEMABLE REDEEMABLE EMPLOYEES'
COMMON PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK STOCK
- -----------------------------------------------------------------------------------------------------------------------
Issued at January 31, 1993 23,657,879 1,052 103,544 93,648
- -----------------------------------------------------------------------------------------------------------------------
Exercise of options and warrants 1,101,082 -0- -0- -0-
Redemptions -0- (1,052) (600) -0-
Other 33,680 -0- 300 (8,857)
- -----------------------------------------------------------------------------------------------------------------------
Issued at January 31, 1994 24,792,641 -0- 103,244 84,791
- -----------------------------------------------------------------------------------------------------------------------
Other 39,486 -0- 50 (4,478)
- -----------------------------------------------------------------------------------------------------------------------
Issued at January 31, 1995 24,832,127 -0- 103,294 80,313
- -----------------------------------------------------------------------------------------------------------------------
Exercise of options 7,625 -0- -0- -0-
Other 4,284 -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------
Issued at January 31, 1996 24,844,036 -0- 103,294 80,313
Less treasury shares 488,464 -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT JANUARY 31, 1996 24,355,572 -0- 103,294 80,313
=======================================================================================================================
46
47
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 13
INCOME TAXES
The Company adopted SFAS No. 109, "Accounting For Income Taxes", effective
February 1, 1993. The adoption of SFAS No. 109 had no effect on net earnings
for Fiscal 1994. SFAS No. 109 permits the recognition of a deferred tax asset
if it is more likely than not that the future tax benefit will be realized.
The Company does not recognize a deferred tax asset except to the extent future
years' deductible items will offset future years' taxable items or will, as
loss carrybacks, generate a refund in the current and two previous years.
Income tax expense (benefit) is comprised of the following:
- -----------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
Current
U.S. federal $ -0- $(1,693) $(2,962)
Foreign 25 741 438
State -0- 10 (377)
Deferred
U.S. federal -0- 1,699 787
Foreign -0- -0- (24)
State -0- -0- 238
- -----------------------------------------------------------------------------------------------------------
Income tax before discontinued operations 25 757 (1,900)
Discontinued operations -0- -0- 1,905
- -----------------------------------------------------------------------------------------------------------
TOTAL INCOME TAX EXPENSE $ 25 $ 757 $ 5
===========================================================================================================
47
48
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 13
INCOME TAXES, CONTINUED
Deferred tax assets and liabilities are comprised of the following:
- ----------------------------------------------------------------------------------------------------------
JANUARY 31, JANUARY 31,
IN THOUSANDS 1996 1995
- ----------------------------------------------------------------------------------------------------------
Pensions $ (885) $ (885)
Other (346) (347)
- ----------------------------------------------------------------------------------------------------------
Gross deferred tax liabilities (1,231) (1,232)
- ----------------------------------------------------------------------------------------------------------
Net operating loss carryforwards 25,399 12,567
Net capital loss carryforwards 11,180 -0-
Provisions for discontinued operations
and restructurings 8,437 24,945
Inventory valuation 1,743 7,092
Expense accruals 6,581 7,053
Goodwill amortization and writeoff -0- 3,555
Allowances for bad debts and notes 1,711 2,456
Uniform capitalization costs 1,937 2,223
Depreciation 2,105 1,791
Pensions 692 1,881
Leases 176 1,608
Other 2,047 1,647
Tax credit carryforwards 1,200 1,496
- ----------------------------------------------------------------------------------------------------------
Gross deferred tax assets 63,208 68,314
- ----------------------------------------------------------------------------------------------------------
Deferred tax asset valuation allowance (61,977) (67,082)
- ----------------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS $ -0- $ -0-
==========================================================================================================
The Company has net operating loss carryfowards available to offset future U.S.
taxable income of approximately $65,971,000 expiring in 2010 and 2011. The
Company also has capital loss carryforwards available to offset future U.S.
capital gains of approximately $29,038,000 expiring in 2001.
48
49
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 13
INCOME TAXES, CONTINUED
Reconciliation of the United States federal statutory rate to the Company's
effective tax rate is as follows:
- -----------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
U. S. federal statutory rate of tax 34.00% 34.00% 34.00%
State taxes (net of federal tax benefit) 4.50 -0- -0-
Change in valuation allowance (38.5) -0- -0-
Operating losses with no current tax benefit -0- (34.00) (33.27)
Other (.01) -0- (.74)
- -----------------------------------------------------------------------------------------------------------
EFFECTIVE TAX RATE (.01%) .00% (.01%)
===========================================================================================================
49
50
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 14
EMPLOYEE RETIREMENT BENEFITS
RETIREMENT PLAN
The Company sponsors a non-contributory, defined benefit pension plan.
Effective January 1, 1996 the Company amended the plan to change the pension
benefit formula to a cash balance formula from the existing benefit calculation
based upon years of service and final average pay. The benefits accrued under
the old formula were frozen as of December 31, 1995. Upon retirement, the
participant will receive this accrued benefit payable as an annuity. In
addition, the participant will receive as a lump sum (or annuity if desired)
the amount credited to their cash balance account under the new formula.
Under the amended plan, beginning January 1, 1996 the Company credits each
participants account annually with an amount equal to 4% of the participant's
compensation plus 4% of the participant's compensation in excess of the Social
Security taxable wage base. Beginning December 31, 1996 and annually
thereafter, the account balance of each active participant will be credited
with 7% interest calculated on the sum of the balance as of the beginning of
the plan year and 50% of the amounts credited to the account, other than
interest, for the plan year. The account balance of each participant who is
inactive will be credited with interest at the lesser of 7% or the 30 year
Treasury interest rate.
PENSION EXPENSE
- --------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Service cost of benefits earned during the year $ 1,914 $ 2,309 $ 1,808
Interest on projected benefit obligation 6,621 6,430 6,141
Actual return on plan assets (12,522) (933) (5,341)
Deferral of current period asset gains (losses) 7,089 (4,256) 451
Amortization of prior service cost 388 388 463
Amortization of net loss 171 1,385 345
Amortization of transition obligation 983 983 983
- --------------------------------------------------------------------------------------------------------------
TOTAL PENSION EXPENSE $ 4,644 $ 6,306 $ 4,850
==============================================================================================================
ACTUARIAL ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------------
Weighted average discount rate 7.00% 8.50%
Salary progression rate 5.00% 5.00%
Expected long-term rate of return on plan assets 9.50% 9.50%
- ----------------------------------------------------------------------------------------------------------
50
51
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 14
EMPLOYEE RETIREMENT BENEFITS, CONTINUED
The weighted average discount rate used to measure the benefit obligation
decreased from 8.50% to 7.00% from Fiscal 1995 to Fiscal 1996. The decrease in
the rate increased the accumulated benefit obligation by $12,073,000 and
increased the projected benefit obligation by $15,661,000. The weighted
average discount rate increased from 7.00% to 8.50% from Fiscal 1994 to Fiscal
1995. The increase in the rate decreased the accumulated benefit obligation by
$11,867,000 and decreased the projected benefit obligation by $16,217,000.
The following table sets forth the funded status of the plan as of the
measurement date (December 31) for the respective fiscal year:
FUNDED STATUS
- ---------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995
- ---------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $83,833 $68,500
Non-vested benefit obligation 1,242 1,031
- ---------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $85,075 $69,531
===============================================================================================================
Projected benefit obligation
for services rendered to date $99,058 $82,097
Plan assets at fair value, primarily
cash equivalents, common stock, notes and
real estate 68,550 53,760
- ---------------------------------------------------------------------------------------------------------------
PROJECTED BENEFIT OBLIGATION IN EXCESS OF
PLAN ASSETS $30,508 $28,337
===============================================================================================================
Plan assets for 1995 include Company related assets of $575,000 which consisted
of properties leased to the Company. At January 31, 1996, there are no Company
related assets in the plan.
BALANCE SHEET EFFECT
SFAS No. 87 requires the Company to recognize a pension liability ($16,525,000
for 1996 and $15,771,000 for 1995) equal to the amount by which the actuarial
present value of the accumulated benefit obligation ($85,075,000 for 1996 and
$69,531,000 for 1995) exceeds the fair value of the retirement plan's assets
($68,550,000 for 1996 and $53,760,000 for 1995). A corresponding amount is
recognized as an intangible asset to the extent of the unamortized prior
service cost and unamortized transition obligation. Any excess of the pension
liability above the intangible pension asset is recorded as a separate
component and reduction of shareholders' equity. In 1996, this resulted in the
recording of an intangible asset of $8,051,000 and a reduction to shareholders'
equity of $8,244,000. In the prior year, an intangible asset of $9,422,000 and
a reduction to shareholders' equity of $2,613,000 was recorded in the Company's
balance sheet. The increase in the charge to shareholders' equity from
$2,613,000 in Fiscal 1995 to $8,244,000 in Fiscal 1996 results primarily from
the decrease in the weighted average discount rate.
51
52
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 14
EMPLOYEE RETIREMENT BENEFITS, CONTINUED
A reconciliation of the plan's funded status to amounts recognized in the
Company's balance sheet follows:
- --------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995
- --------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets $(30,508) $(28,337)
Unamortized transition obligation 5,897 6,880
Unrecognized net actuarial losses 22,227 15,179
Unrecognized prior service cost 2,154 2,542
- --------------------------------------------------------------------------------------------------------------
Accrued pension cost (230) (3,736)
Amount reflected as an intangible asset* (8,051) (9,422)
Amount reflected as minimum pension liability
adjustment** (8,244) (2,613)
- --------------------------------------------------------------------------------------------------------------
AMOUNT REFLECTED AS PENSION LIABILITY*** $(16,525) $(15,771)
==============================================================================================================
* Included in other non-current assets in the balance sheet.
** Included as a component of shareholders' equity in the balance sheet.
*** Included in other long-term liabilities in the balance sheet.
SECTION 401(K) SAVINGS PLAN
The Company has a Section 401(k) Savings Plan available to employees who have
completed one full year of service and are age 21 or older.
Concurrent with the January 1, 1996 amendment to the pension plan (discussed
previously), the Company amended the 401(k) savings plan to make matching
contributions equal to 50% of each employee's contribution of up to 5% of
salary. Matching funds vest after five years of service with the Company.
Years of service earned prior to the adoption of this change contribute toward
the vesting requirement. For the one month period since amendment to the end
of the fiscal year, the contribution expense to the Company for the matching
program was approximately $40,000.
52
53
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 15
OTHER BENEFIT PLANS
Prior to Fiscal 1996 the Company contributed to a multiemployer pension plan
applicable to all hourly-paid employees of its tailored clothing division
covered by collective bargaining agreements. As a result of the Company's
decision to liquidate The Greif Companies men's tailored clothing business, the
Company provided for its estimated union pension withdrawal liability (see Note
2). Pension costs and amounts contributed to the plan during Fiscal 1995 and
1994 were $1,831,000 and $2,232,000, respectively.
The Company provides health care benefits for early retirees and life insurance
benefits for certain retirees not covered by collective bargaining agreements.
Under the health care plan, early retirees are eligible for limited benefits
until age 65. Employees who meet certain requirements are eligible for life
insurance benefits upon retirement.
The Company implemented SFAS No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" in the first quarter of 1994. In the past the
Company expensed the cost of postretirement benefits as incurred. The adoption
of SFAS No. 106, which requires the accrual of such benefits during the period
in which the employee renders service, resulted in a net charge to income of
$2,273,000 for the cumulative effect of the change in accounting principle for
periods prior to 1994, which were not restated. The $2,273,000 represents the
actuarial present value of the accumulated postretirement benefit obligation
(the "APBO") at February 1, 1993 which the Company elected to charge in the
first quarter of Fiscal 1994.
Postretirement benefit expense was $256,000, $217,000 and $245,000 for Fiscal
1996, 1995 and 1994, respectively. The components of postretirement benefit
expense follow:
- -----------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
Service cost of benefits earned during the year $ 64 $ 70 $ 63
Interest cost on accumulated postretirement
benefits 192 147 182
- -----------------------------------------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COST $ 256 $ 217 $ 245
===========================================================================================================
53
54
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 15
OTHER BENEFIT PLANS, CONTINUED
The funded status of the plan and amounts recognized in the financial
statements at January 31, 1996 and 1995 were as follows:
- -------------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Postretirement benefit liability at beginning
of year $ 1,929 $ 2,447
Net periodic postretirement benefit cost 256 217
Cash expenditures for benefits (162) (164)
(Gain) loss due to actual experience 376 (317)
Increase (decrease) in liability due to change in
discount rate 294 (254)
- -------------------------------------------------------------------------------------------------------------------
Postretirement benefit liability 2,693 1,929
Unrecognized net (loss) gain (289) 381
- -------------------------------------------------------------------------------------------------------------------
POSTRETIREMENT BENEFIT LIABILITY RECOGNIZED
IN FINANCIAL STATEMENTS $ 2,404 $ 2,310
===================================================================================================================
At January 31, 1995, the weighted average discount rate used to determine the
APBO increased from 7.00% to 8.50% resulting in an unrecognized net gain of
$254,000. The weighted average discount rate used to determine the APBO at
January 31, 1996 was 7%. The decrease from the previous year's rate of 8.5%
resulted in an unrecognized loss of $294,000. The APBO was determined using an
assumed annual increase in the health care cost trend rate of 10.50% for Fiscal
1996. The trend rate is assumed to decrease gradually to 5.0% by Fiscal 2013.
A one percentage point increase in the assumed health care cost trend rate
would increase the APBO by approximately $200,000 and increase the aggregate of
the service and interest cost components of net periodic postretirement benefit
expense for the fiscal year by approximately $23,000.
NOTE 16
SUPPLEMENTAL CASH FLOW INFORMATION
- -------------------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
Net cash paid (received) for:
Interest $ 9,146 $ 11,227 $ 6,865
Income taxes (802) (2,457) (273)
Noncash investing and financing activities:
Fixed assets acquired under capital leases $ -0- $ -0- $ 428
Business acquisitions:
Fair value of assets acquired $ -0- $ -0- $ 13,119
Liabilities assumed -0- -0- 1,743
- -------------------------------------------------------------------------------------------------------------------
CASH PAID FOR ACQUISITION $ -0- $ -0- $ 11,376
===================================================================================================================
54
55
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 17
EMPLOYEE STOCK PLANS
STOCK OPTION PLANS
- -----------------------------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------------
Options outstanding at beginning of period 1,261,904 1,363,058
Options granted - 1987 Stock Option Plan 245,500 991,375
Options granted - Genesco Employee Stock Purchase Plans 134,752 66,158
Options exercised - 1987 Stock Option Plan (7,625) (1,875)
Options exercised - Genesco Employee Stock Purchase Plans (4,284) (9,527)
Options expired - Key Executives Stock Option Plan -0- (22,000)
Options cancelled - Genesco Employee Stock Purchase Plans (44,162) (55,185)
Options cancelled - 1987 Stock Option Plan (143,825) (1,070,100)
- -----------------------------------------------------------------------------------------------------------
Total options outstanding at end of period 1,442,260 1,261,904
Shares reserved for future options 1,051,515 1,243,780
- -----------------------------------------------------------------------------------------------------------
TOTAL SHARES RESERVED 2,493,775 2,505,684
===========================================================================================================
Under the 1987 Stock Option Plan, options to purchase 1,275,525 shares were
outstanding at a weighted average exercise price of $3.46 per share. These
options, held by 55 individuals, expire between August 21, 1999 and December
22, 2005. Options to purchase 584,772 shares are currently exercisable.
Under the Genesco Employee Stock Purchase Plans, options to purchase
approximately 166,735 shares were outstanding at a weighted average exercise
price of approximately $3.45 per share. Unless withdrawn by the participants,
these options may be exercised on September 30, 1996. There are approximately
260 employees participating in the plan.
In addition to the above stock options plans, there were 200,000 executive
stock options outstanding and exercisable at a weighted average exercise price
of $2.13 per share.
STOCK PURCHASE PLANS
Stock purchase accounts arising out of sales to employees prior to 1972 under
certain employee stock purchase plans amounted to $454,000 and $469,000 at
January 31, 1996 and 1995, respectively, and were secured at January 31, 1996,
by 21,497 employees' preferred shares and 325 common shares. Payments on stock
purchase accounts under the stock purchase plans have been indefinitely
deferred. No further sales under these plans are contemplated.
55
56
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 18
LEGAL PROCEEDINGS
Tennessee Environmental Proceedings
The Company is subject to several administrative orders issued by the Tennessee
Department of Environment and Conservation directing the Company to implement
plans designed to remedy possible ground water contamination and to manage
source area material which was generated by a divested operating division and
which was deposited on a site in a rural area near Nashville, Tennessee.
Substantially all source material and ground water remedial actions have been
implemented. The Company believes that it has fully provided for the costs to
be incurred with respect to these remedial actions.
New York State Environmental Proceedings
The Company is a defendant in two separate civil actions filed by the State of
New York; one against the City of Gloversville, New York, and 33 other private
defendants and the other against the City of Johnstown, New York, and 14 other
private defendants. In addition, third party complaints and cross claims have
been filed against numerous other entities, including the Company, in both
actions. These actions arise out of the alleged disposal of certain hazardous
material directly or indirectly in municipal landfills. The complaints in both
cases allege the defendants, together with other contributors to the municipal
landfills, are liable under a federal environmental statute and certain common
law theories for the costs of investigating and performing remedial actions
required to be taken with respect to the landfills and damages to the natural
resources.
The environmental authorities have issued decisions selecting plans of
remediation with respect to the Johnstown and Gloversville sites which have
total estimated costs of $16.5 million and $28.3 million, respectively.
The Company has filed answers to the complaints in both the Johnstown and
Gloversville cases denying liability and asserting numerous defenses. Because
of uncertainties related to the ability or willingness of the other defendants,
including the municipalities involved, to pay a portion of future remediation
costs, the availability of State funding to pay a portion of future remediation
costs, the insurance coverage available to the various defendants, the
applicability of joint and several liability and the basis for contribution
claims among the defendants, management is presently unable to predict the
outcome or to estimate the extent of liability the Company may incur with
respect to either of the Johnstown or Gloversville actions.
56
57
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 18
LEGAL PROCEEDINGS, CONTINUED
In November 1995 the Company responded to a request for information dated
October 23, 1995 from the New York State Department of Environmental
Conservation (the "Department") regarding the site of a knitting mill operated
by the Company or a former subsidiary from 1965 to 1969. The Company has
received notice from the Department that it deems remedial action to be
necessary with respect to certain contaminants in the vicinity of the facility.
The owner of the site has advised the Company that it intends to hold the
Company responsible for any required remediation or other damages incident to
the contamination. The Company has not ascertained what responsibility, if
any, it has for any contamination in connection with the facility and is unable
to predict whether its liability in this connection, if any, will have a
material effect on its financial condition or results of operations.
Whitehall Environmental Sampling
The Michigan Department of Environmental Quality ("MDEQ") has performed
sampling and analysis of soil, sediments, surface water, groundwater, and waste
management areas at the Company's Volunteer Leather Company facility in
Whitehall, Michigan. MDEQ advised the Company that it would review the results
of the analysis for possible referral to the EPA for action under the
Comprehensive Environmental Response Compensation and Liability Act. However,
the Company is cooperating with MDEQ and has been advised by MDEQ that no EPA
referral is presently contemplated. Neither MDEQ nor the EPA has threatened or
commenced any enforcement action. In response to the testing data, the Company
submitted and MDEQ approved, a work plan. The plan provides, among other
things, for fencing a waste disposal area to reduce the likelihood of human
contact with any hazardous substances which may be in the area, installing an
erosion barrier along a portion of the shore of White Lake adjoining the
facility, and performing testing and analysis to determine what additional
remediation may be necessary. The Company does not believe that the
installation of an erosion barrier and fencing and the testing anticipated by
the conceptual work plan will have a material effect on its financial condition
or results of operations, but is unable to determine whether additional
remediation activities, if any, would have a material effect on its financial
condition or results of operations.
57
58
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 18
LEGAL PROCEEDINGS, CONTINUED
Preferred Shareholder Action
On January 7, 1993, 23 former holders of the Company's series 2, 3 and 4
subordinated serial preferred stock filed a civil action against the Company
and certain officers in the United States District Court for the Southern
District of New York (the "U.S. District Court Action"). The plaintiffs allege
that the defendants misrepresented and failed to disclose material facts to
representatives of the plaintiffs in connection with exchange offers which were
made by the Company to the plaintiffs and other holders of the Company's series
1, 2, 3 and 4 subordinated serial preferred stock from June 23, 1988 to August
1, 1988. The plaintiffs contend that had they been aware of the
misrepresentations and omissions, they would not have agreed to exchange their
shares pursuant to the exchange offers. The plaintiffs allege breach of
fiduciary duty and fraudulent and negligent misrepresentations and seek damages
in excess of $10 million, costs, attorneys' fees, interest and punitive damages
in an unspecified amount. By order dated December 2, 1993, the U.S. District
Court denied a motion for judgement on the pleadings filed on behalf of all
defendants. On July 6, 1994, the court denied a motion for partial summary
judgement filed on behalf of the plaintiffs. The Company and the individual
defendants intend to defend the U.S. District Court Action vigorously. The
Company is unable to predict if the U.S. District Court Action will have a
material adverse effect on the Company's results of operations or financial
condition.
Texas Interference Action
On October 6, 1995, a prior holder of a license to manufacture and market
western boots and other products under a trademark now licensed to the Company
filed an action in the District Court of Dallas County, Texas against the
Company and a contract manufacturer alleging tortious interference with a
business relationship, breach of contract, tortious interference with a
contract, breach of a confidential relationship and civil conspiracy based on
the Company's entry into the license. The Company filed an answer denying all
the material allegations of the plaintiff's complaint. The Company is unable
to predict whether the outcome of the litigation will have a material effect on
its financial condition or results of operations.
58
59
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 19
BUSINESS SEGMENT INFORMATION
- ---------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
SALES TO UNAFFILIATED CUSTOMERS:
Footwear (shoes and accessories):
Retail $ 243,303 $ 234,448 $ 231,456
Wholesale and manufacturing 191,272 228,453 236,435
- ---------------------------------------------------------------------------------------------------------
TOTAL SALES $ 434,575 $ 462,901 $ 467,891
=========================================================================================================
PRETAX EARNINGS (LOSS):
Footwear (shoes and accessories):
Retail $ 17,881(1) $ 16,925(3) $ (3,841)(4)
% of applicable sales 7.3% 7.2% (1.7%)
Wholesale and manufacturing (1,254)(2) (12,105)(3) 873(4)
% of applicable sales (0.7%) (5.3%) 0.4%
- ---------------------------------------------------------------------------------------------------------
Operating income (loss) 16,627 4,820 (2,968)
% of total sales 3.8% 1.0% (0.6%)
Corporate expenses:
Interest expense (9,645) (11,955) (11,030)
Other corporate expenses (11,238) (15,522)(3) (16,467)(4)
Gain on divestiture -0- 4,900 677
- ---------------------------------------------------------------------------------------------------------
TOTAL PRETAX LOSS $ (4,256) $ (17,757) $ (29,788)
% OF TOTAL SALES (1.0%) (3.8%) (6.4%)
=========================================================================================================
(1) Includes an asset impairment loss of $978,000.
(2) Includes a restructuring charge in Fiscal 1996 of $14,146,000.
(3) Includes a restructuring charge in Fiscal 1995 as follows: Footwear
Retail $236,000, Footwear Wholesale and Manufacturing $20,578,000 and
Corporate $1,300,000.
(4) Includes a restructuring charge in Fiscal 1994 as follows: Footwear
Retail $8,673,000, Footwear Wholesale and Manufacturing $3,242,000 and
Corporate $404,000.
59
60
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 19
BUSINESS SEGMENT INFORMATION, CONTINUED
- -----------------------------------------------------------------------------------------------------------
IN THOUSANDS 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
ASSETS:
Footwear:
Retail $ 67,482 $ 69,287 $ 66,922
Wholesale and manufacturing 74,290 115,601 140,530
- -----------------------------------------------------------------------------------------------------------
Total footwear 141,772 184,888 207,452
Men's apparel -0- 28,984 73,644
Corporate assets 56,034 30,006 28,290
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 197,806 $ 243,878 $ 309,386
===========================================================================================================
DEPRECIATION AND AMORTIZATION:
Footwear:
Retail $ 4,755 $ 4,735 $ 5,027
Wholesale and manufacturing 1,691 2,759 3,339
- -----------------------------------------------------------------------------------------------------------
Total footwear 6,446 7,494 8,366
Men's apparel -0- 1,305 1,883
Corporate 908 455 474
- -----------------------------------------------------------------------------------------------------------
TOTAL DEPRECIATION AND AMORTIZATION $ 7,354 $ 9,254 $ 10,723
===========================================================================================================
ADDITIONS TO PLANT, EQUIPMENT
AND CAPITAL LEASES:
Footwear:
Retail $ 4,364 $ 3,181 $ 3,254
Wholesale and manufacturing 2,514 2,129 3,738
- -----------------------------------------------------------------------------------------------------------
Total footwear 6,878 5,310 6,992
Men's apparel 9 198 993
Corporate 1,677 242 371
- -----------------------------------------------------------------------------------------------------------
TOTAL ADDITIONS TO PLANT, EQUIPMENT
AND CAPITAL LEASES $ 8,564 $ 5,750 $ 8,356
===========================================================================================================
60
61
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 20
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1ST QUARTER 2ND QUARTER 3RD QUARTER
IN THOUSANDS 1996 1995 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
Net sales $ 93,225 $100,221 $109,600 $114,166 $111,994 $123,199
Gross margin 35,537 38,176 42,499 42,887 45,292 46,357
Pretax earnings (loss) (13,322)(1) (2,393) (1,179)(3) 2,657(5) 4,238(6) (22,750)(7)
Earnings (loss) before
discontinued operations (13,331) (2,534) (1,185) 2,285 4,231 (22,973)
Net earnings (loss) (678)(2) (2,673) 514(4) (516) 4,231 (93,160)(8)
Earnings (loss) per common share:
Before discontinued operations (.55) (.11) (.05) .09 .17 (.95)
Net earnings (loss) (.03) (.11) .02 (.02) .17 (3.83)
======================================================================================================================
4TH QUARTER FISCAL YEAR
IN THOUSANDS 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
Net sales $119,756 $125,315 $434,575 $462,901
Gross margin 49,504 45,520 172,832 172,940
Pretax earnings (loss) 6,007(9) 4,729 (4,256) (17,757)
Earnings (loss) before discontinued operations 6,004 4,708 (4,281) (18,514)
Net earnings (loss) 6,004 15,157(10) 10,071 (81,192)
Earnings (loss) per common share:
Before discontinued operations .24 .19 (.19) (.77)
Net earnings (loss) .24 .62 .40 (3.35)
======================================================================================================================
(1) Includes a restructuring charge of $14,113,000 (see Note 2).
(2) Includes excess provision for discontinued operations of $12,653,000
(see Note 2).
(3) Includes a restructuring charge of $2,216,000 (see Note 2).
(4) Includes excess provision for discontinued operations of $1,699,000
(see Note 2).
(5) Includes $4,900,000 of additional gain on the divestiture of the
Company's Canadian operations.
(6) Includes a restructuring credit of $1,170,000 and a $978,000 charge
for impaired assets (see Note 2).
(7) Includes a restructuring charge of $22,114,000 (see Note 2).
(8) Includes a provision for discontinued operations of $68,587,000 (see
Note 2).
(9) Includes a restructuring credit of $1,013,000 (see Note 2).
(10) Includes $10,449,000 gain from excess provision for discontinued
operations (see Note 2).
61
62
ITEM 9, CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10, DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company incorporates by reference the (i) information regarding directors
of the Company appearing under the heading "Information Concerning Nominees" to
be included in the Company's proxy statement relating to the annual meeting of
shareholders scheduled for June 26, 1996 (the "Proxy Statement") and (ii)
information regarding compliance by persons subject to Section 16(a) of the
Securities Exchange Act of 1934 appearing under the heading "Compliance with
Beneficial Ownership Reporting Rules" to be included in the Proxy Statement.
Information regarding the executive officers of the Company appears under the
heading "Executive Officers of Genesco" in this report following Item 4 of Part
I.
ITEM 11, EXECUTIVE COMPENSATION
The Company incorporates by reference the (i) information regarding the
compensation of directors of the Company to appear under the heading "Director
Compensation" in the Proxy Statement and (ii) information regarding the
compensation of the Company's executive officers to appear under the heading
"Executive Compensation" in the Proxy Statement.
ITEM 12, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding beneficial ownership of the Company's voting securities
by (i) the Company's directors, (ii) certain executive officers and (iii) the
officers and directors of the Company as a group is incorporated by reference
to the Proxy Statement.
The following information regarding beneficial ownership on March 31, 1996
(except as indicated) of the Company's voting securities is furnished with
respect to each person or group of persons acting together who, as of such
date, was known by the Company to be the beneficial owner of more than five
percent of any class of the Company's voting securities. Beneficial ownership
of the shares consists of sole voting and investment power except as otherwise
noted.
CLASS OF NO. OF PERCENT OF
NAME AND ADDRESS STOCK* SHARES CLASS
- ---------------- -------- ------ ----------
Pioneering Management Corporation Common 1,568,000(1) 6.4
60 State Street
Boston, MA 02109
62
63
CLASS OF NO. OF PERCENT OF
NAME AND ADDRESS STOCK* SHARES CLASS
- ---------------- -------- ------ ----------
Jeannie Bussetti Series 1 3,000 8.1
Ronald R. Bussetti
12 Carteret Drive
Pomona, NY 10970
Joseph Bussetti Series 1 2,000 5.4
52 South Lilburn Drive
Garnerville, NY 10923
Ronald R. Bussetti Series 1 2,000 5.4
12 Carteret Drive
Pomona, NY 10970
S. Robert Weltz, Jr. Series 1 2,308 6.2
415 Hot Springs Road
Santa Barbara, CA 93108
Estate of Hyman Fuhrman, Deceased Series 3 1,081 5.5
c/o Sylvia Fuhrman
3801 South Ocean Drive
Hollywood, FL 33020
Clinton Grossman Series 3 1,965(2) 10.0
3200 Park Avenue
Apt. 7A-1
Bridgeport, CT 06604
Hazel Grossman Series 3 1,074 5.5
3589 S. Ocean Blvd.
South Palm Beach, FL 33480
Roselyn Grossman Series 3 1,965(2) 10.0
3200 Park Avenue
Apt. 7A-1
Bridgeport, CT 06604
63
64
CLASS OF NO. OF PERCENT OF
NAME AND ADDRESS STOCK* SHARES CLASS
- ---------------- -------- ------ ----------
Stanley Grossman Series 3 1,965(2) 10.0
3200 Park Avenue
Apt. 7A-1
Bridgeport, CT 06604
Michael Miller, Trustee Series 4 5,605 34.2
Under Will of David Evins
c/o Bloom Hochberg & Co., Inc.
450 7th Avenue
New York, NY 10123
Mathew Evins Series 4 2,571 15.7
c/o Evins Communications Ltd.
635 Madison Ave.
New York, NY 10022
Melissa Evins Series 4 2,893 17.6
417 East 57th Street
New York, NY 10022
Reed Evins Series 4 2,418 14.7
417 East 57th Street
Apt. 32B
New York, NY 10022
James H. Cheek, Jr. Subordinated 2,413 8.0
221 Evelyn Avenue Cumulative
Nashville, TN 37205 Preferred
- ---------------
* See Note 12 to the Consolidated Financial Statements included in Item 8 and
under the heading "Voting Securities" included in the Company's Proxy Statement
for a more complete description of each class of stock.
(1) This information is from a Schedule 13G dated January 8, 1996.
(2) Owned by a trust of which Roselyn Grossman, Stanley Grossman and Clinton
Grossman are trustees.
ITEM 13, CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company incorporates by reference information appearing under the heading
"Certain Relationships and Related Transactions" included in the Company's
Proxy Statement.
64
65
PART IV
ITEM 14, EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
The following are included in Item 8.
Report of Independent Accountants
Consolidated Balance Sheet, January 31, 1996 and January 31, 1995
Consolidated Earnings, each of the three years ended January 31, 1996
Consolidated Cash Flows, each of the three years ended January 31, 1996
Consolidated Shareholders' Equity, each of the three years ended
January 31, 1996
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES
II -Reserves, each of the three years ended January 31, 1996
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 70.
EXHIBITS
(3) a. By-laws of Genesco Inc. Incorporated by reference to Exhibit
(3)a to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1995.
b. Restated Charter of Genesco Inc. Incorporated by reference to
Exhibit (3)b to the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1993.
(4) Indenture dated as of February 1, 1993 between the Company and
United States Trust Company of New York relating to 10 3/8%
Senior Notes due 2003. Incorporated by reference to Exhibit
(4) to the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1993.
(10) a. Form of Split-Dollar Insurance Agreement with Executive
Officers. Incorporated by reference to Exhibit (10)b to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1991.
b. Key Executives Stock Option Plan and Form of Stock Option
Agreement. Incorporated by reference to Exhibit (10)c to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1993.
c. Form of Officers and Key Executives Change-in-Control
Employment Agreement. Incorporated by reference to Exhibit
(10)d to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1993.
d. 1987 Stock Option Plan and Form of Stock Option Agreement.
Incorporated by reference to Exhibit (10)e to the Company's
Annual Report on Form 10-K for the fiscal year ended January
31, 1993.
65
66
e. Description of Adjustable Life Insurance Plan for Key Executive
Officers. Incorporated by reference to pages 23-24 under the
heading "Executive Compensation Life and Medical Insurance
Plans" in the Company's proxy statement dated May 6, 1992.
f. 1996 Management Incentive Compensation Plan. Incorporated by
reference to Exhibit (10)f to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1995.
g. 1997 Management Incentive Compensation Plan.
h. Other Executive Officer Personal Benefits. Incorporated by
reference to pages 10-17 under the heading "Executive
Compensation" in the Company's proxy statement dated May 6, 1992.
i. Restricted Stock Plan For Directors. Incorporated by reference to
Exhibit (10)k to the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1992.
j. 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.
k. Loan Agreement dated as of January 5, 1996 among the Company and
NationsBank of North Carolina, N.A. and First National Bank of Chicago.
l. Supplemental Pension Agreement dated as of October 18, 1988 between
the Company and William S. Wire II, as amended January 9, 1993.
Incorporated by reference to Exhibit (10)p to the Company's
Annual Report of Form 10-K for the fiscal year ended January 31, 1993.
m. Deferred Compensation Trust Agreement dated as of February 27, 1991
between the Company and NationsBank of Tennessee for the benefit
of William S. Wire, II, as amended January 9, 1993.
Incorporated by reference to Exhibit (10)q to the Company's
Annual Report of Form 10-K for the fiscal year ended January 31, 1993.
n. Shareholder Rights Agreement dated as of August 8, 1990 between the
Company and Chicago Trust Company of New York. Incorporated by
reference to Exhibit 1 to the Registration Statement dated
August 25, 1990 on Form 8-A. First Amendment to the Rights
Agreement dated as of August 8, 1990. Incorporated by reference
to Exhibit (10)s to the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1991.
o. Employment agreement with William S. Wire, II, dated January 9,
1993. Incorporated by reference to Exhibit (10) to the Company's
Registration Statement on Form S-3 (No. 33-52858).
p. Severance Agreement dated as of October 12, 1994, between the
Company and E. Douglas Grindstaff. Incorporated by reference to
Exhibit (10)y to the Company's Quarterly Report of Form 10-Q for
the quarter ended October 31, 1994.
q. Severance Agreement dated as of October 12, 1994, between the
Company and Thomas B. Clark. Incorporated by reference to
Exhibit (10)z to the Company's Quarterly Report of Form 10-Q for
the quarter ended October 31, 1994.
r. Form of Employment Continuation Agreement between the Company and
certain executive officers. Incorporated by reference to
Exhibit (10)aa to the Company's Quarterly Report of Form 10-Q
for the quarter ended October 31, 1994.
s. Nonqualified Stock Option Agreement as amended and restated through
December 21, 1994 between the Company and David M. Chamberlain.
Incorporated by reference to Exhibit (10)x. to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1995.
t. Nonqualified Stock Option Agreement dated as of December 21, 1994
between the Company and David M. Chamberlain. Incorporated by
reference to Exhibit (10)y. to the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1995.
66
67
(11) Computation of earnings per share.
(21) Subsidiaries of the Company.
(23) Consent of Independent Public Accountants included on page 68.
(24) Power of Attorney
(27) Financial Data Schedule
(99) Financial Statements and Report of Independent Accountants with
respect to the Genesco Stock Savings Plan being filed herein in
lieu of filing Form 11-K pursuant to Rule 15d-21 and Financial
Statements and Report of Independent Accountants to the Genesco
Employee Stock Purchase Plan being filed herein in lieu of filing
Form 11-K pursuant to Rule 15d-21.
Exhibits (10)a through (10)j and (10)o through (10)t are Management Contracts
or Compensatory Plans or Arrangements required to be filed as Exhibits to this
Form 10-K.
- --------------
A copy of any of the above described exhibits will be furnished to the
shareholders upon written request, addressed to Director, Corporate Relations,
Genesco Inc., Genesco Park, Room 498, P.O. Box 731, Nashville, Tennessee
37202-0731, accompanied by a check in the amount of $15.00 payable to Genesco
Inc.
REPORTS ON FORM 8-K
None.
67
68
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (No. 2-86509 and
33-52858) and the Registration Statements on Form S-8 (Nos. 2-61487, 2-70824,
33-15835, 33-30828, 33-35328, 33-35329 and 33-50248) of Genesco Inc. of our
report dated February 27, 1996 appearing on page 27 of this Form 10-K. We also
consent to the incorporation by reference in the Registration Statement on Form
S-8 (No. 33-35328) of Genesco Inc. of our report dated April 2, 1996 appearing
on page 1 of the January 31, 1996 Genesco Stock Savings Plan Financial
Statements. We also consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 33-62653) of Genesco Inc. of our report
dated April 2, 1996 appearing on page 1 of the January 31, 1996 Genesco
Employee Stock Purchase Plan Financial Statements.
/s/ PRICE WATERHOUSE LLP
Nashville, Tennessee
April 30, 1996
68
69
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
GENESCO INC.
By: /s/ James S. Gulmi
---------------------------------------------
James S. Gulmi
Senior Vice President - Finance and Treasurer
Date: April 30, 1996
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 30th day of April, 1996.
/s/ David M. Chamberlain
- ----------------------------
David M. Chamberlain Chairman, President and Chief Executive
Officer
/s/ James S. Gulmi
- ----------------------------
James S. Gulmi Senior Vice President - Finance and Treasurer
(Principal Financial Officer)
/s/ Paul D. Williams
- ----------------------------
Paul D. Williams Chief Accounting Officer
Directors:
W. Lipscomb Davis, Jr.* Joel C. Gordon*
John Diebold* William A. Williamson, Jr.*
Harry D. Garber* William S. Wire, II*
* By /s/ Roger G. Sisson
-----------------------
Roger G. Sisson
Attorney-In-Fact
69
70
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Financial Statement Schedules
January 31, 1996
70
71
SCHEDULE 2
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Reserves
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 1996
- ------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------
CHARGED CHARGED
BEGINNING TO PROFIT TO OTHER INCREASES ENDING
IN THOUSANDS BALANCE AND LOSS ACCOUNTS (DECREASES) BALANCE
- ------------------------------------------------------------------------------------------------------------------
Reserves deducted from assets in
the balance sheet:
Allowance for bad debts $1,127 3,029 55 (1) (2,146) (2) $2,065
Allowance for cash discounts 117 -0- -0- 2 (3) 119
Allowance for sales returns 540 -0- -0- (57) (4) 483
Allowance for customer deductions 258 -0- -0- 726 (5) 984
Allowance for co-op advertising 537 -0- -0- 8 (6) 545
- ------------------------------------------------------------------------------------------------------------------
TOTALS $2,579 3,029 55 (1,467) $4,196
==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 1995
- ------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------
CHARGED CHARGED
BEGINNING TO PROFIT TO OTHER INCREASES ENDING
IN THOUSANDS BALANCE AND LOSS ACCOUNTS (DECREASES) BALANCE
- ------------------------------------------------------------------------------------------------------------------
Reserves deducted from assets in
the balance sheet:
Allowance for bad debts $2,065 1,222 117 (1) (2,277) (2) $1,127
Allowance for cash discounts 177 -0- -0- (60) (3) 117
Allowance for sales returns 766 -0- -0- (226) (4) 540
Allowance for customer deductions 847 -0- -0- (589) (5) 258
Allowance for co-op advertising 719 -0- -0- (182) (6) 537
- ------------------------------------------------------------------------------------------------------------------
TOTALS $4,574 1,222 117 (3,334) $2,579
==================================================================================================================
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 1994
- ------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------
CHARGED CHARGED
BEGINNING TO PROFIT TO OTHER INCREASES ENDING
IN THOUSANDS BALANCE AND LOSS ACCOUNTS (DECREASES) BALANCE
- ------------------------------------------------------------------------------------------------------------------
Reserves deducted from assets in
the balance sheet:
Allowance for bad debts $2,457 1,396 31 (1) (1,819) (2) $2,065
Allowance for cash discounts 150 -0- -0- 27 (3) 177
Allowance for sales returns 191 -0- -0- 575 (4) 766
Allowance for customer deductions -0- -0- -0- 847 (5) 847
Allowance for co-op advertising 961 -0- -0- (242) (6) 719
- ------------------------------------------------------------------------------------------------------------------
TOTALS $3,759 1,396 31 (612) $4,574
==================================================================================================================
Note: Most subsidiaries and branches charge credit and collection expense
directly to profit and loss. Adding such charges of $279,000 in
1996, $248,000 in 1995, and $346,000 in 1994 to the addition above,
the total bad debt expense amounted to $3,308,000 in 1996, $1,470,000
in 1995, and $1,742,000 in 1994.
(1) Bad debt recoveries.
(2) Bad debt charged to reserve and transfers to operations to be divested.
(3) Adjustment of allowance for estimated discounts to be allowed subsequent
to period end on receivables at same date and transfers to operations
to be divested.
(4) Adjustment of allowance for sales returns to be allowed subsequent to
period end on receivables at same date and transfers to operations to be
divested.
(5) Adjustment of allowance for customer deductions to be allowed subsequent
to period end on receivables at same date and transfers to operations to
be divested.
(6) Adjustment of allowance for estimated co-op advertising to be allowed
subsequent to period end on receivables at same date and transfers to
operations to be divested.
See Note 3 to the Consolidated Financial Statements included in Item 8.
71