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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
For the Fiscal Year Ended
February 3, 2001
[ ] Transition Report Pursuant To
Section 13 or 15(d) of the
Securities Exchange Act of 1934
Securities and Exchange Commission
Washington, D.C. 20549
Commission File No. 1-3083
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GENESCO INC.
A Tennessee Corporation
I.R.S. No. 62-0211340
Genesco Park
1415 Murfreesboro Road
Nashville, Tennessee 37217-2895
Telephone 615/367-7000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
EXCHANGES ON WHICH
TITLE REGISTERED
Common Stock, $1.00 par value New York and Chicago
Preferred Share Purchase Rights New York and Chicago
5 1/2% Convertible Subordinated
Notes due 2005 New York
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
Subordinated Serial Preferred Stock, Series 1
Employees' Subordinated Convertible Preferred Stock
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Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
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DOCUMENTS INCORPORATED BY REFERENCE Portions of the
proxy statement for the June 27, 2001 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 27, 2001 - 21,901,895
Aggregate market value on April 27, 2001 of the voting
stock held by nonaffiliates of the registrant was
approximately $604,000,000.
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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 7A. Quantitative and Qualitative Disclosures about Market Risk 28
Item 8. Financial Statements and Supplementary Data 29
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 68
PART III
Item 10. Directors and Executive Officers of the Registrant 68
Item 11. Executive Compensation 68
Item 12. Security Ownership of Certain Beneficial Owners and Management 68
Item 13. Certain Relationships and Related Transactions 70
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 71
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PART I
ITEM 1, BUSINESS
GENERAL
Genesco is a leading retailer and wholesaler of branded footwear with net sales
for Fiscal 2001 of $680.2 million. During Fiscal 2001, the Company operated five
reportable business segments (not including corporate): Journeys; Jarman,
comprised primarily of the Jarman and Underground Station retail footwear
chains; Johnston & Murphy, comprised of Johnston & Murphy retail stores, direct
marketing and wholesale distribution; Licensed Brands, comprised of Dockers and
Nautica Footwear; and Leather. The Company sold certain assets of its Volunteer
Leather business on June 19, 2000, and has discontinued all Leather segment
operations. The Company has also ended its license agreement with Nautica
Apparel, Inc. to market Nautica footwear effective January 31, 2001. The Company
will continue to sell Nautica-branded footwear for the first six months of
Fiscal 2002 in order to fill existing customer orders and sell existing
inventory. At February 3, 2001, the Company operated 836 retail stores and
leased footwear departments throughout the United States and Puerto Rico. It
currently plans to open a total of approximately 167 new retail stores in Fiscal
2002. At February 3, 2001, Journeys operated 425 stores; Jarman operated 207
stores, including 57 Underground Station stores; Johnston & Murphy operated 147
stores and factory stores and Nautica retail operated 57 leased departments.
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
1997 1998 1999 2000 2001
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Retail Stores and Leased Departments
Beginning of year 434 475 561 674 679
Opened during year 55 102 162 113 181
Closed during year (14) (16) (49) (108) (24)
---- ---- ---- ---- ----
End of year 475 561 674 679 836
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The Company also designs, sources, markets and distributes footwear under its
own and licensed brands, including Johnston & Murphy and Dockers, to more than
1,500 retail accounts in the United States, including a number of leading
department, discount, and specialty stores.
Reference to Fiscal 2001 refers to the Company's fiscal year ended February 3,
2001. Reference to Fiscal 2000 refers to the Company's fiscal year ended January
29, 2000. Reference to Fiscal 1999 refers to the Company's fiscal year ended
January 30, 1999. Reference to Fiscal 1998 refers to the Company's fiscal year
ended January 31, 1998. Reference to Fiscal 1997 refers to the Company's fiscal
year ended February 1, 1997. For further information on the Company's business
segments, see Note 18 to the Consolidated Financial Statements included in Item
8 and Management's Discussion and Analysis of Financial Condition and Results of
Operations. 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.
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This report contains forward-looking statements. Actual results may turn out
materially different from the expectations reflected in these statements. For a
discussion of some of the factors that may lead to different results, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SEGMENTS
Journeys
The Journeys segment accounted for approximately 44% of the Company's net sales
in Fiscal 2001. Operating income attributable to Journeys was $41.9 million in
Fiscal 2001, with an operating margin of 13.9%. The Company believes its
innovative store formats, mix of well-known brands, new product introductions,
and experienced management team provide a significant competitive advantage.
At February 3, 2001, Journeys operated 425 stores, averaging approximately 1,500
square feet, throughout the United States and Puerto Rico, selling footwear for
young men and women.
Journeys added 102 net new stores in Fiscal 2001 and achieved a comparable store
sales increase of 12% from the prior fiscal year. Journeys stores, located
primarily in the Southeast, Midwest, California, Texas, and Puerto Rico, target
customers in the 12-19 year age group through the use of youth-oriented decor
and popular music videos. Journeys stores carry predominately branded
merchandise of other footwear companies across a spectrum of prices including
leading brand names such as Dr. Martens, Skechers, Timberland, adidas, Vans and
Steve Madden. From a base of 176 Journeys stores at the end of Fiscal 1998, the
Company opened 82 net new Journeys stores in Fiscal 1999, 65 net new stores in
Fiscal 2000 and 102 net new stores in Fiscal 2001 and plans to open
approximately 100 net new Journeys stores in Fiscal 2002.
The Company introduced a new concept, named "Journeys Kidz" in Fiscal 2001.
Journeys Kidz is an offshoot of Journeys and is aimed at the "tween" customer,
ages five to 12. Journeys Kidz stores will carry predominately branded
merchandise of other footwear companies including leading brand names such as
Dr. Martens, Skechers, Timberland, adidas and Converse. The Company has opened
four Journeys Kidz stores in the first quarter of Fiscal 2002. The Company plans
to open approximately 12 Journeys Kidz stores in Fiscal 2002.
Jarman
The Jarman segment accounted for approximately 16% of the Company's net sales in
Fiscal 2001. Operating income attributable to Jarman was $8.4 million in Fiscal
2001, with an operating margin of 7.6%.
At February 3, 2001, Jarman operated 207 stores, including 57 Underground
Station stores, averaging approximately 1,400 square feet, throughout the United
States, selling footwear primarily for men.
Jarman achieved a comparable store sales increase of 6% from the prior fiscal
year. Jarman stores are located primarily in urban and suburban areas in the
Southeast and Midwest, target male consumers in the 20-35 age group and sell
footwear in the mid-price range ($50 to $100). The Jarman stores which operate
under the name Underground Station are located primarily in urban
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areas. For Fiscal 2001, most of the footwear sold in Jarman stores was branded
merchandise of national brands other than the Company's, with the remainder made
up of Genesco and private label brands. The product mix at each Jarman store is
tailored to match local customer preferences and competitive dynamics. The
Company opened 46 net new Jarman stores, including 36 net new Underground
Station stores, in Fiscal 2001, increasing the total number of stores to 207.
The Company plans to open approximately 37 net new Jarman stores in Fiscal 2002,
including approximately 52 net new Underground Station stores. Going forward,
the Company will not open any new Jarman stores. All new store openings in this
segment will be Underground Station stores and many of the existing Jarman
stores will be converted to Underground Station stores.
Johnston & Murphy
The Johnston & Murphy segment accounted for approximately 28% of the Company's
net sales in Fiscal 2001. Operating income attributable to Johnston & Murphy was
$24.6 million in Fiscal 2001, with an operating margin of 13.1%. All of the
Johnston & Murphy wholesale sales are of the Genesco-owned Johnston & Murphy
brand and approximately 90% of the Johnston & Murphy retail sales are of
Genesco-owned brands.
At February 3, 2001, Johnston & Murphy operated 147 retail stores and factory
stores, averaging approximately 1,425 square feet, throughout the United States
selling footwear for men.
Johnston & Murphy Wholesale Operations. In its nearly 150-year history as a
high-quality men's footwear label, Johnston & Murphy has come to symbolize
superior craftsmanship, quality materials, and classic styling. The Company has
taken these brand attributes to the growing casual lifestyle market by expanding
the product line to include a wide selection of dress casual and casual styles.
The Company has also introduced a line of contemporary, European-influenced
dress and dress casual footwear. In addition to sales through Company-owned
Johnston & Murphy retail shops and factory stores, Johnston & Murphy footwear is
sold primarily through better department and independent specialty stores.
Johnston & Murphy Retail Operations. Johnston & Murphy retail shops are located
primarily in better malls nationwide and sell a broad range of men's dress and
casual footwear and accessories. Johnston & Murphy stores target business and
professional consumers primarily between the ages of 25 and 54. Retail prices
for Johnston & Murphy footwear generally range from $130 to $240. To capitalize
upon the trend toward more casual business attire, Johnston & Murphy retail
shops have increased their selection of casual and dress casual products, which
accounted for 55% of total Johnston & Murphy retail sales in Fiscal 2001. The
Company has been repositioning the brand to appeal to a broader market and
estimates it has lowered the average age of the Johnston & Murphy customer by
ten years since the initiative was launched. Johnston & Murphy comparable store
sales were up 3% from the prior fiscal year.
Licensed Brands
The Licensed Brands segment accounted for approximately 12% of the Company's net
sales in Fiscal 2001. Operating income attributable to Licensed Brands was $4.7
million in Fiscal 2001, with an operating margin of 5.8%. Substantially all of
the Licensed Brands sales are of footwear marketed under brands for which
Genesco has an exclusive footwear license. See "Trademarks and Licenses."
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Dockers. In 1991, Levi Strauss & Co. granted the Company the exclusive license
to market men's footwear under the Dockers brand name in the United States. The
Dockers brand name is well recognized in the men's casual fashion industry. The
Company uses the Dockers brand name to market a line of comfortable,
moderately-priced, casual lifestyle footwear. Dockers footwear is marketed
through many of the same national retail chains that carry Dockers slacks and
sportswear. Suggested retail prices for Dockers footwear generally range from
$50 to $84.
Nautica. The Company ended its license agreement with Nautica Apparel, Inc. to
market Nautica footwear effective January 31, 2001. For additional information
on Nautica, see Note 2 to the Consolidated Financial Statements included in Item
8 and "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Leather
During Fiscal 2001, the Company sold certain assets of its Volunteer Leather
business and discontinued all Leather segment operations. For additional
information on the Leather segment, see Note 2 to the Consolidated Financial
Statements included in Item 8 and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
MANUFACTURING AND SOURCING
The Company relies primarily on independent third-party manufacturers for
production of its footwear products. The Company sources footwear products from
foreign manufacturers located in China, Italy, Mexico, Brazil, Indonesia, Taiwan
and the United Kingdom. During Fiscal 2001, Genesco manufactured Johnston &
Murphy footwear in one facility in Nashville, Tennessee, but shoes manufactured
in the Johnston & Murphy factory have not accounted for a significant portion of
its sales of footwear products.
COMPETITION
Competition is intense in the footwear industry. The Company's retail footwear
competitors range from small, locally owned shoe stores to regional and national
department stores, discount stores, and specialty chains. The Company competes
with hundreds of footwear wholesale and manufacturing operations in the United
States and throughout the world, most of which are relatively small, specialized
operations, but some of which are large, more diversified companies. Some of the
Company's competitors have certain resources that are not available to the
Company. The Company's success depends upon its ability to remain competitive
with respect to the key factors of style, price, quality, comfort, brand
loyalty, and customer service. The location and atmosphere of the Company's
retail stores is an additional competitive factor for the Company's retail
operations. Any failure by the Company to remain competitive with respect to
such key factors could have a material adverse effect on the Company's business,
financial condition, or results of operations.
TRADEMARKS AND LICENSES
The Company owns its Johnston & Murphy footwear brand. The Nautica and Dockers
brand footwear lines, introduced in Fiscal 1993, are sold under license
agreements. The Nautica license agreement was cancelled effective January 31,
2001. The Dockers license agreement expires on December 31, 2004 with an option
to renew through December 31, 2008. Net sales of Nautica and Dockers products
were approximately $82 million in Fiscal 2001 and approximately $75 million in
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Fiscal 2000. The Company licenses certain of its footwear brands, mostly in
foreign markets. License royalty income was not material in Fiscal 2001.
RAW MATERIALS
Genesco is not dependent upon any single source of supply for any major raw
material. In Fiscal 2001 the Company experienced no significant shortages of raw
materials in its principal businesses. The Company considers its available raw
material sources to be adequate, although the effects of disruptions because of
foot and mouth, "Mad Cow" and other diseases affecting cattle or of other
unforeseen disruptions are unpredictable. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
BACKLOG
Most of the Company's 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. As of March 31, 2001, the Company's wholesale
operations had a backlog of orders, including unconfirmed customer purchase
orders, amounting to approximately $35.0 million, compared to approximately
$27.2 million on March 25, 2000. The backlog is somewhat seasonal, reaching a
peak in spring. The Company maintains in-stock programs for selected anticipated
high volume sales.
EMPLOYEES
Genesco had approximately 4,700 employees at February 3, 2001, approximately
4,610 of whom were employed in footwear and 90 in corporate staff departments.
Retail footwear stores employ a substantial number of part-time employees during
peak selling seasons and approximately 2,065 of the Company's employees were
part-time during such seasons.
PROPERTIES
At February 3, 2001, the Company operated 836 retail stores and leased
departments throughout the United States and Puerto Rico. New shopping center
store leases typically are for a term of approximately 10 years and new factory
outlet leases typically are for a term of approximately five years. 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.
The Company operates one manufacturing facility (which is leased) and four
warehousing facilities (two of which are owned and two of which are leased)
aggregating approximately 795,000 square feet. All of the facilities are located
in Tennessee. The Company's executive offices and the offices of its footwear
operations, which are leased, are in Nashville, Tennessee where Genesco occupies
approximately 60% of a 295,000 square foot building.
Leases on the Company's Nashville, Tennessee, plant, offices, and warehouses
expire in 2007, including renewal options. The Company believes that all leases
(other than the long-term Nashville leases) of properties that are material to
its operations may be renewed on terms not materially less favorable to the
Company than existing leases.
ENVIRONMENTAL MATTERS
The Company's manufacturing operations are subject to numerous federal, state,
and local laws and regulations relating to human health and safety and the
environment. These laws and regulations address and regulate, among other
matters, wastewater discharge, air quality and the generation, handling,
storage, treatment, disposal, and transportation of solid and hazardous wastes
and releases of hazardous substances into the environment. In addition, third
parties and governmental agencies
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in some cases have the power under such laws and regulations to require
remediation of environmental conditions and, in the case of governmental
agencies, to impose fines and penalties. The Company makes capital expenditures
from time to time to stay in compliance with applicable laws and regulations.
Several of the facilities owned or operated by the Company (currently or in the
past) are located in industrial areas and have historically been used for
extensive periods for industrial operations such as tanning, dyeing, and
manufacturing. Some of these operations used materials and generated wastes that
would be considered regulated substances under current environmental laws and
regulations. The Company currently is involved in several administrative and
judicial environmental proceedings relating to the Company's former and current
facilities. See "Legal Proceedings."
ITEM 2, PROPERTIES
See Item 1.
ITEM 3, LEGAL PROCEEDINGS
New York State Environmental Proceedings
The Company is a defendant in a civil action filed by the State of New York
against the City of Gloversville, New York, and 33 other private defendants. The
action arose out of the alleged disposal of certain hazardous material directly
or indirectly into a municipal landfill and seeks recovery under a federal
environmental statute and certain common law theories for the costs of
investigating and performing remedial actions and damage to natural resources.
The environmental authorities have selected a plan of remediation for the site
with a total estimated cost of approximately $12.0 million. The Company was
allocated liability for a 1.31% share of the remediation cost in non-binding
mediation with other defendants and the State of New York. The State has offered
to release the Company from further liability related to the site in exchange
for payment of its allocated share plus a small premium, and the Company has
accepted. Assuming the settlement is completed as proposed, the Company believes
it has fully provided for its liability in connection with the site.
The Company has received notice from the New York State Department of
Environmental Conservation (the "Department") that it deems remedial action to
be necessary with respect to certain contaminants in the vicinity of a knitting
mill operated by a former subsidiary of the Company from 1965 to 1969, and that
it considers the Company a potentially responsible party. In August 1997, the
Department and the Company entered into a consent order whereby the Company
assumed responsibility for conducting a remedial investigation and feasibility
study ("RIFS") and implementing an interim remediation measure with regard to
the site, without admitting liability or accepting responsibility for any future
remediation of the site. In conjunction with the consent order, the Company
entered into an agreement with the owner of the site providing for a release
from liability for property damage and for necessary access to the site, for
payments totaling $400,000. The Company estimates that the cost of conducting
the RIFS and implementing the interim remedial measure will be in the range of
$2.2 million to $2.6 million. The Company believes that it has adequately
reserved for the costs of conducting the RIFS and implementing the interim
remedial measure contemplated by the consent order, but there is no assurance
that the consent order will ultimately resolve the matter. The Company has not
ascertained what responsibility, if any, it has for any contamination in
connection with the facility or what other parties may be liable in that
connection and is unable to predict whether its liability, if any, beyond
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that voluntarily assumed by the consent order will have a material effect on its
financial condition or results of operations.
Whitehall Environmental Sampling
Pursuant to a work plan approved by the Michigan Department of Environmental
Quality ("MDEQ") the Company 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. On June 29,
1999, the Company submitted a remedial action plan (the "Plan") for the site to
MDEQ. The Plan proposed no direct remedial action with respect to soils at the
site, which are in compliance with applicable regulatory standards, or lake
sediments, which the Company believes do not pose a threat to human health or
the environment and do not violate any applicable regulatory standard. The Plan
included the filing of certain restrictive covenants encumbering the tannery
property to prevent activities disturbing the lake sediments and uses of the
property inconsistent with the applicable regulatory standards. The Company,
with the approval of MDEQ, previously installed horizontal wells to capture
groundwater from a portion of the site and treat it by air sparging. The Plan
proposed continued operation of this system for an indefinite period and
monitoring of groundwater samples to ensure that the system is functioning as
intended. The Plan is subject to MDEQ approval. In December 1999, MDEQ responded
to the Plan with a request for further information.
On June 30, 1999, the City of Whitehall filed an action against the Company in
the circuit court for the City of Muskegon alleging that the Company's and its
predecessors' past wastewater management practices have adversely affected the
environment, and seeking injunctive relief under Parts 17 and 201 of the
Michigan Natural Resources Environmental Protection Act ("MNREPA") to require
the Company to correct the alleged pollution. Further, the City alleges
violations of City ordinances prohibiting blight and litter, and that the
Whitehall Volunteer Leather plant constitutes a public nuisance. The Company
filed an answer denying the material allegations of the complaint and asserting
affirmative defenses and counterclaims against the City. The Company also moved
to join the State of Michigan as a party to the action, since it has primary
responsibility for administration of the environmental statutes underlying most
of the City's claims. The State moved to dismiss the Company's action against it
and to intervene in the case on a limited basis, seeking declaratory and
injunctive relief regarding the restrictive covenants on the property, the
State's jurisdiction under MNREPA Part 201 and its right of access to the
property. On May 5, 2000, the court dismissed the Company's action against the
State; the cross actions between the City and the Company remain.
In connection with its decision during the second quarter of Fiscal 2001 to exit
the leather business and to shut down the Whitehall facility, the Company
formally proposed a compromise remediation plan (the "Compromise Proposal"),
including limited sediment removal and additional upland remediation to bring
the property into compliance with regulatory standards for non-industrial uses.
The Company estimated that the Compromise Proposal would include incremental
costs of approximately $2.2 million, which were fully provided for during the
quarter.
If the Compromise Proposal is approved and the litigation's outcome does not
require additional remediation of the site, the Company does not expect
remediation to have a material impact on its financial condition or results of
operations. However, there can be no assurance that the Compromise Proposal will
be approved, and the Company is unable to predict whether any further
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remediation that may ultimately be required will have a material effect on its
financial condition or results of operations.
Whitehall Accident
On June 4, 1999, a truck driver working under contact with a carrier for a
chemical vendor died after inhaling a toxic vapor produced when he deposited a
chemical compound that he was delivering to the Company's Whitehall, Michigan
leather tannery into a tank containing another chemical solution. Regulatory
authorities, including the National Transportation Safety Board and the Michigan
Occupational Safety and Health Administration, investigated the incident. The
Michigan agency issued six citations alleging regulatory infractions identified
in the course of a general compliance review following the accident. Proposed
monetary penalties associated with the citations total $15,100. The Company
contested the citations; ultimately, the monetary penalties were reduced to
$7,600, which the Company has paid. On March 14, 2000, the estate of the
deceased truck driver brought an action against the Company in Michigan state
court alleging that the Company's negligent acts and omissions caused his death
and seeking unspecified damages. In February 2001, the Company reached a
settlement of the action, which was funded by insurance. The Company does not
expect any additional material effects related to the accident.
Threatened Contribution Claim
The Company has been advised by the current owner of an adhesives manufacturing
business formerly owned by the Company that the owner has been named a
third-party defendant in a suit brought under CERCLA relating to an Alabama
solvent recycling facility allegedly used by the business. According to the
owner, it would in turn seek contribution from the Company against any portion
of its liability arising out of the Company's operation of the business prior to
its 1986 divestiture. The current owner has advised the Company that available
information on volumes of contaminants at the site indicates that the entire
share of liability related to the adhesives business is de minimis, not likely
to exceed $50,000. Based on information concerning its relative contribution of
wastes to the site the Company has agreed to accept approximately 40% of up to
$50,000 in liability imposed on the adhesives business and the current owner and
one other former owner have agreed to accept the balance of such liability up to
$50,000. The Company does not expect this threatened claim to have a material
adverse 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 2001.
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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:
BEN T. HARRIS, 57, Chairman and Chief Executive Officer of Genesco. Mr. Harris
joined the Company in 1967 and in 1980 was named manager of the leased
department division of the Jarman Shoe Company. In 1991, he was named president
of the Jarman Shoe Company and in 1995 was named president of Retail Footwear,
which included the Jarman Shoe Company, Journeys, Boot Factory and General Shoe
Warehouse. Mr. Harris was named executive vice president - operations in January
1996. He was named president and chief operating officer and a director of the
Company as of November 1, 1996 and was named chief executive officer as of
February 1, 1997. Mr. Harris was named chairman as of November 4, 1999.
HAL N. PENNINGTON, 63, President and Chief Operating Officer. Mr. Pennington has
served in various roles during his 39 year tenure with Genesco. He was vice
president-wholesale for Johnston & Murphy from 1990 until his appointment as
president of Dockers Footwear in August 1995. He was named president of Johnston
& Murphy in February 1997 and named senior vice president in June 1998. Mr.
Pennington was named executive vice president, chief operating officer and a
director of the Company as of November 4, 1999. Mr. Pennington was named
president of the Company as of November 1, 2000. He will assume responsibility
for operational support functions including human resources and information
systems, in addition to his existing oversight of the Company's operating
divisions.
JAMES S. GULMI, 55, Senior Vice President - Finance and Chief Financial Officer.
Mr. Gulmi was employed by Genesco in 1971 as a financial analyst, appointed
assistant treasurer in 1974 and named treasurer in 1979. He was elected a vice
president in 1983 and assumed the responsibilities of chief financial officer in
1986. He was again elected treasurer in February 1995. Mr. Gulmi was appointed
senior vice president - finance in January 1996.
JAMES W. BOSCAMP, 51, 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. He was appointed president of Jarman, overseeing
the Jarman retail chain, in March 1999. Before joining the Company, Mr. Boscamp
was executive vice president, marketing at Munsingwear.
JAMES C. ESTEPA, - 49, Senior Vice President. Mr. Estepa joined the Company in
1985 and in February 1996 was named vice president operations of Genesco Retail,
which included the Jarman Shoe Company, Journeys, Boot Factory and General Shoe
Warehouse. Mr. Estepa was named senior vice president operations of Genesco
Retail in June 1998. He was named president of Journeys in March 1999. Mr.
Estepa was named senior vice president of the Company in April 2000.
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JOHN W. CLINARD, 53, Vice President - Administration and Human Resources. Mr.
Clinard has served in various human resources capacities during his 28 year
tenure with Genesco. He was named vice president - human resources in June 1997.
He was named vice president administration and human resources in November 2000.
ROGER G. SISSON, 37, Secretary and General Counsel. Mr. Sisson joined the
Company in January 1994 as assistant general counsel and was elected secretary
in February 1994. He was named general counsel in January 1996. Before joining
the Company, Mr. Sisson was associated with the firm of Boult, Cummings, Conners
& Berry for approximately six years.
MATTHEW N. JOHNSON, 36, Treasurer. Mr. Johnson joined the Company in April 1993
as manager, corporate finance and was elected assistant treasurer in December
1993. He was elected treasurer in June 1996. Prior to joining the Company, Mr.
Johnson was a vice president in the corporate and institutional banking division
of The First National Bank of Chicago.
PAUL D. WILLIAMS, 46, 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 29
High Low
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2000 1st Quarter 12 7 1/16
2nd Quarter 15 10 5/8
3rd Quarter 13 5/8 10 1/16
4th Quarter 14 9
Fiscal Year ended February 3
2001 1st Quarter 14 1/4 8 1/4
2nd Quarter 18 12 1/4
3rd Quarter 18 1/2 13 7/16
4th Quarter 26 1/2 15 3/4
There were approximately 6,200 common shareholders of record on February 3,
2001.
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.
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14
ITEM 6, SELECTED FINANCIAL DATA
FINANCIAL SUMMARY
FISCAL YEAR END
IN THOUSANDS EXCEPT PER COMMON SHARE DATA, -----------------------------------------------------------
FINANCIAL STATISTICS AND OTHER DATA 2001 2000 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS DATA
Net sales $680,166 $553,032 $532,164 $506,889 $426,565
Depreciation and amortization 13,200 10,514 9,691 8,893 7,747
Earnings before interest and taxes 60,187 46,969 37,101 16,396 15,761
Pretax earnings 52,987 40,982 30,490 7,534 7,020
Earnings before discontinued operations and
extraordinary loss 32,831 25,335 54,558 7,494 7,442
Discontinued operations (3,233) 587 815 1,326 2,962
Loss on early retirement of debt (net of tax) -0- -0- 2,245 169 -0-
- -------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 29,598 $ 25,922 $ 53,128 $ 8,651 $ 10,404
===============================================================================================================================
PER COMMON SHARE DATA
Earnings before discontinued operations and
extraordinary loss
Basic $ 1.51 $ 1.12 $ 2.13 $ .28 $ .29
Diluted 1.35 1.03 1.87 .27 .28
Discontinued operations
Basic (.15) .03 .03 .05 .12
Diluted (.12) .02 .03 .05 .12
Extraordinary loss
Basic .00 .00 (.09) .00 .00
Diluted .00 .00 (.07) (.01) .00
Net earnings
Basic 1.36 1.14 2.07 .33 .41
Diluted 1.23 1.05 1.83 .31 .39
===============================================================================================================================
BALANCE SHEET DATA
Total assets $352,163 $301,165 $307,198 $246,817 $221,654
Long-term debt 103,500 103,500 103,500 75,000 75,000
Capital leases 28 34 36 279 1,485
Non-redeemable preferred stock 7,721 7,882 7,918 7,945 7,944
Common shareholders' equity 130,504 100,360 108,661 64,019 45,846
Additions to plant, equipment and capital leases 34,735 22,312 23,512 24,725 14,640
===============================================================================================================================
FINANCIAL STATISTICS
Earnings before interest and taxes as a percent of net sales 8.8% 8.5% 7.0% 3.2% 3.7%
Book value per share $ 6.02 $ 4.73 $ 4.56 $ 2.43 $ 1.82
Working capital $144,926 $138,007 $155,778 $119,313 $108,795
Current ratio 2.5 2.8 3.1 2.6 2.6
Percent long-term debt to total capitalization 42.8% 48.9% 47.0% 51.1% 58.7%
===============================================================================================================================
OTHER DATA (END OF YEAR)
Number of retail outlets* 836 679 674 587 504
Number of employees 4,700 4,250 3,650 4,300 4,050
===============================================================================================================================
*Includes 78 Jarman Leased departments in Fiscal 1999 which were divested during
the first quarter of Fiscal 2000 and 26 Boot Factory stores in Fiscal 1998 and
29 Boot Factory stores in Fiscal 1997 which were divested during the second
quarter of Fiscal 1999. Also includes Nautica Retail leased departments of 57,
47, 24 and 4 in Fiscal 2001, 2000, 1999 and 1998, respectively.
Reflected in the earnings for Fiscal 1999 was a tax benefit of $24.1 million.
See Note 13 to the Consolidated Financial Statements for additional information.
Reflected in the earnings for Fiscal 2001, 1999, 1998 and 1997 were
restructuring and other charges of $4.4 million, ($2.4) million, $17.7 million
and $1.7 million, respectively. See Note 2 to the Consolidated Financial
Statements for additional information regarding these charges. Also reflected in
the earnings for Fiscal 1997 was a $6.7 million litigation settlement.
Long-term debt and capital leases include current payments. On April 9, 1998,
the Company issued $103.5 million of 5 1/2% convertible subordinated notes due
2005. The Company used $80 million of the proceeds to repay all of its 10 3/8%
senior notes including interest and expenses incurred in connection therewith.
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
This discussion and the notes to the Consolidated Financial Statements include
certain forward-looking statements. Actual results could differ materially from
those reflected by the forward-looking statements in this discussion and a
number of factors may adversely affect future results, liquidity and capital
resources. These factors include changes in consumer demand or tastes that
affect sales at retail or wholesale, changes in buying patterns by significant
wholesale customers and risks associated with a softening economy, including
erosion of revenues or margins caused by weakening consumer demand and
deterioration in the collectibility of trade accounts receivable. These factors
also include disruptions in product supply or distribution, including
disruptions or price increases in the leather market related to foot and mouth
or other cattle diseases, changes in business strategies by the Company's
competitors, the Company's ability to open or convert, staff and support
additional retail stores on schedule and at acceptable expense levels, failure
of new retail ventures to meet expectations and the outcome of litigation and
environmental matters and the adequacy of related reserves, including those
discussed in Note 17 to the Consolidated Financial Statements. Although the
Company believes it has an appropriate business strategy and the resources
necessary for its operations, future revenue and margin trends cannot be
reliably predicted and the Company may alter its business strategies to address
changing conditions.
SIGNIFICANT DEVELOPMENTS
Nautica Footwear License Cancellation
The Company entered into an agreement with Nautica Apparel, Inc. to end its
license to market footwear under the Nautica label, effective January 31, 2001.
The Company will continue to sell Nautica - branded footwear for the first six
months of Fiscal 2002 in order to fill existing customer orders and sell
existing inventory.
In connection with the termination of the Nautica Footwear license agreement,
the Company recorded a pretax charge to earnings of $4.4 million ($2.7 million
net of tax) in the fourth quarter of Fiscal 2001. The charge includes
contractual obligations to Nautica Apparel for the license cancellation and
other costs, primarily severance. Included in the charge is a $1.0 million
inventory write-down which is reflected in gross margin on the income statement.
All of these costs are expected to be incurred in the next twelve months.
Volunteer Leather Divestiture
On May 22, 2000, the Company's board of directors approved a plan to sell its
Volunteer Leather finishing business and liquidate its tanning business, to
allow the Company to be more focused on the retailing and marketing of branded
footwear.
Certain assets of the Volunteer Leather business were sold on June 19, 2000. The
plan resulted in a pretax charge to second quarter earnings of $4.9 million
($3.0 million net of tax). Because Volunteer Leather constitutes the entire
Leather segment of the Company's business, the charge to earnings is treated for
financial reporting purposes as a provision for discontinued operations.
The provision for discontinued operations included $1.3 million in asset
write-downs and $3.6 million of other costs, of which $2.3 million are expected
to be incurred in the next twelve months. As of February 3, 2001, $1.1 million
of such other costs had been incurred. Other costs include primarily
15
16
employee severance and facility shutdown costs. The approximately $1.3 million
of other costs expected to be incurred beyond twelve months are classified as
long-term liabilities in the consolidated balance sheet. The Volunteer Leather
business employed approximately 160 people.
Share Repurchase Program
In total, the Company's board of directors has authorized the repurchase of 6.8
million shares of the Company's common stock since the third quarter of Fiscal
1999. This total includes the authorization in February of 2000 of an additional
1.0 million shares. The purchases may be made on the open market or in privately
negotiated transactions. As of February 3, 2001, the Company had repurchased 6.4
million shares at a cost of $60.5 million pursuant to all authorizations.
Workforce Reduction
In connection with the exit of the western boot business and the closing of the
Jarman Leased departments, the Company reviewed the structure and level of
staffing in all of its operations during the third and fourth quarters of Fiscal
1999. Upon completion of the review, the Company recorded a $1.3 million charge
to earnings, included in selling and administrative expenses, during the fourth
quarter of Fiscal 1999 for a workforce reduction of 66 positions, of which
substantially all were eliminated by January 29, 2000. Twenty-six of the
positions eliminated related to the Jarman Leased departments business, with the
remainder being primarily employed at corporate headquarters.
BUSINESS SEGMENTS
The Company currently operates four reportable business segments (not including
corporate): Journeys; Jarman, comprised primarily of the Jarman and Underground
Station retail footwear chains; Johnston & Murphy, comprised of Johnston &
Murphy retail stores, direct marketing and wholesale distribution; and Licensed
Brands, comprised of Dockers and Nautica Footwear. The Company has ended the
license agreement with Nautica Apparel, Inc. to market Nautica footwear
effective January 31, 2001. In Fiscal 2000 the Company operated the Other Retail
segment, comprised of General Shoe Warehouse and the Jarman Leased departments,
both of which were closed in Fiscal 2000. The Company also operated the Leather
segment in Fiscal 2000 and some of Fiscal 2001. The Company sold certain assets
of its Volunteer Leather business on June 19, 2000 and has discontinued all
Leather segment operations.
RESULTS OF OPERATIONS - FISCAL 2001 COMPARED TO FISCAL 2000
The Company's net sales for Fiscal 2001 (53 weeks) increased 23.0% to $680.2
million from $553.0 million in Fiscal 2000 (52 weeks). Total retail sales
attributable to the extra week were $9.4 million. Excluding net sales
attributable to the divested Other Retail business from last year, the Company's
net sales increased 25.0% to $680.2 million in Fiscal 2001 from $544.2 million
in Fiscal 2000. Gross margin increased 25.9% to $322.5 million in Fiscal 2001
from $256.3 million in Fiscal 2000 and increased as a percentage of net sales
from 46.3% to 47.4%. Selling and administrative expenses in Fiscal 2001
increased 23.7% from Fiscal 2000 and increased as a percentage of net sales from
37.8% to 38.1%. Selling and administrative expenses were reduced $1.4 million in
Fiscal 2001, reflecting a reduction in pension expense to $0.3 million from $1.7
million in Fiscal 2000. Explanations of the changes in results of operations are
provided by business segment in discussions following these introductory
paragraphs.
16
17
Earnings before income taxes and discontinued operations ("pretax earnings") for
Fiscal 2001 were $53.0 million compared to $41.0 million for Fiscal 2000. Pretax
earnings for Fiscal 2001 included a restructuring charge of $4.4 million related
to the termination of the Nautica Footwear license.
Net earnings for Fiscal 2001 were $29.6 million ($1.23 diluted earnings per
share) compared to $25.9 million ($1.05 diluted earnings per share) for Fiscal
2000. Net earnings for Fiscal 2001 included a $3.0 million ($.11 diluted
earnings per share) charge to earnings (net of tax) related to the divestiture
of the Company's Volunteer Leather business. Net earnings for Fiscal 2000
include a gain from discontinued operations, net of tax, of $0.6 million ($0.02
diluted earnings per share). The Company recorded an effective federal income
tax rate of 38.0% for Fiscal 2001.
Journeys
Fiscal Year Ended
-------------------------- %
2001 2000 Change
----------- ----------- ------
(dollars in thousands)
Net sales............................................... $ 300,758 $ 215,318 39.7%
Operating income........................................ $ 41,869 $ 29,719 40.9%
Operating margin........................................ 13.9% 13.8%
Reflecting both a 30% increase in average Journeys stores operated (i.e., the
sum of the number of stores open on the first day of the fiscal year and the
last day of each fiscal month during the year divided by thirteen) and a 12%
increase in comparable store sales, net sales from Journeys increased 39.7% for
Fiscal 2001 compared to Fiscal 2000. The average price per pair of shoes
increased 1% in Fiscal 2001, primarily reflecting changes in product mix, and
unit sales increased 38% during the same period. The store count for Journeys
was 425 stores at the end of Fiscal 2001 compared to 323 stores at the end of
Fiscal 2000.
Journeys' operating income for Fiscal 2001 increased 40.9% to $41.9 million
compared to $29.7 million for Fiscal 2000. The increase was due to increased
sales from both store openings and a comparable store sales increase and
increased gross margin as a percentage of sales.
Jarman
Fiscal Year Ended
-------------------------- %
2001 2000 Change
----------- ----------- ------
(dollars in thousands)
Net sales............................................... $ 109,791 $ 86,897 26.3%
Operating income........................................ $ 8,395 $ 4,336 93.6%
Operating margin........................................ 7.6% 5.0%
Primarily due to a 17% increase in average stores operated and a 6% increase in
comparable store sales, net sales from the Jarman division (including
Underground Station stores) increased 26.3% for Fiscal 2001 compared to Fiscal
2000. The increase in sales and comparable store sales was driven primarily by
Underground Station stores. The average price per pair of shoes increased 2% in
Fiscal 2001, primarily reflecting changes in product mix, and unit sales
increased 22% during the same period. Jarman operated 207 stores at the end of
Fiscal 2001, including 57 Underground Station stores. Going forward, the Company
will not open any new Jarman stores. All new store openings in
17
18
this segment will be Underground Station stores, and many of the existing Jarman
stores will be converted to Underground Station stores. It had operated 161
stores at the end of Fiscal 2000, including 21 Underground Station stores.
Jarman operating income for Fiscal 2001 was $8.4 million compared to $4.3
million for Fiscal 2000 and increased as a percent of sales to 7.6% from 5.0% in
Fiscal 2000. The increase was due to increased sales and increased gross margin
in dollars and as a percentage of sales, due primarily to changes in product
mix, and to decreased expenses as a percentage of sales.
Johnston & Murphy
Fiscal Year Ended
-------------------------- %
2001 2000 Change
----------- ----------- ------
(dollars in thousands)
Net sales............................................... $ 188,060 $ 167,459 12.3%
Operating income........................................ $ 24,636 $ 22,187 11.0%
Operating margin........................................ 13.1% 13.2%
Johnston & Murphy net sales increased 12.3% to $188.1 million for Fiscal 2001
from $167.5 million for Fiscal 2000. Johnston & Murphy retail sales increased
14%. The increase reflects primarily a 3% increase in comparable store sales and
a 6% increase in average Johnston & Murphy retail stores operated. Retail
operations accounted for 64% of Johnston & Murphy segment sales in Fiscal 2001,
up from 63% in Fiscal 2000. The store count for Johnston & Murphy retail
operations at the end of Fiscal 2001 included 147 Johnston & Murphy stores and
factory stores compared to 143 Johnston & Murphy stores and factory stores at
the end of Fiscal 2000. The average price per pair of shoes for Johnston &
Murphy retail decreased 1% in Fiscal 2001, primarily due to increased markdowns,
while unit sales increased 10% during the same period. There was a 10% increase
in Johnston & Murphy wholesale sales. Unit sales for the Johnston & Murphy
wholesale business increased 15% in Fiscal 2001, while the average price per
pair of shoes decreased 4% for the same period, reflecting increased promotional
activities and mix changes.
Johnston & Murphy operating income for Fiscal 2001 increased 11.0% from $22.2
million for Fiscal 2000 to $24.6 million, primarily due to increased sales.
Licensed Brands
Fiscal Year Ended
-------------------------- %
2001 2000 Change
----------- ----------- ------
(dollars in thousands)
Net sales............................................... $ 81,557 $ 74,518 9.4%
Operating income........................................ $ 4,695 $ 2,488 88.7%
Operating margin......................................... 5.8% 3.3%
Licensed Brands net sales increased 9.4% to $81.6 million for Fiscal 2001 from
$74.5 million for Fiscal 2000. The sales increase reflected a 36% increase in
net sales of Dockers Footwear, offset by declining sales of Nautica Footwear.
Unit sales for the Licensed Brands wholesale businesses
18
19
increased 9% for Fiscal 2001, while the average price per pair of shoes
decreased 2% for the same period, reflecting increased promotional activities in
the Nautica business and changes in product mix.
Licensed Brands operating income for Fiscal 2001 increased 88.7% from $2.5
million for Fiscal 2000 to $4.7 million, primarily due to increased sales and
decreased expenses as a percentage of sales. For additional information
regarding the Company's decision to exit the Nautica Footwear business, see
"Significant Developments -- Nautica Footwear License Cancellation." Net sales
for Nautica footwear were $18.8 million and $28.4 million for Fiscal 2001 and
Fiscal 2000, respectively, while operating losses were $2.5 million and $2.2
million for Fiscal 2001 and Fiscal 2000, respectively.
Other Retail
Fiscal Year Ended
-------------------------- %
2001 2000 Change
----------- ----------- -------
(dollars in thousands)
Net sales............................................... $ -0- $ 8,840 (100.0%)
Operating loss..........................................$ -0- $ (500) NA
Operating margin........................................ NA (5.7%)
The Jarman Leased departments business was closed in the first quarter of Fiscal
2000 and the remaining five Other Retail stores, which were General Shoe
Warehouse stores, were transferred to the Jarman and Johnston & Murphy operating
segments during the first quarter of Fiscal 2001. The Company will no longer
report results from the Other Retail segment.
Corporate and Interest Expenses
Corporate and other expenses for Fiscal 2001 were $14.9 million compared to
$10.9 million for Fiscal 2000 (exclusive of a restructuring charge of $4.4
million and other charges of $0.1 million, primarily litigation and severance
charges, in Fiscal 2001 and other charges of $0.4 million, primarily litigation
and severance charges, in Fiscal 2000), an increase of 37.3%. The increase in
corporate expenses in Fiscal 2001 is attributable primarily to increased bonus
accruals based upon the improved financial performance of the Company.
Interest expense increased 5.7% from $8.2 million in Fiscal 2000 to $8.6 million
in Fiscal 2001, primarily due to increased bank activity fees related to the
increase in the number of individual bank accounts because of new store
openings.
Interest income decreased 34% from $2.2 million in Fiscal 2000 to $1.4 million
in Fiscal 2001 due to decreases in average short-term investments. There were no
borrowings under the Company's revolving credit facility during either Fiscal
2001 or Fiscal 2000.
RESULTS OF OPERATIONS - FISCAL 2000 COMPARED TO FISCAL 1999
The Company's net sales for Fiscal 2000 increased 3.9% to $553.0 million from
$532.2 million in Fiscal 1999. Excluding net sales attributable to the divested
Other Retail and western boot businesses from both periods, the Company's net
sales increased 18.5% to $544.2 million in Fiscal 2000 from $459.4 million in
Fiscal 1999. Gross margin increased 5.2% to $256.3 million in Fiscal 2000 from
$243.5 million in Fiscal 1999 and increased as a percentage of net sales from
45.8% in Fiscal 1999 to 46.3% in Fiscal 2000. Selling and administrative
expenses in Fiscal 2000 were flat with Fiscal 1999 but decreased as a percentage
of net sales from 39.2% in Fiscal 1999 to 37.8% in Fiscal 2000. Explanations of
the changes in results of operations are provided by business segment in
discussions following these introductory paragraphs.
19
20
Earnings before income taxes, discontinued operations and extraordinary loss
("pretax earnings") for Fiscal 2000 were $41.0 million compared to $30.5 million
for Fiscal 1999. Pretax earnings for Fiscal 1999 included a restructuring gain
of $2.4 million primarily relating to the Boot Divestiture and $2.0 million of
other charges, primarily litigation and severance charges, including the fourth
quarter $1.3 million workforce reduction charge discussed under "Significant
Developments--Workforce Reduction."
Net earnings in Fiscal 2000 were $25.9 million ($1.05 diluted earnings per
share) compared to $53.1 million ($1.83 diluted earnings per share) for Fiscal
1999. Net earnings for Fiscal 2000 include a gain from discontinued operations,
net of tax, of $0.6 million ($0.02 diluted earnings per share). In addition to
the adjustments to earnings discussed above, Fiscal 1999 earnings included a tax
benefit of $24.1 million, a gain from discontinued operations, net of tax, of
$0.8 million ($0.03 diluted earnings per share) and an extraordinary charge, net
of tax, of $2.2 million ($0.07 diluted earnings per share) for the early
retirement of debt. The Company recorded an effective federal income tax rate of
38.2% for Fiscal 2000.
The Fiscal 1999 tax benefit of $24.1 million related to reversal of valuation
reserves on deferred tax assets in the fourth quarter of Fiscal 1999. The
reversal resulted from the reassessment by the Company of the levels of
valuation allowances. The Company concluded it was more likely than not that the
increased levels of deferred tax assets will be realized due to increased levels
of profitability, future income projections and the substantial removal of
uncertainties surrounding the Company's divestitures.
Journeys
Fiscal Year Ended
-------------------------- %
2000 1999 Change
----------- ----------- -------
(dollars in thousands)
Net sales............................................... $ 215,318 $ 159,965 34.6%
Operating income........................................ $ 29,719 $ 21,704 36.9%
Operating margin........................................ 13.8% 13.6%
Reflecting both a 28% increase in average Journeys stores operated and a 13%
increase in comparable store sales, net sales from Journeys increased 34.6% for
Fiscal 2000 compared to Fiscal 1999. The average price per pair of shoes
increased 3% in Fiscal 2000 and unit sales increased 31% during the same period.
The store count for Journeys included 323 stores at the end of Fiscal 2000
compared to 258 stores at the end of Fiscal 1999.
Journeys operating income for Fiscal 2000 was up 36.9% to $29.7 million compared
to $21.7 million in Fiscal 1999. The increase was due to increased sales both
from store openings and a comparable store sales increase and decreased expenses
as a percentage of sales.
20
21
Jarman
Fiscal Year Ended
---------------------- %
2000 1999 Change
-------- -------- ------
(dollars in thousands)
Net sales............................................... $ 86,897 $83,315 4.3%
Operating income........................................ $ 4,336 $ 2,983 45.4%
Operating margin........................................ 5.0% 3.6%
Primarily due to an 8% increase in comparable store sales, net sales from Jarman
increased 4.3% for Fiscal 2000 compared to Fiscal 1999. The increase in sales
was driven primarily by Underground Station stores. The average price per pair
of shoes increased 7% in Fiscal 2000 while unit sales decreased 4% during the
same period. Jarman operated 161 stores at the end of Fiscal 2000, including 21
Underground Station stores. It had operated 166 stores at the end of Fiscal
1999, including 17 Underground Station stores.
Jarman operating income for Fiscal 2000 was up 45.4% to $4.3 million compared to
$3.0 million in Fiscal 1999 and increased as a percent of sales to 5.0% from
3.6% in Fiscal 1999. The increase was due to increased sales, increased gross
margin in dollars and as a percentage of sales due primarily to lower markdowns,
and to decreased expenses as a percentage of sales.
Other Retail
Fiscal Year Ended
----------------------- %
2000 1999 Change
-------- -------- ------
(dollars in thousands)
Net sales............................................... $ 8,840 $ 56,184 (84.3%)
Operating income (loss)................................. $ (500) $ 2,214 NA
Operating margin........................................ (5.7%) 3.9%
The Jarman Leased departments business was closed in the first quarter of Fiscal
2000. Primarily because of the loss of sales from the Jarman Leased departments
business and a 14% decrease in comparable store sales for General Shoe
Warehouse, net sales from Other Retail decreased 84.3% for Fiscal 2000 compared
to Fiscal 1999. Other Retail operating income for Fiscal 2000 was down $2.7
million from Fiscal 1999 as a result of the decreased sales and decreased gross
margins as a percentage of sales. As of January 29, 2000, only five Other Retail
stores were open, which were General Shoe Warehouse stores, compared to 94 Other
Retail stores operated at the end of Fiscal 1999. In the first quarter of Fiscal
2001, four of the General Shoe Warehouse stores were transferred to the Jarman
operating segment and one was transferred to the Johnston & Murphy operating
segment. The Company will no longer report results from the Other Retail
segment.
21
22
Johnston & Murphy
Fiscal Year Ended
------------------------ %
2000 1999 Change
--------- ---------- ------
(dollars in thousands)
Net sales............................................... $ 167,459 $ 148,380 12.9%
Operating income........................................ $ 22,187 $ 19,708 12.6%
Operating margin........................................ 13.2% 13.3%
Johnston & Murphy net sales increased 12.9% to $167.5 million in Fiscal 2000
from $148.4 million in Fiscal 1999, reflecting primarily a 4% increase in
comparable store sales and a 9% increase in average Johnston & Murphy retail
stores operated. Retail operations accounted for 63% of Johnston & Murphy
segment sales in Fiscal 2000 and 62% of Johnston & Murphy segment sales in
Fiscal 1999. The store count for Johnston & Murphy retail operations at the end
of Fiscal 2000 included 143 Johnston & Murphy stores and factory stores compared
to 132 Johnston & Murphy stores and factory stores at the end of Fiscal 1999.
The average price per pair of shoes for Johnston & Murphy retail increased 1% in
Fiscal 2000 and unit sales increased 11% during the same period. There was a 10%
increase in Johnston & Murphy wholesale sales. Unit sales for the Johnston &
Murphy wholesale business increased 12% in Fiscal 2000, while the average price
per pair of shoes decreased 3% for the same period, reflecting increased
promotional activities and mix changes.
Johnston & Murphy operating income for Fiscal 2000 increased 12.6% from $19.7
million in Fiscal 1999 to $22.2 million in Fiscal 2000, primarily due to
increased sales and decreased expenses as a percentage of sales from increased
leverage.
Licensed Brands
Fiscal Year Ended
----------------------- %
2000 1999 Change
-------- --------- ------
(dollars in thousands)
Net sales............................................... $ 74,518 $ 67,760 10.0%
Operating income........................................ $ 2,488 $ 2,435 2.2%
Operating margin........................................ 3.3% 3.6%
Licensed Brands net sales increased 10.0% to $74.5 million in Fiscal 2000 from
$67.8 million in Fiscal 1999, reflecting primarily a 9% increase in Licensed
Brands wholesale sales. Unit sales for the Licensed Brands wholesale businesses
increased 16% in Fiscal 2000, while the average price per pair of shoes
decreased 6% for the same period, reflecting increased promotional activities.
Licensed Brands operating income for Fiscal 2000 increased 2.2% from $2.4
million in Fiscal 1999 to $2.5 million in Fiscal 2000, primarily due to
increased sales and decreased expenses as a percentage of sales.
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23
Corporate and Interest Expenses
Corporate and other expenses for Fiscal 2000 were $10.9 million compared to
$11.0 million for Fiscal 1999 (exclusive of other charges of $0.4 million,
primarily litigation and severance charges, in Fiscal 2000 and a restructuring
gain of $2.4 million and other charges of $2.0 million, primarily litigation and
severance charges, in Fiscal 1999), a decrease of 1.3%. The decrease in
corporate expenses in Fiscal 2000 is attributable primarily to decreased
professional fees.
Interest expense decreased 11.9% from $9.3 million in Fiscal 1999 to $8.2
million in Fiscal 2000, primarily due to the decrease in interest rates on the
Company's long-term debt from 10 3/8% on $75 million in borrowings as a result
of the notes being redeemed in Fiscal 1999 to 5 1/2% on $103.5 million of
convertible notes issued in Fiscal 1999.
Interest income decreased 18% from $2.6 million in Fiscal 1999 to $2.2 million
in Fiscal 2000, due to decreases in general marketplace interest rates. There
were no borrowings under the Company's revolving credit facility during either
Fiscal 2000 or Fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain financial data at the dates indicated.
Feb. 3, Jan. 29, Jan. 30,
2001 2000 1999
------- -------- --------
(dollars in millions)
-------------------
Cash and short-term investments.............................................. $ 60.4 $ 57.9 $ 58.7
Working capital.............................................................. $ 144.9 $ 138.0 $ 155.8
Long-term debt (includes current maturities)................................. $ 103.5 $ 103.5 $ 103.5
Current ratio................................................................ 2.5x 2.8x 3.1x
Working Capital
The Company's business is somewhat seasonal, with the Company's investment in
inventory and accounts receivable normally reaching peaks in the spring and fall
of each year. Cash flow from operations is generated principally in the fourth
quarter of each fiscal year.
Cash provided by operating activities was $36.1 million in Fiscal 2001 compared
to $47.2 million in Fiscal 2000. The $11.1 million decrease in cash flow from
operating activities reflects primarily a $3.1 million increase in accounts
receivable due to increased wholesale sales and extended terms, increased
inventory and a $6.8 million increase in taxes paid. The $25.8 million increase
in inventories at February 3, 2001 from January 29, 2000 levels reflects
increases in retail inventory to support the net increase of 147 stores,
excluding Nautica Leased departments, in Fiscal 2001 as well as increases to
support the Company's continued growth.
Cash provided by operating activities was $47.2 million in Fiscal 2000 compared
to $9.4 million in Fiscal 1999. The $37.7 million increase in cash flow from
operating activities reflected primarily improved earnings, a much smaller
increase in inventory for Fiscal 2000 compared to Fiscal 1999 and an increase in
accrued liabilities for increased bonus accruals and income taxes to be paid in
Fiscal 2001. The $0.3 million increase in inventories at January 29, 2000 from
January 30, 1999 levels
23
24
reflects planned increases in retail inventory to support the net increase of 60
stores, excluding Jarman Leased and Nautica Leased departments, in Fiscal 2000.
Accounts receivable at January 29, 2000 decreased $0.7 million compared to
January 30, 1999, primarily due to exiting the Jarman Leased departments
business, also contributing to the cash flow improvement. The Company's earnings
before income taxes, discontinued operations and extraordinary loss for Fiscal
2000 improved by $10.5 million over the prior year. Federal income taxes paid
for Fiscal 2000 increased by only $2.6 million from the prior year, as the
Company utilized its remaining net operating loss carryforwards.
Cash provided (or used) due to changes in accounts payable and accrued
liabilities are as follows:
Fiscal Year Ended
-----------------------------------
2001 2000 1999
-------- -------- --------
(in thousands)
Accounts payable................................................... $ 4,635 $ (348) $ (634)
Accrued liabilities................................................ 10,468 4,385 (3,107)
-------- -------- --------
$ 15,103 $ 4,037 $ (3,741)
======== ======== ========
The fluctuations in accounts payable for Fiscal 2001 from Fiscal 2000 and for
Fiscal 2000 from Fiscal 1999 are due to changes in payment terms negotiated with
individual vendors, inventory levels and buying patterns. The change in accrued
liabilities in Fiscal 2001 as well as Fiscal 2000 was due primarily to increased
bonus accruals and income tax accruals.
There were no revolving credit borrowings during Fiscal 2001, 2000 or 1999, as
cash generated from operations and cash on hand funded seasonal working capital
requirements and capital expenditures.
Capital Expenditures
Capital expenditures were $34.7 million, $22.3 million and $23.5 million for
Fiscal 2001, 2000 and 1999, respectively. The $12.4 million increase in Fiscal
2001 capital expenditures as compared to Fiscal 2000 resulted primarily from an
increase in retail store capital expenditures due to the increase in new stores.
The $1.2 million decrease in Fiscal 2000 capital expenditures as compared to
Fiscal 1999 resulted primarily from a decrease of capital expenditures connected
with new system initiatives related to the year 2000, which more than offset the
increase in retail store capital expenditures due to the increase in new stores.
Total capital expenditures in Fiscal 2002 are expected to be approximately $54.6
million. These include expected retail expenditures of $29.1 million to open
approximately 101 Journeys stores, 12 Journeys Kidz stores, 8 Johnston & Murphy
stores and factory stores, and 46 Underground Station stores, and to complete 29
major store renovations. Capital expenditures for wholesale and manufacturing
operations and other purposes, including a new distribution center, are expected
to be approximately $25.5 million, including approximately $1.9 million for new
computer systems to improve customer service and support the Company's growth
and approximately $22.0 million for a new distribution center.
Due to the Company's retail growth, the Company has begun studies for a new
distribution center. The Company does not know the size or location of the
facility, but expects it to be located in the Middle Tennessee area. The Company
expects the Fiscal 2002 cost of the facility to be in the range of $22.0
24
25
million to $24.0 million. The Company's current bank agreement has been amended
in order to facilitate the additional capital expenditure for the new
distribution center.
ENVIRONMENTAL AND OTHER CONTINGENCIES
The Company is subject to certain loss contingencies related to environmental
proceedings and other legal matters, including those disclosed in Note 17 to the
Company's Consolidated Financial Statements. The Company has made provisions for
certain of these contingencies, including approximately $2.6 million reflected
in Fiscal 2001 and $472,000 reflected in Fiscal 2000. The Company monitors these
matters on an ongoing basis and at least quarterly management reviews the
Company's reserves and accruals in relation to each of them, adjusting
provisions as management deems necessary in view of changes in available
information. Changes in estimates of liability are reported in the periods when
they occur. Consequently, management believes that its reserve in relation to
each proceeding is a reasonable estimate of the probable loss connected to the
proceeding, or in cases in which no reasonable estimate is possible, the minimum
amount in the range of estimated losses, based upon its analysis of the facts
and circumstances as of the close of the most recent fiscal quarter. Because of
uncertainties and risks inherent in litigation generally and in environmental
proceedings in particular, however, there can be no assurance that future
developments will not require additional reserves to be set aside, that some or
all reserves may not be adequate or that the amounts of any such additional
reserves or any such inadequacy will not have a material adverse effect upon the
Company's financial condition or results of operations.
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 2002. The
approximately $8.7 million of costs associated with the prior restructurings and
discontinued operations that are expected to be incurred during the next twelve
months are also expected to be funded from cash on hand. In February of 2000,
the Company authorized the additional repurchase, from time to time, of up to
1.0 million shares of the Company's common stock. These purchases will be funded
from available cash. The Company has repurchased a total of 6.4 million shares
at a cost of $60.5 million out of authorizations totaling $6.8 million during
Fiscal 1999, Fiscal 2000 and Fiscal 2001.
There were $9.8 million of letters of credit outstanding under the revolving
credit agreement at February 3, 2001, leaving availability under the revolving
credit agreement of $55.2 million.
The Company's revolving credit agreement restricts the payment of dividends and
other payments with respect to capital stock. At February 3, 2001, $30.7 million
was available for such payments. 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 $294,000.
FINANCIAL MARKET RISK
The following discusses the Company's exposure to financial market risk related
to changes in interest rates and foreign currency exchange rates.
Outstanding Debt of the Company - The Company's outstanding long-term debt of
$103.5 million 5 1/2% convertible subordinated notes due April 2005 bears
interest at a fixed rate. Accordingly, there would be no immediate impact on the
Company's interest expense due to fluctuations in market
25
26
interest rates. The fair value of the Company's long-term debt was $129.9
million at February 3, 2001 based on a dealer quote.
Cash and Short-Term Investments - The Company's cash and short-term investment
balances are invested in financial instruments with original maturities of three
months or less. The Company does not have significant exposure to changing
interest rates on invested cash at February 3, 2001. As a result, the interest
rate market risk implicit in these investments at February 3, 2001, if any, is
low.
Foreign Currency Exchange Rate Risk - Most purchases by the Company from foreign
sources are denominated in U.S. dollars. To the extent that import transactions
are denominated in other currencies, it is the Company's practice to hedge its
risks through the purchase of forward foreign exchange contracts. Gains and
losses from these transactions are included in the cost of the underlying
purchases. The gain on contracts outstanding at February 3, 2001 was $1.3
million from current spot rates. At February 3, 2001, the Company had $31.3
million of foreign exchange contracts for Italian Lira and Euro. As of February
3, 2001, a 10% adverse change in foreign currency exchange rates from market
rates would decrease the fair value of the contracts by approximately $1.7
million.
Summary - Based on the Company's overall market interest rate and foreign
currency rate exposure at February 3, 2001, the Company believes that the
effect, if any, of reasonably possible near-term changes in interest rates or
fluctuations in foreign currency exchange rates on the Company's consolidated
financial position, results of operations or cash flows for Fiscal 2001 would
not be material.
The Company does not purchase or hold any derivative financial instruments for
trading purposes.
CHANGES IN ACCOUNTING PRINCIPLES
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for fiscal years beginning after
June 15, 1999. The Financial Accounting Standards Board issued SFAS No. 137 in
July 1999 to delay the effective date of SFAS No. 133 for one year, to fiscal
years beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires an entity to recognize all derivatives as either assets or liabilities
in the consolidated balance sheet and to measure those instruments at fair
value. Under certain conditions, a derivative may be specifically designated as
a fair value hedge or a cash flow hedge. The accounting for changes in the fair
value of a derivative are recorded each period in current earnings or in other
comprehensive income depending on the intended use of the derivative and the
resulting designation. Management of the Company anticipates that, due to the
Company's limited use of derivative instruments, the adoption of SFAS No. 133
will not have a significant effect on the Company's results of operations or its
financial position.
In July 2000, the Emerging Issues Task Force issued EITF: Issue 00-10,
"Accounting for Shipping and Handling Fees and Costs." The new pronouncement
requires shipping and handling billings to customers be recorded as revenue.
Amounts for shipping and handling costs can no longer be netted with related
shipping and handling billings. The Company has restated its financial
statements for Fiscal 2001, 2000 and 1999 to reflect the change in accounting
for shipping and handling fees and costs.
26
27
OUTLOOK
This "Outlook" section in this Form 10-K contains a number of forward-looking
statements relating to sales, earnings per share, capital expenditures and store
opening expectations for Fiscal 2002. These forward-looking statements are based
on the Company's expectations as of May 4, 2001. All of the forward-looking
statements are based on management's current expectations and are inherently
uncertain. Actual results could differ materially from those reflected by the
forward-looking statements in this discussion and a number of factors may
adversely affect future results, liquidity and capital resources. These factors
include changes in consumer demand or tastes that affect sales at retail or
wholesale, changes in buying patterns by significant wholesale customers and
risks associated with a softening economy, including erosion of revenues or
margins caused by weakening consumer demand and deterioration in the
collectibility of trade accounts receivable. These factors also include
disruptions in product supply or distribution, including disruptions or price
increases in the leather market related to foot and mouth or other cattle
diseases, changes in business strategies by the Company's competitors, the
Company's ability to open or convert, staff and support additional retail stores
on schedule and at acceptable expense levels, failure of new retail ventures to
meet expectations and the outcome of litigation and environmental matters and
the adequacy of related reserves, including those discussed in Note 17 to the
Consolidated Financial Statements. Although the Company believes it has an
appropriate business strategy and the resources necessary for its operations,
future revenue and margin trends cannot be reliably predicted and the Company
may alter its business strategies to address changing conditions.
The Company expects net sales growth in the range of 15-20% for Fiscal 2002,
with an overall same store sales increase in the mid-single digit range.
In connection with the termination of the Nautica Footwear license agreement,
the Company will fill customer orders and sell existing inventory for the first
half of Fiscal 2002. The Company anticipates Nautica sales of between $6.5 and
$8.0 million and operating losses in the range of $1.0 - $1.8 million in the
first half of Fiscal 2002. The Company's expectations for Nautica are subject to
uncertainties including the risk that existing orders may be cancelled or that
existing inventory may not be sold or may require greater that planned
markdowns.
The Company is comfortable that it can meet First Call earnings expectations of
$1.70 per share for Fiscal 2002. It expects the earnings improvement from Fiscal
2001 to be primarily attributable to net sales growth and to selling, general
and administrative expense leverage related to same store sales growth.
The Company expects capital expenditures for Fiscal 2002 to be approximately
$54.6 million. The Company plans to open 101 Journeys stores, 12 Journeys Kidz
stores, 46 Underground Station stores and 8 Johnston & Murphy stores and factory
stores. The Company also plans to build a new distribution center with current
year expenditures of approximately $22.0 - $24.0 million.
INFLATION
The Company does not believe inflation has had a material impact on sales or
operating results during periods covered in this discussion.
27
28
ITEM 7A, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company incorporates by reference the information regarding market risk to
appear under the heading "Market Risk" in Management's Discussion and Analysis
of Financial Condition and Results of Operations.
28
29
ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants 30
Consolidated Balance Sheet, February 3, 2001 and January 29, 2000 31
Consolidated Earnings, each of the three fiscal years ended 2001, 2000 and 1999 32
Consolidated Cash Flows, each of the three fiscal years ended 2001, 2000 and 1999 33
Consolidated Shareholders' Equity, each of the three fiscal years ended 2001, 2000 and 1999 34
Notes to Consolidated Financial Statements 35
29
30
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 on page 71, presents fairly, in all material respects,
the financial position of Genesco Inc. and its subsidiaries (the "Company") at
February 3, 2001 and January 29, 2000, and the results of their operations and
their cash flows for each of the three years in the period ended February 3,
2001 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 14 on page 71 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, 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/PricewaterhouseCoopers LLP
Nashville, Tennessee
February 27, 2001
30
31
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheet
In Thousands
AS OF FISCAL YEAR END
- ----------------------------------------------------------------------------------------------
2001 2000
- ----------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and short-term investments $ 60,382 $ 57,860
Accounts receivable 22,700 23,617
Inventories 134,236 109,815
Deferred income taxes 15,263 14,826
Other current assets 10,806 8,881
Current assets of discontinued operations 359 -0-
- ----------------------------------------------------------------------------------------------
Total current assets 243,746 214,999
- ----------------------------------------------------------------------------------------------
Plant, equipment and capital leases 87,747 68,661
Deferred income taxes 3,396 4,184
Other noncurrent assets 16,644 13,321
Plant and equipment of discontinued operations, net 630 -0-
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS $ 352,163 $ 301,165
==============================================================================================
- ----------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 94,252 $ 74,874
Provision for discontinued operations 4,568 2,118
- ----------------------------------------------------------------------------------------------
Total current liabilities 98,820 76,992
- ----------------------------------------------------------------------------------------------
Long-term debt 103,500 103,500
Other long-term liabilities 7,354 6,368
Provision for discontinued operations 4,264 6,063
- ----------------------------------------------------------------------------------------------
Total liabilities 213,938 192,923
- ----------------------------------------------------------------------------------------------
Contingent liabilities (see Note 17)
SHAREHOLDERS' EQUITY
Non-redeemable preferred stock 7,721 7,882
Common shareholders' equity:
Common stock, $1 par value:
Authorized: 80,000,000 shares
Issued: 2001 - 22,149,915; 2000 - 21,714,678 22,150 21,715
Additional paid-in capital 95,194 94,784
Retained earnings 31,017 1,718
Treasury shares, at cost (17,857) (17,857)
- ----------------------------------------------------------------------------------------------
Total shareholders' equity 138,225 108,242
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 352,163 $ 301,165
==============================================================================================
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
31
32
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED EARNINGS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
FISCAL YEAR
------------------------------
2001 2000 1999
-------- -------- --------
Net sales................................................... $680,166 $553,032 $532,164
Cost of sales............................................... 357,653 296,772 288,684
Selling and administrative expenses......................... 258,893 209,291 208,782
Restructuring and other charges, net........................ 3,433 -0- (2,403)
-------- -------- --------
Earnings from operations before interest.................... 60,187 46,969 37,101
-------- -------- --------
Interest expense.......................................... 8,618 8,152 9,250
Interest income........................................... (1,418) (2,165) (2,639)
-------- -------- --------
Total interest expense, net................................. 7,200 5,987 6,611
-------- -------- --------
Earnings before income taxes, discontinued operations and
extraordinary loss........................................ 52,987 40,982 30,490
Income taxes (benefit)...................................... 20,156 15,647 (24,068)
-------- -------- --------
Earnings before discontinued operations and extraordinary
loss...................................................... 32,831 25,335 54,558
Discontinued operations:
Operating income (loss)................................... (226) 587 365
Excess provision (provision) for future losses............ (3,007) -0- 450
-------- -------- --------
Earnings before extraordinary loss.......................... 29,598 25,922 55,373
Extraordinary loss from early retirement of debt, net....... -0- -0- (2,245)
-------- -------- --------
NET EARNINGS................................................ $ 29,598 $ 25,922 $ 53,128
======== ======== ========
Basic earnings per common share:
Before discontinued operations and extraordinary loss..... $ 1.51 $ 1.12 $ 2.13
Discontinued operations................................... $ (.15) $ .03 $ .03
Extraordinary loss........................................ $ .00 $ .00 $ (.09)
Net earnings.............................................. $ 1.36 $ 1.14 $ 2.07
Diluted earnings per common share:
Before discontinued operations and extraordinary loss..... $ 1.35 $ 1.03 $ 1.87
Discontinued operations................................... $ (.12) $ .02 $ .03
Extraordinary loss........................................ $ .00 $ .00 $ (.07)
Net earnings.............................................. $ 1.23 $ 1.05 $ 1.83
======== ======== ========
The accompanying Notes are an integral part of these Consolidated Financial
Statements
32
33
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Cash Flows
In Thousands
FISCAL YEAR
---------------------------------------
2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net earnings $ 29,598 $ 25,922 $ 53,128
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 13,200 10,514 9,691
Deferred income taxes 351 10,687 (28,762)
Provision for losses on accounts receivable 457 434 447
Loss on retirement of debt -0- -0- 3,651
Restructuring charge (gain) 4,433 -0- (2,403)
Provision for (gain from) discontinued operations 4,854 -0- (731)
Other 467 1,690 2,344
Effect on cash of changes in working
capital and other assets and liabilities:
Accounts receivable (3,093) 671 (2,814)
Inventories (25,772) (282) (12,284)
Other current assets (1,925) (2,162) (913)
Accounts payable and accrued liabilities 15,103 4,037 (3,741)
Other assets and liabilities (1,620) (4,358) (8,195)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 36,053 47,153 9,418
- ------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (34,735) (22,312) (23,512)
Proceeds from businesses divested and asset sales 3,694 10,069 14,115
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (31,041) (12,243) (9,397)
- ------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Payments on capital leases (6) (2) (243)
Stock repurchases (8,778) (39,519) (12,232)
Dividends paid (298) (300) (1,502)
Exercise of options 6,592 4,028 2,169
Payments of long-term debt -0- -0- (77,220)
Long-term borrowings -0- -0- 103,500
Deferred note expense -0- -0- (3,970)
Other -0- -0- (1,056)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (2,490) (35,793) 9,446
- ------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOW 2,522 (883) 9,467
Cash and short-term investments at
beginning of year 57,860 58,743 49,276
- ------------------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 60,382 $ 57,860 $ 58,743
==============================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid for:
Interest $ 8,043 $ 7,520 $ 11,112
Income taxes 9,398 2,605 23
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
33
34
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Shareholders' Equity
In Thousands
RETAINED ACCUMULATED
TOTAL ADDITIONAL EARNINGS OTHER
NON-REDEEMABLE COMMON PAID-IN TREASURY (ACCUMULATED COMPREHENSIVE COMPREHENSIVE
PREFERRED STOCK STOCK CAPITAL STOCK DEFICIT) INCOME INCOME
--------------- ------- ---------- -------- ------------ ------------- -------------
BALANCE JANUARY 31, 1998 $7,945 $26,264 $132,218 $(17,857) $(75,456) $(1,150)
====== ======= ======== ======== ======== ======= =======
Net earnings -0- -0- -0- -0- 53,128 -0- 53,128
Dividends paid -0- -0- -0- -0- (1,576) -0- -0-
Exercise of options -0- 230 845 -0- -0- -0- -0-
Issue shares -- restricted
stock options -0- 67 533 -0- -0- -0- -0-
Issue shares -- Employee
Stock Purchase Plan -0- 107 387 -0- -0- -0- -0-
Tax effect of exercise
of stock options -0- -0- 1,887 -0- -0- -0- -0-
Stock repurchases -0- (2,343) (9,889) -0- -0- -0- -0-
Minimum pension
liability adjustment -0- -0- -0- -0- -0- 1,150 1,150
Other (27) 2 114 -0- -0- -0- -0-
-------
Comprehensive Income $54,278
------ ------- -------- -------- -------- ------- -------
BALANCE JANUARY 30, 1999 $7,918 $24,327 $126,095 $(17,857) $(23,904) $ -0-
====== ======= ======== ======== ======== ======= =======
Net earnings -0- -0- -0- -0- 25,922 -0- 25,922
Dividends paid -0- -0- -0- -0- (300) -0- -0-
Exercise of options -0- 693 2,796 -0- -0- -0- -0-
Issue shares -- Employee
Stock Purchase Plan -0- 122 417 -0- -0- -0- -0-
Tax effect of exercise
of stock options -0- -0- 1,427 -0- -0- -0- -0-
Stock repurchases -0- (3,439) (36,0