GENESCO INC - 10-Q Quarterly Report

(GENESCO LOGO)

Form 10-Q

(Mark One)
þ		Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
		For Quarter Ended July 31, 2004

o		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

Genesco Inc.

A Tennessee Corporation
I.R.S. No. 62-0211340
Genesco Park
1415 Murfreesboro Road
Nashville, Tennessee 37217-2895
Telephone 615/367-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

Common Shares Outstanding August 27, 2004 – 22,044,461

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Genesco Inc.
and Subsidiaries

Consolidated Balance Sheets

In Thousands, except share amounts


	July 31,			January 31,			August 2,
	2004			2004			2003
Assets
*Current Assets*
Cash and cash equivalents	$	15,286		$	81,549		$	32,968
Accounts receivable, net of allowances of $3,414 at July 31, 2004, $3,334 at January 31, 2004 and $2,428 at August 2, 2003		17,449			12,515			14,579
Inventories		263,377			167,234			213,440
Deferred income taxes		10,966			7,633			8,696
Prepaids and other current assets		13,401			14,835			13,377

Total current assets		320,479			283,766			283,060

Property and equipment:
Land		4,971			4,856			4,956
Buildings and building equipment		14,175			13,917			13,654
Machinery		51,277			45,174			45,696
Furniture and fixtures		55,975			45,305			44,055
Construction in progress		5,703			3,469			3,959
Improvements to leased property		123,212			104,941			102,665

Property and equipment, at cost		255,313			217,662			214,985
Accumulated depreciation		(107,034	)		(95,995	)		(89,120	)

Property and equipment, net		148,279			121,667			125,865

Deferred income taxes		-0-			18,137			20,624
Goodwill		97,556			-0-			-0-
Trademarks		47,543			-0-			-0-
Other intangibles, net of accumulated amortization of $772 at July 31, 2004, $-0- at January 31, 2004 and $-0- at August 2, 2003		7,814			-0-			-0-
Other noncurrent assets		9,650			6,617			6,720

Total Assets	$	631,321		$	430,187		$	436,269

Genesco Inc.
and Subsidiaries
Consolidated Balance Sheets
In Thousands, except share amounts


	July 31,			January 31,			August 2,
	2004			2004			2003
Liabilities and Shareholders’ Equity
*Current Liabilities*
Accounts payable	$	104,468		$	47,921		$	80,074
Accrued employee compensation		12,570			6,284			7,229
Accrued rent		12,601			11,636			11,390
Accrued other taxes		7,314			5,055			4,766
Accrued income taxes		309			8,689			(1,525	)
Other accrued liabilities		17,966			11,100			14,642
Current portion – long-term debt		13,000			-0-			-0-
Provision for discontinued operations		1,234			1,757			248

Total current liabilities		169,462			92,442			116,824

Long-term debt		189,250			86,250			86,250
Pension liability		27,799			25,617			36,334
Deferred income taxes		4,645			-0-			-0-
Other long-term liabilities		9,246			9,014			10,964
Provision for discontinued operations		1,234			1,266			44

Total liabilities		401,636			214,589			250,416

Commitments and contingent liabilities
*Shareholders’ Equity*
Non-redeemable preferred stock		7,502			7,580			7,596
Common shareholders’ equity:
Common stock, $1 par value:
Authorized: 80,000,000 shares
Issued/Outstanding:
July 31, 2004 – 22,461,925/21,973,461 January 31, 2004 – 22,211,661/21,723,197 August 2, 2003 – 22,259,610/21,771,146		22,462			22,212			22,260
Additional paid-in capital		100,615			96,612			97,642
Retained earnings		142,647			132,215			106,078
Accumulated other comprehensive loss		(25,684	)		(25,164	)		(29,866	)
Treasury shares, at cost		(17,857	)		(17,857	)		(17,857	)

Total shareholders’ equity		229,685			215,598			185,853

Total Liabilities and Shareholders’ Equity	$	631,321		$	430,187		$	436,269

The accompanying Notes are an integral part of these Consolidated Financial Statements.

Genesco Inc.
and Consolidated Subsidiaries

Consolidated Statements of Earnings

In Thousands, except per share amounts


	Three Months Ended						Six Months Ended
	July 31,			August 2,			July 31,			August 2,
	2004			2003			2004			2003
Net sales	$	245,939		$	179,478		$	471,465		$	372,224
Cost of sales		124,050			95,989			238,898			200,643
Selling and administrative expenses		112,115			80,271			211,345			160,924
Restructuring and other, net		186			139			40			139

Earnings from operations		9,960			3,357			21,262			10,796

Loss on early retirement of debt		-0-			2,581			-0-			2,581
Interest expense, net
Interest expense		2,899			2,366			4,934			4,572
Interest income		(3	)		(217	)		(156	)		(391	)

Total interest expense, net		2,896			2,149			4,778			4,181

Earnings (loss) before income taxes from continuing operations		7,064			(1,373	)		16,484			4,034
Income tax expense (benefit)		2,289			(482	)		5,885			1,588

Earnings (loss) from continuing operations		4,775			(891	)		10,599			2,446
Provision for discontinued operations, net		(21	)		-0-			(21	)		-0-

Net Earnings (Loss)	$	4,754		$	(891	)	$	10,578		$	2,446

Basic earnings (loss) per common share:
Continuing operations	$	.21		$	(.04	)	$	.48		$	.11
Discontinued operations	$	.00		$	.00		$	.00		$	.00
Net earnings (loss)	$	.21		$	(.04	)	$	.48		$	.11
Diluted earnings (loss) per common share:
Continuing operations	$	.21		$	(.04	)	$	.47		$	.10
Discontinued operations	$	.00		$	.00		$	.00		$	.00
Net earnings (loss)	$	.21		$	(.04	)	$	.47		$	.10

The accompanying Notes are an integral part of these Consolidated Financial Statements.

Genesco Inc.
and Consolidated Subsidiaries

Consolidated Statements of Cash Flows

In Thousands


	Three Months Ended						Six Months Ended
	July 31,			August 2,			July 31,			August 2,
	2004			2003			2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)	$	4,754		$	(891	)	$	10,578		$	2,446
Tax benefit of stock options exercised		822			12			1,095			16
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation		7,270			5,530			13,265			10,639
Deferred income taxes		(758	)		-0-			(309	)		-0-
Provision for losses on accounts receivable		8			132			88			292
Impairment of long-lived assets		275			-0-			275			-0-
Restructuring gain		-0-			(139	)		-0-			(139	)
Loss on retirement of debt		-0-			959			-0-			959
Provision for discontinued operations		34			-0-			34			-0-
Other		595			401			935			672
Effect on cash of changes in working capital and other assets and liabilities net of acquisitions:
Accounts receivable		(2,913	)		4,658			(3,449	)		4,480
Inventories		(47,305	)		(49,671	)		(61,373	)		(44,818	)
Other current assets		775			804			1,905			182
Accounts payable		25,165			35,087			23,902			40,445
Other accrued liabilities		(1,414	)		(1,084	)		(487	)		(6,756	)
Other assets and liabilities		1,690			565			3,433			1,501

Net cash provided by (used in) operating activities		(11,002	)		(3,637	)		(10,108	)		9,919

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(9,352	)		(4,552	)		(16,255	)		(9,199	)
Acquisitions, net of cash acquired		(1,261	)		-0-			(168,783	)		-0-
Proceeds from sale of property and equipment		2			473			2			626

Net cash used in investing activities		(10,611	)		(4,079	)		(185,036	)		(8,573	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital leases		(133	)		-0-			(186	)		-0-
Stock repurchases		-0-			-0-			-0-			(31	)
Change in overdraft balances		11,485			3,292			13,608			(4,032	)
Revolver borrowings, net		12,000			-0-			16,000			-0-
Dividends paid		(73	)		(73	)		(146	)		(147	)
Payments of long-term debt		-0-			(103,245	)		-0-			(103,245	)
Long-term borrowings		-0-			86,250			100,000			86,250
Deferred financing costs		-0-			(3,238	)		(3,360	)		(3,238	)
Options exercised		2,084			27			2,965			136

Net cash provided by (used in) financing activities		25,363			(16,987	)		128,881			(24,307	)

Net Cash Flow		3,750			(24,703	)		(66,263	)		(22,961	)
Cash and cash equivalents at beginning of period		11,536			57,671			81,549			55,929

Cash and cash equivalents at end of period	$	15,286		$	32,968		$	15,286		$	32,968

Supplemental Cash Flow Information:
Net cash paid for:
Interest	$	3,391		$	2,076		$	4,108		$	5,523
Income taxes		6,422			4,528			14,654			7,574

The accompanying Notes are an integral part of these Consolidated Financial Statements.

Genesco Inc.
and Subsidiaries

Consolidated Statements of Shareholders’ Equity

In Thousands


	Total															Accumulated						Total
	Non-Redeemable						Additional									Other						Share-
	Preferred			Common			Paid-In			Treasury			Retained			Comprehensive			Comprehensive			holders’
	Stock			Stock			Capital			Shares			Earnings			Loss			Income			Equity
Balance February 1, 2003	$	7,599		$	22,222		$	97,488		$	(17,857	)	$	103,779		$	(30,452	)				$	182,779

Net earnings		-0-			-0-			-0-			-0-			28,730			-0-		$	28,730			28,730
Dividends paid		-0-			-0-			-0-			-0-			(294	)		-0-			-0-			(294	)
Exercise of options		-0-			45			624			-0-			-0-			-0-			-0-			669
Issue shares — Employee Stock Purchase Plan		-0-			32			327			-0-			-0-			-0-			-0-			359
Tax benefit of stock options exercised		-0-			-0-			69			-0-			-0-			-0-			-0-			69
Stock repurchases		-0-			(117	)		(1,784	)		-0-			-0-			-0-			-0-			(1,901	)
Gain on foreign currency forward contracts (net of tax of $0.6 million)		-0-			-0-			-0-			-0-			-0-			985			985			985
Minimum pension liability adjustment (net of tax of $2.8 million)		-0-			-0-			-0-			-0-			-0-			4,303			4,303			4,303
Other		(19	)		30			(112	)		-0-			-0-			-0-			-0-			(101	)

Comprehensive income																				34,018

Balance January 31, 2004		7,580			22,212			96,612			(17,857	)		132,215			(25,164	)					215,598

Net earnings		-0-			-0-			-0-			-0-			10,578			-0-			10,578			10,578
Dividends paid		-0-			-0-			-0-			-0-			(146	)		-0-			-0-			(146	)
Exercise of options		-0-			229			2,736			-0-			-0-			-0-			-0-			2,965
Tax benefit of stock options exercised		-0-			-0-			1,095			-0-			-0-			-0-			-0-			1,095
Loss on foreign currency forward contracts (net of tax benefit of $0.4 million)		-0-			-0-			-0-			-0-			-0-			(610	)		(610	)		(610	)
Gain on interest rate swaps (net of tax of $55,000)		-0-			-0-			-0-			-0-			-0-			87			87			87
Foreign currency translation adjustment		-0-			-0-			-0-			-0-			-0-			3			3			3
Other		(78	)		21			172			-0-			-0-			-0-			-0-			115

Comprehensive income*																			$	10,058

Balance July 31, 2004	$	7,502		$	22,462		$	100,615		$	(17,857	)	$	142,647		$	(25,684	)				$	229,685


	Page
Part I. Financial Information
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets – July 31, 2004, January 31, 2004 and August 2, 2003		3
Consolidated Statements of Earnings — Three Months Ended and Six Months Ended July 31, 2004 and August 2, 2003		5
Consolidated Statements of Cash Flows — Three Months Ended and Six Months Ended July 31, 2004 and August 2, 2003		6
Consolidated Statements of Shareholders’ Equity — Year Ended January 31, 2004 and Six Months Ended July 31, 2004		7
Notes to Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		36
Item 3. Quantitative and Qualitative Disclosures About Market Risk		51
Item 4. Controls and Procedures		51
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders		52
Item 6. Exhibits and Reports on Form 8-K		52
Signature		54
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 302 CERTIFICATION OF THE CFO

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