Genesco FY2014 Q3
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended November 2, 2013
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from              to             
Commission File No. 1-3083
 
Genesco Inc.
(Exact name of registrant as specified in its charter)
 
 
Tennessee
 
62-0211340
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
Genesco Park, 1415 Murfreesboro Road
Nashville, Tennessee
 
37217-2895
(Address of principal executive offices)
 
(Zip Code)
 
Registrant's telephone number, including area code: (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 and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer; an accelerated filer; a non-accelerated filer; or a smaller reporting company. See definitions of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
 
Large accelerated filer
 
x
 
Accelerated filer
o
 
 
 
 
Non-accelerated filer
 
o   (Do not check if smaller reporting company)
 
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes  o    No  x
As of November 29, 2013, 23,833,386 shares of the registrant's common stock were outstanding.
 




Table of Contents

INDEX
 
 
 
 



2

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

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

Assets
November 2, 2013

 
February 2,
2013 (As restated)

 
October 27, 2012 (As restated)

Current Assets:
 
 
 
 
 
Cash and cash equivalents
$
32,250

 
$
59,795

 
$
39,890

Accounts receivable, net of allowances of $5,144 at November 2,
 
 
 
 
 
2013, $6,082 at February 2, 2013 and $6,331 at October 27, 2012
64,235

 
48,214

 
61,006

Inventories
694,256

 
505,344

 
600,251

Deferred income taxes
20,033

 
23,725

 
23,109

Prepaids and other current assets
58,787

 
45,193

 
42,520

Total current assets
869,561

 
682,271

 
766,776

 
 
 
 
 
 
Property and equipment:
 
 
 
 
 
Land
6,131

 
6,128

 
6,152

Buildings and building equipment
20,415

 
20,390

 
20,427

Computer hardware, software and equipment
126,529

 
120,757

 
126,311

Furniture and fixtures
165,261

 
148,903

 
145,476

Construction in progress
33,259

 
8,702

 
12,757

Improvements to leased property
327,261

 
318,376

 
313,180

Property and equipment, at cost
678,856

 
623,256

 
624,303

Accumulated depreciation
(409,871
)
 
(381,587
)
 
(384,804
)
Property and equipment, net
268,985

 
241,669

 
239,499

Deferred income taxes
15,980

 
18,731

 
22,935

Goodwill
283,049

 
273,827

 
272,201

Trademarks, net of accumulated amortization of $4,155 at Nov. 2,
 
 
 
 
 
2013, $3,350 at February 2, 2013 and $3,062 at Oct. 27, 2012
76,905

 
77,408

 
78,184

Other intangibles, net of accumulated amortization of $19,782 at
 
 
 
 
 
Nov. 2, 2013, $17,220 at February 2, 2013 and $16,336 at
 
 
 
 
 
October 27, 2012
9,502

 
11,598

 
12,462

Other noncurrent assets
21,821

 
20,568

 
33,565

Total Assets
$
1,545,803

 
$
1,326,072

 
$
1,425,622









3


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

Liabilities and Equity
November 2, 2013

 
February 2,
2013 (As restated)

 
October 27, 2012 (As restated)

Current Liabilities:
 
 
 
 
 
Accounts payable
$
265,067

 
$
118,350

 
$
219,826

Accrued employee compensation
49,837

 
55,241

 
54,782

Accrued other taxes
19,710

 
25,985

 
21,828

Accrued income taxes
4,099

 
2,096

 
2,415

Current portion – long-term debt
5,596

 
5,675

 
5,639

Other accrued liabilities
58,455

 
60,659

 
66,650

Provision for discontinued operations
7,223

 
7,192

 
7,081

Total current liabilities
409,987

 
275,198

 
378,221

Long-term debt
92,361

 
45,007

 
86,296

Pension liability
19,296

 
20,514

 
25,576

Deferred rent and other long-term liabilities
158,403

 
157,407

 
142,404

Provision for discontinued operations
4,158

 
4,159

 
4,202

Total liabilities
684,205

 
502,285

 
636,699

Commitments and contingent liabilities

 

 

Equity
 
 
 
 
 
Non-redeemable preferred stock
1,305

 
3,924

 
3,934

Common equity:
 
 
 
 
 
Common stock, $1 par value:
 
 
 
 
 
Authorized: 80,000,000 shares
 
 
 
 
 
Issued/Outstanding:
 
 
 
 
 
November 2, 2013 – 24,321,850/23,833,386
 
 
 
 
 
February 2, 2013 – 24,484,915/23,996,451
 
 
 
 
 
October 27, 2012 – 24,640,003/24,151,539
24,322

 
24,485

 
24,640

Additional paid-in capital
184,608

 
170,360

 
167,332

Retained earnings
692,380

 
669,189

 
638,532

Accumulated other comprehensive loss
(25,251
)
 
(28,241
)
 
(29,669
)
Treasury shares, at cost (488,464 shares)
(17,857
)
 
(17,857
)
 
(17,857
)
Total Genesco equity
859,507

 
821,860

 
786,912

Noncontrolling interest – non-redeemable
2,091

 
1,927

 
2,011

Total equity
861,598

 
823,787

 
788,923

Total Liabilities and Equity
$
1,545,803

 
$
1,326,072

 
$
1,425,622


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

4


Genesco Inc.
and Subsidiaries
Condensed Consolidated Statements of Operations
(In Thousands, except per share amounts)

 
Three Months Ended
Nine Months Ended
 
November 2, 2013

 
October 27, 2012 (As restated)

November 2, 2013

 
October 27, 2012 (As restated)

Net sales
$
666,332

 
$
664,458

$
1,832,466

 
$
1,808,124

Cost of sales
334,171

 
330,046

919,060

 
893,747

Selling and administrative expenses
283,702

 
279,847

829,506

 
806,425

Asset impairments and other, net
1,480

 
357

(4,331
)
 
896

Earnings from operations
46,979

 
54,208

88,231

 
107,056

Interest expense, net:
 
 
 
 
 
 
Interest expense
1,199

 
1,342

3,418

 
3,691

Interest income
(9
)
 
(41
)
(49
)
 
(66
)
Total interest expense, net
1,190

 
1,301

3,369

 
3,625

Earnings from continuing operations before income taxes
45,789

 
52,907

84,862

 
103,431

Income tax expense
17,993

 
10,686

34,092

 
29,447

Earnings from continuing operations
27,796

 
42,221

50,770

 
73,984

Provision for discontinued operations, net
(46
)
 
(94
)
(270
)
 
(312
)
Net Earnings
$
27,750

 
$
42,127

$
50,500

 
$
73,672

 
 
 
 
 
 
 
Basic earnings per common share:
 
 
 
 
 
 
Continuing operations
$
1.19

 
$
1.79

$
2.18

 
$
3.12

Discontinued operations
0.00

 
(0.01
)
(0.01
)
 
(0.01
)
     Net earnings
$
1.19

 
$
1.78

$
2.17

 
$
3.11

Diluted earnings per common share:
 
 
 
 
 
 
Continuing operations
$
1.18

 
$
1.76

$
2.15

 
$
3.07

Discontinued operations
0.00

 
0.00

(0.01
)
 
(0.02
)
    Net earnings
$
1.18

 
$
1.76

$
2.14

 
$
3.05


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


5


Genesco Inc.
and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(In Thousands)

 
Three Months Ended
Nine Months Ended
 
November 2, 2013

 
October 27, 2012 (As restated)

November 2, 2013

 
October 27, 2012 (As restated)

Net earnings
$
27,750

 
$
42,127

$
50,500

 
$
73,672

Other comprehensive income (loss):
 
 
 
 
 
 
Gain on foreign currency forward contract, net of tax of $0.0
 
 
 
 
 
 
million for the three and nine months ended October 27, 2012, respectively

 
32


 
12

Pension liability adjustments, net of tax of $0.6 million and
 
 
 
 
 
 
 $1.8 million for the three and nine months ended November 2, 2013, respectively
915

 

2,815

 

Postretirement liability adjustments, net of tax of $0.0
 
 
 
 
 
 
  million for the three and nine months ended November 2, 2013, respectively
12

 

44

 

Foreign currency translation adjustments
5,626

 
3,124

131

 
3,285

Total other comprehensive income
6,553

 
3,156

2,990

 
3,297

Comprehensive income
$
34,303

 
$
45,283

$
53,490

 
$
76,969


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


6


Genesco Inc.
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In Thousands)
 
Three Months Ended
Nine Months Ended
 
November 2, 2013

 
October 27, 2012 (As restated)

November 2,
2013

 
October 27, 2012 (As restated)

CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
Net earnings
$
27,750

 
$
42,127

$
50,500

 
$
73,672

Adjustments to reconcile net earnings to net cash
 
 
 
 
 
 
provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization
16,634

 
15,651

49,517

 
46,195

Amortization of deferred note expense and debt discount
198

 
198

594

 
594

Deferred income taxes
7,320

 
(4,543
)
4,594

 
(7,053
)
Provision (recoveries) for losses on accounts receivable
61

 
340

(575
)
 
1,195

Impairment of long-lived assets
350

 
283

1,767

 
720

Restricted stock expense
3,223

 
2,828

9,075

 
7,483

Provision for discontinued operations
77

 
155

446

 
515

Tax benefit of stock options and restricted stock exercised
7

 
(154
)
(3,073
)
 
(4,820
)
Other
458

 
342

973

 
981

Effect on cash from changes in working capital and other
 
 
 
 
 
 
assets and liabilities, before acquisitions:
 
 
 
 
 
 
  Accounts receivable
(13,877
)
 
(15,515
)
(15,410
)
 
(18,379
)
  Inventories
(63,441
)
 
(40,975
)
(186,837
)
 
(159,683
)
  Prepaids and other current assets
2,434

 
15,973

(13,377
)
 
(1,790
)
  Accounts payable
16,707

 
2,934

139,428

 
67,320

  Other accrued liabilities
2,584

 
7,545

(16,075
)
 
(9,347
)
  Other assets and liabilities
8,069

 
866

3,497

 
8,959

Net cash provided by operating activities
8,554

 
28,055

25,044

 
6,562

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
  Capital expenditures
(38,470
)
 
(20,332
)
(75,676
)
 
(52,865
)
  Acquisitions, net of cash acquired
(1,000
)
 
(2,893
)
(12,006
)
 
(13,690
)
  Proceeds from asset sales

 
28

60

 
66

Net cash used in investing activities
(39,470
)
 
(23,197
)
(87,622
)
 
(66,489
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
  Payments of long-term debt
(1,412
)
 
(1,417
)
(4,655
)
 
(9,014
)
  Borrowings under revolving credit facility
123,700

 
113,700

324,400

 
304,400

  Payments on revolving credit facility
(98,500
)
 
(121,600
)
(273,100
)
 
(245,500
)
  Tax benefit of stock options and restricted stock exercised
(7
)
 
154

3,073

 
4,820

  Share repurchases
(9,458
)
 
(7,312
)
(20,676
)
 
(27,539
)
  Change in overdraft balances
2,705

 
3,372

7,192

 
12,984

  Redemption of preferred shares

 

(1,462
)
 

  Dividends paid on non-redeemable preferred stock

 
(33
)
(33
)
 
(114
)
  Exercise of stock options and issue shares - Employee Stock
 
 
 
 
 
 
    Purchase Plan
196

 
193

1,116

 
4,976

  Other
(1
)
 

1

 

Net cash provided by (used in) financing activities
17,223

 
(12,943
)
35,856

 
45,013

Effect of foreign exchange rate fluctuations on cash
(84
)
 
753

(823
)
 
1,014

Net Decrease in Cash and Cash Equivalents
(13,777
)
 
(7,332
)
(27,545
)
 
(13,900
)
Cash and cash equivalents at beginning of period
46,027

 
47,222

59,795

 
53,790

Cash and cash equivalents at end of period
$
32,250

 
$
39,890

$
32,250

 
$
39,890

Supplemental Cash Flow Information:
 
 
 
 
 
 
Net cash paid for:
 
 
 
 
 
 
Interest
$
1,032

 
$
1,334

$
2,794

 
$
3,043

Income taxes
2,807

 
8,839

32,011

 
53,752

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

7


Genesco Inc.
and Subsidiaries
Condensed Consolidated Statements of Equity
(In Thousands)

 
Total
Non-Redeemable
Preferred
Stock

 
Common
Stock

 
Additional
Paid-In
Capital

 
Retained
Earnings

 
Accumulated
Other
Comprehensive Loss

 
Treasury
Shares

 
Non Controlling
Interest
Non-Redeemable

 
Total
Equity

Balance January 28, 2012 (As restated)
$
4,957

 
$
24,758

 
$
149,479

 
$
598,360

 
$
(32,966
)
 
$
(17,857
)
 
$
2,249

 
$
728,980

Net earnings (As restated)

 

 

 
112,435

 

 

 

 
112,435

Other comprehensive income

 

 

 

 
4,725

 

 

 
4,725

Dividends paid on non-redeemable preferred stock

 

 

 
(147
)
 

 

 

 
(147
)
Exercise of stock options

 
224

 
4,584

 

 

 

 

 
4,808

Issue shares – Employee Stock Purchase Plan

 
2

 
155

 

 

 

 

 
157

Employee and non-employee restricted stock

 

 
10,508

 

 

 

 

 
10,508

Restricted stock issuance

 
194

 
(194
)
 

 

 

 

 

Restricted shares withheld for taxes

 
(76
)
 

 
(4,455
)
 

 

 

 
(4,531
)
Tax benefit of stock options and restricted stock exercised

 

 
4,820

 

 

 

 

 
4,820

Shares repurchased

 
(646
)
 

 
(37,004
)
 

 

 

 
(37,650
)
Other
(1,033
)
 
29

 
1,008

 

 

 

 

 
4

Noncontrolling interest – loss

 

 

 

 

 

 
(322
)
 
(322
)
Balance February 2, 2013 (As restated)
3,924

 
24,485

 
170,360

 
669,189

 
(28,241
)
 
(17,857
)
 
1,927

 
823,787

Net earnings

 

 

 
50,500

 

 

 

 
50,500

Other comprehensive income

 

 

 

 
2,990

 

 

 
2,990

Dividends paid on non-redeemable preferred stock

 

 

 
(33
)
 

 

 

 
(33
)
Exercise of stock options

 
43

 
877

 

 

 

 

 
920

Issue shares - Employee Stock Purchase Plan

 
3

 
193

 

 

 

 

 
196

Employee and non-employee restricted stock

 

 
9,075

 

 

 

 

 
9,075

Restricted stock issuance

 
214

 
(214
)
 

 

 

 

 

Restricted shares withheld for taxes

 
(105
)
 
105

 
(6,938
)
 

 

 

 
(6,938
)
Tax benefit of stock options and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
restricted stock exercised

 

 
3,073

 

 

 

 

 
3,073

Shares repurchased

 
(338
)
 

 
(20,338
)
 

 

 

 
(20,676
)
Redemption of preferred shares
(1,462
)
 

 

 

 

 

 

 
(1,462
)
Other
(1,157
)
 
20

 
1,139

 

 

 

 

 
2

Noncontrolling interest – loss

 

 

 

 

 

 
164

 
164

Balance November 2, 2013
$
1,305

 
$
24,322

 
$
184,608

 
$
692,380

 
$
(25,251
)
 
$
(17,857
)
 
$
2,091

 
$
861,598


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


8

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies

Interim Statements
The condensed consolidated financial statements and notes contained in this report are unaudited but reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results for the interim periods of the fiscal year ending February 1, 2014 ("Fiscal 2014") and of the fiscal year ended February 2, 2013 ("Fiscal 2013"). The results of operations for any interim period are not necessarily indicative of results for the full year. The interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Genesco Inc.'s (the Company’s) Annual Report on Form 10-K, as restated. See Note 2 for additional information.

Nature of Operations
The Company's business includes the design and sourcing, marketing and distribution of footwear and accessories through retail stores in the U.S., Puerto Rico and Canada primarily under the Journeys, Journeys Kidz, Shi by Journeys, Underground by Journeys and Johnston & Murphy banners and under the Schuh banner in the United Kingdom and the Republic of Ireland; through e-commerce websites including journeys.com, journeyskidz.com, shibyjourneys.com, undergroundbyjourneys.com, schuh.co.uk and johnstonmurphy.com and catalogs, and at wholesale, primarily under the Company's Johnston & Murphy brand, the recently relaunched Trask brand, the licensed Dockers brand and other brands that the Company licenses for footwear, and the Company's SureGrip line of slip-resistant, operational footwear. The Company's business also includes Lids Sports Group, which operates headwear and accessory stores in the U.S. and Canada primarily under the Lids, Hat World and Hat Shack banners; the Lids Locker Room and Lids Clubhouse businesses, consisting of sports-oriented fan shops featuring a broad array of licensed merchandise such as apparel, hats and accessories, sports decor and novelty products, operating under various trade names; licensed team merchandise departments in Macy's department stores operated under the name of Locker Room by Lids® and on macys.com, under a license agreement with Macy's; certain e-commerce operations including lids.com, lids.ca, lidslockerroom.com and lidsclubhouse.com; and an athletic team dealer business operating as Lids Team Sports. Including both the footwear businesses and the Lids Sports Group business, at November 2, 2013, the Company operated 2,537 retail stores in the U.S., Puerto Rico, Canada, the United Kingdom and the Republic of Ireland.
During the nine months ended November 2, 2013 and October 27, 2012, the Company operated five reportable business segments (not including corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz, Shi by Journeys and Underground by Journeys retail footwear chains, catalog and e-commerce operations; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Lids Sports Group, comprised as described in the preceding paragraph; (iv) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, e-commerce and catalog operations and wholesale distribution; and (v) Licensed Brands, comprised of Dockers® Footwear, sourced and marketed under a license from Levi Strauss & Company; SureGrip®Footwear, occupational footwear primarily sold directly to consumers; and other footwear brands.  




9

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Principles of Consolidation
All subsidiaries are consolidated in the Condensed Consolidated Financial Statements. All significant intercompany transactions and accounts have been eliminated.

Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant areas requiring management estimates or judgments include the following key financial areas:

Inventory Valuation
The Company values its inventories at the lower of cost or market.

In its footwear wholesale operations, its Schuh Group segment and its Lids Sports Group wholesale operations, except for the Anaconda Sports wholesale division, cost is determined using the first-in, first-out method. Market value is determined using a system of analysis which evaluates inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and selling prices reflected in future orders. The Company provides reserves when the inventory has not been marked down to market value based on current selling prices or when the inventory is not turning and is not expected to turn at levels satisfactory to the Company.

The Lids Sports Group retail segment and its Anaconda Sports wholesale division employ the moving average cost method for valuing inventories and apply freight using an allocation method.
The Company provides a valuation allowance for slow-moving inventory based on negative margins and estimated shrink based on historical experience and specific analysis, where appropriate.

In its retail operations, other than the Schuh Group and Lids Sports Group retail segments, the Company employs the retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories.

Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on, markups, markdowns, and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, the Company employs the retail inventory method in multiple subclasses of inventory with similar gross margins, and analyzes markdown requirements at the stock number level based on factors such as inventory turn, average selling price, and inventory age. In addition, the Company accrues



10

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

markdowns as necessary. These additional markdown accruals reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to provide
markdown support. In addition to markdown provisions, the Company maintains provisions for shrinkage and damaged goods based on historical rates.

Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends, and overall economic conditions. Failure to make appropriate conclusions regarding these factors may result in an overstatement or understatement of inventory value.

Impairment of Long-Lived Assets
The Company periodically assesses the realizability of its long-lived assets and evaluates such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying amount. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets. See also Notes 4 and 6.
The goodwill impairment test involves performing a qualitative assessment, on a reporting unit level, based on current circumstances. If the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a two-step impairment test will not be performed. However, if the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a two-step impairment test is performed. Alternatively, the Company may elect to bypass the qualitative assessment and proceed directly to the two-step impairment test, on a reporting unit level basis. The first step is a comparison of the fair value and carrying value of the business unit with which the goodwill is associated. The Company estimates fair value using the best information available, and computes the fair value derived by an income approach utilizing discounted cash flow projections. The income approach uses a projection of a reporting unit’s estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions. A key assumption in the Company’s fair value estimate is the weighted average cost of capital utilized for discounting its cash flow projections in its income approach. The Company believes the rate it used in its latest annual test, which was completed in the prior year fourth quarter, was consistent with the risks inherent in its business and with industry discount rates. The projection uses management’s best estimates of economic and market conditions over the projected period including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures.
Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements.





11

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss. The amount of impairment is determined by comparing the implied fair value of reporting
unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination.

Specifically, the Company would allocate the fair value to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference.

Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental proceedings and other legal matters. The Company has made pretax accruals for certain of these contingencies, including approximately $0.0 million and $0.2 million in the third quarter of Fiscal 2014 and 2013, respectively, and $0.4 million and $0.6 million in the first nine months of Fiscal 2014 and 2013, respectively. These charges are included in provision for discontinued operations, net in the Condensed Consolidated Statements of Operations because they relate to former facilities operated by the Company. The Company monitors these matters on an ongoing basis and, on a quarterly basis, management reviews the Company’s reserves and accruals, adjusting provisions as management deems necessary in view of changes in available information. Changes in estimates of liability are reported in the periods when they occur. Consequently, management believes that its reserve in relation to each proceeding is a best estimate of probable loss connected to the proceeding, or in cases in which no best estimate is possible, the minimum amount in the range of estimated losses, based upon its analysis of the facts and circumstances as of the close of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in environmental proceedings in particular, there can be no assurance that future developments will not require additional reserves, that some or all reserves will be adequate or that the amounts of any such additional reserves or any such inadequacy will not have a material adverse effect upon the Company’s financial condition or results of operations. See also Notes 4 and 10.

Revenue Recognition
Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales and value added taxes. Catalog and internet sales are recorded at estimated time of delivery to the customer and are net of estimated returns and exclude sales and value added taxes. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Shipping and handling costs charged to customers are included in net sales. Estimated returns are based on historical returns and claims. Actual amounts of markdowns have not differed materially from estimates. Actual returns and claims in any future period may differ from historical experience.




12

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Income Taxes
As part of the process of preparing the Condensed Consolidated Financial Statements, the Company is required to estimate its income taxes in each of the tax jurisdictions in which it operates. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within the Condensed Consolidated Balance Sheets. The Company then assesses the likelihood that its deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. To the extent the Company believes that recovery of an asset is at risk, valuation allowances are established. To the extent valuation allowances are established or increased in a period, the Company includes an expense within the tax provision in the Condensed Consolidated Statements of Operations. These deferred tax valuation allowances may be released in future years when management considers that it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, management will need to periodically evaluate whether or not all available evidence, such as future taxable income and reversal of temporary differences, tax planning strategies, and recent results of operations, provides sufficient positive evidence to offset any potential negative evidence that may exist at such time. In the event the deferred tax valuation allowance is released, the Company would record an income tax benefit for the portion or all of the deferred tax valuation allowance released. At November 2, 2013, the Company had a deferred tax valuation allowance of $3.6 million.

Income tax reserves for certain tax positions are determined using the methodology required by the Income Tax Topic of the Accounting Standards Codification ("Codification"). This methodology requires companies to assess each income tax position taken using a two step process. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may be subject to change or varying interpretation. If the Company’s determinations and estimates prove to be inaccurate, the resulting adjustments could be material to its future financial results.

The Company recorded an effective income tax rate of 39.3% in the third quarter of Fiscal 2014 compared to 20.2% for the same period last year and 40.2% and 28.5% for the first nine months of Fiscal 2014 and 2013, respectively. The tax rates for Fiscal 2013 were lower compared to Fiscal 2014 primarily due to the reversal of previously recorded charges related to uncertain tax positions due to the expiration of the applicable statutes of limitations and a settlement with state tax authorities more favorable than anticipated related to other uncertain tax positions.




13

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Postretirement Benefits Plan Accounting
Full-time employees who had at least 1,000 hours of service in calendar year 2004, except employees in the Lids Sports Group and Schuh Group segments, are covered by a defined benefit pension plan. The Company froze the defined benefit pension plan effective January 1, 2005. The Company also provides certain former employees with limited medical and life insurance benefits. The Company funds at least the minimum amount required by the Employee Retirement Income Security Act.

As required by the Compensation – Retirement Benefits Topic of the Codification, the Company is required to recognize the overfunded or underfunded status of postretirement benefit plans as an asset or liability in its Condensed Consolidated Balance Sheets and to recognize changes in that funded status in accumulated other comprehensive loss, net of tax, in the year in which the changes occur.

The Company accounts for the defined benefit pension plans using the Compensation-Retirement Benefits Topic of the Codification. As permitted under this topic, pension expense is recognized on an accrual basis over employees’ approximate service periods. The calculation of pension expense and the corresponding liability requires the use of a number of critical assumptions, including the expected long-term rate of return on plan assets and the assumed discount rate, as well as the recognition of actuarial gains and losses. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions.

Share-Based Compensation
The Company has share-based compensation plans covering certain members of management and non-employee directors. The Company recognizes compensation expense for share-based payments based on the fair value of the awards as required by the Compensation – Stock Compensation Topic of the Codification. There was no share-based compensation expense related to stock options for the third quarters and first nine months of Fiscal 2014 or 2013. The Company has not issued any new stock option awards since the first quarter of Fiscal 2008. For the third quarter of Fiscal 2014 and 2013, restricted stock expense was $3.2 million and $2.8 million, respectively. For the first nine months of Fiscal 2014 and 2013, restricted stock expense was $9.1 million and $7.5 million, respectively. The fair value of employee restricted stock is determined based on the closing price of the Company’s stock on the date of the grant. The benefits of tax deductions in excess of recognized compensation expense are reported as a financing cash flow.

There were no employee restricted stock or director restricted stock grants during the three months ended November 2, 2013 or October 27, 2012. During the nine months ended November 2, 2013, the Company issued 199,392 shares of employee restricted stock at a grant date fair value of $65.11 per share which vest in four equal annual installments over a four-year term. For the nine months ended October 27, 2012, the Company issued 194,232 shares of employee restricted stock at a grant date fair value of $57.58 per share which vest in four equal annual installments over a four-year term. For the nine months ended November 2, 2013, the Company issued 9,280 shares of director restricted stock at a weighted average price of $68.91 which vest on the first anniversary


14

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

of the grant date. For the nine months ended October 27, 2012, the Company issued 10,224 shares of director restricted stock at a weighted average price of $65.06, which vest on the first anniversary of the grant date. An outside director can elect irrevocably to receive all or a specified portion of his annual retainers for board membership and any committee chairmanship for the following fiscal year in a number of shares of restricted stock (the "Retainer Stock"). Shares of the Retainer Stock are granted as of the first business day of the fiscal year as to which the election is effective, subject to forfeiture to the extent not earned upon the outside director's ceasing to serve as a director or committee chairman during such fiscal year. During the nine months ended November 2, 2013, the Company issued 4,790 shares of Retainer Stock at a grant date fair value of $59.53 per share which vest over one year. The Company did not issue any Retainer Stock for the three months ended November 2, 2013 or the three and nine months ended October 27, 2012.

Cash and Cash Equivalents
Included in cash and cash equivalents at November 2, 2013, February 2, 2013 and October 27, 2012 are cash equivalents of $0.0 million, $0.2 million and $0.0 million, respectively. Cash equivalents are highly-liquid financial instruments having an original maturity of three months or less. At November 2, 2013, substantially all of the Company’s domestic cash was invested in deposit accounts at FDIC-insured banks. The majority of payments due from banks for domestic customer credit card transactions process within 24 - 48 hours and are accordingly classified as cash and cash equivalents.

At November 2, 2013, February 2, 2013 and October 27, 2012, outstanding checks drawn on zero-balance accounts at certain domestic banks exceeded book cash balances at those banks by approximately $43.3 million, $36.1 million and $52.0 million, respectively. These amounts are included in accounts payable.

Concentration of Credit Risk and Allowances on Accounts Receivable
The Company’s footwear wholesale businesses sell primarily to independent retailers and department stores across the United States. Receivables arising from these sales are not collateralized. Customer credit risk is affected by conditions or occurrences within the economy and the retail industry as well as by customer specific factors. The Company’s Lids Team Sports wholesale business sells primarily to colleges and high school athletic teams and their fan bases. Including both footwear wholesale and Lids Team Sports wholesale business receivables, one customer accounted for 8% and another customer accounted for 7% of the Company’s total trade receivables balance, while no other customer accounted for more than 7% of the Company’s total trade receivables balance as of November 2, 2013.

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information, as well as customer specific factors. The Company also establishes allowances for sales returns, customer deductions and co-op advertising based on specific circumstances, historical trends and projected probable outcomes.





15

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized over the estimated useful life of related assets. Depreciation and amortization expense are computed principally by the straight-line method over the following estimated useful lives:

Buildings and building equipment
20-45 years
Computer hardware, software and equipment
3-10 years
Furniture and fixtures
10 years

Leases
Leasehold improvements and properties under capital leases are amortized on the straight-line method over the shorter of their useful lives or their related lease terms and the charge to earnings is included in selling and administrative expenses in the Condensed Consolidated Statements of Operations.

Certain leases include rent increases during the initial lease term. For these leases, the Company recognizes the related rental expense on a straight-line basis over the term of the lease (which
includes any rent holidays and the pre-opening period of construction, renovation, fixturing and merchandise placement) and records the difference between the amounts charged to operations and amounts paid as deferred rent.

The Company occasionally receives reimbursements from landlords to be used towards construction of the store the Company intends to lease. Leasehold improvements are recorded at their gross costs including items reimbursed by landlords. The reimbursements are amortized as a reduction
of rent expense over the initial lease term. Tenant allowances of $23.8 million, $20.0 million and $20.0 million at November 2, 2013, February 2, 2013 and October 27, 2012, respectively, and deferred rent of $40.5 million, $37.9 million and $37.2 million at November 2, 2013, February 2, 2013 and October 27, 2012, respectively, are included in deferred rent and other long-term liabilities on the Condensed Consolidated Balance Sheets.

Goodwill and Other Intangibles
Under the provisions of the Intangibles – Goodwill and Other Topic of the Codification, goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually, during the fourth quarter, for impairment. The Company will update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of the business unit with which the goodwill is associated below its carrying amount. It is also required that intangible assets with finite lives be amortized over their respective lives to their estimated residual values, and reviewed for impairment in accordance with the Property, Plant and Equipment Topic of the Codification.

Intangible assets of the Company with indefinite lives are primarily goodwill and identifiable trademarks acquired in connection with the acquisition of Schuh Group Ltd. in June 2011 and Hat World Corporation in April 2004. The Condensed Consolidated Balance



16

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Sheets include goodwill of $180.4 million for the Lids Sports Group, $101.8 million for the Schuh Group and $0.8 million for Licensed Brands at November 2, 2013, $172.3 million for the Lids
Sports Group, $100.7 million for the Schuh Group and $0.8 million for Licensed Brands at February 2, 2013 and $168.8 million for the Lids Sports Group, $102.6 million for the Schuh Group and $0.8 million for Licensed Brands at October 27, 2012.

The Company tests for impairment of intangible assets with an indefinite life, relying on a number of factors including operating results, business plans, projected future cash flows and observable market data. The impairment test for identifiable assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying amount. The Company has not had an impairment charge for intangible assets.

In connection with acquisitions, the Company records goodwill on its Condensed Consolidated Financial Statements. This asset is not amortized but is subject to an impairment test at least annually, based on projected future cash flows from the acquired business discounted at a rate commensurate with the risk the Company considers to be inherent in its current business model. The Company performs the impairment test annually as of the close of its fiscal year, or more frequently if events or circumstances indicate that the value of the asset might be impaired.

As a result of the various acquisitions comprising the Lids Team Sports team dealer business, the Company carries goodwill related to such acquisitions at a value of $14.4 million on its Condensed Consolidated Balance Sheets. The Company found that the result of its annual impairment test in January 2013, which valued the business at approximately $2.8 million in excess of its carrying value, indicated no impairment at that time. The Company may determine in future impairment tests that some or all of the carrying value of the goodwill may not be recoverable. Such a finding would require a write-off of the amount of the carrying value that is impaired, which would reduce the Company's profitability in the period of the impairment charge. Holding all other assumptions constant as of the measurement date, the Company noted that an increase in the weighted average cost of capital of 100 basis points would reduce the fair value of the Lids Team Sports business by $7.4 million. Furthermore, the Company noted that a decrease in projected annual revenue growth by one percent would reduce the fair value of the Lids Team Sports business by $0.4 million. However, if other assumptions do not remain constant, the fair value of the Lids Team Sports business may decrease by a greater amount.

Identifiable intangible assets of the Company with finite lives are trademarks, customer lists, in-place leases, non-compete agreements and a vendor contract. They are subject to amortization based upon their estimated useful lives. Finite-lived intangible assets are evaluated for impairment using a process similar to that used to evaluate other definite-lived long-lived assets, a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset.





17

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Fair Value of Financial Instruments
The carrying amounts and fair values of the Company’s financial instruments at November 2, 2013 and February 2, 2013 are:

Fair Values
 
 
 
 
 
 
 
In thousands
November 2, 2013
 
February 2, 2013
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
U.S. Revolver Borrowings
$
79,000

 
$
79,106

 
$
27,700

 
$
27,742

UK Term Loans
18,957

 
19,003

 
22,982

 
22,982


Debt fair values were determined using a discounted cash flow analysis based on current market interest rates for similar types of financial instruments and would be classified in Level 2 as defined in Note 6.

Carrying amounts reported on the Condensed Consolidated Balance Sheets for cash, cash equivalents, receivables and accounts payable approximate fair value due to the short-term maturity of these instruments.

Cost of Sales
For the Company’s retail operations, the cost of sales includes actual product cost, the cost of transportation to the Company’s warehouses from suppliers and the cost of transportation from the Company’s warehouses to the stores. Additionally, the cost of its distribution facilities allocated to its retail operations is included in cost of sales.

For the Company’s wholesale operations, the cost of sales includes the actual product cost and the cost of transportation to the Company’s warehouses from suppliers.

Selling and Administrative Expenses
Selling and administrative expenses include all operating costs of the Company excluding (i) those related to the transportation of products from the supplier to the warehouse, (ii) for its retail operations, those related to the transportation of products from the warehouse to the store and (iii) costs of its distribution facilities which are allocated to its retail operations. Wholesale and unallocated retail costs of distribution are included in selling and administrative expenses on the Condensed Consolidated Statements of Operations in the amounts of $2.3 million and $2.2 million for the third quarters of Fiscal 2014 and 2013, respectively, and $6.5 million and $6.0 million for the first nine months of Fiscal 2014 and 2013, respectively.

Gift Cards
The Company has a gift card program that began in calendar year 1999 for its Lids Sports operations and calendar year 2000 for its footwear operations. The gift cards issued to date do not expire. As such, the Company recognizes income when: (i) the gift card is redeemed by the customer; or (ii) the likelihood of the gift card being redeemed by the customer for the purchase of goods in the future is remote and there are no related escheat laws (referred to as “breakage”). The gift card

18

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

breakage rate is based upon historical redemption patterns and income is recognized for unredeemed gift cards in proportion to those historical redemption patterns.

Gift card breakage is recognized in revenues each period for which financial statements are updated. Gift card breakage recognized as revenue was $0.2 million and less than $0.1 million for the third quarter of Fiscal 2014 and 2013, respectively, and $0.3 million and $0.2 million for the first nine months of Fiscal 2014 and 2013, respectively. The Condensed Consolidated Balance Sheets include an accrued liability for gift cards of $11.1 million, $13.1 million and $9.7 million at November 2, 2013, February 2, 2013 and October 27, 2012, respectively.

Buying, Merchandising and Occupancy Costs
The Company records buying, merchandising and occupancy costs in selling and administrative expense on the Condensed Consolidated Statements of Operations. Because the Company does not include these costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin.

Shipping and Handling Costs
Shipping and handling costs related to inventory purchased from suppliers are included in the cost of inventory and are charged to cost of sales in the period that the inventory is sold. All other shipping and handling costs are charged to cost of sales in the period incurred except for wholesale and unallocated retail costs of distribution, which are included in selling and administrative expenses on the Condensed Consolidated Statements of Operations.

Preopening Costs
Costs associated with the opening of new stores are expensed as incurred, and are included in selling and administrative expenses on the accompanying Condensed Consolidated Statements of Operations.

Store Closings and Exit Costs
From time to time, the Company makes strategic decisions to close stores or exit locations or activities. If stores or operating activities to be closed or exited constitute components, as defined by the Property, Plant and Equipment Topic of the Codification, and will not result in a migration of customers and cash flows, these closures will be considered discontinued operations when the related assets meet the criteria to be classified as held for sale, or at the cease-use date, whichever occurs first. The results of operations of discontinued operations are presented retroactively, net of tax, as a separate component on the Condensed Consolidated Statements of Operations, if material individually or cumulatively. To date in Fiscal 2014, no store closings meeting the discontinued operations criteria have been material individually or cumulatively.

Assets related to planned store closures or other exit activities are reflected as assets held for sale and recorded at the lower of carrying value or fair value less costs to sell when the required criteria, as defined by the Property, Plant and Equipment Topic of the Codification, are satisfied. Depreciation ceases on the date that the held for sale criteria are met.



19

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Assets related to planned store closures or other exit activities that do not meet the criteria to be classified as held for sale are evaluated for impairment in accordance with the Company’s normal impairment policy, but with consideration given to revised estimates of future cash flows. In any event, the remaining depreciable useful lives are evaluated and adjusted as necessary.

Exit costs related to anticipated lease termination costs, severance benefits and other expected charges are accrued for and recognized in accordance with the Exit or Disposal Cost Obligations Topic of the Codification.

Advertising Costs
Advertising costs are predominantly expensed as incurred. Advertising costs were $14.1 million and $12.5 million for the third quarters of Fiscal 2014 and 2013, respectively, and $38.0 million and $33.6 million for the first nine months of Fiscal 2014 and 2013, respectively. Direct response advertising costs for catalogs are capitalized in accordance with the Other Assets and Deferred Costs Topic for Capitalized Advertising Costs of the Codification. Such costs are amortized over the estimated future period as revenues are realized from such advertising, not to exceed six months. The Condensed Consolidated Balance Sheets include prepaid assets for direct response advertising costs of $3.6 million, $1.4 million and $1.8 million at November 2, 2013, February 2, 2013 and October 27, 2012, respectively.

Consideration to Resellers
The Company does not have any written buy-down programs with retailers, but the Company has provided certain retailers with markdown allowances for obsolete and slow moving products that are in the retailer’s inventory. The Company estimates these allowances and provides for them as reductions to revenues at the time revenues are recorded. Markdowns are negotiated with retailers and changes are made to the estimates as agreements are reached. Actual amounts for markdowns have not differed materially from estimates.

Cooperative Advertising
Cooperative advertising funds are made available to most of the Company’s wholesale footwear customers. In order for retailers to receive reimbursement under such programs, the retailer must meet specified advertising guidelines and provide appropriate documentation of expenses to be reimbursed. The Company’s cooperative advertising agreements require that wholesale customers present documentation or other evidence of specific advertisements or display materials used for the Company’s products by submitting the actual print advertisements presented in catalogs, newspaper inserts or other advertising circulars, or by permitting physical inspection of displays. Additionally, the Company’s cooperative advertising agreements require that the amount of reimbursement requested for such advertising or materials be supported by invoices or other evidence of the actual costs incurred by the retailer. The Company accounts for these cooperative advertising costs as selling and administrative expenses, in accordance with the Revenue Recognition Topic for Customer Payments and Incentives of the Codification.

Cooperative advertising costs recognized in selling and administrative expenses on the Condensed Consolidated Statements of Operations were $0.9 million and $1.1 million for the third quarters of Fiscal 2014 and 2013, respectively, and $2.7 million and $2.8 million for the first nine months of

20

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Fiscal 2014 and 2013, respectively. During the first nine months of Fiscal 2014 and 2013, the Company’s cooperative advertising reimbursements paid did not exceed the fair value of the benefits received under those agreements.

Vendor Allowances
From time to time, the Company negotiates allowances from its vendors for markdowns taken or expected to be taken. These markdowns are typically negotiated on specific merchandise and for specific amounts. These specific allowances are recognized as a reduction in cost of sales in the
period in which the markdowns are taken. Markdown allowances not attached to specific inventory on hand or already sold are applied to concurrent or future purchases from each respective vendor.

The Company receives support from some of its vendors in the form of reimbursements for cooperative advertising and catalog costs for the launch and promotion of certain products. The reimbursements are agreed upon with vendors and represent specific, incremental, identifiable costs incurred by the Company in selling the vendor’s specific products. Such costs and the related reimbursements are accumulated and monitored on an individual vendor basis, pursuant to the respective cooperative advertising agreements with vendors. Such cooperative advertising
reimbursements are recorded as a reduction of selling and administrative expenses in the same period in which the associated expense is incurred. If the amount of cash consideration received exceeds the costs being reimbursed, such excess amount would be recorded as a reduction of cost of sales.

Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses were $0.6 million and $0.9 million for the third quarters of Fiscal 2014 and 2013, respectively, and $1.8 million and $2.5 million for the first nine months of Fiscal 2014 and 2013, respectively. During the first nine months of Fiscal 2014 and 2013, the Company’s cooperative advertising reimbursements received were not in excess of the costs incurred.

Environmental Costs
Environmental expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated and are evaluated independently of any future claims for recovery. Generally, the timing of these accruals coincides with completion of a feasibility study or the Company's commitment to a formal plan of action. Costs of future expenditures for environmental remediation obligations are not discounted to their present value.

Earnings Per Common Share
Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities to issue common stock were exercised or converted to common stock (see Note 9).



21

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

Other Comprehensive Income
The Comprehensive Income Topic of the Codification requires, among other things, the Company’s pension liability adjustment, postretirement liability adjustment and foreign currency translation adjustments to be included in other comprehensive income net of tax. Accumulated other comprehensive loss at November 2, 2013 consisted of $23.2 million of cumulative pension liability adjustments, net of tax, a cumulative post retirement liability adjustment of $0.3 million, net of tax, and a cumulative foreign currency translation adjustment of $1.8 million.

The following table summarizes the components of accumulated other comprehensive income for the quarter ended November 2, 2013:

 
 
Foreign Currency Translation
Unrecognized Pension/Postretirement Benefit Costs
Total Accumulated Other Comprehensive Income (Loss)
(In thousands)
 
 
 
 
Balance February 2, 2013
 
$
(1,931
)
$
(26,310
)
$
(28,241
)
Other comprehensive income (loss) before reclassifications:
 
 
 
 
  Foreign currency translation adjustment
 
131


131

Amounts reclassified from AOCI:
 
 
 
 
  Amortization of net actuarial loss (1)
 

4,721

4,721

  Amortization reclassified from AOCI, before tax
 

4,721

4,721

Income tax expense (2)
 

1,862

1,862

Current period other comprehensive (loss) income, net of tax
 
131

2,859

2,990

Balance November 2, 2013
 
$
(1,800
)
$
(23,451
)
$
(25,251
)

(1) Amount is included in net periodic benefit cost, which is recorded in selling and administrative expense on the Condensed Consolidated Statements of Operations.
(2) Relates to amounts reclassified from AOCI.

Business Segments
The Segment Reporting Topic of the Codification requires that companies disclose “operating segments” based on the way management disaggregates the Company’s operations for making internal operating decisions (see Note 11).










22

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 1
Summary of Significant Accounting Policies, Continued

New Accounting Principles
In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“AOCI”), which sets forth additional disclosure requirements for items reclassified out of AOCI and into net income, and is effective for annual and interim reporting periods beginning after December 15, 2012. The Company adopted ASU No. 2013-02 in the first quarter of Fiscal 2014 by presenting amounts reclassified out of AOCI as a separate disclosure in Note 1 to the Condensed Consolidated Financial Statements. Amounts reclassified out of AOCI were related to amortization of net actuarial loss associated with the Company's pension and postretirement plans.





23

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 2
Restatement of Previously Issued Financial Statements

The Company restated its Consolidated Financial Statements for Fiscal 2013, 2012 and 2011 in its Form 10-K/A filed September 24, 2013 and restated its Condensed Consolidated Financial Statements for the three month periods ended May 4, 2013 and April 28, 2012 in its Form 10-Q/A filed September 24, 2013. This report on Form 10-Q includes restated Condensed Consolidated Financial Statements for the three and nine months ended October 27, 2012.

Under the Company's EVA Incentive Plan, bonus awards in excess of a specified cap in any year are retained and paid out over the three subsequent years, subject to reduction or elimination by deteriorating financial performance or subject to forfeiture if the participant voluntarily resigns from employment with the Company or is terminated for cause before the retained amount is paid. Historically, the Company has expensed the full amount of the retained bonus in the year in which it was determined. As a result of a review of this treatment, the Company has determined that the retained bonus should be expensed across the three-year service period rather than fully expensed in the year it is determined.

Following is a summary of the effects of corrections on the Company's Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Income and Statements of Cash Flows for the three and nine months ended October 27, 2012. The corrections had no impact on total revenues or total cash flows for the restated periods and had no impact on the Company's compliance with debt covenants in any period presented.


24

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 2
Restatement of Previously Issued Financial Statements, Continued


 
 
As of and for the three months Ended October 27, 2012
 
 
As Previously Reported
Adjustments
As Restated
(In Thousands, except per share amounts)
 
 
 
 
Condensed Consolidated Balance Sheets
 
 
 
 
Deferred income taxes
 
$
30,711

$
(7,776
)
$
22,935

Total assets
 
1,433,398

(7,776
)
1,425,622

Accrued employee compensation
 
64,362

(9,580
)
54,782

Accrued other taxes
 
22,962

(1,134
)
21,828

Total current liabilities
 
388,935

(10,714
)
378,221

Deferred rent and other long-term liabilities
 
152,499

(10,095
)
142,404

Total liabilities
 
657,508

(20,809
)
636,699

Retained earnings
 
625,499

13,033

638,532

Total Genesco equity
 
773,879

13,033

786,912

Total equity
 
775,890

13,033

788,923

Total liabilities and equity
 
1,433,398

(7,776
)
1,425,622

Condensed Consolidated Statements of Operations and Comprehensive Income
 
 
 
 
Cost of sales
 
$
330,110

$
(64
)
$
330,046

Selling and administrative expenses
 
281,613

(1,766
)
279,847

Earnings from operations
 
52,378

1,830

54,208

Earnings from continuing operations before income taxes
 
51,077

1,830

52,907

Income tax expense
 
10,108

578

10,686

Earnings from continuing operations
 
40,969

1,252

42,221

Net earnings
 
40,875

1,252

42,127

Comprehensive Income
 
44,031

1,252

45,283

Basic EPS - continuing operations
 
1.74

0.05

1.79

Basic EPS - net earnings
 
1.73

0.05

1.78

Diluted EPS - continuing operations
 
1.71

0.05

1.76

Diluted EPS - net earnings
 
1.70

0.06

1.76

Condensed Consolidated Statements of Cash Flows
 
 
 
 
Net earnings
 
$
40,875

$
1,252

$
42,127

Deferred income taxes
 
(5,121
)
578

(4,543
)
Other accrued liabilities
 
9,552

(2,007
)
7,545

Other assets and liabilities
 
689

177

866







25

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 2
Restatement of Previously Issued Financial Statements, Continued


 
 
As of and for the nine months ended October 27, 2012
 
 
As Previously Reported
Adjustments
As Restated
(In Thousands, except per share amounts)
 
 
 
 
Condensed Consolidated Balance Sheets
 
 
 
 
Deferred income taxes
 
$
30,711

$
(7,776
)
$
22,935

Total assets
 
1,433,398

(7,776
)
1,425,622

Accrued employee compensation
 
64,362

(9,580
)
54,782

Accrued other taxes
 
22,962

(1,134
)
21,828

Total current liabilities
 
388,935

(10,714
)
378,221

Deferred rent and other long-term liabilities
 
152,499

(10,095
)
142,404

Total liabilities
 
657,508

(20,809
)
636,699

Retained earnings
 
625,499

13,033

638,532

Total Genesco equity
 
773,879

13,033

786,912

Total equity
 
775,890

13,033

788,923

Total liabilities and equity
 
1,433,398

(7,776
)
1,425,622

Condensed Consolidated Statements of Operations and Comprehensive Income
 
 
 
 
Cost of sales
 
$
894,090

$
(343
)
$
893,747

Selling and administrative expenses
 
807,798

(1,373
)
806,425

Earnings from operations
 
105,340

1,716

107,056

Earnings from continuing operations before income taxes
 
101,715

1,716

103,431

Income tax expense
 
29,394

53

29,447

Earnings from continuing operations
 
72,321

1,663

73,984

Net earnings
 
72,009

1,663

73,672

Comprehensive Income
 
75,306

1,663

76,969

Basic EPS - continuing operations
 
3.05

0.07

3.12

Basic EPS - net earnings
 
3.04

0.07

3.11

Diluted EPS - continuing operations
 
3.00

0.07

3.07

Diluted EPS - net earnings
 
2.98

0.07

3.05

Condensed Consolidated Statements of Cash Flows
 
 
 
 
Net earnings
 
$
72,009

$
1,663

$
73,672

Deferred income taxes
 
(7,325
)
272

(7,053
)
Other accrued liabilities
 
227

(9,574
)
(9,347
)
Other assets and liabilities
 
1,320

7,639

8,959









26

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 3
Intangible Assets

Other intangibles by major classes were as follows:

 
Leases
 
Customer Lists
 
Other*
 
Total
(In Thousands)
Nov. 2, 2013

Feb. 2, 2013

 
Nov. 2, 2013

Feb. 2, 2013

 
Nov. 2, 2013

Feb. 2, 2013

 
Nov. 2, 2013

Feb. 2, 2013

Gross other intangibles
$
12,930

$
12,584

 
$
14,164

$
14,116

 
$
2,190

$
2,118

 
$
29,284

$
28,818

Accumulated amortization
(11,715
)
(10,800
)
 
(6,824
)
(5,312
)
 
(1,243
)
(1,108
)
 
(19,782
)
(17,220
)
Net Other Intangibles
$
1,215

$
1,784

 
$
7,340

$
8,804

 
$
947

$
1,010

 
$
9,502

$
11,598


*Includes non-compete agreements, vendor contract and backlog.

The amortization of intangibles, including trademarks, was $0.8 million for each of the third quarters of Fiscal 2014 and 2013, and $2.4 million and $2.5 million for the first nine months of Fiscal 2014 and 2013, respectively. The amortization of intangibles, including trademarks, are expected to be $3.2 million, $2.8 million, $2.1 million, $1.6 million and $1.0 million for Fiscal 2014, 2015, 2016, 2017 and 2018, respectively.


27

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 4
Asset Impairments and Other Charges and Discontinued Operations

Asset Impairments and Other Charges

In accordance with Company policy, assets (other than goodwill and intangibles) are determined to be impaired when the revised estimated future cash flows are insufficient to recover the carrying costs. Impairment charges represent the excess of the carrying value over the fair value of those assets.

Asset impairment charges are reflected as a reduction of the net carrying value of property and equipment, and in asset impairments and other, net in the accompanying Condensed Consolidated Statements of Operations.

The Company recorded a pretax charge of $1.5 million in the third quarter of Fiscal 2014, including a $0.9 million charge for network intrusion expenses, a $0.4 million charge for retail store asset impairments and a $0.3 million charge for other legal matters. The Company recorded a pretax gain of $(4.3) million in the first nine months of Fiscal 2014, including an $(8.3) million gain on the lease termination of a New York City Journeys store, partially offset by charges of $1.8 million for retail store asset impairments, $1.4 million for network intrusion expenses and $0.8 million for other legal matters.

The Company recorded a pretax charge to earnings of $0.4 million in the third quarter of Fiscal 2013, including $0.3 million for retail store asset impairments and $0.1 million for other legal matters. The Company recorded a pretax charge to earnings of $0.9 million in the first nine months of Fiscal 2013, including $0.7 million for retail store asset impairments, $0.1 million for network intrusion expenses and $0.1 million for other legal matters.

Discontinued Operations

Accrued Provision for Discontinued Operations
 
In thousands
Facility
Shutdown
Costs

Balance January 28, 2012
$
12,517

Additional provision Fiscal 2013
796

Charges and adjustments, net
(1,962
)
Balance February 2, 2013
11,351

Additional provision Fiscal 2014
445

Charges and adjustments, net
(415
)
Balance November 2, 2013*
11,381

Current provision for discontinued operations
7,223

Total Noncurrent Provision for Discontinued Operations    
$
4,158


*Includes a $11.9 million environmental provision, including $7.7 million in current provision for discontinued operations.


28

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 5
Inventories
            
In thousands
November 2, 2013

 
February 2, 2013

Raw materials
$
24,696

 
$
24,223

Wholesale finished goods
56,524

 
57,161

Retail merchandise
613,036

 
423,960

Total Inventories
$
694,256

 
$
505,344


Note 6
Fair Value

The Fair Value Measurements and Disclosures Topic of the Codification defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. This Topic defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.


29

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 6
Fair Value, Continued

The following table presents the Company’s assets (which excludes the Company's pension plan assets) and liabilities measured at fair value on a nonrecurring basis as of November 2, 2013 aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):
 
Long-Lived Assets
Held and Used

 
Level 1

 
Level 2

 
Level 3

 
Total
Losses

Measured as of May 4, 2013
$
191

 
$

 
$

 
$
191

 
$
1,208

Measured as of August 3, 2013
93

 

 

 
93

 
209

Measured as of November 2, 2013
514

 

 

 
514

 
350

  Sub-total asset impairment YTD
 
 
 
 
 
 
 
 
$
1,767


In accordance with the Property, Plant and Equipment Topic of the Codification, the Company recorded $1.8 million of impairment charges as a result of the fair value measurement of its long-lived assets held and used on a nonrecurring basis during the nine months ended November 2, 2013. These charges are reflected in asset impairments and other, net on the Condensed Consolidated Statements of Operations.

The Company used a discounted cash flow model to estimate the fair value of these long-lived assets. Discount rate and growth rate assumptions are derived from current economic conditions, expectations of management and projected trends of current operating results. As a result, the Company has determined that the majority of the inputs used to value its long-lived assets held and used are unobservable inputs that fall within Level 3 of the fair value hierarchy.

Note 7
Defined Benefit Pension Plans and Other Benefit Plans


Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
Three Months Ended
 
Three Months Ended
In thousands
November 2, 2013

 
October 27, 2012

 
November 2, 2013

 
October 27, 2012

Service cost
$
88

 
$
88

 
$
95

 
$
89

Interest cost
1,145

 
1,239

 
33

 
39

Expected return on plan assets
(1,663
)
 
(1,750
)
 

 

Amortization:
 
 
 
 
 
 
 
Prior service cost

 
1

 

 

Losses
1,512

 
1,478

 
21

 
21

Net amortization
1,512

 
1,479

 
21

 
21

Net Periodic Benefit Cost
$
1,082

 
$
1,056

 
$
149

 
$
149




30

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)



Note 7
Defined Benefit Pension Plans and Other Benefit Plans, Continued


Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Benefits
 
Nine Months Ended
 
Nine Months Ended
In thousands
November 2, 2013

 
October 27, 2012

 
November 2, 2013

 
October 27, 2012

Service cost
$
264

 
$
264

 
$
321

 
$
267

Interest cost
3,438

 
3,722

 
119

 
117

Expected return on plan assets
(4,991
)
 
(5,254
)
 

 

Amortization:
 
 
 
 
 
 
 
Prior service cost

 
3

 

 

Losses
4,648

 
4,554

 
73

 
63

Net amortization
4,648

 
4,557

 
73

 
63

Net Periodic Benefit Cost
$
3,359

 
$
3,289

 
$
513

 
$
447



There is no cash contribution required for the Plan in 2013.







31

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 8
Equity

Non-Redeemable Preferred Stock

 
 
Shares
Authorized
 
Number of Shares Outstanding
Amounts in Thousands
Common
Convertible
Ratio
 
No. of
Votes per share
Class (In order of preference)*
 
 
November 2, 2013
 
February 2, 2013
 
November 2, 2013
 
February 2, 2013
 
 
Subordinated Serial Preferred (Cumulative)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate
 
3,000,000

** 

 

 

 

 
N/A
  
N/A
$2.30 Series 1
 
64,368

  

 
16,203

 
$

 
$
648

 
.83
  
1
$4.75 Series 3
 
40,449

  

 
7,398

 

 
740

 
2.11
  
2
$4.75 Series 4
 
53,764

  

 
3,247

 

 
325

 
1.52
  
1
Series 6
 
800,000

  

 

 

 

 
 
 
100
$1.50 Subordinated Cumulative Preferred
 
5,000,000

  

 
30,067

 

 
902

 
 
 
1
 
 
 
 

 
56,915

 

 
2,615

 
 
 
 
Employees’ Subordinated Convertible Preferred
 
5,000,000

  
46,069

 
46,852

 
1,382

 
1,405

 
1.00
*** 
1
Stated Value of Issued Shares
 
 
 
 
 
 
 
1,382

 
4,020

 
 
 
 
Employees’ Preferred Stock Purchase Accounts
 
 
 
 
 
 
 
(77
)
 
(96
)
 
 
 
 
Total Non-Redeemable Preferred Stock
 
 
 
 
 
 
 
$
1,305

 
$
3,924

 
 
 
 

*    In order of preference for liquidation and dividends.

**
The Company’s charter permits the board of directors to issue Subordinated Serial Preferred Stock in as many series, each with as many shares and such rights and preferences, as the board may designate.

***    Also convertible into one share of $1.50 Subordinated Cumulative Preferred Stock.









32

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 8
Equity, Continued
Preferred Stock Transactions

In thousands
Non-Redeemable
Preferred Stock
 
Non-Redeemable
Employees’
Preferred Stock
 
Employees’
Preferred
Stock
Purchase
Accounts
 
Total
Non-Redeemable
Preferred Stock
Balance January 28, 2012
3,621

 
1,437

 
(101
)
 
4,957

Other stock conversions
(1,006
)
 
(32
)
 
5

 
(1,033
)
Balance February 2, 2013
2,615

 
1,405

 
(96
)
 
3,924

Preferred stock redemptions
(1,462
)
 

 

 
(1,462
)
Other stock conversions
(1,153
)
 
(23
)
 
19

 
(1,157
)
Balance November 2, 2013
$

 
$
1,382

 
$
(77
)
 
$
1,305


Subordinated Serial Preferred Stock (Cumulative):

The Company issued a notice of mandatory redemption effective April 30, 2013, to its holders of Subordinated Serial Preferred Stock $2.30 Series 1, $4.75 Series 3 and $4.75 Series 4 during the first quarter of Fiscal 2014. The Series 1 preferred stock was redeemed at $40 per share plus accumulated dividends. For the three months ended May 4, 2013, 13,713 shares of Series 1 preferred stock were converted to common stock and 2,490 shares of Series 1 preferred stock were redeemed. The Series 3 and 4 preferred stocks were redeemed at $100 per share plus accumulated dividends. For the three months ended May 4, 2013, 6,046 shares of Series 3 preferred stock were converted to common stock and 1,352 shares of Series 3 preferred stock were redeemed. For the three months ended May 4, 2013, 3,247 shares of Series 4 preferred stock were redeemed. The total cost of the redemption for Series 1, 3 and 4 preferred stock was $0.6 million.

The Company’s shareholders’ rights plan grants to common shareholders the right to purchase, at a specified exercise price, a fraction of a share of subordinated serial preferred stock, Series 6, in the event of an acquisition of, or an announced tender offer for, 15% or more of the Company’s outstanding common stock. Upon any such event, each right also entitles the holder (other than the person making such acquisition or tender offer) to purchase, at the exercise price, shares of common stock having a market value of twice the exercise price. In the event the Company is acquired in a transaction in which the Company is not the surviving corporation, each right would entitle its holder to purchase, at the exercise price, shares of the acquiring company having a market value of twice the exercise price. The rights expire in March 2020, are redeemable under certain circumstances for $0.01 per right and are subject to exchange for one share of common stock or an equivalent amount of preferred stock at any time after the event which makes the rights exercisable and before a majority of the Company’s common stock is acquired.









33

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 8
Equity, Continued

$1.50 Subordinated Cumulative Preferred Stock:

The Company issued a notice of mandatory redemption effective April 30, 2013, to its holders of $1.50 Subordinated Cumulative Preferred Stock during the first quarter of Fiscal 2014. The $1.50 Subordinated Cumulative Preferred Stock was redeemed at $30 per share plus accumulated dividends. For the three months ended May 4, 2013, 30,067 shares of $1.50 Subordinated Cumulative Preferred Stock were redeemed. The total cost of the redemption for the $1.50 Subordinated Cumulative Preferred Stock was $0.9 million.

Employees’ Subordinated Convertible Preferred Stock:
Stated and liquidation values are 88 times the average quarterly per share dividend paid on common stock for the previous eight quarters (if any), but in no event less than $30 per share.


34

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)


Note 9
Earnings Per Share


For the Three Months Ended

For the Three Months Ended (As restated)

November 2, 2013

October 27, 2012
(In thousands, except
     per share amounts)