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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended November 2, 2019
 
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 Pike
 
37217-2895
Nashville,
Tennessee
 
(Zip Code)
(Address of principal executive offices)
 
Registrant's telephone number, including area code: (615) 367-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $1.00 par value
GCO
New York Stock Exchange

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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer; an accelerated filer; a non-accelerated filer; a smaller reporting company; or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
 
Large accelerated filer
 
 
Accelerated filer
 
 
 
 
Non-accelerated filer
 
 
Smaller reporting company
Emerging growth company
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes      No  
As of November 29, 2019, 14,700,187 shares of the registrant's common stock were outstanding.
 



INDEX
 
 
 
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



3


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,
2019

 
February 2,
2019

 
November 3,
2018

Current Assets:
 
 
 
 
 
  Cash and cash equivalents
$
55,826

 
$
167,355

 
$
53,423

  Accounts receivable, net of allowances of $2,457 at Nov. 2, 2019,
 
 
 
 
 
$2,894 at Feb. 2, 2019 and $3,217 at Nov. 3, 2018
34,849

 
132,390

 
39,158

  Inventories
473,940

 
366,667

 
454,673

  Prepaids and other current assets
36,179

 
64,634

 
60,159

  Current assets - discontinued operations

 

 
235,689

Total current assets
600,794

 
731,046

 
843,102

 
 
 
 
 
 
Property and equipment:
 
 
 
 
 
Land
7,943

 
7,953

 
7,934

Buildings and building equipment
82,467

 
82,621

 
82,317

Computer hardware, software and equipment
139,814

 
138,147

 
135,297

Furniture and fixtures
130,013

 
129,625

 
128,919

Construction in progress
12,911

 
5,920

 
13,230

Improvements to leased property
339,721

 
341,134

 
339,995

Property and equipment, at cost
712,869

 
705,400

 
707,692

Accumulated depreciation
(451,588
)
 
(428,025
)
 
(421,839
)
Property and equipment, net
261,281

 
277,375

 
285,853

Operating lease right of use asset
750,855

 

 

Goodwill
92,166

 
93,081

 
92,396

Trademarks, net of accumulated amortization of zero at Nov. 2, 2019,
 
 
 
 
 
   Feb. 2, 2019 and Nov. 3, 2018
30,637

 
30,904

 
30,714

Other intangibles, net of accumulated amortization of $1,794 at
 
 
 
 
 
Nov. 2, 2019, $4,680 at Feb. 2, 2019 and $4,574 at Nov. 3, 2018

 
943

 
1,014

Deferred income taxes
25,188

 
21,335

 
25,015

Other noncurrent assets
24,571

 
26,397

 
27,697

Non-current assets - discontinued operations

 

 
124,922

Total Assets
$
1,785,492

 
$
1,181,081

 
$
1,430,713










4


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

Liabilities and Equity
November 2,
2019

 
February 2,
2019

 
November 3,
2018

Current Liabilities:
 
 
 
 
 
  Accounts payable
$
195,906

 
$
158,603

 
$
176,451

  Accrued employee compensation
31,531

 
43,246

 
28,716

  Accrued other taxes
12,978

 
17,389

 
16,459

  Accrued income taxes
73

 
2,133

 
69

  Current portion – long-term debt
17,146

 
8,992

 
9,325

  Current portion - operating lease liability
145,788

 

 

  Other accrued liabilities
44,614

 
45,313

 
40,204

  Provision for discontinued operations
488

 
553

 
470

  Current liabilities - discontinued operations

 

 
100,598

Total current liabilities
448,524

 
276,229

 
372,292

Long-term debt
62,368

 
56,751

 
72,455

Long-term operating lease liability
663,168

 

 

Other long-term liabilities
36,138

 
108,704

 
117,782

Provision for discontinued operations
1,846

 
1,846

 
1,743

Non-current liabilities - discontinued operations

 

 
24,680

Total liabilities
1,212,044

 
443,530

 
588,952

Commitments and contingent liabilities

 

 

Equity:
 
 
 
 
 
Non-redeemable preferred stock
1,011

 
1,060

 
1,061

Common equity:
 
 
 
 
 
Common stock, $1 par value:
 
 
 
 
 
Authorized: 80,000,000 shares
 
 
 
 
 
Issued/Outstanding:
 
 
 
 
 
Nov. 2, 2019 – 15,188,651/14,700,187
 
 
 
 
 
February 2, 2019 – 19,591,048/19,102,584
 
 
 
 
 
Nov. 3, 2018 – 20,681,008/20,192,544
15,189

 
19,591

 
20,681

Additional paid-in capital
271,505

 
264,138

 
260,709

Retained earnings
343,156

 
508,555

 
617,923

Accumulated other comprehensive loss
(39,556
)
 
(37,936
)
 
(43,054
)
Treasury shares, at cost (488,464 shares)
(17,857
)
 
(17,857
)
 
(17,857
)
Total Genesco equity
573,448

 
737,551

 
839,463

Noncontrolling interest – non-redeemable

 

 
2,298

Total equity
573,448

 
737,551

 
841,761

Total Liabilities and Equity
$
1,785,492

 
$
1,181,081

 
$
1,430,713


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

5


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

 
Three Months Ended
Nine Months Ended
 
November 2,
2019

 
November 3,
2018

November 2,
2019

 
November 3,
2018

Net sales
$
537,263

 
$
539,828

$
1,519,487

 
$
1,513,062

Cost of sales
273,061

 
277,910

773,844

 
781,669

Selling and administrative expenses
237,460

 
235,601

705,811

 
699,200

Asset impairments and other, net
799

 
(70
)
1,843

 
1,019

Operating income
25,943

 
26,387

37,989

 
31,174

Other components net periodic benefit cost
(92
)
 
(30
)
(271
)
 
(67
)
Interest expense, net:
 
 
 
 
 
 
Interest expense
808

 
984

2,491

 
3,144

Interest income
(206
)
 
(147
)
(1,708
)
 
(176
)
Total interest expense, net
602

 
837

783

 
2,968

Earnings from continuing operations before
 
 
 
 
 
 
  income taxes
25,433

 
25,580

37,477

 
28,273

Income tax expense
6,454

 
5,886

11,235

 
6,748

Earnings from continuing operations
18,979

 
19,694

26,242

 
21,525

Loss from discontinued operations, net of tax
(80
)
 
(5,307
)
(420
)
 
(9,484
)
Net Earnings
$
18,899

 
$
14,387

$
25,822

 
$
12,041

 
 
 
 
 
 
 
Basic earnings per common share:
 
 
 
 
 
 
Continuing operations
$
1.31

 
$
1.01

$
1.64

 
$
1.11

Discontinued operations
0.00

 
(0.27
)
(0.03
)
 
(0.49
)
     Net earnings
$
1.31

 
$
0.74

$
1.61

 
$
0.62

Diluted earnings per common share:
 
 
 
 
 
 
Continuing operations
$
1.31

 
$
1.00

$
1.63

 
$
1.10

Discontinued operations
(0.01
)
 
(0.27
)
(0.03
)
 
(0.48
)
    Net earnings
$
1.30

 
$
0.73

$
1.60

 
$
0.62


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


6


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

 
Three Months Ended
Nine Months Ended
 
November 2,
2019

 
November 3,
2018

November 2,
2019

 
November 3,
2018

Net earnings
$
18,899

 
$
14,387

$
25,822

 
$
12,041

Other comprehensive income (loss):
 
 
 
 
 
 
Pension liability adjustments, net of tax
51

 
145

157

 
430

Postretirement liability adjustments, net of tax
(167
)
 
11

(500
)
 
48

Foreign currency translation adjustments
8,715

 
(466
)
(1,277
)
 
(14,340
)
Total other comprehensive income (loss)
8,599

 
(310
)
(1,620
)
 
(13,862
)
Comprehensive income (loss)
$
27,498

 
$
14,077

$
24,202

 
$
(1,821
)

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


7


Genesco Inc.
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
 
 
Three Months Ended
Nine Months Ended
 
November 2,
2019

 
November 3,
2018

November 2,
2019

 
November 3,
2018

CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
Net earnings
$
18,899

 
$
14,387

$
25,822

 
$
12,041

Adjustments to reconcile net earnings to net cash provided by
 
 
 
 
 
 
 (used in) operating activities:
 
 
 
 
 
 
Depreciation and amortization
12,180

 
19,151

37,298

 
58,069

Amortization of deferred note expense and debt discount
98

 
146

315

 
447

Deferred income taxes
(1,842
)
 
(1,976
)
(3,127
)
 
(1,926
)
Provision (recoveries) on accounts receivable
(167
)
 
50

(76
)
 
(53
)
Gain on sale of business

 

86

 

Impairment of intangible assets
268

 
5,736

268

 
5,736

Impairment of long-lived assets
531

 
1,522

1,569

 
3,724

Restricted stock expense
2,617

 
3,408

7,485

 
10,130

Provision for discontinued operations
107

 
178

487

 
455

Other
28

 
(566
)
803

 
1,005

Effect on cash from changes in working capital and other
 
 
 
 
 
 
assets and liabilities, net of acquisitions:
 
 
 
 
 
 
  Accounts receivable
(7,752
)
 
(10,315
)
(5,158
)
 
(8,219
)
  Inventories
(25,566
)
 
(59,680
)
(107,657
)
 
(130,537
)
  Prepaids and other current assets
9,343

 
3,897

11,001

 
(6,949
)
  Accounts payable
30,892

 
37,599

51,756

 
110,587

  Other accrued liabilities
2,436

 
3,949

(17,225
)
 
3,961

  Other assets and liabilities
(1,158
)
 
(2,231
)
(841
)
 
(174
)
Net cash provided by operating activities
40,914

 
15,255

2,806

 
58,297

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
  Capital expenditures
(8,137
)
 
(16,082
)
(21,388
)
 
(47,208
)
  Other investing activities

 
872

23

 
1,505

  Proceeds from sale of business and asset sales

 
23

98,707

 
297

Net cash provided by (used in) investing activities
(8,137
)
 
(15,187
)
77,342

 
(45,406
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
  Payments of long-term debt

 
(400
)
(789
)
 
(1,240
)
  Borrowings under revolving credit facility
24,291

 
33,946

74,123

 
239,942

  Payments on revolving credit facility
(21,839
)
 
(34,535
)
(59,042
)
 
(239,554
)
  Share repurchases related to share repurchase program
(43,849
)
 

(189,210
)
 

  Restricted shares withheld for taxes

 

(2,209
)
 
(2,433
)
  Change in overdraft balances
6,027

 
4,643

(14,191
)
 
8,316

  Additions to deferred note cost

 


 
(359
)
  Other

 
(73
)

 
(3,282
)
Net cash provided by (used in) financing activities
(35,370
)
 
3,581

(191,318
)
 
1,390

Effect of foreign exchange rate fluctuations on cash
454

 
(12
)
(359
)
 
(795
)
Net Increase (Decrease) in Cash and Cash Equivalents
(2,139
)
 
3,637

(111,529
)
 
13,486

Cash and cash equivalents at beginning of period(1)
57,965

 
49,786

167,355

 
39,937

Cash and cash equivalents at end of period(1)
$
55,826

 
$
53,423

$
55,826

 
$
53,423

Supplemental Cash Flow Information:
 
 
 
 
 
 
Net cash paid for:
 
 
 
 
 
 
Interest
$
639

 
$
628

$
2,146

 
$
2,352

Income taxes
(253
)
 
2,080

3,542

 
12,041

(1) The cash flows related to discontinued operations have not been segregated and are included in the Condensed Consolidated Cash Flows for the three and nine months ended November 3, 2018.

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

8


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

 

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 February 3, 2018
$
1,052

 
$
20,392

 
$
250,877

 
$
603,902

 
$
(29,192
)
 
$
(17,857
)
 
$
1,530

 
$
830,704

Cumulative adjustment from ASC 606, net of tax

 

 

 
4,413

 

 

 

 
4,413

Net loss

 

 

 
(2,331
)
 

 

 

 
(2,331
)
Other comprehensive loss

 

 

 

 
(7,698
)
 

 

 
(7,698
)
Employee and non-employee restricted stock

 

 
3,354

 

 

 

 

 
3,354

Restricted stock issuance

 
14

 
(14
)
 

 

 

 

 

Other
(12
)
 
(2
)
 
13

 

 

 

 

 
(1
)
Noncontrolling interest – earnings

 

 

 

 

 

 
398

 
398

Balance May 5, 2018
1,040

 
20,404

 
254,230

 
605,984

 
(36,890
)
 
(17,857
)
 
1,928

 
828,839

Net loss

 

 

 
(15
)
 

 

 

 
(15
)
Other comprehensive loss

 

 

 

 
(5,854
)
 

 

 
(5,854
)
Employee and non-employee restricted stock

 

 
3,368

 

 

 

 

 
3,368

Restricted stock issuance

 
375

 
(375
)
 

 

 

 

 

Restricted shares withheld for taxes

 
(61
)
 
61

 
(2,433
)
 

 

 

 
(2,433
)
Other
24

 
(34
)
 
11

 

 

 

 

 
1

Noncontrolling interest – earnings

 

 

 

 

 

 
252

 
252

Balance August 4, 2018
1,064

 
20,684

 
257,295

 
603,536

 
(42,744
)
 
(17,857
)
 
2,180

 
824,158

Net earnings

 

 

 
14,387

 

 

 

 
14,387

Other comprehensive loss

 

 

 

 
(310
)
 

 

 
(310
)
Employee and non-employee restricted stock

 

 
3,408

 

 

 

 

 
3,408

Other
(3
)
 
(3
)
 
6

 

 

 

 

 

Noncontrolling interest – earnings

 

 

 

 

 

 
118

 
118

Balance November 3, 2018
$
1,061

 
$
20,681

 
$
260,709

 
$
617,923

 
$
(43,054
)
 
$
(17,857
)
 
$
2,298

 
$
841,761
























9


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

 

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 February 2, 2019
$
1,060

 
$
19,591

 
$
264,138

 
$
508,555

 
$
(37,936
)
 
$
(17,857
)
 
$

 
$
737,551

Cumulative adjustment from ASC 842, net of tax

 

 

 
(4,208
)
 

 

 

 
(4,208
)
Net earnings
 
 

 

 
6,346

 

 

 

 
6,346

Other comprehensive earnings

 

 

 

 
968

 

 

 
968

Employee and non-employee restricted stock

 

 
2,239

 

 

 

 

 
2,239

Shares repurchased

 
(1,809
)
 

 
(78,162
)
 

 

 

 
(79,971
)
Other
(48
)
 
(29
)
 
78

 

 

 

 

 
1

Balance May 4, 2019
1,012

 
17,753

 
266,455

 
432,531

 
(36,968
)
 
(17,857
)
 

 
662,926

Net earnings

 

 

 
577

 

 

 

 
577

Other comprehensive loss

 

 

 

 
(11,187
)
 

 

 
(11,187
)
Employee and non-employee restricted stock

 

 
2,629

 

 

 

 

 
2,629

Shares repurchased

 
(1,611
)
 

 
(66,503
)
 

 

 

 
(68,114
)
Restricted stock issuance

 
285

 
(285
)
 

 

 

 

 

Restricted shares withheld for taxes

 
(56
)
 
56

 
(2,209
)
 

 

 

 
(2,209
)
Other
(2
)
 
(26
)
 
27

 

 

 

 

 
(1
)
Balance August 3, 2019
1,010

 
16,345

 
268,882

 
364,396

 
(48,155
)
 
(17,857
)
 

 
584,621

Net earnings

 

 

 
18,899

 

 

 

 
18,899

Employee and non-employee restricted stock

 

 
2,617

 

 

 

 

 
2,617

Shares repurchased

 
(1,150
)
 

 
(40,139
)
 

 

 

 
(41,289
)
Other comprehensive income

 

 

 

 
8,599

 

 

 
8,599

Other
1

 
(6
)
 
6

 

 

 

 

 
1

Balance November 2, 2019
$
1,011

 
$
15,189

 
$
271,505

 
$
343,156

 
$
(39,556
)
 
$
(17,857
)
 
$

 
$
573,448








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

10

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

Note 1
Summary of Significant Accounting Policies

Basis of Presentation
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, 2020 ("Fiscal 2020") and of the fiscal year ended February 2, 2019 ("Fiscal 2019"). The results of operations for any interim period are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") have been condensed or omitted. The Condensed Consolidated Balance Sheet as of February 2, 2019 has been derived from the audited financial statements at that date. These Condensed Consolidated Financial Statements should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto for Fiscal 2019, which are contained in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission ("SEC") on April 3, 2019.

Nature of Operations
Genesco Inc. and its subsidiaries (collectively, the "Company") business includes the sourcing and design, marketing and distribution of footwear and accessories through retail stores in the U.S., Puerto Rico and Canada primarily under the Journeys, Journeys Kidz, Little Burgundy and Johnston & Murphy banners and under the Schuh banner in the United Kingdom and the Republic of Ireland; through catalogs and e-commerce websites including the following: journeys.com, journeyskidz.com, journeys.ca, schuh.co.uk, littleburgundyshoes.com, johnstonmurphy.com, johnstonmurphy.ca and trask.com, and at wholesale, primarily under the Company's Johnston & Murphy brand, the Trask brand, the licensed Dockers brand and other brands that the Company licenses for footwear. At November 2, 2019, the Company operated 1,492 retail stores in the U.S., Puerto Rico, Canada, the United Kingdom and the Republic of Ireland.

On February 2, 2019, the Company completed the sale of its Lids Sports Group business. As a result, the Company reported the operating results of this business in loss from discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for the three and nine months ended November 3, 2018. In addition, the related assets and liabilities as of November 3, 2018 have been reported as assets and liabilities of discontinued operations in the Condensed Consolidated Balance Sheets. The cash flows related to discontinued operations have not been segregated, and are included in the Condensed Consolidated Statements of Cash Flows for the three and nine months ended November 3, 2018. Unless otherwise noted, discussion within these notes to the condensed consolidated financial statements relates to continuing operations. See Note 3 for additional information related to discontinued operations.
During the three and nine months ended November 2, 2019 and November 3, 2018, the Company operated four reportable business segments (not including corporate): (i) Journeys Group, comprised of the Journeys, Journeys Kidz and Little Burgundy retail footwear chains, e-commerce and catalog operations; (ii) Schuh Group, comprised of the Schuh retail footwear chain and e-commerce operations; (iii) Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, e-commerce operations, catalog, Trask e-commerce operations and wholesale distribution of products under the Johnston & Murphy® and H.S. Trask® brands; and (iv) Licensed


11

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

Note 1
Summary of Significant Accounting Policies, Continued
Brands, comprised of Dockers® Footwear, sourced and marketed under a license from Levi Strauss & Company; and other brands.  

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

Revenue Recognition
In accordance with ASC 606, revenue shall be recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for corresponding goods. The majority of the Company's sales are single performance obligation arrangements for retail sale transactions for which the transaction price is equivalent to the stated price of the product, net of any stated discounts applicable at a point in time. Each sales transaction results in an implicit contract with the customer to deliver a product at the point of sale. Revenue from retail sales is recognized at the point of sale, is net of estimated returns, and excludes sales and value added taxes. Revenue from catalog and internet sales is recognized at estimated time of delivery to the customer, is net of estimated returns, and excludes 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. Actual amounts of markdowns have not differed materially from estimates. Shipping and handling costs charged to customers are included in net sales. The Company elected the practical expedient within ASC 606 related to taxes that are assessed by a governmental authority, which allows for the exclusion of sales and value added tax from transaction price.

A provision for estimated returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. Estimated returns are based on historical returns and claims. Actual returns and claims in any future period may differ from historical experience. Revenue from gift cards is deferred and recognized upon the redemption of the cards. These cards have no expiration date. Income from unredeemed cards is recognized on the Condensed Consolidated Statements of Operations within net sales in proportion to the pattern of rights exercised by the customer in future periods. The Company performs an evaluation of historical redemption patterns from the date of original issuance to estimate future period redemption activity.

The Condensed Consolidated Balance Sheets include an accrued liability for gift cards of $3.7 million, $5.1 million and $3.6 million at November 2, 2019, February 2, 2019 and November 3, 2018, respectively. Gift card breakage recognized as revenue was $0.1 million for each of the third quarters of Fiscal 2020 and Fiscal 2019, and $0.4 million for each of the first nine months of Fiscal 2020 and Fiscal 2019. During the nine months ended November 2, 2019, the Company recognized $2.9 million of gift card redemptions and gift card breakage revenue that were included in the gift card liability as of February 2, 2019.





12

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

Note 1
Summary of Significant Accounting Policies, Continued

Cash and Cash Equivalents
The Company's foreign subsidiaries held cash of approximately $6.1 million, $20.8 million and $11.3 million as of November 2, 2019, February 2, 2019 and November 3, 2018, respectively, which is included in cash and cash equivalents on the Condensed Consolidated Balance Sheets. The Company's strategic plan does not require the repatriation of foreign cash in order to fund its operations in the U.S., and it is the Company's current intention to indefinitely reinvest its foreign cash and cash equivalents outside of the U.S. If the Company were to repatriate foreign cash to the U.S., it would be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations as a result of the repatriation.

There were $32.8 million, $127.2 million and $17.0 million in cash equivalents at November 2, 2019, February 2, 2019 and November 3, 2018, respectively. The Company's cash equivalents at November 2, 2019, February 2, 2019 and November 3, 2018 were invested in institutional money market funds which invest exclusively in highly rated, short-term securities that are issued, guaranteed or collateralized by the U.S. government or by U.S. government agencies and instrumentalities.

At November 2, 2019, substantially all of the Company’s domestic cash was invested in institutional money market funds. The majority of payments due from banks for domestic customer credit card transactions process within 24 - 48 hours and are accordingly classified as cash and cash equivalents in the Condensed Consolidated Balance Sheets.

At November 2, 2019, February 2, 2019 and November 3, 2018, outstanding checks drawn on zero-balance accounts at certain domestic banks exceeded book cash balances at those banks by approximately $15.4 million, $29.6 million and $22.5 million, respectively. These amounts are included in accounts payable in the Condensed Consolidated Balance Sheets.

Concentration of Credit Risk and Allowances on Accounts Receivable
The Company’s footwear wholesale businesses sell primarily to department stores and independent retailers 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. In the footwear wholesale businesses, one customer accounted for 21%, two customers each accounted for 9% and no other customer accounted for more than 6% of the Company’s total trade receivables balance as of November 2, 2019.

Asset Retirement Obligations
The Condensed Consolidated Balance Sheets include asset retirement obligations related to leases of $10.7 million, $10.9 million and $10.7 million as of November 2, 2019, February 2, 2019 and November 3, 2018, respectively.






13

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, 2019 and February 2, 2019 are as follows:

Fair Values
 
 
 
 
 
 
 
In Thousands
November 2, 2019
 
February 2, 2019
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
U.S. Credit Facility Borrowings
$
62,368

 
$
63,199

 
$
56,773

 
$
56,861

UK Term Loans
8,088