1
GENESCO
[LOGO]
- --------------------------------------------------------------------------------
(Mark One) Form 10-Q
[X] Quarterly Report Pursuant To
Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended
October 31, 1994
[ ] Transition Report Pursuant To
Section 13 or 15(d) of the
Securities Exchange Act of 1934
Securities and Exchange Commission
Washington, D.C. 20549
Commission File No. 1-3083
-----------------------------------------
GENESCO INC.
A Tennessee Corporation
I.R.S. No. 62-0211340
Genesco Park
1415 Murfreesboro Road
Nashville, Tennessee 37217-2895
Telephone 615/367-7000
-----------------------------------------
Indicate by check mark whether the
registrant (1) has filed all reports
required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of
1934 during the preceding 12 months
(or such shorter period that the
registrant was required to file such
reports with the Commission) and (2) has
been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
- --------------------------------------------------------
Common Shares Outstanding December 9, 1994 - 24,343,663
2
INDEX
- --------------------------------------------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------------------------------------------
Part 1 - Financial Information
- --------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheet - October 31, 1994, January 31, 1994 and
October 31, 1993 3
- --------------------------------------------------------------------------------------------------------------------
Consolidated Earnings - Three Months and Nine Months Ended
October 31, 1994 and 1993 4
- --------------------------------------------------------------------------------------------------------------------
Consolidated Cash Flows - Three Months and Nine Months Ended
October 31, 1994 and 1993 5
- --------------------------------------------------------------------------------------------------------------------
Consolidated Shareholders' Equity - Year Ended
January 31, 1994 and Nine Months Ended October 31, 1994 6
- --------------------------------------------------------------------------------------------------------------------
Notes to Consolidated Financial Statements 7
- --------------------------------------------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and
Results of Operations 22
- --------------------------------------------------------------------------------------------------------------------
Part II - Other Information 33
- --------------------------------------------------------------------------------------------------------------------
Signature 35
- --------------------------------------------------------------------------------------------------------------------
3
PART I - FINANCIAL INFORMATION
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheet
In Thousands
- -------------------------------------------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31, OCTOBER 31,
1994 1994 1993
- -------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 5,619 $ 3,625 $ 2,097
Accounts receivable 41,797 66,006 89,470
Inventories 98,721 155,120 176,218
Other current assets 4,848 5,839 9,897
Current assets of operations to be divested 72,911 -0- -0-
- -------------------------------------------------------------------------------------------------------------------
Total current assets 223,896 230,590 277,682
- -------------------------------------------------------------------------------------------------------------------
Plant, equipment and capital leases 28,502 42,909 49,330
Goodwill and other intangibles -0- 18,590 26,280
Other noncurrent assets 16,037 17,297 19,240
Noncurrent assets of operations to be
divested 19,298 -0- -0-
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $287,733 $309,386 $372,532
===================================================================================================================
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Current payments on capital leases $ 2,413 $ 2,365 $ 2,179
Accounts payable and accrued liabilities 74,354 62,723 61,186
Provision for discontinued operations 24,898 5,408 -0-
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 101,665 70,496 63,365
- -------------------------------------------------------------------------------------------------------------------
Long-term debt 110,000 90,000 114,000
Capital leases 10,750 12,888 12,855
Other long-term liabilities 35,740 36,168 25,492
Provision for discontinued operations 22,700 1,111 -0-
Contingent liabilities - - -
SHAREHOLDERS' EQUITY:
Non-redeemable preferred stock 7,942 8,064 8,131
Common shareholders' equity:
Par value of issued shares 24,832 24,793 24,795
Additional paid-in capital 121,664 121,634 121,612
Retained earnings (deficit) (119,739) (23,241) 25,168
Minimum pension liability (9,964) (9,964) -0-
Treasury shares, at cost (17,857) (17,857) (17,857)
Foreign currency translation adjustments -0- (4,706) (5,029)
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 6,878 98,723 156,820
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $287,733 $309,386 $372,532
===================================================================================================================
The accompanying Notes are an integral part of these Financial Statements.
4
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Earnings
In Thousands
- ----------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------- ------------------------
1994 1993 1994 1993
- ----------------------------------------------------------------------------------------------------------------
Net sales $123,199 $123,689 $337,586 $347,968
Cost of sales 76,842 76,401 210,166 213,812
Selling and administrative expenses 43,524 46,033 123,836 130,763
Restructuring charge 22,114 -0- 22,114 -0-
- ----------------------------------------------------------------------------------------------------------------
Earnings (loss) from operations before
other income and expenses (19,281) 1,255 (18,530) 3,393
- ----------------------------------------------------------------------------------------------------------------
Other expenses (income):
Interest expense 3,207 3,019 9,106 8,100
Other expense (income), net 262 500 (250) 378
Gain on divestiture -0- -0- (4,900) (677)
- ----------------------------------------------------------------------------------------------------------------
Total other expenses (income), net 3,469 3,519 3,956 7,801
- ----------------------------------------------------------------------------------------------------------------
Loss before income taxes, discontinued
operations, extraordinary loss and
cumulative effect of change in
accounting principle (22,750) (2,264) (22,486) (4,408)
Income taxes 223 105 736 470
- ----------------------------------------------------------------------------------------------------------------
Loss before discontinued operations,
extraordinary loss and cumulative
effect of change in accounting
principle (22,973) (2,369) (23,222) (4,878)
Discontinued operations:
Operating income (loss) (1,600) (715) (4,540) 1,508
Provision for future losses (68,587) -0- (68,587) -0-
- ----------------------------------------------------------------------------------------------------------------
Loss before extraordinary loss and
cumulative effect of change in
accounting principle (93,160) (3,084) (96,349) (3,370)
Extraordinary loss from
early retirement of debt -0- -0- -0- (240)
Postretirement benefits* -0- -0- -0- (2,273)
- ----------------------------------------------------------------------------------------------------------------
NET LOSS $(93,160) $ (3,084) $(96,349) $ (5,883)
================================================================================================================
Earnings (loss) per common share:
Before discontinued operations,
extraordinary loss and cumulative
effect of change in accounting
principle $ (.95) $ (.10) $ (.96) $ (.21)
Discontinued operations $ (2.88) $ (.03) $ (3.01) $ .06
Extraordinary loss $ .00 $ .00 $ .00 $ (.01)
Postretirement benefits* $ .00 $ .00 $ .00 $ (.09)
Net loss $ (3.83) $ (.13) $ (3.97) $ (.25)
==============================================================================================================
*Reflects the cumulative effect of changes in the method of accounting for
postretirement benefits due to the implementation of Statement of Financial
Accounting Standards No. 106 (see Note 1).
The accompanying Notes are an integral part of these Financial Statements.
5
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Cash Flows
In Thousands
- ------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
---------------------- ----------------------
1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net loss $(93,160) $ (3,084) $(96,349) $ (5,883)
Noncash charges to earnings:
Provision for discontinued operations 68,587 -0- 68,587 -0-
Restructuring charge 22,114 -0- 22,114 -0-
Depreciation and amortization 2,500 2,777 7,447 7,841
Provision for deferred income taxes 1,404 -0- 1,404 -0-
Gain on divestiture -0- -0- (4,900) (677)
Postretirement benefits -0- -0- -0- 2,273
Provision for losses on accounts receivable 7 397 1,262 924
Loss on retirement of debt -0- -0- -0- 240
Other (198) 956 400 1,299
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations before
working capital and other changes 1,254 1,046 (35) 6,017
Effect on cash of changes in working
capital and other assets and liabilities
net of effect of business acquisitions:
Accounts receivable (2,844) (2,340) (22,889) (18,652)
Inventories 2,447 1,053 4,054 (22,878)
Other current assets 819 (1,789) (570) (3,093)
Accounts payable and accrued liabilities 6,220 4,808 3,837 (5,771)
Other assets and liabilities 1,432 639 2,473 (490)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations 9,328 3,417 (13,130) (44,867)
- ------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (1,347) (2,446) (4,542) (5,846)
Business acquisition -0- (11,432) -0- (11,432)
Proceeds from disposal of plant and equipment 275 64 2,045 163
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,072) (13,814) (2,497) (17,115)
- ------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Long-term borrowings -0- -0- -0- 76,299
Net borrowings (repayments) under
revolving credit agreement (4,000) 12,000 20,000 17,000
Net change in short-term borrowings (3,095) (1,371) (69) -0-
Payments of long-term debt -0- -0- -0- (32,000)
Payments on capital leases (578) (616) (2,089) (1,544)
Exercise of options and warrants 23 679 29 7,873
Redemption of Mitre U.K. B shares -0- -0- -0- (5,000)
Deferred note expense -0- (550) -0- (3,109)
Dividends paid -0- (77) -0- (232)
Other (2) 3 (250) (25)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (7,652) 10,068 17,621 59,262
- ------------------------------------------------------------------------------------------------------------------------
NET CASH FLOW 604 (329) 1,994 (2,720)
Cash and short-term investments at
beginning of period 5,015 2,426 3,625 4,817
- ------------------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 5,619 $ 2,097 $ 5,619 $ 2,097
========================================================================================================================
The accompanying Notes are an integral part of these Financial Statements.
6
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Shareholders' Equity
In Thousands
- ---------------------------------------------------------------------------------------------------------------------------
FOREIGN MINIMUM TOTAL
TOTAL RETAINED CURRENCY PENSION SHARE-
PREFERRED COMMON PAID-IN EARNINGS TREASURY TRANSLATION LIABILITY HOLDERS'
STOCK STOCK CAPITAL (DEFICIT) STOCK ADJUSTMENTS ADJUSTMENT EQUITY
- ---------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1993 $ 8,305 $ 23,658 $114,706 $ 31,283 $(17,857) $ (5,044) $ -0- $155,051
- ---------------------------------------------------------------------------------------------------------------------------
Exercise of options and warrants -0- 1,132 6,743 -0- -0- -0- -0- 7,875
Translation adjustments -0- -0- -0- -0- -0- 338 -0- 338
Net loss -0- -0- -0- (54,292) -0- -0- -0- (54,292)
Preferred dividends -0- -0- -0- (232) -0- -0- -0- (232)
Minimum pension liability adjustment -0- -0- -0- -0- -0- -0- (9,964) (9,964)
Other (241) 3 185 -0- -0- -0- -0- (53)
- ---------------------------------------------------------------------------------------------------------------------------
Balance January 31, 1994 $ 8,064 $ 24,793 $121,634 $ (23,241) $(17,857) $ (4,706) $ (9,964) $ 98,723
- ---------------------------------------------------------------------------------------------------------------------------
Exercise of options -0- 2 4 -0- -0- -0- -0- 6
Translation adjustments:
Year-to-date adjustments -0- -0- -0- -0- -0- 2,136 -0- 2,136
Realized in FY 1995 restructuring -0- -0- -0- -0- -0- 2,570 -0- 2,570
Net loss -0- -0- -0- (96,349) -0- -0- -0- (96,349)
Other (122) 37 26 (149) -0- -0- -0- (208)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 31, 1994 $ 7,942 $ 24,832 $121,664 $(119,739) $(17,857) $ -0- $ (9,964) $ 6,878
===========================================================================================================================
The accompanying Notes are an integral part of these Financial Statements.
7
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM STATEMENTS
The consolidated financial statements 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 January 31, 1995 ("Fiscal 1995") and of the fiscal year
ended January 31, 1994 ("Fiscal 1994"). The results of operations for any
interim period are not necessarily indicative of results for the full year.
The financial statements should be read in conjunction with the financial
statements and notes thereto included in the annual report on Form 10-K.
Certain reclassifications have been made to conform prior years' data to the
current presentation.
BASIS OF CONSOLIDATION
All subsidiaries are included in the consolidated financial statements. All
significant intercompany transactions and accounts have been eliminated.
CASH AND SHORT-TERM INVESTMENTS
There were no short-term investments at October 31, 1994 or January 31, 1994.
Short-term investments are highly-liquid debt instruments having an original
maturity of three months or less.
INVENTORIES
Inventories of wholesaling and manufacturing companies are stated at the lower
of cost or market, determined principally by the first-in, first-out method.
Retail inventories are determined by the retail method.
PLANT, EQUIPMENT AND CAPITAL LEASES
Plant, equipment and capital leases are recorded at cost and depreciated or
amortized over the estimated useful life of related assets. Depreciation and
amortization expense is computed principally by the straight-line method.
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles consist primarily of the excess of purchase
price over fair value of net assets acquired in acquisitions. Goodwill is
being amortized on a straight-line basis over 40 years. The Company
periodically assesses the realizability of intangible assets taking into
consideration such factors as expected cash flows and operating strategies.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated at the exchange
rate on the balance sheet date. Income and expenses are translated at the
average exchange rates prevailing during the period. Unrealized translation
adjustments are reported as a separate component of shareholders' equity.
8
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
HEDGING CONTRACTS
In order to reduce exposure to foreign currency exchange rate fluctuations in
connection with inventory purchase commitments, the Company enters into foreign
currency forward exchange contracts. At October 31, 1994 and January 31, 1994,
the Company had approximately $8.4 million and $7.1 million, respectively, of
such contracts outstanding. Gains and losses arising from these contracts
offset gains and losses from the underlying hedged transactions. The Company
monitors the credit quality of the major national and regional financial
institutions with whom it enters into such contracts.
POSTRETIREMENT BENEFITS
Substantially all full-time employees are covered by pension plans. For its
defined benefit plan, the Company funds at least the minimum amount required by
the Employee Retirement Income Security Act. The Company expenses the
multiemployer plan contributions required to be funded under collective
bargaining agreements.
The Company implemented Statement of Financial Accounting Standards (SFAS) 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in the
first quarter of Fiscal 1994. This statement requires accrual of
postretirement benefits such as life insurance and health care over the period
the employee provides services to the Company.
ENVIRONMENTAL COSTS
Environmental expenditures relating to current operations are expensed or
capitalized as appropriate. Expenditures relating to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be
reasonably estimated and are evaluated independently of any future claims for
recovery. Generally, the timing of these accruals coincides with completion of
a feasibility study or the Company's commitment to a formal plan of action.
INCOME TAXES
Income taxes are accounted for in accordance with SFAS 109, "Accounting for
Income Taxes". SFAS 109, which superseded SFAS 96, was adopted in the first
quarter of Fiscal 1994. SFAS 109 adoption had no effect on earnings and only
resulted in reclassifications of the deferred tax assets in the balance sheet.
Deferred income taxes are provided for the timing differences between reported
earnings and taxable income.
9
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
FISCAL 1995 RESTRUCTURING
In response to worsening trends in the Company's men's apparel business and in
response to a strategic review of its footwear operations, the Company's board
of directors, on November 3, 1994, approved a plan (the "1995 Restructuring")
designed to focus the Company on its core footwear businesses by selling or
liquidating four businesses, two of which constitute its entire men's apparel
segment.
The 1995 Restructuring provides for the following:
o Liquidation of the University Brands children shoes business,
o Sale of the Mitre Sports soccer business,
o Liquidation of The Greif Companies men's tailored clothing
business, and
o Sale of the GCO Apparel Corporation tailored clothing
manufacturing business.
The 1995 Restructuring also includes estimated costs of consolidating certain
facilities and effecting permanent work force reductions. Implementation of
the 1995 Restructuring is expected to be complete within 12 months. It is
anticipated that the cash proceeds to be received from implementation of the
1995 Restructuring will slightly exceed the cash costs thereof. Any excess
cash will be reinvested in the Company's ongoing businesses.
The total costs to implement the 1995 Restructuring (both cash and non-cash)
are expected to be $90.7 million, of which $22.1 million (the "1995
Restructuring Charge") relates to University Brands and Mitre and other costs
described below and $68.6 million (the "1995 Restructuring Provision") relates
to Greif and GCO Apparel, which constitute the entire men's apparel segment of
the Company's business, and is therefore treated for financial reporting
purposes as a provision for discontinued operations. No tax benefit is
currently available with respect to either the 1995 Restructuring Charge or the
1995 Restructuring Provision.
The 1995 Restructuring Charge includes $10.7 million in asset write-downs, $2.6
million of foreign currency translation adjustments realization and $8.8
million of other costs, of which $7.2 million are expected to be incurred in
the next 12 months. Other costs expected to be incurred beyond 12 months
include primarily facility shutdown costs and other contract liabilities and
are classified as long-term liabilities in the consolidated balance sheet.
The 1995 Restructuring Provision includes $27.5 million in asset write-downs
and $41.1 million of other costs, of which approximately $19.5 million are
expected to be incurred in the next 12 months. Other costs include primarily
union pension liability, employee severance arrangements, facility shutdown
costs and other contract liabilities. Other costs expected to be incurred
beyond 12 months, of which the most significant are union pension liabilities
and Greif lease costs, are classified as long-term liabilities in the
consolidated balance sheet.
The 1995 Restructuring provides for the elimination of the remaining 1,300 jobs
in the Company's men's apparel operations and approximately 535 jobs in
footwear operations to be divested or consolidated and in staff positions to be
eliminated.
10
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
FISCAL 1995 RESTRUCTURING, CONTINUED
The operating results of the men's apparel segment are shown below:
- -----------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
----------------------- -----------------------
IN THOUSANDS 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------------------
Net sales $24,579 $30,407 $81,777 $80,571
Cost of sales and expenses 26,179 31,122 86,317 79,063
- -----------------------------------------------------------------------------------------------------------
Pretax earnings (loss) (1,600) (715) (4,540) 1,508
Income tax benefit -0- -0- -0- -0-
- -----------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $(1,600) $ (715) $(4,540) $ 1,508
===========================================================================================================
11
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 3
BUSINESS ACQUISITION
LAMAR MANUFACTURING COMPANY
On August 12, 1993, GCO Apparel Corporation, a newly formed subsidiary of the
Company, acquired all of the men's clothing manufacturing assets and assumed
certain liabilities of LaMar Manufacturing Company, a manufacturer of
moderately priced tailored clothing. The purchase price was approximately
$11.8 million. The purchase price included $10.9 million of cash and $900,000
of deferred payments that will be completed by August 1995. In addition, the
Company paid acquisition expenses of approximately $500,000. The acquisition
was financed through revolving credit borrowings.
In January 1994, the Company reassessed the recoverability of the $6.9 million
of goodwill associated with this acquisition and wrote-off the unamortized
portion of the goodwill. On November 3, 1994, the board of directors of the
Company, as part of a decision to exit the tailored clothing business, adopted
a plan to sell GCO Apparel Corporation (see Note 2).
NOTE 4
ACCOUNTS RECEIVABLE
- --------------------------------------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31,
IN THOUSANDS 1994 1994
- --------------------------------------------------------------------------------------------------------------
Trade accounts receivable $ 40,937 $ 67,174
Miscellaneous receivables 2,940 3,406
- --------------------------------------------------------------------------------------------------------------
Total receivables 43,877 70,580
Allowance for bad debts (1,214) (2,065)
Other allowances (866) (2,509)
- --------------------------------------------------------------------------------------------------------------
NET ACCOUNTS RECEIVABLE $ 41,797 $ 66,006
==============================================================================================================
NOTE 5
INVENTORIES
- --------------------------------------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31,
IN THOUSANDS 1994 1994
- ---------------------------------------------------------------------------------------------------------------
Raw materials $ 7,725 $ 21,305
Work in process 4,605 15,786
Finished goods 28,335 71,981
Retail merchandise 58,056 46,048
- --------------------------------------------------------------------------------------------------------------
TOTAL INVENTORIES $ 98,721 $155,120
==============================================================================================================
12
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 6
ASSETS OF OPERATIONS TO BE DIVESTED (AT OCTOBER 31, 1994)
- ---------------------------------------------------------------------------------------------------------------
DISCONTINUED OTHER
IN THOUSANDS OPERATIONS OPERATIONS TOTALS
- ---------------------------------------------------------------------------------------------------------------
CURRENT ASSETS:
Accounts receivable $19,133 $18,587 $37,720
Inventory 16,158 18,256 34,414
Other -0- 777 777
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS $35,291 $37,620 $72,911
===============================================================================================================
NONCURRENT ASSETS:
Fixed Assets:
Plant and equipment $ 1,878 $ 1,819 $ 3,697
Capitalized lease rights -0- 65 65
Goodwill and other intangibles -0- 15,536 15,536
- ---------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT ASSETS $ 1,878 $17,420 $19,298
===============================================================================================================
13
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 7
PLANT, EQUIPMENT AND CAPITAL LEASES, NET
- -----------------------------------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31,
IN THOUSANDS 1994 1994
- -----------------------------------------------------------------------------------------------------------
Plant and equipment:
Land $ 75 $ 485
Buildings and building equipment 2,514 5,830
Machinery, furniture and fixtures 30,617 45,105
Construction in progress 1,853 1,550
Improvements to leased property 37,602 43,474
Capital leases:
Land 60 592
Buildings 2,126 11,203
Machinery, furniture and fixtures 7,759 10,324
- -----------------------------------------------------------------------------------------------------------
Plant, equipment and capital leases, at cost 82,606 118,563
Accumulated depreciation and amortization:
Plant and equipment (48,734) (64,642)
Capital leases (5,370) (11,012)
- -----------------------------------------------------------------------------------------------------------
NET PLANT, EQUIPMENT AND CAPITAL LEASES $ 28,502 $ 42,909
===========================================================================================================
NOTE 8
PROVISION FOR DISCONTINUED OPERATIONS (AT OCTOBER 31, 1994)
- -----------------------------------------------------------------------------------------------------------
IN THOUSANDS CURRENT NON-CURRENT TOTALS
- -----------------------------------------------------------------------------------------------------------
Employee related costs $ 9,839 $16,347 $26,186
Facility shutdown costs 2,965 5,983 8,948
Other contract liabilities 8,439 -0- 8,439
Other 3,655 370 4,025
- -----------------------------------------------------------------------------------------------------------
TOTALS $24,898 $22,700 $47,598
===========================================================================================================
14
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 9
CREDIT FACILITIES
At October 31, 1994, the Company's English subsidiary, Mitre U.K., had a credit
facility with a credit limit equal to the lesser of (i) 5,000,000 pounds
sterling (approximately U.S. $8,183,000 at October 31, 1994) or (ii) the
aggregate of 75 percent of the value of current receivables and 50 percent of
the value of inventory of Mitre U.K. The facility, which was guaranteed up to
4,300,000 pounds sterling by the Company, permitted borrowings for working
capital of up to 2,000,000 pounds sterling, the issuance of letters of credit
of up to 3,500,000 pounds sterling and the issuance of guarantee bonds and
indemnities of up to 500,000 pounds sterling. The facility expired on December
2, 1994.
15
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 10
LONG-TERM DEBT
- --------------------------------------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31,
IN THOUSANDS 1994 1994
- --------------------------------------------------------------------------------------------------------------
Borrowings under revolving credit agreement
(weighted average interest rate at:
October 31, 1994-7.34%; January 31, 1994-5.56%) $ 35,000 $ 15,000
10 3/8% senior notes due February 2003 75,000 75,000
- --------------------------------------------------------------------------------------------------------------
Total long-term debt 110,000 90,000
Current portion -0- -0-
- --------------------------------------------------------------------------------------------------------------
TOTAL NONCURRENT PORTION OF LONG-TERM DEBT $110,000 $ 90,000
==============================================================================================================
REVOLVING CREDIT AGREEMENTS:
On August 2, 1993 the Company entered into a revolving credit agreement with a
group of seven banks providing for loans or letters of credit of up to $100
million (subsequently amended to $65 million and subject to further reductions-
see below). The agreement expires August 2, 1996. This agreement replaced the
$45 million revolving credit agreement and Genesco's $25 million letter of
credit agreement in effect at July 31, 1993. The repayment of the revolving
credit borrowings under the $45 million credit agreement resulted in an
extraordinary loss recognized in the second quarter of Fiscal 1994 of $240,000.
Loan borrowings for the quarter ended October 31, 1994 under the revolving
credit agreements averaged $36,901,000 at a rate of 7.06% with a maximum month
end borrowing of $38,000,000. Outstanding letters of credit at October 31, 1994
were $8,791,000.
As of October 31, 1994, the revolving credit agreement was amended in regard to
certain financial covenants to reflect operating results, including the
restructuring charge and the provision for the discontinuation of the men's
apparel segment, and the maximum commitment was reduced to $65 million. The
maximum commitment will be further reduced by $15 million on the earlier of
April 30, 1995 or 7 days after the first Designated Asset Sale Date, defined in
the credit agreement as a date when the Company or any of its subsidiaries
sells an operating division, excluding any discontinued operations, for a
purchase price in excess of $15 million. Further commitment reductions occur
in the event Net Cash Proceeds generated on account of any Designated Asset
Sale exceed $40 million.
Under the amended revolving credit agreement, the Company may borrow at the
prime rate plus .5% or LIBOR plus 2.75%. Commitment fees are 0.5% per annum on
the daily unused portion. In addition, the interest and commitment fee rates
will increase by .15% per month commencing on the earlier of May 1, 1995 or a
Designated Asset Sale Date.
16
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 10
LONG-TERM DEBT, CONTINUED
The amended credit agreement requires the Company to maintain:
(i) a ratio of Consolidated Current Assets to the sum of Consolidated Current
Liabilities and Consolidated Senior Funded Indebtedness of not less than 1.0 to
1.0 at the end of any quarter beginning with the quarter ending January 31,
1995;
(ii) a Consolidated Interest Coverage Ratio of a certain amount for
respective periods as follows:
Quarter ending January 31, 1995 1.82 to 1.00
Two quarters ending April 30, 1995 .99 to 1.00
Three quarters ending July 31, 1995 .92 to 1.00
Four quarters ending October 31, 1995 1.24 to 1.00
Four quarters ending January 31, 1996 1.26 to 1.00
Four quarters ending April 31, 1996 and thereafter 1.34 to 1.00
(iii) Consolidated Net Worth, as defined in the credit agreement, at the end of
each quarter as follows:
October 31, 1994 $15,000,000
January 31, 1995 18,260,000
April 30, 1995 15,760,000
July 31, 1995 15,452,000
October 31, 1995 19,071,000
January 31, 1996 22,264,000
April 30, 1996 20,634,000
July 31, 1996 20,357,000
(iv) the ratio of Consolidated Senior Funded Indebtedness to Total Capital of
not more than 0.80 to 1.0 at the end of any quarter beginning with the quarter
ending January 31, 1995.
The Company is required by the amended credit agreement to reduce the
outstanding principal balance to $20,000,000 or less for 20 consecutive days
during the fourth fiscal quarter of each fiscal year. The Company must also
maintain a balance of zero for 20 consecutive days both during the 45 days
immediately following a Designated Asset Sale Date and, unless such a reduction
has been accomplished during the 45 day period following any Designated Asset
Sale Date in either that quarter or the previous one, during the first fiscal
quarter of each year.
The revolving credit agreement contains other covenants which restrict the
payment of dividends and other payments with respect to capital stock and
annual capital expenditures are limited to $20,000,000, subject to certain
exceptions. The Company was in compliance with the financial covenants
contained in the amended revolving credit agreement at October 31, 1994.
17
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 10
LONG-TERM DEBT, CONTINUED
10 3/8% SENIOR NOTES DUE 2003:
On February 1, 1993, the Company issued $75,000,000 of 10 3/8% senior notes due
February 1, 2003. The Company used $54 million of the proceeds to repay all of
its outstanding long-term debt resulting in an extraordinary loss recognized in
the fourth quarter of Fiscal 1993 of $583,000 (net of income tax benefit of
$37,000). The balance of the proceeds was used to purchase shares of Mitre
U.K. and for general corporate purposes.
The fair value of the Company's 10 3/8% senior notes, based on the quoted
market price on October 31, 1994, is $57,750,000.
The indenture under which the notes were issued limits the incurrence of
indebtedness, the making of restricted payments, the restricting of subsidiary
dividends, transactions with affiliates, liens, sales of assets and
transactions involving mergers, sales or consolidations.
NOTE 11
SUPPLEMENTAL CASH FLOW INFORMATION
- --------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
OCTOBER 31,
--------------------------
IN THOUSANDS 1994 1993
- --------------------------------------------------------------------------------------------------------------
Cash paid (received) for:
Interest $10,338 $ 6,145
Income taxes (98) 375
Noncash investing and financing activities:
Fixed assets acquired under capital leases $ -0- $ 379
Business acquisition:
Fair value of assets acquired -0- 13,102
Liabilities assumed -0- (1,670)
- --------------------------------------------------------------------------------------------------------------
NET CASH PAID FOR ACQUISITION $ -0- $11,432
==============================================================================================================
18
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
LEGAL PROCEEDINGS
Tennessee Environmental Proceedings
The Company is subject to several administrative orders issued by the Tennessee
Department of Environment and Conservation directing the Company to implement
plans designed to remedy possible ground water contamination and to manage
source area material which was generated by a divested operating division and
which was deposited on a site in a rural area near Nashville, Tennessee.
Substantially all source material and ground water remedial actions have been
implemented. The Company believes that it has fully provided for the costs to
be incurred with respect to these remedial actions.
In addition to the administrative proceedings described above, the Company was
named as a defendant in nine civil actions originally filed on behalf of 29
individuals who reside or own property in the vicinity of the site described
above. The plaintiffs alleged that the Company is liable for creating a
nuisance and a hazardous condition and for negligence based upon the alleged
violation of several state and federal environmental statutes. The plaintiffs
sought recovery for personal injuries and property damages totalling $17.6
million, punitive damages totalling $19.5 million and certain costs and
expenses, including attorneys' fees. On November 2, 1994, the Company
concluded a settlement agreement disposing of all claims in the litigation
which had not been previously settled, resulting in a charge to earnings of
approximately $659,000 in the third quarter. The Company had previously
concluded settlement agreements with the other plaintiffs providing for
payments by the Company aggregating approximately $675,000 and for the purchase
of a residence at an appraised value of approximately $170,000.
New York State Environmental Proceedings
The Company is also a defendant in two separate civil actions filed by the
State of New York; one against the City of Gloversville, New York, and 33 other
private defendants; and the other against the City of Johnstown, New York, and
14 other private defendants. In addition, third party complaints and cross
claims have been filed against numerous other entities, including the Company,
in both actions. These actions arise out of the alleged disposal of certain
hazardous material directly or indirectly in municipal landfills. The
complaints in both cases allege the defendants, together with other
contributors to the municipal landfills, are liable under a federal
environmental statute and certain common law theories for the costs of
investigating and performing remedial actions required to be taken with respect
to the landfills and damages to the natural resources.
The environmental authorities have issued decisions selecting plans of
remediation with respect to the Johnstown and Gloversville sites which have
total estimated costs of $16.5 million and $28.3 million, respectively.
19
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
LEGAL PROCEEDINGS, CONTINUED
The Company has filed answers to the complaints in both the Johnstown and
Gloversville cases denying liability and asserting numerous defenses. The
Company has established a provision in the amount of $1,000,000 to cover its
estimated share of future remediation costs, including a $500,000 charge in the
third quarter ended October 31, 1993. Because of uncertainties related to the
ability or willingness of the other defendants, including the municipalities
involved, to pay a portion of such costs, the availability of State funding to
pay a portion of such costs, the insurance coverage available to the various
defendants, the applicability of joint and several liability and the basis for
contribution claims among the defendants, management is presently unable to
predict the outcome or to estimate the extent of any additional liability the
Company may incur with respect to either of the Johnstown or Gloversville
actions.
Preferred Shareholder Action
On January 7, 1993, 23 former holders of the Company's series 2, 3 and 4
subordinated serial preferred stock filed a civil action against the Company
and certain officers in the United States District Court for the Southern
District of New York (the "U.S. District Court Action"). The plaintiffs
allege that the defendants misrepresented and failed to disclose material facts
to representatives of the plaintiffs in connection with exchange offers which
were made by the Company to the plaintiffs and other holders of the Company's
series 1, 2, 3 and 4 subordinated serial preferred stock from June 23, 1988 to
August 1, 1988. The plaintiffs contend that had they been aware of the
misrepresentations and omissions, they would not have agreed to exchange their
shares pursuant to the exchange offers. The plaintiffs allege breach of
fiduciary duty and fraudulent and negligent misrepresentations and seek damages
in excess of $10 million, costs, attorneys' fees, interest and punitive damages
in an unspecified amount. By order dated December 2, 1993, the U.S. District
Court denied a motion for judgement on the pleadings filed on behalf of all
defendants. On July 6, 1994, the court denied a motion for partial summary
judgement filed on behalf of the plaintiffs. The Company and the individual
defendants intend to vigorously defend the U.S. District Court Action. The
Company is unable to predict if the U.S. District Court Action will have a
material adverse effect on the Company's results of operations or financial
condition.
20
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
LEGAL PROCEEDINGS, CONTINUED
The U.S. District Court Action is based, in part, on a judicial determination
on July 29, 1992 of the fair value of the Company's series 2 and 3 subordinated
serial preferred stock in an appraisal action in the Chancery Court for
Davidson County, Tennessee (the "Chancery Court Action"). The Chancery Court
Action was commenced after certain preferred shareholders dissented from
certain charter amendments approved by shareholders on February 4, 1988 and
demanded the fair value of their shares. The Chancery Court determined that
the fair values of a share of series 2 was $131.32 and of a share of the series
3 was $193.11 (which amounts are in excess of the mandatory redemption and
liquidation values of a share of series 2 subordinated serial preferred stock
and of the optional redemption and liquidation values of a share of series 3
subordinated serial preferred stock), compared with $91 a share for the series
2 and $46 a share for the series 3 previously paid by the Company as the fair
value of such shares. The Chancery Court ordered the Company to pay to Jacob
Landis, the only shareholder who prosecuted his dissenter's rights, the
additional sum of $358,062 plus interest at 10% from July 29, 1992, attorneys'
fees and costs to be determined in further proceedings. The Company appealed
the Chancery Court's decision, and on September 1, 1993 the Tennessee Court of
Appeals affirmed the Chancery Court's decision and remanded the case to the
Chancellor for further proceedings. The Company filed a petition to the
Tennessee Supreme Court to review the case, which the court denied on January
31, 1994. The Company paid the amount of the judgement plus accrued interest
on February 4, 1994. In September 1994, the Company paid the dissenter's legal
fees and expenses aggregating approximately $445,000.
New York Real Estate Claim
On May 13, 1993, the landlord of one of the Company's retail stores in New York
City filed a civil action claiming that the Company breached the store lease
and negligently allowed the premises to deteriorate. The complaint sought
compensatory damages of $2.5 million and punitive damages of $5 million. On
September 9, 1994, the Company settled the case for $255,000.
Canadian Tax Litigation
At various times in 1990 and 1991 (i) the Canadian Department of National
Revenue, Taxation (the "Department"), the Alberta Corporate Tax Administration
and the Ontario Ministry of Revenue made tax reassessments relating to the
deductibility of interest expense incurred by one of the Company's Canadian
subsidiaries on funds borrowed from the Company and (ii) the Department made
tax reassessments relating to non-resident withholding tax with respect to the
payment by that subsidiary of its loan from the Company and with respect to
interest on loans by that subsidiary to the Company. These reassessments,
which the Company has calculated to be approximately Canadian $18.7 million
including interest (approximately U.S. $14.1 million) at January 31, 1994, were
made against Agnew Group, Inc., the corporate successor to the purchaser of the
Company's Canadian operations (the "Taxpayer").
21
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 12
LEGAL PROCEEDINGS, CONTINUED
The Company entered into a settlement agreement, dated as of May 4, 1994, with
the Taxpayer and the Department and paid, in full satisfaction of the
Department's and the Taxpayer's claims against it, $1.3 million. The
settlement became effective with Canadian government approval on August 10,
1994. The Company had previously made a provision for its liability to the
Taxpayer in an amount greater than its payment under the settlement agreement,
resulting in $4.9 million of additional gain on the divestiture of the
Company's Canadian operations, recognized in the second quarter ended July 31,
1994.
22
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
SIGNIFICANT DEVELOPMENTS
Fiscal 1994 Restructuring
Certain events and changes in operating strategies in the fourth quarter of the
fiscal year ended January 31, 1994 ("Fiscal 1994") led to a decision to
restructure certain of the Company's operations and a reassessment of the
recoverability of certain assets (the "1994 Restructuring"). As a result, the
Company recorded a charge of $29.4 million (the "1994 Restructuring Charge"),
for which no tax benefit is currently available. This charge reflected
estimated costs of closing certain manufacturing facilities, effecting
permanent work force reductions and closing 58 retail stores. The 1994
Restructuring Charge included $15.8 million in asset write- downs and $13.6
million of other costs, of which, depending upon the timing and outcome of
certain pending negotiations, approximately $12 million are expected to be
incurred in the fiscal year ending January 31, 1995 ("Fiscal 1995"). The
Company expects to complete the 1994 Restructuring by the end of Fiscal 1995.
To date, the Company has closed a footwear plant and 39 retail stores, paid
approximately $4.6 million of the other costs, and closed a men's apparel
plant.
Fiscal 1995 Restructuring
In response to worsening trends in the Company's men's apparel business and in
response to a strategic review of its footwear operations, the Company's board
of directors, on November 3, 1994, approved a plan (the "1995 Restructuring")
designed to focus the Company on its core footwear businesses by selling or
liquidating four businesses, two of which constitute its entire men's apparel
segment. The ongoing businesses, after implementation of the 1995
Restructuring, will include the manufacture or sourcing, marketing and
distribution of footwear under the Johnston & Murphy, J. Murphy, Domani,
Laredo, Code West, Dockers and Nautica brands, the tanning and distribution of
leather by the Volunteer Leather division and the operation of Jarman,
Journeys, Johnston & Murphy, J. Murphy, Boot Factory and Factory To You retail
footwear stores.
The 1995 Restructuring provides for the following:
o Liquidation of the University Brands children shoes business,
o Sale of the Mitre Sports soccer business,
o Liquidation of The Greif Companies men's tailored clothing
business, and
o Sale of the GCO Apparel Corporation tailored clothing
manufacturing business.
The 1995 Restructuring also includes estimated costs of consolidating certain
facilities and effecting permanent work force reductions. Implementation of
the 1995 Restructuring is expected to be complete within 12 months. It is
anticipated that the cash proceeds to be received from implementation of the
1995 Restructuring will slightly exceed the cash costs thereof. Any excess
cash will be reinvested in the Company's ongoing businesses.
23
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The total costs to implement the 1995 Restructuring (both cash and non-cash)
are expected to be $90.7 million, of which $22.1 million (the "1995
Restructuring Charge") relates to University Brands and Mitre and other costs
described below and $68.6 million (the "1995 Restructuring Provision") relates
to Greif and GCO Apparel, which constitute the entire men's apparel segment of
the Company's business, and is therefore treated for financial reporting
purposes as a provision for discontinued operations. No tax benefit is
currently available with respect to either the 1995 Restructuring Charge or the
1995 Restructuring Provision.
The 1995 Restructuring Charge includes $10.7 million in asset write-downs, $2.6
million of foreign currency translation adjustments realization and $8.8
million of other costs, of which $7.2 million are expected to be incurred in
the next 12 months. Other costs expected to be incurred beyond 12 months
include primarily facility shutdown costs and other contract liabilities and
are classified as long-term liabilities in the consolidated balance sheet.
The 1995 Restructuring Provision includes $27.5 million in asset write-downs
and $41.1 million of other costs, of which approximately $19.5 million are
expected to be incurred in the next 12 months. Other costs include primarily
union pension liability, employee severance arrangements, facility shutdown
costs and other contract liabilities. Other costs expected to be incurred
beyond 12 months, of which the most significant are union pension liabilities
and Greif lease costs, are classified as long-term liabilities in the
consolidated balance sheet.
The 1995 Restructuring provides for the elimination of the remaining 1,300 jobs
in the Company's men's apparel operations and approximately 535 jobs in
footwear operations to be divested or consolidated and in staff positions to be
eliminated.
Revolving Credit Agreement
On January 31, 1994, the Company's revolving credit agreement was amended to
adjust certain financial covenants to reflect operating results, including the
1994 Restructuring Charge. The agreement was further amended as of October 31,
1994 to reflect operating results, including the charges and provisions
associated with the 1995 Restructuring, and to reduce the facility from $100
million to $65 million (subject to further reductions). See Notes 2 and 10 to
the Consolidated Financial Statements.
24
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
RESULTS OF OPERATIONS - THIRD QUARTER FISCAL 1995 VS 1994
The Company's net sales from continuing operations in the third quarter ended
October 31, 1994 decreased 0.4% from the same period the previous year. Total
gross margin for the quarter decreased 2.0% and declined from 38.2% to 37.6% as
a percentage of net sales. Selling and administrative expenses decreased 5.5%
and decreased as a percentage of net sales from 37.2% to 35.3%. The pretax
loss in the quarter was $22,750,000, compared to a pretax loss of $2,264,000 in
the same quarter last year. The Company reported a net loss of $93,160,000
($3.83 per share) in the third quarter ended October 31, 1994 compared to a net
loss of $3,084,000 ($.13 per share) last year. The pretax loss for the quarter
ended October 31, 1994 includes the $22.1 million 1995 Restructuring Charge.
The quarter's net loss includes, in addition to the 1995 Restructuring Charge,
the $68.6 million 1995 Restructuring Provision. See Note 2 to the Consolidated
Financial Statements.
Footwear Retail
Three Months
Ended October 31,
---------------------------
1994 1993 % Change
-------- -------- --------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $59,698 $58,417 2.2%
Operating Income . . . . . . . . . . . . . . . . . . . $ 5,148 $ 1,292 298%
Operating Margin . . . . . . . . . . . . . . . . . . . 8.6% 2.2%
Led by an increase in comparable store sales of approximately 4%, net sales
from footwear retail operations increased 2.2% in the quarter ended October 31,
1994 compared to the same period last year. The average price per pair
decreased approximately 3%, while unit sales increased approximately 16%,
primarily from the opening of lower-priced children's shoes leased departments
during Fiscal 1995. Gross margin as a percentage of net sales increased from
49.6% to 51.5%. Operating expenses decreased 6.8%, primarily due to the
operation of fewer stores as a result of the 1994 Restructuring, and lower
advertising expenses, and decreased as a percentage of net sales from 46.9% to
42.8%. Operating income in the third quarter ended October 31, 1994 does not
include operating losses of the 58 retail stores to be closed in the 1994
Restructuring. Operating income in the third quarter ended October 31, 1993,
adjusted to exclude results of these 58 stores, was $2,270,000. Operating
income of $5,148,000 in the third quarter this year was higher than last year's
third quarter adjusted operating income due to improved gross margin resulting
from lower markdowns and from the lower operating expenses.
25
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Footwear Wholesale & Manufacturing
Three Months
Ended October 31,
---------------------------
1994 1993 % Change
-------- -------- --------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $ 63,501 $65,272 (2.7%)
Operating Income . . . . . . . . . . . . . . . . . . $(18,211) $ 2,689
Operating Margin . . . . . . . . . . . . . . . . . . . (28.7%) 4.1%
Net sales from footwear wholesale and manufacturing operations were $1.8
million (2.7%) lower in the quarter ended October 31, 1994 than in the
comparable period last year, reflecting primarily lower sales (both in pairs
and prices) of western boots and, to a lesser extent, tanned leather. Gross
margin as a percentage of net sales decreased from 28.0% to 24.6%, primarily
due to price reductions to stimulate sales. Operating expenses decreased 15.7%
and decreased as a percentage of net sales from 24.2% to 21.0%, primarily
because of reduced advertising expenses. Operating income for the quarter
ended October 31, 1994 includes $20.6 million of the 1995 Restructuring Charge.
The decline in operating income, excluding the 1995 Restructuring Charge, is
due primarily to lower sales of western boots.
The net sales and operating income (loss) for the quarter ended October 31,
1994 of the University Brands and Mitre Sports businesses that will be disposed
of in the 1995 Restructuring were $18,980,000 and $(1,340,000), respectively
and for the quarter ended October 31, 1993 were $17,094,000 and $(946,000),
respectively.
Discontinued Operations
Three Months
Ended October 31,
---------------------------
1994 1993 % Change
-------- -------- --------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $24,579 $30,407 (19.2%)
Operating Income . . . . . . . . . . . . . . . . . . . $(1,600) $ (715) (123.8%)
Operating Margin . . . . . . . . . . . . . . . . . . . (6.5%) (2.4%)
Net sales from men's apparel operations decreased 19.2%. Net sales, excluding
those of GCO Apparel Corporation ("GCO Apparel"), which began operations in
August 1993, declined by 21%.
26
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Operating income declined in the quarter ended October 31, 1994 versus the
quarter ended October 31, 1993 because of declining sales and continued
pressure on tailored clothing gross margin. See "Significant
Developments-Fiscal 1995 Restructuring" for information regarding the
discontinuation of this business segment.
Corporate and Interest Expenses
Corporate and other expenses were $6.5 million in the third quarter this year
compared to $3.2 million for the same period last year, an increase of 101%.
Included in the $6.5 million is a $659,000 provision for environmental
litigation recorded in the third quarter this year, while in the third quarter
last year, the Company recorded a $500,000 provision for environmental
litigation. This year's expenses also include $2.3 million of severance costs,
$1.3 million of which relate to the 1995 Restructuring. After adjusting each
quarter for the above items, the current quarter's expenses are $841,000
greater than last year's comparable quarter, due principally to the costs of
amending the revolving credit agreement and to increased professional services.
Interest expense increased $188,000, or 6%, in the third quarter this year
compared to the same quarter of last year. Higher average interest rates this
year compared to last year more than offset lower average borrowings under the
revolving credit agreement .
RESULTS OF OPERATIONS - NINE MONTHS ENDED OCTOBER 31 FISCAL 1995 VS 1994
Net sales from continuing operations for the nine months ended October 31, 1994
decreased 3.0% from the comparable period last year. Total gross margin for
the nine months decreased 5.0% and declined from 38.6% to 37.7% as a percentage
of net sales. Selling and administrative expenses decreased 5.3% and decreased
as a percentage of net sales from 37.6% to 36.7%. The pretax loss in the nine
months ended October 31, 1994 was $22.5 million, compared to a pretax loss of
$4.4 million last year. The Company reported a net loss of $96.3 million
($3.97 per share) in the nine months ended October 31, 1994 compared to a net
loss of $5.9 million ($.25 per share) last year. The pretax loss for the nine
months ended October 31, 1994 includes the $22.1 million 1995 Restructuring
Charge and recognition of $4.9 million of additional gain on the sale in 1987
of the Company's Canadian operations. See Notes 2 and 12 to the Consolidated
Financial Statements. This year's net loss includes, in addition to the above
adjustments, the $68.6 million 1995 Restructuring Provision. Last year's net
loss includes a $2.3 million ($.09 per share) loss from the cumulative effect
of changes in the method of accounting for postretirement benefits due to the
implementation of Statement of Financial Accounting Standards No. 106 and an
extraordinary loss of $240,000 ($.01 per share) from the early retirement of
debt.
27
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Footwear Retail
Nine Months
Ended October 31,
---------------------------
1994 1993 % Change
-------- -------- --------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $160,469 $160,760 (0.2%)
Operating Income . . . . . . . . . . . . . . . . . . . $ 8,560 $ 1,728 395%
Operating Margin . . . . . . . . . . . . . . . . . . . 5.3% 1.1%
Despite an increase in comparable store sales of approximately 3%, net sales
from footwear retail operations declined 0.2% in the nine months ended October
31, 1994 compared to the corresponding period in the previous year, principally
due to the operation of 6% fewer stores as a result of the 1994 Restructuring
and a $6.3 million decline in accessory sales. The average price per pair
declined 1%, while unit sales were up 5% for the nine months, primarily from
the operation of lower priced children's shoes leased departments this year.
Gross margin as a percentage of net sales increased from 50.3% to 51.2%
primarily from lower markdowns. Operating expenses decreased 5.5%, primarily
due to the operation of fewer stores as a result of the 1994 Restructuring and
lower advertising expenses, and decreased as a percentage of net sales from
49.0% to 46.4%. Operating income in the nine months ending October 31, 1994
does not include operating losses of the retail stores to be closed in the 1994
Restructuring. Operating income in the first nine months ended October 31,
1993, adjusted to exclude results of the 58 stores to be closed in the 1994
Restructuring, was $4,129,000. Current operating income of $8,560,000 in the
first nine months this year was higher than last year's adjusted operating
income due to improved margin as a percentage of net sales from lower markdowns
and the lower operating expenses.
Footwear Wholesale & Manufacturing
Nine Months
Ended October 31,
---------------------------
1994 1993 % Change
-------- -------- --------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $177,117 $187,208 (5.4%)
Operating Income . . . . . . . . . . . . . . . . . . . $(13,544) $ 11,357
Operating Margin . . . . . . . . . . . . . . . . . . . (7.6%) 6.1%
Net sales from footwear wholesale and manufacturing operations were $10.1
million (5.4%) lower in the nine months ended October 31, 1994 than in the
previous year's corresponding nine month period, reflecting primarily lower
unit sales and selling prices of western boots and, to a lesser extent, lower
sales of tanned leather.
28
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Gross margin as a percentage of net sales decreased from 28.5% to 25.5%,
primarily due to volume-related manufacturing variances and price reductions to
stimulate sales.
Operating expenses decreased 8.8% and decreased as a percentage of net sales
from 22.6% to 21.8%, primarily because of reduced advertising expenses.
Included in this year's operating income is $20.6 million of the 1995
Restructuring Charge. The decline in operating income, excluding the 1995
Restructuring Charge, is due to lower western boot sales combined with price
reductions taken to stimulate sales of boots and children's shoes.
Driven by record sales, western boot production in the first quarter of last
year resulted in positive manufacturing variances in the Company's boot plants.
A sharp decline in the sale of western boots led to a decision in the latter
part of Fiscal 1994 to curtail western boot production. See "Significant
Developments-Fiscal 1994 Restructuring" above. Despite the closing of a
western boot plant in the first quarter of Fiscal 1995 pursuant to the 1994
Restructuring, the lower volume of boots manufactured in the first nine months
of Fiscal 1995 resulted in negative manufacturing variances. The 1995
Restructuring Charge includes a provision to close another boot manufacturing
plant, which is anticipated to occur in the first quarter of Fiscal 1996.
The net sales and operating income (loss) for the nine months ended October 31,
1994 of the University Brands and Mitre Sports businesses that will be disposed
of in the 1995 Restructuring were $62,342,000 and $(173,000), respectively and
for the nine months ended October 31, 1993 were $63,117,000 and $1,823,000,
respectively.
Discontinued Operations
Nine Months
Ended October 31,
---------------------------
1994 1993 % Change
-------- -------- --------
(In Thousands)
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $81,777 $80,571 1.5%
Operating Income . . . . . . . . . . . . . . . . . . . $(4,540) $ 1,508 -
Operating Margin . . . . . . . . . . . . . . . . . . . (5.6%) 1.9%
Net sales from tailored clothing operations increased 1.5% in the nine months
ended October 31, 1994 as compared to the same period last year. Net sales,
excluding those of GCO Apparel, which began operations in August 1993, declined
by 10.8%.
The reduction in operating income is attributable to lower Greif sales and
lower gross margins. See "Significant Developments- Fiscal 1995 Restructuring"
for information regarding the discontinuation of this business segment.
29
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Corporate and Interest Expenses
Corporate and other expenses in the nine months ended October 31, 1994 were
$13.3 million compared to $10.1 million for the same period last year, an
increase of approximately 32%. Included in corporate and other expenses this
year are provisions of $1.4 million for environmental litigation compared to
only $500,000 of such provisions last year. This year's expenses also include
$2.3 million of severance costs, $1.3 million of which relates to the 1995
Restructuring. Excluding the provisions for environmental litigation and the
severance costs, corporate expenses were essentially unchanged from last year,
with lower compensation expenses due to layoffs related to the 1994
Restructuring and other staff reductions that occurred after the first quarter
of Fiscal 1994 being offset by higher professional fees and the costs of
amending the revolving credit agreement. It is expected that compensation
expense will be further reduced in Fiscal 1996 as the 1995 Restructuring is
implemented.
Interest expense increased $1,006,000, or 12%, from the same period last year
because of an increase in both average borrowings and average interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain financial data at the dates indicated.
All dollar amounts are in millions.
October 31,
----------------------
1994 1993
------ ------
Cash and short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.6 $ 2.1
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $122.2 $214.3
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $110.0 $114.0
Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2x 4.4x
_______________
Working Capital
The Company's business is somewhat seasonal, with the Company's investment in
inventory and accounts receivable reaching peaks in the spring and fall of each
year. Cash flow from operations is generated principally in the fourth quarter
of each fiscal year.
Cash used by operating activities was $13.1 million in the first nine months of
Fiscal 1995 compared to $44.9 million in the same period last year. The $31.8
million improvement in cash flow from operating activities as compared to the
first nine months of Fiscal 1994 reflects factors including lower footwear
wholesale inventory (primarily in the Company's boot business), lower tailored
clothing inventory as a result of anticipated lower Greif sales and reduced raw
material purchases for the spring 1995 season and improved footwear inventory
management, as well as differences in the timing and manner of deliveries and
in payment terms from vendors, resulting in a higher level of accounts payable
at October 31, 1994 than at the same date last year.
30
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
A $4.1 million decrease in inventories from January 31, 1994 levels was due
primarily to lower tailored clothing inventory that more than offset normal
seasonal increases. The $14.2 million decrease in continuing inventories
compared with October 31, 1993 reflects lower boot inventory, improved footwear
inventory controls, and lower retail inventory from the store closings included
in the 1994 Restructuring.
Accounts receivable at October 31, 1994 increased $22.9 million compared to
January 31, 1994, primarily from seasonal increases and extended terms given to
meet competitive pressures. Accounts receivable at October 31, 1994, excluding
those of operations to be divested, were $800,000 less than at October 31,
1993, due to lower footwear wholesale sales.
Cash provided (or used) due to changes in accounts payable and accrued
liabilities during the nine months ended October 31, 1994 and 1993 is as
follows:
Nine Months Ended October 31,
--------------------------------------
(In Thousands) 1994 1993
------- --------
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 9,803 $ (6,188)
Accrued liabilities . . . . . . . . . . . . . . . . . . . (5,966) 417
------- --------
$ 3,837 $ (5,771)
======= ========
The increase in accounts payable is due to differences in the timing and manner
of deliveries and in payment terms negotiated with individual vendors and
changes in inventory levels.
The change in accrued liabilities in the nine months ended October 31, 1994
versus the nine months ended October 31, 1993 is due primarily to accrued
liabilities, including severance costs and liabilities under leases, related to
the 1994 Restructuring.
Revolving credit agreement borrowings during the nine months ended October 31,
1994 increased by $20 million to finance seasonal working capital increases, to
finance current operations and to fund approximately $4.6 million of costs
associated with the 1994 Restructuring.
Capital Expenditures and Acquisitions
Total capital expenditures in Fiscal 1995 are expected to be approximately $7.0
million. These include expected expenditures of $3.7 million to open
approximately 28 new retail stores and to complete 12 major store renovations.
Capital expenditures for wholesale and manufacturing operations and other
purposes are expected to total approximately $3.3 million for the year.
31
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
On August 12, 1993, GCO Apparel Corporation acquired all of the men's clothing
manufacturing assets and assumed certain liabilities of LaMar. See Note 3 to
the Consolidated Financial Statements. The purchase price was approximately
$11.8 million, including $10.9 million of cash and $900,000 of deferred
payments to be completed by August 1995. The acquisition was financed through
revolving credit agreement borrowings. The divestiture of GCO Apparel's
operations are included in the 1995 Restructuring Provision.
Future Capital Needs
The Company expects that cash provided by operations and by the sale of assets
employed in operations to be divested pursuant to the 1995 Restructuring will
be sufficient to fund all of its capital expenditures through Fiscal 1996. The
substantial improvement in cash flow achieved to date and expected for the
remainder of Fiscal 1995 is based upon lower working capital needs resulting
from better footwear inventory management and substantial liquidation of
working capital invested in the tailored clothing business. The approximately
$34.1 million of costs associated with the 1994 Restructuring and the 1995
Restructuring that are expected to be incurred during the next 12 months are
expected to be fully offset by cash inflows from sales of assets employed in
operations to be divested pursuant to the 1995 Restructuring.
The Company believes it will be able to comply with the financial covenants
contained in its revolving credit agreement, as amended as of October 31, 1994,
and that the commitments under that agreement will be adequate to meet the
Company's credit needs for Fiscal 1996. See Note 10 to the Consolidated
Financial Statements. However, the financial covenants contained in the
revolving credit agreement are restrictive and the Company is considering
various alternatives in meeting its credit needs.
There were $43.8 million of loans and letters of credit outstanding under the
revolving credit agreement at October 31, 1994.
The restricted payments covenant contained in the Company's revolving credit
agreement prohibits the Company from declaring dividends on the Company's
capital stock. The aggregate of annual dividend requirements on the Company's
Subordinated Serial Preferred Stock, $2.30 Series 1, $4.75 Series 3 and $4.75
Series 4, and on its $1.50 Subordinated Cumulative Preferred Stock is $302,000.
The Company is unable to predict when dividends may be reinstated.
At October 31, 1994, the Company's English subsidiary, Mitre U.K., had a credit
facility with a credit limit equal to the lesser of (i) 5.0 million pounds
sterling (approximately U.S. $8.2 million at October 31, 1994) or (ii) the
aggregate of 75 percent of the value of current receivables and 50 percent of
the value of inventory of Mitre U.K. The facility expired on December 2, 1994.
Management of the Company believes that the financial commitments provided by
its revolving credit agreement will be adequate to replace the commitments
provided by the expired facility.
32
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
On November 7, 1994, Standard & Poor's announced that it had lowered the rating
of the 10 3/8% Notes to B from B+ based on its concern that Genesco's ongoing
business operations will not provide the earnings and cash flow generation
reflective of a B+ senior credit rating. On June 6, 1994, Moody's announced
that it had lowered its rating of the Notes to B2 from B1 and that the rating
remains under review for potential further downgrade. According to Standard &
Poor's, a debt instrument rated B has a greater vulnerability to default than
debt rated BB, but currently has the capacity to meet interest and principal
payments. According to Moody's, the assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small with respect to a debt instrument rated B. Ratings are
not a recommendation to purchase, hold or sell long-term debt of the Company,
inasmuch as ratings do not comment as to market price or suitability for
particular investors and may be subject to revision or withdrawal at any time
by the assigning rating agency.
BACKLOG
On October 31, 1994 the Company's footwear wholesale operations (including
leather tanning operations), which accounted for 51% of continuing operations
sales in Fiscal 1994, had a backlog of orders, including unconfirmed customer
purchase orders, amounting to approximately $37.6 million, compared to
approximately $34.2 million on October 31, 1993. Most orders are for delivery
within 90 days. Therefore, the backlog at any one time is not necessarily
indicative of future sales for an extended period of time. The backlog is
somewhat seasonal, reaching a peak in the spring. Footwear companies maintain
in-stock programs for selected anticipated high volume styles.
33
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 2, 1994 the Company entered into a settlement agreement with
members of the Hackett family, the last of 29 individual plaintiffs who brought
civil actions arising out of alleged contamination of a site in Williamson
County, Tennessee. The settlement resulted in a charge to earnings of
approximately $659,000 in the third quarter ended October 31, 1994.
For additional information concerning these settlements, see Note 12 to the
Consolidated Financial Statements which is incorporated herein by reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
At October 31, 1994 Genesco was in arrears with respect to dividends payable on
the following classes of preferred stock:
ARREARAGE
-------------------------------------------
DATE DIVIDENDS BEGINNING THIS END OF
CLASS OF STOCK PAID TO OF QUARTER QUARTER QUARTER
- -----------------------------------------------------------------------------------------------------------
$2.30 Series 1 October 31, 1993 $ 64,285 $ 21,409 $ 85,694
$4.75 Series 3 October 31, 1993 69,939 23,313 93,252
$4.75 Series 4 October 31, 1993 58,467 19,490 77,957
$1.50 Subordinated Cumulative
Preferred October 31, 1993 33,694 11,256 44,950
- -----------------------------------------------------------------------------------------------------------
TOTALS $226,385 $ 75,468 $301,853
===========================================================================================================
34
PART II - OTHER INFORMATION, CONTINUED
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
(10) y. Severance Agreement dated as of October 12, 1994, between the
Company and E. Douglas Grindstaff.
z. Severance Agreement dated as of October 12, 1994, between the
Company and Thomas B. Clark.
aa. Form of Employment Continuation Agreement between the Company
and certain executive officers.
ab. Nonqualified Stock Option Agreement dated as of October 12,
1994, between the Company and David M. Chamberlain.
ac. Third Amendment to Loan Agreement dated as of October 28,
1994, among the Company and NationsBank of North Carolina,
N.A., First National Bank of Chicago and others, incorporated
by reference to the Company's Current Report on Form 8-K dated
November 7, 1994.
(11) Computation of earnings per common and common share equivalent.
(27) Financial Data Schedule
______________
REPORTS ON FORM 8-K
On October 13, 1994 the Company filed a Current Report on Form 8-K announcing
the resignation of its President and Chief Executive Officer and its Executive
Vice President-Administration and the election of a new chief executive
officer.
On November 7, 1994 the Company filed a Current Report on Form 8-K announcing
the adoption of a restructuring plan and an amendment to its revolving credit
facility agreement with a group of seven banks.
35
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Genesco Inc.
/s/ Robert E. Brosky
Robert E. Brosky
Controller and Chief Accounting Officer
December 15, 1994
1
EXHIBIT 10(y)
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (the "Agreement"), made and entered into this
12th day of October, 1994, by and between E. DOUGLAS GRINDSTAFF ("Grindstaff")
and GENESCO INC., a Tennessee corporation ("Genesco").
WITNESSETH
WHEREAS, Genesco and Grindstaff are parties to that certain Employment
Agreement dated April 22, 1992, as amended by an amendment thereto dated
December 8, 1993 (as amended, the "Employment Agreement");
WHEREAS, Genesco and Grindstaff desire to terminate Grindstaff's
employment with Genesco under the Employment Agreement upon the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual premises herein
contained and other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. RESIGNATION; TERMINATION OF EMPLOYMENT. Grindstaff
acknowledges that as of October 12, 1994 he resigned as (i) an officer,
employee and director of Genesco, (ii) an officer and director of all
subsidiaries of Genesco, whether or not wholly owned by Genesco and whether
owned directly or indirectly by Genesco and (iii) a member of any committees on
which he may have served for Genesco or any of its subsidiaries. Grindstaff
agrees not to take or attempt to take any further action on behalf of or
purportedly on behalf of Genesco or any of its subsidiaries and agrees to
remove all personal effects from Genesco's premises as soon as practicable.
Grindstaff agrees to immediately deliver to Genesco all property of Genesco or
any of its subsidiaries in his possession, including, without limitation, (a)
all written materials, records and documents whether or not generated by
Grindstaff, and all copies, summaries or compilations thereof, which concern
the business, finances or affairs of Genesco or any of its subsidiaries and (b)
any credit cards furnished to him by Genesco or any of its subsidiaries;
provided, however, that Grindstaff shall be entitled to receive the furniture
in his office, including the computer on his desk.
2. BENEFITS. Genesco agrees to pay to Grindstaff monthly
severance payments, each in an amount equal to the monthly base salary
currently provided for in the Employment Agreement ($41,666.67) and payable on
the 20th day of each month (including October 20) through and including April
20, 1996. Grindstaff hereby agrees that, except as provided below, these
payments shall be in lieu of all compensation, payments and benefits to which
he is otherwise entitled under the terms of the Employment Agreement, any
change in control agreement with Genesco or its subsidiaries, Genesco's 1994
Management Incentive Compensation Plan, Genesco's 1995 Management Incentive
Plan, any long-term incentive
1
2
plan, any restricted stock plan, insurance program or plan or any other plans,
agreements or arrangements with Genesco or any of its subsidiaries. Grindstaff
shall continue to be entitled to any vested pension benefits to which he is now
entitled. Grindstaff and his dependents shall continue to receive medical
insurance benefits pursuant to the Genesco health insurance program until the
earlier of Grindstaff obtaining health insurance benefits from an entity other
than Genesco or April 20, 1996. Thereafter, Grindstaff may purchase health
insurance benefits to the extent provided under COBRA. Grindstaff shall be
entitled to continue to receive at Genesco's expense life insurance coverage
(and any cash surrender build up therein) as is currently provided to him
through April 20, 1996, subject to Grindstaff's insurability at rates
comparable to those now paid by Genesco. Grindstaff shall be entitled to
participate in reasonable out-placement assistance. Grindstaff shall be
entitled to continue to receive the car allowance he now receives until April
20, 1996. Grindstaff shall be entitled to reimbursement of reasonable
relocation expenses (not to exceed $10,000) if he should move from the
Nashville metropolitan area within 12 months from the date hereof. Further,
Grindstaff shall be entitled to the reimbursement of the real estate commission
paid in connection with the sale of his residence (not to exceed $50,000) if he
should move from the Nashville metropolitan area within 12 months from the date
hereof. All other employment benefits (including but not limited to benefits
provided for in Sections 3, 4, 7, 9, 10 and 13 of the Employment Agreement) for
Grindstaff shall cease on the date hereof; provided that stock options
previously granted to Grindstaff by Genesco shall continue to be governed by
the terms of such stock options and all plans and agreements related thereto.
Grindstaff shall forfeit immediately any unpaid amounts and benefits due
pursuant to this Section 2 in the event of any material breach by him of any
covenants contained in this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF GRINDSTAFF. Grindstaff has
the full right, power and authority to enter into this Agreement. This
Agreement has been duly and validly executed and delivered by Grindstaff and
constitutes a valid and binding obligation on his part, enforceable against him
in accordance with its terms. The execution, delivery and performance of this
Agreement will not, with or without the giving of notice or the passage of time
or both, (a) violate any judgment, injunction or order of any court, arbitrator
or governmental agency applicable to Grindstaff, or (b) conflict with, result
in the breach of any provision of or constitute a default under any agreement
or instrument to which Grindstaff is a party or by which he may be bound.
4. REPRESENTATIONS AND WARRANTIES OF GENESCO. Genesco hereby
represents and warrants that it is a corporation duly organized and validly
existing in good standing under the laws of the State of Tennessee and has all
requisite corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by Genesco and all the transactions contemplated hereby have
been duly authorized by all necessary corporate action on its part. This
Agreement has been duly executed and delivered by Genesco and constitutes a
valid and binding obligation on its part, enforceable against it in accordance
with its terms. The execution, delivery and performance of this Agreement will
not, with or without the giving of notice or the passage of time or both, (a)
violate any judgment, injunction or order of any court, arbitrator or
2
3
governmental agency applicable to Genesco, or (b) conflict with, result in the
breach of any provision of or constitute a default under any agreement or
instrument to which Genesco is a party or by which it may be bound.
5. COVENANTS BY GRINDSTAFF. From and after the date hereof and
for a period of six months from the date hereof, (i) Grindstaff will take no
action to dissipate or negatively affect the goodwill, business, prospects or
reputation of Genesco or its relationship with its employees, customers,
suppliers, competitors, shareholders, lenders, prospective investors,
prospective purchasers of any businesses or assets of Genesco or others, (ii)
Grindstaff will for 60 days after the date hereof cooperate reasonably on a
non-full-time basis with Genesco, its employees, agents and representatives to
assist Genesco's business and operations and (iii) for a period of two years
after the date hereof, Grindstaff will not, directly or indirectly, for
whatever reason, whether on his own behalf or on behalf of anyone else: (a)
solicit, employ, deal with or interfere with Genesco or any of Genesco
Subsidiaries' contracts or relationships with any employee, officer or
director, whether such person is employed by or associated with Genesco or a
Genesco Affiliate on the date hereof or during such two year period or (b)
solicit, accept, deal with or otherwise interfere with any of Genesco's or a
Genesco Subsidiaries' contracts or relationships with any customer, client or
supplier of Genesco or any Genesco Affiliate; provided, however, that this
clause shall not be construed to constitute a covenant restricting competition
by Grindstaff against the Company.
Grindstaff acknowledges that the provisions of this Section 5 are
essential to the operations and business of Genesco and further acknowledges
that the application or operation of the provisions of this Section 5 does not
involve a substantial hardship upon his future livelihood. If any court
determines that any of the provisions of this Section 5 are unenforceable in
any respect, such court shall be empowered to substitute, to the extent
enforceable, provisions similar to this Section 5 or other provisions so as to
provide Genesco, to the fullest extent possible, the benefits and protections
intended by this Section 5.
6. RELEASE. Effective immediately, Grindstaff releases and
discharges Genesco, each subsidiary and affiliate of Genesco and each present
and former director, officer and employee of Genesco or any subsidiary or
affiliate of Genesco (collectively "Genesco Affiliates") from all manner of
claims, actions, causes of action or suits, in law or in equity, which
Grindstaff has or hereafter can, shall or may have against Genesco or Genesco
Affiliates or any of them by reason of any matter, cause or thing whatsoever,
arising out of an event or matter occurring prior to the date hereof, including
any action arising from or during his employment with Genesco, resulting from
his termination of such employment or related to his status as a shareholder,
officer, employee or participant in any Genesco employee benefit plan, except
for any claims or action Grindstaff may have that results from a breach of
Genesco's obligations under this Agreement or a failure by Genesco to perform
its obligations under this Agreement. From and after the date hereof,
Grindstaff agrees and covenants not to sue or initiate arbitration, or threaten
suit or arbitration against, or make any claim against, Genesco or any Genesco
Affiliate for or alleging any of the claims,
3
4
actions, causes of action or suits as discussed above. Grindstaff acknowledges
that this release includes but is not limited to all claims arising under
federal, state or local laws prohibiting employment discrimination and all
claims growing out of any legal restrictions on Genesco's right to terminate
its employees. This release specifically encompasses all claims of employment
discrimination based on race, color, religion, sex, handicap and national
origin, as provided under Title VII of the Civil Rights Act of 1964, as
amended, the 1991 Civil Rights Act, all claims of discrimination based on age,
as provided under the Age Discrimination in Employment Act of 1967, as amended,
all claims of discrimination based on handicap, as provided in the Americans
with Disabilities Act, as amended, and all claims of employment discrimination
under state law as provided under Tennessee Code Annotated Sections 8-50-103
and 4-21-401, et seq. Notwithstanding anything hereto to the contrary,
Grindstaff shall not be deemed to have released the Company's obligation to
Grindstaff, if any, under indemnification provisions of the Company's charter
or bylaws, whether or not covered by insurance, or any rights Grindstaff may
have under any directors' and officers' liability policy. Nothing herein shall
limit Grindstaff's ability to seek contribution from directors for liabilities
for claims brought by third parties who are unrelated to Grindstaff. Genesco
and the Genesco Affiliates hereby release Grindstaff from all claims, actions,
causes of action or suits, in law or in equity, which Genesco or the Genesco
Affiliates have or hereafter can, shall or may have against Grindstaff by
reason of any matter, cause of action or thing whatsoever, arising out of an
event or matter occurring prior to the date hereof, including any alleged
breach by Grindstaff of the Employment Agreement or based on his actions as an
employee, officer or director of Genesco or a Genesco Affiliate, except for
matters relating to a breach of fiduciary duty by Grindstaff of which Genesco
is not now aware.
7. CONFIDENTIALITY. Other than as set forth in this Section 7,
both Grindstaff and Genesco agree not to disclose the terms and provisions of
this Agreement or any circumstances surrounding its execution to anyone other
than Genesco's Board of Directors, Genesco's lenders and counsel or as may be
required by law, regulation or court order; except that Grindstaff may disclose
the circumstances surrounding the execution of this Agreement and Sections 5
and 7 hereof to a prospective employer. In addition, for a period of two years
from and after the date hereof, Grindstaff agrees that he will keep
confidential and not appropriate any (i) trade or business secrets of Genesco
and Genesco Affiliates, (ii) information relating to Genesco and Genesco
Affiliates' customers and suppliers and their business habits, (iii) personnel
policies, (iv) business relations information or customer lists, (v) business
or financial strategies of Genesco, (vi) financial or other performance data,
(vii) pricing policies or strategies, or (viii) any other proprietary or
confidential information of Genesco and Genesco Affiliates, whether or not
obtained with the knowledge and permission of Genesco or any Genesco Affiliates
and whether or not developed, devised or otherwise created in whole or in part
by his efforts.
4
5
8. MISCELLANEOUS.
a. Successors and Assigns. This Agreement
shall be binding upon and shall inure to the benefit of
Genesco, its successors and assigns, and Grindstaff, his
heirs, personal representatives, successors and assigns.
b. Survival. All representations and warranties
contained in this Agreement shall survive the execution and
delivery hereof.
c. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to injunctive relief to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state thereof
having jurisdiction, this being in addition to any other
remedy to which they are entitled under this Agreement or at
law or in equity. In addition, a party that is required to
enforce the terms and provisions of this Agreement and is
successful therein shall be reimbursed by the other party for
all costs and expenses, including reasonable legal fees, that
it may incur with respect to such enforcement.
d. Entire Agreement. This Agreement constitutes
the entire agreement between Genesco and Grindstaff relating
to the subject matter hereof and there are no terms other than
those contained herein. To the extent that there is any
conflict between the terms and provisions of the Employment
Agreement or any other agreements related to compensation or
benefits and this Agreement, the terms and provisions of this
Agreement shall prevail. This Agreement may not be modified
or amended except in a writing signed by the parties hereto.
e. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Tennessee without giving effect to principles of
conflicts of law.
f. Counterparts. This Agreement may be executed
in counterparts, which together shall constitute one and the
same agreement.
g. Enforceability. If any provision of this
Agreement shall be held or deemed to be or shall, in fact, be
invalid, inoperative or unenforceable as applied in any
particular case in any jurisdiction or jurisdictions, or in
all jurisdictions, because it conflicts with any provisions of
any constitution, statute, rule or public policy, or for any
reason, such circumstances shall not have the effect of
rendering the provision in question invalid, inoperative or
5
6
unenforceable in any other case or circumstance, or of
rendering any other provision or provisions of this Agreement
invalid, inoperative or unenforceable to any extent whatever.
If any provision of this Agreement shall be held or deemed to
impose restrictions which are too broad, too lengthy or
otherwise unreasonable, the parties hereto agree to be bound
by a court's decision as to what restrictions would be
reasonable and acknowledge that such court has the authority
and discretion to make such a determination.
h. Acknowledgement by Grindstaff. Grindstaff
hereby acknowledges that he has carefully read and fully
understands all the provisions of this Agreement. He further
acknowledges that this Agreement sets forth the entire
agreement between himself and Genesco with respect to the
subject matter of this Agreement. Finally, Grindstaff hereby
acknowledges that, in considering whether to sign this
Agreement, he has not relied upon any representation or
statement, written or oral, not set forth in this Agreement
and that he has not been threatened or coerced into signing
this Agreement by any official of Genesco and that he has
read, understood, and fully and voluntarily accepts the terms
of this Agreement.
i. Captions. The captions herein are for
purposes of identification only and shall not be considered in
construing this Agreement.
GENESCO INC.
By: /s/ Harry D. Garber
-------------------
Name: Harry D. Garber
-------------------
Title: Chairman
-------------------
/s/ E. Douglas Grindstaff
--------------------------
E. DOUGLAS GRINDSTAFF
6
1
EXHIBIT 10(z)
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (the "Agreement"), made and entered into this
12th day of October, 1994, by and between THOMAS B. CLARK ("Clark") and
GENESCO INC., a Tennessee corporation ("Genesco").
WITNESSETH
WHEREAS, Genesco and Clark are parties to that certain Employment
Agreement dated December 8, 1993 (the "Employment Agreement");
WHEREAS, Genesco and Clark desire to terminate Clark's employment with
Genesco under the Employment Agreement upon the terms and conditions set forth
below;
NOW, THEREFORE, in consideration of the mutual premises herein
contained and other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. RESIGNATION; TERMINATION OF EMPLOYMENT. Clark acknowledges
that as of October 12, 1994 he resigned as (i) an officer of Genesco, (ii) an
officer and director of all subsidiaries of Genesco, whether or not wholly
owned by Genesco and whether owned directly or indirectly by Genesco and (iii)
a member of any committees on which he may have served for Genesco or any of
its subsidiaries. Except as specifically requested by the Chairman or
President of Genesco, Clark agrees not to take or attempt to take any further
action on behalf of or purportedly on behalf of Genesco or any of its
subsidiaries and agrees to remove all personal effects from Genesco's premises
as soon as practicable. Clark shall continue as an employee-consultant to
Genesco with respect to its legal affairs until such time as he is no longer
entitled to Genesco paid medical insurance benefits pursuant to Section 2
below. Clark agrees to immediately deliver to Genesco all property of Genesco
or any of its subsidiaries in his possession, including, without limitation,
any credit cards furnished to him by Genesco or any of its subsidiaries.
2. BENEFITS. Genesco agrees to pay to Clark (i) monthly
severance payments, each in an amount of $22,000 and payable on the 20th day of
each month through and including July 20, 1996 (including October 20, 1994) and
(ii) $200,000 upon Clark's execution of this Agreement. Clark and his
dependents shall continue to receive medical insurance benefits pursuant to the
Genesco health insurance program (including the optional executive coverage)
until the earlier of Clark obtaining health insurance benefits from an entity
other than Genesco or July 31, 1996. Thereafter, Clark may purchase health
insurance benefits to the extent provided under COBRA. In addition, Clark
shall be entitled to all amounts currently vested under the Genesco Retirement
Plan, the Genesco Retirement Savings Plan and the Genesco Salary Deferral Plan
(the 401(k) plan) in accordance with the
1
2
terms of such plan and shall be entitled to reimbursements for appropriate
expenses incurred in his capacity as an employee on or prior to the date
hereof. All other employment benefits (including but not limited to benefits
provided for in Sections 3, 4, 6 and 8 of the Employment Agreement) for Clark
shall cease on the date hereof; provided that stock options previously granted
to Clark by Genesco shall continue to be governed by the terms of such stock
options and all plans and agreements related thereto. Clark hereby agrees
that, except as provided in this Section 2, these payments shall be in lieu of
all compensation, payments and benefits to which he is otherwise entitled under
the terms of the Employment Agreement, any change in control agreement with
Genesco or its subsidiaries, Genesco's 1994 Management Incentive Compensation
Plan, Genesco's 1995 Management Incentive Plan, any long-term incentive plan,
any restricted stock plan, insurance program or plan or any other plans,
agreements or arrangements with Genesco or any of its subsidiaries. Clark
shall forfeit immediately any unpaid amounts and benefits due pursuant to this
Section 2 in the event of any material breach by him of any covenants contained
in this Agreement.
Clark shall continue to be indemnified to the fullest extent provided
by Genesco's bylaws and Genesco agrees to reimburse Clark for any travel or
other out-of-pocket expenses that he may incur as a result of his being
required to testify as a witness or to respond to any subpoena or other legal
process in connection with any legal proceeding or governmental investigation
which arises out of or relates to his serving as an officer or employee of, or
as counsel to, Genesco.
3. REPRESENTATIONS AND WARRANTIES OF CLARK. Clark has the full
right, power and authority to enter into this Agreement. This Agreement has
been duly and validly executed and delivered by Clark and constitutes a valid
and binding obligation on his part, enforceable against him in accordance with
its terms (subject to applicable bankruptcy, insolvency, moratorium or other
similar laws and subject to general principles of equity). The execution,
delivery and performance of this Agreement will not, with or without the giving
of notice or the passage of time or both, (a) violate any judgment, injunction
or order of any court, arbitrator or governmental agency applicable to Clark,
or (b) conflict with, result in the breach of any provision of or constitute a
default under any agreement or instrument to which Clark is a party or by which
he may be bound.
4. REPRESENTATIONS, WARRANTIES AND REQUIREMENTS OF GENESCO.
Genesco hereby represents and warrants that it is a corporation duly organized
and validly existing in good standing under the laws of the State of Tennessee
and has all requisite corporate power and authority to enter into and perform
all of its obligations under this Agreement. The execution, delivery and
performance of this Agreement by Genesco and all the transactions contemplated
hereby have been duly authorized by all necessary corporate action on its part.
This Agreement has been duly executed and delivered by Genesco and constitutes
a valid and binding obligation on its part, enforceable against it in
accordance with its terms (subject to applicable bankruptcy, insolvency,
moratorium or other similar laws and subject to general principles of equity).
The execution, delivery and performance of this Agreement will not, with or
without the giving of notice or the passage of time or both, (a) violate any
judgment,
2
3
injunction or order of any court, arbitrator or governmental agency applicable
to Genesco, or (b) conflict with, result in the breach of any provision of or
constitute a default under any agreement or instrument to which Genesco is a
party or by which it may be bound. Genesco will take no action that is
intended to disparage or negatively affect the professional or personal
character or reputation of Clark.
5. COVENANTS BY CLARK. From and after the date hereof, (i) Clark
will take no action to dissipate or negatively affect the goodwill, business,
prospects or reputation of Genesco or its relationship with its employees,
customers, suppliers, competitors, shareholders, lenders, prospective
investors, prospective purchases of any of businesses or assets of Genesco or
others, (ii) Clark will not represent any party in any adversarial proceeding
against or involving Genesco, (iii) Clark will for 60 days after the date
hereof cooperate fully with Genesco, its employees, agents and representatives
to assist Genesco's business and operations and (iv) for a period of two years
after the date hereof, Clark will not, directly or indirectly, for whatever
reason, whether on his own behalf or on behalf of anyone else: (a) solicit,
employ, deal with or interfere with Genesco's or any of Genesco's subsidiaries'
contracts or relationships with any employee, officer, director or any
independent contractor whether such person is employed by or associated with
Genesco or any of Genesco's subsidiaries on the date hereof or during such two
year period or (b) solicit, accept, deal with or otherwise interfere with any
of Genesco's or any of Genesco's subsidiaries' contracts or relationships with
any independent contractor, customer, client or supplier of Genesco or any of
Genesco's subsidiaries; provided that Clark may assist employees of Genesco who
seek Clark's assistance without Clark's solicitation in obtaining employment
with another entity if Clark is not associated with such entity and Clark may
discuss employment opportunities with any officer or employee of Genesco with
the prior specific approval of the Chairman or President of Genesco.
Clark acknowledges that the provisions of this Section 5 are essential
to the operations and business of Genesco and further acknowledges that the
application or operation of the provisions of this Section 5 does not involve a
substantial hardship upon his future livelihood. If any court determines that
any of the provisions of this Section 5 are unenforceable in any respect, such
court shall be empowered to substitute, to the extent enforceable, provisions
similar to this Section 5 or other provisions so as to provide Genesco, to the
fullest extent possible, the benefits and protections intended by this Section
5.
6. RELEASE. Effective immediately, Clark releases and discharges
Genesco, and each parent, subsidiary, affiliate and shareholder of Genesco, and
each present, former and future director, officer and employee of Genesco or
any parent, subsidiary, affiliate or shareholder of Genesco (collectively
"Genesco Affiliates") from all manner of claims, actions, causes of action or
suits, in law or in equity, which Clark has or hereafter can, shall or may have
against Genesco or Genesco Affiliates or any of them arising from, relating to
or during his employment with Genesco, resulting from his termination of such
employment or related to his status as a shareholder, officer, employee or
participant in any Genesco
3
4
employee benefit plan, except for (i) any claims for indemnity Clark may have
against Genesco in accordance with Genesco's bylaws and (ii) any claim or
action Clark may have that results from a breach of Genesco's obligations under
this Agreement or a failure by Genesco to perform its obligations under this
Agreement or under any plan or arrangement under which Clark is entitled to
benefits or payments as described in Section 2 of this Agreement. From and
after the date hereof, Clark agrees and covenants not to sue or initiate
arbitration, or threaten suit or arbitration against, or make any claim
against, Genesco or any Genesco Affiliate for or alleging any of the claims,
actions, causes of action or suits that are released and discharged pursuant to
the preceding sentence. Clark acknowledges that this release includes but is
not limited to all claims arising under federal, state or local laws
prohibiting employment discrimination. This release specifically encompasses
all claims of employment discrimination based on race, color, religion, sex,
handicap and national origin, as provided under Title VII of the Civil Rights
Act of 1964, as amended, the 1991 Civil Rights Act, all claims of
discrimination based on age, as provided under the Age Discrimination in
Employment Act of 1967, as amended, all claims of discrimination based on
handicap, as provided in the Americans with Disabilities Act, as amended, and
all claims of employment discrimination under state law as provided under
Tennessee Code Annotated Sections 8-50-103 and 4-21-401, et seq.
7. CONFIDENTIALITY. Other than as set forth in this Section 7,
both Clark and Genesco agree not to disclose the terms and provisions of this
Agreement or any circumstances surrounding its execution to anyone other than
Clark's immediate family (who shall be instructed by Clark to maintain such
information in confidence), Genesco's officers who need to know such
information in order to perform their duties as employees of Genesco and
directors of Genesco, Genesco's lenders and counsel or as may be required by
law, regulation or court order. In addition, for a period of two years from
and after the date hereof, Clark agrees that he will keep confidential and not
appropriate any (i) trade or business secrets of Genesco and subsidiaries of
Genesco, (ii) information relating to Genesco's and its subsidiaries' customers
and suppliers and their business habits, (iii) personnel policies, (iv)
business relations information or customer lists, (v) business or financial
strategies of Genesco, (vi) financial or other performance data, (vii) pricing
policies or strategies, or (viii) any other proprietary or confidential
information of Genesco and Genesco's subsidiaries, whether or not obtained with
the knowledge and permission of Genesco or any subsidiaries of Genesco and
whether or not developed, devised or otherwise created in whole or in part by
his efforts, except for those matters which have been publicly disclosed by
Genesco, a subsidiary of Genesco or any other person.
4
5
8. MISCELLANEOUS.
a. Successors and Assigns. This Agreement
shall be binding upon and shall inure to the benefit of
Genesco, its successors and assigns, and Clark, his heirs,
personal representatives, successors and assigns.
b. Survival. All representations and warranties
contained in this Agreement shall survive the execution and
delivery hereof.
c. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to injunctive relief to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state thereof
having jurisdiction, this being in addition to any other
remedy to which they are entitled under this Agreement or at
law or in equity. In addition, a party that is required to
enforce the terms and provisions of this Agreement and is
successful therein shall be reimbursed by the other party for
all costs and expenses, including reasonable legal fees, that
it may incur with respect to such enforcement.
d. Entire Agreement. This Agreement constitutes
the entire agreement between Genesco and Clark relating to the
subject matter hereof and there are no terms other than those
contained herein and in the plans, arrangements and agreements
referred to in Section 2 of this Agreement. To the extent
that there is any conflict between the terms and provisions of
the Employment Agreement or any other agreements related to
compensation or benefits and this Agreement, the terms and
provisions of this Agreement shall prevail. This Agreement
may not be modified or amended except in a writing signed by
the parties hereto.
e. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Tennessee without giving effect to principles of
conflicts of law.
f. Counterparts. This Agreement may be executed
in counterparts, which together shall constitute one and the
same agreement.
g. Enforceability. If any provision of this
Agreement shall be held or deemed to be or shall, in fact, be
invalid, inoperative or unenforceable as applied in any
particular case in any jurisdiction or jurisdictions, or in
all jurisdictions, because it conflicts with any provisions of
any constitution, statute, rule or public policy, or for any
reason, such circumstances shall not
5
6
have the effect of rendering the provision in question
invalid, inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or
provisions of this Agreement invalid, inoperative or
unenforceable to any extent whatever. If any provision of
this Agreement shall be held or deemed to impose restrictions
which are too broad, too lengthy or otherwise unreasonable,
the parties hereto agree to be bound by a court's decision as
to what restrictions would be reasonable and acknowledge that
such court has the authority and discretion to make such a
determination.
h. Acknowledgement by Clark. Clark hereby
acknowledges that he has carefully read and fully understands
all the provisions of this Agreement. He further acknowledges
that, in considering whether to sign this Agreement, he has
not relied upon any representation or statement, written or
oral, not set forth in this Agreement and that he has not been
threatened or coerced into signing this Agreement by any
official of Genesco and that he has read, understood, and
fully and voluntarily accepts the terms of this Agreement.
i. Captions. The captions herein are for
purposes of identification only and shall not be considered in
construing this Agreement.
GENESCO INC.
By: /s/ David M. Chamberlain
------------------------
Name: David M. Chamberlain
------------------------
Title: President and CEO
------------------------
/s/ Thomas B. Clark
-------------------------------
THOMAS B. CLARK
6
1
Exhibit 10(aa)
November 3, 1994
[Name of Employee]
Dear [Employee]:
As an inducement for you to continue your employment by GENESCO Inc.
(the "Company"), I am pleased to confirm to you the following pursuant to
authorization of the compensation committee of the board of directors on
November 3, 1994:
1. If the Company terminates your employment prior to January 31,
1996 for any reason other than for Cause (as defined in paragraph 2 below), you
will be entitled (i) to receive on the 20th of each month for a period of 365
days following the date of such termination (the "Severance Period") severance
payments at a rate equal to your monthly base salary in effect immediately
prior to the date on which a decision is made to terminate your employment (but
not less than your monthly base salary as of the date of this agreement),
reduced by the amount of any other compensation you may earn from other
employment (including earnings from self-employment) during each month, and
(ii) to continue your and your dependents' health benefits under the Company's
health insurance program (including the executive optional benefit plan) to the
extent of the availability mandated by COBRA. In such event, until the earlier
of your obtaining health insurance benefits from an entity other than the
Company or the date which is 12 months after your termination without Cause,
the Company will bear the cost of such health insurance under COBRA. You will
certify to the Company each month as to whether you are engaged in other
employment and the amount of compensation earned therefrom, and whether you are
covered by health insurance benefits provided by an entity other than the
Company. This severance arrangement is in lieu of any severance pay benefits
you might otherwise be entitled to receive, including any benefits provided
under the Company's Severance Pay Plan for Monthly-Paid Salaried Employees.
2. The term "Cause" as used herein means (i) conviction of a
felony, (ii) the incurrence of a mental or physical disability continuing for a
period of 180 consecutive days which renders you unable to carry out your
duties or
2
responsibilities as an executive employee of the Company, whether by reason of
accident, illness or otherwise, (iii) failure to make all reasonable efforts to
follow the express lawful directives of the Company's board of directors, its
chief executive officer or any executive to whom you report, (iv) violation of
the Company's policies on ethical business conduct, (v) failure faithfully to
perform your duties as an employee of the Company or (vi) intentional or
grossly negligent misconduct by you injurious to the interest of the Company.
"Cause" shall not include mere bad business judgment or any acts or omission,
not covered by Items (i) through (v) above, reasonably believed by you in good
faith to have been in or not opposed to the best interest of the Company.
3. This agreement sets forth our entire agreement with respect to
the matters covered herein (and supersedes our letter agreement dated
____________________, 199__.) However, this agreement does not supersede your
employment agreement dated as of ____________________, 199___ (the "Employment
Agreement") which has not become effective. This letter agreement and the
obligation of the Company to you hereunder shall terminate in the event the
Employment Agreement becomes effective upon a "change- in-control" as defined
in such agreement.
4. This agreement shall not be construed to limit in any way the
Company's ability to terminate your employment at any time with or without
cause or otherwise to change from time-to-time your duties, the location of
your primary employment or any of the other terms and conditions of your
employment.
5. By entering into this agreement, you hereby covenant and agree
that you will keep confidential and not appropriate any (i) trade and business
secrets or other methods of the Company, (ii) information relating to the
Company's customers and their business habits, (iii) personnel policies, (iv)
business relations information or customer lists, (v) proprietary designs or
specifications, (vi) financial or other performance data, (vii) pricing
policies or strategies, (viii) any other proprietary or confidential
information of the Company, whether or not obtained with the knowledge and
permission of the Company or any subsidiary of the Company and whether or not
developed, devised or otherwise created in whole or in part by your efforts.
6. This agreement shall be construed in accordance with the laws
of the State of Tennessee applicable to contracts made and to be wholly
performed within that State.
3
7. No provision of this agreement may be modified or waived,
unless such modification or waiver is agreed to in writing and is signed by you
and another executive officer of the Company.
8. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this agreement.
Please confirm that the foregoing accurately sets forth our agreement
by signing and returning to me the enclosed copy of this letter.
Very truly yours,
GENESCO INC.
-------------------------------------
David M. Chamberlain
President and Chief Executive Officer
DMC:gb
CONFIRMED:
- ------------------------------------------
Date:
-------------------------------------
1
EXHIBIT 10(ab)
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement is made as of the 12th day of
October, 1994 between GENESCO INC., a Tennessee corporation (hereinafter called
the "Company"), and David M. Chamberlain (hereinafter called the "Optionee"),
pursuant to authorization by the compensation committee of the Company's board
of directors (hereinafter called the "Committee").
The Company and the Optionee agree as follows:
1. GRANT OF OPTION. As of the date hereof, the Company hereby
grants to the Optionee the right and option (hereinafter called the "Option")
to purchase an aggregate of 100,000 shares of its authorized common stock
(hereinafter called the "Stock"), subject to the terms and conditions of this
agreement. The Option granted hereunder is not an incentive stock option
within the meaning of section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. PURCHASE PRICE. The purchase price of the shares of Stock
covered by the Option shall be $2.38 per share (the "Option Price") and shall
be payable either in cash or by delivery of shares of Stock having a Fair
Market Value (as defined below) on the date of exercise equal to the total
purchase price of the shares to be purchased on such date, together with any
applicable taxes required to be withheld by the Company or a Subsidiary (as
defined below) or Parent (as defined below) of the Company as provided in
Section 8. The Optionee shall not have any of the rights of a shareholder with
respect to any of the shares of Stock subject to an Option or with respect to
shares issuable upon surrender of the right to exercise an Option, unless and
until he shall become the holder of record of such shares.
"Fair Market Value" means the reported closing price of the Stock on
the New York Stock Exchange - Composite Transactions on the relevant
date or, if no shares are traded on that date, the reported closing
price on the next preceding date on which shares were traded. In the
event the Stock is no longer reported on the New York Stock Exchange -
Composite Transactions, Fair Market Value shall be determined by such
other method as the Committee in good faith deems appropriate without
regard to any restriction other than a restriction which, by its
terms, will never lapse.
"Parent" means a parent corporation as defined in section 424(e) of
the Code.
"Subsidiary" means a subsidiary corporation as defined in section
424(f) of the Code.
3. TERM OF OPTION. The Option shall terminate at 5:00 p.m.
(Nashville, Tennessee time) on October 12, 2004.
2
4. EXERCISE OF OPTION. All of the shares subject to the Option
may be purchased after April 12, 1995; or immediately upon a change of control
(as defined below) of the Company.
The term "change in control" means a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as in effect on the date of this stock option
agreement, provided that, without limitation, such a change in control shall be
deemed to have occurred if and when (A) any "person" (as such term is defined
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities or (B) individuals who were members of the board of
directors of the Company immediately prior to a meeting of the shareholders of
the Company involving a contest for the election of directors do not constitute
a majority of the board of directors following such election.
5. SURRENDER OF OPTIONS. The Optionee is authorized during his
employment to surrender the right to exercise the Option or any portion thereof
to the extent then exercisable in exchange for the payment to the Optionee of
an amount equal to the excess of the Fair Market Value of the shares of Stock
to which the Option (or portion thereof) relate on the date of surrender of
such right over the total Option Price of such shares, less any applicable
withholding taxes required to be withheld by the Company or a Subsidiary or
Parent of the Company. Such payment shall be made in shares of Stock valued at
their Fair Market Value on such date (with cash in lieu of fractional shares),
cash or a combination thereof, in such proportion and upon such terms and
conditions and subject to such restrictions as shall be determined by the
Committee. The surrender of the right to exercise the Option shall be made
only if the Company (i) has filed all reports and statements required to be
filed pursuant to section 13 of the Exchange Act, and only during a period
beginning on the third business day following the date on which quarterly or
annual summary statements of the Company's sales and earnings have been made
publicly available and ending on the twelfth business day following such date
or (ii) has otherwise complied with the requirements of Rule 16b-3 under the
Exchange Act with respect to the Option.
6. CAPITAL ADJUSTMENTS AND CORPORATE REORGANIZATIONS. In the
event of any change in the outstanding shares of Stock by reason of a Stock
dividend, split or combination, a recapitalization or reclassification, or a
reorganization, merger or consolidation in which the Company is the surviving
corporation or other similar change affecting the Stock, the number and class
of shares then subject to the Option and for which the Option may thereafter be
exercised and the amounts per share of Stock payable upon exercise or surrender
of such Option shall be appropriately adjusted by the Committee to reflect such
change. No fractional shares shall be issued as a result of such adjustment.
In the event of a dissolution of the Company or a reorganization, merger or
consolidation in which the Company is not the surviving corporation, the
Company by action of the Committee shall either (i) terminate outstanding and
unexercised Options as of the effective
2
3
date of such dissolution, merger or consolidation by giving notice to the
Optionee of its intention to do so and permitting the exercise, during a period
prior to such effective date to be specified by the Committee, of all
outstanding and unexercised Options or portions thereof, provided that no
Option shall become exercisable hereunder either after the expiration date
thereof or prior to six months from date of grant thereof, or (ii) in the case
of such reorganization, merger or consolidation, arrange for an appropriate
substitution of shares or other securities of the corporation with which the
Company is reorganized, merged or consolidated in lieu of the shares of Stock
which are subject to such outstanding and unexercised Options.
7. NON-TRANSFERABILITY. The Option may not be assigned, pledged
or otherwise transferred except by will or the laws of descent and distribution
and, during the Optionee's lifetime, may be exercised only by the Optionee.
8. WITHHOLDING TAXES. Upon exercise of an Option which requires
the Company at the time of exercise to withhold any Federal, state or local
income or other taxes by reason of the exercise of such Option, the Optionee
shall tender to the Company along with payment of the total Option Price of the
shares an amount in cash equal to such withholding taxes as determined by the
Company or, alternatively, may make a written request to the Committee that the
Company withhold from the shares to be received by the Optionee upon exercise
of the Option shares of Stock having an aggregate Fair Market Value on the date
of exercise at least equal to the applicable withholding taxes. The acceptance
by the Committee of any such request by an Optionee shall be in the sole
discretion of the Committee. If the exercise of an Option will give rise to an
obligation to withhold Federal income taxes subsequent to the date of exercise,
the Committee may, in its sole discretion, require the Optionee to place the
shares of Stock purchased under the Option in escrow for the benefit of the
Company until such time as any amount is required to be included in the gross
income of the Optionee as a result of the exercise of the Option. The
Committee may, in its sole discretion, at any time require that the Optionee
pay the applicable withholding taxes to the Company in cash, in which case the
shares of Stock shall be released from escrow to the Optionee. Alternatively,
the Committee, in its sole discretion, may permit the Company to accept the
shares of Stock held in escrow to satisfy the Company's withholding obligation
based on the Fair Market Value of the shares on the date of the termination of
the escrow arrangement. Upon application of such shares to the Company's
withholding obligation, any shares of Stock held in escrow which are not, in
the sole judgment of the Committee, necessary to satisfy such obligation shall
be released from escrow to the Optionee.
9. GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee.
3
4
IN WITNESS WHEREOF, this agreement has been duly executed by the
Company and the Optionee.
GENESCO INC.
By: /s/ Harry D. Garber
---------------------------
Title: Chairman
---------------------------
OPTIONEE
/s/ David M. Chamberlain
----------------------------------
David M. Chamberlain
4
1
EXHIBIT 11
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Earnings Per Common and
Common Share Equivalent
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED OCTOBER 31, NINE MONTHS ENDED OCTOBER 31,
---------------------------------------- -------------------------------------
1994 1993 1994 1993
----------------- ---------------- ---------------- ------------------
IN THOUSANDS EARNINGS SHARES EARNINGS SHARES EARNINGS SHARES EARNINGS SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMARY EARNINGS (LOSS) PER SHARE
Loss before discontinued operations,
and cumulative effect of change in
accounting principle $(22,973) $(2,369) $(23,222) $(4,878)
Preferred dividend requirements $ 75 $ 77 $ 226 $ 232
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before discontinued operations,
extraordinary loss and cumulative
effect of change in accounting principle
applicable to common stock and average
common shares outstanding $(23,048) 24,337 $(2,446) 24,254 $(23,448) 24,320 $(5,110) 24,110
Employees preferred and stock options
deemed to be a common stock equivalent -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Totals before discontinued operations,
extraordinary loss, and cumulative effect
of change in accounting principle $(23,048) 24,337 $(2,446) 24,254 $(23,448) 24,320 $(5,110) 24,110
PER SHARE $ (.95) $ (.10) $ (.96) $ (.21)
====================================================================================================================================
Loss before extraordinary loss
and cumulative effect of change
in accounting principle $(93,160) $(3,084) $(96,349) $(3,370)
Preferred dividend requirements $ 75 $ 77 $ 226 $ 232
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before extraordinary loss
and cumulative effect of change
in accounting principle applicable
to common stock and average common
shares outstanding $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(3,602) 24,110
Employees preferred and stock options deemed
to be a common stock equivalent -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Totals before extraordinary loss and
cumulative effect of change
in accounting principle $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(3,602) 24,110
PER SHARE $ (3.83) $ (.13) $ (3.97) $ (.15)
====================================================================================================================================
Loss before cumulative effect
of change in accounting principle $(93,160) $(3,084) $(96,349) $(3,610)
Preferred dividend requirements $ 75 $ 77 $ 226 $ 232
- ------------------------------------------------------------------------------------------------------------------------------------
Loss before cumulative effect
of change in accounting principle applicable
to common stock and average common shares
outstanding $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(3,842) 24,110
Employees preferred and stock options deemed
to be a common stock equivalent -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Totals before cumulative effect of change in
accounting principle $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(3,842) 24,110
PER SHARE $ (3.83) $ (.13) $ (3.97) $ (.16)
====================================================================================================================================
Net loss $(93,160) $(3,084) $(96,349) $(5,883)
Preferred dividend requirements $ 75 $ 77 $ 226 $ 232
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss applicable to common stock
and average common shares outstanding $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(6,115) 24,110
Employees preferred and stock options deemed
to be a common stock equivalent -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Total net loss $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(6,115) 24,110
PER SHARE $ (3.83) $ (.13) $ (3.97) $ (.25)
====================================================================================================================================
All figures in thousands except amount per share.
2
Exhibit 11
Genesco Inc. Continued
and Consolidated Subsidiaries
Earnings Per Common and
Common Share Equivalent
- ---------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED OCTOBER 31, NINE MONTHS ENDED OCTOBER 31,
------------------------------------ --------------------------------------
1994 1993 1994 1993
---------------- ----------------- ---------------- -----------------
IN THOUSANDS EARNINGS SHARES EARNINGS SHARES EARNINGS SHARES EARNINGS SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Loss before discontinued operations,
extraordinary loss and cumulative effect
of change in accounting principle
applicable to common stock and average
common shares outstanding $(23,048) 24,337 $(2,446) 24,254 $(23,448) 24,320 $(5,110) 24,110
Senior securities the conversion of which
would dilute earnings per share -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------------
Totals before discontinued operations,
extraordinary loss and cumulative effect
of change in accounting principle $(23,048) 24,337 $(2,446) 24,254 $(23,448) 24,320 $(5,110) 24,110
PER SHARE $ (.95) $ (.10) $ (.96) $ (.21)
=================================================================================================================================
Loss before extraordinary loss and
cumulative effect of change
in accounting principle applicable
to common stock and average common
shares outstanding $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(3,602) 24,110
Senior securities the conversion of which
would dilute earnings per share -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------------
Totals before extraordinary loss and
cumulative effect of change
in accounting principle $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(3,602) 24,110
PER SHARE $ (3.83) $ (.13) $ (3.97) $ (.15)
=================================================================================================================================
Loss before cumulative effect of
change in acounting principle applicable
to common stock and average common shares
outstanding $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(3,842) 24,110
Senior securities the conversion of which
would dilute earnings per share -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------------
Totals before cumulative effect of change in
accounting principle $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(3,842) 24,110
PER SHARE $ (3.83) $ (.13) $ (3.97) $ (.16)
=================================================================================================================================
Net loss applicable to common stock
and average common shares outstanding $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(6,115) 24,110
Senior securities the conversion of which
would dilute earnings per share -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------------
Total net loss $(93,235) 24,337 $(3,161) 24,254 $(96,575) 24,320 $(6,115) 24,110
PER SHARE $ (3.83) $ (.13) $ (3.97) $ (.25)
=================================================================================================================================
All figures in thousands except amount per share.
5
1,000
9-MOS
JAN-31-1995
OCT-31-1994
5,619
0
40,071
1,214
98,721
223,896
82,606
54,104
287,733
101,665
120,750
24,832
0
7,942
(25,896)
287,733
337,586
337,586
210,166
210,166
0
1,262
9,106
(22,486)
736
(23,222)
(73,127)
0
0
(96,349)
$(3.97)
$(3.97)
