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Table of Contents

 

 

 

 

 

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended October 31, 2020

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from              to             

Commission File No. 1-3083

Genesco Inc.

(Exact name of registrant as specified in its charter)

 

Tennessee

 

62-0211340

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

Genesco Park,

1415 Murfreesboro Pike

 

37217-2895

Nashville,

Tennessee

 

(Zip Code)

(Address of principal executive offices)

 

 

 

Registrant's telephone number, including area code: (615367-7000

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

GCO

New York Stock Exchange

 

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer; an accelerated filer; a non-accelerated filer; a smaller reporting company; or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes      No  

As of November 27, 2020, 14,992,078 shares of the registrant's common stock were outstanding.

 

 

 


Table of Contents

 

INDEX

 

 

 

Part I. Financial Information

 

Item 1. Financial Statements (unaudited):

 

Condensed Consolidated Balance Sheets – October 31, 2020, February 1, 2020 and November 2, 2019

4

Condensed Consolidated Statements of Operations - Three and Nine Months ended October 31, 2020 and November 2, 2019

5

Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months ended October 31, 2020 and November 2, 2019

6

Condensed Consolidated Statements of Cash Flows – Three and Nine Months ended October 31, 2020 and November 2, 2019

7

Condensed Consolidated Statements of Equity - Three and Nine Months ended October 31, 2020 and November 2, 2019

8

Notes to Condensed Consolidated Financial Statements (unaudited)

9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3. Quantitative and Qualitative Disclosures about Market Risk

30

Item 4. Controls and Procedures

30

Part II. Other Information

31

Item 1. Legal Proceedings

31

Item 1A. Risk Factors

31

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

33

Item 6. Exhibits

34

Signature

35

 

 

 

2


Table of Contents

 

cautionary notice regarding forward-looking statements

Statements in this Quarterly Report on Form 10-Q include certain forward-looking statements, including those regarding the performance outlook for the Company and our individual businesses (including, without limitation, sales, expenses, margins and earnings) and all other statements not addressing solely historical facts or present conditions. Words such as "may," "will," "should," "likely," "anticipate," "expect," "intend," "plan," "project," "believe," "estimate" and similar expressions can be used to identify these forward-looking statements. Actual results, including those regarding our performance outlook for Fiscal 2021 and beyond, could differ materially from those reflected by the forward-looking statements in this Quarterly Report on Form 10-Q and a number of factors may adversely affect the forward-looking statements and our future results, liquidity, capital resources or prospects. These include, but are not limited to, risks related to public health and safety issues, including, for example, the novel coronavirus disease ("COVID-19") outbreak which began in 2019, our ability to keep stores open, operate stores safely and ensure the safety of customers and employees, whether there are periods of increases in the number of COVID-19 cases in locations in which we operate, further closures of stores due to COVID-19, weakness in consumer demand and store and shopping mall traffic, restrictions on operations imposed by government entities and landlords, changes in public safety and health requirements, our ability to adequately staff our stores, limitations on our ability to provide adequate personal protective equipment to our employees, our ability to maintain social distancing requirements, stores closures and effect on our business as a result of civil disturbances, the level and timing of promotional activity necessary to maintain inventories at appropriate levels, our ability to recognize deferred tax assets and expected tax and cash benefits associated with tax accounting method changes permitted by the CARES Act, the imposition of tariffs on products imported by us or our vendors as well as the ability and costs to move production of products in response to tariffs, our ability to obtain from suppliers products that are in-demand on a timely basis and effectively manage disruptions in product supply or distribution, including disruptions as a result of COVID-19, unfavorable trends in fuel costs, foreign exchange rates, foreign labor and material costs, and other factors affecting the cost of products, the effects of the British decision to exit the European Union and other sources of weakness in the U.K. market, the effectiveness of our omnichannel initiatives, costs associated with changes in minimum wage and overtime requirements, wage pressure in the markets in which we operate, weakness in the consumer economy and retail industry, competition and fashion trends in our markets, risks related to the potential for terrorist events, changes in buying patterns by significant wholesale customers,  retained liabilities associated with divestitures of businesses including potential liabilities under leases as the prior tenant or as a guarantor of certain leases, and changes in the timing of holidays or in the onset of seasonal weather affecting period-to-period sales comparisons. Additional factors that could cause differences from expectations include the ability to renew leases in existing stores and control or lower occupancy costs, and to conduct required remodeling or refurbishment on schedule and at expected expense levels, our ability to eliminate stranded costs associated with dispositions, our ability to realize anticipated cost savings, including rent savings, deterioration in the performance of individual businesses or of our market value relative to our book value, resulting in impairments of fixed assets, operating lease right of use assets or intangible assets or other adverse financial consequences and the timing and amount of such impairments or other consequences, unexpected changes to the market for our shares or for the retail sector in general, costs and reputational harm as a result of disruptions in our business or information technology systems either by security breaches and incidents or by potential problems associated with the implementation of new or upgraded systems, uncertainty regarding the expected phase out of the London Interbank Offered Rate ("LIBOR"), and the cost and outcome of litigation, investigations and environmental matters that involve us.

Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020, and Item 1A in Part II of this Quarterly Report on Form 10-Q, which should be read in conjunction with the forward-looking statements in this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements.

We maintain a website at www.genesco.com where investors and other interested parties may obtain, free of charge, press releases and other information as well as gain access to our periodic filings with the Securities and Exchange Commission (“SEC”). The information contained on this website should not be considered to be a part of this or any other report filed with or furnished to the SEC.

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                                                PART I - FINANCIAL INFORMATION

                                                Item 1. Financial Statements (unaudited)

 

Genesco Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

 

Assets

 

October 31, 2020

 

 

February 1, 2020

 

 

November 2, 2019

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

115,061

 

 

$

81,418

 

 

$

55,826

 

Accounts receivable, net of allowances of $5,142 at October 31, 2020,

 

 

 

 

 

 

 

 

 

 

 

 

$2,940 at Feb. 1, 2020 and $2,457 at November 2, 2019

 

 

35,592

 

 

 

29,195

 

 

 

34,849

 

Inventories

 

 

370,699

 

 

 

365,269

 

 

 

473,940

 

Prepaids and other current assets

 

 

62,606

 

 

 

32,301

 

 

 

36,179

 

Total current assets

 

 

583,958

 

 

 

508,183

 

 

 

600,794

 

Property and equipment, net

 

 

210,834

 

 

 

238,320

 

 

 

261,281

 

Operating lease right of use assets

 

 

640,078

 

 

 

735,044

 

 

 

750,855

 

Goodwill

 

 

38,129

 

 

 

122,184

 

 

 

92,166

 

Other intangibles

 

 

29,664

 

 

 

36,364

 

 

 

30,637

 

Deferred income taxes

 

 

12,790

 

 

 

19,475

 

 

 

25,188

 

Other noncurrent assets

 

 

21,047

 

 

 

20,908

 

 

 

24,571

 

Total Assets

 

 

1,536,500

 

 

 

1,680,478

 

 

 

1,785,492

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

151,978

 

 

 

135,784

 

 

 

195,906

 

Accrued employee compensation

 

 

12,247

 

 

 

31,579

 

 

 

31,531

 

Current portion – long-term debt

 

 

 

 

 

 

 

 

17,146

 

Current portion - operating lease liabilities

 

 

196,603

 

 

 

142,695

 

 

 

145,788

 

Other accrued liabilities

 

 

71,380

 

 

 

51,382

 

 

 

57,665

 

Provision for discontinued operations

 

 

434

 

 

 

495

 

 

 

488

 

Total current liabilities

 

 

432,642

 

 

 

361,935

 

 

 

448,524

 

Long-term debt

 

 

32,850

 

 

 

14,393

 

 

 

62,368

 

Long-term operating lease liabilities

 

 

560,082

 

 

 

647,949

 

 

 

663,168

 

Other long-term liabilities

 

 

39,335

 

 

 

35,177

 

 

 

36,138

 

Provision for discontinued operations

 

 

1,619

 

 

 

1,681

 

 

 

1,846

 

Total liabilities

 

 

1,066,528

 

 

 

1,061,135

 

 

 

1,212,044

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Non-redeemable preferred stock

 

 

1,009

 

 

 

1,009

 

 

 

1,011

 

Common equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $1 par value:

 

 

 

 

 

 

 

 

 

 

 

 

Authorized: 80,000,000 shares

 

 

 

 

 

 

 

 

 

 

 

 

Issued common stock

 

 

15,479

 

 

 

15,186

 

 

 

15,189

 

Additional paid-in capital

 

 

280,340

 

 

 

274,101

 

 

 

271,505

 

Retained earnings

 

 

231,001

 

 

 

378,572

 

 

 

343,156

 

Accumulated other comprehensive loss

 

 

(40,000

)

 

 

(31,668

)

 

 

(39,556

)

Treasury shares, at cost (488,464 shares)

 

 

(17,857

)

 

 

(17,857

)

 

 

(17,857

)

Total equity

 

 

469,972

 

 

 

619,343

 

 

 

573,448

 

Total Liabilities and Equity

 

$

1,536,500

 

 

$

1,680,478

 

 

$

1,785,492

 

 

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

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Genesco Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31, 2020

 

 

November 2, 2019

 

 

October 31, 2020

 

 

November 2, 2019

 

Net sales

 

$

479,280

 

 

$

537,263

 

 

$

1,149,729

 

 

$

1,519,487

 

Cost of sales

 

 

253,776

 

 

 

273,061

 

 

 

637,081

 

 

 

773,844

 

Gross margin

 

 

225,504

 

 

 

264,202

 

 

 

512,648

 

 

 

745,643

 

Selling and administrative expenses

 

 

210,961

 

 

 

237,460

 

 

 

587,264

 

 

 

705,811

 

Goodwill impairment

 

 

 

 

 

 

 

 

79,259

 

 

 

 

Asset impairments and other, net

 

 

6,359

 

 

 

799

 

 

 

15,953

 

 

 

1,843

 

Operating income (loss)

 

 

8,184

 

 

 

25,943

 

 

 

(169,828

)

 

 

37,989

 

Other components net periodic benefit income

 

 

(182

)

 

 

(92

)

 

 

(488

)

 

 

(271

)

Interest expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

1,415

 

 

 

808

 

 

 

4,429

 

 

 

2,491

 

Interest income

 

 

(11

)

 

 

(206

)

 

 

(251

)

 

 

(1,708

)

Total interest expense, net

 

 

1,404

 

 

 

602

 

 

 

4,178

 

 

 

783

 

Earnings (loss) from continuing operations before

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income taxes

 

 

6,962

 

 

 

25,433

 

 

 

(173,518

)

 

 

37,477

 

Income tax expense (benefit)

 

 

(514

)

 

 

6,454

 

 

 

(27,446

)

 

 

11,235

 

Earnings (loss) from continuing operations

 

 

7,476

 

 

 

18,979

 

 

 

(146,072

)

 

 

26,242

 

Loss from discontinued operations, net of tax

 

 

(10

)

 

 

(80

)

 

 

(275

)

 

 

(420

)

Net Earnings (Loss)

 

$

7,466

 

 

$

18,899

 

 

$

(146,347

)

 

$

25,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.52

 

 

$

1.31

 

 

$

(10.29

)

 

$

1.64

 

Discontinued operations

 

 

 

 

 

 

 

 

(0.02

)

 

 

(0.03

)

Net earnings (loss)

 

$

0.52

 

 

$

1.31

 

 

$

(10.31

)

 

$

1.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.52

 

 

$

1.31

 

 

$

(10.29

)

 

$

1.63

 

Discontinued operations

 

 

 

 

 

(0.01

)

 

 

(0.02

)

 

 

(0.03

)

Net earnings (loss)

 

$

0.52

 

 

$

1.30

 

 

$

(10.31

)

 

$

1.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Basic

 

 

14,283

 

 

 

14,465

 

 

 

14,191

 

 

 

16,023

 

       Diluted

 

 

14,362

 

 

 

14,529

 

 

 

14,191

 

 

 

16,136

 

 

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

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Genesco Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

October 31, 2020

 

 

November 2, 2019

 

 

October 31, 2020

 

 

November 2, 2019

 

Net earnings (loss)

 

$

7,466

 

 

$

18,899

 

 

$

(146,347

)

 

$

25,822

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension liability adjustments, net of tax

 

 

 

 

 

51

 

 

 

 

 

 

157

 

Postretirement liability adjustments, net of tax

 

 

(157

)

 

 

(167

)

 

 

(433

)

 

 

(500

)

Foreign currency translation adjustments

 

 

(283

)

 

 

8,715

 

 

 

(7,899

)

 

 

(1,277

)

Total other comprehensive income (loss)

 

 

(440

)

 

 

8,599

 

 

 

(8,332

)

 

 

(1,620

)

Comprehensive income (loss)

 

$

7,026

 

 

$

27,498

 

 

$

(154,679

)

 

$

24,202

 

 

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

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Genesco Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Nine Months Ended

 

 

 

October 31, 2020

 

 

November 2, 2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

(146,347

)

 

$

25,822

 

Adjustments to reconcile net earnings (loss) to net cash provided by

 

 

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

35,553

 

 

 

37,298

 

Amortization of deferred note expense and debt discount

 

 

611

 

 

 

315

 

Deferred income taxes

 

 

6,827

 

 

 

(3,127

)

Provision for accounts receivable

 

 

2,770

 

 

 

(76

)

Impairment of intangible assets

 

 

84,519

 

 

 

268

 

Impairment of long-lived assets

 

 

11,141

 

 

 

1,569

 

Restricted stock expense

 

 

6,532

 

 

 

7,485

 

Other

 

 

594

 

 

 

1,376

 

Effect on cash from changes in working capital and other

   assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(9,130

)

 

 

(5,158

)

Inventories

 

 

(6,902

)

 

 

(107,657

)

Prepaids and other current assets

 

 

(30,626

)

 

 

11,001

 

Accounts payable

 

 

32,428

 

 

 

51,756

 

Other accrued liabilities

 

 

613

 

 

 

(17,225

)

Other assets and liabilities

 

 

62,719

 

 

 

(841

)

Net cash provided by operating activities

 

 

51,302

 

 

 

2,806

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(18,157

)

 

 

(21,388

)

Other investing activities

 

 

 

 

 

23

 

Acquisitions, net of cash acquired

 

 

(75

)

 

 

 

Proceeds from sale of businesses

 

 

 

 

 

98,677

 

Proceeds from asset sales

 

 

100

 

 

 

30

 

Net cash provided by (used in) investing activities

 

 

(18,132

)

 

 

77,342

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments of long-term debt

 

 

 

 

 

(789

)

Borrowings under revolving credit facility

 

 

218,307

 

 

 

74,123

 

Payments on revolving credit facility

 

 

(201,569

)

 

 

(59,042

)

Share repurchases related to share repurchase program

 

 

 

 

 

(189,210

)

Restricted shares withheld for taxes

 

 

(1,224

)

 

 

(2,209

)

Change in overdraft balances

 

 

(15,970

)

 

 

(14,191

)

Additions to deferred note cost

 

 

(1,301

)

 

 

 

Net cash used in financing activities

 

 

(1,757

)

 

 

(191,318

)

Effect of foreign exchange rate fluctuations on cash

 

 

2,230

 

 

 

(359

)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

33,643

 

 

 

(111,529

)

Cash and cash equivalents at beginning of period

 

 

81,418

 

 

 

167,355

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

115,061

 

 

$

55,826

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Interest paid

 

$

3,560

 

 

$

2,146

 

Income taxes paid

 

 

4,256

 

 

 

3,542

 

Cash paid for amounts included in measurement of operating lease liabilities

 

 

78,777

 

 

 

137,108

 

Right of use assets obtained in exchange for new operating lease liabilities

 

 

24,999

 

 

 

54,175

 

 

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

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Genesco Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(In thousands)

 

 

 

Non-

Redeemable

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Treasury

Shares

 

 

Total

Equity

 

Balance February 2, 2019

 

$

1,060

 

 

$

19,591

 

 

$

264,138

 

 

$

508,555

 

 

$

(37,936

)

 

$

(17,857

)

 

$

737,551

 

Cumulative adjustment from ASC 842, net of tax

 

 

 

 

 

 

 

 

 

 

 

(4,208

)

 

 

 

 

 

 

 

 

(4,208

)

Net earnings

 

 

 

 

 

 

 

 

 

 

 

6,346