<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For quarter ended: October 30, 1999
----------------
- OR -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transaction period from to
---------- ----------
COMMISSION FILE NUMBER - 1-3083
GENESCO INC.
---------------------
(Exact name of registrant as specified in its charter)
TENNESSEE 62-0211340
--------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
GENESCO PARK, 1415 MURFREESBORO ROAD, NASHVILLE, TENNESSEE 37217-2895
- ---------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(615) 367-7000
--------------
(Registrant's phone number including area code)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Common Shares Outstanding December 3, 1999 -
22,001,574.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part 1 - Financial Information 3
Consolidated Balance Sheet - October 30, 1999, January 30, 1999 and
October 31, 1998 3
Consolidated Earnings - Three Months Ended and Nine Months Ended
October 30, 1999 and October 31, 1998 4
Consolidated Cash Flows - Three Months Ended and Nine Months Ended
October 30, 1999 and October 31, 1998 5
Consolidated Shareholders' Equity - Year Ended
January 30, 1999 and Nine Months Ended October 30, 1999 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 21
Part II - Other Information 34
Signature 35
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheet
In Thousands
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30, OCTOBER 31,
1999 1999 1998
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 38,543 $ 58,743 $ 42,552
Accounts receivable 25,996 26,258 26,007
Inventories 129,787 117,213 127,924
Deferred income taxes 10,775 19,327 -0-
Other current assets 5,984 6,719 6,121
--------- --------- ---------
Total current assets 211,085 228,260 202,604
--------- --------- ---------
Plant, equipment and capital leases, net 64,850 58,387 56,361
Deferred income taxes 10,370 10,370 -0-
Other noncurrent assets 10,117 10,181 9,715
--------- --------- ---------
TOTAL ASSETS $ 296,422 $ 307,198 $ 268,680
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 73,817 $ 70,606 $ 62,836
Provision for discontinued operations 2,083 1,876 2,997
--------- --------- ---------
Total current liabilities 75,900 72,482 65,833
--------- --------- ---------
Long-term debt 103,500 103,500 103,500
Other long-term liabilities 6,373 6,446 12,530
Provision for discontinued operations 6,615 8,191 8,822
--------- --------- ---------
Total liabilities 192,388 190,619 190,685
--------- --------- ---------
Contingent liabilities (see Note 8)
SHAREHOLDERS' EQUITY
Non-redeemable preferred stock 7,884 7,918 7,936
Common shareholders' equity:
Common stock, $1 par value:
Authorized: 80,000,000 shares
Issued: October 30, 1999 - 22,282,538;
January 30, 1999 - 24,327,109;
October 31, 1998 - 25,113,324 22,282 24,327 25,113
Additional paid-in capital 101,407 126,095 127,876
Accumulated deficit (9,682) (23,904) (63,923)
Accumulated other comprehensive income -0- -0- (1,150)
Treasury shares, at cost (17,857) (17,857) (17,857)
--------- --------- ---------
Total shareholders' equity 104,034 116,579 77,995
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 296,422 $ 307,198 $ 268,680
========= ========= =========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
3
<PAGE> 4
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Earnings
In Thousands
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- --------------------------
OCTOBER 30, OCTOBER 31, OCTOBER 30, OCTOBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $145,968 $ 129,764 $ 400,527 $395,621
Cost of sales 80,621 71,687 221,154 222,281
Selling and administrative expenses 53,418 50,145 150,946 154,017
Restructuring income and other charges, net -0- -0- -0- (2,403)
-------- --------- --------- --------
Earnings from operations before interest 11,929 7,932 28,427 21,726
-------- --------- --------- --------
Interest expense 2,058 2,094 6,095 7,163
Interest income (404) (597) (1,645) (2,038)
-------- --------- --------- --------
Total interest expense, net 1,654 1,497 4,450 5,125
-------- --------- --------- --------
Earnings before income taxes
and extraordinary loss 10,275 6,435 23,977 16,601
Income taxes (benefit) 4,071 162 9,530 (85)
-------- --------- --------- --------
Earnings before extraordinary loss 6,204 6,273 14,447 16,686
Extraordinary loss from
early retirement of debt -0- -0- -0- (3,651)
-------- --------- --------- --------
NET EARNINGS $ 6,204 $ 6,273 $ 14,447 $ 13,035
======== ========= ========= ========
Basic earnings per common share:
Before extraordinary loss $ .28 $ .24 $ .63 $ .64
Extraordinary loss $ .00 $ .00 $ .00 $ (.14)
Net earnings $ .28 $ .24 $ .63 $ .50
Diluted earnings per common share:
Before extraordinary loss $ .26 $ .23 $ .60 $ .61
Extraordinary loss $ .00 $ .00 $ .00 $ (.14)
Net earnings $ .26 $ .23 $ .60 $ .47
======== ========= ========= ========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
4
<PAGE> 5
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Cash Flows
In Thousands
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- ---------------------------
OCTOBER 30, OCTOBER 31, OCTOBER 30, OCTOBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net earnings $ 6,204 $ 6,273 $ 14,447 $ 13,035
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,626 2,421 7,504 7,528
Provision for deferred income taxes 3,766 -0- 8,552 -0-
Provision for losses on accounts receivable 377 (23) 545 124
Loss on retirement of debt -0- -0- -0- 3,651
Restructuring charge (credit) -0- -0- -0- (2,403)
Other 163 126 790 567
Effect on cash of changes in working capital and other assets
and liabilities:
Accounts receivable (4,241) 1,127 (1,819) (2,240)
Inventories (10,567) (1,502) (20,253) (22,994)
Other current assets (116) (728) 734 (315)
Accounts payable and accrued liabilities (142) (6,087) 3,269 (9,498)
Other assets and liabilities (1,904) 155 (1,657) (2,945)
-------- -------- -------- ---------
Net cash provided by (used in) operations (3,834) 1,762 12,112 (15,490)
-------- -------- -------- ---------
INVESTING ACTIVITIES:
Capital expenditures (5,087) (5,347) (15,303) (19,350)
Proceeds from businesses divested and asset sales 11 188 10,066 14,114
-------- -------- -------- ---------
Net cash used in investing activities (5,076) (5,159) (5,237) (5,236)
-------- -------- -------- ---------
FINANCING ACTIVITIES:
Payments of long-term debt -0- -0- -0- (77,220)
Payments on capital leases (1) (20) (2) (237)
Dividends paid (75) (76) (225) (1,502)
Long-term borrowings -0- -0- -0- 103,500
Stock repurchase (2,497) (7,699) (30,761) (7,699)
Exercise of stock options and related income tax benefits 947 494 3,913 2,128
Deferred note expense -0- -0- -0- (3,914)
Other -0- 1 -0- (1,054)
-------- -------- -------- ---------
Net cash provided by (used) in financing activities (1,626) (7,300) (27,075) 14,002
-------- -------- -------- ---------
NET CASH FLOW (10,536) (10,697) (20,200) (6,724)
Cash and short-term investments at
beginning of period 49,079 53,249 58,743 49,276
-------- -------- -------- ---------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 38,543 $ 42,552 $ 38,543 $ 42,552
======== ======== ======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid (received) for:
Interest $ 3,417 $ 3,427 $ 7,015 $ 10,489
Income taxes 195 87 1,847 (14)
======== ======== ======== =========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
5
<PAGE> 6
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Consolidated Shareholders' Equity
In Thousands
<TABLE>
<CAPTION>
TOTAL
NON-REDEEMABLE ADDITIONAL
PREFERRED COMMON PAID-IN TREASURY ACCUMULATED
STOCK STOCK CAPITAL STOCK (DEFICIT)
-------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 31, 1998 $ 7,945 $ 26,264 $ 132,218 $ (17,857) $ (75,456)
======== ========= ========= ========== =========
Net earnings -0- -0- -0- -0- 53,128
Dividends paid -0- -0- -0- -0- (1,576)
Exercise of options -0- 230 845 -0- -0-
Issue shares - restricted stock options -0- 67 533 -0- -0-
Issue shares - Employee Stock Purchase Plan -0- 107 387 -0- -0-
Tax effect of exercise of stock options -0- -0- 1,887 -0- -0-
Stock repurchases -0- (2,343) (9,889) -0- -0-
Minimum pension liability adjustment -0- -0- -0- -0- -0-
Other (27) 2 114 -0- -0-
Comprehensive Income
-------- -------- --------- --------- ----------
BALANCE JANUARY 30, 1999 $ 7,918 $ 24,327 $ 126,095 $ (17,857) $ (23,904)
======== ========= ========= ========== =========
Net earnings -0- -0- -0- -0- 14,447
Dividends paid -0- -0- -0- -0- (225)
Exercise of options -0- 475 2,526 -0- -0-
Issue shares - Employee Stock Purchase Plan -0- 122 417 -0- -0-
Tax effect of exercise of stock options -0- -0- 373 -0- -0-
Stock repurchases -0- (2,654) (28,107) -0- -0-
Other (34) 12 103 -0- -0-
Comprehensive Income
-------- -------- --------- --------- ----------
Balance October 30, 1999 $ 7,884 $ 22,282 $ 101,407 $ (17,857) $ (9,682)
======== ========= ========= ========== ==========
<CAPTION>
ACCUMULATED TOTAL
OTHER SHARE-
COMPREHENSIVE COMPREHENSIVE HOLDERS'
INCOME INCOME EQUITY
------------- ------------- ---------
<S> <C> <C> <C>
BALANCE JANUARY 31, 1998 $ (1,150) $ 71,964
======== ========= =========
Net earnings -0- 53,128 53,128
Dividends paid -0- -0- (1,576)
Exercise of options -0- -0- 1,075
Issue shares - restricted stock options -0- -0- 600
Issue shares - Employee Stock Purchase Plan -0- -0- 494
Tax effect of exercise of stock options -0- -0- 1,887
Stock repurchases -0- -0- (12,232)
Minimum pension liability adjustment 1,150 1,150 1,150
Other -0- -0- 89
---------
Comprehensive Income $ 54,278
------- --------- ---------
BALANCE JANUARY 30, 1999 $ -0- $ 116,579
======= ========= =========
Net earnings -0- 14,447 14,447
Dividends paid -0- -0- (225)
Exercise of options -0- -0- 3,001
Issue shares - Employee Stock Purchase Plan -0- -0- 539
Tax effect of exercise of stock options -0- -0- 373
Stock repurchases -0- -0- (30,761)
Other -0- -0- 81
---------
Comprehensive Income $ 14,447
------- --------- ---------
Balance October 30, 1999 $ -0- $ 104,034
======= ========= =========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
6
<PAGE> 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 29, 2000 ("Fiscal 2000") and of the fiscal year
ended January 30, 1999 ("Fiscal 1999"). 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.
NATURE OF OPERATIONS
The Company's businesses include the manufacture or sourcing, marketing and
distribution of footwear principally under the Johnston & Murphy, Dockers and
Nautica brands, the tanning and distribution of leather by the Volunteer
Leather division and the operation at October 30, 1999 of 665 Jarman, Journeys,
Johnston & Murphy, General Shoe Warehouse, Underground Station, Stone & Co. and
Nautica retail footwear stores and leased departments. Because of the
acquisition of Mercantile by Dillards Inc., the Company ended its operation of
the Jarman leased departments. The Company transferred the remaining Jarman
leased departments to Dillards Inc. and Saks Inc. during the first quarter
ended May 1, 1999. The Jarman leased departments' business contributed sales of
approximately $10.6 million for the third quarter of Fiscal 1999 and sales of
$1.2 million and $35.9 million for the first nine months of Fiscal 2000 and
1999, respectively. The Jarman leased departments' business contributed
operating earnings of $0.9 million for the third quarter of Fiscal 1999 and
operating income (loss) of $(0.3) million and $1.5 million for the first nine
months of Fiscal 2000 and 1999, respectively.
BASIS OF PRESENTATION
All subsidiaries are included in the consolidated financial statements. All
significant intercompany transactions and accounts have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain reclassifications have been made to conform prior years' data to the
current presentation.
CASH AND SHORT-TERM INVESTMENTS
Included in cash and short-term investments at January 30, 1999 and October 30,
1999, are short-term investments of $53.5 million and $33.5 million,
respectively. Short-term investments are highly-liquid debt instruments having
an original maturity of three months or less.
7
<PAGE> 8
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INVENTORIES
Inventories of wholesaling and manufacturing companies are stated at the lower
of cost or market, with cost 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 are computed principally by the straight-line method over
estimated useful lives:
<TABLE>
<S> <C>
Buildings and building equipment 20-45 years
Machinery, furniture and fixtures 3-15 years
</TABLE>
Leasehold improvements and properties under capital leases are amortized on the
straight-line method over the shorter of their useful lives or their related
lease terms.
IMPAIRMENT OF LONG-TERM ASSETS
The Company periodically assesses the realizability of its long-lived assets
and evaluates such assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Asset impairment is determined to exist if estimated future cash
flows, undiscounted and without interest charges, are less than carrying
amount.
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 for Italian lira and Euro. At January 30,
1999 and October 30, 1999, the Company had approximately $21.2 million and
$35.3 million, respectively, of such contracts outstanding. Forward exchange
contracts have an average term of approximately four months. 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 a defined benefit pension
plan. The Company also provides certain former employees with limited medical
and life insurance benefits. The Company funds at least the minimum amount
required by the Employee Retirement Income Security Act.
8
<PAGE> 9
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
REVENUE RECOGNITION
Retail sales are recorded net of actual returns, and exclude all taxes, while
wholesale revenue is recorded net of estimated returns when the related goods
have been shipped and legal title has passed to the customer.
PREOPENING COSTS
Costs associated with the opening of new stores are expensed as incurred.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising costs were $14.5
million and $15.0 million for the first nine months of Fiscal 2000 and 1999,
respectively.
ENVIRONMENTAL COSTS
Environmental expenditures relating to current operations are expensed or
capitalized as appropriate. Expenditures relating to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be
reasonably estimated and are evaluated independently of any future claims for
recovery. Generally, the timing of these accruals coincides with completion of
a feasibility study or the Company's commitment to a formal plan of action.
Costs of future expenditures for environmental remediation obligations are not
discounted to their present value.
INCOME TAXES
Deferred income taxes are provided for all temporary differences and operating
loss and tax credit carryforwards limited, in the case of deferred tax assets,
to the amount the Company believes is more likely than not to be realized in
the foreseeable future.
EARNINGS PER COMMON SHARE
Basic earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities to issue common stock were
exercised or converted to common stock. (see Note 7).
COMPREHENSIVE INCOME
The Company implemented Statement of Financial Accounting Standards (SFAS) 130,
"Reporting Comprehensive Income" in the first quarter of Fiscal 1999. This
statement establishes standards for reporting and display of comprehensive
income. SFAS 130 requires the minimum pension liability adjustment to be
included in other comprehensive income.
9
<PAGE> 10
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 2
RESTRUCTURINGS
Workforce Reduction
In connection with the divestiture of the western boot business and the
substantial completion of the exiting of the Jarman leased department business,
the Company reviewed the structure and level of staffing in all of its
operations. Upon completion of the review, the Company recorded a $1.3 million
charge to earnings, included in selling and administrative expenses, during the
fourth quarter of Fiscal 1999 for a workforce reduction of 66 positions, of
which 59 positions were eliminated by October 30, 1999. Twenty-six of the
positions eliminated related to the Jarman Lease division, with the remainder
being primarily employed at corporate headquarters.
Fiscal 1998 Restructuring
As a result of the continued weakness in the western boot market, the Company
approved a plan (the "Boot Divestiture") in the fourth quarter of Fiscal 1998
to exit the western boot business. In connection with the Boot Divestiture, the
Company recorded a charge to earnings of $17.3 million in the fourth quarter of
Fiscal 1998, including $11.3 million in asset writedowns. The carrying value of
the assets held for sale was reduced to fair value based on estimated selling
values less estimated costs to sell. The charges related to the Boot
Divestiture also included $3.2 million in employee-related costs and $2.8
million of facility shutdown and other costs. On June 12, 1998, the Company and
Texas Boot, Inc. entered into an agreement providing for the purchase by Texas
Boot, Inc. of most of the assets related to the western boot business,
including the Company's 26 store Boot Factory retail chain, which the Company
had not planned to include in the Boot Divestiture. The Company completed the
sale of its western boot business to Texas Boot, Inc. on July 14, 1998. Net
sales of the Company's western boot business were $16.6 million and the
operating loss was $1.5 million for the nine months ended October 31, 1998.
The Company's actions relating to the Boot Divestiture resulted in the
elimination of 622 jobs, including all positions related to the western boot
business and the Boot Factory retail chain.
10
<PAGE> 11
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 3
ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30,
IN THOUSANDS 1999 1999
----------- -----------
<S> <C> <C>
Trade accounts receivable $ 27,257 $ 23,106
Miscellaneous receivables 1,834 5,430
-------- --------
Total receivables 29,091 28,536
Allowance for bad debts (982) (1,075)
Other allowances (2,113) (1,203)
-------- --------
NET ACCOUNTS RECEIVABLE $ 25,996 $ 26,258
======== ========
</TABLE>
The Company's footwear wholesaling business sells primarily to independent
retailers and department stores across the United States. Receivables arising
from these sales are not collateralized. Credit risk is affected by conditions
or occurrences within the economy and the retail industry. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
One customer accounted for 12% of the Company's trade receivables balance as of
October 30, 1999 and no other customer accounted for more than 10% of the
Company's trade receivables balance as of October 30, 1999.
NOTE 4
INVENTORIES
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30,
IN THOUSANDS 1999 1999
----------- -----------
<S> <C> <C>
Raw materials $ 2,772 $ 2,969
Work in process 2,319 2,077
Finished goods 26,684 33,949
Retail merchandise 98,012 78,218
-------- --------
TOTAL INVENTORIES $129,787 $117,213
======== ========
</TABLE>
11
<PAGE> 12
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 5
PLANT, EQUIPMENT AND CAPITAL LEASES, NET
<TABLE>
<CAPTION>
OCTOBER 30, JANUARY 30,
IN THOUSANDS 1999 1999
----------- -----------
<S> <C> <C>
Plant and equipment:
Land $ 263 $ 263
Buildings and building equipment 2,726 2,729
Machinery, furniture and fixtures 43,046 39,587
Construction in progress 8,405 8,819
Improvements to leased property 57,101 56,790
Capital leases:
Buildings 392 200
Machinery, furniture and fixtures 2,916 4,026
--------- ---------
Plant, equipment and capital leases, at cost 114,849 112,414
Accumulated depreciation and amortization:
Plant and equipment (46,854) (49,993)
Capital leases (3,145) (4,034)
--------- ---------
NET PLANT, EQUIPMENT AND CAPITAL LEASES $ 64,850 $ 58,387
========= =========
</TABLE>
12
<PAGE> 13
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 6
PROVISION FOR DISCONTINUED OPERATIONS AND RESTRUCTURING RESERVES
PROVISION FOR DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
EMPLOYEE
RELATED
IN THOUSANDS COSTS* OTHER TOTAL
-------- -------- --------
<S> <C> <C> <C>
Balance January 30, 1999 $ 9,693 $ 374 $ 10,067
Charges and adjustments, net (995) (374) (1,369)
-------- -------- --------
Balance October 30, 1999 8,698 -0- 8,698
Current portion 2,083 -0- 2,083
-------- -------- --------
TOTAL NONCURRENT PROVISION FOR
DISCONTINUED OPERATIONS $ 6,615 $ -0- $ 6,615
======== ======== ========
*Union pension withdrawal liability.
</TABLE>
RESTRUCTURING RESERVES
<TABLE>
<CAPTION>
EMPLOYEE FACILITY
RELATED SHUTDOWN
IN THOUSANDS COSTS COSTS OTHER TOTAL
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Balance January 30, 1999 $ 268 $ 955 $ 985 $ 2,208
Charges and adjustments, net (70) (266) (204) (540)
------- ------- ------- -------
Balance October 30, 1999 198 689 781 1,668
Current portion (included in accounts
payable and accrued liabilities) 198 594 781 1,573
------- ------- ------- -------
TOTAL NONCURRENT RESTRUCTURING RESERVES
(INCLUDED IN OTHER LONG-TERM LIABILITIES) $ -0- $ 95 $ -0- $ 95
======= ======= ======= =======
</TABLE>
13
<PAGE> 14
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 7
EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
OCTOBER 30, 1999 OCTOBER 31, 1998
------------------------------------------ ----------------------------------------
(IN THOUSANDS, EXCEPT INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
PER SHARE AMOUNTS) (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
--------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings before extraordinary loss $ 6,204 $ 6,273
Less: Preferred stock dividends (75) (75)
-------- -------- -------- -------- -------- --------
BASIC EPS
Income available to
common shareholders 6,129 21,786 $ .28 6,198 25,600 $ .24
======== ========
Plus: Interest on 5 1/2% convertible
subordinated notes (net of tax) 962 -0-
EFFECT OF DILUTIVE SECURITIES
Options 695 662
5 1/2% convertible subordinated notes 4,918 -0-
Contingent Options(1) -0- 67
Employees' Preferred Stock(2) 72 74
-------- -------- -------- -------- -------- --------
DILUTED EPS
Income available to common
shareholders plus assumed
conversions $ 7,091 27,471 $ .26 $ 6,198 26,403 $ .23
======== ======== ======== ======== ======== ========
</TABLE>
(1) These options are contingent upon service to the Company and the Company's
common stock trading at various prices.
(2) The Company's Employees' Subordinated Convertible Preferred Stock is
convertible one for one to the Company's common stock. Because there are no
dividends paid on this stock, these shares are assumed to be converted.
The amount of the dividend on the convertible preferred stock per common share
obtainable on conversion of the convertible preferred stock is higher than
basic earnings per share for the period. Therefore, conversion of the
convertible preferred stock is not reflected in diluted earnings per share,
because it would have been antidilutive. The shares convertible to common stock
for Series 1, 3 and 4 preferred stock would have been 30,816, 40,869 and
24,946, respectively.
The weighted shares outstanding reflects the effect of the stock buy back
program of up to 5.8 million shares announced by the Company in August 1998,
January 1999 and August 1999. The Company has repurchased 5.0 million shares as
of October 30, 1999.
14
<PAGE> 15
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 7
EARNINGS PER SHARE, CONTINUED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
OCTOBER 30, 1999 OCTOBER 31, 1998
--------------------------------------- --------------------------------------
(IN THOUSANDS, EXCEPT INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
PER SHARE AMOUNTS) (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
--------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings before extraordinary loss $ 14,447 $ 16,686
Less: Preferred stock dividends (225) (225)
-------- -------- -------- -------- -------- --------
BASIC EPS
Income available to
common shareholders 14,222 22,603 $ .63 16,461 25,850 $ .64
======== ========
Plus: Interest on 5 1/2% convertible
subordinated notes (net of tax) 2,887 -0-
EFFECT OF DILUTIVE SECURITIES
Options 692 1,176
5 1/2% convertible subordinated notes 4,918 -0-
Contingent Options(1) -0- 67
Employees' Preferred Stock(2) 73 74
-------- -------- -------- -------- -------- --------
DILUTED EPS
Income available to common
shareholders plus assumed
conversions $ 17,109 28,286 $ .60 $ 16,461 27,167 $ .61
======== ======== ======== ======== ======== ========
</TABLE>
(1) These options are contingent upon service to the Company and the Company's
common stock trading at various prices.
(2) The Company's Employees' Subordinated Convertible Preferred Stock is
convertible one for one to the Company's common stock. Because there are no
dividends paid on this stock, these shares are assumed to be converted.
The amount of the dividend on the convertible preferred stock per common share
obtainable on conversion of the convertible preferred stock is higher than
basic earnings per share for the period. Therefore, conversion of the
convertible preferred stock is not reflected in diluted earnings per share,
because it would have been antidilutive. The shares convertible to common stock
for Series 1, 3 and 4 preferred stock would have been 30,816, 40,869 and
24,946, respectively.
The weighted shares outstanding reflects the effect of the stock buy back
program of up to 5.8 million shares announced by the Company in August 1998,
January 1999 and August 1999. The Company has repurchased 5.0 million shares as
of October 30, 1999.
15
<PAGE> 16
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 8
LEGAL PROCEEDINGS
New York State Environmental Proceedings
The Company is a defendant in a civil action filed by the State of New York
against the City of Gloversville, New York, and 33 other private defendants.
The action arose out of the alleged disposal of certain hazardous material
directly or indirectly into a municipal landfill and seeks recovery under a
federal environmental statute and certain common law theories for the costs of
investigating and performing remedial actions and damage to natural resources.
The environmental authorities have selected a plan of remediation for the site
with a total estimated cost of approximately $12.0 million. The Company has
filed an answer to the complaint denying liability and asserting numerous
defenses. The Company, along with other defendants, and the State of New York
are participating in non-binding mediation in an attempt to agree upon an
allocation of the remediation costs. Because of uncertainties related to the
ability or willingness of the other defendants to pay a portion of remediation
costs, the availability of New York State funding to pay a portion of
remediaton costs and 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 unable to predict the outcome of the
action. However, management does not presently expect the action to have a
material effect on the Company's financial condition or results of operations.
The Company has received notice from the New York State Department of
Environmental Conservation (the "Department") that it deems remedial action to
be necessary with respect to certain contaminants in the vicinity of a knitting
mill operated by a former subsidiary of the Company from 1965 to 1969, and that
it considers the Company a potentially responsible party. In August 1997, the
Department and the Company entered into a consent order whereby the Company
assumed responsibility for conducting a remedial investigation and feasibility
study ("RIFS") and implementing an interim remediation measure with regard to
the site, without admitting liability or accepting responsibility for any
future remediation of the site. In conjunction with the consent order, the
Company entered into an agreement with the owner of the site providing for a
release from liability for property damage and for necessary access to the
site, for payments totaling $400,000. The Company estimates that the cost of
conducting the RIFS and implementing the interim remedial measure will be in
the range of $1.6 million to $2.0 million. The Company believes that it has
adequately reserved for the costs of conducting the RIFS and implementing the
interim remedial measure contemplated by the consent order, but there is no
assurance that the consent order will ultimately resolve the matter. The
Company has not ascertained what responsibility, if any, it has for any
contamination in connection with the facility or what other parties may be
liable in that connection and is unable to predict whether its liability, if
any, beyond that voluntarily assumed by the consent order will have a material
effect on its financial condition or results of operations.
16
<PAGE> 17
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 8
LEGAL PROCEEDINGS, CONTINUED
Whitehall Environmental Sampling
Pursuant to a work plan approved by the Michigan Department of Environmental
Quality ("MDEQ") the Company has performed sampling and analysis of soil,
sediments, surface water, groundwater and waste management areas at the
Company's Volunteer Leather Company facility in Whitehall, Michigan. On June
29, 1999, the Company submitted a final remedial action plan for the site to
MDEQ. The plan proposes no action with respect to soils at the site, which are
in compliance with applicable regulatory standards, or lake sediments, which
the Company believes do not pose a threat to human health or the environment
and do not violate any applicable regulatory standard. The Company, with the
approval of MDEQ, previously installed horizontal wells to capture groundwater
from a portion of the site and treat it by air sparging. The remedial action
plan proposes continued operation of this system for an indefinite period and
monitoring of groundwater samples to ensure that the system is functioning as
intended. The remedial action plan is subject to MDEQ approval. If the plan is
approved, the Company does not expect it to have a material impact on its
financial condition or results of operations. However, there can be no
assurance that the plan will be approved as submitted, and the Company is
unable to predict whether any further remediation that may ultimately be
required will have a material effect on its financial condition or results of
operations.
On June 30, 1999, the City of Whitehall filed an action against the Company in
the circuit court for the City of Muskegon under various state environmental
statutes and City ordinances, seeking to compel a more extensive cleanup of the
site than the remediation plan proposes. The Company has filed an answer
denying all the material allegations in the City's complaint, asserting
affirmative defenses and including a counterclaim against the city for
contribution.
Whitehall Accident
On June 4, 1999, a truck driver employed by a carrier for a chemical vendor
died after inhaling a toxic vapor produced when he deposited a chemical
compound that he was delivering to the Company's Whitehall, Michigan, leather
tannery into a tank containing another chemical solution. Regulatory
authorities, including the National Transportation Safety Board and the
Michigan Occupational Safety and Health Administration, are investigating the
incident. The Michigan agency has issued six citations alleging regulatory
infractions identified in the course of a general compliance review following
the accident. Proposed monetary penalties associated with the citations total
$15,100. The Company is assessing the citations and intends to contest some or
all of them. The Company is currently unable to predict the additional effect,
if any, of the incident on its financial condition or results of operations.
17
<PAGE> 18
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 9
BUSINESS SEGMENT INFORMATION
The Company has four reportable segments: Specialty Retail Footwear, comprised
of Journeys, Jarman, Underground Station, Stone & Co. and General Shoe
Warehouse; Branded Footwear, comprised of Johnston & Murphy retail and
wholesale, Dockers Footwear and Nautica Footwear; Leather; and Western Boots,
which was divested in Fiscal 1999. All the Company's segments, except Leather,
sell footwear products at either retail or wholesale. The Leather segment is
comprised of Volunteer Leather, a leather tanning and finishing company which
sells primarily to military boot manufacturers and other customers.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies.
The Company's reportable segments are based on an organization methodology used
by management in order to make operating decisions and assess performance along
types of products sold. Specialty Retail Footwear primarily sells branded
products from other companies while Branded Footwear primarily sells the
Company's owned and licensed brands.
Corporate assets include cash, deferred income taxes, prepaid pension cost and
deferred note expense. The Company does not allocate certain costs to each
segment in order to make decisions and assess performance. These costs include
corporate overhead, restructuring gains and losses, interest expense, interest
income, and other charges. Other includes severance and litigation charges and
a $2.4 million restructuring gain in Fiscal 1999.
<TABLE>
<CAPTION>
SPECIALTY
THREE MONTHS ENDED RETAIL BRANDED
OCTOBER 30, 1999 FOOTWEAR FOOTWEAR LEATHER CORPORATE CONSOLIDATED
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Sales $ 78,915 $ 62,255 $ 6,439 $ -0- $ 147,609
Intercompany sales -0- (1,273) (368) -0- (1,641)
--------- --------- --------- --------- ---------
Net sales to external customers 78,915 60,982 6,071 -0- 145,968
--------- --------- --------- --------- ---------
Operating income (loss) 8,994 5,320 568 (2,953) 11,929
Interest expense -0- -0- -0- 2,058 2,058
Interest income -0- -0- -0- 404 404
Other -0- -0- -0- -0- -0-
--------- --------- --------- --------- ---------
Pretax earnings (loss) 8,994 5,320 568 (4,607) 10,275
--------- --------- --------- --------- ---------
Total assets 109,918 90,328 9,244 86,932 296,422
Depreciation 1,245 772 114 495 2,626
Capital expenditures 3,791 808 17 471 5,087
</TABLE>
18
<PAGE> 19
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 9
BUSINESS SEGMENT INFORMATION, CONTINUED
<TABLE>
<CAPTION>
SPECIALTY
THREE MONTHS ENDED RETAIL BRANDED WESTERN
OCTOBER 31, 1998 FOOTWEAR FOOTWEAR LEATHER BOOT CORPORATE CONSOLIDATED
--------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 72,955 $ 53,984 $ 5,137 $ -0- $ -0- $ 132,076
Intercompany sales -0- (1,864) (448) -0- -0- (2,312)
--------- --------- --------- --------- --------- ---------
Net sales to external customers 72,955 52,120 4,689 -0- -0- 129,764
--------- --------- --------- --------- --------- ---------
Operating income (loss) 5,302 4,946 182 57 (2,541) 7,946
Interest expense -0- -0- -0- -0- 2,094 2,094
Interest income -0- -0- -0- -0- 597 597
Other -0- -0- -0- -0- (14) (14)
--------- --------- --------- --------- --------- ---------
Pretax earnings (loss) 5,302 4,946 182 57 (4,052) 6,435
--------- --------- --------- --------- --------- ---------
Total assets 109,019 83,415 9,117 -0- 67,129 268,680
Depreciation 1,270 657 121 -0- 373 2,421
Capital expenditures 2,779 990 -0- -0- 1,578 5,347
</TABLE>
<TABLE>
<CAPTION>
SPECIALTY
NINE MONTHS ENDED RETAIL BRANDED
OCTOBER 30, 1999 FOOTWEAR FOOTWEAR LEATHER CORPORATE CONSOLIDATED
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Sales $205,443 $ 182,740 $ 17,644 $ -0- $405,827
Intercompany sales -0- (3,915) (1,385) -0- (5,300)
-------- --------- -------- ------- --------
Net sales to external customers 205,443 178,825 16,259 -0- 400,527
-------- --------- -------- ------- --------
Operating income (loss) 18,257 17,751 1,093 (8,145) 28,956
Interest expense -0- -0- -0- 6,095 6,095
Interest income -0- -0- -0- 1,645 1,645
Other -0- -0- -0- (529) (529)
-------- --------- -------- ------- --------
Pretax earnings (loss) 18,257 17,751 1,093 (13,124) 23,977
-------- --------- -------- ------- --------
Total assets 109,918 90,328 9,244 86,932 296,422
Depreciation 3,664 2,220 343 1,277 7,504
Capital expenditures 10,187 2,939 37 2,140 15,303
</TABLE>
19
<PAGE> 20
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 9
BUSINESS SEGMENT INFORMATION, CONTINUED
<TABLE>
<CAPTION>
SPECIALTY
NINE MONTHS ENDED RETAIL BRANDED WESTERN
OCTOBER 31, 1998 FOOTWEAR FOOTWEAR LEATHER BOOT CORPORATE CONSOLIDATED
--------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 204,128 $ 166,139 $ 15,868 $ 16,560 $ -0- $ 402,695
Intercompany sales -0- (5,034) (2,040) -0- -0- (7,074)
--------- --------- --------- --------- --------- ---------
Net sales to external customers 204,128 161,105 13,828 16,560 -0- 395,621
--------- --------- --------- --------- --------- ---------
Operating income (loss) 12,354 17,430 310 (1,472) (8,497) 20,125
Interest expense -0- -0- -0- -0- 7,163 7,163
Interest income -0- -0- -0- -0- 2,038 2,038
Other -0- -0- -0- -0- 1,601 1,601
--------- --------- --------- --------- --------- ---------
Pretax earnings (loss) 12,354 17,430 310 (1,472) (12,021) 16,601
--------- --------- --------- --------- --------- ---------
Total assets 109,019 83,415 9,117 -0- 67,129 268,680
Depreciation 3,573 2,005 438 336 1,176 7,528
Capital expenditures 12,495 2,646 157 -0- 4,052 19,350
</TABLE>
20
<PAGE> 21
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
This discussion and the notes to the Consolidated Financial Statements include
certain forward-looking statements. Actual results could differ materially from
those reflected by the forward-looking statements in this discussion and a
number of factors may adversely affect future results, liquidity and capital
resources. These factors include changes in consumer demand or tastes or other
changes in the Company's markets that affect sales in it's retail stores or
sales by its Branded Footwear operations at wholesale, changes in business
strategies or directions of the Company's competitors, the Company's ability to
open, staff and support additional retail stores on schedule and at acceptable
expense levels and otherwise to execute its business strategies and the cost
and availability of externally sourced products. While the Company believes
that it has successfully remediated its own systems to enable them to deal with
issues related to the Year 2000 date change, and while it has made extensive
efforts to gain assurance of Year 2000 readiness from third parties that it
considers key to business, Year 2000 issues could also cause actual results to
be different from expectations. Other factors that could also lead to such a
failure to meet expectations reflected in forward looking statements include
international trade developments affecting foreign sourcing of products and the
outcome of various litigation and environmental contingencies, including those
discussed in Note 8 to the Consolidated Financial Statements. Although the
Company believes it has an appropriate business strategy and the resources
necessary for its operations, future revenue and margin trends cannot be
reliably predicted and the Company may alter its business strategies to address
changing conditions.
SIGNIFICANT DEVELOPMENTS
Leased Department Transition
Under an agreement with Mercantile Stores Company, Inc. the Company operated
the men's shoe departments in Mercantile department stores through the
Company's Jarman Lease division. Because of the 1998 acquisition of Mercantile
by Dillards Inc., the Company has ended its operation of the leased
departments. The Company transferred the remaining Jarman leased departments to
Dillards Inc. and Saks Inc. during the first quarter ended May 1, 1999. The
Jarman leased departments' business contributed sales of $10.6 million for the
third quarter of Fiscal 1999 and sales of $1.2 million and $35.9 million for
the first nine months of Fiscal 2000 and 1999, respectively. The Jarman leased
departments' business contributed operating earnings of $0.9 million for the
third quarter of Fiscal 1999. It had an operating loss of $0.3 million in the
first nine months of Fiscal 2000, compared to operating income of $1.5 million
for the first nine months of Fiscal 1999.
SHARE REPURCHASE PROGRAM
During the third quarter ended October 31, 1998, the Company's board of
directors authorized the purchase, from time to time, of up to 2.6 million
shares of the Company's common stock. During the fourth quarter ended January
30, 1999, the board authorized an additional 2.2 million shares to be
repurchased. In August of 1999, the board authorized the repurchase from time
to time of an additional 1.0 million shares. The purchases may be made on the
open market or in privately negotiated transactions. As of October 30, 1999,
the Company had repurchased 5.0 million shares at a cost of $43.0 million.
21
<PAGE> 22
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
WORKFORCE REDUCTION
In connection with the divestiture of the western boot business and the
substantial completion of the exiting of the Jarman leased department business,
the Company reviewed the structure and level of staffing in all of its
operations during the third and fourth quarter of Fiscal 1999. Upon completion
of the review, the Company recorded a $1.3 million charge to earnings, included
in selling and administrative expenses, during the fourth quarter of Fiscal
1999 for a workforce reduction of 66 positions, of which 59 positions were
eliminated by October 30, 1999. Twenty-six of the positions eliminated related
to the Jarman Lease division, with the remainder being primarily employed at
corporate headquarters.
FISCAL 1998 RESTRUCTURING
As a result of the continued weakness in the western boot market, the Company
approved a plan (the "Boot Divestiture") in the fourth quarter of Fiscal 1998
to exit the western boot business. In connection with the Boot Divestiture, the
Company recorded a charge to earnings of $17.3 million in the fourth quarter of
Fiscal 1998, including $11.3 million in asset writedowns. The carrying value of
the assets held for sale was reduced to fair value based on estimated selling
values less estimated costs to sell. The charges related to the Boot
Divestiture also included $3.2 million in employee-related costs and $2.8
million of facility shutdown and other costs. On June 12, 1998, the Company and
Texas Boot, Inc. entered into an agreement providing for the purchase by Texas
Boot, Inc. of most of the assets related to the western boot business,
including the Company's 26 store Boot Factory retail chain, which the Company
had not planned to include in the Boot Divestiture. The Company completed the
sale of its western boot business to Texas Boot, Inc. on July 14, 1998. Net
sales of the Company's western boot business were $16.6 million and the
operating loss was $1.5 million for the nine months ended October 31, 1998.
The Company's actions relating to the Boot Divestiture resulted in the
elimination of 622 jobs, including all positions related to the western boot
business and the Boot Factory retail chain.
RESULTS OF OPERATIONS - THIRD QUARTER FISCAL 2000 COMPARED TO FISCAL 1999
The Company's net sales in the third quarter ended October 30, 1999 increased
12.5% to $146.0 million from $129.8 million in the third quarter ended October
31, 1998. Excluding sales attributable to the Jarman lease business from last
year, the Company's net sales increased 22.5% to $146.0 million for the third
quarter of this year compared to $119.1 million for the third quarter of last
year. Gross margin increased 12.5% to $65.3 million in the third quarter this
year from $58.1 million in the same period last year but remained flat as a
percentage of net sales at 44.8%. Selling and administrative expenses in the
third quarter this year increased 6.5% from the third quarter last year but
decreased as a percentage of net sales from 38.6% to 36.6%.
Pretax earnings in the third quarter ended October 30, 1999 were $10.3 million
compared to $6.4 million for the third quarter ended October 31, 1998.
22
<PAGE> 23
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Net earnings for the third quarter ended October 30, 1999 were $6.2 million
($0.26 diluted earnings per share) compared to $6.3 million ($0.23 diluted
earnings per share) for the third quarter ended October 31, 1998. The Company
recorded an effective federal income tax rate of 39.6% for the third quarter
ended October 30, 1999. Net earnings for the third quarter last year included
federal income taxes of $162,000.
Specialty Retail Footwear
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
October 30, October 31, %
1999 1998 Change
----------- ----------- ------
(dollars in thousands)
<S> <C> <C> <C>
NET SALES .................... $78,915 $72,955 8.2%
OPERATING INCOME ............. $ 8,994 $ 5,302 69.6%
Operating margin ............. 11.4% 7.3%
</TABLE>
A 15% increase in comparable store sales and a 12% increase in average ongoing
Specialty Retail Footwear stores operated were offset by the lost sales of the
Jarman lease business, producing an 8.2% increase in net sales from Specialty
Retail Footwear operations for the third quarter ended October 30, 1999
compared to the same period last year. Excluding sales attributable to the
Jarman lease business from last year's third quarter, Specialty Retail Footwear
net sales increased 26.6% for the third quarter of this year compared to the
third quarter of last year. Excluding the Jarman lease business, the average
price per pair of shoes increased 4% and unit sales increased 21% for the third
quarter of Fiscal 2000.
The Company's comparable store sales and store count for Specialty Retail
Footwear at the end of the periods were as follows:
<TABLE>
<CAPTION>
Store Count
-----------------------------
Comparable October 30, October 31,
Sales Changes 1999 1998
------------- ----------- -----------
<S> <C> <C> <C>
Journeys .............................. 19% 307 254
Jarman Retail ......................... 11% 159(1) 168(2)
Jarman Lease .......................... -- -0- 86
General Shoe Warehouse ................ -11% 15 16
--- ---
Total Specialty Retail Footwear ... 15% 481 524
=== ===
</TABLE>
- --------------
(1) Includes seventeen Underground Station stores and five Stone & Co. stores.
(2) Includes sixteen Underground Station stores.
23
<PAGE> 24
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Specialty Retail Footwear operating income for the third quarter ended October
30, 1999 increased 69.6% to $9.0 million compared to $5.3 million for the same
period last year. The increase was due primarily to the increased sales,
increased gross margin as percentage of sales and decreased expenses as a
percentage of sales from the ongoing Specialty Retail Footwear businesses.
Branded Footwear
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
October 30, October 31, %
1999 1998 Change
----------- ----------- ------
<S> <C> <C> <C>
(dollars in thousands)
Net Sales .................... $60,982 $52,120 17.0%
Operating income ............. $ 5,320 $ 4,946 7.6%
Operating margin ............. 8.7% 9.5%
</TABLE>
Branded Footwear net sales increased 17.0% to $61.0 million for the third
quarter ended October 30, 1999 from $52.1 million for the third quarter ended
October 31, 1998. The increase included a 3% increase in comparable store sales
for Johnston & Murphy Retail. The segment's increased net sales also reflected
an 18% increase in Branded Footwear wholesale sales. The store count for
Branded Footwear retail operations at the end of the third quarter this year
included 143 Johnston & Murphy stores and factory stores and 41 Nautica Retail
leased departments compared to 132 Johnston & Murphy stores and factory stores
and 22 Nautica Retail leased departments at the end of the third quarter of
last year. The average price per pair of shoes for Branded Footwear retail
increased 2% for the third quarter of this year and unit sales increased 10%
during the same period. Unit sales for the Branded Footwear wholesale
businesses increased 20% for the third quarter of this year but the average
wholesale price per pair of shoes decreased 4% for the same period reflecting
increased promotional activities and mix changes.
Branded Footwear operating income for the third quarter ended October 30, 1999
increased 7.6% from $4.9 million in the third quarter of last year to $5.3
million in the third quarter of this year, primarily due to increased sales and
decreased expenses as a percentage of sales.
24
<PAGE> 25
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Leather
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
October 30, October 31, %
1999 1998 Change
----------- ----------- ------
(dollars in thousands)
<S> <C> <C> <C>
Net Sales .......................... $6,071 $4,689 29.5%
Operating income ................... $ 568 $ 182 212.1%
Operating Margin ................... 9.4% 3.9%
</TABLE>
Leather net sales increased 29.5% to $6.1 million in the third quarter ended
October 30, 1999 from $4.7 million in the third quarter ended October 31, 1998,
primarily due to increased orders from military footwear suppliers, which makes
up the bulk of the Company's tanned leather business.
Leather operating income increased 212.1% from $0.2 million in the third
quarter last year to $0.6 million in the third quarter this year, primarily due
to increased sales, increased gross margin as a percentage of sales and
decreased expenses as a percentage of sales. The Company expects a reversal of
the operating income trend from the last four quarters as margin pressures from
increased raw material prices and competitive pressures on pricing result in
projected lower operating income in the fourth quarter.
Corporate, Interest Expenses and Other Charges
Corporate and other expenses for the third quarter ended October 30, 1999
increased 16.2% to $3.0 million compared to $2.5 million for the third quarter
ended October 31, 1998. The increase in corporate expenses for the third
quarter is attributable primarily to increased bonus accruals.
Interest expense decreased 1.7% for the third quarter ended October 30, 1999.
Interest income decreased 32.3% from $0.6 million in the third quarter of last
year to $0.4 million in the third quarter of this year, due to decreases in
interest rates and investments. There were no borrowings under the Company's
revolving credit facility during the three months ended October 30, 1999 or
October 31, 1998.
RESULTS OF OPERATIONS - NINE MONTHS FISCAL 2000 COMPARED TO FISCAL 1999
The Company's net sales for the nine months ended October 30, 1999 increased
1.2% to $400.5 million from $395.6 million for the nine months ended October
31, 1998. Excluding sales attributable to the Jarman lease and western boot
businesses from both periods, the Company's net sales increased 16.4% to $399.3
million for the first nine months this year compared to $343.1 million for the
first nine months last year. Gross margin increased 3.5% to $179.4 million in
the first nine months this year from $173.3 million in the same period last
year and increased as a percentage of net sales from 43.8% to 44.8%. Selling
and administrative expenses in the first nine months this year decreased 2.0%
from the first nine months last year and decreased as a percentage of net sales
from 38.9% to 37.7%.
25
<PAGE> 26
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Pretax earnings for the nine months ended October 30, 1999 were $24.0 million
compared to $16.6 million for the nine months ended October 31, 1998. Pretax
earnings for the nine months ended October 31, 1998 included a restructuring
gain of $2.4 million primarily relating to the Boot Divestiture.
Net earnings for the nine months ended October 30, 1999 were $14.4 million
($0.60 diluted earnings per share) compared to $13.0 million ($0.47 diluted
earnings per share) for the nine months ended October 31, 1998. The Company
recorded an effective federal income tax rate of 39.7% for the nine months
ended October 30, 1999. Net earnings for the first nine months last year
included a tax credit of $85,000 and an extraordinary loss for the early
retirement of debt of $3.7 million.
Specialty Retail Footwear
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
October 30, October 31, %
1999 1998 Change
----------- ----------- ------
(dollars in thousands)
<S> <C> <C> <C>
Net Sales .......................... $205,443 $204,128 0.6%
Operating Income ................... $ 18,257 $ 12,354 47.8%
Operating Margin ................... 8.9% 6.1%
</TABLE>
Primarily because of the loss of sales from the Jarman lease business, despite
an increase in comparable store sales of 9% and an 15% increase in average
ongoing Specialty Retail Footwear stores operated, net sales from Specialty
Retail Footwear operations increased only 0.6% for the nine months ended
October 30, 1999 compared to the same period last year. Excluding sales
attributable to the Jarman lease business from both periods, Specialty Retail
Footwear net sales increased 21.5% for the first nine months of this year
compared to the first nine months of last year. Excluding the Jarman lease
business, the average price per pair of shoes increased 6% and unit sales
increased 14% for the first nine months of Fiscal 2000.
26
<PAGE> 27
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The Company's comparable store sales and store count for Specialty Retail
Footwear at the end of the periods were as follows:
<TABLE>
<CAPTION>
Store Count
------------------------------
Comparable October 30, October 31,
Sales Changes 1999 1998
------------- ----------- -----------
<S> <C> <C> <C>
Journeys .............................. 11% 307 254
Jarman Retail ......................... 6% 159(1) 168(2)
Jarman Lease .......................... NA (3) -0- 86
General Shoe Warehouse ................ -11% 15 16
--- ---
Total Specialty Retail Footwear ... 9% 481 524
=== ===
</TABLE>
- -------------
(1) Includes seventeen Underground Station stores and five Stone & Co. stores.
(2) Includes sixteen Underground Station stores.
(3) The Jarman lease business was closed out in the first quarter of Fiscal
2000.
Specialty Retail Footwear operating income for the nine months ended October
30, 1999 increased 47.8% to $18.3 million compared to $12.4 million for the
same period last year. The increase was due primarily to the increased sales,
increased gross margin as a percentage of sales and decreased expenses as a
percentage of sales from the ongoing Specialty Retail Footwear businesses. The
Jarman leased departments had an operating loss of $0.3 million in the first
nine months this year compared to operating income of $1.5 million for the same
period last year.
Branded Footwear
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
October 30, October 31, %
1999 1998 Change
----------- ----------- ------
(dollars in thousands)
<S> <C> <C> <C>
Net Sales ................ $178,825 $161,105 11.0%
Operating income ......... $ 17,751 $ 17,430 1.8%
Operating margin ......... 9.9% 10.8%
</TABLE>
Branded Footwear net sales increased 11.0% to $178.8 million for the nine
months ended October 30, 1999 from $161.1 million for the nine months ended
October 31, 1998, reflecting primarily a 4% increase in comparable store sales
for Johnston & Murphy Retail and an 8% increase in Branded Footwear wholesale
sales. The store count for Branded Footwear retail operations at the end of the
first nine months this year included 143 Johnston & Murphy stores and factory
stores and 41 Nautica Retail leased departments compared to 132 Johnston &
Murphy stores and factory stores and 22 Nautica Retail leased departments at
the end of the first nine months of last year. The
27
<PAGE> 28
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
average price per pair of shoes for Branded Footwear retail increased 1% for
the first nine months of this year and unit sales increased 11% during the same
period. Unit sales for the Branded Footwear wholesale businesses increased 9%
for the first nine months of this year while the average price per pair of
shoes decreased 2% for the same period reflecting increased promotional
activities and mix changes.
Branded Footwear operating income for the nine months ended October 30, 1999
increased 1.8% from $17.4 million in the first nine months of last year to
$17.8 million in the first nine months of this year, primarily due to increased
sales and decreased expenses as a percentage of sales.
Leather
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
October 30, October 31, %
1999 1998 Change
----------- ----------- ------
(dollars in thousands)
<S> <C> <C> <C>
Net Sales ................ $ 16,259 $ 13,828 17.6%
Operating income ......... $ 1,093 $ 310 252.6%
Operating margin ......... 6.7% 2.2%
</TABLE>
Leather net sales increased 17.6% to $16.3 million for the nine months ended
October 30, 1999 from $13.8 million for the nine months ended October 31, 1998,
primarily due to increased orders from military footwear suppliers, which makes
up the bulk of the Company's tanned leather business.
Leather operating income increased 252.6% from $0.3 million in the first nine
months last year to $1.1 million in the first nine months this year, primarily
due to increased sales, increased gross margin as a percentage of sales and
decreased expenses as a percentage of sales. The Company expects a reversal of
the operating income trend from the last four quarters as margin pressures from
increased raw material prices and competitive pressures on pricing result in
projected lower operating income in the fourth quarter.
Corporate, Interest Expenses and Other Charges
Corporate and other expenses for the nine months ended October 30, 1999 were
$8.1 million compared to $8.5 million for the nine months ended October 31,
1998 (exclusive of other charges of $0.5 million, primarily environmental
charges, in the first nine months this year and an other credit of $1.6
million, comprising primarily litigation and severance charges and a
restructuring gain of $2.4 million, in the first nine months last year), a
decrease of 4.1%. The decrease in corporate expenses in the first nine months
this year is attributable primarily to decreased professional fees.
Interest expense decreased 14.9% from $7.2 million for the nine months ended
October 31, 1998 to $6.1 million for the nine months ended October 30, 1999,
primarily due to the decrease in interest rates on the Company's long-term debt
from 10 3/8% on $75 million of borrowings to 5 1/2% on $103.5 million of
borrowings. Interest income decreased 19.3% from $2.0 million in the first nine
months of last year to $1.6 million in the first nine months of this year, due
to decreases in interest
28
<PAGE> 29
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
rates. There were no borrowings under the Company's revolving credit facility
during the nine months ended October 30, 1999 or October 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain financial data at the dates indicated.
<TABLE>
<CAPTION>
October 30, October 31,
1999 1998
----------- -----------
(dollars in millions)
<S> <C> <C>
Cash and short-term investments ...................... $ 38.5 $ 42.6
Working capital ...................................... $ 135.2 $ 136.8
Long-term debt (includes current maturities) ......... $ 103.5 $ 103.5
Current ratio ........................................ 2.8x 3.1x
</TABLE>
Working Capital
The Company's business is somewhat seasonal, with the Company's investment in
inventory and accounts receivable normally 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 provided by operating activities was $12.1 million in the first nine
months of Fiscal 2000 compared to $15.5 million cash used in operating
activities in the first nine months of Fiscal 1999. The $27.6 million increase
in cash flow from operating activities reflects primarily the increase in
earnings, a smaller increase in inventory for the first nine months this year
compared to the first nine months last year and an increase in payables due to
changes in buying patterns and payment terms negotiated with individual
vendors. Contributing to the inventory change was a slowdown in store openings
from 150 stores in last years first nine months to 84 stores in this years
first nine months and the selloff of Jarman lease inventory.
The $20.3 million increase in inventories at October 30, 1999 from January 30,
1999 levels included in the statement of cash flows reflects planned seasonal
increases in retail inventory and to support the net increase of 69 stores,
excluding Jarman lease, in the first nine months of Fiscal 2000.
Accounts receivable at October 30, 1999 increased $1.8 million compared to
January 30, 1999, primarily due to the increase in Branded Footwear wholesale
sales.
29
<PAGE> 30
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Cash provided (or used) due to changes in accounts payable and accrued
liabilities are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
October 30, October 31,
1999 1998
----------- -----------
(in thousands)
<S> <C> <C>
Accounts payable $ 7,207 $ 580
Accrued liabilities (3,938) (10,078)
-------- --------
$ 3,269 $ (9,498)
======== ========
</TABLE>
The fluctuations in accounts payable for the first nine months this year from
the first nine months last year are due to changes in buying patterns, payment
terms negotiated with individual vendors and changes in inventory levels.
The change in accrued liabilities for the first nine months this year was due
primarily to scheduled interest payments, severance payments and bonus
payments.
There were no revolving credit borrowings during the nine months ended October
30, 1999 and October 31, 1998, as cash generated from operations and cash on
hand funded seasonal working capital requirements and capital expenditures.
Capital Expenditures
Total capital expenditures in Fiscal 2000 are expected to be approximately
$20.7 million. These include expected retail expenditures of $17.2 million to
open approximately 68 Journeys stores, 17 Johnston & Murphy stores and factory
stores and nine Jarman Retail stores and to complete 32 major store
renovations. Capital expenditures for wholesale and manufacturing operations
and other purposes are expected to be approximately $3.5 million, including
approximately $2.4 million for new computer systems to improve customer service
and support the Company's growth.
Year 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal activities.
The Company determined that it would be required to modify or replace
significant portions of its software so that its computer systems will properly
utilize dates beyond December 31, 1999. The Company is in the process of
upgrading and modernizing its major information systems, including
30
<PAGE> 31
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
its wholesale and retail operating systems and its financial systems. The
replacement systems are expected to be Year 2000 compliant.
The Company utilized both internal and external resources to reprogram or
replace and test software for Year 2000 compliance.
As of the beginning of the first quarter of Fiscal 2000, the Company is using
all modules of its new financial system. The Company implemented a contingency
plan that provided for remediation of the existing retail systems, adding an
additional 0.5 million lines of code to be remediated. After adjusting for the
additional lines of code to be remediated, the Company completed the
remediation, including final testing, of all of its identified 2.5 million
lines of code in its legacy systems by October 31, 1999.
The total cost of upgrading most of the Company's major operating systems,
including the Year 2000 project for Fiscal Years 1998 through 2000, is
estimated at $18.9 million and is being funded through operating cash flows and
cash on hand. Of the total project cost, approximately $10.9 million is
attributable to the purchase of new software and hardware which has been or
will be capitalized. The remaining $8.0 million has been or will be expensed,
including projected costs of $1.8 million for Fiscal 2000. Cumulative to date
expenditures through October 30, 1999 are $7.5 million plus cumulative capital
expenditures of $10.2 million.
The Company has developed plans for formal communications with all of its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate their own
Year 2000 issues. The communications began in the last quarter of Fiscal 1998
which the Company initially completed in the fourth quarter of Fiscal 1999 and
the Company anticipates follow-up continuing until the Year 2000 with critical
trading partners based on the initial responses. There can be no assurance the
systems of other companies on which the Company's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion
that is incompatible with the Company's systems, would not have material
adverse effect on the Company.
Under the most reasonably likely worst case scenario, the Company believes
problems could arise that would relate to possible failure in one or more
geographic regions of third party systems over which the Company has no
control, principally relating to power and telecommunications systems. These
failures could effect the Company's own stores as well as its suppliers of
footwear. The Company anticipates the disruptions will be short-term in nature
and because the shipment of merchandise to the Company's stores is
traditionally at a low point during that time of year, the impact should be
minimal. However, despite the Company's efforts in remediation and on
contingency planning there can be no assurance that the Year 2000 issues will
not have a material adverse impact on the Company's financial condition and
operating results.
31
<PAGE> 32
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The costs of the project and the date on which the Company plans to complete
the Year 2000 modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events, including the
continued availability of certain resources, third party modification plans and
other factors. Management uses outside consultants to review the adequacy of
its Year 2000 plans. However, there can be no assurance that these estimates
will be achieved and actual results could differ materially from those plans.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes, and similar
uncertainties.
Environmental and Other Contingencies
The Company is subject to certain loss contingencies related to environmental
proceedings and other legal matters, including those disclosed in Note 8 to the
Company's Consolidated Financial Statements. The Company has made provisions
for certain of these contingencies, including provisions of $150,000 in
discontinued operations in Fiscal 1997, $250,000 reflected in Fiscal 1998 and
$402,000 reflected in Fiscal 1999. The Company monitors these proceedings on an
ongoing basis and at least quarterly management reviews the Company's reserves
and accruals in relation to each of them, adjusting provisions as management
deems necessary in view of changes in available information. Changes in
estimates of liability are reported in the periods when they occur.
Consequently, management believes that its reserve in relation to each
proceeding is a reasonable estimate of the probable loss connected to the
proceeding, or in cases in which no reasonable estimate is possible, the
minimum amount in the range of estimated losses, based upon its analysis of the
facts as of the close of the most recent fiscal quarter. Because of
uncertainties and risks inherent in litigation generally and in environmental
proceedings in particular, however, there can be no assurance that future
developments will not require additional reserves to be set aside, that some or
all reserves may not be adequate or that the amounts of any such additional
reserves or any such inadequacy will not have a material adverse effect upon
the Company's financial condition or results of operations.
Future Capital Needs
The Company expects that cash on hand and cash provided by operations will be
sufficient to fund all of its capital expenditures through Fiscal 2000,
although the Company may borrow from time to time to support seasonal working
capital requirements. Approximately $3.7 million of costs associated with the
prior restructurings and discontinued operations that are expected to be
incurred during the next twelve months are also expected to be funded from cash
on hand. The Company has also authorized the additional repurchase, from time
to time, of up to 1.0 million shares of the Company's common stock. The Company
intends to fund these purchases from available cash. The Company repurchased
0.2 million shares at a cost of $2.5 million during the third quarter ended
October 30, 1999. The Company completed the previously authorized repurchase of
4.8 million shares at a cost of $40.5 million as of July 31, 1999.
There were $5.4 million of letters of credit outstanding under the revolving
credit agreement at October 30, 1999, leaving availability under the revolving
credit agreement of $59.6 million.
32
<PAGE> 33
GENESCO INC.
AND CONSOLIDATED SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The Company's revolving credit agreement restricts the payment of dividends and
other payments with respect to capital stock. At October 30, 1999, $33.1
million was available for such payments. 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 $300,000.
Changes in Accounting Principles
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, effective for fiscal years beginning after
June 15, 1999. The Financial Accounting Standards Board issued SFAS No. 137 in
July 1999 to delay the effective date of SFAS No. 133 for one year, to fiscal
years beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires an entity to recognize all derivatives as either assets or liabilities
in the consolidated balance sheet and to measure those instruments at fair
value. Under certain conditions, a derivative may be specifically designated as
a fair value hedge or a cash flow hedge. The accounting for changes in the fair
value of a derivative will depend on the intended use of the derivative and the
resulting designation. At this time, management has not fully evaluated the
impact of SFAS No. 133.
33
<PAGE> 34
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
(27) Financial Data Schedule (for SEC use only)
- --------------
REPORTS ON FORM 8-K
None
34
<PAGE> 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/ James S. Gulmi
James S. Gulmi
Chief Financial Officer
December 14, 1999
35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENESCO
INC.'S THIRD QUARTER FISCAL 2000 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> OCT-30-1999
<CASH> 5,000
<SECURITIES> 33,543
<RECEIVABLES> 25,144
<ALLOWANCES> 982
<INVENTORY> 129,787
<CURRENT-ASSETS> 211,085
<PP&E> 114,849
<DEPRECIATION> 49,999
<TOTAL-ASSETS> 296,422
<CURRENT-LIABILITIES> 75,900
<BONDS> 103,500
0
7,884
<COMMON> 22,282
<OTHER-SE> 73,868
<TOTAL-LIABILITY-AND-EQUITY> 296,422
<SALES> 400,527
<TOTAL-REVENUES> 400,527
<CGS> 221,154
<TOTAL-COSTS> 221,154
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 830
<INTEREST-EXPENSE> 6,095
<INCOME-PRETAX> 23,977
<INCOME-TAX> 9,530
<INCOME-CONTINUING> 14,447
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,447
<EPS-BASIC> 0.63
<EPS-DILUTED> 0.60
</TABLE>
