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GENESCO Inc. Reports Operating Results (10-Q)

September 10, 2009 | About:
10qk

10qk

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GENESCO Inc. (GCO) filed Quarterly Report for the period ended 2009-08-01.

Genesco is a leading retailer and wholesaler of branded footwear. The company operates two segments: Specialty Retail Footwear and Branded Footwear. The company's owned and licensed footwear brands sold through both wholesale and retail channels of distribution include Johnston & Murphy Dockers Footwear and Nautica Footwear. The company alsooperates the Volunteer Leather Company a leather tanning and finishing business. Genesco Inc. has a market cap of $472.6 million; its shares were traded at around $21.22 with a P/E ratio of 12.9 and P/S ratio of 0.3. Genesco Inc. had an annual average earning growth of 10.4% over the past 10 years. GuruFocus rated Genesco Inc. the business predictability rank of 3-star.

Highlight of Business Operations:

The Company recorded a pretax charge to earnings of $3.3 million in the second quarter of Fiscal 2010, including $3.4 million in asset impairments offset by a $0.1 million gain for other legal matters. The Company recorded a pretax charge to earnings of $8.3 million in the first six months of Fiscal 2010, including $7.9 million in asset impairments, $0.3 million for other legal matters and $0.1 million for lease terminations.

The Company recorded a pretax charge to earnings of $3.3 million in the second quarter of Fiscal 2009. The charge included $2.4 million in asset impairments, $0.6 million for lease terminations and $0.3 million for other legal matters. The Company recorded a pretax charge to earnings of $5.5 million in the first six months of Fiscal 2009. The charge included $3.6 million in retail store asset impairments, $1.1 million in other legal matters and $0.8 million for lease terminations.

The net loss for the second quarter ended August 1, 2009 was $(2.7) million ($0.13 diluted loss per share) compared to a net loss of $(10.8) million ($0.58 diluted loss per share) for the second quarter ended August 2, 2008. Net earnings for the three months ended August 2, 2008 included a $5.4 million ($0.29 diluted loss per share) charge to earnings (net of tax) primarily for an environmental liability relating to settlement negotiations with the Environmental Protection Agency concerning the site of a factory in New York, which the Company operated in the late 1960s. The Company recorded an effective income tax rate of 30.6% in the second quarter this year compared to 405% in the same period last year. The variance in the effective tax rate for the second quarter this year compared to the second quarter last year is primarily attributable to last years second quarter income tax expense reflecting an income tax liability as a result of the increase in value of shares of common stock of The Finish Line, Inc., received in the settlement of litigation with The Finish Line, Inc. Because of the differences between U.S. Generally Accepted Accounting Principles and the tax law in their respective treatment of this appreciation, the Company recorded a tax liability on the appreciation, which could not be recognized as income for accounting purposes. This years effective tax rate was impacted by FIN 48 discreet expense recorded during the second quarter.

Interest expense decreased 35.6% from $2.9 million in the second quarter ended August 2, 2008, to $1.9 million for the second quarter ended August 1, 2009, primarily due to reduced interest expense on the Companys 4 1/8% Debentures as a result of retiring $56.4 million in aggregate principal amount of the Debentures during the first quarter of Fiscal 2010. The application of FSP APB 14-1 resulted in the recognition of additional pretax non-cash interest expense totaling $0.3 million for the second quarter ended August 1, 2009, compared to $0.8 million for the same period last year. Interest income decreased 83% to $4,000 from $24,000 for the second quarter ended August 2, 2008. Last year had higher average short-term investments as a result of the proceeds from the settlement of merger-related litigation.

(Loss) earnings before income taxes from continuing operations (pretax (loss) earnings) for the six months ended August 1, 2009 were a loss of $(9.2) million compared to earnings of $202.0 million for the six months ended August 2, 2008. The pretax loss for the six months ended August 1, 2009 included a loss on the early retirement of debt of $5.1 million and restructuring and other charges of $8.3 million primarily for retail store asset impairments, other legal matters and lease terminations. Pretax earnings for the six months ended August 2, 2008 included a gain of $204.1 million from the settlement of merger-related litigation with The Finish Line and UBS and

The net loss for the six months ended August 1, 2009 was $(8.5) million ($0.42 diluted loss per share) compared to earnings of $118.6 million ($4.93 diluted earnings per share) for the six months ended August 2, 2008. The net loss for the six months ended August 1, 2009 included $0.2 million ($0.01 diluted loss per share) charge to earnings (net of tax) primarily for anticipated costs of environmental remediation related to former facilities operated by the Company. Net earnings for the six months ended August 2, 2008 included a $5.5 million ($0.22 diluted loss per share) charge to earnings (net of tax) primarily for an environmental liability relating to settlement negotiations with the Environmental Protection Agency concerning the site of a factory in New York, which the Company operated in the late 1960s. The Company recorded an effective income tax rate of 9.7% in the first six months this year compared to 38.6% in the same period last year. This years effective tax rate of 9.7% reflects the non-deductibility of certain items incurred in connection with the inducement of the conversion of the 4 1/8% Debentures for common stock in the first quarter this year. Last years effective tax rate of 38.6% is primarily attributable to the deduction of prior period merger-related expenses that became deductible upon termination of the Finish Line merger agreement offset by an income tax liability recorded as a result of the increase in value of the shares of common stock received in the settlement of litigation with The Finish Line that had no corresponding recording of income in the financial statements.

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