(Mark One)		Form 10-Q
þ		Quarterly Report Pursuant To
		Section 13 or 15(d) of the
		Securities Exchange Act of 1934
		For Quarter Ended
		November 3, 2007
o		Transition Report Pursuant To
		Section 13 or 15(d) of the
		Securities Exchange Act of 1934
		Securities and Exchange Commission
		Washington, D.C. 20549
		Commission File No. 1-3083
				Genesco Inc.
				A Tennessee Corporation
				I.R.S. No. 62-0211340
				Genesco Park
				1415 Murfreesboro Road
				Nashville, Tennessee 37217-2895
				Telephone 615/367-7000
				Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
				Yes þ      No o
				Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one:)
				Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o
				Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes o     No þ

Common Shares Outstanding November 30,2007 — 22,795,681

 

 

INDEX

		Page
Part I. Financial Information
Item 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheets — November 3, 2007, February 3, 2007 and October 28, 2006			3
Condensed Consolidated Statements of Operations — Three and Nine Months Ended November 3, 2007 and October 28, 2006			5
Condensed Consolidated Statements of Cash Flows — Three and Nine Months Ended November 3, 2007 and October 28, 2006			6
Condensed Consolidated Statements of Shareholders’ Equity — Year Ended February 3, 2007 and Nine Months Ended November 3, 2007			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Item 3. Quantitative and Qualitative Disclosures About Market Risk			52
Item 4. Controls and Procedures			52
Part II. Other Information
Item 1. Legal Proceedings			53
Item 1A. Risk Factors			53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			53
Item 4. Submission of Matters to a Vote of Security Holders			54
Item 6. Exhibits			54
Signature			55
EX-31.1 Section 302 Certification of the CEO
EX-31.2 Section 302 Certification of the CFO
EX-32.1 Section 906 Certification of the CEO
EX-32.2 Section 906 Certification of the CFO

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Genesco Inc.
and Subsidiaries

Condensed Consolidated Balance Sheets
(In Thousands, except share amounts)
(Unaudited)

		November 3,				February 3,				October 28,
		2007				2007				2006
Assets
Current Assets
Cash and cash equivalents		$	17,980			$	16,739			$	18,638
Accounts receivable, net of allowances of $2,418 at November 3, 2007, $1,910 at February 3, 2007 and $2,366 at October 28, 2006			29,213				24,084				24,401
Inventories			395,965				261,037				344,309
Deferred income taxes			12,837				12,940				10,416
Prepaids and other current assets			39,879				20,266				22,706
Total current assets			495,874				335,066				420,470
Property and equipment:
Land			4,861				4,861				4,861
Buildings and building equipment			16,509				17,445				14,812
Computer hardware, software and equipment			74,668				72,404				68,820
Furniture and fixtures			90,314				82,542				73,822
Construction in progress			23,511				12,005				16,473
Improvements to leased property			250,800				222,493				216,118
Property and equipment, at cost			460,663				411,750				394,906
Accumulated depreciation			(210,643	)			(189,416	)			(180,932	)
Property and equipment, net			250,020				222,334				213,974
Goodwill			107,618				107,651				96,235
Trademarks			51,420				51,361				47,677
Other intangibles, net of accumulated amortization of $7,140 at November 3, 2007, $6,096 at February 3, 2007 and $5,677 at October 28, 2006			1,772				2,816				2,909
Other noncurrent assets			10,714				10,145				11,290
Total Assets		$	917,418			$	729,373			$	792,555

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

Genesco Inc.
and Subsidiaries

Condensed Consolidated Balance Sheets
(In Thousands, except share amounts)
(Unaudited)

		November 3,				February 3,				October 28,
		2007				2007				2006
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable		$	138,844			$	65,083			$	135,614
Accrued employee compensation			13,528				21,954				16,760
Accrued other taxes			10,486				9,829				9,746
Accrued income taxes			-0-				7,845				3,076
Other accrued liabilities			32,681				25,570				29,154
Provision for discontinued operations			5,373				4,455				4,126
Total current liabilities			200,912				134,736				198,476
Long-term debt			215,220				109,250				158,250
Pension liability			12,656				14,306				21,923
Deferred rent and other long-term liabilities			75,356				64,245				54,987
Provision for discontinued operations			1,755				1,610				1,812
Total liabilities			505,899				324,147				435,448
Commitments and contingent liabilities
Shareholders’ Equity
Non-redeemable preferred stock			5,361				6,602				6,615
Common shareholders’ equity:
Common stock, $1 par value:
Authorized: 80,000,000 shares Issued/Outstanding:
November 3, 2007 — 23,284,029/22,795,565
February 3, 2007 — 23,230,458/22,741,994
October 28, 2006 — 22,960,065/22,471,601			23,284				23,230				22,960
Additional paid-in-capital			115,333				107,956				99,430
Retained earnings			305,833				306,622				271,338
Accumulated other comprehensive loss			(20,435	)			(21,327	)			(25,379	)
Treasury shares, at cost			(17,857	)			(17,857	)			(17,857	)
Total shareholders’ equity			411,519				405,226				357,107
Total Liabilities and Shareholders’ Equity		$	917,418			$	729,373			$	792,555

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

Genesco Inc.
and Subsidiaries

Condensed Consolidated Statements of Operations
(In Thousands, except per share amounts)
(Unaudited)

		Three Months Ended								Nine Months Ended
		November 3,				October 28,				November 3,				October 28,
		2007				2006				2007				2006
Net sales		$	372,496			$	364,298			$	1,035,124			$	983,617
Cost of sales			184,445				182,844				511,610				487,404
Selling and administrative expenses			174,194				150,992				499,326				433,477
Restructuring and other, net			56				1,083				6,809				1,672
Earnings from operations			13,801				29,379				17,379				61,064
Interest expense, net
Interest expense			3,544				2,964				9,025				7,505
Interest income			(40	)			(16	)			(119	)			(483	)
Total interest expense, net			3,504				2,948				8,906				7,022
Earnings before income taxes from continuing operations			10,297				26,431				8,473				54,042
Income tax provision			4,687				10,456				3,600				21,457
Earnings from continuing operations			5,610				15,975				4,873				32,585
Provision for discontinued operations, net			(10	)			(98	)			(1,235	)			(287	)
Net Earnings		$	5,600			$	15,877			$	3,638			$	32,298
Basic earnings per common share:
Continuing operations		$	.25			$	.71			$	.21			$	1.42
Discontinued operations		$	.00			$	.00			$	(.06	)		$	(.01	)
Net earnings		$	.25			$	.71			$	.15			$	1.41
Diluted earnings per common share:
Continuing operations		$	.23			$	.62			$	.20			$	1.26
Discontinued operations		$	.00			$	.00			$	(.05	)		$	(.01	)
Net earnings		$	.23			$	.62			$	.15			$	1.25

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

Genesco Inc.
and Subsidiaries

Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)

		Three Months Ended								Nine Months Ended
		November 3,				October 28,				November 3,				October 28,
		2007				2006				2007				2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings		$	5,600			$	15,877			$	3,638			$	32,298
Tax expense (benefit) of stock options exercised			4				(360	)			(134	)			(518	)
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation			11,378				10,112				33,179				29,289
Deferred income taxes			(167	)			(3,890	)			3,128				(5,215	)
Provision for losses on accounts receivable			44				42				67				296
Impairment of long-lived assets			107				1,031				6,790				1,579
Share-based compensation and restricted stock			2,008				1,836				6,125				5,340
Provision for discontinued operations			17				160				2,028				471
Other			888				674				2,438				1,558
Effect on cash of changes in working capital and other assets and liabilities:
Accounts receivable			(7,103	)			(5,150	)			(5,217	)			(3,526	)
Inventories			(48,391	)			(12,870	)			(134,928	)			(113,661	)
Prepaids and other current assets			1,882				(376	)			(19,613	)			(1,154	)
Accounts payable			15,175				(6,201	)			79,313				54,455
Other accrued liabilities			4,817				9,184				(9,422	)			(19,905	)
Other assets and liabilities			4,065				2,925				1,662				4,773
Net cash (used in) provided by operating activities			(9,676	)			12,994				(30,946	)			(13,920	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(25,719	)			(21,146	)			(68,846	)			(57,559	)
Acquisitions, net of cash acquired			-0-				-0-				(34	)			-0-
Proceeds from asset sales			-0-				5				6				5
Net cash used in investing activities			(25,719	)			(21,141	)			(68,874	)			(57,554	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital leases			(49	)			-0-				(150	)			-0-
Tax (expense) benefit of stock options exercised			(4	)			360				134				518
Shares repurchased			-0-				(20,113	)			-0-				(31,842	)
Change in overdraft balances			3,942				(3,139	)			(5,551	)			7,230
Borrowings under revolving credit facility			84,000				122,000				271,000				152,000
Payments on revolving credit facility			(57,000	)			(93,000	)			(165,000	)			(100,000	)
Dividends paid on non-redeemable preferred stock			(49	)			(64	)			(167	)			(192	)
Exercise of stock options and issue shares- employee stock purchase plan			406				1,381				795				1,947
Net cash provided by financing activities			31,246				7,425				101,061				29,661
Net (Decrease) Increase in Cash and Cash Equivalents			(4,149	)			(722	)			1,241				(41,813	)
Cash and cash equivalents at beginning of period			22,129				19,360				16,739				60,451
Cash and cash equivalents at end of period		$	17,980			$	18,638			$	17,980			$	18,638
Supplemental Cash Flow Information:
Net cash paid for:
Interest		$	2,590			$	1,258			$	7,021			$	5,308
Income taxes			1,317				10,061				27,657				37,328

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

Genesco Inc.
and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity
(In Thousands)
(Unaudited)

		Total																Accumulated												Total
		Non-Redeemable								Additional								Other												Share-
		Preferred				Common				Paid-In				Retained				Comprehensive				Treasury				Comprehensive				holders’
		Stock				Stock				Capital				Earnings				Loss				Stock				Income (Loss)				Equity
Balance January 28, 2006			$6,695			$	23,748			$	123,137			$	239,232				$(26,204	)		$	(17,857	)						$	348,751
Net earnings			-0-				-0-				-0-				67,646				-0-				-0-			$	67,646				67,646
Dividends paid on non-redeemable preferred stock			-0-				-0-				-0-				(256	)			-0-				-0-				-0-				(256	)
Exercise of stock options			-0-				357				6,101				-0-				-0-				-0-				-0-				6,458
Issue shares — Employee Stock Purchase Plan			-0-				10				311				-0-				-0-				-0-				-0-				321
Shares repurchased			-0-				(1,062	)			(31,026	)			-0-				-0-				-0-				-0-				(32,088	)
Employee and non-employee restricted stock			-0-				182				3,164				-0-				-0-				-0-				-0-				3,346
Share-based compensation			-0-				-0-				4,067				-0-				-0-				-0-				-0-				4,067
Tax benefit of stock options exercised			-0-				-0-				2,405				-0-				-0-				-0-				-0-				2,405
Gain on foreign currency forward contracts (net of tax of $0.6 million)			-0-				-0-				-0-				-0-				848				-0-				848				848
Loss on interest rate swaps (net of tax benefit of $0.2 million)			-0-				-0-				-0-				-0-				(218	)			-0-				(218	)			(218	)
Pension liability adjustment (net of tax of $3.2 million)			-0-				-0-				-0-				-0-				5,094				-0-				5,094				5,094
Cumulative adjustment to adopt SFAS No. 158 (net of tax benefit of $0.5 million)			-0-				-0-				-0-				-0-				(802	)			-0-				-0-				(802	)
Foreign currency translation adjustment			-0-				-0-				-0-				-0-				(45	)			-0-				(45	)			(45	)
Other			(93	)			(5	)			(203	)			-0-				-0-				-0-				-0-				(301	)
Comprehensive income																										$	73,325
Balance February 3, 2007			6,602				23,230				107,956				306,622				(21,327	)			(17,857	)							405,226
Cumulative effect of change in accounting principle (see Note 6)			-0-				-0-				-0-				(4,260	)			-0-				-0-				-0-				(4,260	)
Net earnings			-0-				-0-				-0-				3,638				-0-				-0-			$	3,638				3,638
Dividends paid on non-redeemable preferred stock			-0-				-0-				-0-				(167	)			-0-				-0-				-0-				(167	)
Exercise of stock options			-0-				33				551				-0-				-0-				-0-				-0-				584
Issue shares — Employee Stock Purchase Plan			-0-				5				206				-0-				-0-				-0-				-0-				211
Employee and non-employee restricted stock			-0-				-0-				3,476				-0-				-0-				-0-				-0-				3,476
Share-based compensation			-0-				-0-				2,649				-0-				-0-				-0-				-0-				2,649
Restricted shares withheld for taxes			-0-				(19	)			(875	)			-0-				-0-				-0-				-0-				(894	)
Tax benefit of stock options exercised			-0-				-0-				134				-0-				-0-				-0-				-0-				134
Conversion of Series 1 preferred stock			(95	)			2				93				-0-				-0-				-0-				-0-				-0-
Conversion of Series 3 preferred stock			(533	)			11				522				-0-				-0-				-0-				-0-				-0-
Conversion of Series 4 preferred stock			(560	)			8				552				-0-				-0-				-0-				-0-				-0-
Gain on foreign currency forward contracts (net of tax of $0.1 million)			-0-				-0-				-0-				-0-				122				-0-				122				122
Foreign currency translation adjustment			-0-				-0-				-0-				-0-				770				-0-				770				770
Other			(53	)			14				69				-0-				-0-				-0-				-0-				30
Comprehensive income*																										$	4,530
Balance November 3, 2007			$5,361			$	23,284			$	115,333			$	305,833				$(20,435	)		$	(17,857	)						$	411,519

*	Comprehensive income was $6.1 million and $15.8 million for the third quarter ended November 3, 2007 and October 28, 2006, respectively. Comprehensive income was $33.1 million for the nine month period ended October 28, 2006.

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

Genesco Inc.
and Subsidiaries

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1
Summary of Significant Accounting Policies

Interim Statements
The condensed 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 February 2, 2008 (“Fiscal 2008”) and of the fiscal year ended February 3, 2007 (“Fiscal 2007”). The results of operations for any interim period are not necessarily indicative of results for the full year. The interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K.

Nature of Operations
The Company’s businesses include the design or sourcing, marketing and distribution of footwear, principally under the Johnston & Murphy and Dockers brands and the operation at November 3, 2007 of 2,172 Journeys, Journeys Kidz, Shi by Journeys, Johnston & Murphy, Underground Station, Jarman, Hat World, Lids, Hat Shack, Hat Zone, Head Quarters, Cap Connection and Lids Kids retail footwear and headwear stores.

Principles of Consolidation
All subsidiaries are consolidated in the condensed consolidated financial statements. All significant intercompany transactions and accounts have been eliminated.

Financial Statement Reclassifications
Certain reclassifications have been made to the Condensed Consolidated Statements of Cash Flows to conform prior years’ data to the current year presentation.

Use of Estimates
The preparation of financial statements in conformity with U.S. 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.

Significant areas requiring management estimates or judgments include the following key financial areas:

Inventory Valuation
The Company values its inventories at the lower of cost or market.

In its wholesale operations, cost is determined using the first-in, first-out (“FIFO”) method. Market is determined using a system of analysis which evaluates inventory at the stock number level based on factors such as inventory turn, average selling price, inventory level, and selling prices reflected in future orders. The Company provides reserves when the inventory has not been marked down to market based on current selling prices or when the inventory is not turning and is not expected to turn at levels satisfactory to the Company.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

In its retail operations, other than the Hat World segment, the Company employs the retail inventory method, applying average cost-to-retail ratios to the retail value of inventories. Under the retail inventory method, valuing inventory at the lower of cost or market is achieved as markdowns are taken or accrued as a reduction of the retail value of inventories.

Inherent in the retail inventory method are subjective judgments and estimates, including merchandise mark-on, markups, markdowns, and shrinkage. These judgments and estimates, coupled with the fact that the retail inventory method is an averaging process, could produce a range of cost figures. To reduce the risk of inaccuracy and to ensure consistent presentation, the Company employs the retail inventory method in multiple subclasses of inventory with similar gross margin, and analyzes markdown requirements at the stock number level based on factors such as inventory turn, average selling price, and inventory age. In addition, the Company accrues markdowns as necessary. These additional markdown accruals reflect all of the above factors as well as current agreements to return products to vendors and vendor agreements to provide markdown support. In addition to markdown provisions, the Company maintains provisions for shrinkage and damaged goods based on historical rates.

The Hat World segment employs the moving average cost method for valuing inventories and applies freight using an allocation method. The Company provides a valuation allowance for slow-moving inventory based on negative margins and estimated shrink based on historical experience and specific analysis, where appropriate.

Inherent in the analysis of both wholesale and retail inventory valuation are subjective judgments about current market conditions, fashion trends, and overall economic conditions. Failure to make appropriate conclusions regarding these factors may result in an overstatement or understatement of inventory value.

Impairment of Long-Lived 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 the carrying amount. Inherent in the analysis of impairment are subjective judgments about future cash flows. Failure to make appropriate conclusions regarding these judgments may result in an overstatement or understatement of the value of long-lived assets (see Note 3).

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

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 10 to the Company’s Condensed Consolidated Financial Statements. The Company monitors these matters on an ongoing basis and, on a quarterly basis, 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 best estimate of probable loss connected to the proceeding, or in cases in which no best estimate is possible, the minimum amount in the range of estimated losses, based upon its analysis of the facts and circumstances as of the close of the most recent fiscal quarter. However, because of uncertainties and risks inherent in litigation generally and in environmental proceedings in particular, there can be no assurance that future developments will not require additional reserves to be set aside, that some or all reserves will 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.

Revenue Recognition
Retail sales are recorded at the point of sale and are net of estimated returns and exclude sales taxes. Catalog and internet sales are recorded at time of delivery to the customer and are net of estimated returns. Wholesale revenue is recorded net of estimated returns and allowances for markdowns, damages and miscellaneous claims when the related goods have been shipped and legal title has passed to the customer. Shipping and handling costs charged to customers are included in net sales. Estimated returns are based on historical returns and claims. Actual amounts of markdowns have not differed materially from estimates. Actual returns and claims in any future period may differ from historical experience.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

Income Taxes
As part of the process of preparing Condensed Consolidated Financial Statements, the Company is required to estimate its income taxes in each of the tax jurisdictions in which it operates. This process involves estimating actual current tax obligations together with assessing temporary differences resulting from differing treatment of certain items for tax and accounting purposes, such as depreciation of property and equipment and valuation of inventories. These temporary differences result in deferred tax assets and liabilities, which are included within the Condensed Consolidated Balance Sheets. The Company then assesses the likelihood that its deferred tax assets will be recovered from future taxable income. Actual results could differ from this assessment if adequate taxable income is not generated in future periods. To the extent the Company believes that recovery of an asset is at risk, valuation allowances are established. To the extent valuation allowances are established or increase the allowances in a period, the Company includes an expense within the tax provision in the Condensed Consolidated Statements of Operations.

Income tax reserves are determined using the methodology established by FASB Interpretation 48, Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement 109 (“FIN 48”). FIN 48, which was adopted by the Company as of February 4, 2007, requires companies to assess each income tax position taken using a two step process. A determination is first made as to whether it is more likely than not that the position will be sustained, based upon the technical merits, upon examination by the taxing authorities. If the tax position is expected to meet the more likely than not criteria, the benefit recorded for the tax position equals the largest amount that is greater than 50% likely to be realized upon ultimate settlement of the respective tax position. Uncertain tax positions require determinations and estimated liabilities to be made based on provisions of the tax law which may be subject to change or varying interpretation. If the Company’s determinations and estimates prove to be inaccurate, the resulting adjustments could be material to its future financial results. See Note 6 for additional information regarding income taxes.

Postretirement Benefits Plan Accounting
Substantially all full-time employees (except employees in the Hat World segment), who also had 1,000 hours of service in Calendar 2004, are covered by a defined benefit pension plan. The Company froze the defined benefit pension plan effective January 1, 2005. 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.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 158, “Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS No. 158”) which requires companies to recognize the overfunded or underfunded status of postretirement benefit plans as an asset or liability in its Condensed Consolidated Balance Sheets and to recognize changes in that funded status in accumulated other comprehensive loss, net of tax, in the year in which the changes occur. This statement did not change the accounting for plans required by SFAS No. 87, “Employers’ Accounting for Pensions” and it did not eliminate any of the expanded disclosures required by SFAS No. 132(R). On February 3, 2007, the Company adopted the recognition and disclosure provisions of SFAS No. 158. As a result of the adoption of SFAS No. 158, the Company recognized a $0.8 million (net of tax) cumulative adjustment in accumulated other comprehensive loss in shareholders’ equity for Fiscal 2007 related to the Company’s post-retirement medical and life insurance benefits. SFAS No. 158 also requires companies to measure the funded status of a plan as of the date of its fiscal year end. This requirement of SFAS No. 158 is not effective for the Company until Fiscal 2009. The Company is assessing the impact the adoption of the measurement date will have on its consolidated financial position and results of operations.

The Company accounts for the defined benefit pension plans using SFAS No. 87, “Employer’s Accounting for Pensions” (“SFAS No. 87”), as amended. Under SFAS No. 87, pension expense is recognized on an accrual basis over employees’ approximate service periods. The calculation of pension expense and the corresponding liability requires the use of a number of critical assumptions, including the expected long-term rate of return on plan assets and the assumed discount rate, as well as the recognition of actuarial gains and losses. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions.

Share-Based Compensation
The Company has share-based compensation plans covering certain members of management and non-employee directors. Pursuant to SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), adopted on the first day of Fiscal 2007, the Company recognizes compensation expense for share-based payments based on the fair value of the awards. For the third quarter and nine months of Fiscal 2008 and 2007, share-based compensation and restricted stock expense was $2.0 million, $1.8 million, $6.1 million and $5.3 million, respectively. The benefits of tax deductions in excess of recognized compensation expense are reported as a financing cash flow.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option pricing model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense, including expected stock price volatility. The Company bases expected volatility on historical term structures. The Company bases the risk free rate on an interest rate for a bond with a maturity commensurate with the expected term estimate. The Company estimates the expected term of stock options using historical exercise and employee termination experience. The Company does not currently pay a dividend on common stock. The fair value of employee restricted stock is determined based on the closing price of the Company’s stock on the date of the grant.

In addition to the key assumptions used in the Black-Scholes model, the estimated forfeiture rate at the time of valuation (which is based on historical experience for similar options) is a critical assumption, as it reduces expense ratably over the vesting period. Shared-based compensation expense is recorded based on a 2% expected forfeiture rate and is adjusted annually for actual forfeitures. The Company reviews the expected forfeiture rate annually to determine if that percent is still reasonable based on historical experience. The Company believes its estimates are reasonable in the context of actual (historical) experience.

The Company granted zero and 2,351 stock options for the three and nine months ended November 3, 2007, respectively, at a weighted average exercise price of $42.82 and a weighted average fair value of $16.28. The Company granted 109,681 stock options for the three and nine months ended October 28, 2006 at a weighted average exercise price of $38.14 and a weighted average fair value of $16.44. During the three and nine months ended November 3, 2007, the Company issued zero             shares and 3,547 shares, respectively, of employee restricted stock which vest over a four-year term and had a grant date fair value of $42.82. During the three and nine months ended October 28, 2006, the Company issued 165,334 shares of employee restricted stock which vest over a four-year term and had a grant date fair value of $38.14. For the three and nine months ended November 3, 2007 and October 28, 2006, the Company issued zero shares, zero shares, 6,761 shares and 3,022 shares, respectively, of director retainer stock at a grant date fair value of $39.62 and $37.25, respectively.

Cash and Cash Equivalents
Included in cash and cash equivalents at November 3, 2007, February 3, 2007 and October 28, 2006 are cash equivalents of $1.0 million, $0.9 million and $2.9 million, respectively. Cash equivalents are highly-liquid financial instruments having an original maturity of three months or less. The majority of payments due from banks for customer credit card transactions process within 24 — 48 hours and are accordingly classified as cash and cash equivalents.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

At November 3, 2007, February 3, 2007 and October 28, 2006, outstanding checks drawn on zero-balance accounts at certain domestic banks exceeded book cash balances at those banks by approximately $10.2 million, $15.8 million and $24.5 million, respectively. These amounts are included in accounts payable.

Concentration of Credit Risk and Allowances on Accounts Receivable
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. Customer credit risk is affected by conditions or occurrences within the economy and the retail industry as well as by customer specific factors. One customer accounted for 14% and another customer accounted for 12% of the Company’s trade receivables balance and no other customer accounted for more than 8% of the Company’s trade receivables balance as of November 3, 2007.

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information, as well as customer specific factors. The Company also establishes allowances for sales returns, customer deductions and co-op advertising based on specific circumstances, historical trends and projected probable outcomes.

Property and Equipment
Property and equipment 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 the following estimated useful lives:

Buildings and building equipment		20-45 years
Computer hardware, software and equipment		3-10 years
Furniture and fixtures		10 years

Leases
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 and the charge to earnings is included in selling and administrative expenses in the Condensed Consolidated Statements of Operations.

Certain leases include rent increases during the initial lease term. For these leases, the Company recognizes the related rental expense on a straight-line basis over the term of the lease (which includes any rent holidays and the pre-opening period of construction, renovation, fixturing and merchandise placement) and records the difference between the amounts charged to operations and amounts paid as a rent liability.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

The Company occasionally receives reimbursements from landlords to be used towards construction of the store the Company intends to lease. Leasehold improvements are recorded at their gross costs including items reimbursed by landlords. The reimbursements are amortized as a reduction of rent expense over the initial lease term. Tenant allowances of $25.6 million, $23.7 million and $23.0 million at November 3, 2007, February 3, 2007 and October 28, 2006, respectively, and deferred rent of $25.8 million, $22.3 million and $21.6 million at November 3, 2007, February 3, 2007 and October 28, 2006, respectively, are included in deferred rent and other long-term liabilities on the Condensed Consolidated Balance Sheets.

Goodwill and Other Intangibles
Under the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS No. 142”), goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. SFAS No. 142 also requires that intangible assets with finite lives be amortized over their respective lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”).

Intangible assets of the Company with indefinite lives are primarily goodwill and identifiable trademarks acquired in connection with the acquisition of Hat World Corporation on April 1, 2004 and Hat Shack, Inc. on January 11, 2007. The Company tests for impairment of intangible assets with an indefinite life, at a minimum on an annual basis, relying on a number of factors including operating results, business plans and projected future cash flows. The impairment test for identifiable assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying amount.

Identifiable intangible assets of the Company with finite lives are primarily in-place leases and customer lists. They are subject to amortization based upon their estimated useful lives. Finite-lived intangible assets are evaluated for impairment using a process similar to that used to evaluate other definite-lived long-lived assets, a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset.

Cost of Sales
For the Company’s retail operations, the cost of sales includes actual product cost, the cost of transportation to the Company’s warehouses from suppliers and the cost of transportation from the Company’s warehouses to the stores. Additionally, the cost of its distribution facilities allocated to its retail operations is included in cost of sales.

For the Company’s wholesale operations, the cost of sales includes the actual product cost and the cost of transportation to the Company’s warehouses from suppliers.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

Selling and Administrative Expenses
Selling and administrative expenses include all operating costs of the Company excluding (i) those related to the transportation of products from the supplier to the warehouse, (ii) for its retail operations, those related to the transportation of products from the warehouse to the store and (iii) costs of its distribution facilities which are allocated to its retail operations. Wholesale and unallocated retail costs of distribution are included in selling and administrative expenses in the amounts of $1.0 million and $1.2 million for the third quarter of Fiscal 2008 and Fiscal 2007, respectively, and $2.5 million and $2.6 million for the first nine months of Fiscal 2008 and 2007, respectively.

Gift Cards
The Company has a gift card program that began in calendar 1999 for its Hat World operations and calendar 2000 for its footwear operations. The gift cards issued to date do not expire. As such, the Company recognizes income when: (i) the gift card is redeemed by the customer; or (ii) the likelihood of the gift card being redeemed by the customer for the purchase of goods in the future is remote and there are no related escheat laws (referred to as “breakage”). The gift card breakage rate is based upon historical redemption patterns and income is recognized for unredeemed gift cards in proportion to those historical redemption patterns.

The Company recognized income of $0.6 million in the fourth quarter of Fiscal 2007 due to the Company’s belief that it had sufficient historical information to support the recognition of gift card breakage after a review of state escheat laws in which it operates. This initial recognition of gift card breakage was included as a reduction in restructuring and other, net on the Consolidated Statements of Operations. As of February 4, 2007, gift card breakage is recognized in revenues each period.

Buying, Merchandising and Occupancy Costs
The Company records buying, merchandising and occupancy costs in selling and administrative expense. Because the Company does not include these costs in cost of sales, the Company’s gross margin may not be comparable to other retailers that include these costs in the calculation of gross margin.

Shipping and Handling Costs
Shipping and handling costs related to inventory purchased from suppliers is included in the cost of inventory and is charged to cost of sales in the period that the inventory is sold. All other shipping and handling costs are charged to cost of sales in the period incurred except for wholesale and unallocated retail costs of distribution, which are included in selling and administrative expenses.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

Preopening Costs
Costs associated with the opening of new stores are expensed as incurred, and are included in selling and administrative expenses on the accompanying Condensed Consolidated Statements of Operations.

Store Closings and Exit Costs
From time to time, the Company makes strategic decisions to close stores or exit locations or activities. If stores or operating activities to be closed or exited constitute components, as defined by SFAS No. 144, and will not result in a migration of customers and cash flows, these closures will be considered discontinued operations when the related assets meet the criteria to be classified as held for sale, or at the cease-use date, whichever occurs first. The results of operations of discontinued operations are presented retroactively, net of tax, as a separate component on the Condensed Consolidated Statement of Operations, if material individually or cumulatively. To date, no store closings meeting the discontinued operations criteria have been material individually or cumulatively.

Assets related to planned store closures or other exit activities are reflected as assets held for sale and recorded at the lower of carrying value or fair value less costs to sell when the required criteria, as defined by SFAS No. 144, are satisfied. Depreciation ceases on the date that the held for sale criteria are met.

Assets related to planned store closures or other exit activities that do not meet the criteria to be classified as held for sale are evaluated for impairment in accordance with the Company’s normal impairment policy, but with consideration given to revised estimates of future cash flows. In any event, the remaining depreciable useful lives are evaluated and adjusted as necessary.

Exit costs related to anticipated lease termination costs, severance benefits and other expected charges are accrued for and recognized in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”

Advertising Costs
Advertising costs are predominantly expensed as incurred. Advertising costs were $8.8 million and $7.5 million for the third quarter of Fiscal 2008 and 2007, respectively, and $25.1 million and $22.9 million for the first nine months of Fiscal 2008 and 2007, respectively. Direct response advertising costs for catalogs are capitalized in accordance with the American Institute of Certified Public Accountants (“AICPA”) Statement of Position No. 93-7, “Reporting on Advertising Costs.” Such costs are amortized over the estimated future revenues realized from such advertising, not to exceed six months. The Condensed Consolidated Balance Sheets include prepaid assets for direct response advertising costs of $2.3 million, $1.1 million and $1.0 million at November 3, 2007, February 3, 2007 and October 28, 2006, respectively.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

Consideration to Resellers
The Company does not have any written buy-down programs with retailers, but the Company has provided certain retailers with markdown allowances for obsolete and slow moving products that are in the retailer’s inventory. The Company estimates these allowances and provides for them as reductions to revenues at the time revenues are recorded. Markdowns are negotiated with retailers and changes are made to the estimates as agreements are reached. Actual amounts for markdowns have not differed materially from estimates.

Cooperative Advertising
Cooperative advertising funds are made available to all of the Company’s wholesale customers. In order for retailers to receive reimbursement under such programs, the retailer must meet specified advertising guidelines and provide appropriate documentation of expenses to be reimbursed. The Company’s cooperative advertising agreements require that wholesale customers present documentation or other evidence of specific advertisements or display materials used for the Company’s products by submitting the actual print advertisements presented in catalogs, newspaper inserts or other advertising circulars, or by permitting physical inspection of displays. Additionally, the Company’s cooperative advertising agreements require that the amount of reimbursement requested for such advertising or materials be supported by invoices or other evidence of the actual costs incurred by the retailer. The Company accounts for these cooperative advertising costs as selling and administrative expenses, in accordance with Emerging Issues Task Force (“EITF”) Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).”

Cooperative advertising costs recognized in selling and administrative expenses were $1.1 million and $0.8 million for the third quarter of Fiscal 2008 and 2007, respectively, and $2.4 million and $1.9 million for the first nine months of Fiscal 2008 and 2007, respectively. During the first nine months of Fiscal 2008 and 2007, the Company’s cooperative advertising reimbursements paid did not exceed the fair value of the benefits received under those agreements.

Vendor Allowances
From time to time, the Company negotiates allowances from its vendors for markdowns taken or expected to be taken. These markdowns are typically negotiated on specific merchandise and for specific amounts. These specific allowances are recognized as a reduction in cost of sales in the period in which the markdowns are taken. Markdown allowances not attached to specific inventory on hand or already sold are applied to concurrent or future purchases from each respective vendor.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

The Company receives support from some of its vendors in the form of reimbursements for cooperative advertising and catalog costs for the launch and promotion of certain products. The reimbursements are agreed upon with vendors and represent specific, incremental, identifiable costs incurred by the Company in selling the vendor’s products. Such costs and the related reimbursements are accumulated and monitored on an individual vendor basis, pursuant to the respective cooperative advertising agreements with vendors. Such cooperative advertising reimbursements are recorded as a reduction of selling and administrative expenses in the same period in which the associated expense is incurred. If the amount of cash consideration received exceeds the costs being reimbursed, such excess amount would be recorded as a reduction of cost of sales.

Vendor reimbursements of cooperative advertising costs recognized as a reduction of selling and administrative expenses were $0.2 million for the third quarter of each of Fiscal 2008 and 2007 and $2.6 million and $2.5 million for the first nine months of Fiscal 2008 and 2007, respectively. During the first nine months of Fiscal 2008 and 2007, the Company’s cooperative advertising reimbursements received were not in excess of the costs reimbursed.

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.

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 8).

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

Other Comprehensive Income
SFAS No. 130, “Reporting Comprehensive Income,” requires, among other things, the Company’s pension liability adjustment, unrealized gains or losses on foreign currency forward contracts and foreign currency translation adjustments to be included in other comprehensive income net of tax. The cumulative adjustment to adopt SFAS No. 158 is also included in accumulated other comprehensive loss net of tax. Accumulated other comprehensive loss at November 3, 2007 consisted of $20.8 million of cumulative pension liability adjustments, net of tax and a $0.8 million cumulative adjustment to adopt SFAS No. 158, net of tax, offset by cumulative net gains of $0.4 million on foreign currency forward contracts, net of tax, and a foreign currency translation adjustment of $0.8 million.

Business Segments
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” requires that companies disclose “operating segments” based on the way management disaggregates the Company’s operations for making internal operating decisions (see Note 11).

Derivative Instruments and Hedging Activities
SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of SFAS No. 133,” SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities” and SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” (collectively “SFAS No. 133”) require 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 are recorded each period in current earnings or in other comprehensive income depending on the intended use of the derivative and the resulting designation.

New Accounting Principles
In March 2006, the EITF reached a consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, gross versus net presentation),” (“EITF No. 06-3”) which allows companies to adopt a policy of presenting taxes in the income statement on either a gross or net basis. Taxes within the scope of EITF No. 06-3 would include taxes that are imposed on a revenue transaction between a seller and a customer, for example, sales taxes, use taxes, value-added taxes and some types of excise taxes. EITF No. 06-3 was adopted effective February 4, 2007. EITF No. 06-3 did not impact the method for recording and reporting these sales taxes in the Company’s Consolidated Financial Statements for the three and nine months ended November 3, 2007 and will have no impact in future periods as the Company’s policy is to exclude all such taxes from revenue.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies, Continued

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 (fiscal year 2009 for the Company), and interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of SFAS No. 157 will have, if any, on its results of operations and financial position.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 allows companies to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 (fiscal year 2009 for the Company). The Company is currently evaluating the impact that the adoption of SFAS No. 159 will have, if any, on its results of operations and financial position.

Note 2
Acquisitions

Hat Shack Acquisition
On January 11, 2007, Hat World acquired 100% of the outstanding stock of Hat Shack, Inc. for a purchase price of $16.6 million plus debt assumed of $2.2 million funded from cash on hand. As of January 11, 2007, there were 49 Hat Shack retail headwear stores located primarily in the southeastern United States. The Company allocated $11.4 million of the purchase price to goodwill and $3.7 million to tradenames. The goodwill related to the Hat Shack acquisition is not deductible for tax purposes.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 3
Restructuring and Other Charges and Discontinued Operations

Restructuring and Other Charges

In accordance with Company policy, assets are determined to be impaired when the revised estimated future cash flows are insufficient to recover the carrying costs. Impairment charges represent the excess of the carrying value over the fair value of those assets.

Asset impairment charges are reflected as a reduction of the net carrying value of property and equipment, and in restructuring and other, net in the accompanying Condensed Consolidated Statements of Operations.

The Company recorded a pretax charge to earnings of $0.1 million in the third quarter of Fiscal 2008. The charge was primarily for retail store asset impairments. The Company recorded a pretax charge to earnings of $6.8 million ($4.1 million net of tax) in the first nine months of Fiscal 2008. The charge included $6.8 million of charges for retail store asset impairments, primarily in the Underground Station Group, and $0.3 million for the lease termination of one Hat World store, offset by a $0.2 million excise tax refund. The asset impairments, primarily in Underground Station stores, reflected deterioration in the urban footwear market. In addition, in May of 2007, the Company announced a plan to close or convert up to 57 underperforming urban stores, including 49 Underground Station Group stores and eight Hat World stores. See “Forward-Looking Statements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Company recorded a pretax charge to earnings of $1.1 million ($0.7 million net of tax) and $1.7 million ($1.0 million net of tax) in the third quarter and first nine months, respectively, of Fiscal 2007, primarily for retail store asset impairments and the lease termination of one Jarman store.

Discontinued Operations

Accrued Provision for Discontinued Operations

		Facility
		Shutdown
In thousands		Costs				Other				Total
Balance January 28, 2006		$	5,710			$	3			$	5,713
Additional provision Fiscal 2007			988				-0-				988
Charges and adjustments, net			(633	)			(3	)			(636	)
Balance February 3, 2007			6,065				-0-				6,065
Additional provision Fiscal 2008			2,028				-0-				2,028
Charges and adjustments, net			(965	)			-0-				(965	)
Balance November 3, 2007*			7,128				-0-				7,128
Current provision for discontinued operations			5,373				-0-				5,373
Total Noncurrent Provision for Discontinued Operations		$	1,755			$	-0-			$	1,755

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 4
Inventories

		November 3,				February 3,
In thousands		2007				2007
Raw materials		$	186			$	212
Wholesale finished goods			31,920				29,272
Retail merchandise			363,859				231,553
Total Inventories		$	395,965			$	261,037

Note 5
Derivative Instruments and Hedging Activities

In order to reduce exposure to foreign currency exchange rate fluctuations in connection with inventory purchase commitments for its Johnston & Murphy Group (primarily the Euro), the Company enters into foreign currency forward exchange contracts with a maximum hedging period of twelve months. Derivative instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged. The settlement terms of the forward contracts correspond with the payment terms for the merchandise inventories. As a result, there is no hedge ineffectiveness to be reflected in earnings. The notional amount of such contracts outstanding at November 3, 2007 and February 3, 2007 was $3.0 million and $8.0 million, respectively. Forward exchange contracts have an average remaining term of approximately two months. The gain based on spot rates under these contracts at November 3, 2007 was $0.1 million and the loss based on spot rates under these contracts at February 3, 2007 was $4,000. For the nine months ended November 3, 2007 and October 28, 2006, the Company recorded an unrealized gain on foreign currency forward contracts of $0.2 million and $1.4 million, respectively, in accumulated other comprehensive loss, before taxes. The Company monitors the credit quality of the major national and regional financial institutions with which it enters into such contracts.

The Company estimates that the majority of net hedging gains related to forward exchange contracts will be reclassified from accumulated other comprehensive loss into earnings through lower cost of sales over the succeeding year.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 6
Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued FIN 48. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” This Interpretation prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. FIN 48 is effective in fiscal years beginning after December 15, 2006.

Effective February 4, 2007, the Company adopted the provisions of FIN 48. As a result of the adoption of FIN 48, the Company recognized a $4.3 million increase in the liability for unrecognized tax benefits which, as required, was accounted for as a reduction to the February 4, 2007 balance of retained earnings. In addition, the following information required by FIN 48 is provided:

	•		Unrecognized tax benefits were approximately $4.6 million and $8.2 million as of November 3, 2007 and February 4, 2007, respectively. Included in the unrecognized tax benefit balance was $4.6 million of tax positions on both November 3, 2007 and August 4, 2007 which if recognized would impact the annual effective tax rate. The change in the unrecognized tax benefit balance from February 4, 2007 to November 3, 2007, was due to the resolution of a state audit and the IRS approving the Company’s filing of an application for change in accounting method. Upon approval, the Company reclassed approximately $3.4 million between unrecognized tax benefits and deferred taxes. In addition, the Company settled a state audit. While it is expected that the amount of unrecognized tax benefits will change in the next 12 months, we do not expect the change to have a significant impact on the results of operations or the financial position of the Company.
	•		The Company recognizes interest expense and penalties related to the above unrecognized tax benefits within income tax expense. The Company had accrued interest and penalties of approximately $1.2 million and $0.7 million, respectively, as of November 3, 2007 and approximately $1.1 million and $0.7 million, respectively, as of August 4, 2007. The approved change in accounting method described above resulted in an approximately $0.6 million decrease in accrued interest.
	•		The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, many state jurisdictions and foreign jurisdictions. With a few exceptions, the Company’s U.S. Federal and State and Local income tax returns for tax years 2004 and beyond remain subject to examination. In addition, the Company has subsidiaries in various foreign jurisdictions that have statutes of limitation generally ranging from 3 to 6 years.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 6
Accounting for Uncertainty in Income Taxes, Continued

The provision for income taxes resulted in an effective tax rate for continuing operations of 42.5% for the first nine months ended November 3, 2007, compared with an effective tax rate of 39.7% for the first nine months ended October 28, 2006. The increase in the effective tax rate for the first nine months of fiscal year 2008 was primarily attributable to non-deductible expenses incurred in connection with the proposed merger with a subsidiary of The Finish Line, Inc. and the related pending litigation and the accounting for uncertain tax positions (FIN 48).

Note 7
Defined Benefit Pension Plans and Other Benefit Plans

Components of Net Periodic Benefit Cost

		Pension Benefits								Other Benefits
		Three Months Ended								Three Months Ended
		November 3,				October 28,				November 3,				October 28,
In thousands		2007				2006				2007				2006
Service cost		$	62			$	63			$	57			$	54
Interest cost			1,612				1,605				52				50
Expected return on plan assets			(2,006	)			(1,944	)			-0-				-0-
Amortization:
Prior service cost			2				-0-				-0-				-0-
Losses			1,171				1,105				18				22
Net amortization			1,173				1,105				18				22
Net Periodic Benefit Cost		$	841			$	829			$	127			$	126

		Pension Benefits								Other Benefits
		Nine Months Ended								Nine Months Ended
		November 3,				October 28,				November 3,				October 28,
In thousands		2007				2006				2007				2006
Service cost		$	187			$	189			$	171			$	162
Interest cost			4,839				4,818				156				150
Expected return on plan assets			(6,018	)			(5,836	)			-0-				-0-
Amortization:
Prior service cost			6				-0-				-0-				-0-
Losses			3,247				3,375				54				66
Net amortization			3,253				3,375				54				66
Net Periodic Benefit Cost		$	2,261			$	2,546			$	381			$	378

While there was no cash requirement for the Plan in 2007, the Company made a $4.0 million contribution to the Plan in March 2007.

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 8
Earnings Per Share

		For the Three Months Ended												For the Three Months Ended
		November 3, 2007												October 28, 2006
(In thousands, except		Income				Shares				Per-Share				Income				Shares				Per-Share
per share amounts)		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Earnings from continuing operations		$	5,610											$	15,975
Less: Preferred stock dividends			(49	)											(64	)
Basic EPS
Income available to common shareholders			5,561				22,454			$	.25				15,911				22,284			$	.71
Effect of Dilutive Securities
Options							509												315
Convertible preferred stock(1)			-0-				-0-								42				67
4 1/8% Convertible Subordinated Debentures			604				3,898								604				3,899
Employees’ preferred stock(2)							57												59
Diluted EPS
Income available to common shareholders plus assumed conversions		$	6,165				26,918			$	.23			$	16,557				26,624			$	.62

(1)		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 three months ended November 3, 2007. 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 27,936, 26,008 and 5,440, respectively. The amount of the dividends on the Series 1 and 3 convertible preferred stock per common share obtainable on conversion of the convertible preferred stock is less than basic earnings per share for the three months ended October 28, 2006. Therefore, conversion of these preferred shares was included in diluted earnings per share. The amount of the dividend on the Series 4 convertible preferred stock per common share obtainable on conversion of the convertible preferred stock is higher than basic earnings per share for the three months ended October 28, 2006. Therefore, conversion of the Series 4 preferred stock is not reflected in diluted earnings per share, because it would have been antidilutive.
(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.

Genesco Inc.
and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 8
Earnings Per Share, Continued

		For the Nine Months Ended												For the Nine Months Ended
		November 3, 2007												October 28, 2006
(In thousands, except		Income				Shares				Per-Share				Income				Shares				Per-Share
per share amounts)		(Numerator)				(Denominator)				Amount				(Numerator)				(Denominator)				Amount
Earnings from continuing operations		$	4,873											$	32,585
Less: Preferred stock dividends			(167	)											(192	)
Basic EPS
Income available to common shareholders			4,706				22,420			$	.21				32,393				22,771			$	1.42
Effect of Dilutive Securities
Options							516												381
Convertible preferred stock(1)			-0-				-0-								-0-				-0-
4 1/8% Convertible Subordinated Debentures(2)			-0-				-0-								1,811				3,899
Employees’ preferred stock(3)							58												60
Diluted EPS
Income available to common shareholders plus assumed conversions		$	4,706				22,994			$	.20				$34,204				27,111			$	1.26

(1)		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 all periods presented. 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 27,936, 26,008 and 5,440, respectively.
(2)		The amount of the interest on the convertible subordinated debentures for the nine months ended November 3, 2007 per common share obtainable on conversion is higher than basic earnings per share, therefore the convertible debentures are not reflected in diluted earnings per share because it is antidilutive.
(3)		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 weighted shares outstanding reflects the effect of stock buy back programs. In a series of authorizations from Fiscal 1999-2003, the Company’s board of directors authorized the repurchase of up to 7.5 million shares. In June 2006, the board authorized an additional $20.0 million in stock repurchases. In August 2006, the board authorized an additional $30.0 million in stock repurchases. The Company repurchased 1,062,400 shares at a cost of $32.1 million during Fiscal 2007. The Company did not repurchase any shares during the nine months ended November 3, 2007. The agreement and plan of merger entered into in connection with the Proposed Merger generally prohibits further repurchases of stock. In total, the Company has repurchased 8.2 million shares at a cost of $103.4 million from all authorizations from Fiscal 1999 to November 3, 2007.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 9
Proposed Merger Agreement

The Company announced in June 2007 that the boards of directors of both Genesco and Finish Line had unanimously approved a definitive merger agreement under which The Finish Line would acquire all of the outstanding common shares of Genesco at $54.50 per share in cash (the “Proposed Merger”). The Proposed Merger is currently the subject of pending litigation as described in Note 10. During the third quarter and nine months ended November 3, 2007, the Company expensed $6.1 million and $11.6 million, respectively, related to the Proposed Merger and pending litigation.

Note 10
Legal Proceedings

Environmental Matters
New York State Environmental Matters
In August 1997, the New York State Department of Environmental Conservation (“NYSDEC”) 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 (“IRM”) with regard to the site of a knitting mill operated by a former subsidiary of the Company from 1965 to 1969. The Company undertook the IRM and RIFS voluntarily, without admitting liability or accepting responsibility for any future remediation of the site. The Company has concluded the IRM and the RIFS. In the course of preparing the RIFS, the Company identified remedial alternatives with estimated undiscounted costs ranging from $-0- to $24.0 million, excluding amounts previously expended or provided for by the Company, as described in this footnote. The United States Environmental Protection Agency (“EPA”), which has assumed primary regulatory responsibility for the site from NYSDEC, issued a Record of Decision in September, 2007. The Record of Decision requires a remedy of a combination of groundwater extraction and treatment and in-site chemical oxidation at an estimated present worth cost of approximately $10.7 million.

The Village of Garden City, New York, has asserted that the Company is liable for the costs associated with enhanced treatment required by the impact of the groundwater plume from the site on two public water supply wells, including historical costs ranging from approximately $1.8 million to in excess of $2.5 million, and future operation and maintenance costs which the Village estimates at $126,400 annually while the enhanced treatment continues. The Village has threatened to sue the Company to recover its historic costs and to establish the Company’s liability for remediation of the site and for future costs that may be incurred by the Village in connection with it. The Company has not verified the estimates of either historic or future costs asserted by the Village. There can be no assurance that the Village or others will not assert claims for additional amounts which could be material to the Company.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 10
Legal Proceedings, Continued

Because of uncertainty about when the contamination occurred, the short duration of the Company’s operations at the site, and the activities of at least one unrelated business operation at the site, among other reasons, 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 the extent of its liability, if any. The Company’s voluntary assumption of certain responsibility to date was based upon its judgment that such action was preferable to litigation to determine its liability, if any for contamination related to the site. The Company intends to continue to evaluate the costs of further voluntary remediation and compromise of the claims asserted by the Village of Garden City compared to the costs and uncertainty of litigation.

In December 2005, the EPA notified the Company that it considers the Company a potentially responsible party (“PRP”) with respect to contamination at two Superfund sites in upstate New York. The sites were used as landfills for process wastes generated by a glue manufacturer, which acquired tannery wastes from several tanners, allegedly including the Company’s Whitehall tannery, for use as raw materials in the gluemaking process. The Company has no records indicating that it ever provided raw materials to the gluemaking operation and has not been able to establish whether EPA’s substantive allegations are accurate. The Company, together with other tannery PRP’s, has entered into cost sharing agreements with respect to both sites and a Consent Decree with EPA for one of the sites. Based upon the current estimates of the cost of remediation, the Company’s share is expected to be less than $150,000 in total for the two sites. While there is no assurance that the Company’s share of the actual cost of remediation will not exceed the estimate, the Company does not presently expect that its aggregate exposure with respect to these two landfill sites will have a material adverse effect on its financial condition or results of operations.

Whitehall Environmental Matters
The Company has performed sampling and analysis of soil, sediments, surface water, groundwater and waste management areas at the Company’s former Volunteer Leather Company facility in Whitehall, Michigan.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 10
Legal Proceedings, Continued

The Company has submitted to the Michigan Department of Environmental Quality (“MDEQ”) and provided for certain costs associated with a remedial action plan (the “Plan”) designed to bring the property into compliance with regulatory standards for non-industrial uses and has subsequently engaged in negotiations regarding the scope of the Plan. The Company estimates that the costs of resolving environmental contingencies related to the Whitehall property range from $4.4 million to $4.9 million, and considers the cost of implementing the Plan, as it is modified in the course of negotiations with MDEQ, to be the most likely cost within that range. Until the Plan is finally approved by MDEQ, management cannot provide assurances that no further remediation will be required or that its estimate of the range of possible costs or of the most likely cost of remediation will prove accurate.

Accrual for Environmental Contingences
Related to all outstanding environmental contingencies, the Company had accrued $7.4 million as of November 3, 2007, $5.8 million as of February 3, 2007 and $5.7 million as of October 28, 2006. All such provisions reflect the Company’s estimates of the most likely cost (undiscounted, including both current and noncurrent portions) of resolving the contingencies, based on facts and circumstances as of the time they were made. There is no assurance that relevant facts and circumstances will not change, necessitating future changes to the provisions. Such contingent liabilities are included in the liability arising from provision for discontinued operations on the accompanying Condensed Consolidated Balance Sheets.

Merger-Related Litigation
Genesco Inc. v. The Finish Line, et al.
On September 21, 2007, the Company filed suit against The Finish Line, Inc. in Chancery Court in Nashville, Tennessee seeking a court order requiring The Finish Line to consummate the merger with the Company. On September 28, 2007, The Finish Line filed an answer and counterclaim for declaratory judgment of whether a “Company Material Adverse Effect” has occurred under the merger agreement. The Finish Line also filed a third-party claim against UBS Securities LLC and UBS Finance LLC (collectively, “UBS”) who provided The Finish Line with a commitment letter with respect to the financing for the merger transaction. On October 10, 2007, The Finish Line voluntarily dismissed its claims against UBS, and UBS filed a Motion to Intervene as a defendant in the case and an answer to the Company’s complaint. On November 13, 2007, the Company amended its complaint to add an alternative claim for damages. On November 15, 2007, The Finish Line filed an answer to the amended complaint asserting that a Company Material Adverse Effect has occurred under the merger agreement and asserting a counterclaim against the Company for intentional or negligent misrepresentation. On that same day, UBS filed an answer to the amended complaint and a counterclaim asserting fraud against the Company. On November 27, 2007, the Company filed a motion to dismiss the defendants’ counterclaims. A trial began on December 10, 2007.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 10
Legal Proceedings, Continued

UBS Securities LLC and UBS Loan Finance LLC v. Genesco Inc., et al.
On November 15, 2007, the Company was named as a defendant, along with The Finish Line, in a complaint for declaratory relief filed by UBS in the United States District Court for the Southern District of New York. UBS is seeking a declaration in that action that its commitment to provide The Finish Line with financing for the merger transaction is void and/or may be properly terminated by UBS because The Finish Line will not be able to provide, prior to the expiration of the financing commitment on April 30, 2008, a valid solvency certificate attesting to the solvency of the combined entities resulting from the merger, which certificate is a condition precedent to the closing of the financing. The Company’s deadline for responding to the complaint is January 14, 2008.

Investigation by the Office of the U.S. Attorney for the Southern District of New York
On November 21, 2007, the Company received a grand jury subpoena from the Office of the U.S. Attorney for the Southern District of New York for documents relating to the Company’s negotiations and merger agreement with The Finish Line. The subpoena states that the documents are sought in connection with alleged violations of federal fraud statutes. The Company is cooperating fully with the U.S. Attorney’s Office and producing documents pursuant to the subpoena. The Finish Line has notified the Company that it believes the investigation constitutes a material breach of the merger agreement and a Company Material Adverse Effect.

The Company does not believe that it is feasible at this time to predict the outcome of the litigation and investigation described above. The Company does believe, however, that it has meritorious defenses and will defend itself vigorously against any claims against it.

Roeglin v. Genesco Inc., et al.
On December 5, 2007, a class action complaint alleging violations of the federal securities laws on behalf of all purchasers of the Company’s common stock between April 20, 2007 and November 26, 2007 was filed against the Company and four of its officers in the U.S. District Court for the Middle District of Tennessee. The complaint alleges that the defendants violated federal securities laws by making false and misleading statements about the Company’s business during that period. It seeks unspecified damages and interest, costs and attorneys’ fees and other relief. The Company does not believe there is any merit to the allegations and intends to defend these claims vigorously.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 10
Legal Proceedings, Continued

Phillips v. Genesco Inc., et al.
On April 24, 2007, a putative class action, Maxine Phillips, on Behalf of Herself and All Others Similarly Situated vs. Genesco Inc., et al., was filed in the Tennessee Chancery Court in Nashville. The complaint alleges, among other things, that the individual defendants (officers and directors of the Company) refused to consider properly the proposal by Foot Locker, Inc. to acquire the Company. The complaint seeks class certification, a declaration that defendants have breached their fiduciary and other duties, an order requiring defendants to implement a process to obtain the highest possible price for shareholders’ shares, and an award of costs and attorney’s fees. The defendants have not filed a response to the complaint as of the date of this report. Following the execution of the merger agreement with The Finish Line, Inc., plaintiff’s counsel indicated that plaintiff intended to file an amended complaint alleging breach of fiduciary duties by the individual defendants in connection with the board of directors’ approval of the merger agreement and the disclosures made in the preliminary proxy statement related to the merger and seeking injunctive relief. The Company and the individual defendants reached an agreement with plaintiff under which the Company agreed to include certain additional disclosures in its definitive proxy statement related to the merger which was filed on August 13, 2007. The parties executed a Memorandum of Understanding to formalize the settlement on September 10, 2007. Under the terms of the Memorandum, the Company would pay $450,000 in attorneys’ fees and expenses if the settlement and payment of fees are approved by the Court and certain other conditions, including the consummation of the merger with The Finish Line, occur.

The Company is also aware of one or more additional class action suits that have been brought alleging violations of the federal securities laws on behalf of all purchasers of the Company’s common stock between April 20, 2007 and November 26, 2007; however, the Company has not seen a complaint with respect to any of these proceedings. Although the Company has not received a copy of any complaint, it does not believe there is any merit to the allegations and intends to defend these claims vigorously.

California Employment Matter
On November 4, 2005, a former employee gave notice to the California Labor Work Force Development Agency (“LWDA”) of a claim against the Company for allegedly failing to provide a payroll check that is negotiable and payable in cash, on demand, without discount, at an established place of business in California, as required by the California Labor Code. On May 18, 2006, the same claimant filed a putative class, representative and private attorney general action alleging the same violations of the Labor Code in the Superior Court of California, Alameda County, seeking statutory penalties, damages, restitution, and injunctive relief. The Company disputes the material allegations of the complaint and will continue to defend the matter vigorously.

Patent Action
The Company is named as a defendant in Paul Ware and Financial Systems Innovation, L.L.C. v. Abercrombie & Fitch Stores, Inc., et al., filed on June 19, 2007, in the United States District Court for the Northern District of Georgia, against more than 100 retailers. The suit alleges that the defendants have infringed U.S. Patent No. 4,707,592 by using a feature of their retail point of sale registers to generate transaction numbers for credit card purchases. The complaint seeks treble damages in an unspecified amount and attorneys’ fees. The Company has filed an answer denying the substantive allegations in the complaint and asserting certain affirmative defenses.

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 11
Business Segment Information

The Company operates five reportable business segments (not including corporate): Journeys Group, comprised of the Journeys, Journeys Kidz and Shi by Journeys retail footwear chains, catalog and e-commerce operations; Underground Station Group, comprised of the Underground Station and Jarman retail footwear chains and e-commerce operations; Hat World Group, comprised of the Hat World, Lids, Hat Shack, Hat Zone, Head Quarters, Cap Connection and Lids Kids retail headwear chains and e-commerce operations; Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, catalog and e-commerce operations and wholesale distribution; and Licensed Brands, comprised primarily of Dockers^® Footwear.

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 the way management organizes the segments in order to make operating decisions and assess performance along types of products sold. Journeys Group, Underground Station Group and Hat World Group sell primarily branded products from other companies while Johnston & Murphy Group and Licensed Brands sell primarily the Company’s owned and licensed brands.

Corporate assets include cash, deferred income taxes, deferred note expense and corporate fixed assets. The Company charges allocated retail costs of distribution to each segment and unallocated retail costs of distribution to the corporate segment. The Company does not allocate certain costs to each segment in order to make decisions and assess performance. These costs include corporate overhead, stock compensation, interest expense, interest income, restructuring charges and other, including litigation.

Three Months Ended						Underground								Johnston
November 3, 2007		Journeys				Station				Hat World				& Murphy				Licensed				Corporate
In thousands		Group				Group				Group				Group				Brands				& Other				Consolidated
Sales		$	182,587			$	26,792			$	87,815			$	46,403			$	28,817			$	130			$	372,544
Intercompany sales			-0-				-0-				-0-				-0-				(48	)			-0-				(48	)
Net sales to external customers		$	182,587			$	26,792			$	87,815			$	46,403			$	28,769			$	130			$	372,496
Segment operating income (loss)		$	15,336			$	(2,930	)		$	4,639			$	4,377			$	4,019			$	(11,584	)		$	13,857
Restructuring and other			-0-				-0-				-0-				-0-				-0-				(56	)			(56	)
Earnings (loss) from operations			15,336				(2,930	)			4,639				4,377				4,019				(11,640	)			13,801
Interest expense			-0-				-0-				-0-				-0-				-0-				(3,544	)			(3,544	)
Interest income			-0-				-0-				-0-				-0-				-0-				40				40
Earnings (loss) before income taxes from continuing operations		$	15,336			$	(2,930	)		$	4,639			$	4,377			$	4,019			$	(15,144	)		$	10,297
Total assets		$	307,097			$	56,272			$	334,403			$	75,442			$	31,763			$	112,441			$	917,418
Depreciation			4,859				954				3,383				840				20				1,322				11,378
Capital expenditures			13,909				410				8,355				1,493				181				1,371				25,719

Genesco Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 11
Business Segment Information, Continued

Three Months Ended						Underground								Johnston
October 28, 2006		Journeys				Station				Hat World				& Murphy				Licensed				Corporate
In thousands		Group				Group				Group				Group				Brands				& Other				Consolidated
Sales		$	184,391			$	34,981			$	77,503			$	44,467			$	22,905			$	112			$	364,359
Intercompany sales			-0-				-0-				-0-				-0-				(61	)			-0-				(61	)
Net sales to external customers		$	184,391			$	34,981			$	77,503			$	44,467			$	22,844			$	112			$	364,298
Segment operating income (loss)		$	25,260			$	(631	)		$	7,710			$	3,193			$	2,326			$	(7,396	)		$	30,462
Restructuring and other			-0-				-0-				-0-				-0-				-0-				(1,083	)			(1,083	)
Earnings (loss) from operations			25,260				(631	)			7,710				3,193				2,326				(8,479	)			29,379
Interest expense			-0-				-0-				-0-				-0-				-0-				(2,964	)			(2,964	)
Interest income			-0-				-0-				-0-				-0-				-0-				16				16
Earnings (loss) before income taxes from continuing operations		$	25,260			$	(631	)		$	7,710			$	3,193			$	2,326			$	(11,427	)		$	26,431
Total assets		$	243,565			$	68,806			$	287,191			$	68,997			$	27,118			$	96,878			$	792,555
Depreciation			4,133				1,160				2,640				730				16				1,433				10,112
Capital expenditures			9,549				1,057				6,953				2,556				12				1,019				21,146