Business Context and Reporting Period
Genesco Inc. filed this Form 8-K on September 12, 2013, to announce a material accounting error regarding the treatment of bonus awards under its EVA Incentive Plan. The error affected the consolidated financial statements for fiscal years 2011, 2012, and 2013, as well as the first quarter ended May 4, 2013. The company determined that bonuses retained and paid over three years should have been expensed over the service period rather than fully in the year determined.
Key Financial Metrics and Adjustments
The filing details adjustments to previously reported earnings from operations and diluted net earnings per share. The correction resulted in a decrease in total assets and total liabilities for the affected periods.
| Period | Adj. to Earnings from Ops ($000s) | % Change | Adj. to Diluted EPS | % Change | Adj. to Total Assets ($000s) | Adj. to Total Liabilities ($000s) |
|---|---|---|---|---|---|---|
| Fiscal Year 2013 | $1,893 | 1.1% | $0.08 | 1.7% | ($7,717) | ($20,986) |
| Fiscal Year 2012 | $17,615 | 12.2% | $0.36 | 10.5% | ($7,504) | ($18,874) |
| Fiscal Year 2011 | $1,145 | 1.3% | ($0.02) | (0.9)% | N/A | ($14,442) |
| Q1 Ended May 4, 2013 | ($6,544) | (20.3)% | ($0.16) | (20.8)% | ($5,145) | ($20,089) |
| Q1 Ended April 28, 2012 | $996 | 2.8% | $0.02 | 2.4% | ($7,756) | N/A |
Note: The filing does not provide absolute revenue, cash flow, or margin figures, only the adjustments to earnings and balance sheet items.
Material Changes and Restatements
- Non-Reliance: Investors should no longer rely on the Form 10-K for fiscal year 2013, the Form 10-Q for the quarter ended May 4, 2013, or the audit reports by Ernst & Young LLP dated April 3, 2013.
- Restatement Plan: The company will restate financial statements for fiscal years 2011, 2012, and 2013 via an amendment to the 2013 Form 10-K. The Form 10-Q for the quarter ended May 4, 2013, will also be amended.
- Current Period: The Form 10-Q for the quarter ended August 3, 2013, filed concurrently, reflects the corrected accounting treatment.
Outlook, Risks, and Internal Controls
The Audit Committee concluded that a material weakness in internal controls over financial reporting existed as of May 4, 2013, and February 2, 2013, related to the accounting process for retained bonuses. Management has corrected the accounting treatment and implemented new controls to remediate the weakness, with ongoing testing planned for future periods. The company anticipates filing the necessary amendments by September 24, 2013. The filing includes standard forward-looking statement disclaimers regarding potential negative effects on earnings.
Investor Verification Checklist
- Verify the filing of amended Form 10-K (2013) and Form 10-Q (Q1 2013) by September 24, 2013.
- Review the restated financial statements to confirm the impact on total assets and liabilities.
- Assess the effectiveness of the new internal controls implemented to address the material weakness.
- Confirm that press releases and prior audit reports for the affected periods are no longer valid.