SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the third twelve week accounting period ended September 6, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-6024
WOLVERINE WORLD WIDE, INC.
(Exact Name of Registrant as Specified in its Charter)
|
Delaware |
|
38-1185150 |
|
(State or Other Jurisdiction of Incorporation or Organization) |
|
(IRS Employer Identification No.) |
|
|
|
|
|
|
|
|
|
9341 Courtland Drive, Rockford, Michigan |
|
49351 |
|
(Address of Principal Executive Offices) |
|
(Zip Code) |
|
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(616) 866-5500 |
|
|
|
(Registrant's Telephone Number, Including Area Code) |
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 X No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.
There were 46,565,784 shares of Common Stock, $1 par value, outstanding as of October 7, 2003, of which 6,439,820 shares are held as Treasury Stock.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the footwear business, worldwide economics and the Company itself including, without limitation, statements in Part 1, Item 2 regarding the Company's financial condition, liquidity and capital resources and statements in Part 1, Item 3 regarding market risk. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "should," "will," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Risk Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forwar d-looking statements.
Risk Factors include, but are not limited to, uncertainties relating to changes in demand for the Company's products; changes in consumer preferences or spending patterns; the cost and availability of inventories, services, labor and equipment furnished to the Company; the cost and availability of contract manufacturers; the cost and availability of raw materials, including leather; the impact of competition and pricing by the Company's competitors; changes in government and regulatory policies; foreign currency fluctuations; changes in trading policies or import and export regulations; changes in interest rates, tax laws, duties, tariffs, quotas or applicable assessments; technological developments; changes in local, domestic or international economic and market conditions; the size and growth of footwear markets; service interruptions at shipping and receiving ports; changes in the amount or severity of inclement weather; changes due to the growth of Internet commerce; popularity of particular designs a nd categories of footwear; the ability of the Company to manage and forecast its growth and inventories; the ability to secure and protect trademarks, patents and other intellectual property; integration and operation of newly acquired businesses; changes in business strategy or development plans; the ability to attract and retain qualified personnel; labor strikes or disruptions; the ability to retain rights to brands licensed by the Company; loss, bankruptcy and credit limitations of significant customers; relationships with international distributors and licensees; the Company's ability to meet at-once orders; the exercise of future purchase options by the U.S. Department of Defense on previously awarded contracts; the risk of doing business in developing countries and economically volatile areas; and domestic and international terrorism and war. Additionally, concern regarding acts of terrorism, the war in Iraq and subsequent events have created significant global economic and political uncertanties that may have material and adverse effects on consumer demand, foreign sourcing of footwear, shipping and transportation, product imports and exports and the sale of products in foreign markets. These Risk Factors could have a material adverse impact on the Company's financial condition and results of operations as well as the footwear and retail industries generally. These matters are representative of the Risk Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement. Historical operating results are not necessarily indicative of the results that may be expected in the future. The Risk Factors included here are not exhaustive. Other Risk Factors exist, and new Risk Factors emerge from time-to-time, that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Furthermore, the Co mpany undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of dollars)
|
September 6, |
|
December 28, |
|
September 7, |
|||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
18,274 |
|
$ |
27,078 |
|
$ |
10,634 |
|
Accounts receivable, less allowances |
|
|
|
|
|
|
|
|
|
September 6, 2003 - $10,806 |
|
|
|
|
|
|
|
|
|
December 28, 2002 - $10,191 |
|
|
|
|
|
|
|
|
|
September 7, 2002 - $10,607 |
|
191,366 |
|
|
156,285 |
|
|
190,962 |
|
Inventories: |
|
|
|
|
|
|
|
|
|
Finished products |
|
161,252 |
|
|
146,229 |
|
|
169,237 |
|
Raw materials and work in process |
|
19,706 |
|
|
22,769 |
|
|
19,600 |
|
|
180,958 |
|
|
168,998 |
|
|
188,837 |
|
Other current assets |
|
12,571 |
|
|
10,984 |
|
|
9,506 |
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS |
|
403,169 |
|
|
363,345 |
|
|
399,939 |
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT & EQUIPMENT |
|
|
|
|
|
|
|
|
|
Gross cost |
|
233,087 |
|
|
225,974 |
|
|
222,720 |
|
Less accumulated depreciation |
|
137,425 |
|
|
128,700 |
|
|
125,828 |
|
|
95,662 |
|
|
97,274 |
|
|
96,892 |
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
|
Goodwill and other non-amortizable intangibles |
|
30,504 |
|
|
30,706 |
|
|
28,737 |
|
Other |
|
41,261 |
|
|
40,669 |
|
|
57,713 |
|
|
71,765 |
|
|
71,375 |
|
|
86,450 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
$ |
570,596 |
|
$ |
531,994 |
|
$ |
583,281 |
See notes to consolidated condensed financial statements.
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS - Continued
(Thousands of dollars, except share data)
|
September 6, |
|
December 28, |
|
September 7, |
|
|||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Accounts payable and other accrued liabilities |
$ |
84,759 |
|
$ |
65,147 |
|
$ |
79,523 |
|
|
Current maturities of long-term debt |
|
15,030 |
|
|
15,030 |
|
|
15,030 |
|
|
TOTAL CURRENT LIABILITIES |
|
99,789 |
|
|
80,177 |
|
|
94,553 |
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT (less current maturities) |
|
53,603 |
|
|
57,885 |
|
|
87,537 |
|
|
OTHER NONCURRENT LIABILITIES |
|
21,915 |
|
|
24,692 |
|
|
16,796 |
|
|
MINORITY INTEREST |
|
290 |
|
|
143 |
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
Common Stock - par value $1, authorized |
|
|
|
|
|
|
|
|
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80,000,000 shares; shares issued |
|
|
|
|
|
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|
|
|
|
(including shares in treasury): |
|
|
|
|
|
|
|
|
|
|
September 6, 2003 - 46,559,784 shares |
|
|
|
|
|
|
|
|
|
|
December 28, 2002 - 45,839,831 shares |
|
|
|
|
|
|
|
|
|
|
September 7, 2002 - 45,788,370 shares |
|
46,560 |
|
|
45,840 |
|
|
45,788 |
|
|
Additional paid-in capital |
|
98,755 |
|
|
90,994 |
|
|
90,492 |
|
|
Retained earnings |
|
366,121 |
|
|
339,475 |
|
|
324,165 |
|
|
Accumulated other comprehensive loss |
|
(22,099 |
) |
|
(23,522 |
) |
|
(951 |
) |
|
Unearned compensation |
|
(4,754 |
) |
|
(3,833 |
) |
|
(4,379 |
) |
|
Cost of shares in treasury: |
|
|
|
|
|
|
|
|
|
|
September 6, 2003 - 6,439,820 shares |
|
|
|
|
|
|
|
|
|
|
December 28, 2002 - 5,869,429 shares |
|
|
|
|
|
|
|
|
|
|
September 7, 2002 - 5,299,598 shares |
|
(89,584 |
) |
|
(79,857 |
) |
|
(70,780 |
) |
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS' EQUITY |
|
394,999 |
|
|
369,097 |
|
|
384,335 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
$ |
570,596 |
|
$ |
531,994 |
|
$ |
583,281 |
|
( ) - Denotes deduction.
See notes to consolidated condensed financial statements.
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(Thousands of dollars, except shares and per share data)
(Unaudited)
|
12 Weeks Ended |
|
36 Weeks Ended |
|
||||||||
|
September 6, |
|
September 7, |
|
September 6, |
|
September 7, |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
230,571 |
|
$ |
219,197 |
|
$ |
606,096 |
|
$ |
565,750 |
|
|
Cost of products sold |
|
143,857 |
|
|
141,179 |
|
|
384,462 |
|
|
364,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS MARGIN |
|
86,714 |
|
|
78,018 |
|
|
221,634 |
|
|
201,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expenses |
|
60,424 |
|
|
53,428 |
|
|
168,129 |
|
|
150,816 |
|
|
OPERATING INCOME |
|
26,290 |
|
|
24,590 |
|
|
53,505 |
|
|
50,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
1,354 |
|
|
1,641 |
|
|
4,109 |
|
|
4,820 |
|
|
Interest income |
|
(97 |
) |
|
(89 |
) |
|
(304 |
) |
|
(154 |
) |
|
Other - net |
|
605 |
|
|
75 |
|
|
501 |
|
|
163 |
|
|
|
1,862 |
|
|
1,627 |
|
|
4,306 |
|
|
4,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS BEFORE INCOME TAXES |
|
|
|
|
|
|
|
|
|
|
|
|
|
AND MINORITY INTEREST |
|
24,428 |
|
|
22,963 |
|
|
49,199 |
|
|
46,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
7,904 |
|
|
7,561 |
|
|
15,944 |
|
|
15,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS BEFORE MINORITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST |
|
16,524 |
|
|
15,402 |
|
|
33,255 |
|
|
30,904 |
|
|
Minority interest |
|
(110 |
) |
|
(60 |
) |
|
(147 |
) |
|
(60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS |
$ |
16,414 |
|
$ |
15,342 |
|
$ |
33,108 |
|
$ |
30,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
.42 |
|
$ |
.38 |
|
$ |
.84 |
|
$ |
.76 |
|
|
Diluted |
$ |
.40 |
|
$ |
.37 |
|
$ |
.81 |
|
$ |
.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share |
$ |
.055 |
|
$ |
.045 |
|
$ |
.165 |
|
$ |
.135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used for net earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
39,347,416 |
|
|
40,084,219 |
|
|
39,234,460 |
|
|
40,575,077 |
|
|
Diluted |
|
41,224,979 |
|
|
41,454,530 |
|
|
40,913,960 |
|
|
42,157,450 |
|
See notes to consolidated condensed financial statements.
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT
OF STOCKHOLDERS' EQUITY
(Thousands of dollars, except share data)
(Unaudited)
|
|
|
|
|
|
|
Accumulated |
|
|
|
Cost of |
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 28, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 |
$ |
45,840 |
|
$ |
90,994 |
|
$ |
339,475 |
|
$ |
(23,522 |
) |
$ |
(3,833 |
) |
$ |
(79,857 |
) |
$ |
369,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
33,108 |
|
|
|
|
|
|
|
|
|
|
|
33,108 |
|
|
Dividends |
|
|
|
|
|
|
|
(6,462 |
) |
|
|
|
|
|
|
|
|
|
|
(6,462 |
) |
|
Purchase of 580,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares of common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock for treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,863 |
) |
|
(9,863 |
) |
|
Issuance of 9,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares of treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock |
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
136 |
|
|
169 |
|
|
Issuance of common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock under stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
incentive plans |
|
720 |
|
|
7,576 |
|
|
|
|
|
|
|
|
(2,383 |
) |
|
|
|
|
5,913 |
|
|
Net change in notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
receivable |
|
|
|
|
152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152 |
|
|
Amortization of unearned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,462 |
|
|
|
|
|
1,462 |
|
|
Foreign currency cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation adjustments |
|
|
|
|
|
|
|
|
|
|
1,562 |
|
|
|
|
|
|
|
|
1,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at September 6, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
$ |
46,560 |
|
$ |
98,755 |
|
$ |
366,121 |
|
$ |
(22,099 |
) |
$ |
(4,754 |
) |
$ |
(89,584 |
) |
$ |
394,999 |
|
See notes to consolidated condensed financial statements.
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
|
36 Weeks Ended |
|
||||
|
September 6, |
|
September 7, |
|
||
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net earnings |
$ |
33,108 |
|
$ |
30,844 |
|
|
Adjustments necessary to reconcile net earnings to net cash |
|
|
|
|
|
|
|
Depreciation |
|
11,955 |
|
|
11,956 |
|
|
Amortization |
|
374 |
|
|
443 |
|
|
Other |
|
(2,105 |
) |
|
3,844 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(33,992 |
) |
|
(40,498 |
) |
|
Inventories |
|
(10,663 |
) |
|
3,160 |
|
|
Other assets |
|
(854 |
) |
|
470 |
|
|
Accounts payable and other accrued liabilities |
|
18,302 |
|
|
15,765 |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
16,125 |
|
|
25,984 |
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Business acquisitions |
|
- |
|
|
(26,626 |
) |
|
Additions to property, plant and equipment |
|
(11,125 |
) |
|
(8,476 |
) |
|
Other |
|
685 |
|
|
218 |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
(10,440 |
) |
|
(34,884 |
) |
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
30,032 |
|
|
73,550 |
|
|
Payments of long-term debt |
|
(34,314 |
) |
|
(61,831 |
) |
|
Net increase in short-term debt |
|
- |
|
|
(90 |
) |
|
Cash dividends |
|
(6,462 |
) |
|
(5,434 |
) |
|
Purchase of common stock for treasury |
|
(9,727 |
) |
|
(24,442 |
) |
|
Proceeds from shares issued under stock incentive plans |
|
5,903 |
|
|
1,961 |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
(14,568 |
) |
|
(16,286 |
) |
|
Effect of foreign exchange rate changes |
|
79 |
|
|
- |
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS |
|
(8,804 |
) |
|
(25,186 |
) |
|
Cash and cash equivalents at beginning of the period |
|
27,078 |
|
|
35,820 |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD |
$ |
18,274 |
|
$ |
10,634 |
|
( ) - Denotes reduction in cash and cash equivalents.
See notes to consolidated condensed financial statements.
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 6, 2003 and September 7, 2002
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) considered necessary for fair presentation have been included in the accompanying financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2002. Certain amounts previously reported in 2002 have been reclassified to conform with the presentation used in 2003.
2. Fluctuations
The Company's sales are seasonal. Seasonal sales patterns and the fact that the fourth quarter has sixteen or seventeen weeks as compared to twelve weeks in each of the first three quarters can cause significant differences in sales and earnings from quarter to quarter. These differences, however, have followed a consistent pattern each year.
3. Net Earnings Per Share
The following table sets forth the reconciliation of weighted average shares used in the computation of basic and diluted earnings per share:
|
|
12 Weeks Ended |
|
36 Weeks Ended |
|
||||
|
|
September 6, |
|
September 7, |
|
September 6, |
|
September 7, |
|