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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)



 

(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.








2


PART I. FINANCIAL INFORMATION

ITEM 1.     Financial Statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of dollars)

 

September 6,
2003
(Unaudited)


 

December 28,
2002
(Audited)


 

September 7,
2002
(Unaudited)


ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.





3


WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS - Continued

(Thousands of dollars, except share data)

 

September 6,
2003
(Unaudited)


 

December 28,
2002
(Audited)


 

September 7,
2002
(Unaudited)


 

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

 

 

 

 

 

 

 

 

 

          80,000,000 shares; shares issued

 

 

 

 

 

 

 

 

 

          (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.




4


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,
2003


 

September 7,
2002


 

September 6,
2003


 

September 7,
2002


 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.




5


WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT
OF STOCKHOLDERS' EQUITY

(Thousands of dollars, except share data)
(Unaudited)

 



Common
Stock


 


Additional
Paid-In
Capital


 



Retained
Earnings


 

Accumulated
Other
Comprehensive
Income (Loss)


 



Unearned
Compensation


 

Cost of
Shares
in
Treasury


 




Total


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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
      flow hedge adjustments

 

 

 

 

 

 

 

 

 

 


(139


)

 

 

 

 

 

 

 


(139


)

   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.



6


WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Thousands of dollars)
(Unaudited)

 

36 Weeks Ended


 

 

September 6,
2003


 

September 7,
2002


 

 

 

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

 

 

     Net earnings

$

33,108

 

$

30,844

 

     Adjustments necessary to reconcile net earnings to net cash
        provided by operating activities:

 

 

 

 

 

 

     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.




7


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,
2003


 

September 7,
2002


 

September 6,
2003


 

September 7,
2002