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 first twelve week accounting period ended March 26, 1994
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 (I.R.S. Employer Identification No.)
of Incorporation or Organization)
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 the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practical date.
There were 11,233,501 shares of Common Stock, $1 par value,
outstanding as of May 5, 1994 of which 681,780 shares are held as
Treasury Stock.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
WOLVERINE WORLD WIDE, INC. AND
SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of dollars)
March 26, Jan. 1, March 27,
1994 1994 1993
(Unaudited) (Audited) (Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 3,160 $ 3,730 $ 2,887
Accounts receivable, less
allowances (March 26, 1994 -
$3,242; Jan. 1, 1994 -
$3,411; March 27, 1993 -
$2,449) 55,145 62,362 52,585
Inventories:
Finished products 53,196 39,169 44,369
Raw materials and work in
process 31,131 31,387 27,711
84,327 70,556 72,080
Other current assets 12,247 12,864 25,033
TOTAL CURRENT ASSETS 154,879 149,512 152,585
PROPERTY, PLANT & EQUIPMENT
Gross assets 92,619 90,608 87,211
Allowances for depreciation (60,101) (58,985) (56,906)
32,518 31,623 30,305
OTHER ASSETS 26,322 24,581 24,215
TOTAL ASSETS $213,719 $205,716 $207,105
-2-
WOLVERINE WORLD WIDE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS - Continued
(Thousands of dollars)
March 26, Jan. 1, March 27,
1994 1994 1993
(Unaudited) (Audited) (Unaudited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 1,980 $ 1,948 $ 12,078
Accounts payable and other
accrued liabilities 36,293 31,626 31,103
Current maturities of
long-term debt 4,720 4,732 4,461
TOTAL CURRENT LIABILITIES 42,993 38,306 47,642
LONG-TERM DEBT (less current
maturities) 44,663 44,913 49,656
OTHER NONCURRENT LIABILITIES 9,772 9,747 8,916
STOCKHOLDERS' EQUITY
Common Stock - par value $1,
authorized 25,000,000 shares;
shares issued (including
shares in treasury)(post-split):
March 26, 1994 - 11,225,134
Jan. 1, 1994 - 11,042,129
March 27, 1993 - 10,862,801 11,225 7,622 7,502
Additional paid-in-capital 24,478 26,469 24,734
Retained earnings 87,855 86,986 77,012
Accumulated translation
adjustments 341 398 351
Cost of shares in treasury;
March 26, 1994 - 681,778
Jan. 1, 1994 - 781,778
March 27, 1993 - 781,252 (7,608) (8,725) (8,708)
TOTAL STOCKHOLDERS' EQUITY 116,291 112,750 100,891
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $213,719 $205,716 $207,105
See notes to consolidated condensed financial statements.
-3-
WOLVERINE WORLD WIDE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(Thousands of dollars, except per share data)
(Unaudited)
Twelve Weeks Ended
March 26, March 27,
1994 1993
Net sales and other operating income $ 68,537 $ 65,859
Cost of products sold 46,733 46,668
Gross Profit 21,804 19,191
Selling and administrative expenses 19,010 17,134
Operating Profit 2,794 2,057
Other expenses (income):
Interest expense 808 1,014
Interest income (75) (238)
Other - net 162 242
895 1,018
Earnings before income taxes 1,899 1,039
Income taxes 608 339
NET EARNINGS $ 1,291 $ 700
Earnings per share:
Primary $ .12 $ .07
Fully diluted $ .12 $ .07
Cash dividends per share $ .04 $ .03
Shares used for earnings
per share computation:
Primary 10,742,155 10,303,557
Fully diluted 11,018,385 10,694,926
See notes to consolidated condensed financial statements.
-4-
WOLVERINE WORLD WIDE, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Twelve Weeks Ended
March 26, March 27,
1994 1993
OPERATING ACTIVITIES
Net earnings $ 1,291 $ 700
Depreciation, amortization and other non-
cash items 708 1,177
Changes in operating assets and liabilities:
Accounts receivable 7,217 (1,075)
Inventories (13,771) (7,816)
Other current assets 617 4,546
Accounts payable and other accrued
liabilities 4,667 890
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 729 (1,578)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 8,000 7,000
Payments of long-term debt (7,012) (1,305)
Payments of short-term borrowings --- (4,299)
Cash dividends (422) (269)
Proceeds from shares issued under
employee stock plans 1,478 331
Other 32 ---
CASH PROVIDED BY FINANCING ACTIVITIES 2,076 1,458
INVESTING ACTIVITIES
Additions to property, plant and equipment (2,011) (949)
Other (1,364) 1,581
CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (3,375) 632
INCREASE (DECREASE) IN CASH (570) 512
Cash at beginning of period 3,730 2,375
CASH AT END OF PERIOD $ 3,160 $ 2,887
( ) - Denotes reduction in cash.
See notes to consolidated condensed financial statements.
-5-
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 26, 1994
NOTE A - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
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 generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. 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 January 1, 1994.
NOTE B - Fluctuations
The Company's sales are seasonal, particularly in its major product line,
Hush Puppies (Registered) shoes, which has two major and two minor
introductions of new styles per year. 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 cause significant
differences in sales and earnings from quarter to quarter. These
differences, however, follow a consistent pattern each year.
NOTE C - Common Stock
On March 10, 1994, the Company announced a 3-for-2 stock split on shares
outstanding on March 21, 1994. All share and per share data have been
retroactively adjusted for the increased shares resulting from the stock
split.
NOTE D - Earnings Per Share
Primary earnings per share are computed based on the weighted average
shares of common stock outstanding during each period assuming that the
stock split described in Note C had been completed at the beginning of the
earliest period presented. Common stock equivalents (stock options) are
included in the computation of primary earnings per share. Fully diluted
earnings per share are presented reflecting the assumed exercise of stock
options and conversion of subordinated notes into common stock.
-6-
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results Of Operations - Comparisons Of First Quarter 1994 To First Quarter
1993
First quarter net sales of $68.5 million for 1994 exceeded 1993 levels by
$2.7 million, a 4.1% increase. Strength in the Wolverine Brand division
accounted for $4.8 million of the sales increase with an additional
increase of $2.0 million being generated by the Tru-Stitch Footwear
division. Wolverine Brand Durashock products continue to be well accepted
in the marketplace and strong export shipments and expanded product
offerings of Tru-Stitch have favorably effected sales volumes. These
increases were offset by lower shipments by the Hush Puppies Company and
the Bates Uniform Group. Hush Puppies shipments were down during the
quarter due to the changes in warehousing and customer service support
systems.
Gross margin as a percentage of net sales for the first quarter of 1994 was
31.8% versus the prior year level of 29.1%. Improved margins in the
Wolverine Brand, Tru-Stitch and Global Operations Group were offset by
reductions in the Hush Puppies Wholesale and Bates Divisions. The gross
margin improvement reflects the strong performance of the manufacturing
division and sourcing operations along with improved efficiencies at the
Leather Division.
Selling and administrative costs totaling $19.0 million were $1.9 million
higher than the first quarter 1993 levels, a 10.9% increase. Selling costs
and advertising associated with the increased Wolverine Brand volume
accounted for $1.1 million of the change and $.4 million was a result of
conversion costs in the Hush Puppies distribution systems.
Interest expense of $0.8 million reflects a decrease over 1993 levels by
$0.2 million, a 20.3% decrease.
Net earnings of $1.3 million ($.12 per share-post split) for the twelve
weeks ended March 26, 1994 compares favorably to earnings of $0.7 million
($.07 per share-post split) for the respective period of 1993, as a
result of the factors noted above.
Financial Condition, Liquidity and Capital Resources
Accounts receivable of $55.1 million and inventories of $84.3 million
reflect an increase over the end of the first quarter of 1993 by $2.6
million and $12.2 million respectively. These increases are generally
related to sales volume increases; however, a portion of the increase in
inventory was caused by changes in warehousing and customer service support
systems and the remainder was due to product demands on the Wolverine Work
and Outdoor Footwear Group and the related manufacturing facilities.
Other current assets totaling $12.2 million reflect a $.6 million decrease
from January 1, 1994 and a $12.8 million decrease from March 27, 1993. The
-7-
decreases primarily reflect the change in deferred income taxes and
disposition of the assets related to operations discontinued in prior
years.
Total interest bearing debt of $51.4 million on March 26, 1994 compares to
$51.6 million and $66.2 million at January 1, 1994, and March 27, 1993,
respectively. The Company's cash flow from future earnings and present
credit facilities are expected to be sufficient to meet the Company's
normal operating requirements.
The Company has an agreement in principle to refinance its senior notes at
less than the current interest rate on the notes. The financing is
expected to be completed during the third quarter of fiscal 1994.
Dividends declared of $.04 per share of common stock represents a 50%
increased payout over the prior quarter due to the stock split. The
dividend is payable May 12, 1994, to stockholders of record on April 27,
1994.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following documents are filed as exhibits to
this report on Form 10-Q:
Exhibit
Number Document
4(a) The Articles of Incorporation. Previously filed as an exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1988. Here incorporated by reference.
4(b) Preferred Stock Purchase Rights. Previously filed as an exhibit to
Amendment No. 1 to the Company's Form 8-A filed with the Securities
and Exchange Commission on November 13, 1990. Here incorporated by
reference.
4(c) Credit Agreement dated as of March 11, 1993 with NBD Bank, N.A. as
Agent. Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended January 2, 1993.
Here incorporated by reference.
4(d) Note Purchase Agreement dated as of August 29, 1988, relating to
10.4% Senior Notes. Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988. Here incorporated by reference.
-8-
4(e) First, Second, Third and Fourth Amendments to Note Purchase
Agreement. Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended January 2, 1993.
Here incorporated by reference.
4(f) The Registrant has several classes of long-term debt instruments
outstanding in addition to that described in Exhibit 4(d) above.
The amount of none of these classes of debt outstanding on June 19,
1993 exceeds 10% of the Registrant's total consolidated assets.
The Registrant agrees to furnish copies of any agreement defining
the rights of holders of any such long-term indebtedness to the
Securities and Exchange Commission upon request.
10(a) Stock Option Plan of 1979 and amendment. Previously filed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 1988. Here incorporated by reference.
10(b) 1993 Stock Incentive Plan. Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 1, 1994. Here incorporated by reference.
10(c) 1988 Stock Option Plan. Previously filed as an exhibit to the
Company's registration statement on Form S-8, filed July 21, 1988,
Registration No. 33-23196. Here incorporated by reference.
10(d) Amended and Restated Directors Stock Option Plan. Previously filed
as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994. Here incorporated by reference.
10(e) Agreement dated July 24, 1992, between the Registrant and Thomas D.
Gleason. Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended January 2, 1993.
Here incorporated by reference. The Company also incorporates by
reference the description of Mr. Gleason's agreement under the
caption "Employment Agreements, Termination Agreements and Change
of Control Arrangements" contained in the definitive Proxy
Statement of the Company dated March 22, 1994.
10(f) Employment Agreement dated April 27, 1993, between the Registrant
and Geoffrey B. Bloom. Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 1, 1994. Here incorporated by reference.
10(g) Executive Short-Term Incentive Plan for 1994. Previously filed as
an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994. Here incorporated by reference.
10(h) Management Short-Term Incentive Plan for 1994. Previously filed as
an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994. Here incorporated by reference.
-9-
10(i) Stock Option Loan Program. Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1991. Here incorporated by reference.
10(j) Deferred Compensation Agreements with Disability Benefits. The
form of agreement was previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993. An updated participant schedule was filed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994. Here incorporated by reference.
10(k) Deferred Compensation Agreements without Disability Benefits. The
form of agreement was previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993. An updated participant schedule was filed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994. Here incorporated by reference.
10(l) Executive Long-Term Incentive (Three Year) Plans for the years 1991
to 1993 and 1992 to 1994. Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1991. Here incorporated by reference.
10(m) Executive Long-Term Incentive (Three Year) Plan for the three year
period 1993-1995. Previously filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year ended January 1,
1994. Here incorporated by reference.
10(n) Executive Long-Term Incentive (Three Year) Plan for the three-year
period 1994-1996. Previously filed as an exhibit to the Company's
Annual Report on Form 10-K for the fiscal year ended January 1,
1994. Here incorporated by reference.
10(o) Termination of Employment and Change of Control Agreements. The
form of agreement was previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993. An updated participant schedule was filed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994. Here incorporated by reference.
10(p) Indemnification Agreements. The form of agreement was previously
filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended January 2, 1993. An updated participant
schedule was filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994. Here
incorporated by reference.
10(q) Supplemental Retirement Benefits. Previously filed as an exhibit
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988. Here incorporated by reference.
-10-
10(r) Benefit Trust Agreement dated May 19, 1987, and Amendments Number
1, 2 and 3 thereto. Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 2, 1993. Here incorporated by reference.
10(s) Supplemental Director's Fee Arrangement dated April 27, 1993,
between the Company and Phillip D. Matthews. Previously filed as
an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994. Here incorporated by reference.
10(t) Retirement Agreement effective December 31, 1993, between the
Company and Peter D. Panter. Previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 1, 1994. Here incorporated by reference.
10(u) 1984 Executive Incentive Stock Purchase Plan and amendment.
Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended January 2, 1988. Here
incorporated by reference.
10(v) Asset Purchase Agreement dated January 29, 1993, concerning the
sale of the Brooks Business. Previously filed as an exhibit to the
Company's Form 8-K filed February 1, 1993. Here incorporated by
reference.
10(w) Agreements relating to the sale of the assets of the three European
Subsidiaries associated with the Brooks Business. Previously filed
as exhibits to the Company's Form 8-K filed July 8, 1993. Here
incorporated by reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WOLVERINE WORLD WIDE, INC.
AND SUBSIDIARIES
May 10, 1994 /s/ Geoffrey B. Bloom
Date Geoffrey B. Bloom
President and Chief Executive Officer
(Duly Authorized Signatory for Registrant)
-11-
May 10, 1994 /s/ Stephen L. Gulis, Jr.
Date Stephen L. Gulis, Jr.
Vice President and Chief Financial Officer
(Principal Financial Officer and Duly
Authorized Signatory of Registrant)
-12-