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 25, 1995
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 (I.R.S. Employer Identification No.)
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 practicable date.
There were 16,852,434 shares of Common Stock, $1 par value,
outstanding as of April 20, 1995, of which 534,327 shares are
held as Treasury Stock. The shares outstanding, excluding shares
held in treasury, have been adjusted for the 3-for-2 stock split
payable on May 15, 1995, on shares outstanding at the close of
business on May 1, 1995.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of dollars)
March 25, December 31, March 26,
1995 1994 1994
(Unaudited) (Audited) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,286 $ 2,949 $ 3,160
Accounts receivable, less allowances
March 25, 1995 - $4,323
December 31, 1994 - $3,959
March 26, 1994 - $3,242 64,299 70,669 55,084
Inventories:
Finished products 64,218 48,637 49,495
Raw materials and work in process 32,244 30,388 31,131
96,462 79,025 80,626
Other current assets 11,733 14,902 12,310
Net current assets of
discontinued operations 2,066 991 3,548
TOTAL CURRENT ASSETS 177,846 168,536 154,728
PROPERTY, PLANT & EQUIPMENT
Gross cost 99,543 97,028 92,619
Less accumulated depreciation (63,398) (61,680) (60,101)
36,145 35,348 32,518
OTHER ASSETS 26,848 26,267 26,322
TOTAL ASSETS $240,839 $230,151 $213,568
See notes to consolidated condensed financial statements.
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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS - Continued
(Thousands of dollars)
March 25, December 31, March 26,
1995 1994 1994
(Unaudited) (Audited) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 2,467 $ 1,432 $ 1,980
Accounts payable and other accrued
liabilities 40,241 41,284 36,142
Current maturities of long-term debt 170 304 4,720
TOTAL CURRENT LIABILITIES 42,878 43,020 42,842
LONG-TERM DEBT, less current maturities 52,701 43,482 44,663
OTHER NONCURRENT LIABILITIES 10,700 11,125 9,772
STOCKHOLDERS' EQUITY
Common Stock - par value $1, authorized
25,000,000 shares; shares issued
(including shares in treasury):
March 25, 1995 - 16,740,362 shares
December 31, 1994 - 16,705,013 shares
March 26, 1994 - 16,496,812 shares 16,740 11,315 11,225
Additional paid-in-capital 19,771 25,004 24,478
Retained earnings 103,803 101,873 87,855
Accumulated translation adjustments 246 332 341
Cost of shares in treasury:
March 25, 1995 - 533,992 shares
December 31, 1994 - 533,992 shares
March 26, 1994 - 681,778 shares (6,000) (6,000) (7,608)
TOTAL STOCKHOLDERS' EQUITY 134,560 132,524 116,291
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $240,839 $230,151 $213,568
See notes to consolidated condensed financial statements.
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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(Thousands of dollars, except per share data)
(Unaudited)
12 Weeks Ended
March 25, March 26,
1995 1994
Net sales and other operating income $ 76,331 $ 66,766
Cost of products sold 53,543 45,659
Gross margin 22,788 21,107
Selling and administrative expenses 18,913 18,229
Operating income 3,875 2,878
Other expenses (income):
Interest expense 701 740
Interest income (228) (75)
Other - net (217) 162
256 827
Earnings from continuing operations
before income taxes 3,619 2,051
Income taxes 1,122 660
Earnings from continuing operations 2,497 1,391
Loss from discontinued operations,
net of income taxes -- (100)
NET EARNINGS $ 2,497 $ 1,291
Primary earnings (loss) per share:
Continuing operations $ 0.15 $ 0.09
Discontinued operations -- (0.01)
Net earnings $ 0.15 $ 0.08
Fully diluted earnings per share $ 0.15 $ 0.08
Cash dividends per share $ 0.0333 $ 0.0267
Shares used for net earnings
per share computation:
Primary 16,683,028 16,113,234
Fully diluted 16,718,468 16,527,577
See notes to consolidated condensed financial statements.
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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
12 Weeks Ended
March 25, March 26,
1995 1994
OPERATING ACTIVITIES
Net earnings $ 2,497 $ 1,391
Depreciation, amortization and other
non-cash items 657 708
Loss from discontinued operations -- (100)
Changes in operating assets and liabilities:
Accounts receivable 6,370 7,217
Inventories (17,437) (13,771)
Other current assets 2,094 617
Accounts payable and other accrued
liabilities (1,043) 4,667
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (6,862) 729
FINANCING ACTIVITIES
Proceeds from long-term borrowings 12,090 8,000
Payments of long-term borrowings (3,005) (7,012)
Proceeds from short-term borrowings 3,035 --
Payments of short-term borrowings (2,000) --
Cash dividends (567) (422)
Proceeds from shares issued under
employee stock plans 192 1,478
Other -- 32
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,745 2,076
INVESTING ACTIVITIES
Additions to property, plant and equipment (2,515) (2,011)
Other (31) (1,364)
NET CASH USED IN INVESTING ACTIVITIES (2,546) (3,375)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 337 (570)
Cash and cash equivalents at beginning of year 2,949 3,730
CASH AND CASH EQUIVALENTS
AT END OF FIRST QUARTER $ 3,286 $ 3,160
( ) - Denotes reduction in cash and cash equivalents.
See notes to consolidated condensed financial statements.
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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 25, 1995
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 December 31, 1994. Certain amounts in 1994 have been reclassified to
conform with the presentation used in 1995.
NOTE B - Fluctuations
The Company's sales are seasonal, particularly in its major divisions, Hush
Puppies and the Wolverine Footwear Group. 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. Also, on April 19, 1995, the Company
announced an additional 3-for-2 stock split on shares outstanding on May 1,
1995. All share and per share data have been retroactively adjusted for
the increased shares resulting from the stock splits.
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 splits 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 and fully diluted earnings per
share.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results Of Operations - Comparisons Of First Quarter 1995 To First Quarter
1994
First quarter net sales of $76.3 million for 1995 exceeded 1994 levels by
$9.5 million, (a 14.2% increase). Strong shipments by the Wolverine
Footwear Group, a 35.0% increase, accounted for $9.3 million of the
quarterly sales increase with an additional increase of $1.8 million being
generated by the Leather division. These increases were offset by lower
shipments to the Department of Defense and a reduction in sales to Company
owned and independently operated Hush Puppies Retail locations. Increased
Department of Defense shipments are scheduled for the third and fourth
quarter of 1995. However, shipments to Company owned stores will be lower
in 1995, a result of the retail repositioning conducted in 1994.
Gross margin as a percentage of net sales for the first quarter of 1995 was
29.9% compared to the prior year level of 31.6%. Improved margins were
recorded in the Wolverine Footwear Group and Wolverine Leathers. These
improvements were offset by decreases in the Hush Puppies Company,
resulting from the soft retail climate, as well as inventory provisions
recorded to dispose of slow moving items.
Selling and administrative costs totaling $18.9 million (24.8% of net
sales) for the first quarter of 1995 remained relatively stable with the
first quarter 1994 levels of $18.2 million (27.3% of net sales).
Advertising and distribution costs associated with the increased sales
volume and investments in core brands increased these costs by $1.6
million. These increases were offset by reductions in fringe benefit and
selling expenses. We are anticipating that annualized selling and
administrative costs will normalize as a percentage of net sales in a range
approximating 1994 levels.
Interest expense for both the first quarter of 1995 and 1994 was $.7
million. Total interest expense reflects a reduction of the interest rate
on the senior notes. However, this rate reduction was offset by increases
in the variable rates on the Company s revolver debt and increases in the
average borrowings outstanding.
The effective income tax rates on net earnings decreased in 1995 from 1994
levels (31.0% compared to 32.2%) for the first quarter. The decrease was
caused by a higher percentage of pre-tax earnings being attributable to
non-taxable net earnings of foreign subsidiaries.
Net earnings of $2.5 million ($.15 per share) for the twelve weeks ended
March 25, 1995 compares favorably to earnings from continuing operations of
$1.4 million ($.09 per share) for the respective period of 1994. The earnings
mix continues to be diversified as approximately 50% of earnings were from
domestic operations with the balance being generated from international
operations. Increased earnings are primarily a result of the items noted above.
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Financial Condition, Liquidity and Capital Resources
Accounts receivable of $64.3 million at March 25, 1995 reflects a decrease
of $6.4 million and an increase of $9.2 million as compared to the balances
at December 31, 1994 and March 26, 1994, respectively. Inventories of
$96.5. million at March 25, 1995 reflect an increase of $17.5 million and
$15.9 million over the balances at December 31, 1994 and March 26, 1994,
respectively. The increases are generally related to sales volume
increases and additional inventory required to meet future demand in both
wholesaling and manufacturing operations. Also, these working capital
needs were financed through increases in revolver debt as total proceeds
increased $4.1 million over the first quarter of 1994 and payments on long-
term debt decreased by an additional $4.0 million.
Other current assets totaling $13.8 million at March 25, 1995 reflect a
$2.1 million decrease from December 31, 1994 and March 26, 1994. The
decreases primarily reflect the disposition of the assets related to
discontinued operations in prior years.
Total interest bearing debt of $55.3 million on March 25, 1995 compares to
$45.2. million and $51.4 million at December 31, 1994 and March 26, 1994,
respectively. The increase in debt since December 31, 1994 reflects the
seasonal working capital requirements of the Company. The Company is
currently examining its long term capital requirements as the growth of the
Company will require increases in capital needs over the next several
years. Long term opportunities are being evaluated to supplement cash flow
from future earnings and existing credit facilities to assure that the
Company s requirements can be met.
The first quarter 1995 dividend declared of $.0333 per share of common
stock represents a 24.7% increase over the $.0267 per share declared for
the first quarter of 1994. The dividend is payable May 1, 1995 to
stockholders of record on April 3, 1995. Additionally, the Board of
Directors approved a 3-for-2 stock split for holders of record on May 1,
1995 and an additional quarterly dividend increase of 5.0%.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security-Holders.
On April 19, 1995, the Company held its 1995 Annual Meeting of
Stockholders. The purposes of the meeting were: to elect four directors
for three-year terms expiring in 1998; to consider and approve the 1995
Stock Incentive Plan; and to consider and ratify the appointment of Ernst &
Young LLP as independent auditors for the current fiscal year.
Four candidates nominated by management were elected by the stockholders to
serve as directors of the Company at the meeting. The following sets forth
the results of the voting with respect to each candidate:
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Name of Candidate Shares Voted
Geoffrey B. Bloom For 8,973,069
Authority Withheld 21,899
Broker Non-votes 0
David T. Kollat For 8,973,338
Authority Withheld 21,630
Broker Non-votes 0
David P. Mehney For 8,973,244
Authority Withheld 21,724
Broker Non-votes 0
Timothy J. O'Donovan For 8,972,894
Authority Withheld 22,074
Broker Non-votes 0
The stockholders voted to approve the 1995 Stock Incentive Plan. The
following sets forth the results of the voting with respect to this matter:
Shares Voted
For 7,323,549
Against 1,579,818
Abstentions 91,601
Broker Non-votes 0
The stockholders voted to ratify the appointment of Ernst & Young LLP by
the Board of Directors as independent auditors of the Company for the
current fiscal year. The following sets forth the results of the voting
with respect to this matter:
Shares Voted
For 8,988,436
Against 3,412
Abstentions 3,120
Broker Non-votes 0
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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
3.1 Certificate of Incorporation, as amended. Previously filed as
Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for
the period ended June 18, 1994. Here incorporated by reference.
3.2 Amended and Restated Bylaws. Previously filed as Exhibit 3(b) to
the Company's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994. Here incorporated by reference.
3.3 Amendment to Bylaws.
4.1 Certificate of Incorporation, as amended. See Exhibit 3.1 above.
4.2 Rights Agreement dated as of May 7, 1987, as amended and restated
as of October 24, 1990. Previously filed with Amendment No. 1 to
the Company's Form 8-A filed November 13, 1990. Here
incorporated by reference. This agreement has been amended by
the Second Amendment to Rights Agreement included as Exhibit 4.6
below.
4.3 Amended and Restated Credit Agreement dated as of October 13,
1994 with NBD Bank, N.A. as Agent. Previously filed as Exhibit
4(c) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994. Here incorporated by reference.
4.4 Note Agreement dated as of August 1, 1994 relating to 7.81%
Senior Notes. Previously filed as Exhibit 4(d) to the Company's
Quarterly Report on Form 10-Q for the period ended September 10,
1994. Here incorporated by reference.
4.5 The Registrant has several classes of long-term debt instruments
outstanding in addition to that described in Exhibit 4.4 above.
The amount of none of these classes of debt exceeds 10% of the
Company's total consolidated assets. The Company 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.
4.6 Second Amendment to Rights Agreement made as of October 28, 1994
(amending the Rights Agreement included as Exhibit 4.2 above).
Previously filed as Exhibit 4(f) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994. Here
incorporated by reference.
10.1 Supplemental Director's Fee Agreement dated as of March 27, 1995,
between the Company and Phillip D. Matthews.
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10.2 Restricted Stock Agreement as of March 27, 1995, between the
Company and Phillip D. Matthews.
10.3 1995 Stock Incentive Plan. Previously filed as an Appendix to
the Company's Definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders held on April 19,
1995. Here incorporated by reference.
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the quarter for which this report is filed.
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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 9, 1995 s/ Geoffrey B. Bloom
Geoffrey B. Bloom
President and Chief Executive Officer
(Duly Authorized Signatory for Registrant)
May 9, 1995 s/ Stephen L. Gulis, Jr.
Stephen L. Gulis, Jr.
Vice President and Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Signatory of Registrant)
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EXHIBIT INDEX
Exhibit
Number Document
3.1 Certificate of Incorporation, as amended. Previously filed as
Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for
the period ended June 18, 1994.
3.2 Amended and Restated Bylaws. Previously filed as Exhibit 3(b) to
the Company's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994. Here incorporated by reference.
3.3 Amendment to Bylaws.
4.1 Certificate of Incorporation, as amended. See Exhibit 3.1 above.
4.2 Rights Agreement dated as of May 7, 1987, as amended and restated
as of October 24, 1990. Previously filed with Amendment No. 1 to
the Company's Form 8-A filed November 13, 1990. Here
incorporated by reference. This agreement has been amended by
the Second Amendment to Rights Agreement included as Exhibit 4.6
below.
4.3 Amended and Restated Credit Agreement dated as of October 13,
1994 with NBD Bank, N.A. as Agent. Previously filed as Exhibit
4(c) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994. Here incorporated by reference.
4.4 Note Agreement dated as of August 1, 1994 relating to 7.81%
Senior Notes. Previously filed as Exhibit 4(d) to the Company's
Quarterly Report on Form 10-Q for the period ended September 10,
1994. Here incorporated by reference.
4.5 The Registrant has several classes of long-term debt instruments
outstanding in addition to that described in Exhibit 4.4 above.
The amount of none of these classes of debt exceeds 10% of the
Company's total consolidated assets. The Company 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.
4.6 Second Amendment to Rights Agreement made as of October 28, 1994
(amending the Rights Agreement included as Exhibit 4.2 above).
Previously filed as Exhibit 4(f) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994. Here
incorporated by reference.
10.1 Supplemental Director's Fee Agreement dated as of March 27, 1995,
between the Company and Phillip D. Matthews.
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10.2 Restricted Stock Agreement as of March 27, 1995, between the
Company and Phillip D. Matthews.
10.3 1995 Stock Incentive Plan. Previously filed as an Appendix
to the Company's Definitive Proxy Statement with respect to
the Company's Annual Meeting of Stockholders held on April 19,
1995. Here incorporated by reference.
27 Financial Data Schedule
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