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 second twelve week accounting period ended June 20, 1998 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 (IRS Employer Incorporation or Organization) 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 the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. There were 43,780,097 shares of Common Stock, $1 par value, outstanding as of July 31, 1998, of which 824,147 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) <TABLE> <CAPTION> JUNE 20, JANUARY 3, JUNE 14, 1998 1998 1997 (UNAUDITED) (AUDITED) (UNAUDITED) ---------- -------- ---------- <S> <C> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,234 $ 5,768 $ 3,979 Accounts receivable, less allowances June 20, 1998 - $8,151 January 3, 1998 - $7,292 June 14, 1997 - $6,277 133,336 138,066 108,516 Inventories: Finished products 130,331 100,272 125,598 Raw materials and work in process 43,040 43,562 50,147 ---------- ----------- --------------- 173,371 143,834 175,745 Other current assets 10,286 16,193 11,176 ---------- ----------- --------------- TOTAL CURRENT ASSETS 322,227 303,861 299,416 PROPERTY, PLANT & EQUIPMENT Gross cost 179,006 163,381 140,994 Less accumulated depreciation 77,940 73,050 70,270 ---------- ----------- --------------- 101,066 90,331 70,724 OTHER ASSETS 58,625 55,471 37,326 ---------- ----------- --------------- TOTAL ASSETS $ 481,918 $ 449,663 $ 407,466 ========== =========== =============== </TABLE> See notes to consolidated condensed financial statements. -2-
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS -- CONTINUED (THOUSANDS OF DOLLARS) <TABLE> <CAPTION> JUNE 20, JANUARY 3, JUNE 14, 1998 1998 1997 (UNAUDITED) (AUDITED) (UNAUDITED) ---------- -------- ---------- <S> <C> <C> <C> LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 6,441 $ 3,251 $ 3,566 Accounts payable and other accrued liabilities 45,896 57,227 57,606 Current maturities of long-term debt 4,417 4,417 54 ----------- ----------- ---------- TOTAL CURRENT LIABILITIES 56,754 64,895 61,226 LONG-TERM DEBT (less current maturities) 116,258 89,847 84,235 OTHER NONCURRENT LIABILITIES 12,029 12,491 10,129 STOCKHOLDERS' EQUITY Common Stock - par value $1, authorized 80,000,000 shares; shares issued (including shares in treasury): June 20, 1998 - 43,686,126 shares January 3, 1998 - 43,310,718 shares June 14, 1997 - 42,739,721 shares 43,686 43,311 42,739 Additional paid-in capital 70,202 64,912 58,457 Retained earnings 203,985 190,799 163,711 Accumulated translation adjustments (100) (68) (333) Unearned compensation (6,731) (4,285) (5,353) Cost of shares in treasury: June 20, 1998 824,147 shares January 3, 1998 758,113 shares June 14, 1997 583,838 shares (14,165) (12,239) (7,345) ----------- ----------- ---------- TOTAL STOCKHOLDERS' EQUITY 296,877 282,430 251,876 ----------- ----------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 481,918 $ 449,663 $ 407,466 =========== =========== ========== </TABLE> ( ) - Denotes deduction. See notes to consolidated condensed financial statements. -3-
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (THOUSANDS OF DOLLARS, EXCEPT SHARES AND PER SHARE DATA) (UNAUDITED) <TABLE> <CAPTION> 12 WEEKS ENDED 24 WEEKS ENDED ------------------------------ ---------------------------- JUNE 20, JUNE 14, JUNE 20, JUNE 14, 1998 1997 1998 1997 -------------- ----------- ----------- ----------- <S> <C> <C> <C> <C> NET SALES AND OTHER OPERATING INCOME $ 142,002 $ 127,789 $ 290,516 $ 257,090 Cost of products sold 94,270 86,972 196,887 177,884 -------------- ----------- ---------- ------------ GROSS MARGIN 47,732 40,817 93,629 79,206 Selling and administrative expenses 32,510 28,681 67,060 59,339 -------------- ----------- ---------- ------------ OPERATING INCOME 15,222 12,136 26,569 19,867 OTHER EXPENSES (INCOME): Interest expense 2,052 1,286 3,722 2,263 Interest income (467) (123) (530) (291) Other - net (131) 145 159 -------------- ----------- ---------- ------------ 1,454 1,308 3,192 2,131 -------------- ----------- ---------- ------------ EARNINGS BEFORE INCOME TAXES 13,768 10,828 23,377 17,736 Income taxes 4,613 3,460 7,834 5,675 -------------- ----------- ---------- ------------ NET EARNINGS $ 9,155 $ 7,368 $ 15,543 $ 12,061 ============== =========== ========== ============ EARNINGS PER SHARE: Basic $ .22 $ .18 $ .37 $ .29 ============== =========== ========== ============ Diluted $ .21 $ .17 $ .36 $ .28 ============== =========== ========== ============ CASH DIVIDENDS PER SHARE $ .0275 $ .0217 $ .0550 $ .0434 ============== =========== ========== ============ -4-
SHARES USED FOR NET EARNINGS PER SHARE COMPUTATION: Basic 42,164,205 41,470,139 42,052,078 41,263,956 ============== =========== ========== ============ Diluted 43,751,263 43,542,478 43,717,789 43,435,827 ============== =========== ========== ============ </TABLE> See notes to consolidated condensed financial statements. -5-
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (THOUSANDS OF DOLLARS) (UNAUDITED) <TABLE> <CAPTION> 24 WEEKS ENDED -------------------------------- JUNE 20, JUNE 14, 1998 1997 ------------ -------------- <S> <C> <C> OPERATING ACTIVITIES Net earnings $ 15,543 $ 12,061 Depreciation, amortization and other non-cash items 1,618 1,327 Unearned compensation 1,107 575 Changes in operating assets and liabilities: Accounts receivable 4,730 17,483 Inventories (29,537) (58,318) Other current assets 5,907 1,492 Accounts payable and other accrued liabilities (11,331) (11,102) ---------- ---------- NET CASH USED IN OPERATING ACTIVITIES (11,963) (36,482) FINANCING ACTIVITIES Proceeds from long-term borrowings 42,765 54,003 Payments of long-term borrowings (16,354) (11,023) Proceeds from short-term borrowings 7,285 2,540 Payments of short-term borrowings (4,095) Cash dividends (2,357) (1,825) Proceeds from shares issued under employee stock plans 186 2,185 ---------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 27,430 45,880 INVESTING ACTIVITIES Additions to property, plant and equipment (15,628) (11,858) Other (373) (2,095) ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (16,001) (13,953) ---------- ---------- DECREASE IN CASH AND CASH EQUIVALENTS (534) (4,555) Cash and cash equivalents at beginning of the year 5,768 8,534 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 5,234 $ 3,979 ========== ========== </TABLE> ( ) - Denotes reduction in cash and cash equivalents. See notes to consolidated condensed financial statements. -6-
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS June 20, 1998 and June 14, 1997 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 solely 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 3, 1998. Certain amounts previously reported in 1997 have been reclassified to conform with the presentation used in 1998. NOTE B -- FLUCTUATIONS The Company's sales are seasonal, particularly in its major divisions, The Hush Puppies Company, the Wolverine Footwear Group, the Caterpillar Footwear Group, the Wolverine Slipper Group and the Wolverine Leathers Division. 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, have followed a consistent pattern each year. NOTE C -- 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: -7-
<TABLE> <CAPTION> QUARTER ENDED YEAR-TO-DATE ENDED ------------------------ ------------------------- JUNE 20, JUNE 14, JUNE 20, JUNE 14, 1998 1997 1998 1997 --------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Weighted average shares outstanding 42,839,279 42,113,868 42,743,458 42,008,591 Adjustment for nonvested common stock (675,074) (643,729) (691,380) (744,635) ---------- ---------- ---------- ---------- Denominator for basic earnings per share 42,164,205 41,470,139 42,052,078 41,263,956 Effect of dilutive stock options 911,984 1,428,610 974,331 1,427,236 Adjustment for nonvested common stock 675,074 643,729 691,380 744,635 ---------- ---------- ---------- ---------- Denominator for diluted earnings per share 43,751,263 43,542,478 43,717,789 43,435,827 ========== ========== ========== ========== </TABLE> NOTE D -- COMPREHENSIVE INCOME At the beginning of fiscal 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "REPORTING COMPREHENSIVE INCOME." SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of SFAS No. 130 had no impact on the Company's net earnings or stockholders' equity. SFAS No. 130 requires any revenues, expenses, gains or losses that, prior to adoption, were reported separately in stockholders' equity and excluded from net earnings, to be included in other comprehensive income. Total comprehensive income totalled $9,098,000 and $15,511,000, for the second quarter and year-to-date of 1998, respectively, and $7,271,000 and $11,649,000, for the second quarter and year-to-date of 1997, respectively. In addition to net earnings, comprehensive income included foreign currency translation losses of $57,000 and $32,000 for the second quarter and year-to-date of 1998, respectively, and $97,000 and $412,000 for the second quarter and year-to-date of 1997, respectively. NOTE E -- DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which is required to be adopted by the Company in 2000. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of SFAS No. 133 will have a significant effect on earnings or the financial position of the Company. -8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - COMPARISONS OF SECOND QUARTER 1998 TO SECOND QUARTER 1997 Second quarter net sales and other operating income of $142.0 million for 1998 exceeded the 1997 level of $127.8 million by $14.2 million (11.1%) and 1998 year-to-date net sales and other operating income of $290.5 million exceeded the 1997 year-to-date level of $257.1 million by $33.4 million (13.0%). The Hush Puppies Company reported a net sales and other operating income decrease of $4.9 million (9.0%) in the second quarter of 1998 and a $2.8 million (2.4%) increase for the year-to-date 1998 when compared to the same periods in the prior year. The Wolverine Footwear Group contributed to the increase in consolidated net sales and other operating income by increasing its net sales and other operating income by $13.6 million (27.6%) for the second quarter of 1998 and $24.0 million (24.2%) for the year-to-date 1998. The Caterpillar Footwear Group continued its growth reflecting an increase in net sales and other operating income of $.9 million (7.5%) for the second quarter of 1998 and $2.7 million (10.6%) for the year-to-date 1998 over the 1997 levels. The Wolverine Leathers Division reported a $2.2 million (14.9%) decrease in net sales and other operating income from the second quarter of 1997 and a $3.5 million (13.3%) decrease from year-to-date 1997. The Wolverine Slipper Group recognized a $2.6 million (64.9%) net sales and other operating income decline for the second quarter of 1998 and a $1.1 million decrease (31.1%) for the year-to-date 1998 when compared to the same periods in the prior year. The Hush Puppies domestic and foreign wholesale operations' 1998 net sales and other operating income decreased $4.7 million (12.1%) from the 1997 second quarter level and increased $0.1 million (0.1%) over the year-to-date 1997 level. The decrease for the second quarter of 1998 was primarily the result of a planned downsizing of the Hush Puppies UK, Ltd. operations. Other operating income from the Hush Puppies International licensing operation increased $0.6 million (11.2%) for the year-to-date 1998 over the same period in 1997 reflecting continued strong global demand for the brand. The Hush Puppies Retail Division's year-to-date net sales and other operating income increased $1.0 million (6.8%) over the second quarter 1997 level, with same-store net sales down 1.8% from the second quarter of 1997 level, reflecting the sluggish demand in the retail footwear sector. The Wolverine Footwear Group's strong performance continued with the Wolverine Boots and Shoes Division reporting a $3.3 million (11.6%) and $5.5 million (9.6%) increase in net sales and other operating income over the 1997 second quarter and year-to-date levels, -9-
respectively. Hy-Test[REGISTERED] Boots and Shoes reported a $0.7 million (9.4%) and $2.3 million (14.5%) decrease in net sales and other operating income for the second quarter and year-to-date of 1998, respectively. This was a result of the sale of four Company-owned retail and wholesale distribution groups since the second quarter of 1997. Net sales and other operating income for the Bates Footwear Division, including the Department of Defense contract business, improved $2.0 million (17.1%) for second quarter of 1998 and $3.7 million (16.0%) for the first half of 1998 over prior year levels, reflecting increased penetration into military, uniform and export markets. The newly formed Wolverine Outdoor Division, comprised of Coleman[REGISTERED] branded footwear and Merrell[REGISTERED] branded footwear which was acquired in the fourth quarter of 1997, reported net sales and other operating income of $9.6 million for the second quarter of 1998 and $18.6 million for year-to-date 1998. The Caterpillar Footwear Group recognized a $1.0 million (8.1%) and $2.6 million (10.6%) increase in net sales and other operating income for the second quarter and year-to-date of 1998, respectively, as compared to the same periods of 1997. Domestically, the CAT[REGISTERED] footwear brand continues to expand its retail distribution, while internationally it has accelerated its growth in the Pacific Rim and Latin American regions. The Wolverine Slipper Group's second quarter and year-to-date 1998 net sales and other operating income decreased $2.6 million and $1.1 million, respectively, compared to the same periods in 1997, primarily as a result of a decrease in shipments of non-seasonal merchandise. The Wolverine Leathers Division recorded a slight decrease in net sales and other operating income of $1.7 million (8.3%) from the first half of 1997 primarily as a result of the branded wholesale operations maintaining higher inventories of sueded products as compared to 1997. Gross margin as a percentage of net sales and other operating income for the second quarter of 1998 was 33.6% compared to the prior year's second quarter level of 31.9%. Year-to-date gross margin of 32.2% for 1998 compared to 30.8% for the same period in 1997. The improvement in gross margin was primarily a result of higher initial margins, the 1997 closures of three Arkansas women's shoe factories and conversion of a New York slipper factory into a warehouse. The Hush Puppies Company's gross margin remained flat for year-to-date 1998 as compared to 1997. Hush Puppies UK, Ltd. reported a 5.6 percentage point increase in gross margin for year-to-date 1998 as compared to 1997 as a result of a shift in business from lower margin concept stores to higher margin department and shoe stores. The Wolverine Footwear Group experienced a 1.0 percentage point drop in gross margin for year-to-date 1998 as compared to the same period of 1997 due to initial product development investments required to position recent -10-
acquisitions and new product launches. The Caterpillar Footwear Group recognized a 1.1 percentage point increase in gross margin for the first half of 1998 when compared to the 1997 level resulting primarily from higher initial margins in its domestic wholesale operations. Gross margin gains of $.7 million from the Wolverine Leathers Division during the first half of 1998 were mostly offset by lower gross margins experienced by the Wolverine Slipper Group. Selling and administrative expenses of $32.5 million for the second quarter of 1998 increased $3.8 million over the 1997 second quarter level of $28.7 million and, as a percentage of net sales and other operating income, increased to 22.9% compared to the 22.4% in the second quarter of 1997. Year-to-date selling and administrative expenses for 1998 increased $7.7 million to $67.1 million from $59.3 million for the same period of 1997 and, as a percentage of net sales and other operating income, remained flat at 23.1%. The increase in selling and administrative expenses for the second quarter as a percentage of net sales and other operating income was primarily the result of investments in marketing and development for the new Harley-Davidson[REGISTERED] footwear brand, the new worldwide program for Coleman[REGISTERED] brand footwear and the sales and distribution programs for Russia. Interest expense for the second quarter of 1998 was $2.1 million, compared to $1.3 million for the same period of 1997. Year-to-date interest expense for 1998 and 1997 was $3.7 million and $2.3 million, respectively. The increase in interest expense reflects additional borrowings on the revolving credit facility for the 1997 acquisition of the Merrell[REGISTERED] outdoor footwear business and increased working capital requirements associated with higher sales volume. The year-to-date and second quarter effective tax rate of 33.5% for 1998 increased from 31.9% for the same periods in 1997 as a result of earnings from certain foreign subsidiaries, which are taxed generally at lower rates, becoming a smaller percentage of total consolidated earnings. Net earnings of $9.2 million for the twelve weeks ended June 20, 1998 compared favorably to net earnings of $7.4 million for the same period in 1997 (24.3% increase). Year-to-date net earnings increased to $15.5 million in 1998 from $12.1 million for the same period of 1997 (28.9% increase). Diluted earnings per share of $0.21 for the second quarter of 1998 compares to $0.17 for the same period of 1997. Year-to-date diluted earnings per share of $0.36 compares to $0.28 for the same period of 1997. Increased net earnings are primarily a result of the items noted above. -11-
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities was $12.0 million in 1998 compared to $36.5 million in 1997. Cash of $30.2 million for 1998 and $50.4 million for 1997 was used to fund working capital requirements. Accounts receivable of $133.3 million at June 20, 1998 reflect an increase of $24.8 million (22.9%) over the balance at June 14, 1997 and a decrease of $4.7 million (3.4%) from the January 3, 1998 balance. The increase in accounts receivable related primarily to the increase in net sales and other operating income, the acquisition of the Merrell[REGISTERED] outdoor footwear business, and shipments made to the new Russian distributor. Inventories of $173.4 million at June 20, 1998 reflect a decrease of $2.4 million (1.4%) compared to the balance at June 14, 1997 and an increase of $29.5 million (20.5%) over the balance at January 3, 1998. Accounts payable of $16.7 million at June 20, 1998 reflect a $6.8 million (28.9%) decrease from the $23.5 million balance at June 14, 1997 and a $7.6 million (31.3%) decrease from the $24.3 million balance at January 3, 1998. Additions to property, plant and equipment of $15.6 million in the first half of 1998 compares to $11.9 million reported during the same period in 1997. The majority of these expenditures are related to construction of a new corporate business center, modernization of existing office buildings, replacement of legacy information systems, expansion of warehouse facilities and purchases of manufacturing equipment necessary to upgrade the Company's footwear and leather manufacturing facilities. Depreciation and amortization of $5.3 million in the first half of 1998 compares to $4.7 million in the comparable period of 1997. This increase was a result of the capital investments noted above and the amortization of goodwill related to the 1997 and 1996 acquisitions discussed below. The Company maintains short-term borrowing and commercial letter-of-credit facilities of $68.4 million, of which $32.7 million, $39.3 million and $38.5 million were outstanding at June 20, 1998, January 3, 1998 and June 14, 1997, respectively. Long-term debt, excluding current maturities, of $116.3 million at June 20, 1998 compares to $84.2 million and $89.8 million at June 14, 1997 and January 3, 1998, respectively. The increase in debt since January 3, 1998 was a result of the seasonal working capital requirements of the Company. It is expected that continued growth of the Company will require increases in capital funding over the next several years. The combination of cash flows from operations and available credit facilities are expected to be sufficient to meet future capital needs. The dividend declared in the 1998 second quarter of $.0275 per share of common stock represents approximately a 26.7% increase over the dividend declared in the second quarter of 1997 of $.0217 per share. -12-
The dividend is payable August 3, 1998 to stockholders of record on July 1, 1998. Additionally, shares issued under stock incentive plans provided cash of $0.2 million in 1998 compared to $2.2 million in 1997. On October 17, 1997, the Company completed the purchase of substantially all of the assets of the Merrell[REGISTERED] outdoor footwear business from the Outdoor Division of Sports Holdings Corp. The purchase price of this acquisition was $16.3 million, of which $15.8 million was paid in cash in 1997. During 1996, the Company completed two acquisitions, the work, safety and occupational footwear business of Hy-Test, Inc. from The Florsheim Shoe Company and the rights to and certain assets of the Hush Puppies[REGISTERED] wholesale footwear business in the United Kingdom and Ireland from British Shoe Corporation, a subsidiary of Sears Plc. The combined purchase price of these acquisitions was $31.5 million, of which $29.2 million was paid in cash in 1996. The Company has an active program to evaluate strategic business acquisitions on a global basis and may, from time to time, make additional acquisitions. The current ratio for the second quarter was 5.7 to 1.0 in 1998 compared with 4.9 to 1.0 for the same period of 1997. The Company's total debt to total capital ratio increased to .30 to 1.0 in 1998 from .26 to 1.0 in 1997. IMPACT OF YEAR 2000 The Company is currently in the process of addressing a problem that is facing all users of automated information systems. The "Year 2000 Issue" is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This situation could result in a system failure or miscalculations causing disruptions to operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company discussed its plan for assessing and addressing the Year 2000 Issue as it relates to the Company in its Annual Report on Form 10-K for the fiscal year ended January 3, 1998. There have been no material changes in that information. INFLATION Inflation has not had a significant impact on the Company over the past three years nor is it expected to have a significant impact in -13-
the foreseeable future. The Company continuously attempts to minimize the effect of inflation through cost reductions and improved productivity. FORWARD-LOOKING STATEMENTS This discussion and analysis of financial condition and results of operations, and other sections of this report, contain forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the footwear industry, the economy, and about the Company itself. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," 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 ("Future 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 forward-looking statements. Furthermore, the Company undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. Future 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 degree of competition by the Company's competitors; changes in government and regulatory policies; changes in trading policies or import and export regulations; changes in interest rates, tax laws, duties or applicable assessments; technological developments; and changes in domestic or international economic conditions. These matters are representative of the Future 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On April 27, 1998, the Company held its 1998 Annual Meeting of Stockholders. The purposes of the meeting were to elect four directors for three-year terms expiring in 2001 and to consider and ratify the appointment of Ernst & Young LLP as the Company's independent auditors for the current fiscal year. -14-
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: NAME OF CANDIDATE SHARES VOTES <TABLE> <CAPTION> <S> <C> <C> Geoffrey B. Bloom For 37,356,673 Authority Withheld 2,417,364 Broker Non-Votes 0 David T. Kollat For 37,356,429 Authority Withheld 2,417,608 Broker Non-Votes 0 David P. Mehney For 37,355,367 Authority Withheld 2,418,670 Broker Non-Votes 0 Timothy J. O'Donovan For 37,355,949 Authority Withheld 2,418,088 Broker Non-Votes 0 </TABLE> The following persons remained as directors of the Company with terms expiring in 1999: Daniel T. Carroll, Phillip D. Matthews and Paul D. Schrage. The following persons remained as directors of the Company with terms expiring in 2000: Alberto L. Grimoldi, Joseph A. Parini, Joan Parker and Elizabeth A. Sanders. The stockholders also 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 that matter: <TABLE> <CAPTION> SHARES VOTED <S> <C> <C> For 36,698,661 Against 52,040 Abstentions 23,561 Broker Non-Votes 0 </TABLE> -15-
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 3.1 Certificate of Incorporation, as amended. Previously filed as Exhibit 3.1 to the Company's Quarterly Report of Form 10-Q for the period ended June 14, 1997. Here incorporated by reference. 3.2 Amended and Restated Bylaws. Previously filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. Here incorporated by reference. 4.1 Certificate of Incorporation, as amended. See Exhibit 3.1 above. 4.2 Rights Agreement dated as of April 17, 1997. Previously filed with the Company's Form 8-A filed April 12, 1997. Here incorporated by reference. 4.3 Credit Agreement dated as of October 11, 1996 with NBD Bank, N.A. as Agent. Previously filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 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 those described in Exhibit 4.4 above. The amount of none of these classes of debt outstanding on June 20, 1998 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. 10.1 Employment Agreement with Geoffrey B. Bloom dated April 27, 1998. 27 Financial Data Schedule. (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the period for which this report is filed. -16-
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 AUGUST 4,1998 /S/GEOFFREY B. BLOOM Date Geoffrey B. Bloom Chairman and Chief Executive Officer (Duly Authorized Signatory for Registrant) AUGUST 4, 1998 /S/STEPHEN L. GULIS, JR. Date Stephen L. Gulis, Jr. Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Duly Authorized Signatory for Registrant) -17-
EXHIBIT INDEX EXHIBIT NUMBER DOCUMENT 3.1 Certificate of Incorporation, as amended. Previously filed as Exhibit 3.1 to the Company's Quarterly Report of Form 10-Q for the period ended June 14, 1997. Here incorporated by reference. 3.2 Amended and Restated Bylaws. Previously filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. Here incorporated by reference. 4.1 Certificate of Incorporation, as amended. See Exhibit 3.1 above. 4.2 Rights Agreement dated as of April 17, 1997. Previously filed with the Company's Form 8-A filed April 12, 1997. Here incorporated by reference. 4.3 Credit Agreement dated as of October 11, 1996 with NBD Bank, N.A. as Agent. Previously filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 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 those described in Exhibit 4.4 above. The amount of none of these classes of debt outstanding on June 20, 1998 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. 10.1 Employment Agreement with Geoffrey B. Bloom dated April 27, 1998. 27 Financial Data Schedule.