Wolverine World Wide - 10-Q quarterly report FY

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.

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 about the Company itself including, without limitation, statements in Part 1, Item 2 regarding the sourcing realignment charge and 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 forward-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 impact of competition and pricing 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; changes in local, domestic or international economic and market conditions; the size and growth of footwear markets; changes in the amount or severity of inclement weather; changes due to the growth of Internet commerce; popularity of particular designs and 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 oth er intellectual property; changes in business strategy or development plans; and the ability to attract and retain qualified personnel. 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 Company undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

PART I. FINANCIAL INFORMATION

ITEM 1.     Financial Statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Thousands of dollars)

See notes to consolidated condensed financial statements

See notes to consolidated condensed financial statements

As of June 16, 2001, workforce terminations totaling 1,391 employees have occurred in the areas of manufacturing (1,272), general management (28) and administrative support (91).

4. 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:

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 16, 2001 and June 17, 2000

5. Comprehensive Income

Total comprehensive income was $8,744,000 and $13,694,000 for the 12-week and 24-week periods ended June 16, 2001, respectively, and $6,551,000 and $10,944,000, for the 12-week and 24-week periods ended June 17, 2000, respectively. In addition to net earnings, comprehensive income included foreign currency translation losses of $114,000 and $1,142,000 for the 12-week and 24-week periods ended June 16, 2001, respectively, and $1,044,000 and $1,446,000 for the 12-week and 24-week periods ended June 17, 2000, respectively.

6. Business Segments

The Company has one reportable segment that is engaged in the manufacture and marketing of branded footwear to the retail sector, including casual shoes, slippers, moccasins, dress shoes, boots, uniform shoes and work shoes. Revenues of this segment are derived from the sale of branded footwear products to external customers and the Company's retail division as well as royalty income from the licensing of the Company's trademarks and brand names to licensees. The business units comprising the branded footwear segment manufacture or source, market and distribute products in a similar manner. Branded footwear is distributed through wholesale channels and under licensing and distributor arrangements.

The other business units in the following table consist of the Company's retail, apparel and accessories, tannery and procurement operations. The Company operated 62 domestic retail stores at June 16, 2001 that sell Company-manufactured or sourced products and footwear manufactured by unaffiliated companies. The other business units distribute products through retail and wholesale channels.

There have been no changes in the way the Company measures segment profits or in its basis of determining business segments.

Business segment information is as follows (thousands of dollars):

7. Financial Instruments and Risk Management

Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 138. The standard requires that all derivative instruments be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company utilizes foreign currency forward exchange contracts to manage the volatility associated with foreign currency purchases in the normal course of business. These contracts typically have maturities of less than one year and are not designated as accounting hedges. The adoption of SFAS No. 133 did not have a material effect on the Company's earnings or statement of financial position.

Results of Operations - Comparisons of the 12-Weeks and 24-Weeks Ended June 16, 2001 (2001 second quarter and 2001 year-to-date, respectively) to the 12-Weeks and 24-Weeks Ended June 17, 2000 (2000 second quarter and 2000 year-to-date, respectively)

Net sales and other operating income of $151.7 million for the 2001 second quarter exceeded the 2000 second quarter level of $140.6 million by $11.1 million (7.9%) and 2001 year-to-date net sales and other operating income of $309.9 million exceeded the 2000 year-to-date level of $287.9 million by $22.0 million (7.6%). On a combined basis, net sales and other operating income for the Company's branded footwear businesses, consisting of the Casual Footwear Group (comprised of The Hush Puppies Company, the Children's Footwear Group and the Wolverine Slipper Group), the Wolverine Footwear Group (comprised of the Wolverine®, HYTEST®, Stanley®, Coleman®, Bates® and Harley-Davidson® brands), and the Performance Footwear Group (comprised of the Caterpillar® and Merrell® brands), increased $10.4 million (8.5%) for the 2001 second quarter and $19.6 million (7.7%) for 2001 year-to-date as compared to the respective periods of 2000. The Company's other business units, consisting of Wo lverine Retail, Apparel and Accessories Licensing, Wolverine Leathers and Wolverine Procurement, reported a net sales and other operating income increase of $0.7 million (4.1%) for the 2001 second quarter and $2.4 million (7.4%) for 2001 year-to-date as compared to the respective periods of 2000.

The Casual Footwear Group reported a decrease in net sales and other operating income of $5.1 million (14.6%) in the 2001 second quarter and an $11.4 million (14.4%) decrease for 2001 year-to-date when compared to the same periods in 2000. The Hush Puppies Company's 2001 second quarter and year-to-date net sales and other operating income decreased from the 2000 levels as Hush Puppies U.K. experienced soft sales as a result of the difficult U.K. retail environment and the sale of its largest customer to a discount retailer. Partially offsetting the shortfall, Hush Puppies U.S.'s 2001 second quarter and year-to-date net sales and other operating income increased compared to the same period in 2000 due to expanded product offerings and an increase in consumer demand. The Children's Footwear Group also experienced a decrease in net sales and other operating income for the 2001 second quarter and year-to-date as a result of losing one major customer and a number of other customers that exited the childrens' f ootwear business. The Wolverine Slipper Group's 2001 second quarter and year-to-date net sales and other operating income decreased compared to the same periods in 2000 as a result of a significant reduction of closeout shipments.

The Wolverine Footwear Group's net sales and other operating income increased $8.4 million (14.9%) for the 2001 second quarter as compared to 2000 and $12.1 million (10.7%) for 2001 year-to-date over 2000 year-to-date. Harley-Davidson®, Stanley® and Wolverine® footwear contributed the majority of this increase as the brands are becoming more widely distributed in the marketplace. These increases were partially offset by the HYTEST® work boot wholesale business which reported a decrease in net sales and other operating income as compared to the 2000 second quarter and year-to-date levels as a result of decreased shipments to independent mobile shoe distributors, who historically sold only HYTEST® brand product, but now also sell Wolverine®, CAT® and Stanley® brand work boots.

The Performance Footwear Group continued its strong growth, reporting an increase in net sales and other operating income of $7.1 million (22.6%) for the 2001 second quarter and $18.8 million (30.1%) for 2001 year-to-date over the same periods of 2000. The Merrell® outdoor footwear business accounted for substantially all of the increase in net sales and other operating income as a result of new product offerings and expansion of its domestic and international distribution. CAT® footwear reported a slight decrease in net sales and other operating income for the 2001 second quarter resulting in a modest increase for 2001 year-to-date as compared to the respective periods of 2000.

Within the Company's other business units, Wolverine Retail's net sales and other operating income increased $0.4 million (4.3%) for the 2001 second quarter and $1.0 million (5.8%) for 2001 year-to-date as compared to

The information concerning quantitative and qualitative disclosures about market risk contained in the Company's Form 10-K Annual Report for its fiscal year ended December 30, 2000, is incorporated herein by reference.

The Company faces market risk to the extent that changes in foreign currency exchange rates affect the Company's foreign assets, liabilities and inventory purchase commitments and to the extent that its long-term debt requirements are affected by changes in interest rates. The Company manages these risks by attempting to denominate contractual and other foreign arrangements in U.S. dollars and by maintaining a significant percentage of fixed-rate debt. The Company does not believe that there has been a material change in the

PART II. OTHER INFORMATION

On April 26, 2001, the Company held its 2001 Annual Meeting of Stockholders. The purposes of the meeting were to elect four directors for three-year terms expiring in 2004, to consider and approve the proposed Stock Incentive Plan of 2001 and to consider and ratify the appointment of Ernst & Young LLP as the Company's 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:

The following persons remained as directors of the Company with terms expiring in 2002: Daniel T. Carroll, Donald V. Fites, Phillip D. Matthews and Paul D. Schrage. The following persons remained as directors of the Company with terms expiring in 2003: 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:

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.