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 17, 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
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 twelve (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 16,988,951 shares of Common Stock, $1 par value,
outstanding as of July 12, 1995, of which 562,903 shares are held as
Treasury Stock. The shares outstanding, excluding shares held in
treasury, have been adjusted for the 3-for-2 stock split paid on May
15, 1995, on shares outstanding at the close of business on May 1,
1995.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of dollars)
<CAPTION>
June 17, December 31, June 18,
1995 1994 1994
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,396 $ 2,949 $ 2,215
Accounts receivable, less allowances
June 17, 1995 - $4,961
December 31, 1994 - $3,959
June 18, 1994 - $3,975 73,317 70,669 61,953
Inventories:
Finished products 70,942 48,637 55,594
Raw materials and work in process 38,917 30,388 30,936
109,859 79,025 86,530
Other current assets 15,098 14,902 12,327
Net current assets of
discontinued operations 1,403 991 3,327
TOTAL CURRENT ASSETS 202,073 168,536 166,352
PROPERTY, PLANT & EQUIPMENT
Gross cost 102,215 97,028 94,335
Less accumulated depreciation (64,258) (61,680) (60,759)
37,957 35,348 33,576
OTHER ASSETS 23,841 26,267 27,140
TOTAL ASSETS $ 263,871 $230,151 $227,068
</TABLE>
See notes to consolidated condensed financial statements.
-2-
<TABLE>
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS - Continued
(Thousands of dollars)
<CAPTION>
June 17, December 31, June 18,
1995 1994 1994
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 2,881 $ 1,432 $ 5,225
Accounts payable and
other accrued liabilities 40,626 41,284 38,315
Current maturities of long-term debt 120 304 4,719
TOTAL CURRENT LIABILITIES 43,627 43,020 48,259
LONG-TERM DEBT (less current maturities) 69,702 43,482 50,644
OTHER NONCURRENT LIABILITIES 10,950 11,125 9,828
STOCKHOLDERS' EQUITY
Common Stock - par value $1, authorized
25,000,000 shares; shares issued
(including shares in treasury):
June 17, 1995 - 16,982,623 shares
December 31, 1994 - 16,705,013 shares
June 18, 1994 - 16,496,812 shares 16,983 11,315 11,240
Additional paid-in capital 21,651 25,004 24,561
Retained earnings 107,136 101,873 89,784
Accumulated translation adjustments 340 332 361
Cost of shares in treasury:
June 17, 1995 - 562,645 shares
December 31, 1994 - 533,992 shares
June 18, 1994 - 681,817 shares (6,518) (6,000) (7,609)
TOTAL STOCKHOLDERS' EQUITY 139,592 132,524 118,337
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $263,871 $230,151 $227,068
</TABLE>
See notes to consolidated condensed financial statements.
-3-
<TABLE>
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(Thousands of dollars, except per share data)
(Unaudited)
<CAPTION>
12 Weeks Ended 24 Weeks Ended
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales and other operating
income $ 86,289 $79,319 $162,620 $146,085
Cost of products sold 58,799 54,898 112,342 100,557
Gross margin 27,490 24,421 50,278 45,528
Selling and administrative
expenses 21,172 19,423 40,085 37,652
Operating income 6,318 4,998 10,193 7,876
Other expenses (income):
Interest expense 952 876 1,653 1,616
Interest income (177) (121) (405) (196)
Other - net (104) 619 (321) 781
671 1,374 927 2,201
Earnings from continuing
operations
before income taxes 5,647 3,624 9,266 5,675
Income taxes 1,750 1,161 2,872 1,821
Earnings from continuing
operations 3,897 2,463 6,394 3,854
Loss from discontinued
operations, net of income
taxes - 79 - 179
NET EARNINGS $ 3,897 $ 2,384 $ 6,394 $ 3,675
Primary earnings (loss)
per share:
Continuing operations $ 0.23 $ 0.15 $ 0.38 $ 0.24
Discontinued operations - (0.01) - (0.02)
Net earnings $ 0.23 $ 0.14 $ 0.38 $ 0.22
Fully diluted earnings per share $ 0.23 $ 0.14 $ 0.38 $ 0.22
Cash dividends per share $ 0.035 $ 0.027 $ 0.068 $ 0.053
-4-
Shares used for net earnings
per share computation:
Primary 16,880,294 16,384,935 16,779,264 16,302,118
Fully diluted 16,880,294 16,534,935 16,823,293 16,559,262
</TABLE>
See notes to consolidated condensed financial statements.
-5-
<TABLE>
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
<CAPTION>
24 Weeks Ended
June 17, June 18,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings from continuing operations $ 6,394 $ 3,853
Depreciation, amortization and other non-cash items 1,696 489
Loss from discontinued operations - (178)
Changes in operating assets and liabilities:
Accounts receivable (2,648) 414
Inventories (30,834) (19,302)
Other current assets (608) 490
Accounts payable and other accrued liabilities (658) 6,732
NET CASH USED IN OPERATING ACTIVITIES (26,658) (7,502)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 38,181 15,981
Payments of long-term borrowings (12,145) (9,013)
Proceeds from short-term borrowings 3,449 4,388
Payments of short-term borrowings (2,000) (1,111)
Cash dividends (1,131) (877)
Proceeds from shares issued under employee
stock plans 1,797 1,576
NET CASH PROVIDED BY FINANCING ACTIVITIES 28,151 10,944
INVESTING ACTIVITIES
Additions to property, plant and equipment (5,187) (3,727)
Other 3,141 (1,230)
NET CASH USED IN INVESTING ACTIVITIES (2,046) (4,957)
DECREASE IN CASH AND CASH EQUIVALENTS (553) (1,515)
Cash and cash equivalents at beginning of year 2,949 3,730
CASH AND CASH EQUIVALENTS AT END OF SECOND QUARTER $ 2,396 $ 2,215
</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 17, 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 (registered trademark) 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.
-7-
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results Of Operations - Comparison Of Second Quarter 1995 To Second Quarter
1994
Second quarter net sales of $86.3 million for 1995 exceeded 1994 levels by
$7.0 million (an 8.8% increase), and 1995 year-to-date sales of $162.6
million compares to $146.1 million recorded for the comparable period of
1994. The strong performance of the Wolverine Footwear Group continued,
accounting for $5.4 million of the quarterly sales increase and $14.9
million of the year-to-date increase. In addition, second quarter
increases of $3.2 million were generated by United States Department of
Defense contracts, which helped offset a $1.0 million decrease in the
retail division, resulting from the retail repositioning conducted in 1994.
Gross margin as a percentage of net sales for the second quarter of 1995
was 31.9% compared to the prior year level of 30.8%. Year-to-date margin
of 30.9% for 1995 compares to 31.2% for 1994. Improved margins were
recorded in the Wolverine Footwear Group through increased licensing
revenues and manufacturing and sourcing efficiencies. The gross margin
improvement also reflects the strong performance of the leather division
which reported an 11 percentage point margin increase. These improvements
were offset by decreases in the Hush Puppies Wholesale Division, resulting
from continuing margin pressures in the soft retail climate.
Selling and administrative costs totaling $21.2 million for the second
quarter of 1995 were $1.8 million (9.0%) higher than the second quarter
1994 levels of $19.4 million. Both years represent 24.5% of net sales,
indicating that expense controls remain strong. Distribution costs
associated with the increased sales volume and advertising and promotional
investments in the Wolverine Footwear Group accounted for $1.0 million of
the increase. Year-to-date selling and administrative expenses of $40.1
million (24.6% of net sales) is comparable to $37.7 million (25.8% of net
sales) in 1994. The year-to-date increases are principally associated with
advertising, promotional and distribution costs.
Interest expense for the second quarter of 1995 was $1.0 million, compared
to $.9 million for the same period of 1994. Year-to-date interest expense
for 1995 of $1.7 million remains consistent with 1994 levels of $1.6
million. The 1995 interest expense totals reflect a reduction in average
borrowing cost offset by an increase in borrowings outstanding.
The effective income tax rate decreased in 1995 from 1994 levels (31.0%
compared to 32.0%) for both the second quarter and year-to-date periods.
The decrease was caused by a higher percentage of the pre-tax earnings
being attributable to the non-taxable net earnings of foreign subsidiaries.
-8-
Net earnings from continuing operations of $3.9 million ($.23 per share)
for the twelve weeks ended June 17, 1995 compares favorably to earnings of
$2.5 million ($.15 per share) for the respective period of 1994. Year-to-
date earnings from continuing operations of $6.4 million ($.38 per share)
in 1995 compares with earnings of $3.9 million ($.24 per share) for the
same period of 1994. Increased earnings are primarily a result of the
items noted above.
Financial Condition, Liquidity and Capital Resources
Accounts receivable of $73.3 million at June 17, 1995 reflects an increase
of $11.4 million and $2.6 million over the balance at June 18, 1994 and
December 31, 1994, respectively. Inventories of $109.9 million at June 17,
1995 reflects an increase of $23.3 million and $30.8 million over the
balance at June 18, 1994 and December 31, 1994, respectively. The accounts
receivable increase is related to the increased volume and timing
differences in the second quarter shipping. The increased inventory levels
are considered necessary to meet future demand in both wholesaling and
manufacturing operations. However, aggressive inventory targets have been
established for the third and fourth quarters to reduce inventories to
levels which will be commensurate with the growth of the Company's
wholesale businesses.
Other current assets totaling $15.1 million at June 17, 1995 reflect a $2.8
million increase from June 18, 1994 and a $.2 million increase from
December 31, 1994. The increases primarily reflect a change in the current
portion of notes receivable.
Total interest bearing debt of $72.7 million on June 17, 1995 compares to
$60.6 million and $45.2 million at June 18, 1994 and December 31, 1994,
respectively. The increase in debt since January 1, 1994 reflects the
seasonal working capital requirements of the Company and the increase over
June 18, 1994 reflects the additional investment in inventories for
activities in the second half of 1995. The Company is currently examining
its long term capital requirements as the growth of the Company will
require increases in capital funding over the next several years. Long
term opportunities are being evaluated to supplement cash flows from future
earnings and to modify existing credit facilities to assure that the
Company's future capital requirements can be met.
The Company issued $30.0 million of senior debt during the third quarter of
1994 with an interest rate of 7.81% to replace $21.4 million of existing
10.4% senior debt and to reduce balances outstanding under a revolving
credit facility. Additionally, the long-term revolving debt scheduled to
expire in June 1995 was renegotiated during 1994 to provide more favorable
terms and conditions and was extended through June 1998.
The 1995 second quarter dividend declared of $.035 per share of common
stock represents a 29.6% increase over the $.027 per share (post split)
-9-
declared for the second quarter of 1994. The dividend is payable August 1,
1995 to stockholders of record on July 3, 1995.
The Company's increased capital investment has resulted in a $.8 million
increase in depreciation expense for the year-to-date 1995 over the same
period of 1994. Also included in other non-cash items in the statement of
cash flows is a $.5 million reduction of cash surrender value due to the
collection of death benefits.
During the fourth quarter of 1994, the Company adopted a formal plan to
withdraw from its Lamont's leased shoe department business, which resulted
in a charge to 1994 fourth quarter earnings of $1.2 million. The Company
negotiated an early exit, which was executed on July 15, 1995.
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 an
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. Previously filed as Exhibit 3.3 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 25, 1995. Here incorporated by reference.
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.
-10-
Exhibit
Number Document
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.
27 Financial Data Schedule.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed
during the quarter for which this report is filed.
-11-
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
July 31, 1995 s/ Geoffrey B. Bloom
Date Geoffrey B. Bloom
President and Chief Executive Officer
(Duly Authorized Signatory for Registrant)
July 31, 1995 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-
EXHIBIT INDEX
Exhibit
Number Document
3.1 Certificate of Incorporation, as amended. Previously filed as an
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. Previously filed as Exhibit 3.3 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 25, 1995. Here incorporated by reference.
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
-13-
on Form 10-K for the fiscal year ended December 31, 1994. Here
incorporated by reference.
27 Financial Data Schedule.
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES FOR THE PERIOD ENDED
JUNE 17, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-17-1995
<CASH> 2,396
<SECURITIES> 0
<RECEIVABLES> 73,317
<ALLOWANCES> 4,961
<INVENTORY> 109,859
<CURRENT-ASSETS> 202,073
<PP&E> 102,215
<DEPRECIATION> 64,258
<TOTAL-ASSETS> 263,871
<CURRENT-LIABILITIES> 43,627
<BONDS> 72,703
<COMMON> 16,963
0
0
<OTHER-SE> 122,609
<TOTAL-LIABILITY-AND-EQUITY> 263,871
<SALES> 162,620
<TOTAL-REVENUES> 162,620
<CGS> 112,342
<TOTAL-COSTS> 112,342
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,653
<INCOME-PRETAX> 9,266
<INCOME-TAX> 2,872
<INCOME-CONTINUING> 6,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,394
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
