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)
JUNE 20, JANUARY 3, JUNE 14,
1998 1998 1997
(UNAUDITED) (AUDITED) (UNAUDITED)
---------- -------- ----------
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
========== =========== ===============
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)
JUNE 20, JANUARY 3, JUNE 14,
1998 1998 1997
(UNAUDITED) (AUDITED) (UNAUDITED)
---------- -------- ----------
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
=========== =========== ==========
( ) - Denotes deduction.
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 SHARES AND PER SHARE DATA)
(UNAUDITED)
12 WEEKS ENDED 24 WEEKS ENDED
------------------------------ ----------------------------
JUNE 20, JUNE 14, JUNE 20, JUNE 14,
1998 1997 1998 1997
-------------- ----------- ----------- -----------
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
============== =========== ========== ============
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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
============== =========== ========== ============
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)
24 WEEKS ENDED
--------------------------------
JUNE 20, JUNE 14,
1998 1997
------------ --------------
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
========== ==========
( ) - 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
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:
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QUARTER ENDED YEAR-TO-DATE ENDED
------------------------ -------------------------
JUNE 20, JUNE 14, JUNE 20, JUNE 14,
1998 1997 1998 1997
--------- ---------- ---------- ----------
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
========== ========== ========== ==========
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.
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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
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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.
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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
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
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:
SHARES VOTED
For 36,698,661
Against 52,040
Abstentions 23,561
Broker Non-Votes 0
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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.
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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
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.
EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT (the "Agreement") made as of
April 27, 1998, by and between WOLVERINE WORLD WIDE, INC., a Delaware
corporation (the "Employer"), and GEOFFREY B. BLOOM, an individual (the
"Executive").
R E C I T A L S :
Executive has been employed by Employer as its Chief Executive
Officer. Executive has an existing employment agreement with Employer
dated April 17, 1993, which is superseded by this Agreement.
THEREFORE, in consideration of the foregoing and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. EMPLOYMENT. Employer hereby agrees to continue to employ
Executive and Executive agrees to continue to serve Employer in an
executive, managerial and supervisory capacity on the terms and conditions
set forth in this Agreement.
2. POSITION AND DUTIES. Executive shall serve as Chief Executive
Officer of Employer reporting only to Employer's Board of Directors.
Executive shall have supervision and control over, and responsibility for,
the general management and operation of Employer, and shall have such other
powers and duties as may from time to time be prescribed by Employer's
Board of Directors. Subject to the foregoing, Executive agrees to devote
his best efforts and substantially all his working time and attention to
the business of Employer and its subsidiaries, and to the performance of
such executive, managerial and supervisory duties as may be assigned to him
by Employer's Board of Directors; provided, that Executive shall be
permitted to serve on a reasonable number of boards of directors of other
companies, subject to the prior consent of Employer's Board of Directors,
and render occasional services in connection with such service, and
Executive shall be permitted to participate in charitable and civic
endeavors to the extent such service does not interfere with Executive's
obligations under this Agreement.
3. TERM OF EMPLOYMENT. Except in the case of early termination as
specifically provided in this Agreement, the term of Executive's employment
shall continue until April 30, 2000; if the Executive's employment
continues thereafter it will be terminable at will, or on such terms as the
parties may agree in writing, but the Executive's obligations under Section
15 of this Agreement, and the Employer's obligation to pay accrued
compensation called for by this Agreement, shall continue in effect.
4. COMPENSATION. For the services to be rendered by Executive as
provided in this Agreement, Employer agrees to pay Executive in thirteen
(13) equal installments during each year, a base salary of not less than
Six Hundred Thousand Dollars ($600,000) per annum, payable effective as of
April 27, 1998 and prorated for any partial year of employment.
Executive's base salary may be increased at the discretion of Employer's
Board of Directors and/or its Compensation Committee at any time and from
time to time during the term of this Agreement. Executive's base salary
may be decreased, with the consent of Executive, by Employer's Board of
Directors and/or its Compensation Committee at any time and from time to
time during the term of this Agreement. Upon any such increase or decrease
in Executive's base salary, the new rate shall without further action by
the parties be deemed to be substituted for the rate set forth in this
Agreement and this Agreement shall be deemed to be amended accordingly.
5. FRINGE BENEFITS. In addition to the compensation provided in
Section 4 of this Agreement, Executive shall also be entitled to the
following fringe benefits:
(a) Executive shall participate in both the Executive Long-
Term Incentive Plan ("Long-Term Bonus Plan") and the Executive
Short-Term Incentive Plan ("Annual Bonus Plan"), or any successor
or substitute plans, and in such other bonus plans as may be made
available to upper echelon executives of Employer. The Long-Term
Bonus Plan and the Annual Bonus Plan are collectively referred to
herein as the "Plans".
(b) Executive shall be entitled to a leased automobile of a
type to be mutually agreed upon by Executive and Employer. In
addition, Employer shall pay maintenance and all other operating
expenses, including gasoline, repairs and insurance, with respect
to such automobile in accordance with applicable regulations
issued or administered by the Internal Revenue Service.
(c) Employer shall pay for reasonable dues, assessments,
and other non-discretionary expenses and all business related
expenses, associated with a membership in two country clubs or
similar luncheon or social organizations to be selected by
Executive in the Grand Rapids, Michigan area or in such other
clubs or organizations as permitted by Employer's Compensation
Committee.
(d) Employer shall provide Executive with the benefits of a
term life insurance policy in the amount of Five Hundred Thousand
Dollars ($500,000) payable to his designated beneficiaries, in
addition to the benefits of all other life insurance plans as
provided in this Agreement. Upon termination of Executive's
employment (except for voluntary resignation by Executive without
Good Reason or termination of Executive's employment by the
Employer for Cause), such Five Hundred Thousand Dollar ($500,000)
life insurance policy shall be assigned to Executive and Employer
-2-
shall pay all premiums due after any such assignment until the
expiration of the term of this Agreement. In the event of
voluntary resignation without Good Reason by Executive or
termination of Executive for Cause, at Executive's option, such
life insurance policy shall be assigned to Executive and
Executive shall pay all premiums due after such assignment.
(e) Employer shall provide Executive with tax preparation
services and financial planning advice and services consistent
with Employer's past practice or as may be made available to
upper echelon executives of Employer.
(f) Employer shall pay Executive's reasonable legal
expenses related to the negotiation and execution of this
Agreement.
(g) Executive shall be entitled to four (4) weeks of
vacation per year, plus such additional vacation as may be
permitted with the concurrence of Employer's Board of Directors.
(h) Executive shall further be entitled to all benefits in
the way of "fringes" presently available or which may
subsequently be made available to upper echelon executives of
Employer as a class or benefits substantially equivalent thereto,
so long as such benefits or plans are in effect, including but
not limited to all retirement, stock option, incentive, group
life, disability, hospitalization, medical, dental and surgical
benefit plans presently or hereafter in effect and available to
upper echelon executives of Employer, or their equivalent.
(i) Employer and Executive are party to a Supplemental
Executive Retirement Plan ("SERP") Participation Agreement dated
January 1, 1996. In consideration of entering into this
Agreement, Executive will be credited with two (2) additional
years of "deemed service" under SERP Section 5.1(a).
(j) If Executive remains employed under this Agreement
through April 30, 2000, he will be credited with years of service
under the SERP equal to his actual service as of April 30, 2000,
(16 years, including years of deemed service in Section 5(i) of
this Agreement), plus four (4) additional years of "deemed
service" under SERP Section 5.1(a) (iii), (for the total years of
service under the SERP of 20 years). Executive shall also be
credited with an additional four (4) years of deemed service
under the SERP (for total years of service under the SERP of 24
years) if the Employer's Board of Directors determines that the
planning and effectuation of the transition from Executive to his
successor have been carried out successfully (such determination
-3-
to be made in the Board's good faith discretion, and to be made
by April 30, 2000). Additional years of "deemed service"
credited in accordance with this Section 5(j) are collectively
referred to as the "Additional SERP Benefit."
(k) Executive shall be awarded 40,000 restricted shares of
the Employer's common stock under the Employer's 1997 Stock
Incentive Plan or other plan designated by the Board of
Directors, on the following terms:
(i) If the Employer's net earnings as reported in
Employer's audited financial statements for its fiscal year
2001 exceed the Employer's net earnings for its fiscal year
2000 by at least 10%, all 40,000 shares shall vest as of
April 30, 2001; or
(ii) If the Employer's net earnings for its fiscal year
2001 exceed the Employer's net earnings for its fiscal year
2000 by at least 5% but less than 10%, the number of shares
that shall vest as of April 30, 2001 shall be: the
percentage increase in net earnings in excess of 5% divided
by 5% times 40,000 (for example, if the increase in net
earnings was 6.32%, the number of shares to vest would be
1.32% divided by 5% times 40,000 = 10,560), and the balance
of the 40,000 shares shall be forfeited; or
(iii) If the Employer's net earnings for its fiscal
year 2001 do not exceed the Employer's net earnings for its
fiscal year 2000 by at least 5%, all 40,000 shares shall be
forfeited.
(l) The Executive shall be awarded 22,500 restricted shares
of the Employer's common stock under the Employer's 1997 Stock
Incentive Plan or other plan designated by the Board of
Directors, on the following terms:
(i) If the average closing per share price of the
Employer's common stock as reported on the New York Stock
Exchange ("NYSE") for the 10 trading days preceding April
30, 2001 has increased by at least 15% over the average
closing per share price for the 10 trading days preceding
April 30, 2000, all 22,500 restricted shares shall vest,
effective as of April 30, 2001; or
(ii) If the average closing per share price of the
Employer's common stock as reported on the NYSE for the 10
trading days preceding April 30, 2001 is greater than the
average closing per share price for the 10 trading days
-4-
preceding April 30, 2000, but such increase is less than
15%, the number of restricted shares that shall vest as of
April 30, 2001 shall be the percentage increase in the
average closing per share price divided by 15% times 22,500
(for example, 7.5% divided by 15% times 22,500 = 11,250),
and the balance of the 22,500 restricted shares shall be
fortified; or
(iii) If the average closing per share price of the
Employer's common stock as reported on the NYSE for the 10
trading days preceding April 30, 2001 is equal to or less
than the average closing per share price of the Employer's
common stock for the 10 trading days preceding April 30,
2000, all 22,500 shares shall be forfeited.
In making the calculations called for by this Section 5(l), the
average per share price and the number of shares awarded to Executive shall
be adjusted to eliminate the effect of any stock split, stock dividend,
recapitalization or other similar transaction.
Notwithstanding any provision or term of this Agreement to the
contrary, Employer shall not be required or obligated to maintain, amend or
adopt any particular fringe benefit plan or policy, including those plans
or policies referenced in this Section, or to pay, credit or otherwise vest
in Executive as a participant any amount or level of award or grant under
any such plan; provided, however, that the foregoing shall not apply to any
deferred bonus, payment or other credit awarded to Executive under any such
plan, nor shall the foregoing limit in any way or allow the Employer to
avoid the commitment to Executive in Section 5(j), (k) and (l) above.
6. ADDITIONAL BENEFITS. The provisions of this Agreement with
respect to compensation and other benefits payable to Executive shall not
preclude or in any way affect the grant by Employer or the receipt by
Executive of increases in base salary or total compensation, or bonuses, or
additional compensation, contingent or otherwise, to be determined solely
in the discretion of Employer's Board of Directors and/or its Compensation
Committee, or by other persons or groups to whom such authority is legally
delegated.
7. EXPENSES. In addition to the compensation and benefits provided
in Sections 4 and 5 of this Agreement, Employer will reimburse or pay
Executive's reasonable and appropriate expenses for his business related
travel and entertainment in accordance with Employer's then current policy.
As a condition to such reimbursement or payment, Executive shall be
required to account to Employer for expenses incurred in the performance of
his employment duties. Executive shall be entitled, if Executive deems it
appropriate, to bring his spouse with him on up to two out of town trips
involving business of Employer per year, and Employer shall reimburse
-5-
Executive or pay the reasonable and appropriate expenses incurred for her
travel and entertainment. Employer may pay the travel and entertainment
expenses of Executive's spouse incurred on more than two business trips per
year with the prior approval of Employer's Board of Directors, and/or its
Compensation Committee.
8. TERMINATION OF EMPLOYMENT. During the term of this Agreement,
the Executive's employment may be terminated as follows:
(a) DEATH. The Executive's employment shall terminate
automatically in the event of his death.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness, he shall have been absent from
his duties with Employer on a full time basis for six (6)
consecutive months, and if he shall have not returned to the full
time performance of his duties within thirty (30) days after
written notice after such six (6) month period, Employer may
terminate this Agreement for "Disability."
(c) TERMINATION BY EMPLOYER FOR CAUSE. Employer may
terminate Executive's employment for Cause. For purposes of this
Agreement, "Cause" shall mean: (i) the willful and continued
failure by Executive to substantially perform his duties with
Employer (other than any such failure resulting from Executive's
incapacity due to physical or mental illness, or any such actual
or anticipated failure resulting from Executive's termination for
Good Reason) after a demand for substantial performance is
delivered to Executive by Employer's Board of Directors (which
demand shall specifically identify the manner in which the Board
believes that Executive has not substantially performed his
duties); or (ii) the commission of a felony or other gross
misbehavior injurious to Employer or its reputation, as
determined by Employer's Board of Directors; or (iii) willful
misconduct by Executive which is intended to result in material
harm to the business or goodwill of the Employer. For purposes
of this Section, no act or failure to act on the part of
Executive shall be considered "willful" unless done or omitted to
be done by Executive not in good faith and without reasonable
belief that his action(s) or omission(s) was in the best
interests of Employer.
(d) TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive
may terminate his employment at any time for Good Reason and, in
such event, Employer shall continue to be obligated to pay
Executive the amounts and benefits set forth in Sections 11 and
12 of this Agreement. For purposes of this Agreement, "Good
Reason" shall, without Executive's express written consent, mean:
-6-
(i) The assignment to Executive of any duties
inconsistent with this Agreement.
(ii) A reduction by Employer (without the consent of
Executive) in Executive's annual base salary as provided in
this Agreement or as the same may be increased from time to
time, except for across-the-board salary reductions, freezes
or reduced increases similarly affecting all executives of
Employer;
(iii) A failure by Employer to continue the
Employer's Plans as such may be modified from time to time
but substantially in the form presently in effect, or a
failure by Employer to continue Executive as a participant
in the Plans or to pay Executive any annual installment of a
previous award under the Plans or any deferred distribution
(as defined in the Plans) awarded under the Plans;
(iv) The relocation of Employer's principal executive
offices to a location outside Rockford, Michigan, or any
requirement that Executive be based anywhere other than
Employer's principal executive offices, except for required
travel on Employer's business to an extent substantially
consistent with Executive's present business travel
obligations, or, in the event Executive consents to any such
relocation of Employer's principal executive offices, the
failure by Employer to pay (or reimburse Executive for) all
reasonable moving expenses incurred by Executive relating to
a change of Executive's principal residence in connection
with such relocation and to indemnify Executive against any
loss (defined as the difference between the actual sale
price of such residence and the higher of (A) Executive's
aggregate investment in such residence or (B) the fair
market value of such residence as determined by a real
estate appraiser designated by Executive and reasonably
satisfactory to Employer) realized in the sale of
Executive's principal residence in connection with any such
relocation;
(v) The failure by Employer to continue to provide
Executive with benefits substantially similar to those
enjoyed by Executive under any benefit or compensation plan,
pension, life insurance, medical, health and accident or
disability plan in which Executive is currently
participating, the taking of any action by Employer which
would adversely affect Executive's participation in or
materially reduce Executive's benefits under any of such
plans or deprive Executive of any material fringe benefit
-7-
currently enjoyed by Executive, or the failure by Employer
to provide Executive with the number of paid vacation days
to which Executive is then entitled on the basis of years of
service with Employer in accordance with this Agreement and
Employer's normal vacation policy in effect on the date of
this Agreement;
(vi) The failure of Employer to obtain the assumption
of Employer's obligations under this Agreement by any
successor as contemplated in Section 14 of this Agreement;
(vii) Any purported termination of Executive's
employment which is not effected pursuant to a Notice of
Termination which satisfies the requirements of Section 9
below (and, if applicable, Section 8 above); or
(viii) Any other material breach by Employer of its
obligations under this Agreement.
(e) TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer may
terminate Executive's employment with Employer at will at any
time, subject to its obligations under this Agreement.
(f) TERMINATION BY EXECUTIVE OTHER THAN FOR GOOD REASON.
Executive may terminate his employment with Employer at will at
any time, subject to his obligations under Section 15 of this
Agreement and upon not less than (60) days advance notice to
Employer.
9. NOTICE OF TERMINATION. Any purported termination of Executive's
employment by Employer or by Executive shall be communicated by written
Notice of Termination to the other party. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon (except in the
event of death of Executive or termination of Executive without Cause) and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the
provision so indicated (including, if applicable, the requirements of
Section 8(c) hereof).
10. DATE OF TERMINATION. "Date of Termination" shall mean (a) the
date of Executive's death under Section 8(a); (b) if this Agreement is
terminated for Disability, the time specified in Section 8(b) of this
Agreement; and (c) if Executive's employment is terminated for any reason
other than death or Disability, the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Section 8(d)
above shall not be more than sixty (60) days from the date such Notice of
Termination is given); provided, that, if within thirty (30) days after any
-8-
Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute
is finally resolved, either by mutual written agreement of the parties or
by a binding arbitration award; and provided further, that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution
of such dispute with reasonable diligence. Notwithstanding the pendency of
any such dispute, Employer will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue Executive as a
participant in all compensation, benefit and insurance plans, subject to
the terms of this Agreement, in which Executive was participating when the
notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Section. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement; provided, however, in the event that the Date of Termination
shall be extended by a notice of dispute and such dispute is resolved in
favor of the Employer, then the Employer may credit and offset any
compensation paid to Executive after the date specified in the Notice of
Termination against any payments due to Executive hereunder or, at
Employer's option, such payments shall be reimbursed by the Executive to
Employer.
11. COMPENSATION UPON TERMINATION. If during the term of this
Agreement Executive's employment is terminated for any reason, Employer
shall pay Executive:
(a) his full base salary through the Date of Termination
(as provided in this Agreement) at the rate in effect at the time
Notice of Termination is given; and
(b) accrued benefits and rights under all fringe benefit,
incentive, deferred compensation, stock option, restricted stock,
retirement and other plans and policies of the Employer as
provided under the terms of such plans and policies.
12. ADDITIONAL COMPENSATION UPON CERTAIN TERMINATIONS OF EMPLOYMENT.
If Executive's employment is terminated before April 30, 2000:
(a) By Executive's death or due to Executive's Disability,
Executive will be entitled to the payments and benefits provided
in Section 11 of this Agreement and will receive credit for eight
(8) years of "deemed service" under Section 5(j) (the Additional
SERP Benefit) the same as if all conditions for such credit were
satisfied under Section 5(j). If Executive's employment is
terminated before April 30, 2000 by Executive's death or due to
-9-
Executive's Disability, all 62,500 shares of restricted stock
covered by Sections 5(k) and (l) shall be forfeited.
(b) By the Employer without Cause and not due to
Executive's death or Disability, Executive shall be entitled to
Severance Payments under Section 13.
(c) By the Executive for Good Reason, Executive shall be
entitled to Severance Payments under Section 13.
13. SEVERANCE PAYMENTS. Executive shall receive the following
Severance Payments, if he is entitled thereto under Section 12 of this
Agreement, provided that no portion of the Severance Payments shall
duplicate payments to be received by the Executive pursuant to Section 11
of this Agreement.
(a) Employer shall pay to Executive in a lump sum on the
fifth day following the Date of Termination, the following
amounts:
(i) an amount equal to the amount, if any, of the
deferred portion of any awards which pursuant to the Plans
has been awarded to Executive but which have not yet been
paid to Executive as well as a bonus for the year prior to
termination if not yet awarded and for the year of
termination prorated through the date of termination, both
based on 100% of any bonus awarded Executive for the
immediately preceding year, or the average of Executive's
bonus awards pursuant to the Plans for the two immediately
preceding years, whichever is greater, and including in
either case the amount of deferred distributions, if any,
which have accrued to Executive's account;
(ii) In lieu of any further salary payments to
Executive for periods subsequent to the Date of Termination,
Employer shall pay Executive, the product of (A) the sum of
Executive's annual base salary at the rate in effect on the
Date of Termination plus the amounts awarded Executive under
the Plans for the year most recently ended (whether or not
fully paid), and (B) the number of years (rounded to the
nearest hundredth) between the Date of Termination and April
30, 2000;
(iii) Employer shall also pay all relocation and
indemnity payments as set forth in Section 8(d) of this
Agreement;
(iv) All reasonable legal fees and expenses incurred by
Executive as a result of such termination if Executive
-10-
substantially prevails in enforcing his rights under this
Agreement (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or
in seeking to obtain or enforce any right or benefit
provided by this Agreement);
(v) In lieu of the $1.00 par value per share common
stock of Employer ("Company Shares") issuable upon the
exercise of options that have been awarded to Executive
(whether or not exercisable or vested, but excluding options
or portions thereof which have lapsed without being
exercised by Executive), under any and all Employer stock
option plans or agreements, (which options shall be canceled
upon payment of the amount set forth below), Executive shall
receive an amount in cash equal to one hundred percent
(100%) of the aggregate positive spread between the exercise
prices of all such options held by Executive, whether or not
then fully exercisable, and the closing price of Company
Shares as reported on the New York Stock Exchange on the
Date of Termination or the last trading date preceding the
Date of Termination;
(b) If Employer shall terminate Executive's employment
without Cause or if Executive terminates his employment for Good
Reason and at the time of termination any restrictions against
sale, transfer or other disposition of Company Shares awarded to
Executive under any restricted stock plan or agreement have not
lapsed on the Date of Termination, (i) Employer shall declare the
restrictions to have lapsed with respect to those shares,
provided such restrictions would have lapsed prior to April 30,
2000; and (ii) all restrictions on the 62,500 shares of
restricted common stock issued pursuant to Sections 5(k) and (l)
of this Agreement shall immediately lapse, and all such shares
shall become the property of Executive without restrictions.
(c) Employer shall maintain in full force and effect,
through April 30, 2000, all employee benefit plans and programs
or arrangements in which Executive was entitled to participate
immediately prior to the Date of Termination (except for bonus
and stock option plans) provided that Executive's continued
participation is possible under the general terms and provisions
of such plans and programs. In the event that Executive's
participation in any such plan or program is barred, Employer
shall arrange to provide Executive with benefits substantially
similar to those which Executive is entitled to receive under
such plans and programs. At the end of the period of coverage,
Executive shall have the option to have assigned to him at no
cost and with no apportionment of prepaid premiums, any
-11-
assignable insurance policy owned by Employer and relating
specifically to Executive.
(d) If Employer terminates Executive's employment without
Cause or if Executive terminates his employment for Good Reason,
then in addition to the benefits to which Executive is entitled
under the retirement plans or programs in which Executive
participates or any successor plans or programs in effect on the
Date of Termination, Employer shall: (i) grant Executive the full
eight (8) years of deemed additional service under the SERP, as
if all of the conditions of Section 5(j) had been met; and (ii)
pay Executive in one lump sum in cash at Executive's normal
retirement age (or earlier retirement age should Executive so
elect) as defined in the retirement plans or programs in effect
on the Date of Termination, an amount equal to the actuarial
equivalent of the retirement pension to which Executive would
have been entitled under the terms of such retirement plans or
programs without regard to any vesting requirements of such plans
or programs, had Executive accumulated additional continuous
service through April 30, 2000, at Executive's salary rate in
effect on the Date of Termination plus the amount awarded
Executive under the Plans during the year most recently ended
(whether or not fully paid) (including subsequent annual salary
adjustments) under such retirement plans or programs and
including any Additional SERP Benefit credited under this
Agreement, reduced by the single sum actuarial equivalent of any
amount to which Executive is entitled pursuant to the provisions
of such retirement plans and programs. For purposes of this
Subsection, "actuarial equivalent" shall be determined using the
same methods and assumptions utilized under Employer's retirement
plans and programs immediately prior to the termination of
employment.
(e) If Employer shall terminate Executive's employment
without Cause or if Executive shall terminate his employment for
Good Reason, Employer shall provide Executive with executive out-
placement services by entering into a contract with a company
specializing in such services.
(f) If Executive's employment is terminated under
circumstances entitling Executive to payments and benefits under
this Agreement and the Executive Severance Agreement between
Executive and Employer (a "change in control termination"), all
payments and benefits due to Executive shall be determined
exclusively in accordance with the Executive Severance Agreement
and the terms of this Agreement shall not apply to the
determination of payments or benefits due to Executive in the
event of a change in control termination. Without limiting the
-12-
foregoing, in the event of a change in control termination,
Executive will not be entitled to credit for any additional years
of "deemed service" referenced in Section 5(j) (the Additional
SERP Benefit) or any of the restricted shares referenced in
Sections 5(k) or (l). Notwithstanding the foregoing, in the
event of a change in control termination, Executive shall be
entitled to the assignment of life insurance in accordance with
Section 5(d).
14. SUCCESSORS; BINDING AGREEMENT.
(a) Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of Employer,
to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that Employer would be
required to perform this Agreement if no such succession had
occurred. Failure of Employer to obtain such assumption and
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Executive to
compensation from Employer in the same amount and on the same
terms as Executive would be entitled (i) under Section 13(f); or
(ii) if Section 13(f) is inapplicable, as if Executive terminated
his employment for Good Reason, except that for purposes of
implementing the foregoing clause (ii), the date on which any
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Employer" shall mean
Employer as defined in this Agreement and any successor to its
business and/or assets which assumes and agrees to perform this
Agreement by operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die following
termination of employment with Employer while any amounts would
still be payable to him hereunder if Executive had continued to
live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to his
devisee, legatee, or other designee or, if there be no such
designee, to his estate.
15. NONCOMPETITION. Recognizing that his skill, experience and
knowledge are unique and are a material inducement to Employer to enter
into this Agreement, Executive agrees that during his employment, and for
an additional period of sixty (60) months after any termination of his
employment (provided the Employer complies with this Agreement), Executive
will not (i) enter employment with, or, directly or indirectly, own an
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interest in, or manage, operate, control or participate in the business of,
or furnish services or advice to, any company whose business is similar to
or in competition with that of Employer without the express authorization
of Employer's Board of Directors; or (ii) solicit or suggest to any
customer, distributor or other person doing business with Employer that
they should cease or diminish their business with Employer or do business
with any other person or entity, to any extent, instead of Employer; or
(iii) solicit or suggest to any employee of Employer that s/he should
terminate employment with Employer or provide services or advice to any
competitor of Employer. This provision shall not, however, restrict the
right of Executive to own less than five percent (5%) of a class of equity
securities in any company listed on a national or regional stock exchange,
regardless of the nature of its business. The geographic scope of the
covenant against competition in this Section 15 is worldwide. The parties
hereto agree that in view of all the facts and circumstances, this
provision is neither an unreasonable restraint nor unconscionable.
16. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and such officer as may be
specifically designated by Employer's Board of Directors. No waiver by
either party at any time of any breach by the other party of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of the same or similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter of this Agreement have been made by
either party which are not set forth expressly in this Agreement. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Michigan.
17. WITHHOLDING TAXES. Employer may withhold from all payments due
to Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law or regulation, Employer is
required to withhold therefrom.
18. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
19. COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
20. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration in Rockford, Michigan, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered
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on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of
his right to be paid until the Date of Termination during the pendency of
any dispute or controversy arising under or in connection with this
Agreement.
21. WAR OR NATIONAL EMERGENCY. Employer agrees that, in the event of
a war or national emergency, Executive will, at his request, be granted a
leave of absence for military or governmental service and during said
period of leave of absence shall be paid such compensation as may be fixed
by, or with the authority of Employer's Board of Directors. During any
such leave of absence, Executive shall, except with respect to his rights
to the compensation provided in this Agreement and his obligation to
perform such active duties of Employer, be deemed, for the purposes of this
Agreement, to be continuing in the employment of Employer pursuant to the
Agreement.
22. NOTICE. Any and all notices referred to in this Agreement shall
be sufficient if furnished in writing, sent by certified or registered mail
or by overnight courier service, to the respective parties at the following
addresses:
If to Employer: Wolverine World Wide, Inc.
9341 Courtland Drive, N.E.
Rockford, MI 49351
Attn: General Counsel
If to Executive: Geoffrey B. Bloom
440 Cambridge, S.E.
East Grand Rapids, MI 49506
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23. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
replaces in its entirety all prior employment agreements between the
parties, including the Amended Restated Employment Agreement dated April
27, 1993 and the Employment Agreement dated May 8, 1992, as amended.
WOLVERINE WORLD WIDE, INC.
By /s/Daniel T. Carroll
Daniel T. Carroll
Director and Chairman of the
Compensation Committee of the
Board of Directors
/s/Geoffrey B. Bloom
Geoffrey B. Bloom
-16-
5
1,000
OTHER
JAN-02-1999
JAN-04-1998
JUN-20-1998
5,234
0
133,336
8,151
173,371
322,227
179,006
77,940
481,918
56,754
116,258
43,686
0
0
253,191
481,918
290,516
290,516
196,887
196,887
0
0
3,722
23,377
7,834
15,543
0
0
0
15,543
.36
.36
