Wolverine World Wide, Inc. Third Quarter Form 10-Q/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
AMENDMENT NO. 1TO
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the third twelve week accounting period ended September 11, 1999OR
[ ] 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 Incorporation or Organization) (IRS Employer 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 44,418,335 shares of Common Stock, $1 par value, outstanding as of October 19, 1999, of which 3,120,928 shares are held as Treasury Stock.
This Amendment No. 1 to Form 10-Q is filed solely for the purpose of correcting a typographical error in the Consolidated Statements of Cash Flows included in the financial statements filed as part of this report.
2
PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of dollars)
| September 11 | January 2, | September 12, | |||
| 1999 | 1999 | 1998 | |||
| (Unaudited) |
(Audited) |
(Unaudited) |
|||
| ASSETS | |||||
| CURRENT ASSETS | |||||
| Cash and cash equivalents | $ 7,639 | $ 6,203 | $ 8,853 | ||
| Accounts receivable, less allowances | |||||
| September 11, 1999 - $6,656 | |||||
| January 2, 1999 - $5,896 | |||||
| September 12, 1998 - $8,621 | 181,525 | 152,110 | 159,100 | ||
| Inventories: | |||||
| Finished products | 145,253 | 113,923 | 131,467 | ||
| Raw materials and work in process | 44,720 |
53,116 |
46,067 |
||
| 189,973 | 167,039 | 177,534 | |||
| Other current assets | 10,139 |
15,626 |
10,381 |
||
| TOTAL CURRENT ASSETS | 389,276 | 340,978 | 355,868 | ||
| PROPERTY, PLANT & EQUIPMENT | |||||
| Gross cost | 208,919 | 194,374 | 184,594 | ||
| Less accumulated depreciation | 92,436 |
83,239 |
80,274 |
||
| 116,483 | 111,135 | 104,320 | |||
| OTHER ASSETS | 68,518 |
69,365 |
60,881 |
||
| TOTAL ASSETS | $574,277 |
$521,478 |
$521,069 |
See notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED BALANCE SHEETS - Continued
(Thousands of dollars)
| September 11 | January 2, | September 12, | |||
| 1999 | 1999 | 1998 | |||
| (Unaudited) |
(Audited) |
(Unaudited) |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
| CURRENT LIABILITIES | |||||
| Notes payable to banks | $ 500 | $ 6,546 | $ 7,896 | ||
| Accounts payable and other accrued liabilities | 48,670 | 40,161 | 47,018 | ||
| Current maturities of long-term debt | 4,351 |
4,561 |
4,417 |
||
| TOTAL CURRENT LIABILITIES | 53,521 | 51,268 | 59,331 | ||
| LONG-TERM DEBT (less current maturities) | 196,745 | 157,089 | 153,505 | ||
| OTHER NONCURRENT LIABILITIES | 11,538 | 12,801 | 11,904 | ||
| STOCKHOLDERS' EQUITY | |||||
| Common Stock - par value $1, authorized | |||||
| 80,000,000 shares; shares issued | |||||
| (including shares in treasury): | |||||
| September 11, 1999 - 44,416,294 shares | |||||
| January 2, 1999 - 43,832,070 shares | |||||
| September 12, 1998 - 43,802,049 shares | 44,416 | 43,832 | 43,802 | ||
| Additional paid-in capital | 77,195 | 72,825 | 71,324 | ||
| Retained earnings | 236,525 | 227,829 | 213,668 | ||
| Accumulated other comprehensive income | (894) | (1,014) | (156) | ||
| Unearned compensation | (7,065) | (6,731) | (7,708) | ||
| Cost of shares in treasury: | |||||
| September 11, 1999 - 3,120,928 shares | |||||
| January 2, 1999 - 3,067,177 shares | |||||
| September 12, 1998 - 1,829,147 shares | (37,704) |
(37,153) |
(24,601) |
||
| TOTAL STOCKHOLDERS' EQUITY | 312,473 |
300,320 |
296,329 |
||
| TOTAL LIABILITIES AND | |||||
| STOCKHOLDERS' EQUITY | $574,277 |
$521,478 |
$521,069 |
( ) - Denotes deduction.
See notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(Thousands of dollars, except shares and per share data)
(Unaudited)
| 12 Weeks Ended |
36 Weeks Ended |
||||||
| September 11, | September 12, | September 11, | September 12, |
| 1999 |
1998 |
1999 |
1998 |
||||
| NET SALES AND OTHER | |||||||
| OPERATING INCOME | $170,482 | $164,486 | $438,119 | $455,002 | |||
| Cost of products sold | 119,025 |
112,766 |
308,314 |
309,653 |
|||
| GROSS MARGIN | 51,457 | 51,720 | 129,805 | 145,349 | |||
| Selling and administrative expenses | 31,741 |
33,324 |
103,493 |
100,384 |
|||
| OPERATING INCOME | 19,716 | 18,396 | 26,312 | 44,965 | |||
| OTHER EXPENSES (INCOME): | |||||||
| Interest expense | 2,507 | 2,231 | 7,338 | 5,953 | |||
| Interest income | (55) | (92) | (506) | (622) | |||
| Other - net | (9) |
(27) |
872 |
27 |
|||
| 2,443 |
2,166 |
7,704 |
5,358 |
||||
| EARNINGS BEFORE | |||||||
| INCOME TAXES | 17,273 | 16,230 | 18,608 | 39,607 | |||
| Income taxes | 5,752 |
5,399 |
6,196 |
13,233 |
|||
| NET EARNINGS | $ 11,521 |
$ 10,831 |
$ 12,412 |
$ 26,374 |
|||
| EARNINGS PER SHARE: | |||||||
| Basic | $ .29 |
$ .26 |
$ .31 |
$ .63 |
|||
| Diluted | $ .28 |
$ .25 |
$ .30 |
$ .61 |
|||
| CASH DIVIDENDS PER SHARE | $ .0300 |
$ .0275 |
$ .0900 |
$ .0825 |
|||
| SHARES USED FOR NET EARNINGS | |||||||
| PER SHARE COMPUTATION: | |||||||
| Basic | 40,364,820 |
42,069,486 |
40,215,686 |
42,039,921 |
|||
| Diluted | 41,669,724 |
43,346,374 |
41,451,064 |
43,581,795 |
See notes to consolidated condensed financial statements.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
| 36 Weeks Ended |
|||
| September 11, | September 12, | ||
| 1999 |
1998 |
||
| OPERATING ACTIVITIES | |||
| Net earnings | $12,412 | $26,374 | |
| Depreciation, amortization and other non-cash items | 4,562 | 2,746 | |
| Unearned compensation | 1,996 | 1,809 | |
| Russian restructuring charge | 14,000 | ||
| Changes in operating assets and liabilities: | |||
| Accounts receivable | (31,615) | (21,034) | |
| Inventories | (29,834) | (33,700) | |
| Other current assets | 4,587 | 5,812 | |
| Accounts payable and other accrued liabilities | 8,009 |
(10,209) |
|
| NET CASH USED IN OPERATING ACTIVITIES | (15,883) | (28,202) | |
| FINANCING ACTIVITIES | |||
| Proceeds from long-term borrowings | 60,004 | 85,429 | |
| Payments of long-term borrowings | (20,558) | (21,771) | |
| Proceeds from short-term borrowings | 1,080 | 11,734 | |
| Payments of short-term borrowings | (7,126) | (7,089) | |
| Cash dividends | (3,716) | (3,500) | |
| Purchase of common stock for treasury | (551) | (10,432) | |
| Proceeds from shares issued under employee stock plans | 1,892 |
(259) |
|
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 31,025 | 54,112 | |
| INVESTING ACTIVITIES | |||
| Additions to property, plant and equipment | (14,545) | (21,788) | |
| Net increase in notes receivable | (282) | ||
| Other | 839 |
(755) |
|
| NET CASH USED IN INVESTING ACTIVITIES | (13,706) |
(22,825) |
|
| INCREASE IN CASH AND CASH EQUIVALENTS | 1,436 | 3,085 | |
| Cash and cash equivalents at beginning of the year | 6,203 |
5,768 |
|
| CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | $ 7,639 |
$ 8,853 |
( ) - Denotes reduction in cash and cash equivalents.
See notes to consolidated condensed financial statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 11, 1999 and September 12, 1998
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 2, 1999. Certain amounts previously reported in 1998 have been reclassified to conform with the presentation used in 1999.
NOTE B - Fluctuations
The Company's sales are seasonal. 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 - Restructuring Charge
As a result of the continued deterioration in Russian economic and political conditions, the Company approved a plan in the second quarter of 1999 to close its Russian wholesale footwear business. In connection with the closure, the Company recorded a non-recurring, non-cash pre-tax charge to earnings of $14.0 million, of which $6.9 million is reflected in a write-down in cost of goods sold for inventory, $6.6 million is reflected in selling and administrative expenses for goodwill, bad debt, severance, and other restructuring expenses, and $0.5 million is reflected in other expense for the disposal of fixed assets. The $14.0 million pre-tax restructuring charge resulted in a reduction of net earnings of $0.23 per share after-tax for the twenty-four weeks ended June 19, 1999. As of September 11, 1999, $7.0 million has been charged against the restructuring reserve. The Company expects to complete the liquidation and exit the business by the end of 1999.
NOTE D - 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:
| Quarter Ended |
36-Weeks Ended |
||||||
| Sept 11, | Sept 12, | Sept 11, | Sept 12, | ||||
| 1999 |
1998 |
1999 |
1998 |
||||
| Weighted average shares outstanding | 41,256,523 | 42,777,021 | 41,079,790 | 42,754,646 | |||
| Adjustment for nonvested common stock | (891,703) |
(707,535) |
(864,104) |
(714,725) |
|||
| Denominator for basic earnings per share | 40,364,820 | 42,069,486 | 40,215,686 | 42,039,921 | |||
| Effect of dilutive stock options | 413,201 | 569,353 | 371,274 | 827,149 | |||
| Adjustment for nonvested common stock | 891,703 |
707,535 |
864,104 |
714,725 |
|||
| Denominator for diluted earnings per share | 41,669,724 |
43,346,374 |
41,451,064 |
43,581,795 |
|||
NOTE E - Comprehensive Income
Total comprehensive income totaled $11,831,000 and $12,532,000 for the third quarter and 36-week period of 1999, respectively. Total comprehensive income was $10,775,000 and $26,286,000, for the third quarter and 36-week period of 1998, respectively. In
addition to net earnings, comprehensive income included foreign currency translation gains of $310,000 and $120,000 for the third quarter and 36-week period of 1999, respectively, and losses of $56,000 and $88,000 for the third quarter and 36-week period
of 1998, respectively.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 11, 1999 and September 12, 1998
The Company has one reportable segment that is engaged in the manufacture and marketing of branded footwear to the retail sector, including casual shoes, slippers, moccasins, dress shoes, boots, uniform shoes and work shoes. Revenues of this segment are derived from the sale of branded footwear products to external customers and the Company's retail division as well as royalty income from the licensing of the Company's trademarks and brand names to licensees. The business units comprising the branded footwear segment manufacture or source, market and distribute products in a similar manner. Branded footwear is distributed through wholesale channels and under licensing and distributor arrangements.
The other business units in the following table consist of the Company's retail, tannery and pigskin procurement operations. The Company operated 58 domestic retail stores at September 11, 1999 that sell Company-manufactured or sourced products and footwear manufactured by unaffiliated companies. The other business units distribute products through retail and wholesale channels.
There have been no changes in the way the Company measures segment profits or in its basis of segmentation since the year ended January 2, 1999.
Business segment information is as follows (in thousands of dollars):
|
|
Branded |
Other |
|
|
||||
|
|
Quarter ended September 11, 1999 |
|||||||
|
Net sales and other operating income |
|
|
|
|
||||
|
|
from external customers |
$154,028 |
$16,454 |
|
$170,482 |
|||
|
Intersegment sales |
4,898 |
1,384 |
|
6,282 |
||||
|
Earnings before income taxes |
14,785 |
1,517 |
$971 |
17,273 |
||||
|
|
|
|
|
|
||||
|
|
36 weeks ended September 11, 1999 |
|||||||
|
Net sales and other operating income |
|
|
|
|
||||
|
|
from external customers |
$390,055 |
$48,064 |
|
$438,119 |
|||
|
Intersegment sales |
11,089 |
3,870 |
|
14,959 |
||||
|
Earnings before income taxes |
13,631 |
4,348 |
$629 |
18,608 |
||||
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||
|
|
Quarter ended September 12, 1998 |
|||||||
|
Net sales and other operating income |
|
|
|
|
||||
|
|
from external customers |
$149,740 |
$14,746 |
|
$164,486 |
|||
|
Intersegment sales |
5,030 |
2,307 |
|
7,337 |
||||
|
Earnings before income taxes |
14,288 |
558 |
$1,383 |
16,230 |
||||
|
|
|
|
|
|
||||
|
|
36 weeks ended September 12, 1998 |
|||||||
|
Net sales and other operating income |
|
|
|
|
||||
|
|
from external customers |
$406,211 |
$48,791 |
|
$455,002 |
|||
|
Intersegment sales |
13,569 |
6,394 |
|
19,963 |
||||
|
Earnings before income taxes |
34,043 |
3,942 |
$1,622 |
39,607 |
||||
| WOLVERINE WORLD WIDE, INC. | |
| AND SUBSIDIARIES | |
| November 2, 1999 | /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) | |
| Exhibit | |
| Number | Document |
| 3.1 | Certificate of Incorporation, as amended. Previously filed as Exhibit 3.1 to the Company's Quarterly Report on 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 January 2, 1999. Here incorporated by reference. |
| 27 | Financial Data Schedule. Previously filed. |