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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________
FORM 10-Q
________________________________________________
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2022
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: 001-06024
 __________________________________________________________ 
WOLVERINE WORLD WIDE, INC.
(Exact Name of Registrant as Specified in its Charter)
 __________________________________________________________ 
Delaware38-1185150
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
9341 Courtland Drive N.E.,Rockford,Michigan49351
(Address of principal executive offices)(Zip Code)
(616) 866-5500
(Registrant’s telephone number, including area code)
________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading symbolName of each exchange on which registered
Common Stock, $1 Par ValueWWWNew York Stock Exchange
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
There were 78,755,075 shares of common stock, $1 par value, outstanding as of October 24, 2022.

Table of Contents
Table of Contents
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 6.
2

Table of Contents
FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements,” which are statements relating to future, not past, events. In this context, forward-looking statements often address management’s current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, economic and market conditions, and the Company itself. Such statements often contain words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company’s performance to differ materially from what is expressed in forward-looking statements include, but are not limited to, the following:
the potential effects of the COVID-19 pandemic on the Company’s business, operations, financial results and liquidity;
changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting consumer spending in the markets and regions in which the Company’s products are sold;
the inability for any reason to effectively compete in global footwear, apparel and direct-to-consumer markets;
the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer preferences;
the inability to effectively manage inventory levels;
increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export;
foreign currency exchange rate fluctuations;
currency restrictions;
supply chain and capacity constraints, production disruptions, including reduction in operating hours, labor shortages, and facility closures resulting in production delays at the Company’s manufacturers due to disruption from the effects of the COVID-19 pandemic, quality issues, price increases or other risks associated with foreign sourcing;
the cost, including the effect of inflationary pressures and availability of raw materials, inventories, services and labor for contract manufacturers;
labor disruptions;
changes in relationships with, including the loss of, significant wholesale customers;
risks related to the significant investment in, and performance of, the Company’s direct-to-consumer operations;
risks related to expansion into new markets and complementary product categories as well as direct-to-consumer operations;
the impact of seasonality and unpredictable weather conditions;
the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers, distributors, suppliers, joint venture partners and wholesale customers;
changes in the Company’s effective tax rates;
failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company;
the risks of doing business in developing countries and politically or economically volatile areas;
the ability to secure and protect owned intellectual property or use licensed intellectual property;
the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal, state and local laws and regulations relating to the protection of the environment, environmental remediation and other related costs, and litigation or other legal proceedings relating to the protection of the environment or environmental effects on human health;
risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal information, payment card data or proprietary information, due to cyberattack or other similar events;
problems affecting the Company’s supply chain and distribution system, including service interruptions at shipping and receiving ports;
strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company’s success in integrating acquired businesses, including Sweaty Betty®, and implementing new initiatives and ventures;
the risk of impairment to goodwill and other intangibles;
the success of the Company’s restructuring and realignment initiatives undertaken from time to time; and
changes in future pension funding requirements and pension expenses.
These or other uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A: “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (the “2021 Form 10-K”). Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
3

Table of Contents
PART I.     FINANCIAL INFORMATION
ITEM 1.    Financial Statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations and Comprehensive Income
(Unaudited)
 Quarter EndedYear-To-Date Ended
(In millions, except per share data)October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Revenue
$691.4 $636.7 $2,019.8 $1,779.3 
Cost of goods sold
413.6 361.9 1,173.6 1,011.8 
Gross profit
277.8 274.8 846.2 767.5 
Selling, general and administrative expenses
216.8 215.0 657.3 591.2 
Gain on sale of trademarks  (90.0) 
Environmental and other related costs, net of recoveries2.2 17.3 32.6 11.9 
Operating profit
58.8 42.5 246.3 164.4 
Other expenses:
Interest expense, net
12.5 9.6 31.3 28.9 
Debt extinguishment and other costs 34.0  34.0 
Other expense (income), net2.7 (0.4)2.2 2.5 
Total other expense, net15.2 43.2 33.5 65.4 
Earnings (loss) before income taxes43.6 (0.7)212.8 99.0 
Income tax expense4.8 0.1 41.1 17.0 
Net earnings (loss)$38.8 $(0.8)$171.7 $82.0 
Less: net loss attributable to noncontrolling interests(0.2)(0.8)(1.6)(1.2)
Net earnings attributable to Wolverine World Wide, Inc.$39.0 $ $173.3 $83.2 
Net earnings per share (see Note 3):
Basic
$0.49 $0.00 $2.12 $0.99 
Diluted
$0.48 $0.00 $2.12 $0.98 
Comprehensive income (loss)$13.5 $(10.2)$110.1 $84.2 
Less: comprehensive loss attributable to noncontrolling interests(0.6)(0.7)(2.4)(1.2)
Comprehensive income (loss) attributable to Wolverine World Wide, Inc.$14.1 $(9.5)$112.5 $85.4 
Cash dividends declared per share
$0.10 $0.10 $0.30 $0.30 
See accompanying notes to consolidated condensed financial statements.
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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited)
(In millions, except share data)October 1,
2022
January 1,
2022
October 2,
2021
ASSETS
Current assets:
Cash and cash equivalents$136.4 $161.7 $183.6 
Accounts receivable, less allowances of $23.0, $28.3 and $27.4
440.0 319.6 362.6 
Finished products, net871.1 354.1 400.2 
Raw materials and work-in-process, net9.8 11.4 11.8 
Total inventories880.9 365.5 412.0 
Prepaid expenses and other current assets94.5 56.9 44.4 
Total current assets1,551.8 903.7 1,002.6 
Property, plant and equipment, net of accumulated depreciation of $228.4, $219.1 and $212.2
126.0 129.0 127.3 
Lease right-of-use assets, net165.0 138.2 134.7 
Goodwill526.5 556.6 555.5 
Indefinite-lived intangibles658.6 718.1 718.3 
Amortizable intangibles, net67.7 74.6 76.8 
Deferred income taxes0.8 1.8 1.9 
Other assets74.2 64.4 64.3 
Total assets$3,170.6 $2,586.4 $2,681.4 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$317.9 $222.1 $265.1 
Accrued salaries and wages26.5 41.7 39.1 
Other accrued liabilities203.4 222.5 193.5 
Lease liabilities33.5 38.3 34.4 
Current maturities of long-term debt10.0 10.0 10.0 
Borrowings under revolving credit agreements740.0 225.0 310.0 
Total current liabilities1,331.3 759.6 852.1 
Long-term debt, less current maturities725.2 731.8 704.4 
Accrued pension liabilities103.0 107.4 145.3 
Deferred income taxes116.4 118.9 121.2 
Lease liabilities, noncurrent147.5 118.2 117.9 
Other liabilities73.0 106.1 98.6 
Stockholders’ equity:
Common stock – par value $1, authorized 320,000,000 shares; 112,170,049, 111,632,094, and 111,538,349 shares issued
112.2 111.6 111.5 
Additional paid-in capital318.7 298.9 289.8 
Retained earnings1,277.1 1,128.2 1,151.2 
Accumulated other comprehensive loss(159.7)(98.9)(128.4)
Cost of shares in treasury; 33,414,974, 29,604,013, and 29,170,142 shares
(891.4)(810.2)(797.4)
Total Wolverine World Wide, Inc. stockholders’ equity656.9 629.6 626.7 
Noncontrolling interest17.3 14.8 15.2 
Total stockholders’ equity674.2 644.4 641.9 
Total liabilities and stockholders’ equity$3,170.6 $2,586.4 $2,681.4 
See accompanying notes to consolidated condensed financial statements.
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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Year-To-Date Ended
(In millions)October 1,
2022
October 2,
2021
OPERATING ACTIVITIES
Net earnings$171.7 $82.0 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization
25.2 23.1 
Deferred income taxes
2.5 (3.9)
Stock-based compensation expense
26.4 30.0 
Pension and SERP expense
7.0 10.5 
Debt extinguishment and other costs 5.6 
Environmental and other related costs, net of cash payments and recoveries received
(35.8)(8.5)
Gain on sale of trademarks(90.0) 
Other
(4.9)(3.5)
Changes in operating assets and liabilities:
Accounts receivable
(133.5)(90.3)
Inventories
(533.5)(124.6)
Other operating assets
(15.1)7.7 
Accounts payable
109.2 68.4 
Income taxes payable
5.7 5.7 
Other operating liabilities
(25.1)14.8 
Net cash provided by (used in) operating activities(490.2)17.0 
INVESTING ACTIVITIES
Business acquisition, net of cash acquired
 (417.8)
Additions to property, plant and equipment
(23.5)(10.0)
Investment in joint ventures
(2.8) 
Proceeds from sale of trademarks90.0  
Other
4.5 (1.9)
Net cash provided by (used in) investing activities68.2 (429.7)
FINANCING ACTIVITIES
Payments under revolving credit agreements(153.0)(40.0)
Borrowings under revolving credit agreements668.0 350.0 
Borrowings of long-term debt
 550.0 
Payments on long-term debt
(7.5)(557.5)
Payments of debt issuance and debt extinguishment costs (7.4)
Cash dividends paid
(24.7)(25.2)
Purchases of common stock for treasury
(81.3)(26.9)
Employee taxes paid under stock-based compensation plans(7.4)(13.7)
Proceeds from the exercise of stock options
1.4 15.6 
Contributions from noncontrolling interests
7.0 4.8 
Net cash provided by financing activities402.5 249.7 
Effect of foreign exchange rate changes
(5.8)(0.8)
Decrease in cash and cash equivalents(25.3)(163.8)
Cash and cash equivalents at beginning of the year
161.7 347.4 
Cash and cash equivalents at end of the quarter
$136.4 $183.6 
See accompanying notes to consolidated condensed financial statements.
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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Stockholders' Equity
(Unaudited)
Wolverine World Wide, Inc. Stockholders' Equity
(In millions, except share and per share data)Common StockAdditional Paid-In CapitalRetained EarningsAccumulated
Other
Comprehensive
Loss
Treasury StockNon-controlling InterestTotal
Balance at July 3, 2021$111.4 $278.4 $1,159.6 $(118.9)$(797.3)$15.9 $649.1 
Net earnings (loss) (0.8)(0.8)
Other comprehensive income (loss)(9.5)0.1 (9.4)
Shares issued, net of shares forfeited under stock incentive plans (18,229 shares)
 (0.4)(0.4)
Shares issued for stock options exercised, net (137,527 shares)
0.1 3.4 3.5 
Stock-based compensation expense8.4 8.4 
Cash dividends declared ($0.10 per share)
(8.4)(8.4)
Purchases of shares under stock-based compensation plans (4,743 shares)
(0.1)(0.1)
Balance at October 2, 2021$111.5 $289.8 $1,151.2 $(128.4)$(797.4)$15.2 $641.9 
Balance at July 2, 2022$112.1 $311.9 $1,246.1 $(134.8)$(891.4)$17.9 $661.8 
Net earnings (loss)39.0 (0.2)38.8 
Other comprehensive loss(24.9)(0.4)(25.3)
Shares issued, net of shares forfeited under stock incentive plans (20,672 shares)
0.1 (0.3)(0.2)
Stock-based compensation expense7.1 7.1 
Cash dividends declared ($0.10 per share)
(8.0)(8.0)
Balance at October 1, 2022$112.2 $318.7 $1,277.1 $(159.7)$(891.4)$17.3 $674.2 

See accompanying notes to consolidated condensed financial statements.







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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Stockholders' Equity
(Unaudited)
Wolverine World Wide, Inc. Stockholders' Equity
(In millions, except share and per share data)Common StockAdditional Paid-In CapitalRetained EarningsAccumulated
Other
Comprehensive
Loss
Treasury StockNon-controlling InterestTotal
Balance at January 2, 2021$110.4 $252.6 $1,093.3 $(130.6)$(764.3)$11.6 $573.0 
Net earnings (loss)83.2 (1.2)82.0 
Other comprehensive income2.2  2.2 
Shares issued, net of shares forfeited under stock incentive plans (414,851 shares)
0.4 (7.8)(7.4)
Shares issued for stock options exercised, net (696,729 shares)
0.7 15.0 15.7 
Stock-based compensation expense30.0 30.0 
Cash dividends declared ($0.30 per share)
(25.3)(25.3)
Issuance of treasury shares (2,991 shares)
 0.1 0.1 
Purchase of common stock for treasury (716,027 shares)
(26.9)(26.9)
Purchases of shares under stock-based compensation plans (171,832 shares)
(6.3)(6.3)
Capital contribution from noncontrolling interest4.8 4.8 
Balance at October 2, 2021$111.5 $289.8 $1,151.2 $(128.4)$(797.4)$15.2 $641.9 
Balance at January 1, 2022$111.6 $298.9 $1,128.2 $(98.9)$(810.2)$14.8 $644.4 
Net earnings (loss)173.3 (1.6)171.7 
Other comprehensive loss(60.8)(0.8)(61.6)
Shares issued, net of shares forfeited under stock incentive plans (463,473 shares)
0.5 (8.0)(7.5)
Shares issued for stock options exercised, net (74,482 shares)
0.1 1.4 1.5 
Stock-based compensation expense26.4 26.4 
Cash dividends declared ($0.30 per share)
(24.4)(24.4)
Issuance of treasury shares (4,203 shares)
 0.1 0.1 
Purchase of common stock for treasury (3,815,164 shares)
(81.3)(81.3)
Capital contribution from noncontrolling interest7.0 7.0 
Other(2.1)(2.1)
Balance at October 1, 2022$112.2 $318.7 $1,277.1 $(159.7)$(891.4)$17.3 $674.2 

See accompanying notes to consolidated condensed financial statements.
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WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
 
1.BASIS OF PRESENTATION
Nature of Operations
Wolverine World Wide, Inc. (the “Company”) is a leading designer, marketer and licensor of a broad range of quality casual footwear and apparel; performance outdoor and athletic footwear and apparel; kids’ footwear; industrial work shoes, boots and apparel; and uniform shoes and boots. The Company’s portfolio of owned and licensed brands includes: Bates®, Cat®, Chaco®, Harley-Davidson®, Hush Puppies®, Hytest®, Keds®, Merrell®, Saucony®, Sperry®, Stride Rite®, Sweaty Betty® and Wolverine®. The Company’s products are marketed worldwide through owned operations, through licensing and distribution arrangements with third parties, and joint ventures. The Company also operates retail stores and eCommerce sites to market both its own brands and branded footwear and apparel from other manufacturers, as well as a leathers division that markets Wolverine Performance Leathers™.
On June 30, 2022, the Company sold the Champion trademarks for footwear in the United States and Canada to HanesBrand Inc., for $90.0 million in cash. The Company recorded a gain of $90.0 million associated with the transaction.
On August 2, 2021, the Company completed the acquisition of Lady Leisure InvestCo Limited (the “Acquired Company”) for $417.4 million, which is net of acquired cash of $7.4 million. The Acquired Company owns the Sweaty Betty® brand and activewear business, a premium women’s activewear brand. See Note 16 for further discussion.
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for a complete presentation of the financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included in the accompanying financial statements. For further information, refer to the consolidated financial statements and notes included in the Company’s 2021 Form 10-K.
The COVID-19 pandemic, the duration and severity of which is subject to uncertainty, has had and continues to have, an impact on the Company's business. Management's estimates and assumptions used in the preparation of the Company’s consolidated financial statements in accordance with U.S. GAAP take into account both current and expected potential future impacts of the COVID-19 pandemic on the Company’s business based on available information. Actual results may differ materially from management’s estimates.
Fiscal Year
The Company’s fiscal year is the 52 or 53-week period that ends on the Saturday nearest to December 31. Fiscal years 2022 and 2021 each have 52 weeks. The Company reports its quarterly results of operations on the basis of 13-week quarters for each of the first three fiscal quarters and a 13 or 14-week period for the fiscal fourth quarter. References to particular years or quarters refer to the Company’s fiscal years ended on the Saturday nearest to December 31 or the fiscal quarters within those years.
Seasonality
The Company experiences moderate fluctuations in sales volume during the year, as reflected in quarterly revenue. The Company expects current seasonal sales patterns to continue in future years. The Company also experiences some fluctuation in its levels of working capital, typically reflecting an increase in net working capital requirements near the end of the first and third fiscal quarters as inventory builds to support peak shipping periods. Historically, cash provided by operating activities is higher in the second half of the fiscal year due to collection of wholesale channel receivables and direct-to-consumer sales being higher during the holiday season. The Company meets its working capital requirements through internal operating cash flows and, as needed, borrowings under its revolving credit facility, as discussed in more detail under the caption "Liquidity and Capital Resources" in Item 2: "Management's Discussion and Analysis of Financial Condition and Results of Operations". The Company's working capital could also be impacted by other events, including the COVID-19 pandemic or other events.



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2.NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards Update (“ASU”) that the Company has not yet adopted. The following is a summary of the new standard.
StandardDescriptionEffect on the Financial Statements or Other Significant Matters
ASU 2020-04, Reference Rate Reform (Topic 848); Facilitation of the Effects of Reference Rate Reform on Financial Reporting (as amended by ASU 2021-01)
Provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for the Company’s borrowing instruments under the amended senior credit facility, which use LIBOR as a reference rate, and is available for adoption effective immediately but is only available through December 31, 2022.
The Company is evaluating the impact of the new standard on its consolidated financial statements.
3.EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share.
Quarter EndedYear-To-Date Ended
(In millions, except per share data)October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Numerator:
Net earnings attributable to Wolverine World Wide, Inc.$39.0 $ $173.3 $83.2 
Adjustment for earnings allocated to non-vested restricted common stock
(0.8)(0.2)(3.4)(1.4)
Net earnings (loss) used in calculating basic and diluted earnings per share$38.2 $(0.2)$169.9 $81.8 
Denominator:
Weighted average shares outstanding
78.782.380.082.5
Adjustment for non-vested restricted common stock
(0.1)
Shares used in calculating basic earnings per share
78.782.380.082.4
Effect of dilutive stock options
0.20.21.0
Shares used in calculating diluted earnings per share
78.982.380.283.4
Net earnings per share:
Basic$0.49 $0.00 $2.12 $0.99 
Diluted$0.48 $0.00 $2.12 $0.98 
For the quarter and year-to-date ended October 1, 2022, 1,422,302 and 1,126,353 outstanding stock options, respectively, have not been included in the denominator for the computation of diluted earnings per share because they were anti-dilutive.
For the quarter and year-to-date ended October 2, 2021, 494,447 and 576,081 outstanding stock options, respectively, have not been included in the denominator for the computation of diluted earnings per share because they were anti-dilutive.
4.GOODWILL AND INDEFINITE-LIVED INTANGIBLES
The changes in the carrying amount of goodwill are as follows:
Year-To-Date Ended
(In millions)October 1,
2022
October 2,
2021
Goodwill balance at beginning of the year
$556.6 $442.4 
Acquisition of a business (see Note 16) 117.4 
Foreign currency translation effects(30.1)(4.3)
Goodwill balance at end of the quarter
$526.5 $555.5 
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The Company’s indefinite-lived intangible assets, which comprise trade names and trademarks, totaled $658.6 million, $718.1 million, and $718.3 million as of October 1, 2022, January 1, 2022, and October 2, 2021, respectively. The carrying values of the Company’s Sperry® and Sweaty Betty® trade names were $296.0 million and $276.3 million, respectively, as of October 1, 2022. Based on the interim impairment assessment as of October 1, 2022, it was determined that there were no triggering events indicating impairment of the Company’s goodwill and indefinite-lived intangible assets. The risk of future non-cash impairment for the Sperry® and Sweaty Betty® trade names is dependent on whether actual results differ from the key assumptions used in the determination of the trade name's fair value, such as revenue growth, earnings before interest, taxes, depreciation and amortization ("EBITDA") margin, discount rate, and assumed tax rate, or if macroeconomic conditions deteriorate and adversely affect the values of the Company's Sperry® and Sweaty Betty® trade names.
5.REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition and Performance Obligations
The Company provides disaggregated revenue by sales channel, including the wholesale and direct-to-consumer sales channels, reconciled to the Company’s reportable segments. The wholesale channel includes royalty revenues due to the similarity in the Company’s oversight and management, customer base, the performance obligation (footwear and apparel goods) and point in time completion of the performance obligation. The direct-to-consumer sales channel includes sales from the Company’s owned retail stores and from the Company’s owned eCommerce sites.
 Quarter Ended October 1, 2022Quarter Ended October 2, 2021
(In millions)WholesaleDirect-to-ConsumerTotalWholesaleDirect-to-ConsumerTotal
Wolverine Michigan Group$322.5 $67.7 $390.2 $263.2 $61.6 $324.8 
Wolverine Boston Group191.0 56.7 247.7 202.7 56.1 258.8 
Other18.1 35.4 53.5 17.9 35.2 53.1 
Total$531.6 $159.8 $691.4 $483.8 $152.9 $636.7 
Year-To-Date Ended October 1, 2022Year-To-Date Ended October 2, 2021
(In millions)WholesaleDirect-to-ConsumerTotalWholesaleDirect-to-ConsumerTotal
Wolverine Michigan Group$920.3 $188.9 $1,109.2 $779.6 $197.3 $976.9 
Wolverine Boston Group556.8 157.1 713.9 548.0 169.7 717.7 
Other75.3 121.4 196.7 47.3 37.4 84.7 
Total$1,552.4 $467.4 $2,019.8 $1,374.9 $404.4 $1,779.3 
The Company has agreements to license symbolic intellectual property with minimum guarantees or fixed consideration. The Company was due $12.9 million of remaining fixed transaction price under its license agreements as of October 1, 2022, which it expects to recognize per the terms of its contracts over the course of time through December 2026. The Company has elected to omit the remaining variable consideration under its license agreements given the Company recognizes revenue equal to what it has the right to invoice and that amount corresponds directly with the value to the customer of the Company’s performance to date.
Reserves for Variable Consideration
Revenue is recorded at the net sales price (“transaction price”), which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, customer markdowns, customer rebates and other sales incentives relating to the sale of the Company’s products. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales. These estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts. Revenue recognized during the fiscal periods presented related to the Company’s contract liabilities was nominal.
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The Company’s contract balances are as follows:
(In millions)October 1,
2022
January 1,
2022
October 2,
2021
Product returns reserve$11.6 $16.6 $14.5 
Customer markdowns reserve2.2 2.3 2.9 
Other sales incentives reserve3.7 3.4 4.5 
Customer rebates liability18.2 17.0 16.6 
Customer advances liability5.3 6.8 5.2 
The amount of variable consideration included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Actual amounts of consideration ultimately received may differ from initial estimates. If actual results in the future vary from initial estimates, the Company subsequently adjusts these estimates, which affects net revenue and earnings in the period such variances become known.
6.DEBT
Total debt consists of the following obligations:
(In millions)October 1,
2022
January 1,
2022
October 2,
2021
Term Facility, due October 21, 2026$192.5 $200.0 $ 
Term Loan A, due December 6, 2023  172.5 
Senior Notes, 4.000% interest, due August 15, 2029550.0 550.0 550.0 
Borrowings under revolving credit agreements740.0 225.0 310.0 
Unamortized deferred financing costs(7.3)(8.2)(8.1)
Total debt$1,475.2 $966.8 $1,024.4 
On October 21, 2021, the Company entered into a 2021 Replacement Facility Amendment and Reaffirmation Agreement (the “Amendment”) of its credit facility (as amended and restated, the "Credit Agreement"). The Amendment amended and restated the prior credit agreement to, among other things: (i) provide for a term loan A facility (the “Term Facility”) in an aggregate principal amount of $200.0 million, which replaced the existing term loan A; (ii) provide for an increased revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facilities”) with total commitments of $1.0 billion, an increase of $200.0 million from the existing Revolving Facility; and (iii) set the LIBOR floor to 0.000%, a decrease of 0.750% from the existing Senior Credit Facilities. The maturity date of the loans under the Senior Credit Facilities was extended to October 21, 2026. The Amendment provides for a debt capacity of up to an aggregate debt amount (including outstanding term loan principal and revolver commitment amounts in addition to permitted incremental debt) not to exceed $2.0 billion unless certain specified conditions set forth in the Credit Agreement are met.
The Term Facility requires quarterly principal payments with a balloon payment due on October 21, 2026. The scheduled principal payments due under the Term Facility over the next 12 months total $10.0 million as of October 1, 2022 and are recorded as current maturities of long-term debt on the consolidated condensed balance sheets.
The Revolving Facility allows the Company to borrow up to an aggregate amount of $1.0 billion. The Revolving Facility also includes a $100.0 million swingline subfacility and a $50.0 million letter of credit subfacility. The Company had outstanding letters of credit under the Revolving Facility of $5.6 million, $5.8 million and $5.9 million as of October 1, 2022, January 1, 2022 and October 2, 2021, respectively. These outstanding letters of credit reduce the borrowing capacity under the Revolving Facility.
The interest rates applicable to amounts outstanding under Term Facility and to U.S. dollar denominated amounts outstanding under the Revolving Facility are, at the Company’s option, either (1) the Alternate Base Rate plus an Applicable Margin as determined by the Company’s Consolidated Leverage Ratio, within a range of 0.125% to 1.000%, or (2) the Eurocurrency Rate plus an Applicable Margin as determined by the Company’s Consolidated Leverage Ratio, within a range of 1.125% to 2.000% (all capitalized terms used in this sentence are as defined in the Credit Agreement). At October 1, 2022, the Term Facility and the Revolving Facility had a weighted-average interest rate of 3.81%.
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The obligations of the Company pursuant to the Credit Agreement are guaranteed by substantially all of the Company’s material domestic subsidiaries and secured by substantially all of the personal and real property of the Company and its material domestic subsidiaries, subject to certain exceptions.
The Senior Credit Facilities also contain certain affirmative and negative covenants, including covenants that limit the ability of the Company and its Restricted Subsidiaries to, among other things: incur or guarantee indebtedness; incur liens; pay dividends or repurchase stock; enter into transactions with affiliates; consummate asset sales, acquisitions or mergers; prepay certain other indebtedness; or make investments, as well as covenants restricting the activities of certain foreign subsidiaries of the Company that hold intellectual property related assets. Further, the Senior Credit Facilities require compliance with the following financial covenants: a maximum Consolidated Leverage Ratio and a minimum Consolidated Interest Coverage Ratio (all capitalized terms used in this paragraph are as defined in the Senior Credit Facilities). As of October 1, 2022, the Company was in compliance with all covenants and performance ratios under the Senior Credit Facilities.
On August 26, 2021, the Company issued $550.0 million aggregate principal debt amount of 4.000% senior notes due on August 15, 2029. Related interest payments are due semi-annually beginning February 15, 2022. The senior notes are guaranteed by substantially all of the Company’s domestic subsidiaries. The proceeds from the senior notes were used to extinguish the Company’s $250.0 million senior notes due on September 1, 2026 and $300.0 million senior notes due on May 15, 2025. The Company incurred $34.0 million of debt extinguishment and other costs in connection with the extinguishment of the senior notes, of which $28.4 million is related to redemption premiums and $5.6 million is related to the write-off of capitalized financing fees.
The Company has a foreign revolving credit facility with aggregate available borrowings of $2.0 million that are uncommitted and, therefore, each borrowing against the facility is subject to approval by the lender. There were no borrowings against this facility as of October 1, 2022, January 1, 2022 and October 2, 2021.
The Company included in interest expense the amortization of deferred financing costs of $0.5 million and $1.5 million for the quarter and year-to-date ended October 1, 2022, respectively. The Company included in interest expense the amortization of deferred financing costs of $0.6 million and $1.9 million for the quarter and year-to-date ended October 2, 2021, respectively.
7. LEASES
The following is a summary of the Company’s lease cost.
Quarter EndedYear-To-Date Ended
(In millions)October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Operating lease cost$8.6 $9.0 $26.4 $25.1 
Variable lease cost3.8 3.3 11.4 9.4 
Short-term lease cost0.6 0.3 2.2 0.8 
Sublease income(2.0)(1.5)(6.2)(4.8)
Total lease cost$11.0 $11.1 $33.8 $30.5 
The following is a summary of the Company’s supplemental cash flow information related to leases.
Quarter EndedYear-To-Date Ended
(In millions)October 1,
2022
October 2,
2021
October 1,
2022
October 2,
2021
Cash paid for operating lease liabilities$11.1 $9.8 $30.3 $27.9 
Operating lease assets obtained in exchange for lease liabilities9.7 0.4 59.0 3.8 
The Company did not enter into any real estate leases with commencement dates subsequent to October 1, 2022.
8.DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes foreign currency forward exchange contracts designated as cash flow hedges to manage the volatility associated primarily with U.S. dollar inventory purchases made by non-U.S. wholesale operations in the normal course of business. These foreign currency forward exchange hedge contracts extended out to a maximum of 524 days, 538 days, and 538 days as of October 1, 2022, January 1, 2022 and October 2, 2021, respectively. If, in the future, the foreign exchange contracts are determined not to be highly effective or are terminated before their contractual termination dates, the Company would
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remove the hedge designation from those contracts and reclassify into earnings the unrealized gains or losses that would otherwise be included in accumulated other comprehensive income (loss) within stockholders’ equity.
The Company also utilizes foreign currency forward exchange contracts that are not designated as hedging instruments to manage foreign currency transaction exposure. Foreign currency derivatives not designated as hedging instruments are offset by foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities.
The Company has an interest rate swap arrangement, which unless otherwise terminated, will mature on May 30, 2025. This agreement, which exchanges floating rate interest payments for fixed rate interest payments over the life of the agreement without the exchange of the underlying notional amounts, has been designated as a cash flow hedge of the underlying debt. The notional amount of the interest rate swap arrangement is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap arrangement is recognized as interest expense, net. In accordance with FASB Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, the Company has formally documented the relationship between the interest rate swap and the variable rate borrowing, as well as its risk management objective and strategy for undertaking the hedge transactions. This process included linking the derivative to the specific liability or asset on the balance sheet. The Company also assessed at the inception of the hedge, and continues to assess on an ongoing basis, whether the derivative used in the hedging transaction is highly effective in offsetting changes in the cash flows of the hedged item.
The Company had a cross currency swap to minimize the impact of exchange rate fluctuations which matured on September 1, 2021. Changes in fair value related to movements in the foreign currency exchange spot rate were recorded in accumulated other comprehensive income (loss), offsetting the currency translation adjustment related to the underlying net investment that was also recorded in accumulated other comprehensive income (loss). All other changes in fair value were recorded in interest expense.
The notional amounts of the Company’s derivative instruments are as follows:
(Dollars in millions)October 1,
2022
January 1,
2022
October 2,
2021
Foreign exchange hedge contracts$376.3 $296.7