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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 September 30, 2023

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)

 __________________________________________________________ 

Delaware

38-1185150

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

9341 Courtland Drive N.E.

,

Rockford

,

Michigan

49351

(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 class			Trading symbol			Name of each exchange on which registered
Common Stock, $1 Par Value			WWW			New 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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller 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 79,532,461 shares of common stock, $1 par value, outstanding as of October 23, 2023.

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Table of Contents

Table of Contents

PART I			Financial Information			4
Item 1.			Financial Statements			4
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			33
Item 4.			Controls and Procedures			33
PART II			Other Information			34
Item 1.			Legal Proceedings			34
Item 1A.			Risk Factors			34
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 5.			Other Information			34
Item 6.			Exhibits			35
Signatures						36

2

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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:

•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, 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;

•risks related to stockholder activism;

•the potential effects of outbreaks of COVID-19 or future health crises on the Company’s business, operations, financial results and liquidity;

•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 December 31, 2022 (the “2022 Form 10-K”), filed with the SEC on February, 23, 2023. 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

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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 Ended												Year-To-Date Ended
(In millions, except per share data)			September 30, 2023						October 1, 2022						September 30, 2023						October 1, 2022
Revenue			$	527.7					$	691.4					$	1,716.2					$	2,019.8
Cost of goods sold			312.3						413.6						1,036.7						1,173.6
Gross profit			215.4						277.8						679.5						846.2
Selling, general and administrative expenses			203.3						216.8						610.8						657.3
Gain on sale of businesses, trademarks, and intangible assets			(57.7)						—						(77.8)						(90.0)
Impairment of long-lived assets			40.2						—						55.8						—
Environmental and other related costs, net of recoveries			2.3						2.2						(28.0)						32.6
Operating profit			27.3						58.8						118.7						246.3
Other expenses:
Interest expense, net			15.5						12.5						47.4						31.3
Other expense, net			2.4						2.7						3.2						2.2
Total other expense, net			17.9						15.2						50.6						33.5
Earnings before income taxes			9.4						43.6						68.1						212.8
Income tax expense			0.4						4.8						16.7						41.1
Net earnings			$	9.0					$	38.8					$	51.4					$	171.7
Less: net earnings (loss) attributable to noncontrolling interests			0.4						(0.2)						(0.2)						(1.6)
Net earnings attributable to Wolverine World Wide, Inc.			$	8.6					$	39.0					$	51.6					$	173.3
Net earnings per share (see Note 3):
Basic			$	0.11					$	0.49					$	0.64					$	2.12
Diluted			$	0.11					$	0.48					$	0.64					$	2.12
Comprehensive income (loss)			$	(0.2)					$	13.5					$	39.8					$	110.1
Less: comprehensive income (loss) attributable to noncontrolling interests			0.2						(0.6)						(0.2)						(2.4)
Comprehensive income (loss) attributable to Wolverine World Wide, Inc.			$	(0.4)					$	14.1					$	40.0					$	112.5
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)			September 30, 2023						December 31, 2022						October 1, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	160.4					$	131.5					$	136.4
Accounts receivable, less allowances of $13.3, $11.1 and $23.0			272.0						241.7						440.0
Finished products, net			561.7						743.2						871.1
Raw materials and work-in-process, net			2.1						2.0						9.8
Total inventories			563.8						745.2						880.9
Prepaid expenses and other current assets			84.9						79.0						94.5
Current assets held for sale			16.1						67.9						—
Total current assets			1,097.2						1,265.3						1,551.8
Property, plant and equipment, net of accumulated depreciation of $254.6, $236.1 and $228.4			126.5						136.2						126.0
Lease right-of-use assets, net			148.7						174.7						165.0
Goodwill			465.4						485.0						526.5
Indefinite-lived intangibles			237.0						274.0						658.6
Amortizable intangibles, net			57.4						67.4						67.7
Deferred income taxes			26.3						24.5						0.8
Other assets			72.8						65.6						74.2
Total assets			$	2,231.3					$	2,492.7					$	3,170.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	197.2					$	272.2					$	317.9
Accrued salaries and wages			21.8						32.3						26.5
Other accrued liabilities			210.9						322.9						203.4
Lease liabilities			38.7						39.1						33.5
Current maturities of long-term debt			10.0						10.0						10.0
Borrowings under revolving credit agreements			370.0						425.0						740.0
Current liabilities held for sale			3.1						8.8						—
Total current liabilities			851.7						1,110.3						1,331.3
Long-term debt, less current maturities			716.3						723.0						725.2
Accrued pension liabilities			71.7						72.9						103.0
Deferred income taxes			34.0						35.3						116.4
Lease liabilities, noncurrent			141.3						153.6						147.5
Other liabilities			53.6						58.6						73.0
Stockholders’ equity:
Common stock – par value $1, authorized 320,000,000 shares; 112,939,664, 112,202,078, and 112,170,049 shares issued			112.9						112.2						112.2
Additional paid-in capital			330.7						325.4						318.7
Retained earnings			934.5						907.2						1,277.1
Accumulated other comprehensive loss			(144.5)						(132.9)						(159.7)
Cost of shares in treasury; 33,407,203, 33,413,204, and 33,414,974 shares			(891.2)						(891.3)						(891.4)
Total Wolverine World Wide, Inc. stockholders’ equity			342.4						320.6						656.9
Noncontrolling interest			20.3						18.4						17.3
Total stockholders’ equity			362.7						339.0						674.2
Total liabilities and stockholders’ equity			$	2,231.3					$	2,492.7					$	3,170.6

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)			September 30, 2023						October 1, 2022
OPERATING ACTIVITIES
Net earnings			$	51.4					$	171.7
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization			26.3						25.2
Deferred income taxes			(1.6)						2.5
Stock-based compensation expense			11.8						26.4
Pension and SERP expense			1.2						7.0
Impairment of long-lived assets			55.8						—
Environmental and other related costs, net of cash payments and recoveries received			(68.8)						(35.8)
Gain on sale of businesses, trademarks and intangible assets			(77.8)						(90.0)
Other			(1.1)						(4.9)
Changes in operating assets and liabilities:
Accounts receivable			(25.1)						(133.5)
Inventories			178.5						(533.5)
Other operating assets			(11.7)						(15.1)
Accounts payable			(74.7)						109.2
Income taxes payable			5.6						5.7
Other operating liabilities			(62.8)						(25.1)
Net cash provided by (used in) operating activities			7.0						(490.2)
INVESTING ACTIVITIES
Additions to property, plant and equipment			(18.5)						(23.5)
Proceeds from sale of businesses, trademarks, intangible assets and other assets			136.0						90.0
Investment in joint ventures			—						(2.8)
Other			(1.3)						4.5
Net cash provided by investing activities			116.2						68.2
FINANCING ACTIVITIES
Payments under revolving credit agreements			(620.0)						(153.0)
Borrowings under revolving credit agreements			565.0						668.0
Payments on long-term debt			(7.5)						(7.5)
Payments of debt issuance costs			(0.9)						—
Cash dividends paid			(24.5)						(24.7)
Purchases of common stock for treasury			—						(81.3)
Employee taxes paid under stock-based compensation plans			(5.8)						(7.4)
Proceeds from the exercise of stock options			0.1						1.4
Contributions from noncontrolling interests			2.1						7.0
Net cash provided by (used in) financing activities			(91.5)						402.5
Effect of foreign exchange rate changes			(2.5)						(5.8)
Increase (decrease) in cash and cash equivalents			29.2						(25.3)
Cash and cash equivalents at beginning of the year			135.5						161.7
Cash and cash equivalents at end of the quarter			$	164.7					$	136.4

Cash and cash equivalents at the end of the third quarter of 2023 in the consolidated condensed statements of cash flows includes $4.3 million of Wolverine Leathers business related cash and cash equivalents that are classified as held for sale as of September 30, 2023 that are not included in cash and cash equivalents in the consolidated condensed balance sheets. The cash and cash equivalents at beginning of the year balance includes $4.0 million of Wolverine Leathers business related cash and cash equivalents that were classified as held for sale as of December 31, 2022.

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 Stock						Additional Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Treasury Stock						Non-controlling Interest						Total
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 expense									7.1																														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
Balance at July 1, 2023			$	112.9					$	326.8					$	933.8					$	(135.5)					$	(891.2)					$	20.1					$	366.9
Net earnings															8.6																		0.4						9.0
Other comprehensive loss																					(9.0)												(0.2)						(9.2)
Stock-based compensation expense									4.0																														4.0
Cash dividends declared ($0.10 per share)															(7.9)																								(7.9)
Issuance of treasury shares (2,374 shares)									(0.1)																		—												(0.1)
Balance at September 30, 2023			$	112.9					$	330.7					$	934.5					$	(144.5)					$	(891.2)					$	20.3					$	362.7

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 Stock						Additional Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Treasury Stock						Non-controlling Interest						Total
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 expense									26.4																														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 interest																																	$	7.0					$	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
Balance at December 31, 2022			$	112.2					$	325.4					$	907.2					$	(132.9)					$	(891.3)					$	18.4					$	339.0
Net earnings (loss)															51.6																		(0.2)						51.4
Other comprehensive income (loss)																					(11.6)												—						(11.6)
Shares issued, net of shares forfeited under stock incentive plans (731,544 shares)			0.7						(6.5)																														(5.8)
Shares issued for stock options exercised, net (6,042 shares)			—						0.1																														0.1
Stock-based compensation expense									11.8																														11.8
Cash dividends declared ($0.30 per share)															(24.3)																								(24.3)
Issuance of treasury shares (6,001 shares)									(0.1)																		0.1												—
Capital contribution from noncontrolling interest																																	2.1						2.1
Balance at September 30, 2023			$	112.9					$	330.7					$	934.5					$	(144.5)					$	(891.2)					$	20.3					$	362.7

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®, 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™.

Effective February 4, 2023, the Company completed the sale of the Keds® business. See Note 18 for further discussion.

In the third quarter of fiscal 2023, the Company entered into a multi-year licensing agreement of the Hush Puppies® brand in the United States and Canada. As part of this agreement, the Company agreed to sell inventory and provide certain transition services to the licensee. In addition, the Company completed the sale of Hush Puppies® trademarks, patents, copyrights, and domains in China, Hong Kong, and Macau. Wolverine will continue to own the Hush Puppies® brand throughout the rest of the world. See Note 18 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 2022 Form 10-K.

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 2023 and 2022 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 pandemics.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or an asset group may not be recoverable. Each impairment test is based on a comparison of the carrying amount of the asset or asset group to the future undiscounted net cash flows expected to be generated by the asset or asset group. Assets are considered impaired if the carrying amount exceeds fair value. The impairment amount recognized is the amount by which the carrying amount of the assets exceeds their fair value.

In the second quarter of 2023, the Company incurred $15.6 million in non-cash impairment charges on certain Corporate U.S. office long-lived property, plant and equipment and right-of-use assets, primarily resulting from divestiture activities and

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consolidation of U.S. offices, to adjust the carrying amount of the assets to estimated fair value. Fair value was estimated based on the discounted cash flows of estimated rental income from subleases net of estimated expenses. In the third quarter of 2023, the Company incurred $1.9 million in non-cash impairment charges on certain Sperry® retail store assets where the estimated future cash flows did not support the net book value of the assets. The following table provides details related to asset impairment charges recorded during 2023:

			Quarter Ended						Year-To-Date Ended
(In millions)			September 30, 2023						September 30, 2023
Lease right-of-use assets impairment			$	—					$	12.1
Property, plant and equipment impairment			1.9						5.4
Indefinite-lived trade name impairment (1)			38.3						38.3
Total impairment			$	40.2					$	55.8

(1) See Note 4 for information related to the Indefinite-lived trade name impairment recorded in the third quarter of fiscal 2023.

2.NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards Update (“ASU”) that the Company has adopted. The following is a summary of the new standard.

Standard

Description

Effect on the Financial Statements

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 and ASU 2022-06).

Provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.

The Company adopted ASU 2020-04 during the second quarter of 2023 on a prospective basis. The Company amended its amended senior credit facility to use SOFR as an alternative to LIBOR. The adoption of the ASU did not have a material effect on the consolidated financial statements.

3.EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share.

			Quarter Ended												Year-To-Date Ended
(In millions, except per share data)			September 30, 2023						October 1, 2022						September 30, 2023						October 1, 2022
Numerator:
Net earnings attributable to Wolverine World Wide, Inc.			$	8.6					$	39.0					$	51.6					$	173.3
Adjustment for earnings allocated to non-vested restricted common stock			(0.2)						(0.8)						(1.2)						(3.4)
Net earnings used in calculating basic and diluted earnings per share			$	8.4					$	38.2					$	50.4					$	169.9
Denominator:
Weighted average shares outstanding			79.5						78.7						79.4						80.0
Effect of dilutive stock options			—						0.2						—						0.2
Shares used in calculating diluted earnings per share			79.5						78.9						79.4						80.2
Net earnings per share:
Basic			$	0.11					$	0.49					$	0.64					$	2.12
Diluted			$	0.11					$	0.48					$	0.64					$	2.12

For the quarter and year-to-date ended September 30, 2023, 1,964,421 and 2,042,094 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 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.

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4.GOODWILL AND INDEFINITE-LIVED INTANGIBLES

The changes in the carrying amount of goodwill are as follows:

			Year-To-Date Ended
(In millions)			September 30, 2023						October 1, 2022
Goodwill balance at beginning of the year			$	485.0					$	556.6
Sale of business (see Note 18)			(20.4)						—
Foreign currency translation effects			0.8						(30.1)
Goodwill balance at end of the quarter			$	465.4					$	526.5

The Company’s indefinite-lived intangible assets, which comprise trade names and trademarks, totaled $237.0 million, $274.0 million, and $658.6 million as of September 30, 2023, December 31, 2022, and October 1, 2022, respectively. In the third quarter of 2023, due to the continued lower current year performance of the Sperry® brand, the Company determined that a triggering event had occurred requiring impairment testing of the Sperry® trade name. Based on the results of the impairment testing, the Company recognized impairment charges of $38.3 million to the Sperry® trade name. The impairment charge was due to reductions in future cash flow assumptions mainly due to decreases in anticipated future performance and an increase in the discount rate used in the valuation. In conjunction with the Sperry® trade name impairment trigger identified, the Company performed a quantitative impairment analysis of the Lifestyle reporting unit and concluded the reporting unit was not impaired. The estimated fair value of the Lifestyle reporting unit exceeded the carrying value by 30%.

In the fourth quarter of 2022, the Company recognized impairment charges of $191.0 million and $189.3 million related to the Sperry® and Sweaty Betty® trade names, respectively, and recognized a $48.4 million goodwill impairment charge related to the Sweaty Betty® reporting unit.

The risk of future non-cash impairment of the Sperry® and Sweaty Betty® trade names and Sweaty Betty® goodwill is dependent on whether actual results differ from the key assumptions used in the determination of each trade name's fair value and the Sweaty Betty® reporting unit’s fair value, such as revenue growth, earnings before interest, taxes depreciation and amortization 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 and the Sweaty Betty® reporting unit. A future impairment charge of the Sperry® trade name or Sweaty Betty® trade name and the Sweaty Betty® reporting unit goodwill could have an adverse material effect on the Company's consolidated financial results. The carrying values of the Company’s Sperry® and Sweaty Betty® trade names indefinite-lived assets were $67.0 million and $95.3 million, respectively, as of September 30, 2023.

5.ACCOUNTS RECEIVABLE

The Company and certain of its subsidiaries sell, on a continuous basis without recourse, their trade receivables to Rockford ARS, LLC (“Rockford ARS”), a wholly-owned bankruptcy-remote subsidiary of the Company. On December 7, 2022, Rockford ARS entered into a receivables purchase agreement (“RPA”) to sell up to $175.0 million of receivables to certain purchasers (the “Purchasers”) on a recurring basis in exchange for cash (referred to as “capital” in the RPA) equal to the gross receivables transferred. The parties intend that the transfers of receivables to the Purchasers constitute purchases and sales of receivables. Rockford ARS has guaranteed to each Purchaser the prompt payment of sold receivables, and has granted a security interest in its assets for the benefit of the Purchasers. Under the RPA, which matures on December 5, 2025 each Purchaser’s share of capital accrues yield at a floating rate plus an applicable margin. The Company is the master servicer under the RPA, and is responsible for administering and collecting receivables.

The proceeds of the RPA are classified as operating activities in the Company's consolidated condensed statements of cash flows. Cash received from collections of sold receivables may be used to fund additional purchases of receivables on a revolving basis or to return all or any portion of outstanding capital of the Purchasers. Subsequent collections of the pledged receivables, which have not been sold, will be classified as operating cash flows at the time of collection. Total receivables sold under the RPA were $144.7 million and $510.3 million for the quarter and year-to-date ended September 30, 2023, respectively. Total cash collections under the RPA were $148.7 million and $521.5 million in the quarter and year-to-date ended September 30, 2023, respectively. The fair value of the sold receivables approximated book value due to their credit quality and short-term nature, and as a result, no gain or loss on sale of receivables was recorded.

As of the fiscal quarter ended September 30, 2023, the amount sold to the Purchasers under the RPA was $131.5 million, which was derecognized from the consolidated condensed balance sheets. As collateral against sold receivables, Rockford ARS maintains a certain level of unsold receivables, which was $61.5 million as of the fiscal quarter ended September 30, 2023.

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6.REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition and Performance Obligations

The Company reports 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 September 30, 2023																		Quarter Ended October 1, 2022
(In millions)			Wholesale						Direct-to-Consumer						Total						Wholesale						Direct-to-Consumer						Total
Active Group			$	225.2					$	103.4					$	328.6					$	288.7					$	109.5					$	398.2
Work Group			111.4						11.6						123.0						145.4						12.4						157.8
Lifestyle Group			42.8						20.0						62.8						81.7						36.0						117.7
Other			11.7						1.6						13.3						15.8						1.9						17.7
Total Revenue			$	391.1					$	136.6					$	527.7					$	531.6					$	159.8					$	691.4

			Year-To-Date Ended September 30, 2023																		Year-To-Date Ended October 1, 2022
(In millions)			Wholesale						Direct-to-Consumer						Total						Wholesale						Direct-to-Consumer						Total
Active Group			$	800.4					$	297.4					$	1,097.8					$	849.5					$	323.1					$	1,172.6
Work Group			322.4						32.9						355.3						398.1						37.7						435.8
Lifestyle Group			162.0						61.0						223.0						244.8						102.1						346.9
Other			35.9						4.2						40.1						60.0						4.5						64.5
Total Revenue			$	1,320.7					$	395.5					$	1,716.2					$	1,552.4					$	467.4					$	2,019.8

The Company has agreements to license symbolic intellectual property with minimum guarantees or fixed consideration. The Company was due $15.2 million of remaining fixed transaction price under its license agreements as of September 30, 2023, which it expects to recognize per the terms of its contracts over the course of time through December 2028. 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.

The Company’s contract balances are as follows:

(In millions)			September 30, 2023						December 31, 2022						October 1, 2022
Product returns reserve			$	10.8					$	15.3					$	11.6
Customer markdowns reserve			4.6						2.6						2.2
Other sales incentives reserve			3.4						3.3						3.7
Customer rebates liability			14.0						19.8						18.2
Customer advances liability			4.9						9.1						5.3

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

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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.

7.DEBT

Total debt consists of the following obligations:

(In millions)			September 30, 2023						December 31, 2022						October 1, 2022
Term Facility, due October 21, 2026			$	182.5					$	190.0					$	192.5
Senior Notes, 4.000% interest, due August 15, 2029			550.0						550.0						550.0
Borrowings under revolving credit agreements			370.0						425.0						740.0
Unamortized deferred financing costs			(6.2)						(7.0)						(7.3)
Total debt			$	1,096.3					$	1,158.0					$	1,475.2

The Company’s credit agreement provides for a term loan A facility (the “Term Facility”) and for a revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facilities”). The maturity date of the loans under the Senior Credit Facilities is October 21, 2026. The credit agreement 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 September 30, 2023 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 $6.6 million, $5.7 million and $5.6 million as of September 30, 2023, December 31, 2022 and October 1, 2022, 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 September 30, 2023, the Term Facility and the Revolving Facility had a weighted-average interest rate of 6.38%.

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 September 30, 2023, the Company was in compliance with all covenants and performance ratios under the Senior Credit Facilities.

On June 30, 2023, the Company entered into the Fourth Amendment (the “Amendment”) to its credit agreement, dated as of July 31, 2012. The Amendment provides the Company with near-term financial flexibility by adjusting the maximum Consolidated Leverage Ratio allowed under the credit agreement through the end of fiscal 2023. Financial covenant thresholds will revert to pre-existing levels in the first quarter of fiscal 2024.

The Company’s $550.0 million 4.000% senior notes issued on August 26, 2021 are due on August 15, 2029. Related interest payments are due semi-annually. The senior notes are guaranteed by substantially all of the Company’s domestic subsidiaries.

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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 September 30, 2023, December 31, 2022 and October 1, 2022.

The Company included in interest expense the amortization of deferred financing costs of $0.6 million and $1.6 million for the quarter and year-to-date ended September 30, 2023, respectively. 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.

8.LEASES

The following is a summary of the Company’s lease cost.

			Quarter Ended												Year-To-Date Ended
(In millions)			September 30, 2023						October 1, 2022						September 30, 2023						October 1, 2022
Operating lease cost			$	10.0					$	8.6					$	30.5					$	26.4
Variable lease cost			3.9						3.8						10.9						11.4
Short-term lease cost			0.7						0.6						2.6						2.2
Sublease income			(1.3)						(2.0)						(4.5)						(6.2)
Total lease cost			$	13.3					$	11.0					$	39.5					$	33.8

The following is a summary of the Company’s supplemental cash flow information related to leases.

			Quarter Ended												Year-To-Date Ended
(In millions)			September 30, 2023						October 1, 2022						September 30, 2023						October 1, 2022
Cash paid for operating lease liabilities			$	10.0					$	11.1					$	32.6					$	30.3
Operating lease assets obtained in exchange for lease liabilities			4.2						9.7						9.6						59.0

The Company did not enter into any real estate leases with commencement dates subsequent to September 30, 2023.

9.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 531 days, 524 days, and 524 days as of September 30, 2023, December 31, 2022 and October 1, 2022, 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 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.

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The notional amounts of the Company’s derivative instruments are as follows:

(Dollars in millions)			September 30, 2023						December 31, 2022						October 1, 2022
Foreign exchange hedge contracts			$	267.8					$	334.2					$	376.3
Interest rate swap			109.6						176.2						240.6

The recorded fair values of the Company’s derivative instruments are as follows:

(In millions)			September 30, 2023						December 31, 2022						October 1, 2022
Financial assets:
Foreign exchange hedge contracts			$	4.3					$	7.5					$	32.3
Interest rate swap			3.0						6.1						7.2
Financial liabilities:
Foreign exchange hedge contracts			$	(0.3)					$	(1.3)					$	—

Foreign exchange hedge contract financial assets are recorded to prepaid expenses and other current assets and financial liabilities are recorded to other accrued liabilities on the consolidated balance sheets. Interest rate swap financial assets are recorded to other assets and financial liabilities are recorded to other liabilities on the consolidated condensed balance sheets.

10.STOCK-BASED COMPENSATION

The Company recognized compensation expense of $4.0 million and $11.8 million, and related income tax benefits of $0.8 million and $2.3 million, for grants under its stock-based compensation plans for the quarter and year-to-date ended September 30, 2023, respectively. The Company recognized compensation expense of $7.1 million and $26.4 million, and related income tax benefits of $1.4 million and $5.1 million, for grants under its stock-based compensation plans for the quarter and year-to-date ended October 1, 2022, respectively.

The Company grants restricted stock or units (“restricted awards”), performance-based restricted stock or units (“performance awards”) and stock options under its stock-based compensation plans.

The Company granted restricted awards and performance awards as follows:

			Year-To-Date Ended September 30, 2023												Year-To-Date Ended October 1, 2022
(In millions)			Company Shares Issued						Weighted-Average Grant Date Fair Value						Company Shares Issued						Weighted-Average Grant Date Fair Value
Restricted Awards			1,412,030						$	14.90					965,341						$	26.06
Performance Awards			680,737						$	15.16					393,647						$	29.90

11.RETIREMENT PLANS

The following is a summary of net pension and Supplemental Executive Retirement Plan (“SERP”) expense recognized by the Company.

			Quarter Ended												Year-To-Date Ended
(In millions)			September 30, 2023						October 1, 2022						September 30, 2023						October 1, 2022
Service cost pertaining to benefits earned during the period			$	0.7					$	1.3					$	2.3					$	4.0
Interest cost on projected benefit obligations			4.4						3.3						13.3						9.9
Expected return on pension assets			(4.6)						(5.1)						(13.9)						(15.4)
Net amortization loss			(0.1)						2.9						(0.5)						8.5
Net pension expense			$	0.4					$	2.4					$	1.2					$	7.0

The non-service cost components of net pension expense is recorded in the Other expense, net line item on the consolidated condensed statements of operations and comprehensive income.

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12.INCOME TAXES

The Company maintains management and operational activities in overseas subsidiaries, and its foreign earnings are taxed at rates that are different than the U.S. federal statutory income tax rate. A significant amount of the Company’s earnings are generated by its Canadian, European and Asian subsidiaries and, to a lesser extent, in jurisdictions that are not subject to income tax.

The Company intends to permanently reinvest all non-cash undistributed earnings outside of the U.S. and has therefore not established a deferred tax liability on that amount of foreign unremitted earnings. However, if these non-cash undistributed earnings were repatriated, the Company would be required to accrue and pay applicable U.S. taxes and withholding taxes payable to various countries. It is not practicable to estimate the amount of the deferred tax liability associated with these non-cash unremitted earnings due to the complexity of the hypothetical calculation.

The Company’s effective tax rates for the quarter and year-to-date ended September 30, 2023 were 4.6% and 24.5%, respectively. The Company’s effective tax rates for the quarter and year-to-date ended October 1, 2022 were 10.9% and 19.3%, respectively. The decrease in the effective tax rate between 2023 and 2022 for the quarter-to-date period is due to income mix changes between jurisdictions with differing tax rates, partially offset by discrete tax expenses in the current year compared to discrete benefits in the prior year. The increase in the effective tax rate between 2023 and 2022 for the year-to-date period is due to discrete tax expenses in the current year compared to discrete tax benefits in the prior year, partially offset by income mix changes between jurisdictions with differing tax rates.

The Company is subject to periodic audits by U.S. federal, state, local and non-U.S. tax authorities. Currently, the Company is undergoing routine periodic audits in both U.S. federal, state, local and non-U.S. tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next 12 months as a result of the audits; however, any payment of tax is not expected to be significant to the consolidated condensed financial statements. The Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2017 in the majority of tax jurisdictions.

13.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) represents net earnings and any revenue, expenses, gains and losses that, under U.S. GAAP, are excluded from net earnings and recognized directly as a component of stockholders’ equity.

The change in accumulated other comprehensive income (loss) during the quarters ended September 30, 2023 and October 1, 2022 is as follows:

(In millions)			Foreign currency translation						Derivatives						Pension						Total
Balance at July 2, 2022			$	(115.9)					$	9.8					$	(28.7)					$	(134.8)
Other comprehensive income (loss) before reclassifications (1)			(40.9)						17.4						—						(23.5)
Amounts reclassified from accumulated other comprehensive income (loss)			—						(4.7)			(2)			2.9			(3)			(1.8)
Income tax expense (benefit)			—						1.1						(0.7)						0.4
Net reclassifications			—						(3.6)						2.2						(1.4)
Net current-period other comprehensive income (loss) (1)			(40.9)						13.8						2.2						(24.9)
Balance at October 1, 2022			$	(156.8)					$	23.6					$	(26.5)					$	(159.7)
Balance at July 1, 2023			$	(125.0)					$	(8.5)					$	(2.0)					$	(135.5)
Other comprehensive income (loss) before reclassifications (1)			(13.1)						8.9						—						(4.2)
Amounts reclassified from accumulated other comprehensive income (loss)			—						(6.1)			(2)			(0.1)			(3)			(6.2)
Income tax expense (benefit)			—						1.4						—						1.4
Net reclassifications			—						(4.7)						(0.1)						(4.8)
Net current-period other comprehensive income (loss) (1)			(13.1)						4.2						(0.1)						(9.0)
Balance at September 30, 2023			$	(138.1)					$	(4.3)					$	(2.1)					$	(144.5)

(1)Other comprehensive income (loss) is reported net of taxes and noncontrolling interest.

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(2)Amounts related to foreign currency derivatives deemed to be highly effective are included in cost of goods sold. Amounts related to foreign currency derivatives that are no longer deemed to be highly effective are included in other income. Amounts related to the interest rate swap are included in interest expense.

(3)Amounts reclassified are included in the computation of net pension expense.

The change in accumulated other comprehensive income (loss) during the year-to-date periods ended September 30, 2023 and October 1, 2022 is as follows:

(In millions)			Foreign currency translation						Derivatives						Pension						Total
Balance at January 1, 2022			$	(56.8)					$	(8.9)					$	(33.2)					$	(98.9)
Other comprehensive income (loss) before reclassifications (1)			(100.0)						39.1						—						(60.9)
Amounts reclassified from accumulated other comprehensive income (loss)			—						(8.7)			(2)			8.5			(3)			(0.2)
Income tax expense (benefit)			—						2.1						(1.8)						0.3
Net reclassifications			—						(6.6)						6.7						0.1
Net current-period other comprehensive income (loss) (1)			(100.0)						32.5						6.7						(60.8)
Balance at October 1, 2022			$	(156.8)					$	23.6					$	(26.5)					$	(159.7)
Balance at December 31, 2022			$	(133.1)					$	1.9					$	(1.7)					$	(132.9)
Other comprehensive income (loss) before reclassifications (1)			(9.2)						6.0						—						(3.2)
Amounts reclassified from accumulated other comprehensive income (loss)			4.2						(16.2)			(2)			(0.5)			(3)			(12.5)
Income tax expense (benefit)			—						4.0						0.1						4.1
Net reclassifications			4.2						(12.2)						(0.4)						(8.4)
Net current-period other comprehensive income (loss) (1)			(5.0)						(6.2)						(0.4)						(11.6)
Balance at September 30, 2023			$	(138.1)					$	(4.3)					$	(2.1)					$	(144.5)

(1)Other comprehensive income (loss) is reported net of taxes and noncontrolling interest.

(2)Amounts related to foreign currency derivatives deemed to be highly effective are included in cost of goods sold. Amounts related to foreign currency derivatives that are no longer deemed to be highly effective are included in other income. Amounts related to the interest rate swap are included in interest expense.

(3)Amounts reclassified are included in the computation of net pension expense.

14. FAIR VALUE MEASUREMENTS

The Company measures certain financial assets and liabilities at fair value on a recurring basis. For additional information regarding the Company’s fair value policies, refer to Note 1 in the Company’s 2022 Form 10-K.

Recurring Fair Value Measurements

The following table sets forth financial assets and liabilities measured at fair value in the consolidated condensed balance sheets and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy.

			Fair Value Measurements
			Quoted Prices With Other Observable Inputs (Level 2)
(In millions)			September 30, 2023						December 31, 2022						October 1, 2022
Financial assets:
Derivatives			$	7.3					$	13.6					$	39.5
Financial liabilities:
Derivatives			$	(0.3)					$	(1.3)					$	—

The fair value of foreign currency forward exchange contracts represents the estimated receipts or payments necessary to terminate the contracts. The interest rate swap was valued based on the current forward rates of the future cash flows.

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Nonrecurring Fair Value Measurements

Indefinite-lived intangible assets and goodwill are tested annually, or if a triggering event occurs that indicates an impairment loss may have been incurred, using fair value measurements with unobservable inputs (Level 3). In the third quarter of fiscal 2023, after completion of impairment testing, the Company recognized impairment charges of $38.3 million to the Sperry® trade name. Refer to Note 4, “Goodwill and Other Intangibles” for additional discussion on the Sperry® trade name impairment.

Fair Value Disclosures

The Company’s financial instruments that are not recorded at fair value consist of cash and cash equivalents, accounts and notes receivable, accounts payable, borrowings under revolving credit agreements and other short-term and long-term debt. The carrying amount of these financial instruments is historical cost, which approximates fair value, except for the debt. The carrying value and the fair value of the Company’s debt are as follows:

(In millions)			September 30, 2023						December 31, 2022						October 1, 2022
Carrying value			$	1,096.3					$	1,158.0					$	1,475.2
Fair value			971.9						1,042.9						1,355.2

The fair value of the fixed rate debt was based on third-party quotes (Level 2). The fair value of the variable rate debt was calculated by discounting the future cash flows to its present value using a discount rate based on the risk-free rate of the same maturity (Level 3).

15. LITIGATION AND CONTINGENCIES

Litigation

The Company operated a leather tannery in Rockford, Michigan from the early 1900s through 2009 (the “Tannery”). The Company also owns a parcel on House Street in Plainfield Township that the Company used for the disposal of Tannery byproducts until about 1970 (the "House Street" site). Beginning in the late 1950s, the Company used 3M Company’s Scotchgard™ in its processing of certain leathers at the Tannery. Until 2002 when 3M Company changed its Scotchgard™ formula, Tannery byproducts disposed of by the Company at the House Street site and other locations may have contained PFOA and/or PFOS, two chemicals in the family of compounds known as per- and polyfluoroalkyl substances (together, “PFAS”). PFOA and PFOS help provide non-stick, stain-resistant, and water-resistant qualities, and were used for many decades in commercial products like firefighting foams and metal plating, and in common consumer items like food wrappers, microwave popcorn bags, pizza boxes, Teflon™, carpets and Scotchgard™.

In May 2016, the Environmental Protection Agency (“EPA”) announced a lifetime health advisory level of 70 parts per trillion (“ppt”) combined for PFOA and PFOS, which the EPA reduced in June 2022 to 0.004 ppt and 0.02 ppt for PFOA and PFOS, respectively. In January 2018, the Michigan Department of Environmental Quality (“MDEQ”, now known as the Michigan Department of Environment, Great Lakes, and Energy (“EGLE”)) enacted a drinking water criterion of 70 ppt combined for PFOA and PFOS, which set an official state standard for acceptable concentrations of these contaminants in groundwater used for drinking water purposes. On August 3, 2020, Michigan changed the standards for PFOA and PFOS in drinking water to 8 and 16 ppt, respectively, and set standards for four other PFAS substances.

Civil and Regulatory Actions of EGLE and EPA

On January 10, 2018, EGLE filed a civil action against the Company in the U.S. District Court for the Western District of Michigan under the federal Resource Conservation and Recovery Act of 1976 (“RCRA”) and Parts 201 and 31 of the Michigan Natural Resources and Environmental Protection Act (“NREPA”) alleging that the Company’s past and present handling, storage, treatment, transportation and/or disposal of solid waste at the Company’s properties has resulted in releases of PFAS at levels exceeding applicable Michigan cleanup criteria for PFOA and PFOS (the "EGLE Action"). Plainfield and Algoma Townships intervened in the EGLE Action alleging claims under RCRA, NREPA, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and common law nuisance.

On February 3, 2020, the parties entered into a consent decree resolving the EGLE Action, which was approved by U.S. District Judge Janet T. Neff on February 19, 2020 (the “Consent Decree”). Under the Consent Decree, the Company agreed to pay for an extension of Plainfield Township’s municipal water system to more than 1,000 properties in Plainfield and Algoma Townships, subject to an aggregate cap of $69.5 million. The Company also agreed to continue maintaining water filters for certain homeowners, resample certain residential wells for PFAS, continue remediation at the Company’s Tannery property and House Street site, and conduct further investigations and monitoring to assess the presence of PFAS in area groundwater. The Company’s activities under the Consent Decree are not materially impacted by either the drinking water standards that became effective on August 3, 2020, or the EPA’s revised advisory levels issued in June 2022.

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On December 19, 2018, the Company filed a third-party complaint against 3M Company seeking, among other things, recovery of the Company’s remediation and other costs incurred in defense of the EGLE Action ("the 3M Action"). On June 20, 2019, the 3M Company filed a counterclaim against the Company in response to the 3M Action, seeking, among other things, contractual and common law indemnity and contribution under CERCLA and Part 201 of NREPA. On February 20, 2020, the Company and 3M Company entered into a settlement agreement resolving the 3M Action, under which 3M Company paid the Company a lump sum amount of $55.0 million during the first quarter of 2020.

On January 10, 2018, the EPA entered a Unilateral Administrative Order (the “Order”) under Section 106(a) of CERCLA, 42 U.S.C. § 9606(a) with an effective date of February 1, 2018. The Order pertained to specified removal actions at the Company's Tannery and House Street sites, including certain time critical removal actions subsequently identified in an April 29, 2019 letter from the EPA, to abate the actual or threatened release of hazardous substances at or from the sites. On October 28, 2019, the EPA and the Company entered into an Administrative Settlement and Order on Consent (“AOC”) that supersedes the Order and addresses the agreed-upon removal actions outlined in the Order. The Company has completed the activities required by the AOC, and is awaiting the final review and determination from the EPA.

The Company discusses its reserve for remediation costs in the environmental liabilities section below.

Individual and Class Action Litigation

Beginning in late 2017, individual lawsuits and three putative class action lawsuits were filed against the Company that raise a variety of claims, including claims related to property, remediation, and human health effects. The three putative class action lawsuits were subsequently refiled in the U.S. District Court for the Western District of Michigan as a single consolidated putative class action lawsuit. 3M Company has been named as a co-defendant in the individual lawsuits and consolidated putative class action lawsuit. In addition, the current owner of a former landfill and gravel mining operation sued the Company seeking damages and cost recovery for property damage allegedly caused by the Company’s disposal of tannery waste containing PFAS (this suit collectively with the individual lawsuits and putative class action, the “Litigation Matters”).

On January 11, 2022, the Company and 3M Company entered into a master settlement agreement with the law firm representing certain of the plaintiffs in the individual lawsuits included in the Litigation Matters, and each of these plaintiffs subsequently agreed to participate in the settlement. These plaintiffs’ lawsuits were dismissed with prejudice on or around April 25, 2022.

On December 9, 2021, the Company and 3M Company reached a settlement in principle to resolve certain of the remaining individual lawsuits included in the Litigation Matters, and the parties entered into definitive settlement agreements in March 2022. These plaintiffs’ lawsuits were dismissed with prejudice on June 14, 2022. The last remaining individual action was dismissed without prejudice on June 24, 2022.

In addition, in September 2022, the parties to the putative class action filed a motion for preliminary approval of a proposed class action settlement seeking to resolve the putative class action plaintiffs’ claims. On March 29, 2023, the court presiding over the putative class action granted final approval of the proposed settlement and dismissed the lawsuit with prejudice.

The last remaining Litigation Matter, the lawsuit filed by the current owner of a former landfill and gravel mining operations, was pending in Michigan state court but has been administratively stayed by the Court.

There were no developments during the first three quarters of 2023 that required the Company to change the amount accrued for the Litigation Matters described above. The Company made related payments of $37.8 million in connection with the Litigation Matters described above during the first three quarters of 2023. As of September 30, 2023, the Company had recorded liabilities of $2.7 million for certain of the Litigation Matters described above which are recorded as other accrued liabilities in the consolidated condensed balance sheets.

In December 2018, the Company filed a lawsuit against certain of its historic liability insurers, seeking to compel them to provide a defense against the Litigation Matters on the Company's behalf and coverage for remediation efforts undertaken by, and indemnity provided by, the Company. The Company recognized certain recoveries from legacy insurance policies in 2023 and 2022 and continues pursuing additional recoveries through the lawsuit.

Other Litigation

The Company is also involved in litigation incidental to its business and is a party to legal actions and claims, including, but not limited to, those related to employment, intellectual property, and consumer related matters. Some of the legal proceedings include claims for compensatory as well as punitive damages. While the final outcome of these matters cannot be predicted with certainty, considering, among other things, the meritorious legal defenses available to the Company and reserves for liabilities that the Company has recorded, along with applicable insurance, it is management’s opinion that the outcome of these

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items are not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Environmental Liabilities

The following is a summary of the activity with respect to the environmental remediation reserve established by the Company:

			Year-To-Date Ended
(In millions)			September 30, 2023						October 1, 2022
Remediation liability at beginning of the year			$	74.1					$	85.7
Changes in estimate			(21.0)						—
Amounts paid			(9.5)						(21.3)
Remediation liability at the end of the quarter			$	43.6					$	64.4

The reserve balance as of September 30, 2023 includes $22.8 million that is expected to be paid within the next twelve months and is recorded as a current obligation in other accrued liabilities, with the remaining $20.8 million expected to be paid over the course of up to 25 years, recorded in other liabilities.

The Company's remediation activity at the Tannery property, House Street site and other relevant operations or disposal sites is ongoing. Although the Consent Decree has made near-term costs more clear, it is difficult to estimate the long-term cost of environmental compliance and remediation given the uncertainties regarding the interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination and the existence of alternative cleanup methods. Future developments may occur that could materially change the Company’s current cost estimates, including, but not limited to: (i) changes in the information available regarding the environmental impact of the Company’s operations and products; (ii) changes in environmental regulations, changes in permissible levels of specific compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural resource damages; (iii) new and evolving analytical and remediation techniques; (iv) changes to the form of remediation; (v) success in allocating liability to other potentially responsible parties; and (vi) the financial viability of other potentially responsible parties and third-party indemnitors. For locations at which remediation activity is largely ongoing, the Company cannot estimate a possible loss or range of loss in excess of the associated established reserves for the reasons described above. The Company adjusts recorded liabilities as further information develops or circumstances change.

Minimum Royalties and Advertising Commitments

The Company has future minimum royalty and advertising obligations due under the terms of certain licenses held by the Company. These minimum future obligations for the fiscal periods subsequent to September 30, 2023 are as follows:

(In millions)			2023						2024						2025						2026						2027						Thereafter
Minimum royalties			$	—					$	—					$	—					$	—					$	—					$	—
Minimum advertising			—						3.9						3.3						3.3						3.4