-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GceVqe/BRi7npxzdPFdxLAGS7Ygh4z5rsivzzT+uCP7KX2V7j7p/KmKMrB5bl9Sq nzAHUZpCh5wZwHkj99xGUg== 0000905729-96-000063.txt : 19960508 0000905729-96-000063.hdr.sgml : 19960508 ACCESSION NUMBER: 0000905729-96-000063 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960323 FILED AS OF DATE: 19960507 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WOLVERINE WORLD WIDE INC /DE/ CENTRAL INDEX KEY: 0000110471 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 381185150 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06024 FILM NUMBER: 96557440 BUSINESS ADDRESS: STREET 1: 9341 COURTLAND DR CITY: ROCKFORD STATE: MI ZIP: 49351 BUSINESS PHONE: 6168665500 MAIL ADDRESS: STREET 1: 9341 COURTLAND DR CITY: ROCKFORD STATE: MI ZIP: 49351 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the first twelve week accounting period ended March 23, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number 1-6024 WOLVERINE WORLD WIDE, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 38-1185150 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 9341 COURTLAND DRIVE, ROCKFORD, MICHIGAN 49351 (Address of Principal Executive Offices) (Zip Code) (616) 866-5500 (Registrant's Telephone Number, including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practical date. There were 18,408,358 shares of Common Stock, $1 par value, outstanding as of April 15, 1996 of which 548,239 shares are held as Treasury Stock. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (THOUSANDS OF DOLLARS)
MARCH 23, DECEMBER 30, MARCH 25, 1996 1995 1995 (UNAUDITED) (AUDITED) (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents $ 8,920 $ 27,088 $ 3,286 Accounts receivable, less allowances March 23, 1996 - $3,450 December 30, 1995 - $3,407 March 25, 1995 - $4,323 78,746 83,392 64,299 Inventories: Finished products 65,167 45,814 64,218 Raw materials and work in process 40,995 42,536 32,244 106,162 88,350 96,462 Other current assets 34,461 15,896 11,733 Net current assets of discontinued operations 26 149 2,066 TOTAL CURRENT ASSETS 228,315 214,875 177,846 PROPERTY, PLANT & EQUIPMENT Gross cost 112,473 109,731 99,543 Less accumulated depreciation 63,979 62,846 63,398 48,494 46,885 36,145 OTHER ASSETS 22,389 21,794 25,769 TOTAL ASSETS $299,198 $283,554 $239,760
See notes to consolidated condensed financial statements. -2- WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS - CONTINUED (THOUSANDS OF DOLLARS)
MARCH 23, DECEMBER 30, MARCH 25, 1996 1995 1995 (UNAUDITED) (AUDITED) (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 3,160 $ 2,339 $ 2,467 Accounts payable and other accrued liabilities 35,441 35,224 40,241 Current maturities of long-term debt 84 84 170 TOTAL CURRENT LIABILITIES 38,685 37,647 42,878 LONG-TERM DEBT (less current maturities) 42,569 30,594 52,701 OTHER NONCURRENT LIABILITIES 10,372 11,099 10,700 STOCKHOLDERS' EQUITY Common Stock - par value $1, authorized 25,000,000 shares; shares issued (including shares in treasury): March 23, 1996 - 18,865,844 shares December 30, 1995 - 18,782,580 shares March 25, 1995 - 16,740,362 shares 18,866 18,783 16,740 Additional paid-in capital 71,183 70,716 19,771 Retained earnings 126,248 123,593 103,803 Accumulated translation adjustments (349) (324) 246 Unearned compensation (1,649) (1,827) (1,079) Cost of shares in treasury: March 23, 1996 - 548,239 shares December 30, 1995 - 547,913 shares March 25, 1995 - 533,992 shares (6,727) (6,727) (6,000) TOTAL STOCKHOLDERS' EQUITY 207,572 204,214 133,481 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $299,198 $283,554 $239,760
( ) - Denotes deduction. See notes to consolidated condensed financial statements. -3- WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) (UNAUDITED)
12 WEEKS ENDED MARCH 23, MARCH 25, 1996 1995 NET SALES AND OTHER OPERATING INCOME $ 83,842 $ 76,331 Cost of products sold 58,519 53,543 GROSS MARGIN 25,323 22,788 Selling and administrative expenses 20,489 18,913 OPERATING INCOME 4,834 3,875 OTHER EXPENSES (INCOME): Interest expense 626 701 Interest income (407) (228) Other - net (323) (217) (104) 256 EARNINGS BEFORE INCOME TAXES 4,938 3,619 Income taxes 1,545 1,122 NET EARNINGS $ 3,393 $ 2,497 EARNINGS PER SHARE: Primary $ .18 $ .15 Fully diluted $ .18 $ .15 CASH DIVIDENDS PER SHARE $ .040 $ .033 SHARES USED FOR NET EARNINGS PER SHARE COMPUTATION: Primary 18,814,872 16,683,028 Fully diluted 18,825,050 16,718,468
See notes to consolidated condensed financial statements. -4- WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (THOUSANDS OF DOLLARS) (UNAUDITED)
12 WEEKS ENDED MARCH 23, MARCH 25, 1996 1995 OPERATING ACTIVITIES Net earnings from continuing operations $ 3,393 $ 2,497 Depreciation, amortization and other non-cash items (278) 657 Changes in operating assets and liabilities: Accounts receivable 4,646 6,370 Inventories (17,812) (17,437) Other current assets 4,308 2,094 Accounts payable and other accrued liabilities 217 (1,043) NET CASH USED IN OPERATING ACTIVITIES (5,526) (6,862) FINANCING ACTIVITIES Proceeds from long-term borrowings 12,000 12,090 Payments of long-term borrowings (25) (3,005) Proceeds from short-term borrowings 821 3,035 Payments of short-term borrowings (2,000) Cash dividends (738) (567) Proceeds from shares issued under employee stock plans 550 192 NET CASH PROVIDED BY FINANCING ACTIVITIES 12,608 9,745 INVESTING ACTIVITIES Purchase of business product line (22,750) Additions to property, plant and equipment (3,127) (2,515) Other 627 (31) NET CASH USED IN INVESTING ACTIVITIES (25,250) (2,546) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,168) 337 Cash and cash equivalents at beginning of year 27,088 2,949 CASH AND CASH EQUIVALENTS AT END OF FIRST QUARTER $ 8,920 $ 3,286
( ) - Denotes reduction in cash and cash equivalents. See notes to consolidated condensed financial statements. -5- WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MARCH 23, 1996 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. Certain amounts in 1995 have been reclassified to conform with the presentation used in 1996. NOTE B - FLUCTUATIONS The Company's sales are seasonal, particularly in its major divisions, The Hush Puppies Company, The Wolverine Footwear Group and the Wolverine Slipper Group. Seasonal sales patterns and the fact that the fourth quarter has sixteen or seventeen weeks as compared to twelve weeks in each of the first three quarters cause significant differences in sales and earnings from quarter to quarter. These differences, however, follow a consistent pattern each year. NOTE C - BUSINESS ACQUISITION On March 22, 1996, the Company consummated the acquisition of certain net assets of the Hy-Test product line from The Florsheim Shoe Company. The purchase price at the closing date was $22,750,000 in cash and is subject to change based on a review and agreement of both parties on the final closing balance sheet. The preliminary purchase price has not been allocated to the related assets and liabilities at March 23, 1996 and has been included in other current assets in the consolidated condensed balance sheet because the primary assets purchased were accounts receivable and inventories. A final purchase price allocation will be completed in future periods. NOTE D - EARNINGS PER SHARE Primary earnings per share are computed based on the weighted average shares of common stock outstanding during each period assuming that the stock split described in Note C had been completed at the beginning of the earliest period presented. Common stock equivalents (stock options) are included in the computation of primary and fully diluted earnings per share. -6- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - COMPARISON OF FIRST QUARTER 1996 TO FIRST QUARTER 1995 First quarter net sales and other operating income of $83.8 million for 1996 exceeded 1995 levels by $7.5 million (a 9.8% increase). The Hush Puppies Wholesale Division recognized an increase of $2.5 million or 10.6%, despite the continuing slow retail environment. The Wolverine Footwear Group continued its strong performance accounting for $2.2 million of the increase in quarterly net sales and other operating income. Also, a sales increase in the first quarter 1996 was generated by United States Department of Defense contracts which helped to offset slight sales decreases in the Wolverine Leather Division and the Wolverine Slipper Group. Gross margin as a percentage of net sales and other operating income for the first quarter of 1996 was 30.2% compared to the prior year level of 29.9%. Improved margins were recognized in the Wolverine Footwear Group through increased licensing revenues and manufacturing and sourcing efficiencies. The Hush Puppies Retail Division reported a 6.5 percentage point increase in gross margin due to lower promotional costs on key selling merchandise. These improvements were offset by a slight decline in the Wolverine Leather Division's performance, reporting a year-to-date $.8 million gross margin decrease as a result of balancing production to reduced sales levels and erosion of pigskin procurement pricing margins. Decreases in the Hush Puppies Wholesale Division resulted from the continued soft retail climate which impacts both initial wholesale margins and adjustments for retail promotional pricing requirements. Selling and administrative costs totaling $20.5 million for the first quarter of 1996 increased $1.6 million over the 1995 first quarter levels of $18.9 million. First quarter selling, advertising and distribution costs associated with the increased sales volume combined with advertising and promotional investments for the Wolverine Footwear Group accounted for $1.2 million of the increase. As a percentage of sales, first quarter 1996 costs decreased .4% to 24.4% from the 24.8% for the first quarter of 1995, reflecting the effects of the cost controls. The Hush Puppies Wholesale Division's distribution costs continue to decrease, reflecting the implementation of the new incentive wage program designed to reduce costs through increased productivity. Interest expense for the first quarter of 1996 was $.6 million, compared to $.7 million for the same period of 1995. The 1996 interest expense total reflects a decrease in borrowings outstanding. Interest income of $.4 million in 1996 reflects an increase over the $.2 million for the -7- same period in 1995. The Company invested a portion of the funds from the equity offering in the fourth quarter of 1995 which resulted in both a decrease in borrowings and an increase in interest income. The effective income tax rate on net earnings increased on a year-to-date basis to 31.3% in 1996 from 31.0% in 1995. The effective tax rate reflects the anticipated annualized rate for the Company giving consideration to the non-taxable net earnings of foreign subsidiaries. Net earnings of $3.4 million for the twelve weeks ended March 23, 1996 compared favorably to earnings of $2.5 million for the respective period of 1995 (a 35.9% increase). Earnings per share of $.18 for the first quarter 1996 compares to $.15 for the same period 1995 (a 20.0% increase), reflecting the stock issuance from the equity offering. Increased earnings are primarily a result of the items noted above. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Accounts receivable of $78.7 million at March 23, 1996 reflect an increase of $14.4 million and a decrease of $4.6 million over the balances at March 25, 1995 and December 30, 1995, respectively. Inventories of $106.2 million at March 23, 1996 reflect increases of $9.7 million and $17.8 million over the balances at March 25, 1995 and December 30, 1995, respectively. The increase in accounts receivable was directly related to increased volume. Inventories were increased to meet anticipated future demand in both wholesaling and manufacturing. First quarter footwear order backlogs increased 13% when compared to 1995, supporting the need for increased inventories. Other current assets totaling $34.5 million at March 23, 1996 included $22.8 million of unallocated Hy-Test assets purchased the last day of the reporting period. The Hy-Test assets currently classified in other current assets will be reclassified upon the completion of the due diligence procedures on the closing balance sheet. Excluding the Hy-Test assets, other current assets were unchanged from March 25, 1995 and $4.2 million lower than December 30, 1995 levels. The decrease was a result of the collection of the current portion of notes receivable from the 1992 disposition of the Brooks athletic footwear business. Additions to property, plant and equipment of $2.7 million in the first quarter of 1996 compares to $2.5 million reported during the same period in 1995. The majority of these expenditures are related to the modernization of corporate facilities, expansion of warehouse facilities and purchases of manufacturing equipment necessary to continue to upgrade the Company's footwear and leather manufacturing facilities to respond to product demand on a timely and cost-effective basis. Short-term debt increased to $3.2 million at March 23, 1996 compared to $2.5 million at March 25, 1995 and $2.3 million at December 30, 1995. -8- Long-term debt, excluding current maturities, of $42.6 million on March 23, 1996 compares to $52.7 million and $30.6 million at March 25, 1995 and December 30, 1995, respectively. The increases in debt since December 30, 1995 was a result of the seasonal working capital requirements of the Company. The decrease in long-term debt levels from March 25, 1995 is attributable to the pay down of the Company's revolving credit facility with funds generated by an equity offering discussed below. It is expected that continued growth of the Company will require increases in capital funding over the next several years. The combination of cash flows from operations and available credit facilities are expected to be sufficient to meet future capital needs. The 1996 first quarter dividend declared of $.04 per share of common stock represents approximately a 20.0% increase over the $.033 per share (post split) declared for the first quarter of 1995. The dividend is payable May 1, 1996 to stockholders of record on April 1, 1996. Additionally, shares issued under stock incentive plans provided cash of $.6 million in 1996 compared to $.2 million in 1995. The Company further strengthened its financial position in 1995 through a successful public offering of 1,737,500 shares of common stock at $29.875 per share. The $48.9 million of net proceeds from this offering were used in part to reduce debt in the fourth quarter of 1995 and to acquire certain assets of the Hy-Test work, safety and occupational footwear business of The Florsheim Shoe Company for approximately $22,750,000 at the end of the first quarter 1996. INFLATION Inflation has not had a significant effect on the Company over the past three years nor is it expected to have a significant effect in the foreseeable future. The Company continuously attempts to minimize the effect of inflation through cost reductions and improved productivity. -9- PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. The following documents are filed as exhibits to this report on Form 10-Q: EXHIBIT NUMBER DOCUMENT 3.1 Certificate of Incorporation, as amended. Previously filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the period ended June 18, 1994. Here incorporated by reference. 3.2 Amended and Restated Bylaws. Previously filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. Here incorporated by reference. 4.1 Certificate of Incorporation, as amended. See Exhibit 3.1 above. 4.2 Rights Agreement dated as of May 7, 1987, as amended and restated as of October 24, 1990. Previously filed with Amendment No. 1 to the Company's Form 8-A filed November 13, 1990. Here incorporated by reference. This agreement has been amended by the Second Amendment to Rights Agreement included as Exhibit 4.6 below. 4.3 Amended and Restated Credit Agreement dated as of October 13, 1994 with NBD Bank, N.A. as Agent. Previously filed as Exhibit 4(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. Here incorporated by reference. 4.4 Note Agreement dated as of August 1, 1994 relating to 7.81% Senior Notes. Previously filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the period ended September 10, 1994. Here incorporated by reference. 4.5 The Registrant has several classes of long-term debt instruments outstanding in addition to that described in Exhibit 4.4 above. The amount of none of these classes of debt exceeds 10% of the Company's total consolidated assets. The Company agrees to furnish copies of any agreement defining the rights of holders of any such long-term indebtedness to the Securities and Exchange Commission upon request. 4.6 Second Amendment to Rights Agreement made as of October 28, 1994 (amending the Rights Agreement included as Exhibit 4.2 above). Previously filed as Exhibit 4(f) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. Here incorporated by reference. -10- 27 Financial Data Schedule. (b) REPORTS ON FORM 8-K. No reports on Form 8-K have been filed during the period for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES May 7, 1996 /S/STEPHEN L. GULIS, JR. Date Stephen L. Gulis, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Signatory of Registrant) -11- EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES FOR THE PERIOD ENDED MARCH 23, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 OTHER DEC-28-1996 DEC-31-1995 MAR-23-1996 8,920 0 78,746 3,450 106,162 228,315 112,473 63,979 299,198 38,685 42,569 18,866 0 0 188,706 299,198 83,842 83,842 58,519 58,519 0 0 626 4,938 1,545 3,393 0 0 0 3,393 .18 .18
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