Wolverine World Wide Form 10-Q

10-Q 1 wwwform10q73001.htm FORM 10-Q Wolverine World Wide Form 10-Q - 2nd Quarter 2001

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the second twelve week accounting period ended June 16, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 1-6024

WOLVERINE WORLD WIDE, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware		38-1185150
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)


9341 Courtland Drive, Rockford, Michigan		49351
(Address of Principal Executive Offices)		(Zip Code)

	(616) 866-5500
	(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.

There were 45,335,417 shares of Common Stock, $1 par value, outstanding as of July 25, 2001, of which 3,751,885 shares are held as Treasury Stock.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the footwear business, worldwide economics and about the Company itself including, without limitation, statements in Part 1, Item 2 regarding the sourcing realignment charge and the Company's financial condition, liquidity and capital resources and statements in Part 1, Item 3 regarding market risk. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "should," "will," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Risk Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

Risk Factors include, but are not limited to, uncertainties relating to changes in demand for the Company's products; changes in consumer preferences or spending patterns; the cost and availability of inventories, services, labor and equipment furnished to the Company; the cost and availability of contract manufacturers; the impact of competition and pricing by the Company's competitors; changes in government and regulatory policies; changes in trading policies or import and export regulations; changes in interest rates, tax laws, duties or applicable assessments; technological developments; changes in local, domestic or international economic and market conditions; the size and growth of footwear markets; changes in the amount or severity of inclement weather; changes due to the growth of Internet commerce; popularity of particular designs and categories of footwear; the ability of the Company to manage and forecast its growth and inventories; the ability to secure and protect trademarks, patents and other intellectual property; changes in business strategy or development plans; and the ability to attract and retain qualified personnel. These matters are representative of the Risk Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement. Historical operating results are not necessarily indicative of the results that may be expected in the future. The Risk Factors included here are not exhaustive. Other Risk Factors exist, and new Risk Factors emerge from time-to-time, that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Furthermore, the Company undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Thousands of dollars)

	June 16, 2001 (Unaudited)		December 30, 2000 (Audited)		June 17, 2000 (Unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	2,449	$	8,434	$	5,344
Accounts receivable, less allowances
June 16, 2001 - $6,562
December 30, 2000 - $6,147
June 17, 2000 - $5,070		154,935		161,957		156,708
Inventories:
Finished products		141,651		114,855		145,222
Raw materials and work in process		26,247		29,337		36,461
		167,898		144,192		181,683

Other current assets		10,480		10,503		11,393

TOTAL CURRENT ASSETS		335,762		325,086		355,128

PROPERTY, PLANT & EQUIPMENT
Gross cost		212,857		216,743		215,848
Less accumulated depreciation		112,818		114,078		103,888
		100,039		102,665		111,960

OTHER ASSETS		68,766		66,817		69,551

TOTAL ASSETS	$	504,567	$	494,568	$	536,639

See notes to consolidated condensed financial statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS -- Continued

(Thousands of dollars, except share data)

	June 16, 2001 (Unaudited)			December 30, 2000 (Audited)			June 17, 2000 (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Notes payable	$	703		$	896		$	-
Accounts payable and other accrued liabilities		46,304			48,792			39,524
Current maturities of long-term debt		4,316			4,316			4,370
TOTAL CURRENT LIABILITIES		51,323			54,004			43,894

LONG-TERM DEBT (less current maturities)		92,869			87,878			133,363

OTHER NONCURRENT LIABILITIES		15,864			15,448			18,594

STOCKHOLDERS' EQUITY
Common Stock - par value $1, authorized
80,000,000 shares; shares issued
(including shares in treasury):
June 16, 2001 -- 45,250,652 shares
December 30, 2000 - 44,785,009 shares
June 17, 2000 - 44,757,739 shares		45,251			44,785			44,758
Additional paid-in capital		83,970			79,633			79,820
Retained earnings		271,670			260,158			264,757
Accumulated other comprehensive loss		(3,674	)		(2,532	)		(2,060	)
Unearned compensation		(6,458	)		(5,921	)		(7,927	)
Cost of shares in treasury:
June 16, 2001 -- 3,734,445 shares
December 30, 2000 -- 3,125,952 shares
June 17, 2000 -- 3,120,452 shares		(46,248	)		(38,885	)		(38,560	)

TOTAL STOCKHOLDERS' EQUITY		344,511			337,238			340,788

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	504,567		$	494,568		$	536,639

( ) - Denotes deduction.
See notes to consolidated condensed financial statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS

(Thousands of dollars, except shares and per share data)
(Unaudited)

	12-Weeks Ended						24-Weeks Ended
	June 16, 2001			June 17, 2000			June 16, 2001			June 17, 2000

NET SALES AND OTHER
OPERATING INCOME	$	151,699		$	140,558		$	309,921		$	287,928

Cost of products sold		96,430			92,360			201,327			190,838
GROSS MARGIN		55,269			48,198			108,594			97,090

Selling and administrative expenses		40,239			34,848			82,962			74,392
OPERATING INCOME		15,030			13,350			25,632			22,698

OTHER EXPENSES (INCOME):
Interest expense		1,726			2,407			3,290			4,888
Interest income		(55	)		(91	)		(173	)		(148	)
Other -- net		(62	)		(135	)		35			(263	)
		1,609			2,181			3,152			4,477

EARNINGS BEFORE
INCOME TAXES		13,421			11,169			22,480			18,221

Income taxes		4,563			3,574			7,644			5,831

NET EARNINGS	$	8,858		$	7,595		$	14,836		$	12,390

NET EARNINGS PER SHARE:
Basic	$	.22		$	.19		$	.36		$	.31
Diluted	$	.21		$	.18		$	.35		$	.30

CASH DIVIDENDS PER SHARE	$	.040		$	.035		$	.080		$	.070

SHARES USED FOR NET EARNINGS
PER SHARE COMPUTATION:
Basic		40,662,628			40,637,057			40,726,428			40,567,858
Diluted		42,510,266			41,906,964			42,504,906			41,781,568

See notes to consolidated condensed financial statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Thousands of dollars)
(Unaudited)

	24-Weeks Ended
	June 16, 2001			June 17, 2000

OPERATING ACTIVITIES
Net earnings	$	14,836		$	12,390
Adjustments necessary to reconcile net earnings to net cash
provided by operating activities:
Depreciation		7,870			7,405
Amortization		733			582
Other non-cash items		(2,711	)		(3,157	)
Changes in operating assets and liabilities:
Accounts receivable		7,022			14,024
Inventories		(23,706	)		(13,672	)
Other assets		812			(1,156	)
Accounts payable and other accrued liabilities		(2,489	)		(4,497	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		2,367			11,919

INVESTING ACTIVITIES
Additions to property, plant and equipment		(5,557	)		(3,082	)
Other		313

NET CASH USED IN INVESTING ACTIVITIES		(5,244	)		(3,082	)

FINANCING ACTIVITIES
Proceeds from long-term debt		47,000			44,745
Payments of long-term debt		(42,009	)		(46,213	)
Net decrease in short-term debt		(193	)		(148	)
Cash dividends		(3,324	)		(2,898	)
Purchase of common stock for treasury		(4,582	)		(425	)

NET CASH USED IN FINANCING ACTIVITIES		(3,108	)		(4,939	)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(5,985	)		3,898
Cash and cash equivalents at beginning of the year		8,434			1,446

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD	$	2,449		$	5,344

( ) -- Denotes reduction in cash and cash equivalents.
See notes to consolidated condensed financial statements.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 16, 2001 and June 17, 2000

1. 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 accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) considered necessary for fair presentation have been included in the accompanying financial statements. 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, 2000. Certain amounts previously reported in 2000 have been reclassifed to conform with the presentation used in 2001.

2. Fluctuations

The Company's sales are seasonal. Seasonal sales patterns and the fact that the fourth quarter has sixteen or seventeen weeks as compared to twelve weeks in each of the first three quarters can cause significant differences in sales and earnings from quarter to quarter. These differences, however, have followed a consistent pattern each year.

3. Sourcing Realignment and Other Nonrecurring Charges

As discussed in the Annual Report on Form 10-K for the fiscal year ended December 30, 2000, the Company initiated a strategic realignment of its global sourcing and manufacturing operations on July 12, 2000. In connection with this realignment, the Company closed five of its manufacturing facilities in New York, Missouri, Canada, Puerto Rico and Costa Rica. The Company also eliminated certain footwear product offerings and related raw material inventories, reduced administrative support services and incurred other nonrecurring expenses in connection with the strategic realignment. The realignment activities were primarily completed in the third and fourth quarters of 2000.

The remaining liabilities associated with the sourcing realignment include pension benefits for certain terminated employees, lease termination costs and fixed costs related to facilities held for sale.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 16, 2001 and June 17, 2000

The following table summarizes the activity and remaining liabilities associated with the sourcing realignment activities at June 16, 2001 and the 12-week period then ended (thousands of dollars):

	Severance and Related Costs			Inventories			Other Exit Costs			Total

Amounts recognized as charges in the consolidated condensed statement of operations at September 9, 2000	$	11,754		$	10,938		$	3,259		$	25,951
Disposal of inventories					(52	)					(52	)
Payments		(1,669	)								(1,669	)
Balance at September 9, 2000		10,085			10,886			3,259			24,230

Changes in amounts recognized		(31	)		1,203			1,004			2,176
Disposal of inventories					(10,972	)					(10,972	)
Payments		(4,051	)					(1,871	)		(5,922	)
Balance at December 30, 2000		6,003			1,117			2,392			9,512

Changes in amounts recognized					468						468
Disposal of inventories					(1,585	)					(1,585	)
Payments		(2,155	)					(730	)		(2,885	)
Balance at March 24, 2001		3,848			--			1,662			5,510

Changes in amounts recognized								(1,068	)		(1,068	)
Payments		(872	)					(492	)		(1,364	)
Balance at June16, 2001	$	2,976		$	--		$	102		$	3,078

As of June 16, 2001, workforce terminations totaling 1,391 employees have occurred in the areas of manufacturing (1,272), general management (28) and administrative support (91).

4. Net Earnings Per Share

The following table sets forth the reconciliation of weighted average shares used in the computation of basic and diluted earnings per share:

	12-Weeks Ended				24-Weeks Ended
	June 16, 2001		June 17, 2000		June 16, 2001		June 17, 2000
Weighted average shares outstanding	41,499,940		41,560,241		41,574,974		41,480,298
Adjustment for nonvested common stock	(837,312	)	(923,184	)	(848,546	)	(912,440	)
Denominator for basic earnings per share	40,662,628		40,637,057		40,726,428		40,567,858
Effect of dilutive stock options	1,010,326		346,723		929,932		301,270
Adjustment for nonvested common stock	837,312		923,184		848,546		912,440
Denominator for diluted earnings per share	42,510,266		41,906,964		42,504,906		41,781,568

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 16, 2001 and June 17, 2000

5. Comprehensive Income

Total comprehensive income was $8,744,000 and $13,694,000 for the 12-week and 24-week periods ended June 16, 2001, respectively, and $6,551,000 and $10,944,000, for the 12-week and 24-week periods ended June 17, 2000, respectively. In addition to net earnings, comprehensive income included foreign currency translation losses of $114,000 and $1,142,000 for the 12-week and 24-week periods ended June 16, 2001, respectively, and $1,044,000 and $1,446,000 for the 12-week and 24-week periods ended June 17, 2000, respectively.

6. Business Segments

The Company has one reportable segment that is engaged in the manufacture and marketing of branded footwear to the retail sector, including casual shoes, slippers, moccasins, dress shoes, boots, uniform shoes and work shoes. Revenues of this segment are derived from the sale of branded footwear products to external customers and the Company's retail division as well as royalty income from the licensing of the Company's trademarks and brand names to licensees. The business units comprising the branded footwear segment manufacture or source, market and distribute products in a similar manner. Branded footwear is distributed through wholesale channels and under licensing and distributor arrangements.

The other business units in the following table consist of the Company's retail, apparel and accessories, tannery and procurement operations. The Company operated 62 domestic retail stores at June 16, 2001 that sell Company-manufactured or sourced products and footwear manufactured by unaffiliated companies. The other business units distribute products through retail and wholesale channels.

There have been no changes in the way the Company measures segment profits or in its basis of determining business segments.

Business segment information is as follows (thousands of dollars):

	Branded Footwear	Other Businesses	Corporate	Consolidated
	12-weeks ended June 16, 2001
Net sales and other operating income
from external customers	$ 132,360	$ 19,339		$ 151,699
Intersegment sales	3,403	1,050		4,453
Earnings (loss) before income taxes	13,065	2,024	$ (1,668)	13,421

	24-weeks ended June 16, 2001
Net sales and other operating income
from external customers	$ 274,492	$ 35,429		$ 309,921
Intersegment sales	7,791	2,699		10,490
Earnings (loss) before income taxes	24,097	2,700	$ (4,317)	22,480

	12-weeks ended June 17, 2000
Net sales and other operating income
from external customers	$ 121,990	$ 18,568		$ 140,558
Intersegment sales	3,618	1,496		5,114
Earnings (loss) before income taxes	10,334	2,062	$ (1,227)	11,169

	24-weeks ended June 17, 2000
Net sales and other operating income
from external customers	$ 254,931	$ 32,997		$ 287,928
Intersegment sales	7,862	3,171		11,033
Earnings (loss) before income taxes	16,299	2,679	$ (757)	18,221

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 16, 2001 and June 17, 2000

7. Financial Instruments and Risk Management

Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 138. The standard requires that all derivative instruments be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company utilizes foreign currency forward exchange contracts to manage the volatility associated with foreign currency purchases in the normal course of business. These contracts typically have maturities of less than one year and are not designated as accounting hedges. The adoption of SFAS No. 133 did not have a material effect on the Company's earnings or statement of financial position.

ITEM 2.

Management's Discussion and Analysis of Financial Condition and
Results of Operations

Results of Operations - Comparisons of the 12-Weeks and 24-Weeks Ended June 16, 2001 (2001 second quarter and 2001 year-to-date, respectively) to the 12-Weeks and 24-Weeks Ended June 17, 2000 (2000 second quarter and 2000 year-to-date, respectively)

Net sales and other operating income of $151.7 million for the 2001 second quarter exceeded the 2000 second quarter level of $140.6 million by $11.1 million (7.9%) and 2001 year-to-date net sales and other operating income of $309.9 million exceeded the 2000 year-to-date level of $287.9 million by $22.0 million (7.6%). On a combined basis, net sales and other operating income for the Company's branded footwear businesses, consisting of the Casual Footwear Group (comprised of The Hush Puppies Company, the Children's Footwear Group and the Wolverine Slipper Group), the Wolverine Footwear Group (comprised of the Wolverine®, HYTEST®, Stanley®, Coleman®, Bates® and Harley-Davidson® brands), and the Performance Footwear Group (comprised of the Caterpillar® and Merrell® brands), increased $10.4 million (8.5%) for the 2001 second quarter and $19.6 million (7.7%) for 2001 year-to-date as compared to the respective periods of 2000. The Company's other business units, consisting of Wolverine Retail, Apparel and Accessories Licensing, Wolverine Leathers and Wolverine Procurement, reported a net sales and other operating income increase of $0.7 million (4.1%) for the 2001 second quarter and $2.4 million (7.4%) for 2001 year-to-date as compared to the respective periods of 2000.

The Casual Footwear Group reported a decrease in net sales and other operating income of $5.1 million (14.6%) in the 2001 second quarter and an $11.4 million (14.4%) decrease for 2001 year-to-date when compared to the same periods in 2000. The Hush Puppies Company's 2001 second quarter and year-to-date net sales and other operating income decreased from the 2000 levels as Hush Puppies U.K. experienced soft sales as a result of the difficult U.K. retail environment and the sale of its largest customer to a discount retailer. Partially offsetting the shortfall, Hush Puppies U.S.'s 2001 second quarter and year-to-date net sales and other operating income increased compared to the same period in 2000 due to expanded product offerings and an increase in consumer demand. The Children's Footwear Group also experienced a decrease in net sales and other operating income for the 2001 second quarter and year-to-date as a result of losing one major customer and a number of other customers that exited the childrens' footwear business. The Wolverine Slipper Group's 2001 second quarter and year-to-date net sales and other operating income decreased compared to the same periods in 2000 as a result of a significant reduction of closeout shipments.

The Wolverine Footwear Group's net sales and other operating income increased $8.4 million (14.9%) for the 2001 second quarter as compared to 2000 and $12.1 million (10.7%) for 2001 year-to-date over 2000 year-to-date. Harley-Davidson®, Stanley® and Wolverine® footwear contributed the majority of this increase as the brands are becoming more widely distributed in the marketplace. These increases were partially offset by the HYTEST® work boot wholesale business which reported a decrease in net sales and other operating income as compared to the 2000 second quarter and year-to-date levels as a result of decreased shipments to independent mobile shoe distributors, who historically sold only HYTEST® brand product, but now also sell Wolverine®, CAT® and Stanley® brand work boots.

The Performance Footwear Group continued its strong growth, reporting an increase in net sales and other operating income of $7.1 million (22.6%) for the 2001 second quarter and $18.8 million (30.1%) for 2001 year-to-date over the same periods of 2000. The Merrell® outdoor footwear business accounted for substantially all of the increase in net sales and other operating income as a result of new product offerings and expansion of its domestic and international distribution. CAT® footwear reported a slight decrease in net sales and other operating income for the 2001 second quarter resulting in a modest increase for 2001 year-to-date as compared to the respective periods of 2000.

Within the Company's other business units, Wolverine Retail's net sales and other operating income increased $0.4 million (4.3%) for the 2001 second quarter and $1.0 million (5.8%) for 2001 year-to-date as compared to

the same periods of 2000. The Wolverine Leathers Division recorded an increase in net sales and other operating income of $0.3 million (3.4%) over the 2000 second quarter and $1.3 million (8.9%) over the 2000 year-to-date level. The increases relate primarily to a strengthening of demand in the sow skin market, which increased net sales and other operating income in the procurement operation.

Gross margin as a percentage of net sales and other operating income for the 2001 second quarter was 36.4%, compared to 34.3% for the 2000 second quarter. The 2001 year-to-date gross margin of 35.0% compares to 33.7% for the same period in 2000. Gross margin dollars increased $7.1 million or 14.7% for the 2001 second quarter and $11.5 million or 11.8% for 2001 year-to-date as compared to the same periods of 2000, respectively. The gross margin percentages for the branded footwear businesses were 36.3% for the 2001 second quarter and 34.9% for 2001 year-to-date as compared to 33.7% and 33.2% for the same periods of 2000, respectively. The margin increases for the branded footwear business reflects a larger mix of high margin Merrell® and Harley-Davidson® sales and improved initial margins from the Hush Puppies U.S. wholesale operation and the Wolverine Slipper Group in 2001 as compared to 2000. The benefits realized from the 2000 sourcing realignment also contributed to the margin increase. The gross margin percentage for the other business units decreased to 37.2% for the 2001 second quarter from 38.2% for the same period of 2000 and to 36.4% for 2001 year-to-date compared to 37.5% for 2000 as a result of increased raw material costs associated with the tannery operations.

Selling and administrative expenses of $40.2 million for the 2001 second quarter increased $5.4 million from the 2000 second quarter level of $34.8 million and, as a percentage of net sales and other operating income, increased to 26.5% in 2001 compared to 24.8% in the 2000 second quarter. Selling and administrative expenses for 2001 year-to-date increased $8.6 million to $83.0 million from $74.4 million for the same period of 2000 and, as a percentage of net sales and other operating income, increased to 26.8% in 2001 compared to 25.8% for 2000 year-to-date. The change in the year-to-date selling and administrative expenses includes increased depreciation expense of $0.5 million related to recent investments in warehousing infrastructure and information services, $2.4 million in advertising costs, $4.7 million of selling and administration costs related to the expansion of Merrell®, Stanley® and Harley-Davidson® and $1.1 million in employee benefit program costs.

As discussed in the Note 3 of the consolidated condensed financial statements, the Company announced a strategic realignment of its global sourcing and manufacturing operations on July 12, 2000. In connection with this realignment, the Company closed manufacturing facilities in New York, Missouri, Canada, Costa Rica and Puerto Rico. The remaining liabilities associated with the sourcing realignment include pension benefits for certain terminated employees, lease termination costs and fixed costs related to facilities held for sale.

Interest expense for the 2001 second quarter was $1.7 million, compared to $2.4 million for the same period of 2000. Interest expense for 2001 and 2000 year-to-date was $3.3 million and $4.9 million, respectively. The decrease in interest expense for 2001 year-to-date reflects lower average borrowings as compared to 2000 year-to-date and lower interest rates on the Company's borrowings under its revolving credit facility.

The 2001 second quarter and year-to-date effective tax rate of 34.0% compares to 32.0% for the respective periods in the prior year. The increase in the effective tax rate between 2001 and 2000 relates to a higher percentage of income being generated during 2001 in jurisdictions with relatively higher tax rates.

Net earnings of $8.9 million for the 2001 second quarter compares to net earnings of $7.6 million for the same period in 2000. The 2001 year-to-date net earnings increased to $14.8 million in 2001 from $12.4 million for the same period of 2000. Diluted earnings per share were $0.21 and $0.35 for the 2001 second quarter and year-to-date, respectively compare to $0.18 and $0.30 for the same periods of 2000, respectively.

Financial Condition, Liquidity and Capital Resources

Net cash provided by operating activities was $2.4 million in 2001 compared to $11.9 million in 2000. Cash of $18.4 million for 2001 and $5.3 million for 2000 was used to fund working capital requirements. Accounts receivable of $154.9 million at June 16, 2001 reflects a decrease of $1.8 million (1.1%) from the balance at

June 17, 2000 and a decrease of $7.0 million (4.3%) from the December 30, 2000 balance. Inventories of $167.9 million at June 16, 2001 reflect a decrease of $13.8 million (7.6%) compared to the balance at June 17, 2000 and an increase of $23.7 million (16.4%) over the balance at December 30, 2000, reflecting consistent seasonal trends. Accounts payable and other accrued liabilities of $46.3 million at June 16, 2001 reflect a $6.8 million (17.2%) increase over the $39.5 million balance at June 17, 2000 and a $2.5 million (5.1%) decrease from the $48.8 million balance at December 30, 2000. The increase in accounts payable and other accrued liabilities when compared to the 2000 second quarter was primarily attributable to the timing of payments and nonrecurring charges associated with the sourcing realignment.

Additions to property, plant and equipment of $5.6 million for 2001 year-to-date compares to $3.1 million reported during the same period of 2000. The increase in additions is the result of timing of the Company's purchases. Depreciation and amortization expense of $8.6 million for 2001 year-to-date compared to $8.0 million for the same period of 2000. The increase in depreciation was a result of the capital investments noted above.

The Company maintains short-term borrowing and commercial letter-of-credit facilities of $66.5 million, of which $36.7 million, $27.3 million and $27.0 million were outstanding at June 16, 2001, June 17, 2000 and December 30, 2000, respectively. Long-term debt, excluding current maturities, of $92.9 million at June 16, 2001 compares to $133.4 million and $87.8 million at June 17, 2000 and December 30, 2000, respectively. The decrease in debt at June 16, 2001 as compared to June 17, 2000 was a result of improved operating cash flows that provided funds to pay down amounts borrowed under the revolving credit facility.

Effective October 3, 2000, the Company's Board of Directors approved a common stock repurchase program authorizing the repurchase of up to 2.0 million shares of common stock over 24 months. The primary purpose of this stock repurchase program is to increase stockholder value. There were 289,600 shares repurchased during the 2001 second quarter and 395,500 total cumulative common shares repurchased under the program through June 16, 2001. The Company intends to continue to repurchase shares of its common stock in open market transactions, from time to time, depending upon market conditions and other factors.

The Company has long-term revolving credit facilities of $110.0 million expiring in May 2006. The revolving credit facilities are used to support working capital requirements. The combination of credit facilities and cash flows from operations is expected to be sufficient to meet future capital needs in the forseeable future. Any excess cash flows from operations are expected to be used to pay down existing debt, fund growth initiatives and repurchase the Company's common stock under the repurchase program.

The 2001 second quarter dividend declared of $.04 per share of common stock represents a 14.3% increase over the $.035 per share declared in the 2000 second quarter. The dividend is payable August 1, 2001 to stockholders of record on July 2, 2001.

The current ratio was 6.5 to 1.0 for the 2001 second quarter compared with 8.1 to 1.0 for the same period of 2000. The Company's total debt to total capital ratio decreased to 0.22 to 1.0 for the 2001 second quarter from 0.29 to 1.0 for the same period of 2000.

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

The information concerning quantitative and qualitative disclosures about market risk contained in the Company's Form 10-K Annual Report for its fiscal year ended December 30, 2000, is incorporated herein by reference.

The Company faces market risk to the extent that changes in foreign currency exchange rates affect the Company's foreign assets, liabilities and inventory purchase commitments and to the extent that its long-term debt requirements are affected by changes in interest rates. The Company manages these risks by attempting to denominate contractual and other foreign arrangements in U.S. dollars and by maintaining a significant percentage of fixed-rate debt. The Company does not believe that there has been a material change in the

nature of the Company's primary market risk exposures, including the categories of market risk to which the Company is exposed and the particular markets that present the primary risk of loss to the Company. As of the date of this Form 10-Q Quarterly Report, the Company does not know of or expect there to be any material change in the general nature of its primary market risk exposure in the near term.

The methods used by the Company to manage its primary market risk exposures, as described in the sections of its annual report incorporated herein by reference in response to this item, have not changed materially during the current year. As of the date of this Form 10-Q Quarterly Report, the Company does not expect to change its methods used to manage its market risk exposures in the near term. However, the Company may change those methods in the future to adapt to changes in circumstances or to implement new techniques.

The Company's market risk exposure is mainly comprised of its vulnerability to changes in foreign currency exchange rates and interest rates. Prevailing rates and rate relationships in the future will be primarily determined by market factors that are outside of the Company's control. All information provided in response to this item consists of forward-looking statements. Reference is made to the section captioned "Forward-Looking Statements" at the beginning of this document for a discussion of the limitations on the Company's responsibility for such statements.

PART II. OTHER INFORMATION

ITEM 4.

Submission of Matters to a Vote of Security Holders

On April 26, 2001, the Company held its 2001 Annual Meeting of Stockholders. The purposes of the meeting were to elect four directors for three-year terms expiring in 2004, to consider and approve the proposed Stock Incentive Plan of 2001 and to consider and ratify the appointment of Ernst & Young LLP as the Company's independent auditors for the current fiscal year.

Four candidates nominated by management were elected by the stockholders to serve as directors of the Company at the meeting. The following sets forth the results of the voting with respect to each candidate:

Name of Candidate	Shares Votes

Geoffrey B. Bloom	For	36,869,232
	Authority Withheld	1,022,304
	Broker Non-Votes	0

David T. Kollat	For	36,864,620
	Authority Withheld	1,026,916
	Broker Non-Votes	0

David P. Mehney	For	36,868,551
	Authority Withheld	1,022,985
	Broker Non-Votes	0

Timothy J. O'Donovan	For	36,870,451
	Authority Withheld	1,021,085
	Broker Non-Votes	0

The following persons remained as directors of the Company with terms expiring in 2002: Daniel T. Carroll, Donald V. Fites, Phillip D. Matthews and Paul D. Schrage. The following persons remained as directors of the Company with terms expiring in 2003: Alberto L. Grimoldi, Joseph A. Parini, Joan Parker and Elizabeth A. Sanders.

The stockholders voted to approve the Stock Incentive Plan of 2001. The following sets forth the results of the voting with respect to that matter:

	Shares Voted

	For	31,341,876
	Against	5,165,759
	Abstentions	1,383,901
	Broker Non-Votes	0

The stockholders also voted to ratify the appointment of Ernst & Young LLP by the Board of Directors as independent auditors of the Company for the current fiscal year. The following sets forth the results of the voting with respect to that matter:

	Shares Voted

	For	37,523,012
	Against	331,898
	Abstentions	36,626
	Broker Non-Votes	0

ITEM 6.

Exhibits and Reports on Form 8-K

(a)

Exhibits. The following documents are filed as exhibits to this report on Form 10-Q:

Exhibit Number	Document

3.1	Certificate of Incorporation, as amended. Previously filed as Exhibit 3.1 to the Company's Quarterly Report of Form 10-Q for the period ended June 14, 1997. Here incorporated by reference.

3.2	Amended and Restated Bylaws. Previously filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1999. Here incorporated by reference.

4.1	Credit Agreement dated as of May 29, 2001, with Bank One, Michigan, as Agent.

10.1	Stock Incentive Plan of 2001. Previously filed as Appendix B to the Company's Definitive Proxy Statement for its April 26, 2001 Annual Meeting of Stockholders. Here incorporated by reference.

(b)

Reports on Form 8-K. Reports on Form 8-K were filed during the period covered by this report as follows:

Date Filed
March 30, 2001
April 6, 2001

Items Reported
7, 9
7, 9

Financial Statements
None
None

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



July 31, 2001		/s/ Timothy J. O'Donovan
Date		Timothy J. O'Donovan President and Chief Executive Officer (Duly Authorized Signatory for Registrant)



July 31, 2001		/s/ Stephen L. Gulis, Jr.
Date		Stephen L. Gulis, Jr. Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Duly Authorized Signatory for Registrant)



July 31, 2001		/s/ Nicholas P. Ottenwess
Date		Nicholas P. Ottenwess Vice President of Finance and Corporate Controller (Principal Accounting Officer and Duly Authorized Signatory for Registrant)

EXHIBIT INDEX

Exhibit Number	Document

3.1	Certificate of Incorporation, as amended. Previously filed as Exhibit 3.1 to the Company's Quarterly Report of Form 10-Q for the period ended June 14, 1997. Here incorporated by reference.

3.2	Amended and Restated Bylaws. Previously filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1999. Here incorporated by reference.

4.1	Credit Agreement dated as of May 29, 2001, with Bank One, Michigan, as Agent.

10.1	Stock Incentive Plan of 2001. Previously filed as Appendix B to the Company's Definitive Proxy Statement for its April 26, 2001 Annual Meeting of Stockholders. Here incorporated by reference.