2021 ANNUAL REPORT
2021 FINANCIAL HIGHLIGHTS
$2.41 B
in Revenue,
Growth of 35%
$2.09
Adjusted EPS,
Growth of 125%
47%
Growth of
Direct-to-Consumer
Revenue
Acquired
All growth comparisons are to fiscal year 2020.
LETTER TO SHAREHOLDERS
A YEAR OF GROWTH AND EXPANSION
2021 FINANCIAL HIGHLIGHTS
I am very pleased to be writing
to you for the first time as CEO
of Wolverine Worldwide. I joined
the Company as President in the
fall of 2020, and I am more confident than
ever in the untapped growth potential of our
powerful and diversified portfolio of world class
brands which operate in attractive categories,
deliver industry-leading product innovation, and
are supported by strong teams and centers of
excellence.
2021 was another successful year for the
Company, with continued progress against our
three strategic growth drivers — an intense
Direct-to-Consumer focus, particularly in
Digital channels; enhanced Product Innovation
and Creation; and accelerated growth in
International markets.
Focused efforts and investments in these
growth drivers in 2021 helped fuel strong
financial performance and build momentum in
our brands and fast-growing direct-to-consumer
businesses. We also expanded our portfolio
through the acquisition of Sweaty Betty, a
global premium women’s activewear brand that
is expected to further accelerate our growth.
I am proud to share the following 2021
highlights with you, and touch on our strategic
focus and approach for 2022 as we work to
fulfill our vision to “Build a family of the most
admired performance and lifestyle brands on
earth.”
We are pleased with the Company’s strong
financial performance in 2021, with revenue and
earnings growing significantly and exceeding
our expectations entering the year. Revenue
for the year was $2.41 billion, growing 28%
organically compared to 2020 or nearly 35%
including Sweaty Betty.
We also grew revenue in each of our four largest
brands. Merrell and Saucony delivered year-
over-year growth of 22% and 57%, respectively,
resulting in record revenue in both brands,
and Sperry showed marked improvement with
25% revenue growth. Sweaty Betty grew over
40% on a full-year, pro forma basis. Our work
business revenue also grew at a strong rate in
2021, increasing nearly 30% over 2020.
This revenue growth, coupled with strong gross
margin expansion, fueled adjusted earnings per
share in fiscal 2021 of $2.09, up 125% over 2020
or 113% excluding Sweaty Betty. Adjusted gross
margin expanded 260 basis points to 44.1%
including 70 basis points of expansion from the
addition of Sweaty Betty.
Other contributors to strong earnings leverage
in 2021 were disciplined management of the
business and a flexible operating model that
we adjusted in response to market and supply
chain challenges throughout the year. With
healthy cash flow and a strong balance sheet,
we continued to pay our shareholders dividends
throughout 2021, which the Company has now
done for 136 consecutive quarters.
1
2021 ANNUAL REPORT STRATEGIC GROWTH DRIVERS
We made significant progress in 2021 against
our three primary growth drivers, which
represent the Company’s roadmap for sustained
growth, momentum, and value creation.
Direct-to-Consumer Focus; Digital Priority
In 2021, we continued to deliver strong growth
in our direct-to-consumer business, and further
advanced our digital penetration with the
acquisition of Sweaty Betty. Direct-to-Consumer
revenue was up 47% over 2020, or 23%
excluding Sweaty Betty, and represented 26%
of total revenue in 2021 as compared to 15% in
2019.
In August 2021, we acquired Sweaty Betty,
a digitally-native, premium global women’s
apparel brand. Sweaty Betty’s expertise and
focus on apparel, female consumers, and best-
in-class digital execution fills white space in our
portfolio and complements our strategic shift
over the last several years from a traditional
footwear wholesaler into a consumer-obsessed,
digital-focused growth company.
This digital progress is paying dividends, as we
grew active customers by 24% versus the prior
year and 50% compared to 2019, drove double
digit increases in conversion rate, and achieved
higher retention rates as compared to 2019.
Powerful Product Innovation and Creation
Product innovation is embedded in our DNA
and is the cornerstone of our success. Our four
largest brands maintained leadership positions
in their respective categories through consistent
delivery of new product innovation in both
proven franchise businesses as well as new
STRATEGIC GROWTH DRIVERS
1. DTC Focus, Digital Priority:
An intense focus on DTC, particularly
digital, to create pinnacle brand
experiences, expand our global
eCommerce platforms, and engage
consumers with a constant flow of
compelling content and storytelling
2. Powerful Product Innovation and Creation:
A relentless and frequent flow of craveable
product, driven by an increased supply
base, stronger consumer insights, and the
use of digital tools to bring products to
market more quickly and efficiently
3. Accelerated International Growth:
Strengthening regional teams, using
regional merchandising strategies to
enhance development of market-right
product, expanding our network of
core partners, and investing in digital
capabilities in new markets
product introductions that add excitement to
the offerings and provide a halo for the brands.
Our four largest brands all launched new
products within their key product franchise
collections in 2021, including Merrell’s Moab
seizing on outdoor industry tailwinds, Saucony’s
Endorphin running ahead of the competition,
Sperry’s Authentic Original leading the boat
shoe resurgence, and Sweaty Betty continuing
to innovate in core collections like its power
leggings.
Accelerated International Growth
In 2021 we continued to grow our international
business and expand in key markets.
International revenue grew 50% in 2021 as
compared to 2020, or 34% excluding Sweaty
Betty. This growth spanned across regions,
with Asia-Pacific revenue up 50% over 2020,
including 60% growth in China led by our
2
2021 ANNUAL REPORT Merrell and Saucony joint venture. Latin
America revenue increased 20% over 2020, and
EMEA revenue exceeded pre-pandemic 2019
levels.
2022 STRATEGIC FOCUS & PRIORITIES
Looking ahead to 2022, we are taking a more
focused approach to our three primary growth
drivers, as we capitalize on the sustained
favorable industry backdrop in outdoor and
performance categories.
First, we will increase our focus and
prioritization, making concentrated bets that
we believe will have meaningful impacts on our
business. This means prioritizing our largest
brands, increasing investments in our primary
growth drivers, and encouraging our brands
to chase opportunities with greater speed and
agility.
Second, we will leverage our largest brands’
leadership positions through more informed
product innovation, and greater investments in
driving brand awareness. This means delivering
product with a consumer-centric focus, using
more testing and consumer research to better
inform our direction, and “failing quickly” then
course correcting. We will also emphasize
purpose-driven, authentic messaging that
aligns with our brand and consumer values
and creates a better balance of marketing
investments to accelerate growth in new
consumers.
Third, we will go after white space
opportunities, focusing our efforts in categories
that have attractive total addressable
markets, are logical extensions of our own
performance brands, and are areas where we
Blake W. Krueger, Executive Chairman (left);
Brendan L. Hoffman, President & Chief Executive Officer (right)
can achieve leading market share positions.
These opportunities will permit us to leverage
our brand equity and product development
capabilities to expand into new categories that
will broaden our consumer reach and accelerate
profitable growth.
IN CLOSING
Our 2021 success reflects the hard work and
efforts of our incredible global team. Sustained
and profitable growth continues to be our
primary goal, and the leadership team remains
extremely focused on executing the initiatives
and activities that will allow us to succeed. I
want to thank our team around the world for
all their hard work and efforts over this past
year to help us emerge from the pandemic and
position us for accelerated growth.
I would also like to thank Blake Krueger, now
our Executive Chairman, for his 15 years of
passionate, dedicated leadership as CEO of
Wolverine Worldwide. Finally, on behalf of
everyone at Wolverine Worldwide, I would
like to thank you, our shareholders, for your
continued support of our Company.
Brendan L. Hoffman
President and Chief Executive Officer,
Wolverine Worldwide
3
2021 ANNUAL REPORT 4
2021 ANNUAL REPORT In August 2021, Wolverine
Worldwide acquired Sweaty
Betty, a digitally native,
global women’s activewear
brand. This aligns perfectly
with our strategic growth
plan and is expected to
enhance our fast-growing
eCommerce business.
5
2021 ANNUAL REPORT RECONCILIATION TO GAAP MEASURES
Reconciliation of Reported Revenue to Adjusted Organic Revenue* (Unaudited; in millions)
Revenue – Fiscal 2021
$2,414.9
$(117.4)
$2,297.5
GAAP Basis
Sweaty Betty1
Organic Basis
Reconciliation of Reported Gross Margin to Adjusted Gross Margin* (Unaudited; in millions)
GAAP Basis
Adjustments2
As Adjusted
Sweaty Betty1
Organic Basis
Gross Profit – Fiscal 2021
$1,029.9
$35.2
$ 1,065.1
$ (67.8)
$ 997.3
Gross margin
42.6%
44.1%
43.4%
Gross Profit – Fiscal 2020
$ 735.6
$ 8.3
$ 743.9
$ —
$ 743.9
Gross margin
41.1%
41.5%
41.5%
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS and Adjusted Organic Diluted EPS*
(Unaudited)
GAAP Basis
Adjustments3
As Adjusted
Sweaty Betty1
Organic Basis
EPS – Fiscal 2021
$ 0.81
$ 1.28
$ 2.09
$ (0.11)
$ 1.98
EPS – Fiscal 2020
$ (1.70)
$2.63
$ 0.93
$ —
$ 0.93
1 2021 adjustment reflects the Sweaty Betty results included in the consolidated condensed statement of operations.
2 2021 adjustments reflect $26.1 million of air freight and other charges related to production and shipping delays caused by
the COVID-19 pandemic and $9.1 million of costs associated with the acquisition of Sweaty Betty. 2020 adjustments reflect
expenses related to the COVID-19 pandemic including $4.4 million of inventory charges and $3.9 million of air freight charges
related to production delays.
3 2021 adjustments reflect debt extinguishment costs, costs associated with the acquisition of Sweaty Betty, air freight and
other costs related to production and shipping delays caused by the COVID-19 pandemic, environmental and other related
costs net of recoveries and non-cash impairment related to one of the Company’s joint ventures. 2020 adjustments reflect a
non-cash impairment of the Sperry® trade name, expenses related to the COVID-19 pandemic, and environmental and other
related costs net of recoveries.
6
2021 ANNUAL REPORT
RECONCILIATION TO GAAP MEASURES
* To supplement the consolidated condensed financial statements presented in accordance with
Generally Accepted Accounting Principles (“GAAP”), the Company describes what certain financial
measures would have been if, costs associated with the acquisition of the Sweaty Betty brand,
environmental and other related costs net of recoveries, costs related to the COVID-19 pandemic
including air freight costs and debt extinguishment costs were excluded. The Company also describes
what certain financial measures would have been if the previously described financial measures also
excluded the results of Sweaty Betty. The Company believes these non-GAAP measures provide useful
information to both management and investors by increasing comparability to the prior period by
adjusting for certain items that may not be indicative of core operating measures and to better identify
trends in the Company’s business. The adjusted financial results are used by management to, and allow
investors to, evaluate the operating performance of the Company on a comparable basis.
Management does not, nor should investors, consider such non-GAAP financial measures in isolation
from, or as a substitution for, financial information prepared in accordance with GAAP. Reconciliations
of all non-GAAP measures included in this document, to the most directly comparable GAAP measures
are found in the financial tables above.
7
2021 ANNUAL REPORT EXECUTIVE MANAGEMENT
BOARD OF DIRECTORS
Brendan L. Hoffman
President & Chief Executive Officer
Amy Klimek
Executive Vice President, Global Human
Resources
Michael D. Stornant
Executive Vice President & Chief Financial
Officer
James D. Zwiers
Executive Vice President, President of Global
Operations Group
Matt Blonder
President, Global eCommerce
Anne Cavassa
Global President, Saucony
Chip Coe
Senior Vice President, Mergers & Acquisitions
Katherine Cousins
Global President, Sperry & Keds
Kyle Hanson
Senior Vice President, General Counsel and
Secretary
Christopher E. Hufnagel
Global President, Merrell, Kids & Licensing
Tom Kennedy
President, Wolverine Boot Group
Dee Slater
CIO & Senior Vice President, Central Services
Isabel Soriano
President, International
Julia Straus
CEO, Sweaty Betty
Blake W. Krueger
Executive Chairman; Retired CEO of Wolverine
World Wide, Inc.
Jeffrey M. Boromisa
Retired Executive Vice President of Kellogg
International; President, Latin America and
Senior Vice President of Kellogg Company
Gina R. Boswell
Retired President, Customer Development,
Unilever U.S.A.
William K. Gerber
Managing Director of Cabrillo Point Capital LLC
Brendan L. Hoffman
President & Chief Executive Officer of Wolverine
World Wide, Inc.
David T. Kollat
Lead Director of the Board for Wolverine World
Wide, Inc.; President and Chairman of 22, Inc.
Brenda J. Lauderback
Retired President of the Wholesale and Retail
Group of Nine West Group, Inc.
Nicholas T. Long
Retired Chief Executive Officer of MillerCoors;
Managing Partner Bridger Growth Partners LLC
David W. McCreight
Chief Executive Officer and Director of Lulu’s
Fashion Lounge Holdings, Inc.; Retired President,
Urban Outfitters, Inc., and Retired Chief
Executive Officer, Anthropologie Group
Kathleen Wilson-Thompson
Retired Executive Vice President & Global Chief
Human Resources Officer of Walgreens Boots
Alliance Inc.
2021 ANNUAL REPORT
8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-06024
WOLVERINE WORLD WIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware
State or other jurisdiction of
incorporation or organization
Rockford
9341 Courtland Drive N.E.
,
(Address of principal executive offices)
Michigan
38-1185150
(I.R.S. Employer
Identification No.)
49351
(Zip Code)
Registrant’s telephone number, including area code (616) 866-5500
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
Title of each class
Name of each exchange on which registered
Common Stock, $1 Par Value
WWW
New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ¨ No þ
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 þ 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 þ 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
Non-accelerated filer
þ
¨
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 has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by
the registered public accounting firm that prepared or issued its audit report. þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ
The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant based on the closing price on
the New York Stock Exchange on July 2, 2021, the last business day of the registrant’s most recently completed second fiscal
quarter: $2,662,805,544. Number of shares outstanding of the registrant’s Common Stock, $1 par value as of February 11, 2022:
81,689,715.
Portions of the definitive proxy statement for the registrant’s annual stockholders’ meeting expected to be held May 4, 2022 are
incorporated by reference into Part III of this report.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Item 4.
Supplemental Item. Executive Officers of the Registrant
Mine Safety Disclosures
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
SIGNATURES
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
5
11
21
21
21
21
21
22
24
24
34
35
74
74
74
74
74
75
75
76
76
76
80
81
Appendix A: Financial Statement Schedule
A-1
3
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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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the potential effects of the COVID-19 pandemic on the Company’s business, operations, financial results and liquidity;
changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors
affecting consumer spending in the markets and regions in which the Company’s products are sold;
the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets;
the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel
trends and consumer preferences;
the inability to effectively manage inventory levels;
increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export;
foreign currency exchange rate fluctuations;
currency restrictions;
supply chain and capacity constraints, production disruptions, including reduction in operating hours, labor shortages, and
facility closures resulting in production delays at the Company’s manufacturers due to disruption from the effects of the
COVID-19 pandemic, quality issues, price increases or other risks associated with foreign sourcing;
the cost, 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 consumer-direct operations;
risks related to expansion into new markets and complementary product categories as well as consumer-direct operations;
the impact of seasonality and unpredictable weather conditions;
the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers,
distributors, suppliers, joint venture partners and wholesale customers;
changes in the Company’s effective tax rates;
failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company;
the risks of doing business in developing countries and politically or economically volatile areas;
the ability to secure and protect owned intellectual property or use licensed intellectual property;
the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal,
state and local laws and regulations relating to the protection of the environment, environmental remediation and other
related costs, and litigation or other legal proceedings relating to the protection of the environment or environmental effects
on human health;
risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal
information, payment card data or proprietary information, due to cyberattack or other similar events;
problems affecting the Company's supply chain and distribution system, including service interruptions at shipping and
receiving ports;
strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company’s success in
integrating acquired businesses, including Sweaty Betty®, and implementing new initiatives and ventures;
the risk of impairment to goodwill and other intangibles;
the success of the Company’s restructuring and realignment initiatives undertaken from time to time; and
changes in future pension funding requirements and pension expenses.
These or other uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The
uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A: “Risk Factors” of this Annual Report
on Form 10-K. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a
prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements,
whether as a result of new information, future events or otherwise.
4
PART I
Item 1. Business
General
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 boots and apparel,
and uniform shoes and boots. The Company’s products are marketed worldwide in approximately 170 countries and territories
through owned operations in the United States ("U.S."), Canada, the United Kingdom and certain countries in continental
Europe and Asia Pacific. In other regions (Latin America, portions of Europe and Asia Pacific, the Middle East and Africa), the
Company relies on a network of third-party distributors, licensees and joint ventures.
Today, the Company sources and markets a broad range of footwear and apparel styles, including shoes, boots and sandals
under many recognizable brand names, including Bates®, Cat®, Chaco®, Harley-Davidson®, Hush Puppies®, Hytest®, Keds®,
Merrell®, Saucony®, Sperry®, Sweaty Betty® and Wolverine®. The Company licenses its Stride Rite® brand under a global
license arrangement. The Company also markets Merrell® and Wolverine® brand apparel and accessories and licenses some of
its brands for use on non-footwear products, including Hush Puppies® apparel, eyewear, watches, socks, handbags and plush
toys; Wolverine® eyewear and gloves; Keds® apparel; Saucony® apparel and Sperry® apparel. Cat® is a registered trademark of
Caterpillar Inc. and Harley-Davidson® is a registered trademark of H-D U.S.A., LLC.
The Company’s products generally feature contemporary styling with proprietary technologies designed to provide maximum
comfort and performance. The Company believes that its primary competitive advantages are its well-recognized brand names,
patented proprietary designs, diverse product offerings and comfort technologies, wide range of distribution channels and
diversified manufacturing and sourcing base. The Company combines quality materials and skilled workmanship to produce
footwear according to its specifications at both Company-owned and third-party manufacturing facilities. The Company’s
products are sold at various price points targeting a wide range of consumers of casual, work, outdoor and athletic footwear and
apparel.
The Company’s portfolio of brands is organized into the following two operating segments, which the Company has determined
to be reportable segments.
• Wolverine Michigan Group, consisting of Merrell® footwear and apparel, Cat® footwear, Wolverine® footwear and
apparel, Chaco® footwear, Hush Puppies® footwear and apparel, Bates® uniform footwear, Harley-Davidson®
footwear and Hytest® safety footwear; and
• Wolverine Boston Group, consisting of Sperry® footwear, Saucony® footwear and apparel, Keds® footwear and the
Kids' footwear business, which includes the Stride Rite® licensed business, as well as Kids' footwear offerings from
Saucony®, Sperry®, Keds®, Merrell®, Hush Puppies® and Cat®.
The Company also reports “Other” and “Corporate” categories. The Other category consists of the Sweaty Betty® activewear
business, the Company’s leather marketing operations, sourcing operations that include third-party commission revenues and
multi-branded consumer-direct retail stores. The Corporate category consists of unallocated corporate expenses, such as
corporate employee costs, costs related to the COVID-19 pandemic, impairment of intangible assets and environmental and
other related costs.
The reportable segments are engaged in designing, manufacturing, sourcing, marketing, licensing and distributing branded
footwear, apparel and accessories. Revenue for the reportable segments includes revenue from the sale of branded footwear,
apparel and accessories to third-party customers; revenue from third-party distributors, licensees and joint ventures; and
revenue from the Company’s consumer-direct businesses. The Company’s reportable segments are determined based on how
the Company internally reports and evaluates financial information used to make operating decisions.
The Company's reportable segments and related brands are described in more detail below.
1. Wolverine Michigan Group
Merrell®: Merrell® believes in sharing the simple power of being outside – no matter who you are, where you come
from, who you love, or how you move. With a persistent focus on innovation, thoughtful design and rigorous testing,
Merrell® has become a global leader in hiking footwear, with a rapidly growing following in trail running and lifestyle.
All of this is fueled by a desire to build a world where everyone can safely enjoy the benefits of being outdoors.
Merrell® can be found across the globe, on Merrell.com, in key outdoor and sporting goods retail stores and in
Company owned Merrell® stores.
5
Cat® Footwear: Cat® Footwear is driven by the belief that generations of builders, makers and creators can turn
challenge into enduring greatness. The Company is the exclusive global footwear licensee of Caterpillar Inc., and for
over two decades, Cat® Footwear has been living up to the hardworking spirit of both the Caterpillar® trademark and
the millions of consumers who trust the brand. Cat® Footwear originally created a small collection of rugged work
boots designed to provide workers with the comfort and durability that met the challenges of the worksite. Today, Cat®
Footwear offers a wide range of footwear, including work boots and casual shoes for men, women and children - sold
through a global distribution network. CAT®, CATERPILLAR, their respective logos, "Caterpillar Corporate Yellow",
as well as corporate product identity used herein, are registered trademarks of Caterpillar Inc.
Wolverine®: For more than 135 years, Wolverine® has existed to support people who forge their own path; men and
women who stop at nothing to build the future they want. Wolverine® designs and creates footwear, apparel and
accessories across three strategic territories; Work, Outdoor and Casual. The brand is best known for DuraShocks and
Ultraspring comfort technology, as well as the Wolverine® 1000 Mile collection of premium lifestyle boots
handcrafted in the USA from archival patterns. Wolverine® products can be found online at Wolverine.com and across
a variety of retail channels including online retail, farm & fleet, work specialty, outdoor specialty, department stores
and national family stores.
Chaco®: Chaco® has a rich, 30+ year history of creating footwear that’s “Fit For Adventure” of any kind, whether
that’s exploring rivers, trails or swerving city streets. Originating as an innovation in the whitewater rafting world,
Chaco® now designs footwear for all walks of life in the outdoor and lifestyle communities. The brand's mission is to
help people find their way, providing access to new people, places, and experiences that make them more confident in
who they are and where they’re headed. That’s why Chaco® creates footwear that comes with all-terrain versatility, a
unique 360° fit, unmatched durability and signature LUVSEAT™ footbed arch support. The MyChacos custom sandal
program provides customers an opportunity to express their funky individuality, while the ReChaco program helps
reduce their impact on the places they explore by repairing used sandals. Chaco® products are distributed primarily
through specialty footwear retailers, the Chaco® eCommerce site, and other leading online and brick and mortar
retailers.
Hush Puppies®: Launched in 1958, Hush Puppies® has a history of bringing color and optimism to a boring, brown
shoe category. Today, Hush Puppies® exists to inspire consumers to live life on the bright side. The Company believes
that optimism is contagious and that by encouraging positivity it can help shape a better world. Hush Puppies®
footwear is distributed through wholesale and licensed channels, and through an eCommerce site. In addition, the Hush
Puppies® brand is licensed to third parties engaged in the manufacturing, marketing and distribution of apparel,
handbags, eyewear, socks, watches and plush toys sold around the world. Hush Puppies®, with its basset hound icon, is
one of the most well-known and loved brands worldwide.
Bates®: Bates® Footwear is a leading supplier of tactical and uniform footwear for first responders, U.S. Military
members and military members of several foreign countries. Civilian uniform users include police officers, fire
fighters, security and emergency medical services workers, and others in light industrial occupations. Bates® products
are distributed through sporting goods chains, department stores, uniform specialty retailers, catalog retailers and
online retailers.
Harley-Davidson® Footwear: Pursuant to a license arrangement with the Harley-Davidson Motor Company, Inc., the
Company has footwear marketing and distribution rights for Harley-Davidson® branded footwear. Harley-Davidson®
branded footwear products include motorcycle, casual, fashion, work and western footwear for men, women and kids.
Harley-Davidson® footwear is sold globally through a network of independent Harley-Davidson® dealerships and
other retail outlets. Harley-Davidson® is a registered trademark of H-D U.S.A., LLC.
Hytest® Safety Footwear: The Hytest® product line consists of high-quality work boots and shoes that incorporate
various specialty safety features designed to protect against hazards of the workplace, including steel toe, composite
toe, nano toe, metatarsal guards, electrical hazard protection, static dissipating and conductive footwear. Hytest®
footwear is distributed primarily through a network of independently-owned Shoemobile® mobile truck retail outlets
providing direct sales of the Company’s occupational and work footwear brands to workers at industrial facilities and
also through direct sales arrangements with large industrial customers.
2. Wolverine Boston Group
Saucony®: Saucony® is a purpose driven performance running brand with roots dating back to 1898. Saucony® targets
both elite and casual runners through award winning design, innovation and performance technology. The brand is
focused on meeting the functional biomechanical needs of runners while delivering on their emotional style needs as
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well. Saucony innovations include Powerrun+, a cushioning technology system; PWRFOAM midsole, PWRTRAC
outsole, and FormFit, an adaptive fit system. Saucony® offers five categories of performance footwear products;
Competition, Road, Trail, Train and Walking; as well as the Originals lifestyle footwear inspired by Saucony®
products of the 1970's to 2000's. Saucony® also offers a complete line of performance running apparel and select
lifestyle apparel pieces. Through Saucony's® Run For Good brand platform and charitable foundation, Saucony® is
strengthening connections with consumers and elevating the positioning of the brand. The brand’s products are
distributed primarily through leading run specialty and sporting goods retailers, as well as in Company owned
Saucony® retail stores and an eCommerce site.
Sperry®: Sperry® was founded in 1935 by avid sailor, inventor and intrepid explorer Paul Sperry. The brand is fully
rooted in the history of American style and continues to craft the tools for life’s memorable experiences on, off and by
the water. From the invention of the world's first boat shoe, Sperry® is a market leader in both boat shoes and wet
weather boots, and has expanded its business into casuals and sneakers. The brand is primarily distributed through
Sperry.com and in Company owned Sperry® retail stores, as well as leading premium and better lifestyle retailers.
Keds®: For over 100 years, Keds® has been making timeless, comfortable, accessible footwear for consumers to step
out into the world their way. Ever since the creation of the iconic Keds® Champion "sneaker" back in 1916, Keds® has
held the belief that when we feel comfortable inside and out, we can leap forward and make our marks on the world.
This belief continues to inspire and drive us every day. Keds® designs every product to support everyone—to give
them the versatility, comfort, and style they need to confidently live as their truest selves. Keds® is focused on driving
unique marketing and product stories through Keds.com and distributing footwear at leading footwear retailers
worldwide.
Kids' Footwear: The Kids' footwear business includes footwear offerings from Saucony®, Sperry®, Keds®, Merrell®,
Hush Puppies® and Cat®, as well as a licensed business, Stride Rite®. Kids' footwear offerings from Saucony®,
Sperry®, Keds®, Merrell®, Hush Puppies® and Cat® are distributed through premium and better lifestyle retailers,
outdoor and sporting goods retailers, as well as through an eCommerce site and by a license partner. With a history
dating back to 1919, Stride Rite® is an industry leader in kids' footwear. The Company signed a multi-year license
agreement in 2017 to license the Stride Rite® brand.
Other Businesses
In addition to its reportable segments, the Company operates the Sweaty Betty® activewear business, a performance leather
business, sourcing operations and a multi-brand consumer-direct business.
Sweaty Betty®: Sweaty Betty® is a global women’s activewear and lifestyle brand that has been on a mission to
empower women through fitness and beyond since 1998. Famous for its “bum-sculpting” leggings and innovative
designs, Sweaty Betty® fuses performance and style with technical, high-performance fabrics and responsibly sourced
materials. The brand services its loyal, fast-growing community worldwide through SweatyBetty.com, complemented
by retail locations across the United Kingdom, Europe and Asia and the world’s best luxury retailers, including
Selfridges, Harrods, Neiman Marcus and Nordstrom. Through the Sweaty Betty Foundation, the brand aims to give
more girls access to activities they love, helping the next generation get and stay active for life.
Wolverine Leathers Division: The Wolverine Leathers Division markets pigskin leather for use primarily in the
footwear industry. The Company believes pigskin leather offers superior performance and other advantages over
cowhide leather. The Company’s waterproof and stain resistant leathers are featured in some of the Company’s
footwear lines and also sold to external footwear brands.
Sourcing Division: The sourcing division earns third-party commission revenue by providing consulting services
related to product development, production control, quality assurance, materials procurement, compliance and other
services.
Multi-brand Consumer-Direct Division: The multi-brand consumer-direct division includes retail stores that sell
footwear and apparel from the Company's brand portfolio and other brands.
Marketing
The Company’s marketing strategy is to develop brand-specific plans and related promotional materials that foster a consistent
message for each of the Company’s brands across the globe. Marketing campaigns and strategies vary by brand and are
generally designed to target consumers in order to increase awareness of, and affinity for, the Company’s brands. The
Company’s marketing typically emphasizes compelling brand stories and brand recognition associated with new and existing
products, the performance, comfort and quality features and styles of our products within each of the Company’s brands, as
well as raising global brand relevance and awareness. The Company’s brand marketing has an omni-channel approach and
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includes various means of delivery, such as print and radio advertising, search engine optimization, social networking sites,
event sponsorships, in-store point-of-purchase displays, promotional materials and sales and technical assistance.
The Company operates branded eCommerce sites that the Company believes are effective marketing tools to consumers. The
Company maintains an active presence on a variety of global social media platforms, and the Company’s digital marketing
seeks to create demand among new consumers as well as connecting consumers to brand content and products.
In addition to the Company’s internal marketing efforts, each brand provides its third-party licensees and distributors with
creative direction, brand images and other materials to convey globally consistent brand messaging. The Company believes its
brand names represent a competitive advantage, and the Company, its licensees and its distributors make significant marketing
investments to promote and enhance the market positions of its products and drive brand awareness.
Domestic Sales and Distribution
The Company uses a variety of means to support sales to a variety of domestic distribution channels:
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The Company uses a dedicated sales force and customer service team, third party sales representatives and point-of-
purchase materials to support domestic sales.
The Company maintains core in-stock inventories to service department stores, national chains, specialty retailers, catalog
retailers, independent retailers, uniform outlets and its own consumer-direct business.
The Company uses volume direct programs to ship products to retail customers and to provide products at competitive
prices to service major retail, catalog, mass merchant and government customers.
The Company also operates brick and mortar retail stores and eCommerce sites.
International Operations and Global Licensing
The Company’s foreign-sourced revenue is generated from a combination of (i) sales of branded footwear and apparel through
the Company’s owned operations in Canada, the United Kingdom and certain countries in continental Europe and Asia-Pacific;
(ii) revenue from third-party distributors for certain markets and businesses; (iii) revenue from a network of third-party
licensees; and (iv) revenue and income from joint ventures that market the Company’s branded products in Mexico, Colombia
and China. The Company’s international owned operations are located in markets where the Company believes it can gain a
strategic advantage by directly controlling the sale of its products into retail accounts. License and distribution arrangements
enable the Company to generate sales in other markets without the capital commitment required to maintain related foreign
operations, employees, inventories or localized marketing programs. The Company believes that joint ventures provide it with a
more meaningful ownership stake and near-term brand impact in fast-growing markets than its traditional licensee and
distributor arrangements.
The Company continues to develop its international network of third-party licensees and distributors to market its branded
products. The Company assists its licensees in designing products that are appropriate to each foreign market, yet consistent
with global brand positioning. Pursuant to license or distribution agreements, third-party licensees and distributors either
purchase goods directly from the Company and authorized third-party manufacturers or manufacture branded products
themselves, consistent with Company standards. Distributors and licensees are responsible for independently marketing and
distributing the Company’s branded products in their respective territories, with product and marketing support from the
Company.
Manufacturing and Sourcing
The Company directly controls the majority of the units of footwear and apparel sourced under the Company’s brand names.
The Company’s licensees directly control the balance. Substantially all of the units sourced by the Company are procured from
numerous third-party manufacturers in the Asia Pacific region. The Company maintains offices in the Asia Pacific region to
develop and facilitate sourcing strategies. The Company has established guidelines for each of its third-party manufacturers in
order to monitor product quality, labor practices and financial viability. The Company has adopted “Engagement Criteria for
Partners and Sources,” a policy that requires the Company’s domestic and foreign manufacturers, licensees and distributors to
use ethical business standards, comply with all applicable health and safety laws and regulations, commit to use
environmentally safe practices, treat employees fairly with respect to wages, benefits and working conditions and not use child
or prison labor. The Company’s third-party sourcing strategy allows the Company to (i) benefit from lower manufacturing costs
and state-of-the-art manufacturing facilities; (ii) source high quality raw materials from around the world; and (iii) avoid capital
expenditures necessary for additional owned factories. The Company believes that its overall global manufacturing strategy
provides the flexibility to properly balance the need for timely shipments, high quality products and competitive pricing.
8
The Company’s principal raw material is quality leather, which it purchases from a select group of domestic and foreign
suppliers. The widespread availability of common upper materials and specialty leathers eliminates reliance by the Company on
a single supplier.
The Company has a diversified supply base of raw pigskins and currently purchases a majority of the raw pigskins used for its
Wolverine Leathers Division from one domestic source, which has been a reliable and consistent supplier to the Company for
over 50 years. The Company purchases all of its other raw materials and component parts from a variety of sources and does
not believe that any of these sources are a dominant supplier.
Trademarks, Licenses and Patents
The Company holds a significant portfolio of registered and common law trademarks that identify its branded products and
technologies. The Company’s owned trademarks include Hush Puppies®, Dog Likeness (registered design trademark),
Wolverine®, Bates®, Chaco®, Soft Style®, Wolverine Fusion®, DuraShocks®, MultiShox®, Wolverine Compressor®, Wolverine
ICS®, Hidden Tracks®, iTechnology™, Bounce®, Comfort Curve®, Hytest®, Merrell®, M Circle Design (registered design
trademark), Continuum®, Q Form®, Sperry®, Saucony®, Stride Rite®, Sweaty Betty® and Keds®. The Company’s Wolverine
Leathers Division markets its pigskin leathers under the trademarks Wolverine Warrior Leather®, Weather Tight® and All
Season Weather Leathers™. The Company has footwear marketing and distribution rights under the Cat® and Harley-
Davidson® trademarks pursuant to license arrangements with the respective trademark owners. The Cat® license was recently
renewed and the license term runs through December 31, 2028 and the Harley-Davidson® license term runs through December
31, 2022. Both licenses are subject to early termination for breach.
The Company believes that consumers identify its products by the Company’s trademarks and that its trademarks are valuable
assets. The Company has a policy of registering its primary trademarks and vigorously defending its trademarks against
infringement or other threats whenever practicable. The Company also holds many design and utility patents, copyrights and
various other proprietary rights. The Company protects its proprietary rights under applicable laws.
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 including an increase in net working capital requirements near the end of the first and
third fiscal quarters. The Company meets its working capital requirements through internal operating cash flows and, as needed,
the Revolving Facility, as discussed in more detail under the caption "Liquidity and Capital Resources" in Item 7:
"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 such as COVID-19.
Competition
The Company markets its footwear and apparel lines in a highly competitive and fragmented environment. The Company
competes with numerous domestic and international footwear and apparel designers and marketers, some of whom are larger
and have greater resources than the Company. Product performance and quality, including technological improvements, product
identity, competitive pricing, ability to control costs and ability to adapt to style changes are all important elements of
competition in the footwear and apparel markets served by the Company. The footwear and apparel industries are subject to
changes in consumer preferences. The Company strives to maintain its competitive position through promotions designed to
increase brand awareness, manufacturing and sourcing efficiencies, and the style, comfort and value of its products. Future
sales by the Company will be affected by its continued ability to sell its products at competitive prices and to meet shifts in
consumer preferences.
Because of the lack of reliable published statistics, the Company is unable to state with certainty its competitive position in the
overall footwear and apparel industries. The non-athletic footwear and apparel markets are highly fragmented and no one
company has a dominant market position.
Environmental Matters
The Company uses and generates certain substances and wastes that are regulated or may be deemed hazardous to the
environment under certain federal, state and local regulations. The Company works with foreign and domestic federal, state and
local agencies from time to time to resolve cleanup issues at various affected sites and other regulatory issues. Financial
information regarding the Company’s environmental remediation activities is found in Note 17 to the Company's Consolidated
Financial Statements.
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Human Capital Resources
Employee Profile: As of January 1, 2022, the Company had approximately 4,400 domestic and foreign production, office and
sales employees. One of the Company's Core Values is "Our People Are the Difference," and the Company works to maximize
the engagement and contribution of its current workforce and to attract the best talent available from outside the organization
when needed.
Talent Recruitment, Retention and Development: The Company's talent strategy is focused on attracting top talent and
continually developing, engaging, investing in and retaining top employees through a variety of retention and development
efforts and world class corporate amenities. We strive to hire world class talent, while ensuring opportunities for growth and
development for team members. We maintain an engaging modern recruitment marketing website to tell the Company's
compelling story of opportunity and inclusion. Development starts on day one with an enriching day one experience designed to
help employees start off on the right foot from the moment they begin their career with the Company. The Company strives to
be one of the best places to work.
The Company seeks to maximize engagement and contribution of team members and the Company stays connected with team
members across many experience touchpoints through surveys, including a day one survey, 90 days into their career, regular
pulse and check in surveys, and exit surveys. These insights have been especially valuable during the COVID-19 pandemic to
understand and develop solutions to maintain a positive employee well-being. The Company's annual talent planning process
provides invaluable data to help retain top talent through career planning and leadership continuity by using that data to identify
and mitigate succession gaps through hiring and development.
The Company benchmarks its benefits regularly and keeps abreast of the most up-to-date and effective strategies in order to
offer a comprehensive and competitive compensation and benefits package that is specific to the employees’ region of
employment including annual incentive programs, long-term incentive programs and health and wellness benefits, such as the
corporate headquarters' on-site, state of the art Fitness Center, Child Care, and Doggie Day Care facilities for employees.
The Company believes that leaders should be developed at every stage of their career, from new managers to executives. We
have a global leadership development program for all people leaders through partnerships with top educational institutions
which focuses both on business leadership and capabilities needed to evolve the Company's businesses, and on people
leadership capabilities to build, retain, and inspire top performing teams. As we continue to evolve and transform, the continued
development of leaders is viewed as critical to the Company's future success. To enhance the development of employees, the
Company offers a wide variety of virtual learning courses, instructor led classes, video libraries, and quick reference documents
and provides tuition reimbursement to help employees achieve higher education goals.
Diversity, Equity, and Inclusion: The Company is committed to having a diverse and inclusive workforce which is reflected in
the wide range of cultures, religions, ethnicities and nationalities, as well as varied professional and educational backgrounds
currently represented at the Company. Because the Company believes in cultivating a well-rounded, diverse workforce, the
Company continuously seeks out individuals who reflect and support the goal of maintaining a diverse corporation. We have
further prioritized diversity and inclusion by hiring an expert partner to help us build a framework to promote an inclusive
environment today and into the future in order to make the Company an even greater place to work. The Company's major
development focus over the next year will be in implementing a comprehensive diversity, equity, and inclusion learning
program which includes learning on inclusive teams, inclusive leadership, and inclusive selection.
Health and Safety: The health and safety of the Company's employees is one of its highest priorities. The Company has
developed safety protocols to enhance the health and safety of all employees. The Environmental, Health, & Safety Council is
composed of representatives from across the Company and coordinates health and safety matters on a real time basis. The
Company's focus on the health and safety of its workforce is also evidenced by the actions it has taken in response to the
COVID-19 pandemic around the globe, including:
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Increasing employees' work from home flexibility;
Adjusting attendance policies to encourage those who are sick to stay home;
Increasing cleaning protocols;
Initiating regular communication regarding impacts of the COVID-19 pandemic, including health and safety protocols
and procedures;
Implementing temperature screening of employees at the majority of its distribution facilities;
Establishing new physical distancing procedures for employees who need to be onsite;
Providing additional personal protective equipment and cleaning supplies;
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• Modifying work spaces with plexiglass dividers and touchless faucets;
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Implementing protocols to address actual and suspected COVID-19 cases and potential exposure;
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Prohibiting all domestic and international non-essential travel for all employees; and
Requiring masks to be worn in all locations where allowed by local law.
The Company distributes its products to a variety of customers, many of which are deemed essential, including customers in the
health and safety, critical construction, food and agriculture, and energy sectors. As a result, the majority of the Company's
distribution facilities have continued operating since the COVID-19 pandemic began. In order to keep distribution facilities
open, the Company invested in creating physically safe work environments for employees.
Available Information
Information about the Company, including the Company’s Code of Business Conduct, Corporate Governance Guidelines,
Director Independence Standards, Accounting and Finance Code of Ethics, Audit Committee Charter, Compensation
Committee Charter and Governance Committee Charter, is available at its website at www.wolverineworldwide.com/investor-
relations/corporate-governance. Printed copies of the documents listed above are available upon request, without charge, by
writing to the Company at 9341 Courtland Drive, N.E., Rockford, Michigan 49351, Attention: General Counsel.
The Company also makes available on or through its website at www.wolverineworldwide.com/investor-relations, free of
charge, the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and
amendments to those reports (along with certain other Company filings with the Securities and Exchange Commission
(“SEC”)), as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC. These
materials are also accessible on the SEC’s website at www.sec.gov.
Item 1A. Risk Factors
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic has disrupted the Company's operations and could have a material adverse impact on the Company’s
operations and financial results.
The COVID-19 pandemic has negatively affected the global economy, disrupted consumer spending and global supply chains,
and significantly increased the volatility and disruption of financial markets both globally and in the U.S. These conditions
following the onset of the pandemic led to a decline in discretionary spending by consumers that had a negative effect on the
Company's financial condition and results of operations in 2020. There can be no assurance that these conditions will not recur,
for example, as new variants of the virus emerge, and negatively affect the Company's financial condition and results of
operations in future periods. The extent to which the COVID-19 pandemic impacts the Company’s business, operations and
financial results, including the duration and magnitude of such effects, will depend on numerous evolving factors outside of the
Company's control that the Company cannot currently fully predict or assess, such as; the duration and scope of the pandemic
and effectiveness of containment efforts; the negative impact on global and regional economies and economic activity,
including the duration and magnitude of its impact on unemployment rates, consumer discretionary spending and levels of
consumer confidence; and actions governments, businesses and individuals may take in response to the pandemic. The
Company’s business has been and could continue to be materially adversely affected by several factors related to the
COVID-19 pandemic, including, but not limited to:
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The inability of employees, suppliers and other business providers to carry out tasks at ordinary levels of performance
as a result of safety measures taken to limit the spread of COVID-19.
Future outbreaks requiring the closure of retail stores operated by the Company or the Company's wholesale customers;
Decreased retail traffic resulting from social distancing measures.
Negative effects on consumer spending due to general macroeconomic conditions, decreased disposable income and
increased unemployment.
• Wholesale and distributor customer order cancellations due to lower consumer demand.
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Decline in the performance or financial condition of the Company’s major wholesale customers as a result of retail store
closures, bankruptcy or liquidation.
Disruption to the operations of the Company’s distribution centers and its third-party manufacturers because of facility
closures, reductions in operating hours, labor or material shortages, travel limitations or mass transit disruptions.
Additional expenses related to mitigating the pandemic’s impact on regular operations.
Supply chain disruption effecting the Company's ability to receive and distribute goods as well as increases in supply
chain costs. Disruptions in the supply chain have had an adverse effect and may continue to have an adverse effect on
the Company's ability to meet consumer demand and financial results.
Continued volatility in the availability and prices for commodities and raw materials used in the Company's products
and related inflationary pressures.
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•
Increased cyber security risk due to the increase in the number of employees working remotely.
The disruption to the global economy and the Company's business may lead to triggering events indicating that the carrying
value of certain assets, such as long-lived assets, intangibles and goodwill, may not be recoverable. Any required non-cash
impairment charges will adversely affect the Company's results of operations.
The COVID-19 pandemic may also affect the Company's operating and financial results in a manner that is not presently
known to the Company or that the Company does not currently believe presents significant risks to its operations.
Business and Operational Risks
The Company’s operating results could be adversely affected if it is unable to maintain its brands’ positive images with
consumers or anticipate, understand and respond to changing footwear and apparel trends and consumer preferences.
Consumer preferences and, as a result, the popularity of particular designs and categories of footwear and apparel, generally
change over time. The Company’s success depends in part on its ability to maintain its brands’ positive images, and the ability
to anticipate, understand and respond to changing footwear and apparel trends and consumer preferences in a timely manner.
The Company’s efforts to maintain and improve its competitive position by monitoring and timely and appropriately
responding to changes in consumer preferences, increasing brand awareness and enhancing the style, comfort and perceived
value of its products may not be successful. If the Company is unable to maintain or enhance the images of its brands or if it is
unable to timely and appropriately respond to changing consumer preferences and evolving footwear and apparel trends,
consumers may consider its brands’ images to be outdated and associate its brands with styles that are no longer popular, which
would decrease demand for its products. Such failures could result in reduced sales, excess inventory, trade name impairments,
lower gross margin and other adverse impacts on the Company’s operating results.
Significant capacity constraints, production disruptions, quality issues, price increases and other risks associated with foreign
sourcing could increase the Company’s operating costs and adversely impact the Company’s business and reputation.
The Company currently sources a substantial majority of its products from third-party manufacturers in foreign countries,
predominantly in the Asia Pacific region. As is common in the footwear and apparel industry, the Company does not have long-
term contracts with its third-party manufacturers. The Company may experience difficulties with such manufacturers, including
reductions in the availability of production capacity, failures to meet production deadlines, failure to make products that meet
applicable quality standards, or increases in manufacturing costs. The Company’s future results depend partly on its ability to
maintain its relationships with third-party manufacturers.
Foreign manufacturing is subject to a number of risks, including work stoppages, transportation delays and interruptions,
political instability, foreign currency exchange rate fluctuations, changing economic conditions, expropriation, nationalization,
the imposition of tariffs, import and export controls and other non-tariff barriers and changes in governmental policies. Various
factors could significantly interfere with the Company’s ability to source its products, including adverse developments in trade
or political relations with China or other countries where it sources its products, or a shift in these countries' manufacturing
capacities away from footwear and apparel to other industries. Other adverse developments, such as the COVID-19 pandemic,
could cause significant production and shipping delays. Any of these events could have an adverse effect on the Company’s
business, results of operations and financial position and, in particular, on the Company’s ability to meet customer demands and
produce its products in a cost-effective manner.
The Company’s ability to import products in a timely and cost-effective manner may also be affected by conditions at ports or
issues that otherwise affect transportation and warehousing providers, such as fluctuations in freight costs, port and shipping
capacity, labor disputes or severe weather due to climate change. These issues have in the past and may in the future delay
importation of products or require the Company to locate alternative ports or warehousing providers to avoid disruption to
customers. These alternatives may not be available on short notice or could result in higher costs, which could have an adverse
impact on the Company’s business and financial condition.
Labor disruptions could adversely affect the Company’s business.
The Company’s business depends on its ability to source and distribute products in a timely and cost-effective manner. Labor
disputes at or that affect independent factories where the Company’s goods are produced, shipping ports, tanneries,
transportation carriers, retail stores or distribution centers create significant risks for the Company’s business, particularly if
these disputes result in work slowdowns, stoppages, lockouts, strikes or other disruptions. Any such disruption may have an
adverse effect on the Company’s business by potentially resulting in inventory shortages, delayed or canceled orders by
customers and unanticipated inventory accumulation, and may negatively impact the Company’s results of operations and
financial position.
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A significant reduction in wholesale customer purchases of the Company’s products, wholesale customers seeking more
favorable terms or failure of wholesale customers to pay for the Company’s products in a timely manner could adversely affect
the Company’s business.
The Company’s financial success depends on its wholesale customers continuing to purchase its products. The Company does
not typically have long-term contracts with its wholesale customers. Sales to the Company’s wholesale customers are generally
on an order-to-order basis and are subject to rights of cancellation and rescheduling by the wholesale customers. Failure to fill
wholesale customers’ orders in a timely manner could harm the Company’s relationships with its wholesale customers.
Furthermore, if any of the Company’s major wholesale customers experiences a significant downturn in its business, or fails to
remain committed to the Company’s products or brands, these wholesale customers may reduce or discontinue purchases from
the Company, which could have an adverse effect on the Company’s results of operations and financial position.
The Company sells its products to wholesale customers and extends credit based on an evaluation of each wholesale customer’s
financial condition. The financial difficulties of a wholesale customer could cause the Company to stop doing business with that
wholesale customer or reduce its business with that wholesale customer. The Company’s inability to collect from its wholesale
customers or a cessation or reduction of sales to certain wholesale customers because of credit concerns could have an adverse
effect on the Company’s business, results of operations and financial position.
Retail consolidation could lead to fewer wholesale customers, wholesale customers seeking more favorable price, payment or
other terms from the Company and a decrease in the number of stores that carry the Company’s products. In addition, changes
in the channels of distribution, such as the continued growth of eCommerce and related competitive pressures, and the sale of
private label products by major retailers, could have an adverse effect on the Company’s results of operations and financial
position.
The Company’s consumer-direct operations continue to require substantial investment and commitment of resources and are
subject to numerous risks and uncertainties.
The Company’s consumer-direct operations, including its brick and mortar locations as well as its eCommerce and mobile
channels, require substantial fixed investment in equipment and leasehold improvements, information systems, inventory and
personnel. The Company also has substantial operating lease commitments for retail space. Due to the high fixed-cost structure
associated with the Company’s brick and mortar consumer-direct operations, a decline in sales or the closure or poor
performance of individual or multiple stores could result in significant lease termination costs, write-offs of equipment and
leasehold improvements and employee-related costs. The success of its consumer-direct operations also depends on the
Company’s ability to identify and adapt to changes in consumer spending patterns and retail shopping preferences, including
the shift from brick and mortar to eCommerce and mobile channels, reductions in mall traffic and the Company’s ability to
effectively develop its eCommerce and mobile channels. The Company has made and will continue to make significant
investments in building technologies and digital capabilities. As omni-channel retailing continues to evolve, the Company’s
customers are increasingly more likely to shop across multiple channels that work in tandem to meet their needs. The
Company’s failure to successfully respond to these factors could adversely affect the Company’s consumer-direct business, as
well as limit the Company's ability to successfully develop and expand the omni-channel experience for customers, damage its
reputation and brands, and have an adverse effect on the Company’s results of operations and financial position.
The Company’s reputation and competitive position depend on its third-party manufacturers, distributors, licensees and others
complying with applicable laws and ethical standards.
The Company cannot ensure that its independent contract manufacturers, third-party distributors, third-party licensees and
others with which it does business comply with all applicable laws and ethical standards relating to working conditions and
other matters. If a party with which the Company does business is found to have violated applicable laws or ethical standards,
the Company could be subject to negative publicity that could damage its reputation, negatively affect the value of its brands
and subject the Company to legal risks.
In addition, the Company relies on its third-party licensees to help preserve the value of the Company’s brands. The Company’s
attempts to protect its brands through approval rights over design, production processes, quality, packaging, merchandising,
distribution, advertising and promotion of its licensed products may not be successful as the Company cannot completely
control the use by its licensees of its licensed brands. The misuse of a brand by a licensee could adversely affect the value of
such brand.
Disruption of the Company’s information technology systems could adversely affect the Company’s business.
The Company’s information technology systems are critical to the operations of its business. Any future material interruption,
unauthorized access, impairment or loss of data integrity or malfunction of these systems could severely impact the Company’s
business, including delays in product fulfillment and reduced efficiency in operations. In addition, costs and potential problems
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and interruptions associated with the implementation of new or upgraded systems, or with maintenance or adequate support of
existing systems, could disrupt or reduce the efficiency of the Company’s operations. Disruption to the Company’s information
technology systems may be caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of
terrorism or war, denial-of-service attacks, computer viruses, physical or electronic break-ins, or similar events or disruptions.
System redundancy may be ineffective or inadequate, and the Company’s disaster recovery planning may not be sufficient for
all eventualities. Such failures or disruptions could prevent access to the Company’s online services and preclude store
transactions. System failures and disruptions could also impede the manufacturing and shipping of products, transactions
processing and financial reporting. Additionally, the Company may be adversely affected if it is unable to improve, upgrade,
maintain, and expand its technology systems.
If the Company encounters problems affecting its logistics and distribution systems, its ability to deliver its products to the
market could be adversely affected.
The Company relies on owned or independently operated distribution facilities to transport, warehouse and ship products to its
customers. The Company’s logistics and distribution systems include computer-controlled and automated equipment, which are
subject to a number of risks related to security or computer viruses, the proper operation of software and hardware, power
interruptions or other system failures. Substantially all of the Company’s products are distributed from a relatively small
number of locations. These operations could be interrupted by earthquakes, floods, fires or other natural disasters near its
distribution centers or other events over which the Company has no control, such as the COVID-19 pandemic. The Company’s
business interruption insurance may not adequately protect the Company from the adverse effects that could be caused by
significant disruptions affecting its distribution facilities, such as the long-term loss of customers or an erosion of brand image.
In addition, the Company’s distribution capacity depends upon the timely performance of services by third parties, including
the transportation of products to and from the Company’s distribution facilities. If the Company encounters problems affecting
its distribution system, its results of operations and its ability to meet customer expectations, manage inventory, complete sales
and achieve operating efficiencies could be adversely affected.
The Company faces risks associated with its growth strategy and acquiring businesses.
The Company has expanded its products and markets in part through strategic acquisitions, including the acquisition of the
Sweaty Betty® brand in the third quarter of fiscal 2021, and it may continue to do so in the future, depending on its ability to
identify and successfully pursue suitable acquisition candidates. Acquisitions involve numerous risks, including risks inherent
in entering new markets in which the Company may not have prior experience; potential loss of significant customers or key
personnel of the acquired business; not obtaining the expected benefits of the acquisition on a timely basis or at all; managing
geographically-remote operations; and potential diversion of management’s attention from other aspects of the Company’s
business operations. Acquisitions may also cause the Company to incur debt or result in dilutive issuances of its equity
securities, write-offs of goodwill and substantial amortization expenses associated with other intangible assets. The Company
may not be able to obtain financing for future acquisitions on favorable terms, making any such acquisitions more expensive.
Any such financing may have terms that restrict the Company’s operations. The Company may not be able to successfully
integrate the operations of any acquired businesses into its operations and achieve the expected benefits of any acquisitions. In
addition, the Company may not consummate a potential acquisition for a variety of reasons, but still incur material costs in
connection with an acquisition that it cannot recover. The failure to successfully integrate newly acquired businesses or achieve
the expected benefits of strategic acquisitions in the future, or consummate a potential acquisition after incurring material costs,
could have an adverse effect on the Company’s business, results of operations and financial position.
The Company’s international operations may be affected by legal, regulatory, political and economic risks.
The Company’s ability to conduct business in new and existing international markets is subject to legal, regulatory, political
and economic risks. These include:
•
•
•
•
the burdens of complying with foreign laws and regulations, including trade and labor restrictions;
compliance with U.S. and other countries’ laws relating to foreign operations, including the U.S. Foreign Corrupt
Practices Act (“FCPA”), which prohibits U.S. companies from making improper payments to foreign officials for the
purpose of obtaining or retaining business;
unexpected changes in regulatory requirements; and
new tariffs or other barriers in some international markets, including China.
The Company is also subject to general political and economic risks in connection with its international operations, including:
•
•
•
political instability and terrorist attacks;
differences in business culture;
different laws governing relationships with employees and business partners;
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•
•
changes in diplomatic and trade relationships, including with China; and
general economic fluctuations in specific countries or markets.
The Company cannot predict whether quotas, duties, taxes, or other similar restrictions will be imposed by the U.S. or foreign
countries upon the import or export of the Company's products in the future, or what effect any of these actions would have, if
any, on the Company’s business, financial condition or results of operations. Changes in regulatory, geopolitical, social or
economic policies and other factors may have an adverse effect on the Company’s business in the future or may require the
Company to exit a particular market or significantly modify the Company's current business practices.
Foreign currency exchange rate fluctuations could adversely impact the Company’s business.
Foreign currency exchange rate fluctuations affect the Company’s revenue and profitability. Changes in foreign currency
exchange rates may impact the Company’s financial results positively or negatively in any given period, which may make it
difficult to compare the Company’s operating results from different periods. Foreign currency exchange rate fluctuations may
also adversely impact third parties that manufacture the Company’s products by increasing their costs of production and raw
materials and making such costs more difficult to finance, thereby raising prices for the Company, its distributors and its
licensees. The Company’s hedging strategy may not successfully mitigate the Company’s foreign currency exchange rate risk.
For a more detailed discussion of the risks related to foreign currency exchange rate fluctuations, see Item 7A: “Quantitative
and Qualitative Disclosures About Market Risk.”
In addition, the Company's foreign subsidiaries purchase products in U.S. dollars and the cost of those products will vary
depending on the applicable foreign currency exchange rate, which will impact the price charged to customers. The Company’s
foreign distributors also purchase products in U.S. dollars and sell in local currencies, which impacts the price to foreign
consumers and in turn, impacts the amount of royalties paid to the Company in U.S. dollars. As the U.S. dollar strengthens
relative to foreign currencies, the Company's revenues and profits denominated in foreign currencies are reduced when
converted into U.S. dollars and the Company's margins may be negatively impacted by the increase in product costs. The
Company may seek to mitigate the negative impacts of foreign currency exchange rate fluctuations through price increases and
further actions to reduce costs, but the Company may not be able to fully offset the impact, if at all. The Company’s success
depends, in part, on its ability to manage these various foreign currency impacts as changes in the value of the U.S. dollar
relative to other currencies could have an adverse effect on the Company’s business and results of operations.
The Company’s quarterly sales and earnings may fluctuate, and the Company or securities analysts may not accurately
estimate the Company’s financial results, which may result in volatility in, or a decline in, the Company's stock price.
The Company’s quarterly sales and earnings can vary due to a number of factors, many of which are beyond the Company’s
control, including the following:
•
•
•
In the wholesale business, sales of footwear depend on orders from major customers, who may change delivery
schedules, change the mix of products they order or cancel orders without penalty.
Changes to the Company's estimated annual tax rate which is based on projections of its domestic and international
operating results for the year, which the Company reviews and revises as necessary each quarter.
The Company's earnings are also sensitive to a number of factors that are beyond the Company’s control, including
certain manufacturing and transportation costs, changes in product sales mix, geographic sales trends, weather
conditions, customer demand, consumer sentiment and currency exchange rate fluctuations.
As a result of these specific and other general factors, the Company’s operating results will vary from quarter to quarter and the
results for any particular quarter may not be indicative of results for the full year. In addition, various securities analysts follow
the Company’s financial results and issue reports. These reports include information about the Company’s historical financial
results as well as the analysts’ estimates of future performance. The analysts’ estimates are based upon their own opinions and
are often different from the Company’s estimates or expectations. Any shortfall in sales or earnings from the levels expected by
investors or securities analysts could cause a decrease in the trading price of the Company’s common stock.
Changes in general economic conditions and other factors affecting consumer spending could adversely affect the Company’s
sales, costs, operating results or financial position.
The Company’s results of operations depend on factors affecting consumer disposable income and spending patterns. These
factors include general economic conditions, employment rates, business conditions, interest rates and tax policy in each of the
markets and regions in which the Company or its third-party distributors and licensees operates. Customers may defer or cancel
purchases of the Company’s products due to uncertainty about global, regional or local economic conditions, and how such
conditions may impact them. Disposable income and consumer spending may decline due to recessionary economic cycles,
high interest rates on consumer or business borrowings, restricted credit availability, inflation, high levels of unemployment or
consumer debt, high tax rates, declines in consumer confidence or other factors. A decline in disposable income and consumer
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spending could adversely affect demand for the Company’s products, which could adversely affect the Company's results of
operations.
The Company operates in competitive industries and markets.
The Company competes with a large number of wholesalers, and retailers of footwear and apparel, and consumer-direct
footwear and apparel companies. Many of the Company’s competitors have greater resources and larger customer and
consumer bases, are able, or elect, to sell their products at lower prices, or have greater financial, technical or marketing
resources than the Company, particularly its competitors in the apparel and consumer-direct businesses. The Company’s
competitors may own or license brands with greater name recognition; implement more effective marketing campaigns; adopt
more aggressive pricing policies; make more attractive offers to potential employees, distribution partners and manufacturers;
or respond more quickly to changes in consumer preferences. The Company’s continued ability to sell its products at
competitive prices and to meet shifts in consumer preferences quickly will affect its future sales. If the Company is unable to
respond effectively to competitive pressures, its results of operations and financial position may be adversely affected.
Unseasonable or extreme weather conditions could adversely affect the Company’s results of operations.
The Company markets and sells footwear and apparel suited for specific seasons, such as sandals and flats for the summer
season and boots for the winter season. If the weather conditions for a particular season vary significantly from those typical for
that season, such as an unusually cold and rainy summer or an unusually warm and dry winter, consumer demand for seasonally
appropriate products could be adversely affected. Lower demand for seasonally appropriate products may result in excess
inventory, forcing the Company to sell these products at significantly discounted prices, which would adversely affect the
Company’s results of operations. Conversely, if weather conditions permit the Company to sell seasonal products early in the
season, this may reduce inventory levels needed to meet customers’ needs later in that same season. Consequently, the
Company’s results of operations are dependent on future weather conditions and its ability to react to changes in weather
conditions.
Extreme weather conditions can also adversely impact the Company’s business, results of operations and financial position. If
extreme weather events forced closures of, or disrupted operations at, distribution centers maintained by the Company or third
parties, the Company could incur higher costs and experience longer lead times to distribute its products on a timely basis to the
Company’s retail stores, wholesale customers or eCommerce consumers. In addition, consumer traffic may be reduced as a
result of extreme weather conditions and a decrease in shopping traffic could have an adverse effect on the Company’s results
of operations and financial position.
Changes in general economic conditions and/or the credit markets affecting the Company's distributors, suppliers and retailers
could adversely affect the Company’s results of operations and financial position.
Changes in general economic conditions and/or the credit markets could have an adverse impact on the Company’s future
results of operations and financial position. Negative trends in global economic conditions may adversely impact the
Company's third-party distributors’, suppliers’ and retailers’ ability to meet their obligations to provide the Company with the
materials and services it needs at the prices, terms or levels as such third-parties have historically, which could adversely impact
the Company’s ability to meet consumers’ demands and, in turn, the Company's results of operations and financial position.
In addition, if the Company’s third-party distributors, suppliers and retailers are not able to obtain financing on favorable terms,
or at all, they may delay or cancel orders for the Company’s products or fail to meet their obligations to the Company in a
timely manner, either of which could adversely impact the Company’s sales, cash flow and operating results.
Global political and economic uncertainty could adversely impact the Company’s business.
The Company’s products are marketed in approximately 170 countries and territories, and the Company sources a substantial
majority of its products from foreign countries. Concerns regarding acts of terrorism or regional and international conflicts and
concerns regarding public health threats, such as the COVID-19 pandemic, have created and may in the future create significant
global economic and political uncertainties that may have adverse effects on consumer demand, acceptance of U.S. brands in
international markets, foreign sourcing of products, shipping and transportation, product imports and exports and the sale of
products in foreign markets, any of which could adversely affect the Company’s ability to source, manufacture, distribute and
sell its products.
In addition, an economic downturn, whether actual or perceived, a further decrease in economic growth rates or an otherwise
uncertain economic outlook in China or any other market in which the Company operates could have an adverse effect on the
Company. The Company cannot predict the timing, strength or duration of any economic slowdown or subsequent economic
recovery, worldwide, in China or any other market in which the Company operates, or in its industry.
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The Company is also subject to risks related to doing business in developing countries and economically volatile areas. These
risks include social, political and economic instability; nationalization by local governmental authorities of the Company’s, its
distributors’, or its licensees’ assets and operations; slower payment of invoices; and restrictions on the Company’s ability to
repatriate foreign currency or receive payment of amounts owed by third-party distributors and licensees. In addition,
commercial laws in these areas may not be well developed or consistently administered, and new unfavorable laws may be
retroactively applied. Any of these risks could have an adverse impact on the Company’s prospects and results of operations in
these areas.
Financial Risks
The Company’s operating results depend on effectively managing inventory levels.
The Company’s ability to effectively manage its inventories and accurately forecast demand are important factors in its
operations. Inventory shortages can impede the Company’s ability to meet demand, adversely affect the timing of shipments to
customers and, consequently, adversely affect business relationships with retail customers, diminish brand loyalty and decrease
sales.
Conversely, excess inventory can result in lower gross margins if the Company lowers prices in order to liquidate it. In
addition, inventory may become obsolete as a result of changes in consumer preferences over time. The Company’s business,
results of operations and financial position could be adversely affected if it is unable to effectively manage its inventory.
Increases or changes in duties, quotas, tariffs and other trade restrictions could adversely impact the Company’s sales and
profitability.
All of the Company’s products manufactured overseas and imported into the U.S., Canada, the European Union and other
countries are subject to customs duties collected by customs authorities. The customs information submitted by the Company is
routinely subject to review by customs authorities and any such review might result in the assessment of additional duties or
penalties. Additional U.S. or foreign customs duties, quotas, tariffs, anti-dumping duties, safeguard measures, cargo restrictions,
the loss of most favored nation trading status or other trade restrictions, including those due to changes in trade relations
between the U.S. and other countries, may be imposed on the importation of the Company’s products in the future. The
imposition of such costs or restrictions in countries where the Company operates, as well as in countries where its third-party
distributors and licensees operate, could result in increases in the cost of the Company’s products generally and adversely affect
its sales and profitability.
Increases in the cost of raw materials, labor and services could adversely affect the Company’s results of operations.
The Company’s ability to competitively price its products depends on the prices of commodities, such as cotton, leather, rubber,
petroleum, cattle, pigskin hides, and other raw materials, used to make and transport its products, as well as the prices of
equipment, labor, transportation and shipping, insurance and health care. The cost of commodities, equipment, services and
materials is subject to change based on availability and general economic and market conditions that are difficult to predict.
Various conditions, such as diseases affecting the availability of leather, affect the cost of the footwear marketed by the
Company. Increases in costs for commodities, equipment, services and materials used in production could have a negative
impact on the Company’s results of operations and financial position.
The Company purchases a majority of the pigskin hides used in its leathers operations from a single domestic source pursuant
to short-term contracts. If this source fails to continue to supply the Company with raw pigskin or supplies the Company with
raw pigskin on less favorable terms, the Company’s cost of raw materials for its leathers operations could increase and, as a
result, have a negative impact on the Company’s results of operations and financial position.
An increase in the Company’s effective tax rate or negative determinations by domestic or foreign tax authorities could have an
adverse effect on the Company’s results of operations and financial position.
A significant amount of the Company’s earnings are generated by its Canadian, European and Asia Pacific subsidiaries and, to
a lesser extent, in jurisdictions that are not subject to income tax. As a result, the Company’s income tax expense has
historically differed from the tax computed at the U.S. statutory income tax rate due to discrete items and because the Company
did not provide for U.S. taxes on non-cash undistributed earnings that it intends to permanently reinvest in foreign operations.
The Company’s future effective tax rates could be unfavorably affected by a number of factors, including, but not limited to,
changes in the tax rates in jurisdictions in which the Company generates income; changes in, or in the interpretation of, tax rules
and regulations in the jurisdictions in which the Company does business; or decreases in the amount of earnings in countries
with low statutory tax rates. An increase in the Company’s effective tax rate could have an adverse effect on its results of
operations and financial position.
17
In addition, the Company’s income tax returns are subject to examination by the Internal Revenue Service and other domestic
and foreign tax authorities. The Company regularly assesses the likelihood of outcomes resulting from these examinations to
determine the adequacy of its provision for income taxes and establishes reserves for potential adjustments that may result from
these examinations. The final determination of any of these examinations could have an adverse effect on the Company’s
results of operations and financial position.
An impairment of goodwill or other intangibles could have an adverse impact to the Company’s results of operations.
The carrying value of goodwill represents the fair value of acquired businesses in excess of identifiable assets and liabilities as
of the acquisition date. The carrying value of other intangibles represents the fair value of trade names and other acquired
intangibles as of the acquisition date. Goodwill and other acquired intangibles expected to contribute indefinitely to the
Company’s cash flows are not amortized but must be evaluated by the Company at least annually for impairment. If the
carrying amounts of one or more of these assets are not recoverable based upon discounted cash flow and market-approach
analyses, the carrying amounts of such assets are impaired by the estimated difference between the carrying value and estimated
fair value. An impairment charge could adversely affect the Company’s results of operations, such as the impairment recorded
associated with the Sperry trade name recorded in fiscal 2020.
The Company’s current level of indebtedness could adversely affect the Company by decreasing business flexibility and
increasing borrowing costs.
The Company’s current level of indebtedness could adversely affect the Company by decreasing its business flexibility and
increasing its borrowing costs. The Company has debt outstanding under a senior secured credit agreement (“Credit
Agreement”) and senior notes. The Credit Agreement and the indenture governing the senior notes contain customary restrictive
covenants imposing operating and financial restrictions on the Company, including restrictions that may limit the Company’s
ability to engage in acts that may be in its long-term best interests. These covenants restrict the ability of the Company and
certain of its 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. In addition, the restrictive covenants in the Credit Agreement require the Company to maintain specified
financial ratios and satisfy other financial condition tests.
These restrictive covenants may limit the Company’s ability to finance future operations or capital needs or to engage in other
business activities. The Company’s ability to comply with any financial covenants could be materially affected by events
beyond its control and the Company may be unable to satisfy any such requirements. If the Company fails to comply with these
covenants, it may need to seek waivers or amendments of such covenants, seek alternative or additional sources of financing or
reduce its expenditures. The Company may be unable to obtain such waivers, amendments or alternative or additional financing
on favorable terms or at all.
Legal and Regulatory Risks
If the Company is unsuccessful in establishing and protecting its intellectual property, the value of its brands could be
adversely affected.
The Company’s ability to remain competitive depends upon its continued ability to secure and protect trademarks, patents and
other intellectual property rights in the U.S. and internationally for all of the Company’s lines of business. The Company relies
on a combination of trade secret, patent, trademark, copyright and other laws, license agreements and other contractual
provisions and technical measures to protect its intellectual property rights; however, some countries’ laws do not protect
intellectual property rights to the same extent U.S. laws do.
The Company’s business could be significantly harmed if it is not able to protect its intellectual property or if a court found it to
be infringing on other persons’ intellectual property rights. Any intellectual property lawsuits or threatened lawsuits in which
the Company is involved, either as a plaintiff or as a defendant, could cost the Company a significant amount of time and
money and distract management’s attention from operating the Company’s business. If the Company does not prevail on any
intellectual property claims, then the Company may have to change its manufacturing processes, products or trade names, any
of which could reduce its profitability.
In addition, some of the Company’s branded footwear operations are operated pursuant to licensing agreements with third-party
trademark owners. These agreements are subject to early termination for breach. These agreements also expire by their terms
and as the agreements expire, the Company may be forced to stop selling the related products. Expiration or early termination
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by the licensor of any of these license agreements could have an adverse effect on the Company’s business, results of
operations and financial position.
Changes in employment laws and regulations and other related changes may lead to higher employment and pension costs for
the Company.
Changes in employment laws and regulations in the countries and territories in which the Company operates and other factors
could increase the Company’s overall employment costs. The Company’s employment costs include costs relating to health
care and retirement benefits, including U.S.-based defined benefit pension plans. The annual cost of benefits can vary
significantly depending on a number of factors, including changes in the assumed or actual rate of return on pension plan assets,
a change in the discount rate or mortality assumptions used to determine the annual service cost related to the defined benefit
plans, a change in the method or timing of meeting pension funding obligations and the rate of health care cost inflation.
Increases in the Company’s overall employment and pension costs could have an adverse effect on the Company’s business,
results of operations and financial position.
The Company’s and its vendors’ databases containing personal information and payment card data of the Company’s
customers, employees and other third parties, could be breached, which could subject the Company to adverse publicity,
litigation, fines and expenses. If the Company is unable to comply with bank and payment card industry standards, its
operations could be adversely affected.
The protection of the Company’s customer, associate and Company data is critically important to the Company. The Company
relies on its networks, databases, systems and processes, as well as those of third parties such as vendors, to protect its
proprietary information and information about its customers, employees and vendors. The Company’s customers and associates
have a high expectation that the Company will adequately safeguard and protect their sensitive personal information. The
Company's operations have become increasingly centralized and dependent upon automated information technology processes.
In addition, a portion of the Company’s business operations is conducted electronically, increasing the risk of attack or
interception that could cause loss or misuse of data, system failures or disruption of operations. If unauthorized parties gain
access to these networks or databases, they may be able to steal, publish, delete or modify the Company’s private and sensitive
third-party or employee information. Improper activities by third parties, exploitation of encryption technology, new data-
hacking tools and discoveries and other events or developments may result in a future compromise or breach of the Company’s
networks, payment card terminals or other payment systems. In particular, the techniques used by criminals to obtain
unauthorized access to sensitive data change frequently and often are not recognized until launched against a target;
accordingly, the Company may be unable to anticipate these techniques or implement adequate preventative measures. Any
failure to maintain the security of the Company’s customers’ sensitive information, or data belonging to it or its suppliers, could
put it at a competitive disadvantage, result in deterioration of its customers’ confidence in it, and subject it to potential
litigation, liability, fines and penalties, resulting in a possible adverse impact on its financial condition and results of operations.
The Company's insurance coverage may be insufficient to cover all losses and would not remedy damage to the Company's
reputation. In addition, employees may intentionally or inadvertently cause data or security breaches that result in unauthorized
release of personal or confidential information. In such circumstances, the Company could be held liable to its customers, other
parties or employees, be subject to regulatory or other actions for breaching privacy laws or failing to adequately protect such
information or respond to a breach. This could result in costly investigations and litigation, civil or criminal penalties,
operational changes and negative publicity that could adversely affect the Company’s reputation and its results of operations
and financial position. In addition, if the Company is unable to comply with bank and PCI security standards, it may be subject
to fines, restrictions and expulsion from card acceptance programs, which could adversely affect the Company’s consumer-
direct operations.
The Company’s operations are subject to environmental and workplace safety laws and regulations, and costs or claims related
to these requirements could adversely affect the Company’s business.
The Company’s operations are subject to various federal, state and local laws and regulations relating to the protection of the
environment, including those governing the discharge of pollutants into the air, soil and water, the management and disposal of
solid and hazardous materials and wastes, employee exposure to hazards in the workplace, and the investigation and
remediation of contamination resulting from releases of hazardous materials. Failure to comply with legal requirements could
result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal
liability. Various third parties have brought, and in the future could bring actions against the Company alleging health-related or
other harm arising from non-compliance. The Company may incur investigation, remediation or other costs related to releases
of hazardous materials or other environmental conditions at its currently or formerly owned or operated properties, regardless of
whether such environmental conditions were created by the Company or a third-party, such as a prior owner or tenant. The
Company has incurred, and continues to incur, costs to address soil and groundwater contamination at some locations. If such
issues become more expensive to address, or if new issues arise, they could increase the Company’s expenses, generate
negative publicity, or otherwise adversely affect the Company.
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The disruption, expense and potential liability associated with existing and future litigation against the Company could
adversely affect its reputation, financial position or results of operations.
The Company may be named as a defendant from time to time in lawsuits and regulatory actions relating to its business. For
example, regulatory actions, punitive class actions lawsuits and individual lawsuits have been filed against the Company
alleging claims relating to property damage, remediation and human health effects, among other claims, arising from the
Company’s operations, including its handling, storage, treatment, transportation and/or disposal of waste. These claims are
discussed in more detail in Note 17 to the consolidated financial statements. Due to the inherent uncertainties of litigation and
regulatory proceedings, the Company cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable
outcome could have an adverse impact on the Company’s business, results of operations and financial position. In addition,
regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and may require that the
Company devote substantial resources and executive time to the defense of such proceedings.
Provisions of Delaware law and the Company’s certificate of incorporation and bylaws could prevent or delay a change in
control or change in management that could be beneficial to the Company’s stockholders.
Provisions of the Delaware General Corporation Law, as well as the Company’s certificate of incorporation and bylaws, could
discourage, delay or prevent a merger, acquisition or other change in control of the Company that might benefit the Company's
stockholders. These provisions are intended to provide the Company’s Board of Directors with continuity and also serve to
encourage negotiations between the Company’s Board of Directors and any potential acquirer. Such provisions include a Board
of Directors that is classified so that only one-third of directors stand for election each year. These provisions could also
discourage proxy contests and make it more difficult for stockholders to replace the majority of the Company's directors and
take other corporate actions that may be beneficial to the Company’s stockholders.
The Company’s marketing programs, eCommerce initiatives and use of consumer information are governed by an evolving set
of laws, industry standards and enforcement trends and unfavorable changes in those laws, standards or trends, or the
Company’s failure to comply with existing or future laws, could negatively impact the Company’s business and results of
operations.
The Company collects, maintains and uses data provided to it through its online activities and other consumer interactions in its
business. The Company’s current and future marketing programs depend on its ability to collect, maintain and use this
information, and its ability to do so is subject to certain contractual restrictions in third party contracts as well as evolving
international, federal and state laws, industry standards and enforcement trends. The Company is subject to a broad array of
applicable laws and other legal obligations relating to privacy, data protection and consumer protection, including those relating
to the use of data for marketing purposes. These requirements may be interpreted and applied in a manner that is inconsistent
from one jurisdiction to another, may conflict with other rules or may conflict with the Company’s practices. If the Company is
not able to comply with any applicable requirements, the Company's reputation could be negatively impacted and the Company
may be subject to proceedings or actions against it by governmental entities or others.
In addition, as data privacy and marketing laws change, the Company may incur additional costs to remain in compliance. If
applicable data privacy and marketing laws become more restrictive at the federal or state level, the Company’s compliance
costs may increase, the Company’s ability to effectively engage customers via personalized marketing may decrease which
could potentially impact growth.
Because the Company processes and transmits payment card information, the Company is subject to the Payment Card Industry
(“PCI”) Data Security Standard (the “Standard”), and card brand operating rules (“Card Rules”). The Standard is a
comprehensive set of requirements for enhancing payment account data security that was developed by the PCI Security
Standards Council to help facilitate the broad adoption of consistent data security measures. The Company is required by
payment card network rules to comply with the Standard, and the Company’s failure to do so may result in fines or restrictions
on its ability to accept payment cards. Under certain circumstances specified in the payment card network rules, the Company
may be required to submit to periodic audits, self-assessments or other assessments of its compliance with the Standard. Such
activities may reveal that the Company has failed to comply with the Standard. If an audit, self-assessment or other test
determines that the Company needs to take steps to remediate any deficiencies, such remediation efforts may require it to
undertake remediation efforts. In addition, even if the Company complies with the Standard, there is no assurance that it will be
protected from a security breach. Further, changes in technology and processing procedures may result in changes in the Card
Rules. Such changes may require the Company to make significant investments in operating systems and technology that may
impact business. Failure to keep up with changes in technology could impact growth opportunities. Failure to comply with the
Standard or Card Rules could result in losing certification under the PCI standards and an inability to process payments.
The Company is also subject to U.S. and international data privacy and cybersecurity laws and regulations, which may impose
fines and penalties for noncompliance and may have an adverse effect on the Company's operations. For example, the General
Data Protection Regulation ("GDPR"), which applies in all European Union member states introduced new data protection
20
requirements in the European Union and substantial fines for breaches of the data protection rules. GDPR increases our
responsibility and potential liability in relation to personal data that we collect, process and transfer, and we have put in place
additional mechanisms designed to ensure compliance with the new data protection rules. Any failure to comply with these
rules and related national laws of European Union member states, could lead to government enforcement actions and significant
penalties against us, and could adversely affect our business, financial condition, cash flows and results of operations. In
addition, the California Consumer Privacy Act (“CCPA”) limits how we may collect and use personal data. The effects of the
CCPA governs the Company's data processing practices and policies. Additionally, other states have adopted, or are
considering enacting, similar laws that may affect the Company's data processing practices and policies.
The Company operates in many different international markets and could be adversely affected by violations of the FCPA and
similar worldwide anti-corruption laws.
The FCPA and similar worldwide anti-corruption laws generally prohibit companies and their intermediaries from making
improper payments to non-U.S. officials for the purpose of obtaining or retaining business. The Company’s internal policies
mandate compliance with these anti-corruption laws. Despite training and compliance programs, the Company's internal control
policies and procedures may not protect it from reckless or criminal acts committed by its employees or agents.
The Company’s continued expansion internationally, including in developing countries, could increase the risk of FCPA
violations in the future. Violations of these laws, or allegations of such violations, could disrupt the Company’s business and
result in an adverse effect on the results of operations or financial condition.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company operates its domestic administration, sales and marketing operations primarily from an owned facility of
approximately 307,000 square feet in Rockford, Michigan, as well as leased facilities of approximately 102,000 square feet in
Waltham, Massachusetts and 101,000 square feet in the United Kingdom.. The Company operates its distribution operations
primarily through a leased distribution facility of approximately 720,000 square feet in Beaumont, California; an owned
distribution facility of approximately 520,000 square feet in Louisville, Kentucky; a leased distribution center of approximately
468,000 square feet in Howard City, Michigan; a leased distribution center of approximately 242,000 square feet in Ontario,
Canada and a leased distribution center of approximately 125,000 square feet in Heerhugowaard, Netherlands.
The Company also leases or owns offices, showrooms and other facilities throughout the U.S., Canada, the United Kingdom,
continental Europe, Hong Kong and China to meet its operational requirements. In addition, the Company operates 143 retail
stores primarily through leases with various third-party landlords in the U.S., United Kingdom, and Canada that collectively
occupy approximately 325,000 square feet. The Company believes that its current facilities are suitable and adequate to meet its
current needs.
Item 3. Legal Proceedings
The Company is involved in litigation and various legal matters arising in the normal course of business, including certain
environmental compliance activities. For a discussion of legal matters, see Note 17 to the Company's Consolidated Financial
Statements.
Item 4. Mine Safety Disclosures
Not applicable.
Supplemental Item. Information about Executive Officers
The following table lists the names and ages of the Executive Officers of the Company and their positions held with the
Company as of January 31, 2022. The information provided below the table lists the business experience of each such
21
Executive Officer for at least the past five years. All Executive Officers serve at the pleasure of the Board of Directors of the
Company, or, if not appointed by the Board of Directors, at the pleasure of management.
Name
Kyle L. Hanson
Brendan L. Hoffman
Christopher E. Hufnagel
Amy M. Klimek
Isabel Soriano
Michael D. Stornant
James D. Zwiers
Positions held with the Company
Age
Senior Vice President, General Counsel and Secretary
56
President and Chief Executive Officer
53
President, Global Brand - Merrell
49
Senior Vice President, Global Human Resources
48
President, International
51
55
Senior Vice President, Chief Financial Officer and Treasurer
54 Executive Vice President and President, Global Operations Group
Kyle L. Hanson has served the Company as Senior Vice President, General Counsel and Secretary since June 2018. From
March 2014 through June 2018, she was Vice President, General Counsel and Corporate Secretary at The Buckle, Inc., a
publicly traded footwear and apparel retailer.
Brendan L. Hoffman has served the Company as Chief Executive Officer since January 2022 and as President since September
2020. From October 2015 through August 2020, he was the Chief Executive Officer and President of Vince Holding Corp., a
publicly-traded global apparel brand and retailer.
Christopher E. Hufnagel has served the Company as President, Merrell since September 2019. From July 2018 through
September 2019, he served as President, CAT Footwear. From January 2013 through July 2018, he served as Senior Vice
President and Head of Corporate Strategy.
Amy M. Klimek has served the Company as Senior Vice President, Global Human Resources since May 2016. From October
2014 to May 2016, she served as Vice President of Human Resources.
Isabel Soriano has served the Company as President, International, since June 2021. From June 2018 to May 2021, she served
as Vice President and Managing Director of EMEA. From April 2014 to June 2018, she served as Vice President and General
Manager for Vans, Timberland and Kipling in South America at VF Corporation, a publicly traded footwear and apparel
retailer.
Michael D. Stornant has served the Company as Senior Vice President, Chief Financial Officer and Treasurer since June 2015.
From January 2013 through June 2015, he served as Vice President, Corporate Finance.
James D. Zwiers has served the Company as Executive Vice President since February 2017 and President, Global Operations
Group since January 2021. From February 2016 through February 2017, he served as President, Wolverine Outdoor & Lifestyle
Group. From June 2014 through February 2016, he served as Senior Vice President and President, International Group.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
The Company’s common stock is traded on the New York Stock Exchange under the symbol “WWW.” The number of
stockholders of record on February 11, 2022, was 684.
A quarterly dividend of $0.10 per share was declared on February 9, 2022. The Company currently expects that comparable
cash dividends will be paid in future quarters in fiscal 2022.
Stock Performance Graph
The following graph compares the five-year cumulative total stockholder return on the Company’s common stock to the
Standard & Poor’s Small Cap 600 Index and the Standard & Poor’s 600 Footwear Index, assuming an investment of $100 at the
beginning of the period indicated. The Company is part of both the Standard & Poor’s Small Cap 600 Index and the Standard &
Poor’s 600 Footwear Index. This Stock Performance Graph shall not be deemed to be incorporated by reference into the
Company’s SEC filings and shall not constitute soliciting material or otherwise be considered filed under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended.
22
Five-Year Cumulative Total Return Summary
The following table provides information regarding the Company’s purchases of its own common stock during the fourth
quarter of fiscal 2021.
Issuer Purchases of Equity Securities
Period
Period 10 (October 3, 2021 to November 6, 2021)
Common Stock Repurchase Program (1)
Employee Transactions (2)
Period 11 (November 7, 2021 to December 4, 2021)
Common Stock Repurchase Program (1)
Employee Transactions (2)
Period 12 (December 5, 2021 to January 1, 2022)
Common Stock Repurchase Program (1)
Employee Transactions (2)
Total for the fourth Quarter Ended January 1, 2022
Common Stock Repurchase Program (1)
Employee Transactions (2)
Total
Number of
Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Dollar
Amount that May
Yet Be Purchased
Under the Plans or
Programs
— $
—
10,988 $
34.36
— $
460,584,931
101,778 $
31.08
101,778 $
457,420,278
— $
—
332,916 $
28.80
332,916 $
447,828,564
— $
—
434,694 $
10,988 $
29.35
34.36
434,694 $
447,828,564
(1) On September 11, 2019, the Company’s Board of Directors approved a common stock repurchase program that authorized
the repurchase of $400.0 million of common stock over a four-year period, incremental to the $113.4 million available as
of that date for repurchases under the previous program. Since that date, the Company repurchased $65.6 million of
common stock. The annual amount of any stock repurchases is restricted under the terms of the Company's amended senior
credit facility and senior notes indenture.
(2) Employee transactions include: (1) shares delivered or attested to in satisfaction of the exercise price and/or tax
withholding obligations by holders of employee stock options who exercised options, and (2) restricted shares and units
withheld to offset statutory minimum tax withholding that occurs upon vesting of restricted shares and units. The
23
DOLLARSWolverine World Wide, Inc.S&P SmallCap 600 IndexS&P 600 Footwear Index201620172018201920202021050100150200250300350 Company’s employee stock compensation plans provide that the shares delivered or attested to, or withheld, shall be valued
at the closing price of the Company’s common stock on the date the relevant transaction occurs.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
BUSINESS OVERVIEW
The Company is a leading global designer, marketer and licensor of branded footwear, apparel and accessories. The Company’s
vision statement is “to build a family of the most admired performance and lifestyle brands on earth” and the Company
seeks to fulfill this vision by offering innovative products and compelling brand propositions; complementing its footwear
brands with strong apparel and accessories offerings; expanding its global consumer-direct footprint; and delivering supply
chain excellence.
The Company’s brands are marketed in approximately 170 countries and territories at January 1, 2022, including through
owned operations in the U.S., Canada, the United Kingdom and certain countries in continental Europe and Asia Pacific. In
other regions (Latin America, portions of Europe and Asia Pacific, the Middle East and Africa), the Company relies on a
network of third-party distributors, licensees and joint ventures. At January 1, 2022, the Company operated 143 retail stores in
the U.S., United Kingdom, and Canada and 65 consumer-direct eCommerce sites.
On July 31, 2021, the Company entered into a definitive agreement to acquire 100% of the outstanding shares of Lady Leisure
InvestCo Limited. The acquisition was completed on August 2, 2021 for $417.4 million, which is net of acquired cash of $7.4
million. Lady Leisure InvestCo Limited owns the Sweaty Betty® brand and activewear business, a premium women’s
activewear brand. The acquisition was funded with cash on hand and borrowings under the Company’s Revolving Facility.
The following discussion includes a comparison of the Company's results of operations and liquidity and capital resources for
fiscal 2021 and 2020. A discussion of a comparison of the Company's results of operations and liquidity and capital resources
for fiscal 2020 and 2019 has been omitted from this Form 10-K but may be found in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended
January 2, 2021, filed with the SEC on February 26, 2021.
Known Trends Impacting Our Business
The global impact of the COVID-19 pandemic continues to affect the Company’s business. Most importantly, the Company
remains focused on the health and safety of its employees, customers and partners around the world. In accordance with
regulatory guidance and protocols promulgated by health authorities and government officials, the Company continues to
execute a number of enhanced business practices including temporary office closures, travel restrictions, enhanced cleaning
procedures and social distancing designed to protect all employees, customers and partners.
Following the onset of the pandemic, the Company further prioritized brand investments in the Company’s owned eCommerce
sites. The Company’s brands’ online growth accelerated due to the investments in this channel and consumer preference
changes in favor of digital purchases. The Company continues to prioritize eCommerce investments including digital
leadership, marketing investments in digital platforms, developing richer content and storytelling, and optimizing digital user
experiences to increase conversion. The Company is offering incremental exclusive products through owned eCommerce sites,
and the Company has enhanced the online customer shopping experience.
During the third quarter of 2021, a significant portion of the Company’s contract manufacturer’s production capacity in
Vietnam was subject to government mandated shutdowns due to COVID-19. Contract manufacturers in certain other Asia
Pacific countries were also subject to closures, reduced capacity and production delays due to COVID-19. Factories reopened
during October 2021, although some did not reopen at full capacity. These production capacity restraints significantly
negatively impacted, and are expected to continue to significantly negatively impact, the Company’s previously planned
inventory production and in turn, deliveries to wholesale customers.
The COVID-19 pandemic has had a material adverse impact, and is expected to continue to have an adverse impact, on the
Company’s financial results. In addition to the contract manufacturer closures during the third quarter discussed above, the
effects of the pandemic caused disruption in the global supply chain due to vessel shortages, containers damaged and lost in
transit, labor and container shortages and U.S. port congestion that resulted in transportation delays that interrupted the flow of
the Company’s inventory and caused delays of shipments to wholesale partners during fiscal 2021. The Company expects
certain aspects of the disruption in the global supply chain to continue, which may negatively impact results in fiscal 2022.
24
Expenses related to the COVID-19 pandemic incurred in fiscal 2021 included $26.1 million of costs primarily for incremental
air freight cost to expedite the delivery of inventory resulting from production and shipping delays. Expenses related to the
COVID-19 pandemic incurred in fiscal 2020 included $37.6 million of costs related to severance expenses, credit loss expenses,
air freight related to production delays, facility exit costs and other costs.
The Company continues to monitor the ongoing impacts of COVID-19, including developments that are outside the Company’s
control, such as the planned return to full production of factories in Vietnam and certain other Asia Pacific countries and the
planned shift of production capacity to other countries following factory closures. These developments and other potential
impacts of COVID-19, such as new or prolonged factory closures and other adverse impacts on the global supply chain
affecting the planned delivery of inventory, could materially adversely impact revenue growth as well as profitability in future
periods.
2021 FINANCIAL OVERVIEW
•
•
•
•
•
•
•
Revenue was $2,414.9 million for 2021, representing an increase of 34.8% compared to the prior year's revenue of
$1,791.1 million. The increase reflects a 23.6% increase from the Michigan Group, a 34.5% increase from the Boston
Group and a 18.8% increase on Sweaty Betty® revenue of $117.3 million. Changes in foreign exchange rates increased
revenue by $25.3 million during 2021. Owned eCommerce revenue increased 39.7% during 2021 compared to 2020.
Gross margin for 2021 was 42.6%, an increase of 150 basis points from 2020.
The effective tax rate in 2021 was 16.6%, compared to 24.7% in 2020.
Diluted earnings per share in 2021 was $0.81, compared to a diluted loss per share of $1.70 in 2020.
The Company declared cash dividends of $0.40 per share in 2021 and 2020.
Cash flow provided by operating activities was $86.8 million and $309.1 million for 2021 and 2020, respectively.
Compared to the prior year, inventory increased $122.4 million, or 50.3%.
RESULTS OF OPERATIONS
The following is a discussion of the Company’s results of operations and liquidity and capital resources. This section should be
read in conjunction with the Company’s consolidated financial statements and related notes, which are included in Item 8 of
this Annual Report on Form 10-K.
(In millions, except per share data)
Revenue
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Impairment of intangible assets
Environmental and other related costs, net of recoveries
Operating profit (loss)
Interest expense, net
Debt extinguishment and other costs
Other expense (income), net
Earnings (loss) before income taxes
Income tax expense (benefit)
Net earnings (loss)
Less: net earnings (loss) attributable to noncontrolling interests
Net earnings (loss) attributable to Wolverine World Wide, Inc.
Diluted earnings (loss) per share
REVENUE
$
Fiscal Year
2021
2,414.9 $
1,385.0
1,029.9
817.8
—
56.4
155.7
37.4
34.3
3.7
80.3
13.3
67.0
2020
1,791.1
1,055.5
735.6
639.4
222.2
11.1
(137.1)
43.6
5.5
(2.1)
(184.1)
(45.5)
(138.6)
(1.6)
(1.7)
Percent Change
34.8 %
31.2 %
40.0 %
27.9 %
(100.0)
408.1 %
213.6 %
(14.2) %
523.6
276.2 %
143.6 %
129.2 %
148.3 %
5.9 %
$
$
68.6 $
(136.9)
150.1 %
0.81 $
(1.70)
147.6 %
Revenue was $2,414.9 million for 2021, representing an increase of 34.8% compared to the prior year's revenue of $1,791.1
million. The change in revenue reflected a 23.6% increase from the Michigan Group and a 34.5% increase from the Boston
Group. The Michigan Group's revenue increase was driven by high-forties increase from Hytest®, low-thirties increase from
Cat®, high-twenties increase from Wolverine®, mid-twenties increase from Hush Puppies®, low-twenties increase from Harley-
25
Davidson®, low-twenties increase from Merrell®, and low-teens increase from Bates®. The Boston Group’s revenue increase
was driven by high-fifties increase from Saucony®, high-twenties increase from Kids’, and mid-twenties increase from Sperry®.
International revenue represented 34.8%, and 31.1% of total reported revenues in 2021 and 2020, respectively. Sweaty Betty®
contributed $117.3 million to the current year revenue increase. Changes in foreign exchange rates increased revenue by $25.3
million during 2021. Owned eCommerce revenue increased during 2021 by 39.7% compared to 2020, including a 21.4%
contribution from the Sweaty Betty® acquisition.
GROSS MARGIN
For 2021, the Company’s gross margin was 42.6%, compared to 41.1% in 2020. The gross margin increase was driven by
favorable product mix and average selling price through the Company's direct to consumer channel (110 basis points), the
contribution from the Sweaty Betty® acquisition (80 basis points), and favorable product mix and average selling price across
the Company's brands mainly attributable to Saucony®, Merrell® and Wolverine® (80 basis points), partially offset by
incremental air freight costs resulting from production and shipping delays caused by the COVID-19 pandemic (140 basis
points).
OPERATING EXPENSES
Operating expenses increased $1.5 million in 2021, to $874.2 million. The increase was driven by higher general and
administrative costs ($61.7 million), higher advertising costs ($59.8 million), higher environmental and other related costs, net
of recoveries ($45.3 million), higher selling costs ($34.2 million), higher incentive compensation costs ($22.5 million), higher
distribution costs ($16.9 million), higher acquisition costs ($7.5 million), and higher product development costs ($5.1 million).
These increases were partially offset by lower impairment of intangible assets ($222.2 million) and lower non-operating costs
incurred due to the COVID-19 pandemic ($29.4 million). Environmental and other related costs were $73.9 million and
$19.4 million in 2021 and 2020, respectively. The increase in environmental and other related costs in 2021 is due to settlement
accruals recorded. See Note 17 to the Company's Consolidated Financial Statements for further discussion.
INTEREST, OTHER AND TAXES
Net interest expense was $37.4 million in 2021 compared to $43.6 million in 2020. Interest expense decreased in the current
year due to the lower average debt balances outstanding on the Company's credit facility.
The Company incurred $34.0 million of debt extinguishment and other costs in connection with the extinguishment of the
$250.0 million senior notes due on September 1, 2026 and $300.0 million senior notes due on May 15, 2025. The Company
also incurred $0.3 million of debt extinguishment and other costs in connection with the 2021 Replacement Facility
Amendment and Reaffirmation Agreement entered into on October 21, 2021.
The effective tax rate in 2021 was 16.6%, compared to 24.7% in 2020. The Company recognized discrete tax benefits in 2021
which reduced the tax expense on pretax income, resulting in a lower effective tax rate. In 2020, the Company also recognized
discrete tax benefits however such benefits increased the tax benefit recognized from the pretax loss, resulting in a higher
effective tax rate.
Other expense was $3.7 million in 2021 compared to other income of $2.1 million in 2020. The increase in expense was driven
by higher non-service pension costs ($4.9 million) and higher losses from equity method investments ($1.8 million), partially
offset by higher sublease income ($1.7 million).
REPORTABLE SEGMENTS
The Company’s portfolio of brands is organized into the following two operating segments, which the Company has determined
to be reportable segments.
• Wolverine Michigan Group, consisting of Merrell® footwear and apparel, Cat® footwear, Wolverine® footwear and
apparel, Chaco® footwear, Hush Puppies® footwear and apparel, Bates® uniform footwear, Harley-Davidson®
footwear and Hytest® safety footwear; and
• Wolverine Boston Group, consisting of Sperry® footwear, Saucony® footwear and apparel, Keds® footwear and the
Kids' footwear business, which includes the Stride Rite® licensed business, as well as Kids' footwear offerings from
Saucony®, Sperry®, Keds®, Merrell®, Hush Puppies® and Cat®.
The Company also reports “Other” and “Corporate” categories. The Other category consists of the Sweaty Betty® activewear
business, the Company’s leather marketing operations, sourcing operations that include third-party commission revenues and
multi-branded consumer-direct retail stores. The Corporate category consists of unallocated corporate expenses, such as
corporate employee costs, costs related to the COVID-19 pandemic, impairment of intangible assets and environmental and
other related costs.
26
The reportable segment results for years 2021 and 2020 are as follows:
(In millions)
REVENUE
Wolverine Michigan Group
Wolverine Boston Group
Other
Total
OPERATING PROFIT (LOSS)
Wolverine Michigan Group
Wolverine Boston Group
Other
Corporate
Total
2021
2020
Change
Percent Change
Fiscal Year
$
1,298.9 $
1,051.0 $
935.8
180.2
2,414.9 $
696.0
44.1
1,791.1 $
245.3 $
149.3
14.3
(253.2)
155.7 $
179.9 $
88.1
1.6
(406.7)
(137.1) $
$
$
$
247.9
239.8
136.1
623.8
65.4
61.2
12.7
153.5
292.8
23.6 %
34.5 %
308.6 %
34.8 %
36.4 %
69.5 %
793.8 %
37.7 %
213.6 %
Further information regarding the reportable segments can be found in Note 18 to the consolidated financial statements.
Wolverine Michigan Group
The Michigan Group’s revenue increased $247.9 million, or 23.6%, in 2021 compared to 2020. The increase was driven by
high-forties increase from Hytest®, low-thirties increase from Cat®, high-twenties increase from Wolverine®, mid-twenties
increase from Hush Puppies®, low-twenties increase from Harley-Davidson®, low-twenties increase from Merrell®, and low-
teens increase from Bates®. The increase across all brands is due to economic recovery from the effects of the COVID-19
pandemic experienced in the prior period as a result of the closure of brick-and-mortar stores in 2020, as well as accelerated
growth from Merrell®, Cat® and Wolverine® resulting from strength in the outdoor and work categories.
The Michigan Group’s operating profit increased $65.4 million, or 36.4%, in 2021 compared to 2020. The operating profit
increase was due to the revenue increases and a 100 basis point increase in gross margin, partially offset by a $50.9 million
increase in selling, general and administrative costs. The increase in gross margin in the current year period was due to
improved product mix, including higher margin eCommerce sales, partially offset by increased product and shipping costs
including air freight. The increase in selling, general and administrative expenses in 2021 was primarily due to higher
advertising costs and higher employee costs.
Wolverine Boston Group
The Boston Group’s revenue increased $239.8 million, or 34.5%, in 2021 compared to 2020. The increase was driven by high-
fifties increase from Saucony®, high-twenties increase from Kids’ and mid-twenties increase from Sperry®. The increase across
all brands is due to economic recovery from the effects of the COVID-19 pandemic experienced in the prior period as a result
of closure of brick-and-mortar stores in 2020, as well as accelerated growth from Saucony® resulting from strength in the
running category and innovative product launches.
The Boston Group’s operating profit increased $61.2 million, or 69.5%, in 2021 compared to 2020. The operating profit
increase was due to the revenue increases and a 40 basis point increase in gross margin, partially offset by a $46.0 million
increase in selling, general and administrative costs. The increase in gross margin in the current year period was due to
improved product mix including higher margin eCommerce sales, partially offset by increased product and shipping costs
including air freight. The increase in selling, general and administrative expenses in 2021 was primarily due to higher
advertising costs and higher employee costs.
Other
The Other category's revenue increased $136.1 million, or 308.6%, in 2021 compared to 2020. The revenue increase was driven
by low-forties increase in the performance leathers business and an $117.3 million contribution from the Sweaty Betty®
acquisition.
Corporate
Corporate expenses decreased $153.5 million in 2021 compared to 2020 primarily due to the impairment of the Sperry trade
name in 2020 ($222.2 million) and lower non-operating costs due to the COVID-19 pandemic ($29.2 million), partially offset
by higher environmental and other related costs ($45.3 million), higher incentive compensation and bonus expense ($28.4
million), higher wages and employee cost ($13.1 million), and higher acquisition costs ($7.5 million).
27
LIQUIDITY AND CAPITAL RESOURCES
Fiscal Year
(In millions)
Cash and cash equivalents
Debt
Available Revolving Facility (1)
793.9
(1) Amounts are net of both borrowings, if any, and outstanding standby letters of credit issued in accordance with the terms of
161.7 $
966.8
347.4
722.5
769.2
2021
2020
$
the Revolving Facility.
Liquidity
Cash and cash equivalents of $161.7 million as of January 1, 2022 were $185.7 million lower compared to January 2, 2021. The
decrease is due primarily to the acquisition of Sweaty Betty® for $417.4 million, share repurchases of $39.6 million, cash
dividends paid of $33.5 million, additions to property, plant, and equipment of $17.6 million, shares acquired related to
employee stock plans of $14.1 million and payments of debt issuance and debt extinguishment costs of $10.4 million, partially
offset by net revolver borrowings of $225.0 million, cash provided by operating activities of $86.8 million, and net borrowings
of long-term debt of $20.0 million. The Company had $769.2 million of borrowing capacity available under the Revolving
Facility as of January 1, 2022. Cash and cash equivalents located in foreign jurisdictions totaled $133.4 million as of January 1,
2022.
The Company funded the purchase price for the Sweaty Betty® acquisition through a combination of cash on hand and
borrowings under the Revolving Facility.
Cash flow from operating activities is expected to be sufficient to meet the Company’s working capital needs for the
foreseeable future. Any excess cash flow from operating activities is expected to be used to fund organic growth initiatives,
reduce debt, pay dividends, pursue acquisitions and for general corporate purposes.
The Company may purchase up to an additional $447.8 million of shares under its existing common stock repurchase program
which expires in 2023. The common stock repurchase program does not obligate the Company to acquire any shares and may
be suspended at any time. The Company repurchased $39.6 million and $21.0 million of shares during 2021 and 2020,
respectively.
A detailed discussion of environmental remediation costs is found in Note 17 to the Company's Consolidated Financial
Statements. The Company has established a reserve for estimated environmental remediation costs based upon an evaluation of
currently available facts with respect to each individual affected site. As of January 1, 2022, the Company has a reserve of
$85.7 million, of which $24.5 million is expected to be paid in the next 12 months and is recorded as a current obligation in
other accrued liabilities, with the remaining $61.2 million recorded in other liabilities and expected to be paid over the course of
up to 25 years. The Company's remediation activity at its former Tannery site and sites where the Company disposed of
Tannery byproducts is ongoing. It is difficult to estimate the 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.
Note 17 to the Company's Consolidated Financial Statements also includes a detailed discussion of environmental litigation
matters. The Company has established an accrual in the amount of $50.7 million, and made related payments of $0.6 million,
with respect to certain of these matters for the year ended January 1, 2022, as discussed in Note 17. The Company expects to
disburse payments during 2022 equal to the remainder of the established accrual.
Developments may occur that could materially change the Company’s current cost estimates. The Company adjusts recorded
liabilities as further information develops or circumstances change.
The future impact of the COVID-19 pandemic on the Company’s statement of operations and cash flows remains uncertain.
The actions the Company has taken and continues to take to improve the Company’s liquidity are discussed above in this Item 7
and below under “Financing Arrangements.”
28
The Company expects to meet its contractual obligations through its typical sources of liquidity in the normal course of
business, such as coash from operating activities, and believes it has the financial resources to satisfy these contractual
obligations. The Company had the following contractual obligations due by period at January 1, 2022:
$
(In millions)
Long-term debt obligations (1)
Operating lease obligations
Purchase obligations (2)
Supplemental Executive Retirement Plan
Municipal water improvements (3)
TCJA transition obligation
Total (4)
$
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
1,176.9 $
193.2
988.0
42.1
46.9
28.4
263.8 $
35.9
988.0
3.9
18.6
0.4
77.6 $
44.9
—
8.1
28.3
16.3
2,475.5 $
1,310.6 $
175.2 $
226.7 $
35.8
—
8.3
—
11.7
282.5 $
608.8
76.6
—
21.8
—
—
707.2
(1)
Includes principal and interest payments on the Company’s long-term debt. Estimated future interest payments on
outstanding debt obligations are based on interest rates as of January 1, 2022. Actual cash outflows may differ significantly
due to changes in underlying interest rates.
(2) Purchase obligations related primarily to inventory and capital expenditure commitments.
(3) Under the terms of a Consent Decree resolving certain civil and regulatory actions, the Company is obligated to contribute
towards the costs of extending municipal water lines, developing a replacement wellfield and making certain improvements
to Plainfield Township’s existing water treatment plant, all subject to an aggregate cap of $69.5 million. During 2021 and
2020, the Company made payments of $12.9 and $9.7 million towards the total cap, respectively. Due to the uncertainty of
the timing and amounts related to the Company's other environmental remediation costs, they have been excluded from this
table. See Note 17 to the Company's Consolidated Financial Statements for additional information.
(4) The total amount of unrecognized tax benefits on the consolidated balance sheet at January 1, 2022 is $10.9 million. At this
time, the Company is unable to make a reasonably reliable estimate of the timing of payments in individual years beyond
12 months due to uncertainties in the timing of tax audit outcomes. As a result, this amount is not included in the table
above.
Financing Arrangements
On October 21, 2021, the Company entered into a 2021 Replacement Facility Amendment and Reaffirmation Agreement (the
“Amendment”) to the Company's Credit Facility (as amended and restated, the "Credit Agreement"). The Amendment amended
and restated the Credit Agreement to, among other things: (i) provide for a term loan A facility (the “Term Facility”) in an
aggregate principal amount of $200.0 million, which replaced the existing term loan A; (ii) provide for an increased revolving
credit facility (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facilities”) with total
commitments of $1.0 billion, an increase of $200.0 million from the existing Revolving Facility; and (iii) set the LIBOR floor
to 0.000%, a decrease of 0.750%. The maturity date of the loans under the Senior Credit Facilities was extended to October 21,
2026. The Amendment provides for a debt capacity of up to an aggregate debt amount (including outstanding term loan
principal and revolver commitment amounts in addition to permitted incremental debt) not to exceed $2.0 billion unless certain
specified conditions set forth in the amended senior credit facility are met. The Term Facility requires quarterly principal
payments with a balloon payment due on October 21, 2026.
On August 26, 2021, the Company issued $550.0 million aggregate principal debt amount of 4.000% senior notes due on
August 15, 2029. Related interest payments are due semi-annually beginning February 15, 2022. The senior notes are
guaranteed by substantially all of the Company’s domestic subsidiaries. The proceeds from the senior notes were used to
extinguish the Company’s $250.0 million senior notes due on September 1, 2026 and $300.0 million senior notes due on May
15, 2025.
As of January 1, 2022, the Company was in compliance with all covenants and performance ratios under the Credit Agreement.
The Company’s debt at January 1, 2022 totaled $966.8 million compared to $722.5 million at January 2, 2021. The Company
expects to use the current borrowings to fund organic growth initiatives, reduce debt, pay dividends, pursue acquisitions and for
general corporate purposes. The increased debt position resulted from borrowings under the Revolving Facility to fund the
Sweaty Betty® acquisition as well as the new Term Facility's increased principal balance resulting from the Amendment.
29
Cash Flows
The following table summarizes cash flow activities:
(In millions)
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Additions to property, plant and equipment
Depreciation and amortization
Operating Activities
Fiscal Year Ended
January 1,
2022
January 2,
2021
$
86.8 $
(437.3)
169.3
17.6
33.2
309.1
6.1
(154.0)
10.3
32.8
The principal source of the Company’s operating cash flow is net earnings, including cash receipts from the sale of the
Company’s products, net of costs of goods sold.
Cash from operations during 2021 was lower compared to 2020, due primarily to an increase in net working capital
representing a use of cash of $88.4 million. Working capital balances were unfavorably impacted by an increase in inventories
of $77.2 million, an increase in accounts receivable of $49.2 million, and an increase in other operating assets of $2.3 million,
partially offset by an increase in accounts payable of $23.0 million and an increase in other operating liabilities of $15.7
million. Operating cash flows were favorably impacted by stock-based compensation expense of $38.1 million, environmental
and other related costs of $33.7 million, depreciation and amortization expense of $33.2 million, pension expense of $14.0
million and debt extinguishment costs of $5.8 million, partially offset by deferred income taxes of $14.7 million.
Investing Activities
The Company acquired the Sweaty Betty® brand and activewear business in 2021 resulting in a net cash payment of $417.4
million. The Company also made capital expenditures of $17.6 million and $10.3 million in years 2021 and 2020, respectively,
for building improvements, new retail stores, distribution operations improvements and information system enhancements. The
Company also received $26.8 million of proceeds during the second quarter of 2020 related to a company-owned life insurance
policy. During the first quarter of 2020, the Company made a contingent consideration payment of $5.5 million related to the
Saucony® Italy distributor acquisition.
Financing Activities
The current year debt activity includes net borrowings under the Revolving Facility of $225.0 million. The current year revolver
borrowings were used to fund a portion of the Sweaty Betty® brand and activewear business acquisition. On August 26, 2021,
the Company issued $550.0 million aggregate principal amount of senior notes, and the proceeds from these senior notes were
used to extinguish the Company’s $250.0 million senior notes due on September 1, 2026 and $300.0 million senior notes due
on May 15, 2025. The October 21, 2021 Replacement Facility Amendment and Reaffirmation Agreement also provided for a
term facility that replaced the prior term loan A, resulting in a $20.0 million increase in long-term debt. Payments of debt
issuance costs of $10.4 million were associated with the current year debt transactions. The prior year activity included net
revolving credit payments of $360.0 million, net long-term debt borrowings of $287.5 million that included issuance of senior
notes and quarterly term loan payments, and payments of debt issuance costs of $6.4 million.
The Company paid $14.1 million and $24.8 million in 2021 and 2020, respectively, in connection with shares or units withheld
to pay employee taxes related to awards under stock incentive plans and received $17.1 million and $9.8 million in proceeds
from the exercise of stock options in 2021 and 2020, respectively. The Company also repurchased $39.6 million and $21.0
million of its common stock during 2021 and 2020, respectively. The Company received $4.8 million and $1.8 million from
noncontrolling owners of the Company’s China joint venture to support the growth of the joint venture in 2021 and 2020,
respectively. During 2020, the Company terminated an interest rate swap and the fair value of the swap of $7.3 million was
repaid.
The Company declared cash dividends of $0.40 per share in each of 2021 and 2020. Dividends paid totaled $33.5 million and
$33.6 million for 2021 and 2020, respectively. A quarterly dividend of $0.10 per share was declared on February 9, 2022 to
shareholders of record on April 1, 2022.
NEW ACCOUNTING STANDARDS
See Note 2 to the Company's Consolidated Financial Statements for information related to new accounting standards.
30
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting
principles generally accepted in the U.S. ("U.S. GAAP"), requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these
estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from
the Company’s estimates. However, actual results may differ materially from these estimates under different assumptions or
conditions.
The Company has identified the following critical accounting policies used in determining estimates and assumptions in the
amounts reported. Management believes that an understanding of these policies is important to an overall understanding of the
Company’s Consolidated Financial Statements. Significant accounting policies are summarized in Note 1 to the consolidated
financial statements.
Revenue Recognition and Performance Obligations
Revenue is recognized upon the transfer of promised goods or services to customers, in an amount that reflects the expected
consideration to be received in exchange for those goods or services. The Company identifies the performance obligation in the
contract, determines the transaction price, allocates the transaction price to the performance obligations, and recognizes revenue
upon completion of the performance obligation. Revenue is recognized net of variable consideration and any taxes collected
from customers, which are subsequently remitted to governmental authorities.
Control of the Company's goods and services, and associated revenue, are transferred to customers at a point in time. The
Company’s contract revenue consist of wholesale revenue and consumer-direct revenue. Wholesale revenue is recognized for
products sourced by the Company when control transfers to the customer generally occurring upon the purchase, shipment or
delivery of branded products or to the customer. Consumer-direct includes eCommerce revenue that is recognized for products
sourced by the Company when control transfers to the customer once the related goods have been shipped and retail store
revenue recognized at time of sale. The point of purchase or shipment was evaluated to best represent when control transfers
based on the Company’s right of payment for the goods, the customer’s legal title to the asset, the transfer of physical
possession and the customer having the risks and rewards of the goods. Payment terms for the Company's revenue vary by sales
channel. Standard credit terms apply to the Company's wholesale receivables, while payment is rendered at the time of sale
within the consumer-direct channel.
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 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 year ended
January 1, 2022, related to the Company’s contract liabilities was nominal.
Inventory
The Company values its inventory at the lower of cost or net realizable value. Cost is determined by the last-in, first out
("LIFO") method for certain domestic finished goods inventories. Cost is determined using the first-in, first-out (“FIFO”)
method for all raw materials, work-in-process and finished goods inventories in foreign countries and certain domestic finished
goods inventories. The average cost of inventory is used for finished goods inventories of the Company’s consumer-direct
business and Sweaty Betty® inventory. The Company has applied these inventory cost valuation methods consistently from year
to year.
The Company reduces the carrying value of its inventories to the lower of cost or net realizable value for excess or obsolete
inventories based upon assumptions about future demand and market conditions. If the Company were to determine that the
estimated realizable value of its inventory is less than the carrying value of such inventory, the Company would provide a
reserve for such difference as a charge to cost of sales. If actual market conditions are different from those projected,
adjustments to those inventory reserves may be required. The adjustments would increase or decrease the Company’s cost of
sales and net income in the period in which they were realized or recorded. Inventory quantities are verified at various times
throughout the year by performing physical inventory counts and subsequently comparing those results to perpetual inventory
31
balances. If the Company determines that adjustments to the inventory quantities are appropriate, an adjustment to the
Company’s cost of goods sold and inventory is recorded in the period in which such determination was made.
Business Combinations
The Company accounts for business combinations using the acquisition method of accounting, which requires that once control
is obtained, the consolidated financial statements reflect the operations of an acquired business starting from the acquisition
date.
All assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. The Company allocates the
purchase price of an acquired business to the fair values of the tangible and identifiable intangible assets acquired and liabilities
assumed, with any excess purchase price recorded as goodwill. Contingent consideration, if any, is included in the purchase
price and is recognized at its fair value on the acquisition date. During the measurement period, which is up to one year from
the acquisition date, adjustments to the assets acquired and liabilities assumed may be recorded, with the corresponding offset
to goodwill.
The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques and
requires management to make judgments that may involve the use of significant estimates. For intangible assets acquired in a
business combination, the Company typically uses the income method. Significant estimates used in valuing certain intangible
assets include, but are not limited to, the amount and timing of future cash flows, growth rates and discount rates, among other
items. If the actual results differ from the estimates and judgments used, the amounts recorded in the Consolidated Financial
Statements may be exposed to potential impairment of the intangible assets and goodwill as discussed in the "Goodwill and
Indefinite-Lived Intangibles" section below. Refer to Note 19 “Business Acquisitions” for additional discussion.
Goodwill and Indefinite-Lived Intangibles
Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment tests at least
annually. The Company reviews the carrying amounts of goodwill and indefinite-lived intangible assets by reporting unit at
least annually, or when indicators of impairment are present, to determine if such assets may be impaired. If the carrying
amounts of these assets are not recoverable based upon discounted cash flow and market approach analyses, the carrying
amounts of such assets are reduced by the estimated difference between the carrying values and estimated fair values. The
Company includes assumptions about expected future operating performance, which are derived from internal projections and
operating plans, as part of a discounted cash flow analysis to estimate fair value.
For goodwill, if the estimated fair value of the reporting unit exceeds its carrying value, no further review is required. However,
if the estimated fair value of the reporting unit is less than its carrying value, the Company records an impairment charge equal
to the excess of the recorded goodwill over the fair value of the goodwill.
The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill
and indefinite-lived intangible assets are less than their carrying value. The Company would not be required to quantitatively
determine the fair value unless the Company determines, based on the qualitative assessment, that it is more likely than not that
its fair value is less than the carrying value.
The Company performs its annual testing for goodwill and indefinite-lived intangible asset impairment at the beginning of the
fourth quarter of the fiscal year for all reporting units. The Company did not recognize any impairment charges for goodwill
during years 2021, 2020 and 2019. No impairment charges were recognized for the Company's intangible assets during years
2021 and 2019. In the fourth quarter of 2020, after the completion of the annual impairment testing, the Company recorded a
$222.2 million impairment charge for the Sperry trade name. Refer to Note 4, “Goodwill and Other Intangibles” for additional
discussion on the Sperry trade name impairment.
Environmental
The Company establishes a reserve for estimated environmental remediation costs based upon the evaluation of currently-
available facts with respect to each individual affected site. The costs are recorded on an undiscounted basis when they are
probable and reasonably estimable, generally no later than the completion of feasibility studies, the Company’s commitment to
a plan of action, or approval by regulatory agencies. Liabilities for estimated costs of environmental remediation are based
primarily upon third-party environmental studies, other internal analysis and the extent of the contamination and the nature of
required remedial actions at each site. The Company records adjustments to the estimated costs if there are changes in the scope
of the required remediation activity, extent of contamination, governmental regulations or remediation technologies.
Environmental costs relating to existing conditions caused by past operations that do not contribute to current or future revenues
are expensed as incurred. Refer to Note 17, “Litigation and Contingencies” for additional discussion on estimated
environmental remediation costs.
32
Assets related to potential recoveries from other responsible parties are recognized when a definitive agreement is reached and
collection of cash is realizable. Recoveries of covered losses under insurance policies are recognized only when realization of
the claim is deemed probable.
The Company is subject to legal proceedings and claims related to the environmental matters as described in Note 17 to the
Company's Consolidated Financial Statements. The Company routinely assesses the legal and factual circumstances of each
matter and the likelihood of any adverse outcomes in these matters, as well as ranges of possible losses. Assessments of
lawsuits and claims can involve a series of complex judgments about future events and can rely heavily on estimates and
assumptions. The Company accrues an estimated liability for legal proceeding claims that are both probable and estimable and
reserves may change in future periods due to new developments in each matter. For further discussion, refer to Note 17
“Litigation and Contingencies”.
Retirement Benefits
The determination of the obligation and expense for retirement benefits depends upon the selection of certain actuarial
assumptions used in calculating such amounts. These assumptions include, among others, the discount rate, expected long-term
rate of return on plan assets, mortality rates and rates of increase in compensation. These assumptions are reviewed with the
Company’s actuaries and updated annually based on relevant external and internal factors and information, including, but not
limited to, long-term expected asset returns, rates of termination, regulatory requirements and plan changes.
The Company utilizes a bond matching calculation to determine the discount rate used to calculate its year-end pension liability
and subsequent year pension expense. A hypothetical bond portfolio is created based on a presumed purchase of individual
bonds to settle the plans' expected future benefit payments. The discount rate is the resulting yield of the hypothetical bond
portfolio. The bonds selected are listed as high grade by at least two recognized ratings agency and are non-callable, currently
purchasable and non-prepayable. The calculated discount rate was 3.09% at January 1, 2022, compared to 2.85% at January 2,
2021. Pension expense is also impacted by the expected long-term rate of return on plan assets, which the Company has
determined to be 6.75% and 6.75% for fiscal 2021 and 2020, respectively. This rate is based on both actual historical rates of
return experienced by the pension assets and the long-term rate of return of a composite portfolio of equity and fixed income
securities that reflects the approximate diversification of the pension assets.
Income Taxes
The Company maintains certain strategic management and operational activities in overseas subsidiaries, and its foreign
earnings are taxed at rates that have generally been lower 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. Income tax audits associated with the allocation of this income and other
complex issues may require an extended period of time to resolve and may result in income tax adjustments if changes to the
income allocation are required between jurisdictions with different income tax rates. Because income tax adjustments in certain
jurisdictions can be significant, the Company records accruals representing management’s best estimate of the resolution of
these matters. To the extent additional information becomes available, such accruals are adjusted to reflect the revised estimated
outcome. The carrying value of the Company’s deferred tax assets assumes that the Company will be able to generate sufficient
taxable income in future years to utilize these deferred tax assets. If these assumptions change, the Company may be required to
record valuation allowances against its gross deferred tax assets in future years, which would cause the Company to record
additional income tax expense in its consolidated statements of operations. Management evaluates the potential that the
Company will be able to realize its gross deferred tax assets and assesses the need for valuation allowances on a quarterly basis.
On a periodic basis, the Company estimates the full year effective tax rate and records a quarterly income tax provision in
accordance with the projected full year rate. As the year progresses, that estimate is refined based upon actual events and the
distribution of earnings in each tax jurisdiction during the year. This continual estimation process periodically results in a
change to the expected effective tax rate for the year. When this occurs, the Company adjusts the income tax provision during
the quarter in which the change in estimate occurs so that the year-to-date provision reflects the revised anticipated annual rate.
The Company intends to repatriate cash held in foreign jurisdictions and has recorded a deferred tax liability related to
estimated state taxes and foreign withholding taxes on the future dividends received in the U.S. from the foreign subsidiaries.
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.
33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, the Company's financial position and results of operations are routinely subject to a variety of
risks, including market risk associated with interest rate movements on borrowings and investments and currency rate
movements on non-U.S. dollar denominated assets, liabilities and cash flows. The Company regularly assesses these risks and
has established policies and business practices that should mitigate a portion of the adverse effect of these and other potential
exposures.
Foreign Exchange Risk
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. The Company manages these risks by attempting to denominate
contractual and other foreign arrangements in U.S. dollars. 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 Annual Report on
Form 10-K, the Company does not know of any material change in the near-term in the general nature of its primary market
risk exposure.
Under the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 815, Derivatives and
Hedging,, the Company is required to recognize all derivatives on the balance sheet at fair value. Derivatives that are not
qualifying hedges must be adjusted to fair value through earnings. If a derivative is a qualifying hedge, depending on the nature
of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets,
liabilities or firm commitments through earnings or recognized in accumulated other comprehensive income (loss) until the
hedged item is recognized in earnings.
The Company conducts wholesale operations outside of the U.S. in Canada, continental Europe, United Kingdom, Colombia,
Hong Kong, China and Mexico where the functional currencies are primarily the Canadian dollar, euro, British pound,
Colombian peso, Hong Kong dollar, Chinese renminbi and Mexican peso, respectively. The Company utilizes foreign currency
forward exchange contracts 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 as well as to manage foreign currency translation exposure. At
January 1, 2022 and January 2, 2021, the Company had outstanding forward currency exchange contracts to purchase primarily
U.S. dollars in the amounts of $296.7 million and $250.7 million, respectively, with maturities ranging up to 538 and 538 days,
respectively.
The Company also has sourcing locations in Asia, where financial statements reflect the U.S. dollar as the functional currency.
However, operating costs are paid in the local currency. Revenue generated by the Company from third-party foreign licensees
is calculated in the local currencies but paid in U.S. dollars. Accordingly, the Company’s reported results are subject to foreign
currency exposure for this stream of revenue and expenses. Any associated foreign currency gains or losses on the settlement of
local currency amounts are reflected within the Company's consolidated statement of operations and comprehensive income.
Assets and liabilities outside the U.S. are primarily located in the United Kingdom, Canada and the Netherlands. The
Company’s investments in foreign subsidiaries with a functional currency other than the U.S. dollar are generally considered
long-term. At January 1, 2022, a stronger U.S. dollar compared to certain foreign currencies decreased the value of these
investments in net assets by $20.0 million from their value at January 2, 2021. At January 2, 2021, a weaker U.S. dollar
compared to foreign currencies increased the value of these investments in net assets by $10.8 million from their value at
December 28, 2019.
Interest Rate Risk
The Company is exposed to interest rate changes primarily as a result of interest expense on the Incremental Term Loan
borrowings and any borrowings under the Revolving Facility. The Company’s total variable-rate debt was $425.0 million at
January 1, 2022 and the Company held a forward-dated interest rate swap agreement, denominated in U.S. dollars that will
effectively convert $311.3 million of this amount to fixed-rate debt. The interest rate swap derivative instrument is held and
used by the Company as a tool for managing interest rate risk. The counterparty to the swap instrument is a large financial
institution that the Company believes is of high-quality creditworthiness. While the Company may be exposed to potential
losses due to the credit risk of non-performance by this counterparty, such losses are not anticipated. The fair value of the
interest rate swap was determined to be a net liability of $0.1 million as of January 1, 2022. As of January 1, 2022, the
weighted-average interest rate on the Company’s variable-rate debt, net of the impact of the interest rate swap, was 1.35%.
Based on the level of variable-rate debt outstanding as of that date, a 100 basis point increase in the weighted-average interest
rate would have increased the Company’s annual pre-tax interest expense by approximately $4.7 million. The Company does
not enter into contracts for speculative or trading purposes, nor is it a party to any leveraged derivative instruments.
34
Item 8.
Financial Statements and Supplementary Data
Table of Contents
Consolidated Financial Statements
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Equity
Note 1. Summary of Significant Accounting Policies
Note 2. New Accounting Standards
Note 3. Earnings Per Share
Note 4. Goodwill and Other Intangibles
Note 5. Accounts Receivable
Note 6. Revenue From Contracts With Customers
Note 7. Inventories
Note 8. Debt
Note 9. Property, Plant and Equipment
Note 10. Leases
Note 11. Derivative Financial Instruments
Note 12. Stock-Based Compensation
Note 13. Retirement Plans
Note 14. Income Taxes
Note 15. Accumulated Other Comprehensive Income (Loss)
Note 16. Fair Value Measurements
Note 17. Litigation and Contingencies
Note 18. Business Segments
Note 19. Business Acquisition
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
36
37
38
39
41
43
48
48
49
50
50
52
52
53
53
54
55
57
60
63
63
64
66
68
71
35
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In millions, except per share data)
Revenue
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Impairment of intangible assets
Environmental and other related costs, net of recoveries
Operating profit (loss)
Other expenses:
Interest expense, net
Debt extinguishment and other costs
Other expense (income), net
Total other expenses
Earnings (loss) before income taxes
Income tax expense (benefit)
Net earnings (loss)
Less: net earnings (loss) attributable to noncontrolling interests
Net earnings (loss) attributable to Wolverine World Wide, Inc.
Net earnings (loss) per share (see Note 3):
Basic
Diluted
See accompanying notes to consolidated financial statements.
2021
Fiscal Year
2020
$
2,414.9 $
1,791.1 $
1,385.0
1,029.9
817.8
—
56.4
155.7
37.4
34.3
3.7
75.4
80.3
13.3
67.0
(1.6)
1,055.5
735.6
639.4
222.2
11.1
(137.1)
43.6
5.5
(2.1)
47.0
(184.1)
(45.5)
(138.6)
(1.7)
$
$
$
68.6 $
(136.9) $
0.82 $
0.81 $
(1.70) $
(1.70) $
2019
2,273.7
1,349.9
923.8
669.3
—
83.5
171.0
30.0
—
(4.9)
25.1
145.9
17.0
128.9
0.4
128.5
1.48
1.44
36
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
(In millions)
Net earnings (loss)
Other comprehensive income (loss) net of tax:
Foreign currency translation adjustments
Unrealized gain (loss) on derivative instruments:
Unrealized gain (loss) arising during the period, net of taxes of $3.0,
$(5.2) and $0.2
Reclassification adjustments included in net earnings (loss), net of taxes
of $1.4, $0.4 and $(2.2)
Pension adjustments:
Net actuarial gain (loss) arising during the period, net of taxes of $7.8,
$(8.0) and $(3.9)
Amortization of prior actuarial losses, net of taxes of $3.0, $1.4 and $0.5
Other comprehensive income (loss)
Less: other comprehensive income (loss) attributable to noncontrolling
interests
Other comprehensive income (loss) attributable to Wolverine World
Wide, Inc.
Comprehensive income (loss)
Less: comprehensive income (loss) attributable to noncontrolling interests
2021
Fiscal Year
2020
2019
$
67.0 $
(138.6) $
128.9
(20.0)
10.6
5.4
7.7
3.7
29.5
10.8
31.7
—
31.7
98.7
(1.6)
(17.6)
3.1
(30.0)
5.2
(28.7)
(0.2)
0.9
(7.6)
(14.6)
2.1
(13.8)
—
(28.5)
(13.8)
(167.3)
(1.9)
115.1
0.4
114.7
Comprehensive income (loss) attributable to Wolverine World Wide, Inc.
$
100.3 $
(165.4) $
See accompanying notes to consolidated financial statements.
37
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, less allowances of $28.3 and $33.5
Finished products, net
Raw materials and work-in-process, net
Total inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net of accumulated depreciation of $219.1 and $197.2
Lease right-of-use assets
Goodwill
Indefinite-lived intangibles
Amortizable intangibles, net
Deferred income taxes
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued salaries and wages
Other accrued liabilities
Lease liabilities
Current maturities of long-term debt
Borrowings under revolving credit agreements
Total current liabilities
Long-term debt, less current maturities
Accrued pension liabilities
Deferred income taxes
Lease liabilities, noncurrent
Other liabilities
Stockholders’ equity
Common stock – par value $1, authorized 320,000,000 shares; 111,632,094, and
110,426,769 shares issued
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Cost of shares in treasury; 29,604,013, and 28,285,274 shares
Total Wolverine World Wide, Inc. stockholders’ equity
Noncontrolling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements.
38
January 1,
2022
January 2,
2021
$
$
$
161.7 $
319.6
354.1
11.4
365.5
56.9
903.7
129.0
138.2
556.6
718.1
74.6
1.8
64.4
2,586.4 $
222.1 $
41.7
222.5
38.3
10.0
225.0
759.6
731.8
107.4
118.9
118.2
106.1
111.6
298.9
1,128.2
(98.9)
(810.2)
629.6
14.8
644.4
2,586.4 $
$
347.4
268.3
237.9
5.2
243.1
45.4
904.2
124.6
142.5
442.4
382.3
73.0
3.2
65.2
2,137.4
185.0
27.0
150.0
34.0
10.0
—
406.0
712.5
147.0
35.5
130.3
133.1
110.4
252.6
1,093.3
(130.6)
(764.3)
561.4
11.6
573.0
2,137.4
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
2021
Fiscal Year
2020
2019
$
67.0 $
(138.6) $
128.9
(In millions)
OPERATING ACTIVITIES
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation and amortization
Deferred income taxes
Stock-based compensation expense
Pension and SERP expense
Debt extinguishment, interest rate swap termination, and other costs
Impairment of intangible assets
Environmental and other related costs, net of cash payments and
recoveries received
Other
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Other operating assets
Accounts payable
Income taxes
Other operating liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES
Business acquisition, net of cash acquired
Additions to property, plant and equipment
Investment in joint ventures
Proceeds from company-owned life insurance policies
Other
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES
Payments under revolving credit agreements
Borrowings under revolving credit agreements
Borrowings of long-term debt
Payments on long-term debt
Payments of debt issuance and debt extinguishment costs
Termination of interest rate swap
Cash dividends paid
Purchase of common stock for treasury
Employee taxes paid under stock-based compensation plans
Proceeds from the exercise of stock options
Contributions from noncontrolling interests
Net cash provided by (used in) financing activities
Effect of foreign exchange rate changes
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
See accompanying notes to consolidated financial statements.
$
39
33.2
(14.7)
38.1
14.0
5.8
—
33.7
(1.9)
(49.2)
(77.2)
(2.3)
23.0
1.6
15.7
86.8
(417.4)
(17.6)
—
—
(2.3)
(437.3)
(435.0)
660.0
750.0
(730.0)
(10.4)
—
(33.5)
(39.6)
(14.1)
17.1
4.8
169.3
(4.5)
(185.7)
347.4
161.7 $
32.8
(56.9)
28.9
8.5
5.5
222.2
31.5
(12.7)
64.8
107.2
7.4
(18.9)
(0.5)
27.9
309.1
(5.5)
(10.3)
(3.5)
26.8
(1.4)
6.1
(898.0)
538.0
471.0
(183.5)
(6.4)
(7.3)
(33.6)
(21.0)
(24.8)
9.8
1.8
(154.0)
5.6
166.8
180.6
347.4 $
32.7
(9.0)
24.5
5.6
—
—
48.8
(11.6)
30.7
(23.8)
(5.4)
—
3.6
(2.4)
222.6
(15.1)
(34.4)
(8.5)
—
(3.5)
(61.5)
(469.3)
704.3
—
(7.5)
(0.3)
—
(33.6)
(319.2)
(16.9)
12.2
5.7
(124.6)
1.0
37.5
143.1
180.6
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows – continued
(In millions)
OTHER CASH FLOW INFORMATION
Interest paid
Net income taxes paid
NON-CASH INVESTING AND FINANCING ACTIVITY
Additions to property, plant and equipment not yet paid
Business acquisition not yet paid
See accompanying notes to consolidated financial statements.
2021
Fiscal Year
2020
2019
$
34.6 $
41.4 $
27.8
3.2
—
8.6
0.9
—
32.4
23.2
0.8
5.5
40
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In millions, except share and per share data)
Wolverine World Wide, Inc. Stockholders' Equity
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Non-
controlling
Interest
Total
Balance at December 29, 2018
$ 107.6 $ 201.4 $ 1,169.7 $
(88.3) $ (404.4) $
5.6 $ 991.6
Net earnings
Other comprehensive income (loss)
Shares forfeited, net of shares issued under
stock incentive plans (38,655 shares)
Shares issued for stock options exercised,
net (681,389 shares)
Stock-based compensation expense
Cash dividends declared ($0.40 per share)
Issuance of treasury shares (7,460 shares)
Purchase of common stock for treasury
(10,914,965 shares)
Purchases of shares under stock-based
compensation plans (368,326 shares)
Capital contribution from noncontrolling
interests
128.5
(13.8)
0.4
128.9
—
(13.8)
0.1
0.6
(4.2)
11.6
24.5
0.1
(34.9)
0.2
(4.1)
12.2
24.5
(34.9)
0.3
(319.2)
(319.2)
(12.8)
(12.8)
5.7
5.7
Balance at December 28, 2019
$ 108.3 $ 233.4 $ 1,263.3 $
(102.1) $ (736.2) $
11.7 $ 778.4
Net loss
Other comprehensive loss
Shares issues, net of shares forfeited under
stock incentive plans (1,497,478 shares)
Shares issued for stock options exercised,
net (600,041 shares)
Stock-based compensation expense
Cash dividends declared ($0.40 per share)
Issuance of treasury shares (5,479 shares)
Purchase of common stock for treasury
(877,624 shares)
Purchases of shares under stock-based
compensation plans (231,617 shares)
Capital contribution from noncontrolling
interests
(136.9)
(28.5)
(1.7) (138.6)
(0.2)
(28.7)
1.5
0.6
(19.0)
9.3
28.9
—
(33.1)
(17.5)
9.9
28.9
(33.1)
0.2
(21.0)
(7.3)
1.8
1.8
0.2
(21.0)
(7.3)
Balance at January 2, 2021
$ 110.4 $ 252.6 $ 1,093.3 $
(130.6) $ (764.3) $
11.6 $ 573.0
See accompanying notes to consolidated financial statements.
41
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity – continued
(In millions, except share and per share data)
Wolverine World Wide, Inc. Stockholders' Equity
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Non-
controlling
Interest
Total
Balance at January 2, 2021
$ 110.4 $ 252.6 $ 1,093.3 $
(130.6) $ (764.3) $
11.6 $ 573.0
Net earnings (loss)
Other comprehensive income
Shares issued, net of shares forfeited under
stock incentive plans (431,180 shares)
Shares issued for stock options exercised,
net (774,145 shares)
Stock-based compensation expense
Cash dividends declared ($0.40 per share)
Issuance of treasury shares (4,005 shares)
Purchase of common stock for treasury
(1,150,721 shares)
Purchases of shares under stock-based
compensation plans (172,023 shares)
Capital contribution from noncontrolling
interests
68.6
31.7
(1.6)
—
67.0
31.7
0.4
0.8
(8.2)
16.4
38.1
—
(33.7)
(7.8)
17.2
38.1
(33.7)
0.1
(39.6)
(6.4)
4.8
4.8
0.1
(39.6)
(6.4)
Balance at January 1, 2022
$ 111.6 $ 298.9 $ 1,128.2 $
(98.9) $ (810.2) $
14.8 $ 644.4
See accompanying notes to consolidated financial statements.
42
WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Fiscal Years 2021, 2020 and 2019
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Wolverine World Wide, Inc. (the “Company”) is a leading designer, marketer and licensor of a broad range of quality casual
footwear and apparel; performance outdoor and athletic footwear and apparel; kids’ footwear; industrial work shoes, boots and
apparel; and uniform shoes and boots. The Company’s portfolio of owned and licensed brands includes: Bates®, Cat®, Chaco®,
Harley-Davidson®, Hush Puppies®, Hytest®, Keds®, Merrell®, Saucony®, Sperry®, Stride Rite®, Sweaty Betty® and Wolverine®.
The Company’s products are marketed worldwide through owned operations, through licensing and distribution arrangements
with third parties, and through 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, and has a leathers division that markets Wolverine
Performance Leathers™.
On August 2, 2021, the Company completed the acquisition of Lady of Leisure InvestCo Limited (the “Acquired Company”)
for $417.4 million, which is net of acquired cash of $7.4 million. The Acquired Company owns the Sweaty Betty® brand and
activewear business, a premium women’s activewear brand. See Note 19 for further discussion.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Wolverine World Wide, Inc. and its majority-owned subsidiaries
(collectively, the “Company”). All intercompany accounts and transactions have been eliminated in consolidation.
The COVID-19 pandemic, the duration and severity of which is subject to uncertainty, has had and continues to have, an
impact on the Company's business. Management's estimates and assumptions used in the preparation of the Company’s
consolidated financial statements in accordance with U.S. GAAP take into account both current and expected potential future
impacts of the COVID-19 pandemic on the Company’s business based on available information. Actual results may differ
materially from management’s estimates.
Fiscal Year
The Company’s fiscal year is the 52- or 53-week period that ends on the Saturday nearest to December 31. Fiscal years 2021
and 2019 each had 52 weeks, and fiscal year 2020 had 53 weeks.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") Topic 606, Revenue from Contracts with Customers. Revenue is recognized upon the transfer of
promised goods or services to customers, in an amount that reflects the expected consideration to be received in exchange for
those goods or services. The Company identifies the performance obligation in the contract, determines the transaction price,
allocates the transaction price to the performance obligations and recognizes revenue upon completion of the performance
obligation.
Control of the Company's goods and services, and associated revenue, are transferred to customers at a point in time. The
Company’s contract revenue consist of wholesale revenue and consumer-direct revenue. Wholesale revenue is recognized for
products sourced by the Company when control transfers to the customer generally occurring upon the shipment or delivery of
branded products to the customer. Consumer-direct includes eCommerce revenue that is recognized for products sourced by the
Company when control transfers to the customer once the related goods have been shipped and retail store revenue is
recognized at time of sale. The shipment of goods, or point of purchase for retail store sales, was evaluated to best represent
when control transfers based on the Company’s right of payment for the goods, the customer’s legal title to the asset, the
transfer of physical possession and the customer having the risks and rewards of the goods.
Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
Shipping and handling costs that are charged to and reimbursed by a customer are recognized as revenue, while the related
43
expenses incurred by the Company are recorded as cost of goods sold. The Company has elected the practical expedient to treat
shipping and handling activities that occur after control of the goods transfers to the customer as fulfillment activities.
Payment terms for the Company's revenue vary by sales channel. Standard credit terms apply to the Company's wholesale
receivables, while payment is rendered at the time of sale within the consumer-direct channel. The timing of revenue
recognition, billings and cash collections results in billed accounts receivable (contract assets), and customer advances (contract
liabilities) on the consolidated balance sheets. Generally, billing occurs commensurate to revenue recognition resulting in
contract assets. See Note 6 for additional information.
Cost of Goods Sold
Cost of goods sold includes the actual product costs, including inbound freight charges and certain outbound freight charges,
purchasing, sourcing, inspection and receiving costs. Warehousing costs are included in selling, general and administrative
expenses.
Advertising Costs
Advertising costs are expensed as incurred, except for certain materials that are expensed the first time that the advertising takes
place. Advertising expenses were $195.4 million, $135.6 million and $119.4 million for fiscal years 2021, 2020 and 2019,
respectively. Prepaid advertising totaled $3.6 million and $1.2 million as of January 1, 2022 and January 2, 2021, respectively.
Earnings Per Share
The Company calculates earnings per share in accordance with FASB ASC Topic 260, Earnings Per Share (“ASC 260”). ASC
260 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and,
therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. Under the
guidance in ASC 260, the Company’s unvested share-based payment awards that contain non-forfeitable rights to dividends,
whether paid or unpaid, are participating securities and must be included in the computation of earnings per share pursuant to
the two-class method.
Cash Equivalents
Cash equivalents include highly liquid investments with an original maturity of three months or less. Cash equivalents are
stated at cost, which approximates fair value.
Allowance for Credit Losses
The Company maintains an allowance for credit losses on accounts receivable that represents estimated losses resulting from its
customers’ failure to make required payments. Company management evaluates the allowance for credit losses based on a
review of current customer status and historical collection experience along with current and reasonable supportable forecasts
of future economic conditions.
Inventories
The Company values its inventory at the lower of cost or net realizable value. Cost is determined by the LIFO method for
certain domestic finished goods inventories. Cost is determined using the FIFO method for all raw materials, work-in-process
and finished goods inventories in foreign countries and certain domestic finished goods inventories. The average cost of
inventory is used for finished goods inventories of the Company’s consumer-direct business and Sweaty Betty® inventory. The
Company has applied these inventory cost valuation methods consistently from year to year.
The Company reduces the carrying value of its inventories to the lower of cost or net realizable value for excess or obsolete
inventories based upon assumptions about future demand and market conditions. If the Company were to determine that the
estimated realizable value of its inventory is less than the carrying value of such inventory, the Company would provide a
reserve for such difference as a charge to cost of sales. If actual market conditions are different from those projected,
adjustments to those inventory reserves may be required. The adjustments would increase or decrease the Company’s cost of
sales and net income in the period in which they were realized or recorded. Inventory quantities are verified at various times
throughout the year by performing physical inventory counts and subsequently comparing those results to perpetual inventory
balances. If the Company determines that adjustments to the inventory quantities are appropriate, an adjustment to the
Company’s cost of goods sold and inventory is recorded in the period in which such determination was made.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost and include expenditures for buildings, leasehold improvements,
furniture and fixtures, material handling systems, equipment and computer hardware and software. Normal repairs and
maintenance are expensed as incurred. Depreciation of property, plant and equipment is computed using the straight-line
44
method. The depreciable lives range from 14 to 20 years for buildings, from 5 to 15 years for leasehold improvements, from 3
to 10 years for furniture, fixtures and equipment and from 3 to 5 years for software.
Leases
The Company’s leases consist primarily of corporate offices, retail stores, distribution centers, showrooms, vehicles and office
equipment. The Company leases assets in the normal course of business to meet its current and future needs while providing
flexibility to its operations. The Company enters into contracts with third parties to lease specifically identified assets. Most of
the Company’s leases have contractually specified renewal periods. Most retail store leases have early termination clauses that
the Company can elect if stipulated sales amounts are not achieved. The Company determines the lease term for each lease
based on the terms of each contract and factors in renewal and early termination options if such options are reasonably certain
to be exercised.
Under FASB ASC Topic 842, Leases, the Company has elected the practical expedient to account for lease components and
nonlease components associated with individual leases as a single lease component for all of its leases. In addition, the
Company has elected to account for multiple lease components as a single lease component. The Company’s leases may include
variable lease costs such as payments based on changes to an index, payments based on a percentage of retail store sales, and
maintenance, utilities, shared marketing or other service costs that are paid directly to the lessor under terms of the lease. The
Company recognizes variable lease payments when the amounts are incurred and determinable. The Company has elected to
account for leases of less than one year as short-term leases and accordingly does not recognize a right-of-use asset or lease
liability for these leases. The Company recognizes rent expense on a straight-line basis over the lease term.
The Company subleases certain portions of leased offices and distribution centers that exceed the Company’s current
operational needs. Since the Company utilizes the majority of the leased space and retains the obligation to the lessor, the
underlying leases continue to be accounted for as operating leases. Sublease income is recognized on a straight-line basis over
the term of the sublease and is recognized in other expense (income), net on the consolidated statements of operations.
The Company recognizes a lease liability in current and noncurrent liabilities equal to the present value of the fixed future lease
payments using an incremental borrowing rate as of the commencement date of each lease. The incremental borrowing rate is
based on an interest rate that the Company would normally pay to borrow on a collateralized basis over a similar term and an
amount equal to the lease payments. The Company also recognizes a right-of-use asset, which is equal to the lease liability as of
January 1, 2022 adjusted for the remaining balance of accrued rent and unamortized lease incentives.
Deferred Financing Costs
Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining commitments
for financing that result in a closing of such financings for the Company. Deferred financing costs related to fixed term
borrowings are recorded as a reduction of long-term debt in the consolidated balance sheet. Deferred financing costs related to
revolving credit facilities are recorded as an other noncurrent asset in the consolidated balance sheet. These costs are amortized
into earnings through interest expense over the terms of the respective agreements.
Derivatives
The Company follows FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"), which requires that all derivative
instruments be recorded on the consolidated balance sheets at fair value by establishing criteria for designation and
effectiveness of hedging relationships. The Company does not hold or issue financial instruments for trading purposes. Refer to
Note 11 for further discussion regarding the Company's derivative arrangements and derivative accounting.
Goodwill and Other Intangibles
Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of
acquired businesses. Indefinite-lived intangibles include trademarks and trade names. Goodwill and intangible assets deemed to
have indefinite lives are not amortized, but are subject to impairment tests at least annually. The Company reviews the carrying
amounts of goodwill and indefinite-lived intangible assets by reporting unit at least annually, or when indicators of impairment
are present, to determine if such assets may be impaired. The Company includes assumptions about expected future operating
performance, such as forecasted growth rates and cost of capital, which are derived from internal projections and operating
plans, as part of a discounted cash flow analysis to estimate fair value. If the carrying value of these assets is not recoverable,
based on the discounted cash flow analysis, management compares the fair value of the assets to the carrying value. Goodwill
and indefinite-lived intangibles are considered impaired if the recorded value exceeds the fair value.
The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill
and indefinite-lived intangible asset are less than their carrying value. The Company would not be required to quantitatively
45
determine the fair value unless the Company determines, based on the qualitative assessment, that it is more likely than not that
its fair value is less than the carrying value.
The Company performs its annual testing for goodwill and indefinite-lived intangible asset impairment at the beginning of the
fourth quarter of the fiscal year for all reporting units. See Note 4 for information related to the results of the Company's annual
test.
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. If such assets are considered to be impaired, the impairment amount to be recognized is the amount by which the
carrying value of the assets exceeds their fair value.
Fair Value of Financial Instruments
The Company follows FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which provides a
consistent definition of fair value, focuses on exit price, prioritizes the use of market-based inputs over entity-specific inputs for
measuring fair value and establishes a three-tier hierarchy for fair value measurements. ASC 820 requires fair value
measurements to be classified and disclosed in one of the following three categories:
Level 1:
Fair value is measured using quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2:
Fair value is measured using either direct or indirect inputs, other than quoted prices included within Level 1,
which are observable for similar assets or liabilities.
Level 3:
Fair value is measured using valuation techniques in which one or more significant inputs are unobservable.
Environmental
The Company establishes a reserve for estimated environmental remediation costs based upon the evaluation of currently-
available facts with respect to each individual affected site. The costs are recorded on an undiscounted basis when they are
probable and reasonably estimable, generally no later than the completion of feasibility studies, the Company’s commitment to
a plan of action, or approval by regulatory agencies. Liabilities for estimated costs of environmental remediation are based
primarily upon third-party environmental studies, other internal analysis and the extent of the contamination and the nature of
required remedial actions at each site. The Company records adjustments to the estimated costs if there are changes in the scope
of the required remediation activity, extent of contamination, governmental regulations or remediation technologies.
Environmental costs relating to existing conditions caused by past operations that do not contribute to current or future revenues
are expensed as incurred.
Assets related to potential recoveries from other responsible parties are recognized when a definitive agreement is reached and
collection of cash is realizable. Recoveries of covered losses under insurance policies are recognized only when realization of
the claim is deemed probable.
The Company is subject to legal proceedings and claims related to the environmental matters described in Note 17. The
Company routinely assesses the legal and factual circumstances of each matter and the likelihood of any adverse outcomes in
these matters, as well as ranges of possible losses. Assessments of lawsuits and claims can involve a series of complex
judgments about future events and can rely heavily on estimates and assumptions. The Company accrues an estimated liability
for legal proceeding claims that are both probable and estimable and reserves may change in future periods due to new
developments in each matter. For further discussion, refer to Note 17.
Retirement Benefits
The determination of the obligation and expense for retirement benefits is dependent on the selection of certain actuarial
assumptions used in calculating such amounts. These assumptions include, among others, the discount rate, expected long-term
rate of return on plan assets, mortality rates and rates of increase in compensation. These assumptions are reviewed with the
Company’s actuaries and updated annually based on relevant external and internal factors and information, including, but not
limited to, long-term expected asset returns, rates of termination, regulatory requirements and plan changes. See Note 13 for
additional information. The Company has elected to measure its defined benefit plan assets and obligations as of December 31
of each year, regardless of the Company's actual fiscal year end date, which is the Saturday nearest to December 31.
46
Stock Based Compensation
The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of ASC Topic
718, Compensation – Stock Compensation. The Company generally grants restricted stock or units (“Restricted Awards”),
performance-based restricted stock or units (“Performance Awards”) and stock options under its stock-based compensation
plans. All stock-based awards are accounted for based on their respective grant date fair values. Compensation cost for all
awards expected to vest is recognized over the vesting period, including accelerated recognition for retirement-eligible
employees.
Income Taxes
The provision for income taxes is based on the geographic dispersion of the earnings reported in the consolidated financial
statements. A deferred income tax asset or liability is determined by applying currently-enacted tax laws and rates to the
cumulative temporary differences between the carrying values of assets and liabilities for financial statement and income tax
purposes. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that
includes the enactment date. A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely
than not to be realized. In the event the Company determines it is more likely than not that the deferred tax assets will not be
realized in the future, the valuation allowance adjustment to the deferred tax assets will be charged to earnings in the period in
which the Company makes such a determination.
The Company records an increase in liabilities for income tax accruals associated with tax benefits claimed on tax returns but
not recognized for financial statement purposes (unrecognized tax benefits). In determining whether an uncertain tax position
exists, the Company determines, based solely on its technical merits, whether the tax position is more likely than not to be
sustained upon examination, and if so, a tax benefit is measured on a cumulative probability basis that is more likely than not to
be realized upon the ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax benefits
through interest expense and income tax expense, respectively.
Foreign Currency
For most of the Company’s international subsidiaries, the local currency is the functional currency. Assets and liabilities of
these subsidiaries are translated into U.S. dollars at the year-end exchange rate. Operating statement amounts are translated at
average exchange rates for each period. The cumulative translation adjustments resulting from changes in exchange rates are
included in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) in stockholders’
equity. Transaction gains and losses are included in the consolidated statements of operations and were not material for fiscal
years 2021, 2020 and 2019.
Business Combination
The Company accounts for business combinations using the acquisition method of accounting, which requires that once control
is obtained, the consolidated financial statements reflect the operations of an acquired business starting from the acquisition
date.
All assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. The Company allocates the
purchase price of an acquired business to the fair values of the tangible and identifiable intangible assets acquired and liabilities
assumed, with any excess purchase price recorded as goodwill. Contingent consideration, if any, is included in the purchase
price and is recognized at its fair value on the acquisition date. During the measurement period, which is up to one year from
the acquisition date, adjustments to the assets acquired and liabilities assumed may be recorded, with the corresponding offset
to goodwill.
The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques and
requires management to make judgments that may involve the use of significant estimates. For intangible assets acquired in a
business combination, the Company typically uses the income method. Significant estimates used in valuing certain intangible
assets include, but are not limited to, the amount and timing of future cash flows, growth rates and discount rates, among other
items. If the actual results differ from the estimates and judgments used, the amounts recorded in the Consolidated Financial
Statements may be exposed to potential impairment of the intangible assets and goodwill as discussed in the "Goodwill and
Indefinite-Lived Intangibles" accounting policy. For further discussion, refer to Note 19.
47
2. NEW ACCOUNTING STANDARDS
The FASB has issued the following Accounting Standards Update (“ASU”) that the Company has not yet adopted. The
following is a summary of the new standard.
Standard
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)
Description
Provides practical expedients for contract
modifications and certain hedging
relationships associated with the
transition from reference rates that are
expected to be discontinued. This
guidance is applicable for the Company’s
borrowing instruments under the
amended senior credit facility, which use
LIBOR as a reference rate, and is
available for adoption effective
immediately but is only available through
December 31, 2022.
Effect on the Financial Statements or Other
Significant Matters
The Company is evaluating the impact of the
new standard on its Consolidated Financial
Statements.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
(In millions, except per share data)
Numerator:
2021
Fiscal Year
2020
2019
Net earnings (loss) attributable to Wolverine World Wide, Inc.
$
Less: net earnings attributed to participating share-based awards
Net earnings (loss) used to calculate basic earnings per share
Adjustment for earnings reallocated to participating share-based awards
68.6 $
(1.1)
67.5
—
(136.9) $
(0.8)
(137.7)
—
Net earnings (loss) used to calculate diluted earnings per share
$
67.5 $
(137.7) $
Denominator:
Weighted average shares outstanding
Adjustment for unvested restricted common stock
Shares used to calculate basic earnings per share
Effect of dilutive share-based awards
Shares used to calculate diluted earnings per share
Net earnings (loss) per share:
Basic
Diluted
82.4
(0.1)
82.3
1.0
83.3
81.8
(0.8)
81.0
—
81.0
$
$
0.82 $
0.81 $
(1.70) $
(1.70) $
128.5
(2.6)
125.9
0.1
126.0
85.7
(0.6)
85.1
2.1
87.2
1.48
1.44
For fiscal years 2021, 2020 and 2019, 605,774, 1,179,088 and 133,505 outstanding stock options, respectively, have not been
included in the denominator for the computation of diluted earnings per share because they were anti-dilutive.
The Company has 2,000,000 authorized shares of $1 par value preferred stock, none of which was issued or outstanding as of
January 1, 2022 or January 2, 2021. The Company has designated 150,000 shares of preferred stock as Series A junior
participating preferred stock and 500,000 shares of preferred stock as Series B junior participating preferred stock for possible
future issuance.
The Company repurchased $39.6 million, $21.0 million and $319.2 million of Company common stock in fiscal years 2021,
2020 and 2019, respectively, under stock repurchase plans. In addition to the stock repurchase program activity, the Company
acquired $14.1 million, $24.8 million and $16.9 million of Company common stock in fiscal years 2021, 2020 and 2019,
respectively, in connection with employee transactions related to stock incentive plans.
On February 11, 2019, the Company's Board of Directors approved a common stock repurchase program that authorizes the
repurchase of an additional $400.0 million of common stock over a four year period incremental to amounts remaining under
48
the previous repurchase program. The annual amount of stock repurchases is restricted under the terms of the Company's Credit
Agreement.
4. GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill are as follows:
(In millions)
Goodwill balance at beginning of the year
Acquisition of a business (see Note 19)
Foreign currency translation effects
Goodwill balance at end of the year
Fiscal Year
2021
2020
$
$
442.4 $
118.9
(4.7)
556.6 $
438.9
—
3.5
442.4
The Company did not recognize any goodwill impairment charges during fiscal years 2021, 2020 and 2019. The annual
impairment testing indicated, for all reporting units tested quantitatively, that the fair values exceeded the respective carrying
values. For the reporting units that the Company elected to test qualitatively, the Company concluded it to be more likely than
not that their estimated fair values are greater than their respective carrying values.
The Company’s indefinite-lived intangible assets, which comprise trade names and trademarks, totaled $718.1 million and
$382.3 million as of January 1, 2022 and January 2, 2021, respectively. In the fourth quarter of fiscal 2020, after the completion
of the annual impairment testing, the Company recognized a $222.2 million impairment charge for the Sperry® trade name
resulting from reductions in the future cash flow assumptions mainly due to the impact of the COVID-19 pandemic to the
Sperry® brand and an increase in the discount rate. The Sperry® trade name was valued using the income approach, specifically
the multi-period excess earnings method with the key assumptions used in the valuation being revenue growth, operating profit,
and the discount rate. The risk of future impairment for the Sperry® trade name is dependent on key assumptions used in the
determination of the trade name's fair value, such as revenue growth, earnings before interest, taxes, depreciation and
amortization ("EBITDA") margin, discount rate, and assumed tax rate, or macroeconomic conditions deteriorate due to the
COVID-19 pandemic and adversely affect the value of the Company's Sperry® trade name. The Company continues to monitor
the effects of the COVID-19 pandemic, and actions taken by governments, businesses and individuals in response to the
pandemic, on the global economy to assess the outlook for demand for the Company's products and the impact on the
Company's business and financial performance. The carrying value of the Company’s Sperry® trade name indefinite-lived
intangible asset was $296.0 million as of January 1, 2022.
Amortizable intangible assets are amortized using the straight-line method over their estimated useful lives. The combined
gross carrying values and accumulated amortization for these amortizable intangibles are as follows:
(In millions)
Customer relationships
Other
Total
(In millions)
Customer relationships
Other
Total
Gross carrying
value
Accumulated
amortization
Net
Average remaining
life (years)
January 1, 2022
$
$
119.9 $
20.3
140.2 $
49.1 $
16.5
65.6 $
Gross carrying
value
Accumulated
amortization
Net
January 2, 2021
$
$
114.5 $
18.7
133.2 $
44.9 $
15.3
60.2 $
11
3
Average remaining
life (years)
12
3
70.8
3.8
74.6
69.6
3.4
73.0
Amortization expense for these amortizable intangible assets was $8.4 million, $7.1 million and $8.6 million for fiscal years
2021, 2020 and 2019, respectively. Estimated aggregate amortization expense for such intangibles for the fiscal years
subsequent to January 1, 2022 is as follows:
(In millions)
Amortization expense
2022
2023
2024
2025
2026
$
7.8 $
7.4 $
7.1 $
6.7 $
6.4
49
5. ACCOUNTS RECEIVABLE
The Company has an agreement with a financial institution to sell selected trade accounts receivable on a recurring,
nonrecourse basis that expires in the fourth quarter of fiscal 2022. Under the agreement, up to $17.4 million of accounts
receivable may be sold to the financial institution and remain outstanding at any point in time. After the sale, the Company does
not retain any interests in the accounts receivable and removes them from its consolidated balance sheet, but continues to
service and collect the outstanding accounts receivable on behalf of the financial institution. The Company recognizes a
servicing asset or servicing liability, initially measured at fair value, each time it undertakes an obligation to service the
accounts receivable under the agreement. The fair value of this obligation resulted in a nominal servicing liability for all periods
presented. For receivables sold under the agreement, 90% of the stated amount is paid for in cash to the Company at the time of
sale, with the remainder paid to the Company at the completion of the collection process.
The following is a summary of the stated amount of accounts receivable that was sold as well as fees charged by the financial
institution.
(In millions)
Accounts receivable sold
Fees charged
2021
$
Fiscal Year
2020
2019
— $
—
14.1 $
0.1
42.7
0.2
The fees are recorded in the other expense (income), net line item on the consolidated statements of operations. Net proceeds of
this program are classified in operating activities in the consolidated statements of cash flows. There were no amounts
outstanding under this program as of January 1, 2022 and January 2, 2021.
6.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition and Performance Obligations
The Company provides disaggregated revenue for the wholesale and consumer-direct sales channels, which are reconciled to
the Company’s reportable segments. The wholesale channel includes royalty revenues, which operates in a similar manner as
other wholesale revenues due to similar oversight and management, customer base, the performance obligation (footwear and
apparel goods) and point in time completion of the performance obligation.
(in millions)
Wolverine Michigan Group:
Wholesale
Consumer-direct
Total
Wolverine Boston Group:
Wholesale
Consumer-direct
Total
Other:
Wholesale
Consumer-direct
Total
Total revenue
2021
Fiscal Year
2020
2019
$
1,016.8 $
814.2 $
1,134.9
282.1
1,298.9
236.8
1,051.0
164.8
1,299.7
695.8
240.0
935.8
74.6
105.6
180.2
508.9
187.1
696.0
40.5
3.6
44.1
743.4
167.5
910.9
57.9
5.2
63.1
$
2,414.9 $
1,791.1 $
2,273.7
The Company has agreements to license symbolic intellectual property with minimum guarantees or fixed consideration. The
Company is due $19.3 million of remaining fixed transaction price under its license agreements as of January 1, 2022, which it
expects to recognize per the terms of its contracts over the course of time through December 2026. The Company has elected to
omit the remaining variable consideration under its license agreements given the Company recognizes revenue equal to what it
50
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 fiscal years 2021 and 2020 related to the Company’s contract liabilities was nominal.
The Company’s contract balances are as follows:
(In millions)
Product returns reserve
Customer markdowns reserve
Other sales incentives reserve
Customer rebates liability
Customer advances liability
January 1,
2022
January 2,
2021
$
16.6 $
2.3
3.4
17.0
6.8
15.6
3.7
6.0
13.4
8.2
The amount of variable consideration included in the transaction price may be constrained and is included in the net sales price
only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the
contract will not occur in a future period. Actual amounts of consideration ultimately received may differ from initial estimates.
If actual results in the future vary from initial estimates, the Company subsequently adjusts these estimates, which would affect
net revenue and earnings in the period such variances become known.
Product Returns
Consistent with industry practice, the Company offers limited product return rights for various return scenarios. The Company
estimates the amount of product sales that may be returned by customers and records this estimate as a reduction of revenue in
the period the related product revenue is recognized, and a reduction to trade receivables, net on the consolidated balance
sheets. The Company believes there is sufficient current and historical information to record an estimate of the expected value
of product returns although actual returns could differ from recorded amounts.
Customer Markdowns
Markdowns represent the estimated reserve resulting from commitments to sell products to the Company’s customers at prices
lower than the list prices charged to customers who directly purchase the product from the Company. Customers charge the
Company for the difference between what they pay for the product and the ultimate selling price to the end consumer. The
reserve is established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and a
reduction to trade receivables, net on the consolidated balance sheets.
Other Sales Incentives
The Company accrues for other customer allowances for certain customers that purchase required volumes or meet other
criteria. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of
product revenue and a reduction to trade receivables, net on the consolidated balance sheets depending on the nature of the
item.
Customer Rebates
The Company accrues for customer rebates related to customers who purchase required volumes or meet other criteria. These
reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue
and an establishment of a current liability on the consolidated balance sheets.
Customer Advances
The Company recognizes a liability for amounts received from customers before revenue is recognized. Customer advances are
recognized as a current liability on the consolidated balance sheets.
51
7.
INVENTORIES
The Company used the LIFO method to value inventories of $42.0 million and $35.6 million at January 1, 2022 and January 2,
2021, respectively. During fiscal years 2021 and 2020, changes in the LIFO reserve increased cost of goods sold by $0.5
million and decreased cost of goods sold $3.9 million, respectively. If the FIFO method had been used, inventories would have
been $8.0 million and $7.5 million higher than reported at January 1, 2022 and January 2, 2021, respectively.
8. DEBT
Total debt consists of the following obligations:
(In millions)
Term Facility, due October 21, 2026
Senior Notes, 5.000% interest, due September 1, 2026
Senior Notes, 6.375% interest, due May 15, 2025
Senior Notes, 4.000% interest, due August 15, 2029
Borrowings under revolving credit agreements
Unamortized deferred financing costs
Total debt
January 1,
2022
January 2,
2021
$
$
200.0 $
—
—
550.0
225.0
(8.2)
966.8 $
180.0
250.0
300.0
—
—
(7.5)
722.5
On October 21, 2021, the Company entered into a 2021 Replacement Facility Amendment and Reaffirmation Agreement (the
“Amendment”) to its Credit Facility (as amended and restated, the "Credit Agreement"). The Amendment amended and restated
the Credit Agreement to, among other things: (i) provide for a term loan A facility (the “Term Facility”) in an aggregate
principal amount of $200.0 million, which replaced the existing term loan A; (ii) provide for an increased revolving credit
facility (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facilities”) with total commitments of
$1.0 billion, an increase of $200.0 million from the existing Revolving Facility; and (iii) set the LIBOR floor to 0.000%, a
decrease of 0.750% from the existing Senior Credit Facilities. The maturity date of the loans under the Senior Credit Facilities
was extended to October 21, 2026. The Amendment provides for a debt capacity of up to an aggregate debt amount (including
outstanding term loan principal and revolver commitment amounts in addition to permitted incremental debt) not to exceed $2.0
billion unless certain specified conditions set forth in the Credit Agreement are met.
The Term Facility requires quarterly principal payments with a balloon payment due on October 21, 2026. The scheduled
principal payments due over the next 12 months total $10.0 million as of January 1, 2022 and are recorded as current maturities
of long-term debt on the consolidated 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 also had
outstanding letters of credit under the Revolving Facility of $5.8 million and $6.1 million as of January 1, 2022 and January 2,
2021, respectively. These outstanding borrowings and 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 will be, 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 January 1, 2022, Term Facility had
weighted-average interest rate of 1.35%.
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
52
capitalized terms used in this paragraph are as defined in the Credit Agreement). As of January 1, 2022, the Company was in
compliance with all covenants and performance ratios under the Senior Credit Facilities.
On August 26, 2021, the Company issued $550.0 million aggregate principal debt amount of 4.000% senior notes due on
August 15, 2029. Related interest payments are due semi-annually beginning February 15, 2022. The senior notes are
guaranteed by substantially all of the Company’s domestic subsidiaries. The proceeds from the senior notes were used to
extinguish the Company’s $250.0 million senior notes due on September 1, 2026 and $300.0 million senior notes due on May
15, 2025. The Company incurred $34.0 million of debt extinguishment and other costs in connection with the senior notes
extinguished, of which $28.4 million is related to redemption premiums and $5.6 million is related to write-off of capitalized
financing fees.
The Company has a foreign revolving credit facility with aggregate available borrowings of $4.0 million that are uncommitted
and, therefore, each borrowing against the facility is subject to approval by the lender. As of January 1, 2022 and January 2,
2021, there were no borrowings against this credit facility.
The Company included in interest expense the amortization of deferred financing costs of $2.3 million, $2.7 million, and $1.6
million in fiscal years 2021, 2020 and 2019, respectively.
Annual maturities of debt for the fiscal years subsequent to January 1, 2022 are as follows:
(In millions)
Annual maturities of debt
2022
2023
2024
2025
2026
Thereafter
$
235.0 $
10.0 $
10.0 $
10.0 $
160.0 $
550.0
9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
(In millions)
Land
Buildings and leasehold improvements
Furniture, fixtures and equipment
Software
Gross cost
Less: accumulated depreciation
Property, plant and equipment, net
January 1,
2022
January 2, 2021
$
$
3.9 $
122.2
144.7
77.3
348.1
219.1
129.0 $
3.9
119.6
135.1
63.2
321.8
197.2
124.6
Depreciation expense was $24.8 million, $25.7 million and $24.1 million for fiscal years 2021, 2020 and 2019, respectively.
10. LEASES
The following is a summary of the Company’s lease cost.
(In millions)
Operating lease cost
Variable lease cost
Short-term lease cost
Sublease income
Total lease cost
Fiscal Year
2021
2020
$
$
34.5 $
12.3
1.3
(6.5)
41.6 $
34.1
12.3
1.2
(4.8)
42.8
The following is a summary of the Company’s supplemental cash flow information related to leases.
(In millions)
Cash paid for operating lease liabilities
Operating lease assets obtained in exchange for lease liabilities
Fiscal Year
2021
2020
$
38.5 $
14.6
28.6
6.0
53
The weighted-average discount rate for operating leases as of January 1, 2022 is 5.0%. The weighted-average remaining lease
term for operating leases as of January 1, 2022 is 8.7 years. Future undiscounted cash flows for operating leases for the fiscal
periods subsequent to January 1, 2022 are as follows:
(In millions)
2022
2023
2024
2025
2026
Thereafter
Total future payments
Less: imputed interest
Recognized lease liability
Operating Leases
$
35.9
24.7
20.2
18.4
17.4
76.6
193.2
36.7
156.5
$
The Company did not enter into any real estate leases with commencement dates subsequent to January 1, 2022.
11. 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 538 days and 538 days as of
January 1, 2022 and January 2, 2021, respectively. When 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. During fiscal 2020, the Company reclassified $0.6 million to other
income for foreign currency derivatives that were no longer deemed highly effective.
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. In accordance with ASC 815, the Company has formally documented the relationship between the interest rate
swap and the variable rate borrowing, as well as its risk management objective and strategy for undertaking the hedge
transactions. This process included linking the derivative to the specific liability or asset on the balance sheet. The Company
also assessed at the inception of the hedge, and continues to assess on an ongoing basis, whether the derivative used in the
hedging transaction is highly effective in offsetting changes in the cash flows of the hedged item.
The Company had a cross currency swap to minimize the impact of exchange rate fluctuations which matured on September 1,
2021. Changes in fair value related to movements in the foreign currency exchange spot rate were recorded in accumulated
other comprehensive income (loss), offsetting the currency translation adjustment related to the underlying net investment that
was also recorded in accumulated other comprehensive income (loss). All other changes in fair value were recorded in interest
expense.
The notional amounts of the Company’s derivative instruments are as follows:
(Dollars in millions)
Foreign exchange hedge contracts
Interest rate swap
Cross currency swap
January 1,
2022
January 2,
2021
$
296.7
$
311.3
—
250.7
—
79.8
54
The recorded fair values of the Company’s derivative instruments are as follows:
(In millions)
Financial assets:
Foreign exchange hedge contracts
Financial liabilities:
Foreign exchange hedge contracts
Interest rate swap
Cross currency swap
12. STOCK-BASED COMPENSATION
January 1,
2022
January 2,
2021
$
$
5.9
$
—
(1.0) $
(0.1)
—
(8.8)
—
(10.8)
The Company recognized stock-based compensation expense of $38.1 million, $28.9 million and $24.5 million and related
income tax benefits of $7.5 million, $5.6 million and $4.8 million for grants under its stock-based compensation plans in the
statements of operations for fiscal years 2021, 2020 and 2019, respectively.
As of January 1, 2022, the Company had 7,961,971 stock incentive units (stock options, stock appreciation rights, restricted
stock, restricted stock units and common stock) available for issuance under the Stock Incentive Plan of 2016, as amended and
restated ("Stock Plan"). Each stock option or stock appreciation right granted counts as 1.0 stock incentive unit. Stock options
granted under the Stock Plan have an exercise price equal to the fair market value of the underlying stock on the grant date,
expire no later than ten years from the grant date and generally vest over three years. All other awards granted, including
Restricted Awards and Performance Awards, count as 2.6 stock incentive units for each share, restricted share or restricted
stock unit granted. Restricted Awards issued under the Stock Plan are subject to certain restrictions, including a prohibition
against any sale, transfer or other disposition by the officer or employee during the vesting period (except for certain transfers
for estate planning purposes for certain officers), and a requirement to forfeit all or a certain portion of the award upon certain
terminations of employment. These restrictions typically lapse over a three- to four-year period from the date of the award. The
Company has elected to recognize expense for these stock-based incentive plans ratably over the vesting term on a straight-line
basis. Certain option and restricted awards provide for accelerated vesting under various scenarios, including retirement, death
and disability, and upon a change in control of the Company. Awards issued to employees that meet the specified retirement
age and service requirements are vested upon the employee's retirement in accordance with plan provisions and the applicable
award agreements issued under the Stock Plan. The Company issues shares to plan participants upon exercise or vesting of
stock-based incentive awards from either authorized, but unissued shares or treasury shares.
The Board of Directors awards an annual grant of Performance Awards to certain plan participants. The number of Performance
Awards that will be earned (and eligible to vest) during the performance period will depend on the Company’s level of success
in achieving two specifically identified performance targets. Any portion of the Performance Awards that are not earned by the
end of the three-year measurement period will be forfeited. The final determination of the number of Performance Awards to be
issued in respect to an award is determined by the Compensation Committee of the Company’s Board of Directors.
55
Restricted Awards and Performance Awards
A summary of the unvested Restricted Awards and Performance Awards is as follows:
Unvested at December 29, 2018
Granted
Vested
Forfeited
Unvested at December 28, 2019
Granted
Vested
Forfeited
Unvested at January 2, 2021
Granted
Vested
Forfeited
Unvested at January 1, 2022
Restricted
Awards
1,920,373 $
554,092
(681,938)
(173,611)
1,618,916 $
1,416,117
(1,122,811)
(268,205)
1,644,017 $
654,898
(981,681)
(109,234)
1,208,000 $
Weighted-
Average
Grant Date
Fair Value
24.38
34.73
24.63
28.47
27.36
22.59
22.07
29.67
26.39
34.64
22.78
32.75
33.62
Performance
Awards
1,631,018 $
370,830
(654,021)
(220,725)
1,127,102 $
455,207
(451,334)
(125,653)
1,005,322 $
630,996
(181,657)
(690,246)
764,415 $
Weighted-
Average
Grant Date
Fair Value
23.42
37.10
17.46
19.74
31.94
34.00
23.51
35.91
35.25
38.02
35.03
35.71
35.69
As of January 1, 2022, there was $19.8 million of unrecognized compensation expense related to unvested Restricted Awards,
which is expected to be recognized over a weighted-average period of 1.6 years. The total fair value of Restricted Awards
vested during the year ended January 1, 2022 was $34.8 million. As of January 2, 2021, there was $18.5 million of
unrecognized compensation expense related to unvested Restricted Awards, which was expected to be recognized over a
weighted-average period of 1.5 years. The total fair value of Restricted Awards vested during the year ended January 2, 2021
was $35.0 million. As of December 28, 2019, there was $19.9 million of unrecognized compensation expense related to
unvested Restricted Awards, which was expected to be recognized over a weighted-average period of 1.5 years. The total fair
value of Restricted Awards vested during the year ended December 28, 2019 was $23.7 million.
As of January 1, 2022, there was $16.1 million of unrecognized compensation expense related to unvested Performance
Awards, which is expected to be recognized over a weighted-average period of 1.4 years. The total fair value of Performance
Awards vested during the year ended January 1, 2022 was $6.2 million. As of January 2, 2021, there was $1.4 million of
unrecognized compensation expense related to unvested Performance Awards, which was expected to be recognized over a
weighted-average period of 1.4 years. The total fair value of Performance Awards vested during the year ended January 2, 2021
was $28.0 million. As of December 28, 2019, there was $4.5 million of unrecognized compensation expense related to unvested
Performance Awards, which was expected to be recognized over a weighted-average period of 1.1 years. The total fair value of
Performance Awards vested during the year ended December 28, 2019 was $22.8 million.
56
Stock Options
The Company estimated the fair value of employee stock options on the date of grant using the Black-Scholes-Merton formula.
The estimated weighted-average fair value for each option granted was $11.14, $8.20 and $9.07 per share for fiscal years 2021,
2020 and 2019, respectively.
A summary of the stock option transactions is as follows:
Outstanding at December 29, 2018
Granted
Exercised
Canceled
Outstanding at December 28, 2019
Granted
Exercised
Canceled
Outstanding at January 2, 2021
Granted
Exercised
Canceled
Outstanding at January 1, 2022
Unvested at January 1, 2022
Exercisable at January 1, 2022
Shares Under
Option
4,702,002 $
25,471
(681,389)
(12,977)
4,033,107 $
28,171
(788,883)
(12,990)
3,259,405 $
23,610
(776,850)
(17,353)
2,488,812 $
(33,526)
2,455,286 $
Weighted-
Average Exercise
Price
Average
Remaining
Contractual Term
(Years)
Aggregate
Intrinsic Value
(In millions)
5.2 $
54.5
4.4 $
49.8
3.9 $
29.7
3.2 $
16.7
3.1 $
16.7
20.83
34.81
17.87
23.97
21.41
32.85
18.39
25.39
22.22
34.22
22.11
33.79
22.29
22.13
The total pretax intrinsic value of stock options exercised during fiscal years 2021, 2020 and 2019 was $11.4 million, $9.3
million and $10.7 million, respectively. As of January 1, 2022, there was $0.2 million of unrecognized compensation expense
related to stock option grants expected to be recognized over a weighted-average period of 1.3 years. As of January 2, 2021 and
December 28, 2019, there was $0.1 million and $0.2 million, respectively, of unrecognized compensation expense related to
stock option awards expected to be recognized over a weighted-average period of 0.9 years and 1.4 years, respectively.
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing
stock price as of each fiscal year end, which would have been received by the option holders had all option holders exercised
options, where the market price of the Company's stock was above the strike price ("in-the-money"), as of that date. The total
number of in-the-money options exercisable as of January 1, 2022, based on the Company’s closing stock price of $28.81 per
share, was 2,247,575 and the weighted-average exercise price was $21.70 per share. As of January 2, 2021, 3,096,685
outstanding options were exercisable and in-the-money, with a weighted-average exercise price of $21.66 per share.
13. RETIREMENT PLANS
The Company has two non-contributory, defined benefit pension plans that provide retirement benefits to less than half of its
domestic employees. The Company’s principal defined benefit pension plan, which is closed to new participants, provides
benefits based on the employee’s years of service and final average earnings. The second plan is closed to new participants and
no longer accrue future benefits.
The Company has a Supplemental Executive Retirement Plan (the “SERP”) for certain current and former employees that
entitles a participating employee to receive payments from the Company following retirement based on the employee’s years of
service and final average earnings (as defined in the SERP). Under the SERP, the employees can elect early retirement with a
corresponding reduction in benefits. The Company also has individual deferred compensation agreements with certain former
employees that entitle those employees to receive payments from the Company following retirement, generally for the duration
of their lives. The Company maintains life insurance policies with a cash surrender value of $45.6 million at January 1, 2022
and $44.0 million at January 2, 2021 recognized as a other assets on the consolidated balance sheets that are intended to
partially fund deferred compensation benefits under the SERP and deferred compensation agreements.
The Company has two defined contribution 401(k) plans covering substantially all domestic employees that provide for
discretionary Company contributions based on the amount of participant deferrals. The Company recognized expense for its
57
contributions to the defined contribution plans of $5.2 million, $4.2 million and $5.2 million in fiscal years 2021, 2020 and
2019, respectively.
The Company also has certain defined contribution plans at foreign subsidiaries. Contributions to these plans were $1.4 million,
$1.3 million and $1.1 million in fiscal years 2021, 2020 and 2019, respectively. The Company also has a benefit plan at a
foreign location that provides for retirement benefits based on years of service. The obligation recorded under this plan was
$1.0 million at January 1, 2022 and $1.0 million at January 2, 2021 and was recognized as a deferred compensation liability on
the consolidated balance sheets.
The following summarizes the status of and changes in the Company’s assets and related obligations for its pension plans
(which include the Company’s defined benefit pension plans and the SERP) for the fiscal years 2021 and 2020:
(In millions)
Change in projected benefit obligations:
Projected benefit obligations at beginning of the year
Service cost pertaining to benefits earned during the year
Interest cost on projected benefit obligations
Actuarial loss (gain)
Benefits paid to plan participants
Projected benefit obligations at end of the year
Change in fair value of pension assets:
Fair value of pension assets at beginning of the year
Actual return on plan assets
Company contributions - SERP
Benefits paid to plan participants
Fair value of pension assets at end of the year
Funded status
Amounts recognized in the consolidated balance sheets:
Current liabilities
Accrued pension liabilities
Net amount recognized
Funded status of pension plans and SERP (supplemental):
Funded status of qualified defined benefit plans and SERP
Nonqualified trust assets (cash surrender value of life insurance) recorded in other assets
and intended to satisfy the projected benefit obligation of unfunded SERP obligations
Net funded status of pension plans and SERP (supplemental)
Fiscal Year
2021
2020
455.8 $
6.9
12.8
(26.6)
(14.6)
434.3 $
305.0 $
30.1
2.5
(14.6)
323.0 $
(111.3) $
(3.9) $
(107.4)
(111.3) $
401.0
6.4
14.2
48.1
(13.9)
455.8
287.6
28.8
2.5
(13.9)
305.0
(150.8)
(3.8)
(147.0)
(150.8)
(111.3) $
(150.8)
38.0
(73.3) $
36.6
(114.2)
$
$
$
$
$
$
$
$
$
Unrecognized net actuarial loss recognized in accumulated other comprehensive income was $41.8 million and $92.8 million,
and amounts net of tax were $33.2 million and $73.5 million, as of January 1, 2022 and January 2, 2021, respectively. The
accumulated benefit obligations for all defined benefit pension plans and the SERP were $416.1 million at January 1, 2022 and
$430.2 million at January 2, 2021. The decrease in benefit obligation for fiscal 2021 was the result of actuarial gains caused by
changes to the discount rate. The actuarial loss included in accumulated other comprehensive loss and expected to be
recognized in net periodic pension expense during fiscal 2022 is $11.3 million.
58
The following is a summary of net pension and SERP expense recognized by the Company:
(In millions)
Service cost pertaining to benefits earned during the year
Interest cost on projected benefit obligations
Expected return on pension assets
Net amortization loss
Net pension expense
Less: SERP expense
Qualified defined benefit pension plans expense
2021
Fiscal Year
2020
2019
$
$
$
6.9 $
12.8
(19.5)
13.8
14.0 $
5.7
8.3 $
6.4 $
14.2
(18.7)
6.6
8.5 $
5.2
3.3 $
5.5
15.2
(17.7)
2.6
5.6
5.4
0.2
The non-service cost components of net pension expense is recorded in the Other expense (income), net line item on the
consolidated statements of operations and comprehensive income.
The weighted-average actuarial assumptions used to determine the benefit obligation amounts and the net periodic benefit cost
for the Company’s pension and post-retirement plans are as follows:
Weighted-average assumptions used to determine benefit obligations at fiscal year-end:
Discount rate
Rate of compensation increase - pension
Rate of compensation increase - SERP
Weighted average assumptions used to determine net periodic benefit cost for the years ended:
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase - pension
Rate of compensation increase - SERP
Fiscal Year
2021
2020
3.09%
4.18%
7.00%
2.85%
6.75%
4.18%
7.00%
2.85%
4.18%
7.00%
3.60%
6.75%
4.23%
7.00%
Unrecognized net actuarial losses exceeding certain corridors are amortized over one of two amortization periods, based on
each plan's election. The amortization period is either a five-year period, unless the minimum amortization method based on
average remaining service periods produces a higher amortization; or, over the average remaining service period of participants
expected to receive benefits. The Company utilizes a bond matching calculation to determine the discount rate. A hypothetical
bond portfolio is created based on a presumed purchase of high-quality corporate bonds with maturities that match the plan’s
expected future cash outflows. The discount rate is the resulting yield of the hypothetical bond portfolio. The discount rate is
used in the calculation of the year-end pension liability and the service and interest cost for the subsequent year.
The long-term rate of return is based on overall market expectations for a balanced portfolio with an asset mix similar to the
Company’s, utilizing historic returns for broad market and fixed income indices. The Company’s investment policy for plan
assets uses a blended approach of U.S. and foreign equities combined with U.S. fixed income investments. The target
investment allocations as of January 1, 2022 were 57% in equity securities, 38% in fixed income securities and 5% in real
estate investments. Within the equity and fixed income classifications, the investments are diversified. The Company’s asset
allocations by asset category and fair value measurement are as follows:
(In millions)
Equity securities
Fixed income securities
Real estate investments
Other
Fair value of plan assets
January 1, 2022
January 2, 2021
Total
% of Total
Total
% of Total
$
181.3 1
118.9 1
19.9 1
2.9 2
56.1 % $
36.8 %
6.2 %
0.9 %
173.3 1
112.7 1
16.7 1
2.3 2
$
323.0
100.0 % $
305.0
56.8 %
37.0 %
5.5 %
0.7 %
100.0 %
1
In accordance with ASC 820, Fair Value Measurement (“ASC 820”), certain investments are measured at fair value using
the net asset value per share as a practical expedient. These assets have not been classified in the fair value hierarchy.
59
2
In accordance with ASC 820, investments have been measured using valuation techniques in which one or more significant
inputs are unobservable (Level 3). See Note 1 for additional information.
The Company does not expect to make any contributions to its qualified defined benefit pension plans in fiscal 2022 and
expects to make $3.9 million in contributions to the SERP in fiscal 2022.
Expected benefit payments for the fiscal years subsequent to January 1, 2022 are as follows:
(In millions)
Expected benefit payments
2022
2023
2024
2025
2026
2027-2031
$
17.4 $
18.0 $
18.8 $
19.5 $
20.0 $
106.7
14. INCOME TAXES
The geographic components of earnings (loss) before income taxes are as follows:
(In millions)
United States
Foreign
Earnings (loss) before income taxes
The provisions for income tax expense (benefit) consist of the following:
(In millions)
Current expense:
Federal
State
Foreign
Deferred expense (benefit):
Federal
State
Foreign
Income tax expense (benefit)
2021
Fiscal Year
2020
$
$
22.7 $
57.6
80.3 $
(218.6) $
34.5
(184.1) $
2019
79.3
66.6
145.9
2021
Fiscal Year
2020
2019
$
$
14.6 $
2.5
15.0
(17.1)
(1.8)
0.1
13.3 $
0.7 $
0.6
8.3
(51.6)
(4.4)
0.9
(45.5) $
10.6
0.5
12.5
(5.8)
(2.0)
1.2
17.0
60
A reconciliation of the Company’s total income tax expense and the amount computed by applying the statutory federal income
tax rate to earnings before income taxes is as follows:
(In millions)
Income taxes at U.S. statutory rate of 21%
State income taxes, net of federal income tax
Foreign earnings taxed at rates different from the U.S. statutory rate:
2021
Fiscal Year
2020
2019
$
16.9 $
(38.7) $
(1.1)
(8.1)
Hong Kong
Other
Adjustments for uncertain tax positions
Change in valuation allowance
Change in state tax rates
Global Intangible Low Tax Income tax
Foreign Derived Intangible Income tax benefit
Non-deductible executive compensation
Permanent adjustments related to employee share based compensation
Deferred tax on future cash dividends
Income tax audit adjustments
Deferred adjustment for income tax audit
Other Permanent adjustments and non-deductible expenses
Other
Income tax expense (benefit)
(7.2)
3.1
(1.3)
2.2
—
3.2
(3.7)
5.2
(3.7)
(0.9)
2.5
(1.2)
(0.3)
(0.4)
(3.3)
1.2
(1.4)
4.7
—
2.5
(1.6)
1.6
(4.6)
1.0
—
—
1.0
0.2
$
13.3 $
(45.5) $
Significant components of the Company’s deferred income tax assets and liabilities are as follows:
30.6
0.5
(8.5)
2.8
(1.0)
(0.2)
(1.5)
2.1
(4.4)
2.0
(5.1)
0.6
—
—
(0.6)
(0.3)
17.0
(In millions)
Deferred income tax assets:
Accounts receivable and inventory valuation allowances
Deferred compensation accruals
Accrued pension expense
Stock-based compensation
Net operating loss and foreign tax credit carryforwards
Book over tax depreciation and amortization
Tenant lease expenses
Environmental reserve
Other
Total gross deferred income tax assets
Less valuation allowance
Net deferred income tax assets
Deferred income tax liabilities:
Intangible assets
Tax over book depreciation and amortization
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
January 1,
2022
January 2,
2021
$
$
5.2 $
7.2
25.7
8.2
18.5
0.4
4.0
33.7
9.5
112.4
(24.6)
87.8
(190.6)
(9.3)
(5.0)
(204.9)
(117.1) $
3.5
4.5
33.4
9.1
21.0
0.4
4.4
24.9
9.1
110.3
(22.3)
88.0
(105.3)
(10.7)
(4.3)
(120.3)
(32.3)
The valuation allowance for deferred income tax assets as of January 1, 2022 and January 2, 2021 was $24.6 million and $22.3
million, respectively. The net increase in the total valuation allowance during fiscal 2021 was $2.3 million. The valuation
allowance for both years is primarily related to U.S. state and local net operating loss carryforwards as well as a valuation
allowance against state deferred tax assets for certain U.S. legal entities, foreign net operating loss carryforwards and tax credit
61
carryforwards in foreign jurisdictions. The ultimate realization of the deferred tax assets depends on the generation of future
taxable income in foreign jurisdictions as well as state and local tax jurisdictions. The current year change in the valuation
allowance results in an increase against the state deferred tax assets of $1.0 million, an increase related to state net operating
loss carryforward of $0.5 million, and a net increase relating to the foreign net operating losses and foreign tax credits and other
deferred tax assets of $0.8 million.
At January 1, 2022, the Company had foreign net operating loss carryforwards of $30.4 million, which have expirations ranging
from 2022 to an unlimited term during which they are available to offset future foreign taxable income. The Company had U.S.
federal net operating loss carryforwards, state net operating loss carryforwards and Internal Revenue Code section 163(j)
interest expense carryforwards of $15.7 million, $234.4 million and $32.5 million respectively, which have expirations ranging
from 2022 to an unlimited term during which they are available to offset future state taxable income. The Company also had tax
credit carryforwards in foreign jurisdictions of $2.9 million, which are available for an unlimited carryforward period to offset
future foreign taxes.
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
(In millions)
Unrecognized tax benefits at beginning of the year
Increases related to current year tax positions
Decreases related to prior year positions
Decreases relating to settlements with taxing authorities
Decrease due to lapse of statute
Unrecognized tax benefits at end of the year
Fiscal Year
2021
2020
$
$
5.5 $
7.8
(0.9)
(1.4)
(0.1)
10.9 $
6.9
2.6
(1.3)
(2.4)
(0.3)
5.5
The portion of the unrecognized tax benefits that, if recognized currently, would reduce the annual effective tax rate was $10.1
million and $5.0 million as of January 1, 2022 and January 2, 2021, respectively. The Company recognizes interest and
penalties related to unrecognized tax benefits through interest expense and income tax expense, respectively. Interest accrued
related to unrecognized tax benefits was $0.6 million and $0.6 million as of January 1, 2022 and January 2, 2021, respectively.
The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the Company is undergoing
routine periodic audits in both domestic and foreign 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
material to the consolidated financial statements. For the majority of tax jurisdictions, 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.
The Company intends to repatriate cash held in foreign jurisdictions and as such has recorded a deferred tax liability related to
additional state taxes and foreign withholding taxes on the future dividends received in the U.S. from the foreign subsidiaries of
$1.4 million and $2.2 million for fiscal years 2021 and 2020, respectively. 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 the amount of
non-cash foreign undistributed earnings of $199.1 million at January 1, 2022. 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.
62
15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income 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 fiscal years 2021 and 2020 is as follows:
(In millions)
Balance at December 28, 2019
Other comprehensive income (loss) before reclassifications (1)
Amounts reclassified from accumulated other comprehensive
income (loss)
Income tax (expense) benefit
Net reclassifications
Net current-period other comprehensive income (loss) (1)
Balance at January 2, 2021
Other comprehensive income (loss) before reclassifications (1)
Amounts reclassified from accumulated other comprehensive
income (loss)
Income tax (expense) benefit
Net reclassifications
Net current-period other comprehensive income (loss) (1)
Balance at January 1, 2022
Foreign
currency
translation
Derivatives
Pension
Total
$
(47.6)
$
(5.8)
$
(48.7)
$ (102.1)
10.8
(17.6)
(30.0)
(36.8)
—
—
—
10.8
3.5 (2)
(0.4)
3.1
(14.5)
6.6 (3)
(1.4)
5.2
(24.8)
10.1
(1.8)
8.3
(28.5)
$
(36.8)
$
(20.3)
$
(73.5)
$ (130.6)
(20.0)
7.7
29.5
—
—
—
(20.0)
5.1 (2)
(1.4)
3.7
11.4
13.8 (3)
(3.0)
10.8
40.3
17.2
18.9
(4.4)
14.5
31.7
$
(56.8)
$
(8.9)
$
(33.2)
$
(98.9)
(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 interest rate swaps and the cross currency swap are included in interest expense.
(3) Amounts reclassified are included in the computation of net pension expense.
16. FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The following table sets forth financial assets and liabilities measured at fair value in the consolidated balance sheets and the
respective pricing levels to which the fair value measurements are classified within the fair value hierarchy.
(In millions)
Financial assets:
Derivatives
Financial liabilities:
Derivatives
Fair Value Measurements
Quoted Prices With Other Observable Inputs
(Level 2)
January 1, 2022
January 2, 2021
$
$
5.9 $
—
(1.1) $
(19.6)
The fair value of foreign currency forward exchange contracts represents the estimated receipts or payments necessary to
terminate the contracts. The fair value of the cross-currency swap is determined using the current forward rates and changes in
the spot rate.
Nonrecurring Fair Value Measurements
Indefinite-lived intangible assets 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). The Company recorded an impairment charge
63
of $222.2 million on the Sperry® indefinite-lived trade name in fiscal 2020. 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)
Carrying value
Fair value
January 1, 2022
January 2, 2021
$
966.8 $
960.6
722.5
765.4
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).
17. 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. 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 the drinking water standards that became
effective on August 3, 2020.
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
64
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 on-site 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 September 27, 2021, the Company and 3M Company entered into a non-binding term sheet outlining proposed settlement
terms with the law firm representing certain of the plaintiffs in the individual lawsuits included in the Litigation Matters, and,
on January 11, 2022, the parties entered into the agreement related to this proposed settlement (the “Master Settlement
Agreement”). The plaintiffs’ law firm has until March 11, 2022 to obtain each of its individual clients’ agreement to participate
in the proposed settlement under the Master Settlement Agreement and provide a related release. After the March 11, 2022
deadline, any party to the Master Settlement Agreement may, for a limited time, elect to opt out of the Master Settlement
Agreement if: (a) too many individual plaintiffs do not sign releases and participate in the proposed settlement under the Master
Settlement Agreement; or (b) any plaintiff asserting personal injury claims fails to participate in the proposed settlement under
the Master Settlement Agreement. In the event any party opts out of the Master Settlement Agreement, it will be void. If the
Master Settlement Agreement is voided, the Company intends to continue vigorously defending the individual lawsuits and
other Litigation Matters.
On December 9, 2021, the Company and 3M Company reached a settlement in principle to resolve certain of the other
remaining individual lawsuits included in the Litigation Matters. Upon completion of these settlements, only one private
individual action will remain pending in Michigan state court. In addition, the parties to the putative class action have engaged
in mediation.
Assessing potential liability with respect to the Litigation Matters at this time is difficult. Other than the individual lawsuits
subject to the settlements described above, the Litigation Matters are in various stages of discovery and related motions. In
addition, there is minimal direct and relevant precedent for these types of claims related to PFAS, and the science regarding the
human health effects of PFAS exposure in the environment remains inconclusive and inconsistent, thereby creating additional
uncertainties. For certain of the Litigation Matters described above, the Company has recorded an accrual in the amount of
$50.7 million since January 2, 2021 and made related payments of $0.6 million.
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 2021
and 2020, and continues pursing 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 other environmental 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
items are not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations
or cash flows.
65
Environmental Liabilities
The following is a summary of the activity with respect to the environmental remediation reserve established by the Company:
(In millions)
Remediation liability at beginning of the year
Amounts paid
Remediation liability at the end of the year
Fiscal Year
2021
2020
$
$
101.8
$
(16.1)
85.7
$
124.4
(22.6)
101.8
The reserve balance as of January 1, 2022 includes $24.5 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 $61.2 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 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 years subsequent to January 1, 2022 are as follows:
(In millions)
Minimum royalties
Minimum advertising
2022
2023
2024
2025
2026
Thereafter
$
1.8 $
3.8
— $
3.9
— $
4.1
— $
—
— $
—
—
—
Minimum royalties are based on both fixed obligations and assumptions regarding the Consumer Price Index. Royalty
obligations in excess of minimum requirements are based upon future sales levels. In accordance with these agreements, the
Company incurred royalty expense of $2.3 million, $1.9 million and $2.3 million for fiscal years 2021, 2020 and 2019,
respectively.
The terms of certain license agreements also require the Company to make advertising expenditures based on the level of sales
of the licensed products. In accordance with these agreements, the Company incurred advertising expense of $6.5 million, $2.5
million and $3.6 million for fiscal years 2021, 2020 and 2019, respectively.
18. BUSINESS SEGMENTS
The Company’s portfolio of brands is organized into the following two operating segments, which the Company has determined
to be reportable segments.
• Wolverine Michigan Group, consisting of Merrell® footwear and apparel, Cat® footwear, Wolverine® footwear and
apparel, Chaco® footwear, Hush Puppies® footwear and apparel, Bates® uniform footwear, Harley-Davidson®
footwear and Hytest® safety footwear; and
• Wolverine Boston Group, consisting of Sperry® footwear, Saucony® footwear and apparel, Keds® footwear and the
Kids' footwear business, which includes the Stride Rite® licensed business, as well as Kids' footwear offerings from
Saucony®, Sperry®, Keds®, Merrell®, Hush Puppies® and Cat®.
The Company also reports “Other” and “Corporate” categories. The Other category consists of the Sweaty Betty® activewear
business, the Company’s leather marketing operations, sourcing operations that include third-party commission revenues and
multi-branded consumer-direct retail stores. The Corporate category consists of unallocated corporate expenses, such as
66
corporate employee costs, costs related to the COVID-19 pandemic, impairment of intangible assets and environmental and
other related costs.
The reportable segments are engaged in designing, manufacturing, sourcing, marketing, licensing and distributing branded
footwear, apparel and accessories. Revenue for the reportable segments includes revenue from the sale of branded footwear,
apparel and accessories to third-party customers; revenue from third-party licensees and distributors; and revenue from the
Company’s consumer-direct businesses. The Company’s reportable segments are determined based on how the Company
internally reports and evaluates financial information used to make operating decisions.
Company management uses various financial measures to evaluate the performance of the reportable segments. The following
is a summary of certain key financial measures for the respective fiscal periods indicated.
(In millions)
Revenue:
Wolverine Michigan Group
Wolverine Boston Group
Other
Total
Operating profit (loss):
Wolverine Michigan Group
Wolverine Boston Group
Other
Corporate
Total
Depreciation and amortization expense:
Wolverine Michigan Group
Wolverine Boston Group
Other
Corporate
Total
Capital expenditures:
Wolverine Michigan Group
Wolverine Boston Group
Other
Corporate
Total
(In millions)
Total assets:
Wolverine Michigan Group
Wolverine Boston Group
Other
Corporate
Total
Goodwill:
Wolverine Michigan Group
Wolverine Boston Group
Other
Total
2021
Fiscal Year
2020
2019
1,298.9 $
935.8
180.2
2,414.9 $
1,051.0 $
696.0
44.1
1,791.1 $
1,299.7
910.9
63.1
2,273.7
245.3 $
149.3
14.3
(253.2)
155.7 $
179.9 $
88.1
1.6
(406.7)
(137.1) $
244.8
153.8
2.9
(230.5)
171.0
2.2 $
2.6
4.8
23.6
33.2 $
0.8 $
0.4
6.0
10.4
17.6 $
2.7 $
3.4
2.0
24.7
32.8 $
0.8 $
2.3
0.9
6.3
10.3 $
2.4
3.3
2.4
24.6
32.7
2.2
5.7
2.2
24.3
34.4
$
$
$
$
$
$
$
$
January 1,
2022
January 2,
2021
$
$
$
$
651.9 $
1,123.6
606.2
204.7
2,586.4 $
145.1 $
296.2
115.3
556.6 $
626.9
1,077.8
31.4
401.3
2,137.4
145.4
297.0
—
442.4
67
Geographic dispersion of revenue from external customers, based on shipping destination is as follows:
(In millions)
United States
Foreign:
Europe, Middle East and Africa
Asia Pacific
Canada
Latin America
Total from foreign territories
Total revenue
2021
Fiscal Year
2020
2019
$
1,573.9 $
1,234.2 $
1,507.9
460.3
161.6
116.9
102.2
841.0
279.8
120.3
88.9
67.9
556.9
343.1
193.7
117.9
111.1
765.8
$
2,414.9 $
1,791.1 $
2,273.7
The location of the Company’s tangible long-lived assets, which comprises property, plant and equipment and lease right-of-use
assets, is as follows:
(In millions)
United States
Foreign countries
Total
January 1,
2022
January 2,
2021
December 28,
2019
$
$
205.8 $
61.4
267.2 $
222.2 $
44.9
267.1 $
247.2
54.6
301.8
The Company does not believe that it is dependent upon any single customer because no customer accounts for more than 10%
of consolidated revenue in any year.
During fiscal 2021, the Company sourced 100% of its footwear products and apparel and accessories from third-party suppliers,
located primarily in the Asia Pacific region. While changes in suppliers could cause delays in manufacturing and a possible loss
of sales, management believes that other suppliers could provide similar products on comparable terms.
19. BUSINESS ACQUISITIONS
Sweaty Betty®
On July 31, 2021, the Company entered into a definitive agreement to acquire 100% of the outstanding shares of Lady of
Leisure InvestCo Limited. The acquisition was completed on August 2, 2021 for $417.4 million, which is net of acquired cash
of $7.4 million. The Acquired Company owns the Sweaty Betty® brand and activewear business. The acquisition was funded
with cash on hand and borrowings under the Company’s Revolving Facility.
Sweaty Betty® is a premium women’s activewear brand that distributes a wide array of innovative on-trend tops, bottoms,
swimwear, outerwear and accessories around the world, mainly through direct-to-consumer channels. The Sweaty Betty®
acquisition is part of the Company’s strategic shift over the last several years from a traditional footwear wholesaler to a
consumer-obsessed, digital-focused growth company. The acquisition also aligns with the Company’s strategic growth plan to
focus on expanding the Company’s digital and international footprint, and building the brand portfolio beyond footwear.
Sweaty Betty® contributed net revenue of $117.4 million and net earnings of $9.7 million to the Company for the period from
the acquisition date to January 1, 2022. The Sweaty Betty® operating results are included in the Other category for segment
reporting purposes.
The Company recognized acquisition-related transaction costs of $7.5 million for 2021, in the selling, general and
administrative expenses line item in the Consolidated Statement of Operations. These costs represent investment banking fees,
legal and professional fees, transaction fees, and consulting fees associated with the acquisition.
The Company accounted for the acquisition following FASB ASC Topic 805, Business Combinations, and the related assets
acquired and liabilities assumed were recorded at fair value on the acquisition date. The aggregate purchase price was allocated
to the major categories of assets acquired and liabilities assumed based upon their respective fair values at the acquisition date
using primarily Level 2 and Level 3 inputs. The Level 2 and Level 3 valuation inputs include an estimate of future cash flows
and discount rates. The Sweaty Betty® trademark, which is estimated to have an indefinite life, has been valued at
$346.4 million using the multi-period excess earnings method. The multi-period excess earnings method requires the use of
68
significant estimates and assumptions, including but not limited to, future revenues, growth rates, EBITDA margin, tax rates
and a discount rate.
The purchase price allocation is preliminary and based upon valuation information available to determine the fair value of
certain assets and liabilities, including goodwill, and is subject to change, primarily for income tax matters and final
adjustments to net working capital as additional information is obtained about the facts and circumstances that existed at the
valuation date. The Company expects to finalize the fair values of the assets acquired and liabilities assumed over the one-year
measurement period.
The following table summarizes the preliminary purchase price allocation to the assets acquired and liabilities assumed at the
acquisition date:
(In millions)
Accounts receivable
Inventories
Prepaid expenses and other current assets
Property, plant and equipment
Lease right-of-use assets
Goodwill
Intangibles
Other assets
Total assets acquired
Accounts payable
Accrued salaries and wages
Other accrued liabilities
Lease liabilities
Deferred income taxes
Total liabilities assumed
Net assets acquired
Fair Value
3.6
48.4
5.3
10.0
7.0
118.9
355.0
0.6
548.8
13.1
6.0
14.3
7.0
91.0
131.4
417.4
$
$
Goodwill is the result of expected synergies and the Company’s ability to grow the Sweaty Betty® brand, as well the acquired
assembled workforce. All of the goodwill is presented within the Other category for segment reporting purposes and within the
Sweaty Betty® reporting unit and will not be deductible for income tax purposes.
Intangible assets acquired in the acquisition were valued as follows:
(In millions)
Trade name and trademark
Customer relationship
Backlog
Customer list
Intangible Asset
Useful life
$
346.4
Indefinite
7.2 18 years
1.0 5 months
0.4 3 years
Total intangible assets acquired
$
355.0
The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition of the
Sweaty Betty® brand and activewear business occurred at the beginning of fiscal 2020. The pro forma information is not
necessarily indicative of the results that would have actually been obtained if the acquisition had occurred at such date or that
may be attained in the future. These pro forma amounts have been calculated after including the historical Sweaty Betty®
operating results in the Company’s consolidated results and reflecting the following adjustments: fair value adjustments for
intangible assets and inventory acquired, timing adjustment to recognize acquisition related costs incurred in 2021 and in 2020,
and adjustments reflecting historical interest expense. The adjustments have been applied with related tax effects.
69
(In millions)
Net revenue
Net earnings attributable to Wolverine World Wide, Inc.
Sportlab
Fiscal Year
2021
2020
$
2,552.4 $
1,954.7
83.9
(144.9)
On April 30, 2019, the Company acquired assets and assumed liabilities from Sportlab S.R.L. (“Sportlab”), the distributor of
Saucony® footwear in Italy. Total purchase consideration of $25.2 million includes cash paid, extinguishment of Sportlab’s
accounts payable balance that was due to the Company at the time of acquisition and contingent consideration. The contingent
consideration was based on sales activity from the date of the acquisition through the end of fiscal 2019 and was paid in the first
quarter of fiscal 2020. The detailed amounts of each component of the purchase consideration are as follows:
(In millions)
Cash paid
Extinguishment of Sportlab’s accounts payable balance
Contingent consideration
Total purchase consideration
Purchase Consideration
$
$
15.1
4.6
5.5
25.2
The Company accounted for the acquisition under the provisions of FASB ASC Topic 805, Business Combinations. The related
assets acquired and liabilities assumed were recorded at fair value on the acquisition date. The operating results for the acquired
Saucony® distribution business are included in the Company’s consolidated results of operations beginning April 30, 2019, and
are included in the Wolverine Boston Group reporting group for segment reporting purposes.
The final allocation of the purchase price as of December 28, 2019 was:
(In millions)
Accounts receivable
Inventories
Goodwill
Amortizable intangibles
Total assets acquired
Deferred income taxes
Other liabilities
Total liabilities assumed
Net assets acquired
Final Valuation
$
$
1.8
6.2
12.0
12.9
32.9
3.2
4.5
7.7
25.2
The excess of the purchase price over the fair value of the net assets acquired, amounting to $12.0 million, was recorded as
goodwill in the consolidated balance sheet and was assigned to the Wolverine Boston Group reportable segment. The goodwill
that was recognized is attributable to the efficiencies to be gained by integrating operations with the Saucony® distribution
business purchased from Sportlab. Other intangible assets acquired include order backlog, valued at $1.7 million, and customer
relationship assets, valued at $11.2 million, which had estimated useful lives at the acquisition date of 7 months and 14 years,
respectively.
70
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Wolverine World Wide, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Wolverine World Wide, Inc. and subsidiaries (the Company)
as of January 1, 2022 and January 2, 2021, the related consolidated statements of operations, comprehensive income (loss),
stockholders' equity and cash flows for each of the three years in the period ended January 1, 2022, and the related notes and
financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company at January 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the three
years in the period ended January 1, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of January 1, 2022, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 24, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Valuation of indefinite-lived intangibles
Description of the Matter At January 1, 2022, the Company’s indefinite-lived intangible assets were $718.1 million, which
included $296.0 million for the Sperry trade name. As discussed in Notes 1 and 4 of the
consolidated financial statements, indefinite-lived intangibles are tested for impairment at least
annually.
Auditing management’s annual impairment test for the Sperry trade name was complex due to the
significant estimation uncertainty required in determining the fair value of the Sperry trade name
indefinite-lived intangible asset. The significant assumptions used to estimate the fair value of the
Sperry trade name included the forecasted revenue growth, EBITDA margin, and discount rate.
These significant assumptions are forward-looking and could be affected by future economic and
market conditions. Changes in these assumptions could have a significant impact on the fair value
of the Sperry trade name, the amount of any impairment charge, or both.
71
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
Company’s controls over the Sperry trade name impairment review process. For example, we
tested controls that address the risk of material misstatement relating to the valuation of the trade
name, including management’s review of the significant assumptions described above and the
completeness and accuracy of the data used to develop such estimates.
To test the estimated fair value of the Sperry trade name, our audit procedures included, among
others, assessing the appropriateness of the valuation model used, evaluating the significant
assumptions discussed above, and evaluating the completeness and accuracy of the underlying
data supporting the significant assumptions and estimates. We compared the financial projections
to current industry and economic trends and the historical accuracy of management’s estimates.
We involved our valuation specialists to assist in our evaluation of the Company's model,
valuation methodology and the discount rate.
Valuation of Sweaty Betty trade name and trademark intangible asset in the acquisition of
Lady of Leisure InvestCo Limited
Description of the Matter As discussed in Note 19 to the consolidated financial statements, during the year ended January 1,
2022, the Company completed the acquisition of Lady of Leisure InvestCo Limited (which owns
the Sweaty Betty brand and activewear business, referred to herein as “Sweaty Betty”) for a total
purchase price of approximately $417.4 million. The acquisition was accounted for as a business
combination. The consideration paid in the acquisition must be allocated to the acquired assets
and liabilities assumed generally based on their fair value with the excess of the purchase price
over those fair values allocated to goodwill.
Auditing the Company’s accounting for its acquisition of Sweaty Betty was complex due to the
significant estimation uncertainty involved in estimating the fair value of the trade name and
trademark intangible asset. The total fair value ascribed to the trade name and trademark
intangible amounted to $346.4 million. The Company used the multi-period excess earnings
method to value the trade name and trademark. The significant assumptions used to estimate the
fair value of trade name and trademark included the forecasted revenue growth, EBITDA margin
and discount rate. These significant assumptions are forward-looking and could be affected by
future economic and market conditions.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
Company’s controls over its accounting for the acquisition of Sweaty Betty. For example, we
tested controls that address the risks of material misstatement relating to the valuation of the trade
name and trademark intangible asset, including management’s review of the methods and
significant assumptions used to develop such estimates.
To test the estimated fair value of the acquired trade name and trademark intangible asset, our
audit procedures included, among others, assessing the appropriateness of the valuation
methodologies used, evaluating the significant assumptions discussed above, and evaluating the
completeness and accuracy of the underlying data supporting the significant assumptions and
estimates. We compared the financial projections to current industry and economic trends, the
historic financial performance of the acquired business, and forecasted performance of guideline
public companies. We also performed sensitivity analyses to evaluate the changes in the fair
value of the intangible assets that would result from changes in the significant assumptions. We
involved our valuation specialist to assist in evaluating the methodologies used to estimate the fair
value of the trade name and trademark intangible asset and to test certain significant assumptions,
including the discount rate.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since at least 1933, but we are unable to determine the specific year.
Grand Rapids, Michigan
February 24, 2022
72
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Wolverine World Wide, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Wolverine World Wide, Inc. and subsidiaries’ internal control over financial reporting as of January 1, 2022,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wolverine World Wide, Inc. and
subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of January
1, 2022, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal
controls of Lady of Leisure InvestCo Limited, which is included in the 2022 consolidated financial statements of the Company
and constituted 4% of total assets as of January 1, 2022 and 5% of revenues for the year then ended. Our audit of internal
control over financial reporting of the Company also did not include an evaluation of the internal control over financial
reporting of Lady of Leisure InvestCo Limited.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of January 1, 2022 and January 2, 2021, the related consolidated
statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the
period ended January 1, 2022, and the related notes and financial statement schedule and our report dated February 24, 2022
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
February 24, 2022
73
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision, and with the participation, of the Company’s management, including the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures. Based on and as of the time of such evaluation, the Company’s management, including the
Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were
effective as of the end of the period covered by this Annual Report on Form 10-K.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Securities Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including
the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal
control over financial reporting as of January 1, 2022, based on the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013 framework). Based on that
evaluation, management, including the Chief Executive Officer and Chief Financial Officer, concluded that internal control
over financial reporting was effective as of January 1, 2022. The Company excluded Lady of Leisure InvestCo Limited,
acquired on August 2, 2021, from the evaluation of internal control over financial reporting as of January 1, 2022. The total
assets of Lady of Leisure InvestCo Limited that are subject to the Company's evaluation, represent approximately 4% of
consolidated assets at January 1, 2022. The total revenues of Lady of Leisure InvestCo Limited represent approximately 5% of
the consolidated revenues for the year ended January 1, 2022.
The effectiveness of the Company’s internal control over financial reporting as of January 1, 2022 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in its report, which is included in Item 8 of this Annual
Report on Form 10-K and is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended
January 1, 2022 that has materially affected, or that is reasonably likely to materially affect, the Company’s internal control
over financial reporting. The Company has excluded Lady of Leisure InvestCo Limited from the assessment of internal control
over financial reporting as of January 1, 2022 because it was acquired by the Company in a business combination during the
year ended January 1, 2022.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information called for by Item 10 is incorporated herein by reference to the Definitive Proxy Statement of the Company
relating to the Annual Meeting of Stockholders of Wolverine World Wide, Inc. expected to be held on May 4, 2022 in sections
"Election of Directors" and "Corporate Governance". The Company intends to file such Definitive Proxy Statement with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K.
We have adopted a Code of Business Conduct that applies to all of our directors, officers and employees, including our
principal executive, principal financial and principal accounting officers, or persons performing similar functions. Our Code of
Business Conduct is posted on our website located at http://www.wolverineworldwide.com/investor-relations/corporate-
governance/. We intend to disclose future amendments to certain provisions of the Code of Business Conduct, and waivers of
the Code of Business Conduct granted to executive officers and directors, on the website within four business days following
the date of the amendment or waiver.
74
Item 11. Executive Compensation
The information called for by Item 11 is incorporated herein by reference to the Definitive Proxy Statement referenced above in
Item 10 in section "Compensation Discussion and Analysis".
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information called for by Item 12 is incorporated herein by reference to the Definitive Proxy Statement referenced above in
Item 10 in section "Securities Ownership in Officers and Directors and Certain Beneficial Owners"..
Equity Compensation Plan Information
The following table provides information about the Company’s equity compensation plans as of January 1, 2022:
Plan Category (1)
Equity compensation plans approved
by security holders
Equity compensation plans not
approved by security holders
Total
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(a)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
Number of Securities Remaining
Available for Future Issuance under
Equity Compensation Plans Excluding
Securities Reflected in Column (a))
(c)
2,488,812 (2), (3)
—
2,488,812
$22.29
—
$22.29
8,071,611 (4)
—
8,071,611
(1) Each plan for which aggregated information is provided contains customary anti-dilution provisions that are applicable in
the event of a stock split, stock dividend or certain other changes in the Company’s capitalization.
(2)
Includes: (i) 2,219,618 stock options awarded to employees under the Amended and Restated Stock Incentive Plan of 1999,
the Amended and Restated Stock Incentive Plan of 2001, the Amended and Restated Stock Incentive Plan of 2003, the
Amended and Restated Stock Incentive Plan of 2005, the Stock Incentive Plan of 2010, the Stock Incentive Plan of 2013
and the Stock Incentive Plan of 2016, as amended and restated; and (ii) and 269,194 stock options awarded to non-
employee directors under the Amended and Restated Stock Incentive Plan of 2005, the Stock Incentive Plan of 2010, the
Stock Incentive Plan of 2013 and the Stock Incentive Plan of 2016, as amended and rested. Column (a) does not include
stock units credited to outside directors’ fee accounts or retirement accounts under the Outside Directors’ Deferred
Compensation Plan. Stock units do not have an exercise price. Each stock unit credited to a director’s fee account and
retirement account under the Outside Directors’ Deferred Compensation Plan will be converted into one share of common
stock upon distribution. Column (a) also does not include shares of restricted or unrestricted common stock previously
issued under the Company’s equity compensation plans.
(3) Of this amount, 33,526 options were not exercisable as of January 1, 2022 due to vesting restrictions.
(4) Comprised of: (i) 109,640 shares available for issuance under the Outside Directors’ Deferred Compensation Plan upon the
retirement of the current directors or upon a change in control; and (ii) 7,961,971 shares issuable under the Stock Incentive
Plan of 2016, as amended and restated.
The Outside Directors’ Deferred Compensation Plan is a supplemental, unfunded, nonqualified deferred compensation plan for
non-employee directors. Beginning in 2006, the Company began paying an annual equity retainer to non-management directors
in the form of a contribution under the Outside Directors’ Deferred Compensation Plan. Non-management directors may also
voluntarily elect to receive, in lieu of some or all directors’ fees, a number of stock units equal to the amount of the deferred
directors’ fees divided by the fair market value of the Company’s common stock on the date of payment. These stock units are
increased by a dividend equivalent based on dividends paid by the Company and the amount of stock units credited to the
participating director’s fee account and retirement account. Upon distribution, the participating directors receive a number of
shares of the Company’s common stock equal to the number of stock units to be distributed at that time. Distribution is
triggered by termination of service as a director or by a change in control of the Company and can occur in a lump sum, in
installments or on another deferred basis. A total of 346,315 shares have been issued to a trust to satisfy the Company’s
obligations when distribution is triggered and are included in shares the Company reports as issued and outstanding.
The Stock Incentive Plan of 2016, as amended and restated, is an equity-based incentive plan for officers, key employees, and
directors. Such plan authorizes awards of stock options, restricted common stock, common stock, restricted stock units and/or
stock appreciation rights. The Stock Incentive Plan of 2016, as amended and restated, provides that each share of restricted or
unrestricted common stock and each restricted stock unit issued under the plan is counted as 2.6 shares against the total number
of shares authorized for issuance under the plan. The number of securities listed as remaining available in column (c) of the
table assumes only stock options will be issued under the plan in the future; each stock option counts as only one share against
the total number of shares authorized for issuance under the plan. Actual shares available under the plan will be less to the
75
extent that the Company awards restricted common stock, unrestricted common stock or restricted stock units under the plan.
The numbers provided in this footnote and in column (c) will increase to the extent that options relating to the number of shares
listed in column (a) of the table or other outstanding awards (e.g., shares of restricted or unrestricted stock, restricted stock units
or stock appreciation rights) previously issued under the plan are canceled, surrendered, modified, exchanged for substitutes,
expire or terminate prior to exercise or vesting because the number of shares underlying any such awards will again become
available for issuance under the plan under which the award was granted.
Of the total number of shares available under column (c), the number of shares with respect to the following plans may be
issued other than upon the exercise of an option, warrant or right outstanding as of January 1, 2022:
•
•
Outside Directors’ Deferred Compensation Plan: 109,640
Stock Incentive Plan of 2016, as amended and restated: 3,062,297
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information called for by Item 13 is incorporated herein by reference to the Definitive Proxy Statement referenced above in
Item 10 in sections "Related Party Matters" and "Director Independence".
Item 14. Principal Accountant Fees and Services
The information called for by Item 14 is incorporated herein by reference to the Definitive Proxy Statement referenced above in
Item 10 in section "Independent Registered Public Accounting Firm".
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
(1) Financial Statements Included in Item 8
The following consolidated financial statements of Wolverine World Wide, Inc. and its subsidiaries are filed as a part
of this report:
•
•
•
•
•
•
•
Consolidated Statements of Operations for the Fiscal Years Ended January 1, 2022, January 2, 2021 and
December 28, 2019.
Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years Ended January 1, 2022, January 2,
2021 and December 28, 2019.
Consolidated Balance Sheets as of January 1, 2022 and January 2, 2021.
Consolidated Statements of Cash Flows for the Fiscal Years Ended January 1, 2022, January 2, 2021 and
December 28, 2019.
Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended January 1, 2022, January 2, 2021 and
December 28, 2019.
Notes to the Consolidated Financial Statements.
Reports of Independent Registered Public Accounting Firm.
(2) Financial Statement Schedules Attached as Appendix A
The following consolidated financial statement schedule of Wolverine World Wide, Inc. and its subsidiaries is filed as
a part of this report:
•
Schedule II - Valuation and Qualifying Accounts.
All other schedules (I, III, IV, and V) for which provision is made in the applicable accounting regulations of the SEC
are not required under the related instructions or are inapplicable and, therefore, have been omitted.
(3) Exhibits
The following exhibits are filed with this Annual Report or incorporated by reference. The Company will furnish a
copy of any exhibit listed below to any stockholder without charge upon written request to General Counsel and
Secretary, 9341 Courtland Drive N.E., Rockford, Michigan 49351.
76
Exhibit
Number
Document
2.1
2.2
3.1
3.2
4.1
4.2
4.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Share Purchase Agreement, dated as of July 31, 2021 by and among the Institutional Sellers, the
Management Sellers, and Wolverine World Wide, Inc. Incorporated by reference to Exhibit 2.1 to the
Company's Quarterly Report on Form 10-Q for the period ended October 2, 2021.
Management Warranty Deed, dated as of July 31, 2021, by and among the Warrantors and Wolverine
World Wide, Inc. Incorporated by reference to Exhibit 2.2 to the Company's Quarterly Report on Form
10-Q for the period ended October 2, 2021.
Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to the
Company’s current report on Form 8-K filed on April 24, 2014.
Amended and Restated By-laws. Incorporated by reference to Exhibit 3.1 to the Company’s Current
Report on Form 8-K filed on May 7, 2021.
Description of the Registrant's Securities Registered Pursuant To Section 12 of The Securities Exchange
Act of 1934. Incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 2019.
Senior Notes Indenture, dated August 26, 2021, among Wolverine World Wide, Inc., the guarantors
named therein, and The Huntington National Bank. Incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on August 26, 2021.
Form of 4.000% Senior Notes due 2029. Incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed on August 26, 2021.
Amended and Restated Outside Directors’ Deferred Compensation Plan.* Incorporated by reference to
Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29,
2007.
Outside Directors’ Deferred Compensation Plan.* Incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on December 17, 2008.
Wolverine World Wide, Inc. Deferred Compensation Plan, Amended and Restated.* Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 13, 2018.
First Amendment to the Wolverine World Wide, Inc. Deferred Compensation Plan, dated as of
December 29, 2020.* Incorporated by reference to Exhibit 10.35 to the Company's Annual Report on
Form 10-K for the fiscal year ended January 2, 2021.
Amended and Restated Stock Option Loan Program.* Incorporated by reference to Exhibit 10.12 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2007.
Separation Agreement between Wolverine World Wide, Inc. and Blake W. Krueger, dated as of March
13, 2008, as amended.* Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report
on Form 10-Q for the period ended March 22, 2008.
First Amendment to Separation Agreement between Wolverine World Wide, Inc. and Blake W.
Krueger, dated as of December 11, 2008.* Incorporated by reference to Exhibit 10.30 to the Company’s
Annual Report on Form 10-K for the fiscal year ended January 3, 2009.
Executive Severance Agreement.* Incorporated by reference to Exhibit 10.3 to the Company’s Current
Report on Form 8-K filed on December 17, 2008. A participant schedule of current executive officers
who are parties to this agreement is attached as Exhibit 10.8.
Executive Severance Agreement.* Incorporated by reference to Exhibit 10.14 to the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2011. A participant schedule of current
executive officers who are parties to this agreement is attached as Exhibit 10.9.
Executive Severance Agreement between Brendan Hoffman and the Company, dated August 7, 2020.*
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
August 13, 2020.
Amendment, dated as of March 25, 2021, to the Executive Severance Agreement between Brendan
Hoffman and the Company, dated as of September 8, 2020.* Incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K filed on March 26, 2021.
Form of Indemnification Agreement.* The Company has entered into an Indemnification Agreement
with each director and certain executive officers. Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on April 25, 2007. All executive officers and directors
are parties to this agreement.
Indemnification Agreement between Brendan Hoffman and the Company, dated August 7, 2020.*
Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
August 13, 2020.
Amended and Restated Benefit Trust Agreement dated April 25, 2007.* Incorporated by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on April 25, 2007.
77
Exhibit
Number
10.15
10.16
10.17
10.18
10.19
Document
Form of 409A Supplemental Retirement Plan Participation Agreement with Blake W. Krueger.*
Incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the fiscal
year ended January 3, 2009.
409A Supplemental Executive Retirement Plan (2008 Restatement through First Amendment).*
Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
period ended April 1, 2017. A participant schedule of current executive officers who participate in this
plan is attached as Exhibit 10.16.
Employees’ Pension Plan (Restated as amended through December 29, 2017).* Incorporated by
reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 30, 2017.
Sixth Amendment to the Wolverine Employees' Pension Plan.* Incorporated by reference to Exhibit
10.34 to the Company's Form 10-K for the fiscal year ended December 29, 2018.
First Amendment to the Wolverine Employees' Pension Plan, dated as of December 2, 2020.*
Incorporated by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the fiscal
year ended January 2, 2021.
10.20
Second Amendment to the Wolverine Employees' Pension Plan, dated as of December 9, 2021.*
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
Stock Incentive Plan of 2010.* Incorporated by reference to Exhibit 10.1 to the Company’s
Registration Statement on Form S-8 filed on March 4, 2010.
Amended and Restated Stock Incentive Plan of 2013.* Incorporated by reference to Exhibit 10.38 to
the Company’s Form 10-K for the fiscal year ended December 28, 2013.
2016 Form of Non-Qualified Stock Option Agreement.* Incorporated by reference to Exhibit 10.24 to
the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2016.
Wolverine World Wide, Inc. Stock Incentive Plan of 2016, as amended and restated.* Incorporated by
reference to Appendix B to the Company’s Definitive Proxy Statement filed on March 26, 2021.
2018 Form of Restricted Stock Unit Agreement.* Incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2018.
2019 Form of Restricted Stock Unit Agreement.* Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended March 30, 2019.
2020 Form of Restricted Stock Unit Agreement.* Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended March 28, 2020.
2020 Form of Restricted Stock Agreement.* Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on April 22, 2020.
2021 Form of Restricted Stock Unit Agreement.* Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended April 3, 2021.
Form of Performance Stock Unit Agreement (2021 performance period).* Incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended April 3, 2021.
Form of Performance Stock Unit Agreement (2021 - 2022 performance period).* Incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the period ended April 3,
2021.
Form of Performance Stock Unit Agreement (2021 - 2023 performance period).* Incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the period ended April 3,
2021.
Credit Agreement, dated as of July 31, 2012, by and among Wolverine World Wide, Inc., as borrower,
JPMorgan Chase Bank, N.A., as administrative agent and as a lender, J.P. Morgan Europe Limited, as
foreign currency agent, Wells Fargo Bank, National Association, as syndication agent and as a lender,
Fifth Third Bank as documentation agent and as a lender, and PNC Bank, National Association, as
documentation agent and as a lender. Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on August 1, 2012.
First Amendment to Credit Agreement, dated as of September 28, 2012, by and among Wolverine
World Wide, Inc., as borrower, JPMorgan Chase Bank, N.A., as administrative agent and as a lender,
J.P. Morgan Europe Limited, as foreign currency agent, Wells Fargo Bank, National Association, as
syndication agent and as a lender, Fifth Third Bank as documentation agent and as a lender, and PNC
Bank, National Association, as documentation agent and as a lender. Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 4, 2012.
78
Exhibit
Number
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
Document
Second Amendment to the Credit Agreement, dated as of October 8, 2012, among Wolverine World
Wide, Inc., as borrower, JPMorgan Chase Bank, N.A., as administrative agent and as a lender, J.P.
Morgan Europe Limited, as foreign currency agent, Wells Fargo Bank, National Association, as
syndication agent and as a lender, Fifth Third Bank, as documentation agent and as a lender, and PNC
Bank, National Association, as documentation agent and as a lender. Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 9, 2012.
Replacement Facility Amendment, dated as of October 10, 2013, to the Amended and Restated Credit
Agreement among Wolverine World Wide, Inc., the lenders party thereto, and JPMorgan Chase Bank,
N.A. as administrative agent. Incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on October 11, 2013.
Omnibus Amendment, dated as of December 19, 2014 to the Amended and Restated Credit Agreement
dated as of October 10, 2013 among Wolverine World Wide, Inc., the lenders party thereto, Wells Fargo
Bank, National Association, as syndication agent, Bank of America, N.A., Fifth Third Bank, PNC Bank,
National Association, Sumitomo Mitsui Banking Corporation, Union Bank, N.A., And BBVA Compass
Bank, as co-documentation agents, J.P. Morgan Europe Limited, as foreign currency agent, and
JPMorgan Chase Bank, N.A., as administrative agent. Incorporated by reference to Exhibit 10.45 to the
Company’s Annual Report on Form 10-K filed on March 3, 2015.
Replacement Facility Amendment, dated as of July 13, 2015, among Wolverine World Wide, Inc., JP
Morgan Chase Bank, N.A., as administrative agent and as a lender, J.P. Morgan Europe Limited, as
foreign currency agent, Wells Fargo Bank, National Association and MUFG Union Bank, N.A., as co-
syndication agents and lenders, and the other lenders party thereto. Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 15, 2015.
First Amendment, dated September 15, 2016, to the Amended and Restated Credit Agreement, dated
July 13, 2015, among Wolverine World Wide, Inc., as parent borrower, the several banks and other
financial institutions or entities from time to time parties thereto, the several agents and other financial
institutions or entities from time to time parties thereto, J.P. Morgan Europe Limited, as foreign
currency agent, and JPMorgan Chase Bank, N.A., as administrative agent. Incorporated by reference to
Exhibit 10.1 to the Company Current Report on Form 8-K, filed on September 19, 2016.
2018 Replacement Facility Amendment, dated as of December 6, 2018 among the Company, JP Morgan
Chase Bank, N.A., as administrative agent and as a lender, Wells Fargo Bank, National Association,
Bank of America, N.A. and HSBC Bank USA, N.A., as co-syndication agents and lenders, and the other
lenders party thereto. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on December 11, 2018.
Second Amendment, dated as of May 5, 2020, to the Amended and Restated Credit Agreement, dated as
of December 6, 2018, among Wolverine World Wide, Inc., as parent borrower, JPMorgan Chase Bank,
N.A., as administrative agent and as a lender, the other borrowers party thereto, and the other lenders
party thereto. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
filed on May 6, 2020.
2021 Replacement Facility Amendment and Reaffirmation Agreement, dated as of October 21, 2021,
among Wolverine World Wide, Inc., as parent borrower, the Additional Borrowers party thereto, JP
Morgan Chase Bank, N.A., as administrative agent and as a lender, and the other lenders party thereto.
Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on
October 25, 2021.
Receivables Purchase Agreement dated as of December 22, 2014, among Wolverine World Wide, Inc.
and certain of its subsidiaries as sellers, and HSBC Bank USA, N.A. as purchaser. Incorporated by
reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K filed on March 3, 2015.
Amendment to the Receivables Purchase Agreement, among Wolverine World Wide, Inc. and certain of
its subsidiaries as sellers, and HSBC Bank USA, N.A. as purchaser, dated January 5, 2018. Incorporated
by reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 30, 2017.
Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan).* Incorporated by
reference to Appendix A to the Company’s Definitive Proxy Statement filed on March 28, 2017.
Wolverine World Wide, Inc. Amended and Restated Executive Short-Term Incentive Plan (Annual
Bonus Plan).* Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the period ended June 29, 2019.
Consent Decree by and among Wolverine World Wide, Inc., the State of Michigan, Plainfield Charter
Township, and Algoma Township. Incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on February 7, 2020.
Employment Agreement between Brendan Hoffman and the Company.* Incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 26,
2020.
79
Exhibit
Number
10.49
21
23
31.1
31.2
32
101
104
Document
Amended Employment Agreement between Brendan Hoffman and the Company.* Incorporated by
reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 23, 2021.
Subsidiaries of Registrant.
Consent of Ernst & Young LLP.
Certification of Chairman, Chief Executive Officer and President under Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of Senior Vice President, Chief Financial Officer and Treasurer under Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification pursuant to 18 U.S.C. § 1350.
The following financial information from the Company’s Annual Report on Form 10-K for the fiscal
year ended January 2, 2021, formatted in Inline XBRL: (i) Consolidated Statements of Operations; (ii)
Consolidated Statements of Comprehensive Income; (iii) Consolidated Balance Sheets; (iv)
Consolidated Statements of Cash Flows; (v) Consolidated Statements of Stockholders’ Equity; and (vi)
Notes to Consolidated Financial Statements.
The cover page of the Company’s Annual Report on Form 10-K for the fiscal year ended January 2,
2021, formatted in Inline XBRL (included in Exhibit 101).
* Management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
80
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
WOLVERINE WORLD WIDE, INC.
Date:
February 24, 2022
By:
/s/ Brendan L. Hoffman
Brendan L. Hoffman
President and Chief Executive Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
President and Chief Executive Officer
(Principal Executive Officer)
Date
February 24, 2022
/s/ Brendan L. Hoffman
Brendan L. Hoffman
/s/ Michael D. Stornant
Michael D. Stornant
/s/ Blake W. Krueger
Blake W. Krueger
/s/ Jeffrey M. Boromisa
Jeffrey M. Boromisa
/s/ Gina R. Boswell
Gina R. Boswell
/s/ William K. Gerber
William K. Gerber
/s/ David T. Kollat
David T. Kollat
/s/ Brenda J. Lauderback
Brenda J. Lauderback
/s/ Nicholas T. Long
Nicholas T. Long
/s/ David W. McCreight
David W. McCreight
/s/ Kathleen Wilson-Thompson
Kathleen Wilson-Thompson
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
February 24, 2022
Executive Chairman
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
February 24, 2022
Director
Director
Director
Director
Director
Director
Director
Director
81
APPENDIX A
Schedule II - Valuation and Qualifying Accounts
Wolverine World Wide, Inc. and Subsidiaries
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Deductions
(Describe)
Balance at
End of
Period
$
$
$
$
$
$
6.7 $
15.6
11.2
9.1
42.6 $
6.0 $
11.4
9.3
7.3
34.0 $
4.0 $
13.6
9.0
8.3
34.9 $
(2.4) $
52.5
9.4
5.6
65.1 $
9.7 $
41.5
19.8
9.3
80.3 $
5.1 $
50.2
15.3
6.9
77.5 $
(A)
(B)
(C)
(D)
(A)
(B)
(C)
(D)
(A)
(B)
(C)
(D)
0.3
51.5
12.9
4.0
68.7
9.0
37.3
17.9
7.5
71.7
3.1
52.4
15.0
7.9
78.4
$
$
$
$
$
$
4.0
16.6
7.7
10.7
39.0
6.7
15.6
11.2
9.1
42.6
6.0
11.4
9.3
7.3
34.0
(In millions)
Fiscal Year Ended January 1, 2022
Deducted from asset accounts:
Allowance for credit losses
Allowance for sales returns
Allowance for cash discounts and customer markdowns
Inventory valuation allowances
Total
Fiscal Year Ended January 2, 2021
Deducted from asset accounts:
Allowance for credit losses
Allowance for sales returns
Allowance for cash discounts and customer markdowns
Inventory valuation allowances
Total
Fiscal Year Ended December 28, 2019
Deducted from asset accounts:
Allowance for credit losses
Allowance for sales returns
Allowance for cash discounts and customer markdowns
Inventory valuation allowances
Total
(A) Accounts charged off, net of recoveries.
(B) Actual customer returns.
(C) Discounts given to customers.
(D) Adjustment upon disposal of related inventories.
A-1
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SHAREHOLDER INFORMATION
CORPORATE INFORMATION
Websites
Company: www.wolverineworldwide.com
Investor Relations: wolverineworldwide.gcs-web.com
Inquiries: www.wolverineworldwide.com/contact-us/
investor-contact/
Form 10-K Report
A copy of this Annual Report and the Annual Report
to the Securities and Exchange Commission on Form
10-K for 2021, including the consolidated financial
statements and financial statement schedules, may
be obtained by any shareholder without charge by
writing to the General Counsel and Secretary,
9341 Courtland Drive, N.E., Rockford, Michigan 49351
or by accessing the “Investor Relations” section of
the Company’s website at
www.wolverineworldwide.com.
Annual Meeting
The annual meeting of shareholders will be held
virtually on May 4, 2022, at 10:00 a.m. E.D.T.
Shareholders as of the close of business on March 7,
2022, may attend the meeting by visiting
www.virtualshareholdermeeting.com/WWW2022.
A Special Offer for Our Shareholders
We encourage you to experience our brands for
yourself. Shareholders are invited to take advantage
of a special 30% discount on Company products.
Exclusions and limitations may apply. Please contact
a member of our Consumer Relations team at the
special Wolverine Worldwide shareholder toll-free
number, 1-866-889-3151, to receive more information
about this offer.
A member of our Consumer Relations team can assist
shareholders with placing an order for any of our
Company products available at one of our branded
websites:
Batesfootwear.com | Catfootwear.com | Chacos.com
Harley-davidsonfootwear.com | Hushpuppies.com
Hytest.com | Keds.com | Merrell.com
Onlineshoes.com | Saucony.com | Sperry.com
Wolverine.com
Corporate Headquarters
9341 Courtland Drive, N.E.
Rockford, Michigan 49351
Telephone 616.866.5500
Common Stock Listing
New York Stock Exchange
(Symbol: WWW)
Independent Registered
Public Accounting Firm
Ernst & Young, LLP
Registrar and Transfer Agent
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
Telephone: 877.581.5548
Investor Relations
Michael D. Stornant
Executive Vice President,
Chief Financial Officer and Treasurer
BATES®, CHACO®, HUSH PUPPIES®, HYTEST®, KEDS®,
MERRELL®, SAUCONY®, SPERRY®, SWEATY BETTY®,
WOLVERINE®, and related design marks are registered and
unregistered trademarks of Wolverine World Wide, Inc. or
its subsidiaries.
CAT, CATERPILLAR, and related design marks are registered
trademarks of Caterpillar Inc. HARLEY, HARLEY-DAVIDSON,
and related design marks are registered trademarks of H-D
U.S.A., LLC. Cat Footwear and Harley-Davidson Footwear
are produced under license by Wolverine World Wide, Inc.
Other trademarks and design marks are properties of their
respective owners.
©2022 Wolverine World Wide, Inc. All rights reserved.
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