UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-06024

WOLVERINE WORLD WIDE, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		38-1185150
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)
9341 Courtland Drive, Rockford, Michigan		49351
(Address of Principal Executive Offices)		(Zip Code)

(616) 866-5500

(Registrant’s Telephone Number, Including Area Code)

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

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

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

There were 62,452,892 shares of Common Stock, $1 par value, outstanding as of July 24, 2009, of which 13,163,074 shares are held as Treasury Stock.

 

 

TABLE OF CONTENTS

Part I. Financial Information		5
Item 1. Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosure About Market Risk		28
Item 4. Controls and Procedures		29
Part II. Other Information		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 4. Submission of Matters to a Vote of Securities Holders		31
Item 6. Exhibits		32
Signatures		32
Exhibit 31.1
Exhibit 31.2
Exhibit 32

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about, among other things, the footwear business, worldwide economics and Wolverine World Wide, Inc. (the “Company”) itself. Forward-looking statements include, without limitation, those related to:

•

future revenue, earnings, margins, growth, cash flows, operating measurements, tax rates and tax benefits;

•

expected economic returns;

•

projected 2009 operating results, restructuring and other transition costs and dividend rates;

•

future share repurchase activity;

•

the effect of new accounting rules and guidance;

•

future brand positioning;

•

seasonal sales patterns and capital requirements;

•

ability to arrange adequate alternative sources of supply;

•

the outcome of litigation;

•

achievement of the Company vision;

•

future pension expenses, contributions and costs;

•

future marketing investments;

•

the ability to successfully extend into new lines or categories of products, including the extension into Merrell® Apparel;

•

the ability to integrate acquired brands or businesses, including the acquired Chaco® Footwear and CusheTM Footwear businesses;

•

future growth or success in specific countries, categories or market sectors;

•

foreign exchange fluctuations, including volatility of the U.S. dollar versus the British pound, euro, Canadian dollar and other currencies;

•

liquidity;

•

capital resources; and

•

market risk.

In addition, words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Risk Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

Risk Factors include, but are not limited to:

•

uncertainties relating to changes in demand for the Company’s products;

•

changes in consumer preferences or spending patterns;

•

changes in local, domestic or international economic and market conditions;

•

the impact of competition and pricing by the Company’s competitors;

•

the cost and availability of inventories, services, labor and equipment furnished to the Company;

•

the ability of the Company to manage and forecast its growth and inventories;

•

increased costs of future pension funding requirements;

•

changes in duty structures in countries of import and export;

•

changes in interest rates, tax laws, duties, tariffs, quotas or applicable assessments;

•

foreign currency fluctuation in valuations compared to the U.S. dollar;

•

changes in monetary controls and valuations of the Chinese yuan and the relative value to the U.S. dollar;

•

the risk of doing business in developing countries and economically volatile areas;

•

the cost and availability of contract manufacturers;

•

the cost and availability of raw materials, including leather and petroleum based materials;

•

changes in planned consumer demand or at-once orders;

•

loss of significant customers;

•

bankruptcies of significant vendors or customers;

•

customer order cancellations;

•

the exercise of future purchase options by the U.S. Department of Defense on previously awarded contracts;

•

the impact of a global recession on demand for the Company’s products;

•

the impact of credit risk on the Company’s suppliers, distributors and customers;

•

the success of new business initiatives, including apparel initiatives;

•

changes in business strategy or development plans;

•

integration of operations of newly acquired businesses;

•

relationships with international distributors and licensees;

•

the ability to secure and protect trademarks, patents and other intellectual property;

•

technological developments;

•

the ability to attract and retain qualified personnel;

•

the size and growth of footwear markets;

•

service interruptions at shipping and receiving ports;

•

changes in the amount or severity of inclement weather;

•

changes due to the growth of Internet commerce;

•

popularity of particular designs and categories of footwear;

•

the Company’s ability to adapt and compete in global apparel and accessory markets;

•

the ability to retain rights to brands licensed by the Company;

•

the impact of the Company’s 2009 restructuring plan;

•

the Company’s ability to meet at-once orders;

•

changes in government and regulatory policies;

•

retail buying patterns;

•

consolidation in the retail sector; and

•

the acceptance of U.S. brands in international markets.

Additionally, concerns regarding acts of terrorism, the war in the Middle East, and subsequent events have created significant global economic and political uncertainties that may have material and adverse effects on consumer demand, foreign sourcing of footwear, shipping and transportation, product imports and exports and the sale of products in foreign markets. These matters are representative of the Risk Factors that could cause a difference between an ultimate actual outcome and the potential outcome described in a forward-looking statement. Historical operating results are not necessarily indicative of the results that may be expected in the future. The Risk Factors included here are not exhaustive. Investors should review the Risk Factors identified in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009. Other Risk Factors exist, and new Risk Factors emerge from time-to-time, that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Furthermore, the Company undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets
(Thousands of dollars)

		June 20,				January 3,				June 14,
		2009				2009				2008
		(Unaudited)				(Audited)				(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	79,171			$	89,502			$	77,923
Accounts receivable, less allowances
June 20, 2009 — $14,021
January 3, 2009 — $15,161
June 14, 2008 — $14,442			182,881				167,949				195,572
Inventories:
Finished products			169,516				177,801				157,666
Raw materials and work in process			14,145				18,976				14,065
			183,661				196,777				171,731
Deferred income taxes			10,780				8,127				10,741
Prepaid expenses and other current assets			12,473				11,487				12,647
TOTAL CURRENT ASSETS			468,966				473,842				468,614
PROPERTY, PLANT AND EQUIPMENT
Gross cost			302,348				298,438				292,977
Less accumulated depreciation			224,350				212,681				208,589
			77,998				85,757				84,388
OTHER ASSETS
Goodwill and other non-amortizable intangibles			55,755				41,567				47,858
Cash surrender value of life insurance			37,247				35,531				33,735
Pension assets			—				—				19,110
Other			27,796				28,083				9,437
			120,798				105,181				110,140
TOTAL ASSETS		$	667,762			$	664,780			$	663,142

The accompanying notes are an integral part of the consolidated condensed financial statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets — continued
(Thousands of dollars, except share data)

		June 20,				January 3,				June 14,
		2009				2009				2008
		(Unaudited)				(Audited)				(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	30,826			$	45,320			$	49,599
Accrued salaries and wages			18,558				22,702				15,825
Accrued pension liabilities			2,044				28,144				1,828
Restructuring reserve			3,115				—				—
Other accrued liabilities			61,636				35,658				57,563
Current maturities of long-term debt			549				5				10,725
Revolving credit agreement			34,800				59,500				30,500
TOTAL CURRENT LIABILITIES			151,528				191,329				166,040
Long-term debt (less current maturities)			1,094				—				—
Deferred compensation			6,108				7,714				8,023
Accrued pension liabilities			64,582				34,777				24,319
Other non-current liabilities			1,999				1,038				1,091
STOCKHOLDERS’ EQUITY
Common Stock — par value $1, authorized 160,000,000 shares; shares issued (including shares in treasury):
June 20, 2009 — 62,427,269 shares
January 3, 2009 — 61,655,814 shares
June 14, 2008 — 61,589,455 shares			62,427				61,656				61,589
Additional paid-in capital			69,037				64,696				57,619
Retained earnings			673,713				666,027				621,391
Accumulated other comprehensive income (loss)			(37,556	)			(42,834	)			22,133
Cost of shares in treasury:
June 20, 2009 — 13,163,074 shares
January 3, 2009 — 12,748,721 shares
June 14, 2008 — 11,916,265 shares			(325,170	)			(319,623	)			(299,063	)
TOTAL STOCKHOLDERS’ EQUITY			442,451				429,922				463,669
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	667,762			$	664,780			$	663,142

The accompanying notes are an integral part of the consolidated condensed financial statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Operations
(Thousands of dollars, except per share data)
(Unaudited)

		12 Weeks Ended								24 Weeks Ended
		June 20,				June 14,				June 20,				June 14,
		2009				2008				2009				2008
Revenue		$	246,438			$	267,362			$	501,762			$	555,600
Cost of products sold			153,380				164,963				303,441				331,640
Restructuring and other transition costs			1,018				—				3,338				—
GROSS PROFIT			92,040				102,399				194,983				223,960
Selling, general and administrative expenses			72,823				76,511				148,143				161,803
Restructuring and other transition costs			6,901				—				19,039				—
Operating expenses			79,724				76,511				167,182				161,803
OPERATING INCOME			12,316				25,888				27,801				62,157
Other expenses (income):
Interest expense			209				678				430				1,164
Interest income			(90	)			(376	)			(222	)			(799	)
Other (income) expense			520				312				412				879
			639				614				620				1,244
EARNINGS BEFORE INCOME TAXES			11,677				25,274				27,181				60,913
Income taxes			3,771				8,462				8,780				20,400
NET EARNINGS		$	7,906			$	16,812			$	18,401			$	40,513
Net earnings per share:
Basic		$	0.16			$	0.34			$	0.38			$	0.81
Diluted		$	0.16			$	0.33			$	0.37			$	0.79
Cash dividends per share		$	0.11			$	0.11			$	0.22			$	0.22

The accompanying notes are an integral part of the consolidated condensed financial statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows
(Thousands of dollars)
(Unaudited)

		24 Weeks Ended
		June 20,				June 14,
		2009				2008
OPERATING ACTIVITIES
Net earnings		$	18,401			$	40,513
Adjustments necessary to reconcile net earnings to net cash provided by operating activities:
Depreciation			6,571				8,552
Amortization			704				476
Deferred income taxes			2				100
Stock-based compensation expense			4,033				3,913
Excess tax benefits from stock-based compensation			257				(1,320	)
Pension			3,705				(895	)
Restructuring and other transition costs			22,378				—
Cash payments related to restructuring			(11,662	)			—
Other			(9,322	)			2,702
Changes in operating assets and liabilities:
Accounts receivable			(9,052	)			(16,413	)
Inventories			16,096				(6,010	)
Other operating assets			(631	)			(689	)
Accounts payable and other liabilities			723				9,218
Net cash provided by operating activities			42,203				40,147
INVESTING ACTIVITIES
Business acquisitions			(7,954	)			—
Additions to property, plant and equipment			(4,937	)			(7,988	)
Other			(1,063	)			(2,766	)
Net cash used in investing activities			(13,954	)			(10,754	)
FINANCING ACTIVITIES
Net borrowings (payments) under revolver			(24,700	)			30,495
Payments of capital lease obligations			(3	)			—
Cash dividends paid			(10,729	)			(10,034	)
Purchase of common stock for treasury			(6,195	)			(54,292	)
Proceeds from shares issued under stock incentive plans			1,553				4,287
Excess tax benefits from stock-based compensation			(257	)			1,320
Net cash used in financing activities			(40,331	)			(28,224	)
Effect of foreign exchange rate changes			1,751				667
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(10,331	)			1,836
Cash and cash equivalents at beginning of the period			89,502				76,087
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD		$	79,171			$	77,923

The accompanying notes are an integral part of the consolidated condensed financial statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements
June 20, 2009 and June 14, 2008

1. Summary of Significant Accounting Policies

NATURE OF OPERATIONS

Wolverine World Wide, Inc. is a leading designer, manufacturer and marketer of a broad range of quality casual shoes, performance outdoor footwear, apparel, work shoes and boots, and uniform shoes and boots. The Company’s global portfolio of owned and licensed brands includes: Bates^®, Cat^® Footwear, Chaco^®, Cushe^TM, Harley-Davidson^® Footwear, Hush Puppies^®, HyTest^®, Merrell^®, Patagonia^® Footwear, Sebago^®, Soft Style^®, Wolverine^®, and through June 30, 2008, Stanley^® Footgear. Licensing programs are utilized to extend the global reach of the Company’s owned brands. The Company also operates a retail division to market its brands and branded footwear and apparel from other manufacturers; a leathers division that markets Wolverine Performance Leathers™; and a pigskin procurement operation.

BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for a complete presentation of the financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included in the accompanying financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009.

REVENUE RECOGNITION

Revenue is recognized on the sale of products manufactured or sourced by the Company when the related goods have been shipped, legal title has passed to the customer and collectibility is reasonably assured. Revenue generated through programs with licensees and distributors involving products bearing the Company’s trademarks is recognized as earned according to stated contractual terms upon either the purchase or shipment of branded products by licensees and distributors.

The Company records provisions against gross revenue for estimated stock returns and cash discounts in the period when the related revenue is recorded. These estimates are based on factors that include, but are not limited to, historical stock returns, historical discounts taken and analysis of credit memorandum activity.

COST OF PRODUCTS SOLD

Cost of products sold for the Company’s operations include the actual product costs, including inbound freight charges, purchasing, sourcing, inspection and receiving costs. Warehousing costs are included in selling, general and administrative expenses.

SEASONALITY

The Company’s business is subject to seasonal influences and the Company’s fiscal year has twelve weeks in each of the first three quarters and sixteen or seventeen weeks in the fourth quarter. Both factors can cause significant differences in revenue, earnings and cash flows from quarter to quarter; however, the differences have followed a consistent pattern in previous years.

RECLASSIFICATIONS

Certain prior period amounts on the consolidated condensed financial statements have been reclassified to conform to current period presentation. These reclassifications did not affect net earnings.

SUBSEQUENT EVENTS

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through July 30, 2009, the date the financial statements were issued.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

2. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (thousands of dollars, except share and per share data):

		12 Weeks Ended								24 Weeks Ended
		June 20,				June 14,				June 20,				June 14,
		2009				2008				2009				2008
Numerator:
Net earnings		$	7,906			$	16,812			$	18,401			$	40,513
Adjustment for earnings allocated to nonvested restricted common stock			(111	)			(189	)			(321	)			(460	)
Net earnings used in calculating basic earnings per share			7,795				16,623				18,080				40,053
Adjustment for earnings reallocated to nonvested restricted common stock			—				3				1				9
Net earnings used in calculating diluted earnings per share		$	7,795			$	16,626			$	18,081			$	40,062
Denominator:
Weighted average shares outstanding			49,087,819				49,571,763				49,001,869				49,969,742
Adjustment for nonvested restricted common stock			(689,497	)			(556,308	)			(854,248	)			(568,995	)
Shares used in calculating basic earnings per share			48,398,322				49,015,455				48,147,621				49,400,747
Effect of dilutive stock options			559,669				1,397,163				523,434				1,354,986
Shares used in calculating diluted earnings per share			48,957,991				50,412,618				48,671,055				50,755,733
Net earnings per share:
Basic		$	0.16			$	0.34			$	0.38			$	0.81
Diluted		$	0.16			$	0.33			$	0.37			$	0.79

Options to purchase 3,564,712 and 3,425,423 shares of common stock for the 12 and 24 weeks ended June 20, 2009, respectively, and 1,171,885 and 1,167,874 shares for the 12 and 24 weeks ended June 14, 2008, respectively, have not been included in the denominator for the computation of diluted earnings per share because the related exercise prices were greater than the average market price for the period and, therefore, they were anti-dilutive.

Effective January 4, 2009, the Company implemented the Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 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 as described in Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings per Share. Under the guidance of FSP EITF 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The application of this standard had no impact on basic or diluted net earnings per share for the 12 weeks ended June 20, 2009 or June 14, 2008. For the 24 weeks ended June 20, 2009 the application of this standard had no impact on basic net earnings per share and reduced diluted net earnings per share by $0.01. For the 24 weeks ended June 14, 2008, the application of this standard reduced basic net earnings per share by $0.01 and had no impact on diluted net earnings per share.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

3. Goodwill and Other Non-Amortizable Intangibles

The changes in the net carrying amounts of goodwill and trademarks are as follows (thousands of dollars):

		Goodwill				Trademarks				Total
Balance at June 14, 2008		$	38,850			$	9,008			$	47,858
Intangibles acquired			—				249				249
Foreign currency translation effects			(6,540	)			—				(6,540	)
Balance at January 3, 2009			32,310				9,257				41,567
Intangibles acquired			5,095				6,713				11,808
Foreign currency translation effects			2,380				—				2,380
Balance at June 20, 2009		$	39,785			$	15,970			$	55,755

The purchase price allocations related to the acquisitions of the Cushe^TM and Chaco^® brands are preliminary. See Note 11 for further discussion.

4. Comprehensive Income (Loss)

Comprehensive income (loss) represents net earnings and any revenue, expenses, gains and losses that, under accounting principles generally accepted in the United States, are excluded from net earnings and recognized directly as a component of stockholders’ equity.

The ending accumulated other comprehensive income (loss) is as follows (thousands of dollars):

		June 20,				January 3,				June 14,
		2009				2009				2008
Foreign currency translation adjustments		$	9,971			$	(872	)		$	34,070
Foreign currency cash flow hedge adjustments, net of taxes			(1,642	)			3,923				(827	)
Pension adjustments, net of taxes			(45,885	)			(45,885	)			(11,110	)
Accumulated other comprehensive income (loss)		$	(37,556	)		$	(42,834	)		$	22,133

The reconciliation from net earnings to comprehensive income is as follows (thousands of dollars):

		12 Weeks Ended								24 Weeks Ended
		June 20,				June 14,				June 20,				June 14,
		2009				2008				2009				2008
Net earnings		$	7,906			$	16,812			$	18,401			$	40,513
Other comprehensive income (loss):
Foreign currency translation adjustments			14,155				(1,916	)			10,843				(1,363	)
Change in fair value of foreign currency cash flow hedges, net of taxes			(6,102	)			(242	)			(5,565	)			1,228
Comprehensive income		$	15,959			$	14,654			$	23,679			$	40,378

5. Business Segments

The Company has one reportable segment that is engaged in manufacturing, sourcing, marketing, licensing, and distributing branded footwear, apparel, and accessories to the retail sector, including casual shoes, dress shoes, performance outdoor footwear, boots, uniform shoes, work shoes, and apparel and accessories. Revenue earned from the operations of this segment is derived from the sale of branded footwear and apparel to external customers as well as receipt of royalty income from the licensing of the Company’s trademarks and brand names to licensees and distributors. The business units comprising the branded footwear, apparel, and licensing segment manufacture or source, market, and distribute products in a similar manner. Branded footwear, apparel, and licensed products are distributed through wholesale channels and under licensing and distributor arrangements.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

The other business units in the following tables consist of the Company’s retail, leathers, and pigskin procurement operations. These other operations do not collectively form a reportable segment because their respective operations are dissimilar. The Company operated 93 retail stores and 22 consumer-direct internet sites at June 20, 2009 that sell Company-manufactured and sourced products, as well as footwear and apparel manufactured by unaffiliated companies. The other business units distribute products through retail and wholesale channels.

The Company measures segment profits as earnings before income taxes. The accounting policies used to determine profitability and total assets of the branded footwear, apparel, and licensing segment and other business units are the same as disclosed in Note 1.

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

		Branded
		Footwear,				Other
		Apparel and				Business
		Licensing				Units				Corporate				Consolidated
		12 Weeks Ended June 20, 2009
Revenue		$	218,139			$	28,299			$	—			$	246,438
Intersegment revenue			10,557				332				—				10,889
Earnings (loss) before income taxes			19,166				(1,660	)			(5,829	)			11,677
Total assets			516,354				45,228				106,180				667,762
		24 Weeks Ended June 20, 2009
Revenue		$	453,223			$	48,539			$	—			$	501,762
Intersegment revenue			21,919				1,468				—				23,387
Earnings (loss) before income taxes			48,567				(10,498	)			(10,888	)			27,181
Total assets			516,354				45,228				106,180				667,762

		Branded
		Footwear,				Other
		Apparel and				Business
		Licensing				Units				Corporate				Consolidated
		12 Weeks Ended June 14, 2008
Revenue		$	236,365			$	30,997			$	—			$	267,362
Intersegment revenue			9,315				850				—				10,165
Earnings (loss) before income taxes			27,502				1,688				(3,916	)			25,274
Total assets			484,182				52,942				126,018				663,142
		24 Weeks Ended June 14, 2008
Revenue		$	503,615			$	51,985			$	—			$	555,600
Intersegment revenue			21,462				1,988				—				23,450
Earnings (loss) before income taxes			68,569				805				(8,461	)			60,913
Total assets			484,182				52,942				126,018				663,142

6. Financial Instruments and Risk Management

The Company follows SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which, among other things, establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. As of June 20, 2009 and June 14, 2008, a liability of $3,651,000 and an asset of $389,000, respectively, have been recognized for the fair value of the Company’s foreign exchange contracts. In accordance with SFAS No. 157, these liabilities fall within Level 2 of the fair value hierarchy. The Company did not have any additional assets or liabilities that were measured at fair value on a recurring basis at June 20, 2009.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

Effective January 4, 2009, the Company adopted the provisions of FSP FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”). FSP 157-2 delayed the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Effective January 4, 2009, the Company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment of SFAS No. 133, (“SFAS No. 161”), which is intended to improve transparency in financial reporting. As required by SFAS No. 161, the Company enhanced its disclosure relating to derivative instruments and hedging activities and their effects on the Company’s financial position, financial performance and cash flows.

The Company follows Statement SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS Nos. 137, 138, and 161, which requires that all derivative instruments be recorded on the consolidated condensed balance sheets at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company utilizes foreign currency forward exchange contracts to manage the volatility associated with foreign currency inventory purchases made by non-U.S. wholesale operations in the normal course of business. At June 20, 2009 and June 14, 2008, foreign currency forward exchange contracts with a notional value of $72,315,000 and $56,398,000, respectively, were outstanding to purchase U.S. dollars with maturities ranging up to 308 days. These contracts have been designated as cash flow hedges.

The fair value of the foreign currency forward exchange contracts represents the estimated receipts or payments necessary to terminate the contracts. Hedge effectiveness is evaluated by the hypothetical derivative method. Any hedge ineffectiveness is reported within the cost of products sold caption of the consolidated condensed statements of operations. Hedge ineffectiveness was not material to the consolidated condensed financial statements for the quarters ended June 20, 2009 and June 14, 2008. If, in the future, the foreign exchange contracts are determined to be ineffective hedges or terminated before their contractual termination dates, the Company would be required to reclassify into earnings all or a portion of the unrealized amounts related to the cash flow hedges that are currently included in accumulated other comprehensive income (loss) within stockholders’ equity. For the 12 weeks ended June 20, 2009 and June 14, 2008, the Company recognized a gain of $333,000 and a loss of $675,000, respectively, in accumulated other comprehensive income (loss) related to the effective portion of its foreign exchange contracts. For the 12 weeks ended June 20, 2009 and June 14, 2008, the Company reclassified a loss of $2,742,000 and a gain of $424,000, respectively, from accumulated other comprehensive income (loss) into cost of products sold related to the effective portion of its foreign exchange contracts designated and qualifying as cash flow hedges. For the 24 weeks ended June 20, 2009 and June 14, 2008, the Company recognized a gain of $3,167,000 and a loss of $1,526,000, respectively, in accumulated other comprehensive income (loss) related to the effective portion of its foreign exchange contracts. For the 24 weeks ended June 20, 2009 and June 14, 2008, the Company reclassified a loss of $3,986,000 and a gain of $1,310,000, respectively, from accumulated other comprehensive income (loss) into cost of products sold related to the effective portion of its foreign exchange contracts designated and qualifying as cash flow hedges.

The Company’s other financial instruments consist of cash and cash equivalents, accounts and notes receivable, accounts and notes payable and long-term debt. The Company’s estimate of the fair values of these financial instruments approximates their carrying amounts at June 20, 2009. The carrying value of these financial assets and liabilities approximates fair value due to their short maturities and because interest rates approximate current market rates for debt. The Company does not hold or issue financial instruments for trading purposes.

The Company does not generally require collateral or other security on trade accounts and notes receivable.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

7. Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of SFAS No. 123(R), Share-Based Payment. The Company recognized compensation costs of $2,486,000 and $4,033,000, respectively, and related income tax benefits of $553,000 and $918,000, respectively, for grants under its stock-based compensation plans in the statements of operations for the 12 and 24 weeks ended June 20, 2009. For the 12 and 24 weeks ended June 14, 2008, the Company recognized compensation costs of $1,957,000 and $3,913,000, respectively, and related income tax benefits of $399,000 and $799,000, respectively, for grants under its stock-based compensation plans.

Stock-based compensation expense recognized in the consolidated condensed statements of operations for the 12 and 24 weeks ended June 20, 2009 and June 14, 2008 has been reduced for estimated forfeitures, as it is based on awards ultimately expected to vest. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.

The Company estimated the fair value of employee stock options on the date of grant using the Black-Scholes model. The estimated weighted-average fair value for each option granted during the 24 weeks ended June 20, 2009 and June 14, 2008 was $4.36 and $5.68 per share, respectively, with the following weighted-average assumptions:

		12 Weeks Ended								24 Weeks Ended
		June 20,				June 14,				June 20,				June 14,
		2009				2008				2009				2008
Expected market price volatility (1)			36.4	%			29.8	%			34.8	%			28.7	%
Risk-free interest rate (2)			1.6	%			2.6	%			1.6	%			2.5	%
Dividend yield (3)			2.0	%			1.7	%			1.8	%			1.6	%
Expected term (4)		4 years				4 years				4 years				4 years

The Company issued 120,200 and 816,069 shares of common stock in connection with the exercise of stock options and new restricted stock grants during the 12 and 24 weeks ended June 20, 2009, respectively. The Company cancelled 7,850 and 11,834 shares of common stock for restricted stock awards as a result of forfeitures during the 12 and 24 weeks ended June 20, 2009, respectively.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

8. Pension Expense

A summary of net pension and Supplemental Executive Retirement Plan costs recognized by the Company is as follows (thousands of dollars):

		12 Weeks Ended								24 Weeks Ended
		June 20,				June 14,				June 20,				June 14,
		2009				2008				2009				2008
Service cost pertaining to benefits earned during the period		$	1,077			$	1,121			$	2,155			$	2,243
Interest cost on projected benefit obligations			2,839				2,634				5,677				5,268
Expected return on pension assets			(2,518	)			(3,211	)			(5,036	)			(6,423	)
Net amortization loss			2,214				915				4,428				1,831
Net pension expense		$	3,612			$	1,459			$	7,224			$	2,919

9. Litigation and Contingencies

The Company is involved in various environmental claims and other legal actions arising in the normal course of business. The environmental claims include sites where the U.S. Environmental Protection Agency has notified the Company that it is a potentially responsible party with respect to environmental remediation. These remediation claims are subject to ongoing environmental impact studies, assessment of remediation alternatives, allocation of costs between responsible parties, and concurrence by regulatory authorities and have not yet advanced to a stage where the Company’s liability is fixed. However, after taking into consideration legal counsel’s evaluation of all actions and claims against the Company, management is currently of the opinion that their outcome will not have a material adverse effect on the Company’s consolidated financial condition, results of operations, or cash flows.

The Company is involved in routine litigation incidental to its business and is a party to legal actions and claims, including, but not limited to, those related to employment and intellectual property. 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 liabilities that have been recorded along with applicable insurance, it is currently the opinion of the Company’s management that these items will not have a material adverse effect on the Company’s consolidated financial condition, results of operations, or cash flows.

Pursuant to certain of the Company’s lease agreements, the Company has provided financial guarantees to third parties in the form of indemnification provisions. These provisions require the Company to indemnify and reimburse the third parties for costs, including but not limited to adverse judgments in lawsuits, taxes and operating costs. The terms of the guarantees are equal to the terms of the related lease agreements. The Company is not able to calculate the maximum potential amount of future payments it could be required to make under these guarantees, as the potential payment is dependent upon the occurrence of future unknown events.

The Company has future minimum royalty and other obligations due under the terms of certain licenses held by the Company. These minimum future obligations are as follows (thousands of dollars):

		2009				2010				2011				2012				2013				Thereafter
Minimum royalties		$	1,328			$	1,544			$	1,772			$	1,825			$	1,880			$	3,832
Minimum advertising			2,121				2,208				2,275				2,343				2,413				1,125

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

Minimum royalties are based on both fixed obligations and assumptions related to 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 $756,000 and $1,345,000, respectively, for the 12 and 24 weeks ended June 20, 2009. The Company has met the minimum royalty requirements for 2009. For the 12 and 24 weeks ended June 14, 2008, the Company incurred royalty expense of $668,000 and $1,354,000, respectively.

The terms of certain license agreements also require the Company to make advertising expenditures based on the level of sales. In accordance with these agreements, the Company incurred advertising expense of $492,000 and $1,049,000, respectively, for the 12 and 24 weeks ended June 20, 2009. For the 12 and 24 weeks ended June 14, 2008, the Company incurred advertising expense of $877,000 and $1,584,000, respectively.

10. Restructuring and Other Transition Costs

On January 8, 2009 the Company announced a strategic restructuring plan designed to create significant operating efficiencies, improve its supply chain and create a stronger global brand platform. The Company plans to consolidate key manufacturing, distribution and global operations functions. The costs to implement these programs are expected to be incurred throughout 2009 and are estimated to range from $33,000,000 to $36,000,000. These estimates are preliminary and differences may arise between these estimates and actual costs to the Company. The Company incurred restructuring and other transition costs of $7,919,000 ($5,361,000 on an after-tax basis), or $0.11 per diluted share and $22,377,000 ($15,149,000 on an after-tax basis), or $0.31 per diluted share, for the 12 and 24 weeks ending June 20, 2009, respectively.

The following is a summary of the restructuring and other transition costs recorded as of June 20, 2009 (thousands of dollars):

		12 Weeks Ended				24 Weeks Ended
		June 20, 2009				June 20, 2009
Restructuring		$	5,159			$	19,204
Other transition costs			2,760				3,173
Total restructuring and other transition costs		$	7,919			$	22,377

Restructuring

The Company incurred restructuring charges of $5,159,000 ($3,493,000 on an after-tax basis), or $0.07 per diluted share, in the second quarter of 2009. The Company incurred restructuring charges of $19,204,000 ($13,001,000 on an after-tax basis), or $0.27 per diluted share, for the first two quarters of 2009.

The following is a summary of the activity with respect to a reserve established by the Company in connection with the restructuring plan, by category of costs (thousands of dollars):

						Non-cash
		Severance and				charges related								Consulting and
		employee				to property and				Facility exit				other
		related				equipment				Costs				restructuring				Total
Balance at January 3, 2009		$	—			$	—			$	—			$	—			$	—
Charges incurred			8,853				4,570				530				92				14,045
Amounts paid or utilized			(3,757	)			(4,570	)			—				(69	)			(8,396	)
Balance at March 28, 2009		$	5,096			$	—			$	530			$	23			$	5,649
Charges incurred			2,118				1,626				159				1,256				5,159
Amounts paid or utilized			(4,830	)			(1,626	)			(23	)			(1,214	)			(7,693	)
Balance at June 20, 2009		$	2,384			$	—			$	666			$	65			$	3,115

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

Other Transition Costs

Incremental costs incurred related to the restructuring initiative that do not qualify as restructuring costs under the provisions of SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS No. 146”) have been included in the Company’s consolidated condensed statements of operations on the line titled “Restructuring and other transition costs”. These primarily include costs related to inventory markdowns resulting from closure of facilities, new employee training and transition to outsourced services. All costs included in this caption were solely related to the transition and implementation of the restructuring initiative and do not include ongoing business operating costs. Other transition costs for the 12 and 24 weeks ended June 20, 2009, were $2,760,000 ($1,869,000 on an after-tax basis) and $3,173,000 ($2,148,000 on an after-tax basis), respectively.

11. Business Acquisitions

On January 8, 2009 the Company announced the acquisition of the Cushe^TM footwear brand. The purchase price consisted of cash of $1,641,000, a $1,641,000 note payable over three years and contingent consideration of $932,000. The Company acquired assets preliminarily valued at $304,000, consisting primarily of property, plant, and equipment and inventory, and assumed operating liabilities valued at $322,000, resulting in goodwill and intangibles of $4,232,000 at June 20, 2009. Amounts relating to the acquisition are subject to changes in foreign currency exchange rates.

On January 22, 2009, the Company acquired the Chaco^® footwear brand. The Company acquired assets preliminarily valued at $3,912,000, consisting primarily of accounts receivable and inventory, were acquired for cash of $6,910,000 and assumed operating liabilities valued at $4,547,000, resulting in goodwill and intangibles recorded at June 20, 2009 of $7,545,000.

Using the purchase method of accounting, the purchase price in each of these acquisitions is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the effective date of the acquisition. The excess purchase price over the assets and liabilities is recorded as goodwill. The Company is in the process of obtaining third-party valuations of certain intangible assets; thus, the provisional measurements of intangible assets and goodwill are subject to change. Any change in the estimated fair value of the net assets of the acquired brands will change the amount of the purchase price allocable to goodwill. Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to the Company’s consolidated results of operations. Both of the brands have been consolidated into the Company’s results of operations since their respective acquisition dates.

12. New Accounting Standards

On December 30, 2008, the FASB issued FSP SFAS No. 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (“FSP SFAS No. 132(R)-1”). This FSP amends FASB Statement No. 132 (Revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits (“SFAS No. 132(R)”), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosures about plan assets required by FSP SFAS No. 132(R)-1 shall be provided for fiscal years ending after December 15, 2009 (fiscal 2009 for the Company). Upon initial application, the additional disclosure under FSP SFAS No. 132(R)-1 is not required for earlier periods that are presented for comparative purposes. Earlier application of the provisions of FSP SFAS No. 132(R)-1 is permitted. Since FSP SFAS No. 132(R)-1 requires only additional disclosures concerning plan assets, adoption of FSP SFAS No. 132(R)-1 will not affect the Company’s consolidated financial condition, results of operations or cash flows.

In April 2009, the FASB issued Staff Position FAS No. 107-1 and Accounting Principles Bulletin (“APB”) No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP No. 107-1 and APB No. 28-1”), to require, on an interim basis, disclosures about the fair value of financial instruments for public entities. FSP No. 107-1 and APB No. 28-1 is expected to improve the transparency and quality of information provided to financial statement users by increasing the frequency of disclosures about fair value for interim periods as well as annual periods. FSP No. 107-1 and APB No. 28-1 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company has been disclosing this information on an interim basis and the adoption did not affect the Company’s consolidated financial condition, results of operations, or cash flows.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements — continued
June 20, 2009 and June 14, 2008

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”). The objective of this statement is to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165, among other things, sets forth the period after the balance sheet date during which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures an entity should make about events or transactions that occurred after the balance sheet date. In accordance with this statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. The Company adopted SFAS No. 165 in the second quarter of 2009 and the adoption did not affect the Company’s consolidated financial condition, results of operations, or cash flows.

In June 2009, the FASB issued SFAS No. 168, The “FASB Accounting Standards Codification^TM” and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162 (“SFAS No. 168”). SFAS No. 168 establishes the FASB Accounting Standards Codification^TM (Codification) as the source of authoritative U.S. generally accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS No. 168 and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009 (year ending January 2, 2010 for the Company).

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

BUSINESS OVERVIEW

Wolverine World Wide, Inc. (the “Company”) is a leading global marketer of branded footwear, apparel and accessories. The Company’s business strategy is to market a portfolio of lifestyle brands that will: “Excite Consumers Around the World with Innovative Footwear and Apparel that Bring Style to Purpose.” The Company intends to pursue this strategy by offering innovative products and compelling brand propositions, delivering supply chain excellence and operating efficiency, complementing its footwear brands with strong apparel and accessories offerings, and building a more substantial global consumer-direct footprint.

The Company expects that 2009 will continue to be a difficult economic environment, with unpredictable consumer spending. Furthermore, foreign exchange volatility has had a negative impact on the Company’s results thus far in 2009, and the Company cannot predict how the U.S. dollar will fare against the British pound, euro and Canadian dollar over the balance of 2009. In light of the current challenging economic conditions, the Company is taking actions through its strategic restructuring plan, its recent acquisitions and a thorough examination of all sources of profit growth. While 2009 will likely present challenges, the Company has planned for tough market conditions and believes that it has taken appropriate measures to combat global uncertainty. The Company remains focused on building strong global lifestyle brands that have a competitive advantage, even in a challenging worldwide economy.

FINANCIAL HIGHLIGHTS

The following represents selected financial performance measures for the second quarter of 2009:

	•		Revenue for the second quarter of 2009 was $246.4 million, a 7.8% decrease over second quarter 2008 revenue of $267.4 million, with the substantial strengthening of the U.S. dollar contributing to more than half of the revenue decline.
	•		Diluted earnings per share for the second quarter of 2009 were $0.16 per share compared to $0.33 per share for the same quarter in the prior year, with non-recurring restructuring and other transition costs reducing earnings by $0.11 per share.
	•		Accounts receivable decreased 6.5% in the second quarter of 2009 compared to the second quarter of 2008 on a 7.8% decrease in revenue.
	•		Inventory increased 6.9% in the second quarter of 2009 compared to the second quarter of 2008, driven by additional inventory from recently acquired brands, the strategic pre-buy of core products prior to anticipated cost increases, a planned increase in inventory for the Wolverine Leathers business as it transitioned to an outsource model, and higher product costs from third party factories.
	•		The Company ended the second quarter of 2009 with $79.2 million of cash on hand and interest-bearing debt of $36.4 million.
	•		The Company declared a quarterly cash dividend of $0.11 per share in the second quarter of 2009, payable on August 3, 2009 to stockholders of record on July 1, 2009.

RECENT DEVELOPMENTS

Strategic Restructuring Plan

On January 8, 2009, the Company announced a strategic restructuring plan. This plan will allow the company to create significant operating efficiencies, improve its supply chain, and create a stronger global platform.

The Company incurred non-recurring restructuring and other transition costs of approximately $7.9 million, or $0.11 per diluted share, in the second quarter of 2009.

The total implementation costs to achieve the goals of the restructuring plan are estimated in the range of $33 million to $36 million. Approximately $8 million to $9 million of the total estimate represents non-cash charges. Year-to-date through the second quarter, $22.4 million of restructuring and other transition costs have been incurred. It is currently estimated that approximately $6 million to $7 million of restructuring and other transition costs will be incurred in the third quarter of 2009 and approximately $5 million to $6 million will be incurred in the fourth quarter of 2009. Continuing annualized pretax benefits once all initiatives are fully implemented are estimated to be $17 million to $19 million. The Company estimates that approximately $3.5 million of benefits relating to the strategic restructuring plan are reflected in the second quarter’s results and $5.4 million have been realized year-to-date. The strategic restructuring plan is expected to be completed by the end of 2009.

The following is a discussion of the Company’s results of operations and liquidity and capital resources for the second quarter of 2009. This section should be read in conjunction with the consolidated condensed financial statements and notes.

RESULTS OF OPERATIONS — SECOND QUARTER 2009 COMPARED TO SECOND QUARTER 2008

FINANCIAL SUMMARY — SECOND QUARTER 2009 VERSUS SECOND QUARTER 2008

		2009								2008								Change
						% of								% of
(Millions of dollars, except per share data)		$				Total				$				Total				$				%
Revenue
Branded footwear, apparel and licensing		$	218.1				88.5	%		$	236.4				88.4	%		$	(18.3	)			(7.7	%)
Other business units			28.3				11.5	%			31.0				11.6	%			(2.7	)			(8.8	%)
Total Revenue		$	246.4				100.0	%		$	267.4				100.0	%		$	(21.0	)			(7.8	%)
						% of								% of
		$				Revenue				$				Revenue				$				%
Gross Profit
Branded footwear, apparel and licensing		$	81.9				37.6	%		$	92.1				39.0	%		$	(10.2	)			(11.0	%)
Other business units			10.1				35.7	%			10.3				33.2	%			(0.2	)			(1.8	%)
Total Gross Profit		$	92.0				37.3	%		$	102.4				38.3	%		$	(10.4	)			(10.1	%)
Selling, General and Administrative expenses		$	72.8				29.6	%		$	76.5				28.6	%		$	(3.7	)			(4.8	%)
Restructuring and other transition costs			6.9				2.8	%			—				0.0	%			6.9				100.0	%
Operating Expenses		$	79.7				32.4	%		$	76.5				28.6	%		$	3.2				4.2	%
Interest expense — net		$	0.1				0.0	%		$	0.3				0.1	%		$	(0.2	)			(60.6	%)
Other expense — net			0.5				0.2	%			0.3				0.1	%			0.2				66.7	%
Earnings before income taxes		$	11.7				4.7	%		$	$25.3				9.5	%		$	(13.6	)			(53.8	%)
Net earnings		$	7.9				3.2	%			16.8				6.3	%		$	(8.9	)			(53.0	%)
Diluted earnings per share		$	0.16				—			$	0.33				—			$	(0.17	)			(51.5	%)

The Company has one reportable segment that is engaged in manufacturing, sourcing, marketing, licensing and distributing branded footwear, apparel and accessories. Within the branded footwear, apparel and licensing segment, the Company has identified four primary operating units, consisting of the Outdoor Group (consisting of the Merrell^®, Chaco^® and Patagonia^® Footwear brands), the Wolverine Footwear Group (consisting of the Wolverine^®, HyTest^®, Bates^® and through June 30, 2008, Stanley^® Footgear brands and certain private label branded products), the Heritage Brands Group (consisting of the Cat^® Footwear, Harley-Davidson^® Footwear and Sebago^® brands) and The Hush Puppies Company (consisting of the Hush Puppies^®, Soft Style^®, and Cushe^TM brands). The Company’s other business units, which do not collectively comprise a separate reportable segment, consist of Wolverine Retail and Wolverine Leathers (comprised of the leathers and procurement operations). The following is supplemental information on total revenue:

TOTAL REVENUE — SECOND QUARTER

		2009								2008								Change
						% of								% of
(Millions of dollars)		$				Total				$				Total				$				%
Outdoor Group		$	92.8				37.7	%		$	87.5				32.7	%		$	5.3				6.1	%
Wolverine Footwear Group			49.7				20.2	%			60.9				22.8	%			(11.2	)			(18.4	%)
Heritage Brands Group			45.0				18.3	%			52.3				19.5	%			(7.3	)			(13.8	%)
The Hush Puppies Company			27.1				11.0	%			33.1				12.4	%			(6.0	)			(18.3	%)
Other			3.5				1.3	%			2.6				1.0	%			0.9				34.0	%
Total branded footwear, apparel and licensing revenue		$	218.1				88.5	%		$	236.4				88.4	%		$	(18.3	)			(7.7	%)
Other business units			28.3				11.5	%			31.0				11.6	%			(2.7	)			(8.8	%)
Total revenue		$	246.4				100.0	%		$	267.4				100.0	%		$	(21.0	)			(7.8	%)

REVENUE

Revenue for the second quarter of 2009 decreased $21.0 million from the second quarter of 2008 to $246.4 million. The impact of translating foreign denominated revenue to U.S. dollars decreased revenue by $12.7 million as a result of the substantial strengthening of the U.S. dollar against the British pound, euro and Canadian dollar since the second quarter of 2008. Declines in unit volume, partially offset by price increases in selected brands, for the branded footwear, apparel and licensing operations, as discussed below, caused revenue to decrease $5.6 million. Revenue from the other business units decreased $2.7 million. International revenue represented 37.4% of total revenue in the second quarter of 2009 compared to 42.1% in the second quarter of 2008, with the decline resulting primarily from the stronger U.S. dollar.

The Outdoor Group generated revenue of $92.8 million for the second quarter of 2009, a $5.3 million increase from the second quarter of 2008. The Merrell^® brand’s revenue in the second quarter of 2009 decreased at a mid single-digit rate compared to the second quarter of 2008, as strong growth in the U.S. market was more than offset by the strengthening of the U.S. dollar and soft retail conditions in many of the brand’s other major markets. Patagonia^® Footwear’s revenue increased at a rate in the high thirties in the second quarter of 2009 compared to the second quarter of 2008, due primarily to strong sell-through of key product. Revenue from the recently acquired Chaco^® brand contributed to the group’s overall revenue growth in the quarter.

The Wolverine Footwear Group recorded $49.7 million in revenue for the second quarter of 2009, an $11.2 million decrease from the second quarter of 2008. Revenue for the Wolverine^® brand declined at a rate in the low teens over the prior year due to negative economic conditions in the work boot industries. Revenue from the Bates^® military and civilian uniform footwear business in the second quarter of 2009 declined from the second quarter of 2008 at a rate in the low twenties as a result of the expected reduction in purchases by the U.S. Department of Defense. HyTest^®’s revenue for the second quarter of 2009 declined at a mid forties rate from the second quarter of 2008 due to continued difficulties in the U.S. manufacturing sector and related workforce reductions, resulting in decreased demand for safety footwear products.

The Heritage Brands Group had revenue of $45.0 million in the second quarter of 2009, a $7.3 million decrease compared to the second quarter of 2008. Cat^® Footwear’s revenue in the second quarter of 2009 decreased at a rate in the mid twenties versus the prior year, reflecting the impact of the stronger U.S. dollar on the reported results of the brand’s extensive international operations. Harley-Davidson^® Footwear’s revenue grew in the second quarter of 2009 at a low single-digit rate compared to the second quarter of 2008 due primarily to strong performance in the U.S. market. The Sebago^® brand’s revenue also grew at a rate in the low single digits in the quarter due to increased sales in the international markets.

The Hush Puppies Company recorded revenue of $27.1 million in the second quarter of 2009, a $6.0 million decrease from the second quarter of 2008. Hush Puppies^® revenue in the second quarter of 2009 decreased at a rate in the high teens due primarily to bankruptcies and consolidations of key retailers caused by weaker consumer spending and the strengthening of the U.S. dollar compared to the second quarter of 2008. Soft Style^® experienced a revenue decline at a rate in the high forties in the quarter as a result of a weak retail environment. Revenue generated by the recently acquired Cushe^TM brand partially offset these revenue declines with a very modest contribution to the group’s revenue for the second quarter of 2009.

Within the Company’s other business units, Wolverine Retail’s revenue increased in the second quarter of 2009 at a mid single-digit rate compared to the second quarter of 2008. Wolverine Retail operated 93 retail stores worldwide at the end of the second quarter of 2009 compared to 91 at the end of the second quarter of 2008. Revenue from the Wolverine Leathers operation decreased at a mid twenties rate in the second quarter of 2009 compared to the second quarter of 2008 due to a decline in demand for its proprietary products.

GROSS MARGIN

The gross margin for the second quarter of 2009 of 37.3% was 100 basis points lower than gross margin for the second quarter of 2008. Non-recurring restructuring and other transition costs of $1.0 million included in cost of products sold in the second quarter of 2009 resulted in a 50 basis point decrease. The remainder of the decrease resulted from expected increases in product and freight costs during the quarter and increased sales of non-core, excess inventory at a reduced margin.

OPERATING EXPENSES

Operating expenses of $79.7 million for the second quarter of 2009 increased $3.2 million from $76.5 million for the second quarter of 2008. Non-recurring restructuring and other transition costs contributed $6.9 million to the increase, operating expenses associated with recently acquired brands contributed $2.4 million to the increase, and increased pension expense contributed $2.2 million to the increase. These increases were offset by the impact of foreign exchange of $3.7 million, lower general and administrative costs resulting from the Company’s restructuring and cost-savings initiatives of $1.9 million, as well as significant decreases in certain operating expenses that vary with revenue, such as selling and distribution costs.

INTEREST, OTHER AND TAXES

The change in net interest expense reflected lower outstanding amounts as a result of the repayment in full of the Company’s senior notes during the fourth quarter of 2008.

The change in other expense resulted primarily from the change in realized gains or losses on foreign denominated assets and liabilities.

The Company’s effective tax rate for the second quarter of 2009 was 32.3% compared to 33.5% for the second quarter of 2008. The reduced rate reflects a higher portion of earnings from foreign jurisdictions with lower tax rates, tax benefits from the strategic restructuring plan and the extension of the Federal research and development tax credit by the U.S. Congress in the fourth quarter of 2008.

NET EARNINGS AND EARNINGS PER SHARE

As a result of the revenue, gross margin and expense changes discussed above, the Company had net earnings of $7.9 million for the second quarter of 2009, compared to $16.8 million in the second quarter of 2008, a decrease of $8.9 million.

Basic net earnings per share decreased 52.9% in the second quarter of 2009 to $0.16 from $0.34 in the second quarter of 2008, and diluted net earnings per share decreased 51.5% in the second quarter of 2009 to $0.16 from $0.33 in the second quarter of 2008. The decrease attributable to lower net earnings is partially offset by fewer average shares outstanding in the second quarter of 2009 compared to the second quarter of 2008 as a result of repurchases of the Company’s common stock over the prior twelve months.

RESULTS OF OPERATIONS — FIRST TWO QUARTERS OF 2009 COMPARED TO FIRST TWO QUARTERS OF 2008

FINANCIAL SUMMARY — FIRST TWO QUARTERS OF 2009 VERSUS FIRST TWO QUARTERS OF 2008

		2009								2008								Change
						% of								% of
(Millions of dollars, except per share data)		$				Total				$				Total				$				%
Revenue
Branded footwear, apparel and licensing		$	453.2				90.3	%		$	503.6				90.6	%		$	(50.4	)			(10.0	%)
Other business units			48.6				9.7	%			52.0				9.4	%			(3.4	)			(6.6	%)
Total Revenue		$	501.8				100.0	%		$	555.6				100.0	%		$	(53.8	)			(9.7	%)
						% of								% of
		$				Revenue				$				Revenue				$				%
Gross profit
Branded footwear, apparel and licensing		$	179.8				39.7	%		$	206.4				41.0	%		$	(26.6	)			(12.9	%)
Other business units			15.2				31.2	%			17.6				33.8	%			(2.4	)			(13.8	%)
Total Gross Profit		$	195.0				38.9	%		$	224.0				40.3	%		$	(29.0	)			(12.9	%)
Selling, General and Administrative expenses		$	148.2				29.5	%		$	161.8				29.1	%		$	(13.6	)			(8.4	%)
Restructuring and other transition costs			19.0				3.8	%			—				0.0	%			19.0				100.0	%
Operating Expenses		$	167.2				33.3	%		$	161.8				29.1	%		$	5.4				3.3	%
Interest (income) expense — net		$	0.2				0.0	%		$	0.4				0.1	%		$	(0.2	)			(43.0	%)
Other expense — net			0.4				0.1	%			0.9				0.2	%			(0.5	)			(53.1	%)
Earnings before income taxes		$	27.2				5.4	%		$	60.9				11.0	%		$	(33.7	)			(55.4	%)
Net Earnings			18.4				3.7	%		$	40.5				7.3	%		$	(22.1	)			(54.6	%)
Diluted earnings per share		$	0.37				—			$	0.79				—			$	(0.42	)			(53.2	%)