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 N.E., Rockford, Michigan		49351
(Address of Principal Executive Offices)		(Zip Code)

(616) 866-5500

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 þ 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 49,284,946 shares of Common Stock, $1 par value, outstanding as of July 22, 2011.

 

 

TABLE OF CONTENTS

Part I. Financial Information			4
Item 1. Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures About Market Risk			26
Item 4. Controls and Procedures			27
Part II. Other Information			28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 6. Exhibits			29
Signatures			30
Exhibit 31.1
Exhibit 31.2
Exhibit 32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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, global political, economic and market conditions, and the Company itself. Such statements often contain words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company’s performance to differ materially from what is expressed in forward-looking statements include, but are not limited to the following:

•

changes in national, regional or global economic and market conditions;

•

the impact of financial and credit markets on the Company, its suppliers and customers;

•

changes in interest rates, tax laws, duties, tariffs, quotas or applicable assessments in countries of import and export;

•

the impact of regulation, regulatory and legal proceedings and legal compliance risks;

•

currency fluctuations;

•

changes in costs of future pension funding requirements;

•

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;

•

changes in consumer preferences, spending patterns, buying patterns, price sensitivity or demand for the Company’s products;

•

changes in relationships with, including the loss of, significant customers;

•

the cancellation of orders for future delivery, the failure of the Department of Defense to exercise future purchase options or award new contracts, or the cancellation or modification of existing contracts by the Department of Defense or other military purchasers;

•

the cost, availability and management of raw materials, inventories, services and labor for owned and contract manufacturers;

•

service interruptions at shipping and receiving ports;

•

the ability to adapt to and compete in global footwear, apparel and consumer-direct markets;

•

strategic actions, including new initiatives and ventures, acquisitions and dispositions, and our success in integrating acquired businesses and new initiatives and ventures; and

•

many other matters of national, regional and global scale, including those of a political, environmental, economic, business and competitive nature.

These uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2011 and any information regarding such Risk Factors included in the Company’s subsequent filings with the Securities and Exchange Commission. 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.

PART I. FINANCIAL INFORMATION

ITEM 1.		Financial Statements

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Thousands of Dollars, Except Share and Per Share Data)
(Unaudited)

		June 18,				January 1,				June 19,
		2011				2011				2010
ASSETS
Current assets:
Cash and cash equivalents		$	118,478			$	150,400			$	110,120
Accounts receivable, less allowances
June 18, 2011 — $10,237
January 1, 2011 — $11,413
June 19, 2010 — $14,217			226,739				196,457				183,221
Inventories:
Finished products			227,289				188,647				155,363
Raw materials and work-in-process			22,582				20,008				15,410
			249,871				208,655				170,773
Deferred income taxes			13,264				13,225				9,941
Prepaid expenses and other current assets			12,719				11,397				10,687
Total current assets			621,071				580,134				484,742
Property, plant and equipment:
Gross cost			292,559				281,564				305,903
Accumulated depreciation			(215,820	)			(207,167	)			(235,348	)
			76,739				74,397				70,555
Other assets:
Goodwill			39,888				39,014				38,064
Other non-amortizable intangibles			16,646				16,464				16,101
Cash surrender value of life insurance			37,718				36,042				36,323
Deferred income taxes			38,620				37,602				35,690
Other			2,815				2,922				3,865
			135,687				132,044				130,043
Total assets		$	833,497			$	786,575			$	685,340

See accompanying notes to consolidated condensed financial statements.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets — continued
(Thousands of Dollars, Except Share and Per Share Data)
(Unaudited)

		June 18,				January 1,				June 19,
		2011				2011				2010
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	72,599			$	64,080			$	43,038
Accrued salaries and wages			16,342				26,848				15,907
Income taxes			5,454				2,746				2,778
Taxes, other than income taxes			8,782				6,586				5,367
Restructuring reserve			641				1,314				3,340
Other accrued liabilities			36,094				37,046				37,139
Pension liabilities			2,018				2,018				2,044
Current maturities of long-term debt			539				517				492
Borrowings under revolving credit agreement			20,000				—				—
Total current liabilities			162,469				141,155				110,105
Long-term debt (less current maturities)			—				517				492
Deferred compensation			4,317				4,410				5,558
Pension liabilities			59,155				83,685				80,476
Other non-current liabilities			13,293				12,911				10,598
Stockholders’ equity
Common Stock — par value $1, authorized 160,000,000 shares; shares issued (including shares in treasury):
June 18, 2011 — 64,860,785 shares
January 1, 2011 — 63,976,387 shares
June 19, 2010 — 63,678,277 shares			64,861				63,976				63,678
Additional paid-in capital			126,682				108,286				94,316
Retained earnings			837,920				789,684				740,472
Accumulated other comprehensive income (loss)			(33,763	)			(41,123	)			(47,389	)
Cost of shares in treasury:
June 18, 2011 — 15,632,031 shares
January 1, 2011 — 14,976,835 shares
June 19, 2010 — 14,822,207 shares			(401,437	)			(376,926	)			(372,966	)
Total stockholders’ equity			594,263				543,897				478,111
Total liabilities and stockholders’ equity		$	833,497			$	786,575			$	685,340

See accompanying notes to 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 18,				June 19,				June 18,				June 19,
		2011				2010				2011				2010
Revenue		$	310,139			$	258,199			$	641,012			$	543,096
Cost of goods sold			188,022				154,093				381,096				320,420
Restructuring and other transition costs			—				425				—				1,406
Gross profit			122,117				103,681				259,916				221,270
Selling, general and administrative expenses			88,751				76,720				177,080				155,260
Restructuring and other transition costs			—				2,311				—				2,828
Operating profit			33,366				24,650				82,836				63,182
Other expenses:
Interest expense (income) — net			129				(4	)			354				85
Other expense — net			973				395				393				165
			1,102				391				747				250
Earnings before income taxes			32,264				24,259				82,089				62,932
Income taxes			8,301				7,037				22,246				18,251
Net earnings		$	23,963			$	17,222			$	59,843			$	44,681
Net earnings per share (see Note 2):
Basic		$	0.49			$	0.35			$	1.23			$	0.91
Diluted		$	0.48			$	0.35			$	1.20			$	0.89
Cash dividends declared per share		$	0.12			$	0.11			$	0.24			$	0.22

See accompanying notes to consolidated condensed financial statements.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flow
(Thousands of Dollars)
(Unaudited)

		24 Weeks Ended
		June 18,				June 19,
		2011				2010
OPERATING ACTIVITIES
Net earnings		$	59,843			$	44,681
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation			7,082				7,059
Amortization			473				795
Deferred income taxes			(1,093	)			(649	)
Stock-based compensation expense			7,377				5,110
Excess tax benefits from stock-based compensation			(1,770	)			(873	)
Pension expense			8,078				7,517
Pension contribution			(31,800	)			(10,400	)
Restructuring and other transition costs			—				4,234
Cash payments related to restructuring and other transition costs			(673	)			(6,912	)
Other			(224	)			8,510
Changes in operating assets and liabilities:
Accounts receivable			(28,369	)			(21,639	)
Inventories			(38,398	)			(15,693	)
Other operating assets			(1,160	)			1,214
Accounts payable			7,671				1,276
Income taxes			2,708				(11,856	)
Other operating liabilities			(9,464	)			(2,041	)
Net cash (used in) provided by operating activities			(19,719	)			10,333
INVESTING ACTIVITIES
Additions to property, plant and equipment			(9,182	)			(5,102	)
Other			(1,410	)			(890	)
Net cash used in investing activities			(10,592	)			(5,992	)
FINANCING ACTIVITIES
Net borrowings under revolving credit obligations			20,000				—
Cash dividends paid			(11,194	)			(10,799	)
Purchase of common stock for treasury			(23,146	)			(47,193	)
Other			9,336				7,529
Net cash used in financing activities			(5,004	)			(50,463	)
Effect of foreign exchange rate changes			3,393				(4,197	)
Decrease in cash and cash equivalents			(31,922	)			(50,319	)
Cash and cash equivalents at beginning of the period			150,400				160,439
Cash and cash equivalents at end of the period		$	118,478			$	110,120

See accompanying notes to consolidated condensed financial statements.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 18, 2011 and June 19, 2010
(Unaudited)

All amounts are in thousands of dollars except share and per share data, and elsewhere as noted.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Wolverine World Wide, Inc. (the “Company”) is a leading designer, manufacturer and marketer of a broad range of quality casual footwear and apparel; performance outdoor footwear and apparel; industrial work shoes, boots and apparel; and uniform shoes and boots. The Company’s portfolio of owned and licensed brands includes: Bates^®, Cat^® Footwear, Chaco^®, Cushe^®, Harley-Davidson^® Footwear, Hush Puppies^®, HyTest^®, Merrell^®, Patagonia^® Footwear, Sebago^®, Soft Style^® and Wolverine^®. Licensing and distribution arrangements with third parties extend the global reach of the Company’s brand portfolio. The Company also operates a consumer-direct division to market its own brands as well as branded footwear and apparel from other manufacturers and a leathers division that markets Wolverine Performance Leathers™.

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 1, 2011.

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 collectability is reasonably assured. Revenue generated through 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 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 returns, historical discounts taken and analysis of credit memorandum activity.

Cost of Goods Sold

Cost of goods sold 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, depending on the fiscal calendar, sixteen or seventeen weeks in the fourth quarter. Both of these 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.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 18, 2011 and June 19, 2010
(Unaudited)

2. EARNINGS PER SHARE

The Company calculates earnings per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and must be included in the computation of earnings per share pursuant to the two-class method.

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

		12 Weeks Ended								24 Weeks Ended
		June 18,				June 19,				June 18,				June 19,
		2011				2010				2011				2010
Numerator:
Net earnings		$	23,963			$	17,222			$	59,843			$	44,681
Adjustment for earnings allocated to nonvested restricted common stock			(403	)			(273	)			(992	)			(670	)
Net earnings used in calculating basic earnings per share			23,560				16,949				58,851				44,011
Adjustment for earnings reallocated from nonvested restricted common stock			12				6				31				15
Net earnings used in calculating diluted earnings per share		$	23,572			$	16,955			$	58,882			$	44,026
Denominator:
Weighted average shares outstanding			49,439,698				49,160,001				49,366,041				49,376,607
Adjustment for nonvested restricted common stock			(1,490,880	)			(1,248,223	)			(1,435,262	)			(1,170,522	)
Shares used in calculating basic earnings per share			47,948,818				47,911,778				47,930,779				48,206,085
Effect of dilutive stock options			1,342,848				1,056,525				1,311,765				1,043,953
Shares used in calculating diluted earnings per share			49,291,666				48,968,303				49,242,544				49,250,038
Net earnings per share:
Basic		$	0.49			$	0.35			$	1.23			$	0.91
Diluted		$	0.48			$	0.35			$	1.20			$	0.89

Options to purchase 379,231 and 289,369 shares of common stock for the 12 and 24 weeks ended June 18, 2011, respectively, and 851,533 and 989,145 shares of common stock for the 12 and 24 weeks ended June 19, 2010, respectively, have not been included in the denominator for the computation of diluted earnings per share because the related exercise prices of these shares were greater than the average market price for the quarters then-ended and they were, therefore, anti-dilutive.

3. GOODWILL AND OTHER NON-AMORTIZABLE INTANGIBLES

The changes in the carrying amount of goodwill and other non-amortizable intangibles are as follows:

		Goodwill				Trademarks				Total
Balance at June 19, 2010		$	38,064			$	16,101			$	54,165
Intangibles acquired			—				273				273
Foreign currency translation effects			950				90				1,040
Balance at January 1, 2011			39,014				16,464				55,478
Intangibles acquired			—				105				105
Intangibles disposed			—				(11	)			(11	)
Foreign currency translation effects			874				88				962
Balance at June 18, 2011		$	39,888			$	16,646			$	56,534

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 18, 2011 and June 19, 2010
(Unaudited)

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:

		June 18,				January 1,				June 19,
		2011				2011				2010
Foreign currency translation adjustments		$	18,846			$	11,548			$	4,532
Fair value of foreign exchange contracts, net of taxes			(1,753	)			(1,815	)			1,816
Pension adjustments, net of taxes			(50,856	)			(50,856	)			(53,737	)
Accumulated other comprehensive income (loss)		$	(33,763	)		$	(41,123	)		$	(47,389	)

The reconciliation from net earnings to comprehensive income is as follows:

		12 Weeks Ended								24 Weeks Ended
		June 18,				June 19,				June 18,				June 19,
		2011				2010				2011				2010
Net earnings		$	23,963			$	17,222			$	59,843			$	44,681
Other comprehensive income (loss):
Foreign currency translation adjustments			159				(2,042	)			7,298				(9,945	)
Change in fair value of foreign exchange contracts, net of taxes			1,367				3,227				62				5,362
Comprehensive income		$	25,489			$	18,407			$	67,203			$	40,098

5. BUSINESS SEGMENTS

The Company has one reportable segment that is engaged in designing, manufacturing, sourcing, marketing, licensing and distributing to the retail sector branded footwear, apparel and accessories. Revenue earned from the operations of this segment is derived from the sale of branded footwear, apparel and accessories to third-party customers and royalty income from the licensing of the Company’s trademarks and brand names to third-party licensees and distributors. The operating segments aggregated into the branded footwear, apparel and licensing reportable segment all manufacture, source, market and distribute products in a similar manner.

The other business units in the following tables consist of the Company’s consumer-direct, leather and pigskin procurement operations. Substantially all of the assets of Wolverine Procurement, Inc. were sold to a third-party buyer on December 29, 2010. These other operations do not collectively form a reportable segment because their respective operations are dissimilar and they do not meet the applicable quantitative requirements. At June 18, 2011, the Company owned and operated 92 retail stores in the United States, Canada and the United Kingdom and operated 45 consumer-direct websites. 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 reportable segment and other business units are the same as disclosed in Note 1.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 18, 2011 and June 19, 2010
(Unaudited)

Business segment information is as follows:

		12 Weeks Ended June 18, 2011
		Branded
		Footwear,
		Apparel and				Other
		Licensing				Business Units				Corporate				Consolidated
Revenue		$	275,278			$	34,861			$	—			$	310,139
Intersegment revenue			10,883				508				—				11,391
Earnings (loss) before income taxes			39,481				2,522				(9,739	)			32,264
Total assets			637,928				63,022				132,547				833,497

		24 Weeks Ended June 18, 2011
		Branded
		Footwear,
		Apparel and				Other
		Licensing				Business Units				Corporate				Consolidated
Revenue		$	579,594			$	61,418			$	—			$	641,012
Intersegment revenue			19,906				873				—				20,779
Earnings (loss) before income taxes			98,940				1,464				(18,315	)			82,089
Total assets			637,928				63,022				132,547				833,497

		12 Weeks Ended June 19, 2010
		Branded
		Footwear,
		Apparel and				Other
		Licensing				Business Units				Corporate				Consolidated
Revenue		$	225,147			$	33,052			$	—			$	258,199
Intersegment revenue			9,149				777				—				9,926
Earnings (loss) before income taxes			31,330				2,237				(9,308	)			24,259
Total assets			520,097				43,393				121,850				685,340

		24 Weeks Ended June 19, 2010
		Branded
		Footwear,
		Apparel and				Other
		Licensing				Business Units				Corporate				Consolidated
Revenue		$	486,785			$	56,311			$	—			$	543,096
Intersegment revenue			16,568				1,506				—				18,074
Earnings (loss) before income taxes			79,246				845				(17,159	)			62,932
Total assets			520,097				43,393				121,850				685,340

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 18, 2011 and June 19, 2010
(Unaudited)

6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

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. This topic 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.

The Company’s financial instruments consist of cash and cash equivalents, accounts and notes receivable, accounts payable, foreign currency forward exchange contracts, borrowings under the Company’s revolving credit agreement and long-term debt. The carrying amount of the Company’s financial instruments is historical cost, which approximates their fair value, except for the foreign currency exchange contracts, which are carried at fair value. The Company does not hold or issue financial instruments for trading purposes.

At June 18, 2011 and June 19, 2010, a liability of $1,227 and an asset of $1,988, respectively, have been recognized for the fair value of the Company’s foreign exchange contracts. In accordance with ASC 820, these assets and liabilities fall within Level 2 of the fair value hierarchy. The prices for the financial instruments are determined using prices for recently-traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs. The Company did not have any additional assets or liabilities that were measured at fair value on a recurring basis at June 18, 2011 and June 19, 2010.

The Company follows FASB ASC Topic 815, Derivatives and Hedging, which is intended to improve transparency in financial reporting and 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 utilizes foreign currency forward exchange contracts to manage the volatility associated with U.S. dollar inventory purchases made by non-U.S. wholesale operations in the normal course of business. At June 18, 2011 and June 19, 2010, foreign exchange contracts with a notional value of $113,368 and $91,900, respectively, were outstanding to purchase U.S. dollars with maturities ranging up to 336 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 goods sold caption of the consolidated condensed statements of operations. Hedge ineffectiveness was not material to the Company’s consolidated condensed financial statements for the 12 and 24 weeks ended June 18, 2011 and June 19, 2010. 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 18, 2011 and June 19, 2010, the Company recognized a net loss of $555 and a net gain of $676, respectively, in accumulated other comprehensive income (loss) related to the effective portion of its foreign exchange contracts. For the 12 weeks ended June 18, 2011 and June 19, 2010, the Company reclassified gains of $595 and $991, respectively, from accumulated other comprehensive income (loss) into cost of goods sold related to the effective portion of its foreign exchange contracts designated and qualifying as cash flow hedges. For the 24 weeks ended June 18, 2011 and June 19, 2010, the Company recognized net losses of $1,555 and $203, respectively, in accumulated other comprehensive income (loss) related to the effective portion of its foreign exchange contracts. For the 24 weeks ended June 18, 2011 and June 19, 2010, the Company reclassified gains of $1,595 and $2,408, respectively, from accumulated other comprehensive income (loss) into cost of goods sold related to the effective portion of its foreign exchange contracts designated and qualifying as cash flow hedges.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 18, 2011 and June 19, 2010
(Unaudited)

7. STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of FASB ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). The Company recognized compensation expense of $4,095 and $7,377 and related income tax benefits of $1,318 and $2,370 for grants under its stock-based compensation plans in the statements of operations for the 12 and 24 weeks ended June 18, 2011, respectively. For the 12 and 24 weeks ended June 19, 2010, the Company recognized compensation expense of $2,555 and $5,110 and related income tax benefits of $791 and $1,557, 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 18, 2011 and June 19, 2010, is based on awards ultimately expected to vest and, as such, has been reduced for estimated forfeitures. ASC 718 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 was $10.45 and $6.94 per share for 24 weeks ended June 18, 2011 and June 19, 2010, respectively, with the following weighted-average assumptions:

		12 Weeks Ended								24 Weeks Ended
		June 18,				June 19,				June 18,				June 19,
		2011				2010				2011				2010
Expected market price volatility (1)			38.5	%			37.2	%			38.6	%			37.9	%
Risk-free interest rate (2)			1.6	%			2.1	%			1.8	%			1.9	%
Dividend yield (3)			1.6	%			1.7	%			1.6	%			1.9	%
Expected term (4)		4 years				4 years				4 years				4 years

The Company issued 147,797 and 895,116 shares of common stock in connection with the exercise of stock options and restricted stock grants made during the 12 and 24 weeks ended June 18, 2011, respectively. During the 12 and 24 weeks ended June 18, 2011, the Company cancelled 5,563 and 9,528 shares, respectively, of common stock issued under restricted stock awards as a result of forfeitures. The Company issued 154,658 and 1,017,829 shares of common stock in connection with the exercise of stock options and restricted stock grants made during the 12 and 24 weeks ended June 19, 2010, respectively. During the 12 and 24 weeks ended June 19, 2010, the Company cancelled 17,328 and 21,081 shares, respectively, of common stock issued under restricted stock awards as a result of forfeitures.

8. PENSION EXPENSE

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

		12 Weeks Ended								24 Weeks Ended
		June 18, 2011				June 19, 2010				June 18, 2011				June 19, 2010
Service cost pertaining to benefits earned during the period		$	1,500			$	1,322			$	3,000			$	2,644
Interest cost on projected benefit obligations			3,075				2,936				6,150				5,871
Expected return on pension assets			(3,323	)			(2,877	)			(6,646	)			(5,754	)
Net amortization loss			2,787				2,378				5,574				4,756
Net pension expense		$	4,039			$	3,759			$	8,078			$	7,517

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 18, 2011 and June 19, 2010
(Unaudited)

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, in management’s opinion the outcome of these matters will not have a material adverse effect on the Company’s consolidated financial position, 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 and liabilities that have been recorded along with applicable insurance, in management’s opinion the outcome of these items will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company has future minimum royalty and advertising obligations due under the terms of certain licenses held by the Company. These minimum future obligations are as follows:

		2011				2012				2013				2014				2015				Thereafter
Minimum royalties			1,693				880				898				916				934				953
Minimum advertising			2,091				1,999				2,059				2,121				2,184				4,169

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 $710 and $1,664, respectively, for the 12 and 24 weeks ended June 18, 2011. For the 12 and 24 weeks ended June 19, 2010, the Company incurred royalty expense of $728 and $1,467, 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 $767 and $1,451 for the 12 and 24 weeks ended June 18, 2011, respectively. For the 12 and 24 weeks ended June 19, 2010, the Company incurred advertising expense of $669 and $1,281, respectively.

10. RESTRUCTURING AND OTHER TRANSITION COSTS

On January 7, 2009, the Company’s Board of Directors approved a strategic restructuring plan designed to create significant operating efficiencies, improve the Company’s supply chain and create a stronger global platform. On October 7, 2009, the Company announced an expansion of its restructuring plan to include the consolidation of two domestic manufacturing facilities into one and to finalize realignment in certain of the Company’s product creation organizations. The strategic restructuring plan and all actions under the plan, except for certain cash payments, were completed at June 19, 2010. Accordingly, the Company did not incur any restructuring or other transition costs for the 12 and 24 weeks ended June 18, 2011. The Company incurred restructuring and other transition costs of $2,736 ($1,943 on an after-tax basis), or $0.04 per diluted share, and $4,234 ($3,087 on an after-tax basis), or $0.06 per diluted share, for the 12 and 24 weeks ended June 19, 2010, respectively.

Restructuring

The Company did not incur restructuring charges for the 12 and 24 weeks ended June 18, 2011. Prior to completion of the restructuring plan, the Company incurred restructuring charges of $1,823 ($1,337 on an after-tax basis), or $0.03 per diluted share, for the 12 weeks ended June 19, 2010 and $2,239 ($1,632 on an after-tax basis), or $0.03 per diluted share, for the 24 weeks ended June 19, 2010.

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:

		Severance and				Facility exit costs
		employee related				and other				Total
Balance at June 19, 2010		$	1,324			$	2,016			$	3,340
Amounts paid or utilized			(1,037	)			(989	)			(2,026	)
Balance at January 1, 2011		$	287			$	1,027			$	1,314
Amounts paid or utilized			(287	)			(386	)			(673	)
Balance at June 18, 2011		$	—			$	641			$	641

Other Transition Costs

Incremental costs incurred related to the restructuring plan that do not qualify as restructuring costs under the provisions of FASB ASC Topic 420, Exit or Disposal Cost Obligations, have been included in the Company’s consolidated condensed statements of operations on the line item titled “Restructuring and other transition costs”. These primarily include costs related to 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 plan and do not include ongoing business operating costs. There were no other transition costs incurred during the 12 and 24 weeks ended June 18, 2011. Other transition costs were $913 ($686 on an after-tax basis), and $1,995 ($1,454 on an after-tax basis), respectively, for the 12 and 24 weeks ended June 19, 2010.

11. NEW ACCOUNTING STANDARDS

In December 2010, the FASB issued Accounting Standard Update (“ASU”) 2010-28, Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity must consider whether there are any adverse qualitative factors indicating impairment may exist. ASU 2010-28 is effective for fiscal years, and interim periods within those years, beginning December 15, 2010 (the first quarter of fiscal 2011 for the Company). The adoption of this ASU is not expected to have a material impact on the Company’s goodwill impairment evaluation as the Company does not currently have reporting units with zero or negative carrying amounts.

In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations. ASU 2010-29 requires that if a public entity presents comparative financial statements, the entity should disclose only revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. This ASU also expands the disclosure requirements regarding supplemental pro forma adjustments to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the first annual reporting period beginning on or after December 15, 2010 (the first quarter of fiscal 2011 for the Company). The Company will provide the supplementary pro forma information in connection with any future business combinations.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 represents the converged guidance of the FASB and the International Accounting Standards Board on fair value measurement and is intended to result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and International Financial Reporting Standards (“IFRS”). The ASU sets forth common U.S. GAAP and IFRS requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The amendments in the ASU are effective during interim and annual periods beginning after December 15, 2011 (the first quarter of fiscal 2012 for the Company). Early adoption is not permitted. This standard impacts disclosure only, and therefore adoption will not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU 2011-05 amends the FASB Accounting Standards Codification^TM (the “Codification”) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 should be applied retrospectively. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 (the first quarter of fiscal 2012 for the Company). Early adoption is permitted. This standard impacts presentation and disclosure only, and therefore adoption will not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

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

OVERVIEW

BUSINESS OVERVIEW

The Company is a leading global designer, manufacturer and marketer of branded footwear, apparel and accessories. The Company’s stated mission is to “Excite Consumers Around the World with Innovative Footwear and Apparel that Bring Style to Purpose.” The Company seeks to fulfill this mission by offering innovative products and compelling brand propositions; delivering supply chain excellence; complementing its footwear brands with strong apparel and accessories offerings; and building a more substantial global consumer-direct footprint.

The Company’s portfolio consists of 12 brands that were marketed in approximately 190 countries and territories at June 18, 2011. The diverse brand portfolio and broad geographic reach position the Company for robust organic growth. The Company controls distribution of its brands into the market via wholesale and retail operations in the United States, Canada, the United Kingdom and certain other countries in continental Europe. In other markets (Asia Pacific, Latin America and certain other countries in continental Europe), the Company relies on a network of third-party distributors and licensees to market products bearing its brands. The Company operated 92 brick-and-mortar retail stores in the United States, Canada and the United Kingdom and operated 45 consumer-direct websites at June 18, 2011.

2011 FINANCIAL OVERVIEW

	•		Revenue for the second quarter of 2011 increased to $310.1 million, 20.1% above second quarter 2010 revenue of $258.2 million, reflecting continued strong organic growth across all operating groups and major geographic regions.
	•		Gross margin for the second quarter of 2011 of 39.4% was 80 basis points lower than the comparable period in the prior year. The decrease resulted primarily from temporary production issues in the quarter related to Company-owned manufacturing operations and a reserve related to a Bates boot program with the U.S. military, as product and input cost increases and unfavorable mix were essentially offset by strategic selling price increases and the favorable impact of foreign exchange.
	•		Operating expenses as a percentage of revenue decreased to 28.6% in the second quarter of 2011, from 30.6% in the second quarter of 2010 reflecting strong revenue growth and the absence of $2.3 million of restructuring and other transition costs incurred in the second quarter of 2010.
	•		The effective tax rate in the second quarter of 2011 decreased to 25.7% from 29.0% in the second quarter of 2010 driven by the settlement of a state tax audit, more favorable dispersion of taxable income to lower tax rate jurisdictions and the impact of the U.S. research and development tax credit that was not in effect for the first two quarters of 2010.
	•		Diluted earnings per share for the second quarter of 2011 were $0.48 per share compared to $0.35 per share for the second quarter of 2010, the latter of which included the impact of $0.04 per share of restructuring and other transition costs in 2010.
	•		Accounts receivable increased 23.8% in the second quarter of 2011 compared to the second quarter of 2010, driven primarily by the increase and timing of revenue in the quarter.
	•		Inventory increased $79.1 million, or 46.3%, in the second quarter of 2011 compared to the second quarter of 2010, reflecting higher product costs, the effect of a weaker U.S. dollar, strategic purchases of core product from third-party suppliers prior to announced price increases, inventory for new collections and the solid outlook for the balance of the fiscal year.
	•		The Company declared cash dividends of $0.12 per share in the second quarter of 2011 compared to $0.11 per share in the second quarter of 2010, a 9.1% increase.
	•		During the second quarter of 2011, the Company repurchased approximately 479,000 shares of common stock for approximately $18.1 million.

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 included elsewhere in this Quarterly Report.

RESULTS OF OPERATIONS — SECOND QUARTER 2011 COMPARED TO SECOND QUARTER 2010

FINANCIAL SUMMARY — SECOND QUARTER 2011 VERSUS SECOND QUARTER 2010

		2011								2010								Change
						% of								% of
(Millions of Dollars, Except Per Share Data)		$				Total				$				Total				$				%
Revenue
Branded footwear, apparel and licensing		$	275.2				88.7	%		$	225.1				87.2	%		$	50.1				22.3	%
Other business units			34.9				11.3	%			33.1				12.8	%			1.8				5.4	%
Total Revenue		$	310.1				100.0	%		$	258.2				100.0	%		$	51.9				20.1	%
						% of								% of
		$				Revenue				$				Revenue				$				%
Gross Profit
Branded footwear, apparel and licensing		$	107.2				39.0	%		$	91.8				40.8	%		$	15.4				16.8	%
Other business units			14.9				42.7	%			11.9				36.0	%			3.0				25.2	%
Total Gross Profit		$	122.1				39.4	%		$	103.7				40.2	%		$	18.4				17.7	%
Selling, general and administrative expenses		$	88.8				28.6	%		$	76.7				29.7	%		$	12.1				15.8	%
Restructuring and other transition costs			—				—				2.3				0.9	%			(2.3	)		nm
Total Operating Expenses		$	88.8				28.6	%		$	79.0				30.6	%		$	9.8				12.4	%
Interest expense — net		$	0.1				0.0	%		$	0.0				0.0	%		$	0.1			nm
Other expense — net			1.0				0.3	%			0.4				0.2	%			0.6				150.0	%
Earnings before income taxes			32.3				10.4	%			24.3				9.4	%			8.0				32.9	%
Net Earnings		$	24.0				7.7	%		$	17.2				6.7	%		$	6.8				39.5	%
Diluted earnings per share		$	0.48				—			$	0.35				—			$	0.13				37.1	%

The Company had one reportable segment that is engaged in designing, manufacturing, sourcing, marketing, licensing and distributing branded footwear, apparel and accessories. In January 2011, the Company announced a realignment of the operating groups included within the branded footwear, apparel and licensing reportable segment. As a result, the Company had identified three operating segments within its branded footwear, apparel and licensing reportable segment:

•

Outdoor Group, consisting of Merrell®, Chaco® and Patagonia® footwear and Merrell® brand apparel;

•

Heritage Group, consisting of Wolverine® boots and shoes and Wolverine® brand apparel, Cat® footwear, Bates®, Harley-Davidson® footwear, and HyTest® and;

•

Lifestyle Group, consisting of Hush Puppies®, Sebago® footwear and apparel, Cushe® and Soft Style®.

The Company’s other operating segments, which do not collectively comprise a separate reportable segment, consisted of Wolverine Retail (the Company’s consumer-direct business) and Wolverine Leathers (which markets pigskin leather).

The following is supplemental information on total revenue:

TOTAL REVENUE — SECOND QUARTER

		2011								2010								Change
						% of								% of
(Millions of Dollars)		$				Total				$				Total				$				%
Outdoor Group		$	127.2				41.0	%		$	97.9				37.9	%		$	29.3				30.0	%
Heritage Group			102.9				33.2	%			89.4				34.6	%			13.5				15.1	%
Lifestyle Group			41.5				13.4	%			35.3				13.7	%			6.2				17.6	%
Other			3.6				1.1	%			2.5				1.0	%			1.1				44.0	%
Total branded footwear, apparel and licensing revenue		$	275.2				88.7	%		$	225.1				87.2	%		$	50.1				22.3	%
Other business units			34.9				11.3	%			33.1				12.8	%			1.8				5.4	%
Total Revenue		$	310.1				100.0	%		$	258.2				100.0	%		$	51.9				20.1	%

REVENUE

Revenue for the second quarter of 2011 increased $51.9 million from the second quarter of 2010, to $310.1 million. Continued strong performance from the branded footwear, apparel and licensing operations, driven by robust organic growth in unit volume and strategic selling price increases, generated $43.8 million of the increase. Changes in foreign exchange rates increased reported revenue for the second quarter by $6.3 million. Revenue from the other business units increased $1.8 million, led by continued organic growth in the consumer-direct business. International revenue represented 39.8% of total revenue in the second quarter of 2011 compared to 34.7% in the second quarter of 2010.

The Outdoor Group generated revenue of $127.2 million in the second quarter of 2011, a $29.3 million increase from the second quarter of 2010. Merrell^® revenue increased at a rate in the mid thirties compared to the second quarter of 2010, led by the new Merrell^® Barefoot Collection and strong spring product sales. Patagonia^® footwear’s revenue increased at a rate in the mid twenties in the second quarter of 2011 compared to the second quarter of 2010, due to continued strong demand from key outdoor retailers. Chaco^® revenue was up slightly compared to the second quarter of 2010, with its growth dampened by the cool and rainy weather impacting the spring sandal season.

The Heritage Group generated revenue of $102.9 million during the second quarter of 2011, a $13.5 million increase over the second quarter of 2010. Cat^® footwear’s revenue increased at a rate in the low forties compared to the second quarter of 2010, reflecting double digit growth in every major geographic region. Bates^® revenue increased at a mid single digit rate compared to the second quarter of 2010. Revenue for the Wolverine^® increased at a mid single digit rate compared to the second quarter of 2010 as Wolverine^® apparel continued to perform well by generating additional synergies between footwear and apparel at retail.

The Lifestyle Group recorded revenue of $41.5 million in the second quarter of 2011, a $6.2 million increase from the second quarter of 2010. Hush Puppies^® revenue increased at a mid single digit rate, as continued excellent growth in the brand’s third-party licensing business were partially offset by softness in the United States. Sebago^® revenue increased at a rate in the mid twenties for the second quarter of 2011 compared to the second quarter of 2010 as a result of solid organic growth in Canada, Europe and the United States, driven by strong increases in sales to both new and existing key retailers and continued investments designed to increase brand awareness. Cushe^® revenue more than doubled compared to the second quarter of 2010, due to continued strong growth in all markets reflects the additional growth from international distributors, independent retailers and key specialty, outdoor and action sport accounts.

Within the Company’s other business units, Wolverine Retail reported a sales increase in the low twenties compared to the second quarter of 2010, as a result of growth from the Company’s e-commerce channel, amid single digit growth in comparable store sales from Company-owned stores and the addition of new stores in the second quarter of 2011 compared to the second quarter of 2010. Wolverine Retail operated 92 retail stores worldwide at the end of the second quarter of 2011 compared to 84 retail stores at the end of the second quarter of 2010. The Company also operated 45 consumer-direct websites as of June 18, 2011 compared to 28 sites at June 19, 2010. The Wolverine Leathers business reported a revenue decline in the mid teens, reflecting both lower demand from third-party customers and the sale of its procurement division in the fourth quarter of 2010.

GROSS MARGIN

Gross margin for the second quarter of 2011 of 39.4% was 80 basis points lower than the comparable period in the prior year. The decrease resulted primarily from temporary production issues in the quarter related to Company-owned manufacturing operations and a reserve related to a Bates boot program with the U.S. military, as product and input cost increases and unfavorable mix were essentially offset by strategic selling price increases and the favorable impact of foreign exchange.

OPERATING EXPENSES

Operating expenses of $88.8 million in the second quarter of 2011 increased $9.8 million from $79.0 million in the second quarter of 2010. The increase was primarily due to an increase in advertising and marketing designed to improve brand awareness, an increase in selling expense intended to improve the Company’s ability to serve retail customers, an increase in product development and an increase in other operating expenses that vary with revenue, such as distribution costs and sales commissions. These increases were partially offset by a $2.3 million reduction in restructuring and other transition costs due to the completion of the Company’s restructuring plan in June 2010.

INTEREST, OTHER AND TAXES

The increase in net interest expense was due primarily to the increase in revolver borrowings in the second quarter of 2011 compared to the second quarter of 2010.

The increase in other expense was due primarily to the change in realized gains or losses on foreign denominated assets and liabilities.

The Company’s effective tax rate for the second quarter of 2011 was 25.7%, compared to 29.0% in the second quarter of 2010. The lower effective tax rate was driven by the settlement of a state tax audit, a more favorable dispersion of taxable income to lower tax rate jurisdictions and the inclusion of a U.S. research and development tax credit in the current year second quarter that was not reflected in the second quarter of 2010.

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 $24.0 million in the second quarter of 2011 compared to $17.2 million in the second quarter of 2010, an increase of $6.8 million, or 39.5%.

Diluted net earnings per share increased 37.1% in the second quarter of 2011 to $0.48 from $0.35 in the second quarter of 2010. The increase was primarily attributable to revenue growth, continued operating expense leverage and the absence of a $0.04 per share impact of restructuring and other transition costs in the prior year. The Company repurchased approximately 479,000 shares of common stock in the second quarter of 2011 for approximately $18.1 million and repurchased approximately 753,000 shares of common stock in the second quarter of 2010 for approximately $22.6 million.

RESULTS OF OPERATIONS — FIRST TWO QUARTERS 2011 COMPARED TO FIRST TWO QUARTERS 2010

FINANCIAL SUMMARY — FIRST TWO QUARTERS 2011 VERSUS FIRST TWO QUARTERS 2010

		2011								2010								Change
						% of								% of
(Millions of Dollars, Except Per Share Data)		$				Total				$				Total				$				%
Revenue
Branded footwear, apparel and licensing		$	579.6				90.4	%		$	486.8				89.6	%		$	92.8				19.1	%
Other business units			61.4				9.6	%			56.3				10.4	%			5.1				9.1	%
Total Revenue		$	641.0				100.0	%		$	543.1				100.0	%		$	97.9				18.0	%

						% of								% of
		$				Revenue				$				Revenue				$				%
Gross Profit
Branded footwear, apparel and licensing		$	234.4				40.4	%		$	200.6				41.2	%		$	33.8				16.8	%
Other business units			25.5				41.5	%			20.7				36.8	%			4.8				23.2	%
Total Gross Profit		$	259.9				40.5	%		$	221.3				40.7	%		$	38.6				17.4	%
Selling, general and administrative expenses		$	177.1				27.6	%		$	155.3				28.6	%		$	21.8				14.0	%
Restructuring and other transition costs			—				—				2.8				0.5	%			(2.8	)		nm
Total Operating Expenses		$	177.1				27.6	%		$	158.1				29.1	%		$	19.0				12.0	%
Interest expense — net		$	0.3				0.1	%		$	0.1				0.0	%		$	0.2				200.0	%
Other expense — net			0.4				0.1	%			0.2				0.0	%			0.2				100.0	%
Earnings before income taxes			82.1				12.8	%			62.9				11.6	%			19.2				30.5	%
Net Earnings		$	59.8				9.3	%		$	44.7				8.2	%		$	15.1				33.8	%
Diluted earnings per share		$	1.20				—			$	0.89				—			$	0.31				34.8	%