What changed in this filing

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Item 1. Business

2021-02-26 compared with 2020-02-26 · 92 added, 68 removed, 137 unchanged (54% of the section changed)

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(the “Company”) is a leading designer, marketer and licensor of a broad range of quality casual footwear and apparel, performance outdoor and athletic footwear and apparel, kids' footwear, industrial work boots and apparel, and uniform shoes and boots.

The Company, a Delaware corporation, is the successor of a Michigan corporation of the same name, originally organized in 1906, which, in turn, was the successor of a footwear business established in Grand Rapids, Michigan in 1883.

The Company’s products are marketed worldwide in approximately 170 countries and territories through owned operations in the United States ("U.S."), Canada, the United Kingdom and certain countries in continental Europe and Asia Pacific.

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The Company’s products are sold at various price points targeting a wide range of consumers of casual, work, outdoor and athletic footwear and apparel.

The Company’s portfolio of brands is organized into the following two operating segments, which the Company has determined to be reportable operating segments.

The Company’s portfolio of brands is organized into the following two operating segments, which the Company has determined to be reportable segments.

• Wolverine Michigan Group , consisting of Merrell ® footwear and apparel, Cat ® footwear, Wolverine ® footwear and apparel, Chaco ® footwear, Hush Puppies ® footwear and apparel, Bates ® uniform footwear, Harley-Davidson ® footwear and Hytest ® safety footwear;

Wolverine Boston Group , consisting of Sperry ® footwear and apparel, Saucony ® footwear and apparel, Keds ® footwear and apparel, and the Kids footwear business, which includes the Stride Rite ® licensed business, as well as kids' footwear offerings from Saucony ® , Sperry ® , Keds ® , Merrell ® , Hush Puppies ® and Cat ® .

• Wolverine Boston Group , consisting of Sperry ® footwear, Saucony ® footwear and apparel, Keds ® footwear and the Kids' footwear business, which includes the Stride Rite ® licensed business, as well as Kids' footwear offerings from Saucony ® , Sperry ® , Keds ® , Merrell ® , Hush Puppies ® and Cat ® .

The reportable segments are engaged in designing, manufacturing, sourcing, marketing, licensing and distributing branded footwear, apparel and accessories.

Revenue for the reportable operating segments includes revenue from the sale of branded footwear, apparel and accessories to third-party customers;

Revenue for the reportable segments includes revenue from the sale of branded footwear, apparel and accessories to third-party customers;

revenue from third-party distributors, licensees and joint ventures;

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The Other category consists of the Company’s leather marketing operations, sourcing operations and multi-branded consumer-direct retail stores.

The Corporate category consists of unallocated corporate expenses, organizational transformation costs, reorganization costs, restructuring and other related costs, impairment of intangible assets, environmental and other related costs, a foreign currency remeasurement gain recorded in the second quarter of fiscal 2018 and a pension settlement loss related to the Company's purchase of pension annuity contracts in the fourth quarter of fiscal 2018 .

The Company’s operating segments are determined based on how the Company internally reports and evaluates financial information used to make operating decisions.

The operating segment managers all report directly to the chief operating decision maker.

The Company’s Global Operations Group is responsible for sourcing, distribution, logistics and customer support.

The Company's operating segments and related brands are described in more detail below.

The Corporate category consists of unallocated corporate e xpenses, such as costs related to the COVID-19 pandemic, impairment of intangible assets and environmental and other related costs.

T he Company’s reportable segments are determined based on how the Company internally reports and evaluates financial information used to make operating decisions.

The Company's reportable segments and related brands are described in more detail below.

Wolverine Michigan Group

Merrell ® exists to give you all you really need to discover the simple yet profound power of the trail.

We believe the trail is for everyone and our goal is to provide thoughtfully designed, rigorously tested products that over-deliver on performance, versatility and durability.

The brand's slogan is "When you’ve got air in your lungs and good shoes on your feet, you’ve got everything you need." Merrell ® designs and creates products (footwear, apparel and accessories) in strategic categories such as technical hiking, trail running, training, lifestyle and work for men, women and children.

Merrell ® footwear is sold in a variety of channels including outdoor

specialty, sporting goods and department stores, internet and catalog retailers, Merrell ® retail stores and an eCommerce site.

Merrell ® apparel and accessories helps extend the brand to create a versatile line of apparel built for both performance and lifestyle.

Merrell ® also creates and markets a line of accessories including daypacks and duffels fit for adventure.

Merrell ® believes in sharing the simple power of being outside – no matter who you are, where you came from, who you love, or how you move — everyone should be welcome in the outdoors and wherever life takes us.

Merrell ® works each day to build innovative, thoughtfully-designed, rigorously-tested products that over-deliver on quality, comfort, versatility, and style.

Merrell ® designs and creates footwear, apparel, and accessories for the whole family in categories such as hiking, trail running, training, lifestyle, and work.

Merrell ® can be found around the world in the Company's own retail stores and on Merrell ® eCommerce sites, including merrell.com, and in industry-leading, partner retailers and digital platforms.

Cat ® Footwear:

Cat ® footwear comes from a world of industry and action.

The Company is the exclusive global footwear licensee of Caterpillar Inc., and for over two decades, Cat ® footwear has been designing and engineering quality footwear that lives up to the hard-working reputation of the Caterpillar ® brand.

Cat ® footwear originally created a small collection of rugged work boots designed to provide workers with comfort and durability that met the challenges of the worksite.

Today, Cat ® footwear offers a wide range of footwear, including work boots, casual shoes and women’s fashion products - sold through a global distribution network.

Cat ® , Caterpillar ® , Build For It ® , "Caterpillar Yellow" and "Power Edge" are registered trademarks of Caterpillar Inc.

Cat ® Footwear is driven by the belief that generations of builders, makers and creators can turn challenge into enduring greatness.

The Company is the exclusive global footwear licensee of Caterpillar Inc., and for

over two decades, Cat ® Footwear has been living up to the hardworking spirit of both the Caterpillar ® trademark and the millions of consumers who trust the brand.

Cat ® Footwear originally created a small collection of rugged work boots designed to provide workers with the comfort and durability that met the challenges of the worksite.

Today, Cat ® Footwear offers a wide range of footwear, including work boots and casual shoes for men, women and children - sold through a global distribution network.

CAT ® , CATERPILLAR, their respective logos, "Caterpillar Corporate Yellow", as well as corporate product identity used herein, are registered trademarks of Caterpillar Inc.

Wolverine ® :

The Wolverine ® brand offers high-quality boots and shoes to deliver comfort and durability.

The Wolverine ® brand, in existence since 1883, markets footwear in the trade work, outdoor recreation, and lifestyle and heritage categories.

The development of DuraShocks ® and EPX Anti-Fatigue ® technologies, as well as the development of the Contour Welt ® line, allows the Wolverine ® brand to offer a broad line of footwear with a focus on comfort.

The Wolverine ® work product line targets skilled trade workers and focuses on work boots and shoes with protective features such as toe caps, metatarsal guards and electrical hazard protection.

The Wolverine ® outdoor recreation product lines incorporate DuraShocks ® and other technologies and comfort features into products designed for outdoor sport use and to meet the needs of hunters, fishermen and other active outdoor sports enthusiasts.

The brand's lifestyle and heritage line targets consumers looking for rugged and well-crafted casual boots and shoes.

The brand also markets a line of work and rugged casual Wolverine ® brand apparel and socks, and licenses the Wolverine ® brand for use on eyewear, gloves and base layers.

Chaco’s whitewater heritage and 30-year history of outfitting rafting guides has helped cement its place in the high-performance footwear space.

Every product Chaco ® makes exists to connect life-loving explorers to the wonders of the world through all-terrain versatility, unmatched durability, and signature LUVSEAT™ footbed arch support.

Consumers can demonstrate their own creativity and express themselves through the virtually limitless sandal customization options available through the MyChaco design program.

The brand’s products are distributed primarily through leading outdoor and footwear specialty retailers.

as well as through an eCommerce site and other leading internet retailers.

For more than 135 years, Wolverine ® has existed to support people who forge their own path;

men and women who stop at nothing to build the future they want.

Wolverine ® designs and creates footwear, apparel and accessories across three strategic territories;

Work, Outdoor and Heritage.

The brand is best known for DuraShocks comfort technology in work boots, as well as the Wolverine ® 1000 Mile collection of premium lifestyle boots handcrafted in the USA from archival patterns.

Wolverine ® products can be found online at Wolverine.com and across a variety of retail channels including online retail, farm & fleet, work specialty, outdoor specialty, department stores and national family stores.

Chaco ® has a rich, 30+ year history of creating footwear that’s “Fit For Adventure” of any kind, whether that’s exploring rivers, trails or swerving city streets.

Originating as an innovation in the whitewater rafting world, Chaco ® now designs footwear for all walks of life in the outdoor and lifestyle communities.

The brand's mission is to help people find their way, providing access to new people, places, and experiences that make them more confident in who they are and where they’re headed.

That’s why we create footwear that comes with all-terrain versatility, a unique 360° fit, unmatched durability and signature LUVSEAT™ footbed arch support.

The MyChacos custom sandal program provides customers an opportunity to express their funky individuality, while the ReChaco program helps reduce their impact on the places they explore by repairing used sandals.

Chaco ® products are distributed primarily through specialty footwear retailers, the Chaco ® eCommerce site, and other leading online and brick and mortar retailers.

Hush Puppies ® :

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Today, Hush Puppies ® exists to inspire our consumers to live life on the bright side.

We believe that optimism is contagious and that by encouraging positivity we can help shape a better world.

The Company believes that optimism is contagious and that by encouraging positivity it can help shape a better world.

Hush Puppies ® footwear is distributed through wholesale and licensed channels, and through an eCommerce site.

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Hush Puppies ® , with its basset hound icon, is one of the most well-known and loved brands worldwide.

The Bates ® brand is a leader in supplying footwear to military and civilian uniform wearers.

Bates ® utilizes DuraShocks ® , Bates iCS ® , Bates Endurance Performance System and other proprietary comfort technologies in the design of its footwear.

The Bates ® brand supplies footwear to military and civilian uniform wearers.

Bates ® utilizes DuraShocks ® , Bates iCS ® , Bates Endurance Performance System and other proprietary comfort technologies in the design of Bates ® footwear.

Bates ® supplies military footwear to several foreign countries.

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Wolverine Boston Group

Sperry ® is a leading global nautical performance and lifestyle brand offering footwear, apparel and accessories to a broad range of consumers.

The brand has been an American favorite since 1935 with the introduction of the industry’s first boat shoe.

Today, Sperry ® remains the leader in the boat shoe category, but has also expanded its business into casuals, dress casuals, wet weather, boots and vulcanized product categories.

Sperry ® has evolved into a well-balanced, multi-category (footwear, apparel and accessories) and year-round lifestyle brand for men and women.

The Sperry core product lines have evolved from the A/O Boat Shoe to include Saltwater in Wet Weather and the CVO, Striper and Crest Vibe.

The brand is primarily distributed through leading premium and better lifestyle retailers, as well as through Sperry ® retail stores and an eCommerce site.

Sperry ® was founded in 1935 by avid sailor, inventor and intrepid explorer Paul Sperry.

The brand is fully rooted in the history of American style and continues to craft the tools for life’s memorable experiences on, off and by the water.

From the invention of the world's first boat shoe, Sperry ® remains the leader in the boat shoe category, and has also expanded its business into casuals, wet weather, boots and sneakers.

The brand is primarily distributed through leading premium and better lifestyle retailers, as well as through Sperry ® retail stores and Sperry.com.

Saucony ® is a purpose driven performance running brand with roots dating back to 1898.

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Saucony ® offers five categories of performance footwear products;

Competition, Road, Trail, Tread and Walking;

Competition, Road, Trail, Train and Walking;

as well as the Originals lifestyle footwear inspired by Saucony ® products of the 1970's to 2000's.

Saucony ® also offers a complete line of performance running apparel and select lifestyle apparel pieces.

Through our Run For Good brand platform and charitable foundation, Saucony ® is strengthening connections with consumers and elevating the positioning of the brand.

Through Saucony's ® Run For Good brand platform and charitable foundation, Saucony ® is strengthening connections with consumers and elevating the positioning of the brand.

The brand’s products are distributed primarily through leading run specialty and sporting goods retailers, as well as Saucony ® retail stores and an eCommerce site.

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The Company signed a multi-year license agreement in 2017 to license the Stride Rite ® brand.

Kids' footwear offerings from Saucony ® , Sperry ® , Keds ® , Merrell ® , Hush Puppies ® and Cat ® are distributed through premium and better lifestyle retailers, outdoor and sporting good retailers, as well as through an eCommerce site and by a license partner.

Kids' footwear offerings from Saucony ® , Sperry ® , Keds ® , Merrell ® , Hush Puppies ® and Cat ® are distributed through premium and better lifestyle retailers, outdoor and sporting goods retailers, as well as through an eCommerce site and by a license partner.

Other Businesses

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Sourcing Division - The sourcing division earns third-party commission revenue by providing consulting services related to product development, production control, quality assurance, materials procurement, compliance and other services.

Multi-brand Consumer-Direct Division - The multi-brand consumer-direct division includes retail stores that sell footwear and apparel from the Company's brand portfolio and other brands.

Multi-brand Consumer-Direct Division - The multi-brand consumer-direct division includes retail stores that sell footwear and apparel from the Company's brand portfoli o and other brands.

The Company’s marketing strategy is to develop brand-specific plans and related promotional materials that foster a consistent message for each of the Company’s core brands across the globe.

Each operating segment has dedicated marketing personnel who develop the marketing strategies for specific brands.

Each reportable segment has dedicated marketing personnel who develop the marketing strategies for specific brands.

Marketing campaigns and strategies vary by brand, but are generally designed to target consumers in order to increase awareness of, and affinity for, the Company’s brands.

The Company’s advertisements typically emphasize fashion, comfort, quality, durability, functionality and other performance and lifestyle attributes of the

Company’s brands and products.

The Company’s advertisements typically emphasize fashion, comfort, quality, durability, functionality and other performance and lifestyle attributes of the Company’s brands and products.

Components of brand-specific marketing plans vary and may include print and radio advertising, search engine optimization, social networking sites, event sponsorships, in-store point-of-purchase displays, promotional materials and sales and technical assistance.

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and (vi) consulting services regarding retail store layout and design.

The Company believes its brand names represent a competitive advantage, and the Company, along with its licensees and distributors, make significant marketing investments to promote and enhance the market position of its products and drive brand awareness.

The Company believes its brand names represent a competitive

advantage, and the Company, along with its licensees and distributors, make significant marketing investments to promote and enhance the market position of its products and drive brand awareness.

Domestic Sales and Distribution

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• The Company also operates brick and mortar retail stores and eCommerce sites.

A broad distribution base insulates the Company from dependence on any one customer.

No single customer accounted for more than 10% of the Company’s consolidated revenue in fiscal 2019 , 2018 or 2017 .

International Operations and Global Licensing

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The Company has footwear marketing and distribution rights under the Cat ® and Harley-Davidson ® trademarks pursuant to license arrangements with the respective trademark owners.

The Cat ® license has a term through December 31, 2024 and the Harley-Davidson ® license has a term through December 31, 2022.

The Cat ® license term runs through December 31, 2024 and the Harley-Davidson ® license term runs through December 31, 2022.

Both licenses are subject to early termination for breach.

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The Company protects its proprietary rights under applicable laws.

Order Backlog

At February 22, 2020 , the Company had an order backlog of $ 974 million , compared to an order backlog of $ 964 million at February 23, 2019 .

Substantially all of the backlog as of February 22, 2020 relates to orders for products expected to ship in fiscal 2020 .

Orders in the backlog are subject to cancellation by customers and to changes in planned customer demand or at-once orders.

The backlog at any particular time is affected by a number of factors, including seasonality, retail conditions, expected customer demand, product availability and the schedule for the manufacture and shipment of products.

Accordingly, a comparison of backlog from period to period is not necessarily meaningful and may not be predictive of eventual actual shipments.

The Company experiences moderate fluctuations in sales volume during the year, as reflected in quarterly revenue.

The Company expects current seasonal sales patterns to continue in future years.

Prior to the COVID-19 pandemic, the Company’s business was subject to seasonal influences that could cause significant differences in revenue, earnings and cash flows from quarter to quarter.

The COVID-19 pandemic resulted in changes in consumer behavior and preferences in fiscal 2020 that have negatively impacted the Company's fiscal 2020 results.

The Company expects the seasonal cadence that the Company experienced historically may continue to be affected as a result of these changes in consumer behavior and preferences.

The Company also experiences some fluctuation in its levels of working capital, typically including an increase in net working capital requirements near the end of the first and third fiscal quarters.

The Company meets its working capital requirements through internal operating cash flows and, as needed, the Revolving Credit Facility, as discussed in more detail under the caption "Liquidity and Capital Resources" in Item 7:

The Company meets its working capital requirements through internal operating cash flows and, as needed, borrowings under the Revolving Credit Facility, included in its Amended Senior Credit Facility as discussed in more detail under the caption "Liquidity and Capital Resources" in Item 7:

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

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The Company competes with numerous domestic and international footwear marketers, some of whom are larger and have greater resources than the Company.

Product performance and quality, including technological improvements, product identity, competitive pricing and ability to control costs and the ability to adapt to style changes are all important elements of competition in the footwear and apparel markets served by the Company.

Product performance and quality, including technological improvements, product identity, competitive pricing, ability to control costs and ability to adapt to style changes are all important elements of competition in the footwear and apparel markets served by the Company.

The footwear and apparel industries are subject to changes in consumer preferences.

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The Company uses and generates certain substances and wastes that are regulated or may be deemed hazardous to the environment under certain federal, state and local regulations.

The Company works with foreign and domestic federal, state and local agencies

from time to time to resolve cleanup issues at various sites and other regulatory issues.

Financial information regarding the Company’s environmental remediation activities is found in Note 17 to our Consolidated Financial Statements.

As of December 28, 2019 , the Company had approximately 4,000 domestic and foreign production, office and sales employees.

The Company presently considers its employee relations to be good.

The Company works with foreign and domestic federal, state and local agencies from time to time to resolve cleanup issues at various affected sites and other regulatory issues.

Financial information regarding the Company’s environmental remediation activities is found in Note 17 to the Company's Consolidated Financial Statements.

Human Capital Resources

Employee Profile :

As of January 2, 2021, the Company had approximately 3,400 domestic and foreign production, office and sales employees.

One of the Company's Core Values is "Our People Are the Difference," and as such we work to maximize the

engagement and contribution of our current workforce and to attract the best talent available from outside the organization when needed.

Talent Recruitment, Retention and Development :

Our talent strategy is focused on attracting top talent and continually developing, engaging, investing in and retaining top employees through a variety of retention and development efforts and world class corporate amenities.

We strive to hire world class talent, while ensuring opportunities for growth and development for our team members.

We recently launched an engaging modern recruitment marketing website to tell our compelling story of opportunity and inclusion.

Development starts on day one with an enriching Day 1 experience designed to help employees start off on the right foot from the moment they begin their career with the Company.

The Company strives to be one of the best places to work.

In order to maximize engagement and contribution of our team members, we conduct regular pulse and check-in surveys to ensure we are in touch with our team member needs and perspectives.

Our annual talent planning process provides invaluable data to help retain top talent through career planning and leadership continuity by using that data to identify and mitigate succession gaps through hiring and development.

The Company benchmarks its benefits regularly and keeps abreast of the most up-to-date and effective strategies in order to offer a comprehensive and competitive compensation and benefits package that is specific to the employees’ region of employment including annual incentive programs, long-term incentive programs and health and wellness benefits, such as the corporate headquarters' on-site, state of the art Fitness Center, Child Care, and Doggie Day Care facilities for our employees.

The Company believes that leaders should be developed at every stage of their career, from new managers to executives.

We have a global leadership development program for all people leaders through partnerships with top educational institutions which focuses both on business leadership and capabilities needed to evolve our businesses, and on people leadership capabilities to build, retain, and inspire top performing teams.

As we continue to evolve and transform, the continued development of leaders is viewed as critical to the Company's future success.

To enhance the development of employees, the Company offers a wide variety of virtual learning courses, instructor led classes, video libraries, and quick reference documents and provides tuition reimbursement to help employees achieve higher education goals.

Diversity, Equity, and Inclusion :

The Company is committed to having a diverse and inclusive workforce which is reflected in the wide range of cultures, religions, ethnicities and nationalities, as well as varied professional and educational backgrounds currently represented at the Company.

Because the Company believes in cultivating a well-rounded, diverse workforce, the Company continuously seeks out individuals who reflect and support the goal of maintaining a diverse corporation.

We have further prioritized diversity and inclusion by hiring an expert partner to help us build a framework to promote an inclusive environment today and into the future in order to make the Company an even greater place to work.

Health and Safety :

The health and safety of the Company's employees is one of its highest priorities.

The Company has developed safety protocols to enhance the health and safety of all employees.

The Environmental, Health, & Safety Council is composed of representatives from across the Company and coordinates health and safety matters on a real time basis.

The Company's focus on the health and safety of its workforce is also evidenced by the actions it has taken in response to the COVID-19 pandemic around the globe, including:

• Increasing employees' work from home flexibility;

• Adjusting attendance policies to encourage those who are sick to stay home;

• Increasing cleaning protocols;

• Initiating regular communication regarding impacts of the COVID-19 pandemic, including health and safety protocols and procedures;

• Implementing temperature screening of employees at the majority of its distribution facilities;

• Establishing new physical distancing procedures for employees who need to be onsite;

• Providing additional personal protective equipment and cleaning supplies;

• Modifying work spaces with plexiglass dividers and touchless faucets;

• Implementing protocols to address actual and suspected COVID-19 cases and potential exposure;

• Prohibiting all domestic and international non-essential travel for all employees;

• Requiring masks to be worn in all locations where allowed by local law.

The Company distributes its products to a variety of customers, many of which are deemed essential, including customers in the health and safety, critical construction, food and agriculture, and energy sectors.

As a result, the majority of the Company's distribution facilities have continued operating since the COVID-19 pandemic began.

In order to keep distribution facilities open, the Company invested in creating physically safe work environments for employees.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business