What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-26 · 341 added, 305 removed, 1041 unchanged (38% of the section changed)

23 unchanged sentences

Business Acquisition 68

Quarterly Results of Operations (Unaudited) 70

Reports of Independent Registered Public Accounting Firm 71

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

WOLVERINE WORLD WIDE, INC.

11 unchanged sentences

Interest expense, net 37.4 43.6 30.0

Debt extinguishment, interest rate swap termination, and other costs 5.5 — 0.6

Other income, net ( 2.1 ) ( 4.9 ) ( 0.6 )

Debt extinguishment and other costs 34.3 5.5 —

Other expense (income), net 3.7 ( 2.1 ) ( 4.9 )

Total other expenses 75.4 47.0 25.1

14 unchanged sentences

Net earnings (loss) $ 67.0 $ ( 138.6 ) $ 128.9

Other comprehensive loss net of tax:

Other comprehensive income (loss) net of tax:

Foreign currency translation adjustments ( 20.0 ) 10.6 5.4

1 unchanged sentence

Unrealized gain (loss) arising during the period, net of taxes of $ 3.0 , $( 5.2 ) and $ 0.2

7.7 ( 17.6 ) 0.9

Reclassification adjustments included in net earnings (loss), net of taxes of $ 1.4 , $ 0.4 and $( 2.2 )

3.7 3.1 ( 7.6 )

Pension adjustments:

Net actuarial loss arising during the period, net of taxes of $(8.0), $(3.9) and $(2.6) ( 30.0 ) ( 14.6 ) ( 9.9 )

Net actuarial gain (loss) arising during the period, net of taxes of $ 7.8 , $( 8.0 ) and $( 3.9 )

29.5 ( 30.0 ) ( 14.6 )

Amortization of prior actuarial losses, net of taxes of $ 3.0 , $ 1.4 and $ 0.5

Settlement loss, net of taxes of $1.5 in 2018

Other comprehensive loss ( 28.7 ) ( 13.8 ) ( 5.2 )

Other comprehensive income (loss) 31.7 ( 28.7 ) ( 13.8 )

other comprehensive income (loss) attributable to noncontrolling interests — ( 0.2 ) —

Other comprehensive loss attributable to Wolverine World Wide, Inc.

Other comprehensive income (loss) attributable to Wolverine World Wide, Inc.

31.7 ( 28.5 ) ( 13.8 )

8 unchanged sentences

(In millions, except share data) January 1,

2021 December 28,

2022 January 2,

Current assets:

Cash and cash equivalents $ 161.7 $ 347.4

$ 347.4 $ 180.6

Accounts receivable, less allowances of $ 28.3 and $ 33.5

4 unchanged sentences

Total current assets 903.7 904.2

Property, plant and equipment:

Accumulated depreciation

( 197.2 ) ( 184.0 )

Property, plant and equipment, net

Property, plant and equipment, net of accumulated depreciation of $ 219.1 and $ 197.2

Lease right-of-use assets

Other assets:

Goodwill 556.6 442.4

Indefinite-lived intangibles 718.1 382.3

1 unchanged sentence

Deferred income taxes 1.8 3.2

Total other assets

966.1 1,211.1

$ 2,137.4 $ 2,480.0

See accompanying notes to consolidated financial statements.

WOLVERINE WORLD WIDE, INC.

AND SUBSIDIARIES

Consolidated Balance Sheets – continued

(In millions, except share data) January 2 ,

2021 December 28,

Other assets 64.4 65.2

Total assets $ 2,586.4 $ 2,137.4

LIABILITIES AND STOCKHOLDERS’ EQUITY

1 unchanged sentence

Accounts payable $ 222.1 $ 185.0

$ 185.0 $ 202.1

Accrued salaries and wages 41.7 27.0

10 unchanged sentences

Stockholders’ equity

Wolverine World Wide, Inc.

stockholders’ equity:

Common stock – par value $ 1 , authorized 320,000,000 shares;

2 unchanged sentences

Retained earnings 1,128.2 1,093.3

1,093.3 1,263.3

Accumulated other comprehensive loss ( 98.9 ) ( 130.6 )

( 130.6 ) ( 102.1 )

Cost of shares in treasury;

29,604,013 , and 28,285,274 shares

( 810.2 ) ( 764.3 )

Total Wolverine World Wide, Inc.

3 unchanged sentences

Total liabilities and stockholders’ equity $ 2,586.4 $ 2,137.4

$ 2,137.4 $ 2,480.0

See accompanying notes to consolidated financial statements.

13 unchanged sentences

38.1 28.9 24.5

Pension contribution

Pension and SERP expense

19 unchanged sentences

Additions to property, plant and equipment ( 17.6 ) ( 10.3 ) ( 34.4 )

( 10.3 ) ( 34.4 ) ( 21.7 )

Proceeds from sale of a business and other assets

Investment in joint ventures

22 unchanged sentences

Contributions from noncontrolling interests

Net cash used in financing activities ( 154.0 ) ( 124.6 ) ( 404.5 )

Net cash provided by (used in) financing activities 169.3 ( 154.0 ) ( 124.6 )

Effect of foreign exchange rate changes

30 unchanged sentences

Net earnings 128.5 0.4 128.9

Other comprehensive loss ( 5.0 ) ( 0.2 ) ( 5.2 )

Other comprehensive income (loss) ( 13.8 ) — ( 13.8 )

Shares forfeited, net of shares issued under stock incentive plans ( 38,655 shares)

0.1 ( 4.2 ) ( 4.1 )

Shares issued for stock options exercised, net ( 681,389 shares)

0.6 11.6 12.2

Stock-based compensation expense

Cash dividends declared ($ 0.40 per share)

( 34.9 ) ( 34.9 )

Issuance of treasury shares ( 7,460 shares)

Purchase of common stock for treasury ( 10,914,965 shares)

( 319.2 ) ( 319.2 )

Purchases of shares under stock-based compensation plans ( 368,326 shares)

Change in accounting principle 8.1 ( 8.1 ) $ —

( 12.8 ) ( 12.8 )

Capital contribution from noncontrolling interests 5.7 5.7

Balance at December 28, 2019 $ 108.3 $ 233.4 $ 1,263.3 $ ( 102.1 ) $ ( 736.2 ) $ 11.7 $ 778.4

Net earnings 128.5 0.4 128.9

Other comprehensive income (loss) ( 13.8 ) — ( 13.8 )

Net loss ( 136.9 ) ( 1.7 ) ( 138.6 )

Other comprehensive loss ( 28.5 ) ( 0.2 ) ( 28.7 )

Shares issues, net of shares forfeited under stock incentive plans ( 1,497,478 shares)

1.5 ( 19.0 ) ( 17.5 )

Shares issued for stock options exercised, net ( 600,041 shares)

1 unchanged sentence

Cash dividends declared ($ 0.40 per share)

( 33.1 ) ( 33.1 )

Issuance of treasury shares ( 5,479 shares)

Purchase of common stock for treasury ( 877,624 shares)

( 21.0 ) ( 21.0 )

Purchases of shares under stock-based compensation plans ( 231,617 shares)

( 7.3 ) ( 7.3 )

Capital contribution from noncontrolling interests 1.8 1.8

Balance at December 28, 2019 $ 108.3 $ 233.4 $ 1,263.3 $ ( 102.1 ) $ ( 736.2 ) $ 11.7 $ 778.4

Balance at January 2, 2021 $ 110.4 $ 252.6 $ 1,093.3 $ ( 130.6 ) $ ( 764.3 ) $ 11.6 $ 573.0

See accompanying notes to consolidated financial statements.

7 unchanged sentences

Loss Treasury Stock Non-controlling Interest Total

Balance at December 28, 2019 $ 108.3 $ 233.4 $ 1,263.3 $ ( 102.1 ) $ ( 736.2 ) $ 11.7 $ 778.4

Net loss ( 136.9 ) ( 1.7 ) ( 138.6 )

Other comprehensive loss ( 28.5 ) ( 0.2 ) ( 28.7 )

Balance at January 2, 2021 $ 110.4 $ 252.6 $ 1,093.3 $ ( 130.6 ) $ ( 764.3 ) $ 11.6 $ 573.0

Net earnings (loss) 68.6 ( 1.6 ) 67.0

Other comprehensive income 31.7 — 31.7

Shares issued, net of shares forfeited under stock incentive plans ( 431,180 shares)

0.4 ( 8.2 ) ( 7.8 )

Shares issued for stock options exercised, net ( 774,145 shares)

0.8 16.4 17.2

Stock-based compensation expense

Cash dividends declared ($ 0.40 per share)

( 33.7 ) ( 33.7 )

Issuance of treasury shares ( 4,005 shares)

Purchase of common stock for treasury ( 1,150,721 shares)

( 39.6 ) ( 39.6 )

Purchases of shares under stock-based compensation plans ( 172,023 shares)

( 6.4 ) ( 6.4 )

Capital contribution from noncontrolling interests 4.8 4.8

14 unchanged sentences

The Company’s portfolio of owned and licensed brands includes:

Bates ® , Cat ® , Chaco ® , Harley-Davidson ® , Hush Puppies ® , Hytest ® , Keds ® , Merrell ® , Saucony ® , Sperry ® , Stride Rite ® and Wolverine ® .

Bates ® , Cat ® , Chaco ® , Harley-Davidson ® , Hush Puppies ® , Hytest ® , Keds ® , Merrell ® , Saucony ® , Sperry ® , Stride Rite ® , Sweaty Betty ® and Wolverine ® .

The Company’s products are marketed worldwide through owned operations, through licensing and distribution arrangements with third parties, and through joint ventures.

The Company also operates retail stores and eCommerce sites to market both its own brands and branded footwear and apparel from other manufacturers, and has a leathers division that markets Wolverine Performance Leathers™ .

On August 2, 2021, the Company completed the acquisition of Lady of Leisure InvestCo Limited (the “Acquired Company”) for $ 417.4 million, which is net of acquired cash of $ 7.4 million.

The Acquired Company owns the Sweaty Betty ® brand and activewear business, a premium women’s activewear brand.

See Note 19 for further discussion.

Principles of Consolidation and Basis of Presentation

2 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

The COVID-19 pandemic, the duration and severity of which is subject to uncertainty, has had and continues to have, a significant impact on the Company's business.

The COVID-19 pandemic, the duration and severity of which is subject to uncertainty, has had and continues to have, an impact on the Company's business.

Management's estimates and assumptions used in the preparation of the Company’s consolidated financial statements in accordance with U.S.

2 unchanged sentences

The Company’s fiscal year is the 52- or 53-week period that ends on the Saturday nearest to December 31.

Fiscal year 2020 had 53 weeks, and fiscal years 2019 and 2018 each had 52 weeks.

Fiscal years 2021 and 2019 each had 52 weeks, and fiscal year 2020 had 53 weeks.

Use of Estimates

3 unchanged sentences

Revenue Recognition

The Company recognizes revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers .

The Company recognizes revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers .

Revenue is recognized upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration to be received in exchange for those goods or services.

3 unchanged sentences

Wholesale revenue is recognized for products sourced by the Company when control transfers to the customer generally occurring upon the shipment or delivery of branded products to the customer.

Consumer-direct includes eCommerce revenue that is recognized for products sourced by the Company when control transfers to the customer once the related goods have been shipped and retail store revenue recognized at time of sale.

The shipment of goods, or point of purchase for retail store sales, was evaluated to best represent when control transfers based on the Company’s right of payment for the goods, the customer’s legal title to the asset, the transfer of physical possession and the customer having the risks and rewards of the goods.

Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

Shipping and handling costs that are charged to and reimbursed by a customer are recognized as revenue, while the related expenses incurred by the Company are recorded as cost of goods sold.

Shipping and handling costs that are charged to and reimbursed by a customer are recognized as revenue, while the related

expenses incurred by the Company are recorded as cost of goods sold.

The Company has elected the practical expedient to treat shipping and handling activities that occur after control of the goods transfers to the customer as fulfillment activities.

1 unchanged sentence

Standard credit terms apply to the Company's wholesale receivables, while payment is rendered at the time of sale within the consumer-direct channel.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable (contract assets), and customer advances (contract

liabilities) on the consolidated balance sheets.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable (contract assets), and customer advances (contract liabilities) on the consolidated balance sheets.

Generally, billing occurs commensurate to revenue recognition resulting in contract assets.

6 unchanged sentences

Advertising expenses were $ 195.4 million, $ 135.6 million and $ 119.4 million for fiscal years 2021, 2020 and 2019, respectively.

Prepaid advertising totaled $ 1.2 million and $ 3.7 million as of January 2 , 2021 and December 28, 2019, respectively.

Prepaid advertising totaled $ 3.6 million and $ 1.2 million as of January 1, 2022 and January 2, 2021, respectively.

Earnings Per Share

The Company calculates earnings per share in accordance with FASB ASC Topic 260, Earnings Per Share (“ASC 260”).

ASC 260 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method.

Under the guidance in ASC 260, the Company’s unvested share-based payment awards that contain non-forfeitable rights to dividends, whether paid or unpaid, are participating securities and must be included in the computation of earnings per share pursuant to the two-class method.

Cash Equivalents

7 unchanged sentences

Cost is determined using the FIFO method for all raw materials, work-in-process and finished goods inventories in foreign countries and certain domestic finished goods inventories.

The average cost of inventory is used for finished goods inventories of the Company’s consumer-direct business.

The average cost of inventory is used for finished goods inventories of the Company’s consumer-direct business and Sweaty Betty ® inventory.

The Company has applied these inventory cost valuation methods consistently from year to year.

8 unchanged sentences

Normal repairs and maintenance are expensed as incurred.

Depreciation of property, plant and equipment is computed using the straight-line method.

Depreciation of property, plant and equipment is computed using the straight-line

The depreciable lives range from 14 to 20 years for buildings, from 5 to 15 years for leasehold improvements, from 3 to 10 years for furniture, fixtures and equipment and from 3 to 5 years for software.

The Company’s leases consist primarily of corporate offices, retail stores, distribution centers, showrooms, vehicles and office equipment.

The Company leases assets in the normal course of business to meet its current and future needs while providing flexibility to its operations.

The Company enters into contracts with third parties to lease specifically identified assets.

Most of the Company’s leases have contractually specified renewal periods.

Most retail store leases have early termination clauses that the Company can elect if stipulated sales amounts are not achieved.

The Company determines the lease term for each lease based on the terms of each contract and factors in renewal and early termination options if such options are reasonably certain to be exercised.

Under FASB ASC Topic 842, Leases , the Company has elected the practical expedient to account for lease components and nonlease components associated with individual leases as a single lease component for all of its leases.

In addition, the Company has elected to account for multiple lease components as a single lease component.

The Company’s leases may include variable lease costs such as payments based on changes to an index, payments based on a percentage of retail store sales, and maintenance, utilities, shared marketing or other service costs that are paid directly to the lessor under terms of the lease.

The Company recognizes variable lease payments when the amounts are incurred and determinable.

The Company has elected to account for leases of less than one year as short-term leases and accordingly does not recognize a right-of-use asset or lease liability for these leases.

The Company recognizes rent expense on a straight-line basis over the lease term.

The Company subleases certain portions of leased offices and distribution centers that exceed the Company’s current operational needs.

Since the Company utilizes the majority of the leased space and retains the obligation to the lessor, the underlying leases continue to be accounted for as operating leases.

Sublease income is recognized on a straight-line basis over the term of the sublease and is recognized in other expense (income), net on the consolidated statements of operations.

The Company recognizes a lease liability in current and noncurrent liabilities equal to the present value of the fixed future lease payments using an incremental borrowing rate as of the commencement date of each lease.

The incremental borrowing rate is based on an interest rate that the Company would normally pay to borrow on a collateralized basis over a similar term and an amount equal to the lease payments.

The Company also recognizes a right-of-use asset, which is equal to the lease liability as of January 1, 2022 adjusted for the remaining balance of accrued rent and unamortized lease incentives.

Deferred Financing Costs

3 unchanged sentences

These costs are amortized into earnings through interest expense over the terms of the respective agreements.

The Company follows FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"), which requires that all derivative instruments be recorded on the consolidated balance sheets at fair value by establishing criteria for designation and effectiveness of hedging relationships.

The Company does not hold or issue financial instruments for trading purposes.

Refer to Note 11 for further discussion regarding the Company's derivative arrangements and derivative accounting.

Goodwill and Other Intangibles

1 unchanged sentence

Indefinite-lived intangibles include trademarks and trade names.

Goodwill and intangible assets deemed to

have indefinite lives are not amortized, but are subject to impairment tests at least annually.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment tests at least annually.

The Company reviews the carrying amounts of goodwill and indefinite-lived intangible assets by reporting unit at least annually, or when indicators of impairment are present, to determine if such assets may be impaired.

The Company includes assumptions about expected future operating performance as part of a discounted cash flow analysis to estimate fair value.

The Company includes assumptions about expected future operating performance, such as forecasted growth rates and cost of capital, which are derived from internal projections and operating plans, as part of a discounted cash flow analysis to estimate fair value.

If the carrying value of these assets is not recoverable, based on the discounted cash flow analysis, management compares the fair value of the assets to the carrying value.

Goodwill and indefinite-lived intangibles are considered impaired if the recorded value exceeds the fair value.

The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value.

The Company would not be required to quantitatively determine the fair value of the indefinite-lived intangible unless the Company determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than the carrying value.

Future cash flows of the individual indefinite-lived intangible assets are used to measure their fair value after consideration by management of certain assumptions, such as forecasted growth rates and cost of capital, which are derived from internal projections and operating plans.

The Company performs its annual testing for goodwill and indefinite-lived intangible asset impairment at the beginning of the fourth quarter of the fiscal year.

The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill and indefinite-lived intangible asset are less than their carrying value.

The Company would not be required to quantitatively

determine the fair value unless the Company determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than the carrying value.

The Company performs its annual testing for goodwill and indefinite-lived intangible asset impairment at the beginning of the fourth quarter of the fiscal year for all reporting units.

See Note 4 for information related to the results of the Company's annual test.

3 unchanged sentences

If such assets are considered to be impaired, the impairment amount to be recognized is the amount by which the carrying value of the assets exceeds their fair value.

Fair Value of Financial Instruments

The Company follows FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which provides a consistent definition of fair value, focuses on exit price, prioritizes the use of market-based inputs over entity-specific inputs for measuring fair value and establishes a three-tier hierarchy for fair value measurements.

ASC 820 requires fair value measurements to be classified and disclosed in one of the following three categories:

Fair value is measured using quoted prices (unadjusted) in active markets for identical assets and liabilities.

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.

Fair value is measured using valuation techniques in which one or more significant inputs are unobservable.

Environmental

5 unchanged sentences

Assets related to potential recoveries from other responsible parties are recognized when a definitive agreement is reached and collection of cash is realizable.

Recoveries of covered losses under insurance policies are recognized only when realization of the claim is deemed realized or realizable.

Recoveries of covered losses under insurance policies are recognized only when realization of the claim is deemed probable.

The Company is subject to legal proceedings and claims related to the environmental matters described in Note 17.

The Company routinely assesses the legal and factual circumstances of each matter and the likelihood of any adverse outcomes in these matters, as well as ranges of possible losses.

Assessments of lawsuits and claims can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

The Company accrues an estimated liability for legal proceeding claims that are both probable and estimable and reserves may change in future periods due to new developments in each matter.

For further discussion, refer to Note 17.

Retirement Benefits

4 unchanged sentences

The Company has elected to measure its defined benefit plan assets and obligations as of December 31 of each year, regardless of the Company's actual fiscal year end date, which is the Saturday nearest to December 31.

Stock Based Compensation

The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of ASC Topic 718, Compensation – Stock Compensation .

The Company generally grants restricted stock or units (“Restricted Awards”), performance-based restricted stock or units (“Performance Awards”) and stock options under its stock-based compensation plans.

All stock-based awards are accounted for based on their respective grant date fair values.

Compensation cost for all awards expected to vest is recognized over the vesting period, including accelerated recognition for retirement-eligible employees.

The provision for income taxes is based on the geographic dispersion of the earnings reported in the consolidated financial statements.

13 unchanged sentences

Transaction gains and losses are included in the consolidated statements of operations and were not material for fiscal years 2021, 2020 and 2019.

Business Combination

The Company accounts for business combinations using the acquisition method of accounting, which requires that once control is obtained, the consolidated financial statements reflect the operations of an acquired business starting from the acquisition date.

All assets acquired and liabilities assumed are recorded at fair value as of the acquisition date.

The Company allocates the purchase price of an acquired business to the fair values of the tangible and identifiable intangible assets acquired and liabilities assumed, with any excess purchase price recorded as goodwill.

Contingent consideration, if any, is included in the purchase price and is recognized at its fair value on the acquisition date.

During the measurement period, which is up to one year from the acquisition date, adjustments to the assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill.

The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques and requires management to make judgments that may involve the use of significant estimates.

For intangible assets acquired in a business combination, the Company typically uses the income method.

Significant estimates used in valuing certain intangible assets include, but are not limited to, the amount and timing of future cash flows, growth rates and discount rates, among other items.

If the actual results differ from the estimates and judgments used, the amounts recorded in the Consolidated Financial Statements may be exposed to potential impairment of the intangible assets and goodwill as discussed in the "Goodwill and Indefinite-Lived Intangibles" accounting policy.

For further discussion, refer to Note 19.

NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board (“FASB”) issued the following ASUs that have been adopted by the Company during fiscal 2020.

The following is a summary of the effect of adoption of these new standards.

The FASB has issued the following Accounting Standards Update (“ASU”) that the Company has not yet adopted.

The following is a summary of the new standard.

Standard Description Effect on the Financial Statements or Other Significant Matters

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

Seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.

The Company adopted ASU 2016-13 at the beginning of the first quarter on a prospective basis.

The Company adjusted its business policies and processes relating to the measurement of allowances for credit losses to consider reasonable and supportable information to determine expected credit losses on accounts receivable.

The adoption of the ASU did not have a material effect on the consolidated financial statements.

ASU 2017-04, Intangibles Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment Eliminates step two of the goodwill impairment test under legacy US GAAP.

Annual and interim goodwill impairment tests are performed by comparing the fair value of a reporting unit with its carrying amount and the amount by which the carrying amount exceeds the reporting unit’s fair value will be recognized as an impairment charge.

The Company adopted the ASU at the beginning of the first quarter on a prospective basis.

The adoption of the ASU did not have a significant impact on the Company’s financial statements and all prospective impairment tests will be completed under this standard.

ASU 2020-04, Reference Rate Reform (Topic 848);

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (as amended by ASU 2021-01) Provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.

This guidance is applicable for the Company’s borrowing instruments under the amended senior credit facility, which use LIBOR as a reference rate, and is available for adoption effective immediately but is only available through December 31, 2022.

The Company is evaluating the impact of the new standard on its Consolidated Financial Statements.

EARNINGS PER SHARE

The Company calculates earnings per share in accordance with FASB ASC Topic 260, Earnings Per Share (“ASC 260”).

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

20 unchanged sentences

For fiscal years 2021, 2020 and 2019, 605,774 , 1,179,088 and 133,505 outstanding stock options, respectively, have not been included in the denominator for the computation of diluted earnings per share because they were anti-dilutive.

The Company has 2,000,000 authorized shares of $ 1 par value preferred stock, none of which was issued or outstanding as of January 2 , 2021 or December 28, 2019.

The Company has 2,000,000 authorized shares of $ 1 par value preferred stock, none of which was issued or outstanding as of January 1, 2022 or January 2, 2021.

The Company has designated 150,000 shares of preferred stock as Series A junior participating preferred stock and 500,000 shares of preferred stock as Series B junior participating preferred stock for possible future issuance.

1 unchanged sentence

In addition to the stock repurchase program activity, the Company acquired $ 14.1 million, $ 24.8 million and $ 16.9 million of Company common stock in fiscal years 2021, 2020 and 2019, respectively, in connection with employee transactions related to stock incentive plans.

On February 11, 2019, the Company's Board of Directors approved a common stock repurchase program that authorizes the repurchase of an additional $ 400.0 million of common stock over a four year period incremental to amounts remaining under the previous repurchase program.

the previous repurchase program.

The annual amount of stock repurchases is restricted under the terms of the Company's Credit Agreement.

9 unchanged sentences

For the reporting units that the Company elected to test qualitatively, the Company concluded it to be more likely than not that their estimated fair values are greater than their respective carrying values.

The Company’s indefinite-lived intangible assets, which comprise trade names and trademarks, totaled $ 382.3 million and $ 604.5 million as of January 2 , 2021 and December 28, 2019, respectively.

In the fourth quarter of fiscal 2020, after the completion of the annual impairment testing, the Company recognized a $ 222.2 million impairment charge for the Sperry ®

trade name resulting from reductions in the future cash flow assumptions mainly due to the impact of the COVID-19 pandemic to the Sperry ® brand and an increase in the discount rate.

The Company’s indefinite-lived intangible assets, which comprise trade names and trademarks, totaled $ 718.1 million and $ 382.3 million as of January 1, 2022 and January 2, 2021, respectively.

In the fourth quarter of fiscal 2020, after the completion of the annual impairment testing, the Company recognized a $ 222.2 million impairment charge for the Sperry ® trade name resulting from reductions in the future cash flow assumptions mainly due to the impact of the COVID-19 pandemic to the Sperry ® brand and an increase in the discount rate.

The Sperry ® trade name was valued using the income approach, specifically the multi-period excess earnings method with the key assumptions used in the valuation being revenue growth, operating profit, and the discount rate.

If the operating results for Sperry ® decline in future periods compared to current projections, the discount rate increases, increases in the assumed tax rate, or macroeconomic conditions deteriorate further due to the COVID-19 pandemic and adversely affect the value of the Company’s Sperry ® trade name balance, the Company may need to record additional non-cash impairment charges.

The Company continues to monitor the effects of the COVID-19 pandemic, and actions taken by governments, businesses and individuals in response to the pandemic, on the global economy to assess the outlook for demand for the Company's products and the impact on the Company's business and financial performance.

The risk of future impairment for the Sperry ® trade name is dependent on key assumptions used in the determination of the trade name's fair value, such as revenue growth, earnings before interest, taxes, depreciation and amortization ("EBITDA") margin, discount rate, and assumed tax rate, or macroeconomic conditions deteriorate due to the COVID-19 pandemic and adversely affect the value of the Company's Sperry ® trade name.

T he Company continues to monitor the effects of the COVID-19 pandemic, and actions taken by governments, businesses and individuals in response to the pandemic, on the global economy to assess the outlook for demand for the Company's products and the impact on the Company's business and financial performance.

The carrying value of the Company’s Sperry ® trade name indefinite-lived intangible asset was $ 296.0 million as of January 1, 2022.

8 unchanged sentences

Total $ 140.2 $ 65.6 $ 74.6

December 28, 2019

January 2, 2021

(In millions) Gross carrying

21 unchanged sentences

Net proceeds of this program are classified in operating activities in the consolidated statements of cash flows.

The amounts outstanding under this program were $ 0.0 million and $ 33.9 million as of January 2 , 2021 and December 28, 2019, respectively.

There were no amounts outstanding under this program as of January 1, 2022 and January 2, 2021.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition and Performance Obligations

The Company has agreements to license symbolic intellectual property with minimum guarantees or fixed consideration.

The Company is due $ 26.4 million of remaining fixed transaction price under its license agreements as of January 2 , 2021, which it expects to recognize per the terms of its contracts over the course of time through December 2024 .

The Company has elected to omit the remaining variable consideration under its license agreements given the Company recognizes revenue equal to what it has the right to invoice and that amount corresponds directly with the value to the customer of the Company’s performance to date.

The Company provides disaggregated revenue for the wholesale and consumer-direct sales channels, which are reconciled to the Company’s reportable segments.

13 unchanged sentences

Total revenue $ 2,414.9 $ 1,791.1 $ 2,273.7

The Company has agreements to license symbolic intellectual property with minimum guarantees or fixed consideration.

The Company is due $ 19.3 million of remaining fixed transaction price under its license agreements as of January 1, 2022, which it expects to recognize per the terms of its contracts over the course of time through December 2026 .

The Company has elected to omit the remaining variable consideration under its license agreements given the Company recognizes revenue equal to what it

has the right to invoice and that amount corresponds directly with the value to the customer of the Company’s performance to date.

Reserves for Variable Consideration

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These estimates take into consideration a range of possible outcomes, which are probability-weighted in accordance with the expected value method for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

Overall, the revenue recognized by the Company, net of these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

Overall these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

Revenue recognized during fiscal years 2021 and 2020 related to the Company’s contract liabilities was nominal.

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(In millions) January 1,

2021 December 28,

2022 January 2,

Product returns reserve $ 16.6 $ 15.6

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Customer advances liability 6.8 8.2

The amount of variable consideration included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the

contract will not occur in a future period.

Actual amounts of consideration ultimately received may differ from initial estimates.

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Customer advances are recognized as a current liability on the consolidated balance sheets.

The Company used the LIFO method to value inventories of $ 35.6 million and $ 81.2 million at January 2 , 2021 and December 28, 2019, respectively.

During fiscal years 2020 and 2019, a reduction in inventory quantities resulted in a liquidation of applicable LIFO inventory quantities carried at lower costs in prior years.

This LIFO liquidation decreased cost of goods sold by $ 3.9 million and $ 0.4 million, respectively.

If the FIFO method had been used, inventories would have been $ 7.5 million and $ 11.4 million higher than reported at January 2 , 2021 and December 28, 2019, respectively.

The Company used the LIFO method to value inventories of $ 42.0 million and $ 35.6 million at January 1, 2022 and January 2, 2021, respectively.

During fiscal years 2021 and 2020, changes in the LIFO reserve increased cost of goods sold by $ 0.5 million and decreased cost of goods sold $ 3.9 million, respectively.

If the FIFO method had been used, inventories would have been $ 8.0 million and $ 7.5 million higher than reported at January 1, 2022 and January 2, 2021, respectively.

Total debt consists of the following obligations:

(In millions) January 1,

2021 December 28,

Term Loan A, due December 6, 2023 $ 180.0 $ 192.5

2022 January 2,

Term Facility, due October 21, 2026 $ 200.0 $ 180.0

Senior Notes, 5.000% interest, due September 1, 2026 — 250.0

Senior Notes, 6.375% interest, due May 15, 2025 — 300.0

Senior Notes, 4.000% interest, due August 15, 2029 550.0 —

Borrowings under revolving credit agreements 225.0 —

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Total debt $ 966.8 $ 722.5

On May 5, 2020, the Company entered into a Second Amendment (the “Amendment”) which amended its senior credit facility, which had previously been amended and restated as of December 6, 2018 (as so amended by the Amendment, the “Amended Senior Credit Facility”).

In connection with the Amendment, the Company borrowed $ 171.0 million in aggregate principal amount of an incremental term loan (the “Incremental Term Loan”).

The Incremental Term Loan was fully repaid by the end of fiscal 2020.

The Amended Senior Credit Facility also includes a $ 200.0 million term loan facility (“Term Loan A”) and an $ 800.0 million Revolving Credit Facility, both with maturity dates of December 6, 2023, that remain unchanged as a result of the Amendment.

The Amended Senior Credit Facility’s debt capacity is limited to an aggregate debt amount (including outstanding term loan principal and revolver commitment amounts in addition to permitted incremental debt) not to exceed $ 1,750.0 million, unless certain specified conditions set forth in the Credit Agreement are met.

Term Loan A requires quarterly principal payments with a balloon payment due on December 6, 2023.

On October 21, 2021, the Company entered into a 2021 Replacement Facility Amendment and Reaffirmation Agreement (the “Amendment”) to its Credit Facility (as amended and restated, the "Credit Agreement").

The Amendment amended and restated the Credit Agreement to, among other things:

(i) provide for a term loan A facility (the “Term Facility”) in an aggregate principal amount of $ 200.0 million, which replaced the existing term loan A;

(ii) provide for an increased revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facilities”) with total commitments of $ 1.0 billion, an increase of $ 200.0 million from the existing Revolving Facility;

and (iii) set the LIBOR floor to 0.000 %, a decrease of 0.750% from the existing Senior Credit Facilities.

The maturity date of the loans under the Senior Credit Facilities was extended to October 21, 2026.

The Amendment provides for a debt capacity of up to an aggregate debt amount (including outstanding term loan principal and revolver commitment amounts in addition to permitted incremental debt) not to exceed $ 2.0 billion unless certain specified conditions set forth in the Credit Agreement are met.

The Term Facility requires quarterly principal payments with a balloon payment due on October 21, 2026.

The scheduled principal payments due over the next 12 months total $ 10.0 million as of January 1, 2022 and are recorded as current maturities of long-term debt on the consolidated balance sheets.

The Revolving Credit Facility allows the Company to borrow up to an aggregate amount of $ 800.0 million, which includes a $ 200.0 million foreign currency subfacility under which borrowings may be made, subject to certain conditions, in Canadian dollars, British pounds, euros, Hong Kong dollars, Swedish kronor, Swiss francs and such additional currencies as are determined in accordance with the Credit Agreement.

The Revolving Credit Facility also includes a $ 50.0 million swingline subfacility and a $ 50.0 million letter of credit subfacility.

The Company also had outstanding letters of credit under the Revolving Credit Facility of $ 6.1 million and $ 5.7 million as of January 2 , 2021 and December 28, 2019, respectively.

These outstanding borrowings and letters of credit reduce the borrowing capacity under the Revolving Credit Facility.

The interest rates applicable to amounts outstanding under Term Loan A and to U.S.

dollar denominated amounts outstanding under the Revolving Credit Facility will be, at the Company’s option, either (1) the Alternate Base Rate plus an Applicable Margin as determined by the Company’s Consolidated Leverage Ratio, within a range of 0.125 % to 1.000 %, or (2) the Eurocurrency Rate plus an Applicable Margin as determined by the Company’s Consolidated Leverage Ratio, within a range of 1.125 % to 2.000 % (all capitalized terms used in this sentence are as defined in the Credit Agreement).

At January 2 , 2021, Term Loan A had weighted-average interest rate of 2.00 %.

The Revolving Facility allows the Company to borrow up to an aggregate amount of $ 1.0 billion.

The Revolving Facility also includes a $ 100.0 million swingline subfacility and a $ 50.0 million letter of credit subfacility.

The Company also had outstanding letters of credit under the Revolving Facility of $ 5.8 million and $ 6.1 million as of January 1, 2022 and January 2, 2021, respectively.

These outstanding borrowings and letters of credit reduce the borrowing capacity under the Revolving Facility.

The interest rates applicable to amounts outstanding under Term Facility and to U.S.

dollar denominated amounts outstanding under the Revolving Facility will be, at the Company’s option, either (1) the Alternate Base Rate plus an Applicable Margin as determined by the Company’s Consolidated Leverage Ratio, within a range of 0.125 % to 1.000 %, or (2) the Eurocurrency Rate plus an Applicable Margin as determined by the Company’s Consolidated Leverage Ratio, within a range of 1.125 % to 2.000 % (all capitalized terms used in this sentence are as defined in the Credit Agreement).

At January 1, 2022, Term Facility had weighted-average interest rate of 1.35 %.

The obligations of the Company pursuant to the Credit Agreement are guaranteed by substantially all of the Company’s material domestic subsidiaries and secured by substantially all of the personal and real property of the Company and its material domestic subsidiaries, subject to certain exceptions.

The Amended Senior Credit Facility also contains certain affirmative and negative covenants, including covenants that limit the ability of the Company and its Restricted Subsidiaries to, among other things:

The Senior Credit Facilities also contain certain affirmative and negative covenants, including covenants that limit the ability of the Company and its Restricted Subsidiaries to, among other things:

incur or guarantee indebtedness;

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or make investments, as well as covenants restricting the activities of certain foreign subsidiaries of the Company that hold intellectual property related assets.

Further, the Amended Senior Credit Facility requires compliance with the following financial covenants:

a maximum Consolidated Leverage Ratio and a minimum Consolidated Interest Coverage Ratio (all capitalized terms used in this paragraph are as defined in the Amended Senior Credit Facility).

As of January 2 , 2021, the Company was in compliance with all covenants and performance ratios under the Amended Senior Credit Facility.

On May 11, 2020 the Company issued $ 300.0 million aggregate principal amount of 6.375 % senior notes due on May 15, 2025.

Related interest payments are due semi-annually beginning on November 15, 2020.

These senior notes are guaranteed by substantially all of the Company’s domestic subsidiaries

The Company has $ 250.0 million of senior notes outstanding that are due on September 1, 2026.

These senior notes bear interest at 5.00 % and related interest payments are due semi-annually.

Further, the Senior Credit Facilities require compliance with the following financial covenants:

a maximum Consolidated Leverage Ratio and a minimum Consolidated Interest Coverage Ratio (all

capitalized terms used in this paragraph are as defined in the Credit Agreement).

As of January 1, 2022, the Company was in compliance with all covenants and performance ratios under the Senior Credit Facilities.

On August 26, 2021, the Company issued $ 550.0 million aggregate principal debt amount of 4.000 % senior notes due on August 15, 2029.

Related interest payments are due semi-annually beginning February 15, 2022.

The senior notes are guaranteed by substantially all of the Company’s domestic subsidiaries.

The proceeds from the senior notes were used to extinguish the Company’s $ 250.0 million senior notes due on September 1, 2026 and $ 300.0 million senior notes due on May 15, 2025.

The Company incurred $ 34.0 million of debt extinguishment and other costs in connection with the senior notes extinguished, of which $ 28.4 million is related to redemption premiums and $ 5.6 million is related to write-off of capitalized financing fees.

The Company has a foreign revolving credit facility with aggregate available borrowing s of $ 4.0 million that are un committed and, therefore, each borrowing against the facility is subject to approval by the lender.

As of January 2 , 2021 and December 28, 2019, there were no borrowings against this credit facility.

As of January 1, 2022 and January 2, 2021, there were no borrowings against this credit facility.

The Company included in interest expense the amortization of deferred financing costs of $ 2.3 million, $ 2.7 million, and $ 1.6 million in fiscal years 2021, 2020 and 2019, respectively.

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(In millions) January 1,

2021 December 28, 2019

2022 January 2, 2021

Land $ 3.9 $ 3.9

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Depreciation expense was $ 24.8 million, $ 25.7 million and $ 24.1 million for fiscal years 2021, 2020 and 2019, respectively.

Description of Leases

The Company’s leases consist primarily of corporate offices, retail stores, distribution centers, showrooms, vehicles and office equipment.

The Company leases assets in the normal course of business to meet its current and future needs while providing flexibility to its operations.

The Company enters into contracts with third parties to lease specifically identified assets.

Most of the Company’s leases have contractually specified renewal periods.

Most retail store leases have early termination clauses that the Company can elect if stipulated sales amounts are not achieved.

The Company determines the lease term for each lease based on the terms of each contract and factors in renewal and early termination options if such options are reasonably certain to be exercised.

In response to the COVID-19 pandemic and the effect the pandemic had on the Company’s leased properties, the Company has been actively seeking rent relief from its landlords.

The Company considered the FASB staff guidance issued in April 2020 in relation to accounting for lease concessions made in connection with the effects of the COVID-19 pandemic and elected to apply the temporary practical expedient to account for rent deferrals and abatements as though the enforceable rights and obligations existed in each contract.

Depending on the timing of the future payments, amounts deferred and payable in future periods have been included in “Other accrued liabilities” and “Other liabilities” on the Company’s condensed consolidated balance sheets.

The Company continued to recognize lease expense on a straight-line basis for its leases over the related lease terms.

Accounting for Leases

In addition, the Company has elected to account for multiple lease components as a single lease component.

The Company recognizes variable lease payments when the amounts are incurred and determinable.

The Company has elected to account for leases of less than one year as short-term leases and accordingly does not recognize a right-of-use asset or lease liability for these leases.

The Company recognizes rent expense on a straight-line basis over the lease term.

The Company subleases certain portions of leased offices and distribution centers that exceed the Company’s current operational needs.

Since the Company utilizes the majority of the leased space and retains the obligation to the lessor, the underlying leases continue to be accounted for as operating leases.

Sublease income is recognized on a straight-line basis over the term of the sublease, and beginning in fiscal 2019, is recognized in other expense (income), net on the consolidated statements of operations.

The incremental borrowing rate is based on an interest rate that the Company would normally pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments.

The weighted-average discount rate for operating leases as of January 2 , 2021 is 5.2 %.

The Company also recognizes a right-of-use asset, which is equal to the lease liability as of January 2 , 2021 adjusted for the remaining balance of accrued rent and unamortized lease incentives.

The following is a summary of the Company’s lease cost.

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Total lease cost $ 41.6 $ 42.8

The following is a summary of the Company’s supplemental cash flow information related to leases.

(In millions) 2021 2020

Cash paid for operating lease liabilities $ 38.5 $ 28.6

Operating lease assets obtained in exchange for lease liabilities 14.6 6.0

The weighted-average discount rate for operating leases as of January 1, 2022 is 5.0 %.

The weighted-average remaining lease term for operating leases as of January 1, 2022 is 8.7 years.

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Recognized lease liability $ 156.5

The Company made cash payments of $ 28.6 million and $ 33.2 million for operating lease liabilities during fiscal 2020 and 2019, respectively.

The Company entered into new or amended leases that resulted in the noncash recognition of right-of-use assets and lease liabilities of $ 6.0 million and $ 26.8 million during fiscal 2020 and 2019, respectively.

The Company did not enter into any real estate leases with commencement dates subsequent to January 1, 2022.

Rental expense under all operating leases, under the previous lease standard ASC 840 and consisting primarily of minimum rentals, totaled $ 32.0 million in fiscal year 2018.

The Company recognized sublease income of $ 2.8 million in fiscal year 2018.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company follows ASC 815, which requires that all derivative instruments be recorded on the consolidated balance sheets at fair value by establishing criteria for designation and effectiveness of hedging relationships.

The Company does not hold or issue financial instruments for trading purposes.

The Company utilizes foreign currency forward exchange contracts designated as cash flow hedges to manage the volatility associated primarily with U.S.

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wholesale operations in the normal course of business.

These foreign currency forward exchange hedge contracts extended out to a maximum of 538 days and 545 days as of January 2 , 2021 and December 28, 2019, respectively.

These foreign currency forward exchange hedge contracts extended out to a maximum of 538 days and 538 days as of January 1, 2022 and January 2, 2021, respectively.

When foreign exchange contracts are determined not to be highly effective or are terminated before their contractual termination dates, the Company would remove the hedge designation from those contracts and reclassify into earnings the unrealized gains or losses that would otherwise be included in accumulated other comprehensive income (loss) within stockholders’ equity.

During fiscal 2020 and 2019, the Company reclassified $ 0.6 million and $ 1.2 million respectively, to other income for foreign currency derivatives that were no longer deemed highly effective.

During fiscal 2020, the Company reclassified $ 0.6 million to other income for foreign currency derivatives that were no longer deemed highly effective.

The Company also utilizes foreign currency forward exchange contracts that are not designated as hedging instruments to manage foreign currency transaction exposure.

Foreign currency derivatives not designated as hedging instruments are offset by foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities.

The Company had an interest rate swap arrangement to mitigate interest volatility with regard to variable rate borrowings under the Amended Senior Credit Facility.

The interest rate swap exchanged floating rate for fixed rate interest payments without the exchange of the underlying notional amounts, and had been designated as cash flow hedge of the underlying debt.

The arrangement was terminated, effective December 29, 2020, in association with the repayment of the Incremental Term Loan.

The fair value of the swap at the termination date of $ 7.3 million was required to be paid in full.

Consequently, unrealized losses of $ 4.9 million in accumulated other comprehensive income that were associated with variable rate debt interest

payments that were no longer probable were reclassified to “Debt extinguishment, interest rate swap termination, and other costs“ in the accompanying consolidated statement of operations.

The Company has a cross currency swap to minimize the impact of exchange rate fluctuations.

The hedging instrument, which, unless otherwise terminated, will mature on September 1, 2021 , has been designated as a hedge of a net investment in a foreign operation.

The Company will pay 2.75 % on the euro-denominated notional amount and receive 5.00 % on the U.S.

dollar notional amount, with an exchange of principal at maturity.

Changes in fair value related to movements in the foreign currency exchange spot rate are recorded in accumulated other comprehensive income, offsetting the currency translation adjustment related to the underlying net investment that is also recorded in accumulated other comprehensive income.

All other changes in fair value are recorded in interest expense.

In accordance with ASC 815, the Company has formally documented the relationship between the cross-currency swap and the Company’s investment in its euro-denominated subsidiary, as well as its risk management objective and strategy for undertaking the hedge transaction.

This process included linking the derivative to its net investment on the balance sheet.

The Company also assessed at the hedge’s inception, and continues to assess on an ongoing basis, whether the derivative used in the hedging transaction is highly effective in offsetting changes in the net investment in the foreign operations.

The Company has an interest rate swap arrangement, which unless otherwise terminated, will mature on May 30, 2025 .

This agreement, which exchanges floating rate interest payments for fixed rate interest payments over the life of the agreement without the exchange of the underlying notional amounts, has been designated as a cash flow hedge of the underlying debt.

The notional amount of the interest rate swap arrangement is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss.

The differential paid or received on the interest rate swap arrangement is recognized as interest expense.

In accordance with ASC 815, the Company has formally documented the relationship between the interest rate swap and the variable rate borrowing, as well as its risk management objective and strategy for undertaking the hedge transactions.

This process included linking the derivative to the specific liability or asset on the balance sheet.

The Company also assessed at the inception of the hedge, and continues to assess on an ongoing basis, whether the derivative used in the hedging transaction is highly effective in offsetting changes in the cash flows of the hedged item.

The Company had a cross currency swap to minimize the impact of exchange rate fluctuations which matured on September 1, 2021 .

Changes in fair value related to movements in the foreign currency exchange spot rate were recorded in accumulated other comprehensive income (loss), offsetting the currency translation adjustment related to the underlying net investment that was also recorded in accumulated other comprehensive income (loss).

All other changes in fair value were recorded in interest expense.

The notional amounts of the Company’s derivative instruments are as follows:

(Dollars in millions) January 1,

2021 December 28, 2019

Foreign exchange contracts:

Hedge contracts $ 250.7 $ 246.3

Non-hedge contracts — 7.3

2022 January 2,

Foreign exchange hedge contracts $ 296.7 $ 250.7

Interest rate swap 311.3 —

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(In millions) January 1,

2021 December 28, 2019

2022 January 2,

Financial assets:

Foreign exchange contracts - hedge $ — $ 2.3

Foreign exchange hedge contracts $ 5.9 $ —

Financial liabilities:

Foreign exchange contracts - hedge $ ( 8.8 ) $ ( 1.8 )

Foreign exchange hedge contracts $ ( 1.0 ) $ ( 8.8 )

Interest rate swap ( 0.1 ) —

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STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of ASC Topic 718, Compensation – Stock Compensation .

The Company recognized compensation expense of $ 28.9 million, $ 24.5 million and $ 31.2 million and related income tax benefits of $ 5.6 million, $ 4.8 million and $ 6.4 million for grants under its stock-based compensation plans in the statements of operations for fiscal years 2020, 2019 and 2018, respectively.

The Company recognized stock-based compensation expense of $ 38.1 million, $ 28.9 million and $ 24.5 million and related income tax benefits of $ 7.5 million, $ 5.6 million and $ 4.8 million for grants under its stock-based compensation plans in the statements of operations for fiscal years 2021, 2020 and 2019, respectively.

As of January 1, 2022, the Company had 7,961,971 stock incentive units (stock options, stock appreciation rights, restricted stock, restricted stock units and common stock) available for issuance under the Stock Incentive Plan of 2016, as amended and restated ("Stock Plan").

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Certain option and restricted awards provide for accelerated vesting under various scenarios, including retirement, death and disability, and upon a change in control of the Company.

Awards issued to employees that meet the specified retirement

age and service requirements are vested upon the employee's retirement in accordance with plan provisions and the applicable award agreements issued under the Stock Plan.

Awards issued to employees that meet the specified retirement age and service requirements are vested upon the employee's retirement in accordance with plan provisions and the applicable award agreements issued under the Stock Plan.

The Company issues shares to plan participants upon exercise or vesting of stock-based incentive awards from either authorized, but unissued shares or treasury shares.

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Forfeited ( 268,205 ) 29.67 ( 125,653 ) 35.91

Unvested at December 28, 2019 1,618,916 $ 27.36 1,127,102 $ 31.94

Unvested at January 2, 2021 1,644,017 $ 26.39 1,005,322 $ 35.25

Granted 654,898 34.64 630,996 38.02

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Unvested at January 1, 2022 1,208,000 $ 33.62 764,415 $ 35.69

As of January 2 , 2021, there was $ 18.5 million of unrecognized compensation expense related to unvested Restricted Awards, which is expected to be recognized over a weighted-avera ge period of 1.5 years.

As of January 1, 2022, there was $ 19.8 million of unrecognized compensation expense related to unvested Restricted Awards, which is expected to be recognized over a weighted-average period of 1.6 years.

The total fair value of Restricted Awards vested during the year ended January 1, 2022 was $ 34.8 million.

As of December 28, 2019, there was $ 19.9 million of unrecognized compensation expense related to unvested Restricted Awards, which was expected to be recognized over a weighted-average period of 1.5 years.

The total fair value of Restricted Awards vested during the year ended December 28, 2019 was $ 23.7 million.

As of January 2, 2021, there was $ 18.5 million of unrecognized compensation expense related to unvested Restricted Awards, which was expected to be recognized over a weighted-average period of 1.5 years.

The total fair value of Restricted Awards vested during the year ended January 2, 2021 was $ 35.0 million.

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The total fair value of Performance Awards vested during the year ended January 1, 2022 was $ 6.2 million.

As of December 28, 2019, there was $ 4.5 million of unrecognized compensation expense related to unvested Performance Awards, which was expected to be recognized over a weighted-average period of 1.1 years.

The total fair value of Performance Awards vested during the year ended December 28, 2019 was $ 22.8 million.

As of January 2, 2021, there was $ 1.4 million of unrecognized compensation expense related to unvested Performance Awards, which was expected to be recognized over a weighted-average period of 1.4 years.

The total fair value of Performance Aw ards vested during the year ended January 2, 2021 was $ 28.0 million.

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The Company estimated the fair value of employee stock options on the date of grant using the Black-Scholes-Merton formula.

The estimated weighted-average fair value for each option granted was $ 8.20 , $ 9.07 and $ 8.20 per share for fiscal years 2020, 2019 and 2018, respectively, with the following weighted-average assumptions.

2020 2019 2018

Expected market price volatility (1)

31.2 % 29.6 % 29.6 %

Risk-free interest rate (2)

1.5 % 2.5 % 2.5 %

Dividend yield (3)

1.2 % 1.0 % 0.8 %

Expected term (4)

4 years 4 years 4 years

(1) Based on historical volatility of the Company’s common stock.

The expected volatility is based on the daily percentage change in the price of the stock over the four years prior to the grant.

(2) Represents the U.S.

Treasury yield curve in effect for the expected term of the option at the time of grant .

(3) Represents the Company’s estimated cash dividend yield for the expected term.

(4) Represents the period of time that options granted are expected to be outstanding.

As part of the determination of the expected term, the Company concluded that all employee groups exhibit similar exercise and post-vesting termination behavior.

The estimated weighted-average fair value for each option granted was $ 11.14 , $ 8.20 and $ 9.07 per share for fiscal years 2021, 2020 and 2019, respectively.

A summary of the stock option transactions is as follows:

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Canceled ( 12,990 ) 25.39

Outstanding at December 28, 2019 4,033,107 $ 21.41 4.4 $ 49.8

Outstanding at January 2, 2021 3,259,405 $ 22.22 3.9 $ 29.7

Granted 23,610 34.22

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As of January 1, 2022, there was $ 0.2 million of unrecognized compensation expense related to stock option grants expected to be recognized over a weighted-average period of 1.3 years.

As of December 28, 2019 and December 29, 2018, there was $ 0.2 million and $ 0.4 million, respectively, of unrecognized compensation expense related to stock option awards expected to be recognized over a weighted-average period of 1.4 years and 0.8 years, respectively.

As of January 2, 2021 and December 28, 2019, there was $ 0.1 million and $ 0.2 million, respectively, of unrecognized compensation expense related to stock option awards expected to be recognized over a weighted-average period of 0.9 years and 1.4 years, respectively.

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price as of each fiscal year end, which would have been received by the option holders had all option holders exercised options, where the market price o f the Company's stock was above the strike price ("in-the-money"), as of that date.

The total number of in-the-money options exercisable as of January 1, 2022, based on the Company’s closing stock price of $ 28.81 per share, was 2,247,575 and the weighted-average exercise price was $ 21.70 per share .

As of December 28, 2019, 3,974,757 outstanding options were exercisable and in-the-money, with a weighted-average exercise price of $ 21.29 per share.

As of January 2, 2021, 3,096,685 outstanding options were exercisable and in-the-money, with a weighted-average exercise price of $ 21.66 per share.

RETIREMENT PLANS

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The Company also has individual deferred compensation agreements with certain former employees that entitle those employees to receive payments from the Company following retirement, generally for the duration of their lives.

The Company maintains life insurance policies with a cash surrender value of $ 44.0 million at January 2 , 2021 and $ 66.8 million at December 28, 2019 that are intended to partially fund deferred compensation benefits under the SERP and deferred compensation agreements.

The Company maintains life insurance policies with a cash surrender value of $ 45.6 million at January 1, 2022 and $ 44.0 million at January 2, 2021 recognized as a other assets on the consolidated balance sheets that are intended to partially fund deferred compensation benefits under the SERP and deferred compensation agreements.

The Company has two defined contribution 401(k) plans covering substantially all domestic employees that provide for discretionary Company contributions based on the amount of participant deferrals.

The Company recognized expense for its contributions to the defined contribution plans of $ 4.2 million, $ 5.2 million and $ 4.5 million in fiscal years 2020, 2019 and 2018, respectively.

The Company recognized expense for its

contributions to the defined contribution plans of $ 5.2 million, $ 4.2 million and $ 5.2 million in fiscal years 2021, 2020 and 2019, respectively.

The Company also has certain defined contribution plans at foreign subsidiaries.

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The Company also has a benefit plan at a foreign location that provides for retirement benefits based on years of service.

The obligation recorded under this plan was $ 1.0 million at January 2 , 2021 and $ 0.9 million at December 28, 2019 and was recognized as a deferred compensation liability on the consolidated balance sheets.

The obligation recorded under this plan was $ 1.0 million at January 1, 2022 and $ 1.0 million at January 2, 2021 and was recognized as a deferred compensation liability on the consolidated balance sheets.

The following summarizes the status of and changes in the Company’s assets and related obligations for its pension plans (which include the Company’s defined benefit pension plans and the SERP) for the fiscal years 2021 and 2020:

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Interest cost on projected benefit obligations

Actuarial losses 48.1 45.4

Actuarial loss (gain) ( 26.6 ) 48.1

Benefits paid to plan participants

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$ ( 3.9 ) $ ( 3.8 )

Noncurrent liabilities

( 147.0 ) ( 109.7 )

Accrued pension liabilities ( 107.4 ) ( 147.0 )

Net amount recognized

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$ ( 73.3 ) $ ( 114.2 )

Unrecognized net actuarial loss recognized in accumulated other comprehensive income was $ 92.8 million and $ 61.4 million, and amounts net of tax were $ 73.5 million and $ 48.7 million, as of January 2 , 2021 and December 28, 2019, respectively.

The accumulated benefit obligations for all defined benefit pension plans and the SERP were $ 430.2 million at January 2 , 2021 and $ 378.4 million at December 28, 2019 .

The increase in benefit obligation for fiscal 2020 was the result of actuarial losses caused by changes to the discount rate.

Unrecognized net actuarial loss recognized in accumulated other comprehensive income was $ 41.8 million and $ 92.8 million, and amounts net of tax were $ 33.2 million and $ 73.5 million, as of January 1, 2022 and January 2, 2021, respectively.

The accumulated benefit obligations for all defined benefit pension plans and the SERP were $ 416.1 million at January 1, 2022 and $ 430.2 million at January 2, 2021 .

The decrease in benefit obligation for fiscal 2021 was the result of actuarial gains caused by changes to the discount rate.

The actuarial loss included in accumulated other comprehensive loss and expected to be recognized in net periodic pension expense during fiscal 2022 is $ 11.3 million.

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Net amortization loss 13.8 6.6 2.6

Settlement loss — — 7.2

Net pension expense $ 14.0 $ 8.5 $ 5.6

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Qualified defined benefit pension plans expense $ 8.3 $ 3.3 $ 0.2

During fiscal 2018, the Company completed a pension annuity purchase, which settled $ 66.6 million of projected benefit obligations.

The Company recognized a settlement loss of $ 7.2 million due to the annuity purchase.

The non-service cost components of net pension expense is recorded in the Other expense (income), net line item on the consolidated statements of operations and comprehensive income.

The weighted-average actuarial assumptions used to determine the benefit obligation amounts and the net periodic benefit cost for the Company’s pension and post-retirement plans are as follows:

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Within the equity and fixed income classifications, the investments are diversified.

The Company’s asset

allocations by asset category and fair value measurement are as follows:

January 2 , 2021 December 28, 2019

The Company’s asset allocations by asset category and fair value measurement are as follows:

January 1, 2022 January 2, 2021

(In millions) Total % of Total Total % of Total

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Foreign 15.0 8.3 12.5

Deferred expense (credit):

Deferred expense (benefit):

Federal ( 17.1 ) ( 51.6 ) ( 5.8 )

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Foreign 0.1 0.9 1.2

Income tax provision $ ( 45.5 ) $ 17.0 $ 27.1

Income tax expense (benefit) $ 13.3 $ ( 45.5 ) $ 17.0

A reconciliation of the Company’s total income tax expense and the amount computed by applying the statutory federal income tax rate to earnings before income taxes is as follows:

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Deferred tax on future cash dividends ( 0.9 ) 1.0 0.6

Income tax audit adjustments 2.5 — —

Deferred adjustment for income tax audit ( 1.2 ) — —

Other Permanent adjustments and non-deductible expenses ( 0.3 ) 1.0 ( 0.6 )

Other ( 0.4 ) 0.2 ( 0.3 )

Income tax provision $ ( 45.5 ) $ 17.0 $ 27.1

Income tax expense (benefit) $ 13.3 $ ( 45.5 ) $ 17.0

Significant components of the Company’s deferred income tax assets and liabilities are as follows:

(In millions) January 1,

2021 December 28,

2022 January 2,

Deferred income tax assets:

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Net deferred income tax liabilities $ ( 117.1 ) $ ( 32.3 )

The valuation allowance for deferred income tax assets as of January 2 , 2021 and December 28, 2019 was $ 22.3 million and $ 17.6 million, respectively.

The valuation allowance for deferred income tax assets as of January 1, 2022 and January 2, 2021 was $ 24.6 million and $ 22.3 million, respectively.

The net increase in the total valuation allowance during fiscal 2021 was $2.3 million.

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state and local net operating loss carryforwards as well as a valuation allowance against state deferred tax assets for certain U.S.

legal entities, foreign net operating loss carryforwards and tax credit carryforwards in foreign jurisdictions.

legal entities, foreign net operating loss carryforwards and tax credit

carryforwards in foreign jurisdictions.

The ultimate realization of the deferred tax assets depends on the generation of future taxable income in foreign jurisdictions as well as state and local tax jurisdictions.

The current year change in the valuation

allowance results in an increase against the state deferred tax assets of $ 0.6 million, an increase related to state net operating loss carryforward of $ 1.9 million, and a net increase relating to the foreign net operating losses and foreign tax credits and other deferred tax assets of $ 2.2 million.

The current year change in the valuation allowance results in an increase against the state deferred tax assets of $ 1.0 million, an increase related to state net operating loss carryforward of $ 0.5 million, and a net increase relating to the foreign net operating losses and foreign tax credits and other deferred tax assets of $ 0.8 million.

At January 1, 2022, the Company had foreign net operating loss carryforwards of $ 30.4 million, which have expirations ranging from 2022 to an unlimited term during which they are available to offset future foreign taxable income.

The Company had U.S.

state net operating loss carryforwards and Internal Revenue Code section 163(j) interest expense carryforwards of $ 189.0 million and $ 22.0 million respectively, which have expirations ranging from 2022 to an unlimited term during which they are available to offset future state taxable income.

federal net operating loss carryforwards, state net operating loss carryforwards and Internal Revenue Code section 163(j) interest expense carryforwards of $ 15.7 million, $ 234.4 million and $ 32.5 million respectively, which have expirations ranging from 2022 to an unlimited term during which they are available to offset future state taxable income.

The Company also had tax credit carryforwards in foreign jurisdictions of $ 2.9 million, which are available for an unlimited carryforward period to offset future foreign taxes.

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Unrecognized tax benefits at end of the year $ 10.9 $ 5.5

The portion of the unrecognized tax benefits that, if recognized currently, would reduce the annual effective tax rate was $ 5.0 million and $ 6.5 million as of January 2 , 2021 and December 28, 2019, respectively.

The portion of the unrecognized tax benefits that, if recognized currently, would reduce the annual effective tax rate was $ 10.1 million and $ 5.0 million as of January 1, 2022 and January 2, 2021, respectively.

The Company recognizes interest and penalties related to unrecognized tax benefits through interest expense and income tax expense, respectively.

Interest accrued related to unrecognized tax benefits was $ 0.6 million and $ 1.5 million as of January 2 , 2021 and December 28, 2019, respectively.

Interest accrued related to unrecognized tax benefits was $ 0.6 million and $ 0.6 million as of January 1, 2022 and January 2, 2021, respectively.

The Company is subject to periodic audits by domestic and foreign tax authorities.

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10.8 ( 14.5 ) ( 24.8 ) ( 28.5 )

Balance at December 28, 2019 $ ( 47.6 ) $ ( 5.8 ) $ ( 48.7 ) $ ( 102.1 )

Balance at January 2, 2021 $ ( 36.8 ) $ ( 20.3 ) $ ( 73.5 ) $ ( 130.6 )

Other comprehensive income (loss) before reclassifications (1)

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FAIR VALUE MEASUREMENTS

ASC 820 requires fair value measurements to be classified and disclosed in one of the following three categories:

Fair value is measured using quoted prices (unadjusted) in active markets for identical assets and liabilities.

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.

Fair value is measured using valuation techniques in which one or more significant inputs are unobservable.

Recurring Fair Value Measurements

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Quoted Prices With Other Observable Inputs (Level 2)

(In millions) January 2 , 2021 December 28, 2019

(In millions) January 1, 2022 January 2, 2021

Financial assets:

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Indefinite-lived intangible assets are tested annually, or if a triggering event occurs that indicates an impairment loss may have been incurred, using fair value measurements with unobservable inputs (Level 3).

The Company recorded an impairment charge of $ 222.2 million on the Sperry ® indefinite-lived trade name in fiscal 2020.

The Company recorded an impairment charge

of $ 222.2 million on the Sperry ® indefinite-lived trade name in fiscal 2020.

Refer to Note 4, “Goodwill and Other Intangibles” for additional discussion on the Sperry ® trade name impairment.

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The carrying value and the fair value of the Company’s debt are as follows:

(In millions) January 2 , 2021 December 28, 2019

(In millions) January 1, 2022 January 2, 2021

Carrying value $ 966.8 $ 722.5

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Under the Consent Decree, the Company agreed to pay for an extension of Plainfield Township’s municipal water system to more than 1,000 properties in Plainfield and Algoma Townships, subject to an aggregate cap of $69.5 million.

The Company also agreed to continue maintaining water filters for certain homeowners, resample certain residential wells for PFAS, continue remediation at the Company’s Tannery property and House Street site, and conduct further investigations and monitoring to the assess the presence of PFAS in area groundwater.

The Company’s activities under the Consent Decree are not materially impacted by the drinking water standards that became effective on August 3, 2020.

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On June 20, 2019, the 3M Company filed a counterclaim against the Company in response to the 3M Action, seeking, among other things, contractual and common law indemnity and contribution under CERCLA and Part 201 of NREPA.

On February 20, 2020, the Company and 3M Company entered into a settlement agreement resolving the 3M Action, under which 3M Company paid the Company a lump sum amount of $ 55.0 million during the first quarter of fiscal 2020.

On February 20, 2020, the

Company and 3M Company entered into a settlement agreement resolving the 3M Action, under which 3M Company paid the Company a lump sum amount of $ 55.0 million during the first quarter of 2020.

On January 10, 2018, the EPA entered a Unilateral Administrative Order (the “Order”) under Section 106(a) of CERCLA, 42 U.S.C.

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On October 28, 2019, the EPA and the Company entered into an Administrative Settlement and Order on Consent (“AOC”) that supersedes the Order and addresses the agreed-upon removal actions outlined in the Order.

The Company has completed almost all of these activities related to the AOC, and anticipates completing the remaining activities in 2021 pursuant to approved work plans.

The Company has completed on-site activities required by the AOC, and is awaiting the final review and determination from the EPA.

The Company discusses its reserve for remediation costs in the environmental liabilities section below.

Individual and Class Action Litigation

Individual lawsuits and three putative class action lawsuits have been filed against the Company that raise a variety of claims, including claims related to property, remediation, and human health effects.

Beginning in late 2017, individual lawsuits and three putative class action lawsuits were filed against the Company that raise a variety of claims, including claims related to property, remediation, and human health effects.

The three putative class action lawsuits were subsequently refiled in the U.S.

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In addition, the current owner of a former landfill and gravel mining operation sued the Company seeking damages and cost recovery for property damage allegedly caused by the Company’s disposal of tannery waste containing PFAS (this suit collectively with the individual lawsuits and putative class action, the “Litigation Matters”).

On September 27, 2021, the Company and 3M Company entered into a non-binding term sheet outlining proposed settlement terms with the law firm representing certain of the plaintiffs in the individual lawsuits included in the Litigation Matters, and, on January 11, 2022, the parties entered into the agreement related to this proposed settlement (the “Master Settlement Agreement”).

The plaintiffs’ law firm has until March 11, 2022 to obtain each of its individual clients’ agreement to participate in the proposed settlement under the Master Settlement Agreement and provide a related release.

After the March 11, 2022 deadline, any party to the Master Settlement Agreement may, for a limited time, elect to opt out of the Master Settlement Agreement if:

(a) too many individual plaintiffs do not sign releases and participate in the proposed settlement under the Master Settlement Agreement;

or (b) any plaintiff asserting personal injury claims fails to participate in the proposed settlement under the Master Settlement Agreement.

In the event any party opts out of the Master Settlement Agreement, it will be void.

If the Master Settlement Agreement is voided, the Company intends to continue vigorously defending the individual lawsuits and other Litigation Matters.

On December 9, 2021, the Company and 3M Company reached a settlement in principle to resolve certain of the other remaining individual lawsuits included in the Litigation Matters.

Upon completion of these settlements, only one private individual action will remain pending in Michigan state court.

In addition, the parties to the putative class action have engaged in mediation.

Assessing potential liability with respect to the Litigation Matters at this time is difficult.

The Litigation Matters are in various stages of discovery and related motions.

Other than the individual lawsuits subject to the settlements described above, the Litigation Matters are in various stages of discovery and related motions.

In addition, there is minimal direct and relevant precedent for these types of claims related to PFAS, and the science regarding the human health effects of PFAS exposure in the environment remains inconclusive and inconsistent, thereby creating additional uncertainties.

Due to these factors, combined with the complexities and uncertainties of litigation, the Company is unable to conclude that adverse verdicts resulting from the Litigation Matters are probable, and therefore no amounts are currently reserved for these claims.

The Company intends to continue to vigorously defend itself against these claims.

In addition, in December 2018 the Company filed a lawsuit against certain of its historic liability insurers, seeking their participation in the Company's defense and remediation efforts.

The Company recognized $ 8.3 million in recoveries from legacy insurance policies in fiscal 2020.

The recoveries resulted from interim payment agreements reached with the insurers and are pending final resolution of the lawsuit filed by the Company.

For certain of the Litigation Matters described above, the Company has recorded an accrual in the amount of $ 50.7 million since January 2, 2021 and made related payments of $ 0.6 million.

In December 2018, the Company filed a lawsuit against certain of its historic liability insurers, seeking to compel them to provide a defense against the Litigation Matters on the Company's behalf and coverage for remediation efforts undertaken by, and indemnity provided by, the Company.

The Company recognized certain recoveries from legacy insurance policies in 2021 and 2020, and continues pursing additional recoveries through the lawsuit.

Other Litigation

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$ 101.8 $ 124.4

Changes in estimate

( 16.1 ) ( 22.6 )

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The Company's remediation activity at the Tannery property, House Street site and other relevant disposal sites is ongoing.

Although the recent Consent Decree has made near-term costs more clear, it is difficult to estimate the long-term cost of environmental compliance and remediation given the uncertainties regarding the interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination and the existence of alternative cleanup methods.

Although the Consent Decree has made near-term costs more clear, it is difficult to estimate the long-term cost of environmental compliance and remediation given the uncertainties regarding the interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination and the existence of alternative cleanup methods.

Future developments may occur that could materially change the Company’s current cost estimates, including, but not limited to:

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

The Company also reports “Other” and “Corporate” categories.

The Other category consists of the Sweaty Betty ® activewear business, the Company’s leather marketing operations, sourcing operations that include third-party commission revenues and multi-branded consumer-direct retail stores.

The Corporate category consists of unallocated corporate expenses, such as

corporate employee costs, costs related to the COVID-19 pandemic, impairment of intangible assets and environmental and other related costs.

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

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

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

revenue from third-party licensees and distributors;

and revenue from the Company’s consumer-direct businesses.

The Company also reports “Other” and “Corporate” categories.

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, such as costs related to the COVID-19 pandemic, impairment of intangible assets and environmental and other related costs.

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

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(In millions) January 1,

2021 December 28,

2022 January 2,

Total assets:

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Wolverine Boston Group 296.2 297.0

Other 115.3 —

Total $ 556.6 $ 442.4

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(In millions) January 1,

2021 December 28,

2022 January 2,

2021 December 28,

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BUSINESS ACQUISITIONS

Sweaty Betty ®

On July 31, 2021, the Company entered into a definitive agreement to acquire 100 % of the outstanding shares of Lady of Leisure InvestCo Limited.

The acquisition was completed on August 2, 2021 for $ 417.4 million, which is net of acquired cash of $ 7.4 million.

The Acquired Company owns the Sweaty Betty ® brand and activewear business.

The acquisition was funded with cash on hand and borrowings under the Company’s Revolving Facility.

Sweaty Betty ® is a premium women’s activewear brand that distributes a wide array of innovative on-trend tops, bottoms, swimwear, outerwear and accessories around the world, mainly through direct-to-consumer channels.

The Sweaty Betty ® acquisition is part of the Company’s strategic shift over the last several years from a traditional footwear wholesaler to a consumer-obsessed, digital-focused growth company.

The acquisition also aligns with the Company’s strategic growth plan to focus on expanding the Company’s digital and international footprint, and building the brand portfolio beyond footwear.

Sweaty Betty ® contributed net revenue of $ 117.4 million and net earnings of $ 9.7 million to the Company for the period from the acquisition date to January 1, 2022.

The Sweaty Betty ® operating results are included in the Other category for segment reporting purposes.

The Company recognized acquisition-related transaction costs of $ 7.5 million for 2021, in the selling, general and administrative expenses line item in the Consolidated Statement of Operations.

These costs represent investment banking fees, legal and professional fees, transaction fees, and consulting fees associated with the acquisition.

The Company accounted for the acquisition following FASB ASC Topic 805, Business Combinations , and the related assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

The aggregate purchase price was allocated to the major categories of assets acquired and liabilities assumed based upon their respective fair values at the acquisition date using primarily Level 2 and Level 3 inputs.

The Level 2 and Level 3 valuation inputs include an estimate of future cash flows and discount rates.

The Sweaty Betty ® trademark, which is estimated to have an indefinite life, has been valued at $ 346.4 million using the multi-period excess earnings method.

The multi-period excess earnings method requires the use of

significant estimates and assumptions, including but not limited to, future revenues, growth rates, EBITDA margin, tax rates and a discount rate.

The purchase price allocation is preliminary and based upon valuation information available to determine the fair value of certain assets and liabilities, including goodwill, and is subject to change, primarily for income tax matters and final adjustments to net working capital as additional information is obtained about the facts and circumstances that existed at the valuation date.

The Company expects to finalize the fair values of the assets acquired and liabilities assumed over the one-year measurement period.

The following table summarizes the preliminary purchase price allocation to the assets acquired and liabilities assumed at the acquisition date:

(In millions) Fair Value

Accounts receivable $ 3.6

Inventories 48.4

Prepaid expenses and other current assets 5.3

Property, plant and equipment 10.0

Lease right-of-use assets 7.0

Goodwill 118.9

Intangibles 355.0

Other assets 0.6

Total assets acquired 548.8

Accounts payable 13.1

Accrued salaries and wages 6.0

Other accrued liabilities 14.3

Lease liabilities 7.0

Deferred income taxes 91.0

Total liabilities assumed 131.4

Net assets acquired $ 417.4

Goodwill is the result of expected synergies and the Company’s ability to grow the Sweaty Betty ® brand, as well the acquired assembled workforce.

All of the goodwill is presented within the Other category for segment reporting purposes and within the Sweaty Betty ® reporting unit and will not be deductible for income tax purposes.

Intangible assets acquired in the acquisition were valued as follows:

(In millions) Intangible Asset Useful life

Trade name and trademark $ 346.4 Indefinite

Customer relationship 7.2 18 years

Backlog 1.0 5 months

Customer list 0.4 3 years

Total intangible assets acquired $ 355.0

The following unaudited pro forma summary presents consolidated information of the Company as if the acquisition of the Sweaty Betty ® brand and activewear business occurred at the beginning of fiscal 2020.

The pro forma information is not necessarily indicative of the results that would have actually been obtained if the acquisition had occurred at such date or that may be attained in the future.

These pro forma amounts have been calculated after including the historical Sweaty Betty ® operating results in the Company’s consolidated results and reflecting the following adjustments:

fair value adjustments for intangible assets and inventory acquired, timing adjustment to recognize acquisition related costs incurred in 2021 and in 2020, and adjustments reflecting historical interest expense.

The adjustments have been applied with related tax effects.

(In millions) 2021 2020

Net revenue $ 2,552.4 $ 1,954.7

Net earnings attributable to Wolverine World Wide, Inc.

83.9 ( 144.9 )

On April 30, 2019, the Company acquired assets and assumed liabilities from Sportlab S.R.L.

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Other intangible assets acquired include order backlog, valued at $ 1.7 million, and customer relationship assets, valued at $ 11.2 million, which had estimated useful lives at the acquisition date of 7 months and 14 years, respectively.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The aggregate quarterly earnings per share amounts disclosed in the table below may not equal the annual per share amounts due to rounding and the fact that results for each quarter are calculated independently of the full fiscal year.

The Company’s unaudited quarterly results of operations are as follows:

Fiscal 2020 Quarters Ended

(In millions, except per share data) March 28, 2020 June 27, 2020 September 26, 2020 January 2 , 2021

$ 439.3 $ 349.1 $ 493.1 $ 509.6

181.8 147.2 202.0 204.6

Net earnings (loss) attributable to Wolverine World Wide, Inc.

13.0 ( 1.6 ) 22.4 ( 170.7 )

Net earnings (loss) per share:

$ 0.16 $ ( 0.02 ) $ 0.27 $ ( 2.10 )

0.16 ( 0.02 ) 0.27 ( 2.10 )

Fiscal 2019 Quarters Ended

(In millions, except per share data) March 30, 2019 June 29, 2019 September 28, 2019 December 28, 2019

$ 523.4 $ 568.6 $ 574.3 $ 607.4

220.2 230.4 243.3 229.9

Net earnings (loss) attributable to Wolverine World Wide, Inc.

40.5 40.2 48.7 ( 0.9 )

Net earnings (loss) per share:

$ 0.44 $ 0.45 $ 0.57 $ ( 0.01 )

0.43 0.45 0.57 ( 0.01 )

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Wolverine World Wide, Inc.

and subsidiaries (the Company) as of January 2, 2021 and December 28, 2019, the related consolidated statements of operations, comprehensive income (loss) , stockholders' equity and cash flows for each of the three years in the period ended January 2, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 2, 2021 and December 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended January 2, 2021, in conformity with U.S.

and subsidiaries (the Company) as of January 1, 2022 and January 2, 2021, the related consolidated statements of operations, comprehensive income (loss) , stockholders' equity and cash flows for each of the three years in the period ended January 1, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 1, 2022 and January 2, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2022, in conformity with U.S.

generally accepted accounting principles.

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As discussed in Notes 1 and 4 of the consolidated financial statements, indefinite-lived intangibles are tested for impairment at least annually.

Auditing management’s annual impairment test for the Sperry trade name was complex and highly judgmental due to the significant estimation required in determining the fair value of the Sperry trade name indefinite-lived intangible asset.

The fair value estimate was sensitive to significant assumptions such as future revenue growth and operating profit, and the discount rate, which are affected by expectations about future market or economic conditions.

Auditing management’s annual impairment test for the Sperry trade name was complex due to the significant estimation uncertainty required in determining the fair value of the Sperry trade name indefinite-lived intangible asset.

The significant assumptions used to estimate the fair value of the Sperry trade name included the forecasted revenue growth, EBITDA margin, and discount rate.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

Changes in these assumptions could have a significant impact on the fair value of the Sperry trade name, the amount of any impairment charge, or both.

During fiscal 2020, the Company recognized an impairment charge related to the Sperry trade name of $222.2 million, as the carrying value exceeds its estimated fair value.

Given the significant judgments made by management to estimate the fair value of the Sperry trade name and the impairment charge recorded during the year, performing auditing procedures to evaluate the reasonableness of management’s judgments regarding the business and valuation assumptions utilized in the valuation model, particularly the future revenue growth, operating profit, and discount rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s Sperry trade name impairment review process.

This included controls over the significant assumptions described above and the completeness and accuracy of the data used in the fair value estimate.

To test the estimated fair value of the Sperry trade name, we performed audit procedures that included, among others, assessing the valuation model and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of Company’s controls over the Sperry trade name impairment review process.

For example, we tested controls that address the risk of material misstatement relating to the valuation of the trade name, including management’s review of the significant assumptions described above and the completeness and accuracy of the data used to develop such estimates.

To test the estimated fair value of the Sperry trade name, our audit procedures included, among others, assessing the appropriateness of the valuation model used, evaluating the significant assumptions discussed above, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

We compared the financial projections to current industry and economic trends and the historical accuracy of management’s estimates.

We involved our valuation specialists to assist in our evaluation of the Company's model, valuation methodology and the discount rate.

We also compared the significant assumptions used by management to current industry and economic trends, to the business model used by Sperry and other relevant factors.

Additionally, we assessed the historical accuracy of management’s estimates.

Environmental Liabilities

Description of the Matter As discussed in Note 17, the Company has recognized environmental liabilities of $101.8 million on an undiscounted basis.

Specifically, the Company was served with two regulatory actions filed by the Environmental Protection Agency (“EPA”) and Michigan Department of Environment, Great Lakes, and Energy (“EGLE”) in early 2018.

The Company, EGLE and EPA entered into various settlement agreements that address and outline the Company’s required remedial actions.

The Company believes it is probable that it will incur losses related to the required remediation actions and has recognized environmental liabilities for its estimate of the cost of the remedial actions.

Auditing management’s accounting for and disclosure of loss contingencies from the environmental matters was especially challenging as evaluating the probability and amount of loss is highly subjective and requires significant judgment due in part to the uncertain nature and extent of the activities to complete the required remedial actions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the identification, evaluation and disclosure of these environmental matters, including the Company’s assessment and measurement of the estimate of the probable liability.

To test the assessment of the probability of incurrence of a loss and the estimated loss, to the extent it was reasonably estimable, we performed audit procedures that included, among others, reviewing summaries of the proceedings and related correspondence with attorneys and environmental agencies, reviewing legal counsel confirmation letters, assessing scope and cost estimates of the Company’s third-party environmental studies used in determination of the reserve, utilizing internal environmental specialists to assist with assessing the cost estimate (by using all the information available) and searching for other publicly available information that might indicate new or contrary facts related to the matter.

Valuation of Sweaty Betty trade name and trademark intangible asset in the acquisition of Lady of Leisure InvestCo Limited

Description of the Matter As discussed in Note 19 to the consolidated financial statements, during the year ended January 1, 2022, the Company completed the acquisition of Lady of Leisure InvestCo Limited (which owns the Sweaty Betty brand and activewear business, referred to herein as “Sweaty Betty”) for a total purchase price of approximately $417.4 million.

The acquisition was accounted for as a business combination.

The consideration paid in the acquisition must be allocated to the acquired assets and liabilities assumed generally based on their fair value with the excess of the purchase price over those fair values allocated to goodwill.

Auditing the Company’s accounting for its acquisition of Sweaty Betty was complex due to the significant estimation uncertainty involved in estimating the fair value of the trade name and trademark intangible asset.

The total fair value ascribed to the trade name and trademark intangible amounted to $346.4 million.

The Company used the multi-period excess earnings method to value the trade name and trademark.

The significant assumptions used to estimate the fair value of trade name and trademark included the forecasted revenue growth, EBITDA margin and discount rate.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its accounting for the acquisition of Sweaty Betty.

For example, we tested controls that address the risks of material misstatement relating to the valuation of the trade name and trademark intangible asset, including management’s review of the methods and significant assumptions used to develop such estimates.

To test the estimated fair value of the acquired trade name and trademark intangible asset, our audit procedures included, among others, assessing the appropriateness of the valuation methodologies used, evaluating the significant assumptions discussed above, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

We compared the financial projections to current industry and economic trends, the historic financial performance of the acquired business, and forecasted performance of guideline public companies.

We also performed sensitivity analyses to evaluate the changes in the fair value of the intangible assets that would result from changes in the significant assumptions.

We involved our valuation specialist to assist in evaluating the methodologies used to estimate the fair value of the trade name and trademark intangible asset and to test certain significant assumptions, including the discount rate.

/s/ Ernst & Young LLP

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and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 1, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 2, 2021 and December 28, 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended January 2, 2021, and the related notes and financial statement schedule and our report dated February 26, 2021 expressed an unqualified opinion thereon.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Lady of Leisure InvestCo Limited, which is included in the 2022 consolidated financial statements of the Company and constituted 4% of total assets as of January 1, 2022 and 5% of revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Lady of Leisure InvestCo Limited.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 1, 2022 and January 2, 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended January 1, 2022, and the related notes and financial statement schedule and our report dated February 24, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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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 8. Financial Statements and Supplementary Data