What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-24 · 340 added, 287 removed, 1095 unchanged (36% of the section changed)

23 unchanged sentences

Business Acquisition 71

Variable Interest Entities and Related Party Transactions

Assets and Liabilities Held for Sale 73

Subsequent Event 74

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

7 unchanged sentences

Selling, general and administrative expenses 906.4 817.8 639.4

Impairment of intangible assets — 222.2 —

Gain on sale of trademarks ( 90.0 ) — —

Impairment of goodwill and intangible assets 428.7 — 222.2

Environmental and other related costs, net of recoveries 33.7 56.4 11.1

8 unchanged sentences

Net earnings (loss) ( 189.1 ) 67.0 ( 138.6 )

net earnings (loss) attributable to noncontrolling interests ( 1.6 ) ( 1.7 ) 0.4

net loss attributable to noncontrolling interests ( 0.8 ) ( 1.6 ) ( 1.7 )

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

25 unchanged sentences

Comprehensive income (loss) ( 223.6 ) 98.7 ( 167.3 )

comprehensive income (loss) attributable to noncontrolling interests ( 1.6 ) ( 1.9 ) 0.4

comprehensive loss attributable to noncontrolling interests ( 1.3 ) ( 1.6 ) ( 1.9 )

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

4 unchanged sentences

Consolidated Balance Sheets

(In millions, except share data) January 1,

(In millions, except share data) December 31,

2022 January 1,

6 unchanged sentences

Prepaid expenses and other current assets 79.0 56.9

Current assets held for sale 67.9 —

Total current assets 1,265.3 903.7

15 unchanged sentences

Borrowings under revolving credit agreements 425.0 225.0

Current liabilities held for sale 8.8 —

Total current liabilities 1,110.3 759.6

26 unchanged sentences

Net earnings (loss) $ ( 189.1 ) $ 67.0 $ ( 138.6 )

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

6 unchanged sentences

Debt extinguishment, interest rate swap termination, and other costs — 5.8 5.5

Impairment of intangible assets — 222.2 —

Impairment of goodwill and intangible assets 428.7 — 222.2

Environmental and other related costs, net of cash payments and recoveries received ( 23.0 ) 33.7 31.5

Gain on sale of trademarks ( 90.0 ) — —

( 2.7 ) ( 1.9 ) ( 12.7 )

10 unchanged sentences

26.1 15.7 27.9

Net cash provided by operating activities 86.8 309.1 222.6

Net cash provided by (used in) operating activities ( 178.9 ) 86.8 309.1

INVESTING ACTIVITIES

4 unchanged sentences

( 2.8 ) — ( 3.5 )

Proceeds from sale of trademarks 90.0 — —

Proceeds from company-owned life insurance policies — — 26.8

4 unchanged sentences

Borrowings under revolving credit agreements 940.0 660.0 538.0

Proceeds from company-owned life insurance policies 30.5 — —

Borrowings of long-term debt

12 unchanged sentences

Proceeds from the exercise of stock options

17.1 9.8 12.2

Contributions from noncontrolling interests

20 unchanged sentences

Additions to property, plant and equipment not yet paid 3.3 3.2 0.9

Business acquisition not yet paid — — 5.5

See accompanying notes to consolidated financial statements.

Cash and cash equivalents at the end of the year in the Consolidated Statements of Cash Flows includes $ 4.0 million of Wolverine Leathers business related cash and cash equivalents that are classified as held for sale as of December 31, 2022 that are not included in cash and cash equivalents in the Consolidated Balance Sheets.

WOLVERINE WORLD WIDE, INC.

7 unchanged sentences

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

1 unchanged sentence

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

0.6 11.6 12.2

Stock-based compensation expense

7 unchanged sentences

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

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

1 unchanged sentence

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

0.8 16.4 17.2

Stock-based compensation expense

18 unchanged sentences

Balance at January 1, 2022 $ 111.6 $ 298.9 $ 1,128.2 $ ( 98.9 ) $ ( 810.2 ) $ 14.8 $ 644.4

Net earnings (loss) 68.6 ( 1.6 ) 67.0

Other comprehensive income 31.7 — 31.7

Net loss ( 188.3 ) ( 0.8 ) ( 189.1 )

Other comprehensive loss ( 34.0 ) ( 0.5 ) ( 34.5 )

Shares issued, net of shares forfeited under stock incentive plans ( 495,502 shares)

1 unchanged sentence

Shares issued for stock options exercised, net ( 74,482 shares)

0.8 16.4 17.2

Stock-based compensation expense

4 unchanged sentences

( 81.3 ) ( 81.3 )

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

( 6.4 ) ( 6.4 )

Capital contribution from noncontrolling interests 7.0 7.0

Balance at January 1, 2022 $ 111.6 $ 298.9 $ 1,128.2 $ ( 98.9 ) $ ( 810.2 ) $ 14.8 $ 644.4

Other ( 2.1 ) ( 2.1 )

Balance at December 31, 2022 $ 112.2 $ 325.4 $ 907.2 $ ( 132.9 ) $ ( 891.3 ) $ 18.4 $ 339.0

See accompanying notes to consolidated financial statements.

15 unchanged sentences

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.

On June 30, 2022, the Company sold the Champion trademarks for footwear in the United States and Canada to HanesBrand Inc.

for $ 90.0 million in cash.

The Company recorded a gain of $ 90.0 million associated with the transaction.

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

2 unchanged sentences

The consolidated financial statements include the accounts of Wolverine World Wide, Inc.

and its majority-owned subsidiaries (collectively, the “Company”).

and its majority-owned subsidiaries (collectively, the “Company”) and any variable interest entities for which we are the primary beneficiary.

All intercompany accounts and transactions have been eliminated in consolidation.

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

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

GAAP take into account both current and expected potential future impacts of the COVID-19 pandemic on the Company’s business based on available information.

Actual results may differ materially from management’s estimates.

During the fourth quarter of 2022, the Company announced changes to its reportable segments as a result of changes in how its Chief Operating Decision Maker, the Company's Chief Executive Officer, allocates resources to and assess performance of the Company's operating segments.

All prior period disclosures have been retrospectively adjusted to reflect the new reportable segments.

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

9 unchanged sentences

Control of the Company's goods and services, and associated revenue, are transferred to customers at a point in time.

The Company’s contract revenue consist of wholesale revenue and consumer-direct revenue.

The Company’s contract revenue consists of wholesale revenue and direct-to-consumer revenue.

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

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

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

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

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

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

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.

Payment terms for the Company's revenue vary by sales channel.

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

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

7 unchanged sentences

Advertising expenses were $ 220.7 million, $ 195.4 million and $ 135.6 million for fiscal years 2022, 2021 and 2020, respectively.

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

Prepaid advertising totaled $ 2.7 million and $ 3.6 million as of December 31, 2022 and January 1, 2022, respectively.

Earnings Per Share

9 unchanged sentences

The Company values its inventory at the lower of cost or net realizable value.

Cost is determined by the LIFO method for certain domestic finished goods inventories.

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

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

Cost is determined by the LIFO method for certain domestic finished product inventories.

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

The average cost of inventory is used for finished product inventories of the Company’s direct-to-consumer 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

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

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

16 unchanged sentences

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.

The Company also recognizes a right-of-use asset, which is equal to the lease liability as of December 31, 2022 adjusted for the remaining balance of accrued rent and unamortized lease incentives.

Deferred Financing Costs

6 unchanged sentences

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

Equity Method Investments

Equity method investments where the Company owns a non-controlling interest, but exercises significant influence, are accounted for under the equity method of accounting.

The Company's original cost of investment is adjusted for the Company's share of equity in the earnings of the equity investee.

Goodwill and Other Intangibles

2 unchanged sentences

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

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

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

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 such as a discount rate and expected future operating performance, which includes forecasted revenue growth, earnings before interest, taxes, depreciation and amortization ("EBITDA") margin 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.

1 unchanged sentence

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 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.

39 unchanged sentences

In the event the Company determines it is more likely than not that the deferred tax assets will not be realized in the future, the valuation allowance adjustment to the deferred tax assets will be charged to earnings in the period in which the Company makes such a determination.

The Company includes Global Intangible Low Tax Income ("GILTI") as a current period tax expense when incurred.

The Company records an increase in liabilities for income tax accruals associated with tax benefits claimed on tax returns but not recognized for financial statement purposes (unrecognized tax benefits).

16 unchanged sentences

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.

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.

5 unchanged sentences

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.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (as amended by ASU 2021-01 and ASU 2022-06) Provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.

but was previously only available through December 31, 2022.

In December 2022, in ASU 2022-06, the FASB deferred the expiration date and extended the relief in Topic 848 beyond the cessation date of USD LIBOR.

The new accounting rules must be adopted by December 31, 2024.

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

6 unchanged sentences

( 0.6 ) ( 1.1 ) ( 0.8 )

Net earnings (loss) used to calculate basic earnings per share 67.5 ( 137.7 ) 125.9

Adjustment for earnings reallocated to participating share-based awards — — 0.1

Net earnings (loss) used to calculate diluted earnings per share $ 67.5 $ ( 137.7 ) $ 126.0

Net earnings (loss) used to calculate earnings per share $ ( 188.9 ) $ 67.5 $ ( 137.7 )

Weighted average shares outstanding

11 unchanged sentences

For fiscal years 2022, 2021 and 2020, 1,434,081 , 605,774 and 1,179,088 outstanding stock options, respectively, have not been included in the denominator for the computation of diluted earnings per share because they were anti-dilutive.

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

The Company has 2,000,000 authorized shares of $ 1 par value preferred stock, none of which was issued or outstanding as of December 31, 2022 or January 1, 2022.

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 $ 7.7 million, $ 14.1 million and $ 24.8 million of Company common stock in fiscal years 2022, 2021 and 2020, 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 annual amount of stock repurchases is restricted under the terms of the Company's Credit Agreement.

4 unchanged sentences

Acquisition of a business (see Note 19) — 118.9

Impairment ( 48.4 ) —

Foreign currency translation effects ( 23.2 ) ( 4.7 )

Goodwill balance at end of the year $ 485.0 $ 556.6

In the fourth quarter of fiscal 2022, after completion of its annual impairment testing, the Company recognized a $ 48.4 million goodwill impairment charge to the Sweaty Betty ® reporting unit.

The impairment was due to an increase in the discount rates used in the valuation.

The Company did not recognize any goodwill impairment charges during fiscal years 2021 and 2020.

The annual impairment testing indicated, for all reporting units tested quantitatively, that the fair values exceeded the respective carrying values.

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

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

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

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

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

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.

The Company’s indefinite-lived intangible assets, which comprise trade names and trademarks, totaled $ 274.0 million and $ 718.1 million as of December 31, 2022 and January 1, 2022, respectively.

In the fourth quarter of fiscal 2022, after the completion of the annual impairment testing, the Company recognized impairment charges of $ 191.0 million and $ 189.3 million to the Sperry ® and Sweaty Betty ® trade names, respectively.

The impairment charge for the Sperry ® trade name was due to reductions in future cash flow assumptions mainly due to decreases in anticipated future performance and an increase in the discount rate used in the valuation.

The impairment charge for the Sweaty Betty ® trade name resulted from reductions in future cash flow assumptions due to an increase in the discount rate used in the valuation.

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.

The Sperry ® and Sweaty Betty ® trade names were valued using the income approach, specifically the multi-period excess earnings method.

The Sweaty Betty ® reporting unit fair value was estimated using both income-based and market-based valuation methods.

T he key assumptions used in the valuations were revenue growth, EBITDA margin, and the discount rate.

Although the Company believes the estimates and assumptions used in the valuation were appropriate, it is possible assumptions could change in future periods.

The risk of future impairment to the Sperry ® and Sweaty Betty ® trade names and Sweaty Betty ® goodwill depend on key assumptions used in the determination of the trade name's and Sweaty Betty ® reporting unit's fair value, such as revenue growth, EBITDA margin, discount rate, and assumed tax rate, or macroeconomic conditions that could adversely affect the value of the Company's Sperry ® and Sweaty Betty ® trade names and Sweaty Betty ® reporting unit.

A future impairment charge of the Sperry ® trade name or Sweaty Betty ® trade name and Sweaty Betty ® reporting unit goodwill could have an adverse material effect on the Company's consolidated financial results.

The carrying value of the Company’s Sperry ® and Sweaty Betty ® trade names indefinite-lived intangible assets was $ 105.3 million and $ 94.1 million, respectively, as of December 31, 2022.

Amortizable intangible assets are amortized using the straight-line method over their estimated useful lives.

The combined gross carrying values and accumulated amortization for these amortizable intangibles are as follows:

January 1, 2022

December 31, 2022

(In millions) Gross carrying

12 unchanged sentences

Amortization expense for these amortizable intangible assets was $ 7.9 million, $ 8.4 million and $ 7.1 million for fiscal years 2022, 2021 and 2020, respectively.

Estimated aggregate amortization expense for such intangibles for the fiscal years subsequent to January 1, 2022 is as follows:

Estimated aggregate amortization expense for such intangibles for the fiscal years subsequent to December 31, 2022 is as follows:

(In millions) 2023 2024 2025 2026 2027

1 unchanged sentence

ACCOUNTS RECEIVABLE

The Company has an agreement with a financial institution to sell selected trade accounts receivable on a recurring, nonrecourse basis that expires in the fourth quarter of fiscal 2022.

Under the agreement, up to $ 17.4 million of accounts receivable may be sold to the financial institution and remain outstanding at any point in time.

After the sale, the Company does not retain any interests in the accounts receivable and removes them from its consolidated balance sheet, but continues to service and collect the outstanding accounts receivable on behalf of the financial institution.

The Company recognizes a servicing asset or servicing liability, initially measured at fair value, each time it undertakes an obligation to service the accounts receivable under the agreement.

The fair value of this obligation resulted in a nominal servicing liability for all periods presented.

For receivables sold under the agreement, 90 % of the stated amount is paid for in cash to the Company at the time of sale, with the remainder paid to the Company at the completion of the collection process.

The following is a summary of the stated amount of accounts receivable that was sold as well as fees charged by the financial institution.

(In millions) 2021 2020 2019

Accounts receivable sold

$ — $ 14.1 $ 42.7

The fees are recorded in the other expense (income), net line item on the consolidated statements of operations.

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

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

The Company and certain of its subsidiaries sell, on a continuous basis without recourse, their trade receivables to Rockford ARS, LLC (“Rockford ARS”), a wholly-owned bankruptcy-remote subsidiary of the Company.

On December 7, 2022, Rockford ARS entered into a receivables purchase agreement (“RPA”) to sell up to $ 175.0 million of receivables to certain purchasers (the “Purchasers”) on a recurring basis in exchange for cash (referred to as “capital” in the RPA) equal to the gross receivables transferred.

The parties intend that the transfers of receivables to the Purchasers constitute purchases and sales of receivables.

Rockford ARS has guaranteed to each Purchaser the prompt payment of sold receivables, and has granted a security interest in its assets for the benefit of the Purchasers.

Under the RPA, which matures on December 5, 2025 each Purchaser’s share of capital accrues yield at a floating rate plus an applicable margin.

The Company is the master servicer under the RPA, and is responsible for administering and collecting receivables.

The proceeds of the RPA are classified as operating activities in the Company's Consolidated Statement of Cash Flows.

Cash received from collections of sold receivables may be used to fund additional purchases of receivables on a revolving basis or to return all or any portion of outstanding capital of the Purchasers.

Subsequent collections on the pledged receivables, which have not been sold, will be classified as operating cash flows at the time of collection.

Total receivables sold under the RPA were $ 218.2 million and total cash collections under the RPA were $ 75.5 million in fiscal year 2022.

The fair value of the sold receivables approximated book value due to their credit quality and short-term nature, and as a result, no gain or loss on sale of receivables was recorded.

As of the fiscal year ended December 31, 2022, the amount sold to the Purchasers was $ 142.7 million, which was derecognized from the Consolidated Balance Sheets.

As collateral against sold receivables, Rockford ARS maintains a certain level of unsold receivables, which was $ 70.0 million as of the fiscal year ended December 31, 2022.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition and Performance Obligations

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

The wholesale channel includes royalty revenues, which operates in a similar manner as other wholesale revenues due to similar oversight and management, customer base, the performance obligation (footwear and apparel goods) and point in time completion of the performance obligation.

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

The wholesale channel includes royalty revenues, which operates in a similar manner as

other wholesale revenues due to similar oversight and management, customer base, the performance obligation (footwear and apparel goods) and point in time completion of the performance obligation.

(in millions) 2022 2021 2020

Wolverine Michigan Group:

Active Group:

Wholesale $ 1,086.6 $ 930.7 $ 682.9

Consumer-direct 282.1 236.8 164.8

Direct-to-consumer 483.6 388.9 226.4

Total 1,570.2 1,319.6 909.3

Wolverine Boston Group:

Wholesale 532.0 487.3 372.0

Consumer-direct 240.0 187.1 167.5

Direct-to-consumer 58.5 61.5 53.4

Total 590.5 548.8 425.4

Lifestyle Group:

Wholesale 304.0 305.6 263.4

Consumer-direct 105.6 3.6 5.2

Direct-to-consumer 143.5 171.4 143.6

Total 447.5 477.0 407.0

Wholesale 70.4 63.6 45.3

Direct-to-consumer 6.2 5.9 4.1

Total 76.6 69.5 49.4

Total revenue $ 2,684.8 $ 2,414.9 $ 1,791.1

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.

The Company is due $ 11.1 million of remaining fixed transaction price under its license agreements as of December 31, 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

6 unchanged sentences

The Company’s contract balances are as follows:

(In millions) January 1,

(In millions) December 31,

2022 January 1,

9 unchanged sentences

Consistent with industry practice, the Company offers limited product return rights for various return scenarios.

The Company estimates the amount of product sales that may be returned by customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized, and a reduction to trade receivables, net on the consolidated balance sheets.

The Company estimates the amount of product sales that may be returned by customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized, and an offsetting increase to other accrued liabilities on the consolidated balance sheets.

The Company believes there is sufficient current and historical information to record an estimate of the expected value of product returns although actual returns could differ from recorded amounts.

The estimated cost of inventory for product returns is recorded in prepaid expenses and other current assets on the consolidated balance sheets.

The estimated cost of inventory for product returns was $ 6.7 million and $ 6.1 million at December 31, 2022 and January 1, 2022, respectively.

Customer Markdowns

10 unchanged sentences

The Company recognizes a liability for amounts received from customers before revenue is recognized.

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

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.

Customer advances are recognized in other accrued liabilities on the consolidated balance sheets.

The Company used the LIFO method to value inventories of $ 109.8 million and $ 42.0 million at December 31, 2022 and January 1, 2022, respectively.

During fiscal years 2022 and 2021, changes in the LIFO reserve increased cost of goods sold by $ 3.0 million and $ 0.5 million, respectively.

If the FIFO method had been used, inventories would have been $ 11.0 million and $ 8.0 million higher than reported at December 31, 2022 and January 1, 2022, respectively.

Total debt consists of the following obligations:

(In millions) January 1,

(In millions) December 31,

2022 January 1,

Term Facility, due October 21, 2026 $ 190.0 $ 200.0

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 550.0 550.0

2 unchanged sentences

Total debt $ 1,158.0 $ 966.8

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:

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

The Amendment amended and restated the prior 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.

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.

1 unchanged sentence

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 scheduled principal payments due under the Term Facility over the next 12 months total $ 10.0 million as of December 31, 2022 and are recorded as current maturities of long-term debt on the consolidated balance sheets.

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

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

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

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

The Company had outstanding letters of credit under the Revolving Facility of $ 5.7 million and $ 5.8 million as of December 31, 2022 and January 1, 2022, respectively.

These outstanding 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 %.

dollar denominated amounts outstanding under the Revolving Facility are, 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 December 31, 2022, the Term Facility and the Revolving Facility had a weighted-average interest rate of 4.86 %.

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.

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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.

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

As of December 31, 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.

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

The Company has a foreign revolving credit facility with aggregate available borrowing s of $ 2.0 million that are un committed and, therefore, each borrowing against the facility is subject to approval by the lender.

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

There were no borrowings against this facility as of December 31, 2022 and January 1, 2022.

The Company included in interest expense the amortization of deferred financing costs of $ 2.0 million, $ 2.3 million, and $ 2.7 million in fiscal years 2022, 2021 and 2020, respectively.

Annual maturities of debt for the fiscal years subsequent to January 1, 2022 are as follows:

Annual maturities of debt for the fiscal years subsequent to December 31, 2022 are as follows:

(In millions) 2023 2024 2025 2026 2027 Thereafter

3 unchanged sentences

Property, plant and equipment consisted of the following:

(In millions) January 1,

(In millions) December 31,

2022 January 1, 2022

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Operating lease assets obtained in exchange for lease liabilities 72.5 14.6

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

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

Future undiscounted cash flows for operating leases for the fiscal periods subsequent to January 1, 2022 are as follows:

The weighted-average discount rate for operating leases as of December 31, 2022 is 5.1 %.

The weighted-average remaining lease term for operating leases as of December 31, 2022 is 8.2 years.

Future undiscounted cash flows for operating leases for the fiscal periods subsequent to December 31, 2022 are as follows:

(In millions) Operating Leases

3 unchanged sentences

Recognized lease liability $ 192.7

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

The Company did not enter into any real estate leases with commencement dates subsequent to December 31, 2022.

DERIVATIVE FINANCIAL INSTRUMENTS

1 unchanged sentence

dollar inventory purchases made by non-U.S.

wholesale operations in the normal course of business.

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

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

wholesale operations in the normal course of

These foreign currency forward exchange hedge contracts extended out to a maximum of 524 days and 538 days as of December 31, 2022 and January 1, 2022, respectively.

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

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

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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.

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

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.

5 unchanged sentences

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

(Dollars in millions) January 1,

(Dollars in millions) December 31,

2022 January 1,

1 unchanged sentence

Interest rate swap 176.2 311.3

Cross currency swap — 79.8

The recorded fair values of the Company’s derivative instruments are as follows:

(In millions) January 1,

(In millions) December 31,

2022 January 1,

1 unchanged sentence

Foreign exchange hedge contracts $ 7.5 $ 5.9

Interest rate swap 6.1 —

Financial liabilities:

1 unchanged sentence

Interest rate swap — ( 0.1 )

Cross currency swap — ( 10.8 )

Foreign exchange hedge contract financial assets are recorded to prepaid expenses and other current assets and financial liabilities are recorded to other accrued liabilities on the consolidated balance sheets.

Interest rate swap financial assets are recorded to other assets and financial liabilities are recorded to other liabilities on the consolidated balance sheets.

STOCK-BASED COMPENSATION

The Company recognized stock-based compensation expense of $ 33.4 million, $ 38.1 million and $ 28.9 million and related income tax benefits of $ 6.5 million, $ 7.5 million and $ 5.6 million for grants under its stock-based compensation plans in the statements of operations for fiscal years 2022, 2021 and 2020, 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").

As of December 31, 2022, the Company had 5,543,811 stock incentive units (stock options, stock appreciation rights, restricted stock, restricted stock units and common stock) available for issuance under the Stock Incentive Plan of 2016, as amended and restated ("Stock Plan").

Each stock option or stock appreciation right granted counts as 1.0 stock incentive unit.

Stock options granted under the Stock Plan have an exercise price equal to the fair market value of the underlying stock on the grant date, expire no later than ten years from the grant date and generally vest over three years .

Stock options

granted under the Stock Plan have an exercise price equal to the fair market value of the underlying stock on the grant date, expire no later than ten years from the grant date and generally vest over three years .

All other awards granted, including Restricted Awards and Performance Awards, count as 2.6 stock incentive units for each share, restricted share or restricted stock unit granted.

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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

5 unchanged sentences

Forfeited ( 219,530 ) 30.05 ( 83,724 ) 27.31

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

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

Unvested at December 31, 2022 1,516,478 $ 28.95 774,654 $ 34.14

As of December 31, 2022, there was $ 19.4 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 December 31, 2022 was $ 10.9 million.

As of January 1, 2022, there was $ 19.8 million of unrecognized compensation expense related to unvested Restricted Awards, which was 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.

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

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

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

As of January 1, 2022, there was $ 16.1 million of unrecognized compensation expense related to unvested Performance Awards, which is expected to be recognized over a weighted-average period of 1.4 years.

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

As of December 31, 2022, there was $ 10.8 million of unrecognized compensation expense related to unvested Performance Awards, which is expected to be recognized over a weighted-average period of 1.6 years.

The total fair value of Performance Awards vested during the year ended December 31, 2022 was $ 9.3 million.

As of January 1, 2022, there was $ 16.1 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 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 weig hted-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 weig hted-average period of 1.4 years.

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

Stock Options

9 unchanged sentences

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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Canceled ( 101,091 ) 22.57

Outstanding at January 1, 2022 2,488,812 $ 22.29 3.2 $ 16.7

Unvested at January 1, 2022 ( 33,526 )

Exercisable at January 1, 2022 2,455,286 $ 22.13 3.1 $ 16.7

Outstanding at December 31, 2022 2,333,410 $ 22.43 2.4 $ —

Unvested at December 31, 2022 ( 36,909 )

Exercisable at December 31, 2022 2,296,501 $ 22.33 2.3 $ —

The total pretax intrinsic value of stock options exercised during fiscal years 2022, 2021 and 2020 was $ 0.4 million, $ 11.4 million and $ 9.3 million, respectively.

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

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

As of December 31, 2022, there was $ 0.1 million of unrecognized compensation expense related to stock option grants expected to be recognized over a weighted-average period of 0.9 years.

As of January 1, 2022 and January 2, 2021, there was $ 0.2 million and $ 0.1 million, respectively, of unrecognized compensation expense related to stock option awards expected to be recognized over a weighted-average period of 1.3 years and 0.9 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 .

There were no in-the-money options exercisable as of December 31, 2022, based on the Company’s closing stock price of $ 10.93 per share .

As of January 1, 2022, 2,247,575 outstanding options were exercisable and in-the-money, with a weighted-average exercise price of $ 21.70 per share.

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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 $ 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 maintains life insurance policies with a cash surrender value of $ 46.6 million at December 31, 2022 and $ 45.6 million at January 1, 2022 recognized as 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.

4 unchanged sentences

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

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

The obligation recorded under this plan was $ 0.8 million at December 31, 2022 and $ 1.0 million at January 1, 2022 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 2022 and 2021:

5 unchanged sentences

Interest cost on projected benefit obligations

Actuarial loss (gain) ( 26.6 ) 48.1

Actuarial gains ( 107.8 ) ( 26.6 )

Benefits paid to plan participants

5 unchanged sentences

$ 323.0 $ 305.0

Actual return on plan assets 30.1 28.8

Actual return (loss) on plan assets ( 58.7 ) 30.1

Company contributions - SERP

17 unchanged sentences

$ ( 38.0 ) $ ( 73.3 )

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 .

Unrecognized net actuarial loss recognized in accumulated other comprehensive income was $ 1.8 million and $ 41.8 million, and amounts net of tax were $ 1.7 million and $ 33.2 million, as of December 31, 2022 and January 1, 2022, respectively.

The accumulated benefit obligations for all defined benefit pension plans and the SERP were $ 315.9 million at December 31, 2022 and $ 416.1 million at January 1, 2022 .

The decrease in benefit obligation for fiscal 2022 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.

The actuarial gain included in accumulated other comprehensive loss and expected to be recognized in net periodic pension income during fiscal 2023 is $ 0.7 million.

The following is a summary of net pension and SERP expense recognized by the Company:

36 unchanged sentences

fixed income investments.

The target investment allocations as of January 1, 2022 were 57 % in equity securities, 38 % in fixed income securities and 5 % in real estate investments.

The target investment allocations as of December 31, 2022 were 43 % in equity securities and 57 % in fixed income securities.

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 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022

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

3 unchanged sentences

35.8 % 118.9 1

Real estate investments 19.9 1

Real Estate — 1

Cash 46.6 18.5 % — — %

Fair value of plan assets $ 251.4 100.0 % $ 323.0 100.0 %

4 unchanged sentences

The Company does not expect to make any contributions to its qualified defined benefit pension plans in fiscal 2023 and expects to make $ 3.9 million in contributions to the SERP in fiscal 2023.

Expected benefit payments for the fiscal years subsequent to January 1, 2022 are as follows:

Expected benefit payments for the fiscal years subsequent to December 31, 2022 are as follows:

(In millions) 2023 2024 2025 2026 2027 2028-2032

27 unchanged sentences

Change in valuation allowance 2.1 2.2 4.7

Change in state tax rates — — ( 1.5 )

Tax impact of impairment in foreign jurisdiction 3.0 — —

Global Intangible Low Tax Income tax 3.8 3.2 2.5

9 unchanged sentences

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

(In millions) January 1,

(In millions) December 31,

2022 January 1,

18 unchanged sentences

Net deferred income tax liabilities $ ( 10.8 ) $ ( 117.1 )

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 valuation allowance for deferred income tax assets as of December 31, 2022 and January 1, 2022 was $ 26.7 million and $ 24.6 million, respectively.

The net increase in the total valuation allowance during fiscal 2022 was $2.1 million.

1 unchanged sentence

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 $ 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 current year change in the valuation allowance results in a decrease against the state deferred tax assets of $ 0.3 million, an increase related to state net operating loss carryforward of $ 0.3 million, and a net increase relating to the foreign net operating losses and foreign tax credits and other deferred tax assets of $ 2.1 million.

At December 31, 2022, the Company had foreign net operating loss carryforwards of $ 33.7 million, which have expirations ranging from 2023 to an unlimited term during which they are available to offset future foreign taxable income.

The Company had U.S.

9 unchanged sentences

Unrecognized tax benefits at end of the year $ 9.0 $ 10.9

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 portion of the unrecognized tax benefits that, if recognized currently, would reduce the annual effective tax rate was $ 9.0 million and $ 10.1 million as of December 31, 2022 and January 1, 2022, respectively.

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

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

Interest accrued related to unrecognized tax benefits was $ 0.5 million and $ 0.6 million as of December 31, 2022 and January 1, 2022, respectively.

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

8 unchanged sentences

The Company intends to permanently reinvest all non-cash undistributed earnings outside of the U.S.

and has, therefore, not established a deferred tax liability on the amount of non-cash foreign undistributed earnings of $ 199.1 million at January 1, 2022.

and has, therefore, not established a deferred tax liability on the amount of non-cash foreign undistributed earnings of $ 176.0 million at December 31, 2022.

However, if these non-cash undistributed earnings were repatriated, the Company would be required to accrue and pay applicable U.S.

7 unchanged sentences

translation Derivatives Pension Total

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

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

Other comprehensive income (loss) before reclassifications (1)

15 unchanged sentences

( 76.3 ) 10.8 31.5 ( 34.0 )

Balance at January 1, 2022 $ ( 56.8 ) $ ( 8.9 ) $ ( 33.2 ) $ ( 98.9 )

Balance at December 31, 2022 $ ( 133.1 ) $ 1.9 $ ( 1.7 ) $ ( 132.9 )

(1) Other comprehensive income (loss) is reported net of taxes and noncontrolling interest.

(2) Amounts related to foreign currency derivatives deemed to be highly effective are included in cost of goods sold.

(2) Amounts related to foreign currency derivatives used to manage the volatility associated with inventory purchases in various currencies and deemed to be highly effective are included in cost of goods sold.

Amounts related to foreign currency derivatives that are no longer deemed to be highly effective are included in other income.

6 unchanged sentences

Quoted Prices With Other Observable Inputs (Level 2)

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

(In millions) December 31, 2022 January 1, 2022

Financial assets:

5 unchanged sentences

Nonrecurring Fair Value Measurements

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

The Company recorded an impairment charge

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.

Indefinite-lived intangible assets and goodwill 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).

In the fourth quarter of fiscal 2022, after completion of its annual impairment testing, the Company recognized a $ 48.4 million goodwill impairment charge to the Sweaty Betty ® reporting unit.

The Company also recorded impairment charges of $ 189.3 million and $ 191.0 million to

the Sweaty Betty ® and Sperry ® indefinite-lived trade names, respectively, in fiscal 2022.

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

Fair Value Disclosures

2 unchanged sentences

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

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

(In millions) December 31, 2022 January 1, 2022

Carrying value $ 1,158.0 $ 966.8

8 unchanged sentences

PFOA and PFOS help provide non-stick, stain-resistant, and water-resistant qualities, and were used for many decades in commercial products like firefighting foams and metal plating, and in common consumer items like food wrappers, microwave popcorn bags, pizza boxes, Teflon™, carpets and Scotchgard™.

In May 2016, the Environmental Protection Agency (“EPA”) announced a lifetime health advisory level of 70 parts per trillion (“ppt”) combined for PFOA and PFOS.

In May 2016, the Environmental Protection Agency (“EPA”) announced a lifetime health advisory level of 70 parts per trillion (“ppt”) combined for PFOA and PFOS, which the EPA reduced in June 2022 to 0.004 ppt and 0.02 ppt for PFOA and PFOS, respectively.

In January 2018, the Michigan Department of Environmental Quality (“MDEQ”, now known as the Michigan Department of Environment, Great Lakes, and Energy (“EGLE”)) enacted a drinking water criterion of 70 ppt combined for PFOA and PFOS, which set an official state standard for acceptable concentrations of these contaminants in groundwater used for drinking water purposes.

9 unchanged sentences

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

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

The Company’s activities under the Consent Decree are not materially impacted by either the drinking water standards that became effective on August 3, 2020, or the EPA’s revised advisory levels issued in June 2022.

On December 19, 2018, the Company filed a third-party complaint against 3M Company seeking, among other things, recovery of the Company’s remediation and other costs incurred in defense of the EGLE Action ("the 3M Action").

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

On February 20, 2020, the

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

The Company has completed the 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.

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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.

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

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

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

On January 11, 2022, the Company and 3M Company entered into a master settlement agreement with the law firm representing certain of the plaintiffs in the individual lawsuits included in the Litigation Matters, and each of these plaintiffs subsequently agreed to participate in the settlement.

These plaintiffs’ lawsuits were dismissed with prejudice on or around April 25, 2022.

On December 9, 2021, the Company and 3M Company reached a settlement in principle to resolve certain of the remaining individual lawsuits included in the Litigation Matters, and the parties entered into definitive settlement agreements in March 2022.

These plaintiffs’ lawsuits were dismissed with prejudice on June 14, 2022.

The last remaining individual action included in the Litigation Matters was dismissed without prejudice on June 24, 2022.

In addition, in September 2022, the parties to the putative class action filed a motion for preliminary approval of a proposed class action settlement seeking to resolve the putative class action plaintiffs’ claims (the “Motion for Preliminary Approval”).

On September 19, 2022, the court granted the Motion for Preliminary Approval and scheduled a final approval hearing regarding the settlement for March 29, 2023.

Only one of the Litigation Matters, the lawsuit filed by the current owner of a former landfill and gravel mining operations, remains pending in Michigan state court, and it is in the discovery and motions stages of litigation.

For certain of the Litigation Matters described above and as a result of developments during 2022, the Company has increased its accrual by $ 40.5 million since January 1, 2022 and made related payments of $ 50.1 million.

As of December 31, 2022, the Company had recorded liabilities of $ 40.5 million for certain of the Litigation Matters described above which are recorded as other accrued liabilities in the consolidated balance sheets.

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.

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Other Litigation

The Company is also involved in litigation incidental to its business and is a party to legal actions and claims, including, but not limited to, those related to employment, intellectual property, and other environmental matters.

Some of the legal proceedings include claims for compensatory as well as punitive damages.

While the final outcome of these matters cannot be predicted with certainty, considering, among other things, the meritorious legal defenses available to the Company and reserves for liabilities that the Company has recorded, along with applicable insurance, it is management’s opinion that the outcome of these items are not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

items are not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Environmental Liabilities

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$ 85.7 $ 101.8

Changes in estimate

( 18.4 ) ( 16.1 )

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$ 74.1 $ 85.7

The reserve balance as of January 1, 2022 includes $ 24.5 million that is expected to be paid within the next twelve months and is recorded as a current obligation in other accrued liabilities, with the remaining $ 61.2 million expected to be paid over the course of up to 25 years, recorded in other liabilities.

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

The reserve balance as of December 31, 2022 includes $ 49.8 million that is expected to be paid within the next twelve months and is recorded as a current obligation in other accrued liabilities, with the remaining $ 24.3 million expected to be paid over the course of up to 25 years, recorded in other liabilities .

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

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

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The Company has future minimum royalty and advertising obligations due under the terms of certain licenses held by the Company.

These minimum future obligations for the fiscal years subsequent to January 1, 2022 are as follows:

These minimum future obligations for the fiscal years subsequent to December 31, 2022 are as follows:

(In millions) 2023 2024 2025 2026 2027 Thereafter

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BUSINESS SEGMENTS

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

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

• 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’s portfolio of brands are organized into the following three reportable segments.

All prior period disclosures have been retrospectively adjusted to reflect the new reportable segments.

• Active Group, consisting of Merrell ® footwear and apparel, Saucony ® footwear and apparel, Sweaty Betty ® activewear, and Chaco ® footwear;

• Work Group, consisting of Wolverine ® footwear and apparel, Cat ® footwear, Bates ® uniform footwear, Harley-Davidson ® footwear and HYTEST ® safety footwear;

• Lifestyle Group , consisting of Sperry ® footwear, Keds ® footwear, and Hush Puppies ® footwear and apparel.

The Company's operating segments are the Work Group, Lifestyle Group, Active Group, and Sweaty Betty ® .

Sweaty Betty ® and the Active Group were evaluated and combined into one reportable segment because they meet the similar economic characteristics and qualitative aggregation criteria set forth in the relevant accounting guidance

Kids' footwear offerings from Saucony ® , Sperry ® , Keds ® , Merrell ® , Hush Puppies ® and Cat ® are included with the applicable brand.

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 Other category consists of the Company’s leather marketing operations, sourcing operations that include third-party commission revenues, multi-branded direct-to-consumer retail stores and the Stride Rite® licensed business.

The Corporate category consists of the gain on the sale of the Champion trademarks in fiscal 2022 and unallocated corporate expenses, such as corporate employee costs, costs related to the COVID-19 pandemic, impairment of intangible assets and goodwill, reorganization activities, and environmental and other related costs.

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

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revenue from third-party licensees and distributors;

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

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

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) 2022 2021 2020

Wolverine Michigan Group $ 1,298.9 $ 1,051.0 $ 1,299.7

Wolverine Boston Group 935.8 696.0 910.9

Active Group $ 1,570.2 $ 1,319.6 $ 909.3

Work Group 590.5 548.8 425.4

Lifestyle Group 447.5 477.0 407.0

Other 76.6 69.5 49.4

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Operating profit (loss):

Wolverine Michigan Group $ 245.3 $ 179.9 $ 244.8

Wolverine Boston Group 149.3 88.1 153.8

Active Group $ 198.4 $ 229.5 $ 164.1

Work Group 102.5 103.8 65.2

Lifestyle Group 48.1 67.5 34.2

Other 11.8 8.1 6.1

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Total $ ( 208.4 ) $ 155.7 $ ( 137.1 )

Interest expense, net 47.3 37.4 43.6

Debt extinguishment and other costs — 34.3 5.5

Other expense (income), net ( 2.8 ) 3.7 ( 2.1 )

Earnings (loss) before income taxes $ ( 252.9 ) $ 80.3 $ ( 184.1 )

(In millions) 2022 2021 2020

Depreciation and amortization expense:

Wolverine Michigan Group $ 2.2 $ 2.7 $ 2.4

Wolverine Boston Group 2.6 3.4 3.3

Active Group $ 8.1 $ 5.4 $ 2.7

Work Group 0.3 0.3 0.4

Lifestyle Group 2.0 2.3 3.0

Other 1.4 1.6 2.0

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Capital expenditures:

Wolverine Michigan Group $ 0.8 $ 0.8 $ 2.2

Wolverine Boston Group 0.4 2.3 5.7

Active Group $ 18.9 $ 5.0 $ 1.4

Work Group 0.4 0.4 —

Lifestyle Group 2.0 0.1 1.7

Other 3.2 1.7 0.9

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Total $ 36.5 $ 17.6 $ 10.3

(In millions) January 1,

(In millions) December 31,

2022 January 1,

Total assets:

Wolverine Michigan Group $ 651.9 $ 626.9

Wolverine Boston Group 1,123.6 1,077.8

Active Group $ 1,331.5 $ 1,377.3

Work Group 375.7 284.2

Lifestyle Group 514.8 663.4

Other 58.6 57.8

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Total $ 2,492.7 $ 2,586.4

Wolverine Michigan Group $ 145.1 $ 145.4

Wolverine Boston Group 296.2 297.0

Active Group $ 314.4 $ 380.3

Work Group 59.6 61.3

Lifestyle Group 97.4 101.3

Other 13.6 13.7

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The location of the Company’s tangible long-lived assets, which comprises property, plant and equipment and lease right-of-use assets, is as follows:

(In millions) January 1,

(In millions) December 31,

2022 January 1,

2021 December 28,

2022 January 2,

United States $ 222.3 $ 205.8 $ 222.2

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

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

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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.

Sweaty Betty ® contributed net revenue of $ 211.5 million and net loss of $ 5.5 million to the Company for the year ended December 31, 2022.

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

The Company recognized acquisition-related transaction costs of $ 7.5 million, all of which were recognized in fiscal year 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.

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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:

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 was finalized during the quarter ended July 2, 2022.

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

(In millions) Fair Value

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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:

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

All of the goodwill is presented within the Active Group 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 on the acquisition date as follows:

(In millions) Intangible Asset Useful life

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83.9 ( 144.9 )

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

(“Sportlab”), the distributor of Saucony ® footwear in Italy.

Total purchase consideration of $ 25.2 million includes cash paid, extinguishment of Sportlab’s accounts payable balance that was due to the Company at the time of acquisition and contingent consideration.

The contingent consideration was based on sales activity from the date of the acquisition through the end of fiscal 2019 and was paid in the first quarter of fiscal 2020.

The detailed amounts of each component of the purchase consideration are as follows:

(In millions) Purchase Consideration

Cash paid $ 15.1

Extinguishment of Sportlab’s accounts payable balance 4.6

Contingent consideration 5.5

Total purchase consideration $ 25.2

The Company accounted for the acquisition under the provisions of FASB ASC Topic 805, Business Combinations .

The related assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

The operating results for the acquired Saucony ® distribution business are included in the Company’s consolidated results of operations beginning April 30, 2019, and are included in the Wolverine Boston Group reporting group for segment reporting purposes.

The final allocation of the purchase price as of December 28, 2019 was:

(In millions) Final Valuation

VARIABLE INTEREST ENTITIES AND RELATED PARTY TRANSACTIONS

Assets and Liabilities of Consolidated VIEs

The Company has joint ventures that source and market the Company’s footwear and apparel products in China.

Based upon the criteria set forth in FASB ASC 810, Consolidation , the Company has determined two of the consolidated joint ventures are variable interest entities (VIEs) and the Company is the primary beneficiary.

The primary beneficiary determination is based on the relationship between the Company and the VIE, including contractual agreements between the Company and the VIE.

Specifically, the Company has the power to direct the activities that are considered most significant to the entities’ performance and the Company has the obligation to absorb losses and the right to receive benefits that are significant to the entities.

The other equity holder’s interests are reflected in “net earnings (loss) attributable to noncontrolling interests” in the Consolidated Statement of Operations and “Noncontrolling interest” in the Consolidated Balance Sheets.

Assets held by the VIEs are only available to settle obligations of the respective entities.

Holders of liabilities of the VIEs do not have recourse to the Company.

The following is a summary of the entities’ assets and liabilities included in the Company’s consolidated balance sheets.

(In millions) 2022 2021

Cash $ 5.8 $ 3.7

Accounts receivable 19.7 8.0

Inventory 16.0 9.7

Other current assets 2.4 0.1

Noncurrent assets 0.8 0.7

Total assets 44.7 22.2

Current liabilities 9.6 4.0

Noncurrent liabilities 1.6 2.4

Total liabilities $ 11.2 $ 6.4

Nonconsolidated VIEs

The Company also has two joint ventures that are VIEs and are not consolidated as the Company does not have the power to direct the most significant activities that impact the VIEs' economic performance.

The two VIEs distribute footwear and apparel products in the Asia Pacific region.

The following is a summary of carrying amounts of assets included in the Company’s consolidated balance sheets for fiscal years 2022 and 2021 related to VIEs for which the Company is not the primary beneficiary.

The Company’s maximum exposure to loss is the same as the carrying amounts.

The following is a summary of the carrying amounts of assets included in the Company’s consolidated balance sheets.

(In millions) 2022 2021

Equity method investments (1)

(1) Equity method investments are included in “Other Assets” on the Consolidated Balance Sheets.

Related Party Transactions

In the normal course of business, the Company enters into transactions with related party equity affiliates.

Related party transactions consist of the sale of goods, made at arm’s length, and other arrangements.

For the fiscal years ended December 31, 2022 and January 1, 2022 the Company recognized net sales to equity affiliates totaling $ 35.5 million and $ 19.5 million, respectively.

The following table summarizes related party transactions included in the consolidated balance sheets.

(In millions) 2022 2021

Accounts receivable due from related parties $ 18.1 $ 10.3

Long term liabilities due to related parties — 2.4

Long term assets due from related parties 1.6 —

ASSETS AND LIABILITIES HELD FOR SALE

During the fourth quarter of 2022, the Company announced that it had initiated a formal process to divest the Keds ® business and Wolverine Leathers business, both of which are low-profit contributors.

The Company has determined that both the Keds ®

business and the Wolverine Leathers business meet the criteria to be classified as held for sale, and therefore have reclassified the related assets and liabilities as held for sale on the Consolidated Balance Sheets.

The following is a summary of the major categories of assets and liabilities that have been classified as held for sale on the Consolidated Balance Sheets at December 31, 2022:

(In millions) 2022

Cash and cash equivalents $ 4.0

Accounts receivables, net 3.5

Inventories 43.1

Goodwill 12.0

Amortizable intangibles 12.9

Total assets acquired 32.9

Deferred income taxes 3.2

Other liabilities 4.5

Total liabilities assumed 7.7

Net assets acquired $ 25.2

The excess of the purchase price over the fair value of the net assets acquired, amounting to $ 12.0 million, was recorded as goodwill in the consolidated balance sheet and was assigned to the Wolverine Boston Group reportable segment.

The goodwill that was recognized is attributable to the efficiencies to be gained by integrating operations with the Saucony ® distribution business purchased from Sportlab.

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

Indefinite-lived intangibles 11.4

Other assets 5.9

Total assets held for sale 67.9

Accounts payable 8.1

Accrued liabilities 0.7

Total liabilities held for sale 8.8

The Company determined that the divestiture of the Keds ® business and Wolverine Leathers business do not represent a strategic shift that had or will have a major effect on the Consolidated Results of Operations, and therefore results were not classified as discontinued operations.

SUBSEQUENT EVENT

On February 7, 2023 the Company entered into an Asset Purchase Agreement with Designer Brands, Inc.

(the "Buyer") pursuant to which the Buyer agreed to purchase the global Keds ® business, other than the Excluded Assets (as defined in the Asset Purchase Agreement), and to assume certain liabilities.

The purchase price was approximately $ 83.6 million and the sale was effective February 4, 2023, in accordance with the terms and conditions of the Asset Purchase Agreement.

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 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.

and subsidiaries (the Company) as of December 31, 2022 and January 1, 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the fiscal years ended December 31, 2022, January 1, 2022, and 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 December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for the fiscal years ended December 31, 2022, January 1, 2022, and January 2, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of indefinite-lived intangibles

Description of the Matter At January 1, 2022, the Company’s indefinite-lived intangible assets were $718.1 million, which included $296.0 million for the Sperry trade name.

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

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

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

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of goodwill and indefinite-lived intangibles

Description of the Matter At December 31, 2022, the Company’s goodwill and indefinite-lived intangible assets were $485.0 million and $274.0 million, respectively.

During 2022, the Company recognized a goodwill impairment charge of $48.4 million associated with its Sweaty Betty reporting unit and impairment charges of $191.0 million and $189.3 million, associated with its Sperry and Sweaty Betty indefinite-lived intangible assets, respectively.

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

The impairment test for goodwill consists of measuring the fair value of the reporting unit and comparing it to the reporting unit’s carrying amount.

The impairment test for indefinite-lived intangible assets consists of measuring the fair value of the asset and comparing it to the asset’s carrying amount.

Auditing management’s annual impairment tests for goodwill and indefinite-lived intangible assets was complex due to the significant estimation uncertainty required in determining the fair values of certain reporting units and the Sperry and Sweaty Betty trade names.

The significant assumptions used to estimate the fair values of certain reporting units and the Sperry and Sweaty Betty trade names 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.

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.

Changes in these assumptions could have a significant impact on the fair values of certain reporting units and the Sperry and Sweaty Betty trade names, the amount of any impairment charge, or both.

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 the impairment review process.

For example, we tested controls that address the risk of material misstatement relating to the valuation of certain reporting units and the Sperry and Sweaty Betty trade names, 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 values of certain reporting units and the Sperry and Sweaty Betty trade names, our audit procedures included, among others, assessing the appropriateness of the valuation model used, evaluating the significant assumptions discussed above, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

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

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

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

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

The acquisition was accounted for as a business combination.

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

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

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

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

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

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

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

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

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

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

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

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

/s/ Ernst & Young LLP

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We have audited Wolverine World Wide, Inc.

and subsidiaries’ internal control over financial reporting as of January 1, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

and subsidiaries’ internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Wolverine World Wide, Inc.

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

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

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

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

and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 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 December 31, 2022 and January 1, 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the fiscal years ended December 31, 2022, January 1, 2022, and January 2, 2021, and the related notes and financial statement schedule and our report dated February 23, 2023 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