Published in Breaking News

Wolverine spent up to $35 million to deal with groundwater issues last year

BY Friday, February 09, 2018 10:54am

ROCKFORD — Footwear and apparel maker Wolverine World Wide Inc. has outlined for shareholders what it cost the company to deal with environmental issues related to its former tannery operations and waste disposal sites.

According to an update provided to shareholders yesterday, Wolverine acknowledged that it racked up $30 million to $35 million in testing, monitoring and remediation costs for the 2017 fiscal year, of which it expects to pay $13 million to $16 million during 2018. The remainder will be paid in 2019 and beyond, the company said.

Wolverine said its handling of the environmental issues will result in a 8-cent reduction of its earnings per diluted share for the 2018 fiscal year.

“The environmental costs discussed are estimates and actual amounts could differ significantly in the future as circumstances evolve,” the company said in the statement.

Numerous landowners in Plainfield Township and the Rockford area have sued Wolverine individually and as a class after groundwater test results revealed high levels of PFAS chemicals. The family of chemicals are often found in Scotchguard, a 3M product Wolverine used to treat leather at its former tannery operations in Rockford.

Wolverine is alleged to have dumped PFAS-laden tannery waste at various sites in West Michigan, including at a Plainfield Township dump the company now owns and at various farm fields across the region, where the material was used as crop fertilizer decades ago.

To date, Wolverine has paid for well water testing for dozens of homeowners in the affected areas of Plainfield and Algoma townships.

Additionally, Wolverine expects to incur $8 million to $12 million in legal, consulting and other costs in 2018 related to its handling of the environmental work.

In the statement, Wolverine also said it “intends to pursue recovery of environmental remediation costs incurred from other parties including insurance carriers that provided coverage during the relevant periods.”  

Wolverine disclosed the costs while providing shareholders a preliminary update on its 2017 fiscal year and offering guidance for 2018.

Changes to the U.S. tax code will result in Wolverine reporting a one-time expense of about $9 million for the fourth quarter of 2017. However, the company expects the changes will reduce its tax bill going forward by $18 million to $20 million.

The company said it will repatriate $300 million in cash from its foreign subsidiaries, and will be able to do so in the future “with minimal U.S. tax cost.”

“This tax reform is expected to result in material positive benefits for Wolverine,” the company said in a statement.

For the 2017 fiscal year, Wolverine expects to report that it generated $2.35 billion in revenue, while earnings could vary from a loss of 4 cents to a gain of 1 cent per diluted share.

Adjusted for costs related to restructuring, impairment charges, organizational transformation, inventory markdowns, and environmental remediation — plus the impact of federal tax reform — earnings would be in the range of $1.60 to $1.65 per diluted share.

The company also expects to recognize a non-cash impairment charge of $69 million related to its Sperry brand and the current market trends in the boat shoe category. The charge is about 12 percent of the trade name’s value the company previously carried on its balance sheet.

“The Company has been very proactive and has successfully navigated the challenging and fast-changing global retail marketplace, something we’ve been calling the ‘New Normal’ environment for several years,” Senior Vice President and CFO Mike Stornant stated. “We have focused on operational excellence and addressing underperforming segments of our business.  The result is a stronger portfolio that is now positioned to be more profitable and generate sustainable growth.”

For the current 2018 fiscal year, Wolverine expects to generate $2.24 billion to $2.32 billion in revenue, a decline of 1.3 percent to 6 percent. The company forecasts it will report earnings per diluted share in the range of $1.87 to $1.97.

Wolverine is planning to invest $40 million to $45 million this year as part of its Global Growth Agenda to support product innovation, better reach customers and position the company for what it described as the “new normal” business conditions.

Combined with its previous Wolverine Way Forward restructuring plan, the company expects underlying revenue to grow in the mid-single digits for 2018 and that it will maintain a 12-percent adjusted operating margin.

“As we look ahead, we will focus on acting with speed and urgency to build craveable brands, expanding our product innovation pipeline, and delivering accelerated growth in both our direct-to-consumer and international businesses,” Chairman, CEO and President Blake Krueger said in a statement.

Read 3548 times Last modified on Friday, 09 February 2018 11:42