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WOLVERINE WORLD WIDE INC /DE/ - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) OVERVIEW BUSINESS OVERVIEW The Company is a leading global designer, manufacturer and marketer of branded footwear, apparel and accessories. The Company's stated vision is "To build a family of the most admired performance and lifestyle brands on earth." The Company seeks to fulfill this vision by offering innovative products and compelling brand propositions; complementing its footwear brands with strong apparel and accessories offerings; expanding its global consumer-direct footprint; and delivering supply chain excellence. The Company's portfolio consists of brands that are marketed in approximately 200 countries and territories. The Company believes that this diverse brand portfolio and broad geographic reach position it for continued organic growth. The Company's brands are distributed into the marketplace via owned operations in the United States, Canada, the United Kingdom and certain countries in continental Europe. In other regions (Asia Pacific, Latin America, the Middle East, Africa and certain countries in continental Europe), the Company relies on a network of third-party distributors, licensees and joint ventures. At September 6, 2014, the Company operated 463 retail stores in the United States, Canada and the United Kingdom and 63 consumer-direct websites. 2014 FINANCIAL OVERVIEW • Revenue for the third quarter of fiscal 2014 was in line with the Company's expectations, at $711.1 million, a decrease of 0.8% compared to the third quarter of fiscal 2013. • Gross margin for the third quarter of fiscal 2014 was 40.0%, an increase of 10 basis points from the third quarter of fiscal 2013. • Operating expenses as a percentage of revenue decreased to 27.7% for the third quarter of fiscal 2014 compared to 27.9% for the third quarter of fiscal 2013. • The effective tax rate in the third quarter of fiscal 2014 was 25.7% compared to 25.9% in the third quarter of fiscal 2013. • Diluted earnings per share for the third quarter of fiscal 2014 were $0.57 compared to $0.54 per share for the third quarter of fiscal 2013. • The Company declared cash dividends of $0.06 per share in both the third quarter of fiscal 2014 and the third quarter of fiscal 2013. 34-------------------------------------------------------------------------------- Table of Contents The following is a discussion of the Company's results of operations and liquidity and capital resources. This section should be read in conjunction with the Company's consolidated condensed financial statements and related notes included elsewhere in this Quarterly Report. RESULTS OF OPERATIONS 12 Weeks Ended 36 Weeks Ended (In millions, except per share September 6, September 7, Percent September 6, September 7, Percent data) 2014 2013 Change 2014 2013 Change Revenue $ 711.1 $ 716.6 (0.8 )% $ 1,952.2 $ 1,950.3 0.1 % Cost of goods sold 426.3 430.6 (1.0 ) 1,165.4 1,161.2 0.4 Restructuring costs 0.1 - - 0.6 - - Gross profit 284.7 286.0 (0.5 ) 786.2 789.1 (0.4 ) Selling, general and administrative expenses 186.8 192.3 (2.9 ) 568.1 584.3 (2.8 ) Acquisition-related integration costs 2.3 7.4 (68.9 ) 6.4 30.5 (79.0 ) Restructuring costs 8.0 - - 11.4 - - Operating profit 87.6 86.3 1.5 200.3 174.3 14.9 Interest expense, net 10.0 11.9 (16.0 ) 31.4 37.3 (15.8 ) Other (income) expense, net (0.3 ) 1.0 (130.0 ) 0.5 2.0 (75.0 ) Earnings before income taxes 77.9 73.4 6.1 168.4 135.0 24.7 Income taxes 20.0 19.0 5.3 45.7 32.7 39.8 Net earnings 57.9 54.4 6.4 122.7 102.3 19.9 Less: net earnings attributable to non-controlling interest 0.1 - - 0.3 0.2 50.0 Net earnings attributable to Wolverine World Wide, Inc. $ 57.8 $ 54.4 6.3 % $ 122.4 $ 102.1 19.9 % Diluted earnings per share $ 0.57 $ 0.54 5.6 % $ 1.20 $ 1.02 17.6 % REVENUE Revenue was $711.1 million for the third quarter of fiscal 2014, a decrease of 0.8% from the third quarter of fiscal 2013. Revenue for the first three quarters of fiscal 2014 was $1,952.2 million, an increase of 0.1% over the first three quarters of fiscal 2013. Changes in foreign exchange rates had a minimal impact on reported revenue for the third quarter of fiscal 2014 and the first three quarters of fiscal 2014 compared to the prior year periods. GROSS MARGIN Gross margin was 40.0% for the third quarter of fiscal 2014 compared to 39.9% in the third quarter of fiscal 2013. The higher gross margin was a result of higher selling prices net of higher product costs. Gross margin was 40.3% for the first three quarters of fiscal 2014 compared to 40.5% in the first three quarters of fiscal 2013. The lower gross margin was a result of higher selling prices net of higher product costs of 30 basis points, which were more than offset by increased promotional activity of 30 basis points and unfavorable foreign exchange forward contracts of 20 basis points. OPERATING EXPENSES Operating expenses decreased $2.6 million, from $199.7 million in the third quarter of fiscal 2013 to $197.1 million in the third quarter of fiscal 2014. The decrease was driven by $5.1 million of lower acquisition-related integration costs associated with the acquisition of PLG, $5.6 million of lower pension expense and $2.1 million of lower incentive compensation expense, which were partially offset by $8.0 million of restructuring costs recorded during the third quarter of fiscal 2014. Operating expenses decreased $28.9 million, from $614.8 million in the first three quarters of fiscal 2013 to $585.9 million in the first three quarters of fiscal 2014. The decrease was driven by $24.1 million of lower acquisition-related integration costs associated with the acquisition of PLG, $16.9 million of lower pension expense and $7.0 million of lower incentive compensation expense, which were partially offset by $11.4 million of restructuring costs recorded during the first three quarters of fiscal 2014. 35-------------------------------------------------------------------------------- Table of Contents INTEREST, OTHER AND TAXES Net interest expense was $10.0 million in the third quarter of fiscal 2014 compared to $11.9 million in the third quarter of fiscal 2013. Net interest expense was $31.4 million for the first three quarters of fiscal 2014 compared to $37.3 million in the first three quarters of fiscal 2013. The decreases in both periods reflect the benefits of the amendment to the Credit Agreement executed in the fourth quarter of fiscal 2013 and lower average principal balances. The Company maintains certain strategic management and operational activities in overseas subsidiaries, and its foreign earnings are taxed at rates that are generally lower than the U.S. federal statutory income tax rate. A significant amount of the Company's earnings are generated by its Canadian, European and Asia Pacific subsidiaries and, to a lesser extent, in other foreign jurisdictions that are not subject to income tax. The Company has not provided for U.S. taxes for earnings generated in foreign jurisdictions because it plans to reinvest these earnings indefinitely outside the U.S. However, if certain foreign earnings previously treated as permanently reinvested are repatriated, the additional U.S. tax liability could have a material adverse effect on the Company's after-tax results of operations,financial position and cash flows. The Company's effective tax rate was 25.7% in the third quarter of fiscal 2014, compared to 25.9% in the third quarter of fiscal 2013. The Company's effective tax rate was 27.1% in the first three quarters of fiscal 2014, compared to 24.2% in the first three quarters of fiscal 2013. The lower effective tax rate in the prior year-to-date period reflects the benefit from the deductibility of higher acquisition-related integration costs in high statutory tax rate jurisdictions and the benefit of a retroactive reinstatement of the research and development federal tax credit for 2012 and extension of the credit through 2013. The research and development federal tax credit has now expired and is not available for 2014. REPORTABLE OPERATING SEGMENTS The Company has three reportable operating segments. The Company's operating segments are determined based on how the Company internally reports and evaluates financial information used to make operating decisions. The Company's reportable operating segments are: • Lifestyle Group, consisting of Sperry Top-Sider® footwear and apparel, Stride Rite® footwear and apparel, Hush Puppies® footwear and apparel, Keds® footwear and apparel and Soft Style® footwear; • Performance Group, consisting of Merrell® footwear and apparel, Saucony® footwear and apparel, Chaco® footwear, Patagonia® footwear and Cushe® footwear; and • Heritage Group, consisting of Wolverine® footwear and apparel, Cat® footwear, Bates® uniform footwear, Sebago® footwear and apparel, Harley-Davidson® footwear and HyTest® safety footwear. The Company also reports "Other" and "Corporate" categories. The Other category consists of the Company's multi-brand consumer-direct business, leather marketing operations and sourcing operations that include third-party commission revenues. The Corporate category consists of unallocated corporate expenses, including acquisition-related integration costs, restructuring costs and impairment costs. The current quarter and prior year reportable operating segment results are as follows: 12 Weeks Ended 36 Weeks Ended September 6, September 7, Percent September 6, September 7, Percent (In millions) 2014 2013 Change Change 2014 2013 Change Change Revenue: Lifestyle Group $ 277.9 $ 297.9 $ (20.0 ) (6.7 )% $ 780.0 $ 827.6 $ (47.6 ) (5.8 )% Performance Group 257.1 251.5 5.6 2.2 717.1 686.8 30.3 4.4 Heritage Group 151.3 144.6 6.7 4.6 385.5 373.7 11.8 3.2 Other 24.8 22.6 2.2 9.7 69.6 62.2 7.4 11.9 Total $ 711.1 $ 716.6 $ (5.5 ) (0.8 )% $ 1,952.2 $ 1,950.3 $ 1.9 0.1 % 36-------------------------------------------------------------------------------- Table of Contents 12 Weeks Ended 36 Weeks Ended September 6, September 7, Percent September 6, September 7, Percent (In millions) 2014 2013 Change Change 2014 2013 Change Change Operating profit (loss): Lifestyle Group $ 45.6 $ 56.5 $ (10.9 ) (19.3 )% $ 109.5 $ 148.1 $ (38.6 ) (26.1 )% Performance Group 59.2 55.1 4.1 7.4 153.0 134.0 19.0 14.2 Heritage Group 26.6 24.4 2.2 9.0 58.6 55.6 3.0 5.4 Other 0.3 1.9 (1.6 ) (84.2 ) 1.5 4.3 (2.8 ) (65.1 ) Corporate (44.1 ) (51.6 ) 7.5 14.5 (122.3 ) (167.7 ) 45.4 27.1 Total $ 87.6 $ 86.3 $ 1.3 1.5 % $ 200.3 $ 174.3 $ 26.0 14.9 % Further information regarding the reportable operating segments can be found in Note 12 to the consolidated condensed financial statements. Lifestyle Group The Lifestyle Group's revenue decreased $20.0 million, or 6.7%, in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. The decrease was driven by Sperry Top-Sider® and Stride Rite®, with revenue declines in the low teens and mid single digits, respectively. The Sperry Top-Sider® revenue decrease was impacted by declines in the domestic boat shoe category and a distribution channel realignment in the family channel, partially offset by sales from new retail stores. The Stride Rite® revenue decrease resulted from lower store traffic in its retail stores. These decreases were partially offset by low teens growth from Keds® due to higher volumes of its core Lifestyle products, driven by continued marketing investment to support the brand. The Lifestyle Group's revenue decreased $47.6 million, or 5.8%, in the first three quarters of fiscal 2014 compared to the first three quarters of fiscal 2013. The decrease was driven by revenue declines in the high single digits for Sperry Top-Sider® and a mid single digit decline for Stride Rite® and Hush Puppies®. The Sperry Top-Sider® decline was impacted by decreases in the domestic boat shoe category and a distribution channel realignment in the family channel, partially offset by sales from new retail stores, while the Stride Rite® decline was impacted by negative weather trends and lower store traffic. The Hush Puppies® decline was due to decreases in the U.S. department store channel. These declines were partially offset by growth in the high teens for Keds® due to higher volumes, driven by continued marketing investment to support the brand. The Lifestyle Group's operating profit decreased $10.9 million, or 19.3%, in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. The operating profit decrease was due primarily to the revenue declines and lower gross margins for Sperry Top-Sider® and Stride Rite® driven by negative product mix and higher promotional activity. Partially offsetting these declines was a higher operating profit for Keds® due to higher revenues and a higher gross margin for Hush Puppies as a result of higher selling prices. For the first three quarters of fiscal 2014, the Lifestyle Group's operating profit decreased $38.6 million, or 26.1%, compared to the first three quarters of fiscal 2013. The operating profit decrease was due primarily to the revenue declines and gross margin decreases for Sperry Top-Sider® and Stride Rite®. The gross margin decline for Sperry Top-Sider® was driven by negative product mix and higher promotional activity. The gross margin decline for Stride Rite® was driven by higher promotional activity in its consumer-direct channel. These operating profit declines were partially offset by higher operating profit for Keds® driven by higher revenue. Performance Group The Performance Group's revenue increased $5.6 million, or 2.2%, in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. The increase was driven by mid single digit growth from Saucony®, low single digit growth from Merrell® and high single digit growth from Chaco®. The Performance Group's revenue increased $30.3 million, or 4.4%, in the first three quarters of fiscal 2014 compared to the first three quarters of fiscal 2013. The year to date increase was driven by high single digit growth from Saucony®, low single digit growth from Merrell® and low twenties growth from Chaco®. In both reporting periods, Saucony® benefited from growth in its franchise products and the lifestyle-oriented Originals product, Chaco® experienced increased demand for its sandals product and Merrell® benefited from growth in its Performance Outdoor product category. The Performance Group's operating profit increased $4.1 million, or 7.4%, in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. The improvement was driven by increased revenue from Merrell®, Saucony® and Chaco®, and from gross margin expansion from Merrell® (driven by higher selling prices) and Chaco® (due to a reduction in low margin close-out sales). 37-------------------------------------------------------------------------------- Table of Contents The Performance Group's operating profit increased $19.0 million, or 14.2%, in the first three quarters of fiscal 2014 compared to the first three quarters of fiscal 2013. The improvement was driven by increased revenue for Merrell®, Saucony® and Chaco®, and by gross margin expansion from Merrell® (due to higher selling prices) and Chaco® (due to a reduction in low margin close-out sales). Heritage Group The Heritage Group's revenue increased $6.7 million, or 4.6% in the third quarter of fiscal 2014 compared to the third quarter of fiscal 2013. The increase was driven by growth from Cat® footwear at a rate in the low twenties, which was partially offset by declines from Sebago® and Bates®. The Heritage Group's operating profit increased $2.2 million during the same period, driven by the revenue increase. The Heritage Group's revenue increased $11.8 million, or 3.2% for the first three quarters of fiscal 2014 compared to the first three quarters of fiscal 2013. The increase was driven by growth from Cat® footwear in the high teens, which was partially offset by declines from Sebago® and Bates®. During the same period, the Heritage Group's operating profit increased $3.0 million, due primarily to the higher revenues partially offset by a low single digit increase in selling, general and administrative expenses. Corporate Corporate expenses were $44.1 million in the third quarter of fiscal 2014 compared to $51.6 million in the third quarter of fiscal 2013. The $7.5 million decrease was driven by a $5.1 million decrease in acquisition-related integration costs associated with the acquisition of PLG, $5.6 million lower pension expense and $2.1 million lower incentive compensation expense. These improvements were partially offset by $8.1 million of restructuring costs recorded during the third quarter of fiscal 2014. Corporate expenses were $122.3 million for the first three quarters of fiscal 2014 compared to $167.7 million for the first three quarters of fiscal 2013. The $45.4 million decrease was driven by a $24.1 million decrease in acquisition-related integration costs associated with the acquisition of PLG, $16.9 million lower pension expense and $7.0 million lower incentive compensation expense. These improvements were partially offset by $12.0 million of restructuring costs recorded during the first three quarters of fiscal 2014. LIQUIDITY AND CAPITAL RESOURCES (In millions) September 6, 2014 December 28, 2013 September 7, 2013 Cash and cash equivalents $ 231.5 $ 214.2 $ 147.8 Debt 1,096.6 1,150.0 1,142.1 Available revolving credit facility (1) 196.7 196.5 196.9 (1) Amounts shown are net of outstanding letters of credit, which reduce availability under the Revolving Credit Facility. 36 Weeks Ended September 6, September 7, (In millions) 2014 2013 Net cash provided by operating activities $ 114.7 $ 125.4 Net cash used in investing activities (24.3 ) (29.8 ) Net cash used in financing activities (73.3 ) (117.0 ) Additions to property, plant and equipment 21.4 29.2 Depreciation and amortization 37.1 37.0 Liquidity Cash and cash equivalents of $231.5 million as of September 6, 2014 were $83.7 million higher compared to September 7, 2013. In addition, the Company had $196.7 million of borrowing capacity available under the Revolving Credit Facility as of September 6, 2014. Operating Activities The principal source of the Company's operating cash flow is net earnings, including cash receipts from the sale of the Company's products, net of costs of goods sold. Through the first three quarters of fiscal 2014, an increase in net working capital represented a use of cash of $81.2 million. Working capital balances were negatively impacted by an increase in accounts receivable of $89.9 million and an increase in inventories of $42.2 million. This was partially offset by an increase in accounts payable of $28.1 million, an increase in other 38-------------------------------------------------------------------------------- Table of Contents operating liabilities of $15.7 million and a decrease in other operating assets of $7.1 million. These changes in working capital balances reflect the seasonality of the Company's business. Through the first three quarters of fiscal 2013, an increase in net working capital represented a use of cash of $56.3 million. Working capital balances were negatively impacted by an increase in accounts receivable of $128.4 million. This was partially offset by increases in accounts payable and other operating liabilities and a decrease in other operating assets of $22.4 million, $24.2 million and $24.1 million, respectively. Investing Activities The Company made capital expenditures of $21.4 million in the first three quarters of fiscal 2014 compared to $29.2 million in the first three quarters of fiscal 2013. The majority of the capital expenditures during the first three quarters of fiscal 2014 were for information system enhancements, building improvements and new retail store openings. Included in investing activities in the first three quarters of fiscal 2013 were net cash proceeds of $2.8 million from the sale of a distribution facility acquired as part of the PLG acquisition. Financing Activities On October 10, 2013, the Company amended the Credit Agreement resulting in the payoff of the Term Loan B Facility while establishing a principal balance of $775.0 million for the Term Loan A Facility. The Amendment provided for a lower effective interest rate on term loan debt, and a one-year extension on both the Term Loan A Facility and Revolving Credit Facility, both of which are now due October 10, 2018. In addition, the Amendment provided for increased maximum debt capacity (including outstanding term loan principal and Revolving Credit Facility commitment amounts in addition to permitted incremental debt) not to exceed $1,350.0 million. As of September 6, 2014, the Company was in compliance with all covenants and performance ratios under the Credit Agreement. The Company has outstanding a total of $375.0 million in Public Bonds that are due on October 15, 2020. The Public Bonds bear interest at 6.125% with the related interest payments due semi-annually. The Public Bonds are guaranteed by substantially all of the Company's domestic subsidiaries. The Company's debt at September 6, 2014 totaled $1,096.6 million compared to $1,150.0 million at December 28, 2013. The decrease was the result of principal payments on the Term Loan A Facility. As of September 6, 2014, the Company had outstanding standby letters of credit under the Revolving Credit Facility totaling $3.3 million. At September 6, 2014, the Company had cash and cash equivalents of $231.5 million, of which $199.0 million was located in foreign jurisdictions. The Company intends to permanently reinvest cash in foreign locations. Cash flow from operating activities, along with borrowings on the Revolving Credit Facility, if any, are expected to be sufficient to meet the Company's working capital needs for the foreseeable future. Any excess cash flows from operating activities are expected to be used to reduce debt, fund internal and external growth initiatives, purchase property, plant and equipment, pay dividends or repurchase the Company's common stock. On February 12, 2014, the Company's Board of Directors approved a common stock repurchase program that authorizes the repurchase of up to $200.0 million in common stock in the open market over a four-year period. The Company did not repurchase any shares in the open market in the first three quarters of fiscal 2014 or fiscal 2013 pursuant to this stock repurchase program. The Company acquired 364,620 shares for $10.1 million in the first three quarters of fiscal 2014 in connection with employee transactions related to stock incentive plans. The Company declared cash dividends of $0.06 per share, or $6.0 million, for each of the third quarters of fiscal 2014 and fiscal 2013. The 2014 dividend is payable on November 3, 2014 to shareholders of record on October 1, 2014. CRITICAL ACCOUNTING POLICIES The preparation of the Company's consolidated financial statements, which have been prepared in accordance with U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from the Company's estimates. However, actual results may differ materially from these estimates under different assumptions or conditions. 39-------------------------------------------------------------------------------- Table of Contents The Company has identified the critical accounting policies used in determining estimates and assumptions in the amounts reported in its Management Discussion and Analysis of Financial Conditions and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended December 28, 2013. Management believes there have been no material changes in those critical accounting policies. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk The information concerning quantitative and qualitative disclosures about market risk contained in the Company's Annual Report on Form 10-K for its fiscal year ended December 28, 2013 is incorporated herein by reference. The Company faces market risk to the extent that changes in foreign currency exchange rates affect the Company's foreign assets, liabilities and inventory purchase commitments. The Company manages these risks by attempting to denominate contractual and other foreign arrangements in U.S. dollars. The Company does not believe that there has been a material change in the nature of the Company's primary market risk exposures, including the categories of market risk to which the Company is exposed and the particular markets that present the primary risk of loss to the Company. As of the date of this Quarterly Report on Form 10-Q, the Company does not know of or expect there to be any material change in the near-term in the general nature of its primary market risk exposure. Under the provisions of FASB ASC Topic 815, Derivatives and Hedging, the Company is required to recognize all derivatives on the balance sheet at fair value. Derivatives that are not qualifying hedges must be adjusted to fair value through earnings. If a derivative is a qualifying hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. The Company conducts wholesale operations outside of the United States in the United Kingdom, continental Europe and Canada where the functional currencies are primarily the British pound, euro and Canadian dollar, respectively. The Company utilizes foreign currency forward exchange contracts to manage the volatility associated with U.S. dollar inventory purchases made by non-U.S. wholesale operations in the normal course of business. At September 6, 2014 and September 7, 2013, the Company had outstanding forward currency exchange contracts to purchase U.S. dollars in the amounts of $116.8 million and $96.0 million, respectively, with maturities ranging up to 336 days. The Company also utilizes foreign currency forward exchange contracts to manage volatility associated with euro denominated expenses in the normal course of business. The Company also has sourcing locations in Asia, where financial statements reflect the U.S. dollar as the functional currency. However, operating costs are paid in the local currency. Royalty revenue generated by the Company from third-party foreign licensees is calculated in the licensees' local currencies, but paid in U.S. dollars. Accordingly, the Company's reported results are subject to foreign currency exposure for this stream of revenue and expenses. Assets and liabilities outside the United States are primarily located in the United Kingdom, Canada and the Netherlands. The Company's investments in foreign subsidiaries with a functional currency other than the U.S. dollar are generally considered long-term. Accordingly, the Company currently does not hedge these net investments. At September 6, 2014, a stronger U.S. dollar compared to foreign currencies decreased the value of these investments in net assets by $4.0 million from their value at December 28, 2013. At September 7, 2013, a stronger U.S. dollar compared to foreign currencies decreased the value of these investments in net assets by $10.0 million from their value at December 29, 2012. These changes resulted in cumulative foreign currency translation adjustments at September 6, 2014 and September 7, 2013 of $3.5 million and $4.1 million, respectively, which were recorded in Accumulated other comprehensive loss in the consolidated condensed balance sheets. Because the Company markets, sells and licenses its products throughout the world, it could be affected by weak economic conditions in foreign markets that could reduce demand for its products. The Company is exposed to changes in interest rates primarily as a result of its borrowing under the Credit Agreement. As of September 6, 2014, the Company had no outstanding borrowings and outstanding letters of credit of $3.3 million under the Revolving Credit Facility. At September 6, 2014 and December 28, 2013, the Company had $720.9 million and $775.0 million, respectively, of variable rate debt outstanding under the Term Loan A Facility. As of September 6, 2014 and December 28, 2013, the Company held one interest rate swap arrangement denominated in U.S. dollars that effectively converted $422.4 million and $455.5 million, respectively, of its variable-rate debt to fixed-rate debt. The Company does not enter into contracts for speculative or trading purposes, nor is it a party to any leveraged derivative instruments. 40-------------------------------------------------------------------------------- Table of Contents |