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Adjusting for the negative impact of foreign exchange rates, revenue declined 6.9% in the quarter to $296.8 million, as challenging trading conditions continued across most of the Company's major markets. Reported revenue in the third quarter was $286.8 million, a decline of 10.1% versus the prior year.
The Company continued to make substantial progress in the quarter with its strategic restructuring plan, which is focused on generating significant efficiencies across the Company's supply chain, logistics and backroom functions. Non-recurring restructuring and related charges of $5.1 million, or $0.08 per fully diluted share, were recorded in the quarter. Adjusting for these charges, fully diluted earnings in the quarter were $0.62 per share, equal to the $0.62 per share in the prior year. Further adjusting for a negative $0.05 per share impact in the quarter from foreign exchange, fully diluted earnings were $0.67 per share, 8.1% above the prior year. Reported fully diluted earnings were $0.54 per share.
"We are very pleased with our third quarter results, as the Company continues to deliver excellent earnings performance in the most challenging economic environment that many of us have ever experienced," stated Blake W. Krueger, the Company's CEO and President. "We remain confident that our multi-brand, multi-country business model and our execution against that model can deliver exceptional results in a variety of economic climates.
Krueger continued, "The strength of our brand portfolio coupled with our growth and efficiency initiatives convince us that the Company is positioned for success as we cycle through the global recession. Our key strategic objectives remain unchanged as we stay focused on growing our proven brands via greater wholesale penetration, expanding our consumer-direct initiatives and further extending into apparel and accessories. The demonstrated success of these strategies, combined with our ability to generate permanent cost savings by mining for efficiencies throughout the organization, has us poised to achieve accelerated profit growth in an improved consumer spending environment."
Don Grimes, the Company's Chief Financial Officer, commented, "The Company's impressive 2009 financial performance continued in the third quarter. A heightened emphasis on reducing discretionary operating expenses and the recognition of benefits from new tax strategies helped us achieve earnings per share, excluding restructuring and related charges, equal to the prior year in extremely tough economic conditions."
Highlights for the quarter:
-- Gross margin was 40.9%, compared to prior-year gross margin of 40.4%,
after adjusting for $1.3 million of non-recurring restructuring and
related charges and the impact of foreign exchange. Reported gross
margin was 39.7%.
-- Operating expenses decreased 11.1% from the prior year after adjusting
for non-recurring restructuring and related charges, the benefit of a
stronger U.S. dollar, expenses directly related to newly-acquired
brands, and increased pension expense. Reported operating expenses in
the quarter were $77.8 million, a 5.6% decrease from the prior year.
-- The effective tax rate in the third quarter dropped to 26.6%, reflecting
the cumulative year-to-date benefits from the implementation of tax
planning strategies related primarily to the Company's international
operations.
-- Accounts receivable at quarter end were 7.1% lower than the prior year's
third quarter, as the Company continues to closely monitor customers'
credit standing and remains diligent regarding timely collections.
-- Third quarter inventory was down 5.2% compared to the prior year. As
planned, the Company made a meaningful reduction in inventory in the
quarter and anticipates continued inventory reduction by year-end 2009.
-- The Company has generated $71.1 million of cash from operations year to
date, helping reduce its revolver balance to $9.9 million at the end of
the third quarter, down from $34.8 million at the end of the second
quarter. The Company maintains a strong balance sheet with total
interest-bearing debt of $11.6 million offset by $78.5 million of cash
and cash equivalents.
The Company is pleased to announce that it is raising its full-year 2009 earnings guidance. Excluding full-year restructuring and related charges, the Company now expects fully diluted earnings per share in the range of $1.65 to $1.75 per share, up from its previous range of $1.55 to $1.73 per fully diluted share. This earnings guidance continues to reflect an expected full-year negative foreign exchange impact of $0.14 per fully diluted share and $0.12 per fully diluted share of increased pension expense. The Company is also narrowing its expectation for full-year revenue to a range of $1.080 billion to $1.110 billion. The midpoint of the revenue range remains unchanged at $1.095 billion. Foreign exchange has negatively impacted year-to-date reported revenue by approximately $41 million, and the Company expects minimal foreign exchange impact on fourth quarter reported revenue. Reported fully diluted earnings per share for the year are now expected to be in the range of $1.15 to $1.25, including the $0.50 per share midpoint of the estimated range of restructuring and related charges.
Krueger concluded, "Our year-to-date performance and our outlook for the fourth quarter give us the confidence to raise our annual earnings guidance. We have an outstanding portfolio of lifestyle brands that translates across geographies and appeals to a wide range of consumers. The dedication of our team and our ongoing ability to deliver compelling style, innovation and technical performance features in our branded products are enabling the Company to successfully navigate the current environment and positioning us to continue delivering superior returns to our shareholders."
The Company will host a conference call at 8:30 a.m. EDT today to discuss these results and current business trends. To listen to the call at the Company's website, go to www.wolverineworldwide.com, click on "Investors" in the navigation bar, and then click on "Webcast" from the top navigation bar of the "Investors" page. To listen to the webcast, your computer must have Windows Media Player, which can be downloaded for free at www.wolverineworldwide.com. In addition, the conference call can be heard at www.streetevents.com. A replay of the call will be available at the Company's website through October 21, 2009.
With a commitment to service and product excellence, Wolverine World Wide, Inc. is one of the world's leading marketers of branded casual, active lifestyle, work, outdoor sport and uniform footwear and apparel. The Company's portfolio of highly recognized brands includes: Bates(R), Chaco(R), Cushe(TM), Hush Puppies(R), HYTEST(R), Merrell(R), Sebago(R) Soft Style(R) and Wolverine(R). The Company also is the exclusive footwear licensee of popular brands including CAT(R), Harley-Davidson(R) and Patagonia(R). The Company's products are carried by leading retailers in the U.S. and globally in 180 countries and territories. For additional information, please visit our website, www.wolverineworldwide.com.
This press release contains forward-looking statements. In addition, words such as "estimates," "anticipates," "expects," "intends," "should," "will," variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Risk Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Current uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters and makes it more likely that the Company's actual results could differ materially from expectations. Risk Factors include, among others: the Company's ability to successfully integrate and develop the Cushe and Chaco brands and businesses; the successful implementation of the Company's strategic restructuring plan; changes in duty structures in countries of import and export including anti-dumping measures in Europe and other countries; trade defense actions by countries; the Company's ability to implement and recognize benefits from tax planning strategies; changes in consumer preferences or spending patterns; cancellation of orders for future delivery; changes in planned customer demand, re-orders or at-once orders; the availability and pricing of foreign footwear factory capacity; reliance on foreign sourcing; regulatory or other changes affecting the supply of materials used in manufacturing; the availability of power, labor and resources in key foreign sourcing countries, including China; the impact of competition and pricing; the impact of changes in the value of foreign currencies and the relative value to the U.S. Dollar; integration and operation of newly acquired and licensed businesses; the development of new initiatives; the development of apparel; retail buying patterns; consolidation in the retail sector; changes in economic and market conditions; acts and effects of war and terrorism; weather; and additional factors discussed in the Company's reports filed with the Securities and Exchange Commission and exhibits thereto. Other Risk Factors exist, and new Risk Factors emerge from time to time that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Furthermore, the Company undertakes no obligation to update, amend or clarify forward-looking statements.
WOLVERINE WORLD WIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($000s, except per share data)
12 Weeks Ended 36 Weeks Ended
-------------- --------------
September 12, September 6, September 12, September 6,
2009 2008 2009 2008
---- ---- ---- ----
Revenue $286,764 $318,852 $788,526 $874,452
Cost of products
sold 171,498 190,122 474,939 521,762
Restructuring and
related costs 1,301 - 4,639 -
----- --- ----- ---
Gross profit 113,965 128,730 308,948 352,690
Gross margin 39.7% 40.4% 39.2% 40.3%
Selling, general,
and administrative
expenses 74,015 82,389 222,158 244,192
Restructuring and
related costs 3,787 - 22,826 -
----- --- ------ ---
Operating
expenses 77,802 82,389 244,984 244,192
------ ------ ------- -------
Operating profit 36,163 46,341 63,964 108,498
Operating margin 12.6% 14.5% 8.1% 12.4%
Interest expense, net 15 309 223 674
Other expense, net (333) (880) 79 (1)
---- ---- -- --
(318) (571) 302 673
---- ---- --- ---
Earnings before
income taxes 36,481 46,912 63,662 107,825
Income taxes 9,687 15,721 18,467 36,121
----- ------ ------ ------
Net earnings $26,794 $31,191 $45,195 $71,704
======= ======= ======= =======
Diluted earnings
per share $0.54 $0.62 $0.91 $1.41
===== ===== ===== =====
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000s)
September 12, September 6,
2009 2008
---- ----
ASSETS:
Cash & cash equivalents $78,539 $74,310
Receivables 223,453 240,522
Inventories 183,983 194,062
Other current assets 24,352 21,703
------ ------
Total current assets 510,327 530,597
Property, plant &
equipment, net 75,741 83,258
Other assets 121,536 107,839
------- -------
Total Assets $707,604 $721,694
======== ========
LIABILITIES & EQUITY:
Current maturities
on long-term debt $556 $10,725
Revolving credit
agreement 9,900 70,897
Accounts payable and
other accrued
liabilities 148,398 144,573
------- -------
Total current
liabilities 158,854 226,195
Long-term debt 1,112 -
Other non-current
liabilities 75,143 33,314
Stockholders' equity 472,495 462,185
------- -------
Total Liabilities &
Equity $707,604 $721,694
======== ========
As required by the Securities and Exchange Commission Regulation G, the
following tables contain information regarding the non-GAAP adjustments
used by the Company in the presentation of its financial results:
WOLVERINE WORLD WIDE, INC.
RECONCILIATION OF REPORTED FINANCIAL RESULTS TO ADJUSTED
FINANCIAL RESULTS, EXCLUDING RESTRUCTURING AND RELATED
COSTS AND IMPACT OF FOREIGN EXCHANGE RATES*
(Unaudited)
($000s)
As Reported As Adjusted As Adjusted
12 Weeks 12 Weeks Impact of 12 Weeks
Ended Restructuring Ended Foreign Ended
September 12, and Related September 12, Exchange September 12,
2009 Costs (a) 2009 Rates (a) 2009
------------- ------------- ------------- --------- -------------
Revenue $286,764 $- $286,764 $10,067 $296,831
% change
from
prior
year (10.1%) (6.9%)
Gross
profit $113,965 $1,301 $115,266 $6,077 $121,343
Gross
margin 39.7% 40.9%
Diluted
earnings
per
share $0.54 $0.08 $0.62 $0.05 $0.67
% change
from
prior
year (12.9%) 0.0% 8.1%
RECONCILIATION OF REPORTED OPERATING EXPENSES TO ADJUSTED OPERATING
EXPENSES, EXCLUDING RESTRUCTURING AND RELATED COSTS,
IMPACT OF FOREIGN EXCHANGE RATES, NEWLY-ACQUIRED BRANDS,
AND INCREASED PENSION EXPENSE*
(Unaudited)
($000s)
As Reported As Adjusted
12 Weeks Impact of 12 Weeks
Ended Restructuring Foreign Newly- Increased Ended
September and Related Exchange Acquired Pension September
12, 2009 Costs(b) Rates(b) Brands(b) Expense(b) 12, 2009
-------------------------------------------------------------------
Operating
expenses
$77,802 $(3,787) $2,063 $(808) $(2,047) $73,223
% change
from
prior
year (5.6%) (11.1%)
(a) These adjustments present the Company's results of operations on a
continuing basis without the effects of fluctuations in restructuring and
related costs or impact of foreign exchange rates. The adjusted financial
results are used by management to, and allow investors to, evaluate the
operating performance of the Company on a comparable basis.
(b) These adjustments present the Company's results of operations on a
continuing basis without the effects of fluctuations in restructuring and
related costs, impact of foreign exchange rates, newly acquired brands or
increased pension expense. The adjusted financial results are used by
management to, and allow investors to, evaluate the operating performance
of the Company on a comparable basis.
* To supplement the consolidated financial statements presented in
accordance with Generally Accepted Accounting Principles ("GAAP"), the
Company describes what certain financial measures would have been in the
absence of restructuring and related costs, impact of foreign exchange
rates, newly acquired brands and increased pension expense. The Company
believes these non-GAAP measures provide useful information to both
management and investors to increase comparability to the prior period by
adjusting for certain items that may not be indicative of core operating
measures. Management does not, nor should investors, consider such non-
GAAP financial measures in isolation from, or as a substitution for,
financial information prepared in accordance with GAAP. A reconciliation
of all non-GAAP measures included in this press release, to the most
directly comparable GAAP measures, are found in the financial tables
above.
WOLVERINE WORLD WIDE, INC.
RECONCILIATION OF EPS GUIDANCE TO ADJUSTED EPS GUIDANCE,
EXCLUDING RESTRUCTURING AND RELATED COSTS *
(Unaudited)
Full-Year 2009 Restructuring Full-Year 2009
Guidance and Related Guidance
(GAAP Basis) Costs (a) As Adjusted(a)
-------------- ------------- ---------------
Diluted
earnings
per share $1.15 - $1.25 $0.50 (b) $1.65 - $1.75
(a) These adjustments present the Company's full-year earnings per share
guidance on a continuing basis without the effects of restructuring and
related costs. The adjusted guidance is used by management to, and allows
investors to, evaluate the anticipated operating performance of the
Company on a comparable basis.
(b) This represents the midpoint of the estimated range of 2009
restructuring and related costs of $33 million to $36 million, or $0.47 to
$0.52 per fully diluted share.
* To supplement the consolidated financial statements presented in
accordance with Generally Accepted Accounting Principles ("GAAP"), the
Company describes what certain financial measures would have been in the
absence of restructuring and related costs. The Company believes these
non-GAAP measures provide useful information to both management and
investors to increase comparability to the prior period by adjusting for
certain items that may not be indicative of core operating measures.
Management does not, nor should investors, consider such non-GAAP
financial measures in isolation from, or as a substitution for, financial
information prepared in accordance with GAAP. A reconciliation of all
non-GAAP measures included in this press release, to the most directly
comparable GAAP measures, are found in the financial tables above.
SOURCE Wolverine World Wide, Inc.
http://www.wolverineworldwide.com
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