Wolverine World Wide, Inc. Announces Financial Results for the Fourth Quarter and Full Year 2009; Reports Record Free Cash Flow
ROCKFORD, Mich., Feb. 3 /PRNewswire-FirstCall/ -- Wolverine World Wide, Inc. (NYSE: WWW) today reported financial results for the fourth quarter and fiscal year ended January 2, 2010. Year-over-year growth rates noted below are impacted by one less week in 2009's fourth quarter and fiscal year than in the prior year.
Adjusting for the negative impact of foreign exchange rates, full-year revenue was $1.139 billion, a decline of 6.7% versus the prior year. Reported revenue for the full year was $1.101 billion, a decrease of 9.8% versus the prior year. Earnings per fully diluted share for the year were $1.77, after adjusting for non-recurring charges of $0.53 per share related to the Company's strategic restructuring plan, a 6.8% decrease compared to the prior year's $1.90 per share. Further adjusting earnings for a negative $0.16 per share impact from foreign exchange rates, fully diluted earnings were $1.93 per share, 1.6% above the prior year. Reported fully diluted earnings for the year were $1.24 per share.
Reported revenue for the fourth quarter was $312.5 million, a 9.7% decline versus the prior year. The quarter's reported revenue was minimally impacted by foreign exchange. Fully diluted earnings in the quarter were $0.45 per share after adjusting for $0.12 per share of non-recurring restructuring and related charges. Further adjusting for a negative foreign exchange impact of $0.11, fully diluted earnings were $0.56 per share in the fourth quarter, an increase of 14.3% compared to $0.49 in the prior year. Reported fully diluted earnings for the fourth quarter were $0.33 per share.
"We are extremely pleased with our performance in 2009, particularly considering the challenging economic environment that existed all year," said Blake W. Krueger, the Company's Chairman and Chief Executive Officer. "Bright spots in the quarter included our Retail Division, both our brick-and-mortar and e-commerce businesses, and our Merrell business. We believe the geographic, brand and distribution channel diversity of our business structure provides a competitive advantage in any economic climate.
"There were a number of other accomplishments during the year that not only contributed to our positive results, but also better positioned the Company for accelerated growth. We seamlessly integrated the Cushe and Chaco brands following their early 2009 acquisitions, and both brands exceeded our expectations for the year. We also successfully executed our strategic restructuring plan during the year, an important step forward in our goal of driving continuous improvement in every facet of the Company's operations. In addition, we added key talent throughout the organization with important strategic hires. These actions, and more, have us well-positioned to continue delivering on our most important goals – exceeding the expectations of our consumers and driving shareholder value."
Don Grimes, the Company's Chief Financial Officer, commented, "The Company's excellent financial performance in 2009 clearly demonstrates the strength of our brands, the advantages of our business model, and the discipline with which we manage the business. Throughout the year, we maintained intense focus on executing our restructuring program while continuing to invest in important brand-building initiatives and keeping tight control on discretionary spending. We are proud of the year's results, particularly while operating in such a challenging global economic environment."
Highlights for the year:
- Gross margin for the full year was 39.7% after adjusting for non-recurring restructuring and related charges included in cost of sales, compared to prior-year gross margin of 39.8%. Further adjusting for the negative impact of foreign exchange, gross margin was 40.1%. Reported gross margin for the full year was 39.2%.
- Full-year operating expenses decreased 10.4% from the prior year, to $309.3 million, 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 higher pension expense. Reported operating expenses for the full year were $346.1 million.
- The full-year effective tax rate decreased to 27.8%, compared to the prior year's 31.8% rate. The lower rate reflects benefits from implementing tax planning strategies related primarily to the Company's international operations and the net benefit from non-recurring adjustments in the current year's fourth quarter.
- As expected, the Company significantly reduced its year-end inventory, which was down $38.7 million, or 19.7%, compared to the prior year. Accounts receivable at year end were down 2.5% compared to the prior year.
- The Company had an outstanding year of cash generation, with record operating free cash flow of $146.3 million, fueled by significant reductions in working capital and a conservative capital plan. The Company is in a strong competitive position, with cash and cash equivalents at year end of $160.4 million and $150.0 million of availability on its revolving credit facility.
The Company anticipates continued improvement in the economic environment in most of its major markets and, based on an improved order backlog position throughout its portfolio, expects to deliver both revenue and earnings growth in 2010. For fiscal 2010, the Company currently anticipates:
- Revenue in the range of $1.140 billion to $1.170 billion, representing growth of 3.5% to 6.3% versus the prior year, with no material impact from foreign exchange on 2010 reported revenue;
- Modest improvement in full-year gross margin after adjusting for non-recurring restructuring charges, as lower first-half product costs and strategic price increases are expected to more than offset modest full-year foreign exchange downside from maturing foreign currency forward contracts;
- Incremental investments behind the Merrell, Sebago, Chaco, and Cushe brands and consumer-direct initiatives - strategies designed to capitalize on opportunities to gain market share and accelerate the growth of these important drivers of sales and profit;
- Modestly higher pension expense, more than offset by benefits from the completion of the strategic restructuring program;
- A full-year effective tax rate of 29.0%, versus an effective tax rate of 27.8% in fiscal 2009;
- Fully diluted weighted average shares outstanding of 49.9 million, versus 49.0 million in fiscal 2009;
- Adjusted for non-recurring restructuring charges in the range of $0.03 to $0.05 per share, fully diluted earnings per share in the range of $1.88 to $1.96, representing growth of 6.2% to 10.7% versus the prior year;
- Further adjusting for expected full-year negative foreign exchange of $0.04 per share, fully diluted earnings in the range of $1.92 to $2.00, representing growth of 8.5% to 13.0% versus the prior year;
- Reported earnings per share in the range of $1.84 to $1.92.
Krueger concluded, "Moving into 2010 and beyond, we believe we are well-positioned to grow our dynamic portfolio of brands by both increased penetration in current markets and selective geographic expansion. We also remain focused on expanding our consumer-direct initiatives across our brand portfolio and further extending several of our brands into apparel and accessories. Our strong execution in the difficult environment over the past 18 months gives us great confidence in our ability to accelerate the growth of our lifestyle brands as the global economy continues to improve."
The Company will host a conference call at 8:30 a.m. EST 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 February 17, 2010.
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®, Chaco®, Cushe™, Hush Puppies®, HYTEST®, Merrell®, Sebago® Soft Style® and Wolverine®. The Company also is the exclusive footwear licensee of popular brands including CAT®, Harley-Davidson® and Patagonia®. 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 develop the Cushe and Chaco brands and businesses; the successful completion 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; 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)
4th Quarter Ended Fiscal Year Ended
----------------- -----------------
January 2, January 3, January 2, January 3,
2010 2009 2010 2009
---- ---- ---- ----
Revenue $312,530 $346,116 $1,101,056 $1,220,568
Cost of
products
sold 188,523 212,785 663,461 734,547
Restructuring
and
related
costs 1,234 - 5,873 -
----- --- ----- ---
Gross
profit 122,773 133,331 431,722 486,021
Gross
margin 39.3% 38.5% 39.2% 39.8%
Selling,
general
and
administrative
expenses 94,197 100,991 316,378 345,183
Restructuring
and
related
costs 6,897 - 29,723 -
----- --- ------ ---
Operating
expenses 101,094 100,991 346,101 345,183
------- ------- ------- -------
Operating
profit 21,679 32,340 85,621 140,838
Operating
margin 6.9% 9.3% 7.8% 11.5%
Interest
(income)
expense,
net (112) 419 111 1,093
Other
(income),
net (261) (838) (182) (839)
---- ---- ---- ----
(373) (419) (71) 254
---- ---- --- ---
Earnings
before
income
taxes 22,052 32,759 85,692 140,584
Income
taxes 5,314 8,642 23,780 44,763
----- ----- ------ ------
Net
earnings $16,738 $24,117 $61,912 $95,821
======= ======= ======= =======
Diluted
earnings
per
share $0.33 $0.49 $1.24 $1.90
===== ===== ===== =====
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
($000s)
January 2, January 3,
2010 2009
---- ----
ASSETS:
Cash & cash equivalents $160,439 $89,502
Receivables 163,755 167,949
Inventories 158,065 196,777
Other current assets 21,279 19,614
Total current assets 503,538 473,842
Property, plant & equipment, net 73,952 85,757
Other assets 130,443 105,181
Total Assets $707,933 $664,780
======== ========
LIABILITIES & EQUITY:
Current maturities on long-term debt $538 $5
Revolving credit agreement - 59,500
Accounts payable and other accrued liabilities 132,313 131,824
------- -------
Total current liabilities 132,851 191,329
Long-term debt 1,077
Other non-current liabilities 91,972 43,529
Stockholders' equity 482,033 429,922
Total Liabilities & Equity $707,933 $664,780
======== ========
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 As As
Reported Adjusted Adjusted
Fiscal Fiscal Fiscal
Year Restructuring Year Impact of Year
Ended and Ended Foreign Ended
January 2, Related January 2, Exchange January 2,
2010 Costs(a) 2010 Rates(a) 2010
---------- -------- ---------- -------- ----------
Revenue $1,101,056 $- $1,101,056 $38,192 $1,139,248
% change from
prior year (9.8%) (6.7%)
Gross profit $431,722 $5,873 $437,595 $19,722 $457,317
Gross margin 39.2% 39.7% 40.1%
Diluted
earnings per
share $1.24 $0.53 $1.77 $0.16 $1.93
% change from
prior year (34.7%) (6.8%) 1.6%
As As As
Reported Adjusted Adjusted
4th 4th 4th
Quarter Restructuring Quarter Impact of Quarter
Ended and Ended Foreign Ended
January 2, Related January 2, Exchange January 2,
2010 Costs(a) 2010 Rates(a) 2010
---------- -------- ---------- -------- ----------
Diluted
earnings per
share $0.33 $0.12 $0.45 $0.11 $0.56
% change from
prior year (32.7%) (8.2%) 14.3%
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
Fiscal Year Impact of
Ended Restructuring Foreign
January 2, and Exchange
2010 Related Costs(b) Rates (b)
----------- ---------------- --------
Operating expenses $346,101 $(29,723) $8,623
% change from prior year 0.3%
As Adjusted
Fiscal Year
Newly Increased Ended
Acquired Pension January 2,
Brands(b) Expense(b) 2010
--------- ---------- -----------
Operating expenses $(6,943) $(8,808) $309,250
% change from prior year (10.4)%
As Reported
12 Weeks Impact of
Ended Restructuring Foreign
January 2, and Exchange
2010 Related Costs(b) Rates(b)
----------- ---------------- --------
Operating expenses $101,094 $(6,897) $(1,244)
% change from prior year 0.1%
As Adjusted
12 Weeks
Newly Increased Ended
Acquired Pension January 2,
Brands(b) Expense(b) 2010
--------- ---------- -----------
Operating expenses $(1,456) $(2,456) $89,041
% change from prior year (11.8%)
(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 AND IMPACT OF FOREIGN EXCHANGE RATES*
(Unaudited)
Full-Year Full-Year Impact of Full-Year
2010 Restructuring 2010 Foreign 2010
Guidance and Related Guidance Exchange Guidance
(GAAP Basis) Costs(a) As Adjusted Rates(a) As Adjusted
Diluted
earnings
per
share $1.84-$1.92 $0.04(b) $1.88-$1.96 $0.04 $1.92-$2.00
(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 or fluctuations in foreign exchange
rates. 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 2010
restructuring and related costs of $2.5 million to $3.5 million, or
$0.03 to $0.05 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.
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