Wolverine World Wide, Inc. saw record sales and earnings per share for the third quarter of 2010.  The company has now delivered record earnings per share for three consecutive quarters.

Revenue totaled a record $320.4 million in the quarter ended Sep. 11, 2010, an increase of 11.7% versus the prior year. A slightly stronger U.S. dollar in the quarter reduced revenue growth by 1.1%.  

Diluted earnings per share increased 12.9% to a record 70 cents per share, compared to 2009 adjusted earnings of 62 cents per share.  The prior year's adjusted earnings exclude the impact of restructuring charges and other expenses related to the company's strategic restructuring plan that was completed in the second quarter of 2010.  Reported earnings for the third quarter 2009 were 54 cents per share.

“The momentum in our business continues to build, and we are pleased to report excellent results for the third quarter, with record performance in both revenue and earnings per share,” stated Blake W. Krueger, the company's Chairman and Chief Executive Officer.  “Our standout financial performance was broad-based, with all of our branded business units, including the consumer direct and leathers divisions, contributing to the strong revenue increase.  Additionally, the Outdoor Group, Heritage Brands Group and Wolverine Footwear Group all delivered strong double-digit increases in operating profit.   The actions we took last year to position the company for accelerated growth coming out of a recessionary environment are having the intended beneficial impact.”


Highlights for the quarter:

  • Gross margin in the quarter was 40.1%, essentially flat compared to the prior year's gross margin of 40.2%, adjusted for restructuring and related charges.  Selected selling price increases and a positive shift in channel and geographic mix helped offset the impact of modestly higher product and freight costs.  Reported gross margin for third quarter 2009 was 39.7%.
  • Operating expenses in the quarter were $80.7 million, up 9.0% versus the prior year, excluding restructuring and related charges.  The increase in operating expenses was driven by planned investments in key strategic growth initiatives and included a 24% increase in marketing spend across the portfolio.  These important investments were partially offset by continued discipline in general and administrative expenses, which were down 5.3% versus the prior year.  Reported operating expenses for third quarter 2009 were $77.8 million.
  • Accounts receivable at the end of the quarter were up 6.7%, well below the quarter's 11.7% revenue increase.  Days sales outstanding at quarter end decreased notably versus the prior year, to 58.3.  Consolidated inventory at the end of the quarter was up $24.6 million, or 13.3%, compared to the prior year.  After four consecutive quarters of year-over-year inventory decreases, this quarter's inventory increase reflects strong year-to-date revenue growth and the excellent prospects for the business going forward. 
  • The company repurchased 158,700 of its own shares in the quarter for an aggregate cost of $4.0 million.  The company continues to maintain a solid balance sheet, with no significant debt and $95.3 million of cash and cash equivalents at the end of the third quarter.

Based on the strength of the financial performance during the first three quarters of the year, the company is adjusting its full-year revenue guidance to a range of $1.20 to $1.22 billion, representing growth of 9.0% to 10.8% versus the prior year.  The company is also increasing its full-year earnings outlook to a range of $2.04 to $2.08 per share, excluding restructuring and related charges of 6 cents per share.  This range represents growth of 15.3% to 17.5% versus the prior year's adjusted diluted earnings per share of $1.77.  Reported earnings per diluted share are anticipated in the range of $1.98 to $2.02 compared to prior year reported earnings per share of $1.24.

Krueger concluded, “We are very optimistic about the future, as the first three quarters of 2010 have signaled a return to accelerated growth for our company.  While the consumer recovery is not as robust or as steady as many predicted, we continue to be encouraged by the eagerness with which both our retail partners and consumers are embracing our global lifestyle brands.  Our order backlog is exceptionally strong, and we remain focused on delivering innovation and performance in everything we do.”  

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

($000s, except per share data)











12 Weeks Ended

36 Weeks Ended


September 11,
2010

September 12,
2009

September 11,
2010

September 12,
2009














Revenue

$           320,396

$           286,764

$           863,492

$       788,526

Cost of products sold

191,825

171,498

512,245

474,939

Restructuring and related costs

–

1,301

1,406

4,639

Gross profit

128,571

113,965

349,841

308,948

Gross margin

40.1%

39.7%

40.5%

39.2%









Selling, general and administrative expenses

80,670

74,015

235,930

222,158

Restructuring and related costs

–

3,787

2,828

22,826

Operating expenses

80,670

77,802

238,758

244,984









Operating profit

47,901

36,163

111,083

63,964

Operating margin

15.0%

12.6%

12.9%

8.1%









Interest expense, net

56

15

141

223

Other (income) expense, net

(244)

(333)

(79)

79


(188)

(318)

62

302

Earnings before income taxes

48,089

36,481

111,021

63,662









Income taxes

13,946

9,687

32,197

18,467









Net earnings

$             34,143

$             26,794

$             78,824

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