Wolverine World Wide, Inc. reported revenues increased 4.8% in the second quarter ended June 19, to $258.2 million. Continued strong organic growth was partially offset by the delay into the subsequent quarter of a significant shipment to a third-party distributor and, as expected, by lower closeout sales – the latter of which had a beneficial impact on gross margin in the quarter. Foreign exchange had minimal impact on reported revenue in the quarter.  

Excluding $2.7 million of charges in the quarter related to the company's now fully implemented strategic restructuring plan, diluted earnings were a record 39 cents per share, compared to 2009 adjusted diluted earnings of 27 cents per share, an increase of 44.4%.  Reported diluted earnings in the quarter were 35 cents per share, compared to 16 cents per share in the second quarter of 2009.  

“The momentum in our business this year continued into the second quarter with very solid growth in both revenue and earnings,” stated Blake W. Krueger, the company's chairman and chief executive officer.  “Our strong financial results were well balanced across our portfolio, with all four major branded operating groups contributing to the outstanding earnings performance. Our retail and eCommerce businesses also delivered impressive results.  The company's exceptional year-to-date earnings performance is a clear testament to the power of our global business model.”

Don Grimes, the company's chief financial officer, commented, “The company remains focused on meeting the performance needs and style demands of our consumers, while continually striving to increase market share across the product categories in which our brands compete.  We believe the quarter's excellent results underscore the company's focus on rewarding our investors with an appropriate balance between near-term earnings growth and long-term investments for the future.”

Highlights for the quarter:

    * Adjusted for restructuring and related charges in both years, gross margin in the quarter expanded significantly to a record 40.3%, compared to prior year gross margin of 37.8%, driven by a lower percentage of closeout sales, lower product costs and benefits from year-over-year selling price increases.  Reported gross margin in the quarter was 40.2% versus 37.3% for the second quarter 2009.  
    * Adjusted for restructuring and related charges in both years, operating expenses in the quarter were $76.7 million, compared to prior year operating expenses of $72.8 million, an increase of 5.4%.  The increase was driven, in part, by double-digit growth in advertising and marketing spend and incremental investments in selling infrastructure designed to fuel future growth.  Reported operating expenses in the quarter were $79.0 million versus $79.7 million for the second quarter 2009.
    * Accounts receivable at the end of the quarter were up only 0.2% versus the quarter's mid-single digit revenue increase.  Days sales outstanding at quarter end decreased versus the prior year.  Inventory at the end of the quarter was down $12.9 million, or 7.0%, compared to the prior year.  
    * The company repurchased approximately 753,000 of its own shares in the quarter for an aggregate cost of $22.6 million.  Year to date, the company has repurchased approximately 1.6 million shares for a total cost of $47.1 million. The company has a solid balance sheet, with no significant debt, no borrowings against its recently-announced new $150 million revolving credit facility and $110.1 million of cash and cash equivalents at the end of the second quarter.

Due to the strong year-to-date revenue performance across the portfolio and continued solid order trends, the company is increasing its full-year revenue estimate to a range of $1.190 billion to $1.220 billion, representing growth of 8.1% to 10.8% versus the prior year. The company is also increasing its full-year earnings outlook, excluding restructuring and related charges of $0.06 per share, to a range of $1.98 to $2.04 per share. This range represents growth of 11.9% to 15.3% versus the prior year's adjusted diluted earnings per share of $1.77.  Reported earnings per diluted share are anticipated in the range of $1.92 to $1.98.

Krueger continued, “The company is off to an excellent start this year.  Our increased 2010 revenue and earnings guidance reflects the strength and momentum of our lifestyle brands in the global marketplace.  Product innovation and compelling marketing across our portfolio are driving success at retail, as consumers have embraced our new product offerings.  We remain committed to meeting, and exceeding, the wants and needs of our consumers while also delivering superior financial returns to our shareholders.”

Wolverine's brands include: Bates, Chaco, Cushe, Hush Puppies, HYTEST, Merrell, Sebago and Wolverine.  The company also is the exclusive footwear licensee of popular brands including CAT, Harley-Davidson and Patagonia.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS


(Unaudited)


($000s, except per share data)














12 Weeks Ended


24 Weeks Ended




June 19,


June 20,


June 19,


June 20,




2010


2009


2010


2009












Revenue


$ 258,199


$ 246,438


$ 543,096


$ 501,762


Cost of products sold


154,093


153,380


320,420


303,441


Restructuring and related costs


425


1,018


1,406


3,338


Gross profit


103,681


92,040


221,270


194,983


Gross margin


40.2%


37.3%


40.7%


38.9%












Selling, general and administrative expenses


76,720


72,823


155,260


148,143


Restructuring and related costs


2,311


6,901


2,828


19,039


Operating expenses


79,031


79,724


158,088


167,182












Operating profit


24,650


12,316


63,182


27,801


Operating margin


9.5%


5.0%


11.6%


5.5%












Interest (income) expense, net


(4)


119


85


208


Other expense, net


395


520


165


412




391


639


250


620


Earnings before income taxes


24,259


11,677


62,932


27,181












Income taxes


7,037


3,771


18,251


8,780








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