Wolverine World Wide, Inc. said that adjusting for the negative impact of foreign exchange rates, revenue declined 6.9% in the third quarter to $296.8 million. Reported revenue declined 10.1% to $286.8 million. Excluding a restructuring charge, earnings were flat in the quarter. The footwear maker also raised its EPS guidance for the 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 8 cents per fully diluted share, were recorded in the quarter. Adjusting for these charges, fully diluted earnings in the quarter were 62 cents per share, equal to the 62 cents per share in the prior year. Further adjusting for a negative 5 cents per share impact in the quarter from foreign exchange, fully diluted earnings were 67 cents per share, 8.1% above the prior year. Reported fully diluted earnings were 54 cents 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.”
Among the Q3 highlights:
- 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 t 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 14 cents per fully diluted share and 12 cents 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.”
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
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Diluted earnings
per share $0.54 $0.62 $0.91 $1.41
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