Wolverine World Wide, Inc. reported fourth quarter revenues declined 9.7% to $312.5 million. Net earnings fell 31% to $16.7 million, or 33 cents a share, from $24.1 million, or 49 cents a share, a year earlier. Excluding 12 cents a share in restructuring charges, earnings would have been 45 cents a share.

The company, which owns outdoor brands such as Merrell, Chaco and makes Patagonia Footwear through a license, said it expects 2010 adjusted earnings of $1.92 to $2.00 a share, compared with analysts' consensus expectation of $1.98 a share.

The quarter's reported revenue was minimally impacted by foreign exchange, but the company said the results were also impacted by having one less week in the quarter compared to a year earlier.

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 53 cents 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 16 cents 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.  

“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.

2010 Outlook

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.”   

                               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
                         =====           =====        =====            =====