Wolverine Worldwide Announces Fourth Quarter And Full-Year 2012 Results, With Record Full-Year Revenue And Earnings In Excess Of Guidance

Feb 19, 2013, 06:30 ET from Wolverine Worldwide

ROCKFORD, Mich., Feb. 19, 2013 /PRNewswire/ -- Wolverine Worldwide (NYSE: WWW) today reported financial results for both the fourth quarter and full year ended December 29, 2012.  During the fourth quarter, the Company completed the $1.25 billion acquisition of the Performance+Lifestyle Group ("PLG") from Collective Brands, Inc., adding four world-class lifestyle brands — Sperry Top-Sider, Saucony, Stride Rite, and Keds — to the Company's impressive portfolio of brands.

Highlights include:

  • Consolidated full-year revenue increased 16.4% to $1.641 billion, including a contribution of $219.4 million from the PLG brands in the stub period since the date of acquisition.  Consolidated fourth fiscal quarter revenue was $652.2 million, growth of 60.5% versus the prior year.
  • Fourth fiscal quarter revenue for the legacy WWW business grew to a record $432.8 million, growth of 6.5% versus the prior year.  Foreign exchange had minimal impact on the quarter's reported revenue.  Full-year revenue for the legacy WWW business grew to a record $1.421 billion, an increase of 0.9%.  Foreign exchange negatively impacted full-year reported revenue for the legacy business by $10.6 million.
  • Full-year operating expenses for the legacy WWW business increased only 2.1%, as the Company demonstrated excellent operating discipline in a challenging global business environment.  Reported operating expenses, including both PLG and recurring and non-recurring transaction and integration costs, increased 33.1%.
  • The effective tax rate for the full fiscal year was 14.2%, reflecting both non-recurring tax benefits realized in the first half of the year and acquisition-related expense deductions in high statutory tax rate jurisdictions in the second half of the year.
  • Excluding non-recurring transaction and integration expenses, full-year fully diluted earnings per share were $2.29, compared to the Company's prior guidance of $1.96 to $2.06 per share.  In the fourth quarter, excluding non-recurring transaction and integration expenses, earnings per share were $0.48 – comprised of $0.53 per share from the legacy WWW business and $0.05 of dilution from the PLG acquisition – compared to the Company's prior guidance of $0.12 to $0.22 per share.  These excellent results were due to better than forecasted operating performance from both the legacy and PLG businesses and lower than anticipated costs related to the acquisition.  Reported earnings per share were $1.63 for the full fiscal year and ($0.08) in the fourth fiscal quarter.     
  • The Company generated strong cash flow from operating activities in 2012 and ended the year with $171.4 million of cash and cash equivalents and net debt of $1.080 billion.  The net debt reflects a voluntary prepayment of $25.0 million of principal during the fourth fiscal quarter.   

"Fiscal 2012 was a milestone year – the third consecutive year of record revenue and the completion of the transformational acquisition of the four PLG brands," said Blake W. Krueger, Chairman and Chief Executive Officer.  "With continued successful execution of global growth initiatives and expansion of our direct-to-consumer platform, we delivered solid performance in a challenging global environment.  The U.S. market proved to be an important contributor to our consolidated performance in 2012, with many brands growing at a double-digit pace in the Company's most significant market, helping offset the yearlong headwinds in Europe and, to a lesser extent, Canada.

"With the addition of Sperry Top-Sider, Saucony, Stride Rite, and Keds, our portfolio of global brands has never been stronger.  We are diversified across most consumer groups, distribution channels and geographic regions, and have multiple brands in the portfolio that are delivering accelerated growth.  We are focused on delivering excellent growth, strong profitability and impressive returns to our shareholders, and we look forward to building on our brands' momentum in 2013 and beyond."

Don Grimes, Senior Vice President and Chief Financial Officer, commented: "The Company is very well-positioned for accelerated growth in revenue, profitability and cash flow.  We expect to complete the full integration of the PLG brands in fiscal 2013, after which we should begin to realize incremental operating efficiencies.  Our priorities for the use of our growing cash flow are clear – invest for organic growth, return cash to our shareholders in the form of a stable dividend, and pay down the debt we incurred in connection with the PLG acquisition."

Although the Company expects strong performance in the U.S., Latin America and Asia Pacific markets in fiscal 2013, it also expects continued challenging trading conditions in Europe.   In light of those expectations, the Company is offering the following guidance for fiscal 2013, excluding non-recurring transaction and integration expenses:

  • Full-year consolidated revenue in the range of $2.7 to $2.8 billion, representing growth in the range of 64.5% to 70.6% versus reported fiscal 2012 revenue of $1.641 billion and growth in the range of 6.0% to 9.9% vs. pro forma combined fiscal 2012 revenue of $2.548 billion for PLG and the legacy WWW business.
  • Moderate full-year gross margin expansion.
  • Full-year SG&A expenses as a percentage of revenue to modestly increase due to:
    • Incremental purchase price amortization of approximately $17 million;
    • Incremental non-cash pension expense of approximately $10 million;
    • Normalized incentive compensation expense compared to an unusually low level in 2012; and
    • Importantly, brand investments to fuel future growth, especially in support of Sperry Top-Sider, Keds and Merrell.
  • Full-year interest expense in the range of $55 million to $60 million, including the amortization of deferred financing costs of approximately $6.7 million.
  • Full-year effective tax rate in the range of 24% to 26%.  On a reported basis, including the tax benefit of non-recurring charges, we expect a tax rate in the range of 21% to 23%.
  • Fully diluted weighted average shares outstanding of approximately 50 million.
  • Fully diluted earnings per share, adjusted to exclude non-recurring transaction and integration expenses, in the range of $2.50 to $2.65, representing growth of 9.2% to 15.7% versus the prior year's adjusted earnings per share. Year-over-year earnings growth will be positively impacted by the full-year inclusion of the acquired brands, but will be suppressed by the absence of the $0.19 per share of non-recurring tax benefits recorded in the first half of 2012 and the incremental SG&A discussed above.  Reported fully diluted earnings per share are expected in the range of $2.10 to $2.25
  • Full-year adjusted EBITDA in the range of $330 million to $345 million versus prior year adjusted EBITDA of $220.8 million

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 "Investor Relations" in the navigation bar, and then click on "Webcasts & Presentations" from the side navigation bar of the "Investor Relations" page.  To listen to the webcast, your computer must have a streaming 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 April 12, 2013.

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, athletic, children's and uniform footwear and apparel.  The Company's portfolio of highly recognized brands includes: Merrell®, Sperry Top-Sider®, Hush Puppies®, Saucony®, Wolverine®, Keds®, Stride Rite®, Sebago®, Cushe®, Chaco®, Bates®, HYTEST®, and Soft Style®.  The Company also is the global 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 approximately 200 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," "believes," "forecasts," "plans," "predicts," "projects," "is likely," "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.  Risk Factors include, among others:  the Company's ability to realize the benefits of the PLG acquisition on a timely basis or at all; the Company's ability to combine its legacy businesses and PLG successfully or in a timely and cost-efficient manner; the degree of business disruption relating to the PLG acquisition; the Company's ability to successfully develop its brands and businesses; changes in interest rates, tax laws, duty structures, tariffs, quotas or applicable assessments in countries of import and export including anti-dumping measures and trade defense actions; changes in consumer preferences, spending patterns, buying patterns or price sensitivity; changes in future pension funding requirements and pension expenses; the ability to secure and protect owned intellectual property or use licensed intellectual property; cancellation of orders for future delivery, or the failure of the Department of Defense to exercise future purchase options, award new contracts or the cancellation of existing contracts by the Department of Defense or other military purchasers; changes in planned customer demand, re-orders or at-once orders; changes in relationships with, including the loss of, significant customers; the availability and pricing of footwear manufacturing capacity; reliance on foreign sourcing; failure of international licensees and distributors to meet sales goals or to make timely payments on amounts owed; disruption of technology systems; regulatory or other changes affecting the supply or price of materials used in manufacturing; the impact of regulatory or legal proceedings and legal compliance risks; the availability of power, labor and resources in key foreign sourcing countries, including China; the cost, availability and management of raw materials, inventories, services and labor for owned and contract manufacturers; the impact of competition and pricing; the impact of changes in the value of foreign currencies; the development of new initiatives; the risks of doing business in developing countries, and politically or economically volatile areas; retail buying patterns; consolidation in the retail sector; changes in economic and market conditions; acts and effects of war and terrorism; seasonality and weather; problems affecting the Company's distribution system, including service interruptions at shipping and receiving ports; the failure to maintain the security of personally identifiable and other information of customers, stockholders and employees; 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 CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

($000s, except per share data)

4th Quarter Ended

Fiscal Year Ended

December 29,

December 31,

December 29,

December 31,

2012

2011

2012

2011

Revenue

$       652,245

$       406,466

$    1,640,838

$    1,409,068

Cost of products sold

408,420

256,313

1,008,197

852,316

Non-recurring transaction and integration costs

4,481

-

4,481

-

Gross Profit

239,344

150,153

628,160

556,752

Gross margin

36.7%

36.9%

38.3%

39.5%

Selling, general and administrative expenses

207,152

119,210

481,899

386,534

Non-recurring transaction and integration costs

24,608

-

32,537

-

Operating Expenses

231,760

119,210

514,436

386,534

Operating expenses as a % of revenue

35.5%

29.3%

31.4%

27.4%

Operating Profit

7,584

30,943

113,724

170,218

Operating margin

1.2%

7.6%

6.9%

12.1%

Interest expense, net

13,001

378

14,032

1,025

Non-recurring acquisition related interest expense

3,754

-

5,197

-

Other (income) expense, net

(978)

147

317

283

15,777

525

19,546

1,308

Earnings (loss) before income taxes

(8,193)

30,418

94,178

168,910

Income taxes

(4,694)

7,407

13,414

45,623

Effective tax rate

57.3%

24.4%

14.2%

27.0%

Net earnings (loss)

(3,499)

23,011

80,764

123,287

Net earnings attributable to noncontrolling interests

223

-

78

-

Net earnings (loss) attributable to Wolverine Worldwide

$          (3,722)

$          23,011

$          80,686

$       123,287

Diluted earnings per share

$             (0.08)

$              0.47

$              1.63

$              2.48

Supplemental information:

Net earnings (loss) used to calculate diluted earnings per share

$          (3,722)

$          22,314

$          79,074

$       120,990

Shares used to calculate diluted earnings per share

47,804

47,957

48,514

48,728

Weighted average shares outstanding

49,152

48,209

48,816

48,911

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

($000s)

December 29,

December 31,

2012

2011

ASSETS:

Cash & cash equivalents

$       171,411

$       140,012

Receivables

353,615

219,963

Inventories

466,230

231,738

Other current assets

83,669

42,783

Total current assets

1,074,925

634,496

Property, plant & equipment, net

149,728

78,489

Goodwill and other non-amortizable intangibles

1,139,725

56,269

Other assets

250,056

82,398

Total Assets

$    2,614,434

$       851,652

LIABILITIES & EQUITY:

Current maturities on long-term debt

$          30,750

$               515

Accounts payable and other accrued liabilities

288,584

148,163

Total current liabilities

319,334

148,678

Long-term debt

1,219,250

-

Other non-current liabilities

432,153

124,324

Stockholders' equity

643,697

578,650

Total Liabilities & Equity

$    2,614,434

$       851,652

 

WOLVERINE WORLD WIDE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

($000s)

Fiscal Year Ended

December 29,

December 31,

2012

2011

OPERATING ACTIVITIES:

Net earnings

$          80,764

$       123,287

Adjustments necessary to reconcile 

net earnings to net cash provided by 

operating activities:

Depreciation and amortization

27,651

15,907

Deferred income taxes

(4,248)

7,676

Stock-based compensation expense, net of tax benefits

5,060

10,819

Pension expense

27,902

17,502

Pension contribution

(26,657)

(31,800)

Other

4,802

5,564

Changes in operating assets and liabilities

(23,634)

(70,141)

Net cash provided by operating activities

91,640

78,814

INVESTING ACTIVITIES:

Business acquisition, net of cash acquired

(1,225,880)

-

Investment in JVs

(2,942)

-

Additions to property, plant and equipment

(14,942)

(19,397)

Other

(2,342)

(3,186)

Net cash used in investing activities

(1,246,106)

(22,583)

FINANCING ACTIVITIES:

Net (payments) borrowings under revolver

(11,000)

11,000

Payments of long term debt

(25,515)

(530)

Proceeds from issuance of long term debt

1,275,000

-

Debt issuance costs

(40,121)

-

Cash dividends paid

(23,648)

(22,737)

Purchase of common stock for treasury

(14,122)

(67,388)

Other

22,795

17,338

Net cash provided by (used in) financing activities

1,183,389

(62,317)

Effect of foreign exchange rate changes

2,476

(4,302)

Increase (decrease) in cash and cash equivalents

31,399

(10,388)

Cash and cash equivalents at beginning of year

140,012

150,400

Cash and cash equivalents at end of year

$       171,411

$       140,012

   

WOLVERINE WORLD WIDE, INC.

REVENUE BY OPERATING GROUP*

(Unaudited)

($000s)

4th Quarter Ended

December 29, 2012

December 31, 2011

Change

Revenue

% of Total

Revenue

% of Total

$

%

Outdoor Group

$    143,511

22.0%

$    141,086

34.7%

$      2,425

1.7%

Heritage Group

170,812

26.2%

158,364

39.0%

12,448

7.9%

Lifestyle Group

58,913

9.0%

57,286

14.1%

1,627

2.8%

Performance + Lifestyle Group

150,239

23.0%

-

-

150,239

-

Other

7,469

1.2%

5,043

1.2%

2,426

48.1%

Total branded footwear, apparel

  and licensing revenue

530,944

81.4%

361,779

89.0%

169,165

46.8%

Retail*

109,672

16.8%

37,133

9.1%

72,539

195.3%

Other business units

11,629

1.8%

7,554

1.9%

4,075

53.9%

Total Revenue

$    652,245

100.0%

$    406,466

100.0%

$ 245,779

60.5%

Fiscal Year Ended

December 29, 2012

December 31, 2011

Change

Revenue

% of Total

Revenue

% of Total

$

%

Outdoor Group

$    545,259

33.2%

$    551,790

39.2%

$    (6,531)

-1.2%

Heritage Group

502,738

30.6%

500,283

35.5%

2,455

0.5%

Lifestyle Group

203,457

12.4%

206,277

14.6%

(2,820)

-1.4%

Performance + Lifestyle Group

150,238

9.2%

-

-

150,238

-

Other

17,372

1.1%

15,718

1.1%

1,654

10.5%

Total branded footwear, apparel

  and licensing revenue

1,419,064

86.5%

1,274,068

90.4%

144,996

11.4%

Retail*

183,926

11.2%

101,960

7.2%

81,966

80.4%

Other business units

37,848

2.3%

33,040

2.4%

4,808

14.6%

Total Revenue

$ 1,640,838

100.0%

$ 1,409,068

100.0%

$ 231,770

16.4%

* Includes revenue from PLG's direct to consumer business.

   

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 FISCAL 2012 Q4 AND FULL-YEAR REVENUE AS REPORTED TO REVENUE ADJUSTED TO EXCLUDE PLG*

(Unaudited)

($ millions)

GAAP Basis

PLG Revenue for the

Legacy WWW

16 Weeks Ended

 "Stub Period" Ended

16 Weeks Ended

December 29, 2012

December 29, 2012

December 29, 2012

Revenue

$                          652.2

$                             (219.4)

$                                     432.8

PLG Revenue for the

GAAP Basis

 "Stub Period" Ended

Legacy WWW

Full-Year 2012

December 29, 2012

Full-Year 2012

Revenue

$                       1,640.8

$                             (219.4)

$                                 1,421.4

RECONCILIATION OF FISCAL 2012 FULL-YEAR OPERATING EXPENSES AS REPORTED TO OPERATING EXPENSES ADJUSTED TO EXCLUDE BOTH RECURRING AND NON-RECURRING  ACQUISITION RELATED COSTS AND PLG OPERATING EXPENSES*

(Unaudited)

($ millions)

Recurring & Non-recurring

PLG Operating Expenses

GAAP Basis

Acquisition

for the "Stub Period" Ended

As Adjusted

Full-Year 2012

Related Costs

December 29, 2012 (a)

Full-Year 2012

Operating expenses

$                          514.4

$                               (33.7)

$                                     (86.0)

$                        394.7

Percentage change from

    prior year

33.1%

2.1%

RECONCILIATION OF FISCAL 2012 Q4 AND FULL-YEAR EPS AS REPORTED TO EPS ADJUSTED TO EXCLUDE NON-RECURRING ACQUISITION RELATED COSTS*

(Unaudited)

GAAP Basis

Non-recurring

As Adjusted

16 Weeks Ended

Acquisition

16 Weeks Ended

December 29, 2012

Related Costs

December 29, 2012

Diluted earnings per share

$                           (0.08)

$                                 0.56

$                                       0.48

Non-recurring

GAAP Basis

Acquisition

As Adjusted

Full-Year 2012

Related Costs

Full-Year 2012

Diluted earnings per share

$                             1.63

$                                 0.66

$                                       2.29

RECONCILIATION OF FISCAL 2012 FULL-YEAR REVENUE AS REPORTED TO REVENUE ADJUSTED TO INCLUDE PLG FULL-YEAR 2012 REVENUE*

(Unaudited)

($ millions)

GAAP Basis

PLG Pre "Stub Period"

As Adjusted

Full-Year 2012

Revenue (b)

Full-Year 2012

Revenue

$                       1,640.8

$                              907.4

$                                 2,548.2

 

RECONCILIATION OF FISCAL 2013 FULL-YEAR EPS AND TAX GUIDANCE ADJUSTED TO EXCLUDE NON-RECURRING ACQUISITION RELATED COSTS*

(Unaudited)

GAAP Basis

Non-recurring

 As Adjusted 

Full-Year 2013

Acquisition

Full-Year 2013

Guidance

Related Costs

Guidance

Diluted earnings per share

 $     2.10   -   2.25 

$                  0.40

 $     2.50   -   2.65 

Percentage change from

    prior year

      28.8%   -  38.0% 

       9.2%   -   15.7% 

Effective tax rate

     21.0%   -  23.0% 

36.5% (c)

     24.0%   -  26.0% 

RECONCILIATION OF FISCAL 2012 FULL-YEAR NET EARNINGS AS REPORTED AND FISCAL 2013 FULL-YEAR EARNINGS GUIDANCE TO EBITDA AND ADJUSTED EBITDA*

(Unaudited)

($ millions)

2012

2013 EBITDA

2013 EBITDA

Adjusted EBITDA

Guidance (Low)

Guidance (High)

Reported net earnings

$                        80.7

$               107.0

$                      114.5

Non-recurring transaction and 

    integration costs

37.0

31.5

31.5

Adjusted net earnings

$                      117.7

$               138.5

$                      146.0

Add back:

   Income tax expense

13.4

30.5

32.5

   Interest expense

19.2

57.5

57.5

   Depreciation & amortization

27.7

50.0

53.0

EBITDA (d)

$                      178.0

$               276.5

$                      289.0

   Stock based compensation

       expense

15.0

15.5

18.0

   Pension expense

27.9

38.0

38.0

Adjusted EBITDA (d)

$                      220.9

$               330.0

$                      345.0

(a)   PLG operating expenses for the "stub period" include $7.0 million of purchase price amortization.

(b)   This adjustment presents the Company's revenue as if PLG was acquired on January 1, 2012.  The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis.  

(c)   Represents the effective tax rate for non-recurring acquisition related costs incurred in the U.S.

(d)   EBITDA, a measure used by management to evaluate operating performance, is defined as net earnings plus (i) income tax expense, (ii) net interest expense, and (iii) depreciation and amortization.  Adjusted EBITDA is defined as EBITDA adjusted to exclude noncash items, unusual items and other items.  EBITDA and Adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to net earnings as a measure of operating performance or to cash flows from operating activities as a measure of liquidity.  Management presents EBITDA and Adjusted EBITDA because management believes these are useful supplemental measures in evaluating the performance of its operating business and provides greater transparency with respect to results of operations. 

*   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 acquisition related  revenues, costs and earnings.  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 and to better identify trends in our business.  The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis.  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 Worldwide



RELATED LINKS

http://www.wolverineworldwide.com