WWW Wolverine World Wide Inc

ROCKFORD, Mich., Feb. 17, 2015 /PRNewswire/ -- Wolverine Worldwide (NYSE: WWW) today reported financial results for the fourth quarter and fiscal year ended January 3, 2015.  Adjusted financial results exclude restructuring, acquisition-related integration and debt extinguishment costs.

"We had a strong close to the year, with nine of our 16 brands generating double-digit revenue growth in the fourth quarter, and our two largest brands, Merrell and Sperry, delivering mid single-digit and high single-digit revenue growth, respectively," commented Blake W. Krueger, Wolverine Worldwide's Chairman, Chief Executive Officer and President.  "I am equally pleased with our full-year performance, which was highlighted by our fifth consecutive year of record revenue, as well as record adjusted earnings.  We believe the strategic investments we are planning for our brands position us to capitalize on the many opportunities we've identified to accelerate our growth around the world."

FOURTH QUARTER 2014 REVIEW

• Consolidated revenue increased to a record $808.9 million, representing growth of 9.2% versus prior year revenue of $740.8 million, with each of the Company's three brand operating groups contributing to the quarter's revenue growth.  On a constant currency basis, revenue grew 10.1%.
• Gross margin was 37.1%, a decrease of 10 basis points versus prior year reported gross margin and a decrease of 110 basis points versus prior year adjusted gross margin.  The gross margin decline was driven primarily by a negative mix shift in international markets, the impact of inventory liquidation related to the Company's previously announced Strategic Realignment Plan and incremental LIFO expense.
• Adjusted operating expenses were $247.1 million, an increase of 0.6% versus the prior year, and included a solid double-digit increase in brand marketing investment.  As a percentage of revenue, adjusted operating expenses were 30.5%, compared to 33.2% in the prior year.  The decrease as a percentage of revenue was driven primarily by the strong revenue growth in the quarter and lower pension expense.  Reported operating expenses were $270.5 million, an increase of 5.1% versus the prior year.
• Adjusted diluted earnings per share increased 36.4% to $0.30, compared to an adjusted $0.22 per share in the prior year.  Reported diluted earnings per share were $0.10, compared to a loss of $0.02 per share in the prior year.
• Operating free cash flow was a record $189.4 million, enabling the Company to reduce interest-bearing debt by $195.7 million, including $175 million of voluntary principal payments, a portion of which were funded by the Company's new accounts receivable financing facility.

FULL YEAR 2014 REVIEW

• Consolidated revenue was a record $2.76 billion, representing growth of 2.6% versus prior year revenue of $2.69 billion.  Foreign exchange had a minimal impact on full-year revenue growth.  High single-digit growth from the Heritage Group and mid single-digit growth from the Performance Group were partially offset by the expected low single-digit revenue decline from the Lifestyle Group.
• Adjusted gross margin decreased 40 basis points to 39.4%.  Reported gross margin decreased 30 basis points to 39.3%.
• Adjusted operating expenses were $815.2 million, a decrease of 1.8% versus the prior year.  As a percentage of revenue, adjusted operating expenses declined 130 basis points to 29.5%, driven by lower pension and incentive compensation expense.  Reported operating expenses were $856.4 million, a decrease of 1.8% versus the prior year.
• Adjusted operating margin increased 90 basis points to 9.9%.  Reported operating margin was 8.3%, an increase of 120 basis points versus the prior year.
• Adjusted diluted earnings per share increased 13.3% to $1.62, compared to $1.43 per share in the prior year.  Reported diluted earnings per share were $1.30, compared to $0.99 per share in the prior year.
• Inventory decreased 3.3% versus the prior year.
• Operating free cash flow for the full year was a record $279.8 million.  The Company ended the year with cash and cash equivalents of $223.8 million and net debt of $677.0 million, with the latter down $258.8 million versus the prior year.

"The Company delivered strong financial results in the fourth quarter and fiscal 2014.  We are extremely pleased that our outstanding full-year operating cash flow enabled us to reduce our net debt by over $250 million while still investing behind our brands and maintaining our cash dividend to shareholders," commented Don Grimes, Senior Vice President and Chief Financial Officer.  "In what continues to be a volatile global macroeconomic and retail environment, we delivered full-year revenue growth across almost all geographic regions, which is a testament to the broad acceptance of our brands by consumers around the world.  Double-digit revenue growth in Asia Pacific, high single-digit growth in EMEA and mid single-digit growth in Latin America - important regions for future growth across our portfolio - were partially offset by flat revenue in the U.S. and a low single-digit decline in Canada, with the latter significantly impacted by foreign currency headwinds."

MULTI-YEAR INVESTMENT PLAN AND FISCAL 2015 GUIDANCE
In order to capitalize on opportunities for accelerated growth around the world, last month the Company announced plans to significantly increase brand-building investments in fiscal 2015.  Specifically, the Company intends to increase its investments behind consumer-demand creation, omnichannel initiatives and international expansion - all focused on deepening connections with consumers, elevating brand awareness and driving sustained growth for the portfolio.  The Company plans to incrementally invest approximately $30 million in these brand-building initiatives in fiscal 2015.

Given the global nature of the Company's operations, the significantly stronger U.S. dollar versus the Canadian dollar, euro and British pound is expected to have a meaningful negative impact on reported fiscal 2015 results.  Further, the continued strengthening of the U.S. dollar since the beginning of this calendar year is the primary driver of the Company's current outlook for fiscal 2015, as detailed below.

For 2015, the Company now expects:

• Consolidated reported revenue in the range of $2.82 billion to $2.87 billion, representing growth in the range of approximately 2% to 4% versus the prior year, reflecting negative foreign exchange, the impact of retail store closures associated with the Company's realignment plan and the exit of the Patagonia Footwear license.  Constant currency revenue growth is expected in the range of approximately 5% to 7%.
• Adjusted operating margin to decline approximately 80 basis points, driven primarily by the incremental brand-building investments and higher pension expense, partially offset by modest gross margin expansion.  Reported operating margin is expected to be approximately flat to the prior year.
• Modestly lower interest expense of approximately $40 million.
• A modestly higher effective tax rate of approximately 27.5%.
• Diluted weighted average shares outstanding of approximately 101 million.
• Adjusted diluted earnings per share in the range of $1.53 to $1.60, reflecting the incremental brand-building investments, higher pension expense and the negative impact of foreign exchange.  Constant currency adjusted earnings per share is expected in the range of $1.71 to $1.78.  Reported diluted earnings per share is expected in the range of $1.46 to $1.53.

"The significant incremental investments we are planning for 2015 - which we expect to benefit primarily fiscal 2016 and beyond - represent the next step in achieving the Company's vision of building the most admired family of performance and lifestyle brands on earth," commented Mr. Krueger.  "We believe 2015 is the right time to make these investments and expect this, along with our ongoing global expansion strategies, to position our Company for accelerated growth and drive significant future shareholder value."

EARNINGS CALL INFORMATION
The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss these results and current business trends.  The conference call will be broadcast live and accessible under the "Investor Relations" tab at www.wolverineworldwide.com.  A replay of the conference call will be available at the Company's website for a period of approximately 30 days.

ABOUT WOLVERINE WORLDWIDE
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 the popular brands Cat^® and Harley-Davidson^®.  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.

FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements, including statements regarding 2014 financial and operational performance, expected 2015 financial performance, 2015 investment plans and benefits, future growth plans, future growth in shareholder value, and effectiveness of the Company's business model.  In addition, words such as "guidance," "estimates," "anticipates," "believes," "forecasts," "step," "plans," "predicts," "projects," "is likely," "expects," "intends," "should," "will," "confident," 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.  Risk Factors include, among others:  the Company's ability to continue to integrate and realize the benefits of the PLG Acquisition on a timely basis or at all; 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 or 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; the shift in consumer shopping and buying patterns including the increased shift to e-commerce and mobile platforms; 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.  The foregoing Risk Factors, as well as other existing Risk Factors and new Risk Factors that emerge from time to time, 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.

The following tables contain information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results:

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SOURCE Wolverine Worldwide