Wolverine World Wide, Inc. (NYSE: WWW) today reported financial
results for the third quarter ended September 28, 2019. The Company
also provided an update on its full-year 2019 outlook.
“We delivered our highest quarterly revenue
increase of the year driven by constant currency growth of over 11%
from Merrell, Sperry and Saucony. Our adjusted earnings per share
of $0.68 was a record performance for the Company and meaningfully
better than our expectations heading into the quarter,” said Blake
Krueger, Wolverine World Wide’s Chairman, Chief Executive Officer
and President. “The double-digit growth from our biggest brands is
a direct result of our continued focus on building trend-right
product that resonates with consumers and ongoing execution of our
digital-direct offense.”
THIRD QUARTER 2019 REVIEW
- Reported revenue of $574.3 million
increased 2.8% as compared to the prior year and adjusting for
currency, increased 3.6%.
- Reported gross margin of 42.4%, was in
line with expectations, and increased 80 basis points compared to
41.6% in the prior year.
- Reported operating margin was 11.9%.
Adjusted operating margin of 14.1% exceeded expectations expanding
150 basis points compared to the prior year.
- Reported diluted earnings per share
were $0.57, compared to $0.60 in the prior year. Adjusted diluted
earnings per share increased 9.7% to $0.68 compared to $0.62 in the
prior year.
- The reported tax rate was 20.3%, as
compared to 7.8% in the prior year. The prior year effective rate
was favorably impacted by a $40 million voluntary pension
contribution, resulting in a $0.06 benefit in the prior year.
- Inventories increased 28.8% compared
to the prior year, slightly better than expectations, and include
$8.4 million related to new stores and the Saucony Europe
acquisition.
- The Company repurchased $107 million
of shares in the quarter at an average price of $25.13, and has
approximately $513 million available under its authorized share
repurchase programs.
"The strong results from Merrell, Sperry and
Saucony demonstrate the benefits of our demand creation investments
and steady execution against our global growth model. This
revenue performance combined with continued operational discipline
led to excellent earnings leverage in the quarter, with adjusted
earnings per share growth of nearly 10% and gross margin of 42.4%,
the highest of any third quarter for the Company,” stated Mike
Stornant, Senior Vice President and Chief Financial Officer. “Our
well-positioned capital structure allowed us to continue to
opportunistically repurchase stock. Our strong liquidity position
provides considerable flexibility to drive future long-term
shareholder return."
FULL-YEAR 2019 OUTLOOKThe Company
is maintaining its full-year revenue guidance and updating its
full-year earnings outlook to reflect estimated new tariff costs in
the fourth quarter.
- Revenue is expected to be
approximately $2.28 billion including approximately 7.0% constant
currency growth in the fourth quarter.
- Gross margin is still expected to be
approximately 41.0% matching the prior year's record level.
- Reported operating margin is now
expected to be approximately 10.5% and adjusted operating margin is
expected to be approximately 12.0%.
- The effective tax rate is expected to
be approximately 19.0%.
- Diluted weighted average shares are
now expected to be approximately 86.4 million.
- Reported diluted earnings per share
are now expected to be approximately $1.96 and adjusted diluted
earnings per share are now expected to be approximately $2.25
including $0.03 related to new tariffs on products expected to be
sold in the fourth quarter.
- Cash flow from operations is expected
to be approximately $190 million.
NON-GAAP FINANCIAL
MEASURESMeasures referred to as "adjusted" financial
results exclude environmental and other related costs, business
development related costs, reorganization costs, other costs, the
impact of tax reform updates and a foreign currency remeasurement
gain that is not expected to reoccur. The Company also presents
constant currency information, which is a non-GAAP measure that
excludes the impact of fluctuations in foreign currency exchange
rates. The Company believes providing constant currency information
provides valuable supplemental information regarding results of
operations, consistent with how the Company evaluates performance.
The Company calculates constant currency basis by converting the
current-period local currency financial results using the prior
period exchange rates and comparing these adjusted amounts to our
current period reported results.
The Company has provided a reconciliation of the
above non-GAAP financial measures to the most directly comparable
GAAP financial measure. The Company believes these non-GAAP
measures provide useful information to both management and
investors to increase comparability of current period results to
the prior period by adjusting for certain items that may not be
indicative of core operating results 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.
EARNINGS CALL INFORMATIONThe
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 WORLDWIDEWith a
commitment to service and product excellence, Wolverine World Wide,
Inc. is one of the world’s leading marketers and licensors 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®,
Hush Puppies®, Saucony®, Wolverine®, Keds®, Stride Rite®, Chaco®,
Bates® and HYTEST®. 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 170 countries and territories. For
additional information, please visit our website,
www.wolverineworldwide.com.
FORWARD-LOOKING STATEMENTSThis
press release contains forward-looking statements, including
statements regarding: the Company’s revenue growth during the rest
of fiscal 2019 and focus on leveraging its strong liquidity and
financial position to drive shareholder returns; and the Company’s
fiscal 2019 outlook and guidance. In addition, words such as
"guidance," "estimates," "anticipates," "believes," "forecasts,"
"step," "plans," "predicts," "focused," "projects," "outlook," "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: changes
in general economic conditions, employment rates, business
conditions, interest rates, tax policies and other factors
affecting consumer spending in the markets and regions in which the
Company’s products are sold; the inability for any reason to
effectively compete in global footwear, apparel and consumer-direct
markets; the inability to maintain positive brand images and
anticipate, understand and respond to changing footwear and apparel
trends and consumer preferences; the inability to effectively
manage inventory levels; increases or changes in duties, tariffs,
quotas or applicable assessments in countries of import and export;
foreign currency exchange rate fluctuations; currency restrictions;
capacity constraints, production disruptions, quality issues, price
increases or other risks associated with foreign sourcing; the cost
and availability of raw materials, inventories, services and labor
for contract manufacturers; labor disruptions; changes in
relationships with, including the loss of, significant wholesale
customers; risks related to the significant investment in, and
performance of, the Company’s consumer-direct operations; risks
related to expansion into new markets and complementary product
categories; the impact of seasonality and unpredictable weather
conditions; changes in general economic conditions and/or the
credit markets on the Company’s distributors, suppliers and
retailers; increases in the Company’s effective tax rates; failure
of licensees or distributors to meet planned annual sales goals or
to make timely payments to the Company; the risks of doing business
in developing countries, and politically or economically volatile
areas; the ability to secure and protect owned intellectual
property or use licensed intellectual property; the impact of
regulation, regulatory and legal proceedings and legal compliance
risks, including compliance with federal, state and local laws and
regulations relating to the protection of the environment,
environmental remediation and other related costs, and litigation
or other legal proceedings relating to the protection of the
environment or environmental effects on human health; the potential
breach of the Company’s databases or other systems, or those of its
vendors, which contain certain personal information, payment card
data or proprietary information, due to cyberattack or other
similar event; problems affecting the Company’s distribution
system, including service interruptions at shipping and receiving
ports; strategic actions, including new initiatives and ventures,
acquisitions and dispositions, and the Company’s success in
integrating acquired businesses, and implementing new initiatives
and ventures; the risk of impairment to goodwill and other
intangibles; the success of the Company’s restructuring and
realignment initiatives; changes in future pension funding
requirements and pension expenses; 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 or other 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)(In
millions, except earnings per share)
|
Quarter Ended |
|
Year-To-Date Ended |
|
September 28, 2019 |
|
September 29, 2018 |
|
September 28, 2019 |
|
September 29, 2018 |
Revenue |
$ |
574.3 |
|
|
$ |
558.6 |
|
|
$ |
1,666.3 |
|
|
$ |
1,659.6 |
|
Cost of goods sold |
331.0 |
|
|
326.5 |
|
|
972.4 |
|
|
965.4 |
|
Gross profit |
243.3 |
|
|
232.1 |
|
|
693.9 |
|
|
694.2 |
|
Gross margin |
42.4 |
% |
|
41.6 |
% |
|
41.6 |
% |
|
41.8 |
% |
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
165.9 |
|
|
161.6 |
|
|
498.6 |
|
|
488.6 |
|
Environmental and other
related costs |
9.1 |
|
|
2.1 |
|
|
19.1 |
|
|
7.6 |
|
Operating expenses |
175.0 |
|
|
163.7 |
|
|
517.7 |
|
|
496.2 |
|
Operating expenses as a % of revenue |
30.5 |
% |
|
29.3 |
% |
|
31.1 |
% |
|
29.9 |
% |
|
|
|
|
|
|
|
|
Operating profit |
68.3 |
|
|
68.4 |
|
|
176.2 |
|
|
198.0 |
|
Operating margin |
11.9 |
% |
|
12.2 |
% |
|
10.6 |
% |
|
11.9 |
% |
|
|
|
|
|
|
|
|
Interest expense, net |
8.2 |
|
|
5.8 |
|
|
21.8 |
|
|
18.7 |
|
Other income, net |
(0.9 |
) |
|
(1.3 |
) |
|
(3.2 |
) |
|
(7.2 |
) |
Total other expenses |
7.3 |
|
|
4.5 |
|
|
18.6 |
|
|
11.5 |
|
Earnings before income
taxes |
61.0 |
|
|
63.9 |
|
|
157.6 |
|
|
186.5 |
|
|
|
|
|
|
|
|
|
Income tax expense |
12.4 |
|
|
5.0 |
|
|
28.2 |
|
|
25.5 |
|
Effective tax rate |
20.3 |
% |
|
7.8 |
% |
|
17.9 |
% |
|
13.7 |
% |
|
|
|
|
|
|
|
|
Net earnings |
48.6 |
|
|
58.9 |
|
|
129.4 |
|
|
161.0 |
|
|
|
|
|
|
|
|
|
Less: net earnings (loss)
attributable to noncontrolling interests |
(0.1 |
) |
|
0.1 |
|
|
— |
|
|
0.2 |
|
Net earnings attributable to
Wolverine World Wide, Inc. |
$ |
48.7 |
|
|
$ |
58.8 |
|
|
$ |
129.4 |
|
|
$ |
160.8 |
|
Diluted earnings per
share |
$ |
0.57 |
|
|
$ |
0.60 |
|
|
$ |
1.44 |
|
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
Net earnings used to calculate diluted earnings per share |
$ |
47.7 |
|
|
$ |
57.6 |
|
|
$ |
126.9 |
|
|
$ |
157.5 |
|
Shares used to calculate diluted earnings per share |
83.9 |
|
|
95.3 |
|
|
88.0 |
|
|
95.4 |
|
Weighted average shares outstanding |
83.5 |
|
|
94.9 |
|
|
87.3 |
|
|
95.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
WOLVERINE WORLD WIDE, INC.
CONSOLIDATED CONDENSED BALANCE
SHEETS(Unaudited)(In
millions)
|
September 28, 2019 |
|
September 29, 2018 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
125.2 |
|
$ |
228.1 |
Accounts receivables, net |
357.3 |
|
364.0 |
Inventories, net |
417.7 |
|
324.4 |
Other current assets |
48.4 |
|
32.2 |
Total current assets |
948.6 |
|
948.7 |
Property, plant and equipment,
net |
143.0 |
|
131.4 |
Lease right-of-use assets,
net |
163.9 |
|
— |
Goodwill and other
indefinite-lived intangibles |
1,041.5 |
|
1,032.0 |
Other noncurrent assets |
171.5 |
|
157.0 |
Total assets |
$ |
2,468.5 |
|
$ |
2,269.1 |
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
Accounts payable and other
accrued liabilities |
$ |
297.1 |
|
$ |
296.1 |
Lease liabilities |
33.5 |
|
— |
Current maturities of long-term
debt |
10.0 |
|
60.0 |
Borrowings under revolving credit
agreements and other short-term notes |
493.3 |
|
1.5 |
Total current liabilities |
833.9 |
|
357.6 |
Long-term debt |
430.7 |
|
601.0 |
Lease liabilities,
noncurrent |
151.0 |
|
— |
Other noncurrent liabilities |
259.0 |
|
248.2 |
Stockholders' equity |
793.9 |
|
1,062.3 |
Total liabilities and stockholders' equity |
$ |
2,468.5 |
|
$ |
2,269.1 |
|
|
|
|
|
|
WOLVERINE WORLD WIDE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS(Unaudited)(In
millions)
|
Year-To-Date Ended |
|
September 28, 2019 |
|
September 29, 2018 |
OPERATING
ACTIVITIES: |
|
|
|
Net earnings |
$ |
129.4 |
|
|
$ |
161.0 |
|
Adjustments to reconcile net
earnings to net cash provided by (used in) operating
activities: |
|
|
|
Depreciation and amortization |
23.3 |
|
|
22.6 |
|
Deferred income taxes |
0.3 |
|
|
12.3 |
|
Stock-based compensation expense |
17.3 |
|
|
21.2 |
|
Pension contribution |
— |
|
|
(60.7 |
) |
Pension and SERP expense |
4.2 |
|
|
4.0 |
|
Cash payments related to restructuring costs |
(0.1 |
) |
|
(4.8 |
) |
Environmental and other related costs, net of cash payments |
(3.7 |
) |
|
(6.3 |
) |
Other |
(9.4 |
) |
|
6.8 |
|
Changes in operating assets and liabilities |
(145.3 |
) |
|
(190.1 |
) |
Net cash provided by (used in)
operating activities |
16.0 |
|
|
(34.0 |
) |
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
Business acquisition, net of cash
acquired |
(15.1 |
) |
|
— |
|
Additions to property, plant and
equipment |
(28.7 |
) |
|
(15.3 |
) |
Proceeds from sale of assets |
0.1 |
|
|
2.2 |
|
Investment in joint ventures |
(8.5 |
) |
|
— |
|
Other |
(1.2 |
) |
|
(1.7 |
) |
Net cash used in investing
activities |
(53.4 |
) |
|
(14.8 |
) |
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
Net borrowings under revolving
credit agreements and other short-term notes |
368.3 |
|
|
1.0 |
|
Payments on long-term debt |
(5.0 |
) |
|
(122.6 |
) |
Payments of debt issuance and
debt extinguishment costs |
(0.3 |
) |
|
— |
|
Cash dividends paid |
(25.4 |
) |
|
(21.0 |
) |
Purchase of common stock for
treasury |
(314.2 |
) |
|
(69.9 |
) |
Employee taxes paid under
stock-based compensation plans |
(16.7 |
) |
|
(8.1 |
) |
Proceeds from the exercise of
stock options |
7.0 |
|
|
23.2 |
|
Contributions from noncontrolling
interests |
5.7 |
|
|
— |
|
Net cash provided by (used in)
financing activities |
19.4 |
|
|
(197.4 |
) |
|
|
|
|
Effect of foreign exchange rate
changes |
0.1 |
|
|
(6.7 |
) |
Decrease in cash and cash
equivalents |
(17.9 |
) |
|
(252.9 |
) |
|
|
|
|
Cash and cash equivalents at
beginning of the year |
143.1 |
|
|
481.0 |
|
Cash and cash equivalents at end
of the period |
$ |
125.2 |
|
|
$ |
228.1 |
|
|
|
|
|
|
|
|
|
The following tables contain information regarding
the non-GAAP financial measures used by the Company in the
presentation of its financial results:
WOLVERINE WORLD
WIDE, INC.
Q3 2019 RECONCILIATION
TABLES
RECONCILIATION OF REPORTED
REVENUETO ADJUSTED REVENUE ON A CONSTANT CURRENCY
BASIS*(Unaudited)(In
millions)
|
GAAP Basis 2019-Q3 |
|
Foreign Exchange Impact |
|
Constant Currency Basis 2019-Q3 |
|
GAAP Basis 2018-Q3 |
|
Constant Currency Growth (Decline) |
|
Reported Growth (Decline) |
REVENUE |
|
|
|
|
|
|
|
|
|
|
|
Wolverine Michigan Group |
$ |
318.8 |
|
|
$ |
2.8 |
|
|
$ |
321.6 |
|
|
$ |
327.7 |
|
|
(1.9 |
)% |
|
(2.7 |
)% |
Wolverine Boston Group |
241.3 |
|
|
1.8 |
|
|
243.1 |
|
|
214.6 |
|
|
13.3 |
|
|
12.4 |
|
Other |
14.2 |
|
|
— |
|
|
14.2 |
|
|
16.3 |
|
|
(12.9 |
) |
|
(12.9 |
) |
Total |
$ |
574.3 |
|
|
$ |
4.6 |
|
|
$ |
578.9 |
|
|
$ |
558.6 |
|
|
3.6 |
% |
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF REPORTED OPERATING
MARGINTO ADJUSTED OPERATING
MARGIN*(Unaudited)(In
millions)
|
GAAP Basis |
|
Adjustments (1) |
|
As Adjusted |
|
|
|
|
|
|
Operating Profit - Fiscal 2019 Q3 |
$ |
68.3 |
|
|
$ |
12.5 |
|
|
$ |
80.8 |
|
|
|
|
|
|
|
Operating margin |
11.9 |
% |
|
|
|
14.1 |
% |
|
|
|
|
|
|
Operating Profit - Fiscal 2018
Q3 |
$ |
68.4 |
|
|
$ |
2.1 |
|
|
$ |
70.5 |
|
|
|
|
|
|
|
Operating margin |
12.2 |
% |
|
|
|
12.6 |
% |
(1) Q3 2019
adjustments reflect $9.1 million of environmental and other related
costs, $2.5 million of reorganization costs, $0.6 million of
business development related costs and $0.3 million of other costs.
Q3 2018 adjustment reflects $2.1 million of environmental and
related costs. |
|
RECONCILIATION OF REPORTED DILUTED
EPSTO ADJUSTED DILUTED
EPS*(Unaudited)
|
GAAP Basis |
|
Adjustments (1) |
|
As Adjusted |
|
|
|
|
|
|
EPS - Fiscal 2019 Q3 |
$ |
0.57 |
|
$ |
0.11 |
|
$ |
0.68 |
|
|
|
|
|
|
EPS - Fiscal 2018 Q3 |
$ |
0.60 |
|
$ |
0.02 |
|
$ |
0.62 |
(1) Q3 2019
adjustments reflect environmental and other related costs,
reorganization costs, business development related costs and other
costs. Q3 2018 adjustment reflects environmental and other related
costs. |
|
2019 GUIDANCE RECONCILIATION
TABLES
RECONCILIATION OF FISCAL 2019 Q4 REPORTED
REVENUE GUIDANCETO ADJUSTED REVENUE GUIDANCE ON A
CONSTANT CURRENCY
BASIS*(Unaudited)(In
millions)
|
GAAP Basis 2019 |
|
Foreign Exchange Impact |
|
Constant Currency Basis 2019 |
|
GAAP Basis 2018 |
|
Constant Currency Growth |
|
Reported Growth |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue guidance |
$ |
615.0 |
|
|
$ |
4.0 |
|
|
$ |
619.0 |
|
|
$ |
579.6 |
|
|
6.8 |
% |
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF FISCAL 2019 FULL-YEAR
REPORTED OPERATING MARGINGUIDANCE TO ADJUSTED
OPERATING MARGIN GUIDANCE*(Unaudited)
|
GAAP BasisFull-Year Operating
Margin |
|
Adjustment (1) |
|
As AdjustedFull-Year Operating
Margin |
|
|
|
|
|
|
Operating Margin Guidance |
10.5 |
% |
|
1.5 |
% |
|
12.0 |
% |
(1)
Adjustment includes the impact of estimated environmental and other
related costs, estimated costs related to business development
activities, estimated reorganization and other costs. |
|
RECONCILIATION OF FISCAL 2019 FULL-YEAR
DILUTED EPSGUIDANCE TO ADJUSTED DILUTED EPS
GUIDANCE*(Unaudited)
|
GAAP BasisFull-Year |
|
Adjustment (1) |
|
As AdjustedFull-Year |
|
|
|
|
|
|
Diluted earnings per share guidance (2) |
$ |
1.96 |
|
|
$ |
0.29 |
|
|
$ |
2.25 |
|
(1)
Adjustment includes the impact of estimated environmental and other
related costs, estimated costs related to business development
activities, estimated costs related to reorganization, the impact
of tax reform and other costs. |
(2) Per
GAAP, the Full-Year EPS calculation reflects Net Earnings
attributable to Wolverine World Wide, Inc. adjusted for earnings
allocated to non-vested restricted common stock (for 2019,
adjustment estimated at 97.2% of Net Earnings available to
Wolverine World Wide, Inc.) divided by shares used in calculating
earnings per share. |
|
* |
To supplement the consolidated condensed financial statements
presented in accordance with Generally Accepted Accounting
Principles ("GAAP"), the Company describes what certain financial
measures would have been if environmental and other related costs,
business development related costs, reorganization costs, other
costs, the impact of tax reform updates and a foreign currency
remeasurement gain that is not expected to reoccur were
excluded. 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.The
constant currency presentation, which is a non-GAAP measure,
excludes the impact of fluctuations in foreign currency exchange
rates. The Company believes providing constant currency information
provides valuable supplemental information regarding results of
operations, consistent with how the Company evaluates performance.
The Company calculates constant currency by converting the
current-period local currency financial results using the prior
period exchange rates and comparing these adjusted amounts to our
current period reported results.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. |
|
|
CONTACT: Michael D.
Stornant(616) 866-5728
Wolverine World Wide (NYSE:WWW)
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