Wolverine Worldwide Announces Second-Quarter Results And Reaffirms Full-Year Outlook
"We delivered better-than-expected results for the second quarter," said
SECOND-QUARTER 2016 REVIEW
- Reported revenue of
$583.7 million was in line with expectations, declining 7.4% versus the prior year. Underlying revenue declined 5.2% versus the prior year. - Reported gross margin was 38.8%, compared to 39.1% in the prior year. Gross margin on a constant currency basis was 39.8%, an increase of 70 basis points versus the prior year.
- Reported operating margin was 7.2%, compared to 7.6% in the prior year. Adjusted operating margin on a constant currency basis was 8.4%, up 30 basis points versus the prior year's adjusted operating margin.
- Reported diluted earnings per share were
$0.24 in the current and prior year quarter. Adjusted diluted earnings per share were$0.25 , which exceeded expectations, and on a constant currency basis were$0.30 , compared to$0.27 in the prior year. - Inventory balances at the end of the quarter were 2.9% lower than the prior year.
- Cash and cash equivalents were
$221.7 million . Reported debt was$808.0 million , which resulted in net debt of$586.3 million at quarter end. - The Company repurchased 136,521 shares during the quarter at an average price of
$17.94 per share.
"We are pleased with our performance for the second quarter," stated
FISCAL 2016 OUTLOOK
The Company is reaffirming its revenue and reported and adjusted diluted earnings per share outlook for fiscal 2016, as well as its expectation for inventory levels, as follows:
- Consolidated reported revenue in the range of
$2.475 billion to $2.575 billion , a decline in the range of approximately 8.0% to 4.3% on a reported basis and 5.0% to 1.0% on an underlying basis. - Reported diluted earnings per share in the range of
$1.16 to $1.26 . Adjusted diluted earnings per share in the range of$1.30 to $1.40 . On a constant currency basis, adjusted earnings per share in the range of$1.48 to $1.58 . - Inventory levels to be meaningfully lower than 2015 at year-end.
EARNINGS CALL INFORMATION
The Company will host a conference call today at
ABOUT WOLVERINE WORLDWIDE
With a commitment to service and product excellence,
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements, including statements regarding: the Company's ability to successfully execute key strategic initiatives, the Company's ability to accelerate growth and improve earnings performance; the advantages of the Company's diversified business model; the Company's ability to leverage operational strengths to enhance earnings and drive shareholder value; and the Company's fiscal 2016 guidance. 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: 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; currency 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 owned and contract manufacturers; labor disruptions; changes in relationships with, including the loss of, significant wholesale customers; the failure of the
WOLVERINE WORLD WIDE, INC. |
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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
|||||||||||||||
(Unaudited) |
|||||||||||||||
(In millions, except per share data) |
|||||||||||||||
12 Weeks Ended |
24 Weeks Ended |
||||||||||||||
June 18, |
June 20, |
June 18, |
June 20, |
||||||||||||
Revenue |
$ |
583.7 |
$ |
630.1 |
$ |
1,161.3 |
$ |
1,261.5 |
|||||||
Cost of goods sold |
357.1 |
383.7 |
702.0 |
753.7 |
|||||||||||
Restructuring costs |
— |
— |
3.9 |
— |
|||||||||||
Gross profit |
226.6 |
246.4 |
455.4 |
507.8 |
|||||||||||
Gross margin |
38.8 |
% |
39.1 |
% |
39.2 |
% |
40.3 |
% |
|||||||
Selling, general and administrative expenses |
183.0 |
195.1 |
367.1 |
393.9 |
|||||||||||
Restructuring and impairment costs |
1.8 |
3.7 |
12.5 |
2.7 |
|||||||||||
Operating expenses |
184.8 |
198.8 |
379.6 |
396.6 |
|||||||||||
Operating expenses as a % of revenue |
31.7 |
% |
31.6 |
% |
32.7 |
% |
31.4 |
% |
|||||||
Operating profit |
41.8 |
47.6 |
75.8 |
111.2 |
|||||||||||
Operating margin |
7.2 |
% |
7.6 |
% |
6.5 |
% |
8.8 |
% |
|||||||
Interest expense, net |
7.8 |
9.0 |
16.3 |
18.5 |
|||||||||||
Other expense, net |
1.1 |
1.8 |
1.0 |
0.8 |
|||||||||||
Total other expenses |
8.9 |
10.8 |
17.3 |
19.3 |
|||||||||||
Earnings before income taxes |
32.9 |
36.8 |
58.5 |
91.9 |
|||||||||||
Income tax expense |
8.8 |
11.6 |
16.8 |
26.6 |
|||||||||||
Effective tax rate |
26.7 |
% |
31.4 |
% |
28.8 |
% |
28.9 |
% |
|||||||
Net earnings |
24.1 |
25.2 |
41.7 |
65.3 |
|||||||||||
Less: net earnings (loss) attributable to noncontrolling |
0.1 |
(0.1) |
0.3 |
(0.1) |
|||||||||||
Net earnings attributable to Wolverine World Wide, |
$ |
24.0 |
$ |
25.3 |
$ |
41.4 |
$ |
65.4 |
|||||||
Diluted earnings per share |
$ |
0.24 |
$ |
0.24 |
$ |
0.42 |
$ |
0.63 |
|||||||
Supplemental information: |
|||||||||||||||
Net earnings used to calculate diluted earnings per |
$ |
23.5 |
$ |
24.9 |
$ |
40.5 |
$ |
64.3 |
|||||||
Shares used to calculate earnings per share |
96.1 |
101.6 |
96.1 |
101.3 |
|||||||||||
Weighted average shares outstanding |
99.5 |
103.2 |
99.4 |
102.8 |
WOLVERINE WORLD WIDE, INC. |
|||||||
CONSOLIDATED CONDENSED BALANCE SHEETS |
|||||||
(Unaudited) |
|||||||
(In millions) |
|||||||
June 18, |
June 20, |
||||||
ASSETS |
|||||||
Cash and cash equivalents |
$ |
221.7 |
$ |
220.7 |
|||
Accounts receivables, net |
312.6 |
355.3 |
|||||
Inventories, net |
439.3 |
452.2 |
|||||
Other current assets |
46.9 |
79.8 |
|||||
Total current assets |
1,020.5 |
1,108.0 |
|||||
Property, plant and equipment, net |
149.3 |
137.3 |
|||||
Goodwill and other indefinite-lived intangibles |
1,117.3 |
1,124.4 |
|||||
Other non-current assets |
166.4 |
173.3 |
|||||
Total assets |
$ |
2,453.5 |
$ |
2,543.0 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
Accounts payable and other accrued liabilities |
$ |
311.3 |
$ |
345.8 |
|||
Current maturities of long-term debt |
19.7 |
45.2 |
|||||
Total current liabilities |
331.0 |
391.0 |
|||||
Long-term debt |
788.3 |
776.3 |
|||||
Other non-current liabilities |
332.2 |
376.9 |
|||||
Stockholders' equity |
1,002.0 |
998.8 |
|||||
Total liabilities and stockholders' equity |
$ |
2,453.5 |
$ |
2,543.0 |
WOLVERINE WORLD WIDE, INC. |
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS |
|||||||
(Unaudited) |
|||||||
(In millions) |
|||||||
24 Weeks Ended |
|||||||
June 18, |
June 20, |
||||||
OPERATING ACTIVITIES: |
|||||||
Net earnings |
$ |
41.7 |
$ |
65.3 |
|||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|||||||
Depreciation and amortization |
20.3 |
21.7 |
|||||
Stock-based compensation expense |
11.5 |
14.1 |
|||||
Excess tax benefits from stock-based compensation |
(0.1) |
(3.8) |
|||||
Pension and SERP expense |
4.8 |
12.9 |
|||||
Restructuring and impairment costs |
16.4 |
2.7 |
|||||
Other |
(17.9) |
(7.0) |
|||||
Changes in operating assets and liabilities |
(3.9) |
(11.0) |
|||||
Net cash provided by operating activities |
72.8 |
94.9 |
|||||
INVESTING ACTIVITIES: |
|||||||
Additions to property, plant and equipment |
(28.2) |
(15.8) |
|||||
Investment in joint venture |
(0.5) |
— |
|||||
Other |
2.7 |
3.2 |
|||||
Net cash used in investing activities |
(26.0) |
(12.6) |
|||||
FINANCING ACTIVITIES: |
|||||||
Payments on long-term debt |
(2.8) |
(67.7) |
|||||
Cash dividends paid |
(11.8) |
(12.3) |
|||||
Purchase of common stock for treasury |
(6.0) |
(5.9) |
|||||
Purchases of shares under employee stock plans |
(4.3) |
(7.5) |
|||||
Proceeds from the exercise of stock options |
2.2 |
8.5 |
|||||
Excess tax benefits from stock-based compensation |
0.1 |
3.8 |
|||||
Contributions from noncontrolling interests |
1.3 |
— |
|||||
Net cash used in financing activities |
(21.3) |
(81.1) |
|||||
Effect of foreign exchange rate changes |
2.1 |
(4.3) |
|||||
Increase (decrease) in cash and cash equivalents |
27.6 |
(3.1) |
|||||
Cash and cash equivalents at beginning of the year |
194.1 |
223.8 |
|||||
Cash and cash equivalents at end of the period |
$ |
221.7 |
$ |
220.7 |
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. |
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Q2 2016 RECONCILIATION TABLES |
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RECONCILIATION OF REPORTED REVENUE TO |
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UNDERLYING REVENUE* |
|||||||||||||||||||||||||||||
(Unaudited) |
|||||||||||||||||||||||||||||
(In millions) |
|||||||||||||||||||||||||||||
GAAP |
Foreign |
Fiscal |
GAAP |
Adjustments (1) |
Fiscal |
Underlying |
Reported |
||||||||||||||||||||||
Revenue |
$ |
583.7 |
$ |
3.0 |
$ |
586.7 |
$ |
630.1 |
$ |
(11.4) |
$ |
618.7 |
(5.2)% |
(7.4)% |
|||||||||||||||
(1) Adjustments include the impact from retail stores closures and the exit of the Cushe business. |
RECONCILIATION OF REPORTED GROSS MARGIN TO ADJUSTED |
|||||||||||
GROSS MARGIN ON A CONSTANT CURRENCY BASIS* |
|||||||||||
(Unaudited) |
|||||||||||
(In millions) |
|||||||||||
GAAP Basis |
Foreign |
As Adjusted on |
|||||||||
Gross Profit - Fiscal 2016 Q2 |
226.6 |
$ |
6.9 |
233.5 |
|||||||
Gross margin |
38.8 |
% |
39.8 |
% |
|||||||
Gross Profit - Fiscal 2015 Q2 |
$ |
246.4 |
$ |
246.4 |
|||||||
Gross margin |
39.1 |
% |
39.1 |
% |
|||||||
RECONCILIATION OF REPORTED OPERATING MARGIN TO ADJUSTED |
|||||||||||||||
OPERATING MARGIN ON A CONSTANT CURRENCY BASIS* |
|||||||||||||||
(Unaudited) |
|||||||||||||||
(In millions) |
|||||||||||||||
GAAP Basis |
Foreign |
Adjustments (1) |
As Adjusted on a |
||||||||||||
Operating Profit - Fiscal 2016 Q2 |
$ |
41.8 |
$ |
5.9 |
$ |
1.8 |
$ |
49.5 |
|||||||
Operating margin |
7.2 |
% |
8.4 |
% |
|||||||||||
Operating Profit - Fiscal 2015 Q2 |
$ |
47.6 |
$ |
3.7 |
$ |
51.3 |
|||||||||
Operating margin |
7.6 |
% |
8.1 |
% |
|||||||||||
(1) Fiscal 2016 Q2 and fiscal 2015 Q2 Adjustments include restructuring and impairment costs. |
RECONCILIATION OF REPORTED DILUTED EPS TO ADJUSTED DILUTED EPS ON A CONSTANT CURRENCY BASIS* |
|||||||||||||||||||
(Unaudited) |
|||||||||||||||||||
GAAP Basis |
Adjustments (1) |
As Adjusted |
Foreign |
As Adjusted |
|||||||||||||||
Fiscal 2016 Q2 |
$ |
0.24 |
$ |
0.01 |
$ |
0.25 |
$ |
0.05 |
$ |
0.30 |
|||||||||
Fiscal 2015 Q2 |
$ |
0.24 |
$ |
0.03 |
$ |
0.27 |
|||||||||||||
(1) Fiscal 2016 Q2 and fiscal 2015 Q2 Adjustments include restructuring and impairment costs. |
RECONCILIATION OF REPORTED DEBT TO NET DEBT* |
|||
(Unaudited) |
|||
(In millions) |
|||
Fiscal 2016 Q2 |
|||
GAAP reported debt |
$ |
808.0 |
|
Cash and cash equivalents |
(221.7) |
||
Net debt |
$ |
586.3 |
2016 GUIDANCE RECONCILIATION TABLES |
|||||||||||||||
RECONCILIATION OF FISCAL 2016 FULL-YEAR REPORTED REVENUE GROWTH |
|||||||||||||||
GUIDANCE TO UNDERLYING REVENUE GROWTH GUIDANCE* |
|||||||||||||||
(Unaudited) |
|||||||||||||||
(In millions) |
|||||||||||||||
GAAP Basis Full-Year Revenue |
Foreign Exchange |
Adjustments (1) |
Underlying Full- |
||||||||||||
Fiscal 2016 Revenue Guidance |
$ 2,475 - 2,575 |
$ |
40.0 |
$ 2,515 - 2,615 |
|||||||||||
Fiscal 2015 Revenue |
$ 2,691.6 |
$ |
(63.6) |
$ 2,628.0 |
|||||||||||
Percentage growth |
(8.0) - (4.3)% |
(4.3) - (0.5)% |
|||||||||||||
(1) Adjustments include the impact from retail store closures and the exited Cushe business. |
RECONCILIATION OF FISCAL 2016 FULL-YEAR DILUTED EPS GUIDANCE TO ADJUSTED DILUTED EPS ON A CONSTANT CURRENCY BASIS GUIDANCE* |
|||||||||||||
(Unaudited) |
|||||||||||||
GAAP Basis Full-Year 2016 |
Adjustments (1) |
As Adjusted Full-Year 2016 |
Foreign |
As Adjusted Full-Year 2016 |
|||||||||
Diluted earnings per share |
$ 1.16 - 1.26 |
$ |
0.14 |
$ 1.30 - 1.40 |
$ |
0.18 |
$ 1.48 - 1.58 |
||||||
(1) Fiscal 2016 Full-Year Guidance Adjustments include estimated restructuring costs. |
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* |
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 if restructuring and impairment costs were excluded. The Company also describes underlying revenue, which excludes the impact of foreign exchange, the impact of retail store closures and the exit of the Cushe business in fiscal 2016. 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 Company has defined net debt as debt less cash and cash equivalents. The Company believes that netting these sources of cash against debt provides a clearer picture of the future demands on cash to repay debt. The Company evaluates results of operations on both a reported and a constant currency 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. |
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SOURCE
Michael D. Stornant, (616) 866-5728