Excluding non-recurring transaction and integration expenses, fully diluted EPS in the quarter were 81 cents per share, a 26.6 percent increase over last year and easily above Wall Street's consensus estimate of 55 cents a share.
The results marked the first reporting period for the company that includes a full quarter of results from the Sperry Top-Sider, Saucony, Stride Rite, and Keds brands, which Wolverine acquired in October 2012.
First quarter highlights:
- Revenue for the quarter was a record $645.9 million, growth of 100.1 percent versus prior year's reported revenue and growth of 8.2 percent versus prior year's pro forma revenue. Key contributors to the excellent revenue performance in the quarter were Sperry Top-Sider, Merrell, and Saucony. Foreign exchange fluctuations had minimal impact on reported revenue growth during the quarter.
- Excluding non-recurring transaction and integration expenses, fully diluted earnings per share in the quarter were 81 cents a share, a 26.6 percent increase compared to 64 cents per share in the prior year's first quarter that included a 12 cents per share non-recurring tax benefit. Reported earnings per share were 60 cents in the first fiscal quarter.
- Excluding non-recurring transaction and integration expenses, the PLG acquisition delivered a stronger-than-anticipated 34 cents per share of earnings accretion in the first quarter. The company defines "earnings accretion" as operating income of the acquired business reduced by incremental interest expense, certain non-cash amortization expense related to purchase price accounting, and net synergies, all on an after-tax basis.
- The company reduced its long-term interest-bearing debt by approximately $33 million in the quarter, including a $25 million voluntary principal reduction made in late January, underscoring its intent to aggressively reduce its leverage.
"The U.S. market was a key component of the company's overperformance in the quarter," Krueger contined. "As expected, challenging conditions in Europe continue, but the resiliency of the global consumer, the strength of our international business, and standout performances from brands like Sperry Top-Sider and Merrell combined to more than offset these challenges."
Additional details for the quarter:
- Reported gross margin in the quarter was 40.6 percent, down approximately 40 basis points from the prior year, as negative foreign exchange, lower relative contributions from high-margin third-party distributor and licensee business, and higher LIFO expense more than offset a greater relative contribution from high-margin consumer-direct business.
- Excluding non-recurring transaction and integration expenses of $15.2 million in the quarter, operating expenses were $196.0 million, or 30.3 percent of revenue, compared to 29.5 percent of revenue in the prior year's first quarter. Year-over-year SG&A comparisons were impacted by important long-term brand building investments, such as the multi-year Taylor Swift partnership with the Keds brand; non-cash amortization expense related to purchase price accounting of $4.6 million; incremental non-cash pension expense of $2.1 million; and incremental consumer-direct business in the quarter, which carries higher operating expenses as a percentage of sales. Reported operating expenses were $211.2 million in the first quarter.
- Excluding non-recurring transaction and integration expenses, the effective tax rate in the quarter was 23.3 percent. The reported tax rate, which benefits from the deductibility of the non-recurring charges primarily in high statutory tax rate jurisdictions, was 20.9 percent.
- The company ended the quarter with $82.0 million of cash and cash equivalents and net debt of $1.176 billion.
Update guidance The company updated its full-year revenue guidanceto $2.7 to $2.775 billion, which represents growth in the range of 6.0 percent to 9.0 percent compared to prior year pro forma revenue of $2.547 billion. Adjusted earnings per share are now expected to be in the range of $2.50 to $2.65 per share, or up in the range of 9.2 percent to 15.7 percent compared to prior year adjusted earnings per share of $2.29. The prior year's earnings included 19 cents per share of non-recurring tax benefits. On a reported basis, earnings per share are expected in the range of $2.05 to $2.20 per share.
The company's portfolio of 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.
WOLVERINE WORLD WIDE, INC.
| ||||
|
| ||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited) (in millions, except per share data) | ||||
|
| ||||
1st Quarter Ended
| ||||
March 23,
|
March 24,
| |||
2013
|
2012
| |||
Revenue
|
$ 645.9
|
$ 322.8
| ||
Cost of products sold
|
383.8
|
190.6
| ||
Gross Profit
|
262.1
|
132.2
| ||
Gross margin
|
40.6%
|
41.0%
| ||
Selling, general and administrative expenses
|
196.0
|
95.2
| ||
Non-recurring transaction and integration costs
|
15.2
|
-
| ||
Operating Expenses
|
211.2
|
95.2
| ||
Operating expenses as a % of revenue
|
32.7%
|
29.5%
| ||
Operating Profit
|
50.9
|
37.0
| ||
Operating margin
|
7.9%
|
11.4%
| ||
Interest expense, net
|
12.9
|
0.4
| ||
Other expense, net
|
0.3
|
1.0
| ||
13.2
|
1.4
| |||
Earnings before income taxes
|
37.7
|
35.6
| ||
Income taxes
|
7.9
|
4.4
| ||
Effective tax rate
|
21.0%
|
12.4%
| ||
Net earnings
|
29.8
|
31.2
| ||
Net earnings attributable to noncontrolling interests
|
-
|
-
| ||
Net earnings attributable to Wolverine Worldwide
|
$29.8
|
$31.2
| ||
Diluted earnings per share
|
$0.60
|
$0.64
| ||
Supplemental information:
|
||||
Net earnings used to calculate diluted earnings per share
|
$29.3
|
$30.6
| ||
Shares used to calculate diluted earnings per share
|
49.1
|
48.2
| ||
Weighted average shares outstanding
|
49.7
|
48.4
| ||
REPORTED REVENUE BY OPERATING GROUP
| ||||||||||||
(Unaudited)
| ||||||||||||
(in millions)
| ||||||||||||
|
|
||||||||||||
1st Quarter Ended
| ||||||||||||
March 23, 2013
|
March 24, 2012
|
Change
| ||||||||||
Revenue
|
% of Total
|
Revenue
|
% of Total
|
$
|
%
| |||||||
Lifestyle Group
|
$ 270.2
|
41.8%
|
$ 32.4
|
10.0%
|
$ 237.8
|
734.0%
| ||||||
Performance Group
|
240.5
|
37.2%
|
152.5
|
47.2%
|
88.0
|
57.7%
| ||||||
Heritage Group
|
118.6
|
18.4%
|
119.2
|
36.9%
|
(0.6)
|
-0.5%
| ||||||
Other
|
16.6
|
2.6%
|
18.7
|
5.9%
|
(2.1)
|
-11.2%
| ||||||
Total Revenue
|
$ 645.9
|
100.0%
|
$ 322.8
|
100.0%
|
$ 323.1
|
100.1%
| ||||||
REPORTED FISCAL Q1 2013 REVENUE BY OPERATING GROUP COMPARED TO
FISCAL Q1 2012 PRO FORMA REVENUE BY OPERATING GROUP* | ||||||||||||
(Unaudited)
| ||||||||||||
(in millions)
| ||||||||||||
|
| ||||||||||||
1st Quarter Ended
| ||||||||||||
March 23, 2013
|
March 24, 2012
|
Change
| ||||||||||
Revenue
|
% of Total
|
Pro Forma Revenue*
|
% of Total
|
$
|
%
| |||||||
Lifestyle Group
|
$ 270.2
|
41.8%
|
$ 237.5
|
39.8%
|
$ 32.7
|
13.8%
| ||||||
Performance Group
|
240.5
|
37.2%
|
222.7
|
37.3%
|
17.8
|
8.0%
| ||||||
Heritage Group
|
118.6
|
18.4%
|
119.2
|
20.0%
|
(0.6)
|
-0.5%
| ||||||
Other
|
16.6
|
2.6%
|
17.3
|
2.9%
|
(0.7)
|
-4.1%
| ||||||
Total Revenue
|
$ 645.9
|
100.0%
|
$ 596.7
|
100.0%
|
$ 49.2
|
8.2%
| ||||||
Source Wolverine through SportsOneSource
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