Wolverine Worldwide Announces Record Revenue and Earnings for Second Quarter 2011

The company shows a growth of 20.1% compared to last year, representing the fourth consecutive quarter of record revenue.
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ROCKFORD — Wolverine Worldwide today reported double-digit growth in both revenue and earnings per share for the second quarter ended June 18, 2011, driven by the ongoing successful execution of the Company’s growth strategies and elevated demand for its lifestyle brands.

Second Quarter Highlights:

  • Revenue of $310.1 million, growth of 20.1% vs. the prior year, representing the fourth consecutive quarter of record revenue
  • Diluted earnings per share of $0.48, growth of 23.1% vs. adjusted fully diluted earnings per share for the prior year and representing the sixth consecutive quarter of record earnings
  • Double-digit revenue growth for all brand groups and the consumer direct business
  • Double-digit revenue growth for all major geographic regions
  • Operating expenses of 28.6% as a percentage of revenue versus an adjusted 29.7% in the prior year.
  • Record operating margin of 10.8%

The Company reaffirms full year revenue and earnings guidance

“Our recent revenue performance clearly demonstrates the broad strength of our portfolio and the benefits of consistent investment in brand-building initiatives,” stated Blake W. Krueger, Chairman and Chief Executive Officer. “The outstanding financial results in the second quarter were led by strong double-digit revenue increases in all branded groups, most notably in the Outdoor Group and our Merrell brand.

“2011 is an exciting time for Wolverine Worldwide, with many brands in our portfolio uniquely positioned for success. Our Merrell brand continues to dominate the outdoor space with cutting-edge product and new innovations such as the Merrell Barefoot Collection. In addition, our Hush Puppies, Sebago, Cat Footwear, Wolverine, and Patagonia Footwear brands are all taking advantage of current global lifestyle trends centered on heritage, Americana and authenticity.”

Don Grimes, Senior Vice President and Chief Financial Officer, commented, “We remain focused on driving growth across the entire portfolio of brands while continuing to deliver superior returns on invested capital. We believe the quarter’s excellent results underscore our efforts to deliver near-term earnings growth while also investing for the future.”

Additional details:

  • A modestly weaker U.S. dollar contributed $6.3 million to reported revenue in the quarter.
  • The Outdoor Group (consisting of Merrell Footwear and Apparel, Chaco and Patagonia Footwear) led the way in the quarter, with revenue of $127.3 million, growth of 30.0% vs. the prior year, followed by 17.5% revenue growth from the Lifestyle Group (Hush Puppies, Sebago, Cushe and SoftStyle) and 15.0% revenue growth from the Heritage Group (Wolverine, Caterpillar Footwear, Bates, HyTest and Harley Davidson Footwear). Strong double-digit growth from the consumer direct business was partially offset by softness in the Company’s leather business.
  • Gross margin in the quarter was 39.4% compared to prior-year adjusted gross margin of 40.3%. The decline in gross margin versus the prior year was primarily attributable to negative results from the Company’s owned manufacturing operations. Reported gross margin for the second quarter 2010 was 40.2%.
  • Operating expenses as a percentage of revenue were 28.6% in the quarter, strong leverage of 110 basis points when compared to an adjusted 29.7% in 2010. Reported operating expenses grew to $88.8 million in the quarter, driven by higher variable costs associated with the quarter’s revenue growth and continued brand-building investments in advertising and marketing initiatives, including the support of the Merrell Barefoot Collection. Reported operating expenses as a percentage of revenue for the second quarter of 2010 were 30.6%.
  • The effective tax rate in the quarter was 25.7% and includes the favorable settlement of a state tax audit and a more favorable dispersion of taxable income to lower-tax jurisdictions.
  • Fully diluted earnings were a record $0.48 per share compared to adjusted fully diluted earnings of $0.39 per share in the prior year, an increase of 23.1%. The prior year’s adjusted earnings exclude the impact of restructuring charges and other expenses related to a strategic restructuring plan that was completed in the second quarter of 2010. Reported fully diluted earnings for the second quarter of 2010 were $0.35 per share.
  • The Company repurchased approximately 479,000 of its own shares in the quarter for an aggregate cost of $18.1 million. Through the end of the second quarter, the Company has repurchased approximately 621,000 shares for a total cost of $23.1 million. The Company has a solid balance sheet, with little debt and $118.5 million of cash and cash equivalents at the end of the second quarter.

Today, the Company is reaffirming both its full-year revenue estimate of $1.380 billion to $1.420 billion (representing growth of 10.5% to 13.7%) and its fully diluted earnings per share estimate of $2.40 to $2.50 (representing growth of 10.6% to 15.2% versus the prior year’s adjusted earnings per share and growth of 13.7% to 18.5% versus the prior year’s reported earnings per share). Included in the earnings guidance are the outlooks for flat full-year gross margin and modest full-year operating expense leverage.

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