Keds, Saucony Maker Wolverine Steps Up Revenue Despite Debt

NEW YORK (TheStreet) -- Footwear company Wolverine World Wide (WWW) has recently released its annual results: it managed to grow its top and bottom line, despite a challenging business environment and serious debt.

The company has made significant reductions in its debt levels, although it still has a long way to go. Compared to 2010, Wolverine has reported triple-digit growth in revenue and gross profits after the massive $1.25 billion acquisition of Collective Brands' Performance and Lifestyle group in 2012. Profitability has also improved. Moreover, for the current year, Wolverine has forecast double-digit earnings growth.

With a new buyback program and the expected growth in earnings, Wolverine's shareholders could finally start seeing the benefits of the acquisition, which included the Sperry Top-Sider, Saucony, Stride Rite and Keds brands.

Wolverine's shares have risen 22% in the last 12 months and were at $26.78 today at 11 a.m.

After the buyout of several of Collective Brands' labels, Wolverine has reported significant growth in revenues and income. However, Wolverine also reports its results on pro-forma basis under the assumption that the company had acquired PLG in January 2012, although the deal was finalized in October of that year. That way, the company eliminates the unusual impact on growth from the acquisition.

In the fourth quarter of 2013, Wolverine's revenues rose 13.6% from a year ago to $740.8 million. On a pro-forma basis, the revenues were up 0.6%, and missed analysts' estimates by $3.1 million. The company's losses shrank to $1.7 million from $3.7 million in the prior year. Adjusted earnings came in at 22 cents per share, better than market's expectations of 20 cents per share.

For the full year, Wolverine's revenues climbed 64% from the previous year to $2.69 billion; on a pro-forma basis, the revenues were up 5.6%. Annual income rose 24.4% to $100.4 million.

The difference between the company's reported and pro-forma revenues clearly shows that a significant portion of its growth has come due to the PLG acquisition.

The company witnessed strong growth in Latin America throughout 2013. Asia/Pacific picked up the momentum in the second half of the fiscal year and witnessed double digit growth in the fourth quarter.

A long-term analysis shows that the company has consistently grown its revenue and gross profits over the last several years. Since 2010, the company's revenue and gross profits have more than doubled. Net income, however, has suffered. But that was largely due to the costs associated with the debt-funded acquisition.

For instance, in 2013, the company's net interest expense climbed to $52 million from just $1 million in 2011. This was due to higher levels of debt. The acquisition also gave rise to transaction and integration costs which had an adverse impact on the company's net earnings growth in 2012 and 2013.



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