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FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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Or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-9068
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WEYCO GROUP, INC.
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(Exact name of registrant as specified in its charter)
WISCONSIN 39-0702200
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 West Estabrook Boulevard
P.O. Box 1188
Milwaukee, Wisconsin 53201
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(Address of principal executive offices)
(Zip Code)
(414) 908-1600
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of November 6, 2000 the following shares were outstanding.
Common Stock, $1.00 par value 3,134,009 Shares
Class B Common Stock, $1.00 par value 919,045 Shares
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's latest
annual report on Form 10-K.
WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
September 30 December 31
2000 1999
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CURRENT ASSETS:
Cash and cash equivalents $ 3,943,180 $ 3,843,915
Marketable securities 6,962,624 4,860,576
Accounts receivable, net 26,989,890 21,903,407
Inventories -
Finished shoes 12,812,551 19,026,531
Shoes in process 266,408 380,957
Raw materials and supplies 115,993 132,243
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Total inventories 13,194,952 19,539,731
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Deferred income tax benefits 2,600,000 2,880,000
Prepaid expenses and other current assets 178,334 65,537
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Total current assets 53,868,980 53,093,166
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MARKETABLE SECURITIES 15,619,705 17,672,907
OTHER ASSETS 9,104,588 8,559,332
PLANT AND EQUIPMENT 22,148,855 21,468,279
Less - Accumulated depreciation (5,766,635) (4,874,503)
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16,382,220 16,593,776
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$94,975,493 $95,919,181
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LIABILITIES & SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term borrowings $ 9,483,272 $ 8,800,000
Accounts payable 5,391,329 9,403,897
Dividend payable 446,650 421,277
Accrued liabilities 5,590,710 6,422,885
Accrued income taxes 1,362,099 1,204,621
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Total current liabilities 22,274,060 26,252,680
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DEFERRED INCOME TAX LIABILITIES 1,988,000 1,916,000
SHAREHOLDERS' INVESTMENT:
Common stock 4,036,454 4,160,986
Other shareholders' investment 66,676,979 63,589,515
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$94,975,493 $95,919,181
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Three Months ended September 30 Nine Months ended September 30
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2000 1999 2000 1999
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NET SALES $ 37,063,058 $ 35,009,829 $ 117,375,002 $ 101,854,789
COST OF SALES 27,312,664 26,078,758 86,398,368 74,744,261
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Gross earnings 9,750,394 8,931,071 30,976,634 27,110,528
SELLING AND ADMINISTRATIVE EXPENSES 6,424,228 5,639,236 19,540,914 17,006,316
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Earnings from operations 3,326,166 3,291,835 11,435,720 10,104,212
INTEREST INCOME 275,551 331,134 809,322 1,083,208
INTEREST EXPENSE (175,280) (160,549) (489,485) (435,912)
OTHER INCOME AND EXPENSE, net 162,251 250,313 268,416 275,600
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Earnings before provision for
income taxes 3,588,688 3,712,733 12,023,973 11,027,108
PROVISION FOR INCOME TAXES 1,250,000 1,250,000 4,300,000 3,750,000
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Net earnings $ 2,338,688 $ 2,462,733 $ 7,723,973 $ 7,277,108
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WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
(Note 3)
Basic 4,062,579 4,262,400 4,095,895 4,321,345
Diluted 4,113,631 4,321,877 4,143,866 4,383,019
EARNINGS PER SHARE (Note 3):
Basic $ .58 $ .57 $ 1.89 $ 1.68
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Diluted $ .57 $ .57 $ 1.86 $ 1.66
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CASH DIVIDENDS PER SHARE $ .11 $ .10 $ .32 $ .29
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used for) operating
activities $ 5,099,742 $ (1,371,472)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (4,351,283) (1,760,465)
Proceeds from maturities of marketable securities 4,302,438 10,377,023
Purchase of plant and equipment (903,617) (3,828,780)
Proceeds from sales of plant and equipment 29,754 256,238
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Net cash provided by (used for) investing
activities (922,708) 5,044,016
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (1,310,060) (1,226,792)
Shares purchased and retired (3,874,897) (4,802,652)
Proceeds from stock options exercised 423,916 34,625
Short-term borrowings (repayments), net 683,272 (266,677)
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Net cash used for
financing activities (4,077,769) (6,261,496)
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Net increase (decrease) in cash and
cash equivalents 99,265 (2,588,952)
CASH AND CASH EQUIVALENTS at beginning
of period 3,843,915 4,240,991
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CASH AND CASH EQUIVALENTS at end
of period $ 3,943,180 $ 1,652,039
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 3,428,460 $ 3,364,363
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Interest paid $ 444,485 $ 444,935
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NOTES:
(1) In the opinion of management, all adjustments (which include only normal
recurring accruals) necessary to present fairly the financial information
have been made. The results of operations for the three months or nine
months ended September 30, 2000, are not necessarily indicative of
results for the full year.
(2) The Company has entered into forward exchange contracts for the purpose of
hedging firmly committed inventory purchases with outside vendors. The
Company accounts for these contracts under the deferral method.
Accordingly, gains and losses are recorded in inventory when the inventory
is purchased.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities." The standard requires
that entities recognize derivatives as either assets or liabilities in
the balance sheet and measure those instruments at fair value. The
Company is required to adopt this standard on January 1, 2001. While the
impact of the adoption of this statement is dependent on the fair value
of the Company's derivatives at the date of adoption, it is not expected
to have a material impact on the consolidated financial statements.
(3) The following table sets forth the computation of net earnings per share
and diluted net earnings per share:
Three Months Ended September 30 Nine Months Ended September 30
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2000 1999 2000 1999
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Numerator:
Net Earnings........................... $2,338,688 $2,462,733 $7,723,973 $7,277,108
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Denominator:
Basic weighted average shares.......... 4,062,579 4,262,400 4,095,895 4,321,345
Effect of dilutive securities:
Employee stock options............... 51,052 59,477 47,971 61,674
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Diluted weighted average shares........ 4,113,631 4,321,877 4,143,866 4,383,019
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Basic earnings per share................. $ .58 $ .57 $ 1.89 $ 1.68
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Diluted earnings per share............... $ .57 $ .57 $ 1.86 $ 1.66
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(4) The Company continues to operate in two business segments: wholesale
distribution and retail sales of men's footwear. Summarized segment data
for September 30, 2000 and 1999 is:
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Wholesale
Distribution Retail Total
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THREE MONTHS ENDED SEPTEMBER 30
2000
Net Sales.................................. $35,757,000 $1,306,000 $37,063,000
Earnings from operations................... 3,300,000 26,000 3,326,000
1999
Net Sales.................................. $33,472,000 $1,538,000 $35,010,000
Earnings from operations................... 3,268,000 24,000 3,292,000
NINE MONTHS ENDED SEPTEMBER 30
2000
Net Sales.................................. $112,827,000 $4,548,000 $117,375,000
Earnings from operations................... 11,284,000 152,000 11,436,000
1999
Net Sales.................................. $97,101,000 $4,754,000 $101,855,000
Earnings from operations................... 9,917,000 187,000 10,104,000
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity
The Company's primary source of liquidity is its cash and marketable
securities which aggregated approximately $26,526,000 at September 30,
2000, compared with $26,377,000 at December 31, 1999. In addition, the
Company maintains a $7,500,000 bank line of credit and has banker
acceptance loan facilities to provide funds on a short-term basis when
necessary. There were no draws on the line of credit during the third
quarter of 2000.
For the first nine months of 2000, cash flows from operating activities
increased $6.5 million compared to the same period in 1999. This is
primarily related to a decrease in inventory since December 31, 1999 due to
increased sales volume in 2000.
The Company's capital expenditures were $904,000 and $3,829,000 for the
first nine months of 2000 and 1999, respectively. In 1999, expenditures
were primarily related to the construction of the Company's corporate
office and distribution center. The Company moved into the new building in
1999.
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The Company issued commercial paper with 30 to 90 day maturities to finance
the building construction project. The commercial paper is backed by a
three-year, $15 million revolving credit agreement. At September 30, 2000,
there was $9,483,000 of commercial paper and advances on the revolving
credit agreement outstanding.
In the first nine months of 2000, the Company purchased 101,500 shares at a
total cost of $2,498,000 under its stock repurchase program, and 54,000
shares at a total cost of $1,376,000 in private transactions. As of
September 30, 2000, the Company can purchase up to 374,100 additional
shares under its current stock repurchase program.
The Company believes that available cash and marketable securities, cash
provided from operations and available borrowing facilities will provide
adequate support for the cash needs of the business.
Results of Operations
Total net sales for the third quarter of 2000 were $37,063,000 compared
with $35,010,000 for the third quarter of 1999. Net sales in the wholesale
division increased $2,285,000 (7%) from $33,472,000 in 1999 to $35,757,000
in 2000. Retail net sales decreased 15% from $1,538,000 during the third
quarter of 1999 to $1,306,000 in the third quarter of 2000. Same store net
sales were down 10% between the third quarter of 1999 and 2000.
For the nine months ended September 30, 2000, net sales increased
$15,520,000, or 15%, as compared with the same period in 1999. Wholesale
sales increased from $97,101,000 in 1999 to $112,827,000 in 2000. Retail
net sales decreased $206,000 (4%) from $4,754,000 in 1999 to $4,548,000 in
2000.
The increases in sales for both the third quarter and nine months ended
September 30 were the result of increases in wholesale net sales, up 7% for
the third quarter and 16% for the first nine months of the year. The Stacy
Adams division continued its strong performance, up 22% for the third
quarter and for the nine months ended September 30, 2000. Within this
division significant gains were registered in the "SAO by Stacy Adams"
casual line. The Nunn Bush brand was flat for the quarter and up 10% for
the nine months ended September 30, 2000 with the increase driven in large
part by the performance of our "Nunn Bush NXXT" contemporary line. The
Brass Boot brand continued its strong growth with sales up 57% for the
quarter and remains up 70% for the nine months ended September 30, 2000.
Gross earnings as a percent of net sales increased approximately .8%
between the third quarter of 1999 and 2000, from 25.5% to 26.3%, and were
consistent for the nine months ended September 30, 1999 and 2000 at 26.6%
and 26.4%, respectively.
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For the third quarter, selling and administrative expenses as a percent
of sales increased from 16.1% in 1999 to 17.3% in 2000. The increase was
primarily a result of increased advertising to promote brands and
increased employee health care costs.
For the nine months ended September 30, 1999 and 2000, selling and
administrative expenses as a percent of sales were consistent at 16.7%
and 16.6%, respectively.
Other income and expense for the third quarter of 1999 includes a
$188,000 gain on the sale of the former warehouse facility in Beaver Dam,
Wisconsin. The sale closed on September 30, 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEYCO GROUP, INC.
November 14, 2000 /s/ John Wittkowske
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Date John Wittkowske
Vice President-Finance
Chief Financial Officer
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