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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 March 31, 2001
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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 W. 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 May 4, 2001 the following shares were outstanding.
Common Stock, $1.00 par value 2,906,789 Shares
Class B Common Stock, $1.00 par value 913,329 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
March 31 December 31
2001 2000
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CURRENT ASSETS:
Cash and cash equivalents $ 3,902,181 $ 3,519,190
Marketable securities 8,249,147 7,690,551
Accounts receivable, net 28,949,281 23,864,339
Inventories -
Finished shoes 12,366,083 13,406,933
Shoes in process 167,356 165,918
Raw materials and supplies 128,196 140,365
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Total inventories 12,661,635 13,713,216
Deferred income tax benefits 2,745,000 2,697,000
Prepaid expenses and other current assets 230,998 185,342
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Total current assets 56,738,242 51,669,638
MARKETABLE SECURITIES 13,492,879 14,664,474
OTHER ASSETS 9,444,882 9,336,800
PLANT AND EQUIPMENT 22,516,929 22,259,574
Less - Accumulated depreciation 6,237,856 5,987,377
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16,279,073 16,272,197
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$95,955,076 $91,943,109
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LIABILITIES & SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term borrowings $ 6,313,000 $ 5,206,948
Accounts payable 7,184,179 5,955,873
Dividend payable 431,128 445,836
Accrued liabilities 4,960,196 5,643,391
Accrued income taxes 1,606,285 505,792
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Total current liabilities 20,494,788 17,757,840
DEFERRED INCOME TAX LIABILITIES 2,880,000 2,840,000
SHAREHOLDERS' INVESTMENT:
Common stock 3,946,618 3,972,850
Other shareholders' investment 68,633,670 67,372,419
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$95,955,076 $91,943,109
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
2001 2000
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NET SALES $35,358,258 $41,903,079
COST OF SALES 26,157,909 30,790,502
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Gross earnings 9,200,349 11,112,577
SELLING AND ADMINISTRATIVE EXPENSES 6,313,580 6,538,623
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Earnings from operations 2,886,769 4,573,954
INTEREST INCOME 283,666 259,836
INTEREST EXPENSE (83,958) (154,574)
OTHER INCOME AND EXPENSE 504,427 47,337
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Earnings before provision for
income taxes 3,590,904 4,726,553
PROVISION FOR INCOME TAXES 1,250,000 1,700,000
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Net earnings $ 2,340,904 $ 3,026,553
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WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 3)
Basic 3,953,276 4,131,882
Diluted 3,981,082 4,185,641
EARNINGS PER SHARE (Note 3)
Basic $.59 $.73
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Diluted $.59 $.72
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Cash dividends $.11 $.10
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used for operating activities $ (425,924) $ (1,616,733)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of
marketable securities 612,999 1,445,573
Proceeds from sales of other investments 603,807 --
Purchase of plant and equipment (408,058) (73,079)
Proceeds from sales of plant and equipment -- 18,850
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Net cash provided by
investing activities 808,748 1,391,344
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (434,128) (413,999)
Shares purchased and retired (712,507) (1,393,884)
Proceeds from stock options exercised 40,750 42,375
Short-term borrowings 1,106,052 915,000
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Net cash provided by (used for)
financing activities 167 (850,508)
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Net increase (decrease) in cash
and cash equivalents 382,991 (1,075,897)
CASH AND CASH EQUIVALENTS at beginning
of period 3,519,190 3,843,915
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CASH AND CASH EQUIVALENTS at end
of period $ 3,902,181 $ 2,768,018
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 44,200 $ 240,000
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Interest paid $ 104,563 $ 109,574
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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 ended March
31, 2001, 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 issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard, as amended, requires
that entities recognize derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. The Company
adopted this standard on January 1, 2001. The adoption of this standard
did not have a material effect on the Company's balance sheet or statement
of earnings.
(3) The following table sets forth the computation of net earnings per share
and diluted net earnings per share:
March 31, 2001 March 31, 2000
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Numerator:
Net Earnings . . . . . . . . . . . . . . . . . . . . . $2,340,904 $3,026,553
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Denominator:
Basic weighted average shares . . . . . . . . . . . . 3,953,276 4,131,882
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . . . 27,806 53,759
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Diluted weighted average shares . . . . . . . . . . . 3,981,082 4,185,641
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Basic earnings per share . . . . . . . . . . . . . . . . $.59 $.73
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Diluted earnings per share . . . . . . . . . . . . . . . $.59 $.72
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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 March 31, 2001 and 2000 is:
Wholesale
Distribution Retail Total
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MARCH 31, 2001
Net Sales . . . . . . . . . . . . . . . . . . $34,099,000 $1,259,000 $35,358,000
Earnings from operations . . . . . . . . . . 2,913,000 (26,000) 2,887,000
MARCH 31, 2000
Net Sales . . . . . . . . . . . . . . . . . . $40,300,000 $1,603,000 $41,903,000
Earnings from operations . . . . . . . . . . 4,547,000 27,000 4,574,000
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
The Company's primary source of liquidity is its cash and marketable
securities which aggregated approximately $25,644,000 at March 31, 2001,
compared with $25,874,000 at December 31, 2000.
The Company issues commercial paper with 30 to 90 day maturities. Lines of
credit totaling $22.5 million back commercial paper issuances and provide
funds on a short-term basis when necessary. At March 31, 2001, $6,313,000
of commercial paper was outstanding, and there were no draws on the lines
of credit.
During the first quarter of 2001, the Company did not purchase any shares
of its common stock under its stock repurchase program, but did purchase
29,232 shares at a total cost of $713,000 in private transactions.
Subsequent to March 31, 2001 an additional 126,500 shares of common stock
were purchased at a total cost of $2,952,000 under the Company's stock
repurchase program, and 1,500 shares were purchased at a total cost of
$36,000 in private transactions.
Cash flows from operations were $1.2 million lower in the first quarter of
2001 than in the same period of 2000. The decrease in cash flows from
operations was primarily due to a $993,000 decrease in net earnings between
periods, after adjusting for a $504,000 gain ($307,000 after tax) on the
sale of other investments discussed below.
Cash flows from investing activities for the first quarter of 2001 includes
$604,000 of proceeds from the sale of investments. During the quarter,
investments were sold for $604,000 at a gain of $504,000, which is included
in other income on the Consolidated Condensed Statements of Earnings.
The Company's capital expenditures were $408,000 and $73,000 for the first
quarter of 2001 and 2000, respectively. In 2001, capital expenditures were
primarily related to the remodeling of two retail stores.
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.
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Results of Operations
Overall net sales decreased 16%, from $41,903,000 for the first quarter of
2000 to $35,358,000 for the first quarter of 2001. This 16% decrease was
the result of a 15% decrease in wholesale net sales, down from $40,300,000
for the first quarter of 2000 to $34,099,000 in the first quarter of 2001,
and a 21% decrease in retail net sales, down from $1,603,000 for the first
quarter of 2000 to $1,259,000 in the first quarter of 2001. The decrease in
wholesale sales was driven by a decrease in pairs shipped. Same store
retail net sales decreased 12% between periods. In general, the decreases
in the first quarter 2001 were the result of a difficult retail
environment. Retailers are maintaining lean inventories in response to the
economic slowdown with the timing of seasonal deliveries shifting in part
to the second quarter.
Gross earnings as a percent of net sales for the first quarter decreased
from 26.5% in 2000 to 26.0% in 2001. This decrease results mainly from the
decrease in gross earnings as a percent of net sales for the wholesale
division, which decreased from 25.6% in 2000 to 25.0% in 2001. The decrease
in wholesale gross earnings as a percent of net sales between 2000 and 2001
is primarily attributable to differences in the mix of products sold
between periods.
Selling and administrative expenses as a percent of net sales increased
from 15.6% for the first quarter of 2000 to 17.9% for the same period in
2001. This is primarily the result of the increase in wholesale selling and
administrative expenses as a percent of wholesale net sales from 14.3% in
the first quarter of 2000 to 16.5% in the first quarter of 2001. In
general, the increase in selling and administrative expenses in relation to
the change in net sales reflects the fixed costs included in selling and
administrative expenses, which are not affected by changes in sales
volumes.
The decrease in interest expense in the first quarter of 2001 compared to
the first quarter of 2000 is due to lower short-term borrowings and lower
interest rates in 2001.
In the first quarter of 2001, other income and expense includes a $504,000
gain on the sale of investments.
The effective tax rate decreased from 36% in the first quarter of 2000 to
35% in the first quarter of 2001.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held April 24, 2001 to elect two
members to the Board of Directors.
Thomas W. Florsheim, and Frank W. Norris were nominated for election to
the Board of Directors for terms of three years. A total of 3,571,198
votes were cast for the nominees, with 2,370 votes withheld for Mr.
Florsheim, and 129,017 votes withheld for Mr. Norris.
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.
May 11, 2001 /s/ John Wittkowske
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Date John Wittkowske
Vice President-Finance
Chief Financial Officer
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