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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, 1997
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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.)
234 East Reservoir Avenue
P. O. Box 1188
Milwaukee, Wisconsin 53201
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(Address of principal executive offices)
(Zip Code)
(414) 263-8800
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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 October 29, 1997 the following shares were outstanding.
Common Stock, $1.00 par value 3,808,073 Shares
Class B Common Stock, $1.00 par value 966,352 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
1997 1996
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CURRENT ASSETS:
Cash and cash equivalents $ 4,808,451 $ 6,837,765
Marketable securities 6,686,901 8,179,263
Accounts receivable, net 24,203,856 18,235,404
Inventories -
Finished shoes 7,993,447 11,984,639
Shoes in process 118,046 331,718
Raw materials and supplies 50,810 83,087
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Total inventories 8,162,303 12,399,444
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Deferred income tax benefits 2,371,000 2,161,000
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Total current assets 46,232,511 47,812,876
MARKETABLE SECURITIES 26,515,532 16,440,201
DEFERRED INCOME TAX BENEFIT 225,000 33,000
OTHER ASSETS 6,366,095 6,138,205
PLANT AND EQUIPMENT 8,317,106 8,679,517
Less - Accumulated depreciation (6,310,371) (6,026,644)
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2,006,735 2,652,873
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$ 81,345,873 $ 73,077,155
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LIABILITIES & SHAREHOLDERS' INVESTMENT
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CURRENT LIABILITIES:
Accounts payable $6,890,285 $6,793,555
Dividend payable 380,514 349,354
Accrued liabilities 7,522,757 5,837,753
Accrued income taxes 1,771,976 992,241
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Total current liabilities 16,565,532 13,972,903
SHAREHOLDERS' INVESTMENT:
Common stock 4,756,425 1,587,475
Other shareholders' investment 60,023,916 57,516,777
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$ 81,345,873 $ 73,077,155
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
Three Months ended September 30 Nine Months ended September 30
1997 1996 1997 1996
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NET SALES $35,982,370 $34,864,730 $99,855,623 $100,172,450
COST OF SALES 26,086,296 25,267,625 72,703,204 73,599,206
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Gross earnings 9,896,074 9,597,105 27,152,419 26,573,244
SELLING AND ADMINISTRATIVE EXPENSES 5,791,151 5,576,213 16,872,194 17,683,124
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Earnings from operations 4,104,923 4,020,892 10,280,225 8,890,120
INTEREST AND OTHER INCOME, NET 302,211 275,138 686,492 802,038
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Earnings before provision for
income taxes 4,407,134 4,296,030 10,966,717 9,692,158
PROVISION FOR INCOME TAXES 1,600,000 1,620,000 4,000,000 3,620,000
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Net earnings $ 2,807,134 $ 2,676,030 $ 6,966,717 $ 6,072,158
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WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
(Note 2) 4,756,425 4,782,675 4,760,025 4,902,705
PER SHARE (Note 2):
Net earnings $.59 $.56 $1.46 $1.24
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Cash dividends $.08 $.07 $.23 $.21
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 8,071,692 $ 6,091,531
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (18,473,290) (11,561,000)
Proceeds from sales of marketable securities 9,890,322 11,071,897
Purchase of plant and equipment (72,645) (232,917)
Other (185,925) (323,579)
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Net cash used for investing activities (8,841,538) (1,045,599)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred compensation payments - (1,175,000)
Cash dividends paid (1,063,718) (1,092,234)
Shares purchased and retired (304,500) (11,632,506)
Proceeds from stock options exercised 108,750 14,500
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Net cash used for financing activities (1,259,468) (13,885,240)
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Net decrease in cash and
cash equivalents (2,029,314) (8,839,308)
CASH AND CASH EQUIVALENTS at beginning
of period 6,837,765 11,247,137
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CASH AND CASH EQUIVALENTS at end
of period $ 4,808,451 $ 2,407,829
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 3,621,982 $ 2,545,780
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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, 1997, are not necessarily indicative of results
for the full year.
(2) Earnings per share are computed based on the weighted average number of
common and common equivalent shares outstanding. Common equivalent
shares consist of stock options which have a dilutive effect when applying
the treasury stock method and are considered when material. The Company
intends to adopt Statement of Accounting Standards No. 128, "Earnings Per
Share," for the year ended December 31, 1997 and will restate prior
period earnings per share as required. The adoption of this standard is
not expected to have a material impact on previously reported earnings per
share.
(3) 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.
(4) On July 21, 1997, the Company's Board of Directors declared a 200% stock
dividend on the Company's Common Stock, $1.00 par value, and on the
Company's Class B Common Stock, $1.00 par value, so as to effect a
three-for-one stock split without a change in par value. The additional
shares were mailed October 1, 1997, to shareholders of record on September
2, 1997. Weighted average common and common equivalent shares outstanding
on the Statements of Earnings have been restated for prior periods to
reflect this stock dividend.
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 $38,011,000 at September 30,
1997, compared with $31,457,000 at December 31, 1996. 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. The Company did not make any borrowings under these facilities
during the first nine months of 1997.
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The Company has historically generated adequate cash flow from operations
to meet working capital requirements. 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.
In April, 1997, the Company announced its plan to build a 370,000 square
foot building in Glendale, Wisconsin, to house its corporate offices and
warehouse and distribution facilities. The building is scheduled to open
by the end of 1998. The estimated cost of the building and related
equipment is $12 million.
Results of Operations
Total net sales increased $1,118,000 (3%) for the three months ended
September 30, 1997 compared with the same period in 1996. Net sales in the
wholesale division increased $1,246,000 (4%) from $32,884,000 in 1996 to
$34,130,000 in 1997. The increase in sales resulted from an increase
of 3% in the number of pairs of shoes shipped as compared with 1996, as
well as an increase in the average selling price per pair, attributed to a
change in product mix.
Retail net sales decreased 7% from $1,980,000 in the third quarter of 1996
to $1,852,000 in the third quarter of 1997. The decrease resulted
primarily from the closing of 4 retail units during 1997. Same store net
sales increased 8% from 1996 to 1997 due to increased volume.
For the nine months ended September 30, 1997, net sales were flat compared
with the same period in 1996. Wholesale sales increased $1,700,000 or 2%
from $91,795,000 in 1996 to $93,495,000 in 1997. This increase resulted
primarily from an increase in the average selling price per pair,
attributed to a change in product mix. Retail net sales decreased
$2,016,000 (24%) from $8,377,000 in 1996 to $6,361,000 in 1997, as a result
of the closing of 13 retail units during 1996 and 4 retail units during
1997. Same store net sales were up 13% as compared with the same period in
1996.
Overall gross earnings as a percent of net sales was 27% for the third
quarter of 1996 and 1997, as well as for the nine months ended September
30, 1997. Gross earnings as a percent of net sales was 26% for the nine
months ended September 30, 1996. Wholesale gross earnings as a percent of
wholesale net sales was 26% for the third quarter of 1996 and 1997, as well
as the nine months ended September 30, 1997, and was 25% for the nine
months ended September 30,1996. Retail net earnings as a percent of
retail net sales was consistent between the third quarter of 1996 and 1997
at 50%, and increased from 46% for the nine months ended September 30,
1996 to 49% for the same period in 1997, primarily due to a $600,000 charge
made to retail cost of sales during the first quarter of 1996 for the
closing of retail units.
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Overall selling and administrative expenses as a percent of net sales was
consistent at 16% for the third quarter of 1996 and 1997. For the nine months
ended September 30, selling and administrative expenses as a percent of net
sales decreased from 18% in 1996 to 17% in 1997. Wholesale selling and
administrative expenses as a percent of wholesale net sales between the third
quarter of 1996 and 1997 and the nine months ended September 30, 1996 and 1997
was consistent at 15%. Retail selling and administrative expenses as a
percent of retail net sales decreased from 56% in the third quarter of 1996 to
52% in the third quarter of 1997, and from 52% for the nine months ended
September 30, 1996 to 49% for the same period in 1997. The decreases noted in
the retail figures resulted from the closing of less profitable retail units
during 1996 and 1997. Sales at the remaining retail stores have increased in
relation to occupancy and employee expenses.
Interest and other income consists principally of interest income from fixed
rate short term investments.
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.
_____________________ _____________________________
Date John Wittkowske
Vice President-Finance
Chief Financial Officer
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