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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 June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
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 August 1, 1997 the following shares were outstanding.
Common Stock, $1.00 par value 1,261,297 Shares
Class B Common Stock, $1.00 par value 324,178 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
June 30 December 31
1997 1996
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CURRENT ASSETS:
Cash and cash equivalents $ 5,223,819 $ 6,837,765
Marketable securities 6,209,392 8,179,263
Accounts receivable, net 18,577,628 18,235,404
Inventories -
Finished shoes 9,255,918 11,984,639
Shoes in process 84,094 331,718
Raw materials and supplies 63,539 83,087
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Total inventories 9,403,551 12,399,444
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Deferred income tax benefits 2,369,000 2,161,000
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Total current assets 41,783,390 47,812,876
MARKETABLE SECURITIES 28,712,327 16,440,201
DEFERRED INCOME TAX BENEFIT 213,000 33,000
OTHER ASSETS 6,254,830 6,138,205
PLANT AND EQUIPMENT 8,470,736 8,679,517
Less - Accumulated depreciation (6,258,551) (6,026,644)
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2,212,185 2,652,873
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$79,175,732 $73,077,155
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LIABILITIES & SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 7,833,847 $ 6,793,555
Dividend payable 365,119 349,354
Accrued liabilities 7,408,706 5,837,753
Accrued income taxes 1,187,651 992,241
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Total current liabilities 16,795,323 13,972,903
SHAREHOLDERS' INVESTMENT
Common stock 1,585,475 1,587,475
Other shareholders' investment 60,794,934 57,516,777
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$79,175,732 $73,077,155
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE PERIODS ENDED JUNE 30, 1997 AND 1996
Three Months ended June 30 Six Months ended June 30
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1997 1996 1997 1996
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NET SALES $29,719,784 $31,135,723 $63,873,253 $65,307,720
COST OF SALES 21,745,064 22,830,181 46,616,908 48,331,581
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Gross earnings 7,974,720 8,305,542 17,256,345 16,976,139
SELLING AND ADMINISTRATIVE EXPENSES 5,508,260 6,084,107 11,081,043 12,106,911
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Earnings from operations 2,466,460 2,221,435 6,175,302 4,869,228
INTEREST AND OTHER INCOME, Net 256,879 225,723 384,281 526,900
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Earnings before provision for
income taxes 2,723,339 2,447,158 6,559,583 5,396,128
PROVISION FOR INCOME TAXES 950,000 909,000 2,400,000 2,000,000
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Net earnings $ 1,773,339 $ 1,538,158 $ 4,159,583 $ 3,396,128
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WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
(Note 2) 1,586,975 1,606,980 1,587,189 1,652,632
PER SHARE (Note 2):
Net earnings $1.12 $.95 $2.62 $2.05
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Cash dividends $.23 $.22 $.45 $.43
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $9,693,578 $6,656,284
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (15,508,355) (8,406,795)
Proceeds from sales of marketable securities 5,206,100 6,573,790
Purchase of plant and equipment (62,683) (209,039)
Other (74,925) (218,340)
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Net cash used for investing activities (10,439,863) (2,260,384)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred compensation payments -- (1,175,000)
Cash dividends paid (698,599) (739,580)
Shares purchased and retired (260,500) (11,027,517)
Proceeds from stock options exercised 91,438 14,500
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Net cash used for financing activities (867,661) (12,927,597)
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Net decrease in cash and
cash equivalents (1,613,946) (8,531,697)
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 $5,223,819 $2,715,440
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $2,592,306 $1,560,973
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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 six
months ended June 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.
Accordinaly, gains and losses are recorded in inventory when the inventory
is purchased.
Item 2. Management's Discussion and Analysis of Financial
Condition and results of Operations
Liquidity
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The Company's primary source of liquidity is its cash and marketable
securities which aggregated approximately $40,146,000 at June 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 six months of 1997.
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
in the fall of 1998. The estimated cost of the building and related
equipment is $12 million.
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Results of Operations
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Total net sales decreased $1,416,000 (5%) during the three months ended
June 30, 1997 compared with the same period in 1996. Net sales in the
wholesale division were flat. Retail net sales decreased 34% from
$3,518,000 in the second quarter of 1996 to $2,308,000 in the second
quarter of 1997 as a result of the closing of 13 leased departments in
1996. Same store net sales increased 20% from 1996 to 1997 due to
increased volume.
For the six months ended June 30, 1997, net sales decreased $1,434,000
(2%) as compared with the same period in 1996. Wholesale sales increased
$454,000 or 1% from $58,911,000 in 1996 to $59,365,000 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 $1,888,000 (30%) from $6,397,000 in 1996 to $4,509,000 in 1997,
as a result of the previously discussed store closings. Same store net
sales were up 19% as compared with the same period in 1996.
Gross earnings as a percent of net sales were consistent for the second
quarter of 1996 and 1997, as well as the six months ended June 30, 1997 at
27%. For the six months ended June 30, 1996, gross earnings as a percent
of net sales was 26%, which included a $600,000 loss reserve for the
closing of the 13 leased departments in the first quarter of 1996.
Selling and administrative expenses for the second quarter and six months
ended June 30 decreased from 1996 to 1997 due to the closing of the retail
units during 1996.
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 will be mailed October 1, 1997, to shareholders of record on
September 2, 1997.
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
On July 31, 1997, the Company, along with certain officers and
directors, was sued by Amanda Kahn, a shareholder, in the United States
District Court for the Eastern District of Wisconsin (Kahn v. Weyco Group,
Inc. et al, Case No. 97-824). The lawsuit alleges that a proposed 1994
management buy-out breached the defendants' fiduciary duties, that certain
disclosures violated the securities laws and that Ms. Kahn and her
attorneys created a common benefit by opposing the proposed buy-out. Ms.
Kahn previously sued the Company and certain officers and directors,
making similar allegations, in two separate lawsuits. One suit, filed in
the Circuit Court of Milwaukee County, Wisconsin, was dismissed on June 2,
1995 and the appeal was dismissed on December 29, 1995. The other lawsuit
was dismissed by the parties, without prejudice, in August, 1994. The
Company believes it has meritorious defenses to the allegations and that
the resolution of this new lawsuit will not have a material effect on the
consolidated financial statements of the Company.
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
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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.
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Date John Wittkowske
Vice President-Finance
Chief Financial Officer
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