<PAGE> 1
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, 1998
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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 April 28, 1998 the following shares were outstanding.
Common Stock, $1.00 par value 3,829,369 Shares
Class B Common Stock, $1.00 par value 965,056 Shares
<PAGE> 2
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
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
------------ ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,510,936 $ 3,323,035
Marketable securities 9,023,018 7,360,953
Accounts receivable, net 24,287,652 17,672,176
Inventories -
Finished shoes 8,274,988 10,713,099
Shoes in process 133,739 347,189
Raw materials and supplies 28,420 101,165
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Total inventories 8,437,147 11,161,453
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Deferred income tax benefits 3,302,000 3,357,000
Prepaids and other current assets 41,435 37,447
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Total current assets 49,602,188 42,912,064
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MARKETABLE SECURITIES 30,107,041 30,105,090
OTHER ASSETS 6,996,731 6,874,191
PLANT AND EQUIPMENT 10,042,471 8,608,049
Less - Accumulated depreciation (6,460,119) (6,295,279)
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3,582,352 2,312,770
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$ 90,288,312 $ 82,204,115
============ ============
LIABILITIES & SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term borrowings $ 3,060,000 $ --
Accounts payable 6,910,501 6,275,563
Dividend payable 383,954 381,954
Accrued liabilities 7,924,523 7,006,168
Accrued income taxes 2,183,727 979,024
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Total current liabilities 20,462,705 14,642,709
DEFERRED INCOME TAX LIABILITIES 864,000 884,000
SHAREHOLDERS' INVESTMENT:
Common stock 4,794,425 4,774,925
Other shareholders' investment 64,167,182 61,902,481
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$ 90,288,312 $ 82,204,115
============ ============
</TABLE>
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<PAGE> 3
WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
NET SALES $ 36,055,262 $ 34,153,469
COST OF SALES 26,254,325 24,871,844
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Gross earnings 9,800,937 9,281,625
SELLING AND ADMINISTRATIVE EXPENSES 6,017,306 5,572,783
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Earnings from operations 3,783,631 3,708,842
INTEREST INCOME 433,372 212,044
OTHER INCOME AND EXPENSE 8,750 (84,642)
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Earnings before provision for
income taxes 4,225,753 3,836,244
PROVISION FOR INCOME TAXES 1,550,000 1,450,000
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Net earnings $ 2,675,753 $ 2,386,244
============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 2)
Basic 4,792,050 4,762,425
Diluted 4,860,847 4,793,341
EARNINGS PER SHARE (Note 2)
Basic $ .56 $ .50
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Diluted $ .55 $ .50
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Cash dividends $ .08 $ .07
============ ============
</TABLE>
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<PAGE> 4
WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 1,615,991 $ 1,523,675
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (3,926,549) (7,972,422)
Proceeds from sales of marketable securities 2,262,533 2,229,736
Purchase of plant and equipment (1,434,522) (23,234)
Other -- (61,000)
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Net cash used for investing activities (3,098,538) (5,826,920)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (381,954) (349,245)
Shares purchased and retired (399,625) --
Proceeds from stock options exercised 392,027 --
Short-term borrowings 3,060,000 --
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Net cash (used for) provided by
financing activities 2,670,448 (349,245)
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Net increase (decrease) in cash
and cash equivalents 1,187,901 (4,652,490)
CASH AND CASH EQUIVALENTS at beginning
of period 3,323,035 6,837,765
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CASH AND CASH EQUIVALENTS at end
of period $ 4,510,936 $ 2,185,275
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 225,828 $ 301,000
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</TABLE>
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<PAGE> 5
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, 1998, 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. The Company adopted Statement of Accounting
Standards No. 128, "Earnings Per Share," as of December 31, 1997 and has
restated prior period earnings per share as required.
(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) During the first quarter of 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements, either in the statement of operations or a separate
statement. Additionally, SFAS 130 requires the display of the accumulated
balance of other comprehensive income. The adoption of this standard did
not impact the financial statements of the Company.
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 $43,641,000 at March 31, 1998,
compared with $40,789,000 at December 31, 1997. The Company also 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. In addition, the
Company entered into a 3 year $10,000,000 revolving credit agreement during
the first quarter of 1998. The Company did not make any borrowings under
these facilities during the first quarter.
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<PAGE> 6
In December 1997, the Company broke ground on a new 346,000 square foot
office and distribution center. Management estimates that the building
will be completed in the fall of 1998 with installation of equipment and
systems to follow. Operations are expected to begin in the new facility in
the second quarter of 1999. Management believes that this facility,
coupled with system improvements, will greatly enhance the distribution
process, enabling the Company to better serve customers and continue to
grow. The entire project is expected to cost $12 million. During the first
quarter of 1998, the Company began issuing commercial paper with 30 to 90
day maturities to finance the construction project. As of March 31, 1998,
$3,060,000 of commercial paper was outstanding.
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 increased 6%, from $34,153,000 for the first quarter of
1997 to $36,055,000 for the first quarter of 1998. Net sales in the
wholesale division increased $2,350,000 (7%) from $31,952,000 in 1997 to
$34,302,000 in 1998. The increase in sales resulted from both an increase
in the number of pairs of shoes shipped and the average selling price per
pair, attributable to a change in product mix. Retail net sales decreased
20% from $2,201,000 in the first quarter of 1997 to $1,753,000 in the
first quarter of 1998, primarily as a result of the closing of 4 retail
units during 1997. Same store retail sales were down 6% between the first
quarter of 1997 and 1998 principally due to a later Easter in 1998.
Gross earnings as a percent of net sales was consistent
between the first quarter of 1997 and 1998 at 27%. This reflects the
consistency of wholesale gross earnings as a percent of wholesale net sales
of 26% for the first quarters of 1997 and 1998, as well as retail gross
earnings as a percent of retail net sales of 52% for the first quarters of
1997 and 1998.
For the first quarter, selling and administrative expenses increased
$444,000 between 1997 and 1998. As a percent of net sales, selling and
administrative expenses increased from 16% in 1997 to 17% in 1998. This
increase reflects fees incurred in the first quarter of 1998 relating to
enhancements of our information systems, including costs related to
ensuring our systems will be year 2000 compliant.
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<PAGE> 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held April 28, 1998 to 1) elect two
members to the Board of Directors, 2) vote on a proposal to approve the
Weyco Group, Inc. 1997 Stock Option Plan, and 3) vote on a proposal to
amend the Company's Restated Articles of Incorporation to increase the
number of authorized shares of Common Stock of the Company, $1.00 par
value, from 4,000,000 to 10,000,000 shares.
Thomas W. Florsheim and Frank W. Norris were nominated for election to the
Board of Directors for terms of three years. A total of 10,950,936 votes
were cast for each nominee, and 64,254 votes were withheld for Mr.
Florsheim and 27,750 votes were withheld for Mr. Norris.
The Weyco Group, Inc. 1997 Stock Option Plan was voted on and approved. A
total of 9,936,732 votes were cast for the proposal, 429,150 votes against
the proposal, 86,293 votes abstained, and there were 498,761 nonbroker
votes.
The amendment to the Company's Restated Articles of Incorporation was voted
on and approved. A total of 10,642,580 votes were cast for the amendment,
271,524 votes against the amendment, and 36,832 votes abstained.
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 12, 1998 /s/ John Wittkowske
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Date John Wittkowske
Vice President-Finance
Chief Financial Officer
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,511
<SECURITIES> 9,023
<RECEIVABLES> 26,758
<ALLOWANCES> 2,470
<INVENTORY> 8,437
<CURRENT-ASSETS> 49,602
<PP&E> 10,042
<DEPRECIATION> 6,460
<TOTAL-ASSETS> 90,288
<CURRENT-LIABILITIES> 20,463
<BONDS> 0
0
0
<COMMON> 4,794
<OTHER-SE> 64,167
<TOTAL-LIABILITY-AND-EQUITY> 90,288
<SALES> 36,055
<TOTAL-REVENUES> 36,055
<CGS> 26,254
<TOTAL-COSTS> 32,271
<OTHER-EXPENSES> (442)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 4,226
<INCOME-TAX> 1,550
<INCOME-CONTINUING> 2,676
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,676
<EPS-PRIMARY> .56
<EPS-DILUTED> .55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,185
<SECURITIES> 7,077
<RECEIVABLES> 27,197
<ALLOWANCES> 2,292
<INVENTORY> 6,440
<CURRENT-ASSETS> 42,966
<PP&E> 8,431
<DEPRECIATION> 6,047
<TOTAL-ASSETS> 75,075
<CURRENT-LIABILITIES> 13,934
<BONDS> 0
0
0
<COMMON> 1,587
<OTHER-SE> 59,554
<TOTAL-LIABILITY-AND-EQUITY> 75,075
<SALES> 34,153
<TOTAL-REVENUES> 34,153
<CGS> 24,872
<TOTAL-COSTS> 30,444
<OTHER-EXPENSES> (127)
<LOSS-PROVISION> 36
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 3,836
<INCOME-TAX> 1,450
<INCOME-CONTINUING> 2,386
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,386
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
