<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 June 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 August 1, 2000 the following shares were outstanding.
Common Stock, $1.00 par value 3,139,609 Shares
Class B Common Stock, $1.00 par value 919,945 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
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $3,837,332 $ 3,843,915
Marketable securities 5,243,541 4,860,576
Accounts receivable, net 26,243,910 21,903,407
Inventories -
Finished shoes 15,609,260 19,026,531
Shoes in process 290,751 380,957
Raw materials and supplies 120,911 132,243
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Total inventories 16,020,922 19,539,731
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Deferred income tax benefits 2,844,000 2,880,000
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Prepaid expenses and other current assets 179,759 65,537
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Total current assets 54,369,464 53,093,166
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MARKETABLE SECURITIES 16,493,156 17,672,907
OTHER ASSETS 8,900,612 8,559,332
PLANT AND EQUIPMENT 21,904,856 21,468,279
Less - Accumulated depreciation 5,578,320 4,874,503
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16,326,536 16,593,776
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$96,089,768 $95,919,181
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<CAPTION>
LIABILITIES & SHAREHOLDERS' INVESTMENT
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 8,115,000 $8,800,000
Accounts payable 8,818,600 9,403,897
Dividend payable 449,411 421,277
Accrued liabilities 5,510,114 6,422,885
Accrued income taxes 1,021,172 1,204,621
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Total current liabilities 23,914,297 26,252,680
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DEFERRED INCOME TAX LIABILITIES 2,151,000 1,916,000
SHAREHOLDERS' INVESTMENT:
Common stock 4,070,554 4,160,986
Other shareholders' investment 65,953,917 63,589,515
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$96,089,768 $95,919,181
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</TABLE>
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE PERIODS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
Three Months ended June 30 Six Months ended June 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $38,315,160 $31,804,314 $80,311,944 $66,844,960
COST OF SALES 28,295,202 23,335,105 59,085,704 48,665,503
----------- ----------- ----------- -----------
Gross earnings 10,019,958 8,469,209 21,226,240 18,179,457
SELLING AND ADMINISTRATIVE EXPENSES 6,484,358 5,555,976 13,116,686 11,367,080
----------- ----------- ----------- -----------
Earnings from operations 3,535,600 2,913,233 8,109,554 6,812,377
INTEREST INCOME 267,061 374,808 529,269 750,279
INTEREST EXPENSE (154,887) (139,274) (311,833) (275,367)
OTHER INCOME AND EXPENSE, net 60,958 11,389 108,295 27,086
----------- ----------- ----------- -----------
Earnings before provision for
income taxes 3,708,732 3,160,156 8,435,285 7,314,375
PROVISION FOR INCOME TAXES 1,350,000 1,050,000 3,050,000 2,500,000
----------- ----------- ----------- -----------
Net earnings $ 2,358,732 $ 2,110,156 $ 5,385,285 $ 4,814,375
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
(Note 2)
Basic 4,089,554 4,311,175 4,111,313 4,349,768
Diluted 4,142,965 4,372,696 4,164,371 4,413,331
EARNINGS PER SHARE (Note 2):
Basic $.58 $.49 $1.31 $1.11
==== ==== ===== =====
Diluted $.57 $.48 $1.29 $1.09
==== ==== ===== =====
CASH DIVIDENDS PER SHARE $.11 $.10 $.21 $.19
==== ==== ==== ====
</TABLE>
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WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $3,431,347 $ 1,150,243
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (1,460,829) (750,465)
Proceeds from maturities of marketable securities 2,257,615 3,973,874
Purchase of plant and equipment (467,159) (3,352,314)
Proceeds from sales of plant and equipment 28,758 --
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Net cash provided by (used for)
investing activities 358,385 (128,905)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (863,410) (796,639)
Shares purchased and retired (2,338,196) (3,386,747)
Proceeds from stock options exercised 90,291 --
Short-term borrowings (685,000) 1,678,205
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Net cash used for financing activities (3,796,315) (2,505,181)
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Net decrease in cash and cash equivalents (6,583) (1,483,843)
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 $ 3,837,332 $ 2,757,148
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 2,681,925 $ 2,772,492
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Interest paid $ 314,670 $ 289,457
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</TABLE>
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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, 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 intends to adopt this standard in 2001. The adoption of this
standard is not expected to 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:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
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2000 1999 2000 1999
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net Earnings . . . . . . . . . . . . . . . . . $2,358,732 $2,110,156 $5,385,285 $4,814,375
========== ========== ========== ==========
Denominator:
Basic weighted average shares. . . . . . . . . 4,089,554 4,311,175 4,111,313 4,349,768
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . 53,411 61,521 53,058 63,563
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Diluted weighted average shares . . . . . . . 4,142,965 4,372,696 4,164,371 4,413,331
========== =========== ========== ==========
Basic earnings per share . . . . . . . . . . . . $.58 $.49 $1.31 $1.11
==== ==== ===== =====
Diluted earnings per share . . . . . . . . . . . $.57 $.48 $1.29 $1.09
==== ==== ===== =====
</TABLE>
(4) The Company continues to operate in two business segments: wholesale
distribution and retail sales of men's footwear. Summarized segment data
for June 30, 2000 and 1999 is:
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<TABLE>
<CAPTION>
Wholesale
Distribution Retail Total
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<S> <C> <C> <C>
THREE MONTHS ENDED JUNE 30
2000
Net Sales . . . . . . . . . . . . . . . . . $36,676,000 $1,639,000 $38,315,000
Earnings from operations . . . . . . . . . . . . 3,438,000 98,000 3,536,000
1999
Net Sales . . . . . . . . . . . . . . . . . $30,097,000 $1,707,000 $31,804,000
Earnings from operations . . . . . . . . . . . . 2,776,000 137,000 2,913,000
SIX MONTHS ENDED JUNE 30
2000
Net Sales . . . . . . . . . . . . . . . . . $77,070,000 $3,242,000 $80,312,000
Earnings from operations . . . . . . . . . . . . 7,984,000 126,000 8,110,000
1999
Net Sales . . . . . . . . . . . . . . . . . $63,629,000 $3,216,000 $66,845,000
Earnings from operations . . . . . . . . . . . . 6,649,000 163,000 6,812,000
</TABLE>
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 $25,574,000 at June 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 second quarter of 2000.
Cash flows from operations are $2.3 million higher to date in 2000 than in
the same period of 1999. The increase in cash flows from operations is
primarily due to the higher net income and the $3.5 million decrease in
inventories. This, however, is partially offset by the $4.3 million
increase in accounts receivable and the decreases in accounts payable and
accrued liabilities.
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The Company's capital expenditures were $467,000 and $3,352,000 for the
first six months of 2000 and 1999, respectively. In 1999, expenditures were
primarily related to the construction of the Company's new 346,000 square
foot corporate office and distribution center. The Company's corporate
offices and distribution functions moved into the new building in 1999.
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, $12 million revolving credit agreement. At June 30, 2000, there
was $8,115,000 of commercial paper and advances on the revolving credit
agreement outstanding.
In the first six months of 2000, the Company purchased 66,500 shares at a
total cost of $1,610,000 under its stock repurchase program, and an
additional 29,432 shares at a total cost of $728,000 in private
transactions. As of June 30, 2000, the Company can purchase up to 409,100
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
Overall net sales increased 20%, from $31,804,000 for the second quarter of
1999 to $38,315,000 for the second quarter of 2000. This 20% increase was
the result of a 22% increase in wholesale net sales, up from $30,097,000
for the second quarter of 1999 to $36,676,000 for the second quarter of
2000, offset slightly by a 4% decrease in retail net sales, from $1,707,000
in 1999 to $1,639,000 in 2000. The increase in wholesale net sales was
driven by an increase in pairs shipped. The decrease in retail sales was
due to the closing of one retail store in 2000. Same store sales were flat
between periods.
For the six months ended June 30, net sales increased 20%, from $66,845,000
in 1999 to $80,312,000 in 2000. This increase was also driven primarily by
the increase in wholesale net sales between periods, from $63,629,000 for
the six months ended June 30, 1999 to $77,070,000 for the same period in
2000. Retail sales were flat between periods, and same store retail sales
were up by 3%.
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<PAGE> 8
All of the Company's brands posted strong sales increases during the second
quarter. The Stacy Adams division was up 20% in the second quarter, with a
six- month gain of 24%. Within this division, there were significant gains
in both the dress footwear and "SAO by Stacy Adams" casual line. The Nunn
Bush brand was up 14% for the second quarter and 15% for the six months
ended June 30, 2000, with the strongest growth coming from the "Nunn Bush
NXXT" contemporary line. The Brass Boot brand continued its exceptional
growth with net sales up 84% in the second quarter and 81% for the six
month period.
Gross earnings as a percent of net sales for the second quarter decreased
from 26.6% in 1999 to 26.2% in 2000. For the six months ended June 30,
gross earnings as a percent of net sales decreased from 27.2% in 1999 to
26.4% in 2000. These decreases are the result of changes in the mix of
products sold between periods.
Selling and administrative expenses as a percent of net sales decreased
from 17.5% for the second quarter of 1999 to 16.9% for the same period in
2000, and from 17.0% to 16.3% for the six months ended June 30, 1999 and
2000, respectively. In general, the decrease in the selling and
administrative percentage reflects the fixed costs included in selling and
administrative expenses, which are not affected by changes in sales
volumes.
The effective tax rate increased from 33% in the second quarter of 1999 to
36% in the second quarter of 2000, and from 34% for the six months ended
June 30, 1999 to 36% for the same period in 2000. The increases result from
the decrease in tax exempt municipal bond income in 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
None
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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.
August 14, 2000 /s/ John Wittkowske
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Date John Wittkowske
Vice President-Finance
Chief Financial Officer
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