<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, 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.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0702200
(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 1, 2000 the following shares were outstanding.
Common Stock, $1.00 par value 3,175,519 Shares
Class B Common Stock, $1.00 par value 920,035 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
2000 1999
----------- -----------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 2,768,018 $ 3,843,915
Marketable securities 3,641,545 4,860,576
Accounts receivable, net 29,997,274 21,903,407
Inventories -
Finished shoes 16,016,744 19,026,531
Shoes in process 258,243 380,957
Raw materials and supplies 117,563 132,243
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Total inventories 16,392,550 19,539,731
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Deferred income tax benefits 2,731,000 2,880,000
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Prepaid expenses and other current assets 178,868 65,537
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Total current assets 55,709,255 53,093,166
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MARKETABLE SECURITIES 17,446,365 17,672,907
OTHER ASSETS 8,729,972 8,559,332
PLANT AND EQUIPMENT 21,520,754 21,468,279
Less - Accumulated depreciation 5,211,357 4,874,503
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16,309,397 16,593,776
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$98,194,989 $95,919,181
=========== ===========
LIABILITIES & SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term borrowings $9,715,000 $8,800,000
Accounts payable 8,601,419 9,403,897
Dividend payable 413,999 421,277
Accrued liabilities 6,050,138 6,422,885
Accrued income taxes 2,450,887 1,204,621
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Total current liabilities 27,231,443 26,252,680
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DEFERRED INCOME TAX LIABILITIES 1,952,000 1,916,000
SHAREHOLDERS' INVESTMENT:
Common stock 4,106,554 4,160,986
Other shareholders' investment 64,904,992 63,589,515
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$98,194,989 $95,919,181
=========== ===========
</TABLE>
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<PAGE> 3
WEYCO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
NET SALES $41,996,784 $35,040,646
COST OF SALES 30,790,502 25,330,398
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Gross earnings 11,206,282 9,710,248
SELLING AND ADMINISTRATIVE EXPENSES 6,632,328 5,811,104
----------- -----------
Earnings from operations 4,573,954 3,899,144
INTEREST INCOME 259,836 373,674
INTEREST EXPENSE (154,574) (136,097)
OTHER INCOME AND EXPENSE 47,337 17,498
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Earnings before provision for
income taxes 4,726,553 4,154,219
PROVISION FOR INCOME TAXES 1,700,000 1,450,000
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Net earnings $ 3,026,553 $ 2,704,219
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 3)
Basic 4,131,882 4,387,050
Diluted 4,185,641 4,453,195
EARNINGS PER SHARE (Note 3)
Basic $.73 $.62
==== ====
Diluted $.72 $.61
==== ====
Cash dividends $.10 $.09
==== ====
</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, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used for)
operating activities $ (1,616,733) $ 2,214,128
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of
marketable securities 1,445,573 1,861,082
Purchase of plant and equipment (73,079) (2,300,331)
Proceeds from sales of plant and equipment 18,850 --
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Net cash provided by (used for)
investing activities 1,391,344 (439,249)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (413,999) (403,103)
Shares purchased and retired (1,393,884) (1,925,983)
Proceeds from stock options exercised 42,375 --
Short-term borrowings 915,000 373,234
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Net cash used for financing activities (850,508) (1,955,852)
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Net decrease in cash
and cash equivalents (1,075,897) (180,973)
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 $ 2,768,018 $ 4,060,018
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 240,000 $ 134,788
============= =============
Interest paid $ 109,574 $ 153,113
============= =============
</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 ended March
31, 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 issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This 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>
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Numerator:
Net Earnings . . . . . . . . . . . . . . . . . . . . . $3,026,553 $2,704,219
========== ==========
Denominator:
Basic weighted average shares . . . . . . . . . . . . . 4,131,882 4,387,050
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . . . . 53,759 66,145
--------- ---------
Diluted weighted average shares. . . . . . . .. . . . . 4,185,641 4,453,195
========= =========
Basic earnings per share . . . . . . . . . . . . . . . $.73 $.62
==== ====
Diluted earnings per share . . . . . . . . . . . . . . $.72 $.61
==== ====
</TABLE>
(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, 2000 and 1999 is:
<TABLE>
<CAPTION>
Wholesale
Distribution Retail Total
------------ ---------- -----------
<S> <C> <C> <C>
MARCH 31, 2000
Net Sales. . . . . . . . . . . . . . . . . $40,394,000 $1,603,000 $41,997,000
Earnings from operations . . . . . . . . . 4,547,000 27,000 4,574,000
MARCH 31, 1999
Net Sales . . . . . . . . . . . . . . . .. $33,532,000 $1,509,000 $35,041,000
Earnings from operations. . . . . . . . .. 3,872,000 27,000 3,899,000
</TABLE>
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<PAGE> 6
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 $23,856,000 at March 31, 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 first quarter of 2000.
Cash flows from operations were $3.8 million lower in the first quarter of
2000 than in the same period of 1999. The decrease in cash flows from
operations was primarily due to an $8.1 million increase in accounts
receivable, resulting from the 20% increase in sales. This, however, was
partially offset by the positive effect on cash flows of the $3.1 million
decrease in inventories and the $1.2 million increase in accrued income
taxes during the period.
The Company's capital expenditures were $73,000 and $2,300,000 for the
first quarter 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 March 31, 2000,
there was $9,715,000 of commercial paper and advances on the revolving
credit agreement outstanding.
During the first quarter of 2000, the Company purchased 36,500 shares at a
total cost of $881,000 under its stock repurchase program, and 20,432
shares at a total cost of $513,000 in private transactions. As of March 31,
2000, the Company has the option of purchasing up to 439,100 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.
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<PAGE> 7
Results of Operations
Overall net sales increased 20%, from $35,041,000 for the first quarter of
1999 to $41,997,000 for the first quarter of 2000. This 20% increase was
the result of a 20% increase in wholesale net sales, up from $33,532,000
for the first quarter of 1999 to $40,394,000 in the first quarter of 2000,
and a 6% increase in retail net sales, up from $1,509,000 for the first
quarter of 1999 to $1,603,000 in the first quarter of 2000. The increase in
wholesale sales was driven by an increase in pairs shipped. Same store
retail net sales increased 7% between periods.
All of the Company's brands posted strong sales increases during the first
quarter. The Stacy Adams division was up 21% with significant gains in both
dress footwear and in our "SAO by Stacy Adams" casual line. The Nunn Bush
division was up 16% with strong growth from our Nunn Bush NXXT contemporary
line, as well as our core Nunn Bush line. The Brass Boot brand experienced
a 78% increase in sales. Our sales backlogs are up significantly for all
brands.
Gross earnings as a percent of net sales for the first quarter decreased
from 27.7% in 1999 to 26.7% in 2000. This decrease results mainly from the
decrease in gross earnings as a percent of net sales for the wholesale
division, which decreased from 26.6% in 1999 to 25.8% in 2000. The decrease
in wholesale gross earnings as a percent of net sales between 1999 and 2000
is primarily attributable to differences in the mix of products sold
between periods.
Selling and administrative expenses as a percent of net sales decreased
from 16.6% for the first quarter of 1999 to 15.8% for the same period in
2000. This is primarily the result of the decrease in wholesale selling and
administrative expenses as a percent of wholesale net sales from 15.1% in
the first quarter of 1999 to 14.5% in the first quarter of 2000. In
general, the decrease 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 effective tax rate increased from 35% in the first quarter of 1999 to
36% in the first quarter of 2000. The increase results from the decrease in
municipal bond income due to lower marketable securities balances this
year.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held April 25, 2000 to elect three
members to the Board of Directors.
Virgis W. Colbert, John W. Florsheim, and Frederick P. Stratton, Jr. were
nominated for election to the Board of Directors for terms of three years.
A total of 11,124,983 votes were cast for the nominees, with 13,596 votes
withheld for Mr. Colbert, 35,028 votes withheld for Mr. Florsheim and
12,156 votes withheld for Mr. Stratton.
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<PAGE> 8
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 10, 2000 /s/ John Wittkowske
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Date John Wittkowske
Vice President-Finance
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,768
<SECURITIES> 3,642
<RECEIVABLES> 32,782
<ALLOWANCES> 2,785
<INVENTORY> 16,393
<CURRENT-ASSETS> 55,709
<PP&E> 21,521
<DEPRECIATION> 5,211
<TOTAL-ASSETS> 98,194
<CURRENT-LIABILITIES> 27,231
<BONDS> 0
0
0
<COMMON> 4,107
<OTHER-SE> 64,905
<TOTAL-LIABILITY-AND-EQUITY> 98,194
<SALES> 41,997
<TOTAL-REVENUES> 41,997
<CGS> 30,791
<TOTAL-COSTS> 37,423
<OTHER-EXPENSES> (307)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154
<INCOME-PRETAX> 4,727
<INCOME-TAX> 1,700
<INCOME-CONTINUING> 3,027
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,027
<EPS-BASIC> .73
<EPS-DILUTED> .72
</TABLE>
