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Weyco Reports Third Quarter Sales And Earnings

MILWAUKEE, Oct. 27, 2017 /PRNewswire/ -- Weyco Group, Inc. (NASDAQ: WEYS) (the "Company") today announced financial results for the quarter ended September 30, 2017.

Net sales for the third quarter of 2017 were $76.9 million, a decrease of 3% as compared to third quarter 2016 net sales of $79.1 million. Earnings from operations were $7.8 million in both the third quarters of 2017 and 2016. Net earnings attributable to the Company increased 7% to $4.9 million in the third quarter of 2017, up from $4.6 million in last year's third quarter. Diluted earnings per share were $0.48 per share in the third quarter of 2017 and $0.44 per share in the third quarter of 2016.

Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $60.7 million in the third quarter of 2017, down 2% as compared to $62.2 million in the third quarter of 2016. Within the wholesale segment, net sales of the Stacy Adams and Nunn Bush brands were down 3% and 9%, respectively, for the quarter, due to lower department store sales. These brands, however, did see some increases in other trade channels. BOGS third quarter net sales were down 4% for the quarter, due to lower sales with outdoor retailers. Florsheim sales were up 9% for the quarter, due to higher sales to department stores and national shoe chains. Licensing revenues were $527,000 in the third quarter of 2017 and $525,000 in last year's third quarter.

Gross earnings for the North American wholesale segment increased to 33.9% of net sales in the third quarter of 2017, from 32.2% in last year's third quarter. Earnings from operations for the wholesale segment were $7.4 million in the third quarter of 2017, up 11% as compared to $6.7 million in the same period last year. The increase was primarily due to higher wholesale gross margins and lower selling and administrative expenses this quarter.

Net sales in the North American retail segment, which includes sales from the Company's Florsheim retail stores and its internet business in the United States, were $4.3 million in the third quarter of 2017, down 9% as compared to $4.7 million in 2016. Same store sales (which includes U.S. internet sales) were down 10% for the quarter due to decreased sales at both brick and mortar locations and on the Company's websites. The majority of our brick and mortar locations are in Florida and Texas, and sales this quarter were impacted by the recent hurricanes. Earnings from operations for the retail segment were $17,000 in the third quarter of 2017, as compared to $313,000 in the third quarter 2016. The decrease was mainly due to lower sales.

Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were $11.9 million in the third quarter of 2017, down 3% as compared to $12.2 million in the third quarter of 2016. The decrease was due to lower net sales at both Florsheim Australia and Florsheim Europe. Florsheim Australia's net sales, which accounts for the majority of other net sales, were down 2% for the quarter. In local currency, Florsheim Australia's net sales were down 6% for the quarter, with lower sales in both its retail and wholesale businesses. Earnings from operations of Florsheim Australia and Florsheim Europe were $369,000 in the third quarter of 2017 and $731,000 in the same period last year. The decrease between years was primarily due to lower operating earnings in Florsheim Australia's retail businesses.

In the first quarter of 2017, the Company retrospectively adopted a new accounting rule that required the Company to reclassify the non-service cost components of pension expense from selling and administrative expenses to other expense, net, in the Consolidated Condensed Statements of Earnings and Comprehensive Income (Unaudited). The decrease in other expense, net, this quarter was primarily due to a $316,000 decrease in the non-service cost components of pension expense. Pension expense decreased in 2017 as a result of freezing benefits under the pension plan, effective December 31, 2016.

"While the changing retail environment continues to impact our top-line sales growth, we are pleased to announce a bottom line earnings increase for the quarter," stated Thomas W. Florsheim, Jr., the Company's Chairman and CEO. "This earnings increase reflects our ongoing efforts to improve gross margins and control costs in our wholesale business."

On October 26, 2017, the Company's Board of Directors declared a cash dividend of $0.22 per share to all shareholders of record on December 4, 2017, payable January 2, 2018.

Conference Call Details:

Weyco Group will host a conference call on October 30, 2017, at 11:00 a.m. Eastern Time to discuss the third quarter financial results in more detail. To participate in the call, you will first need to pre-register online. Pre-registration takes only a few minutes and you may pre-register at any time, including up to and after the call start time. To pre-register, please go to: https://www.yourconferencecenter.com/confcenter/PinCode/Pin_Code.aspx?100374&o=UOSfUerPWNaVXY. The pre-registration process will provide the conference call phone number and a passcode required to enter the call. A replay will be available for one year beginning about two hours after the completion of the call at the following webcast link: https://edge.media-server.com/m6/p/qaf9m4d6. The conference call will also be available in the investor relations section of Weyco Group's website at www.weycogroup.com

About Weyco Group:

Weyco Group, Inc. designs and markets quality and innovative footwear for men, women and children under a portfolio of well-recognized brand names including: Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters and Umi. The Company's products can be found in leading footwear, department, and specialty stores worldwide. Weyco Group also operates Florsheim concept stores in the United States and Australia, as well as in a variety of international markets.

Forward-Looking Statements:

This press release contains certain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Various factors could cause the results of Weyco Group to be materially different from any future results expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the Company's ability to: (i) successfully market and sell its products in a highly competitive industry and in view of changing consumer trends, consumer acceptance of products and other factors affecting retail market conditions; (ii) procure its products from independent manufacturers; and (iii) other factors, including those detailed from time to time in Weyco Group's filings made with the SEC. Weyco Group undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)













Three Months Ended September 30,


Nine Months Ended September 30,



2017


2016


2017


2016



(In thousands, except per share amounts)










Net sales

$ 76,906


$ 79,069


$ 203,479


$ 214,836

Cost of sales

47,438


49,747


126,693


136,096

Gross earnings

29,468


29,322


76,786


78,740










Selling and administrative expenses

21,666


21,568


63,635


64,751

Earnings from operations

7,802


7,754


13,151


13,989










Interest income

193


190


572


584

Interest expense

-


(61)


(7)


(228)

Other expense, net

(53)


(311)


(243)


(850)










Earnings before provision for income taxes

7,942


7,572


13,473


13,495










Provision for income taxes

3,022


2,871


5,135


5,084










Net earnings

4,920


4,701


8,338


8,411










Net (losses) earnings attributable to noncontrolling interest

(14)


101


(70)


124










Net earnings attributable to Weyco Group, Inc.

$ 4,934


$ 4,600


$ 8,408


$ 8,287










Weighted average shares outstanding









Basic

10,160


10,461


10,299


10,556


Diluted

10,218


10,516


10,360


10,605










Earnings per share









Basic

$ 0.49


$ 0.44


$ 0.82


$ 0.79


Diluted

$ 0.48


$ 0.44


$ 0.81


$ 0.78










Cash dividends declared (per share)

$ 0.22


$ 0.21


$ 0.65


$ 0.62



















Comprehensive income

$ 5,452


$ 5,218


$ 10,251


$ 10,400










Comprehensive income attributable to noncontrolling interest

25


235


271


376










Comprehensive income attributable to Weyco Group, Inc.

$ 5,427


$ 4,983


$ 9,980


$ 10,024

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)










September 30,


December 31,


2017


2016


(Dollars in thousands)

ASSETS:

Cash and cash equivalents

$ 6,704


$ 13,710

Marketable securities, at amortized cost

11,354


4,601

Accounts receivable, net

56,271


50,726

Income tax receivable

781


789

Inventories

57,692


69,898

Prepaid expenses and other current assets

3,010


6,203

Total current assets

135,812


145,927





Marketable securities, at amortized cost

18,273


21,061

Deferred income tax benefits

707


660

Property, plant and equipment, net

32,371


33,717

Goodwill

11,112


11,112

Trademarks

32,978


32,978

Other assets

22,984


22,785

Total assets

$ 254,237


$ 268,240









LIABILITIES AND EQUITY:




Short-term borrowings

$ 4,772


$ 4,268

Accounts payable

5,001


11,942

Dividend payable

-


2,192

Accrued liabilities

12,207


10,572

Total current liabilities

21,980


28,974





Deferred income tax liabilities

3,096


703

Long-term pension liability

23,724


27,801

Other long-term liabilities

2,269


2,482





Common stock

10,197


10,505

Capital in excess of par value

53,258


50,184

Reinvested earnings

147,951


157,468

Accumulated other comprehensive loss

(14,997)


(16,569)

Total Weyco Group, Inc. equity

196,409


201,588

Noncontrolling interest

6,759


6,692

Total equity

203,168


208,280

Total liabilities and equity

$ 254,237


$ 268,240

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)











Nine Months Ended September 30,




2017


2016




(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:





Net earnings

$ 8,338


$ 8,411


Adjustments to reconcile net earnings to net cash provided by





operating activities -






Depreciation

2,971


2,708



Amortization

265


288



Bad debt expense

350


96



Deferred income taxes

2,192


1,537



Net foreign currency transaction gains

(61)


(389)



Stock-based compensation

1,174


1,121



Pension contributions

(4,000)


(2,400)



Pension expense

746


2,500



Increase in cash surrender value of life insurance

(250)


(250)


Changes in operating assets and liabilities -






Accounts receivable

(5,703)


(3,714)



Inventories

12,195


26,641



Prepaid expenses and other assets

3,167


800



Accounts payable

(6,838)


(7,699)



Accrued liabilities and other

1,879


(1,023)



Accrued income taxes

22


(839)



Excess tax benefits from stock-based compensation

(30)


-



Net cash provided by operating activities

16,417


27,788







CASH FLOWS FROM INVESTING ACTIVITIES:





Purchases of marketable securities

(14,719)


(3,605)


Proceeds from maturities of marketable securities

10,710


4,190


Life insurance premiums paid

(155)


(155)


Purchases of property, plant and equipment

(1,406)


(4,872)



Net cash used for investing activities

(5,570)


(4,442)







CASH FLOWS FROM FINANCING ACTIVITIES:





Cash dividends paid

(8,877)


(8,678)


Cash dividends paid to noncontrolling interest of subsidiary

(204)


(170)


Shares purchased and retired

(11,621)


(9,368)


Proceeds from stock options exercised

2,013


585


Taxes paid related to the net share settlement of equity awards

(51)


-


Payment of contingent consideration

-


(5,217)


Proceeds from bank borrowings

20,651


91,729


Repayments of bank borrowings

(20,147)


(95,568)


Excess tax benefits from stock-based compensation

-


3



Net cash used for financing activities

(18,236)


(26,684)








Effect of exchange rate changes on cash and cash equivalents

383


252








Net decrease in cash and cash equivalents

$ (7,006)


$ (3,086)







CASH AND CASH EQUIVALENTS at beginning of period

13,710


17,926







CASH AND CASH EQUIVALENTS at end of period

$ 6,704


$ 14,840







SUPPLEMENTAL CASH FLOW INFORMATION:





Income taxes paid, net of refunds

$ 2,829


$ 4,083


Interest paid

$ 7


$ 228

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SOURCE Weyco Group, Inc.