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, 1996 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 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.) 234 East Reservoir Avenue P. O. Box 1188 Milwaukee, Wisconsin 53201 (Address of principal executive offices) (Zip Code) (414) 263-8800 (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 --- --- As of August 1, 1996 the following shares were outstanding. Common Stock, $1.00 par value 1,263,043 Shares Class B Common Stock, $1.00 par value 329,932 Shares
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> June 30 December 31 1996 1995 --------------- ------------------- <S> <C> <C> CURRENT ASSETS: Cash and cash equivalents $ 2,715,440 $11,247,137 Marketable securities 10,797,826 12,677,712 Accounts receivable, net 20,699,601 18,867,506 Inventories - Finished shoes 7,155,974 14,188,733 Shoes in process 99,534 618,671 Raw materials and supplies 429,397 138,303 ------------- ------------- Total inventories 7,684,905 14,945,707 ------------ ----------- Deferred income tax benefits 1,558,000 1,746,000 Prepaids and other current assets 83,894 10,211 -------------- -------------- Total current assets 43,539,666 59,494,273 MARKETABLE SECURITIES 14,183,153 10,470,262 DEFERRED INCOME TAX BENEFITS 566,000 519,000 OTHER ASSETS 5,551,002 5,331,314 PLANT AND EQUIPMENT 8,704,485 8,782,806 Less - Accumulated depreciation (5,547,225) (5,269,369) ------------ ----------- 3,157,260 3,513,437 ------------ ----------- $66,997,081 $79,328,286 =========== =========== </TABLE> LIABILITIES & SHAREHOLDERS' INVESTMENT <TABLE> <S> <C> <C> CURRENT LIABILITIES: Accounts payable $ 3,342,815 $ 9,181,933 Dividend payable 352,655 397,113 Deferred compensation 1,816,185 1,175,000 Accrued liabilities 5,714,428 2,743,479 ------------ ------------ Total current liabilities 11,226,083 13,497,525 DEFERRED COMPENSATION -- 1,747,764 SHAREHOLDERS' INVESTMENT: Common stock 1,602,975 1,884,015 Other shareholders' investment 54,168,023 62,198,982 ----------- ------------ $66,997,081 $79,328,286 =========== =========== </TABLE> -1-
3 WEYCO GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS FOR THE PERIODS ENDED JUNE 30, 1996 AND 1995 <TABLE> <CAPTION> Three Months ended June 30 Six Months ended June 30 ------------------------------- ---------------------------- 1996 1995 1996 1995 -------- --------- -------- --------- <S> <C> <C> <C> <C> NET SALES $31,135,723 $28,798,989 $65,307,720 $58,084,877 COST OF SALES 22,830,181 21,321,687 48,331,581 42,251,577 ----------- ---------- ---------- ----------- Gross earnings 8,305,542 7,477,302 16,976,139 15,833,300 SELLING AND ADMINISTRATIVE EXPENSES 6,084,107 5,790,593 12,106,911 12,026,676 ----------- ----------- ----------- ----------- Earnings from operations 2,221,435 1,686,709 4,869,228 3,806,624 INTEREST AND OTHER INCOME, Net 225,723 349,246 526,900 685,396 ----------- ----------- ----------- ----------- Earnings before provision for income taxes 2,447,158 2,035,955 5,396,128 4,492,020 PROVISION FOR INCOME TAXES 909,000 734,000 2,000,000 1,619,000 ----------- ----------- ----------- ----------- Net earnings $ 1,538,158 $ 1,301,955 $ 3,396,128 $ 2,873,020 =========== =========== =========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (Note 2) 1,606,980 1,879,915 1,652,632 1,883,986 PER SHARE (Note 2): Net earnings $.95 $.69 $2.05 $1.52 ==== ==== ===== ===== Cash dividends $.22 $.21 $ .43 $ .41 ==== ==== ===== ===== </TABLE> -2-
4 WEYCO GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 <TABLE> <CAPTION> 1996 1995 ---------------- ---------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: $ 6,656,284 $ 2,578,222 ----------- ----------- Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities (8,406,795) (21,209,376) Proceeds from sales of marketable securities 6,573,790 20,581,434 Purchase of plant and equipment (209,039) (58,755) Other (218,340) (207,062) ----------- ----------- Net cash used for investing activities (2,260,384) (893,759) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Deferred compensation payments (1,175,000) -- Cash dividends paid (739,580) (772,781) Shares purchased and retired (11,027,517) (865,293) Proceeds from stock options exercised 14,500 197,000 ---------- ----------- Net cash used for financing activities (12,927,597) (1,441,074) ----------- ----------- Net (decrease) increase in cash and cash equivalents (8,531,697) 243,389 CASH AND CASH EQUIVALENTS at beginning of period 11,247,137 3,648,361 ----------- ----------- CASH AND CASH EQUIVALENTS at end of period $ 2,715,440 $ 3,891,750 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid $ 1,560,973 $ 1,718,796 =========== =========== </TABLE> -3-
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 or six months ended June 30, 1996, 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. 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 $27,696,000 at June 30, 1996, compared with $34,395,000 at December 31, 1995. 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 1996. On January 3, 1996, the Company paid $9,938,885 for the purchase of 146,860 shares of Common Stock and 106,360 shares of Class B Common Stock. On February 1, 1996, the Company paid $1,175,000 under deferred compensation agreements. 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. Results of Operations Total net sales increased $2,337,000 (8%) during the three months ended June 30, 1996 compared with the same period in 1995. Net sales in the wholesale division increased $2,938,000 (12%) from $24,680,000 in 1995 to $27,618,000 in 1996. The increase in sales resulted from an increase of 5% in the number of pairs of shoes shipped as compared with 1995, as well as an increase in the average selling price per pair, attributed to a change in product mix. Retail net sales decreased 15% from $4,119,000 in the second quarter of 1995 to $3,518,000 in the second quarter of 1996. The decrease resulted primarily from the closing of 10 retail units during 1995. -4-
6 For the six months ended June 30, 1996, net sales increased $7,223,000 (12%) as compared with the same period in 1995. Wholesale sales increased $8,550,000 or 17% from $50,361,000 in 1995 to $58,911,000 in 1996. This increase resulted from an increase of 11% in the number of pairs shipped compared to 1995, as well as an increase in the average selling price per pair, attributed to a change in product mix. Retail net sales decreased $1,327,000 (17%) from $7,724,000 in 1995 to $6,397,000 in 1996, as a result of the previously discussed store closings. Same store net sales were flat as compared with the same period in 1995. Gross earnings as a percent of net sales for the second quarter and the six months ended June 30 were consistent between 1995 and 1996 at approximately 26 - 27%. 1996 gross earnings, however, included a $600,000 loss reserve recorded in the first quarter of 1996 for the closing of 13 retail stores. The last of the closings occurred in July 1996. Management believes that the reserve recorded in the first quarter is adequate to cover the full amount of the related costs incurred or expected to be incurred from the closing of these stores. Excluding this loss reserve, gross earnings as a percent of net sales would have increased 1%. Selling and administrative expenses for the second quarter and six months ended June 30, were consistent between 1996 and 1995, after considering decreases in these expenses related to the closing of retail units during 1995, offset by increases due to increased wholesale volume in 1996. Interest and other income is comprised principally of municipal bond interest. The decrease in both the three and six month amounts is due to a decrease in marketable securities. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K None -5-
7 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. --------------------- ------------------------ Date John Wittkowske Vice President-Finance Chief Financial Officer -6-