Weyco Reports Fourth Quarter And Full Year 2013 Results

MILWAUKEE, Feb. 25, 2014 /PRNewswire/ -- Weyco Group, Inc. (NASDAQ: WEYS) (the "Company") today announced financial results for the quarter and year ended December 31, 2013.

FOURTH QUARTER

Net sales for the fourth quarter of 2013 were $78.5 million, compared with 2012 net sales of $78.4 million.  Earnings from operations were $10.8 million in the fourth quarter of 2013, down 13% as compared to $12.5 million in 2012. Net earnings attributable to the Company were $6.8 million in the fourth quarter of 2013, down 11% as compared to $7.7 million in 2012. Earnings for last year's fourth quarter included approximately $1.8 million ($1.1 million after tax) of income resulting from a reduction in the estimated liability for future payments related to the 2011 acquisition of The Combs Company ("Bogs"). Without this adjustment, earnings from operations and net earnings attributable to the Company would have been up 2% and 4%, respectively, for the quarter.

Diluted earnings per share were $0.62 in the fourth quarter of 2013, compared to $0.71 per share in the fourth quarter of 2012. Without the Bogs liability adjustment described above, 2012 diluted earnings per share on an adjusted basis would have been $0.60 per share, as shown in the "Reconciliation of Non-GAAP Financial Measure" table below.

Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $58.2 million for the fourth quarter of 2013, up 3% as compared to $56.6 million in 2012.  This increase was primarily due to higher sales of the BOGS brand. Wholesale net sales of BOGS increased approximately $2.5 million, or 22%, for the quarter, with higher sales in both the U.S. and Canada. Earnings from operations for the wholesale segment were $7.8 million in the fourth quarter of 2013, down 15% as compared to $9.1 million in 2012. Last year's fourth quarter earnings from operations included approximately $1.8 million of income resulting from the Bogs liability adjustment described above. Without this prior year adjustment, earnings from operations for the wholesale segment would have been up 7% for the quarter, primarily due to the increase in sales.

Net sales in the North American retail segment, which include sales from the Company's Florsheim retail stores and its internet business in the United States, were $6.9 million in the fourth quarter of 2013, down 9% as compared to $7.6 million in 2012.  Same store sales were up 5% for the quarter. There were six fewer domestic retail stores as of December 31, 2013 than at December 31, 2012. Earnings from operations for the retail segment increased approximately $173,000 for the quarter, due to the benefit of closing underperforming stores and improved same store performance.

Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were $13.5 million in the fourth quarter of 2013, down 5% as compared to $14.1 million in 2012.  The majority of other net sales were generated by Florsheim Australia.  Florsheim Australia's net sales were down $790,000, or 6%, for the quarter. In local currency, Florsheim Australia's net sales were up 5%, due to higher sales volumes in its retail businesses, partially offset by lower sales volumes in its wholesale businesses. The decrease in U.S. dollars was caused by the weakening of the Australian dollar relative to the U.S. dollar in 2013. Earnings from operations of these businesses were $1.6 million in the fourth quarter of 2013, down 24% as compared to $2.1 million in the same period last year. This decrease was primarily due to a $600,000 decline in the operating earnings of Florsheim Australia's wholesale businesses, resulting from lower sales volumes and gross margins.

FULL YEAR 2013

Overall net sales in 2013 were a record $300.3 million, an increase of 2% from 2012 sales of $293.5 million. Earnings from operations were $27.8 million in 2013, down 7% as compared to $29.8 million in 2012. Net earnings attributable to the Company were $17.6 million in 2013, down 7% as compared to $19.0 million in 2012. Earnings for 2012 included approximately $3.5 million ($2.1 million after tax) of income resulting from reductions in the estimated liability for future payments related to the 2011 acquisition of Bogs. Without these adjustments, earnings from operations and net earnings attributable to the Company would have been up 6% and 5%, respectively, for 2013 as compared to 2012.

Diluted earnings per share were $1.62 per share in 2013, compared to $1.73 per share in 2012. Without the Bogs liability adjustments described above, 2012 diluted earnings per share on an adjusted basis would have been $1.54 per share, as shown in the "Reconciliation of Non-GAAP Financial Measure" table below.

Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $225.7 million in 2013, up 4% as compared to $217.9 million in 2012. This increase was due to higher sales of the Nunn Bush, BOGS and Florsheim brands. Wholesale net sales of Nunn Bush were up approximately $4.8 million, or 8%, for the year due to higher sales volumes at department stores and national shoe chains, driven by increased sales of new casual products. Wholesale net sales of BOGS were up approximately $3.3 million, or 9%, for the year due to higher sales volumes in both the U.S. and Canada. BOGS net sales in Canada included $1.1 million of additional volume in 2013 due to the takeover of Bogs Canadian distribution in June 2012. Wholesale net sales of Florsheim were up approximately $1.8 million, or 4%, for the year due to increases across several trade channels. Wholesale gross margins increased to 32.6% in 2013, from 32.2% in 2012. Earnings from operations for the wholesale segment were $20.7 million in 2013, down 7% as compared to $22.2 million in 2012. Last year's earnings from operations included approximately $3.5 million of income resulting from the Bogs liability adjustments described above. Without these prior year adjustments, earnings from operations for the wholesale segment would have been up 11% in 2013 as compared to 2012, primarily due to the increase in sales and gross margins.

In the retail segment, net sales were $23.3 million in 2013, down 4% as compared to $24.3 million in 2012.  There were six fewer domestic retail stores as of December 31, 2013 than at December 31, 2012.  Same store sales were up 7% for the year.  Earnings from operations for the retail segment increased approximately $1.4 million for the year due to the benefit of closing underperforming stores and increases at both retail stores and the internet business.

The Company's other businesses had net sales of $51.4 million in 2013, compared with $51.2 million in 2012.  Florsheim Europe's wholesale business was up for the year, but was offset by lower net sales at Florsheim Australia. Florsheim Australia's net sales were down $730,000, or 2%, for the year. In local currency, Florsheim Australia's net sales were up 6% for the year, due to higher sales volumes in its retail businesses, partially offset by lower sales volumes in its wholesale businesses. The decrease in U.S. dollars was caused by the weakening of the Australian dollar relative to the U.S. dollar in 2013. Earnings from operations of these businesses were $4.0 million in 2013, down 33% as compared to $5.9 million last year. This decrease was primarily due to a $2.0 million decline in the operating earnings of Florsheim Australia's wholesale businesses, resulting from lower sales volumes and increased infrastructure costs to accommodate the Bogs expansion in Australia.   

"We are proud, as a Company, to have achieved $300 million in sales in 2013, which is a testament to the strength and staying power of our brands," stated Thomas W. Florsheim, Jr., the Company's Chairman and CEO. "Given the soft retail environment, we are pleased with the performance of our North American wholesale segment and are encouraged by the significant improvement in our retail business. We are looking forward to building upon these successes in 2014."

On February 24, 2014, the Company's Board of Directors declared a cash dividend of $0.18 per share to all shareholders of record on March 17, 2014, payable March 31, 2014.

Reconciliation of Non-GAAP Financial Measure



Three Months Ended December 31,


Twelve Months Ended December 31,


2013


2012


2013


2012

Diluted earnings per share, as reported

$ 0.62


$ 0.71


$ 1.62


$ 1.73

Effect of Bogs liability adjustments

-


(0.11)


-


(0.19)

Diluted earnings per share, as adjusted

$ 0.62


$ 0.60


$ 1.62


$ 1.54

In addition to the results reported in accordance with U.S. generally accepted accounting principles ("GAAP") included in this release, the table above (as well as the information provided in this release) provides certain non-GAAP financial information, related to diluted earnings per share excluding the impact of the Bogs liability adjustments (as described in more details above). Management believes that presentation of this non-GAAP financial measure provides useful information to investors because this information may allow investors to better evaluate ongoing business performance and certain components of the Company's results. In addition, the Company believes the presentation of diluted earnings per share excluding the impact of the Bogs liability adjustments enhances an investor's ability to make period-to-period comparisons of the Company's operating results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measure.

Conference Call Details

Weyco Group will host a conference call on February 26, 2014 at 11:00 a.m. Eastern Time to discuss the fourth quarter and full year 2013 financial results in more detail.  To participate in the call please dial 888-679-8018 or 617-213-4845, referencing passcode 86424742, five minutes before the start of the call. A replay will be available for one week beginning about three hours after the completion of the call by dialing 888-286-8010 or 617-801-6888, referencing passcode 45683792.  Alternatively, the conference call and replay will be available by visiting 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

FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012 (UNAUDITED)





















Three Months Ended December 31, 


Twelve Months Ended December 31,



2013


2012


2013


2012



(In thousands, except per share amounts)










Net sales

$ 78,545


$ 78,351


$ 300,284


$ 293,471

Cost of sales

45,208


44,819


182,971


178,584

Gross earnings

33,337


33,532


117,313


114,887










Selling and administrative expenses

22,536


21,078


89,558


85,090

Earnings from operations

10,801


12,454


27,755


29,797










Interest income 

317


436


1,461


1,840

Interest expense

(70)


(173)


(384)


(561)

Other income and (expense), net

97


(89)


(653)


(144)










Earnings before provision for income taxes

11,145


12,628


28,179


30,932










Provision for income taxes

3,887


4,288


9,930


10,533










Net earnings

7,258


8,340


18,249


20,399










Net earnings attributable to noncontrolling interest

454


663


648


1,442










Net earnings attributable to Weyco Group, Inc.

$   6,804


$   7,677


$   17,601


$   18,957










Weighted average shares outstanding









Basic

10,807


10,797


10,779


10,844


Diluted

10,939


10,878


10,865


10,950










Earnings per share









Basic

$     0.63


$     0.71


$       1.63


$       1.75


Diluted

$     0.62


$     0.71


$       1.62


$       1.73










Cash dividends declared (per share)

$     0.18


$     0.34


$       0.54


$       0.84

 

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)













December 31,


December 31,



2013


2012



(Dollars in thousands)

ASSETS:

Cash and cash equivalents


$   15,969


$   17,288

Marketable securities, at amortized cost


5,196


8,004

Accounts receivable, net


48,530


49,048

Accrued income tax receivable


1,055


1,136

Inventories


63,196


65,366

Deferred income tax benefits


-


649

Prepaid expenses and other current assets


6,136


4,953

     Total current assets


140,082


146,444






Marketable securities, at amortized cost


25,024


36,216

Deferred income tax benefits


-


792

Property, plant and equipment, net


35,112


37,218

Goodwill


11,112


11,112

Trademarks


34,748


34,748

Other assets


21,455


18,791

     Total assets


$ 267,533


$ 285,321






LIABILITIES AND EQUITY:





Short-term borrowings


$   12,000


$   45,000

Accounts payable


13,956


11,133

Dividend payable


1,949


-

Accrued liabilities


10,902


13,888

Deferred income tax liabilities 


849


-

     Total current liabilities


39,656


70,021






Deferred income tax liabilities 


1,993


-

Long-term pension liability


21,901


27,530

Other long-term liabilities


6,991


6,381






Common stock


10,876


10,831

Capital in excess of par value


31,729


26,184

Reinvested earnings


156,983


149,664

Accumulated other comprehensive loss


(9,422)


(12,514)

     Total Weyco Group, Inc. equity


190,166


174,165

Noncontrolling interest


6,826


7,224

     Total equity


196,992


181,389

     Total liabilities and equity


$ 267,533


$ 285,321



WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)











Twelve Months Ended December 31,




2013


2012




(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:





Net earnings

$ 18,249


$  20,399


Adjustments to reconcile net earnings to net cash





 provided by operating activities - 






Depreciation

3,962


3,338



Amortization

272


305



Bad debt expense

132


175



Deferred income taxes

1,268


1,648



Net losses (gains) on remeasurement of contingent consideration

24


(3,522)



Net foreign currency transaction losses

279


138



Stock-based compensation

1,283


1,201



Pension contribution

(1,282)


-



Pension expense

3,737


3,407



Other-than-temporary investment impairment

200


-



Impairment of property, plant and equipment

-


93



Increase in cash surrender value of life insurance

(540)


(535)


Changes in operating assets and liabilities - 






Accounts receivable

421


(5,586)



Inventories

2,048


(2,676)



Prepaids and other assets

(295)


368



Accounts payable

2,846


(1,802)



Accrued liabilities and other

(2,858)


1,356



Accrued income taxes

80


(320)



    Net cash provided by operating activities

29,826


17,987







CASH FLOWS FROM INVESTING ACTIVITIES:





Purchase of marketable securities

(122)


(10)


Proceeds from maturities of marketable securities

13,968


7,342


Life insurance premiums paid

(155)


(155)


Investment in real estate

(3,206)


-


Purchase of property, plant and equipment

(2,699)


(9,540)



     Net cash provided by (used for) investing activities

7,786


(2,363)







CASH FLOWS FROM FINANCING ACTIVITIES:





Cash dividends paid

(3,904)


(10,875)


Cash dividends paid to noncontrolling interest of subsidiary

(205)


(233)


Shares purchased and retired

(4,623)


(6,558)


Proceeds from stock options exercised

3,932


2,300


Payment of contingent consideration

(1,270)


-


Payment of indemnification holdback

-


(2,000)


Proceeds from bank borrowings

11,000


33,000


Repayments of bank borrowings

(44,000)


(25,000)


Income tax benefits from stock-based compensation

570


655



     Net cash used for financing activities

(38,500)


(8,711)








Effect of exchange rate changes on cash and cash equivalents

(431)


46








Net (decrease) increase in cash and cash equivalents

$  (1,319)


$    6,959







CASH AND CASH EQUIVALENTS at beginning of year

17,288


10,329







CASH AND CASH EQUIVALENTS at end of year

$ 15,969


$  17,288







SUPPLEMENTAL CASH FLOW INFORMATION:





Income taxes paid, net of refunds

$   7,807


$    8,946


Interest paid

$      335


$       442








SOURCE Weyco Group, Inc.



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