Weyco Group, Inc. (WEYS)
Q3 2008 Earnings Call Transcript
November 4, 2008, 11:00 am ET
John Wittkowske – SVP, CFO and Secretary
Tom Florsheim, Jr. – Chairman and CEO
John Florsheim – President and COO and Assistant Secretary
Ted Goins – Salem
Previous Statements by WEYS
» Weyco Group Inc. Q4 2008 Earnings Call Transcript
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» Weyco Group Inc Q1 2008 Earnings Call Transcript
I will now turn the call over to Mr. John Wittkowske, Senior Vice President and Chief Financial Officer. Please proceed, sir.
Thanks, Frances. Also on this call today are Tom Florsheim Jr., our Chairman and CEO; and John Florsheim, our President and Chief Operating Officer. On behalf of Tom and John Florsheim, I would like to thank all of you for joining us here today for our third-quarter conference call.
Before we begin to discuss the results for the quarter, I will read a brief disclaimer. During the course of this call, we may make projections or other forward-looking statements regarding our current expectations concerning future events and the future financial performance of the company. We wish to caution you that some statements are just predictions, and that actual events or results may differ materially. We refer you to Weyco Group’s most recent Form 10-K as filed with the Securities and Exchange Commission. This document identifies important factors that could cause the company's actual results to differ materially from our projections. Additionally, some comparisons may refer to non-GAAP measures. Our SEC filings may contain additional information about these non-GAAP measures and why we use them.
Net sales for the third quarter of 2008 were $57.2 million, down 2% from $58.2 million in 2007. Net earnings were $4.3 million for the third quarter as compared with $5.3 million in the third quarter last year. Diluted earnings per share were $0.37 in 2008 as compared with $0.45 in 2007.
Wholesale sales for the third quarter were $49.3 million, down 2% from $50.5 million in 2007. Looking at each brand in our whole division, sales of our Stacy Adams brand were down 18%, Nunn bush was up 16% and Florsheim sales were down 6%. Tom will discuss our individual brand performance in a few minutes.
Sales in our retail division were flat at $6.9 million. Same-store sales in the United States were down 2%, while overall same-store sales, including Europe were flat. As of the end of the third quarter, our retail division consisted of 38 retail stores in the United States, two in Europe, and an Internet business.
Licensing revenue for the quarter was $991,000 in 2008 and $807,000 in 2007. Licensee sales of Stacy Adams branded products were down for the quarter, as the independent closing retailers continue to face a challenging retail environment. However, our Stacy Adams royalties increased this quarter, because we had previously terminated our agreement with our licensing agent, to whom we previously paid a percentage of the royalties. The services performed by the licensing agent are now handled in-house and the related costs are included in our SG&A costs. Those costs offset a portion of the royalty gained. Licensing revenues from the sales of Florsheim footwear overseas and branded products in the United States were up slightly from the prior year.
Operating earnings were down $1.6 million in the third quarter of 2008 compared with the same period of 2007. This decrease consisted of decreases of $1.4 million in a wholesale division and $400,000 in our retail division, offset by the approximate $200,000 increase in royalty income.
In the wholesale division, approximately half of the $1.4 million decrease in operating earnings was due to low margins. Wholesale margins were 31.2% for the third quarter, down 140 basis points compared to last year. The rest of the decrease was due to the lower sales volume and higher selling and administrative expenses. Wholesale selling and administrative expenses were up $360,000, which was primarily the result of $380,000 of receivables written off this quarter following the bankruptcy filings of two of our customers.
In the retail division, the decrease in operating earnings was the result of higher selling and administrative expenses, principally rent and occupancy costs. Rent and occupancy costs were up $218,000, resulting from additional stores being operated in the third quarter of 2008 and from higher costs at existing stores. The remaining increase was due to additional employee costs and depreciation.
As of September 30, 2008, our cash and marketable securities totaled $56.3 million, with only $2 million of debt, resulting in a net cash position of $54.3 million. This compares with a net cash position of $56.2 million at December 31, 2007.
In the first nine months of 2008, we generated $9.2 million of cash from operating activities and borrowed $1.5 million under our short-term credit facility. We used $2 million of cash for capital expenditures, $8.4 million to purchase company stock, and $4.1 million to pay dividends. We anticipate total capital expenditures for 2008 to be between $2 million and $3 million.