Weyco Group, Inc. (WEYS)

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Weyco Group, Inc. (WEYS)

2Q 2013 Results - Earnings Call Transcript

July 31, 2013 11:00 AM ET


John Wittkowske - Chief Financial Officer

Tom Florsheim Jr. - Chairman and CEO

John Florsheim - President and COO


Rebecca Simmons - DCRZ Inc.



Good day, ladies and gentlemen, and welcome to the second quarter 2013 Weyco Group Earnings Conference Call. My name is Lisa and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host, Mr. John Wittkowske, Chief Financial Officer. Please proceed.

John Wittkowske

Thank you. Good morning, everyone. Welcome to our second quarter conference call. On this call with me today are Tom Florsheim Jr., our Chairman and CEO and John Florsheim, our President and COO.

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 such statements are just predictions and that actual event 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. The 10-K identifies important factors and risks 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 second quarter of 2013 were $65 million compared to $60 million in 2012. Operating earnings were $3.7 million for the quarter versus $3.4 million last year. Net earnings attributable to Weyco Group were flat at $2.2 million for the quarter. Diluted earnings per share also remained flat at $0.20 per share.

Earnings for the second quarter of 2012 included approximately $700,000 or about $410,000 after tax, which equals $0.04 per diluted share of income that resulted from a reduction of the estimated liability for future payments related to the BOGS acquisition. Without this adjustment, earnings from operations and net earnings attributable to Weyco Group would have been up 36% and 22% respectively for the quarter.

North American wholesale net sales of footwear for the second quarter of 2013 were $47 million compared to $43 million in 2012. Licensing revenues were $625,000 compared to $539,000 last year. Operating earnings for the wholesale segment were $2.2 million this quarter compared to $2.1 million last year. Without the $700,000 adjustment that I referred to before, our earnings from operations for the wholesale segment would have been up 57% for the quarter.

Gross earnings as a percent of net sales for the wholesale segment were 29.9% in the second quarter compared with 29.3% in 2012. Selling and administrative expenses for the wholesale segment were $12 million or 26% of sales as compared to $10.7 million or 25% of sales in last year second quarter. Excluding the 2012 adjustment related to BOGS acquisition, our selling and administrative expenses as a percent of net sales would have been flat between years.

Net sales of our North American retail segment, which includes our retail stores and internet sales were $5.4 million compared to $5.6 million last year. Same store sales were up 6%, there were seven fewer retail stores at the end of the second quarter of 2013 than they were at the same time last year.

Retail operating earnings increased by $550,000 for the quarter, mainly due to higher same store sales and the previous closing of underperforming stores. Our other operations, which include the wholesale and retail businesses of Florsheim Australia and Florsheim Europe had net sales of $12.2 million in the second quarter versus $11.1 million in the second quarter last year.

The majority of our other net sales are generated by Florsheim Australia. Florsheim Australia's net sales were up 7%. Florsheim Australia's retail sales increased 13% overall with same store sales up 9%. Our Florsheim Australia’s wholesale business was flat for the quarter. Collectively operating earnings of Florsheim Australia and Florsheim Europe were $900,000 compared to $1.3 million in 2012.

The decrease in operating earnings was primarily due to higher selling and administrative expenses in Florsheim Australia’s retail businesses and also cost associated with the expansion of our distribution center in Australia, which was needed to accommodate Bogs.

Other expense for the second quarter of 2013 included foreign currency transaction losses of approximately $520,000 that will recognize on intercompany loans between the United States and Florsheim Australia, compared to only $140,000 of those foreign currency losses last year.

At June 30, 2013; our cash and marketable securities were $45 million. We generated $15.9 million of cash from operations, received proceeds of $6.3 million from the maturity of marketable securities and collected $2.8 million from the exercise of stock options.

We spent $4.6 million on repurchases of our company stock. We paid $25 million on our line of credit and had $1.1 million of capital expenditures. Additionally on May 1, 2013; we purchased a 50% interest in a building in Montreal, Canada for $3.2 million. We previously leased that facility which now serves that our Canadian office and distribution center.

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