Weyco Reports Fourth Quarter And Full Year 2017 Results

MILWAUKEE, March 6, 2018 /PRNewswire/ -- Weyco Group, Inc. (NASDAQ:WEYS) (the "Company") today announced financial results for the quarter and year ended December 31, 2017.

FOURTH QUARTER
Net sales for the fourth quarter of 2017 were $80.3 million, a decrease of 2% compared to fourth quarter 2016 net sales of $82.1 million. Earnings from operations were $10.3 million in the fourth quarter of 2017, up 17% compared to $8.8 million in the fourth quarter of 2016. Net earnings attributable to the Company were $8.1 million in the fourth quarter of 2017, compared to $8.2 million in last year's fourth quarter. Earnings for the fourth quarter of 2017 included an adjustment to reduce the Company's income tax provision due to the change in the federal corporate tax rate which resulted from the passing of the Tax Cuts and Jobs Act ("TCJA") signed into law on December 22, 2017. Earnings for the fourth quarter of 2016 included a charge for the impairment of long-lived assets of $1.8 million ($1.1 million after tax), offset by a $3.1 million adjustment to reverse the deferred tax liability on corporate-owned life insurance policies. Without these non-recurring adjustments, earnings from operations would have been down 3% for the quarter, and net earnings attributable to the Company would have been up 8%, for the quarter.

Diluted earnings per share were $0.79 per share in the fourth quarter of 2017, compared to $0.78 per share in the fourth quarter of 2016. Without the non-recurring adjustments described above, diluted earnings per share on an adjusted basis would have been $0.65 per share in the fourth quarter of 2017 and $0.58 per share in the fourth quarter of 2016. See the "Reconciliations of Non-GAAP Financial Measures" table below.

Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $61.4 million in the fourth quarter of 2017, compared with $61.7 million in the fourth quarter of 2016. Within the wholesale segment, BOGS net sales declined 10% for the quarter, due mostly to lower sales to outdoor and online retailers. Net sales of the Nunn Bush brand were down 5% this quarter, primarily due to lower sales to department stores. These sales decreases were mostly offset by higher sales of the Florsheim and Stacy Adams brands. Florsheim net sales were up 12% for the quarter, driven by higher sales to national shoe chains. Stacy Adams net sales were up 10% this quarter, due mainly to higher sales to online retailers and national shoe chains. Licensing revenues were $724,000 in the fourth quarter of 2017 and $1.1 million in last year's fourth quarter.

Gross earnings for the North American wholesale segment were 37.4% of net sales in the fourth quarter of 2017, compared to 34.7% of net sales in last year's fourth quarter. Earnings from operations for the wholesale segment were $8.3 million in the fourth quarter of 2017, up 38% compared to $6.0 million in 2016. Wholesale operating earnings for the fourth quarter of 2016 included an impairment charge of $1.8 million related to the Umi trademark. Without this non-recurring adjustment, wholesale earnings from operations would have been up 7% for the quarter, due mainly to higher wholesale gross margins.

Net sales of 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 2017, down 7% compared to $7.4 million in last year's fourth quarter. Same store sales (which include U.S. internet sales) were down 3% for the quarter, due mainly to lower sales on the Company's websites. Retail earnings from operations were $1.1 million in the fourth quarter of 2017 and $1.3 million in last year's fourth quarter.

Other net sales, which include the wholesale and retail sales of Florsheim Australia and Florsheim Europe, were $12.0 million in the fourth quarter of 2017, down 8% compared to $13.1 million in 2016. This decrease was primarily due to lower net sales at Florsheim Australia. Florsheim Australia's net sales were down 7% for the quarter. In local currency, Florsheim Australia's net sales were down 9% for the quarter, with lower sales in both its retail and wholesale businesses. Earnings from operations of Florsheim Australia and Florsheim Europe were $800,000 this quarter, down from $1.4 million in the same period last year. This decrease was primarily due to lower sales.

FULL YEAR 2017
Overall net sales were $283.7 million in 2017, a decrease of 4% compared to $296.9 million in 2016. Earnings from operations were $23.4 million in 2017, up 3% compared to $22.8 million in 2016. Net earnings attributable to the Company were flat at $16.5 million in both 2017 and 2016. Earnings for 2017 included an adjustment to reduce the Company's income tax provision due to the change in the federal corporate tax rate which resulted from the passing of the TCJA. Earnings for 2016 included a charge for the impairment of long-lived assets of $1.8 million ($1.1 million after tax), offset by a $3.1 million adjustment to reverse the deferred tax liability on corporate-owned life insurance policies. Without these non-recurring adjustments, earnings from operations would have been down 5% for the year, and net earnings attributable to the Company would have been up 4% for the year.

Diluted earnings per share were $1.60 per share in 2017, compared to $1.56 per share in 2016. Without the non-recurring adjustments described above, diluted earnings per share on an adjusted basis would have been $1.45 per share in 2017 and $1.36 per share in 2016. See the "Reconciliations of Non-GAAP Financial Measures" table below.

Net sales in the North American wholesale segment were $217.3 million in 2017, down 5% from $227.5 million in 2016. Within the wholesale segment, net sales of our Nunn Bush brand were down 11% for the year, due mainly to lower department store sales. BOGS net sales declined 9% for the year, primarily due to lower sales with outdoor retailers. Stacy Adams net sales were down 2% for the year, due mostly to lower sales with department stores, partially offset by increased sales to online retailers. These sales volume losses were partially offset by a 5% increase in Florsheim sales this year. Florsheim's net sales were up mainly with national shoe chains and department stores. Licensing revenues were $2.5 million in 2017 and $2.8 million in 2016.

North American wholesale segment gross earnings as a percent of net sales were 33.6% in 2017 and 32.1% in 2016. Wholesale earnings from operations were $20.2 million in 2017, up 13% compared to $17.9 million in 2016. Last year's wholesale operating earnings included an impairment charge of $1.8 million related to the Umi trademark. Without this non-recurring adjustment, wholesale earnings from operations would have been up 3% for the year, due to higher wholesale gross margins and lower wholesale selling and administrative expenses.

In the North American retail segment, net sales were $20.9 million in 2017, down 5% compared to $21.9 million in 2016. Same store sales (which include U.S. internet sales) were down 5% for the year, due mainly to decreased sales on the Company's websites. Earnings from operations for the retail segment were $1.4 million in 2017, down from $2.1 million in 2016. This decrease was mainly due to lower website sales.

The Company's other businesses had net sales of $45.6 million in 2017, down 4% compared to $47.5 million in 2016. The decrease was primarily due to lower net sales at Florsheim Australia. Florsheim Australia's net sales were down 3% for the year. In local currency, Florsheim Australia's net sales were down 6%, with lower sales in both its wholesale and retail businesses. Earnings from operations at Florsheim Australia and Florsheim Europe were $1.8 million in 2017, down from $2.7 million last year. This decrease was primarily due to lower sales.

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, was primarily due to a $1.1 million decrease in the non-service cost components of pension expense this year. Pension expense decreased in 2017 as a result of freezing benefits under the pension plan, effective December 31, 2016.

"Our efforts to control costs and improve gross margins helped generate earnings growth for our wholesale business this year," stated Thomas W. Florsheim, Jr., the Company's Chairman and CEO. "Despite the challenging retail environment, we feel we ended the year with better, more efficient operations. As we turn to 2018, our focus will continue to be on investing in and growing our brands, and maximizing shareholder value."

On March 6, 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.22 per share to all shareholders of record on March 16, 2018, payable March 30, 2018.

Reconciliations of Non-GAAP Financial Measures

The following is a reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures for the three-month periods ended December 31, 2017 and 2016.


Three Months Ended December 31, 2017


Three Months Ended December 31, 2016


GAAP




Non-GAAP


GAAP




Non-GAAP


Measures




Measures


Measures




Measures


(As Reported)


 Adjustments 


(As Adjusted)


(As Reported)


 Adjustments 


(As Adjusted)













Net sales

$                  80,270




$                 80,270


$                  82,097




$                 82,097

Cost of sales

46,363




46,363


48,794




48,794

Gross earnings

33,907




33,907


33,303




33,303













Selling and administrative expenses

23,646




23,646


24,510


(1,770)

 (2)

22,740

Earnings from operations

10,261




10,261


8,793




10,563













Interest income

201




201


179




179

Interest expense

(8)




(8)


(208)




(208)

Other expense, net

(5)




(5)


(182)




(182)













Earnings before provision for income taxes

10,449




10,449


8,582




10,352













Provision for income taxes

2,088


1,492

(1)

3,580


-


3,832

 (3)

3,832













Net earnings

8,361




6,869


8,582




6,520













Net earnings attributable to noncontrolling interest

278




278


397




397













Net earnings attributable to Weyco Group, Inc. 

$                     8,083




$                   6,591


$                     8,185




$                   6,123













Weighted average shares outstanding












   Basic

10,117




10,117


10,409




10,409

   Diluted

10,176




10,176


10,476




10,476













Earnings per share












   Basic

$                       0.79


(0.14)


$                      0.65


$                       0.79


(0.20)


$                      0.59

   Diluted

$                       0.79


(0.14)


$                      0.65


$                       0.78


(0.20)


$                      0.58



(1)

Impact of the change in the corporate federal income tax rate from 35% to 21%

(2)

Umi trademark impairment

(3)

Includes a $3.1 million adjustment to reverse deferred taxes on corporate-owned life insurance policies on two former executives of the Company, and the tax effect of the Umi trademark impairment

The following is a reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures for the twelve-month periods ended December 31, 2017 and 2016.


Twelve Months Ended December 31, 2017


Twelve Months Ended December 31, 2016


GAAP




Non-GAAP


GAAP




Non-GAAP


Measures




Measures


Measures




Measures


(As Reported)


 Adjustments 


(As Adjusted)


(As Reported)


 Adjustments 


(As Adjusted)













Net sales

$               283,749




$              283,749


$               296,933




$              296,933

Cost of sales

173,056




173,056


184,890




184,890

Gross earnings

110,693




110,693


112,043




112,043













Selling and administrative expenses

87,281




87,281


89,261


(1,770)

(2)

87,491

Earnings from operations

23,412




23,412


22,782




24,552













Interest income

773




773


763




763

Interest expense

(15)




(15)


(436)




(436)

Other expense, net

(248)




(248)


(1,032)




(1,032)













Earnings before provision for income taxes

23,922




23,922


22,077




23,847













Provision for income taxes

7,223


1,492

(1)

8,715


5,084


3,832

(3)

8,916













Net earnings

16,699




15,207


16,993




14,931













Net earnings attributable to noncontrolling interest

208




208


521




521













Net earnings attributable to Weyco Group, Inc. 

$                 16,491




$                14,999


$                 16,472




$                14,410













Weighted average shares outstanding












   Basic

10,253




10,253


10,519




10,519

   Diluted

10,314




10,314


10,572




10,572













Earnings per share












   Basic

$                      1.61


(0.15)


$                     1.46


$                      1.57


(0.20)


$                     1.37

   Diluted

$                      1.60


(0.15)


$                     1.45


$                      1.56


(0.20)


$                     1.36



(1)

Impact of the change in the corporate federal income tax rate from 35% to 21%

(2)

Umi trademark impairment

(3)

Includes a $3.1 million adjustment to reverse deferred taxes on corporate-owned life insurance policies on two former executives of the Company, and the tax effect of the Umi trademark impairment

In addition to the results reported in accordance with U.S. generally accepted accounting principles ("GAAP") included in this release, the tables above (as well as information provided throughout this release) provide certain non-GAAP financial information, such as Non-GAAP selling and administrative expenses, Non-GAAP earnings from operations, Non-GAAP net earnings, and Non-GAAP basic and diluted earnings per share. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because it allows investors to better evaluate ongoing business performance and certain components of the Company's results. In addition, the Company believes the presentation of Non-GAAP financial measures, excluding the impact of the U.S. federal corporate income tax rate change in 2017, the Umi trademark impairment in 2016, and the reversal of the deferred tax liability on corporate-owned life insurance policies in 2016, 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 measures.

Conference Call Details
Weyco Group, Inc. will host a conference call on March 7, 2018, at 11:00 a.m. Eastern Time to discuss the fourth quarter and full year 2017 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=UYzNjfjEVgTRqg. 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/rdq7m7fi. A recording of 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 December 31, 


Twelve Months Ended December 31,



2017


2016


2017


2016



(In thousands, except per share amounts)










Net sales

$ 80,270


$ 82,097


$ 283,749


$ 296,933

Cost of sales

46,363


48,794


173,056


184,890

Gross earnings

33,907


33,303


110,693


112,043










Selling and administrative expenses

23,646


24,510


87,281


89,261

Earnings from operations

10,261


8,793


23,412


22,782










Interest income 

201


179


773


763

Interest expense

(8)


(208)


(15)


(436)

Other expense, net

(5)


(182)


(248)


(1,032)










Earnings before provision for income taxes

10,449


8,582


23,922


22,077










Provision for income taxes

2,088


-


7,223


5,084










Net earnings

8,361


8,582


16,699


16,993










Net earnings attributable to noncontrolling interest

278


397


208


521










Net earnings attributable to Weyco Group, Inc.

$   8,083


$   8,185


$   16,491


$   16,472










Weighted average shares outstanding









Basic

10,117


10,409


10,253


10,519


Diluted

10,176


10,476


10,314


10,572










Earnings per share









Basic

$      0.79


$      0.79


$        1.61


$        1.57


Diluted

$      0.79


$      0.78


$        1.60


$        1.56










Cash dividends declared (per share)

$      0.22


$      0.21


$        0.87


$        0.83










Comprehensive income

$   5,584


$   8,487


$   15,835


$   18,887










Comprehensive income attributable to noncontrolling interest

363


141


634


517










Comprehensive income attributable to Weyco Group, Inc.

$   5,221


$   8,346


$   15,201


$   18,370

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)










December 31,


December 31,


2017


2016


(Dollars in thousands)

ASSETS:

Cash and cash equivalents

$          23,453


$          13,710

Marketable securities, at amortized cost

5,970


4,601

Accounts receivable, net

49,451


50,726

Income tax receivable

669


789

Inventories

60,270


69,898

Prepaid expenses and other current assets

5,770


6,203

     Total current assets

145,583


145,927





Marketable securities, at amortized cost

17,669


21,061

Deferred income tax benefits

750


660

Property, plant and equipment, net

31,643


33,717

Goodwill

11,112


11,112

Trademarks

32,978


32,978

Other assets

23,097


22,785

     Total assets

$        262,832


$        268,240





LIABILITIES AND EQUITY:




Short-term borrowings

$                  -


$            4,268

Accounts payable

8,905


11,942

Dividend payable

2,228


2,192

Accrued liabilities

14,031


10,572

     Total current liabilities

25,164


28,974





Deferred income tax liabilities 

2,069


703

Long-term pension liability

27,766


27,801

Other long-term liabilities

2,174


2,482

     Total liabilities

57,173


59,960





Common stock

10,162


10,505

Capital in excess of par value

55,884


50,184

Reinvested earnings

150,350


157,468

Accumulated other comprehensive loss

(17,859)


(16,569)

     Total Weyco Group, Inc. equity

198,537


201,588

Noncontrolling interest

7,122


6,692

     Total equity

205,659


208,280

     Total liabilities and equity

$        262,832


$        268,240

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)











Twelve Months Ended December 31,




2017


2016




(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:





Net earnings

$ 16,699


$  16,993


Adjustments to reconcile net earnings to net cash provided by operating activities - 






Depreciation

3,956


3,670



Amortization

349


387



Bad debt expense

621


76



Deferred income taxes

2,187


(2,645)



Net foreign currency transaction gains

(146)


(513)



Stock-based compensation

1,622


1,559



Pension contributions

(4,000)


(2,400)



Pension expense

995


3,184



Impairment of property, plant and equipment

-


113



Impairment of trademark

-


1,770



Increase in cash surrender value of life insurance

(517)


(573)


Changes in operating assets and liabilities - 






Accounts receivable

637


3,179



Inventories

9,634


27,313



Prepaid expenses and other assets

486


(1,595)



Accounts payable

(2,813)


(1,378)



Accrued liabilities and other

3,720


(1,447)



Accrued income taxes

124


(811)



Excess tax benefits from stock-based compensation

(37)


-



    Net cash provided by operating activities

33,517


46,882







CASH FLOWS FROM INVESTING ACTIVITIES:





Purchase of marketable securities

(15,597)


(6,287)


Proceeds from maturities of marketable securities

17,565


5,745


Life insurance premiums paid

(155)


(155)


Purchase of property, plant and equipment

(1,578)


(5,992)



     Net cash provided by (used for) investing activities

235


(6,689)







CASH FLOWS FROM FINANCING ACTIVITIES:





Cash dividends paid

(8,877)


(8,720)


Cash dividends paid to noncontrolling interest of subsidiary

(204)


(170)


Shares purchased and retired

(15,190)


(10,967)


Proceeds from stock options exercised

4,284


2,994


Taxes paid related to the net share settlement of equity awards

(154)


(11)


Payment of contingent consideration

-


(5,217)


Proceeds from bank borrowings

31,570


121,959


Repayments of bank borrowings

(35,838)


(144,340)


Excess tax benefits from stock-based compensation

-


20



     Net cash used for financing activities

(24,409)


(44,452)








Effect of exchange rate changes on cash and cash equivalents

400


43








Net increase (decrease) in cash and cash equivalents

$   9,743


$   (4,216)







CASH AND CASH EQUIVALENTS at beginning of year

13,710


17,926







CASH AND CASH EQUIVALENTS at end of year

$ 23,453


$  13,710







SUPPLEMENTAL CASH FLOW INFORMATION:





Income taxes paid, net of refunds

$   4,901


$     8,505


Interest paid

$         15


$        436



CONTACT: John Wittkowske, Senior Vice President and Chief Financial Officer, 414-908-1880


The following information was filed by Weyco Group Inc (WEYS) on Tuesday, March 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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