Bogs Generates Strong Fourth Quarter Growth

Weyco Group, Inc. reported sales of $78.5 million in the fourth quarter ended Dec. 31, 2013, slightly ahead of $78.4 million a year ago. Net earnings declined 11 percent to $6.8 million, or 62 cents a share, from $7.7 million, or 71 cents, 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 percent and 4 percent, 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.

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 percent 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 percent, 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 percent 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 percent 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 percent as compared to $7.6 million in 2012.  Same store sales were up 5 percent 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 percent 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 percent, for the quarter. In local currency, Florsheim Australia's net sales were up 5 percent, 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 percent 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 percent from 2012 sales of $293.5 million. Earnings from operations were $27.8 million in 2013, down 7 percent as compared to $29.8 million in 2012. Net earnings attributable to the company were $17.6 million in 2013, down 7 percent 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 percent and 5 percent, 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.

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 percent 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 percent, 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 percent, for the year due to higher sales volumes in both the U.S. and Canada, including $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 percent, for the year due to increases across several trade channels. Wholesale gross margins increased to 32.6 percent in 2013, from 32.2 percent in 2012. 

Earnings from operations for the wholesale segment were $20.7 million in 2013, down 7 percent 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 percent 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 percent 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 percent 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 percent, for the year. In local currency, Florsheim Australia's net sales were up 6 percent 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 percent 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.

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.

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