Weyco Group 10-K 2007
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Registrants telephone number, include area code (414) 908-1600
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in any definitive proxy of information statements incorporated by reference or in any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The aggregate market value of the registrants Common Stock and Class B Common Stock held by non-affiliates of the registrant as of the close of business on June 30, 2006 was $172,439,000.
As of February 20, 2007, there were outstanding 9,128,206 shares of Common Stock and 2,583,737 shares of Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporations Annual Report to Shareholders for the year ended December 31, 2006, are incorporated by reference in Part II and Part IV of this report.
Portions of the Corporations Proxy Statement for its Annual Meeting of Shareholders scheduled for May 1, 2007, are incorporated by reference in Part III of this report.
The Company is a Wisconsin corporation incorporated in the year 1906 as Weyenberg Shoe Manufacturing Company. Effective April 25, 1990, the name of the corporation was changed to Weyco Group, Inc.
The Company and its subsidiaries engage in one line of business, the distribution of mens footwear.
In 2002, the Company acquired certain assets of Florsheim Group, Inc.s domestic wholesale and retail operations. In addition, the Company also acquired certain assets and assumed the operating liabilities of Florsheim Europe S.r.l. and Florsheim France SARL. The total purchase price of the acquisition was $48.5 million.
The principal brands of shoes sold by the Company are Florsheim, Nunn Bush, and Stacy Adams. The Company also has other brands, including Brass Boot and Nunn Bush NXXT, which are included within Nunn Bush sales figures, and SAO by Stacy Adams, which is included within Stacy Adams sales. Trademarks maintained by the Company on these names are important to the business. The Companys products consist of both mid-priced quality leather dress shoes which would be worn as a part of more formal and traditional attire and quality casual footwear of man-made materials or leather which would be appropriate for leisure or less formal occasions. The Companys footwear, and that of the industry in general, is available in a broad range of sizes and widths, primarily purchased to meet the needs and desires of the American male population.
The Company purchases finished shoes from outside suppliers around the world. The majority of these foreign-sourced purchases are denominated in U. S. dollars. There have been few inflationary pressures in the shoe industry in recent years and leather and other component prices have been stable. However, since the latter part of 2006, there has been some upward movement in leather prices. In certain circumstances, the Company is able increase prices to offset the effect of these increases in costs. The Company previously assembled a small portion of its footwear at one plant in Beaver Dam, Wisconsin. In December 2003, the Company ceased its manufacturing operations. All inventory is now purchased from foreign suppliers. During 2006, the Beaver Dam facility still operated as the Companys reconditioning and rework department and processed some returned goods. The Companys lease for its Beaver Dam, Wisconsin facility expires on June 30, 2007, and it will not be renewed. A total of 9 employees will be affected by the closing. Some functions will subsequently be outsourced, and the remaining operations will be moved to the Companys main distribution center in Glendale, Wisconsin.
The Companys business is separated into two segments - wholesale distribution and retail sales of mens footwear. Wholesale distribution sales, which include both wholesale sales and licensing revenues, constituted approximately 87% of total sales in both 2006 and 2005 and 88% in 2004. At wholesale, shoes are marketed nationwide through more than 10,000 shoe, clothing and department stores. Sales are to unaffiliated customers, primarily in North America, with some distribution in Europe. In 2006 and 2004, sales to the Companys largest customer, JCPenney, were 10% and 12%, respectively, of total sales. There were no customers with sales above 10% in 2005. Net sales to foreign customers were $12.8 million, $11.8 million and $10.8 million in 2006, 2005 and 2004, respectively. The Company employs traveling salespeople who sell the Companys products to retail outlets. Shoes are shipped to these retailers primarily from the Companys distribution center in Glendale, Wisconsin. Although there is no clearly identifiable seasonality in the mens footwear business, new styles are historically developed and shown twice each year, in spring and fall. In accordance with industry practices, the Company is required to carry significant amounts of inventory to meet customer delivery requirements and periodically provides extended payment terms to customers. The Company has licensing agreements with third parties who sell its branded shoes overseas, as well as licensing agreements with apparel and accessory manufacturers in the United States and Canada. Licensing revenues were approximately 2% of total net sales in 2006, 2005 and 2004.
Retail sales constituted approximately 13% of total sales in 2006 and 2005, and 12% in 2004. In the retail division at December 31, 2006, there were 35 company-operated stores in the United States, four retail stores in major cities in Europe and an Internet business. Sales in retail stores are made directly to the consumer by Company employees. In addition to the sale of the Companys brands of footwear in these retail stores, other branded footwear and accessories are also sold in order to provide the consumer with as complete a selection as practically possible.
As of December 31, 2006, the Company had a backlog of $28 million of confirmed orders compared with $23 million as of December 31, 2005. This does not include unconfirmed blanket orders from customers. All orders are expected to be filled within one year.
As of December 31, 2006, the Company employed 412 persons, of which 22 were members of collective bargaining units. The Company ratified new contracts covering the majority of these employees during 2005 and in early 2006. Future wage and benefit increases under the contracts are not expected to have a significant impact on the future operations or financial position of the Company.
Price, quality, service and brand recognition are all important competitive factors in the shoe industry and the Company has been recognized as a leader in all of them. The Company does not engage in any specific research and development activities. However, the Company does have a design department that is continually reviewing and updating product designs. Compliance with environmental regulations historically has not had, and is not expected to have, a material adverse effect on the Companys results of operations or cash flows.
The Company makes available, free of charge, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports upon written or telephone request. Investors can also access these reports through the Companys website, www.weycogroup.com, as soon as reasonably practical after we file or furnish those reports to the SEC. The information on the Companys website is not a part of this filing.
In addition to the above-described office, distribution and warehouse facilities, the Company operates 35 retail stores throughout the United States and four in Europe under various rental agreements. All of these facilities are suitable and adequate for the Companys current operations. See Note 12 to Consolidated Financial Statements and Item 1. Business above.
Executive Officers of the Registrant
WEYCO GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
We have audited the consolidated financial statements of Weyco Group, Inc. and subsidiaries (the Company) as of December 31, 2006 and 2005, and for each of the three years in the period ended December 31, 2006, managements assessment of the effectiveness of the Companys internal control over financial reporting as of December 31, 2006, and the effectiveness of the Companys internal control over financial reporting as of December 31, 2006, and have issued our reports thereon dated March 12, 2007 (which report on the audit of the consolidated financial statements expresses an unqualified opinion and includes an explanatory paragraph concerning the adoption of Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans); such reports are incorporated by reference elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15. The consolidated financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinion based on our audits. In our opinion, this consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
EXHIBIT INDEX (cont.)
EXHIBIT INDEX (cont.)
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas W. Florsheim, Jr., John W. Florsheim, and John Wittkowske, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.