John Wittkowske - Chief Financial Officer Tom Florsheim - Chairman and Chief Executive Officer.

Good day, ladies and gentlemen, and welcome to the Q2 2015 Weyco Group Earnings Conference Call. My name is [Thiya] and I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

[Operator Instructions] I would now like to turn the conference over to your host for today John Wittkowske, Chief Financial Officer. Please proceed..

Thank you. Good morning, everyone and welcome to Weyco Groups second quarter conference call. On this call with me today is Tom Florsheim Jr., our Chairman and CEO. Before we begin to discuss the results, I’ll 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 events or results may differ materially.

We refer you to Weyco Group’s most recent Form 10-K that is 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 2015 were $63.9 million, up 2% as compared with 2014 sales of $62.9 million. Operating earnings were $3.3 million for the second quarter of 2015 versus $3.4 million in 2014.

Net earnings attributable to Weyco Group were $2 million this quarter compared with $2.2 million last year. Diluted earnings per share were $0.19 versus $0.20 per share in 2014. Our second quarter results included a strong performance from our North American wholesale segment but those gains were offset by the results of our international operations.

In the North American wholesale segment net sales for the second quarter were $48.1 million, up 7% as compared to $44.8 million in 2014. Wholesale gross earnings increased 31.0% of net sales in the second quarter, up from 30.5% in 2014.

Selling and administrative expenses for the wholesale segment were $12.7 million or 27% of net sales compared to $11.9 billion or 27% of net sales in 2014. Operating earnings for the wholesale segment rose 26% to $2.2 million this year compared with $1.7 million in 2014. This increase was primarily due to the higher sales and gross margin levels.

Net sales of our North American retail segment which include our retail stores and our U.S. Internet sales were $5 million in the second quarter down 5% as compared with $5.3 million in 2014. The company's U.S. Internet sales increased 12% to $2.3 million, up from $2.1 million last year. Same-store sales which include U.S. Internet sales were flat.

There were two fewer retail stores operating during the second quarter of 2015 than they were in last year’s second quarter. Retail operative earnings were $489,000 compared to $563,000 last year. This decrease resulted mainly from lower sales volumes at the company’s brick-and-mortar stores.

Our other operations which include the wholesale and retail businesses of Florsheim, Australia and Florsheim Europe and net sales of $10.8 million in the second quarter versus $12.8 million in 2014. This decrease was primarily due to lower net sales at Florsheim, Australia caused mainly by the translation of the weaker Australian currency into U.S.

dollars. Collectively the operating earnings of Florsheim Australia and Florsheim Europe were $650,000 in the second quarter of 2015 down from $1.1 million last year.

This decrease was primarily due to lower operating earnings in our retail businesses in Australia resulting from a sluggish retail environment and lower than expected results at our recently opened retail stores. Other expense for the second quarter was $348,000 compared to income of $75,000 last year.

This quarter's other expense included foreign currency transaction losses of $240,000 compared to $69,000 of gains in the same period last year. At June 30, 2015 our cash and marketable securities totaled $39.9 million and we had $18.1 million outstanding under our $60 million revolving line of credit.

During the first six months of 2015 we drew $12.7 million on our line of credit and receive net proceeds of $3.6 million from maturities of marketable securities. We used funds to pay $6.3 million in dividends and to repurchase $2.4 million of our company’s stock.

In addition our operations resulted in a net $8.7 million use of cash mainly to fund inventory purchases. The increase in inventory at June 30 is the result of buying more inventory to meet increased backlogs for the second half of the year.

In addition we are increasing our stock of core products in order to meet at once demand, which is particularly important for BOGS as weather can have a significant impact on demand for its products. For the year we have spent $1 million on capital expenditures. We expect annual capital expenditures to be between $2 million and $3 million.

On August 3, 2015 our Board of Directors declared a cash dividend of $0.20 per share to all shareholders of record as of August 28, 2015 payable on September 30, 2015. I would now like to turn the call over to Tom Florsheim, Jr. our Chairman and CEO..

Thanks John and good morning. Overall as mentioned earlier in the call our second quarter wholesale sales were up 7%. We are extremely pleased with the continued strength of our U.S. wholesale business as we are picking up market share within the category segments where we compete.

Our second quarter BOGS business was up 18% while the second quarter is a relatively small volume quarter for BOGS the brand maintained good momentum. We're focused on leveraging strength of the BOGS brand into categories beyond insulated boots. The growth we have garnered in the first half of the year reflects our success in these areas.

We have diversified our mix of product in the marketplace adding sandals, clogs and other non-insulated footwear. As we head into the most important part of the shortfall shipping season, we feel we are well-positioned to have another successful year with BOGS.

Stacy Adams sales were up 12% reflecting the fourth straight quarter, in which the brand has experienced double-digit growth. We believe Stacy Adams occupies a great space in today's men's footwear market.

Over the last couple of years there is increased interest in fashion from a wider segment of the men’s consumer market In footwear this translates to demand for product with interesting material treatments, ornamentation and color. Stacy Adams as a leader in assessably modern footwear has benefited greatly from this trend.

And the brands footwear signed through retail extremely well. In addition Stacy Adams has been able to increase its sales in the fashion casual market, which has been a long-term objective. Nunn Bush is back on goal track in 2015 with a 9% increase in shipments for the second quarter.

In part the increase was driven by new categories such as Nunn Bush work, which was launched last fall and is doing very well in the marketplace. Nunn Bush has also registered growth in sales within the mid-tier department store trade channel as well as with its key e-commerce accounts.

Overall brand performance remains strong and we are confident that the momentum will continue in the back half of the year. Our Florsheim business was down 3% in the second quarter. Growth in the department store and e-commerce trade channels do not offset a decrease with independent and shoe chain accounts.

As discussed in the previous conference call the challenge with Florsheim is to find the right distribution for the brands strong new product offerings. Independent shoe stores on a main stay trade channel for Florsheim are shrinking category.

In general the big-box shoe chains can only feature a small segment of the Florsheim due to price constraints therefore, limiting the brand sales in this trade channel. We remain encouraged by the positive performance of the Florsheim product introduced over the last several seasons.

However, we believe we need to exercise patience and grow the brand for the long-term and the right points of distribution. Strong sales at better department stores and via e-commerce present viable payouts for future organic growth. In our North American retail segment, our second quarter same-store sales were flat.

Increase in Internet sales generally offset the decrease in our brick-and-mortar sales. Internet sales now represent approximately half of our U.S. retail sales. We are in the process of producing our store count in the U.S. while remodeling key flagship locations and investing and enhancing our e-commerce platform.

Our overseas business has been challenging throughout 2015 and our second quarter results reflected the headwinds we are experiencing in foreign markets. Company performance in Europe, Australia and South Africa were all negatively impacted by the strong U.S. dollar.

Meanwhile in our key overseas markets including Australia and Asia retail sales have been sluggish based on a variety of economic factors. While issues related to currency may persist in the short to mid-term. We are confident about the long-term prospects for Florsheim and other Weyco brands overseas.

Overall margins were off slightly in the quarter given the weakness of the Canadian and Australian currencies, we are pleased that our margins were nearly flat with the same quarter last year. In last quarters call I explained with our sourcing prices have been stable.

That situation continued during the most recent quarter and we expect that this will continue in the near future. The strong U.S. dollar benefited us in the U.S. as for as easing pressure on our margins. However, our foreign operations are experiencing the opposite impact with increased pressure on their margins as they also buy in U.S.

dollars, but their local currencies are comparatively weaker. With July behind us I can say the third quarter has gotten off to a good start. Our backlogs are up and as John indicated, we have brought in inventory earlier than a year ago to ensure we are well-positioned to service our accounts.

Based on our order position and general momentum with our brands. Particularly in North America, we feel optimistic about the second half of the year. That concludes our formal remarks. We appreciate your interest in Weyco Group and I now like to open the floor to any questions..

Q - :.

[Operator Instructions] There are no questions in the queue at this time. I’d like to turn the call over to management to any closing remarks..

Thank you. And we’d like to thank everyone for their interest and have a great day..

Ladies and gentlemen, thank you for your participation in today’s conference. That concludes the presentation. You may now disconnect. Have a great day..