WEYCO GROUP INC — Interim / Quarterly Report 2007

May 8, 2007

10-Q 1 v073691_10q.htm Unassociated Document Licensed to: vf Document Created using EDGARizer HTML 3.0.4.0 Copyright 2006 EDGARfilings, Ltd., an IEC company. All rights reserved EDGARfilings.com

FORM 10-Q

SECURITIES & EXCHANGE COMMISSION

Washington, D. C. 20549

(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

Or

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-9068

WEYCO GROUP, INC.

(Exact name of registrant as specified in its charter)

WISCONSIN	39-0702200
(State
or other jurisdiction of	(I.R.S.
Employer
incorporation
or organization)	Identification
No.)

333 W. Estabrook Boulevard

P. O. Box 1188

Milwaukee, Wisconsin 53201

(Address of principal executive offices)

(Zip Code)

(414) 908-1600

(Registrant’s telephone number, including area code)

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.

Yes X No

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.

Large Accelerated Filer Accelerated Filer X Non-Accelerated Filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

As of May 1, 2007 the following shares were outstanding:

| Common
Stock, $1.00 par value | 9,031,556
Shares |
| --- | --- |
| Class
B Common Stock, $1.00 par value | 2,580,587
Shares |

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s latest annual report on Form 10-K.

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

ASSETS

| | March
31, — 2007 | 2006 | | |
| --- | --- | --- | --- | --- |
| CURRENT
ASSETS: | | | | |
| Cash
and cash equivalents | $ 12,643,572 | $ | 15,314,140 | |
| Marketable
securities, at amortized cost | 1,246,245 | | 1,600,871 | |
| Accounts
receivable, net | 40,709,644 | | 30,641,632 | |
| Inventories | 38,889,077 | | 51,000,849 | |
| Deferred
income tax benefits | 927,161 | | 949,109 | |
| Prepaid
expenses and other current assets | 1,560,790 | | 1,715,859 | |
| Total
current assets | 95,976,489 | | 101,222,460 | |
| MARKETABLE
SECURITIES, at amortized cost | 41,029,406 | | 40,361,296 | |
| OTHER
ASSETS | 8,826,838 | | 8,725,346 | |
| PLANT
AND EQUIPMENT, net | 28,286,459 | | 28,445,900 | |
| TRADEMARK | 10,867,969 | | 10,867,969 | |
| | $ 184,987,161 | $ | 189,622,971 | |
| LIABILITIES
& SHAREHOLDERS’ INVESTMENT | | | | |
| CURRENT
LIABILITIES: | | | | |
| Short-term
borrowings | $ 8,791,809 | $ | 10,957,518 | |
| Accounts
payable | 5,261,199 | | 12,398,740 | |
| Dividend
payable | 1,054,075 | | 1,054,354 | |
| Accrued
liabilities | 7,122,101 | | 8,430,267 | |
| Accrued
income taxes | 2,725,406 | | 72,907 | |
| Total
current liabilities | 24,954,590 | | 32,913,786 | |
| LONG-TERM
PENSION LIABILITY | 6,750,743 | | 6,620,842 | |
| DEFERRED
INCOME TAX LIABILITIES | 1,699,987 | | 1,915,869 | |
| SHAREHOLDERS’
INVESTMENT: | | | | |
| Common
stock | 9,086,456 | | 9,129,256 | |
| Class
B common stock | 2,580,587 | | 2,585,087 | |
| Capital
in excess of par value | 8,109,141 | | 7,576,096 | |
| Reinvested
earnings | 137,124,977 | | 134,264,076 | |
| Accumulated
other comprehensive loss | (5,319,320 | ) | (5,382,041 | ) |
| Total
shareholders' investment | 151,581,841 | | 148,172,474 | |
| | $ 184,987,161 | $ | 189,622,971 | |

The accompanying notes to consolidated condensed financial statements are an integral part of these financial statements.

-1-

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED)

| NET
SALES | 2007 — $ 63,858,057 | $ | 59,288,211 | |
| --- | --- | --- | --- | --- |
| COST
OF SALES | 40,806,918 | | 38,255,321 | |
| Gross
earnings | 23,051,139 | | 21,032,890 | |
| SELLING
AND ADMINISTRATIVE EXPENSES | 14,372,827 | | 12,826,628 | |
| Earnings
from operations | 8,678,312 | | 8,206,262 | |
| INTEREST
INCOME | 507,566 | | 461,859 | |
| INTEREST
EXPENSE | (123,035 | ) | (178,822 | ) |
| OTHER
INCOME (EXPENSE) | 1,781 | | (5,270 | ) |
| Earnings
before provision for income
taxes | 9,064,624 | | 8,484,029 | |
| PROVISION
FOR INCOME TAXES | 3,370,000 | | 3,175,000 | |
| Net
earnings | $ 5,694,624 | $ | 5,309,029 | |

| WEIGHTED
AVERAGE SHARES | | |
| --- | --- | --- |
| OUTSTANDING | | |
| Basic | 11,664,431 | 11,577,837 |
| Diluted | 12,119,780 | 12,081,328 |

| EARNINGS
PER SHARE — Basic | $ .49 | $ .46 |
| --- | --- | --- |
| Diluted | $ .47 | $ .44 |
| CASH
DIVIDENDS PER SHARE | $ .09 | $ .07 |

The accompanying notes to consolidated condensed financial statements are an integral part of these financial statements.

-2-

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED)

	2007
CASH
FLOWS FROM OPERATING ACTIVITIES:
Net
earnings	$ 5,694,624	$	5,309,029
Adjustments
to reconcile net earnings to net cash
provided
by operating activities -
Depreciation	614,908		543,631
Amortization	20,811		15,576
Deferred
income taxes	(252,934	)	(234,313	)
Stock-based
compensation	73,991		--
Pension
expense	332,337		298,251
Loss
on sale of assets	--		13
Increase
in cash surrender value of life insurance	(129,630	)	(125,535	)
Changes
in operating assets and liabilities -
Accounts
receivable	(10,068,012	)	(9,087,136	)
Inventories	12,111,772		7,166,644
Prepaids
and other current assets	183,207		353,227
Accounts
payable.	(7,137,541	)	(5,102,179	)
Accrued
liabilities and other	(1,389,304	)	(832,671	)
Accrued
income taxes	2,679,499		1,803,680
Net
cash provided by operating activities	2,733,728		108,217
CASH
FLOWS FROM INVESTING ACTIVITIES:
Purchase
of marketable securities	(380,321	)	(9,084,960	)
Proceeds
from maturities of marketable securities	46,026		581,072
Purchase
of plant and equipment	(515,054	)	(282,097	)
Proceeds
from sales of plant and equipment	60,000		996
Net
cash used for investing activities	(789,349	)	(8,784,989	)
CASH
FLOWS FROM FINANCING ACTIVITIES:
Cash
dividends paid	(1,054,354	)	(810,241	)
Shares
purchased and retired.	(1,879,739	)	(471,606	)
Proceeds
from stock options exercised.	324,840		289,467
Repayments
under revolving credit agreement	(2,165,709	)	(59,570	)
Income
tax benefit from the exercise of stock options	160,015		156,681
Net
cash used for financing activities	(4,614,947	)	(895,269	)
Net
decrease in cash and cash equivalents	(2,670,568	)	(9,572,041	)
CASH
AND CASH EQUIVALENTS at beginning of period	$ 15,314,140	$	22,780,913
CASH
AND CASH EQUIVALENTS at end of period	$ 12,643,572	$	13,208,872
SUPPLEMENTAL
CASH FLOW INFORMATION:
Income
taxes paid, net of refunds	$ 721,792	$	1,201,281
Interest
paid	$ 170,544	$	182,770

The accompanying notes to consolidated condensed financial statements are an integral part of these financial statements.

-3-

NOTES:

1. Financial Statements

In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2007, are not necessarily indicative of results for the full year.

1. Earnings Per Share

The following table sets forth the computation of earnings per share and diluted earnings per share:

| | Three
Months Ended March 31, — 2007 | 2006 |
| --- | --- | --- |
| Numerator: | | |
| Net
Earnings | $ 5,694,624 | $ 5,309,029 |
| Denominator: | | |
| Basic
weighted average shares outstanding | 11,664,431 | 11,577,837 |
| Effect
of dilutive securities: | | |
| Employee
stock-based awards | 455,349 | 503,491 |
| Diluted
weighted average shares outstanding | 12,119,780 | 12,081,328 |
| Basic
earnings per share | $ .49 | $ .46 |
| Diluted
earnings per share | $ .47 | $ .44 |

Diluted weighted average shares outstanding for the three months ended March 31, 2007 and 2006 include all outstanding options, as none were antidilutive.

-4-

1. Segment Information

The Company continues to operate in two operating segments; wholesale distribution and retail sales of men’s footwear, which also constitute its reportable segments. None of the Company’s operating segments were aggregated in determining the Company’s reportable segments. The chief operating decision maker, the Company’s Chief Executive Officer, evaluates the performance of its segments based on earnings from operations and accordingly, interest income and interest expense and other income or expense are not allocated to the segments. Summarized segment data for the quarters ended March 31, 2007 and 2006 was:

| Three
Months Ended March 31, | Wholesale — Distribution | Retail | Total |
| --- | --- | --- | --- |
| 2007 | | | |
| Product
sales | $ 55,523,000 | $ 7,249,000 | $ 62,772,000 |
| Licensing
revenues | 1,086,000 | -- | 1,086,000 |
| Net
sales | $ 56,609,000 | $ 7,249,000 | $ 63,858,000 |
| Earnings
from operations | $ 7,913,000 | $ 765,000 | $ 8,678,000 |
| 2006 | | | |
| Product
sales | $ 51,206,000 | $ 7,003,000 | $ 58,209,000 |
| Licensing
revenues | 1,079,000 | -- | 1,079,000 |
| Net
sales | $ 52,285,000 | $ 7,003,000 | $ 59,288,000 |
| Earnings
from operations | $ 7,142,000 | $ 1,064,000 | $ 8,206,000 |

1. Share-Based Compensation Plans

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment,” (SFAS 123(R)) using the modified prospective method. This method requires that companies recognize compensation expense for new grants and the unvested portion of prior grants at their fair value on the grant date and recognize this expense over the requisite service period for awards expected to vest. During the three months ended March 31, 2007, the Company recognized approximately $74,000 of compensation expense associated with the stock option and restricted stock awards granted in 2006. No stock-based employee compensation expense was charged against income in the three-month period ended March 31, 2006 as there were no stock options granted during that period and all of the Company’s stock options granted prior to the effective date of the adoption of SFAS 123(R) were 100% vested at the effective date.

-5-

The following table summarizes the stock option activity under the Company’s plans for the three-month period ended March 31, 2007:

| | | | Weighted — Average | Wtd.
Average — Remaining | Aggregate |
| --- | --- | --- | --- | --- | --- |
| | | | Exercise | Contractual | Intrinsic |
| Shares | | | Price | Term
(Years) | Value |
| Outstanding
at December 31, 2006 | 1,252,190 | | $ 12.62 | | |
| Exercised | (28,200 | ) | $ 11.52 | | |
| Forefeited | (3,300 | ) | $ 24.09 | | |
| Outstanding
at March 31, 2007 | 1,220,690 | | $ 12.62 | 4.71 | $ 16,313,800 |
| Exercisable
at March 31, 2007 | 1,176,090 | | $ 12.18 | 4.71 | $ 16,229,507 |

The following table summarizes stock option activity for the quarters ended March 31, 2007 and 2006:

| | Three
Months Ended March 31, — 2007 | 2006 |
| --- | --- | --- |
| Total
intrinsic value of stock options exercised | $ 410,295 | $ 401,748 |
| Cash
received from stock option exercises | $ 324,840 | $ 289,467 |
| Income
tax benefit from the exercise of stock options | $ 160,015 | $ 156,681 |
| Total
fair value of stock options vested | $ -- | $ -- |

The aggregate intrinsic value for outstanding and exercisable stock options is defined as the difference between the market value at March 31, 2007 of $25.98 and the exercise price.

1. Comprehensive Income

Comprehensive income for the three months ended March 31, 2007 and 2006 was as follows:

| | Three
Months Ended March 31, — 2007 | 2006 | |
| --- | --- | --- | --- |
| Net
earnings | $ 5,694,624 | $ | 5,309,029 |
| Foreign
currency translation adjustments | (30,279 | ) | 60,625 |
| Pension
liability (net of tax of $59,000) | 93,000 | | -- |
| Total
comprehensive income | $ 5,757,345 | $ | 5,369,654 |

The components of Accumulated Other Comprehensive Loss as recorded on the accompanying balance sheets were as follows:

| | March
31, — 2007 | | December
31, — 2006 | |
| --- | --- | --- | --- | --- |
| Foreign
currency translation adjustments | $ 407,972 | | $ 438,251 | |
| Pension
liability, net of tax | ( 5,727,292 | ) | ( 5,820,292 | ) |
| Total
accumulated other | | | | |
| comprehensive
loss | $ (5,319,320 | ) | $ (5,382,041 | ) |

-6-

1. New Accounting Pronouncements

On January 1, 2007 the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (FIN 48). This Interpretation clarifies the accounting and disclosures for uncertainty in tax positions. FIN 48 provides that the tax effects from an uncertain tax position can be recognized in the Company’s financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position. Under FIN 48, the cumulative effect is to be reported as an adjustment to the beginning balance of retained earnings on the balance sheet. The adoption of this interpretation did not have a material effect on the Company’s financial statements. At March 31, 2007 the Company had approximately $180,000 of unrecognized tax benefits.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” to define fair value, establish a framework for measuring fair value in accordance with generally accepted accounting principles, and expand disclosures about fair value measurements. SFAS No. 157 will be effective for fiscal years beginning after November 14, 2007, the Company’s 2008 fiscal year. The Company is assessing the impact the adoption of SFAS No. 157 will have on its consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

The Company is a distributor of men’s casual, dress and fashion shoes. 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 net sales figures, and “SAO by Stacy Adams,” which is included within Stacy Adams net sales. Inventory is purchased from third-party overseas manufacturers. The majority of foreign-sourced purchases are denominated in U.S. dollars. In the wholesale division, the Company’s products are sold to shoe specialty stores, department stores and clothing retailers primarily in North America, with some distribution in Europe. The Company also has a retail division, which as of March 31, 2007, consisted of 35 Company-owned retail stores in the United States, four in Europe, and an Internet business. Sales in retail outlets are made directly to consumers by Company employees. The Company also 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. As such, the Company’s results are primarily affected by the economic conditions and the retail environment in the United States.

-7-

The Company achieved record first quarter sales and net earnings in the three months ended March 31, 2007. Consolidated net sales in the first quarter of 2007 reached an all time record of $63.9 million. Sales were up in both the wholesale and retail divisions. Net earnings for the three months ended March 31, 2007 reached a first quarter record of $5.7 million, or $.47 per diluted share compared with $5.3 million, or $.44 per diluted share in 2006. A more detailed analysis of operating results follows.

RESULTS OF OPERATIONS

First quarter consolidated net sales reached $63.9 million in 2007, up from $59.3 million in 2006. Sales in the Company’s wholesale division for the three-month periods ended March 31, 2007 and 2006 were as follows:

| Wholesale
Sales | | | |
| --- | --- | --- | --- |
| | Three
months ended March 31, | | |
| | 2007 | 2006 | %
change |
| Stacy
Adams | $ 18,579,656 | $ 16,846,812 | 10.3 % |
| Nunn
Bush | 17,693,177 | 18,358,484 | -3.6 % |
| Florsheim | 17,064,821 | 14,324,581 | 19.1 % |
| Foreign | 2,185,570 | 1,676,055 | 30.4 % |
| Total
Wholesale | $ 55,523,224 | $ 51,205,932 | 8.4 % |
| Licensing | 1,086,366 | 1,079,279 | 0.7 % |
| Total
Wholesale Division | $ 56,609,590 | $ 52,285,211 | 8.3 % |

The acquisition of one of the Company’s significant customers by another retailer late in 2005 resulted in some loss of sales volume at Nunn Bush and Florsheim during 2006 and in the first quarter of 2007. The acquiring company decided not to go forward with either the Nunn Bush or Florsheim product lines in its stores. Business with this customer in the first quarter of 2007 was down $2.3 million compared with the first quarter of 2006. There will be an additional $600,000 impact on second quarter 2007 sales.

The sales increase at Stacy Adams for the first quarter was driven by strong growth with major shoe chains. There were increases across both the high fashion and more contemporary mainstream Stacy Adams footwear styles. Nunn Bush has been performing well at retail, but its first quarter sales were adversely impacted by the loss of $1.6 million in sales to the customer discussed above.

-8-

Florsheim sales grew considerably this quarter, despite the loss of approximately $0.7 million in sales to the customer discussed above. The expansion of the Florsheim product line into more contemporary and casual styles over the past few years has driven the double-digit growth of this brand in recent quarters. In addition, first quarter 2007 sales included Canadian sales. Prior to January 1, 2007, Florsheim footwear was distributed in Canada by a third party licensee. That license arrangement terminated December 31, 2006, and since then, the Company has been operating its own wholesale business in Canada. The impact of this change in the first quarter was an increase of $1.1 million in sales and a decrease in Florsheim royalty income of $50,000. The Company expects Florsheim’s annual Canadian sales to be approximately $4 to $5 million in 2007.

Retail net sales in the current quarter were $7.25 million, up 3.5% from last year’s $7.0 million. The increase was primarily attributable to four additional stores in the first quarter of 2007 compared with last year’s first quarter. Same store sales were flat in comparison to the first quarter of 2006. Stores are included in same store sales beginning in the store’s 13 th month of operations after its grand opening.

Overall gross earnings as a percent of net sales in the three months ended March 31, 2007 was 36.1% compared with 35.5% in the prior year period. Gross earnings as a percent of net sales in the wholesale division increased to 32.3% in 2007 from 31.6% in 2006. In the retail division, gross earnings as a percent of net sales rose to 65.6%, as compared with 64.8% in the first quarter of 2006. These increases were due to changes in product mix, and in the wholesale division, due to lower markdowns resulting from solid sales of the Company’s products at retail.

The Company’s cost of sales does not include distribution costs (e.g., receiving, inspection or warehousing costs). The Company’s distribution costs for the three months ended March 31, 2007 and 2006 were $1,717,000 and $1,642,000, respectively. These costs were included in selling and administrative expenses. Therefore, the Company’s gross earnings may not be comparable to other companies, as some companies may include distribution costs in cost of sales. The Company’s selling and administrative expenses also include, and are primarily related to, salaries and commissions, advertising costs, employee benefit costs, rent and depreciation.

Selling and administrative expenses as a percent of net sales were 22.5% for the first quarter of 2007 versus 21.6% in 2006. Wholesale selling and administrative expenses as a percent of net wholesale sales were 18.7% in 2007 compared with 18.3% in 2006. Retail selling and administrative expenses as a percent of net sales were 55.1% in 2007 and 49.6% in 2006. The increase in retail selling and administrative expenses as a percent of net sales was due to increased costs associated with lease renewals at some existing stores, as well as higher expenses in relation to sales at the Company’s newer stores.

Interest income in the current quarter was $508,000 compared with $462,000 last year. The increase was attributable to higher marketable securities at March 31, 2007 which are primarily invested in municipal bonds. The Company’s effective tax rate in the first quarter of 2007 was 37.2% compared with 37.4% in the first quarter of 2006.

-9-

LIQUIDITY & CAPITAL RESOURCES

The Company’s primary source of liquidity is its cash and short-term marketable securities, which aggregated approximately $13.9 million at March 31, 2007 as compared with $16.9 million at December 31, 2006. During the first quarter of 2007, the Company’s primary source of cash was from operations while its primary uses of cash were the repayment of borrowings and the repurchases of the Company’s stock. The Company also spent $500,000 on capital expenditures in the first quarter of 2007. Capital expenditures are expected to be between $3 and $5 million for the full year of 2007 due to remodeling of retail stores and the opening of new stores.

The Company generated $2.7 million in cash from operating activities in the first quarter of 2007, compared with $108,000 in the prior year period. This increase was primarily due to changes in operating assets and liabilities and higher net earnings in 2007.

Cash dividends paid were $1.1 million and $0.8 million in the three months ended March 31, 2007 and 2006, respectively. On May 1, 2007, the Company’s Board of Directors declared a quarterly dividend of $.11 per share to shareholders of record June 1, 2007, payable July 2, 2007. This represents an increase of 22% in the quarterly dividend rate. The impact of this will be to increase cash dividends paid annually by approximately $900,000.

The Company continues to repurchase its common stock under its share repurchase program when the Company believes market conditions are favorable. In the first quarter of 2007, the Company repurchased 73,100 shares for a total cost of $1.9 million.

As of March 31, 2007, the Company had a total of $50 million available under its borrowing facility, of which total borrowings were $8.8 million. The facility includes one financial covenant which specifies a minimum level of net worth. The Company was in compliance with the covenant at March 31, 2007. The facility expired on April 30, 2007, at which time the Company entered into a new $50 million 364-day borrowing facility. This new facility, which also includes a minimum net worth covenant, expires on April 30, 2008.

The Company will continue to evaluate the best uses for its free cash, including continued increased dividends, stock repurchases and acquisitions. The Company currently has 1.2 million shares available under its previously announced buyback program.

On July 1, 2007, all of the Company’s Class B Common Stock will convert, one-for-one, into the Company’s Common Stock.

The Company believes that available cash and marketable securities, cash provided by operations, and available borrowing facilities will provide adequate support for the cash needs of the business in 2007.

-10-

FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements with respect to the Company’s outlook for the future. These statements represent the Company's reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially. The reader is cautioned that these forward-looking statements are subject to a number of risks, uncertainties or other factors that may cause (and in some cases have caused) actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risk factors described under Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes from those reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company required to be included in the Company’s periodic filings under the Exchange Act. Such officers have also concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in accumulating and communicating information in a timely manner allowing timely decisions regarding required disclosures.

There have not been any changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

-11-

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In April 1998, the Company first authorized a stock repurchase program to purchase 1,500,000 shares of its common stock in open market transactions at prevailing prices. In April 2000 and again in May 2001, the Company’s Board of Directors extended the stock repurchase program to cover the repurchase of 1,500,000 additional shares. Therefore, 4,500,000 shares have been authorized for repurchase since the program began. The table below presents information pursuant to Item 703(a) of Regulation S-K regarding the repurchase of the Company’s Common Stock by the Company in the three-month period ended March 31, 2007.

| | Total | Average | Total
Number of — Shares
Purchased as | Maximum
Number — of
Shares |
| --- | --- | --- | --- | --- |
| | Number | Price | Part
of the Publicly | that
May Yet Be |
| | of
Shares | Paid | Announced | Purchased
Under |
| Period | Purchased | Per
Share | Program | the
Program |
| 1/1/07
- 1/31/07 | 1,600 | $ 23.29 | 1,600 | 1,294,047 |
| 2/1/07
- 2/28/07 | 10,600 | $ 26.50 | 10,600 | 1,283,447 |
| 3/1/07
- 3/31/07 | 60,900 | $ 25.64 | 60,900 | 1,222,547 |
| Total | 73,100 | $ 25.71 | 73,100 | 1,222,547 |

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders was held May 1, 2007 to elect two members to the Company’s Board of Directors.

Thomas W. Florsheim and Tina Chang were nominated for election to the Board of Directors for terms of three years. A total of 30,166,511 votes were cast for the nominees, with 29,931,631 votes cast “for” and 234,880 votes “withheld” for Mr. Florsheim, and 29,974,850 votes cast “for” and 191,661 votes “withheld” for Ms. Chang. Thomas W. Florsheim, Jr. and Robert Feitler continue as Directors of the Company for a term expiring in 2008. John W. Florsheim, Frederick P. Stratton, Jr. and Cory L. Nettles continue as Directors of the Company for a term expiring in 2009.

Item 6. Exhibits

See the Exhibit Index included herewith for a listing of exhibits.

-12-

SIGNATURES

Pursuant to the requirements 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.

| | WEYCO
GROUP, INC. |
| --- | --- |
| May
8, 2007 Date | /s/
John F. Wittkowske John
F. Wittkowske |
| | Senior
Vice President and |
| | Chief
Financial Officer |

-13-

WEYCO GROUP, INC.

(THE “REGISTRANT”)

(COMMISSION FILE NO. 0-9068)

EXHIBIT INDEX

TO

CURRENT REPORT ON FORM 10-Q

DATE OF March 31, 2007

| EXHIBIT
NUMBER | DESCRIPTION |
| --- | --- |
| 31.1 | Certification
of Chief Executive Officer |
| 31.2 | Certification
of Chief Financial Officer |
| 32.1 | Section
906 Certification of Chief Executive Officer |
| 32.2 | Section
906 Certification of Chief Financial
Officer |