Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Weyco Group Earnings Conference Call. My name is Keith and I'll be your operator for today. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. And I would now like to turn the conference over to your host for today, Mr. John Wittkowske, Senior Vice President and CFO. Please go ahead, sir.

Thanks, Keith. Good morning, everyone, and welcome to Weyco Group's conference call to discuss our fourth quarter and 2011 full-year earnings. On this call with me today are Tom Florsheim, Jr., our Chairman and CEO; and John Florsheim, our President and COO. Before we begin to discuss the results, I'd like to 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, as 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. Our net sales for the fourth quarter of 2011 were $75 million, up 20% compared with $62 million in 2010. Operating earnings were $8.9 million versus $7.2 million. Net earnings were $5.5 million in 2011 compared with $5.1 million in 2010. Diluted earnings per share were $0.50 per share in 2011, up from $0.45 in 2010. The primary reason for the increase in 2011 sales was our acquisition of The Combs Company in the first quarter of 2011. The Combs Company owns the BOGS and Rafters footwear brands. Bogs is a line of boots and shoes for men, women and children, which is sold across the agricultural, industrial, outdoor specialty, outdoor sport, lifestyle and fashion markets. Rafters is a line of outdoor sandals. Hereafter, in this call, we will refer to The Combs…

Thanks, John, and good morning, everyone. In our Wholesale business, the big story this year was the addition of Bogs and Rafters to our portfolio of brands. As John mentioned, collectively, these brands added $28 million of sales and $1.2 million of licensing revenue to our annual sales. During the second half of 2011, the Bogs brand became fully integrated into the Weyco infrastructure. While the U.S. experienced a very mild winter, Bogs still performed well, especially in comparison to other brands in this category. Shipments of the brand were relatively balanced across men's, women's and kids' product. Bogs boots were also sold across a diversified mix of retailers, including independent outdoor stores, family shoe retailers, department stores and farm and agriculture stores. During the fourth quarter, Bogs also started to ship a new collection of industrial boots that are ASTM approved for chemical and slip resistance. While industrial boots are currently a small percentage of the brand's sales, over time, we believe that this category can become a growth market for the brand and an important showcase for Bogs' technical platform. Looking forward, we continue to see growth opportunities for the Bogs brand in 2012 across a number of categories. Based on our success last year with lifestyle product, we are expanding Bogs' assortment, targeting a more fashionable female consumer. This initiative will enable Bogs to increase its penetration in better department stores and big city independents. On the opposite end of the spectrum, we also see an opportunity to increase our tentacle hunting boot business. For Fall '12, we are introducing a range of lightweight hunting boots that are both breathable and insulated, and early feedback from retailers has been very positive. On June 1, 2012, we'll take -- we will be taking over the distribution of Bogs…

[Operator Instructions] Your first question is from the line of Rebecca Simmons with DePrince, Race, & Zollo.

Maybe you could start off -- could you give us an update on leather prices and if you've seen any stabilization there?

Yes. I think that there is some stabilization there. And whereas leather price increases were a major deal a year ago, that has somewhat leveled out. In a couple of cases, we've actually seen some leather price decreases. I would say that, that part of the price increase equation is looking much better, and we hope that it stays that way.

Okay. So you think you kind of reached the peak of the impact? Or is that -- some of that still -- those higher costs still in your inventory?

Well, what we're seeing is that there isn't -- we're not -- I mentioned that we've seen a couple of tanneries that have slightly decreased prices. In general, prices aren't going down, so I think the prices in our inventory pretty much were flat. How those prices are going to be going forward from a leverage standpoint -- the real problem from pricing standpoint is the labor issue in both India and China, and also the currency -- the exchange rate as far as the Chinese currency goes, which is -- their currency continues to increase against the dollar and that is just a big unknown.

We also have oil byproducts that are used as part of out soles and some of the lining materials and some of the synthetic materials that are used in the footwear that we manufacture. And then -- with everything that's going on in terms of oil prices, it pushes up those raw material prices as well.

Okay, great. Finally, can you talk about how you feel about your inventory levels at this point?

Sure. I think that we feel very comfortable with where they are. We -- our inventory levels are up, but we've added a brand. I think that, in general, we keep very tight controls over our inventories. And so we have a very low percentage of obsolete inventory. We are constantly cleaning up any problems that we might have, and so our inventories are generally very clean and they're clean right now. So I would say overall, we're very comfortable, and that they're adequate to support the growth that we expect in 2012.

Okay. And then going back to leather for just a second. Do you think some of the lower leather prices would be able to offset the Chinese wage inflation?

No, I don't. I think that -- I mentioned that we had a couple tanneries where we had some decreases. That is, I would say, the exception, and not the rule. The tanneries in general are mostly overseas today. Where we used to ship a lot of leather from the U.S. over to China, most of those U.S. tanneries have picked up and moved over there. And so they actually are subject to the same type of labor issues that we're seeing in the shoe factories. And so even if the raw material prices are stabilized, they're still facing price pressures. And so while things are stabilized, they're not going down. And I would expect that during this year, we're going to still see some price pressure on leather. And I wouldn't be surprised if it moves up a little bit. It's just not going to be -- I don't think as extreme as what we saw in 2011.

Okay. Got it. And then looking at the Bogs acquisition, is the accretion from this merger kind of meeting your expectations?

We -- I would say, yes. This is John. I think that in Bogs, we have the same issue that Tom just talked about vis-à-vis cost increases and margin. And so we're focused on that to keep that going. And clearly, it was accretive this year, but we also have additional costs integration and acquisition costs that offset some of that accretion that will certainly go away in 2012. Right now, we're happy with where we're going and we expect a better 2012.

Okay. Do you have any expectations for 2012 out of some of your core brands? Do you expect improvement there?

From a sales standpoint? I mean, I think that we have an opportunity to grow our existing brands based upon what we're doing from an assortment standpoint in terms of our merchandising mix, in terms -- we're getting more casual. But that's all -- it's a process that takes time, so it's difficult to say -- and from a percentage standpoint, we normally don't give guidance. But we feel that we're well positioned. I think our brands are performing well at retail. As we push into new categories, it represents a good opportunity for growth going forward. And we've got good relationships with our major retailers. And they seem very happy with our performance. The one other thing I'd just call out, and we mentioned it in the call, but when you consider the additional volume that we're going to get from taking over a licensee up in Canada, that's going to be a significant factor for us this year. And so I just want to -- we don't have that in the release, but we mentioned that in the call -- earlier in the call.

And that's the license out of Canada?

Right. Our Bogs business, when we bought the brand, had been licensed to a third party in Canada. And the business up there is actually very strong, and it's a large business for the size of the market. And we are actually selling -- we officially taking over the shipping of the brand June 1 -- we're out there right now selling for Fall '12. And we'll deliver Bogs for Fall '12, which is obviously the biggest season for Bogs. And so we gave out some numbers earlier, $6 million to $7 million additional sales, we think, this year, and then $8 million to $10 million in 2013. So I think that's going to be some nice additional volume for the Bogs brand and overall.

And then the last question I had is could you just give an update if there's any outlook for additional acquisitions or kind of where you're at, at this point?

It's difficult to control the timing on acquisitions. I think that our preference would be to focus on Bogs for the next couple years, and really grow that business and give that our full attention. With that said, if something very attractive came on the market, we would definitely look at it. We're still, long term, in an acquisition mode. But again, we really believe -- we did this with Florsheim and we intend to do the same thing with Bogs, where we're going to focus our attention on that and make sure that we maximize the growth there. And -- but long term, we definitely are looking at other -- we'll look at additional acquisitions.

And one thing we mentioned in the conference call too is, we're expanding our infrastructure here to accommodate anticipated growth with our existing brands in Bogs. But it sets us up for the future should something interesting come down the pike.

[Operator Instructions] Gentlemen, it looks like no other questions today.

Okay. Then we want to thank everybody again for joining us. And we'll talk to you next quarter. Thank you. Have a good day.

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect, and have a great rest of the day.