Thank you for standing by and welcome to Weyco Group's Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. [Operator Instructions] Please be advised that today's conference maybe recorded. [Operator Instructions] I would now like to hand the call over to John Wittkowske, Senior Vice President/Chief Financial Officer. Please go ahead.

Thank you. Good morning and welcome to Weyco Group's conference call to discuss our fourth quarter and full year 2021 results. 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 for the quarter and for the year, I will read a brief cautionary statement. 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 these 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, as well as our other filings with the SEC. The Form 10-K identifies important factors and risks that could cause our actual results to differ materially from our projections. With respect to the ongoing COVID-19 pandemic, numerous factors will determine the extent and length of the impact on the Company, including the extent and duration of the pandemic and its impact on the global economy, the extent and duration of the negative impacts on our supply chain, actions taken by governments, such as stay at home or similar orders, that among other effects require retail store closures or limit foot traffic, the financial health of our customers and business partners, including the effects of any bankruptcy proceedings by such parties, and the health and welfare of our employees. Our net sales for the fourth quarter of 2021 were a record $101.4 million compared to last year's fourth quarter net sales of $62 million. Consolidated gross earnings were 40.2% of net sales for the quarter, compared to 44.5% of net sales…

Thank you, John and good morning, everyone. As John mentioned, we had an outstanding end to the year, with record wholesale shipments in the fourth quarter and strong performances across all brands. Our results reflected two underlying trends. 1. The slow unwinding of the supply chain bottleneck as we started to receive significant quantities of footwear in the fourth quarter. The incoming shipments allowed us to fill a portion of the demand pipeline as we are still in the process of getting retailers back to their natural inventory models. 2. We are seeing outstanding consumer response to our product offerings in both legacy and outdoor brands. Our BOGS brand has been solid across the pandemic timeframe, so is especially meaningful that we had a record fourth quarter for BOGS. Our classic weather boot styles experienced elevated demand and multiple distribution channels ranging from department stores in cities to farm and agricultural stores in rural communities. In addition, we greatly expanded sales of our casual lifestyle footwear from our wholesale direct-to-consumer perspective. Relative to 2019, our BOGS e-commerce business in North America was up over a 100% for both the fourth quarter and for all of 2021, the BOGS brand is in a good place as we build off the strong momentum over the past two years and pushed successfully into new categories. At June of 2021, we acquired the Forsake brand, which joined BOGS as part of our outdoor group in Portland. Over the past few months, we've been working with for Forsake 's founders, Jake Anderson and Sam Barstow, to onboard the brand and to determine opportunities to expand Forsake's reach, both in the wholesale and direct-to-consumer channels. Similar to our other brands, forsake faced certain supply chain constraints and delays, but we believe we're making good progress in…

[Operator Instructions] Please stand by while we compile the Q&A roster. [Operator Instructions] Our first question comes from the line of John E. Deysher of Pinnacle. Your line is open.

Good morning, everyone. And a nice way to wrap up the year. Congratulations.

Thank you.

Hi, John.

Just curious about a couple of things. One, the price increases that you just mentioned, you said January of this year and when was the second one going into effect.

It will be July. So for the second half of the year.

Okay. And do you anticipate those price increases to recoup part of the increase in freights and raw material costs, or how should we think about the recovery of the inflation that we're -- everyone is seeing these days.

Yeah, that's a great question. It's a little bit of a moving target because when we started this year, we felt that freight cost will probably come down in the second half of the year. And that would be a big help. But I think with everything going on in the world today, we're not so sure about that anymore. And so there's a lot of different pieces that are involved. And so, my answer to you isn't going to be a 100%. I would say that our best guess is that in the fall, I think we're still going to be down a little bit margin-wise. I would say 2% to 3%. But if freight costs get anywhere closer to normal, that will not be the case. We've -- what we tried to do with the second price increase was cover most of the freight increase, and so we're hoping to see really improved margins in the second half. I hope -- I don't know if that gives you definite answers you wanted, but that's our best guess.

Okay. So that covers the freight, but what about raw material costs?

Raw material prices we've covered. And so we're -- we really have covered those increases with -- the increases we had for the first half of '22 are covered and same with the second half. The real challenge to our margins is in these freight costs. And so, we [Indiscernible] all the way our buying works, we are basically locked in our pricing with other factories for the remainder of the year. We've covered most of our needs for this whole year at the current pricing, so we don't expect any surprises there. The other thing to consider is because our backlog is way up. We are seeing big increases in volume as we have started this year. And so even though, we have this pressure on gross margin percentages, our total gross margin percents are up and we feel that they're going to be up considerably for the year.

Okay. Good. So it sounds like your freight is still an issue, but there's no bottlenecks in terms of you getting supply.

Well, that's not 100% true either. We still are seeing some bottlenecks. There is no doubt about that, but we have so much -- Two things. We're placing orders earlier trying to give ourselves more time so that for fall, for example, we're bringing in product as early as we can. So even if the supply chain bottlenecks caused delays, we're hoping that we're going to be able to ship foods in August and September, which we were not able to do at fall of '21, just because everything came in two or three months late. The other thing is we have the pipeline so full between our factories and our distribution center, that even though there are continuing to be delays, just because we have so much in transit, we're receiving a record number of containers every day. So we're getting in product, but that's almost in spite of the supply chain bottlenecks, but not because they completely gone away. And it's different, different ports. And for raw, it seems like it's getting better. Because of various things that are happening around the world, it gets bottlenecked again. But in general, we are getting in product. And because of planning, we feel that we're going to be, either doing much better job shipping our customers at the appropriate time seasonally.

Great. That's helpful. No change in tariffs at this point, they're still what we've talked about in the past coming in from the Far East?

Yes. No change.

No change on tariffs. Okay. Talk to us about the Forsake brand. When will that plan come into effect and kind of what's your target market for that product line?

I'm going to turn that question over to John Florsheim.

Yeah, hey, John. It's -- if the target market is younger, it's 50-50 male, female, we're really looking more in the 25-40 year old range, maybe even a little younger in that. It's outdoor, it's an adventure enthusiasts. It's a very different product category within our mix. I mean, we -- it fits more with our outdoor group in Portland. In terms of winter, when that's going to come online, we're still really in the on-boarding process. It's been -- Forsake deliveries this fall were caught up in some of the supply chain bottlenecks that Tom referenced. And so, we were a little late in deliveries for the fall and then in getting in terms of getting new new product online as well. So we really look at this more, is something that's going to evolve and grow in 2023. In Rio -- also see, this is more important wholesale opportunity. But we also see it is important within our mix of direct-to-consumer, as far as our e-commerce portfolio and addresses a yarn consumer, they built a nice niche e-commerce business on their own. And we feel that we can use some of the tools that we have here that worked for other brands to grow Forsake online. Zen, does that answer your question?

Yeah, that's very helpful. So it sounds like no meaningful sales contributions until 2023. Is that fair?

I would say 2023 would be where we expect to really see the work that we're doing since we purchased the brand, to come to fruition.

Okay. Good. Well, good luck with that. And then two final financial questions. Will there be any -- With the closing of Europe, will there be any additional expenses that slash over into 2022?

No. No. We took all the right [Indiscernible] that we needed to between 2020 and 2021.

Okay. Good. That's helpful. And then on the share buyback, you spent $2.5 million last year. How many shares did you repurchase, and what's left on the authorization?

Last year, we purchased 125,000 shares. We had 210,000 left as of the end of the year. But during the first quarter, so far we bought about 50,000 shares. And so there is about a 160,000 left on that original buyback or that buyback amount. That amount can be changed at our discretion, but what's authorized right now is 160,000 as of right now.

Correct. Okay, 160,000 shares.

Yeah. We have bought back 50,000 more in the first quarter so far.

Okay, so that leaves 160,000. If you decide to increase it, does that merit disclosure in terms of the board deciding to increase it?

Yes. We would disclose it -- we would -- it would be board approved and we would disclose it.

Okay. Great. That's all I have. Thanks very much. And good continued luck.

Thanks, John.

Thanks for the questions.

Thank you. [Operator Instructions]. As there are no further questions in queue, I'd like to turn the call back over to Mr. Wittkowske for any closing remarks, sir.

Thank you. Thanks, everyone for joining us today for our conference call, and we look forward to talking to you on May 4th for our next quarterly update. Have a great day.

And this concludes today's conference call. Thank you for participating. You may now disconnect.