TABLE OF CONTENTS

20122015 vs. 20112014

SEGMENT ANALYSIS

Net sales and earnings from operations for the Company’s segments, as well as its “other” operations, in the years ended December 31, 20122015 and 20112014, were as follows:

		Years ended December 31,
		2015				2014				% Change
		(Dollars in thousands)
Net Sales
North American Wholesale		$	251,370			$	243,429				3	%
North American Retail			22,121				23,324				-5	%
Other			47,126				53,735				-12	%
Total		$	320,617			$	320,488				0	%
Earnings from Operations
North American Wholesale		$	24,272			$	22,527				8	%
North American Retail			2,519				3,300				-24	%
Other			2,994				4,830				-38	%
Total		$	29,785			$	30,657				-3	%

North American Wholesale Segment

Net Sales

Net sales in the Company’s North American wholesale segment for the years ended December 31, 20122015 and 20112014, were as follows:

		Years ended December 31,
		2015				2014				% Change
		(Dollars in thousands)
North American Net Sales
Stacy Adams		$	67,655			$	61,157				11	%
Nunn Bush			66,681				66,498				0	%
Florsheim			50,961				51,440				-1	%
BOGS/Rafters			59,616				57,830				3	%
Umi			2,825				3,322				-15	%
Total North American Wholesale		$	247,738			$	240,247				3	%
Licensing			3,632				3,182				14	%
Total North American Wholesale Segment		$	251,370			$	243,429				3	%

The Company’sincrease in Stacy Adams and Florsheim brands both had solid sales growth during 2012 with department and chain stores, and Internet and mail order retailers. Nunn Bush2015 net sales were up slightly in 2012.was driven by strong new product sales. Net sales of the BOGS and BOGS/Rafters brands increased $8.5 millionwere up due mainly to strong sales of BOGS women’s and children’s footwear in the takeover by the CompanyU.S.

Licensing revenues consist of the Canadian distributionroyalties earned on sales of the brands in 2012. Bogs sales in Canada were $6.9 million in 2012. Bogs also had increased salesbranded apparel, accessories and specialty footwear in the United States due to twelve months of salesand on branded footwear in 2012 compared to ten months in 2011 due to the March 2011 acquisition of the brands.

Licensing revenues were down slightly in 2012 as compared to 2011. This resulted from decreased Bogs licensing revenues offset by increased Florsheim revenues. Bogs licensing revenues decreased in 2012 due to the takeover by the Company of the distribution of the BOGSMexico and Rafters brands in Canada, which had previously been licensed to a third party. Florsheim licensing revenues increased due the collection of past due licensing revenues from the Company’s Mexican licensee of amounts that had previously been reserved for.certain overseas markets.

Earnings from Operations

Overall product margins for the wholesale segment increased to 31.5% this year, from 31.4% last year. Gross margins in the U.S. increased to 32.4% this year, from 31.4% last year, however, this increase was offset by lower gross margins in Canada. Gross margins in Canada continue to be negatively affected by the weaker Canadian dollar because inventory is purchased in U.S. dollars.

TABLE OF CONTENTS

Earnings from operations in the North American wholesale segment were $22.2$24.3 million in 20122015, up 8% as compared with $15.7to $22.5 million in 2011. The 2012 reduction in the estimated liability for future payments to be made as a result of the Bogs acquisition caused $3.4 million of the increase. The remainder of the2014. This increase was achieved throughdue to higher sales volumes across all wholesale brands as well as slightly higherand gross margins as a percent of net sales, partially offset by higher selling and administrative costs related to the Canadian distribution of Bogs as well as higher pension and advertising expenses in 2012. Wholesale gross earnings were 32.2% of net sales in 2012 compared to 31.8% in 2011.

margins.

The Company’s cost of sales does not include distribution costs (e.g., receiving, inspection or warehousing costs). or shipping and handling expenses. The Company’s distribution costs were $10.0$11.3 million and $8.6$11.0 million in the years ended December 31, 20122015 and 2011,2014, respectively. The Company’s shipping and handling expenses were $3.1 million and $3.5 million in the years ended December 31, 2015 and 2014, respectively. These costs were included in selling and administrative expenses. The Company’s gross earnings may not be comparable to other companies, as some companies may include distribution costs in cost of sales.

North American wholesale segment selling and administrative expenses include, and are primarily related to, distribution costs, salaries and commissions, advertising costs, employee benefit costs and depreciation. Wholesale selling and administrative expenses were up $1.3 million for the year, which included an additional $2 million in marketing and advertising expenses. As a percent of net sales, wholesale selling and administrative expenses were 23% in each of 2015 and 2014.

North American Retail Segment

Net Sales

Net sales in the Company’s North American retail segment were $22.1 million in 2015, down 5% as compared to $23.3 million in 2014. The decrease was due to three fewer domestic retail stores operating this year as compared to last year. Same store sales, which include U.S. internet sales, were up 1% for the year. Stores are included in same store sales beginning in the store’s 13^th month of operations after its grand opening. The increase in same store sales was due to an increase in the Company’s U.S. internet business.

Earnings from Operations

Earnings from operations in the North American retail segment were $2.5 million in 2015, down 24% as compared to $3.3 million in 2014. Retail gross earnings as a percent of net sales were 65.7% in 2015 and 65.9% in 2014. Selling and administrative expenses for the retail segment include, and are primarily related to, rent and occupancy costs, employee costs and depreciation. Selling and administrative expenses as a percent of net sales were 54% in 2015 compared to 52% in 2014. The decrease in retail earnings from operations was primarily due to lower net sales at the Company’s brick and mortar locations.

The Company reviews its long-lived assets for impairment in accordance with Accounting Standards Codification (“ASC”) 360,Property Plant and Equipment(“ASC 360”). See Note 2 in the Notes to Consolidated Financial Statements for further information. No impairment charge was recognized in 2015 or 2014.

Other

The Company’s other businesses include its wholesale and retail operations in Australia, South Africa, Asia Pacific and Europe. In 2015, net sales of the Company’s other businesses were $47.1 million, down 12% as compared with $53.7 million in 2014. This decrease was primarily due to lower net sales at Florsheim Australia, caused by the translation of the weaker Australian currency into U.S. dollars. In local currency, Florsheim Australia’s net sales were up 7% for the year. Earnings from operations at Florsheim Australia and Florsheim Europe were $3.0 million in 2015, down 38% as compared to $4.8 million last year. This decrease was primarily due to lower operating earnings at recently opened stores in Asia and Australia as well as lower operating earnings at the Company’s retail store in Macau, as a result of higher operating expenses.

TABLE OF CONTENTS

2014 vs. 2013

SEGMENT ANALYSIS

Net sales and earnings from operations for the Company’s segments, as well as its “other” operations, in the years ended December 31, 2014 and 2013, were as follows:

		Years ended December 31,
		2014				2013				% Change
		(Dollars in thousands)
Net Sales
North American Wholesale		$	243,429			$	225,657				8	%
North American Retail			23,324				23,255				0	%
Other			53,735				51,372				5	%
Total		$	320,488			$	300,284				7	%
Earnings from Operations
North American Wholesale		$	22,527			$	20,742				9	%
North American Retail			3,300				3,018				9	%
Other			4,830				3,995				21	%
Total		$	30,657			$	27,755				10	%

North American Wholesale Segment

Net Sales

Net sales in the Company’s North American wholesale segment for the years ended December 31, 2014 and 2013, were as follows:

		Years ended December 31,
		2014				2013				% Change
		(Dollars in thousands)
North American Net Sales
Stacy Adams		$	61,157			$	58,311				5	%
Nunn Bush			66,498				69,161				-4	%
Florsheim			51,440				51,832				-1	%
BOGS/Rafters			57,830				39,682				46	%
Umi			3,322				3,473				-4	%
Total North American Wholesale		$	240,247			$	222,459				8	%
Licensing			3,182				3,198				-1	%
Total North American Wholesale Segment		$	243,429			$	225,657				8	%

The Stacy Adams brand was up in 2014 due to sales volume increases in the modern dress shoe category which resulted in higher sales across a number of distribution categories. The decline at Nunn Bush was mainly due to lower sales with one major department store. Florsheim net sales were down slightly in 2014 due to lower sales with department stores and independent stores, partially offset by higher sales with chain stores and internet retailers. Net sales of the BOGS and Rafters brands were up approximately $18.1 million for the year, primarily driven by increased sales of women’s and children’s boots in the U.S. and Canada.

Licensing revenues consist of royalties earned on sales of branded apparel, accessories and specialty footwear in the United States and on branded footwear in Mexico and certain overseas markets.

TABLE OF CONTENTS

Earnings from Operations

Earnings from operations in the North American wholesale segment were $22.5 million in 2014, up 9% as compared to $20.7 million in 2013. 2014 wholesale earnings from operations included $611,000 of expense resulting from the Bogs contingent consideration adjustment, which was recorded within selling and administrative expenses. Without this adjustment, wholesale earnings from operations would have been up 11% in 2014, driven by higher sales volumes. Wholesale gross earnings as a percent of net sales were 32.3% in 2014 and 32.6% in 2013. The decrease in wholesale gross earnings as a percent of net sales was primarily due to lower gross margins on product sold in Canada, resulting from the weaker Canadian dollar relative to the U.S. dollar in 2014, as compared to 2013.

The Company’s cost of sales does not include distribution costs (e.g., receiving, inspection or warehousing costs) or shipping and handling expenses. The Company’s distribution costs were $11.0 million and $10.8 million in the years ended December 31, 2014 and 2013, respectively. The Company’s shipping and handling expenses totaled $3.5 million in each of the years ended December 31, 2014 and 2013. These costs were included in selling and administrative expenses. The Company’s gross earnings may not be comparable to other companies, as some companies may include distribution costs in cost of sales.

North American wholesale segment selling and administrative expenses include, and are primarily related to, distribution costs, salaries and commissions, advertising costs, employee benefit costs and depreciation. As a percent of net sales, wholesale selling and administrative expenses were 22% this year23% in 2014 compared to 24% in 2011. The decrease in selling and administrative expenses as a percent of net sales was largely due to the impact of the $3.4 million of income from the reduction of the estimated liability for future payments due to the former owners of the BOGS and Rafters brands. The reduction of this liability was primarily due to a decrease in the Company’s estimate of the 2013 contingent payment which was based on 2011 and 2012 gross margin dollars. The Company lowered its estimate of 2012 gross margin dollars relative to its original projections, primarily because sales of Bogs products were less than expected due to the mild winters experienced in the United States since the brands were acquired.2013.

North American Retail Segment

Net Sales

Net sales in the Company’s North American retail segment decreased $392,000 or 2%were flat at $23.3 million in 2012 compared to 2011.2014 and 2013. There were seven fewer stores at December 31, 2012operating in 2014 than at December 31, 2011, as the Company has been closing unprofitable stores.in 2013; one store closed in 2014 and six stores closed throughout 2013. The sales losses from these closed stores were offset by a 5% increase in same store sales for 2014. Same store sales which include retail store sales and Internet sales, were up 8% in 2012.U.S. internet sales. Stores are included in same store sales beginning in the store’s 13^th month of operations after its grand opening. The increase in same store sales was driven in part by increasesan increase in the Company’s InternetU.S. internet business.

Earnings from Operations

Retail earningsEarnings from operations increased $108,000 in 2012the North American retail segment were $3.3 million in 2014, up 9% as compared to 2011. Gross$3.0 million in 2013. Retail gross earnings as a percent of net sales were 64%65.9% in 20122014 and 2011.65.6% in 2013. Selling and administrative expenses for the retail segment decreased in 2012include, and wereare primarily related to, rent and occupancy costs, employee costs and depreciation. Selling and administrative expenses as a percent of net sales were 57.6%52% in 2012 and 58.1%2014 compared to 53% in 2011.

2013. The increase in retail earnings from operations was due to improved performance in the Company’s U.S. internet business.

The Company reviews its long-lived assets for impairment in accordance with Accounting Standards Codification (ASC)(“ASC”) 360,Property Plant and Equipment(“ASC 360”). See Note 2 in the Notes to Consolidated Financial Statements for further information. In 2012 and 2011,No impairment charges of $93,000 and $165,000, respectively, werecharge was recognized within selling and administrative expenses to write down the fixed assets of certain retail locations that were unprofitable. Those locations have closedin 2014 or are slated to close when their respective lease terms expire. In 2012, seven retail locations closed and in 2011, five locations closed. In general, earnings from operations for the retail segment have improved as fixed assets have been written down and underperforming stores have closed. In 2013, the Company expects to close three more locations.2013.

Other

The Company’s other businesses include its wholesale and retail operations in Australia, South Africa, Asia Pacific and Europe. In 2012,2014, net sales of the Company’s other businesses were $51$53.7 million, up 5% as compared with $47$51.4 million in 2011. The majority of the2013. This increase was due to higher sales volumes at both Florsheim Australia, whose wholesaleEurope and retailFlorsheim Australia. Florsheim Australia’s net sales were up $1.4 million, or 3%, for the year. In local currency, Florsheim Australia’s net sales were up 10% for the year. This increase was due to higher sales volumes in both increased 12%its retail businesses, where sales

TABLE OF CONTENTS

were up 13% (same store sales up 10%), or $4.7 million collectively.and its wholesale businesses, where sales were up 6% compared to 2013. Florsheim Australia’s net sales were negatively impacted by the weaker Australian dollar relative to the U.S. dollar in 2014. Earnings from operations in the Company’s otherof these businesses were flat.$4.8 million in 2014, up 21% as compared to $4.0 million in 2013. This increase was primarily due to higher operating earnings at Florsheim Australia.

Other income and expense and taxes

OTHER INCOME AND EXPENSE AND TAXES

The majority of the Company’s interest income is from its investments in marketable securities. Interest income for 2012 was down approximately $380,000 compared with 2011,$936,000 in 2015, $1.2 million in 2014, and $1.5 million in 2013. The decrease over the three year period was primarily due to lower average investment balances this year compared with last year.

balances.

Interest expense was $561,000$181,000 in 20122015, $178,000 in 2014 and $384,000 in 2013. The decrease in 2014 was due to a lower average debt balance in 2014, as compared with $611,000to 2013.

Other expense, net, was $1.4 million in 2011.

2015, $595,000 in 2014 and $653,000 in 2013. Other expense, net, included foreign exchange transaction losses totaling $961,000, $268,000, and $279,000 in 2015, 2014, and 2013, respectively, and other non-operating expenses. The increase in foreign exchange transaction losses this year was primarily due to the significant decline in the Australian dollar compared to the U.S. dollar. Additionally, other expense in 2015 included $473,000 of expense related to the operating losses and write-off of an investment by Florsheim Australia in a foreign joint venture.

The effective tax rate for 20122015 was 34.1%37.7% compared with 34.3%36.2% in 2011.

2011 vs. 2010

SEGMENT ANALYSIS

Net sales2014 and earnings from operations for the Company’s segments, as well as its “other” operations,35.2% in the years ended December 31, 2011 and 2010 were as follows:

North American Wholesale Segment

Net Sales

Net sales2013. The increase in the Company’s North American wholesale segment for the years ended December 31, 2011 and 2010 were as follows:

Net sales of Stacy Adams and Florsheim grew 1% in 2011 due to slightly higher sales volumes across several trade channels. Nunn Bush net sales remained flat in 2011. Net sales for the BOGS/Rafters brands were $28 million in 2011, following the acquisition of Bogs on March 2, 2011 (see Note 3 of the Notes to Consolidated Financial Statements). Umi was acquired on April 28, 2010. Accordingly, the Company’s 2011 results included Umi’s operations from January 1 through December 31, 2011, while 2010 only included Umi’s operations for the period April 28 through December 31, 2010.

In 2011 and 2010, licensing revenues consisted of royalties earned on sales of branded apparel, accessories and specialty footwear in the United States and on branded footwear in Canada, Mexico and certain overseas markets. In 2011, the Company’s licensing revenues increased 58%, primarily due to the addition of Bogs which contributed $1.2 million in new licensing revenues during the period.

Earnings from Operations

Earnings from operations in the North American wholesale segment were $15.7 million in each of the years 2011 and 2010. Higher net sales in 2011 were offset by slightly lower gross margins and increased selling and administrative costs, which included nonrecurring acquisition and transition costs related to the Bogs acquisition as well as other increased operating costs.

Wholesale gross earnings as a percent of net sales were 31.8% in 2011 compared with 32.5% in 2010. The decrease was due to increased pricing from the Company’s third-party overseas factories resulting primarily from higher labor and material costs.

The Company’s cost of sales does not include distribution costs (e.g., receiving, inspection or warehousing costs). The Company’s distribution costs were $8.6 million and $7.9 million in the years ended December 31, 2011 and 2010, respectively. These costs were included in selling and administrative expenses. The Company’s gross earnings may not be comparable to other companies, as some companies may include distribution costs in cost of sales.

North American wholesale segment selling and administrative expenses include, and are primarily related to, distribution costs, salaries and commissions, advertising costs, employee benefit costs and depreciation. Wholesale selling and administrative expenses were up approximately $9.4 million in 2011 compared with 2010. As a percent of wholesale net sales, wholesale selling and administrative expenses were 24% in 2011 compared with 23% in 2010.

North American Retail Segment

Net Sales

In the North American retail segment, net sales in 2011 were $24.7 million, up 10% from $22.5 million in 2010. There were five fewer stores in 2011 compared with 2010. Same store sales, which include the Company’s retail store sales and the Company’s Internet sales, were up 18%. Stores are included in same store sales beginning in the store’s 13^th month of operations after its grand opening.

Earnings from Operations

Earnings from operations in the North American retail segment increased $1.9 million in 2011 compared to 2010. The increase2015 was primarily due to a higher sales volumes in the Company’s Internet business and across the majority of the retail locations and improvement in same store performancestate tax liability this year as well as the closing of five underperforming stores during 2011. Gross earnings as a percent of net sales in the retail segment were flathigher effective tax rates at 64% in 2011 and 2010.

Retail selling and administrative expenses were down approximately $497,000 in 2011 compared with 2010. As a percent of net retail sales, retail selling and administrative expenses were 58% in 2011 compared with 66% in 2010. In 2011 and 2010, impairment charges of $165,000 and $310,000 respectively, were recognized within selling and administrative expenses to write down the fixed assets of certain retail locations that were deemed unprofitable. Those locations have closed or are slated to close when their respective lease terms expire. In 2011, five retail locations closed and in 2010, one location closed. In general, earnings from operations for the retail segment improved as fixed assets were written down and underperforming stores were closed.

Other

In 2011, net sales of the Company’s other operations were $47 million, compared with $41 million in 2010. The majority of the increase was at Florsheim Australia, whose net sales increased $6.5 million, or 20%. In local currency, Florsheim Australia’s sales increased 7%, and the weaker U.S. dollar in 2011 relative to the Australian dollar caused the rest of the sales increase. Earnings from operations in the Company’s other businesses in 2011 were up $2.5 million, due mainly to Florsheim Australia’s increased retail sales and gross earnings as a percent of sales. The improvement in gross earnings was due to the strengthening of the Australian dollar relative to the U.S. dollar, as Florsheim Australia’s purchases of inventory are denominated in U.S. dollars.

Other income and expense and taxes

The majority of the Company’s interest income is from its investments in marketable securities. Interest income for 2011 was down approximately $70,000 compared with 2010, primarily due to a lower average investment balance in 2011 compared with 2010.

Interest expense was $611,000 in 2011 compared with $120,000 in 2010. The increase was due to additional debt outstanding during 2011 following the Bogs acquisition.

The effective tax rate for 2011 was 34.3% compared with 33.7% in 2010.foreign locations. The increase in 20112014 was primarilylargely due to higher effective rates at certainlower percentages of tax free municipal bond income relative to pretax earnings in the Company’s foreign businesses.United States.

LIQUIDITY & CAPITAL RESOURCES

The Company’s primary sources of liquidity are its cash and short-term marketable securities, which aggregated $25.3$22.4 million at December 31, 20122015, and $15.1$18.4 million at December 31, 2011,2014, and its revolving line of credit. In 2012,2015, the Company generated $18.0used $5.7 million inof cash fromin operating activities, compared with $17.1generating $17.8 million of cash in 2014 and $98,000generating $29.8 million of cash in 2011 and 2010, respectively.2013. Fluctuations in net cash from operating activities over the three year period have mainly resulted from changes in net earnings and operating assets and liabilities, and most significantly the year-end inventory and accounts receivable balances.

The decrease in 2015 was primarily a result of buying more inventory to meet increased backlogs and increase its 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.

The Company’s capital expenditures were $9.5$2.5 million, $8.2$2.9 million and $1.5$2.7 million in 2012, 20112015, 2014 and 2010,2013, respectively. Capital expendituresIn addition, in 2012 included2013 the Company purchased a project to connect50% interest in a neighboring building acquired in December 2011, to the Company’s existing distribution center in Glendale, Wisconsin. This project was completed in the fourth quarter of 2012.Montreal, Canada for $3.2 million. The Company expects capital expenditures to decrease to approximatelybe between $4 million to $6and $5 million in 2013, and2016. The increase in 2016 is due to $1 millionimprovements that will be made to $3 million thereafter.

In 2011, the Company used cash of approximately $30.8 million forCompany’s distribution center in Glendale, Wisconsin to increase its acquisition of Bogs including $3.8 million to repay the debt assumed in the transaction. The Company borrowed a net of $32 million in 2011 under its revolving line of credit to fund the Bogs acquisition and related capital expenditures and inventory purchases. In 2010, the Company used cash of approximately $2.6 million for its acquisition of Umi.capacity.

The Company paid cash dividends of $10.9$8.5 million, $7.2$8.2 million and $7.0$4.1 million in 2012, 20112015, 2014 and 2010,2013, respectively. On December 31, 2012, the Company paid two quarterly cash dividends. The Company accelerated its first and second quarter 2013 dividends, each for $0.17 per share, into 2012 andwhich typically would have been paid them on December 31^st.in the first half of 2013. Both dividends were paid earlyaccelerated into 2012 in anticipation of potential tax law changes effective January 1, 2013. The Company plans to resumeresumed its regular quarterly dividend payment schedule in Julythe second quarter of 2013.

The Company continues to repurchase its common stock under its share repurchase program when the Company believes market conditions are favorable. In 2012,2015, the Company repurchased 285,422354,741 shares for a total cost of $6.6$9.9 million. In 2011,2014, the Company repurchased 175,606297,576 shares for a total cost of $4.0 million through its share repurchase program and 400,319$8.0 million. In 2013, the Company repurchased 195,050 shares for a total cost of $9.0 million in a private transaction. In 2010, the Company repurchased 101,192 shares for a total cost of $2.3$4.6 million. At December 31, 2012,2015, the remaining total shares available to purchase under the program was approximately 824,000976,000 shares.

TABLE OF CONTENTS

At December 31, 2012,2015, the Company had a $60 million unsecured revolving line of credit with a bank expiring April 30, 2013.November 4, 2016. The line of credit allows for up to $60 million in borrowingsbears interest at a rate of LIBOR plus 100 basis points (“LIBOR loans”)0.75%. At December 31, 2012,2015, outstanding borrowings were $45approximately $26.6 million in LIBOR loans at an interest rate of approximately 1.2%1.18%. The highest balance during the year was $42.0 million. At December 31, 2011,2014, outstanding borrowings were $37$5.4 million in LIBOR loans at an interest rate of approximately 1.0%0.92%. The Company’sIn March 2014, the Company began sweeping excess cash against its revolving line of credit includeson a financial covenant that specifiesdaily basis. Proceeds and repayments from bank borrowings increased in 2014 as a minimum levelresult of net worth. As of December 31, 2012, the Company was in compliance with the covenant.

this daily activity.

In connection with the Bogs acquisition, the Company held back $2.0 million of the purchase price to be used to help satisfy any claims of indemnification. This holdback amount was paid in full to the former shareholders of Bogs in 2012. The Company also hashad two contingentearn-out payments due to the former shareholders of BogsBogs. The Company made the first earn-out payment of approximately $1,270,000 in 2013 andthe first quarter of 2013. The second earn-out payment of approximately $5.2 million is due in March 2016. For additional information, see Note 1110 in the Notes to Consolidated Financial Statements.

As of December 31, 2015, $2.8 million of cash and cash equivalents was held by the Company’s foreign subsidiaries. If these funds are needed for operations in the U.S., the Company would be required to accrue and pay U.S. taxes to repatriate these funds. Management believes that under the current tax law, the related tax impact of any such repatriation would not be material to the Company’s financial statements.

The Company will continue to evaluate the best uses for its available liquidity, including, among other uses, capital expenditures, continued stock repurchases and additional acquisitions.

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 2013,2016, although there can be no assurances.

Off-Balance Sheet Arrangements

The Company does not utilize any special purpose entities or other off-balance sheet arrangements.

Commitments

The Company’s significant contractual obligations are its supplemental pension plan, its operating leases, and the contingent paymentsconsideration that may resultwill be paid from the Bogs acquisition, as described above.acquisition. These obligations are discussed further in the Notes to Consolidated Financial Statements. The Company also has significant obligations to purchase inventory. The pension obligations and contingent consideration were recorded on the Company’s Consolidated Balance Sheets. Future obligations under operating leases are disclosed in Note 1413 of the Notes to Consolidated Financial Statements. The table below provides summary information about these obligations as of December 31, 2012.2015.

		Payments Due by Period (dollars in thousands)																				Payments Due by Period (dollars in thousands)
		Total				Less Than a Year				2 - 3 Years				4 - 5 Years				More Than 5 Years				Total				Less Than a Year				2 – 3 Years				4 – 5 Years				More Than 5 Years
Pension obligations		$	30,951			$	373			$	788			$	848			$	28,942			$	34,818			$	405			$	870			$	1,016			$	32,527
Operating leases		$	39,440				9,251				14,269				7,868				8,052				38,696				8,504				13,593				9,927				6,672
Contingent consideration (undiscounted)		$	6,424				1,270				5,154												5,217				5,217				—				—				—
Purchase obligations*		$	50,182				50,182																56,774				56,774				—				—				—
Total		$	126,997			$	61,076			$	20,211			$	8,716			$	36,994			$	135,505			$	70,900			$	14,463			$	10,943			$	39,199

* Purchase obligations relate entirely to commitments to purchase inventory.TABLE OF CONTENTS

OTHER

Critical Accounting Policies

The Company’s accounting policies are more fully described in Note 2 of the Notes to Consolidated Financial Statements. As disclosed in Note 2, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the consolidated financial statements. The following policies are considered by management to be the most critical in understanding the significant accounting estimates inherent in the preparation of the Company’s consolidated financial statements and the uncertainties that could impact the Company’s results of operations, financial position and cash flows.

Sales Returns, Sales Allowances and Doubtful Accounts

The Company records reserves and allowances (“reserves”) for sales returns, sales allowances and discounts, cooperative advertising, and accounts receivable balances that it believes will ultimately not be collected. The reserves are based on such factors as specific customer situations, historical experience, a review of the current aging status of customer receivables and current and expected economic conditions. The reserve for doubtful accounts includes a specific reserve for accounts identified as potentially uncollectible, plus an additional reserve for the balance of accounts. The Company evaluates the reserves and the estimation process and makes adjustments when appropriate. Historically, actual write-offs against the reserves have been within the Company’s expectations. Changes in these reserves may be required if actual returns, discounts and bad debt activity varies from the original estimates. These changes could impact the Company’s results of operations, financial position and cash flows.flows.

Pension Plan Accounting

The Company’s pension expense and corresponding obligation are determined on an actuarial basis and require certain actuarial assumptions. Management believes the two most critical of these assumptions are the discount rate and the expected rate of return on plan assets. The Company evaluates its actuarial assumptions annually on the measurement date (December 31) and makes modifications based on such factors as market interest rates and historical asset performance. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions.

Discount Rate –— Pension expense and projected benefit obligation both increase as the discount rate is reduced. See Note 1211 of the Notes to Consolidated Financial Statements for discount rates used in determining the net periodic pension cost for the years ended December 31, 2012, 20112015, 2014 and 20102013 and the funded status of the plans at December 31, 20122015 and 2011.2014. The rates are based on the plan’s projected cash flows. The Company utilizes the cash flow matching method, which discounts each year’s projected cash flows at the associated spot interest rate back to the measurement date. A 0.5% decrease in the discount rate would increase annual pension expense and the projected benefit obligation by approximately $416,000$458,000 and $4,300,000,$4.6 million, respectively.

Expected Rate of Return –— Pension expense increases as the expected rate of return on pension plan assets decreases. In estimating the expected return on plan assets, the Company considers the historical returns on plan assets and future expectations of asset returns. The Company utilized an expected rate of return on plan assets of 7.50% in 2015 and 2014, and 7.75% in 2012 and 8.0% in 2011 and 2010.2013. This rate was based on the Company’s long-term investment policy of equity securities: 20% -– 80%; fixed income securities: 20% -– 80%; and other, principally cash: 0% -– 20%. A 0.5% decrease in the expected return on plan assets would increase annual pension expense by approximately $135,000.$157,000.

TABLE OF CONTENTS

The Company’s unfunded benefit obligation was $30.6 million and $33.7 million at December 31, 2015 and 2014, respectively. The decrease between years was primarily due to an increase in the discount rate used to determine the funded status of the plan.

Goodwill and Trademarks

Goodwill and trademarks are tested for impairment on an annual basis and more frequently when significant events or changes in circumstances indicate that their carrying values may not be recoverable. Conditions that would trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of the asset.

The Company’s $11.1 million of goodwill resulted from the 2011 acquisition of Bogs. The Company uses a two-step process to test this goodwill for impairment. First, the applicable reporting unit’s fair value is compared to its carrying value. If the reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired, and the second step of the impairment test would be performed. The second step of the goodwill impairment test is to measure the amount of the impairment loss, if any. In the second step, the implied fair value of the reporting unit’s goodwill is determined by allocating the reporting unit’s fair value to all of its assets and liabilities similar to a purchase price allocation. The implied fair value of the goodwill that results from the application of this second step is then compared to the carrying amount of the goodwill and an impairment charge would be recorded for the difference if the carrying value exceeds the implied fair value of the goodwill.

The Company conducted its annual impairment test of goodwill as of December 31, 2012.2015. For goodwill impairment testing, the Company determined the applicable reporting unit is its wholesale segment. Fair value of the wholesale segment was estimated based on a weighted analysis of discounted cash flows (“income approach”) and a comparable public company analysis (“market approach”). The rate used in determining discounted cash flows is a rate corresponding to the Company’s weighted average cost of capital, adjusted for risk where appropriate. In determining the estimated future cash flows, current and future levels of income were considered as well as business trends and market conditions. The testing determined that the estimated fair value of the wholesale segment substantially exceeded its carrying value therefore there was no impairment of goodwill in 2012.

2015.

The Company conducted its annual impairment testtests of trademarks as of December 31, 2012.2015. The Company uses a discounted cash flow methodology to determine the fair value of its trademarks, and a loss would be recognized if the carrying values of the trademarks exceeded their fair values. In fiscal 2012, 20112015, 2014 and 2010,2013, there was no impairment of the Company’s trademarks.

The Company can make no assurances that the goodwill or trademarks will not be impaired in the future. When preparing a discounted cash flow analysis, the Company makes a number of key estimates and assumptions. The Company estimates the future cash flows based on historical and forecasted revenues and operating costs. This, in turn, involves further estimates such as estimates of future growth rates and inflation rates. The discount rate is based on the estimated weighted average cost of capital for the business and may change from year to year. Weighted average cost of capital includes certain assumptions such as market capital structures, market beta, risk-free rate of return and estimated costs of borrowing. Changes in these key estimates and assumptions, or in other assumptions used in this process, could materially affect the Company’s impairment analysis for a given year. Additionally, since the Company’s goodwill measurement also considers a market approach, changes in comparable public company multiples can also materially impact the Company’s impairment analysis.

Contingent Consideration

Contingent Consideration

Theconsideration is comprised of two earn-out payments that the Company recorded its estimateis obligated to pay as a result of the fair value2011 acquisition of contingent consideration that may result from the Bogs acquisition.Bogs. The contingent consideration iswas formula-driven and iswas based on Bogs achieving certain levels of gross margin dollars between January 1, 2011, and December 31, 2015. There are no restrictions as toThe Company paid the amountfirst earn-out payment of consideration that could become payable under$1,270,000 in the arrangement.first

TABLE OF CONTENTS

quarter of 2013. The calculationsecond earn-out payment is due in March 2016. As of December 31, 2015, the estimate of the 2013second earn-out payment has beenwas finalized, and the Company will pay the former shareholdersas it was based on actual gross margin dollars generated by Bogs through December 31, 2015. The final value of Bogs approximately $1.27 million on or before March 31, 2013. Management estimates that the range of reasonably possible potential amounts for the second earn-out payment (due in 2016) will be between $2 million and $8was $5.2 million. The Company recorded $5.0 million, which is management’s bestAs of December 31, 2014, the Company’s estimate of the fair value of the second payment.earn-out payment was $5.7 million. The second earn-out payment was recorded within accrued liabilities as of December 31, 2015, and other long-term liabilities as of December 31, 2014, in the Consolidated Balance Sheets.

ThePrior to December 31, 2015, the Company determined the fair value of the contingent consideration using a probability-weighted model which included estimates related to Bogs future sales levels and gross margins. On a quarterly basis, the Company revaluesrevalued the obligation and records increases or decreases in its fair value as an adjustment to operating earnings. Changes to the contingent consideration obligation can resultresulted from adjustments to the discount rate, accretion of the discount due to the passage of time orand changes in assumptions regarding the actual or projected future performance of Bogs. The assumptions used to determinevalue the value of contingent consideration includeincluded a significant amount of judgment, and any changes in the assumptions couldmay have had a material impact on the amount of contingent consideration expense or income recorded in a given period.

Recent Accounting Pronouncements

See Note 2 of the Notes to Consolidated Financial Statements.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in foreign exchange and interest rates. To reduce the risk from changes in foreign exchange rates, the Company selectively uses forward exchange contracts. The Company does not hold or issue financial instruments for trading purposes. The Company generally does not have significant market risk on its marketable securities as those investments consist of high-gradeinvestment-grade securities and are held to maturity. The Company reviewed its portfolio of investments as of December 31, 20122015, and determined that no other-than-temporary market value impairment exists.

In 2013, the Company concluded that the unrealized loss on one of its municipal bonds was other-than-temporary. Accordingly, the Company wrote the bond down to fair value and recorded an impairment loss of $200,000.

The Company is also exposed to market risk related to the assets in its defined benefit pension plan. The Company reduces that risk by having a diversified portfolio of equity and fixed income and alternative investments and periodically reviews this allocation with its investment consultants.

Foreign Currency

The Company’s earnings are affected by fluctuations in the value of the U.S. dollar against foreign currencies, primarily as a result of the sale of product to Canadian customers, Florsheim Australia’s purchases of its inventory in U.S. dollars and the Company’s intercompany loans with Florsheim Australia. At December 31, 2012,2015, the Company had forward exchange contracts outstanding to sell $3.0 million Canadian dollars at a price of approximately $2.3 million dollars. Additionally, Florsheim Australia had forward exchange contracts outstanding to buy $3.5$6.6 million U.S. dollars at a total price of approximately $3.4$9.3 million Australian dollars. Based on December 31, 2012 exchange rates, there were no significant gains or losses on these contracts. All contracts expire in less than one year. Based on year-end exchange rates, there were no significant unrealized gains or losses on the outstanding contracts. Based on the Company’s outstanding forward contracts and intercompany loans, a 10% appreciationdepreciation in the U.S. dollar at December 31, 20122015 would not haveresult in a material effect on the Company’s financial statements.loss of approximately $327,000.

Interest Rates

The Company is exposed to interest rate fluctuations on borrowings under its revolving line of credit. At December 31, 2012,2015, the Company had $45approximately $26.6 million of outstanding borrowings under the revolving line of credit. The interest expense related to borrowings under the line during 20122015 was $435,000.approximately $180,000. A 10% increase in the Company’s interest rate on borrowings outstanding as of December 31, 20122015 would not have a material effect on the Company’s financial position, results of operations or cash flows.

		Page
Management’s Report on Internal Control Over Financial Reporting		26
		24
Report of Independent Registered Public Accounting Firm (Successor)		27
		25
Report of Independent Registered Public Accounting Firm (Predecessor)			27
Consolidated Statements of Earnings		28
		28
Consolidated Statements of Comprehensive Income		29
		29
Consolidated Balance Sheets		30
		30
Consolidated Statements of Equity		31
		31
Consolidated Statements of Cash Flows		32
		32
Notes to Consolidated Financial Statements			33

25

TABLE OF CONTENTS

Management’s Report on Internal Control Over Financial Reporting

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012.2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control –— Integrated Framework (2013). Based on the assessment, the Company’s management has concluded that, as of December 31, 2012,2015, the Company’s internal control over financial reporting was effective based on those criteria.

The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s independent registered public accounting firm has audited the Company’s consolidated financial statements and the effectiveness of internal controls over financial reporting as of December 31, 20122015 as stated in its report below.

26

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders, Audit Committee and Board of Directors of

Weyco Group, Inc.:

Milwaukee, WI

We have audited the accompanying consolidated balance sheetssheet of Weyco Group, Inc. and subsidiaries (the "Company") as of December 31, 2012 and 2011,2015, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2012.year then ended. We also have audited the Company'sWeyco Group, Inc.’s internal control over financial reporting as of December 31, 2012,2015, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for theseCommission (COSO) (2013 framework). These consolidated financial statements for maintaining effective internal control over financial reporting, and for its assessmentare the responsibility of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.company’s management. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company'scompany’s internal control over financial reporting based on our audits.

We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our auditsaudit of the 2015 financial statements includedinclude examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our auditsaudit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provideaudit provides a reasonable basis for our opinions.

opinion.

A company'scompany’s internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the consolidated financial statements.

Because of theits inherent limitations, of internal control over financial reporting including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be preventedprevent or detected on a timely basis.detect misstatements. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

TABLE OF CONTENTS

In our opinion, the 2015 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Weyco Group, Inc. as of December 31, 2015 and the results of its operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Weyco Group, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework).

/s/ Baker Tilly Virchow Krause, LLP

Milwaukee, Wisconsin
March 10, 2016

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Weyco Group, Inc.

We have audited the accompanying consolidated balance sheet of Weyco Group, Inc. and subsidiaries (the “Company”) as of December 31, 2014, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the two years in the period ended December 31, 2014. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Weyco Group, Inc. and subsidiaries as of December 31, 2012 and 2011,2014, and the results of their operations and their cash flows for each of the threetwo years in the period ended December 31, 2012,2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/DELOITTE & TOUCHE LLP

Milwaukee, Wisconsin

March 14, 201311, 2015

TABLE OF CONTENTS

CONSOLIDATED STATEMENTS OF EARNINGS

For the years ended December 31, 2012, 20112015, 2014 and 20102013

		2012				2011				2010
		(In thousands, except per share amounts)												2015				2014				2013
														(In thousands, except per share amounts)
Net sales		$	293,471			$	271,100			$	229,231			$	320,617			$	320,488			$	300,284
Cost of sales			178,584				164,378				138,934				199,008				197,420				182,971
Gross earnings			114,887				106,722				90,297				121,609				123,068				117,313
Selling and administrative expenses			85,090				83,525				71,516				91,824				92,411				89,558
Earnings from operations			29,797				23,197				18,781				29,785				30,657				27,755
Interest income			1,840				2,220				2,291				936				1,174				1,461
Interest expense			(561	)			(611	)			(120	)			(181	)			(178	)			(384	)
Other income and (expense), net			(144	)			216				345
Other expense, net															(1,425	)			(595	)			(653	)
Earnings before provision for income taxes			30,932				25,022				21,297				29,115				31,058				28,179
Provision for income taxes			10,533				8,581				7,171				10,962				11,234				9,930
Net earnings			20,399				16,441				14,126				18,153				19,824				18,249
Net earnings attributable to noncontrolling interest			1,442				1,190				458
Net (loss) earnings attributable to noncontrolling interest															(59	)			804				648
Net earnings attributable to Weyco Group, Inc.		$	18,957			$	15,251			$	13,668			$	18,212			$	19,020			$	17,601
Basic earnings per share		$	1.75			$	1.38			$	1.21			$	1.69			$	1.76			$	1.63
Diluted earnings per share		$	1.73			$	1.37			$	1.19			$	1.68			$	1.75			$	1.62

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

28

TABLE OF CONTENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2012, 20112015, 2014 and 20102013

		2012				2011				2010
		(Dollars in thousands)												2015				2014				2013
														(Dollars in thousands)
Net earnings		$	20,399			$	16,441			$	14,126			$	18,153			$	19,824			$	18,249
Other comprehensive income (loss), net of tax:
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments			221				(809	)			315				(3,411	)			(2,374	)			(2,456	)
Pension liability adjustments			1,147				(4,095	)			940				2,360				(6,648	)			4,707
Other comprehensive income (loss)			1,368				(4,904	)			1,255
Other comprehensive (loss) income															(1,051	)			(9,022	)			2,251
Comprehensive income			21,767				11,537				15,381				17,102				10,802				20,500
Comprehensive income attributable to noncontrolling interest			1,765				701				651
Comprehensive (loss) income attributable to noncontrolling interest															(673	)			390				(193	)
Comprehensive income attributable to Weyco Group, Inc.		$	20,002			$	10,836			$	14,730			$	17,775			$	10,412			$	20,693

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

29

TABLE OF CONTENTS

CONSOLIDATED BALANCE SHEETS

As of December 31, 20122015 and 20112014

		2012				2011				2015				2014
		(In thousands, except par value and share data)								(In thousands, except par value and share data)
ASSETS:
Cash and cash equivalents		$	17,288			$	10,329			$	17,926			$	12,499
Marketable securities, at amortized cost			8,004				4,745				4,522				5,914
Accounts receivable, less allowances of $2,419 and $2,359, respectively			49,048				43,636
Accrued income tax receivable			1,136				816
Accounts receivable, less allowances of $2,257 and $2,384, respectively											54,009				55,100
Inventories			65,366				62,689				97,184				69,015
Deferred income tax benefits			649				395
Prepaid expenses and other current assets			4,953				5,613				5,835				7,521
Total current assets			146,444				128,223				179,476				150,049
Marketable securities, at amortized cost			36,216				46,839				20,685				24,540
Deferred income tax benefits			792				3,428				—				1,999
Property, plant and equipment, net			37,218				31,077				31,833				33,694
Goodwill			11,112				11,112				11,112				11,112
Trademarks			34,748				34,748				34,748				34,748
Other assets			18,791				18,081				21,143				21,304
Total assets		$	285,321			$	273,508			$	298,997			$	277,446
LIABILITIES AND EQUITY:
Short-term borrowings		$	45,000			$	37,000			$	26,649			$	5,405
Accounts payable			11,133				12,936				13,339				15,657
Dividend payable			-				1,742				2,147				2,045
Accrued liabilities:
Wages, salaries and commissions			3,158				3,094				3,134				3,252
Taxes other than income taxes			1,225				1,234				1,111				1,134
Other			9,505				8,889				13,239				8,366
Accrued income tax payable											31				151
Deferred income tax liabilities											1,537				1,747
Total current liabilities			70,021				64,895				61,187				37,757
Deferred income tax liabilities											70				—
Long-term pension liability			27,530				26,344				30,188				33,379
Other long-term liabilities			6,381				10,879				2,823				8,356
Commitments (Note 13)
Equity:
Common stock, $1.00 par value, authorized 24,000,000 shares in 2012 and 2011, issued and outstanding 10,831,290 shares in 2012 and 10,922,461 shares in 2011			10,831				10,922
Common stock, $1.00 par value, authorized 24,000,000 shares in 2015 and 2014, issued and outstanding 10,767,389 shares in 2015 and 10,821,140 shares in 2014											10,767				10,821
Capital in excess of par value			26,184				22,222				45,759				37,966
Reinvested earnings			149,664				146,266				160,325				160,179
Accumulated other comprehensive loss			(12,514	)			(13,419	)			(18,467	)			(18,030	)
Total Weyco Group, Inc. equity			174,165				165,991				198,384				190,936
Noncontrolling interest			7,224				5,399				6,345				7,018
Total equity			181,389				171,390				204,729				197,954
Total liabilities and equity		$	285,321			$	273,508			$	298,997			$	277,446

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

30

TABLE OF CONTENTS

CONSOLIDATED STATEMENTS OF EQUITY

For the years ended December 31, 2012, 20112015, 2014 and 2010

2013
(In thousands, except per share amounts)

		Common Stock				Capital in Excess of Par Value				Reinvested Earnings				Accumulated Other Comprehensive Loss				Noncontrolling Interest
Balance, December 31, 2009		$	11,333			$	16,788			$	146,241			$	(10,066	)		$	4,047
																						Common Stock				Capital in Excess of Par Value				Reinvested Earnings				Accumulated Other Comprehensive Loss				Noncontrolling Interest
Balance, December 31, 2012																						$	10,831			$	26,184			$	149,664			$	(12,514)			$	7,224
Net earnings			-				-				13,668				-				458				—				—				17,601				—				648
Foreign currency translation adjustments			-				-				-				122				193				—				—				—				(1,615	)			(841	)
Pension liability adjustment (net of tax of $601)			-				-				-				940				-
Cash dividends declared ($0.63 per share)			-				-				(7,144	)			-				-
Stock options exercised			114				1,088				-				-				-
Issuance of restricted stock			13				(13	)			-				-				-
Restricted stock forfeited			(2	)			2				-				-				-
Stock-based compensation expense			-				1,128				-				-				-
Income tax benefit from stock options exercised and vesting of restricted stock			-				555				-				-				-
Shares purchased and retired			(102	)			-				(2,219	)			-				-
Balance, December 31, 2010		$	11,356			$	19,548			$	150,546			$	(9,004	)		$	4,698
Net earnings			-				-				15,251				-				1,190
Foreign currency translation adjustments			-				-				-				(320	)			(489	)
Pension liability adjustment (net of tax of $2,618)			-				-				-				(4,095	)			-
Cash dividends declared ($0.64 per share)			-				-				(7,086	)			-				-
Pension liability adjustment (net of tax of $3,010)																							—				—				—				4,707				—
Cash dividends declared ($0.54 per share)																							—				—				(5,854	)			—				—
Cash dividends paid to noncontrolling interest of subsidiary																							—				—				—				—				(205	)
Stock options exercised			123				973				-				-				-				220				3,712				—				—				—
Issuance of restricted stock			19				(19	)			-				-				-				20				(20	)			—				—				—
Stock-based compensation expense			-				1,224				-				-				-				—				1,283				—				—				—
Income tax benefit from stock options exercised and vesting of restricted stock			-				496				-				-				-				—				570				—				—				—
Shares purchased and retired			(576	)			-				(12,445	)			-				-				(195	)			—				(4,428	)			—				—
Balance, December 31, 2011		$	10,922			$	22,222			$	146,266			$	(13,419	)		$	5,399
Balance, December 31, 2013																						$	10,876			$	31,729			$	156,983			$	(9,422)			$	6,826
Net earnings			-				-				18,957				-				1,442				—				—				19,020				—				804
Foreign currency translation adjustments			-				-				-				(102	)			323				—				—				—				(1,960	)			(414	)
Pension liability adjustment (net of tax of $734)			-				-				-				1,147				-
Cash dividends declared ($0.84 per share)			-				-				(9,133	)			-				-
Pension liability adjustment (net of tax of $4,250)																							—				—				—				(6,648	)			—
Cash dividends declared ($0.75 per share)																							—				—				(8,137	)			—				—
Cash dividends paid to noncontrolling interest of subsidiary			-				-				-				-				(233	)			—				—				—				—				(198	)
Increase in ownership interest of noncontrolling interest of subsidiary			-				-				(153	)			(140	)			293
Stock options exercised			174				2,126				-				-				-				218				4,663				—				—				—
Issuance of restricted stock			20				(20	)			-				-				-				24				(24	)			—				—				—
Stock-based compensation expense			-				1,201				-				-				-				—				1,465				—				—				—
Income tax benefit from stock options exercised and vesting of restricted stock			-				655				-				-				-				—				133				—				—				—
Shares purchased and retired			(285	)			-				(6,273	)			-				-				(297	)			—				(7,687	)			—				—
Balance, December 31, 2012		$	10,831			$	26,184			$	149,664			$	(12,514	)		$	7,224
Balance, December 31, 2014																						$	10,821			$	37,966			$	160,179			$	(18,030)			$	7,018
Net earnings																							—				—				18,212				—				(59	)
Foreign currency translation adjustments																							—				—				—				(2,797	)			(614	)
Pension liability adjustment (net of tax of $1,509)																							—				—				—				2,360				—
Cash dividends declared ($0.79 per share)																							—				—				(8,563	)			—				—
Stock options exercised																							279				5,865				—				—				—
Issuance of restricted stock																							22				(22	)			—				—				—
Stock-based compensation expense																							—				1,559				—				—				—
Income tax benefit from stock options exercised and vesting of restricted stock																							—				391				—				—				—
Shares purchased and retired																							(355	)			—				(9,503	)			—				—
Balance, December 31, 2015																						$	10,767			$	45,759			$	160,325			$	(18,467)			$	6,345

 

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

31

TABLE OF CONTENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2012, 20112015, 2014 and 20102013

		2012				2011				2010				2015				2014				2013
		(Dollars in thousands)												(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings		$	20,399			$	16,441			$	14,126			$	18,153			$	19,824			$	18,249
Adjustments to reconcile net earnings to net cash
provided by operating activities -
Adjustments to reconcile net earnings to net cash (used for) provided by operating activities –
Depreciation			3,338				2,591				2,700				3,612				3,659				3,962
Amortization			305				253				116				426				361				272
Bad debt expense			175				316				35				235				240				132
Deferred income taxes			1,648				(343	)			503				346				1,115				1,268
Net gains on remeasurement of contingent consideration			(3,522	)			(206	)			-
Net foreign currency transaction losses (gains)			138				197				(400	)
Net (gains) losses on remeasurement of contingent consideration															(458	)			611				24
Net foreign currency transaction losses															961				268				279
Stock-based compensation			1,201				1,224				1,128				1,559				1,465				1,283
Pension contributions			-				(1,600	)			(1,500	)			(2,633	)			(1,300	)			(1,282	)
Pension expense			3,407				2,836				3,248				3,699				2,212				3,737
Net gains on sale of marketable securities			-				(346	)			-
Net losses (gains) on disposal of property, plant and equipment			63				(14	)			16
Impairment of property, plant and equipment			93				165				310
Other-than-temporary investment impairment															—				—				200
Increase in cash surrender value of life insurance			(535	)			(527	)			(515	)			(573	)			(552	)			(540	)
Changes in operating assets and liabilities, net of effects from acquisitions -
Changes in operating assets and liabilities –
Accounts receivable			(5,586	)			(1,267	)			(4,642	)			1,009				(6,787	)			421
Inventories			(2,676	)			(3,667	)			(14,889	)			(28,282	)			(5,807	)			2,048
Prepaids and other assets			368				(752	)			(681	)
Prepaid expenses and other assets															2,237				(901	)			(295	)
Accounts payable			(1,802	)			2,141				1,031				(2,326	)			1,626				2,846
Accrued liabilities and other			1,293				633				654				(3,587	)			604				(2,858	)
Accrued income taxes			(320	)			(932	)			(1,142	)			(105	)			1,205				80
Net cash provided by operating activities			17,987				17,143				98
Net cash (used for) provided by operating activities															(5,727	)			17,843				29,826
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired			-				(27,023	)			(2,638	)
Purchase of marketable securities			(10	)			(1,179	)			(22,762	)			(3,033	)			(8,427	)			(122	)
Proceeds from maturities and sales of marketable securities			7,342				12,963				6,375
Proceeds from the sale of property, plant and equipment			-				14				-
Proceeds from maturities of marketable securities															8,191				8,177				13,968
Life insurance premiums paid			(155	)			(155	)			(155	)			(155	)			(155	)			(155	)
Investment in real estate															—				—				(3,206	)
Purchase of property, plant and equipment			(9,540	)			(8,189	)			(1,510	)			(2,481	)			(2,890	)			(2,699	)
Net cash used for investing activities			(2,363	)			(23,569	)			(20,690	)
Net cash provided by (used for) investing activities															2,522				(3,295	)			7,786
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid			(10,875	)			(7,155	)			(7,026	)			(8,452	)			(8,029	)			(3,904	)
Cash dividends paid to noncontrolling interest of subsidiary			(233	)			-				-				—				(198	)			(205	)
Shares purchased and retired			(6,558	)			(13,021	)			(2,321	)			(9,858	)			(7,984	)			(4,623	)
Proceeds from stock options exercised			2,300				1,096				1,202				6,144				4,881				3,932
Payment of indemnification holdback			(2,000	)			-				-
Repayment of debt assumed in acquisition			-				(3,814	)			-
Net (repayments) borrowings of commercial paper			-				(5,000	)			5,000
Payment of contingent consideration															—				—				(1,270	)
Proceeds from bank borrowings			33,000				73,000				-				160,534				101,200				11,000
Repayments of bank borrowings			(25,000	)			(36,000	)			-				(139,290	)			(107,795	)			(44,000	)
Income tax benefits from stock-based compensation			655				496				555				391				133				570
Net cash (used for) provided by financing activities			(8,711	)			9,602				(2,590	)
Net cash provided by (used for) financing activities															9,469				(17,792	)			(38,500	)
Effect of exchange rate changes on cash and cash equivalents			46				3				332				(837	)			(226	)			(431	)
Net increase (decrease) in cash and cash equivalents		$	6,959			$	3,179			$	(22,850	)		$	5,427			$	(3,470	)		$	(1,319	)
CASH AND CASH EQUIVALENTS at beginning of year			10,329				7,150				30,000				12,499				15,969				17,288
CASH AND CASH EQUIVALENTS at end of year		$	17,288			$	10,329			$	7,150			$	17,926			$	12,499			$	15,969
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid, net of refunds		$	8,946			$	7,989			$	8,472			$	10,341			$	8,875			$	7,807
Interest paid		$	442			$	457			$	118			$	181			$	127			$	335

 

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

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2012, 20112015, 2014 and 2010

2013

1. NATURE OF OPERATIONS

Weyco Group, Inc. designs and markets quality and innovative footwear for men, women and children under a portfolio of well-recognized brand names including: “Florsheim,” “Nunn Bush,” “Stacy Adams,” “BOGS,” “Rafters,” and “Umi.” Inventory is purchased from third-party overseas manufacturers. The majority of foreign-sourced purchases are denominated in U.S. dollars. The Company has two reportable segments, North American wholesale operations (“wholesale”) and North American retail operations (“retail”). In the wholesale segment, the Company’s products are sold to leading footwear, department and specialty stores primarily in the United States and Canada. As of December 31, 2012, theThe Company also hadhas licensing agreements with third parties who sell its branded apparel, accessories and specialty footwear in the United States, as well as its footwear in Mexico and certain markets overseas. Licensing revenues are included in the Company’s wholesale segment. As of December 31, 2012, theThe Company’s retail segment consisted of 23Company-owned13 Company-owned retail stores and an internet business in the United States and an Internet business.as of December 31, 2015. Sales in retail outlets are made directly to consumers by Company employees. The Company’s “other” operations include the Company’s wholesale and retail operations in Australia, South Africa, Asia Pacific (collectively, “Florsheim Australia”) and Europe.Europe (“Florsheim Europe”). The majority of the Company’s operations are in the United States, and its results are primarily affected by the economic conditions and the retail environment in the United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation -— The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, and include all of the Company’s majority-owned subsidiaries.

Use of Estimates -— The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ materially from those estimates.

Cash and Cash Equivalents -— The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. At December 31, 20122015 and 2011,2014, the Company’s cash and cash equivalents included investments in money market accounts and cash deposits at various banks.

The Company periodically has cash balances in excess of insured amounts. The Company has not experienced any losses on deposits in excess of insured amounts.

Investments — - All of the Company’s municipal bond investments are classified as held-to-maturity securities and reported at amortized cost pursuant to Accounting Standards Codification (“ASC”) 320,Investments –— Debt and Equity Securities(“ASC 320”) as the Company has the intent and ability to hold all security investments to maturity. See Note 5.

4.

Accounts Receivable –— Trade accounts receivable arise from the sale of products on trade credit terms. On a quarterly basis, the Company reviews all significant accounts with past due balances, as well as the collectability of other outstanding trade accounts receivable for possible write-off. It is the Company’s policy to write-off accounts receivable against the allowance account when receivables are deemed to be uncollectible. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses in the accounts receivable balances. The Company determines the allowance based on known troubled accounts, historical experience and other evidence currently available.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Inventories -— Inventories are valued at cost, which is not in excess of market value. The majority of inventories are determined on a last-in, first-out (“LIFO”) basis. Inventory costs include the cost of shoes purchased from third-party manufacturers, as well as related freight and duty costs. The Company generally takes title to product at the time of shipping. See Note 6.

5.

Property, Plant and Equipment and Depreciation -— Property, plant and equipment are stated at cost. Plant and equipment are depreciated using primarily the straight-line method over their estimated useful lives as follows: buildings and improvements, 10 to 39 years; machinery and equipment, 3 to 105 years; furniture and fixtures, 5 to 7 years.

33

For income tax reporting purposes, depreciation is calculated using applicable methods.

Impairment of Long-Lived Assets -— Property, plant and equipment are reviewed for impairment in accordance with ASC 360,Property, Plant and Equipment (“ASC 360”) if events or changes in circumstances indicate that the carrying amounts may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to its related estimated undiscounted future cash flows. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. To derive the fair value, the Company utilizes the income approach and the fair value determined is categorized as Level 3 in the fair value hierarchy. The fair value of each asset group is determined using the estimated future cash flows discounted at an estimated weighted-average cost of capital. For purposes of the impairment review, the Company groups assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In conjunctionthe case of its retail stores, the Company groups assets at the individual store level. In connection with the Company’s impairment review, the Company’s retail segment recognized anno impairment charge of $93,000charges were recorded in 2012, $165,000 in 2011, and $310,000 in 2010 which was recorded within selling and administrative expenses in the Consolidated Statements of Earnings.

2015, 2014 or 2013.

Goodwill and Intangible Assets –— Goodwill represents the excess of the purchase price over the estimated fair value of the underlying assets acquired and liabilities assumed in the acquisition of a business. Goodwill is not subject to amortization. Other intangible assets consist of a non-compete agreement,trademarks, customer relationships, and trademarks.a non-compete agreement. Intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets which are not amortized are reviewed for impairment annually and whenever events or changes in circumstances indicate the carrying amounts may not be recoverable. See Note 8.

7.

Life Insurance –— Life insurance policies are recorded at the amount that could be realized under the insurance contracts as of the date of financial position.balance sheet date. These assets are included within Other Assetsother assets in the Consolidated Balance Sheets. See Note 9.

8.

Contingent Consideration –— The Company recorded its estimate of the fair value of the contingent consideration related to the Bogs acquisition within other short-term accrued liabilities as of December 31, 2015 and other long-term liabilities onas of December 31, 2014, in the Consolidated Balance Sheets. On a quarterly basis, the Company revalues the obligationliability and records increases or decreases in its fair value as an adjustment to operating earnings. Changes to the contingent consideration obligationliability can result from adjustments to the discount rate, accretion of the discount due to the passage of time, or changes in assumptions regarding the actual or projected future performance of Bogs. The assumptions used to determine the fair value of contingent consideration include a significant amount of judgment, and any changes in the assumptions could have a material impact on the amount of contingent consideration expense or income recorded in a given period. See Note 11.10.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Income Taxes -— Deferred income taxes are provided on temporary differences arising from differences in the basis of assets and liabilities for income tax and financial reporting purposes. Interest related to unrecognized tax benefits is classified as interest expense in the Consolidated Statements of Earnings. See Note 13.

12.

Noncontrolling Interest -— The Company’s noncontrolling interest is accounted for under ASC 810,Consolidation(“ASC 810”) and represents the minority shareholders’shareholder’s ownership interest related to the Company’s wholesale and retail businesses in Australia, South Africa and Asia Pacific. In accordance with ASC 810, the Company reports its noncontrolling interest in subsidiaries as a separate component of equity in the Consolidated Balance Sheets and reports both net (loss) earnings attributable to the noncontrolling interest and net earnings attributable to the Company’s common shareholders on the face of the Consolidated Statements of Earnings.

In accordance with the subscription agreement entered into in connection with the acquisition of Florsheim Australia Pty Ltd (“Florsheim Australia”) in January 2009, the Company’s equity interest in Florsheim Australia decreases from 60% to 51% of equity issued under the subscription agreement as intercompany loans are paid in accordance with their terms. To date, the Company’s equity interest in Florsheim Australia has decreased from 60% to 55% and the noncontrolling shareholder’s interest has increased from 40% to 45%. This change is reflected in the Consolidated Statements of Equity.

Revenue Recognition -— Revenue from the sale of product is recognized when title and risk of loss transfers to the customer and the customer is obligated to pay the Company. Sales to independent dealers are recorded at the time of shipment to those dealers. Sales through Company-owned retail outlets are recorded at the time of delivery to retail customers. All product sales are recorded net of estimated allowances for returns and discounts. The Company’s estimates of allowances for returns and discounts are based on such factors as specific customer situations, historical experience, and current and expected economic conditions. The Company evaluates the reserves and the estimation process and makes adjustments when appropriate. Revenue from third-party licensing agreements is recognized in the period earned. Licensing revenues were $3.3$3.6 million in 2012, $3.4for 2015, and $3.2 million in 2011,for each of 2014 and $2.2 million in 2010.

34

2013.

Shipping and Handling Fees -— The Company classifies shipping and handling fees billed to customers as revenues. The related shippingShipping and handling expenses incurred by the Company are included in selling and administrative expenses in the Consolidated Statements of Earnings. Wholesale segment shipping and handling expenses totaled $2.3$1.9 million in 2012, $2.22015, $2.4 million in 20112014, and $1.4$2.7 million in 2010.

2013. Retail segment shipping and handling expenses, which result primarily from the Company’s shipments to its U.S. internet consumers, totaled $1.2 million in 2015, $1.1 million in 2014, and $760,000 in 2013.

Cost of Sales -— The Company’s cost of sales includes the cost of products and inbound freight and duty costs.

Selling and Administrative Expenses- — Selling and administrative expenses primarily include salaries and commissions, advertising costs, employee benefit costs, distribution costs (e.g., receiving, inspection and warehousing costs), rent and depreciation. Distribution costs included in selling and administrative expenses were $10.0$11.3 million in 2012, $8.62015, $11.0 million in 20112014, and $7.9$10.8 million in 2010.2013.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Advertising Costs -— Advertising costs are expensed as incurred. Total advertising costs were $10.1$12.8 million, $8.7$10.5 million, and $7.9$11.4 million in 2012, 20112015, 2014 and 2010,2013, respectively. All advertising expenses are included in selling and administrative expenses with the exception of co-op advertising expenses which are recorded as a reduction of net sales. Co-op advertising expenses, which are included in the above totals, reduced net sales by $4.2 million, $3.3$3.5 million, and $3.5$4.3 million in 2012, 20112015, 2014 and 2010,2013, respectively.

Foreign Currency Translations -— The Company accounts for currency translations in accordance with ASC 830,Foreign Currency Matters(“ASC 830”). The Company’s non-U.S. subsidiaries local currencies are the functional currencies under which non-U.S. subsidiaries’the balance sheet accounts are translated into U.S. dollars at the rates of exchange in effect at fiscal year-end and income and expense accounts are translated at the weighted average rates of exchange in effect during the year. Translation adjustments resulting from this process are recognized as a separate component of accumulated other comprehensive loss, which is a component of equity.

Foreign Currency Transactions -— Gains and losses from foreign currency transactions are included in other income and expense, net, in the Consolidated Statements of Earnings. Net foreign currency transaction (losses) gainslosses totaled approximately ($138,000)$961,000 in 2012, ($197,000)2015, $268,000 in 2011,2014, and $370,000$279,000 in 2010.

2013.

Financial Instruments –— At December 31, 2012,2015, the Company had forward exchange contracts outstanding to sell $3.0 million Canadian dollars at a price of approximately $2.3 million dollars. Additionally, the Company’s majority ownedmajority-owned subsidiary, Florsheim Australia, had forward exchange contracts outstanding to buy $3.5$6.6 million U.S. dollars at a price of approximately 3.4$9.3 million Australian dollars. These contracts all expire in 2013.2016. Based on year-end exchange rates, there were no significant unrealized gains or losses on the outstanding contracts.

In 2015, the Company recorded realized gains of approximately $1.4 million related to forward exchange contracts. In 2014 and 2013, there were no significant realized gains or losses related to forward exchange contracts.

Earnings Per Share -— Basic earnings per share excludes any dilutive effects of restricted stock and options to purchase common stock. Diluted earnings per share includes any dilutive effects of restricted stock and options to purchase common stock. See Note 16.

15.

Comprehensive Income -— Comprehensive income includes net earnings and changes in accumulated other comprehensive loss. Comprehensive income is reported in the Consolidated Statements of Comprehensive Income. The components of accumulated other comprehensive loss as recorded on the accompanying Consolidated Balance Sheets were as follows:

		2012				2011
		(Dollars in thousands)
Foreign currency translation adjustments		$	681			$	923
Pension liability, net of tax			(13,195	)			(14,342	)
Total accumulated other comprehensive loss		$	(12,514	)		$	(13,419	)

		2015				2014
		(Dollars in thousands)
Foreign currency translation adjustments		$	(5,691)			$	(2,894	)
Pension liability, net of tax			(12,776	)			(15,136	)
Total accumulated other comprehensive loss		$	(18,467)			$	(18,030	)

The noncontrolling interest as recorded in the Consolidated Balance Sheets at December 31, 20122015 and 20112014, included foreign currency translation adjustments of approximately $668,000($1,061,000) and $345,000,($447,000), respectively.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

The following presents a tabular disclosure about changes in accumulated other comprehensive loss during the year ended December 31, 2015 (dollars in thousands):

In 2012,

		Foreign Currency Translation Adjustments				Defined Benefit Pension Items				Total
Balance, December 31, 2013		$	(934	)		$	(8,488	)		$	(9,422	)
Other comprehensive loss before reclassifications			(1,960	)			(7,079	)			(9,039	)
Amounts reclassified from accumulated other comprehensive loss			—				431				431
Net current period other comprehensive loss			(1,960	)			(6,648	)			(8,608	)
Balance, December 31, 2014		$	(2,894	)		$	(15,136	)		$	(18,030	)
Other comprehensive (loss) income before reclassifications			(2,797	)			1,285				(1,512	)
Amounts reclassified from accumulated other comprehensive loss			—				1,075				1,075
Net current period other comprehensive (loss) income			(2,797	)			2,360				(437	)
Balance, December 31, 2015		$	(5,691	)		$	(12,776	)		$	(18,467	)

The following presents a tabular disclosure about reclassification adjustments out of accumulated other comprehensive loss during the Company adopted new accounting guidance from the Financial Accounting Standards Board (“FASB”) related to the financial statement presentation of comprehensive income. This guidance does not change the nature of or accounting for items reported within comprehensive income,years ended December 31, 2015 and the adoption of this guidance did not impact the Company’s results of operations or financial condition.2014 (dollars in thousands):

		Amounts reclassified from accumulated other comprehensive loss for the year ended December 31,								Affected line item in the statement where net income is presented
		2015				2014
Amortization of defined benefit pension items
Prior service cost		$	(112)			$	(112	)			(1)
Actuarial losses			1,874				818				(1)
Total before tax			1,762				706
Tax benefit			(687	)			(275	)
Net of tax		$	1,075			$	431

35

(1)

These amounts were included in the computation of net periodic pension cost. See Note 11 for additional details.

Stock-Based Compensation -— At December 31, 2012,2015, the Company had threetwo stock-based employee compensation plans, which are described more fully in Note 18.17. The Company accounts for these plans under the recognition and measurement principles of ASC 718,Compensation –— Stock Compensation(“ASC 718”). The Company’s policy is to estimate the fair market value of each option award granted on the date of grant using the Black-Scholes option pricing model. The Company estimates the fair value of each restricted stock award based on the fair market value of the Company’s stock price on the grant date. The resulting compensation cost for both the options and restricted stock is amortized on a straight-line basis over the vesting period of the respective awards.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Concentration of Credit Risk — – The Company had no individual customer accounts receivable balances outstanding at December 31, 20122015 and 20112014 that represented more than 10% of the Company’s gross accounts receivable balance. Additionally, there were no single customers with sales above 10% of the Company’s total sales in 20122015, 2014 and 2011. During 2010, one customer represented 12% of the Company’s total sales.

2013.

Recent Accounting Pronouncements —  –

In July 2012,February 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued guidanceAccounting Standards Update (“ASU”) No. 2016-02 “Leases (Topic 842),” The new standard requires lessees to amend and simplify the rules related to testing indefinite-lived intangible assets other than goodwill for impairment. The revised guidance allows an entity to perform an initial qualitative assessment, basedrecognize on the entity’s eventsbalance sheet the assets and circumstances, to determine whether it isliabilities for the rights and obligations created by finance and operating leases with lease terms of more likely than not that an indefinite-lived intangible asset is impaired.12 months. The results ofamendments in this qualitative assessment determine whether it is necessary to perform the quantitative impairment test. The new guidance isupdate are effective for annual and interim impairment tests performed for fiscal years beginning after SeptemberDecember 15, 2012.2018 and interim periods therein. The Company is currently evaluating the impact of the adoption of this guidance is not expected to have a material impactstandard on the Company’s consolidated financial statements and related disclosures.

Reclassifications –Certain reclassifications have been made in the prior years’ financial statements to conform to the current year’s presentation. Such reclassifications had no effect on previously reported net income or equity.

3.

ACQUISITIONS

Bogs

On March 2, 2011, the Company acquired 100% of the outstanding shares of The Combs Company (“Bogs”) from its former shareholders for $29.3 million in cash plus assumed debt of approximately $3.8 million and contingent payments after two and five years (in 2013 and 2016), which are dependent on Bogs achieving certain performance measures. In accordance with the agreement, $2.0 million of the cash portion of the purchase price was held back to be used to help satisfy any claims of indemnification by the Company, and any amounts not used therefore were to be paid to the seller 18 months from the date of acquisition. This holdback was paid in full to the former shareholders of Bogs in 2012. At the acquisition date, the Company’s estimate of the fair value of the contingent payments was approximately $9.8 million in aggregate. For more information regarding the contingent payments, including an estimate of the fair value as of December 31, 2012, see Note 11. The acquisition of Bogs was funded with available cash and short-term borrowings under the Company’s borrowing facility.

Bogs designs and markets boots, shoes, and sandals for men, women and children under the BOGS and Rafters brand names. Its products are sold across the agricultural, industrial, outdoor specialty, outdoor sport, lifestyle and fashion markets.

The acquisition of Bogs was accounted for as a business combination under ASC 805,Business Combinations (“ASC 805”). Under ASC 805, the total purchase price is allocated to tangible and intangible assets acquired and liabilities assumed based on their respective fair values at the acquisition date. The Company’s final allocation of the purchase price was as follows (dollars in thousands):

Cash		$	317
Accounts receivable, less reserves of $316			3,839
Inventory			2,932
Prepaid expenses			15
Property, plant and equipment, net			7
Goodwill			11,112
Trademark			22,000
Other intangible assets			3,700
Accounts payable			(454	)
Accrued liabilities			(561	)
		$	42,907

Other intangible assets consist of customer relationships and a non-compete agreement. Goodwill reflects the excess purchase price over the fair value of net assets, and has been assigned to the Company’s wholesale segment. All of the goodwill is expected to be deductible for tax purposes. For more information on the intangible assets acquired, see Note 8.

The operating results of Bogs have been consolidated into the Company’s wholesale segment since the date of acquisition. Accordingly, the Company’s 2012 results included Bogs operations for the entire year, while 2011 only included Bogs operations from March 2 through December 31, 2011. Bogs net sales were $36.4 million in 2012 compared to $28.0 million in 2011.

Pro Forma Results of Operations

The following table provides consolidated results of operations for Weyco Group, Inc. for 2012 compared to unaudited consolidated pro forma results of operations for 2011, as if Bogs had been acquired on January 1, 2011. The unaudited pro forma results include adjustments to reflect additional amortization of intangible assets, interest expense and a corresponding estimate of the provision for income taxes.

		Year Ended December 31,
		2012				2011
		Actual				Proforma
		(Dollars in thousands)
Net sales		$	293,471			$	275,467
Net earnings attributable to Weyco Group, Inc.		$	18,957			$	15,080

The unaudited pro forma information presented above is not necessarily indicative of either the results of operations that would have occurred had the acquisition of Bogs been effective on January 1, 2011 or the Company’s future results of operations.

Umi

On April 28, 2010, the Company acquired certain assets, including the Umi brand name, intellectual property and accounts receivable, from Umi LLC (“Umi”), a children’s footwear company, for an aggregate price of approximately $2.6 million. The acquisition of Umi was accounted for as a business combination under ASC 805. The Company allocated the purchase price to accounts receivable, trademarks and other assets. The operating results of Umi have been consolidated into the Company’s wholesale segment since the date of acquisition. Accordingly, the Company’s 2012 and 2011 results included Umi’s operations for the entire year while 2010 only included Umi’s operations from April 28 through December 31, 2010. Additional disclosures prescribed by ASC 805 have not been provided as the Umi acquisition was not material to the Company’sour consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” ASU 2015-17 simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the consolidated balance sheet statement of financial position. The amendments in the update require that all deferred tax liabilities and assets be classified as noncurrent in the consolidated balance sheet. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods therein and may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

4.

FAIR VALUE OF FINANCIAL INSTRUMENTS

In August 2015, the FASB issued ASU 2015-04 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” The amendments in this update defer the effective date of the new standard on revenue recognition by one year. The new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new standard is now effective for fiscal years beginning after December 15, 2017 and interim periods therein. The Company is currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820,Fair Value Measurements and Disclosures(“ASC 820”) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes the following three-level hierarchy for fair value measurements based upon the sources of data and assumptions used to develop the fair value measurements:

Level 1 -— unadjusted quoted market prices in active markets for identical assets or liabilities that are publicly accessible.

Level 2 -— quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

Level 3 -— unobservable inputs that reflect the Company’s assumptions, consistent with reasonably available assumptions made by other market participants.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

3. FAIR VALUE OF FINANCIAL INSTRUMENTS  – (continued)

The carrying amounts of all short-term financial instruments, except marketable securities and forward exchange contracts, approximate fair value due to the short-term nature of those instruments. Marketable securities are carried at amortized cost. The fair value disclosures of marketable securities are Level 2 valuations as defined by ASC 820, consisting of quoted prices for identical or similar assets in markets that are not active. See Note 5.4. Forward exchange contracts are carried at fair value. The fair value measurements of forward exchange contracts are based on observable market transactions of spot and forward rates, and thus represent level 2 valuations as defined by ASC 820. The Company’s contingent consideration is measured at fair value. See Note 10.

37

5.

INVESTMENTS

4. INVESTMENTS

Below is a summary of the amortized cost and estimated market values of the Company’s investment securities as of December 31, 20122015 and 2011.2014. The estimated market values provided are Level 2 valuations as defined by ASC 820. See Note 4.

		2012								2011
		Amortized Cost				Market Value				Amortized Cost				Market Value
		(Dollars in thousands)
Municipal bonds:
Current		$	8,004			$	8,117			$	4,745			$	4,781
Due from one through five years			25,384				26,620				32,679				34,184
Due from six through ten years			10,832				11,756				14,160				15,216
Total		$	44,220			$	46,493			$	51,584			$	54,181

		2015								2014
		Amortized Cost				Market Value				Amortized Cost				Market Value
		(Dollars in thousands)
Municipal bonds:
Current		$	4,522			$	4,546			$	5,914			$	6,006
Due from one through five years			12,395				13,057				14,398				15,204
Due from six through ten years			6,929				7,217				9,337				9,711
Due from eleven through twenty years			1,361				1,391				805				762
Total		$	25,207			$	26,211			$	30,454			$	31,683

The unrealized gains and losses on investment securities at December 31, 20122015 and 2011 were:2014 were as follows:

		2012								2011
		Unrealized Gains				Unrealized Losses				Unrealized Gains				Unrealized Losses
		(Dollars in thousands)
Municipal bonds		$	2,473			$	200			$	2,797			$	200

		2015								2014
		Unrealized Gains				Unrealized Losses				Unrealized Gains				Unrealized Losses
		(Dollars in thousands)
Municipal bonds		$	1,014			$	(10)			$	1,279			$	(50	)

At each reporting date, the Company reviews its investments to determine whether a decline in fair value below the amortized cost basis is other than temporary.other-than-temporary. To determine whether a decline in value is other than temporary,other-than-temporary, the Company evaluates several factorsconsiders all available evidence, including the nature of the securities held, credit rating orissuer’s financial condition, of the issuers, the extentseverity and duration of the unrealized losses, prevailing market conditions,decline in fair value, and whetherthe Company’s intent and ability to hold the investment for a reasonable period of time sufficient for any forecasted recovery. If a decline in value is deemed other-than-temporary, the Company will more likely than not be requiredrecords a reduction in the carrying value to sell the impaired securities before the amortized cost basis is fully recovered.estimated fair value. The Company determined that no other-than-temporary impairment exists for the yearsyear ended December 31, 2012, 20112015.

In 2013, the Company concluded that the unrealized loss on one of its municipal bonds was other-than-temporary. Accordingly, the Company wrote the bond down to fair value and 2010.recorded an impairment loss of $200,000. This loss was recorded within other expense, net, in the 2013 Consolidated Statements of Earnings.

TABLE OF CONTENTS

6.

INVENTORIES

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

5. INVENTORIES

At December 31, 20122015 and 2011,2014, inventories consisted of:

		2012				2011
		(Dollars in thousands)
Finished shoes		$	82,535			$	79,648
LIFO reserve			(17,169	)			(16,959	)
Total inventories		$	65,366			$	62,689

		2015				2014
		(Dollars in thousands)
Finished shoes		$	116,177			$	87,203
LIFO reserve			(18,993	)			(18,188	)
Total inventories		$	97,184			$	69,015

Finished shoes included inventory in-transit of $14.3$38.1 million and $13.2$25.9 million as of December 31, 20122015 and 2011,2014, respectively. At December 31, 2012,2015 and 2014, approximately 89%91% of the Company’s inventories were valued by the LIFO method of accounting while approximately 11%9% were valued by the first-in, first-out(“first-out (“FIFO”) method of accounting. At December 31, 2011, approximately 75% of the Company’s inventories were valued by the LIFO method of accounting while approximately 25% were valued by the FIFO method of accounting.

During 2012,2015, there were no liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years as compared to the cost of fiscal 2015 purchases. During 2014, there were liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years as compared to the cost of fiscal 20122014 purchases. The effect of the liquidation decreased cost of goods sold by $104,000$151,000 in 2012.2014. During 2011,2013, there were liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years as compared to the cost of fiscal 20112013 purchases. The effect of the liquidation decreased costscost of goods sold by $250,000$64,000 in 2011. During 2010, there were liquidations of LIFO inventory quantities which resulted in immaterial decreases in cost of goods sold in 2010.2013.

7.

PROPERTY, PLANT AND EQUIPMENT, NET

6. PROPERTY, PLANT AND EQUIPMENT, NET

At December 31, 20122015 and 2011,2014, property, plant and equipment consisted of:

		2012				2011				2015				2014
		(Dollars in thousands)								(Dollars in thousands)
Land and land improvements		$	3,587			$	3,400			$	3,706			$	3,706
Buildings and improvements			26,927				22,868				26,912				26,900
Machinery and equipment			22,456				20,700				27,142				25,816
Retail fixtures and leasehold improvements			11,994				10,879				11,232				12,259
Construction in progress			1,692				172				24				18
Property, plant and equipment			66,656				58,019				69,016				68,699
Less: Accumulated depreciation			(29,438	)			(26,942	)			(37,183	)			(35,005	)
Property, plant and equipment, net		$	37,218			$	31,077			$	31,833			$	33,694

TABLE OF CONTENTS

8.

INTANGIBLE ASSETS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

7. INTANGIBLE ASSETS

The Company’s indefinite-lived and amortizable intangible assets as recorded in the Consolidated Balance Sheets consisted of the following as of December 31, 2012: 2015:

						December 31, 2012
		Weighted				Gross
		Average				Carrying				Accumulated
		Life (Years)				Amount				Amortization				Net
						(Dollars in thousands)
Indefinite-lived intangible assets:
Goodwill						$	11,112			$	-			$	11,112
Trademarks							34,748				-				34,748
Total indefinite-lived intangible assets						$	45,860			$	-			$	45,860
Amortizable intangible assets:
Non-compete agreement		5				$	200			$	(73	)		$	127
Customer relationships		15					3,500				(428	)			3,072
Total amortizable intangible assets						$	3,700			$	(501	)		$	3,199

		Weighted Average Life (Years)				December 31, 2015
						Gross Carrying Amount				Accumulated Amortization				Net
						(Dollars in thousands)
Indefinite-lived intangible assets:
Goodwill						$	11,112			$	—			$	11,112
Trademarks							34,748				—				34,748
Total indefinite-lived intangible assets						$	45,860			$	—			$	45,860
Amortizable intangible assets:
Non-compete agreement			5			$	200			$	(193	)		$	7
Customer relationships			15				3,500				(1,128	)			2,372
Total amortizable intangible assets						$	3,700			$	(1,321	)		$	2,379

The Company’s indefinite-lived and amortizable intangible assets as recorded in the Consolidated Balance Sheets consisted of the following as of December 31, 2011: 2014:

						December 31, 2011
		Weighted				Gross
		Average				Carrying				Accumulated								Weighted Average Life (Years)				December 31, 2014
		Life (Years)				Amount				Amortization				Net								Gross Carrying Amount				Accumulated Amortization				Net
						(Dollars in thousands)																(Dollars in thousands)
Indefinite-lived intangible assets:
Goodwill						$	11,112			$	-			$	11,112							$	11,112			$	—			$	11,112
Trademarks							34,748				-				34,748								34,748				—				34,748
Total indefinite-lived intangible assets						$	45,860			$	-			$	45,860							$	45,860			$	—			$	45,860
Amortizable intangible assets:
Non-compete agreement		5				$	200			$	(33	)		$	167				5			$	200			$	(153	)		$	47
Customer relationships		15					3,500				(195	)			3,305				15				3,500				(894	)			2,606
Total amortizable intangible assets						$	3,700			$	(228	)		$	3,472							$	3,700			$	(1,047	)		$	2,653

The amortizable intangible assets are included within Other Assetsother assets in the Consolidated Balance Sheets. See Note 9.

8.

The Company performs an impairment testtests for goodwill and trademarks on an annual basis and more frequently if an event or changes in circumstances indicate that their carrying values may not be recoverable. Conditions that would trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of the asset.

The Company’s $11.1 million of goodwill resulted from the 2011 acquisition of Bogs. The Company uses a two-step process to test this goodwill for impairment. The first step is to compare the applicable reporting unit’s fair value to its carrying value. The Company has determined the applicable reporting unit is its wholesale segment. If the fair value of the wholesale segment is greater than its carrying value, there is no impairment. If the carrying value is greater than the fair value, then the second step must be completed to measure the amount of the impairment, if any. The second step calculates the implied fair value of the goodwill, which is compared to its carrying value.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

7. INTANGIBLE ASSETS  – (continued)

If the implied fair value is less than the carrying value, an impairment loss is recognized equal to the difference. In fiscal 2012 and 2011, there were noTo date, the Company has never recorded an impairment charges recorded for the Company’scharge on this goodwill.

The Company tests its trademarks for impairment annually by comparing the fair value of each trademark to its related carrying value. Fair value is estimated using a discounted cash flow methodology. In fiscal 2012, 2011 and 2010, there were noTo date, the Company has never recorded an impairment charges recorded for the Company’scharge on these trademarks.

The Company recorded amortization expense for intangible assets of approximately $273,000 $228,000,in each of 2015, 2014 and $0 in 2012, 2011 and 2010, respectively.2013. Excluding the impact of any future acquisitions, the Company anticipates future amortization expense to be as follows:

		Intangible
(Dollars in thousands)		Assets
2013		$	273
2014			273
2015			273
2016			240
2017			233
Thereafter			1,907
Total		$	3,199

9.

OTHER ASSETS

(Dollars in thousands)		Intangible Assets
2016		$	240
2017			233
2018			233
2019			233
2020			233
Thereafter			1,207
Total		$	2,379

8. OTHER ASSETS

Other assets included the following amounts at December 31, 20122015 and 2011:2014:

		2012				2011
		(Dollars in thousands)
Cash surrender value of life insurance			12,745				12,055
Intangible assets (See Note 8)			3,199				3,472
Other			2,847				2,554
Total other assets		$	18,791			$	18,081

		2015				2014
		(Dollars in thousands)
Cash surrender value of life insurance		$	14,876			$	14,148
Intangible assets (See Note 7)			2,379				2,653
Investment in real estate			2,284				2,793
Other			1,604				1,710
Total other assets		$	21,143			$	21,304

The Company has five life insurance policies on current and former executives. Upon death of the insured executives, the approximate death benefit the Company couldwould receive is $15$16.2 million in aggregate as of December 31, 2015.

On May 1, 2013, the aggregate.Company purchased a 50% interest in a building in Montreal, Canada for approximately $3.2 million. The building, which is classified as an investment in real estate in the above table, serves as the Company’s Canadian office and distribution center. The purchase was accounted for as an equity-method investment under ASC 323,Investments — Equity Method and Joint Ventures (“ASC 323”).

10.

SHORT-TERM BORROWINGS

9. SHORT-TERM BORROWINGS

At December 31, 2012,2015, the Company had a $60 million unsecured revolving line of credit with a bank expiring April 30, 2013.November 4, 2016. The line of credit allows for up to $60 million in borrowingsbears interest at a rate of LIBOR plus 100 basis points (“LIBOR loans”)0.75%. At December 31, 2012,2015, outstanding borrowings were $45approximately $26.6 million in LIBOR loans at an interest rate of approximately 1.2%1.18%. The highest balance during the year was $42.0 million. At December 31, 2011,2014, outstanding borrowings were $37$5.4 million in LIBOR loans at an interest rate of 1.0%0.92%.

TABLE OF CONTENTS

The Company’s line of credit includes a financial covenant that specifies a minimum level of net worth. As of

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2012, the Company was in compliance with the covenant.

11.

CONTINGENT CONSIDERATION

2015, 2014 and 2013

10. CONTINGENT CONSIDERATION

Contingent consideration is comprised of two contingentearn-out payments that the Company is obligated to pay the former shareholders of The Combs Company (“Bogs”) related to the Company’s acquisition of Bogs with the first payment due in 2013 and the second in 2016.2011. The estimate of contingent consideration iswas formula-driven and iswas based on Bogs achieving certain levels of gross margin dollars between January 1, 2011, and December 31, 2015. The first earn-out payment was due in 2013 and was paid on March 28, 2013, in the amount of $1,270,000. The second earn-out payment is due in March 2016. In accordance with ASC 805,Business Combinations (“ASC 805”), the Company remeasuresremeasured its estimate of the fair value of the contingent paymentsconsideration at each reporting date. The change in fair value iswas recognized in earnings. The total contingent consideration is reflected in the Company’s wholesale segment.

As of December 31, 2015, the second earn-out payment was finalized, as it was based on actual gross margin dollars generated by Bogs through December 31, 2015. The final value of the second earn-out payment was $5.2 million. As of December 31, 2014, the Company’s estimate of the fair value of the contingent paymentssecond earn-out payment was $5.7 million. The second earn-out payment was recorded within accrued liabilities as recordedof December 31, 2015, and other long-term liabilities as of December 31, 2014, in the Consolidated Balance Sheets was as follows:

		December 31,				December 31,
		2012				2011
		(Dollars in thousands)
Current portion		$	1,270			$	-
Long-term portion			4,991				9,693
Total contingent consideration		$	6,261			$	9,693

The current portion of contingent consideration is recorded within accrued liabilities in the Consolidated Balance Sheets. The long-term portion is recorded within other long-term liabilities in the Consolidated Balance Sheets. The total contingent consideration has been assigned to the Company’s wholesale segment.

The following table summarizes the activity during 20122015 and 2014 related to the contingent paymentssecond earn-out payment as recorded in the Consolidated Statements of Earnings (dollars in thousands):

Beginning balance		$	9,693
Net gain on remeasurement of contingent consideration			(3,522	)
Interest expense			90
Ending balance		$	6,261

		2015				2014
Beginning balance		$	5,675			$	5,064
Net (gains) losses on remeasurement of contingent consideration			(458	)			560
Interest expense			—				51
Ending balance		$	5,217			$	5,675

The net gain was(gains) losses on remeasurement of contingent consideration were recorded within selling and administrative expenses in the Consolidated Statements of Earnings.

The reduction of the estimated liability in 2012 was primarily due to a decrease in the 2013 paymentliability in 2015 was primarily a result of Bogs performance in the current year. Bogs generated lower gross margin dollars in 2015 than the Company had previously projected, primarily as a result of lower Bogs gross margin dollars relativethe mild start to the Company’s original projections. The calculation of the 2013 payment has been finalized and the Company will pay the former shareholders of Bogs approximately $1,270,000 on or before March 31, 2013.

2015 – 2016 winter.

The fair value measurement of the contingent consideration iswas based on significant inputs not observed in the market and thus representsrepresented a level 3 valuation as defined by ASC 820. ThePrior to December 31, 2015, the fair value measurement was determined using a probability-weighted model which includesincluded various estimates related to Bogs future sales levels and gross margins. As of December 31, 2012, management2015, these estimates that the range of reasonably possible potential amounts for the second payment (due in 2016) is between $2 million and $8 million.were final.

41

12.

EMPLOYEE RETIREMENT PLANS

11. EMPLOYEE RETIREMENT PLANS

The Company has a defined benefit pension plan covering substantially all employees, as well as an unfunded supplemental pension plan for key executives. Retirement benefits are provided based on employees’ years of credited service and average earnings or stated amounts for years of service. Normal retirement age is 65 with provisions for earlier retirement. The plan also has provisions for disability and death benefits. The plan closed to new participants as of August 1, 2011. The Company’s funding policy for the defined benefit pension plan is to make contributions to the plan such that all employees’ benefits will be fully provided by the time they retire. Plan assets are stated at market value and consist primarily of equity securities and fixed income securities, mainly U.S. government and corporate obligations.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

11. EMPLOYEE RETIREMENT PLANS  – (continued)

The Company follows ASC 715,Compensation –— Retirement Benefits(“ASC 715”)which requires employers to recognize the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability in their statements of financial position and to recognize changes in the funded status in the year in which the changes occur as a component of comprehensive income. In addition, ASC 715 requires employers to measure the funded status of their plans as of the date of their year-end statements of financial position. ASC 715 also requires additional disclosures regarding amounts included in accumulated other comprehensive loss.

The Company’s pension plan’s weighted average asset allocation at December 31, 20122015 and 2011,2014, by asset category, was as follows:

		Plan Assets at December 31,
		2012				2011
Asset Category:
Equity Securities			52	%			42	%
Fixed Income Securities			40	%			49	%
Other			8	%			9	%
Total			100	%			100	%

		Plan Assets at December 31,
		2015				2014
Asset Category:
Equity Securities			52	%			50	%
Fixed Income Securities			40	%			43	%
Other			8	%			7	%
Total			100	%			100	%

The Company has a Retirement Plan Committee, consisting of the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, to manage the operations and administration of all benefit plans and related trusts. The committee has an investment policy for the pension plan assets that establishes target asset allocation ranges for the above listed asset classes as follows: equity securities: 20% -– 80%; fixed income securities: 20% -– 80%; and other, principally cash: 0% -– 20%. On a semi-annual basis, the committee reviews progress towards achieving the pension plan’s performance objectives.

To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of the 7.75%7.50% long-term rate of return on assets assumption.

assumption for 2015.

Assumptions used in determining the funded status at December 31, 20122015 and 20112014 were:

		2012				2011				2015				2014
Discount rate			4.23	%			4.60	%			4.62	%			4.17	%
Rate of compensation increase			4.50	%			4.50	%			4.00	%			4.00	%

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

11. EMPLOYEE RETIREMENT PLANS  – (continued)

The following is a reconciliation of the change in benefit obligation and plan assets of both the defined benefit pension plan and the unfunded supplemental pension plan for the years ended December 31, 20122015 and 2011:2014:

		Defined Benefit Pension Plan								Supplemental Pension Plan
		2012				2011				2012				2011
		(Dollars in thousands)
Change in projected benefit obligation
Projected benefit obligation, beginning of year		$	39,523			$	34,407			$	13,870			$	10,754
Service cost			1,236				977				236				235
Interest cost			1,800				1,807				516				566
Plan amendments			-				-				(1,415	)			-
Actuarial loss (gain)			2,532				3,776				(576	)			2,494
Benefits paid			(1,639	)			(1,444	)			(361	)			(179	)
Projected benefit obligation, end of year		$	43,452			$	39,523			$	12,270			$	13,870
Change in plan assets
Fair value of plan assets, beginning of year			26,655				26,193				-				-
Actual return on plan assets			2,932				400				-				-
Administrative expenses			(129	)			(94	)			-				-
Contributions			-				1,600				361				179
Benefits paid			(1,639	)			(1,444	)			(361	)			(179	)
Fair value of plan assets, end of year		$	27,819			$	26,655			$	-			$	-
Funded status of plan		$	(15,633	)		$	(12,868	)		$	(12,270	)		$	(13,870	)
Amounts recognized in the consolidated balance sheets consist of:
Accrued liabilities - other		$	-			$	-			$	(373	)		$	(394	)
Long-term pension liability			(15,633	)			(12,868	)			(11,897	)			(13,476	)
Net amount recognized		$	(15,633	)		$	(12,868	)		$	(12,270	)		$	(13,870	)
Amounts recognized in accumulated other comprehensive loss consist of:
Accumulated loss, net of income tax benefit of $6,735, $6,575, $2,102 and $2,487, respectively		$	10,534			$	10,283			$	3,288			$	3,891
Prior service cost, net of income tax benefit of $1, $1, ($402) and $106, respectively			1				2				(628	)			166
Net amount recognized		$	10,535			$	10,285			$	2,660			$	4,057

		Defined Benefit Pension Plan								Supplemental Pension Plan
		2015				2014				2015				2014
		(Dollars in thousands)
Change in projected benefit obligation
Projected benefit obligation, beginning of year		$	50,932			$	41,470			$	14,841			$	12,337
Service cost			1,345				1,042				291				221
Interest cost			2,051				1,999				614				586
Actuarial (gain) loss			(3,806	)			8,221				(1,135	)			2,047
Benefits paid			(1,845	)			(1,800	)			(350	)			(350	)
Projected benefit obligation, end of year		$	48,677			$	50,932			$	14,261			$	14,841
Change in plan assets
Fair value of plan assets, beginning of year			32,027				31,522				—				—
Actual return on plan assets			(320	)			1,145				—				—
Administrative expenses			(150	)			(140	)			—				—
Contributions			2,633				1,300				350				350
Benefits paid			(1,845	)			(1,800	)			(350	)			(350	)
Fair value of plan assets, end of year		$	32,345			$	32,027			$	—			$	—
Funded status of plan		$	(16,332)			$	(18,905	)		$	(14,261)			$	(14,841	)
Amounts recognized in the consolidated balance sheets consist of:
Accrued liabilities – other		$	—			$	—			$	(405)			$	(367	)
Long-term pension liability			(16,332	)			(18,905	)			(13,856	)			(14,474	)
Net amount recognized		$	(16,332)			$	(18,905	)		$	(14,261)			$	(14,841	)
Amounts recognized in accumulated other comprehensive loss consist of:
Accumulated loss, net of income tax benefit of $6,631, $7,559, $1,808 and $2,431, respectively		$	10,371			$	11,824			$	2,828			$	3,803
Prior service cost, net of income tax liability of $0, $0, ($270) and ($314), respectively			—				—				(423	)			(491	)
Net amount recognized		$	10,371			$	11,824			$	2,405			$	3,312

The accumulated benefit obligation for the defined benefit pension plan and the supplemental pension plan was $38.2$43.7 million and $11.6$14.2 million, respectively, at December 31, 20122015, and $35.3$45.3 million and $12.0$14.3 million, respectively, at December 31, 2011.2014.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

11. EMPLOYEE RETIREMENT PLANS  – (continued)

Assumptions used in determining net periodic pension cost for the years ended December 31, 2012, 20112015, 2014 and 20102013 were:

		2012				2011				2010				2015				2014				2013
Discount rate			4.60	%			5.40	%			5.95	%			4.17	%			5.03	%			4.23	%
Rate of compensation increase			4.50	%			4.50	%			4.50	%			4.00	%			4.00	%			4.50	%
Long-term rate of return on plan assets			7.75	%			8.00	%			8.00	%			7.50	%			7.50	%			7.75	%

The components of net periodic pension cost for the years ended December 31, 2012, 20112015, 2014 and 2010,2013, were:

		2012				2011				2010
		(Dollars in thousands)
Benefits earned during the period		$	1,472			$	1,212			$	1,187
Interest cost on projected benefit obligation			2,317				2,373				2,449
Expected return on plan assets			(1,994	)			(2,021	)			(1,836	)
Net amortization and deferral			1,612				1,272				1,448
Net pension expense		$	3,407			$	2,836			$	3,248

		2015				2014				2013
		(Dollars in thousands)
Benefits earned during the period		$	1,636			$	1,263			$	1,726
Interest cost on projected benefit obligation			2,665				2,586				2,403
Expected return on plan assets			(2,364	)			(2,343	)			(2,094	)
Net amortization and deferral			1,762				706				1,702
Net pension expense		$	3,699			$	2,212			$	3,737

The Company expects to recognize expense of approximately $1.6 million ofdue to the amortization of unrecognized loss and $111,000income of approximately $112,000 due to the amortization of prior service cost as components of net periodic benefit cost in 2013,2016, which are included in accumulated other comprehensive loss at December 31, 2012.

2015.

It is the Company’s intention to satisfy the minimum funding requirements and maintain at least an 80% funding percentage in its defined benefit retirement plan in future years. At this time, the level ofCompany expects that any cash contribution that willcontributions necessary to satisfy these requirements would not be requiredmaterial in 2013 to maintain the minimum funding balance is unknown.

2016.

Projected benefit payments for the plans as of December 31, 20122015 were estimated as follows:

		Defined Benefit Pension Plan				Supplemental Pension Plan
		(Dollars in thousands)
2013		$	1,834			$	373
2014		$	1,905			$	390
2015		$	1,968			$	398
2016		$	2,057			$	421
2017		$	2,125			$	427
2018 - 2022		$	11,990			$	2,534

		Defined Benefit Pension Plan				Supplemental Pension Plan
		(Dollars in thousands)
2016		$	2,178			$	405
2017		$	2,248			$	421
2018		$	2,362			$	449
2019		$	2,509			$	488
2020		$	2,563			$	528
2021 – 2025		$	13,882			$	3,684

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

11. EMPLOYEE RETIREMENT PLANS  – (continued)

The following table summarizes the fair value of the Company’s pension plan assets as of December 31, 20122015 by asset category within the fair value hierarchy (for further level information, see Note 4)3):

		December 31, 2012
		Quoted Prices				Significant				Significant								December 31, 2015
		in Active Markets				Observable Inputs				Unobservable Inputs								Quoted Prices in Active Markets				Significant Observable Inputs				Significant Unobservable Inputs
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
		(Dollars in thousands)																(Dollars in thousands)
Common stocks		$	10,169			$	1,118			$	-			$	11,287			$	12,352			$	1,027			$	—			$	13,379
Preferred stocks			1,038				-				-				1,038				409				22				—				431
Exchange traded funds			3,194				-				-				3,194				3,375				—				—				3,375
Corporate obligations			-				4,573				-				4,573				—				4,503				—				4,503
State and municipal obligations			-				574				-				574				—				1,337				—				1,337
Foreign obligations			-				16				-				16
Pooled fixed income funds			3,212				-				-				3,212				5,423				—				—				5,423
U.S. government securities			-				1,584				-				1,584				—				1,103				—				1,103
Cash and cash equivalents			2,264				-				-				2,264				2,703				—				—				2,703
Subtotal			19,877				7,865				-				27,742			$	24,262			$	7,992			$	—			$	32,254
Other assets(1)															77																91
Total														$	27,819															$	32,345

⁽¹⁾ This category represents trust receivables that are not leveled.

(1)

This category represents trust receivables that are not leveled.

The following table summarizes the fair value of the Company’s pension plan assets as of December 31, 20112014 by asset category within the fair value hierarchy (for further level information, see Note 4)3):

		December 31, 2011
		Quoted Prices				Significant				Significant								December 31, 2014
		in Active Markets				Observable Inputs				Unobservable Inputs								Quoted Prices in Active Markets				Significant Observable Inputs				Significant Unobservable Inputs
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
		(Dollars in thousands)																(Dollars in thousands)
Common stocks		$	8,329			$	582			$	-			$	8,911			$	11,888			$	1,139			$	—			$	13,027
Preferred stocks			859				-				-				859				414				20				—				434
Exchange traded funds			2,180				-				-				2,180				3,030				—				—				3,030
Corporate obligations			-				4,747				-				4,747				—				4,762				—				4,762
State and municipal obligations			-				806				-				806				—				1,592				—				1,592
Foreign obligations			-				51				-				51
Pooled fixed income funds			4,378				-				-				4,378				5,893				—				—				5,893
U.S. government securities			-				2,288				-				2,288				—				1,131				—				1,131
Cash and cash equivalents			2,337				-				-				2,337				2,069				—				—				2,069
Subtotal			18,083				8,474				-				26,557			$	23,294			$	8,644			$	—			$	31,938
Other assets(1)															98																89
Total														$	26,655															$	32,027

⁽¹⁾ This category represents trust receivables that are not leveled.

(1)

This category represents trust receivables that are not leveled.

The Company also has a defined contribution plan covering substantially all employees. The Company contributed approximately $221,000, $212,000$350,000, $302,000 and $200,000$227,000 in 2012, 20112015, 2014 and 2010,2013, respectively.

TABLE OF CONTENTS

13.

INCOME TAXES

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

12. INCOME TAXES

The provision for income taxes included the following components at December 31, 2012, 20112015, 2014 and 2010:2013:

		2012				2011				2010
		(Dollars in thousands)
Current:
Federal		$	6,985			$	5,483			$	5,228
State			928				951				1,020
Foreign			972				2,490				420
Total			8,885				8,924				6,668
Deferred			1,648				(343	)			503
Total provision		$	10,533			$	8,581			$	7,171

		2015				2014				2013
		(Dollars in thousands)
Current:
Federal		$	8,801			$	7,339			$	6,449
State			1,314				1,131				940
Foreign			501				1,649				1,273
Total			10,616				10,119				8,662
Deferred			346				1,115				1,268
Total provision		$	10,962			$	11,234			$	9,930

The differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate were as follows for the years ended December 31, 2012, 20112015, 2014 and 2010:2013:

		2012				2011				2010
U.S. federal statutory income tax rate			35.0	%			35.0	%			35.0	%
State income taxes, net of federal tax benefit			2.3				2.5				3.1
Non-taxable municipal bond interest			(1.9	)			(2.7	)			(3.2	)
Foreign income tax rate differences			(2.2	)			(1.5	)			(0.6	)
Other			0.9				1.0				(0.6	)
Effective tax rate			34.1	%			34.3	%			33.7	%

		2015				2014				2013
U.S. federal statutory income tax rate			35.0	%			35.0	%			35.0	%
State income taxes, net of federal tax benefit			3.4				2.8				2.6
Non-taxable municipal bond interest			(1.0	)			(1.2	)			(1.7	)
Foreign income tax rate differences			0.4				(0.8	)			(0.9	)
Other			(0.1	)			0.4				0.2
Effective tax rate			37.7	%			36.2	%			35.2	%

The foreign component of pretax net earnings was $6.2$1.3 million, $5.3$5.0 million and $3.8$4.2 million for 2012, 20112015, 2014 and 2010,2013, respectively. As of December 31, 2012,2015, the total amount of unremitted foreign earnings was $5.7$6.9 million. The repatriationA deferred tax liability has not been recorded on these unremitted earnings because the Company intends to permanently reinvest such earnings outside of the U.S. Future dividends, if any, would be paid only out of current year earnings in the year earned. If the remaining unremitted foreign earnings at December 31, 2015 were to be repatriated in the future, the related deferred tax liability would not have a material impact on the Company’s financial statements.

The components of deferred taxes as of December 31, 20122015 and 20112014 were as follows:

		2012				2011				2015				2014
		(Dollars in thousands)								(Dollars in thousands)
Deferred tax benefits:
Accounts receivable reserves		$	421			$	507			$	422			$	442
Pension liability			10,882				10,428				11,931				13,161
Accrued liabilities			1,934				1,727				2,383				2,426
Foreign currency losses on intercompany loans											148				—
			13,237				12,662				14,884				16,029
Deferred tax liabilities:
Inventory and related reserves			(1,316	)			(964	)			(3,552	)			(3,636	)
Cash value of life insurance			(3,029	)			(2,821	)			(3,517	)			(3,451	)
Property, plant and equipment			(1,713	)			(1,516	)			(1,420	)			(1,703	)
Intangible assets			(5,051	)			(2,827	)			(7,753	)			(6,642	)
Prepaid and other assets			(268	)			(263	)
Prepaid expenses and other assets											(249	)			(240	)
Foreign currency gains on intercompany loans			(419	)			(448	)			—				(105	)
			(11,796	)			(8,839	)			(16,491	)			(15,777	)
Net deferred income tax benefits		$	1,441			$	3,823
Net deferred income tax (liabilities) benefits										$	(1,607)			$	252

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

12. INCOME TAXES  – (continued)

The net deferred tax benefit is(liabilities) benefits are classified in the Consolidated Balance Sheets as follows:

		2012				2011
		(Dollars in thousands)
Current deferred income tax benefits		$	649			$	395
Noncurrent deferred income tax benefits			792				3,428
		$	1,441			$	3,823

		2015				2014
		(Dollars in thousands)
Current deferred income tax liabilities		$	(1,537)			$	(1,747	)
Noncurrent deferred income tax (liabilities) benefits			(70	)			1,999
		$	(1,607)			$	252

Uncertain Tax Positions

The Company accounts for its uncertain tax positions in accordance with ASC 740,Income Taxes(“ASC 740”).ASC 740 provides that the tax effects from an uncertain tax position can be recognized in the Company’s consolidated financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

(Dollars in thousands)
Balance at December 31, 2009		$	449
Increases related to current year tax positions			9
Expiration of the statute of limitations for the assessment of taxes			(23	)
Favorable settlements of tax positions			(351	)
Balance at December 31, 2010		$	84
Expiration of the statute of limitations for the assessment of taxes			(84	)
Balance at December 31, 2011		$	-
Increases related to current year tax positions			124
Balance at December 31, 2012		$	124

(Dollars in thousands)
Balance at December 31, 2012		$	124
Increases related to current year tax positions			—
Balance at December 31, 2013		$	124
Favorable settlements of tax positions			(55	)
Decreases related to prior year tax positions			(69	)
Balance at December 31, 2014		$	—
Increases related to current year tax positions			284
Balance at December 31, 2015		$	284

The Company had $284,000 of unrecognized tax benefits of $124,000 at December 31, 2012. This amount,2015, which, if recognized, would reduce the Company’s annual effective tax rate. Included in the Consolidated Balance Sheets at December 31, 20122015 was a liability for potential interest related to these positions of $2,000.$108,000. The Company had no unrecognized tax benefits as ofat December 31, 2011.

46

2014. At December 31, 2013, the Company had unrecognized tax benefits of $124,000, which, if recognized, would reduce the Company’s annual effective tax rate. Included in the Consolidated Balance Sheets at December 31, 2013 was a liability for potential interest related to these positions of $5,000.

The Company files a U.S. federal income tax return, various U.S. state income tax returns and several foreign returns. In general, the 20082011 through 20122015 tax years remain subject to examination by those taxing authorities.

14.

COMMITMENTS

13. COMMITMENTS

The Company operates retail shoe stores under both short-term and long-term leases. Leases provide for a minimum rental plus percentage rentals based upon sales in excess of a specified amount. The Company also leases office space in the U.S. and its distribution facilities in Canada and overseas. Total minimum rents were $9.6$9.1 million in 2012, $8.32015, $9.7 million in 2011,2014 and $8.4$9.5 million in 2010.2013. Percentage rentals were $1.2 million$461,000 in 2012, $1.2 million2015, $512,000 in 20112014, and $483,000$430,000 in 2010.2013.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

13. COMMITMENTS  – (continued)

Future fixed and minimum rental commitments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2012,2015, are shown below. Renewal options exist for many long-term leases.

		Operating
(Dollars in thousands)		Leases
2013		$	9,251
2014			8,202
2015			6,067
2016			4,535
2017			3,333
Thereafter			8,052
Total		$	39,440

(Dollars in thousands)		Operating Leases
2016		$	8,504
2017			7,241
2018			6,352
2019			5,715
2020			4,212
Thereafter			6,672
Total		$	38,696

At December 31, 2012,2015, the Company also had purchase commitments of approximately $50.2$56.8 million to purchase inventory, all of which were due in less than one year.

15.

STOCK REPURCHASE PROGRAM

14. STOCK REPURCHASE PROGRAM

In April 1998, the Company’s Board of Directors first authorized a stock repurchase program to purchase shares of its common stock in open market transactions at prevailing prices. In 2012,2015, the Company purchased 285,422354,741 shares at a total cost of $6.6$9.9 million through its stock repurchase program. In 2011,2014, the Company purchased 175,606297,576 shares at a total cost of $4.0$8.0 million through its stock repurchase program and 400,319program. In 2013, the Company purchased 195,050 shares at a total cost of $9.0 million in a private transaction. In 2010, the Company purchased 101,192 shares at a total cost of $2.3$4.6 million through its stock repurchase program. At December 31, 2012,2015, the Company was authorized to purchase an additional 824,000976,158 shares under the program.

47

16.

EARNINGS PER SHARE

15. EARNINGS PER SHARE

The following table sets forth the computations of basic and diluted earnings per share for the years ended December 31, 2012, 20112015, 2014 and 2010:2013:

		2012				2011				2010				2015				2014				2013
		(In thousands, except per share amounts)												(In thousands, except per share amounts)
Numerator:
Net earnings attributable to Weyco Group, Inc.		$	18,957			$	15,251			$	13,668			$	18,212			$	19,020			$	17,601
Denominator:
Basic weighted average shares outstanding			10,844				11,066				11,293				10,773				10,791				10,779
Effect of dilutive securities:
Employee stock-based awards			106				93				200				86				97				86
Diluted weighted average shares outstanding			10,950				11,159				11,493				10,859				10,888				10,865
Basic earnings per share		$	1.75			$	1.38			$	1.21			$	1.69			$	1.76			$	1.63
Diluted earnings per share		$	1.73			$	1.37			$	1.19			$	1.68			$	1.75			$	1.62

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

15. EARNINGS PER SHARE  – (continued)

Diluted weighted average shares outstanding for 20122015 exclude antidilutive stock options totaling 720,757 shares at a weighted average price of $27.59. Diluted weighted average shares outstanding for 2014 exclude antidilutive stock options totaling 656,000 shares at a weighted average price of $27.76. Diluted weighted average shares outstanding for 2013 exclude antidilutive unvested restricted stock and outstanding stock options totaling 874,530353,000 shares at a weighted average price of $24.26. Diluted weighted average shares outstanding for 2011 exclude antidilutive$26.85.

Unvested restricted stock awards provide holders with dividend rights prior to vesting, however, such rights are forfeitable if the awards do not vest. As a result, unvested restricted stock awards are not participating securities and outstanding stock options totaling 834,100 shares at a weighted average priceare excluded from the computation of $24.83.earnings per share.

17.

SEGMENT INFORMATION

16. SEGMENT INFORMATION

The Company has two reportable segments: North American wholesale operations (“wholesale”) and North American retail operations (“retail”). 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 or expense, other income or expense, and income taxes are not allocated to the segments. The “other” category in the table below includes the Company’s wholesale and retail operations in Australia, South Africa, Asia Pacific and Europe, which do not meet the criteria for separate reportable segment classification.

In the wholesale segment, shoes are marketed through more than 10,000 footwear, department and specialty stores, primarily in the United States and Canada. Licensing revenues are also included in the Company’s wholesale segment. As of December 31, 2012, theThe Company hadhas licensing agreements with third parties who sell its branded apparel, accessories and specialty footwear in the United States, as well as its footwear in Mexico and certain markets overseas. In 20122015, 2014 and 2011,2013, there was no single customer with sales above 10% of the Company’s total sales. In 2010, sales to the Company’s largest customer were 12% of total sales.

In the retail segment, the Company operated 2313 Company-owned stores in principal cities and an internet business in the United States and an Internet business as of December 31, 2012.2015. Sales in retail outlets are made directly to the consumer by Company employees. In addition to the sale of the Company’s brands of footwear in these retail outlets, other branded footwear and accessories are also sold in order to provide the consumer with as complete a selection as practically possible.sold.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

16. SEGMENT INFORMATION  – (continued)

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies. Summarized segment data for the years ended December 31, 2012, 20112015, 2014 and 20102013 was as follows:

		Wholesale				Retail				Other				Total
		(Dollars in thousands)
2012
Product sales		$	214,568			$	24,348			$	51,215			$	290,131
Licensing revenues			3,340				-				-				3,340
Net sales			217,908				24,348				51,215				293,471
Depreciation			2,083				544				711				3,338
Earnings from operations			22,214				1,662				5,921				29,797
Total assets			246,523				7,994				30,804				285,321
Capital expenditures			7,235				844				1,461				9,540
2011
Product sales		$	195,638			$	24,740			$	47,273			$	267,651
Licensing revenues			3,449				-				-				3,449
Net sales			199,087				24,740				47,273				271,100
Depreciation			1,677				565				349				2,591
Earnings from operations			15,673				1,554				5,970				23,197
Total assets			237,279				7,374				28,855				273,508
Capital expenditures			6,576				249				1,364				8,189
2010
Product sales		$	163,843			$	22,497			$	40,713			$	227,053
Licensing revenues			2,178				-				-				2,178
Net sales			166,021				22,497				40,713				229,231
Depreciation			1,614				682				404				2,700
Earnings from operations			15,742				(400	)			3,439				18,781
Total assets			189,844				7,572				26,019				223,435
Capital expenditures			298				54				1,158				1,510

		Wholesale				Retail				Other				Total
		(Dollars in thousands)
2015
Product sales		$	247,738			$	22,121			$	47,126			$	316,985
Licensing revenues			3,632				—				—				3,632
Net sales			251,370				22,121				47,126				320,617
Depreciation			2,210				535				867				3,612
Earnings from operations			24,272				2,519				2,994				29,785
Total assets			267,265				4,372				27,360				298,997
Capital expenditures			1,329				399				753				2,481
2014
Product sales		$	240,247			$	23,324			$	53,735			$	317,306
Licensing revenues			3,182				—				—				3,182
Net sales			243,429				23,324				53,735				320,488
Depreciation			2,251				553				855				3,659
Earnings from operations			22,527				3,300				4,830				30,657
Total assets			244,278				4,689				28,479				277,446
Capital expenditures			1,305				60				1,525				2,890
2013
Product sales		$	222,459			$	23,255			$	51,372			$	297,086
Licensing revenues			3,198				—				—				3,198
Net sales			225,657				23,255				51,372				300,284
Depreciation			2,481				538				943				3,962
Earnings from operations			20,742				3,018				3,995				27,755
Total assets			230,509				7,412				29,612				267,533
Capital expenditures			790				34				1,875				2,699

All North American corporate office assets are included in the wholesale segment. Transactions between segments primarily consist of sales between the wholesale and retail segments. Intersegment sales are valued at the cost of inventory plus an estimated cost to ship the products. Intersegment sales have been eliminated and are excluded from net sales in the above table.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

16. SEGMENT INFORMATION  – (continued)

Geographic Segments

Financial information relating to the Company’s business by geographic area was as follows for the years ended December 31, 2012, 20112015, 2014 and 2010:2013:

		2012				2011				2010
		(Dollars in thousands)
Net Sales:
United States		$	225,397			$	212,779			$	179,129
Canada			16,859				11,049				9,361
Europe			7,230				8,014				8,008
Australia			29,465				25,049				20,073
Asia			8,956				8,277				7,432
South Africa			5,564				5,932				5,228
Total		$	293,471			$	271,100			$	229,231
Long-Lived Assets:
United States		$	80,268			$	75,293			$	34,334
Other			6,009				5,116				4,089
		$	86,277			$	80,409			$	38,423

		2015				2014				2013
		(Dollars in thousands)
Net Sales:
United States		$	252,459			$	244,260			$	231,729
Canada			21,031				22,493				17,183
Europe			7,291				9,048				8,117
Australia			27,224				30,466				29,318
Asia			9,050				9,842				9,484
South Africa			3,562				4,379				4,453
Total		$	320,617			$	320,488			$	300,284
Long-Lived Assets:
United States		$	74,658			$	75,952			$	77,755
Other			7,699				9,048				9,255
		$	82,357			$	85,000			$	87,010

Net sales attributed to geographic locations are based on the location of the assets producing the sales. Long-lived assets by geographic location consist of property, plant and equipment (net), goodwill, trademarks, investment in real estate and amortizable intangible assets.

49

18.

STOCK-BASED COMPENSATION PLANS

17. STOCK-BASED COMPENSATION PLANS

At December 31, 2012,2015, the Company had threetwo stock-based compensation plans: the 1997 Stock Option Plan, the 2005 Equity2011 Incentive Plan and the 20112014 Incentive Plan (collectively, “the Plans”). Under the Plans, options to purchase common stock were granted to officers and key employees at exercise prices not less than the fair market value of the Company’s common stock on the date of the grant. The Company issues new common stock to satisfy stock option exercises and the issuance of restricted stock awards. Awards are no longer granted under the 1997 and 2005 plans.

2011 plan.

Stock options and restricted stock awards were granted on August 25, 2015, August 26, 2014, and on December 1, 2012, 2011 and 2010.2, 2013. Under the 2011 and 2014 Incentive Plan,Plans, stock options and restricted stock awards are valued at fair market value based on the Company’s closing stock price on the date of grant. Under the 1997 and 2005 plans, stock options were valued at fair market value based on the average of the Company’s high and low trade prices on the date of grant. The stock options and restricted stock awards granted in 2012, 20112015, 2014 and 20102013 vest ratably over four years. Stock options granted in 2012 and 2011 expire six years from the date of grant. Stock options granted between 2006 and 2010 expire five years from the date of grant. Stock options granted prior to 2006 expire ten years from the grant date, with the exception of certain incentive stock options, which expired five years from the date of grant. As of December 31, 2012,2015, there were 472,000321,800 shares remaining available for stock-based awards under the 20112014 Incentive Plan.

The Company expenses stock-based compensation in accordance with ASC 718 using the modified prospective method.

The Company’s policy is to estimate the fair market value of each option award granted on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the table below. The Company estimates the fair value of each restricted stock award based on the fair market value of the Company’s stock price on the grant date. The resulting compensation cost for both the options and restricted stock is amortized on a straight-line basis over the vesting period of the respective awards.

In accordance with ASC 718, stock-based compensation expense was recognized in the 2012, 20112015, 2014 and 20102013 consolidated financial statements for stock options and restricted stock awards granted since 2007.2009. An estimate of forfeitures, based on historical data, was included in the calculation of stock-based compensation, and the estimate was adjusted quarterly to the extent that actual forfeitures differ, or are expected to materially differ, from such estimates. The effect of applying the expense recognition provisions of ASC 718 in 2012, 20112015, 2014 and 20102013 decreased Earnings Before Provision For Income Taxes by approximately $1,201,000, $1,224,000$1,559,000, $1,465,000, and $1,128,000,$1,283,000, respectively.

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

17. STOCK-BASED COMPENSATION PLANS  – (continued)

As of December 31, 2012,2015, there was $2.2$2.1 million of total unrecognized compensation cost related to non-vested stock options granted in the years 20092012 through 20122015 which is expected to be recognized over the weighted-average remaining vesting period of 2.92.8 years. As of December 31, 2012,2015, there was $987,000$1.3 million of total unrecognized compensation cost related to non-vested restricted stock awards granted in the years 20092012 through 20122015 which is expected to be recognized over the weighted-average remaining vesting period of 3.12.8 years.

The following weighted-average assumptions were used to determine compensation expense related to stock options in 2012, 20112015, 2014 and 2010:2013:

		2012				2011				2010
Risk-free interest rate			0.51	%			0.66	%			1.00	%
Expected dividend yield			2.89	%			2.65	%			2.56	%
Expected term			4.3 years				4.3 years				3.5 years
Expected volatility			26.4	%			29.6	%			33.0	%

		2015				2014				2013
Risk-free interest rate			1.36	%			1.45	%			1.10	%
Expected dividend yield			3.12	%			2.81	%			2.53	%
Expected term			4.3 years				4.3 years				4.3 years
Expected volatility			21.6	%			17.8	%			16.2	%

The risk-free interest rate is based on U.S. Treasury bonds with a remaining term equal to the expected term of the award. The expected dividend yield is based on the Company’s expected annual dividend as a percentage of the market value of the Company’s common stock in the year of grant. The expected term of the stock options is determined using historical experience. The expected volatility is based upon historical stock prices over the most recent period equal to the expected term of the award.

The following tables summarize stock option activity under the Company’s plans:

Stock Options

		Years ended December 31,
		2015								2014								2013
Stock Options		Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price
Outstanding at beginning of year			1,355,416			$	25.36				1,260,866			$	24.41				1,265,792			$	22.76
Granted			299,700				25.64				331,600				27.04				333,300				28.50
Exercised			(279,090	)			22.02				(218,150	)			22.37				(219,526	)			17.91
Forfeited or expired			(24,200	)			26.58				(18,900	)			25.71				(118,700	)			30.30
Outstanding at end of year			1,351,826			$	26.09				1,355,416			$	25.36				1,260,866			$	24.41
Exercisable at end of year			594,906			$	25.55				603,834			$	23.66				581,081			$	22.39
Weighted average fair market value of options granted		$	3.30							$	2.93							$	2.77

		Years ended December 31,
		2012								2011								2010
Stock Options		Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price
Outstanding at beginning of year			1,307,488			$	21.76				1,269,426			$	20.25				1,195,276			$	18.68
Granted			253,400				23.53				235,700				24.21				192,000				24.49
Exercised			(174,646	)			13.17				(122,463	)			8.95				(113,500	)			10.59
Forfeited or expired			(120,450	)			27.37				(75,175	)			24.93				(4,350	)			26.90
Outstanding at end of year			1,265,792			$	22.76				1,307,488			$	21.76				1,269,426			$	20.25
Exercisable at end of year			706,863			$	21.89				821,510			$	20.16				848,200			$	17.81
Weighted average fair market value of options granted		$	3.68							$	4.51							$	4.97

		Weighted Average Remaining Contractual Life (in Years)				Aggregate Intrinsic Value
Outstanding - December 31, 2015			4.0			$	1,541,000
Exercisable - December 31, 2015			3.1			$	1,017,000

TABLE OF CONTENTS

		Weighted Average Remaining Contractual Life (in Years)				Aggregate Intrinsic Value
Outstanding - December 31, 2012		3.1				$	2,022,000
Exercisable - December 31, 2012		1.8				$	2,010,000

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

17. STOCK-BASED COMPENSATION PLANS  – (continued)

The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of the Company’s stock on December 31, 20122015 of $23.36$26.76 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options.

Non-vested Stock Options

Non-vested Stock Options		Number of Options				Weighted Average Exercise Price				Weighted Average Fair Value				Number of Options				Weighted Average Exercise Price				Weighted Average Fair Value
Non-vested - December 31, 2009			349,325			$	25.93			$	5.00
Non-vested – December 31, 2012															558,929			$	23.86			$	4.23
Granted			192,000				24.49				4.97				333,300				28.50				2.77
Vested			(116,999	)			26.33				5.17				(207,044	)			23.83				4.42
Forfeited			(3,100	)			26.84				5.00				(5,400	)			23.95				4.28
Non-vested - December 31, 2010			421,226			$	25.16			$	4.94
Non-vested – December 31, 2013															679,785			$	26.14			$	3.46
Granted			235,700				24.21				4.51				331,600				27.04				2.93
Vested			(145,298	)			25.86				5.05				(243,303	)			25.54				3.80
Forfeited			(25,650	)			25.62				4.91				(16,500	)			25.98				3.44
Non-vested - December 31, 2011			485,978			$	24.46			$	4.70
Non-vested – December 31, 2014															751,582			$	26.74			$	3.12
Granted			253,400				23.53				3.68				299,700				25.64				3.30
Vested			(173,824	)			25.05				4.73				(275,187	)			26.14				3.36
Forfeited			(6,625	)			24.26				4.60				(19,175	)			26.59				3.14
Non-vested - December 31, 2012			558,929			$	23.86			$	4.23
Non-vested – December 31, 2015															756,920			$	26.53			$	3.10

The following table summarizes information about outstanding and exercisable stock options at December 31, 2012:2015:

		Options Outstanding												Options Exercisable
Range of Exercise Prices		Number of Options Outstanding				Weighted Average Remaining Contractual Life (in Years)				Weighted Average Exercise Price				Number of Options Exercisable				Weighted Average Exercise Price
$15.46 to $18.03			318,292				1.22			$	17.15				318,292			$	17.15
$23.09 to $23.53			423,400				4.31				23.35				127,949				23.09
$24.21 to $30.67			524,100				3.37				25.69				260,622				27.09
			1,265,792				3.14			$	22.76				706,863			$	21.89

		Options Outstanding												Options Exercisable
Range of Exercise Prices		Number of Options Outstanding				Weighted Average Remaining Contractual Life (in Years)				Weighted Average Exercise Price				Number of Options Exercisable				Weighted Average Exercise Price
$23.53 to $25.86			712,026				3.8			$	24.60				356,169			$	23.90
$27.04 to $28.50			639,800				4.3			$	27.76				238,737			$	28.00
			1,351,826				4.0			$	26.09				594,906			$	25.55

The following table summarizes stock option activity for the years ended December 31:

		2012				2011				2010				2015				2014				2013
		(Dollars in thousands)												(Dollars in thousands)
Total intrinsic value of stock options exercised		$	1,704			$	1,299			$	1,443			$	1,705			$	1,108			$	1,506
Cash received from stock option exercises		$	2,300			$	1,096			$	1,202			$	6,144			$	4,881			$	3,932
Income tax benefit from the exercise of stock options		$	664			$	507			$	563			$	665			$	432			$	588
Total fair value of stock options vested		$	821			$	733			$	604			$	925			$	923			$	915

TABLE OF CONTENTS

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

17. STOCK-BASED COMPENSATION PLANS  – (continued)

Restricted Stock

The following table summarizes restricted stock award activity during the years ended December 31, 2010, 20112013, 2014 and 2012:2015:

Non-vested Restricted Stock		Shares of Restricted Stock				Weighted Average Grant Date Fair Value
Non-vested - December 31, 2009			46,670			$	25.56
Issued			12,800				24.49
Vested			(22,372	)			25.40
Forfeited			(1,650	)			25.00
Non-vested - December 31, 2010			35,448			$	24.79
Issued			19,300				24.21
Vested			(16,748	)			25.91
Forfeited			-				-
Non-vested - December 31, 2011			38,000				24.47
Issued			19,600				23.53
Vested			(15,025	)			24.97
Forfeited			-				-
Non-vested - December 31, 2012			42,575			$	23.87

Non-vested Restricted Stock		Shares of Restricted Stock				Weighted Average Grant Date Fair Value
Non-vested – December 31, 2012			42,575			$	23.87
Issued			20,400				28.50
Vested			(15,475	)			23.85
Forfeited			—				—
Non-vested – December 31, 2013			47,500				25.86
Issued			24,400				27.04
Vested			(17,850	)			25.31
Forfeited			—				—
Non-vested – December 31, 2014			54,050			$	26.58
Issued			21,900				25.64
Vested			(20,700	)			25.94
Forfeited			—				—
Non-vested – December 31, 2015			55,250			$	26.45

At December 31, 2012,2015, the Company expected 42,575 of55,250 shares of restricted stock to vest over a weighted-average remaining contractual term of 3.102.8 years. These shares had an aggregate intrinsic value of $995,000$1.5 million at December 31, 2012.2015. The aggregate intrinsic value was calculated using the market value of the Company’s stock on December 31, 20122015 of $23.36$26.76 multiplied by the number of non-vested restricted shares outstanding. The income tax benefit from the vesting of restricted stock for the years ended December 31 was approximately $137,000$221,000 in 2012, $158,0002015, $183,000 in 20112014, and $214,000$177,000 in 2010.2013.

52

19.

QUARTERLY FINANCIAL DATA (Unaudited)

18. QUARTERLY FINANCIAL DATA (Unaudited)

(In thousands, except per share amounts)

2012		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
2015																						First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
Net sales		$	75,314			$	60,333			$	79,473			$	78,351			$	293,471			$	78,052			$	63,934			$	91,227			$	87,404			$	320,617
Gross earnings		$	28,031			$	22,878			$	30,446			$	33,532			$	114,887			$	28,737			$	24,423			$	32,610			$	35,839			$	121,609
Net earnings attributable to Weyco Group, Inc.		$	3,869			$	2,219			$	5,192			$	7,677			$	18,957			$	3,633			$	2,040			$	5,526			$	7,013			$	18,212
Net earnings per share:
Basic		$	0.36			$	0.20			$	0.48			$	0.71			$	1.75			$	0.34			$	0.19			$	0.51			$	0.65			$	1.69
Diluted		$	0.35			$	0.20			$	0.48			$	0.71			$	1.73			$	0.33			$	0.19			$	0.51			$	0.65			$	1.68

TABLE OF CONTENTS

2011		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
Net sales		$	65,146			$	56,550			$	74,601			$	74,803			$	271,100
Gross earnings		$	24,825			$	22,663			$	28,540			$	30,694			$	106,722
Net earnings attributable to Weyco Group, Inc.		$	3,372			$	1,937			$	4,409			$	5,533			$	15,251
Net earnings per share:
Basic		$	0.30			$	0.17			$	0.40			$	0.51			$	1.38
Diluted		$	0.30			$	0.17			$	0.40			$	0.50			$	1.37

WEYCO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

18. QUARTERLY FINANCIAL DATA (Unaudited)  – (continued)

20.

VALUATION AND QUALIFYING ACCOUNTS

2014		First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
Net sales		$	74,929			$	62,863			$	87,425			$	95,271			$	320,488
Gross earnings		$	27,364			$	24,217			$	32,421			$	39,066			$	123,068
Net earnings attributable to Weyco Group, Inc.		$	3,205			$	2,207			$	5,518			$	8,090			$	19,020
Net earnings per share:
Basic		$	0.30			$	0.20			$	0.51			$	0.75			$	1.76
Diluted		$	0.29			$	0.20			$	0.51			$	0.75			$	1.75

19. VALUATION AND QUALIFYING ACCOUNTS

		Deducted from Assets
		Doubtful				Returns and
		Accounts				Allowances				Total
		(Dollars in thousands)
BALANCE, DECEMBER 31, 2009		$	1,218			$	1,440			$	2,658
Add - Additions charged to earnings			35				2,855				2,890
Deduct - Charges for purposes for which reserves were established			(144	)			(3,118	)			(3,262	)
BALANCE, DECEMBER 31, 2010		$	1,109			$	1,177			$	2,286
Add - Additions charged to earnings			316				2,496				2,812
Add - Acquisitions and other adjustments			316				-				316
Deduct - Charges for purposes for which reserves were established			(326	)			(2,729	)			(3,055	)
BALANCE, DECEMBER 31, 2011		$	1,415			$	944			$	2,359
Add - Additions charged to earnings			175				2,954				3,129
Deduct - Charges for purposes for which reserves were established			(319	)			(2,750	)			(3,069	)
BALANCE, DECEMBER 31, 2012		$	1,271			$	1,148			$	2,419

21.

SUBSEQUENT EVENTS

		Deducted from Assets
		Doubtful Accounts				Returns and Allowances				Total
		(Dollars in thousands)
BALANCE, DECEMBER 31, 2012		$	1,271			$	1,148			$	2,419
Add – Additions charged to earnings			132				2,974				3,106
Deduct – Charges for purposes for which reserves were established			(170	)			(3,062	)			(3,232	)
BALANCE, DECEMBER 31, 2013		$	1,233			$	1,060			$	2,293
Add – Additions charged to earnings			240				3,299				3,539
Deduct – Charges for purposes for which reserves were established			(246	)			(3,202	)			(3,448	)
BALANCE, DECEMBER 31, 2014		$	1,227			$	1,157			$	2,384
Add – Additions charged to earnings			235				3,200				3,435
Deduct – Charges for purposes for which reserves were established			(286	)			(3,276	)			(3,562	)
BALANCE, DECEMBER 31, 2015		$	1,176			$	1,081			$	2,257

20. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through March 14, 2013,10, 2016, the date these financial statements were issued. No significant subsequent events have occurred through this date requiring adjustment to the financial statements or disclosures.

53

TABLE OF CONTENTS

ITEM 9CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9ACONTROLS AND PROCEDURES

Evaluation of Disclosure 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”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. 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 information relating to the Company required to be included in the Company’s periodic filings under the Exchange Act.

Management’s Report on Internal Control over Financial Reporting

The report of management required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Management’s Report on Internal Control over Financial Reporting.”

Report

Reports of Independent Registered Public Accounting Firm

The attestation reportreports from the current and former independent registered public accounting firms required under this Item 9A isare contained in Item 8 of Part II of this Annual Report on Form 10-K under the headingheadings “Report of Independent Registered Public Accounting Firm.Firm (Successor)” and “Report of Independent Registered Public Accounting Firm (Predecessor).”

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)and 15d-15(f)) that occurred during the quarter or year ended December 31, 20122015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9BOTHER INFORMATION

None

TABLE OF CONTENTS

None.

PART III

ITEM 10DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required by this Item is set forth within Part I, “Executive Officers of the Registrant” of this Annual Report on Form 10-K and within the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 7, 201310, 2016 (the “2013“2016 Proxy Statement”), in sections entitled “Proposal One: Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Audit Committee,” and “Code of Business Ethics,” and is incorporated herein by reference.

ITEM 11EXECUTIVE COMPENSATION

Information required by this Item is set forth in the Company’s 20132016 Proxy Statement in sections entitled “Compensation Discussion and Analysis and Executive Compensation,” “Director Compensation,” and “Corporate Governance and Compensation Committee Interlocks and Insider Participation,” and is incorporated herein by reference.

ITEM 12

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by this Item is set forth in the Company’s 20132016 Proxy Statement in the section entitled “Security Ownership of Management and Others,” and is incorporated herein by reference.

The following table provides information about the Company’s equity compensation plans as of December 31, 2012:2015:

(a)

(b)

(c)

Number of Securities

Number of Securities

Remaining Available for

to be Issued Upon

Weighted-Average

Future Issuance Under

Exercise of

Exercise Price of

Equity Compensation Plans

Outstanding Options,

Outstanding Options,

(Excluding Securities

Plan Category

Warrants and Rights

Warrants and Rights

Reflected in Column (a))

Equity compensation plans approved by shareholders

1,265,792

$

22.76

472,000

Equity compensation plans not approved by shareholders

-

-

-

Total

1,265,792

$

22.76

472,000

Plan Category		(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights				(b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights				(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity compensation plans approved by shareholders			1,351,826			$	26.09				321,800
Equity compensation plans not approved by shareholders			—				—				—
Total			1,351,826			$	26.09				321,800

ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required by this Item is set forth in the Company’s 20132016 Proxy Statement in sections entitled “Transactions with Related Persons” and “Director Independence,” and is incorporated herein by reference.

ITEM 14

PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES

Information required by this Item is set forth in the Company’s 20132016 Proxy Statement in the section entitled “Audit and Non-Audit Fees,” and is incorporated herein by reference.

55

TABLE OF CONTENTS

PART IV

ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES

ITEM 15

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)

Documents filed as part of this Annual Report on Form 10-K:

	(1)	Financial Statements -— See the consolidated financial statements included in Part II, Item 8 “Financial Statements and Supplementary Data” in this 20122015 Annual Report on Form 10-K.

(2)

Financial Statement Schedules –— Financial statement schedules have been omitted because information required in these schedules is included in the Notes to Consolidated Financial Statements.

(b)		List of Exhibits.

TABLE OF CONTENTS

Exhibit		Description		Incorporation Herein By Reference To		Filed Herewith
2.1		Stock Purchase Agreement, relating to The Combs Company dated March 2, 2011 by and among Weyco Group, Inc. and The Combs Company, d/b/a Bogs Footwear, William G. Combs and Sue Combs (excluding certain schedules and exhibits referred to in the agreement, which the registrant hereby agrees to furnish supplementally to the SEC upon request of the SEC)		Exhibit 2.1 to Form 8-K filed March 7, 2011
3.1		Articles of Incorporation as Restated August 29, 1961, and Last Amended February 16, 2005		Exhibit 3.1 to Form 10-K for Year Ended December 31, 2004
3.2		Bylaws as Revised January 21, 1991 and Last Amended July 26, 2007		Exhibit 3 to Form 8-K Dated July 26, 2007
10.1		Subscription Agreement relating to Florsheim Australia Pty Ltd, dated January 23, 2009 by and among Florsheim Australia Pty Ltd, Seraneuse Pty Ltd as trustee for the Byblose Trust, Weyco Group, Inc. and David Mayne Venner		Exhibit 10.1 to Form 10-K for Year Ended December 31, 2008
10.2		Shareholders Agreement relating to Florsheim Australia Pty Ltd, dated January 23, 2009 by and among Florsheim Australia Pty Ltd, Seraneuse Pty Ltd as trustee for the Byblose Trust, Weyco Group, Inc, and David Mayne Venner		Exhibit 10.2 to Form 10-K for Year Ended December 31, 2008
10.3		Loan Agreement dated January 23, 2009 between Weyco Investments, Inc. and Florsheim Australia Pty Ltd		Exhibit 10.3 to Form 10-K for Year Ended December 31, 2008
10.4		Fixed and Floating Charge Agreement Between Weyco Investments, Inc. and Florsheim Australia Pty Ltd		Exhibit 10.4 to Form 10-K for Year Ended December 31, 2008
10.4a		Loan Modification Agreement dated December 6, 2012 between Weyco Investments, Inc. and Florsheim Australia Pty Ltd		Exhibit 10.4a to Form 10-K for Year Ended December 31, 2013
10.5*		Consulting Agreement -— Thomas W. Florsheim, dated December 28, 2000		Exhibit 10.1 to Form 10-K for Year Ended December 31, 2001
10.6*		Employment Agreement - (Renewal) — Thomas W. Florsheim, Jr., dated January 1, 20112014		Exhibit 10.6 to Form 10-K for Year Ended December 31, 20102013

TABLE OF CONTENTS

Exhibit		Description		Incorporation Herein By Reference To		Filed Herewith
10.7*		Employment Agreement - (Renewal) — John W. Florsheim, dated January 1, 20112014		Exhibit 10.7 to Form 10-K for Year Ended December 31, 2010

Exhibit		Description		Incorporation Herein By Reference To		Filed Herewith
				2013
10.8*		Excess Benefits Plan -— Amended Effective as of July 1, 2004		Exhibit 10.6 to Form 10-K for Year Ended December 31, 2005
10.9*		Pension Plan -— Amended and Restated Effective January 1, 2006		Exhibit 10.7 to Form 10-K for Year Ended December 31, 2006
10.1010.10*		Deferred Compensation Plan -— Amended Effective as of July 1, 2004		Exhibit 10.8 to Form 10-K for Year Ended December 31, 2005
10.11
10.11		Loan agreement between Weyco Group, Inc. and M&I Marshall & IlsleyLine of Credit Renewal Letter with PNC Bank, dated April 28, 2006		Exhibit 10.9 to Form 10-Q for the Quarter Ended June 30, 2008
10.12		Amendment to loan agreement dated April 30, 2012 which increased the interest rate and extended the revolving maturity date to April 30, 2013		Exhibit 10.1 to Form 10-Q for Quarter Ended March 31, 2012
10.12a		Amendment to loan agreementN.A., dated November 2, 2012, which increased the amount of the borrowing facility from $50 million to $60 million5, 2015		Exhibit 10.1 to Form 10-Q for Quarter Ended September 30, 20122015
10.12		PNC Bank Loan Agreement, dated November 5, 2013		Exhibit 10.1 to Form 10-Q for Quarter Ended September 30, 2013
10.13*10.13		1997 Stock Option PlanPNC Bank Committed Line of Credit Note, dated November 5, 2013		Exhibit 10.1310.2 to Form 10-K10-Q for YearQuarter Ended December 31, 1997
				September 30, 2013
10.14*		Change of Control Agreement John Wittkowske, dated January 26, 1998 and restated December 22, 2008		Exhibit 10.14 to Form 10-K for Year Ended December 31, 2008
10.15*		Weyco Group, Inc. Director Nonqualified Stock Option Agreement Robert Feitler, dated May 19, 2003		Exhibit 10.19 to Form 10-K for Year Ended December 31, 2004
10.16*		Weyco Group, Inc. Director Nonqualified Stock Option Agreement Thomas W. Florsheim, Sr., dated May 19, 2003		Exhibit 10.20 to Form 10-K for Year Ended December 31, 2004
10.17*		Weyco Group, Inc. Director Nonqualified Stock Option Agreement Frederick P. Stratton, Jr., dated May 19, 2003		Exhibit 10.22 to Form 10-K for Year Ended December 31, 2004
10.18*		Weyco Group, Inc. 2005 Equity Incentive Plan		Appendix C to the Registrant’s Proxy Statement Schedule 14A for the Annual Meeting of Shareholders held on April 26, 2005
10.19*		Weyco Group, Inc. 2011 Incentive Plan		Appendix A to the Registrant’s Proxy Statement Schedule 14A for the Annual Meeting of Shareholders held on May 3, 2011

Exhibit10.20*		DescriptionWeyco Group, Inc. 2014 Incentive Plan		Incorporation Herein By Reference To		Filed Herewith
				Appendix A to the Registrant’s Proxy Statement Schedule 14A for the Annual Meeting of Shareholders held on May 6, 2014
10.20a*		Form of incentive stock option agreement for the Weyco Group, Inc. 20112014 Incentive Plan		Exhibit 10.19a to Form 10-Q for Quarter Ended March 31, 2011September 30, 2014
10.20b*		Form of non-qualified stock option agreement for the Weyco Group, Inc. 20112014 Incentive Plan		Exhibit 10.19b to Form 10-Q for Quarter Ended March 31, 2011
				September 30, 2014
10.20c*		Form of restricted stock agreement for the Weyco Group, Inc. 20112014 Incentive Plan		Exhibit 10.19c to Form 10-Q for Quarter Ended March 31, 2011September 30, 2014

TABLE OF CONTENTS

Exhibit		Description		Incorporation Herein By Reference To		Filed Herewith
21		Subsidiaries of the Registrant				X
23.1		Consent of Independent Registered Public Accounting Firm dated March 14, 201310, 2016				X
23.2		Consent of Independent Registered Public Accounting Firm dated March 10, 2016						X
31.1		Certification of Chief Executive Officer				X
31.2		Certification of Chief Financial Officer				X
32		Section 906 Certification of Chief Executive Officer and Chief Financial Officer				X
101		The following financial information from Weyco Group, Inc.'s Annual Report on Form 10-K for the year ended December 31, 20122015 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 20122015 and 2011;2014; (ii) Consolidated Statements of Earnings for the years ended December 31, 2012, 20112015, 2014 and 2010;2013; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 20112015, 2014 and 2010;2013; (iv) Consolidated Statements of Equity for the years ended December 31, 2012, 20112015, 2014 and 2010;2013; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011,2015, 2014, and 2010;2013; (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.				X

*

Management contract or compensatory plan or arrangement

* Management contract or compensatory plan or arrangementTABLE OF CONTENTS

SIGNATURES

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.

WEYCO GROUP, INC.
By	/s/ John F. Wittkowske		March 14, 2013
John F. Wittkowske, Senior Vice President, Chief Financial Officer and Secretary			March 10, 2016

 

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 F. 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, as of March 14, 201310, 2016 by the following persons on behalf of the registrant and in the capacities indicated.

/s/ Thomas W. Florsheim
Thomas W. Florsheim, Chairman Emeritus
/s/ Thomas W. Florsheim, Jr.
Thomas W. Florsheim, Jr., Chairman of the Board
and Chief Executive Officer (Principal Executive Officer)
/s/ John W. Florsheim
John W. Florsheim, President, Chief Operating Officer,
Assistant Secretary and Director
/s/ John F. Wittkowske
John F. Wittkowske, Senior Vice President, Chief
Financial Officer and Secretary (Principal Financial Officer)
		/s/ Judy Anderson Judy Anderson, Vice President, Finance and Treasurer (Principal Accounting Officer)
/s/ Tina Chang Tina Chang, Director

TABLE OF CONTENTS

Tina Chang, Director
/s/ Robert Feitler
Robert Feitler, Director
/s/ Cory L. Nettles
Cory L. Nettles, Director
/s/ Frederick P. Stratton, Jr.
Frederick P. Stratton, Jr., Director

60

65

---