| 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 for the Company. 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, 2017.2021. 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, 2017,2021, 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, 20172021 as stated in its report below. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders, Audit Committee and the Board of Directors of Weyco Group, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Weyco Group, Inc. (the “Company”) as of December 31, 20172021 and 2016,2020, the related consolidated statements of earnings, comprehensive income, equity and cash flows for the three years inthen ended, and the period ended December 21, 2017.related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established inInternal Control — –Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172021 and 20162020 and the results of their operations and their cash flows for each of the three years in the periodthen ended December 31, 2017, 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, 2017,2021, based on criteria established inInternal Control — –Integrated Framework: (2013) issued by COSO. Basis for OpinionOpinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company'sCompany’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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 audits also included performing such other procedures, as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.opinions. Definition and Limitations of Internal Control over Financial Reporting A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of 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 financial statements in accordance with generally
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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 financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Goodwill Impairment Evaluation – Wholesale Reporting Unit – Refer to Notes 2 and 9 to the Consolidated Financial Statements Critical Audit Matter Description As described in Notes 2 and 9 to the consolidated financial statements, the Company’s goodwill balance which is allocated to the Company’s wholesale reporting unit was $11.5 million at December 31, 2021. Goodwill is tested for impairment at least annually, or more frequently as events occur or circumstances change, at the reporting unit level. The Company performed a qualitative assessment to determine whether it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the reporting unit was less than the carrying value, including goodwill. While the impairment test did not result in the recording of any impairment loss, the impairment analysis requires management to make significant judgments in performing its assessment including the evaluation of macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity-specific events, events affecting the reporting unit, and trends in the Company’s share price. Auditing management’s impairment analysis is complex due to the judgments required to evaluate management’s assessment of those factors identified above. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: | ◾ | Testing the design and operating effectiveness of internal controls relating to the evaluation of the assumptions used by management in conducting its impairment analysis including controls addressing: |
| o | Management’s identification of reporting units evaluated for potential impairment. |
| o | Management’s assessment of triggering events indicating potential impairment. |
| ◾ | Substantively tested the appropriateness of the judgments and assumptions used by management in conducting its impairment analysis, including: |
| o | Confirmed the appropriateness of the reporting unit evaluated in performing management’s impairment analysis. |
| o | Evaluated the factors management considered in its qualitative assessment to determine that goodwill was not impaired, including the evaluation of macroeconomic conditions, industry and market conditions, cost factors, the past financial performance of the reporting units, the projected financial performance of the reporting units, other entity-specific events, events affecting the reporting unit, and trends in the Company’s share price. |
Trademark Impairment Assessment - Refer to Notes 2 and 9 to the Consolidated Financial Statements Critical Audit Matter Description As described in Notes 2 and 9 to the consolidated financial statements, the Company’s consolidated trademark balance was $34.8 million at December 31, 2021, which is allocated to the Company’s three trademarks. Trademarks are tested for impairment at least annually, or more frequently as events occur or circumstances change, at the brand level. The Company performed a qualitative assessment to determine where it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the trademark was less than the carrying value. While the impairment test did not result in the recording of any impairment loss, the impairment analysis requires management to make significant judgments in performing its assessment including the evaluation of macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of each brand, other entity-specific events and events affecting the brands. Auditing management’s impairment analysis is complex due to the judgments required to evaluate management’s assessment of those factors identified above. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: | ◾ | Testing the design and operating effectiveness of internal controls relating to the evaluation of the assumptions used by management in conducting its impairment analysis including controls addressing: |
| o | Management’s assessment of triggering events indicating potential impairment. |
| ◾ | Substantively tested the appropriateness of the judgments and assumptions used by management in conducting its impairment analysis, including: |
| o | Evaluated the factors management considered in its qualitative assessment to determine that trademarks were not impaired, including the evaluation of macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of each brand, other entity-specific events, and events affecting the brands. |
/s/ Baker Tilly Virchow Krause,US, LLP We have served as the Company's auditor since 2015. Milwaukee, WI
Wisconsin March 13, 201811, 2022 CONSOLIDATED STATEMENTS OF EARNINGS For the years ended December 31, 2017, 20162021 and 20152020 | | | | | | | | | 2021 | | 2020 | | | | (In thousands, except per share amounts) | | | | | | | | Net sales | | $ | 267,641 | | $ | 195,375 | Cost of sales | | | 160,194 | | | 116,817 | Gross earnings | | | 107,447 | | | 78,558 | | | | | | | | Selling and administrative expenses | | | 81,745 | | | 86,156 | Earnings (loss) from operations | | | 25,702 | | | (7,598) | | | | | | | | Interest income | | | 641 | | | 527 | Interest expense | | | (81) | | | (79) | Other income, net | | | 1,083 | | | 96 | | | | | | | | Earnings (loss) before provision for income taxes | | | 27,345 | | | (7,054) | | | | | | | | Provision for income taxes | | | 6,790 | | | 1,431 | | | | | | | | Net earnings (loss) | | $ | 20,555 | | $ | (8,485) | | | | | | | | | | | | | | | Basic earnings (loss) per share | | $ | 2.13 | | $ | (0.87) | Diluted earnings (loss) per share | | $ | 2.12 | | $ | (0.87) |
 | | | | | | | | | 2017 | | 2016 | | 2015 | | | | (In thousands, except per share amounts) | | Net sales | | $ | 283,749 | | | $ | 296,933 | | | $ | 320,617 | | | Cost of sales | | | 173,056 | | | | 184,890 | | | | 199,008 | | | Gross earnings | | | 110,693 | | | | 112,043 | | | | 121,609 | | | Selling and administrative expenses | | | 87,281 | | | | 89,261 | | | | 89,761 | | | Earnings from operations | | | 23,412 | | | | 22,782 | | | | 31,848 | | | Interest income | | | 773 | | | | 763 | | | | 936 | | | Interest expense | | | (15 | ) | | | (436 | ) | | | (181 | ) | | Other expense, net | | | (248 | ) | | | (1,032 | ) | | | (3,488 | ) | | Earnings before provision for income taxes | | | 23,922 | | | | 22,077 | | | | 29,115 | | | Provision for income taxes | | | 7,223 | | | | 5,084 | | | | 10,962 | | | Net earnings | | | 16,699 | | | | 16,993 | | | | 18,153 | | | Net earnings (loss) attributable to noncontrolling interest | | | 208 | | | | 521 | | | | (59 | ) | | Net earnings attributable to Weyco Group, Inc. | | $ | 16,491 | | | $ | 16,472 | | | $ | 18,212 | | | Basic earnings per share | | $ | 1.61 | | | $ | 1.57 | | | $ | 1.69 | | | Diluted earnings per share | | $ | 1.60 | | | $ | 1.56 | | | $ | 1.68 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
�� CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2017, 20162021 and 20152020 | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | | | | | | | | Net earnings (loss) | | $ | 20,555 | | $ | (8,485) | | | | | | | | Other comprehensive income (loss), net of tax: | | | | | | | Foreign currency translation adjustments | | | (733) | | | 983 | Pension liability adjustments | | | 3,944 | | | (4,452) | Other comprehensive income (loss) | | | 3,211 | | | (3,469) | | | | | | | | Comprehensive income (loss) | | $ | 23,766 | | $ | (11,954) |
| | | | | | | | | 2017 | | 2016 | | 2015 | | | | (Dollars in thousands) | | Net earnings | | $ | 16,699 | | | $ | 16,993 | | | $ | 18,153 | | Other comprehensive (loss) income, net of tax:
| | | | | | | | | | | | | | Foreign currency translation adjustments | | | 1,729 | | | | 198 | | | | (3,411 | ) | | Pension liability adjustments | | | (2,593 | ) | | | 1,696 | | | | 2,360 | | | Other comprehensive (loss) income | | | (864 | ) | | | 1,894 | | | | (1,051 | ) | | Comprehensive income | | | 15,835 | | | | 18,887 | | | | 17,102 | | | Comprehensive income (loss) attributable to noncontrolling interest | | | 634 | | | | 517 | | | | (673 | ) | | Comprehensive income attributable to Weyco Group, Inc. | | $ | 15,201 | | | $ | 18,370 | | | $ | 17,775 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS As ofAt December 31, 20172021 and 20162020
| | | | | | | | | 2021 | | 2020 | | | | (In thousands, except par value and share data) | ASSETS: | | | | | | | Cash and cash equivalents | | $ | 19,711 | | $ | 32,476 | Investments, at fair value | | | 8,122 | | | — | Marketable securities, at amortized cost | | | 219 | | | 2,215 | Accounts receivable, less allowances of $2,067 and $2,666, respectively | | | 53,287 | | | 34,631 | Income tax receivable | | | 495 | | | 1,374 | Inventories | | | 71,026 | | | 59,025 | Prepaid expenses and other current assets | | | 4,317 | | | 4,610 | Total current assets | | | 157,177 | | | 134,331 | | | | | | | | Marketable securities, at amortized cost | | | 9,996 | | | 12,800 | Deferred income tax benefits | | | 1,063 | | | 1,235 | Property, plant and equipment, net | | | 29,202 | | | 30,759 | Operating lease right-of-use assets | | | 9,543 | | | 9,613 | Goodwill | | | 12,317 | | | 11,112 | Trademarks | | | 34,768 | | | 32,868 | Other assets | | | 23,601 | | | 24,001 | Total assets | | $ | 277,667 | | $ | 256,719 | | | | | | | | LIABILITIES AND EQUITY: | | | | | | | Accounts payable | | $ | 19,234 | | $ | 8,444 | Operating lease liabilities | | | 3,593 | | | 4,245 | Accrued liabilities: | | | | | | | Accrued compensation and employee benefits | | | 5,948 | | | 4,019 | Sales and advertising allowances | | | 1,934 | | | 2,477 | Taxes other than income taxes | | | 991 | | | 1,123 | Other | | | 2,808 | | | 4,037 | Total current liabilities | | | 34,508 | | | 24,345 | | | | | | | | Deferred income tax liabilities | | | 5,026 | | | 2,914 | Long-term pension liability | | | 27,776 | | | 33,534 | Operating lease liabilities | | | 7,520 | | | 7,734 | Other long-term liabilities | | | 1,442 | | | 267 | Total liabilities | | | 76,272 | | | 68,794 | | | | | | | | Commitments and contingencies (Note 15) | | | | | | | | | | | | | | Common stock, $1.00 par value, authorized 24,000,000 shares in 2021 and 2020, issued and outstanding 9,708,730 shares in 2021 and 9,797,204 shares in 2020 | | | 9,709 | | | 9,797 | Capital in excess of par value | | | 68,718 | | | 67,178 | Reinvested earnings | | | 147,762 | | | 138,955 | Accumulated other comprehensive loss | | | (24,794) | | | (28,005) | Total equity | | | 201,395 | | | 187,925 | Total liabilities and equity | | $ | 277,667 | | $ | 256,719 |
| | | | | | | 2017 | | 2016 | | | | (In thousands, except par
value and share data) | ASSETS:
| | | | | | | | | | Cash and cash equivalents | | $ | 23,453 | | | $ | 13,710 | | | Marketable securities, at amortized cost | | | 5,970 | | | | 4,601 | | | Accounts receivable, less allowances of $2,206 and $2,516, respectively | | | 49,451 | | | | 50,726 | | | Income tax receivable | | | 669 | | | | 789 | | | Inventories | | | 60,270 | | | | 69,898 | | | Prepaid expenses and other current assets | | | 5,770 | | | | 6,203 | | | Total current assets | | | 145,583 | | | | 145,927 | | | Marketable securities, at amortized cost | | | 17,669 | | | | 21,061 | | | Deferred income tax benefits | | | 750 | | | | 660 | | | Property, plant and equipment, net | | | 31,643 | | | | 33,717 | | | Goodwill | | | 11,112 | | | | 11,112 | | | Trademarks | | | 32,978 | | | | 32,978 | | | Other assets | | | 23,097 | | | | 22,785 | | | Total assets | | $ | 262,832 | | | $ | 268,240 | | LIABILITIES AND EQUITY:
| | | | | | | | | | Short-term borrowings | | $ | — | | | $ | 4,268 | | | Accounts payable | | | 8,905 | | | | 11,942 | | | Dividend payable | | | 2,228 | | | | 2,192 | | Accrued liabilities:
| | | | | | | | | | Accrued compensation and employee benefits | | | 6,184 | | | | 3,444 | | | Sales and advertising allowances | | | 3,538 | | | | 3,050 | | | Taxes other than income taxes | | | 1,182 | | | | 1,193 | | | Other | | | 3,127 | | | | 2,885 | | | Total current liabilities | | | 25,164 | | | | 28,974 | | | Deferred income tax liabilities | | | 2,069 | | | | 703 | | | Long-term pension liability | | | 27,766 | | | | 27,801 | | | Other long-term liabilities | | | 2,174 | | | | 2,482 | | | Total liabilities | | | 57,173 | | | | 59,960 | | Commitments and contingencies (Note 13)
| | | | | | | | | | Common stock, $1.00 par value, authorized 24,000,000 shares in 2017 and 2016, issued and outstanding 10,162,225 shares in 2017 and 10,504,975 shares in 2016 | | | 10,162 | | | | 10,505 | | | Capital in excess of par value | | | 55,884 | | | | 50,184 | | | Reinvested earnings | | | 150,350 | | | | 157,468 | | | Accumulated other comprehensive loss | | | (17,859 | ) | | | (16,569 | ) | | Total Weyco Group, Inc. equity | | | 198,537 | | | | 201,588 | | | Noncontrolling interest | | | 7,122 | | | | 6,692 | | | Total equity | | | 205,659 | | | | 208,280 | | | Total liabilities and equity | | $ | 262,832 | | | $ | 268,240 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF EQUITY For the years ended December 31, 2017, 20162021 and 2015
2020 (In thousands, except per share amounts) | | | | | | | | | | | | | | | Common | | Capital in Excess | | Reinvested | | Accumulated Other | | | Stock | | of Par Value | | Earnings | | Comprehensive Loss | Balance, December 31, 2019 | | $ | 9,873 | | $ | 65,832 | | $ | 158,825 | | $ | (24,536) | Net loss | | | 0 | | | 0 | | | (8,485) | | | 0 | Foreign currency translation adjustments | | | 0 | | | 0 | | | 0 | | | 983 | Pension liability adjustment (net of tax of $1,564) | | | 0 | | | 0 | | | 0 | | | (4,452) | Cash dividends declared ($0.96 per share) | | | 0 | | | 0 | | | (9,429) | | | 0 | Issuance of restricted stock | | | 31 | | | (31) | | | 0 | | | 0 | Share-based compensation expense | | | 0 | | | 1,377 | | | 0 | | | 0 | Shares purchased and retired | | | (107) | | | 0 | | | (1,956) | | | 0 | Balance, December 31, 2020 | | $ | 9,797 | | $ | 67,178 | | $ | 138,955 | | $ | (28,005) | Net earnings | | | 0 | | | 0 | | | 20,555 | | | 0 | Foreign currency translation adjustments | | | 0 | | | 0 | | | 0 | | | (733) | Pension liability adjustment (net of tax of $1,387) | | | 0 | | | 0 | | | 0 | | | 3,944 | Cash dividends declared ($0.96 per share) | | | 0 | | | 0 | | | (9,348) | | | 0 | Common stock issued under equity incentive plans, net of shares withheld for employee taxes and strike price | | | 1 | | | 1 | | | 0 | | | 0 | Issuance of restricted stock | | | 36 | | | (36) | | | 0 | | | 0 | Share-based compensation expense | | | 0 | | | 1,575 | | | 0 | | | 0 | Shares purchased and retired | | | (125) | | | 0 | | | (2,400) | | | 0 | Balance, December 31, 2021 | | $ | 9,709 | | $ | 68,718 | | $ | 147,762 | | $ | (24,794) |
| | | | | | | | | | | | | Common
Stock | | Capital in
Excess of
Par Value | | Reinvested
Earnings | | Accumulated
Other
Comprehensive
Loss | | Noncontrolling
Interest | | 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 | | | | — | | | | — | | | | — | | | Excess tax benefits 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 | | | Net earnings | | | — | | | | — | | | | 16,472 | | | | — | | | | 521 | | | Foreign currency translation adjustments | | | — | | | | — | | | | — | | | | 202 | | | | (4 | ) | | Pension liability adjustment (net of tax of $1,085) | | | — | | | | — | | | | — | | | | 1,696 | | | | — | | | Cash dividends declared ($0.83 per share) | | | — | | | | — | | | | (8,772 | ) | | | — | | | | — | | | Cash dividends paid to noncontrolling interest of subsidiary | | | — | | | | — | | | | — | | | | — | | | | (170 | ) | | Stock options exercised | | | 123 | | | | 2,871 | | | | — | | | | — | | | | — | | | Issuance of restricted stock | | | 27 | | | | (27 | ) | | | — | | | | — | | | | — | | | Restricted stock forfeited | | | (2 | ) | | | 2 | | | | — | | | | — | | | | — | | | Stock-based compensation expense | | | — | | | | 1,559 | | | | — | | | | — | | | | — | | | Excess tax benefits from stock options exercised and vesting of restricted stock | | | — | | | | 20 | | | | — | | | | — | | | | — | | | Shares purchased and retired | | | (410 | ) | | | — | | | | (10,557 | ) | | | — | | | | — | | | Balance, December 31, 2016 | | $ | 10,505 | | | $ | 50,184 | | | $ | 157,468 | | | $ | (16,569 | ) | | $ | 6,692 | | | Net earnings | | | — | | | | — | | | | 16,491 | | | | — | | | | 208 | | | Foreign currency translation adjustments | | | — | | | | — | | | | — | | | | 1,303 | | | | 426 | | | Pension liability adjustment (net of tax of $911) | | | — | | | | — | | | | — | | | | (2,593 | ) | | | — | | | Cash dividends declared ($0.87 per share) | | | — | | | | — | | | | (8,968 | ) | | | — | | | | — | | | Cash dividends paid to noncontrolling interest of subsidiary | | | — | | | | — | | | | — | | | | — | | | | (204 | ) | | Stock options exercised | | | 175 | | | | 4,109 | | | | — | | | | — | | | | — | | | Issuance of restricted stock | | | 31 | | | | (31 | ) | | | — | | | | — | | | | — | | | Stock-based compensation expense | | | — | | | | 1,622 | | | | — | | | | — | | | | — | | | Shares purchased and retired | | | (549 | ) | | | — | | | | (14,641 | ) | | | — | | | | — | | | Balance, December 31, 2017 | | $ | 10,162 | | | $ | 55,884 | | | $ | 150,350 | | | $ | (17,859 | ) | | $ | 7,122 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2017, 20162021 and 20152020 | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | Net earnings (loss) | | $ | 20,555 | | $ | (8,485) | Adjustments to reconcile net earnings (loss) to net cash provided by operating activities - | | | | | | | Depreciation | | | 2,490 | | | 2,901 | Amortization | | | 307 | | | 316 | Bad debt expense | | | 198 | | | 5,289 | Deferred income taxes | | | 910 | | | 2,755 | Net foreign currency transaction (gains) losses | | | (233) | | | 98 | Share-based compensation expense | | | 1,575 | | | 1,377 | Pension (benefit) expense | | | (26) | | | 397 | Impairment of long-lived assets | | | 1,131 | | | 3,055 | Loss on disposal of fixed assets | | | 44 | | | 111 | Increase in cash surrender value of life insurance | | | (636) | | | (611) | Changes in operating assets and liabilities, net of effects from acquisition | | | | | | | Accounts receivable | | | (18,717) | | | 11,397 | Inventories | | | (11,349) | | | 27,520 | Prepaid expenses and other assets | | | 71 | | | 1,281 | Accounts payable | | | 10,755 | | | (4,149) | Accrued liabilities and other | | | (1,567) | | | (1,773) | Accrued income taxes | | | 884 | | | (1,498) | Net cash provided by operating activities | | | 6,392 | | | 39,981 | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | Acquisition of business | | | (2,550) | | | 0 | Proceeds from maturities of marketable securities | | | 4,791 | | | 6,680 | Purchases of investment securities | | | (35,000) | | | 0 | Proceeds from sale of investment securities | | | 26,878 | | | 0 | Life insurance premiums paid | | | (111) | | | (155) | Purchases of property, plant and equipment | | | (1,007) | | | (3,368) | Net cash (used for) provided by investing activities | | | (6,999) | | | 3,157 | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | Cash dividends paid | | | (9,345) | | | (11,776) | Shares purchased and retired | | | (2,525) | | | (2,063) | Net proceeds from stock options exercised | | | 2 | | | 0 | Proceeds from bank borrowings | | | 0 | | | 33,947 | Repayments of bank borrowings | | | 0 | | | (40,996) | Net cash used for financing activities | | | (11,868) | | | (20,888) | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | (290) | | | 427 | | | | | | | | Net (decrease) increase in cash and cash equivalents | | $ | (12,765) | | $ | 22,677 | | | | | | | | CASH AND CASH EQUIVALENTS at beginning of year | | | 32,476 | | | 9,799 | | | | | | | | CASH AND CASH EQUIVALENTS at end of year | | $ | 19,711 | | $ | 32,476 | | | | | | | | SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | | | Income taxes paid, net of refunds | | $ | 5,806 | | $ | 914 | Interest paid | | $ | 80 | | $ | 72 |
| | | | | | | | | 2017 | | 2016 | | 2015 | | | | (Dollars in thousands) | CASH FLOWS FROM OPERATING ACTIVITIES:
| | | | | | | | | | | | | | Net earnings | | $ | 16,699 | | | $ | 16,993 | | | $ | 18,153 | | Adjustments to reconcile net earnings to net cash provided by (used for) operating activities –
| | | | | | | | | | | | | | Depreciation | | | 3,956 | | | | 3,670 | | | | 3,612 | | | Amortization | | | 349 | | | | 387 | | | | 426 | | | Bad debt expense | | | 621 | | | | 76 | | | | 235 | | | Deferred income taxes | | | 2,187 | | | | (2,645 | ) | | | 346 | | | Net gain on remeasurement of contingent consideration | | | — | | | | — | | | | (458 | ) | | Net foreign currency transaction (gains) losses | | | (146 | ) | | | (513 | ) | | | 961 | | | Stock-based compensation | | | 1,622 | | | | 1,559 | | | | 1,559 | | | Pension contributions | | | (4,000 | ) | | | (2,400 | ) | | | (2,633 | ) | | Pension expense | | | 995 | | | | 3,184 | | | | 3,699 | | | Impairment of property, plant and equipment | | | — | | | | 113 | | | | — | | | Impairment of trademark | | | — | | | | 1,770 | | | | — | | | Increase in cash surrender value of life insurance | | | (517 | ) | | | (573 | ) | | | (573 | ) | Changes in operating assets and liabilities –
| | | | | | | | | | | | | | Accounts receivable | | | 637 | | | | 3,179 | | | | 1,009 | | | Inventories | | | 9,634 | | | | 27,313 | | | | (28,282 | ) | | Prepaid expenses and other assets | | | 486 | | | | (1,595 | ) | | | 2,237 | | | Accounts payable | | | (2,813 | ) | | | (1,378 | ) | | | (1,995 | ) | | Accrued liabilities and other | | | 3,720 | | | | (1,447 | ) | | | (3,587 | ) | | Accrued income taxes | | | 124 | | | | (811 | ) | | | (105 | ) | | Excess tax benefits from stock-based compensation | | | (37 | ) | | | — | | | | — | | | Net cash provided by (used for) operating activities | | | 33,517 | | | | 46,882 | | | | (5,396 | ) | CASH FLOWS FROM INVESTING ACTIVITIES:
| | | | | | | | | | | | | | Purchases of marketable securities | | | (15,597 | ) | | | (6,287 | ) | | | (3,033 | ) | | Proceeds from maturities of marketable securities | | | 17,565 | | | | 5,745 | | | | 8,191 | | | Life insurance premiums paid | | | (155 | ) | | | (155 | ) | | | (155 | ) | | Purchases of property, plant and equipment | | | (1,578 | ) | | | (5,992 | ) | | | (2,481 | ) | | Net cash provided by (used for) investing activities | | | 235 | | | | (6,689 | ) | | | 2,522 | | CASH FLOWS FROM FINANCING ACTIVITIES:
| | | | | | | | | | | | | | Cash dividends paid | | | (8,877 | ) | | | (8,720 | ) | | | (8,452 | ) | | Cash dividends paid to noncontrolling interest of subsidiary | | | (204 | ) | | | (170 | ) | | | — | | | Shares purchased and retired | | | (15,190 | ) | | | (10,967 | ) | | | (9,858 | ) | | Proceeds from stock options exercised | | | 4,284 | | | | 2,994 | | | | 6,144 | | | Taxes paid related to the net share settlement of equity awards | | | (154 | ) | | | (11 | ) | | | (331 | ) | | Payment of contingent consideration | | | — | | | | (5,217 | ) | | | — | | | Proceeds from bank borrowings | | | 31,570 | | | | 121,959 | | | | 160,534 | | | Repayments of bank borrowings | | | (35,838 | ) | | | (144,340 | ) | | | (139,290 | ) | | Excess tax benefits from stock-based compensation | | | — | | | | 20 | | | | 391 | | | Net cash (used for) provided by financing activities | | | (24,409 | ) | | | (44,452 | ) | | | 9,138 | | | Effect of exchange rate changes on cash and cash equivalents | | | 400 | | | | 43 | | | | (837 | ) | | Net increase (decrease) in cash and cash equivalents | | $ | 9,743 | | | $ | (4,216 | ) | | $ | 5,427 | | | CASH AND CASH EQUIVALENTS at beginning of year | | | 13,710 | | | | 17,926 | | | | 12,499 | | | CASH AND CASH EQUIVALENTS at end of year | | $ | 23,453 | | | $ | 13,710 | | | $ | 17,926 | | SUPPLEMENTAL CASH FLOW INFORMATION:
| | | | | | | | | | | | | | Income taxes paid, net of refunds | | $ | 4,901 | | | $ | 8,505 | | | $ | 10,341 | | | Interest paid | | $ | 15 | | | $ | 436 | | | $ | 181 | |
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 20162021 and 2015 20201. NATURE OF OPERATIONS Weyco Group, Inc. (the “Company”) designs and markets quality and innovative footwear principally for men, but also for women and children, under a portfolio of well-recognized brand names including: Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters, and Umi.Forsake. 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”Wholesale”) and North American retail operations (“retail”Retail”). In the wholesale segment, the Company’s products are sold to leading footwear, department, and specialty stores, as well as e-commerce retailers, primarily in the United States and Canada. The Company also has 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. The Company’s retail segment consisted of 10e-commerce businesses and four brick and mortar retail stores and internet businesses in the United States as of December 31, 2017. Sales in retail outlets2021. Retail sales are made directly to consumers on the Company’s websites, or by Company employees. The Company’s “other” operations include the Company’s wholesale and retail businesses in Australia, South Africa, Asia Pacific (collectively, “Florsheim Australia”) and Europe (“Florsheim Europe”). In late 2020, the Company decided to close Florsheim Europe and management is in the final stages of winding down this business. The majority of the Company’s operations are in the United States and its results are primarily affecteddriven by the economic conditions and 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 after elimination of intercompany accounts and transactions. 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, liabilities, revenues and liabilitiesexpenses and disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results specifically related to inventory reserves, realizability of deferred tax assets, goodwill and trademarks could materially differ from those estimates, which would impact the reported amounts of revenues and expenses duringdisclosures in the reported periods. Actual results could differ materially from those estimates.consolidated financial statements and accompanying notes. 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, 20172021 and 2016,2020, the Company’s cash and cash equivalents included investments in U.S. treasury bills, money market accounts, andand/or 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 — - At December 31, 2021, the Company held investments in highly liquid fixed income funds. The Company classified these investments as trading securities and reported them at fair value. The Company also invests in municipal bonds. 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”)ASC 320,Investments —– Debt and Equity Securities,(“ASC 320”) as the Company has the intent and ability to hold all investments to maturity. See Note 4.5. Accounts Receivable —– Trade accounts receivable arise from the sale of products on unsecured 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016NaN of the Company’s large customers filed for bankruptcy during 2020. J.C. Penney Company, Inc. and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
affiliated entities (“JCP”) filed for bankruptcy in May 2020, and Tailored Brands, Inc. (“TB”) filed for bankruptcy in August 2020. The Company wrote off $4.3 million (net) in connection with these bankruptcy filings during 2020.Inventories — Inventories are valued at cost, which is not in excess of net realizable value.- The majority of inventories are determined on a last-in, first-out (“LIFO”) basis. LIFO inventory is valued at the lower of cost or market. All other inventories are determined on a first-in, first-out basis (“FIFO”) basis, and are valued at the lower of cost or net realizable value. 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 5.6. 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 515 years; furniture and fixtures, 5 to 715 years. For income tax reporting purposes, depreciation is calculated using applicable methods. Impairment of Long-Lived Assets —- Property, plant, equipment and equipmentoperating lease right-of-use assets, along with other long-lived assets, are reviewedevaluated for impairment in accordance with ASC 360,Property, Plant and Equipment ifperiodically whenever triggering events or changes in circumstances indicateindicators exist that the carrying amountsvalues may not be fully 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,asset. During 2021, the Company utilizesrecorded a $1.1 million impairment charge to write-off certain assets in connection with the income approach andclosing of Florsheim Europe upon determination that the fair value determined is categorizedassets would no longer be recoverable. During 2020, 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 purposesa result of the impairment review,COVID pandemic, the Company groups assets atrecognized $1.9 million for the lowest level for which identifiable cash flows are largely independentimpairment of the cash flows of otherretail store fixed assets and liabilities. In$1.2 million for the caseimpairment of its retail stores, the Company groups assets at the individual store level. The Company performed the required impairment tests and found no impairment following the 2017 and 2015 impairment tests. In 2016, the testing resulted in an impairment charge of $113,000 which wasoperating lease right-of-use assets. These charges were recorded within selling and administrative expenses inwithin the Consolidated Statements of Earnings. This impairment charge was recorded within Leases- The Company leases retail shoe stores, primarily located in the U.S. and Australia, as well as several office and distribution facilities worldwide. The Company determines whether an arrangement is or contains a lease at contract inception. All of the Company’s retail segment.leases are classified as operating leases, which are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. The Company has no finance leases. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement, as well as any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. Lease terms may include options to renew when it is reasonably certain that the Company will exercise that option. As the Company’s leases generally do not provide an implicit rate, the Company used its incremental borrowing rate in determining the present value of lease payments. The incremental borrowing rate was a hypothetical rate based on an understanding of what the Company could borrow from a third-party lender, on a collateralized basis, over a similar term, and in an amount that approximates the value of the Company’s future lease payments. The Company used a portfolio approach and applied a single discount rate to all of its leases. Operating lease costs are recognized on a straight-line basis over the lease term and are included in selling and administrative expenses. Variable lease payments that do not depend on a rate or index, payments associated with non-lease components, and short-term rentals (leases with terms less than 12 months) are expensed as incurred. See Note 8. Goodwill and Intangible Assets — -Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable net assets acquired infrom a business combination. Other intangible assets consist of trademarks and customer relationships.acquisition. Goodwill and trademarks areis not amortized, but areis reviewed for impairment on an annual basis and between annual tests if indicators of impairment are present. Conditions that would trigger an impairment assessment include, but are not limitedThe Company’s goodwill primarily resulted from the 2011 acquisition of the BOGS and Rafters brands, and, to a significant adverse change in legal factors or business climate that could affectlesser extent, the value2021 acquisition of the asset.Forsake brand. See Note 9. Intangible Assets (excluding Goodwill) - Other intangible assets consist of customer relationships and trademarks. Customer relationships are amortized over their estimated useful lives. Trademarks are not amortized, but are reviewed for impairment on an annual basis and between annual tests when an event occurs or circumstances change that indicates the carrying value may not be recoverable. See Note 7.9. Life Insurance —– Life insurance policies are recorded at the amount that could be realized under the insurance contracts as of the balance sheet date. These assets are included within other assets in the Consolidated Balance Sheets. See Note 8. Contingent Consideration — Contingent consideration was comprised of two earn-out payments that the Company was obligated to pay the former shareholders of The Combs Company (“Bogs”) in connection with the Company’s acquisition of Bogs in 2011. The company revalued the contingent consideration liability on a quarterly basis and recorded increases or decreases in its fair value as an adjustment to operating earnings. Changes to the liability resulted from accretion of the discount due to the passage of time as well as changes in the actual or projected performance of Bogs. The assumptions used to determine the fair value of the contingent consideration liability included a significant amount of judgment. See Note 10.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
Income Taxes — -Deferred income taxes are provided on temporary differences arising from differences in the basisbases of assets and liabilities for income tax and financial reporting purposes. Deferred tax assets and liabilities are measured using enacted income tax rates in effect. Tax rate changes affecting deferred tax assets and liabilities are recognized in income at the enactment date. The Company’s policy related toCompany records interest and penalties associated with unrecognized tax benefits are recorded within interest expense and provision for income tax expense,taxes, respectively. See Note 12. Noncontrolling Interest — The Company’s noncontrolling interest is accounted for under ASC 810,Consolidation(“ASC 810”) and represents the minority 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 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.14.
Revenue Recognition — Revenue from the sale of product is recognized when title and risk of loss transfers– The Company’s revenue contracts represent a single performance obligation to the customer and the customer is obligatedsell its products to pay the Company.its customers. Sales to independent dealers are recorded at the time control of the product is transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for the products. Wholesale revenue is generally recognized upon shipment of the product, as that is when the customer obtains control of the promised goods. Shipping and handling activities that occur after control of the product transfers to the customer are treated as fulfillment activities, not as a separate performance obligation. Retail revenue is generated primarily from the sale of footwear to customers through the Company’s websites and at retail locations. For sales made through the Company’s websites, revenue is recognized upon shipment to those dealers. Sales through Company-owned retail outlets are recordedthe customer. For in-store sales, the Company recognizes revenue at the timepoint of delivery tosale. Sales taxes collected from website or retail customers. All product sales are excluded from the Company’s reported net sales. Revenue from third-party licensing agreements is recognized in the period earned. Licensing revenues were $1.7 million in 2021 and $1.2 million in 2020. All revenue is recorded net of estimated allowances for returns and discounts.discounts; these revenue offsets are accrued for at the time of sale. 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 Generally, payments from third-party licensing agreementscustomers are received within 90 days following the sale. The Company’s contracts with customers do not have significant financing components or significant prepayments from customers, and there is recognized in the period earned. Licensing revenues were $2.5 million for 2017, $2.8 million for 2016no non-cash consideration. The Company does not have unbilled revenue, and $3.6 million for 2015.there are no contract assets and liabilities. Shipping and Handling Fees —- The Company classifies shipping and handling fees billed to customers as revenues.sales. Shipping and handling expenses incurred by the Company are included in selling and administrative expenses in the Consolidated Statements of Earnings. Wholesale segment shippingSee “Selling and handling expenses totaled $1.4 million in 2017, $1.6 million in 2016, and $1.9 million in 2015. Retail segment shipping and handling expenses, which resulted primarily from shipments to the Company’s U.S. internet consumers, totaled $1.6 million in 2017, $1.5 million in 2016, and $1.3 million in 2015.Administrative Expenses” below. 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, warehousing, shipping, and warehousinghandling costs), rent and depreciation. DistributionConsolidated distribution costs included in selling and administrative expenses were $11.5$15.5 million in 2017, $11.72021 and $14.8 million in 2016, and $11.3 million in 2015.2020. Advertising Costs — -Advertising costs are expensed as incurred. Total advertising costs were $10.4 million, $11.8$9.7 million and $12.8$7.6 million in 2017, 20162021 and 2015,2020, respectively. All advertisingAdvertising expenses are primarily included in selling and administrative expenses with the exception of co-op advertising
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
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 $3.4 million, $4.0 million, and $4.2 million in 2017, 2016 and 2015, respectively.expenses.
Foreign Currency Translations —- The Company accounts for currency translations in accordance with ASC 830,Foreign Currency Matters. The Company’s non-U.S. subsidiaries’ local currencies are the functional currencies under which 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 expense,income, net, in the Consolidated Statements of Earnings. Net foreign currency transaction gains (losses) totaled $146,000 of gains in 2017, $513,000 of gains in 2016, and losses of ($961,000) in 2015. The foreign currency transaction gains recognized in 2017 resulted mainly from the revaluation of intercompany loans betweenwere not material to the Company’s wholesale segmentfinancial statements in 2021 and Florsheim Australia. The foreign currency transaction gains recognized in 2016 resulted mainly from unrealized gains on foreign exchange contracts entered into by Florsheim Australia. The foreign currency transaction losses recognized in 2015 resulted mainly from unrealized losses on foreign exchange contracts entered into by Florsheim Australia, as well as losses from the revaluation of intercompany loans between the Company’s wholesale segment and Florsheim Australia.2020.
Financial Instruments — –At December 31, 2017, the The Company’s majority-ownedwholly-owned subsidiary, Florsheim Australia, had foreign exchange contracts outstanding to buy $1.0$3.5 million U.S. dollars at a price of approximately $1.3$4.7 million Australian dollars. These contracts all expire in 2018.2022. Realized gains and losses on foreign exchange contracts are related to the purchase and sale of inventory and therefore are included in the Company’s net sales or cost of sales. In 20172021 and 2016,2020, realized gains and losses on foreign exchange contracts were not material to the Company’s financial statements. In 2015, the Company recorded realized gains of $1.4 million on foreign 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 15.17. Comprehensive Income —(Loss) – Comprehensive income (loss) includes net earnings (loss) and changes in accumulated other comprehensive loss. Comprehensive income (loss) 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:
| | | | | | | 2017 | | 2016 | | | | (Dollars in thousands) | | Foreign currency translation adjustments | | $ | (4,186 | ) | | $ | (5,489 | ) | | Pension liability, net of tax | | | (13,673 | ) | | | (11,080 | ) | | Total accumulated other comprehensive loss | | $ | (17,859 | ) | | $ | (16,569 | ) |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
The noncontrolling interest as recorded in the Consolidated Balance Sheets at December 31, 2017 and 2016, included foreign currency translation losses of approximately ($639,000) and ($1.1 million), respectively.
The following presents a tabular disclosure about See Note 13 for more details regarding changes in accumulated other comprehensive loss (dollars in thousands):loss.
| | | | | | | | | Foreign Currency Translation Adjustments | | Defined Benefit Pension Items | | Total | | Balance, December 31, 2015 | | $ | (5,691 | ) | | $ | (12,776 | ) | | $ | (18,467 | ) | | Other comprehensive income before reclassifications | | | 202 | | | | 765 | | | | 967 | | | Amounts reclassified from accumulated other comprehensive loss | | | — | | | | 931 | | | | 931 | | | Net current period other comprehensive income | | | 202 | | | | 1,696 | | | | 1,898 | | | Balance, December 31, 2016 | | $ | (5,489 | ) | | $ | (11,080 | ) | | $ | (16,569 | ) | | Other comprehensive loss before reclassifications | | | 1,303 | | | | (2,982 | ) | | | (1,679 | ) | | Amounts reclassified from accumulated other comprehensive loss | | | — | | | | 389 | | | | 389 | | | Net current period other comprehensive income (loss) | | | 1,303 | | | | (2,593 | ) | | | (1,290 | ) | | Balance, December 31, 2017 | | $ | (4,186 | ) | | $ | (13,673 | ) | | $ | (17,859 | ) |
The following presents a tabular disclosure about reclassification adjustments out of accumulated other comprehensive loss during the years ended December 31, 2017 and 2016 (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 | | | | 2017 | | 2016 | Amortization of defined benefit pension items
| | | | | | | | | | | | | | Prior service cost | | $ | (63 | ) | | $ | (262 | )(1) | | | Other Expense, net | | | Actuarial losses | | | 589 | | | | 1,789 | (1) | | | Other Expense, net | | | Total before tax | | | 526 | | | | 1,527 | | | | | | | Tax benefit | | | (137 | ) | | | (596 | ) | | | | | | Net of tax | | $ | 389 | | | $ | 931 | | | | | |
| (1) | These amounts were included in the computation of net pension expense. See Note 11 for additional details. |
Stock-BasedShare-Based Compensation —- At December 31, 2017,2021, the Company had three stock-basedtwo share-based employee compensation plans, which are described more fully in Note 17.19. 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
Concentration of Credit Risk — The Company had no single customer that represented more than 10% of the Company’s gross accounts receivable balance at December 31, 2017.– There was one individual customer accounts receivable balance outstanding that represented 11%13% of the Company’s gross accounts receivable balance at December 31, 2016. Additionally, there2021. There was one individual customer accounts receivable balance outstanding that was 15% of the Company’s gross accounts receivable balance at December 31, 2020. There were no individual customers with sales above 10% of the Company’s total sales in 2017, 20162021 and 2015.2020. RecentNew Accounting Pronouncements —
In February 2018,Recently Adopted
On January 1, 2021, the Financial Accounting Standards Board (“FASB”) issuedCompany adopted Accounting Standards Update (“ASU”("ASU") 2018-02, “2019-12 Reclassification of Certain Tax Effects from Accumulated Other ComprehensiveSimplifying the Accounting for Income Taxes.” This new standard allows entities to reclassifyguidance removes certain tax effectsexceptions related to the enactmentapproach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of Accounting Standards Codification ("ASC") 740. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements and related disclosures. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Tax Cuts and Jobs Act (“TCJA”) from accumulated other comprehensive loss (“AOCL”)Effects of Reference Rate Reform on Financial Reporting, which provided optional guidance for a limited time to retained earnings. Prior toease the issuance of the new guidance, a portion of the previously recognized deferred tax effects recordedpotential burden in AOCL was “left stranded” in AOCL, as the effect of remeasuring the deferred taxes using the reduced U.S. federal corporate income taxaccounting for reference rate was required to be recorded through income.reform. The new guidance allows these stranded tax effectsprovides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be reclassified from AOCLdiscontinued due to reference rate reform. These amendments are effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The adoption of this ASU did not have a material impact on our consolidated financial statements and related disclosures. Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurements of Credit Losses on Financial Instruments. This ASU modifies the measurement of expected credit losses of certain financial instruments, and applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings. The new guidance will be effective on January 1, 2019, with early adoption permitted and is to be applied eitherearnings/(deficit) in the period of adoption or retrospectively to each period in whichadoption. This ASU will be effective for the effect of the changeCompany in the U.S. federal corporate income tax rate in the Tax Act is recognized.first quarter of 2023. The Company is still assessing which adoption method itcurrently evaluating the impact this ASU will choose but it does not expect either method to have a material effect on its consolidated financial statements and related disclosures. In March 2017,
3. ACQUISITION On June 7, 2021, the FASB issued ASU 2017-07,“ImprovingCompany acquired substantially all of the Presentationoperating assets and certain liabilities of Net Periodic Pension CostForsake, Inc. (“Forsake”) a distributor of outdoor footwear, under the brand name “Forsake.” The principal assets acquired were inventory, accounts receivable, and Net Periodic Post Retirement Benefit Cost”. This new standard requires that employers disaggregateintellectual property, including the service cost componentForsake brand name. The aggregate purchase price was approximately $2.6 million, plus contingent payments to be paid annually over a period of five years, depending on Forsake achieving certain performance measures. The Company’s estimate of the discounted fair value of the contingent payments was approximately $1.3 million in total. The $2.6 million purchase price was funded with the Company’s available cash. The establishment of the contingent consideration liability as of the acquisition date is considered a non-cash investing activity. Transaction costs incurred in connection with the acquisition were not material to the Company's financial statements. The Company’s final allocation of the purchase price as of December 31, 2021 was as follows: | | | | | | (Dollars in thousands) | | | | | Accounts receivable, net | | $ | 143 | Inventories | | | 619 | Prepaid expenses and other current assets | | | 72 | Property, plant and equipment, net | | | 17 | Goodwill | | | 1,205 | Trademark | | | 1,900 | Accrued Liabilities | | | (48) | Total | | $ | 3,908 |
The Company recorded $3.1 million of intangible assets, including $1.2 million of goodwill, which has been allocated to the wholesale and retail segments, as of the acquisition date. Goodwill reflects the excess purchase price over the fair value of net assets. All of this goodwill is deductible for tax purposes.The fair value of the trademark was determined using a discounted cash flow methodology. The trademark will not be amortized, but instead tested for impairment on an annual basis. The accompanying consolidated financial statements include the results of Forsake from the other componentsdate of acquisition through December 31, 2021. During this period, Forsake's net periodic pension costsales totaled approximately $2.1 million, of which $1.2 million was recognized in the income statement. The service cost component should be includedwholesale segment and $0.9 million was recognized in the same line itemretail segment. Pro forma financial information is not presented as other compensation costs rendered by employees, while the other cost components should be presented outside of earnings from operations. The Company adopted ASU 2017-07 effective January 1, 2017 and retrospectively applied it to all periods presented. Accordingly, the service cost component of net periodic pension cost was included within selling and administrative expenses while the other cost components were classified in other expense, net, in the Consolidated Statements of Earnings. See Note 11. In January 2017, the FASB issued ASU 2017-04,“Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This new standard simplified the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. The amendments in this update are effective for annual impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests performed on or after January 1, 2017. The Company early adopted ASU 2017-04 for its 2017 goodwill impairment test. The adoptioneffects of this standard had no impact onacquisition were not material to the Company’sCompany's results of operations or cash flows.financial position.
In March 2016, the FASB issued ASU 2016-09, “Compensation — Stock Compensation: Improvements to Employee Share-Based Payment Accounting.” This new standard simplified several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and specifies the classification of certain cash flows associated with share-based payment transactions within the statements of cash flows. The Company adopted ASU 2016-09 effective January 1, 2017. The adoption of this standard did not have a material impact on the Company’s results of operations or cash flows.
ASU No. 2014-09, “Revenue from Contracts with Customers,” 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
Additional ASUs have also been issued as part of the overall new revenue guidance. The new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The Company completed an analysis of its revenue streams during the fourth quarter of 2017, and concluded that the adoption of the new revenue standard will not have a material impact on the Company’s consolidated financial position or results of operations. The effect is not material because the Company’s analysis of contracts under the new standard supports the recognition of revenue at a point in time for the majority of contracts, which is consistent with the current revenue recognition model. Revenue on the majority of contracts will continue to be recognized at a point in time because of the distinct transfer of control to the customer.
The Company’s analysis identified certain revenue components within its wholesale segment that were recorded within selling and administrative expenses through December 31, 2017, which, upon adoption of the new standard, would be recorded as Net Sales in the Consolidated Statements of Earnings. Additionally, certain provisions of the new standard provided clarification relating to the classification of certain costs incurred relating to revenue arrangements with customers. As a result, the Company will be classifying certain amounts in selling and administrative expenses that were previously classified as a reduction in Net Sales. The Company will adopt the new standard using the modified retrospective method in the first quarter of 2018.
In February 2016, the FASB issued ASU No. 2016-02 “Leases.” This new standard requires lessees to recognize the rights and obligations created by finance and operating leases with terms exceeding 12 months as assets and liabilities on their balance sheets. The amendments in this update are effective for fiscal years beginning after December 15, 2018 and interim periods therein. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
Reclassifications — Certain prior year amounts in the Consolidated Statements of Earnings were reclassified to conform to current year presentation. For the twelve months ended December 31, 2016 and 2015, the Company reclassified $1,546,000 and $2,063,000 respectively, of expense from selling and administrative expenses to other expense, net. These amounts represent the non-service cost components of net periodic pension cost for the periods then ended, and were reclassified in connection with the adoption of ASU 2017-07. Additionally, certain prior year amounts in the Consolidated Statements of Cash Flows were reclassified to conform to current year presentation. These amounts represent the taxes paid related to the net share settlement of equity awards, and were reclassified in connection with the adoption of ASU 2016-09. Finally, certain prior year amounts within Accrued Liabilities in the Consolidated Balance Sheets were reclassified to conform to current year presentation.
3.4. 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 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. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
3. FAIR VALUE OF FINANCIAL INSTRUMENTS – (continued)
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.
The carrying amounts of all short-term financial instruments, except marketable securities and foreign 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 4.5. Foreign exchange contracts are carried at fair value. The fair value measurements of foreign exchange contracts are based on observable market transactions of spot and forward rates, and thus represent levelLevel 2 valuations as defined by ASC 820. 5. INVESTMENTS Investments, at fair value During 2021, the Company invested $8.1 million of cash in highly liquid fixed income funds. The Company’s contingent consideration was measuredCompany classified these investments as trading securities and reported them at fair value. See Note 10.There were 0 significant unrealized gains or losses on these investments in 2021. 4. INVESTMENTS
The fair value measurements of these investments are based on quoted market prices in active markets, and thus represent a level 1 valuation as defined by ASC 820. Marketable securities, at amortized cost The Company also invests in marketable securities. All the Company’s marketable securities are classified as held-to-maturity securities and reported at amortized cost pursuant to ASC Topic 320, Investments – Debt and Equity Securities, as the Company has the intent and ability to hold all investments to maturity. Below is a summary of the amortized cost and estimated market values of the Company’s marketable securities as of December 31, 2017,2021 and 2016.2020. The estimated market values provided are Level 2 valuations as defined by ASC 820. | | | | | | | | | | | | | | | 2021 | | 2020 | | | Amortized Cost | | Market Value | | Amortized Cost | | Market Value | | | | (Dollars in thousands) | Municipal bonds: | | | | | | | | | | | | | Current | | $ | 219 | | $ | 223 | | $ | 2,215 | | $ | 2,249 | Due from one through five years | | | 6,503 | | | 6,805 | | | 7,420 | | | 7,830 | Due from six through ten years | | | 2,479 | | | 2,790 | | | 3,057 | | | 3,608 | Due from eleven through twenty years | | | 1,014 | | | 1,102 | | | 2,323 | | | 2,547 | Total | | $ | 10,215 | | $ | 10,920 | | $ | 15,015 | | $ | 16,234 |
| | | | | | | | | | | 2017 | | 2016 | | | | Amortized
Cost | | Market
Value | | Amortized
Cost | | Market
Value | | | | (Dollars in thousands) | Municipal bonds:
| | | | | | | | | | | | | | | | | | Current | | $ | 5,970 | | | $ | 5,977 | | | $ | 4,601 | | | $ | 4,610 | | | Due from one through five years | | | 10,260 | | | | 10,536 | | | | 12,133 | | | | 12,486 | | | Due from six through ten years | | | 5,005 | | | | 5,197 | | | | 7,705 | | | | 7,804 | | | Due from eleven through twenty years | | | 2,404 | | | | 2,539 | | | | 1,223 | | | | 1,222 | | | Total | | $ | 23,639 | | | $ | 24,249 | | | $ | 25,662 | | | $ | 26,122 | |
The unrealized gains and losses on marketable securities at December 31, 20172021 and 20162020 were as follows: | | | | | | | | | | | | | | | 2021 | | 2020 | | | Unrealized | | Unrealized | | Unrealized | | Unrealized | | | Gains | | Losses | | Gains | | Losses | | | | (Dollars in thousands) | Municipal bonds | | $ | 705 | | $ | — | | $ | 1,219 | | $ | — |
| | | | | | | | | | | 2017 | | 2016 | | | | Unrealized
Gains | | Unrealized
Losses | | Unrealized
Gains | | Unrealized
Losses | | | | (Dollars in thousands) | | Municipal bonds | | $ | 634 | | | $ | (24 | ) | | $ | 546 | | | $ | (86 | ) |
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. To determine whether a decline in value is other-than-temporary, the Company considers all available evidence, including the issuer’s financial condition, the severity and duration of the decline in fair value, and the 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 records a reduction in the carrying value to the estimated fair value. The Company determined that no other-than-temporary impairment exists for the years ended December 31, 2017, 2016,2021 and 2015.2020.
TABLE OF CONTENTS6. INVENTORIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
5. INVENTORIES
At December 31, 20172021 and 2016,2020, inventories consisted of: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Finished shoes | | $ | 99,244 | | $ | 78,158 | LIFO reserve | | | (28,218) | | | (19,133) | Total inventories | | $ | 71,026 | | $ | 59,025 |
| | | | | | | 2017 | | 2016 | | | | (Dollars in thousands) | | Finished shoes | | $ | 78,772 | | | $ | 88,277 | | | LIFO reserve | | | (18,502 | ) | | | (18,379 | ) | | Total inventories | | $ | 60,270 | | | $ | 69,898 | |
Finished shoes included inventory in-transit of $17.3$52.6 million and $16.4$7.1 million at December 31, 20172021 and 2016,2020, respectively. At December 31, 2017,2021 and 2020, approximately 86%90% and 91% of the Company’s inventories were valued by the LIFO method of accounting while approximately 14%10% and 9% were valued by the first-in, first-out (“FIFO”) method of accounting. At December 31, 2016, approximately 89% of the Company’s inventories were valued by the LIFO method of accounting while approximately 11% were valued by the first-in, first-out (“FIFO”)FIFO method of accounting. During 2017,2021, there were liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years compared to the cost of fiscal 2014 purchases. The2021 purchases; the effect of the liquidationliquidations decreased cost of sales by $301,000 in 2017.$181,000. During 2016,2020, there were liquidations of LIFO inventory quantities which resulted in immaterial decreases in cost of sales. During 2015, there were no liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years compared to the cost of fiscal 2015 purchases.2020 purchases; the effect of the liquidations decreased cost of sales by $261,000 6.
7. PROPERTY, PLANT AND EQUIPMENT, NET At December 31, 20172021 and 2016,2020, property, plant and equipment consisted of: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Land and land improvements | | $ | 3,793 | | $ | 3,793 | Buildings and improvements | | | 32,191 | | | 32,154 | Machinery and equipment | | | 36,031 | | | 36,380 | Retail fixtures and leasehold improvements | | | 3,732 | | | 3,830 | Construction in progress | | | 701 | | | 637 | Property, plant and equipment | | | 76,448 | | | 76,794 | Less: Accumulated depreciation | | | (47,246) | | | (46,035) | Property, plant and equipment, net | | $ | 29,202 | | $ | 30,759 |
In early 2020, the Company completed a project to expand its office space within its corporate headquarters. 8. LEASES The Company leases retail shoe stores, as well as several office and distribution facilities worldwide. The leases have original lease periods expiring between 2022 and 2029. Many leases include one or more options to renew. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of the Company’s operating lease costs were as follows: | | | | | | | | | Twelve Months Ended December 31, | | | 2021 | | 2020 | | | | (Dollars in thousands) | Operating lease costs | | $ | 5,045 | | $ | 6,714 | Variable lease costs (1) | | | 82 | | | 30 | Total lease costs | | $ | 5,127 | | $ | 6,744 |
| (1) | Variable lease costs primarily include percentage rentals based upon sales in excess of specified amounts. |
| | | | | | | 2017 | | 2016 | | | | (Dollars in thousands) | | Land and land improvements | | $ | 3,778 | | | $ | 3,714 | | | Buildings and improvements | | | 26,912 | | | | 26,912 | | | Machinery and equipment | | | 31,940 | | | | 30,906 | | | Retail fixtures and leasehold improvements | | | 12,339 | | | | 12,455 | | | Construction in progress | | | 3 | | | | 39 | | | Property, plant and equipment | | | 74,972 | | | | 74,026 | | | Less: Accumulated depreciation | | | (43,329 | ) | | | (40,309 | ) | | Property, plant and equipment, net | | $ | 31,643 | | | $ | 33,717 | |
TABLE OF CONTENTSShort-term lease costs, which were excluded from the above table, are not material to the Company’s financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended
The following is a schedule of maturities of operating lease liabilities as of December 31, 2017, 2016 and 2015 7.2021:
| | | | | | Operating Leases | | | (Dollars in thousands) | 2022 | | $ | 3,906 | 2023 | | | 2,963 | 2024 | | | 2,073 | 2025 | | | 1,358 | 2026 | | | 1,009 | Thereafter | | | 719 | Total lease payments | | | 12,028 | Less imputed interest | | | (915) | Present value of lease liabilities | | $ | 11,113 |
The operating lease liabilities are classified in the consolidated balance sheets as follows: | | | | | | | | | December 31, | | December 31, | | | | 2021 | | | 2020 | | | | (Dollars in thousands) | Operating lease liabilities - current | | $ | 3,593 | | $ | 4,245 | Operating lease liabilities - non-current | | | 7,520 | | | 7,734 | Total | | $ | 11,113 | | $ | 11,979 |
The Company determined the present value of its lease liabilities using a weighted-average discount rate of 4.25%. As of December 31, 2021, the Company’s leases have a weighted-average remaining lease term of 3.5 years. Supplemental cash flow information related to the Company’s operating leases is as follows: | | | | | | | | | Twelve Months Ended December 31, | | | 2021 | | 2020 | | | | (Dollars in thousands) | Cash paid for amounts included in the measurement of lease liabilities | | $ | 4,888 | | $ | 6,746 | Right-of-use assets obtained in exchange for new lease liabilities (noncash) | | $ | 5,334 | | $ | 216 |
9. INTANGIBLE ASSETS The Company’s indefinite-lived intangible assets as recorded in the Consolidated Balance Sheets consisted of the following:were as follows: | | | | | | | | | December 31, 2021 | | December 31, 2020 | | | | (Dollars in thousands) | Indefinite-lived intangibles: | | | | | | | Goodwill | | $ | 12,317 | | $ | 11,112 | Trademarks | | | 34,768 | | | 32,868 | Total | | $ | 47,085 | | $ | 43,980 |
| | | | | | | | | | | | | | | December 31, 2017 | | December 31, 2016 | | | | Gross
Carrying
Amount | | Accumulated
Impairment | | Net | | Gross
Carrying
Amount | | Accumulated
Impairment | | Net | | | | (Dollars in thousands) | | (Dollars in thousands) | Indefinite-lived intangible assets
| | | | | | | | | | | | | | | | | | | | | | | | | | Goodwill | | $ | 11,112 | | | $ | — | | | $ | 11,112 | | | $ | 11,112 | | | $ | — | | | $ | 11,112 | | | Trademarks | | | 34,748 | | | | (1,770 | ) | | | 32,978 | | | | 34,748 | | | | (1,770 | ) | | | 32,978 | | | Total indefinite-lived intangible assets | | $ | 45,860 | | | $ | (1,770 | ) | | $ | 44,090 | | | $ | 45,860 | | | $ | (1,770 | ) | | $ | 44,090 | |
The Company’sadditional goodwill and trademarks in 2021 resulted from the 2011Forsake acquisition. Goodwill resulting from the Forsake acquisition has been allocated to the Company’s wholesale and retail segments as of the BOGS/Rafters brands. Thisacquisition date. Changes in the carrying amount of the Company’s goodwill is testedby reportable segment for the year ended December 31, 2021, were as follows: | | | | | | | | | | | | Wholesale | | Retail | | Total | | | | (Dollars in thousands) | Balance, December 31, 2020 | | $ | 11,112 | | $ | 0 | | $ | 11,112 | Acquisition of business | | | 361 | | | 844 | | | 1,205 | Balance, December 31, 2021 | | $ | 11,473 | | $ | 844 | | $ | 12,317 |
The Company evaluates goodwill for impairment annually by comparing the applicable reporting unit’s fair value to its carrying value. Fair valueas of the applicable reporting unit was estimated using a discounted cash flow methodology. IfDecember 31 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. In 2021, the Company completed a qualitative assessment noting no indicators of impairment. In 2020, the reporting unit exceeds its fair value,Company performed a goodwill impairment charge would be recorded for the difference (upquantitative analysis which indicated a premium compared to the carrying value of net assets, including goodwill, at the goodwill). The Company determined that the applicable reporting unit waslevel. The impairment assessment included comparing the carrying amount of net assets, including goodwill, of each reporting unit to its wholesale segment. In 2017, the impairment test determined that therespective fair value as of the wholesale segment substantially exceeded its carrying value, therefore, goodwill was deemed not impaired. The Company has never recorded an impairment charge on this goodwill. The Company’s trademarks are tested for impairment annually by comparingdate of the fair value of each trademark to its related carrying value.assessment. Fair value was estimated using abased upon an evaluation of the reporting unit’s estimated future discounted cash flow methodology. flows as well as the valuation multiples for comparable companies. The Company did not record impairment charges for any of its reporting units in 2021 or 2020.
In 2017,evaluating trademarks, the impairment testsCompany completed a qualitative assessment in 2021 noting no indicators of impairment. In 2020, a quantitative analysis was used, in which estimated fair values were determined using discounted cash flows and implied royalty rates. Based on the results of the trademark assessments, the Company concluded that the fair valuevalues of the trademarks substantially exceeded their relatedrespective carrying values. There were noTherefore, 0 impairment chargeswas recorded on the Company’s trademarks following the 2017 and 2015 impairment tests. In the fourth quarterin 2021 or 2020. The Company’s amortizable intangible assets as recorded in the Consolidated Balance Sheets consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | | December 31, 2020 | | | Weighted | | Gross | | | | | | | | Gross | | | | | | | | | Average | | Carrying | | Accumulated | | | | | Carrying | | Accumulated | | | | | | Life (Years) | | Amount | | Amortization | | Net | | Amount | | Amortization | | Net | | | | | | | (Dollars in thousands) | | (Dollars in thousands) | Amortizable intangible assets | | | | | | | | | | | | | | | | | | | | | | Customer relationships | | | 15 | | $ | 3,500 | | $ | (2,528) | | $ | 972 | | $ | 3,500 | | $ | (2,294) | | $ | 1,206 | Total amortizable intangible assets | | | | | $ | 3,500 | | $ | (2,528) | | $ | 972 | | $ | 3,500 | | $ | (2,294) | | $ | 1,206 |
| | | | | | | | | | | | | | | | | Weighted
Average
Life (Years) | | December 31, 2017 | | December 31, 2016 | | | | Gross
Carrying
Amount | | Accumulated Amortization
| | Net | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net | | | | | | (Dollars in thousands) | | (Dollars in thousands) | Amortizable intangible assets
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Customer relationships | | | 15 | | | | 3,500 | | | | (1,594 | ) | | | 1,906 | | | | 3,500 | | | | (1,361 | ) | | | 2,139 | | | Total amortizable intangible assets | | | | | | $ | 3,500 | | | $ | (1,594 | ) | | $ | 1,906 | | | $ | 3,500 | | | $ | (1,361 | ) | | $ | 2,139 | |
The amortizable intangible assets are included within other assets in the Consolidated Balance Sheets. See Note 8.10.
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
7. INTANGIBLE ASSETS – (continued)
The Company recorded amortization expense for intangible assets of approximately $233,000 in 2017, $240,0002021 and in 2016, and $273,000 in 2015.2020, respectively. Excluding the impact of any future acquisitions, the Company anticipates future amortization expense towill be as follows:approximately $233,000 in each of the years 2022 through 2025, and approximately $40,000 thereafter. | | | | (Dollars in thousands) | | Intangible Assets | | 2018 | | $ | 233 | | | 2019 | | | 233 | | | 2020 | | | 233 | | | 2021 | | | 233 | | | 2022 | | | 233 | | | Thereafter | | | 741 | | | Total | | $ | 1,906 | |
8.
10. OTHER ASSETS Other assets included the following amounts at December 31, 20172021 and 2016:2020: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Cash surrender value of life insurance | | $ | 19,194 | | $ | 18,447 | Amortizable intangible assets, net (See Note 9) | ��� | | 972 | | | 1,206 | Investment in real estate | | | 2,118 | | | 2,173 | Other | | | 1,317 | | | 2,175 | Total other assets | | $ | 23,601 | | $ | 24,001 |
| | | | | | | 2017 | | 2016 | | | | (Dollars in thousands) | | Cash surrender value of life insurance | | $ | 16,277 | | | $ | 15,604 | | | Amortizable intangible assets (See Note 7) | | | 1,906 | | | | 2,139 | | | Investment in real estate | | | 2,397 | | | | 2,297 | | | Other | | | 2,517 | | | | 2,745 | | | Total other assets | | $ | 23,097 | | | $ | 22,785 | |
The Company has five life insurance policies on current and former executives. Upon death of the insured executives, the approximate death benefit the Company would receive is $17.0$18.6 million in aggregate as of December 31, 2017.2021. The decrease in "other" in 2021 was primarily due to a $1.1 million impairment to write-off certain assets in connection with the closing of Florsheim Europe upon determination that the assets would no longer be recoverable. On May 1, 2013, the 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., and continues to be accounted for under the equity method of accounting. 9.
11. SHORT-TERM BORROWINGS At December 31, 2017,2021, the Company had a $60$40 million unsecured revolving line of credit with a bank expiring November 4, 2018.that is secured by a lien against the Company’s general corporate assets. The line of credit bears interest at the daily London Interbank Offered Rate (“LIBOR”)LIBOR plus 0.75%. 1.35% and expires on November 4, 2022. The related credit agreement contains customary representations, warranties, and covenants (including a minimum tangible net worth financial covenant) for a facility of this type. At December 31, 2017,2021 and 2020, there were 0 amounts outstanding on the Company’s line of credit. There were also no amounts outstanding on the line of credit. The highest balance on the line of credit during 2017 was $4.8 million. At December 31, 2016, outstanding borrowings totaled approximately $4.3 million at an interest rate of 1.52%. 10. CONTINGENT CONSIDERATION
Contingent consideration was comprised of two earn-out payments that the Company was obligated to pay the former shareholders of The Combs Company (“Bogs”) in connection with the Company’s acquisition of Bogs in 2011. The estimate of contingent consideration was formula-driven and was based on Bogs achieving certain levels of gross margin dollars between January 1, 2011, and December 31, 2015. The first earn-out payment was paid on March 28, 2013 in the amount of $1,270,000. The second and final earn-out payment was paid on March 23, 2016 in the amount of $5,217,000. In accordance with ASC 805,Business Combinations, the Company remeasured its
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
10. CONTINGENT CONSIDERATION – (continued)
estimate of the fair value of the liability at each reporting date. The change in fair value was recognized within selling and administrative expenses in the consolidated statements of earnings for the year ended December 31, 2015.2021.
The total contingent consideration was reflected in the Company’s wholesale segment. The fair value measurement of the contingent consideration was based on significant inputs not observed in the market and thus represented a level 3 valuation as defined by ASC 820.
11.
12. EMPLOYEE RETIREMENT PLANS The Company has a defined benefit pension plan covering substantially all employees, as well aswhich was frozen effective December 31, 2016. No benefits have been accrued under the plan subsequent to that date. The Company also has 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 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 marketfair value and consist primarily of equity securities and fixed income securities, mainly U.S. government and corporate obligations. 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.income (loss). 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, 20172021 and 2016,2020, by asset category, was as follows: | | | | | | | | Plan Assets at December 31, | | | | 2021 | | 2020 | | Asset Category: | | | | | | Equity Securities | | 60 | % | 59 | % | Fixed Income Securities | | 30 | % | 32 | % | Other | | 10 | % | 9 | % | Total | | 100 | % | 100 | % |
| | | | | | | Plan Assets at December 31, | | | | 2017 | | 2016 | Asset Category:
| | | | | | | | | | Equity Securities | | | 55 | % | | | 54 | % | | Fixed Income Securities | | | 39 | % | | | 38 | % | | Other | | | 6 | % | | | 8 | % | | 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 7.00%long-term rate of return on assets assumption for 2017.
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016both 2021 and 2015
11. EMPLOYEE RETIREMENT PLANS – (continued)
2020.AssumptionsThe following discount rates were used in determiningto determine the funded status atof the pension plans as of December 31, 20172021 and 2016 were:2020:
| | | | | | | | | | | | Defined Benefit Pension Plan | | Supplemental Pension Plan | | | | 2021 | | 2020 | | 2021 | | 2020 | | Discount rate for determining funded status | | 2.83 | % | 2.47 | % | 2.86 | % | 2.51 | % |
| | | | | | | 2017 | | 2016 | | Discount rate | | | 3.71 | % | | | 4.35 | % | | Rate of compensation increase | | | — | | | | 4.00 | % |
The rate of compensation increase was not applicable in 2017 as benefit accruals under the plan were frozen effective December 31, 2016.
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, 20172021 and 2016:2020: | | | | | | | | | | | | | | | Defined Benefit Pension Plan | | Supplemental Pension Plan | | | 2021 | | 2020 | | 2021 | | 2020 | | | | (Dollars in thousands) | Change in projected benefit obligation | | | | | | | | | | | | | Projected benefit obligation, beginning of year | | $ | 56,026 | | $ | 50,552 | | $ | 21,125 | | $ | 18,460 | Service cost | | | 382 | | | 383 | | | 0 | | | 0 | Interest cost | | | 1,047 | | | 1,450 | | | 440 | | | 562 | Actuarial (gain) loss | | | (2,366) | | | 6,067 | | | (840) | | | 2,485 | Benefits paid | | | (2,582) | | | (2,426) | | | (382) | | | (382) | Projected benefit obligation, end of year | | $ | 52,507 | | $ | 56,026 | | $ | 20,343 | | $ | 21,125 | | | | | | | | | | | | | | Change in plan assets | | | | | | | | | | | | | Fair value of plan assets, beginning of year | | $ | 43,144 | | $ | 41,036 | | $ | 0 | | $ | 0 | Actual return on plan assets | | | 4,402 | | | 4,917 | | | 0 | | | 0 | Administrative expenses | | | (382) | | | (383) | | | 0 | | | 0 | Contributions | | | 0 | | | 0 | | | 382 | | | 382 | Benefits paid | | | (2,582) | | | (2,426) | | | (382) | | | (382) | Fair value of plan assets, end of year | | $ | 44,582 | | $ | 43,144 | | $ | 0 | | $ | 0 | Funded status of plan | | $ | (7,925) | | $ | (12,882) | | $ | (20,343) | | $ | (21,125) | | | | | | | | | | | | | | Amounts recognized in the consolidated balance sheets consist of: | | | | | | | | | | | | | Accrued liabilities - other | | $ | 0 | | $ | 0 | | $ | (492) | | $ | (473) | Long-term pension liability | | | (7,925) | | | (12,882) | | | (19,851) | | | (20,652) | Net amount recognized | | $ | (7,925) | | $ | (12,882) | | $ | (20,343) | | $ | (21,125) | | | | | | | | | | | | | | Amounts recognized in accumulated other comprehensive loss consist of: | | | | | | | | | | | | | Accumulated loss, net of income tax benefit of $4,331, $5,435, $1,976, and $2,275, respectively | | $ | 12,328 | | $ | 15,468 | | $ | 5,624 | | $ | 6,475 | Prior service cost net of income tax benefit of $0, $0, $20 and $4, respectively | | | 0 | | | 0 | | | 59 | | | 12 | Net amount recognized | | $ | 12,328 | | $ | 15,468 | | $ | 5,683 | | $ | 6,487 |
| | | | | | | | | | | Defined Benefit
Pension Plan | | Supplemental
Pension Plan | | | | 2017 | | 2016 | | 2017 | | 2016 | | | | (Dollars in thousands) | Change in projected benefit obligation
| | | | | | | | | | | | | | | | | | Projected benefit obligation, beginning of year | | $ | 45,079 | | | $ | 48,677 | | | $ | 15,409 | | | $ | 14,261 | | | Service cost | | | 378 | | | | 1,328 | | | | 185 | | | | 310 | | | Interest cost | | | 1,616 | | | | 1,833 | | | | 591 | | | | 616 | | | Plan curtailment | | | — | | | | (5,098 | ) | | | — | | | | (919 | ) | | Actuarial loss | | | 4,423 | | | | 2,282 | | | | 1,519 | | | | 1,527 | | | Benefits paid | | | (2,121 | ) | | | (3,943 | ) | | | (528 | ) | | | (386 | ) | | Projected benefit obligation, end of year | | $ | 49,375 | | | $ | 45,079 | | | $ | 17,176 | | | $ | 15,409 | | Change in plan assets
| | | | | | | | | | | | | | | | | | Fair value of plan assets, beginning of year | | | 32,278 | | | | 32,345 | | | | — | | | | — | | | Actual return on plan assets | | | 4,590 | | | | 1,791 | | | | — | | | | — | | | Administrative expenses | | | (378 | ) | | | (315 | ) | | | — | | | | — | | | Contributions | | | 4,000 | | | | 2,400 | | | | 528 | | | | 386 | | | Benefits paid | | | (2,121 | ) | | | (3,943 | ) | | | (528 | ) | | | (386 | ) | | Fair value of plan assets, end of year | | $ | 38,369 | | | $ | 32,278 | | | $ | — | | | $ | — | | | Funded status of plan | | $ | (11,006 | ) | | $ | (12,801 | ) | | $ | (17,176 | ) | | $ | (15,409 | ) | Amounts recognized in the consolidated balance sheets consist of:
| | | | | | | | | | | | | | | | | | Accrued liabilities – other | | $ | — | | | $ | — | | | $ | (416 | ) | | $ | (409 | ) | | Long-term pension liability | | | (11,006 | ) | | | (12,801 | ) | | | (16,760 | ) | | | (15,000 | ) | | Net amount recognized | | $ | (11,006 | ) | | $ | (12,801 | ) | | $ | (17,176 | ) | | $ | (15,409 | ) | Amounts recognized in accumulated other comprehensive loss consist of:
| | | | | | | | | | | | | | | | | | Accumulated loss, net of income tax benefit of $5,904, $5,373, $2,166 and $1,802, respectively | | $ | 9,916 | | | $ | 8,403 | | | $ | 3,854 | | | $ | 2,820 | | | Prior service cost, net of income tax liability of $0, $0, ($75) and ($91), respectively | | | — | | | | — | | | | (97 | ) | | | (143 | ) | | Net amount recognized | | $ | 9,916 | | | $ | 8,403 | | | $ | 3,757 | | | $ | 2,677 | |
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
11. EMPLOYEE RETIREMENT PLANS – (continued)
On November 7, 2016, the Board of Directors of the Company authorized the freezing ofAs noted above, benefit accruals under the pension plan whereby benefit accruals would bewere frozen, effective December 31, 2016. No curtailment gain was recognized in earnings. This plan change reduced the service and interest cost of the plans in 2017.
Another effect of the pension freeze was a reduction of the projected benefit obligation (“PBO”) to the amount of the plans’ accumulated benefit obligation. Therefore, the accumulated benefit obligation of the defined benefit pension plan and supplemental pension plan were equal to the respective plans’ PBO,projected benefit obligations, as shown in the above table, at December 31, 20172021 and 2016.
On September 15, 2016, the pension plan was amended to offer an immediate pension payout either as a one-time lump sum or annuity payment to certain former employees who had not yet commenced benefits under the plan. Benefits were calculated as of December 1, 2016, with lump sum payments being paid in December 2016 and annuity payments beginning January 1, 2017. As of December 31, 2016, $1.9 million in lump sum payments were paid as a result of this amendment. These lump sum payments were included2020. The decrease in the 2016 “Benefits paid” line itemprojected benefit obligations in 2021 was primarily due to an increase in the above table.discount rates.
Assumptions used in determining net periodic pension costexpense for the years ended December 31, 2017, 20162021 and 20152020 were: | | | | | | | | | | | | Defined Benefit Pension Plan | | Supplemental Pension Plan | | | | 2021 | | 2020 | | 2021 | | 2020 | | Discount rate for projected benefit obligation | | 2.47 | % | 3.35 | % | 2.51 | % | 3.38 | % | Discount rate for determining interest cost | | 1.91 | % | 2.92 | % | 2.10 | % | 3.07 | % | Long-term rate of return on plan assets | | 7.00 | % | 7.00 | % | 0 | | 0 | |
| | | | | | | | | | | | | | | Defined Benefit Pension Plan | | Supplemental Pension Plan | | | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | | Discount rate for determining projected benefit obligation | | | 4.33 | % | | | 4.60 | % | | | 4.17 | % | | | 4.41 | % | | | 4.67 | % | | | 4.17 | % | | Discount rate in effect for determining service cost | | | — | | | | 4.81 | % | | | 4.17 | % | | | 4.62 | % | | | 4.84 | % | | | 4.17 | % | | Discount rate in effect for determining interest cost | | | 3.63 | % | | | 3.93 | % | | | 4.17 | % | | | 3.92 | % | | | 4.18 | % | | | 4.17 | % | | Rate of compensation increase | | | — | | | | 4.00 | % | | | 4.00 | % | | | — | | | | 4.00 | % | | | 4.00 | % | | Long-term rate of return on plan assets | | | 7.00 | % | | | 7.50 | % | | | 7.50 | % | | | — | | | | — | | | | — | |
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
11. EMPLOYEE RETIREMENT PLANS – (continued)
The components of net periodic pension cost(benefit) expense for the years ended December 31, 2017, 20162021 and 2015,2020, were: | | | | | | | | | | 2021 | | 2020 | | | | | (Dollars in thousands) | | Service cost | | $ | 382 | | $ | 383 | | Interest cost | | | 1,487 | | | 2,012 | | Expected return on plan assets | | | (2,907) | | | (2,761) | | Net amortization and deferral | | | 1,012 | | | 763 | | Pension (benefit) expense | | $ | (26) | | $ | 397 | |
| | | | | | | | | 2017 | | 2016 | | 2015 | | | | (Dollars in thousands) | | Service cost | | $ | 563 | | | $ | 1,638 | | | $ | 1,636 | | | Interest cost | | | 2,207 | | | | 2,449 | | | | 2,665 | | | Expected return on plan assets | | | (2,301 | ) | | | (2,430 | ) | | | (2,364 | ) | | Net amortization and deferral | | | 526 | | | | 1,527 | | | | 1,762 | | | Net periodic pension cost(1) | | $ | 995 | | | $ | 3,184 | | | $ | 3,699 | |
| (1) | The decrease in net periodic pension cost in 2017 was a result of freezing benefit accruals under the plan, effective December 31, 2016. |
The components of net periodic pension cost(benefit) expense other than the service cost component were included in “other expense,income, net” in the Consolidated Statements of Earnings. The Company expects to recognize expense of $700,000 due to the amortization of unrecognized loss and income of $63,000 due to the amortization of prior service credit as components of net periodic pension cost in 2018 which are included in accumulated other comprehensive loss at December 31, 2017.
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 Company expects that any cash contributions necessary to satisfy these requirements in 2022 would not be material in 2018.material. Projected benefit payments for the plans as ofat December 31, 2017,2021, were estimated as follows: | | | | | | | | | Defined Benefit | | Supplemental | | | Pension Plan | | Pension Plan | | | | (Dollars in thousands) | 2022 | | $ | 2,843 | | $ | 492 | 2023 | | $ | 2,900 | | $ | 679 | 2024 | | $ | 2,911 | | $ | 757 | 2025 | | $ | 2,905 | | $ | 899 | 2026 | | $ | 2,899 | | $ | 965 | 2027 - 2031 | | $ | 14,369 | | $ | 5,925 |
| | | | | | | Defined Benefit
Pension Plan | | Supplemental
Pension Plan | | | | (Dollars in thousands) | | 2018 | | $ | 2,512 | | | $ | 416 | | | 2019 | | $ | 2,651 | | | $ | 450 | | | 2020 | | $ | 2,678 | | | $ | 485 | | | 2021 | | $ | 2,695 | | | $ | 520 | | | 2022 | | $ | 2,686 | | | $ | 566 | | | 2023 – 2027 | | $ | 13,901 | | | $ | 4,383 | |
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
11. EMPLOYEE RETIREMENT PLANS – (continued)
The following table summarizes the fair value of the Company’s pension plan assets as ofat December 31, 2017,2021, by asset category within the fair value hierarchy (for further level information, see Note 3)4): | | | | | | | | | | | | | | | December 31, 2021 | | | Quoted Prices | | Significant | | Significant | | | | | | in Active Markets | | Observable Inputs | | Unobservable Inputs | | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | | (Dollars in thousands) | Common stocks | | $ | 18,493 | | $ | 1,934 | | $ | 0 | | $ | 20,427 | Preferred stocks | | | 247 | | | 31 | | | 0 | | | 278 | Exchange traded funds | | | 6,324 | | | 0 | | | 0 | | | 6,324 | Corporate obligations | | | 0 | | | 4,795 | | | 0 | | | 4,795 | State and municipal obligations | | | 0 | | | 512 | | | 0 | | | 512 | Pooled fixed income funds | | | 6,953 | | | 0 | | | 0 | | | 6,953 | U.S. government securities | | | 0 | | | 659 | | | 0 | | | 659 | Cash and cash equivalents | | | 4,573 | | | 0 | | | 0 | | | 4,573 | Subtotal | | $ | 36,590 | | $ | 7,931 | | $ | 0 | | $ | 44,521 | Other assets (1) | | | | | | | | | | | | 61 | Total | | | | | | | | | | | $ | 44,582 |
(1) This category represents trustreceivables thatarenotleveled.
| | | | | | | | | | | December 31, 2017 | | | | Quoted Prices
in Active
Markets
Level 1 | | Significant Observable Inputs
Level 2 | | Significant Unobservable Inputs
Level 3 | | Total | | | | (Dollars in thousands) | | Common stocks | | $ | 13,855 | | | $ | 1,628 | | | $ | — | | | $ | 15,483 | | | Preferred stocks | | | 290 | | | | 57 | | | | — | | | | 347 | | | Exchange traded funds | | | 5,546 | | | | — | | | | — | | | | 5,546 | | | Corporate obligations | | | — | | | | 5,867 | | | | — | | | | 5,867 | | | State and municipal obligations | | | — | | | | 1,313 | | | | — | | | | 1,313 | | | Pooled fixed income funds | | | 6,895 | | | | — | | | | — | | | | 6,895 | | | U.S. government securities | | | — | | | | 381 | | | | — | | | | 381 | | | Cash and cash equivalents | | | 2,444 | | | | — | | | | — | | | | 2,444 | | | Subtotal | | $ | 29,030 | | | $ | 9,246 | | | $ | — | | | $ | 38,276 | | | Other assets(1) | | | | | | | | | | | | | | | 93 | | | Total | | | | | | | | | | | | | | $ | 38,369 | |
| (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 ofat December 31, 2016,2020, by asset category within the fair value hierarchy (for further level information, see Note 3)4): | | | | | | | | | | | | | | | December 31, 2020 | | | Quoted Prices | | Significant | | Significant | | | | | | in Active Markets | | Observable Inputs | | Unobservable Inputs | | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | | (Dollars in thousands) | Common stocks | | $ | 17,194 | | $ | 2,196 | | $ | 0 | | $ | 19,390 | Preferred stocks | | | 245 | | | 27 | | | 0 | | | 272 | Exchange traded funds | | | 6,033 | | | 0 | | | 0 | | | 6,033 | Corporate obligations | | | — | | | 4,349 | | | 0 | | | 4,349 | State and municipal obligations | | | 0 | | | 821 | | | 0 | | | 821 | Pooled fixed income funds | | | 7,117 | | | 0 | | | 0 | | | 7,117 | U.S. government securities | | | 0 | | | 763 | | | 0 | | | 763 | Marketable CD’s | | | 0 | | | 513 | | | 0 | | | 513 | Cash and cash equivalents | | | 3,817 | | | 0 | | | 0 | | | 3,817 | Subtotal | | $ | 34,406 | | $ | 8,669 | | $ | 0 | | $ | 43,075 | Other assets (1) | | | | | | | | | | | | 69 | Total | | | | | | | | | | | $ | 43,144 |
| | | | | | | | | | | December 31, 2016 | | | | Quoted Prices in Active Markets
Level 1 | | Significant Observable Inputs
Level 2 | | Significant Unobservable Inputs
Level 3 | | Total | | | | (Dollars in thousands) | | Common stocks | | $ | 12,656 | | | $ | 970 | | | $ | — | | | $ | 13,626 | | | Preferred stocks | | | 227 | | | | 17 | | | | — | | | | 244 | | | Exchange traded funds | | | 3,742 | | | | — | | | | — | | | | 3,742 | | | Corporate obligations | | | — | | | | 5,113 | | | | — | | | | 5,113 | | | State and municipal obligations | | | — | | | | 1,538 | | | | — | | | | 1,538 | | | Pooled fixed income funds | | | 4,345 | | | | — | | | | — | | | | 4,345 | | | U.S. government securities | | | — | | | | 1,061 | | | | — | | | | 1,061 | | | Cash and cash equivalents | | | 2,519 | | | | — | | | | — | | | | 2,519 | | | Subtotal | | $ | 23,489 | | | $ | 8,699 | | | $ | — | | | $ | 32,188 | | | Other assets(1) | | | | | | | | | | | | | | | 90 | | | Total | | | | | | | | | | | | | | $ | 32,278 | |
| (1) | This category represents trust receivables that are not leveled. |
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
11. EMPLOYEE RETIREMENT PLANS – (continued)
The Company also has a defined contribution plan covering substantially all employees. The Company contributed $786,000 $417,000,$850,000 and $350,000$875,000 to the plan in 2017, 2016,2021 and 2015,2020, respectively. Effective January 1, 2017, 13. Comprehensive Income (Loss) The components of accumulated other comprehensive loss as recorded on the Company amended its defined contribution plan to increaseaccompanying Consolidated Balance Sheets were as follows: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Foreign currency translation adjustments | | $ | (6,783) | | $ | (6,050) | Pension liability, net of tax | | | (18,011) | | | (21,955) | Total accumulated other comprehensive loss | | $ | (24,794) | | $ | (28,005) |
The following presents a tabular disclosure about changes in accumulated other comprehensive loss (dollars in thousands): | | | | | | | | | | | | Foreign Currency | | | | | | | | | Translation | | Defined Benefit | | | | | | Adjustments | | Pension Items | | Total | Balance, December 31, 2019 | | $ | (7,033) | | $ | (17,503) | | $ | (24,536) | Other comprehensive income (loss) before reclassifications | | | 983 | | | (5,017) | | | (4,034) | Amounts reclassified from accumulated other comprehensive loss | | | — | | | 565 | | | 565 | Net current period other comprehensive income (loss) | | | 983 | | | (4,452) | | | (3,469) | Balance, December 31, 2020 | | $ | (6,050) | | $ | (21,955) | | $ | (28,005) | Other comprehensive (loss) income before reclassifications | | | (733) | | | 3,196 | | | 2,463 | Amounts reclassified from accumulated other comprehensive loss | | | — | | | 748 | | | 748 | Net current period other comprehensive (loss) income | | | (733) | | | 3,944 | | | 3,211 | Balance, December 31, 2021 | | $ | (6,783) | | $ | (18,011) | | $ | (24,794) |
The following presents a tabular disclosure about reclassification adjustments out of accumulated other comprehensive loss during the Company match formula for all plan participants.years ended December 31, 2021 and 2020 (dollars in thousands): 12. | | | | | | | | | | | Amounts reclassified from | | | | | accumulated other | | | | | comprehensive loss for the year | | Affected line item in the | | | ended December 31, | | statement where net income | | | 2021 | | 2020 | | is presented | Amortization of defined benefit pension items | | | | | | | | | Prior service cost | | $ | (62) | (1) | $ | (63) | (1) | Other income, net | Actuarial losses | | | 1,074 | (1) | | 826 | (1) | Other income, net | Total before tax | | | 1,012 | | | 763 | | | Tax benefit | | | (264) | | | (198) | | | Net of tax | | $ | 748 | | $ | 565 | | |
| (1) | These amounts were included in the computation of pension (benefit) expense. See Note 12 for additional details. |
14. INCOME TAXES The provision for income taxes included the following components for the years ended December 31, 2017, 20162021 and 2015:2020: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Current: | | | | | | | Federal | | $ | 3,656 | | $ | (1,954) | State | | | 1,235 | | | (154) | Foreign | | | 989 | | | 784 | Total | | | 5,880 | | | (1,324) | Deferred | | | 910 | | | 2,755 | Total provision | | $ | 6,790 | | $ | 1,431 |
| | | | | | | | | 2017 | | 2016 | | 2015 | | | | (Dollars in thousands) | Current:
| | | | | | | | | | | | | | Federal | | $ | 3,904 | | | $ | 5,965 | | | $ | 8,801 | | | State | | | 499 | | | | 1,027 | | | | 1,314 | | | Foreign | | | 633 | | | | 737 | | | | 501 | | | Total | | | 5,036 | | | | 7,729 | | | | 10,616 | | | Deferred | | | 2,187 | | | | (2,645 | ) | | | 346 | | | Total provision | | $ | 7,223 | | | $ | 5,084 | | | $ | 10,962 | |
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, 2017, 20162021 and 2015:2020: | | | | | | | | 2021 | | 2020 | | U.S. federal statutory income tax rate | | 21.0 | % | 21.0 | % | State income taxes, net of federal tax benefit | | 3.3 | | 1.8 | | Non-taxable municipal bond interest | | (0.3) | | 1.3 | | Net Operating Loss Carryback Under the CARES Act | | — | | 10.4 | | Foreign income tax rate differences | | 1.6 | | (24.3) | | Reversal of deferred tax assets on foreign net operating losses | | — | | (28.4) | | Share-based compensation | | 0.5 | | (1.0) | | Other | | (1.3) | | (1.1) | | Effective tax rate | | 24.8 | % | (20.3) | % |
| | | | | | | | | 2017 | | 2016 | | 2015 | | U.S. federal statutory income tax rate | | | 35.0 | % | | | 35.0 | % | | | 35.0 | % | | State income taxes, net of federal tax benefit | | | 2.9 | | | | 3.5 | | | | 3.4 | | | Non-taxable municipal bond interest | | | (0.9 | ) | | | (1.0 | ) | | | (1.0 | ) | | Foreign income tax rate differences | | | 0.1 | | | | (0.6 | ) | | | 0.4 | | | Life insurance deferred tax reversal | | | — | | | | (14.2 | ) | | | — | | | Impact of tax rate change on deferred taxes | | | (5.8 | ) | | | — | | | | — | | | Other | | | (1.1 | ) | | | 0.3 | | | | (0.1 | ) | | Effective tax rate | | | 30.2 | % | | | 23.0 | % | | | 37.7 | % |
On December 22, 2017, the TCJA was enacted. The TCJA makes broad and complex changes to the U.S. tax code including, among other things, (1) reducing the U.S. federal corporate tax rate, and (2) requiring a one-time transition tax on certain unremitted earnings of foreign subsidiaries. The TCJA reduces the U.S. federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018.
In the fourth quarter of 2017, the Company recognized $1.5 million of non-cash tax benefit due to the revaluation of deferred tax assets and liabilities from the change in the U.S. federal corporate tax rate. This tax benefit reduced the Company’s provision for income taxes and effective tax rate for 2017. The Company also analyzed, in reasonable detail, based on a current earnings and profit studies of the Company’s foreign subsidiaries, the impact of the one-time transition tax. Based on this analysis, management determined that the impact of the one-time transition tax would not be material to the Company’s consolidated financial position, results of operations or cash flows.
Tax benefits recognized in connection with the enactment of the TCJA may change due to, among other things, additional guidance that may be issued by the U.S. Department of the Treasury with respect to the TCJA and revisions to the Company’s assumptions as further information and interpretations become available.
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
12. INCOME TAXES – (continued)
In the fourth quarter of 2016, the Company’s provision for income taxes and effective tax rate were reduced due to a one-time adjustment related to corporate-owned life insurance policies. At that time, the Company reviewed its liquidity needs and sources of capital, including evaluating whether it would need the cash available under corporate-owned life insurance policies on two former executives. It was determined that the chances were remote that the Company would need to surrender the policies to satisfy liquidity needs, and, as a result, the Company reversed the $3.1 million deferred tax liability related to the policies.
The foreign component of pretax net earnings was $1.9 million, $2.7earnings of $3.5 million and $1.3losses of $5.5 million for 2017, 2016,2021 and 2015,2020, respectively. In general, it is the Company’s practice and intention to permanently reinvest unremitted earnings ofThe Company's foreign subsidiaries, Florsheim Australia and this position hasFlorsheim Europe, had net operating losses in 2020, and the Company determined it was more likely than not changed following the enactment of the TCJA. As of December 31, 2017, unremitted foreign earnings of foreign subsidiaries totaled $7.1 million. A deferred tax liability has not been recorded on these unremitted foreign earnings. Future dividends, if any, would be paid only out ofthat current year earnings. Notwithstanding the above, if the unremitted foreign earnings at December 31, 2017 were to be repatriated in the future, the related deferred tax liabilitybenefits would not be materialrealized, and recorded 0 current year tax provision for these entities, causing the majority of 2020’s negative foreign income tax rate differences noted above.
The Company also determined it was more likely than not that $2.0 million of deferred tax assets related to Company’s financial statements.foreign tax carryforwards will not be realized, and reversed them in 2020. The components of deferred taxes as ofat December 31, 2017,2021, and 20162020 were as follows: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Deferred income tax assets: | | | | | | | Accounts receivable reserves | | $ | 269 | | $ | 269 | Pension liability | | | 7,350 | | | 8,842 | Accrued liabilities | | | 1,578 | | | 1,720 | Operating lease liabilities | | | 2,848 | | | 2,716 | Foreign currency losses on intercompany loans | | | 57 | | | 58 | | | | 12,102 | | | 13,605 | Deferred income tax liabilities: | | | | | | | Inventory and related reserves | | | (3,011) | | | (3,149) | Cash value of life insurance | | | (545) | | | (485) | Property, plant and equipment | | | (1,199) | | | (1,285) | Intangible assets | | | (8,539) | | | (7,913) | Operating lease right-of-use assets | | | (356) | | | (2,087) | Prepaid expenses and other assets | | | (2,415) | | | (365) | | | | (16,065) | | | (15,284) | Net deferred income tax liabilities | | $ | (3,963) | | $ | (1,679) |
| | | | | | | 2017 | | 2016 | | | | (Dollars in thousands) | Deferred income tax assets:
| | | | | | | | | | Accounts receivable reserves | | $ | 199 | | | $ | 341 | | | Pension liability | | | 7,307 | | | | 11,002 | | | Accrued liabilities | | | 1,975 | | | | 2,648 | | | Carryfoward losses | | | 250 | | | | 129 | | | Foreign currency losses on intercompany loans | | | (46 | ) | | | 53 | | | | | | 9,685 | | | | 14,173 | | Deferred income tax liabilities:
| | | | | | | | | | Inventory and related reserves | | | (2,989 | ) | | | (3,744 | ) | | Cash value of life insurance | | | (337 | ) | | | (441 | ) | | Property, plant and equipment | | | (1,373 | ) | | | (1,483 | ) | | Intangible assets | | | (6,125 | ) | | | (8,284 | ) | | Prepaid expenses and other assets | | | (180 | ) | | | (264 | ) | | | | | (11,004 | ) | | | (14,216 | ) | | Net deferred income tax liabilities | | $ | (1,319 | ) | | $ | (43 | ) |
The net deferred tax liabilities are classified in the Consolidated Balance Sheets as follows: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Non-current deferred income tax benefits | | $ | 1,063 | | $ | 1,235 | Non-current deferred income tax liabilities | | | (5,026) | | | (2,914) | Net deferred income tax liabilities | | $ | (3,963) | | $ | (1,679) |
| | | | | | | 2017 | | 2016 | | | | (Dollars in thousands) | | Non-current deferred income tax benefits | | $ | 750 | | | $ | 660 | | | Non-current deferred income tax liabilities | | | (2,069 | ) | | | (703 | ) | | Net deferred income tax liabilities | | $ | (1,319 | ) | | $ | (43 | ) |
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
12. INCOME TAXES – (continued)
Uncertain Tax PositionsThe 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: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Unrecognized tax benefits balance at January 1, | | $ | 833 | | $ | 636 | Increases related to current year tax positions | | | 8 | | | 257 | Decreases due to settlements of tax positions | | | (250) | | | 0 | Decreases due to lapsing of statute of limitations | | | (436) | | | (60) | Unrecognized tax benefits balance at December 31, | | $ | 155 | | $ | 833 |
| | | | | | | | | 2017 | | 2016 | | 2015 | | | | (Dollars in thousands) | | Unrecognized tax benefits balance at January 1, | | $ | 275 | | | $ | 284 | | | $ | — | | | Increases related to current year tax positions | | | 144 | | | | 239 | | | | 284 | | | Decreases due to settlements of tax positions | | | (7 | ) | | | (248 | ) | | | — | | | Unrecognized tax benefits balance at December 31, | | $ | 412 | | | $ | 275 | | | $ | 284 | |
The unrecognized tax benefits at December 31, 20172021 and 2016,2020, include $72,000$26,000 and $70,000,$155,000, respectively, of interest related to such positions. The unrecognized tax benefits, if ultimately recognized, would reduce the Company’s annual effective tax rate. The liabilities for potential interest are included in the Consolidated Balance Sheets at December 31, 20172021 and 2016.2020. The Company files a U.S. federal income tax return, various U.S. state income tax returns and several foreign returns. In general, the 20142018 through 20172020 tax years remain subject to examination by those taxing authorities. 13.
15. 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 $10.1 million in 2017, $9.8 million in 2016 and $9.1 million in 2015. Percentage rentals were $254,000 in 2017, $441,000 in 2016, and $461,000 in 2015.
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, 2017, are shown below. Renewal options exist for many long-term leases.
| | | | (Dollars in thousands) | | Operating
Leases | | 2018 | | $ | 9,390 | | | 2019 | | | 8,442 | | | 2020 | | | 6,935 | | | 2021 | | | 5,074 | | | 2022 | | | 2,869 | | | Thereafter | | | 3,885 | | | Total | | $ | 36,595 | |
At December 31, 2017,2021, the Company also had purchase commitments of approximately $57.0$171.5 million to purchase inventory, all of which were due in less than one year. TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
14. STOCK16. SHARE REPURCHASE PROGRAM
In 1998, the Company’s stockshare repurchase program was established. On several occasions since the program’s inception, the Board of Directors has extended the number of shares authorized for repurchase under the program. In total, 7.5 million shares have been authorized for repurchase. This includes the additional 1.0 million shares that the Company’s Board of Directors authorized for repurchase on October 31, 2017. In 2017,2021, the Company purchased 548,539125,204 shares at a total cost of $15.2$2.5 million through its stockshare repurchase program. In 2016,2020, the Company purchased 410,983106,490 shares at a total cost of $11.0$2.1 million through its stock repurchase program. In 2015, the Company purchased 354,741 shares at a total cost of $9.9 million through its stockshare repurchase program. As of December 31,2017,31, 2021, there were 1,016,636210,576 authorized shares remaining under the program. 15.
17. EARNINGS PER SHARE The following table sets forth the computations of basic and diluted earnings per share for the years ended December 31, 2017, 20162021 and 2015:2020: | | | | | | | | | 2021 | | 2020 | | | | (In thousands, except per share amounts) | Numerator: | | | | | | | Net earnings (loss) | | $ | 20,555 | | $ | (8,485) | | | | | | | | Denominator: | | | | | | | Basic weighted average shares outstanding | | | 9,662 | | | 9,757 | Effect of dilutive securities: | | | | | | | Employee share-based awards | | | 31 | | | — | Diluted weighted average shares outstanding | | | 9,693 | | | 9,757 | | | | | | | | Basic earnings (loss) per share | | $ | 2.13 | | $ | (0.87) | | | | | | | | Diluted earnings (loss) per share | | $ | 2.12 | | $ | (0.87) |
| | | | | | | 2017 | | 2016 | | 2015 | | | | (In thousands, except per share amounts) | Numerator:
| | | | | | | | | | | | | | Net earnings attributable to Weyco Group, Inc. | | $ | 16,491 | | | $ | 16,472 | | | $ | 18,212 | | Denominator:
| | | | | | | | | | | | | | Basic weighted average shares outstanding | | | 10,253 | | | | 10,519 | | | | 10,773 | | Effect of dilutive securities:
| | | | | | | | | | | | | | Employee stock-based awards | | | 61 | | | | 53 | | | | 86 | | | Diluted weighted average shares outstanding | | | 10,314 | | | | 10,572 | | | | 10,859 | | | Basic earnings per share | | $ | 1.61 | | | $ | 1.57 | | | $ | 1.69 | | | Diluted earnings per share | | $ | 1.60 | | | $ | 1.56 | | | $ | 1.68 | |
Diluted weighted average shares outstanding for 20172021 exclude antidilutive stock optionsanti-dilutive share-based awards totaling 759,9161,109,000 shares at a weighted average price of $27.27.$26.49. The year ended December 31,2020, resulted in a net loss, therefore there was no difference in the weighted average number of common shares for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive. Diluted weighted average shares outstanding for 20162020 exclude antidilutive stock optionsanti-dilutive share-based awards totaling 873,2761,232,000 shares at a weighted average price of $26.86. Diluted weighted average shares outstanding for 2015 exclude antidilutive stock options totaling 720,757 shares at a weighted average price of $27.59.$25.35. 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 are excluded from the computation of earnings per share. 16.
18. SEGMENT INFORMATION The Company has two2 reportable segments: North American wholesale operations (“wholesale”Wholesale”) and North American retail operations (“retail”Retail”). The chief operating decision maker, the Company’s Chief Executive Officer, evaluates the performance of the Company’s segments based on earnings (loss) from operations. Therefore, 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. The Company has licensing agreements with third
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
16. SEGMENT INFORMATION – (continued)
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 2017, 20162021 and 2015,2020, there was no single customer with sales aboveof 10% or more of the Company’s total sales. In the retail segment, the Company operated 10e-commerce businesses and four brick and mortar retail stores and internet businesses in the United States as ofat December 31, 2017. Sales in retail outlets2021. Retail sales are made directly to consumers on the consumerCompany's websites, or by Company employees. In addition to the sale ofRetail stores sell the Company’s brands of footwear in these retail outlets, other branded footwear, primarily Florsheim, and accessories are also sold.accessories. 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, 2017, 20162021 and 20152020 was as follows: | | | | | | | | | | | | | | | Wholesale | | Retail | | Other | | Total | | | | (Dollars in thousands) | 2021 | | | | | | | | | | | | | Product sales | | $ | 203,649 | | $ | 31,595 | | $ | 30,660 | | $ | 265,904 | Licensing revenues | | | 1,737 | | | — | | | — | | | 1,737 | Net sales | | | 205,386 | | | 31,595 | | | 30,660 | | | 267,641 | Depreciation | | | 1,995 | | | 4 | | | 491 | | | 2,490 | Earnings (loss) from operations | | | 19,455 | | | 6,651 | | | (404) | | | 25,702 | Total assets | | | 246,983 | | | 6,263 | | | 24,421 | | | 277,667 | Capital expenditures | | | 453 | | | 17 | | | 537 | | | 1,007 | | | | | | | | | | | | | | 2020 | | | | | | | | | | | | | Product sales | | $ | 151,012 | | $ | 21,499 | | $ | 21,690 | | $ | 194,201 | Licensing revenues | | | 1,174 | | | — | | | — | | | 1,174 | Net sales | | | 152,186 | | | 21,499 | | | 21,690 | | | 195,375 | Depreciation | | | 1,973 | | | 211 | | | 717 | | | 2,901 | Earnings (loss) from operations | | | 975 | | | (1,073) | | | (7,500) | | | (7,598) | Total assets | | | 222,255 | | | 7,374 | | | 27,090 | | | 256,719 | Capital expenditures | | | 3,095 | | | 30 | | | 243 | | | 3,368 |
| | | | | | | | | | | Wholesale | | Retail | | Other | | Total | | | | (Dollars in thousands) | 2017
| | | | | | | | | | | | | | | | | | Product sales | | $ | 214,733 | | | $ | 20,860 | | | $ | 45,613 | | | $ | 281,206 | | | Licensing revenues | | | 2,543 | | | | — | | | | — | | | | 2,543 | | | Net sales | | | 217,276 | | | | 20,860 | | | | 45,613 | | | | 283,749 | | | Depreciation | | | 2,606 | | | | 412 | | | | 938 | | | | 3,956 | | | Earnings from operations | | | 20,224 | | | | 1,374 | | | | 1,814 | | | | 23,412 | | | Total assets | | | 228,738 | | | | 4,548 | | | | 29,546 | | | | 262,832 | | | Capital expenditures | | | 735 | | | | 338 | | | | 505 | | | | 1,578 | | 2016
| | | | | | | | | | | | | | | | | | Product sales | | $ | 224,752 | | | $ | 21,883 | | | $ | 47,513 | | | $ | 294,148 | | | Licensing revenues | | | 2,785 | | | | — | | | | — | | | | 2,785 | | | Net sales | | | 227,537 | | | | 21,883 | | | | 47,513 | | | | 296,933 | | | Depreciation | | | 2,361 | | | | 461 | | | | 848 | | | | 3,670 | | | Earnings from operations | | | 17,944 | | | | 2,109 | | | | 2,729 | | | | 22,782 | | | Total assets | | | 234,005 | | | | 5,341 | | | | 28,894 | | | | 268,240 | | | Capital expenditures | | | 3,650 | | | | 1,188 | | | | 1,154 | | | | 5,992 | | 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 | | | 26,335 | | | | 2,519 | | | | 2,994 | | | | 31,848 | | | Total assets | | | 267,265 | | | | 4,372 | | | | 27,360 | | | | 298,997 | | | Capital expenditures | | | 1,329 | | | | 399 | | | | 753 | | | | 2,481 | |
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
16. SEGMENT INFORMATION – (continued)
Geographic SegmentsFinancial information relating to the Company’s business by geographic area was as follows for the years ended December 31, 2017, 20162021 and 2015:2020: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Net Sales | | | | | | | United States | | $ | 215,754 | | $ | 155,955 | Canada | | | 21,227 | | | 17,730 | Europe | | | 2,309 | | | 2,600 | Australia | | | 21,218 | | | 15,252 | Asia | | | 3,198 | | | 1,969 | South Africa | | | 3,935 | | | 1,869 | Total | | $ | 267,641 | | $ | 195,375 | | | | | | | | Long-Lived Assets | | | | | | | United States | | $ | 79,486 | | $ | 77,975 | Other | | | 9,434 | | | 9,756 | | | $ | 88,920 | | $ | 87,731 |
| | | | | | | | | 2017 | | 2016 | | 2015 | | | | (Dollars in thousands) | Net Sales:
| | | | | | | | | | | | | | United States | | $ | 219,685 | | | $ | 231,462 | | | $ | 252,459 | | | Canada | | | 18,451 | | | | 17,958 | | | | 21,031 | | | Europe | | | 7,433 | | | | 8,014 | | | | 7,291 | | | Australia | | | 28,082 | | | | 28,390 | | | | 27,224 | | | Asia | | | 6,812 | | | | 7,702 | | | | 9,050 | | | South Africa | | | 3,286 | | | | 3,407 | | | | 3,562 | | | Total | | $ | 283,749 | | | $ | 296,933 | | | $ | 320,617 | | Long-Lived Assets:
| | | | | | | | | | | | | | United States | | $ | 72,328 | | | $ | 74,548 | | | $ | 74,658 | | | Other | | | 7,708 | | | | 7,695 | | | | 7,699 | | | | | $ | 80,036 | | | $ | 82,243 | | | $ | 82,357 | |
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), operating lease ROU assets, goodwill, trademarks, investment in real estate and amortizable intangible assets. 17. STOCK-BASED
19. SHARE-BASED COMPENSATION PLANS At December 31, 2017,2021, the Company had three stock-basedtwo share-based compensation plans: the 2011 Incentive Plan, the 2014 Incentive Plan and the 2017 Incentive Plan (collectively, “the Plans”). UnderAwards are no longer granted under the Plans, options2014 Incentive Plan; however, awards previously granted under such plan continue in accordance with their terms. 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.grant, and the Company also grants restricted stock awards. The Company issues new common stock to satisfy stock option exercises andas well as the issuance of restricted stock awards. The 2017 Incentive Plan was approved by the Company’s shareholders on May 9, 2017. Awards are no longer granted under the 2011 and 2014 plans. Stock options and restricted stock awards were granted on August 25thin each of the years 2017, 2016both 2021 and 2015. Under the Plans, stock2020. 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. Stock options granted in 20172021 and 2020 vest ratably over five years and expire ten years from the grant date. Stock options granted in 2016 and 2015 vest ratably over four years and expire six10 years from the grant date. Restricted stock granted in 2017, 2016,2021 and 20152020 vests ratably over four years. As of December 31, 2017,2021, there were approximately 1.3 million440,000 shares remaining available for stock-basedshare-based awards under the 2017 Incentive Plan. Stock option exercises can be net share settled such that the Company withholds shares with value equivalent to the exercise price of the stock option awards plus the employees’ minimum statutory obligation for the applicable income and other employment taxes. The net share settlement has the effect of share repurchases by the Company as they reduce the number of shares that would have otherwise been issued. In 2021, approximately 1,000 shares were withheld , and were based on the value of the stock on the exercise dates. Total payments made by the Company for the employees’ tax obligations to the taxing authorities were insignificant in 2021 and NaN in 2020; such payments are generally reflected as a financing activity within the consolidated statements of cash flows. In accordance with ASC 718, stock-basedshare-based compensation expense of approximately $1.6 million and $1.4 million was recognized in the 2017, 20162021 and 2015 consolidated financial statements2020, respectively, for stock options and restricted stock awards granted since 2011.2015. An estimate of forfeitures, based on historical data, was included in the calculation of stock-basedshare-based compensation. During 2021, the Company's Board of Directors approved extending the expiration date of stock options granted in years 2015 and 2016. The effect of applying the expense recognition provisions of ASC 718 decreased Earnings before Provision for Income Taxes by $1,622,000 in 2017 and $1,559,000 in eachoriginal expiration date of the stock options granted in 2015 was August 25, 2021, and was extended by two years to August 25, 2023. The original expiration date of the stock options granted in 2016 was August 25, 2022, and 2015.was extended by one year to August 25, 2023. The Company recorded an additional $232,000 of compensation expense in 2021 due to the extension of the exercise periods. As ofAt December 31, 2017,2021, there was $1.8 million of total unrecognized compensation cost related to non-vested stock options granted in the years 20142017 through 2017 which is expected to be
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
17. STOCK-BASED COMPENSATION PLANS – (continued)
recognized over the weighted-average remaining vesting period of 2.7 years. As of December 31, 2017, there was $1.6 million of total unrecognized compensation cost related to non-vested restricted stock awards granted in the years 2014 through 20172021 which is expected to be recognized over the weighted-average remaining vesting period of 2.93.5 years. At December 31, 2020, there was $1.5 million of total unrecognized compensation cost related to non-vested stock options granted in the years 2017 through 2020 which is expected to be recognized over the weighted-average remaining vesting period of 3.2 years.
The following weighted-average assumptions were used to determine compensation expense related to stock options in 2017, 20162021 and 2015:2020: | | | | | | | | | | 2017 | | 2016 | | 2015 | | | | | | | | | | | | 2021 | | 2020 | | | Risk-free interest rate | | | 2.04 | % | | | 1.09 | % | | | 1.36 | % | | 1.13 | % | 0.54 | % | | Expected dividend yield | | | 3.15 | % | | | 3.29 | % | | | 3.12 | % | | 4.00 | % | 5.33 | % | | Expected term | | | 8.0 | | | | 4.3 years | | | | 4.3 years | | | 8.0 | | 8.0 | | | Expected volatility | | | 19.7 | % | | | 21.3 | % | | | 21.6 | % | | 28.5 | % | 26.4 | % |
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, | | | | | 2017 | | 2016 | | 2015 | | | | | | | | | | | | | | | | | | | Years ended December 31, | | | | 2021 | | 2020 | | | | | | | Weighted Average | | | | | Weighted Average | | Stock Options | | Shares | | Weighted
Average
Exercise
Price | | Shares | | Weighted
Average
Exercise
Price | | Shares | | Weighted
Average
Exercise
Price | | Shares | | Exercise Price | | Shares | | Exercise Price | | Outstanding at beginning of year | | | 1,486,257 | | | $ | 26.13 | | | | 1,351,826 | | | $ | 26.09 | | | | 1,355,416 | | | $ | 25.36 | | | | 1,125,383 | | $ | 25.62 | | | 1,176,770 | | $ | 27.14 | | Granted | | | 211,200 | | | | 27.94 | | | | 277,800 | | | | 25.51 | | | | 299,700 | | | | 25.64 | | | | 186,900 | | | 24.00 | | | 188,600 | | | 18.00 | | Exercised | | | (174,989 | ) | | | 24.48 | | | | (123,294 | ) | | | 24.28 | | | | (279,090 | ) | | | 22.02 | | | | (1,300) | | | 18.00 | | | — | | | — | | Forfeited or expired | | | (19,975 | ) | | | 26.53 | | | | (20,075 | ) | | | 26.52 | | | | (24,200 | ) | | | 26.58 | | | | (31,150) | | | 24.06 | | | (239,987) | | | 27.09 | | Outstanding at end of year | | | 1,502,493 | | | $ | 26.57 | | | | 1,486,257 | | | $ | 26.13 | | | | 1,351,826 | | | $ | 26.09 | | | | 1,279,833 | | $ | 25.44 | | | 1,125,383 | | $ | 25.62 | | | | | | | | | | | | | | | | Exercisable at end of year | | | 877,131 | | | $ | 26.59 | | | | 762,132 | | | $ | 26.07 | | | | 594,906 | | | $ | 25.55 | | | | 768,522 | | $ | 26.58 | | | 640,012 | | $ | 26.77 | | | | | | | | | | | | | | | | Weighted average fair market value of options granted | | $ | 4.05 | | | | | | | $ | 3.05 | | | | | | | $ | 3.30 | | | | | | | $ | 4.16 | | | | | $ | 2.01 | | | |
| | | | | | | Weighted Average
Remaining
Contractual Life
(in Years) | | Aggregate
Intrinsic Value | | Outstanding – December 31, 2017 | | | 3.8 | | | $ | 4,733,000 | | | Exercisable – December 31, 2017 | | | 2.4 | | | $ | 2,746,000 | |
| | | | | | | | Weighted Average Remaining | | | | | | Contractual Life (in Years) | | Aggregate Intrinsic Value | Outstanding - December 31, 2021 | | 5.6 | | $ | 1,147,000 | Exercisable - December 31, 2021 | | 3.8 | | $ | 257,000 |
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 29, 201731, 2021 of $29.72$23.94 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options.
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
17. STOCK-BASED COMPENSATION PLANS – (continued)
Non-vested Stock Options | | | | | | | | | Non-vested Stock Options | | Number of
Options | | Weighted
Average
Exercise
Price | | Weighted
Average Fair
Value | | | Non-vested – December 31, 2014 | | | 751,582 | | | $ | 26.74 | | | $ | 3.12 | | | | | | | | | | | | | | | | | | Weighted Average | | Weighted Average | | | | Number of Options | | Exercise Price | | Fair Value | Non-vested - December 31, 2019 | | | 473,740 | | $ | 27.77 | | $ | 4.26 | | Granted | | | 299,700 | | | | 25.64 | | | | 3.30 | | | 188,600 | | | 18.00 | | | 2.01 | | Vested | | | (275,187 | ) | | | 26.14 | | | | 3.36 | | | (165,824) | | | 27.48 | | | 3.99 | | Forfeited | | | (19,175 | ) | | | 26.59 | | | | 3.14 | | | (11,145) | | | 27.54 | | | 4.27 | | Non-vested – December 31, 2015 | | | 756,920 | | | $ | 26.53 | | | $ | 3.10 | | | Non-vested - December 31, 2020 | | | 485,371 | | $ | 24.08 | | $ | 3.48 | | Granted | | | 277,800 | | | | 25.51 | | | | 3.05 | | | 186,900 | | | 24.00 | | | 4.16 | | Vested | | | (293,720 | ) | | | 26.39 | | | | 3.13 | | | (137,180) | | | 25.65 | | | 3.83 | | Forfeited | | | (16,875 | ) | | | 26.37 | | | | 3.10 | | | (23,780) | | | 23.97 | | | 3.48 | | Non-vested – December 31, 2016 | | | 724,125 | | | $ | 26.20 | | | $ | 3.07 | | | | Granted | | | 211,200 | | | | 27.94 | | | | 4.05 | | | | Vested | | | (296,638 | ) | | | 26.71 | | | | 3.01 | | | | Forfeited | | | (13,325 | ) | | | 26.16 | | | | 3.12 | | | | Non-vested – December 31, 2017 | | | 625,362 | | | $ | 26.55 | | | $ | 3.43 | | | Non-vested - December 31, 2021 | | | 511,311 | | $ | 23.63 | | $ | 3.64 |
The following table summarizes information about outstanding and exercisable stock options at December 31, 2017:2021: | | | | | | | | | | | | | | | Options Outstanding | | Options Exercisable | | | | | Weighted | | | | | | | | | | | | Average | | | | | | | | | Number of | | Remaining | | Weighted | | Number of | | Weighted | | | Options | | Contractual Life | | Average | | Options | | Average | Range of Exercise Prices | | Outstanding | | (in Years) | | Exercise Price | | Exercisable | | Exercise Price | $18.00 | | 176,800 | | 8.7 | | $ | 18.00 | | 36,480 | | $ | 18.00 | $23.38 to $25.86 | | 796,500 | | 4.8 | | $ | 24.73 | | 509,844 | | $ | 25.27 | $27.94 to $37.22 | | 306,533 | | 6.0 | | $ | 31.56 | | 222,198 | | $ | 30.99 | | | 1,279,833 | | 5.6 | | $ | 25.44 | | 768,522 | | $ | 26.58 |
| | | | | | | | | | | | | 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 | | | 689,993 | | | | 3.4 | | | $ | 25.11 | | | | 350,843 | | | $ | 24.67 | | | $27.04 to $28.50 | | | 812,500 | | | | 4.2 | | | $ | 27.81 | | | | 526,288 | | | $ | 27.87 | | | | | | 1,502,493 | | | | 3.8 | | | $ | 26.57 | | | | 877,131 | | | $ | 26.59 | |
The following table summarizes stock option activity for the years ended December 31: | | | | | | | | | 2021 | | 2020 | | | | (Dollars in thousands) | Total intrinsic value of stock options exercised | | $ | 8 | | $ | — | Net proceeds from stock option exercises | | $ | 2 | | $ | 0 | Income tax benefit from the exercise of stock options | | $ | 2 | | $ | — | Total fair value of stock options vested | | $ | 525 | | $ | 661 |
| | | | | | | | | 2017 | | 2016 | | 2015 | | | | (Dollars in thousands) | | Total intrinsic value of stock options exercised | | $ | 618 | | | $ | 455 | | | $ | 1,705 | | | Cash received from stock option exercises | | $ | 4,284 | | | $ | 2,994 | | | $ | 6,144 | | | Income tax benefit from the exercise of stock options | | $ | 188 | | | $ | 178 | | | $ | 665 | | | Total fair value of stock options vested | | $ | 892 | | | $ | 919 | | | $ | 925 | |
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
17. STOCK-BASED COMPENSATION PLANS – (continued)
Restricted StockThe following table summarizes restricted stock award activity during the years ended December 31, 2015, 20162020 and 2017:2021: | | | | | | | | Shares of Restricted | | Weighted Average | | | Stock | | Grant Date Fair Value | Non-vested - December 31, 2019 | | 68,735 | | $ | 28.04 | Issued | | 30,800 | | | 18.00 | Vested | | (27,045) | | | 28.04 | Forfeited | | — | | | — | Non-vested - December 31, 2020 | | 72,490 | | $ | 23.77 | Issued | | 36,325 | | | 24.00 | Vested | | (30,345) | | | 25.75 | Forfeited | | — | | | — | Non-vested - December 31, 2021 | | 78,470 | | $ | 23.11 |
| | | | | | Non-vested Restricted Stock | | Shares of
Restricted
Stock | | Weighted
Average
Grant Date
Fair Value | | Non-vested – December 31, 2014 | | | 54,050 | | | $ | 26.58 | | | Issued | | | 21,900 | | | | 25.64 | | | Vested | | | (20,700 | ) | | | 25.94 | | | Non-vested – December 31, 2015 | | | 55,250 | | | | 26.45 | | | Issued | | | 26,900 | | | | 25.51 | | | Vested | | | (22,025 | ) | | | 26.26 | | | Forfeited | | | (1,625 | ) | | | 26.30 | | | Non-vested – December 31, 2016 | | | 58,500 | | | $ | 26.09 | | | Issued | | | 30,800 | | | | 27.94 | | | Vested | | | (23,250 | ) | | | 26.54 | | | Non-vested – December 31, 2017 | | | 66,050 | | | $ | 26.79 | |
At December 31, 2017,2021, the Company expected 66,05078,470 shares of restricted stock to vest over a weighted-average remaining contractual term of 2.8 years. These shares had an aggregate intrinsic value of $2.0$1.0 million at December 31, 2017.2021. The aggregate intrinsic value was calculated using the market value of the Company’s stock on December 29, 201731, 2021 of $29.72$23.94 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 $167,000$184,000 in 2017, $230,0002021 and $127,000 in 2016, and $221,000 in 2015. 18. QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands, except per share amounts)2020.
| | | | | | | | | | | | 2017 | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Year | | Net sales | | $ | 69,120 | | | $ | 57,453 | | | $ | 76,906 | | | $ | 80,270 | | | $ | 283,749 | | | Gross earnings | | $ | 25,228 | | | $ | 22,090 | | | $ | 29,468 | | | $ | 33,907 | | | $ | 110,693 | | | Net earnings attributable to Weyco Group, Inc. | | $ | 2,217 | | | $ | 1,257 | | | $ | 4,934 | | | $ | 8,083 | | | $ | 16,491 | | Net earnings per share:
| | | | | | | | | | | | | | | | | | | | | | Basic | | $ | 0.21 | | | $ | 0.12 | | | $ | 0.49 | | | $ | 0.79 | | | $ | 1.61 | | | Diluted | | $ | 0.21 | | | $ | 0.12 | | | $ | 0.48 | | | $ | 0.79 | | | $ | 1.60 | |
| | | | | | | | | | | | 2016 | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Year | | Net sales | | $ | 78,900 | | | $ | 56,867 | | | $ | 79,069 | | | $ | 82,097 | | | $ | 296,933 | | | Gross earnings | | $ | 27,127 | | | $ | 22,291 | | | $ | 29,322 | | | $ | 33,303 | | | $ | 112,043 | | | Net earnings attributable to Weyco Group, Inc. | | $ | 2,687 | | | $ | 1,000 | | | $ | 4,600 | | | $ | 8,185 | | | $ | 16,472 | | Net earnings per share:
| | | | | | | | | | | | | | | | | | | | | | Basic | | $ | 0.25 | | | $ | 0.09 | | | $ | 0.44 | | | $ | 0.79 | | | $ | 1.57 | | | Diluted | | $ | 0.25 | | | $ | 0.09 | | | $ | 0.44 | | | $ | 0.78 | | | $ | 1.56 | |
TABLE OF CONTENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
19.20. VALUATION AND QUALIFYING ACCOUNTS
| | | | | | | | | Deducted from Assets | | | | Doubtful Accounts | | Returns and Allowances | | Total | | | | (Dollars in thousands) | | 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 | | | Add – Additions charged to earnings | | | 76 | | | | 3,290 | | | | 3,366 | | | Deduct – Charges for purposes for which reserves were established | | | (90 | ) | | | (2,829 | ) | | | (2,919 | ) | | Deduct – Adjustment to reserve | | | (188 | ) | | | — | | | | (188 | ) | | BALANCE, DECEMBER 31, 2016 | | $ | 974 | | | $ | 1,542 | | | $ | 2,516 | | | Add – Additions charged to earnings | | | 621 | | | | 3,865 | | | | 4,486 | | | Deduct – Charges for purposes for which reserves were established | | | (624 | ) | | | (4,072 | ) | | | (4,696 | ) | | Deduct – Adjustment to reserve | | | (100 | ) | | | — | | | | (100 | ) | | BALANCE, DECEMBER 31, 2017 | | $ | 871 | | | $ | 1,335 | | | $ | 2,206 | |
20. SUBSEQUENT EVENTS
| | | | | | | | | | | | Deducted from Assets | | | Doubtful | | Returns and | | | | | | Accounts | | Allowances | | Total | | | | (Dollars in thousands) | BALANCE, DECEMBER 31, 2019 | | $ | 986 | | $ | 1,423 | | $ | 2,409 | Add - Additions charged to earnings | | | 5,289 | | | 3,380 | | | 8,669 | Deduct - Charges for purposes for which reserves were established | | | (4,850) | | | (3,562) | | | (8,412) | BALANCE, DECEMBER 31, 2020 | | $ | 1,425 | | $ | 1,241 | | $ | 2,666 | Add - Additions charged to earnings | | | 198 | | | 2,997 | | | 3,195 | Deduct - Charges for purposes for which reserves were established | | | (316) | | | (3,478) | | | (3,794) | BALANCE, DECEMBER 31, 2021 | | $ | 1,307 | | $ | 760 | | $ | 2,067 |
The Company has evaluated subsequent events through March 13, 2018, the date these financial statements were issued. No significant subsequent events have occurred through this date requiring adjustment to the financial statements or disclosures.
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.” Reports of Independent Registered Public Accounting Firm The attestation report from the Company’s independent registered public accounting firm required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Report of Independent Registered Public Accounting Firm.” 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) and 15d-15(f)) that occurred during the quarter or year ended December 31, 20172021 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 CONTENTSITEM 9CDISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable. PART III
ITEM 10DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information required by this Item is set forth within Part I, “Executive Officers of“Information About the Registrant”Company’s Executive Officers” 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 8, 20183, 2022 (the “2018“2022 Proxy Statement”) in sections entitled “Proposal One: Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,Delinquencies,” “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 20182022 Proxy Statement in sections entitled “Compensation Discussion“Summary Compensation Table,” “Outstanding Equity Awards at December 31, 2021,” “Pension Benefits,” “Employment Contracts and AnalysisPotential Payments Upon Termination or Change of Control” and Executive Compensation,” “Director Compensation,” and “Corporate Governance and Compensation Committee Interlocks and Insider Participation,” and is incorporated herein by reference. ITEM 12SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information required by this Item is set forth in the Company’s 20182022 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, 2017:2021: | | | | | | | | | | | | | | | | | | | | (a) | | (b) | | (c) | | | | Number of | | Weighted-Average | | Number of Securities Remaining | | | | Securities to be Issued Upon | | Exercise Price of | | Available for Future Issuance Under | | | | Exercise of Outstanding | | Outstanding Options, | | Equity Compensation Plans (Excluding | | 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)) | | Options, Warrants and Rights | | Warrants and Rights | | Securities Reflected in Column (a)) | | Equity compensation plans approved by shareholders | | | 1,502,493 | | | $ | 26.57 | | | | 1,258,000 | | | 1,279,833 | | $ | 25.44 | | 439,645 | | Equity compensation plans not approved by shareholders | | | — | | | | — | | | | — | | | — | | | — | | — | | Total | | | 1,502,493 | | | $ | 26.57 | | | | 1,258,000 | | | 1,279,833 | | $ | 25.44 | | 439,645 |
ITEM 13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information required by this Item is set forth in the Company’s 20182022 Proxy Statement in sections entitled “Transactions with Related Persons” and “Director Independence,” and is incorporated herein by reference.
ITEM 14PRINCIPAL ACCOUNTING FEES AND SERVICES Information required by this Item is set forth in the Company’s 20182022 Proxy Statement in the section entitled “Audit and Non-Audit Fees,” and is incorporated herein by reference.
TABLE OF CONTENTS
PART IV
ITEM 15EXHIBITS, 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 20172021 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. |
| | | | | | | Exhibit | | Description | | Incorporation Herein By Reference To | | Filed Herewith | 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 of Weyco Group, Inc. as amended and restated as of March 9, 2021 | | Exhibit 3.1 to Form 8-K filed March 9, 2021 | | | | | | | | | | 4.1 | | Description of Securities of the Registrant | | Exhibit 4.1 to Form 10-K for Year Ended December 31, 2019 | | | | | | | | | | 10.3* | | Consulting Agreement - Thomas W. Florsheim, dated December 28, 2000 | | Exhibit 10.1 to Form 10-K for Year Ended December 31, 2001 | | | | | | | | | | 10.4* | | Employment Agreement (Renewal) - Thomas W. Florsheim, Jr., dated January 1, 2020 | | Exhibit 10.4 to Form 10-K for Year Ended December 31, 2019 | | | | | | | | | | 10.5* | | Employment Agreement (Renewal) - John W. Florsheim, dated January 1, 2020 | | Exhibit 10.5 to Form 10-K for Year Ended December 31, 2019 | | | | | | | | | | 10.6* | | Excess Benefits Plan - Amended Effective as of January 1, 2008, and further Amended Effective December 31, 2016 | | Exhibit 10.8 to Form 10-K for Year Ended December 31, 2016 | | | | | | | | | | 10.7* | | Pension Plan — Amended and Restated Effective January 1, 2006 | | Exhibit 10.7 to Form 10-K for Year Ended December 31, 2006 | | | | | | | | | | 10.7a* | | Second Amendment to Weyco Group, Inc. Pension Plan, dated November 7, 2016 | | Exhibit 10.2 to Form 10-Q for the Quarter Ended September 30, 2016 | | | | | | | | | | 10.8* | | Deferred Compensation Plan - Amended Effective as of January 1, 2008, and further Amended Effective December 31, 2016 | | Exhibit 10.10 to Form 10-K for Year Ended December 31, 2016 | | | | | | | | | | 10.9 | | First Amendment to Credit Agreement, dated as of November 4, 2021, between Weyco Group, Inc. and Associated Bank, National Association | | Exhibit 10.1 to Form 10-Q for Quarter Ended September 30, 2021 | | | | | | | | | | 10.10 | | Amended and Restated Revolving Loan Note, dated November 4, 2021, between Weyco Group, Inc. and Associated Bank, National Association | | Exhibit 10.2 to Form 10-Q for Quarter Ended September 30, 2021 | | | | | | | | | | 10.11 | | Security Agreement with Associated Bank, dated November 4, 2020 | | Exhibit 10.3 to Form 10-Q for Quarter Ended September 30, 2020 | | | | | | | | | | 10.12* | | 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 | | | | | |
| | | | | | | Exhibit | | Description | | Incorporation Herein By Reference To | | Filed Herewith | | | | | | | | 10.14* | | Weyco Group, Inc. 2014 Incentive Plan | | Appendix A to the Registrant’s Proxy Statement Schedule 14A for the Annual Meeting of Shareholders held on May 6, 2014 | | | | | | | | | | 10.15* | | Weyco Group, Inc. 2017 Incentive Plan | | Appendix A to the Registrant’s Proxy Statement Schedule 14A for the Annual Meeting of Shareholders held on May 9, 2017 | | | | | | | | | | 10.15a* | | Form of incentive stock option agreement for the Weyco Group, Inc. 2017 Incentive Plan | | Exhibit 10.21a to Form 10-Q for Quarter Ended September 30, 2017 | | | | | | | | | | 10.15b* | | Form of non-qualified stock option agreement for the Weyco Group, Inc. 2017 Incentive Plan | | Exhibit 10.21b to Form 10-Q for Quarter Ended September 30, 2017 | | | | | | | | | | 10.15c* | | Form of restricted stock agreement for the Weyco Group, Inc. 2017 Incentive Plan | | Exhibit 10.21c to Form 10-Q for Quarter Ended September 30, 2017 | | | | | | | | | | 21 | | Subsidiaries of the Registrant | | | | X | | | | | | | | 23.1 | | Consent of Independent Registered Public Accounting Firm | | | | X | | | | | | | | 24 | | Power of Attorney | | Signatures page | | 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, 2021 formatted in iXBRL ( Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2021 and 2020; (ii) Consolidated Statements of Earnings for the years ended December 31, 2021 and 2020; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020; (iv) Consolidated Statements of Equity for the years ended December 31, 2021 and 2020; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020; (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail. | | | | X | | | | | | | | 104 | | The cover page from the Company's Annual Report on Form 10-K for the year-ended December 31, 2021, formatted in iXBRL (included in Exhibit 101). | | | | X |
* Management contract or compensatory plan or arrangement
ITEM 16FORM 10-K SUMMARY None | | | | | | | 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, 2017 | | Exhibit 10.6 to Form 10-K for Year Ended December 31, 2016 | | | 10.7* | | Employment Agreement (Renewal) — John W. Florsheim, dated January 1, 2017 | | Exhibit 10.7 to Form 10-K for Year Ended December 31, 2016 | |
| | | | | | | Exhibit | | Description | | Incorporation Herein By Reference To | | Filed Herewith | 10.8* | | Excess Benefits Plan — Amended Effective as of January 1, 2008, and further Amended Effective December 31, 2016 | | Exhibit 10.8 to Form 10-K for Year Ended December 31, 2016 | | | 10.9* | | Pension Plan — Amended and Restated Effective January 1, 2006 | | Exhibit 10.7 to Form 10-K for Year Ended December 31, 2006 | | | 10.9a* | | Second Amendment to Weyco Group, Inc. Pension Plan, dated November 7, 2016 | | Exhibit 10.2 to Form 10-Q for the Quarter Ended September 30, 2016 | | | 10.10* | | Deferred Compensation Plan — Amended Effective as of January 1, 2008, and further Amended Effective December 31, 2016 | | Exhibit 10.10 to Form 10-K for Year Ended December 31, 2016 | | | 10.11 | | Line of Credit Renewal Letter with PNC Bank, N.A., dated November 2, 2017 | | Exhibit 10.1 to Form 10-Q for Quarter Ended September 30, 2017 | | | 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 | | PNC Bank Committed Line of Credit Note, dated November 5, 2013 | | Exhibit 10.2 to Form 10-Q for Quarter Ended 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 | | | 10.19* | | 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 | | | 10.20* | | Weyco Group, Inc. 2014 Incentive Plan | | Appendix A to the Registrant’s Proxy Statement Schedule 14A for the Annual Meeting of Shareholders held on May 6, 2014 | | | 10.21* | | Weyco Group, Inc. 2017 Incentive Plan | | Appendix A to the Registrant’s Proxy Statement Schedule 14A for the Annual Meeting of Shareholders held on May 9, 2017 | | | 10.21a* | | Form of incentive stock option agreement for the Weyco Group, Inc. 2017 Incentive Plan | | Exhibit 10.21a to Form 10-Q for Quarter Ended September 30, 2017 | | | 10.21b* | | Form of non-qualified stock option agreement for the Weyco Group, Inc. 2017 Incentive Plan | | Exhibit 10.21b to Form 10-Q for Quarter Ended September 30, 2017 | | | 10.21c* | | Form of restricted stock agreement for the Weyco Group, Inc. 2017 Incentive Plan | | Exhibit 10.21c to Form 10-Q for Quarter Ended September 30, 2017 | | | 21 | | Subsidiaries of the Registrant | | | | X |
TABLE OF CONTENTS
| | | | | | | Exhibit | | Description | | Incorporation Herein By Reference To | | Filed Herewith | 23.1 | | Consent of Independent Registered Public Accounting Firm dated March 13, 2018 | | | | 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, 2017 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2017 and 2016; (ii) Consolidated Statements of Earnings for the years ended December 31, 2017, 2016 and 2015; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015; (iv) Consolidated Statements of Equity for the years ended December 31, 2017, 2016 and 2015; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016, and 2015; (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail. | | | | X |
| * | Management contract or compensatory plan or arrangement |
TABLE 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 | | WEYCO GROUP, INC. | March 11, 2022 | | By
/s/ John F. Wittkowske
John F. Wittkowske, Senior Vice President,
Chief Financial Officer and
| | | | Secretary | | March 13, 2018 | |
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 or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her 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 or she 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 13, 2018,12, 2021, 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 | | | | | /s/ Robert Feitler
| | Robert Feitler, Director | | | | | /s/ Cory L. Nettles
| | Cory L. Nettles, Director | | | | | /s/ Frederick P. Stratton, Jr.
| | Frederick P. Stratton, Jr., Director | | |
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