WISCONSIN | WEYCO GROUP, INC.39-0702200 | (Exact name of registrant as specified in its charter) |
WISCONSIN | 39-0702200 | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
333 W. Estabrook Boulevard P. O. Box 1188 Milwaukee, Wisconsin 53201 (Address of principal executive offices) (Zip Code) (414) 908-1600 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class | | Trading Symbol | | Name of each exchange on which registered | Common Stock - $1.00 par value per share | | WEYS | | The Nasdaq Stock Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx⌧ No¨◻ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ◻ Yesx No¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | Large Accelerated Filer ☐ | Accelerated Filer ☒ | Non-Accelerated Filer ☐ | Smaller Reporting Company ☒ | Emerging Growth Company ☐ |
Large Accelerated Filer¨ Accelerated Filerx Non-Accelerated Filer¨ Smaller Reporting Company¨ Emerging Growth Company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act¨◻ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨☐ Nox⌧ As of October 31, 2017,July 30, 2021, there were 10,192,9059,713,659 shares of common stock outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The following consolidated condensed balance sheet as of December 31, 2020, which has been derived from audited financial statements, and the unaudited interim consolidated condensed financial statements have been prepared by Weyco Group, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s latest annual report on Form 10-K. WEYCO GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) | | September 30, | | | December 31, | | | | 2017 | | | 2016 | | | | (Dollars in thousands) | | ASSETS: | | | | | | | | | Cash and cash equivalents | | $ | 6,704 | | | $ | 13,710 | | Marketable securities, at amortized cost | | | 11,354 | | | | 4,601 | | Accounts receivable, net | | | 56,271 | | | | 50,726 | | Income tax receivable | | | 781 | | | | 789 | | Inventories | | | 57,692 | | | | 69,898 | | Prepaid expenses and other current assets | | | 3,010 | | | | 6,203 | | Total current assets | | | 135,812 | | | | 145,927 | | | | | | | | | | | Marketable securities, at amortized cost | | | 18,273 | | | | 21,061 | | Deferred income tax benefits | | | 707 | | | | 660 | | Property, plant and equipment, net | | | 32,371 | | | | 33,717 | | Goodwill | | | 11,112 | | | | 11,112 | | Trademarks | | | 32,978 | | | | 32,978 | | Other assets | | | 22,984 | | | | 22,785 | | Total assets | | $ | 254,237 | | | $ | 268,240 | | | | | | | | | | | LIABILITIES AND EQUITY: | | | | | | | | | Short-term borrowings | | $ | 4,772 | | | $ | 4,268 | | Accounts payable | | | 5,001 | | | | 11,942 | | Dividend payable | | | - | | | | 2,192 | | Accrued liabilities | | | 12,207 | | | | 10,572 | | Total current liabilities | | | 21,980 | | | | 28,974 | | | | | | | | | | | Deferred income tax liabilities | | | 3,096 | | | | 703 | | Long-term pension liability | | | 23,724 | | | | 27,801 | | Other long-term liabilities | | | 2,269 | | | | 2,482 | | | | | | | | | | | Common stock | | | 10,197 | | | | 10,505 | | Capital in excess of par value | | | 53,258 | | | | 50,184 | | Reinvested earnings | | | 147,951 | | | | 157,468 | | Accumulated other comprehensive loss | | | (14,997 | ) | | | (16,569 | ) | Total Weyco Group, Inc. equity | | | 196,409 | | | | 201,588 | | Noncontrolling interest | | | 6,759 | | | | 6,692 | | Total equity | | | 203,168 | | | | 208,280 | | Total liabilities and equity | | $ | 254,237 | | | $ | 268,240 | |
| | | | | | | | | June 30, | | December 31, | | | 2021 | | 2020 | | | | (Dollars in thousands) | ASSETS: | | | | | | | Cash and cash equivalents | | $ | 22,755 | | $ | 32,476 | Investments, at fair value | | | 30,087 | | | 0 | Marketable securities, at amortized cost | | | 1,493 | | | 2,215 | Accounts receivable, net | | | 36,892 | | | 34,631 | Income tax receivable | | | 876 | | | 1,374 | Inventories | | | 33,571 | | | 59,025 | Prepaid expenses and other current assets | | | 4,431 | | | 4,610 | Total current assets | | | 130,105 | | | 134,331 | | | | | | | | Marketable securities, at amortized cost | | | 10,912 | | | 12,800 | Deferred income tax benefits | | | 1,202 | | | 1,235 | Property, plant and equipment, net | | | 29,984 | | | 30,759 | Operating lease right-of-use assets | | | 8,698 | | | 9,613 | Goodwill | | | 12,219 | | | 11,112 | Trademarks | | | 34,768 | | | 32,868 | Other assets | | | 24,326 | | | 24,001 | Total assets | | $ | 252,214 | | $ | 256,719 | | | | | | | | LIABILITIES AND EQUITY: | | | | | | | Accounts payable | | $ | 4,936 | | $ | 8,444 | Operating lease liabilities | | | 2,857 | | | 4,245 | Accrued liabilities | | | 11,294 | | | 11,656 | Total current liabilities | | | 19,087 | | | 24,345 | | | | | | | | Deferred income tax liabilities | | | 2,899 | | | 2,914 | Long-term pension liability | | | 32,849 | | | 33,534 | Operating lease liabilities | | | 7,662 | | | 7,734 | Other long-term liabilities | | | 1,582 | | | 267 | Total liabilities | | | 64,079 | | | 68,794 | | | | | | | | Common stock | | | 9,714 | | | 9,797 | Capital in excess of par value | | | 68,050 | | | 67,178 | Reinvested earnings | | | 137,978 | | | 138,955 | Accumulated other comprehensive loss | | | (27,607) | | | (28,005) | Total equity | | | 188,135 | | | 187,925 | Total liabilities and equity | | $ | 252,214 | | $ | 256,719 |
The accompanying notes to consolidated condensed financial statements (unaudited) are an integral part of these financial statements. WEYCO GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED) | | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | | (In thousands, except per share amounts) | | | | | | | | | | | | | | | Net sales | | $ | 76,906 | | | $ | 79,069 | | | $ | 203,479 | | | $ | 214,836 | | Cost of sales | | | 47,438 | | | | 49,747 | | | | 126,693 | | | | 136,096 | | Gross earnings | | | 29,468 | | | | 29,322 | | | | 76,786 | | | | 78,740 | | | | | | | | | | | | | | | | | | | Selling and administrative expenses | | | 21,666 | | | | 21,568 | | | | 63,635 | | | | 64,751 | | Earnings from operations | | | 7,802 | | | | 7,754 | | | | 13,151 | | | | 13,989 | | | | | | | | | | | | | | | | | | | Interest income | | | 193 | | | | 190 | | | | 572 | | | | 584 | | Interest expense | | | - | | | | (61 | ) | | | (7 | ) | | | (228 | ) | Other expense, net | | | (53 | ) | | | (311 | ) | | | (243 | ) | | | (850 | ) | | | | | | | | | | | | | | | | | | Earnings before provision for income taxes | | | 7,942 | | | | 7,572 | | | | 13,473 | | | | 13,495 | | | | | | | | | | | | | | | | | | | Provision for income taxes | | | 3,022 | | | | 2,871 | | | | 5,135 | | | | 5,084 | | | | | | | | | | | | | | | | | | | Net earnings | | | 4,920 | | | | 4,701 | | | | 8,338 | | | | 8,411 | | | | | | | | | | | | | | | | | | | Net (losses) earnings attributable to noncontrolling interest | | | (14 | ) | | | 101 | | | | (70 | ) | | | 124 | | | | | | | | | | | | | | | | | | | Net earnings attributable to Weyco Group, Inc. | | $ | 4,934 | | | $ | 4,600 | | | $ | 8,408 | | | $ | 8,287 | | | | | | | | | | | | | | | | | | | Weighted average shares outstanding | | | | | | | | | | | | | | | | | Basic | | | 10,160 | | | | 10,461 | | | | 10,299 | | | | 10,556 | | Diluted | | | 10,218 | | | | 10,516 | | | | 10,360 | | | | 10,605 | | | | | | | | | | | | | | | | | | | Earnings per share | | | | | | | | | | | | | | | | | Basic | | $ | 0.49 | | | $ | 0.44 | | | $ | 0.82 | | | $ | 0.79 | | Diluted | | $ | 0.48 | | | $ | 0.44 | | | $ | 0.81 | | | $ | 0.78 | | | | | | | | | | | | | | | | | | | Cash dividends declared (per share) | | $ | 0.22 | | | $ | 0.21 | | | $ | 0.65 | | | $ | 0.62 | | | | | | | | | | | | | | | | | | | Comprehensive income | | $ | 5,452 | | | $ | 5,218 | | | $ | 10,251 | | | $ | 10,400 | | | | | | | | | | | | | | | | | | | Comprehensive income attributable to noncontrolling interest | | | 25 | | | | 235 | | | | 271 | | | | 376 | | | | | | | | | | | | | | | | | | | Comprehensive income attributable to Weyco Group, Inc. | | $ | 5,427 | | | $ | 4,983 | | | $ | 9,980 | | | $ | 10,024 | |
| | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | 2021 | | 2020 | | 2021 | | 2020 | | | | (In thousands, except per share amounts) | | | | | | | | | | | | | | Net sales | | $ | 57,564 | | $ | 16,646 | | $ | 104,464 | | $ | 80,230 | Cost of sales | | | 34,894 | | | 9,155 | | | 62,489 | | | 49,562 | Gross earnings | | | 22,670 | | | 7,491 | | | 41,975 | | | 30,668 | | | | | | | | | | | | | | Selling and administrative expenses | | | 18,128 | | | 20,504 | | | 35,799 | | | 42,340 | Earnings (loss) from operations | | | 4,542 | | | (13,013) | | | 6,176 | | | (11,672) | | | | | | | | | | | | | | Interest income | | | 188 | | | 138 | | | 319 | | | 287 | Interest expense | | | (74) | | | (2) | | | (81) | | | (53) | Other income (expense), net | | | 189 | | | (252) | | | 327 | | | 155 | | | | | | | | | | | | | | Earnings (loss) before provision (benefit) for income taxes | | | 4,845 | | | (13,129) | | | 6,741 | | | (11,283) | | | | | | | | | | | | | | Provision (benefit) for income taxes | | | 1,025 | | | (4,246) | | | 1,596 | | | (3,562) | | | | | | | | | | | | | | Net earnings (loss) | | $ | 3,820 | | $ | (8,883) | | $ | 5,145 | | $ | (7,721) | | | | | | | | | | | | | | Weighted average shares outstanding | | | | | | | | | | | | | Basic | | | 9,654 | | | 9,745 | | | 9,667 | | | 9,763 | Diluted | | | 9,686 | | | 9,745 | | | 9,686 | | | 9,763 | | | | | | | | | | | | | | Earnings (loss) per share | | | | | | | | | | | | | Basic | | $ | 0.39 | | $ | (0.91) | | $ | 0.53 | | $ | (0.79) | Diluted | | $ | 0.39 | | $ | (0.91) | | $ | 0.53 | | $ | (0.79) | | | | | | | | | | | | | | Cash dividends declared (per share) | | $ | 0.24 | | $ | 0.24 | | $ | 0.48 | | $ | 0.48 | | | | | | | | | | | | | | Comprehensive income (loss) | | $ | 4,178 | | $ | (7,149) | | $ | 5,543 | | $ | (8,407) |
The accompanying notes to consolidated condensed financial statements (unaudited) are an integral part of these financial statements. WEYCO GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) | | Nine Months Ended September 30, | | | | 2017 | | | 2016 | | | | (Dollars in thousands) | | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | Net earnings | | $ | 8,338 | | | $ | 8,411 | | Adjustments to reconcile net earnings to net cash provided by operating activities - | | | | | | | | | Depreciation | | | 2,971 | | | | 2,708 | | Amortization | | | 265 | | | | 288 | | Bad debt expense | | | 350 | | | | 96 | | Deferred income taxes | | | 2,192 | | | | 1,537 | | Net foreign currency transaction gains | | | (61 | ) | | | (389 | ) | Stock-based compensation | | | 1,174 | | | | 1,121 | | Pension contributions | | | (4,000 | ) | | | (2,400 | ) | Pension expense | | | 746 | | | | 2,500 | | Increase in cash surrender value of life insurance | | | (250 | ) | | | (250 | ) | Changes in operating assets and liabilities - | | | | | | | | | Accounts receivable | | | (5,703 | ) | | | (3,714 | ) | Inventories | | | 12,195 | | | | 26,641 | | Prepaid expenses and other assets | | | 3,167 | | | | 800 | | Accounts payable | | | (6,838 | ) | | | (7,699 | ) | Accrued liabilities and other | | | 1,879 | | | | (1,023 | ) | Accrued income taxes | | | 22 | | | | (839 | ) | Excess tax benefits from stock-based compensation | | | (30 | ) | | | - | | Net cash provided by operating activities | | | 16,417 | | | | 27,788 | | | | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | Purchases of marketable securities | | | (14,719 | ) | | | (3,605 | ) | Proceeds from maturities of marketable securities | | | 10,710 | | | | 4,190 | | Life insurance premiums paid | | | (155 | ) | | | (155 | ) | Purchases of property, plant and equipment | | | (1,406 | ) | | | (4,872 | ) | Net cash used for investing activities | | | (5,570 | ) | | | (4,442 | ) | | | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | Cash dividends paid | | | (8,877 | ) | | | (8,678 | ) | Cash dividends paid to noncontrolling interest of subsidiary | | | (204 | ) | | | (170 | ) | Shares purchased and retired | | | (11,621 | ) | | | (9,368 | ) | Proceeds from stock options exercised | | | 2,013 | | | | 585 | | Taxes paid related to the net share settlement of equity awards | | | (51 | ) | | | - | | Payment of contingent consideration | | | - | | | | (5,217 | ) | Proceeds from bank borrowings | | | 20,651 | | | | 91,729 | | Repayments of bank borrowings | | | (20,147 | ) | | | (95,568 | ) | Excess tax benefits from stock-based compensation | | | - | | | | 3 | | Net cash used for financing activities | | | (18,236 | ) | | | (26,684 | ) | | | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | 383 | | | | 252 | | | | | | | | | | | Net decrease in cash and cash equivalents | | $ | (7,006 | ) | | $ | (3,086 | ) | | | | | | | | | | CASH AND CASH EQUIVALENTS at beginning of period | | | 13,710 | | | | 17,926 | | | | | | | | | | | CASH AND CASH EQUIVALENTS at end of period | | $ | 6,704 | | | $ | 14,840 | | | | | | | | | | | SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | | | | | Income taxes paid, net of refunds | | $ | 2,829 | | | $ | 4,083 | | Interest paid | | $ | 7 | | | $ | 228 | |
| | | | | | | | | Six Months Ended June 30, | | | 2021 | | 2020 | | | | (Dollars in thousands) | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | Net earnings (loss) | | $ | 5,145 | | $ | (7,721) | Adjustments to reconcile net earnings (loss) to net cash provided by operating activities - | | | | | | | Depreciation | | | 1,246 | | | 1,493 | Amortization | | | 115 | | | 151 | Bad debt expense | | | 48 | | | 3,615 | Deferred income taxes | | | (112) | | | 281 | Net foreign currency transaction (gains) losses | | | (127) | | | 3 | Share-based compensation expense | | | 872 | | | 701 | Pension expense | | | 0 | | | 230 | Increase in cash surrender value of life insurance | | | (189) | | | (115) | Changes in operating assets and liabilities, net of effects from acquisition - | | | | | | | Accounts receivable | | | (2,203) | | | 21,200 | Inventories | | | 26,240 | | | 5,248 | Prepaid expenses and other assets | | | 49 | | | 2,770 | Accounts payable | | | (3,527) | | | (7,347) | Accrued liabilities and other | | | (955) | | | (3,802) | Accrued income taxes | | | 501 | | | (4,063) | Net cash provided by operating activities | | | 27,103 | | | 12,644 | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | Acquisition of business | | | (2,612) | | | 0 | Proceeds from maturities of marketable securities | | | 2,595 | | | 6,010 | Purchases of investment securities | | | (30,087) | | | 0 | Life insurance premiums paid | | | (111) | | | (155) | Purchases of property, plant and equipment | | | (404) | | | (2,695) | Net cash (used for) provided by investing activities | | | (30,619) | | | 3,160 | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | Cash dividends paid | | | (4,602) | | | (7,033) | Shares purchased and retired | | | (1,535) | | | (1,304) | Proceeds from bank borrowings | | | 0 | | | 11,883 | Repayments of bank borrowings | | | 0 | | | (18,932) | Net cash used for financing activities | | | (6,137) | | | (15,386) | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | (68) | | | (43) | | | | | | | | Net (decrease) increase in cash and cash equivalents | | $ | (9,721) | | $ | 375 | | | | | | | | CASH AND CASH EQUIVALENTS at beginning of period | | | 32,476 | | | 9,799 | | | | | | | | CASH AND CASH EQUIVALENTS at end of period | | $ | 22,755 | | $ | 10,174 | | | | | | | | SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | | | Income taxes paid, net of refunds | | $ | 1,250 | | $ | 572 | Interest paid | | $ | 81 | | $ | 53 |
The accompanying notes to consolidated condensed financial statements (unaudited) are an integral part of these financial statements. NOTES: 1.Financial Statements In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three and ninesix months ended SeptemberJune 30, 2017,2021, may not necessarily be indicative of the results for the full year. | 2. | New Accounting Pronouncements |
Use of Estimates In March 2017,The preparation of financial statements in conformity with accounting principles generally accepted in the FinancialUnited States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses 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 that impact the reported amounts and disclosures in the consolidated financial statements and accompanying notes.
2. Forsake Acquisition On June 7, 2021, the Company acquired substantially all of the operating assets and certain liabilities of Forsake, Inc. (“Forsake”), a distributor of outdoor footwear, under the brand name “Forsake.” The principal assets acquired were inventory, accounts receivable, and intellectual property, including the Forsake 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 is approximately $1.4 million in total. The $2.6 million purchase price, which was funded with the Company’s available cash , is subject to working capital adjustments through October 5, 2021. Working capital adjustments, principally related to the collectability of accounts receivable, are not expected to be material. 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 recorded its preliminary purchase price allocation during the second quarter of 2021 based upon its estimates of the fair value of the acquired assets and assumed liabilities at that time. The fair values assigned to the assets acquired and liabilities assumed as of the acquisition date are as follows: | | | | Accounts receivable, net | | $ | 157 | Inventories | | | 755 | Prepaid expenses and other current assets | | | 68 | Property, plant and equipment, net | | | 17 | Goodwill | | | 1,107 | Trademark | | | 1,900 | Accrued liabilities | | | (35) | | | $ | 3,969 |
The Company recorded $3.0 million of intangible assets, including $1.1 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. 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 fair values above are preliminary for up to one year from the date of acquisition as they are subject to measurement period adjustments as new information is obtained about facts and circumstances that existed as of the acquisition date. The Company does not expect any material changes to the preliminary purchase price allocation summarized above, although it can make no assurances. The accompanying consolidated condensed financial statements include the results of Forsake from the date of acquisition through June 30, 2021, although such results were not material for the quarter. Pro forma financial information is not presented as the effects of this acquisition are not material to the Company's results of operations or financial position. 3.New Accounting Standards Board (“FASB”) issuedPronouncements Recently Adopted On January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2017-072019-12 “ImprovingSimplifying the Presentation of Net Periodic Pension Cost and Net Periodic Post Retirement Benefit Cost”Accounting for Income Taxes(“ASU 2017-07”). This new standard requires that employers disaggregateguidance removes certain exceptions related to the service cost component fromapproach 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 componentsareas of net periodic pension cost inAccounting Standards Codification (“ASC”) 740. The adoption of this ASU did not have a material impact on the income statement. The service cost component should be included in the same line item 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, 2017Company’s consolidated financial statements 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 Condensed Statements of Earnings and Comprehensive Income (Unaudited). See Note 8. related disclosures. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provided optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides 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 discontinued 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 No. 2016-09, "2016-13, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting”Financial Instruments – Credit Losses: Measurements of Credit Losses on Financial Instruments (“ASU 2016-09”). This new standard simplifies several aspectsASU modifies the measurement of the accounting for share-based payment transactions,expected credit losses of certain financial instruments, and applies to financial assets measured at amortized cost, including the accounting for income taxes, forfeitures,loans, held-to-maturity debt securities, net investments in leases, and statutory tax withholding requirements,trade accounts receivable as well as specifies the classification of certain cash flows associated with share-based payment transactions within the statements of cash flows.off-balance sheet credit exposures, such as loan commitments. The Companyguidance must be adopted ASU 2016-09 effective January 1, 2017. The adoption of this standard resultedusing a modified retrospective transition method through a cumulative-effect adjustment to retained earnings/(deficit) in the following: | · | The prospective recognition of excess tax benefits or deficiencies within the provision for income taxes in the income statement. Prior to the adoption of the new standard, these amounts would have been recorded within capital in excess of par value on the balance sheet. This change may create volatility in the Company’s future effective tax rate. |
| · | Accounting rules require the use of the treasury stock method when calculating potential common shares used to determine diluted earnings per share. The new standard requires that the calculation of diluted earnings per share under the treasury stock method exclude the amount of excess tax benefits that would have been recognized within capital in excess of par value on the balance sheet. This change was adopted prospectively and had an immaterial impact on the Company’s weighted average diluted shares outstanding for the quarter and year-to-date periods. |
| · | The new standard requires that excess tax benefits from share-based payment awards be reported as operating activities in the cash flow statement. Previously, these cash flows were included in financing activities. This change was adopted prospectively, and had an immaterial impact on the Consolidated Condensed Statements of Cash Flows (Unaudited) for the year-to-date period. |
| · | The new standard requires that cash flows related to employee taxes paid for withheld shares be presented as a financing activity in the cash flow statement. Previously, accounting rules did not specify where such cash flows should be reported. This change was retrospectively applied to all periods presented, and had an immaterial impact on the Consolidated Condensed Statements of Cash Flows (Unaudited) for the year-to-date period. |
The Company elected not to change its policy on accounting for forfeitures, and will continue to estimate forfeitures expected to occur to determine the amountperiod of stock-based compensation expense recognized in each period. Finally, the Company will continue to allow its employees to withhold up to the minimum statutory withholding requirements, as allowed under the new standard.
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. 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. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The standard allows the Company to transition to the new model using either a full or modified retrospective approach.adoption. This guidanceASU will be effective for the Company’s interim and annual periods beginning January 1, 2018.
The Company plans to complete an assessment of its revenue streams during the fourth quarter of 2017. Based on its assessment to date, the Company does not expect that the adoption of this new standard will have a material impact on its consolidated financial statements. The Company is continuing its assessment, which may identify other impacts. The Company currently plans to adopt the new standard in the first quarter of 2018.2023. The Company is currently planning to adopt this standard using the modified retrospective approach.
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 assessingevaluating the impact of the adoption of this standardASU will have on its consolidated financial statements.statements and related disclosures.
Certain prior year amounts in the Consolidated Condensed Statements of 4.Earnings and Comprehensive Income (Unaudited) were reclassified to conform to current year presentation. For the three and nine months ended September 30, 2016, the Company reclassified $424,000 and $1,272,000, 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. These reclassifications had no effect on previously reported net earnings or equity.
Per Share The following table sets forth the computation of basic and diluted earnings per share: | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | | 2021 | | 2020 | | 2021 | | 2020 | | | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | | | (In thousands, except per share amounts) | | | | | | (In thousands, except per share amounts) | Numerator: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net earnings attributable to Weyco Group, Inc. | | $ | 4,934 | | | $ | 4,600 | | | $ | 8,408 | | | $ | 8,287 | | | | | | | | | | | | | | | | | | | | | Net earnings (loss) | | | $ | 3,820 | | $ | (8,883) | | $ | 5,145 | | $ | (7,721) | | | | | | | | | | | | | | | Denominator: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic weighted average shares outstanding | | | 10,160 | | | | 10,461 | | | | 10,299 | | | | 10,556 | | | | 9,654 | | | 9,745 | | | 9,667 | | | 9,763 | Effect of dilutive securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Employee stock-based awards | | | 58 | | | | 55 | | | | 61 | | | | 49 | | | Employee share-based awards | | | | 32 | | | 0 | | | 19 | | | 0 | Diluted weighted average shares outstanding | | | 10,218 | | | | 10,516 | | | | 10,360 | | | | 10,605 | | | | 9,686 | | | 9,745 | | | 9,686 | | | 9,763 | | | | | | | | | | | | | | | | | | | Basic earnings per share | | $ | 0.49 | | | $ | 0.44 | | | $ | 0.82 | | | $ | 0.79 | | | | | | | | | | | | | | | | | | | | | Diluted earnings per share | | $ | 0.48 | | | $ | 0.44 | | | $ | 0.81 | | | $ | 0.78 | | | | | | | | | | | | | | | | | Basic earnings (loss) per share | | | $ | 0.39 | | $ | (0.91) | | $ | 0.53 | | $ | (0.79) | | | | | | | | | | | | | | | Diluted earnings (loss) per share | | | $ | 0.39 | | $ | (0.91) | | $ | 0.53 | | $ | (0.79) |
Diluted weighted average shares outstanding for the three months ended SeptemberJune 30, 2017, exclude2021, excluded anti-dilutive stock-basedshare-based awards totaling 1,116,325937,000 shares of common stock at a weighted average price of $26.49.$26.83. Diluted weighted average shares outstanding for the ninesix months ended SeptemberJune 30, 2017, exclude2021, excluded anti-dilutive stock-basedshare-based awards totaling 844,0361,048,000 shares of common stock at a weighted average price of $26.93.$25.85. The three and six months ended June 30, 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 the three and six months ended SeptemberJune 30, 2016, exclude2020, excluded anti-dilutive stock-basedshare-based awards totaling 1,232,0001.2 million shares of common stock at a weighted average price of $26.14. Diluted weighted average shares outstanding for$26.74. 5.Investments Investments, at fair value During the ninefirst six months ended September 30, 2016, exclude anti-dilutive stock-based awards totaling 924,161 shares of common stock2021, the Company invested $30.1 million of cash in highly liquid fixed income funds. The Company classifies these investments as trading securities and reports them at fair value. There were 0 significant unrealized gains or losses on these investments in the first half of 2021. The fair value measurements of these investments are based on quoted market prices in active markets, and thus represent a weighted average price of $26.78.level 1 valuation as defined by ASC 820. Marketable securities, at amortized cost The Company also invests in marketable securities. As noted in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2020, all of the Company’s marketable securities are classified as held-to-maturity securities and reported at amortized cost pursuant to Accounting Standards Codification (“ASC”)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’sCompany's marketable securities as of SeptemberJune 30, 2017,2021, and December 31, 2016.2020. | | | | | | | | | | | | | | | | | June 30, 2021 | | December 31, 2020 | | | | Amortized | | Market | | Amortized | | Market | | | | Cost | | Value | | Cost | | Value | | | September 30, 2017 | | | December 31, 2016 | | | | | Amortized | | Market | | Amortized | | Market | | | | | Cost | | | Value | | | Cost | | | Value | | | | | (Dollars in thousands) | | | | | | (Dollars in thousands) | Municipal bonds: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Current | | $ | 11,354 | | | $ | 11,380 | | | $ | 4,601 | | | $ | 4,610 | | | $ | 1,493 | | $ | 1,505 | | $ | 2,215 | | $ | 2,249 | Due from one through five years | | | 9,819 | | | | 10,157 | | | | 12,133 | | | | 12,486 | | | | 6,666 | | | 7,003 | | | 7,420 | | | 7,830 | Due from six through ten years | | | 5,789 | | | | 6,050 | | | | 7,705 | | | | 7,804 | | | | 2,635 | | | 3,106 | | | 3,057 | | | 3,608 | Due from eleven through twenty years | | | 2,665 | | | | 2,763 | | | | 1,223 | | | | 1,222 | | | | 1,611 | | | 1,764 | | | 2,323 | | | 2,547 | Total | | $ | 29,627 | | | $ | 30,350 | | | $ | 25,662 | | | $ | 26,122 | | | $ | 12,405 | | $ | 13,378 | | $ | 15,015 | | $ | 16,234 |
The unrealized gains and losses on marketable securities at SeptemberJune 30, 2017,2021, and at December 31, 2016,2020, were as follows: | | September 30, 2017 | | | December 31, 2016 | | | | Unrealized | | | Unrealized | | | Unrealized | | | Unrealized | | | | Gains | | | Losses | | | Gains | | | Losses | | | | (Dollars in thousands) | | Municipal bonds | | $ | 759 | | | $ | (36 | ) | | $ | 546 | | | $ | (86 | ) |
| | | | | | | | | | | | | | | June 30, 2021 | | December 31, 2020 | | | Unrealized | | Unrealized | | Unrealized | | Unrealized | | | Gains | | Losses | | Gains | | Losses | | | | (Dollars in thousands) | Municipal bonds | | $ | 973 | | $ | 0 | | $ | 1,219 | | $ | 0 |
The estimated market values provided are level 2 valuations as defined by ASC 820,Fair Value Measurements and Disclosures (“ASC 820”). The Company reviewed its portfolio of investments as of SeptemberJune 30, 20172021, and determined that no other-than-temporary market value impairment exists. 6.Intangible Assets The Company’s indefinite-lived and amortizable intangible assets as recorded in the Consolidated Condensed Balance Sheets (Unaudited) consistedwere as follows: | | | | | | | | | June 30, | | December 31, | | | 2021 | | 2020 | | | | (Dollars in thousands) | Indefinite-lived intangibles: | | | | | | | Goodwill | | $ | 12,219 | | $ | 11,112 | Trademarks | | | 34,768 | | | 32,868 | Total | | $ | 46,987 | | $ | 43,980 |
The additional goodwill and trademarks in 2021 resulted from the Forsake acquisition. Goodwill resulting from the Forsake acquisition has been allocated to the Company’s wholesale and retail segments as of the following:acquisition date. Changes in the carrying amount of the Company’s goodwill by reportable segment for the six months ended June 30, 2021, were as follows: | | September 30, 2017 | | | December 31, 2016 | | | | Gross | | | | | | | | | Gross | | | | | | | | | | Carrying | | | Accumulated | | | | | | Carrying | | | Accumulated | | | | | | | Amount | | | Impairment | | | Net | | | Amount | | | 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 | |
| | | | | | | | | | | | Wholesale | | Retail | | Total | | | | (Dollars in thousands) | Balance, December 31, 2020 | | $ | 11,112 | | $ | 0 | | $ | 11,112 | Acquisition of business | | | 332 | | | 775 | | | 1,107 | Balance, June 30, 2021 | | $ | 11,444 | | $ | 775 | | $ | 12,219 |
The Company’s amortizable intangible assets, as recorded in the Consolidated Condensed Balance Sheets (Unaudited) consisted of the following: | | | | | September 30, 2017 | | | December 31, 2016 | | | | 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 | | | $ | (1,536 | ) | | $ | 1,964 | | | $ | 3,500 | | | $ | (1,361 | ) | | $ | 2,139 | | Total amortizable intangible assets | | | | | | $ | 3,500 | | | $ | (1,536 | ) | | $ | 1,964 | | | $ | 3,500 | | | $ | (1,361 | ) | | $ | 2,139 | |
The amortizable intangible assets arewhich were included within other assets in the Consolidated Condensed Balance Sheets. (Unaudited).Sheets (unaudited), consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 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 | | $ | (2,411) | | $ | 1,089 | | $ | 3,500 | | $ | (2,294) | | $ | 1,206 | Total amortizable intangible assets | | | | | $ | 3,500 | | $ | (2,411) | | $ | 1,089 | | $ | 3,500 | | $ | (2,294) | | $ | 1,206 |
Amortization expense related to the intangible assets was approximately $58,000 for$60,000 in both the thirdsecond quarters of 20172021 and 2016.2020. For both the ninesix months ended SeptemberJune 30, 2021 and 2020, amortization expense related to the intangible assets was approximately $175,000 and $182,000 in 2017 and 2016, respectively.$120,000. 7.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 tables 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. Summarized segment data for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, was as follows: | | | | | | | | | | | | | | Three Months Ended | | | | | | | | | | | | | | | | | | | | | | September 30, | | Wholesale | | Retail | | Other | | Total | | | June 30, | | | Wholesale | | Retail | | Other | | Total | | | (Dollars in thousands) | | | 2017 | | | | | | | | | | | | | | (Dollars in thousands) | 2021 | | | | | | | | | | | | | | Product sales | | $ | 60,200 | | | $ | 4,291 | | | $ | 11,887 | | | $ | 76,378 | | | $ | 41,558 | | $ | 6,202 | | $ | 9,453 | | $ | 57,213 | Licensing revenues | | | 528 | | | | - | | | | - | | | | 528 | | | | 351 | | | 0 | | | 0 | | | 351 | Net sales | | $ | 60,728 | | | $ | 4,291 | | | $ | 11,887 | | | $ | 76,906 | | | $ | 41,909 | | $ | 6,202 | | $ | 9,453 | | $ | 57,564 | Earnings from operations | | $ | 7,416 | | | $ | 17 | | | $ | 369 | | | $ | 7,802 | | | $ | 2,655 | | $ | 1,169 | | $ | 718 | | $ | 4,542 | | | | | | | | | | | | | | | | | | | 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | | | | | | | | | | | | | Product sales | | $ | 61,645 | | | $ | 4,702 | | | $ | 12,197 | | | $ | 78,544 | | | $ | 9,177 | | $ | 3,640 | | $ | 3,688 | | $ | 16,505 | Licensing revenues | | | 525 | | | | - | | | | - | | | | 525 | | | | 141 | | | 0 | | | 0 | | | 141 | Net sales | | $ | 62,170 | | | $ | 4,702 | | | $ | 12,197 | | | $ | 79,069 | | | $ | 9,318 | | $ | 3,640 | | $ | 3,688 | | $ | 16,646 | Earnings from operations | | $ | 6,710 | | | $ | 313 | | | $ | 731 | | | $ | 7,754 | | | Earnings (loss) from operations | | | $ | (10,176) | | $ | (856) | | $ | (1,981) | | $ | (13,013) |
7 Nine Months Ended | | | | | | | | | | | | | September 30, | | Wholesale | | | Retail | | | Other | | | Total | | | | (Dollars in thousands) | | 2017 | | | | | | | | | | | | | | | | | Product sales | | $ | 154,049 | | | $ | 13,979 | | | $ | 33,631 | | | $ | 201,659 | | Licensing revenues | | | 1,820 | | | | - | | | | - | | | | 1,820 | | Net sales | | $ | 155,869 | | | $ | 13,979 | | | $ | 33,631 | | | $ | 203,479 | | Earnings from operations | | $ | 11,880 | | | $ | 244 | | | $ | 1,027 | | | $ | 13,151 | | | | | | | | | | | | | | | | | | | 2016 | | | | | | | | | | | | | | | | | Product sales | | $ | 164,145 | | | $ | 14,508 | | | $ | 34,452 | | | $ | 213,105 | | Licensing revenues | | | 1,731 | | | | - | | | | - | | | | 1,731 | | Net sales | | $ | 165,876 | | | $ | 14,508 | | | $ | 34,452 | | | $ | 214,836 | | Earnings from operations | | $ | 11,910 | | | $ | 787 | | | $ | 1,292 | | | $ | 13,989 | |
| 8. | Employee Retirement Plans |
| | | | | | | | | | | | | Six Months Ended | | | | | | | | | | | | | June 30, | | Wholesale | | Retail | | Other | | Total | | | | (Dollars in thousands) | 2021 | | | | | | | | | | | | | Product sales | | $ | 74,594 | | $ | 11,820 | | $ | 17,357 | | $ | 103,771 | Licensing revenues | | | 693 | | | 0 | | | 0 | | | 693 | Net sales | | $ | 75,287 | | $ | 11,820 | | $ | 17,357 | | $ | 104,464 | Earnings from operations | | $ | 4,014 | | $ | 1,925 | | $ | 237 | | $ | 6,176 | | | | | | | | | | | | | | 2020 | | | | | | | | | | | | | Product sales | | $ | 61,405 | | $ | 8,401 | | $ | 9,822 | | $ | 79,628 | Licensing revenues | | | 602 | | | 0 | | | 0 | | | 602 | Net sales | | $ | 62,007 | | $ | 8,401 | | $ | 9,822 | | $ | 80,230 | Earnings (loss) from operations | | $ | (7,416) | | $ | (945) | | $ | (3,311) | | $ | (11,672) |
8.Employee Retirement Plans The components of the Company’s net periodic pension costexpense were as follows: | | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | | (Dollars in thousands) | | Service cost | | $ | 141 | | | $ | 409 | | | $ | 423 | | | $ | 1,228 | | Interest cost | | | 552 | | | | 612 | | | | 1,655 | | | | 1,837 | | Expected return on plan assets | | | (576 | ) | | | (607 | ) | | | (1,727 | ) | | | (1,822 | ) | Net amortization and deferral | | | 132 | | | | 419 | | | | 395 | | | | 1,257 | | Net periodic pension cost | | $ | 249 | | | $ | 833 | | | $ | 746 | | | $ | 2,500 | |
| | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | 2021 | | 2020 | | 2021 | | 2020 | | | | (Dollars in thousands) | | | | | | | Service cost | | $ | 102 | | $ | 115 | | $ | 204 | | $ | 230 | Interest cost | | | 371 | | | 506 | | | 742 | | | 1,006 | Expected return on plan assets | | | (720) | | | (698) | | | (1,440) | | | (1,388) | Net amortization and deferral | | | 247 | | | 196 | | | 494 | | | 382 | Pension expense | | $ | 0 | | $ | 119 | | $ | 0 | | $ | 230 |
The components of net periodic pension costexpense other than the service cost component arewere included in "other expense, net"other income (expense), net in the Consolidated Condensed Statements of Earnings and Comprehensive Income (Unaudited). 9.Leases The Company made a $4.0 million pension contribution in the second quarter of 2017. No additional cash contributions are expected forleases retail shoe stores, as well as several offices and distribution facilities worldwide. The leases have original lease periods expiring between the remainder of 2017.2021 and 2027. 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: | 9. | Stock-Based Compensation Plans |
| | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | 2021 | | 2020 | | 2021 | | 2020 | | | | (Dollars in thousands) | Operating lease costs | | $ | 1,232 | | $ | 1,693 | | $ | 2,566 | | $ | 3,575 | Variable lease costs (1) | | | 37 | | | 2 | | | 57 | | | 12 | Total lease costs | | $ | 1,269 | | $ | 1,695 | | $ | 2,623 | | $ | 3,587 |
(1) Variable lease costs primarily include percentage rentals based upon sales in excess of specified amounts. Short-term lease costs, which were excluded from the above table, are not material to the Company’s financial statements. The following is a schedule of maturities of operating lease liabilities as of June 30, 2021: | | | | | | Operating Leases | | | (Dollars in thousands) | 2021, excluding the six months ended June 30, 2021 | | $ | 2,014 | 2022 | | | 3,450 | 2023 | | | 2,434 | 2024 | | | 1,655 | 2025 | | | 990 | Thereafter | | | 676 | Total lease payments | | | 11,219 | Less imputed interest | | | (700) | Present value of lease liabilities | | | 10,519 |
The operating lease liabilities are classified in the consolidated condensed balance sheet (unaudited) as follows: | | | | | | | | | June 30, 2021 | | December 31, 2020 | | | | (Dollars in thousands) | Operating lease liabilities - current | | $ | 2,857 | | $ | 4,245 | Operating lease liabilities - non-current | | | 7,662 | | | 7,734 | Total | | $ | 10,519 | | $ | 11,979 |
The Company determined the present value of its lease liabilities using a weighted-average discount rate of 4.25%. As of June 30, 2021, the Company’s leases have a weighted-average remaining lease term of 2.96 years. Supplemental cash flow information related to the Company’s operating leases is as follows: | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | | 2021 | | 2020 | | 2021 | | 2020 | | | | | | (Dollars in thousands) | | Cash paid for amounts included in the measurement of lease liabilities | | $ | 1,218 | | $ | 1,262 | | $ | 2,605 | | $ | 3,240 | | Right-of-use assets obtained in exchange for new lease liabilities (noncash) | | $ | 0 | | $ | 0 | | $ | 2,022 | | $ | 144 | |
10. Income Taxes The Company’s provision for income taxes and effective tax rates for the three months and six months ended June 30, 2021 and 2020 are presented in the following table: | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | | 2021 | | 2020 | | 2021 | | 2020 | | | | | (Dollars in thousands) | | Earnings (loss) before provision (benefit) for income taxes | | $ | 4,845 | | $ | (13,129) | | $ | 6,741 | | $ | (11,283) | | Provision (benefit) for income taxes | | $ | 1,025 | | $ | (4,246) | | $ | 1,596 | | $ | (3,562) | | Effective tax rate | | | 21.2 | % | | 32.3 | % | | 23.7 | % | | 31.6 | % |
The effective tax rate for the first six months of 2021 differed from the federal rate of 21% because of state taxes, the benefit of tax-free municipal bond income, and the utilization of net operating loss (NOL) carryforwards at Florsheim Australia. Last year’s effective tax rates were higher because the Company did not record income tax benefits on foreign subsidiary losses, and, in the U.S. the Company had the ability to carry back current year losses to a tax year when the U.S. federal statutory tax rate was 35%, which was permitted under the U.S. Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). 11.Share-Based Compensation Plans During the three and ninesix months ended SeptemberJune 30, 2017,2021, the Company recognized approximately $395,000$327,000 and $1,174,000$872,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 20132015 through 2017.2020. During the three and ninesix months ended SeptemberJune 30, 2016,2020, the Company recognized approximately $393,000$350,000 and $1,121,000,$701,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 20122016 through 2016.2019. During the first quarter of 2021, the Company’s Board of Directors approved extending the expiration date of stock options granted in years 2015 and 2016. The original 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 was extended by one year to August 25, 2023. The Company recorded an additional $232,000 of compensation expense in the first quarter due to the exercise periods of these options being extended. The following table summarizes the Company’s stock option activity for the nine-monthsix-month period ended SeptemberJune 30, 2017:2021: | | | | | | | | Weighted | | | | | | | | | | Weighted | | | Average | | | | | | | | | | Average | | | Remaining | | | Aggregate | | | | | | | Exercise | | | Contractual | | | Intrinsic | | | | Shares | | | Price | | | Term (Years) | | | Value* | | Outstanding at December 31, 2016 | | | 1,486,257 | | | $ | 26.13 | | | | | | | | | | Granted | | | 211,200 | | | $ | 27.94 | | | | | | | | | | Exercised | | | (81,464 | ) | | $ | 24.71 | | | | | | | | | | Forfeited or expired | | | (14,175 | ) | | $ | 26.46 | | | | | | | | | | Outstanding at September 30, 2017 | | | 1,601,818 | | | $ | 26.44 | | | | 3.9 | | | $ | 3,149,000 | | Exercisable at September 30, 2017 | | | 898,106 | | | $ | 26.19 | | | | 2.4 | | | $ | 1,992,000 | |
| | | | | | | | | | | | | | | | | | Weighted | | | | | | | | Weighted | | Average | | | | | | | | Average | | Remaining | | Aggregate | | | | | Exercise | | Contractual | | Intrinsic | | | Shares | | Price | | Term (Years) | | Value* | Outstanding at December 31, 2020 | | 1,125,383 | | $ | 25.62 | | | | | | Granted | | — | | $ | — | | | | | | Exercised | | — | | $ | — | | | | | | Forfeited or expired | | (19,780) | | $ | 23.15 | | | | | | Outstanding at June 30, 2021 | | 1,105,603 | | $ | 25.67 | | 4.9 | | $ | 788,000 | Exercisable at June 30, 2021 | | 644,862 | | $ | 26.74 | | 2.6 | | $ | 11,000 |
* 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 September 29, 2017, the last trading dayJune 30, 2021 of the quarter, of $28.38$22.37 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options. The following table summarizes the Company’s stock option exercise activity for the three and nine months ended September 30, 2017 and 2016:
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | | (Dollars in thousands) | | Total intrinsic value of stock options exercised | | $ | 208 | | | $ | 14 | | | $ | 272 | | | $ | 87 | | Cash received from stock option exercises | | $ | 1,575 | | | $ | 132 | | | $ | 2,013 | | | $ | 585 | | Income tax benefit from the exercise of stock options | | $ | 81 | | | $ | 5 | | | $ | 106 | | | $ | 34 | |
The following table summarizes the Company’s restricted stock award activity for the nine-monthsix-month period ended SeptemberJune 30, 2017:2021: | | | | | | | | Weighted | | | | | | | | | | Weighted | | | Average | | | | | | | Shares of | | | Average | | | Remaining | | | Aggregate | | | | Restricted | | | Grant Date | | | Contractual | | | Intrinsic | | | | Stock | | | Fair Value | | | Term (Years) | | | Value* | | Non-vested at December 31, 2016 | | | 58,500 | | | $ | 26.09 | | | | | | | | | | Issued | | | 30,800 | | | | 27.94 | | | | | | | | | | Vested | | | (18,600 | ) | | | 26.05 | | | | | | | | | | Forfeited | | | - | | | | - | | | | | | | | | | Non-vested at September 30, 2017 | | | 70,700 | | | $ | 26.90 | | | | 2.9 | | | $ | 2,006,000 | |
| | | | | | | | | | | | | | | | | | Weighted | | | | | | | | Weighted | | Average | | | | | | Shares of | | Average | | Remaining | | Aggregate | | | Restricted | | Grant Date | | Contractual | | Intrinsic | | | Stock | | Fair Value | | Term (Years) | | Value* | Non-vested at December 31, 2020 | | 72,490 | | $ | 23.77 | | | | | | Issued | | — | | | — | | | | | | Vested | | (1,350) | | | 24.46 | | | | | | Forfeited | | — | | | — | | | | | | Non-vested at June 30, 2021 | | 71,140 | | $ | 23.76 | | 2.2 | | $ | 1,591,000 |
* The aggregate intrinsic value of non-vested restricted stock was calculated using the market value of the Company'sCompany’s stock on September 29, 2017, the last trading dayJune 30, 2021 of the quarter, of $28.38$22.37 multiplied by the number of non-vested restricted shares outstanding. 12.Short-Term Borrowings At SeptemberJune 30, 2017,2021, the Company had a $60$30 million unsecured revolving line of credit with a bank expiring November 3, 2017.that is secured by a lien against the Company’s general corporate assets. The line of credit bears interest at LIBOR plus 1.35% and expires on November 4, 2021. 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 June 30, 2021, there were 0 amounts outstanding on the daily London Interbank Offered Rate (“LIBOR”) plus 0.75%. At September 30, 2017,Company’s line of credit. There were also 0 amounts outstanding borrowings were approximately $4.8 million at an interest rate of 2.0%. The highest balance on the line of credit during the quarter was approximately $4.8 million. Subsequent to Septembersix-month period ended June 30, 2017, the line of credit agreement was renewed on the same terms for another one-year period, expiring November 4, 2018.2021. 13.Financial Instruments At SeptemberJune 30, 2017,2021, the Company had foreign exchange contracts outstanding to sell $8.0$5.0 million Canadian dollars at a price of approximately $6.0$4.0 million U.S. dollars. TheThese contracts expire in 2021. There were 0 significant unrealized gains or losses on the Canadian foreign exchange contracts in the first six months of 2021. At June 30, 2021, the Company’s majority-ownedwholly owned subsidiary, Florsheim Australia, had foreign exchange contracts outstanding to buy $3.7$4.0 million U.S. dollars at a price of approximately $4.7$5.1 million Australian dollars. Florsheim Australia also hadThese contracts expire in the next twelve months. The Company recorded unrealized gains of $141,000 on Australian foreign exchange contracts outstanding to buy 200,000 Euros at a pricein the first six months of approximately $299,000 Australian dollars. Based on quarter-end exchange rates, there were no significant unrealized gains or losses on the outstanding contracts. 2021. The Company determines the fair value of foreign exchange contracts based on the difference between the foreign currency contract rates and the widely available foreign currency rates as of the measurement date. The fair value measurements are based on observable market transactions, and thus represent a level 2 valuation as defined by ASC 820. 14.Comprehensive Income (Loss) Comprehensive income (loss) for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, was as follows: | | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | | (Dollars in thousands) | | Net earnings | | $ | 4,920 | | | $ | 4,701 | | | $ | 8,338 | | | $ | 8,411 | | Foreign currency translation adjustments | | | 452 | | | | 261 | | | | 1,672 | | | | 1,222 | | Pension liability, net of tax of $52, $163, $154 and $490, respectively | | | 80 | | | | 256 | | | | 241 | | | | 767 | | Total comprehensive income | | $ | 5,452 | | | $ | 5,218 | | | $ | 10,251 | | | $ | 10,400 | |
| | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | 2021 | | 2020 | | 2021 | | 2020 | | | | (Dollars in thousands) | Net earnings (loss) | | $ | 3,820 | | $ | (8,883) | | $ | 5,145 | | $ | (7,721) | Foreign currency translation adjustments | | | 176 | | | 1,590 | | | 33 | | | (968) | Pension liability, net of tax of $65, $52, $129, and $100, respectively | | | 182 | | | 144 | | | 365 | | | 282 | Total comprehensive income (loss) | | $ | 4,178 | | $ | (7,149) | | $ | 5,543 | | $ | (8,407) |
The components of accumulated other comprehensive loss as recorded in the Consolidated Condensed Balance Sheets (Unaudited) were as follows: | | | | | | | | | | | June 30, | | December 31, | | | | 2021 | | 2020 | | | September 30, | | December 31, | | | | | 2017 | | | 2016 | | | | | (Dollars in thousands) | | | | | | (Dollars in thousands) | Foreign currency translation adjustments | | $ | (4,158 | ) | | $ | (5,489 | ) | | $ | (6,017) | | $ | (6,050) | Pension liability, net of tax | | | (10,839 | ) | | | (11,080 | ) | | | (21,590) | | | (21,955) | Total accumulated other comprehensive loss | | $ | (14,997 | ) | | $ | (16,569 | ) | | $ | (27,607) | | $ | (28,005) |
The following presents a tabular disclosure about changes in accumulated other comprehensive loss during the ninesix months ended SeptemberJune 30, 2017:2021: | | Foreign Currency Translation Adjustments | | | Defined Benefit Pension Items | | | Total | | Beginning balance, December 31, 2016 | | $ | (5,489 | ) | | $ | (11,080 | ) | | $ | (16,569 | ) | Other comprehensive income before reclassifications | | | 1,331 | | | | - | | | | 1,331 | | Amounts reclassified from accumulated other comprehensive loss | | | - | | | | 241 | | | | 241 | | Net current period other comprehensive income | | | 1,331 | | | | 241 | | | | 1,572 | | Ending balance, September 30, 2017 | | $ | (4,158 | ) | | $ | (10,839 | ) | | $ | (14,997 | ) |
| | | | | | | | | | | | Foreign | | Defined | | | | | | Currency | | Benefit | | | | | | Translation | | Pension | | | | | | Adjustments | | Items | | Total | Beginning balance, December 31, 2020 | | $ | (6,050) | | $ | (21,955) | | $ | (28,005) | Other comprehensive income before reclassifications | | | 33 | | | 0 | | | 33 | Amounts reclassified from accumulated other comprehensive loss | | | 0 | | | 365 | | | 365 | Net current period other comprehensive income | | | 33 | | | 365 | | | 398 | Ending balance, June 30, 2021 | | $ | (6,017) | | $ | (21,590) | | $ | (27,607) |
The following presents a tabular disclosure about reclassification adjustments out of accumulated other comprehensive loss during the ninesix months ended SeptemberJune 30, 2017:2021: | | Amounts reclassified from accumulated other comprehensive loss for the nine months ended September 30, 2017 | | | Affected line item in the statement where net income is presented | Amortization of defined benefit pension items | | | | | | | Prior service cost | | $ | (47) | (1) | | Other expense, net | Actuarial losses | | | 442 | (1) | | Other expense, net | Total before tax | | | 395 | | | | Tax benefit | | | (154) | | | | Net of tax | | $ | 241 | | | |
| | | | | | | | Amounts reclassified from | | | | | accumulated other | | | | | comprehensive loss for | | Affected line item in the | | | the six months ended | | statement where net income is | | | June 30, 2021 | | presented | Amortization of defined benefit pension items | | | | | | Prior service cost | | $ | (31) | (1) | Other income (expense), net | Actuarial losses | | | 525 | (1) | Other income (expense), net | Total before tax | | | 494 | | | Tax benefit | | | (129) | | | Net of tax | | $ | 365 | | |
| (1) | These amounts were included in the net periodic pension cost.expense. See Note 8 for additional details. |
15.Equity A reconciliation ofThe following table reconciles the Company’s equity for the ninesix months ended SeptemberJune 30, 2017, is as follows:2021:
| | | | | | | | | | | Accumulated | | | | | | | | | | Capital in | | | | | | Other | | | | | | | Common | | | Excess of | | | Reinvested | | | Comprehensive | | | Noncontrolling | | | | Stock | | | Par Value | | | Earnings | | | Loss | | | Interest | | | | (Dollars in thousands) | | | | | | | | | | | | | | | | | | Balance, December 31, 2016 | | $ | 10,505 | | | $ | 50,184 | | | $ | 157,468 | | | $ | (16,569 | ) | | $ | 6,692 | | | | | | | | | | | | | | | | | | | | | | | Net earnings | | | - | | | | - | | | | 8,408 | | | | - | | | | (70 | ) | Foreign currency translation adjustments | | | - | | | | - | | | | - | | | | 1,331 | | | | 341 | | Pension liability adjustment, net of tax | | | - | | | | - | | | | - | | | | 241 | | | | - | | Cash dividends declared | | | - | | | | - | | | | (6,725 | ) | | | - | | | | - | | Cash dividends paid to noncontrolling interest | | | - | | | | - | | | | - | | | | - | | | | (204 | ) | Stock options exercised | | | 82 | | | | 1,931 | | | | - | | | | - | | | | - | | Issuance of restricted stock | | | 31 | | | | (31 | ) | | | - | | | | - | | | | - | | Stock-based compensation expense | | | - | | | | 1,174 | | | | - | | | | - | | | | - | | Shares purchased and retired | | | (421 | ) | | | - | | | | (11,200 | ) | | | - | | | | - | | | | | | | | | | | | | | | | | | | | | | | Balance, September 30, 2017 | | $ | 10,197 | | | $ | 53,258 | | | $ | 147,951 | | | $ | (14,997 | ) | | $ | 6,759 | |
| | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | Capital in | | | | | Other | | | Common | | Excess of | | Reinvested | | Comprehensive | | | Stock | | Par Value | | Earnings | | Loss | | | | (Dollars in thousands) | Balance, December 31, 2020 | | $ | 9,797 | | $ | 67,178 | | $ | 138,955 | | $ | (28,005) | Net earnings | | | 0 | | | 0 | | | 1,325 | | | 0 | Foreign currency translation adjustments | | | 0 | | | 0 | | | 0 | | | (143) | Pension liability adjustment, net of tax | | | 0 | | | 0 | | | 0 | | | 183 | Cash dividends declared | | | 0 | | | 0 | | | (2,336) | | | 0 | Share-based compensation expense | | | 0 | | | 545 | | | 0 | | | 0 | Shares purchased and retired | | | (62) | | | 0 | | | (1,017) | | | 0 | Balance, March 31,2021 | | $ | 9,735 | | $ | 67,723 | | $ | 136,927 | | $ | (27,965) | Net earnings | | | 0 | | | 0 | | | 3,820 | | | 0 | Foreign currency translation adjustments | | | 0 | | | 0 | | | 0 | | | 176 | Pension liability adjustment, net of tax | | | 0 | | | 0 | | | 0 | | | 182 | Cash dividends declared | | | 0 | | | 0 | | | (2,334) | | | 0 | Share-based compensation expense | | | 0 | | | 327 | | | 0 | | | 0 | Shares purchased and retired | | | (21) | | | 0 | | | (435) | | | 0 | Balance, June 30, 2021 | | $ | 9,714 | | $ | 68,050 | | $ | 137,978 | | $ | (27,607) |
On October 31, 2017,The following table reconciles the Company’s Board of Directors authorizedequity for the repurchase of an additional 1.0 million shares of common stock under its repurchase program, bringing the total available to purchase to approximately 1.1 million shares.six months ended June 30, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | Capital in | | | | | Other | | | Common | | Excess of | | Reinvested | | Comprehensive | | | Stock | | Par Value | | Earnings | | Loss | | | | (Dollars in thousands) | Balance, December 31, 2019 | | $ | 9,873 | | $ | 65,832 | | $ | 158,825 | | $ | (24,536) | Net earnings | | | 0 | | | 0 | | | 1,162 | | | 0 | Foreign currency translation adjustments | | | 0 | | | 0 | | | 0 | | | (2,558) | Pension liability adjustment, net of tax | | | 0 | | | 0 | | | 0 | | | 138 | Cash dividends declared | | | 0 | | | 0 | | | (2,357) | | | 0 | Share-based compensation expense | | | 0 | | | 351 | | | 0 | | | 0 | Shares purchased and retired | | | (60) | | | 0 | | | (1,244) | | | 0 | Balance, March 31, 2020 | | $ | 9,813 | | $ | 66,183 | | $ | 156,386 | | $ | (26,956) | Net earnings (loss) | | | 0 | | | 0 | | | (8,883) | | | 0 | Foreign currency translation adjustments | | | 0 | | | 0 | | | 0 | | | 1,590 | Pension liability adjustment, net of tax | | | 0 | | | 0 | | | 0 | | | 144 | Cash dividends declared | | | 0 | | | 0 | | | (2,355) | | | 0 | Share-based compensation expense | | | 0 | | | 350 | | | 0 | | | 0 | Balance, June 30, 2020 | | $ | 9,813 | | $ | 66,533 | | $ | 145,148 | | $ | (25,222) |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements with respect to the Company’s outlook for the future. These statements represent the Company's reasonablegood faith judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially. Such statements can be identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” or variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Therefore, the reader is cautioned that these forward-looking statements are subject to a number of risks, uncertainties or other factors that may cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risk factors described under Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year-ended December 31, 2016.31,2020. GENERAL GENERAL
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,” “NunnFlorsheim, Nunn Bush,” “Stacy Stacy Adams,” “BOGS,” “Rafters,” 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 SeptemberJune 30, 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 process of winding down this business. The majority of the Company’s operations are in the United States, and its results are primarily affected by the economic conditions and the retail environment in the United States. EXECUTIVE OVERVIEW The wholesale business rebounded from the effects of the pandemic in the second quarter of 2021. Customer demand accelerated during the quarter primarily due to vaccinations, stimulus checks, pent-up demand for restocking wardrobes, consumers returning to offices and social events, or a combination of all of the above. ThirdThe Company’s legacy brands: Florsheim, Nunn Bush, and Stacy Adams, all bounced back strongly this Spring, with Florsheim being the outstanding performer. With events such as weddings and formal gatherings on the calendar, there was renewed demand in the market for more refined footwear. At the same time, retailers had reduced both their dress and dress-casual style offerings and inventory levels. Florsheim, Nunn Bush and Stacy Adams, all were able to address this void in the market as Weyco Group was one of the few footwear wholesalers that stocked significant inventory. The Company saw both unprecedented sell throughs at the retail levels and corresponding orders at the wholesale levels, as retailers pivoted strongly back to the refined footwear category. The Company should see continued pipeline fill to its retailers throughout the second half of 2021.
While the Company is pleased with the performance of the legacy brands, it also is excited about the breakthroughs it experienced this Spring with casual footwear. The pandemic pushed the Company to accelerate development, delivery, and selling of more causal, athletic-inspired footwear to fit the more relaxed lifestyle trend in apparel that, over the long-term, will continue to grow in importance. Florsheim, Nunn Bush, and Stacy Adams all significantly increased the percentage of purely casual shoes. The consumer has responded well with certain styles being among our top sellers in our direct-to-consumer business. It is our expectation that the Company will continue to grow its casual mix which will complement our strong position in the more refined footwear segment. BOGS also had an excellent Spring. While second quarter is the smallest shipping period for BOGS, sales were up significantly over both 2020 and 2019. The outdoor footwear market has been robust through the pandemic and the Company continues to see strong retail performance across trade channels. Given the shortages in the outdoor boot market in Fall 2020, management believes that BOGS will have a strong second half of the year, as retailers are taking a more aggressive inventory position on the BOGS brand and the outdoor boot category. In June, the Company acquired the Forsake brand which was a pioneer in the sneaker boot category. Forsake will be headquartered in Portland, and will leverage our back office and distribution infrastructure in Milwaukee. The cofounders of Forsake, Jake Anderson and Sam Barstow, have joined Weyco Group, and will continue to lead the business going forward. The Forsake brand further expands the Company’s reach into the outdoor category which management believes will be a growth avenue for the Company. While Forsake is currently small in volume, it can be found in a range of important outdoor retailers, and has a growing direct-to-consumer e-commerce business that the Company can leverage using its successful e-commerce platform. In regards to Weyco’s direct-to-consumer retail business, same store sales jumped 73% in the second quarter. From a volume perspective, the increase was driven by a 43% increase in e-commerce sales with all of the legacy brands registering strong double-digit gains. The Company reduced its brick and mortar store count as it exited its most unprofitable locations in 2020. Sales at the four remaining stores all registered significant increases over the same period last year when the malls were largely closed. The Company’s business model for direct-to-consumer is greatly improved. The Company is less promotional versus the prior year period, and the increase in e-commerce allows it to leverage the fixed cost investment that has been made in past year to grow this area of the business. The Company’s international businesses greatly improved against 2020, when it was experiencing store closings across key markets in Australia /New Zealand and the Pacific Rim. Business has rebounded from both a sales and profitability perspective. In Australia, which is a significant market for Weyco, the pandemic has allowed the Company to reset the business model by exiting unprofitable stores and renegotiating leases that allow for greater profit potential. In addition, our international e-commerce businesses continue to grow nicely for both Florsheim and BOGS. However, recent developments related to the Delta variant in Australia have led to renewed lockdowns in key provinces and now create an uncertain outlook for the balance of the year. Second Quarter Highlights Consolidated net sales for the thirdsecond quarter of 20172021 were $76.9$57.6 million down 3% as compared to last year’s thirdsecond quarter net sales of $79.1$16.6 million. Earnings from operationsConsolidated operating earnings were $7.8$4.5 million for the quarter compared to operating losses of $13.0 million in both 2017 and 2016. Consolidatedlast year’s second quarter. Net earnings rose to $3.8 million, or $0.39 per diluted share, from net earnings attributable to Weyco Group, Inc. increased 7% to $4.9losses of $8.9 million, in 2017, up from $4.6 million last year. Diluted earningsor $0.91 per share were $0.48 this quarter and $0.44 perdiluted share, in the thirdsecond quarter of 2016.2020. TheLast year’s second quarter results were significantly impacted by the COVID-19 pandemic, as most retailers, including the Company’s retail stores, were closed for a majority of the decreasequarter. As such, comparisons of 2021 financial performance to the significantly impacted 2020 periods may have limited utility. Therefore, herein this document, the Company included selected comparisons to 2019 as appropriate. Net sales for the three months ended June 30, 2021 rose to approximately 95% of second quarter 2019 sales levels, demonstrating strong recovery to near pre-pandemic levels. The Company’s earnings also rebounded, exceeding second quarter 2019 levels.
On June 7, 2021, the Company acquired substantially all of the operating assets and certain liabilities of Forsake, Inc., a distributor of outdoor footwear, under the brand name “Forsake.” The principal assets acquired were inventory, accounts receivable, and intellectual property, including the Forsake 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 is approximately $1.4 million in consolidated net sales came fromtotal. The transaction was funded with the Company’s wholesale segment. Wholesale net sales declined $1.4 million, due mainly to lower sales of the Stacy Adams, Nunn Bush, and BOGS brands, partially offset by higher sales of the Florsheim brand. Net sales of the Company’s retail segment and its other operations were also down.available cash. Consolidated earnings from operations were relatively flat for the quarter. Earnings from operations in the Company’s wholesale segment were up, due to higher gross margins and lower wholesale selling and administrative expenses, but this increase was offset by lower earnings from operations in the Company’s retail segment and its other operations.
Other expense was down due to lower pension expense in 2017.
Year-to-Date Highlights Consolidated net sales for the first nine monthshalf of 20172021 were $203.5$104.5 million down 5% from last year’s year-to-datecompared to net sales of $214.8 million. Earnings from operations were $13.2$80.2 million in 2017, a decreasethe first half of 6% as compared to $14.02020. Consolidated operating earnings totaled $6.2 million in 2016. Consolidatedthe first six months of 2021, up from operating losses of $11.7 million in the first six months of 2020. The Company’s net earnings attributable to Weyco Group, Inc. were $8.4totaled $5.1 million, this year, up 1% as compared to $8.3or $0.53 per diluted share, in the first half of 2021 versus net losses of $7.7 million, last year. Diluted earningsor $0.79 per share to date in 2017 were $0.81, versus $0.78 perdiluted share, in the same period of 2016.last year. Last year’s year-to-date results were significantly impacted by the COVID-19 pandemic. The majority of the decrease in consolidated net sales came fromretailers, including the Company’s wholesale segment. Wholesale net salesretail stores, were down $10.0 million, due primarily to lower salesshut-down in mid-March 2020 and remained closed for a majority of the Stacy Adams, Nunn Bush, and BOGS brands, partially offset by highersecond quarter. Net sales for the six months ended June 30, 2021 totaled 78% of the Florsheim brand. Netnet sales in the Company’s retail segment and its other operations were also down. Consolidated earnings from operations decreased $838,000first half of 2019. Earnings for the nine months ended September 30, 2017, comparedyear-to-date period recovered to the same period one year ago. The decrease occurred mainly in the Company’s retail segment, due to lower sales and higher retail selling and administrative expenses. Earnings from operations in the Company’s wholesale segment were flat, as lower sales were offset by higher gross margins and lower wholesale selling and administrative expenses this year. Earnings from operations in the Company’s other businesses were also down.approximately 94% of 2019 levels.
Other expense was down due to lower pension expense in 2017.
Financial Position Highlights At SeptemberJune 30, 2017,2021, cash, short-term investments and marketable securities totaled $36.3$65.2 million and there was no debt outstanding debt totaled $4.8 million. At December 31, 2016, cash and marketable securities totaled $39.4 million and outstanding debt totaled $4.3 million.on the Company’s revolving line of credit. During the first ninesix months of 2017,2021, the Company generated $16.4$27.1 million of cash from operations. The Company purchased $30.1 million of short-term investments, paid dividends of $9.1$4.6 million, spent $11.6repurchased $1.5 million on purchases of Company stock, and purchased a nethad $404,000 of $4.0 million in marketable securities.capital expenditures. The Company also had $1.4spent $2.6 million of capital expenditures.to acquire to Forsake brand in the second quarter. SEGMENT ANALYSIS Net sales and earnings (loss) from operations for the Company’s segments in the three and ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, were as follows: | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | % | | | Six Months Ended June 30, | | % | | | | | 2021 | | 2020 | | Change | | | 2021 | | 2020 | | Change | | | | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % | | | | | 2017 | | | 2016 | | | Change | | | 2017 | | | 2016 | | | Change | | | | | (Dollars in thousands) | | | | | | (Dollars in thousands) | | Net Sales | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | North American Wholesale | | $ | 60,728 | | | $ | 62,170 | | | | -2% | | | $ | 155,869 | | | $ | 165,876 | | | | -6% | | | $ | 41,909 | | $ | 9,318 | | 350 | % | | $ | 75,287 | | $ | 62,007 | | 21 | % | North American Retail | | | 4,291 | | | | 4,702 | | | | -9% | | | | 13,979 | | | | 14,508 | | | | -4% | | | | 6,202 | | | 3,640 | | 70 | % | | | 11,820 | | | 8,401 | | 41 | % | Other | | | 11,887 | | | | 12,197 | | | | -3% | | | | 33,631 | | | | 34,452 | | | | -2% | | | | 9,453 | | | 3,688 | | 156 | % | | | 17,357 | | | 9,822 | | 77 | % | Total | | $ | 76,906 | | | $ | 79,069 | | | | -3% | | | $ | 203,479 | | | $ | 214,836 | | | | -5% | | | $ | 57,564 | | $ | 16,646 | | 246 | % | | $ | 104,464 | | $ | 80,230 | | 30 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings from Operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings (Loss) from Operations | | | | | | | | | | | | | | | | | | | | North American Wholesale | | $ | 7,416 | | | $ | 6,710 | | | | 11% | | | $ | 11,880 | | | $ | 11,910 | | | | 0% | | | $ | 2,655 | | $ | (10,176) | | 126 | % | | $ | 4,014 | | $ | (7,416) | | 154 | % | North American Retail | | | 17 | | | | 313 | | | | -95% | | | | 244 | | | | 787 | | | | -69% | | | | 1,169 | | | (856) | | 237 | % | | | 1,925 | | | (945) | | 304 | % | Other | | | 369 | | | | 731 | | | | -50% | | | | 1,027 | | | | 1,292 | | | | -21% | | | | 718 | | | (1,981) | | 136 | % | | | 237 | | | (3,311) | | 107 | % | Total | | $ | 7,802 | | | $ | 7,754 | | | | 1% | | | $ | 13,151 | | | $ | 13,989 | | | | -6% | | | $ | 4,542 | | $ | (13,013) | | 135 | % | | $ | 6,176 | | $ | (11,672) | | 153 | % |
North American Wholesale Segment Net Sales Net sales in the Company’s North American wholesale segment for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, were as follows: | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | % | | | Six Months Ended June 30, | | % | | | | 2021 | | 2020 | | Change | | | 2021 | | 2020 | | Change | | | | | (Dollars in thousands) | | | | | (Dollars in thousands) | | | | North American Wholesale Segment Net Sales | | | | | | | | | | | | | | | | | | | Stacy Adams | | $ | 10,770 | | $ | 1,592 | | 577 | % | | $ | 18,670 | | $ | 17,762 | | 5 | % | Nunn Bush | | | 9,427 | | | 2,912 | | 224 | % | | | 17,448 | | | 13,531 | | 29 | % | Florsheim | | | 16,334 | | | 1,694 | | 864 | % | | | 25,813 | | | 21,336 | | 21 | % | BOGS/Rafters | | | 5,025 | | | 2,979 | | 69 | % | | | 12,661 | | | 8,776 | | 44 | % | Forsake | | | 2 | | | — | | 100 | % | | | 2 | | | — | | 100 | % | Total North American Wholesale | | $ | 41,558 | | $ | 9,177 | | 353 | % | | $ | 74,594 | | $ | 61,405 | | 21 | % | Licensing | | | 351 | | | 141 | | 149 | % | | | 693 | | | 602 | | 15 | % | Total North American Wholesale Segment | | $ | 41,909 | | $ | 9,318 | | 350 | % | | $ | 75,287 | | $ | 62,007 | | 21 | % |
North American Wholesale Segment Net Sales
| | Three Months Ended September 30, | | | % | | | Nine Months Ended September 30, | | | % | | | | 2017 | | | 2016 | | | Change | | | 2017 | | | 2016 | | | Change | | | | (Dollars in thousands) | | North American Net Sales | | | | | | | | | | | | | | | | | | | | | | | | | Stacy Adams | | $ | 14,486 | | | $ | 14,861 | | | | -3% | | | $ | 49,632 | | | $ | 52,092 | | | | -5% | | Nunn Bush | | | 12,200 | | | | 13,362 | | | | -9% | | | | 37,027 | | | | 42,909 | | | | -14% | | Florsheim | | | 15,518 | | | | 14,262 | | | | 9% | | | | 39,611 | | | | 38,513 | | | | 3% | | BOGS/Rafters | | | 17,644 | | | | 18,462 | | | | -4% | | | | 26,527 | | | | 28,950 | | | | -8% | | Umi | | | 352 | | | | 698 | | | | -50% | | | | 1,252 | | | | 1,681 | | | | -26% | | Total North American Wholesale | | $ | 60,200 | | | $ | 61,645 | | | | -2% | | | $ | 154,049 | | | $ | 164,145 | | | | -6% | | Licensing | | | 528 | | | | 525 | | | | 1% | | | | 1,820 | | | | 1,731 | | | | 5% | | Total North American Wholesale Segment | | $ | 60,728 | | | $ | 62,170 | | | | -2% | | | $ | 155,869 | | | $ | 165,876 | | | | -6% | |
Stacy Adams and Nunn Bush sales for the quarterthree and year-to-date periodssix months ended June 30, 2021 were down mainly with department stores. The increases in Florsheim sales were primarilyup across all of the Company's brands due to higherthe resumption in sales following pandemic-related retail closures last year. Business recovery continues in the wholesale segment, with wholesale sales for the three and six months ended June 30, 2021 rising to department storesapproximately 91% and national shoe chains. BOGS71% of the comparative 2019 sales were downlevels. Demand for dress and dress-casual footwear accelerated during the second quarter of 2021, as a result of lower sales with outdoor retailers.
consumers returned to offices and many social events resumed. Licensing revenues consist of royalties earned on the sales of branded apparel, accessories and specialty footwear in the United States and on branded footwear in Mexico and certain overseas markets. Last year’s licensing revenues were down for the quarter and year-to-date periods, in line with reductions in licensees’ sales of branded products. Earnings from Operations Wholesale grossGross earnings for the North American wholesale segment were 33.9%32.4% of net sales infor the third quarter, of 2017, compared to 32.2%34.7% of net sales in last year’s thirdsecond quarter. Second quarter gross margins were negatively impacted by increased overseas freight costs. Due to bottlenecks in the supply chain, the Company has begun paying premium freight rates in order to reserve space on container ships. While management believes this is a temporary situation, management does see the challenges in the supply chain continuing into at least the beginning of 2022.
For the first ninesix months of the year,ended June 30, wholesale gross earnings rose to 32.1%were 33.3% of net sales in 2017, from 31.2%2021, compared to 32.3% of net sales in 2016. Gross2020. Last year’s gross margins improvedwere down as a result of additional costs related to the tariff on certain footwear imported from China. The tariff of 15% took effect on September 1, 2019 and was subsequently reduced to 7.5% on February 14, 2020. The Company purchased a reductionlimited amount of inventory at the higher tariff rate, and, as a result, the tariff’s negative impact on gross margins lessoned as it sold through this inventory in salesthe latter part of closeout inventory, which is sold at lower margins. 2020. North American wholesale segment selling and administrative expenses include, and are primarily related to, distribution costs, salaries and commissions, advertising costs, employee benefit costs, and depreciation. Wholesale selling and administrative expenses were $13.2$10.9 million, or 22%26% of net sales, for the quarter, compared to $13.4 million, or 144% of net sales, in the thirdsecond quarter of 2017,2020. Second quarter 2021 expenses included approximately $1.8 million of wage subsidies received from the U.S. and $13.3Canadian governments. Second quarter 2020 expenses included the write-off of approximately $3.3 million or 21%in receivables as a result of net sales, in the third quarterJC Penney’s bankruptcy filing, offset by $1.4 million of 2016. income from U.S. and Canada government wage subsidies. For the ninesix months ended SeptemberJune 30, wholesale selling and administrative expenses were $38.2$21.1 million, or 25%28% of net sales, in 2017, as compared to $39.82021 versus $27.4 million, or 24%44% of net sales, in 2016. Earnings2020. Year-to-date 2021 expenses were reduced by approximately $3.6 million of income from operationsU.S. and Canadian government wage subsides. Additionally, expenses were down in the North Americanfirst half 2021, compared to the same period of 2020, due largely to lower advertising costs. Expenses in the first half of 2020 included the write-off of approximately $3.3 million in JC Penney receivables, as noted above, partially offset by $1.4 million of income from U.S. and Canada government wage subsidies.
Driven by higher sales volumes, wholesale operating earnings were $2.7 million in the second quarter of 2021, up from operating losses of $10.2 million in last year’s second quarter. Second quarter 2021 wholesale operating earnings exceeded 2019 levels, due in part to government wage subsidies recognized during the period, and as a result of cost saving measures implemented over the past twelve months. While gross margins have been impacted by increased freight costs, the cost savings implemented by the Company have helped mitigated that impact. For the six months ended June 30, 2021, the wholesale segment werehad operating earnings of $4.0 million, up from operating losses of $7.4 million in the third quartersame period of 2017, up 11% as compared to $6.7 million in the third quarter of 2016. For the nine months ended September 30, 2017 and 2016, wholesale2020. The year-to-date earnings from operations remained flat at $11.9 million in both periods. Despite the decrease in sales, wholesale earnings from operations were up for the quarter, and flat for the first nine months of the year,increase was primarily due to higher gross marginssales volumes, increased government wage subsidies, and lower wholesale sellingbad debt write-offs relative to last year. Wholesale operating earnings for the six months ended June 30, 2021 recovered to approximately 54% of 2019 levels, as lower sales compared to 2019 were partially offset by the positive impacts of government wage subsidies and administrative expenses. lower advertising costs this year. The Company’s cost of sales does not include distribution costs (e.g., receiving, inspection, or warehousing, shipping, and handling costs). DistributionWholesale distribution costs were $2.6$2.2 million for the thirdsecond quarter of 20172021 versus $2.8$2.4 million for the same period of 2016. For the nine-month periods ended September 30, 20172020. Second quarter 2021 and 2016,2020 distribution costs were $7.9 millionreduced by approximately $495,000 and $8.8 million, respectively. This year,$366,000, respectively, of government wage subsidies, which partially offset related warehouse labor costs. For the six-month periods ended June 30, wholesale distribution costs were down due to lower employee and warehousing costs. The Company’s consolidated wholesale shipping and handling expenses were $353,000 and $408,000 for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017, consolidated wholesale shipping and handling expenses were $959,000 and $1.1$4.5 million in 2016.2021 and $5.7 million in 2020. These costs were included in selling and administrative expenses. Year-to-date 2021 and 2020 distribution costs were reduced by approximately $1.0 million and $366,000, respectively, of government wage subsidies, which partially offset related warehouse labor costs. The Company’s gross earnings may not be comparable to other companies, as some companies may include distribution costs and shipping and handling expenses in cost of sales. North American Retail Segment Net Sales Net sales in the Company’s North American retail segment declined $411,000were $6.2 million in the second quarter of 2021, compared to $3.6 million in the second quarter of 2020. For the six months ended June 30, retail net sales were $11.8 million in 2021, from 8.4 million in 2020. Same store sales rose 73% and $529,000,30% for the threequarter and nine months ended September 30, 2017,year-to-date periods, respectively, compared to the same periods last year. Sameyear, due to increases in e-commerce sales and higher brick-and-mortar same store sales, which include sales of both the U.S. internet business andsales. Last year’s brick and mortar same stores, were down 10% and 6% for the quarter and year-to-date periods, respectively. Same store sales were down significantly due to decreased salesthe temporary store closures resulting from the pandemic. There were four fewer brick-and-mortar stores operating at both brick and mortar locations and on the Company’s websites.June 30, 2021, as compared to June 30, 2020. The majority of the Company’s brick and mortar locations are in Florida and Texas, andCompany currently has just four active U.S. brick-and-mortar stores. Retail net sales for the quarterthree and year were impactedsix months ended June 30, 2021 surpassed the comparative 2019 levels by 15% and 8%, respectively, due largely to growth in the recent hurricanes.Company’s e-commerce businesses. Earnings from Operations GrossRetail gross earnings as a percentwere 65.6% of net sales were 63.6% in the thirdsecond quarter of 2017,2021, compared to 65.5%61.1% of net sales in the third quarter of 2016.last year’s second quarter. For the ninesix months ended SeptemberJune 30, 2021, retail gross earnings as a percentwere 65.5% of net sales, were 64.4%compared to 63.5% of net sales in 2017 and 65.1% in 2016.
Retail2020. The retail segment had operating earnings from operations declined $296,000of $1.2 million for the quarter, compared to the third quarteroperating losses of 2016, due mainly to lower sales.$856,000 in last year’s second quarter. For the six months ended June 30, retail operating earnings were $1.9 million in 2021, compared to operating losses of $945,000 in 2020. The improvement in second quarter and year-to-date period, retailearnings was due to resumption of sales at the Company’s active brick-and-mortar locations, higher operating earnings from operations were down $543,000the e-commerce businesses, and the benefit of closing unprofitable stores since last year.
Retail operating earnings for the three and six months ended June 30, 2021 outpaced 2019 levels due largely to growth in 2017, compared to the first nine monthsCompany’s more profitable e-commerce businesses and the shedding of 2016, due to lower sales and higher retail selling and administrative expenses. unprofitable stores last year. Selling and administrative expenses for the retail segment include, and are primarily related to, freight, advertising expense, employee costs, and rent and occupancy costs, employee costs, advertising expensecosts. Retail selling and freight.administrative expenses were $2.9 million in the second quarter of 2021 versus $3.1 million in the second quarter of 2020. For the six months ended June 30, retail selling and administrative expenses were $5.8 million in 2021 and $6.3 million in 2020. Retail expenses were down in 2021 as a result of store closings over the past year. Retail selling and administrative expenses were 47% of net sales in the second quarter of 2021 versus 85% of net sales in last year’s second quarter. For the six months ended June 30, retail selling and administrative expenses as a percent of net sales were 63%49% and 59% for the three-month periods ended September 30, 201775% in 2021 and 2016,2020, respectively. For the nine months ended September 30, selling and administrative2020 retail expenses as a percent of net sales were 63%high due to the 2020 sales decline, as many retail expenses are fixed in 2017 and 60% in 2016.nature. Other The Company’s other netbusinesses include its wholesale and retail operations of Florsheim Australia and Florsheim Europe. Net sales of the Company’s other businesses were $11.9$9.5 million in the thirdsecond quarter of 2017, down 3% as2021 compared to $12.2$3.7 million in 2016.last year’s second quarter. For the ninesix months ended SeptemberJune 30, 2017,2021, other net sales were $33.6$17.4 million, down 2%up from $34.5$9.8 million in the same period last year. The decreasesincreases in 2021 were primarily at Florsheim Australia, with sales up in both periodsits wholesale and retail businesses, as the retail environment continues to recover. Last year’s second quarter and year-to-date sales were duedown significantly as a result of COVID-related retail shutdowns. Other net sales for the second quarter of 2021 exceeded second quarter 2019 levels by 5%. For the year-to-date period, other net sales recovered to lower sales at bothapproximately 96% of 2019 levels, as the business environment in Australia improved in the second quarter. However, recent outbreaks of COVID have resulted in additional lockdowns. Collectively, Florsheim Australia and Florsheim Europe.Europe had operating earnings of $718,000 in the second quarter of 2021, compared to operating losses of $2.0 million in the second quarter of 2020. For the six months ended June 30, 2021, Florsheim Australia’s net sales, which accountsAustralia and Florsheim Europe had operating earnings totaling $237,000, compared to operating losses totaling $3.3 million in the same period last year. The increases in 2021 were largely due to improved performance at Florsheim Australia. Additionally, last year’s losses included the write-down of approximately $1.0 million in obsolete inventory at Florsheim Asia, offset by $1.4 million of income from rent and wage subsidies recognized in the second quarter. Second quarter and year-to-date operating earnings from the Company’s other businesses beat the comparative 2019 levels, due largely to improved performance at Florsheim Australia. Other income and expense Interest income was $188,000 and $138,000 for the majority of other net sales, were down 2% for boththree months ended June 30, 2021 and 2020, respectively. For the quartersix months ended June 30, interest income was $319,000 in 2021 and first nine$287,000 in 2020. Interest expense increased $72,000 and $28,000 during the three and six months of 2017, asended June 30, 2021, compared to the same periods of 2016. In local currency, Florsheim Australia’s2020. Other income (expense), net, sales were down 6%totaled $189,000 of income for the quarter and 5% forcompared to $252,000 of expense in last year’s second quarter. Last year’s second quarter included approximately $360,000 in losses on foreign exchange contracts entered into by Florsheim Australia. For the year-to-date period, other income (expense), net, rose to $327,000 of income in 2021 from $155,000 of income in 2020, due largely to gains on foreign exchange contracts entered into by Florsheim Australia. The Company’s effective tax rate for the three months ended June 30, 2021 was 21.2% compared to the same periods last year, with sales down in both its retail and wholesale businesses. Collectively, the earnings from operations of the Company’s other businesses were $369,000 in the third quarter of 2017 and $731,000 in32.3% for the same period last year.of 2020. For the ninesix months ended SeptemberJune 30, earnings from operations of the Company’s other businesseseffective tax rates were $1.0 million23.7% in 20172021 and $1.3 million31.6% in 2016. The decreases2020.The effective tax rate for the quarter and year-to-date periods were primarily due to lower operating earnings in Florsheim Australia’s retail businesses, mainly due tofirst six months of 2021 differed from the decrease in retail sales.
Otherfederal rate of 21% because of state taxes, the benefit of tax-free municipal bond income, and expense
Interestthe utilization of net operating loss (NOL) carryforwards at Florsheim Australia. Last year’s effective tax rates were higher because the Company did not record income was $193,000tax benefits on foreign subsidiary losses, and, $190,000 in the third quarters of 2017 and 2016, respectively. For the nine months ended September 30, interest income was $572,000 in 2017 and $584,000 in 2016. Interest expense for the three and nine months ended September 30, 2017, decreased $61,000 and $221,000, respectively, compared to the same periods in 2016, due to lower average debt balances this year compared to last year.
The Company adopted ASU 2017-07 in the first quarter of 2017 and retrospectively applied it to all periods presented. This requiredU.S. the Company had the ability to reclassifycarry back current year losses to a tax year when the non-service cost components of pension expense from selling and administrative expenses to other expense, net, in the Consolidated Condensed Statements of Earnings and Comprehensive Income (Unaudited). The decrease in other expense for the quarter and first nine months of 2017U.S. federal statutory tax rate was mainly due to decreases of $316,000 and $949,000, respectively, in the non-service cost components of pension expense. Pension expense decreased in 2017 as a result of freezing benefits35%, which was permitted under the pension plan, effective December 31, 2016.U.S. Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).
LIQUIDITY AND CAPITAL RESOURCES The Company’s primary sources of liquidity are its cash, short-term marketable securitiesinvestments, and its revolving line of credit. During the first nine months of 2017, theThe Company generated $16.4$27.1 million of cash from operating activities during the first six months of 2021, compared to $27.8$12.6 million in the same period of 2016.2020. The decreaseincrease between years was primarily due to higher earnings and changes in operating assets and liabilities, principally inventory. Inventory levels are down in 2021, as the Company is currently experiencing challenges in bringing in inventory from Asia due to bottlenecks in the supply chain. Management expects that by the end of the third quarter 2021, inventory levels will improve. During the second quarter of 2021, the Company paid $2.6 million to acquire the Forsake brand. In connection with this acquisition, the Company also has 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 is approximately $1.4 million in total. During the first half of 2021, the Company invested $30.1 million of cash in highly liquid fixed income funds. The Company paid two quarterly dividends totaling $4.6 million in the first six months of 2021, and three quarterly dividends totaling $7.0 million in the first six months of 2020. The Company accelerated the timing of its January 2021 quarterly dividend into 2020, and resumed its regular quarterly payment schedule in March 2021. On August 3, 2021, the Company’s Board of Directors declared a cash dividendsdividend of $9.1 million and $8.8 million during the nine months ended$0.24 per share to all shareholders of record on August 27, 2021, payable September 30, 2017 and 2016, respectively. 2021. The Company continues to repurchaserepurchases its common stock under its share repurchase program when the Companyit believes market conditions are favorable. During the first nine monthshalf of 2017,2021, the Company repurchased 420,71183,545 shares atfor a total cost of $11.6$1.5 million. As of SeptemberJune 30, 2017,2021, the Company had the authority to repurchase approximately 144,000252,000 shares available under its previously announced stock repurchase program. On October 31, 2017, the Company’s Board of Directors authorized the repurchase of an additional 1.0 million shares of its common stock under its repurchase program, bringing the total available to purchase to approximately 1.1 million shares. See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” below for more information. Capital expenditures totaled $1.4 millionwere $404,000 in the first ninesix months of 2017.2021. Management estimates that annual capital expenditures for 20162021 will be between $1.5$1.0 million and $2.0 million. At SeptemberJune 30, 2017,2021, the Company had a $60$30 million unsecured revolving line of credit with a bank expiring November 3, 2017.that is secured by a lien against the Company’s general corporate assets. The line of credit bears interest at LIBOR plus 0.75%.1.35% and expires on November 4, 2021. 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 June 30, 2021, there were no amounts outstanding on the Company’s line of credit and the Company borrowed a netwas in compliance with each of $0.5 millionthe financial covenants. There were also no amounts outstanding on the line of credit during the first nine months of 2017. At Septembersix-month period ended June 30, 2017, outstanding borrowings were $4.8 million at an interest rate of 2.0%. The highest balance on the2021.The Company expects to renew this line of credit during the quarter was $4.8 million. Subsequent to September 30, 2017, the line of credit agreement was renewed on the same terms for another one-year period, expiring November 4, 2018. later this year, but cannot provide any assurances. At SeptemberJune 30, 2017,2021, approximately $1.6$3.4 million of cash and cash equivalents was held by the Company’s foreign subsidiaries. The Company will continue to evaluate the best uses for its available liquidity, including, among other uses, capital expenditures, continued stock repurchases and additional acquisitions. The Company believes that available cash, andshort-term investments, marketable securities, cash provided by operations, and available borrowing facilities will provide adequate support for the cash needs of the business for at least one year, although there can be no assurances. COMMITMENTS COMMITMENTSNot applicable.
There were no material changes to the Company’s contractual obligations during the nine months ended September 30, 2017, from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. There have been no material changes from those reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.18
Item 4. Controls and Procedures. The Company maintains disclosure controls and procedures designed to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company required to be included in the Company’s periodic filings under the Exchange Act. Such officers have also concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in accumulating and communicating information in a timely manner, allowing timely decisions regarding required disclosures. There have been no significant changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings. None Item 1A. Risk Factors. There have been no material changes to the risk factors affecting the Company from those disclosed in the Company’s Annual Reportannual report on Form 10-K for the year ended December 31, 2016.2020. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. In 1998, the Company’s stock repurchase program was established. On several occasions since the program’s inception, the Board of Directors has increased the number of shares authorized for repurchase under the program. In total, 7.5 million shares have been authorized for repurchase. The table below presents information pursuant to Item 703(a) of Regulation S-K regarding the purchaserepurchases of the Company’s common stock by the Company in the three-month period ended SeptemberJune 30, 2017.2021. | | | | | | | | Total Number of | | | Maximum Number | | | | Total | | | Average | | | Shares Purchased as | | | of Shares | | | | Number | | | Price | | | Part of the Publicly | | | that May Yet Be | | | | of Shares | | | Paid | | | Announced | | | Purchased Under | | Period | | Purchased | | | Per Share | | | Program | | | the Program(1) | | | | | | | | | | | | | | | 7/1/2017 - 7/31/2017 | | | 45,937 | | | $ | 27.89 | | | | 45,937 | | | | 270,823 | | | | | | | | | | | | | | | | | | | 8/1/2017 - 8/31/2017 | | | 89,816 | | | $ | 27.57 | | | | 89,816 | | | | 181,007 | | | | | | | | | | | | | | | | | | | 9/1/2017 - 9/30/2017 | | | 36,543 | | | $ | 27.94 | | | | 36,543 | | | | 144,464 | | | | | | | | | | | | | | | | | | | Total | | | 172,296 | | | $ | 27.73 | | | | 172,296 | | | | | |
| | | | | | | | | | | | | | | | | | | Maximum Number | | | Total | | Average | | Total Number of | | of Shares | | | Number | | Price | | Shares Purchased as | | that May Yet Be | | | of Shares | | Paid | | Part of the Publicly | | Purchased Under | Period | | Purchased | | Per Share | | Announced Program | | the Program | 04/01/2021 - 04/30/2021 | | — | | $ | — | | — | | 274,043 | 05/01/2021 - 05/31/2021 | | 12,799 | | $ | 20.97 | | 12,799 | | 261,244 | 06/01/2021 - 06/30/2021 | | 9,009 | | $ | 20.91 | | 9,009 | | 252,235 | Total | | 21,808 | | | 20.94 | | 21,808 | | |
| (1) | In 1998 the Company's stock repurchase program was established. On several occasions since the program's inception, the Company's 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 to date. This includes the additional 1.0 million shares that were authorized for repurchase on October 31, 2017. |
Item 5. Other Information
On November 2, 2017, the Company renewed its line of credit agreement with PNC Bank, N.A. for another term that expires on November 4, 2018, on the same terms as the prior agreement. The forgoing description does not purport to be complete and is qualified in its entirety by reference to the Line of Credit Renewal Letter with PNC Bank, N.A., a copy of which is filed as Exhibit 10.1 to this Form 10-Q.20
Item 6. Exhibits. See the Exhibit Index included herewith for a listing of exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Exhibit | WEYCO GROUP, INC. | | | Dated: November 6, 2017 | /s/ John F. Wittkowske | | John F. Wittkowske | | Senior Vice President and Chief Financial Officer |
WEYCO GROUP, INC.
(THE “REGISTRANT”)
(COMMISSION FILE NO. 0-9068)
EXHIBIT INDEX
TO
CURRENT REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDEDSeptember 30, 2017
Exhibit | Description | Description | | Incorporation Herein By Reference To | | Filed
Herewith | | | | | | | | 10.131.1 | | Line of Credit Renewal Letter with PNC Bank, N.A., dated November 2, 2017
| | | | X | | | | | | | | 10.21a | | Form of incentive stock option agreement for the Weyco Group, Inc. 2017 Incentive Plan | | | | X | | | | | | | | 10.21b | | Form of non-qualified stock option agreement for the Weyco Group, Inc. 2017 Incentive Plan | | | | X | | | | | | | | 10.21c | | Form of restricted stock agreement for the Weyco Group, Inc. 2017 Incentive Plan | | | | 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 Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 20172021, formatted in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets (Unaudited); (ii) Consolidated Condensed Statements of Earnings and Comprehensive Income (Unaudited); (iii) Consolidated Condensed Statements of Cash Flows (Unaudited); and (iv) Notes to Consolidated Condensed Financial Statements furnished herewith | | | | X | | | | | | | | 104 | | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 formatted in iXBRL (included in Exhibit 101). | | | | X |
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | 19 | WEYCO GROUP, INC. | | | | Dated: August 9, 2021 | | /s/ John F. Wittkowske | | | John F. Wittkowske | | | Senior Vice President and Chief Financial Officer |
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