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,April 24, 2023, there were 10,192,9059,509,356 shares of common stock outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The following consolidated condensed balance sheet as of December 31, 2022, which has been derived from audited financial statements, and the unaudited interim consolidated condensed financial statements have been prepared by Weyco Group, Inc. (the(“we,” “our,” “us,” and 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 believeswe believe that the disclosures made are adequate to make the information not misleading. It is suggested thatPlease read these consolidated condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’sour 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 | |
| | | | | | | | | March 31, | | December 31, | | | 2023 | | 2022 | | | | (Dollars in thousands) | ASSETS: | | | | | | | Cash and cash equivalents | | $ | 22,565 | | $ | 16,876 | Investments, at fair value | | | 108 | | | 107 | Marketable securities, at amortized cost | | | 1,098 | | | 1,385 | Accounts receivable, net | | | 52,791 | | | 53,298 | Income tax receivable | | | — | | | 945 | Inventories | | | 106,677 | | | 127,976 | Prepaid expenses and other current assets | | | 3,833 | | | 5,870 | Total current assets | | | 187,072 | | | 206,457 | | | | | | | | Marketable securities, at amortized cost | | | 6,903 | | | 7,123 | Deferred income tax benefits | | | 1,021 | | | 1,038 | Property, plant and equipment, net | | | 28,794 | | | 28,812 | Operating lease right-of-use assets | | | 14,032 | | | 13,428 | Goodwill | | | 12,317 | | | 12,317 | Trademarks | | | 33,618 | | | 33,618 | Other assets | | | 23,952 | | | 23,827 | Total assets | | $ | 307,709 | | $ | 326,620 | | | | | | | | LIABILITIES AND EQUITY: | | | | | | | Short-term borrowings | | $ | 20,640 | | $ | 31,136 | Accounts payable | | | 6,540 | | | 14,946 | Dividend payable | | | — | | | 2,290 | Operating lease liabilities | | | 4,270 | | | 4,026 | Accrued liabilities | | | 11,751 | | | 15,137 | Accrued income tax payable | | | 1,245 | | | — | Total current liabilities | | | 44,446 | | | 67,535 | | | | | | | | Deferred income tax liabilities | | | 8,524 | | | 8,530 | Long-term pension liability | | | 15,651 | | | 15,523 | Operating lease liabilities | | | 10,897 | | | 10,661 | Other long-term liabilities | | | 523 | | | 466 | Total liabilities | | | 80,041 | | | 102,715 | | | | | | | | Common stock | | | 9,523 | | | 9,584 | Capital in excess of par value | | | 70,828 | | | 70,475 | Reinvested earnings | | | 167,717 | | | 164,039 | Accumulated other comprehensive loss | | | (20,400) | | | (20,193) | Total equity | | | 227,668 | | | 223,905 | Total liabilities and equity | | $ | 307,709 | | $ | 326,620 |
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 March 31, | | | | 2023 | | 2022 | | | | | (In thousands, except per share amounts) | | | | | | | | | Net sales | | $ | 86,294 | | $ | 81,360 | | Cost of sales | | | 49,132 | | | 52,232 | | Gross earnings | | | 37,162 | | | 29,128 | | | | | | | | | | Selling and administrative expenses | | | 26,776 | | | 23,697 | | Earnings from operations | | | 10,386 | | | 5,431 | | | | | | | | | | Interest income | | | 139 | | | 91 | | Interest expense | | | (385) | | | (1) | | Other expense, net | | | (130) | | | (6) | | | | | | | | | | Earnings before provision for income taxes | | | 10,010 | | | 5,515 | | | | | | | | | | Provision for income taxes | | | 2,565 | | | 1,462 | | | | | | | | | | Net earnings | | | 7,445 | | | 4,053 | | | | | | | | | | Weighted average shares outstanding | | | | | | | | Basic | | | 9,483 | | | 9,596 | | Diluted | | | 9,545 | | | 9,647 | | | | | | | | | | Earnings per share | | | | | | | | Basic | | $ | 0.79 | | $ | 0.42 | | Diluted | | $ | 0.78 | | $ | 0.42 | | | | | | | | | | Cash dividends declared (per share) | | $ | 0.24 | | $ | 0.24 | | | | | | | | | | Comprehensive income | | $ | 7,238 | | $ | 4,728 | |
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 | |
| | | | | | | | | Three Months Ended March 31, | | | 2023 | | 2022 | | | | (Dollars in thousands) | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | Net earnings | | $ | 7,445 | | $ | 4,053 | Adjustments to reconcile net earnings to net cash provided by operating activities - | | | | | | | Depreciation | | | 643 | | | 604 | Amortization | | | 69 | | | 71 | Bad debt (recovery) expense | | | (13) | | | 15 | Deferred income taxes | | | (23) | | | (111) | Net foreign currency transaction (gains) losses | | | (48) | | | 32 | Share-based compensation expense | | | 338 | | | 350 | Pension expense | | | 347 | | | — | Increase in cash surrender value of life insurance | | | (105) | | | (150) | Changes in operating assets and liabilities - | | | | | | | Accounts receivable | | | 520 | | | 1,395 | Inventories | | | 21,297 | | | 8,980 | Prepaid expenses and other assets | | | 1,943 | | | 89 | Accounts payable | | | (8,411) | | | (12,966) | Accrued liabilities and other | | | (3,208) | | | (3,578) | Accrued income taxes | | | 2,192 | | | 1,447 | Net cash provided by operating activities | | | 22,986 | | | 231 | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | Proceeds from maturities of marketable securities | | | 510 | | | 475 | Proceeds from sale of investment securities | | | — | | | 8,050 | Purchases of property, plant and equipment | | | (659) | | | (352) | Net cash (used for) provided by investing activities | | | (149) | | | 8,173 | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | Cash dividends paid | | | (4,561) | | | (2,297) | Shares purchased and retired | | | (1,540) | | | (1,797) | Net proceeds from stock options exercised | | | 16 | | | 11 | Payment of contingent consideration | | | (500) | | | — | Proceeds from bank borrowings | | | 29,018 | | | — | Repayments of bank borrowings | | | (39,514) | | | — | Net cash used for financing activities | | | (17,081) | | | (4,083) | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | (67) | | | 118 | | | | | | | | Net increase in cash and cash equivalents | | $ | 5,689 | | $ | 4,439 | | | | | | | | CASH AND CASH EQUIVALENTS at beginning of period | | | 16,876 | | | 19,711 | | | | | | | | CASH AND CASH EQUIVALENTS at end of period | | $ | 22,565 | | $ | 24,150 | | | | | | | | SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | | | Income taxes paid, net of refunds | | $ | 205 | | $ | 75 | Interest paid | | $ | 423 | | $ | 1 |
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 nine monthsthree-month period ended September 30, 2017,March 31, 2023, may not necessarily be indicative of the results for the full year. Use of Estimates | 2. | New Accounting Pronouncements |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and 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, which would impact the reported amounts and disclosures in the consolidated financial statements and accompanying notes. 2.New Accounting Pronouncement Recently Adopted In March 2017,June 2016, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”) No. 2017-072016-13, “ImprovingFinancial Instruments – Credit Losses: Measurements of Credit Losses on Financial Instruments. This ASU modifies the Presentationmeasurement of Net Periodic Pension Costexpected credit losses of certain financial instruments, based on historical experience, current conditions, and Net Periodic Post Retirement Benefit Cost”(“ASU 2017-07”). This new standard requires that employers disaggregate the servicereasonable forecasts, and applies to financial assets measured at amortized cost, component from the other components ofincluding loans, held-to-maturity debt securities, net periodic pension costinvestments in 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, 2017leases, 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. In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). This new standard simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements,trade accounts receivable as well as specifiescertain off-balance sheet credit exposures, such as loan commitments. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to reinvested earnings in the classificationperiod of certain cash flows associated with share-based payment transactions within the statementsadoption. We adopted this standard in first quarter of cash flows. The Company adopted ASU 2016-09 effective January 1, 2017.2023. The adoption of this standard resulted 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 amount 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. This guidance 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 itsour 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. The Company is currently planning to adopt this standard using the modified retrospective approach.statements or related disclosures.
In February 2016, the FASB issued ASU No. 2016-02 “Leases.” This new standard requires lessees to recognize the rights and obligations created by finance and operating leases with terms exceeding 12 months as assets and liabilities on their balance sheets. The amendments in this update are effective for fiscal years beginning after December 15, 2018 and interim periods therein. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
Certain prior year amounts in the Consolidated Condensed Statements of 3.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 March 31, | | | | | 2023 | | 2022 | | | | 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 | | | $ | 7,445 | | $ | 4,053 | | | | | | | | | | | Denominator: | | | | | | | | | | | | | | | | | | | | | | | | Basic weighted average shares outstanding | | | 10,160 | | | | 10,461 | | | | 10,299 | | | | 10,556 | | | | 9,483 | | | 9,596 | | Effect of dilutive securities: | | | | | | | | | | | | | | | | | | | | | | | | Employee stock-based awards | | | 58 | | | | 55 | | | | 61 | | | | 49 | | | Employee share-based awards | | | | 62 | | | 51 | | Diluted weighted average shares outstanding | | | 10,218 | | | | 10,516 | | | | 10,360 | | | | 10,605 | | | | 9,545 | | | 9,647 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic earnings per share | | $ | 0.49 | | | $ | 0.44 | | | $ | 0.82 | | | $ | 0.79 | | | $ | 0.79 | | $ | 0.42 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Diluted earnings per share | | $ | 0.48 | | | $ | 0.44 | | | $ | 0.81 | | | $ | 0.78 | | | $ | 0.78 | | $ | 0.42 | |
Diluted weighted average shares outstanding for the three months ended September 30, 2017, excludeMarch 31, 2023 excludes anti-dilutive stock-based awardsstock options totaling 1,116,3251,042,000 shares of common stock at a weighted average exercise price of $26.49. Diluted weighted average shares outstanding for the nine months ended September 30, 2017, exclude anti-dilutive stock-based awards totaling 844,036 shares of common stock at a weighted average price of $26.93.$26.79. Diluted weighted average shares outstanding for the three months ended September 30, 2016, excludeMarch 31, 2022 excludes anti-dilutive stock-based awardsstock options totaling 1,232,000928,000 shares of common stock at a weighted average exercise price of $26.14. Diluted weighted average shares outstanding for$27.24. 4.Investments Investments, at fair value At both March 31, 2023 and December 31, 2022, we had $0.1 million of cash invested in highly liquid taxable bond funds. We classify these investments as trading securities and report them at fair value. There were no significant unrealized gains or losses on these investments in the nine months ended September 30, 2016, exclude anti-dilutive stock-based awards totaling 924,161 sharesfirst quarters of common stock2023 and 2022. The fair value measurements of these investments are based on quoted market prices in active markets, and thus represent a Level 1 valuation as defined by Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. Marketable securities, at a weighted average price of $26.78.amortized cost We also invest in marketable securities. As noted in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2016,2022, all of the Company’sour marketable securities are classified as held-to-maturity securities and reported at amortized cost pursuant to Accounting Standards Codification (“ASC”)ASC 320,Investments – Debt and Equity Securities, as the Company haswe have 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 September 30, 2017,March 31, 2023 and December 31, 2016.2022. | | | | | | | | | | | | | | | | | March 31, 2023 | | December 31, 2022 | | | | 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) | | | Municipal bonds: | | | | | | | | | | | | | | | | | | | | | (Dollars in thousands) | Marketable securities: | | | | | | | | | | | | | | Current | | $ | 11,354 | | | $ | 11,380 | | | $ | 4,601 | | | $ | 4,610 | | | $ | 1,098 | | $ | 1,098 | | $ | 1,385 | | $ | 1,381 | Due from one through five years | | | 9,819 | | | | 10,157 | | | | 12,133 | | | | 12,486 | | | | 3,757 | | | 3,758 | | | 3,977 | | | 3,950 | Due from six through ten years | | | 5,789 | | | | 6,050 | | | | 7,705 | | | | 7,804 | | | | 2,347 | | | 2,492 | | | 2,347 | | | 2,455 | Due from eleven through twenty years | | | 2,665 | | | | 2,763 | | | | 1,223 | | | | 1,222 | | | | 799 | | | 796 | | | 799 | | | 773 | Total | | $ | 29,627 | | | $ | 30,350 | | | $ | 25,662 | | | $ | 26,122 | | | $ | 8,001 | | $ | 8,144 | | $ | 8,508 | | $ | 8,559 |
The unrealized gains and losses on marketable securities at September 30, 2017,March 31, 2023, and at December 31, 2016,2022, 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 | ) |
| | | | | | | | | | | | | | | March 31, 2023 | | December 31, 2022 | | | Unrealized | | Unrealized | | Unrealized | | Unrealized | | | Gains | | Losses | | Gains | | Losses | | | | (Dollars in thousands) | Marketable securities | | $ | 181 | | $ | (38) | | $ | 145 | | $ | (94) |
The estimated market values provided are levelLevel 2 valuations as defined by ASC 820,Fair Value Measurements and Disclosures (“ASC 820”). The Company820. We reviewed itsour portfolio of investments as of September 30, 2017March 31, 2023 and determined that no other-than-temporary market value impairment exists. 5.Intangible Assets The Company’s
During the three months ended March 31, 2023, there were no changes in the carrying value of our indefinite-lived intangible assets (goodwill and trademarks). Our amortizable intangible assets, as recorded in the Consolidated Condensed Balance Sheets (Unaudited) consisted of the following: | | 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 | |
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2023 | | December 31, 2022 | | | 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 | | $ | (2,819) | | $ | 681 | | $ | 3,500 | | $ | (2,761) | | $ | 739 | Total amortizable intangible assets | | | | | $ | 3,500 | | $ | (2,819) | | $ | 681 | | $ | 3,500 | | $ | (2,761) | | $ | 739 |
Amortization expense related to the intangible assets was approximately $58,000 forin both the thirdfirst quarters of 20172023 and 2016. For the nine months ended September 30, amortization expense related to the intangible assets was approximately $175,000 and $182,000 in 2017 and 2016, respectively.2022. 6.Segment Information The Company hasWe have two reportable segments: North American wholesale operations (“wholesale”Wholesale”) and North American retail operations (“retail”Retail”). The chief operating decision maker, the Company’sOur Chief Executive Officer evaluates the performance of the Company’sour segments based on earnings 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 tablestable below includes the Company’sour wholesale and retail operations in Australia, South Africa, and Asia Pacific, and Europe, which do not meet the criteria for separate reportable segment classification. Summarized segment data for the three month periods ended March 31, 2023 and nine months ended September 30, 2017 and 2016,2022, was as follows:
| | | | | | | | | | | | | | Three Months Ended | | | | | | | | | | | | | | | | | | | | | | September 30, | | Wholesale | | Retail | | Other | | Total | | | March 31, | | | Wholesale | | Retail | | Other | | Total | | | (Dollars in thousands) | | | 2017 | | | | | | | | | | | | | | (Dollars in thousands) | 2023 | | | | | | | | | | | | | | Product sales | | $ | 60,200 | | | $ | 4,291 | | | $ | 11,887 | | | $ | 76,378 | | | $ | 69,281 | | $ | 8,930 | | $ | 7,467 | | $ | 85,678 | Licensing revenues | | | 528 | | | | - | | | | - | | | | 528 | | | | 616 | | | — | | | — | | | 616 | Net sales | | $ | 60,728 | | | $ | 4,291 | | | $ | 11,887 | | | $ | 76,906 | | | $ | 69,897 | | $ | 8,930 | | $ | 7,467 | | $ | 86,294 | Earnings from operations | | $ | 7,416 | | | $ | 17 | | | $ | 369 | | | $ | 7,802 | | | $ | 8,829 | | $ | 1,282 | | $ | 275 | | $ | 10,386 | | | | | | | | | | | | | | | | | | | 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022 | | | | | | | | | | | | | | Product sales | | $ | 61,645 | | | $ | 4,702 | | | $ | 12,197 | | | $ | 78,544 | | | $ | 66,668 | | $ | 7,860 | | $ | 6,400 | | $ | 80,928 | Licensing revenues | | | 525 | | | | - | | | | - | | | | 525 | | | | 432 | | | — | | | — | | | 432 | Net sales | | $ | 62,170 | | | $ | 4,702 | | | $ | 12,197 | | | $ | 79,069 | | | $ | 67,100 | | $ | 7,860 | | $ | 6,400 | | $ | 81,360 | Earnings from operations | | $ | 6,710 | | | $ | 313 | | | $ | 731 | | | $ | 7,754 | | | Earnings (loss) from operations | | | $ | 4,846 | | $ | 828 | | $ | (243) | | $ | 5,431 |
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 |
7.Employee Retirement Plans The components of the Company’s net periodicour 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 March 31, | | | 2023 | | 2022 | | | | (Dollars in thousands) | Service cost | | $ | 118 | | $ | 112 | Interest cost | | | 672 | | | 432 | Expected return on plan assets | | | (577) | | | (752) | Net amortization and deferral | | | 134 | | | 208 | Pension expense | | $ | 347 | | $ | — |
The components of net periodic pension costexpense other than the service cost component arewere included in "other“other expense, net"net” in the Consolidated Condensed Statements of Earnings and Comprehensive Income (Unaudited). 8.Leases We lease retail shoe stores, as well as several office and distribution facilities worldwide. The leases have original lease periods expiring between 2023 and 2029. Many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company madecomponents of our operating lease costs were as follows: | | | | | | | | | Three Months Ended March 31, | | | 2023 | | 2022 | | | | (Dollars in thousands) | Operating lease costs | | $ | 1,362 | | $ | 1,264 | Variable lease costs (1) | | | 2 | | | — | Total lease costs | | $ | 1,364 | | $ | 1,264 |
(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 our financial statements. The following is a $4.0 million pension contributionschedule of maturities of operating lease liabilities as of March 31, 2023: | | | | | | Operating Leases | | | (Dollars in thousands) | 2023, excluding the quarter ended March 31, 2023 | | $ | 3,697 | 2024 | | | 4,215 | 2025 | | | 3,213 | 2026 | | | 2,754 | 2027 | | | 1,628 | Thereafter | | | 1,084 | Total lease payments | | | 16,591 | Less imputed interest | | | (1,424) | Present value of lease liabilities | | $ | 15,167 |
The operating lease liabilities are classified in the second quarterconsolidated condensed balance sheets (unaudited) as follows: | | | | | | | | | March 31, 2023 | | December 31, 2022 | | | | (Dollars in thousands) | Operating lease liabilities - current | | $ | 4,270 | | $ | 4,026 | Operating lease liabilities - non-current | | | 10,897 | | | 10,661 | Total | | $ | 15,167 | | $ | 14,687 |
We determined the present value of 2017. No additionalour lease liabilities using a weighted-average discount rate of 4.25%. As of March 31, 2023, our leases have a weighted-average remaining lease term of 3.9 years. Supplemental cash contributions are expectedflow information related to our operating leases is as follows: | | | | | | | | | Three Months Ended March 31, | | | 2023 | | 2022 | | | | (Dollars in thousands) | Cash paid for amounts included in the measurement of lease liabilities | | $ | 1,286 | | $ | 1,128 | Right-of-use assets obtained in exchange for new lease liabilities (noncash) | | $ | 1,739 | | $ | — |
9. Income Taxes The effective income tax rates for the remainderthree months ended March 31, 2023 and 2022 were 25.6% and 26.5%, respectively. The 2023 and 2022 effective tax rates differed from the federal rate of 2017.21% primarily because of state taxes. The 2023 and 2022 effective tax rates differed from the federal rate of 21% primarily because of state and foreign taxes. | 9. | Stock-Based Compensation Plans |
10.Share-Based Compensation Plans During the three and nine months ended September 30, 2017, the CompanyMarch 31, 2023, we recognized approximately $395,000 and $1,174,000 respectively,$338,000 of compensation expense associated with stock option and restricted stock awards granted in years 20132018 through 2017.2022. During the three and nine months ended September 30, 2016, the CompanyMarch 31, 2022, we recognized approximately $393,000 and $1,121,000, respectively,$350,000 of compensation expense associated with stock option and restricted stock awards granted in years 20122017 through 2016.2021. The following table summarizes the Company’sour stock option activity for the nine-monththree-month period ended September 30, 2017:March 31, 2023: | | | | | | | Weighted | | | | | | | | | | | Weighted | | Average | | | | | | | | | | | Average | | Remaining | | Aggregate | | | | | | | | Exercise | | Contractual | | Intrinsic | | | | | Shares | | | Price | | | Term (Years) | | | Value* | | | Outstanding at December 31, 2016 | | | 1,486,257 | | | $ | 26.13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted | | | | | | | | | Weighted | | Average | | | | | | | | | Average | | Remaining | | Aggregate | | | | | | Exercise | | Contractual | | Intrinsic | | | | Shares | | Price | | Term (Years) | | Value* | Outstanding at December 31, 2022 | | | 1,345,369 | | $ | 25.83 | | | | | | Granted | | | 211,200 | | | $ | 27.94 | | | | | | | | | | | — | | | — | | | | | | Exercised | | | (81,464 | ) | | $ | 24.71 | | | | | | | | | | | (2,100) | | | 18.00 | | | | | | Forfeited or expired | | | (14,175 | ) | | $ | 26.46 | | | | | | | | | | | (1,020) | | | 29.65 | | | | | | 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 | | | Outstanding at March 31, 2023 | | | 1,342,249 | | $ | 25.84 | | 5.0 | | $ | 1,759,000 | Exercisable at March 31, 2023 | | | 889,013 | | $ | 26.37 | | 3.4 | | $ | 780,000 |
*The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of the Company'sour Company’s common stock on September 29, 2017, the last trading dayMarch 31, 2023 of the quarter, of $28.38$25.30 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’sour restricted stock award activity for the nine-monththree-month period ended September 30, 2017:March 31, 2023:
| | | | | | | 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted | | | | | | | | | Weighted | | Average | | | | | | | Shares of | | Average | | Remaining | | Aggregate | | | | Restricted | | Grant Date | | Contractual | | Intrinsic | | | | Stock | | Fair Value | | Term (Years) | | Value* | Non-vested at December 31, 2022 | | | 71,808 | | $ | 24.67 | | | | | | Issued | | | 30,800 | | | | 27.94 | | | | | | | | | | | — | | | — | | | | | | Vested | | | (18,600 | ) | | | 26.05 | | | | | | | | | | | (150) | | | 28.77 | | | | | | Forfeited | | | - | | | | - | | | | | | | | | | | - | | | — | | | | | | Non-vested at September 30, 2017 | | | 70,700 | | | $ | 26.90 | | | | 2.9 | | | $ | 2,006,000 | | | Non-vested at March 31, 2023 | | | 71,658 | | $ | 24.66 | | 2.4 | | $ | 1,813,000 |
*The aggregate intrinsic value of non-vested restricted stock was calculated using the market value of the Company'sour Company’s common stock on September 29, 2017, the last trading dayMarch 31, 2023 of the quarter, of $28.38$25.30 multiplied by the number of non-vested restricted shares outstanding. 11.Short-Term Borrowings At September 30, 2017, the CompanyMarch 31, 2023, we had a $60$50.0 million unsecured revolving line of credit with a bank expiring November 3, 2017. Thethat is secured by a lien against our general business assets, and expires on September 28, 2023. Outstanding advances on the line of credit bearsbear interest at the daily London Interbank Offered Rateone-month term secured overnight financing rate (“LIBOR”SOFR”) plus 0.75%.145 basis points. Our line of credit agreement contains representations, warranties and covenants (including a minimum tangible net worth financial covenant) that are customary for a facility of this type. At September 30, 2017,March 31, 2023, outstanding borrowings wereon the line of credit totaled approximately $4.8$20.6 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 September 30, 2017, the line of credit agreement was renewed on the same terms for another one-year period, expiring November 4, 2018.6.26%, and we were in compliance with all financial covenants. 12.Financial Instruments At September 30, 2017, the Company had foreign exchange contracts outstanding to sell $8.0 million Canadian dollars at a price of approximately $6.0 million U.S. dollars. The Company’s majority-ownedMarch 31, 2023, our wholly-owned subsidiary, Florsheim Australia, had foreign exchange contracts outstanding to buy $3.7$3.2 million U.S. dollars at a price of approximately $4.7$4.5 million Australian dollars. Florsheim Australia also had foreign exchangeThese contracts outstanding to buy 200,000 Euros at a price of approximately $299,000 Australian dollars.all expire in 2023. Based on quarter-end exchange rates, there were no significant unrealized gains or losses on the outstanding contracts. The Company determinesWe determine 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 levelLevel 2 valuation as defined by ASC 820.
13.Comprehensive Income Comprehensive income for the three and nine months ended September 30, 2017March 31, 2023 and 2016,2022, was as follows: | | | | | | | | | | | Three Months Ended March 31, | | | | 2023 | | 2022 | | | Three Months Ended September 30, | | | Nine Months Ended September 30, | | | | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | | | (Dollars in thousands) | | | | | | (Dollars in thousands) | Net earnings | | $ | 4,920 | | | $ | 4,701 | | | $ | 8,338 | | | $ | 8,411 | | | $ | 7,445 | | $ | 4,053 | Foreign currency translation adjustments | | | 452 | | | | 261 | | | | 1,672 | | | | 1,222 | | | | (306) | | | 521 | Pension liability, net of tax of $52, $163, $154 and $490, respectively | | | 80 | | | | 256 | | | | 241 | | | | 767 | | | Pension liability, net of tax of $35 and $54, respectively | | | | 99 | | | 154 | Total comprehensive income | | $ | 5,452 | | | $ | 5,218 | | | $ | 10,251 | | | $ | 10,400 | | | $ | 7,238 | | $ | 4,728 |
The components of accumulated other comprehensive loss as recorded in the Consolidated Condensed Balance Sheets (Unaudited) were as follows: | | | | | | | | | | | March 31, | | December 31, | | | | 2023 | | 2022 | | | September 30, | | December 31, | | | | | 2017 | | | 2016 | | | | | (Dollars in thousands) | | | | | | (Dollars in thousands) | Foreign currency translation adjustments | | $ | (4,158 | ) | | $ | (5,489 | ) | | $ | (8,902) | | $ | (8,596) | Pension liability, net of tax | | | (10,839 | ) | | | (11,080 | ) | | | (11,498) | | | (11,597) | Total accumulated other comprehensive loss | | $ | (14,997 | ) | | $ | (16,569 | ) | | $ | (20,400) | | $ | (20,193) |
The following presents a tabular disclosure abouttables show changes in accumulated other comprehensive loss during the ninethree months ended September 30, 2017:March 31, 2023 and 2022: | | 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, 2022 | | $ | (8,596) | | $ | (11,597) | | $ | (20,193) | Other comprehensive loss before reclassifications | | | (306) | | | — | | | (306) | Amounts reclassified from accumulated other comprehensive loss | | | — | | | 99 | | | 99 | Net current period other comprehensive (loss) income | | | (306) | | | 99 | | | (207) | Ending balance, March 31, 2023 | | $ | (8,902) | | $ | (11,498) | | $ | (20,400) |
| | | | | | | | | | | | Foreign | | Defined | | | | | | Currency | | Benefit | | | | | | Translation | | Pension | | | | | | Adjustments | | Items | | Total | Beginning balance, December 31, 2021 | | $ | (6,783) | | $ | (18,011) | | $ | (24,794) | Other comprehensive income before reclassifications | | | 521 | | | — | | | 521 | Amounts reclassified from accumulated other comprehensive loss | | | — | | | 154 | | | 154 | Net current period other comprehensive income | | | 521 | | | 154 | | | 675 | Ending balance, March 31, 2022 | | $ | (6,262) | | $ | (17,857) | | $ | (24,119) |
The following presents a tabular disclosure abouttable shows reclassification adjustments out of accumulated other comprehensive loss during the ninethree months ended September 30, 2017:March 31, 2023 and 2022: | | 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 | | | | | | | | | | | | | | | Amounts reclassified from | | | | | | accumulated other | | | | | | comprehensive loss for | | Affected line item in the | | | | the three months ended | | statement where net income is | | | | March 31, 2023 | | March 31, 2022 | | presented | Amortization of defined benefit pension items | | | | | | | | | | | | | | Prior service cost | | $ | (47) | (1) | | Other expense, net | | $ | 5 | | $ | 2 | (1) | Other expense, net | Actuarial losses | | | 442 | (1) | | Other expense, net | | | 129 | | | 206 | (1) | Other expense, net | Total before tax | | | 395 | | | | | 134 | | | 208 | | | Tax benefit | | | (154) | | | | | (35) | | | (54) | | | Net of tax | | $ | 241 | | | | $ | 99 | | $ | 154 | | |
| (1) | These amounts were included in the net periodic pension cost.expense. See Note 87 for additional details. |
14.Equity A reconciliation of the Company’sThe following table reconciles our equity for the ninethree months ended September 30, 2017, is as follows:March 31, 2023:
| | | | | | | | | | | 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, 2022 | | $ | 9,584 | | $ | 70,475 | | $ | 164,039 | | $ | (20,193) | Net earnings | | | — | | | — | | | 7,445 | | | — | Foreign currency translation adjustments | | | — | | | — | | | — | | | (306) | Pension liability adjustment, net of tax | | | — | | | — | | | — | | | 99 | Cash dividends declared | | | — | | | — | | | (2,289) | | | — | Stock options exercised, net of shares withheld for employee taxes and strike price | | | 1 | | | 15 | | | — | | | — | Share-based compensation expense | | | — | | | 338 | | | — | | | — | Shares purchased and retired | | | (62) | | | — | | | (1,478) | | | — | Balance, March 31, 2023 | | $ | 9,523 | | $ | 70,828 | | $ | 167,717 | | $ | (20,400) |
On OctoberThe following table reconciles our equity for the three months ended March 31, 2017, the Company’s Board of Directors authorized 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.2022:
| | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | Capital in | | | | | Other | | | Common | | Excess of | | Reinvested | | Comprehensive | | | Stock | | Par Value | | Earnings | | Loss | | | | (Dollars in thousands) | Balance, December 31, 2021 | | $ | 9,709 | | $ | 68,718 | | $ | 147,762 | | $ | (24,794) | Net earnings | | | — | | | — | | | 4,053 | | | — | Foreign currency translation adjustments | | | — | | | — | | | — | | | 521 | Pension liability adjustment, net of tax | | | — | | | — | | | — | | | 154 | Cash dividends declared | | | — | | | — | | | (2,316) | | | — | Stock options exercised, net of shares withheld for employee taxes and strike price | | | — | | | 8 | | | — | | | — | Share-based compensation expense | | | — | | | 350 | | | — | | | — | Shares purchased and retired | | | (75) | | | — | | | (1,722) | | | — | Balance, March 31, 2022 | | $ | 9,634 | | $ | 69,076 | | $ | 147,777 | | $ | (24,119) |
Item 2. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations. FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements with respect towithin the Company’s outlook formeaning of the future.“safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements represent the Company's reasonableour good 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,“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’sour Annual Report on Form 10-K for the year-endedyear ended December 31, 2016.2022, filed March 13, 2023. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. 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,” “Nunnincluding Florsheim, Nunn Bush,” “Stacy Stacy Adams,” “BOGS,” “Rafters,” BOGS, Rafters and “Umi.”Forsake. Inventory is purchased from third-party overseas manufacturers. The majorityAlmost all of these foreign-sourced purchases are denominated in U.S. dollars. The Company hasWe have two reportable segments, North American wholesale operations (“wholesale”Wholesale”) and North American retail operations (“retail”Retail”). In the wholesaleWholesale segment, the Company’sour products are sold to leading footwear, department, and specialty stores, as well as e-commerce retailers, primarily in the United States and Canada. The CompanyWe also hashave licensing agreements with third parties who sell itsour branded apparel, accessories and specialty footwear in the United States, as well as itsour footwear in Mexico and certain markets overseas. Licensing revenues are included in the Company’s wholesaleour Wholesale segment. The Company’s retailOur Retail segment consistedconsists of 10e-commerce businesses and four brick and mortar retail stores and internet businesses in the United States as of September 30, 2017. Sales in retail outletsStates. Retail sales are made directly to consumers on our websites, or by Companyour employees.
The Company’s Our “other” operations include the Company’sour wholesale and retail businesses in Australia, South Africa, and Asia Pacific (collectively, “Florsheim Australia”) and Europe (“Florsheim Europe”). The majority of the Company’sour operations are in the United States and itsour results are primarily affected by the economic conditions and the retail environment in the United States.
EXECUTIVE OVERVIEW We started the year 2023 strong, setting a first quarter sales record and generating robust record-level earnings in both our Wholesale and Retail segments. Third Quarter HighlightsNet sales of our Wholesale segment were up 4% for the quarter, led by our legacy business. Wholesale sales increased due to higher unit selling prices, while pairs shipped decreased 5%. Florsheim had another record quarter with a 15% increase, as the brand continues to pick up market share in the refined footwear category. Within the retail industry, Florsheim is seen as the go-to brand for on-trend dress footwear, and we continue to focus on expanding the brand into the hybrid and everyday casual market. Our Nunn Bush business was up slightly for the quarter with a 1% sales increase. Nunn Bush has made progress within the comfort casual segment, with over half of its sales coming from the casual category. Stacy Adams was down 3% for the quarter. Stacy Adams continues to be the leading brand for accessible fashion footwear, and we are well-positioned from an inventory and style perspective for the key upcoming prom and wedding seasons. Our legacy brands all experienced resurgent sales in 2022, as we benefited from historically high sell-throughs based on robust demand for refined footwear. Lower than normal inventory levels at retail also resulted in additional shipments through pipeline fill. As of Spring 2023, retail inventory levels have been reset and sell-through rates for our brands have normalized at slightly above pre-pandemic levels. While accounts are now taking a cautious approach to the market as they assess near-term consumer spending, we remain optimistic about our long-term prospects given the strength of our brands and our ability to favorably compete within the non-athletic footwear category.
BOGS first quarter sales were down 2%. After a record 2022, we have seen BOGS’ wholesale sales slow in 2023 as retailers remain cautious about adding to their outdoor footwear inventory given the mild winter in many parts of the country. We anticipate this sales trend to continue into the Fall as accounts right-size their inventory. We see this as a temporary set-back for the BOGS brand. BOGS experienced strong demand throughout the pandemic and has enjoyed extraordinary direct-to-consumer growth. While we are heavier than normal in terms of our BOGS inventory levels, we believe it is a manageable situation as we were careful to invest in evergreen styles. Overall, the BOGS brand is healthy and maintains a leadership position within the weather boot category, as well as an expanding casual lifestyle business. We project a return to more normalized inventory levels in the fourth quarter of 2023 and a rebound in sales growth in 2024. In our Retail segment, sales were up 14% for the quarter. Most of the increase was driven by internet sales; brick-and-mortar sales also increased for the quarter. First quarter retail operating earnings rose 55%. Our e-commerce team has been focused on reducing expenses as a percent of sales. The results this quarter indicated the progress that has been made in controlling expenses. Industry statistics show decreases in online sales year-over-year for footwear. We are currently bucking that trend. However, the challenging footwear retail market makes us mindful of the need to manage our expenses to maintain a healthy net profit margin. Florsheim Australia’s net sales were up 17% for the quarter. In local currency, they were up 24%. While we were up against an easy comparable due to last year’s first Omicron partial shut-down in Australia and other overseas markets, our performance reflects a solid post-pandemic business model for the region. As in the U.S., our business overseas is trending well but faces uncertainty related to economic pressures as the world navigates higher interest rates and cautious consumer demand. Consolidated Sales and Earnings Consolidated net sales for the third quarterwere a first-quarter record of 2017 were $76.9$86.3 million, down 3% asup 6% compared to last year’s third quarterour previous record of $81.4 million in 2022. Consolidated gross earnings increased to 43.1% of net sales of $79.1 million. Earnings from operations were $7.8 million in both 2017 and 2016. Consolidated net earnings attributablecompared to Weyco Group, Inc. increased 7% to $4.9 million in 2017, up from $4.6 million last year. Diluted earnings per share were $0.48 this quarter and $0.44 per share in the third quarter35.8% of 2016. The majority of the decrease in consolidated net sales came from the Company’s wholesale segment. Wholesale net sales declined $1.4 million,in last year’s first quarter, 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.
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 lowerin our Wholesale segment. Operating 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 thewere a first-quarter record of $10.4 million, up more than 90% over last year’s first nine monthsquarter operating earnings of 2017$5.4 million. Net earnings were $203.5a first-quarter record of $7.4 million, down 5% from last year’s year-to-date net sales of $214.8 million. Earnings from operations were $13.2 million in 2017, a decrease of 6% asor $0.78 per diluted share, up 84% compared to $14.0$4.1 million, in 2016. Consolidated net earnings attributable to Weyco Group, Inc. were $8.4 million this year, up 1% as compared to $8.3 millionor $0.42 per diluted share, last year. Diluted earnings per share to date in 2017 were $0.81, versus $0.78 per share in the same period of 2016.
The majority of the decrease in consolidated net sales came from the Company’s wholesale segment. Wholesale net sales were down $10.0 million, due primarily to lower sales of the Stacy Adams, Nunn Bush, and BOGS brands, partially offset by higher sales of the Florsheim brand. Net sales in the Company’s retail segment and its other operations were also down.
Consolidated earnings from operations decreased $838,000 for the nine months ended September 30, 2017, compared 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.
Other expense was down due to lower pension expense in 2017.
Financial Position Highlights At September 30, 2017,March 31, 2023, our cash, short-term investments, and marketable securities totaled $36.3$30.7 million and we had $20.6 million outstanding debt totaled $4.8 million. At December 31, 2016, cash and marketable securities totaled $39.4on our $50.0 million and outstanding debt totaled $4.3 million.revolving line of credit. During the first ninethree months of 2017, the Company2023, we generated $16.4$23.0 million of cash from operations. The Company paid dividends of $9.1 million, spent $11.6We used funds to pay down $10.5 million on purchasesour line of Company stock, and purchased a net of $4.0credit, to pay $4.6 million in marketable securities. The Companydividends, and to repurchase $1.5 million of our common stock. We also had $1.4 millionapproximately $660,000 of capital expenditures. SEGMENT ANALYSIS Net sales and earnings from operations for the Company’sour segments infor the three and nine months ended September 30, 2017March 31, 2023 and 2016,2022, were as follows: | | Three Months Ended September 30, | | | % | | | Nine Months Ended September 30, | | | % | | | | 2017 | | | 2016 | | | Change | | | 2017 | | | 2016 | | | Change | | | | (Dollars in thousands) | | Net Sales | | | | | | | | | | | | | | | | | | | | | | | | | North American Wholesale | | $ | 60,728 | | | $ | 62,170 | | | | -2% | | | $ | 155,869 | | | $ | 165,876 | | | | -6% | | North American Retail | | | 4,291 | | | | 4,702 | | | | -9% | | | | 13,979 | | | | 14,508 | | | | -4% | | Other | | | 11,887 | | | | 12,197 | | | | -3% | | | | 33,631 | | | | 34,452 | | | | -2% | | Total | | $ | 76,906 | | | $ | 79,069 | | | | -3% | | | $ | 203,479 | | | $ | 214,836 | | | | -5% | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings from Operations | | | | | | | | | | | | | | | | | | | | | | | | | North American Wholesale | | $ | 7,416 | | | $ | 6,710 | | | | 11% | | | $ | 11,880 | | | $ | 11,910 | | | | 0% | | North American Retail | | | 17 | | | | 313 | | | | -95% | | | | 244 | | | | 787 | | | | -69% | | Other | | | 369 | | | | 731 | | | | -50% | | | | 1,027 | | | | 1,292 | | | | -21% | | Total | | $ | 7,802 | | | $ | 7,754 | | | | 1% | | | $ | 13,151 | | | $ | 13,989 | | | | -6% | |
| | | | | | | | | | | | Three Months Ended March 31, | | % | | | | 2023 | | 2022 | | Change | | | | | (Dollars in thousands) | | | | Net Sales | | | | | | | | | | North American Wholesale | | $ | 69,897 | | $ | 67,100 | | 4 | % | North American Retail | | | 8,930 | | | 7,860 | | 14 | % | Other | | | 7,467 | | | 6,400 | | 17 | % | Total | | $ | 86,294 | | $ | 81,360 | | 6 | % | | | | | | | | | | | Earnings from Operations | | | | | | | | | | North American Wholesale | | $ | 8,829 | | $ | 4,846 | | 82 | % | North American Retail | | | 1,282 | | | 828 | | 55 | % | Other | | | 275 | | | (243) | | 213 | % | Total | | $ | 10,386 | | $ | 5,431 | | 91 | % |
North American Wholesale Segment Net Sales Net sales in the Company’s North American wholesaleour Wholesale segment for the three and nine months ended September 30, 2017March 31, 2023 and 2016,2022, were as follows: | | | | | | | | | | | | Three Months Ended March 31, | | % | | | | 2023 | | 2022 | | Change | | | | | (Dollars in thousands) | | | | North American Wholesale Segment Net Sales | | | | | | | | | | Stacy Adams | | $ | 16,300 | | $ | 16,797 | | (3) | % | Nunn Bush | | | 14,546 | | | 14,374 | | 1 | % | Florsheim | | | 25,209 | | | 22,012 | | 15 | % | BOGS/Rafters | | | 12,820 | | | 13,099 | | (2) | % | Forsake | | | 406 | | | 386 | | 5 | % | Total North American Wholesale | | $ | 69,281 | | $ | 66,668 | | 4 | % | Licensing | | | 616 | | | 432 | | 43 | % | Total North American Wholesale Segment | | $ | 69,897 | | $ | 67,100 | | 4 | % |
North AmericanNet sales in our Wholesale Segmentsegment reached a first-quarter record of $69.9 million in 2023, up 4% over our previous record of $67.1 million last year. Wholesale sales increased due to higher unit selling prices, while pairs shipped decreased 5%. Florsheim posted 15% growth for the quarter, driven by higher sales of dress and dress-casual footwear, and achieved record quarterly sales on top of record sales for the brand last year. 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% | |
sales of our other major brands, Nunn Bush, Stacy Adams, and Nunn Bush sales for theBOGS, remained relatively steady with last year’s robust first quarter and year-to-date periods were down mainly with department stores. The increases in Florsheim sales were primarily due to higher sales to department stores and national shoe chains. BOGS sales were down as a result of lower sales with outdoor retailers. results. 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. Earnings from Operations Wholesale gross earnings were 33.9%38.2% of net sales compared to 30.0% of net sales in the thirdfirst quarter of 2017, compared to 32.2% of net sales in last year’s third quarter. For the first nine months of the year, wholesale gross earnings rose to 32.1% of net sales in 2017, from 31.2% of net sales in 2016.2022. Gross margins improved due mainly to selling price increases implemented in 2022 to address higher costs. Last year’s first quarter gross margins were negatively impacted by higher inbound freight costs as a result of a reduction in sales of closeout inventory,the global supply chain issues ongoing at that time, which is sold at lower margins.have since eased. 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$17.9 million, or 22%26% of net sales, for the quarter compared to $15.3 million, or 23% of net sales, in the third quarterlast year’s first quarter. This year’s expenses included higher employee costs. Wholesale operating earnings reached a first-quarter record of 2017, and $13.3$8.8 million, or 21% of net sales, in the third quarter of 2016. For the nine months ended September 30, wholesale selling and administrative expenses were $38.2 million, or 25% of net sales, in 2017, asup 82% compared to $39.8 million, or 24% of net sales, in 2016.
Earnings from operations in the North American wholesale segment were $7.4$4.8 million in 2022, driven by the third quarter of 2017, up 11% as compared to $6.7 million in the third quarter of 2016. For the nine months ended September 30, 2017higher sales and 2016, wholesale 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, due to higher gross margins and lower wholesale selling and administrative expenses.this year.
The Company’sOur cost of sales does not include distribution costs (e.g., receiving, inspection, or warehousing, costs). Distribution costs were $2.6 million for the third quarter of 2017 versus $2.8 million for the same period of 2016. For the nine-month periods ended September 30, 2017 and 2016, distribution costs were $7.9 million and $8.8 million, respectively. This year, 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 million in 2016. These costs, werewhich are included in selling and administrative expenses. The Company’sexpenses). Wholesale distribution costs were $4.2 million in the first quarter of 2023 and $3.6 million in the first quarter of 2022. Our 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 our Retail segment were a first-quarter record of $8.9 million, up 14% compared to our previous record of $7.9 million in 2022. The increase was primarily due to higher sales on the Company’s North American retail segment declined $411,000Florsheim and $529,000,Stacy Adams websites. Brick-and-mortar sales also increased for the three and nine months ended September 30, 2017, respectively, compared to the same periods last year. Same store sales, which include sales of both the U.S. internet business and brick and mortar same stores, were down 10% and 6% for the quarter and year-to-date periods, respectively. Same store sales were down due to decreased sales at both brick and mortar locations and on the Company’s websites. The majority of the Company’s brick and mortar locations are in Florida and Texas, and sales for the quarter and year were impacted by the recent hurricanes.quarter. Earnings from Operations Gross earnings as a percent of net sales were 63.6% in the third quarter of 2017, compared to 65.5% in the third quarter of 2016. For the nine months ended September 30, retailRetail gross earnings as a percent of net sales were 64.4%66.3% and 65.9% in 2017 and 65.1% in 2016.
Retail earnings from operations declined $296,000 for the quarter, compared to the third quarter of 2016, due mainly to lower sales. For the year-to-date period, retail earnings from operations were down $543,000 in 2017, compared to the first nine monthsquarters of 2016, due to lower sales2023 and higher retail selling and administrative expenses.2022, respectively. Selling and administrative expenses for the retail segment include, and are primarily relatedwere $4.6 million compared to rent and occupancy costs, employee costs, advertising expense and freight. Retail selling and administrative expenses as$4.4 million last year. As a percent of net sales, were 63% and 59% for the three-month periods ended September 30, 2017 and 2016, respectively. For the nine months ended September 30,retail selling and administrative expenses as a percent of net sales were 63%52% in 20172023 and 60%55% in 2016.
Other
The Company’s other net sales were $11.9 million in the third quarter of 2017, down 3% as compared to $12.2 million in 2016. For the nine months ended September 30, 2017, other net sales were $33.6 million, down 2% from $34.5 million in the same period last year. The decreases in both periods were2022. This decrease was primarily due to lower sales at both Florsheim Australia and Florsheim Europe. Florsheim Australia’se-commerce expenses relative to net sales, which accountsprimarily outbound freight and advertising costs. We realized cost savings during the quarter as a result of measures taken over the past year to control costs.
Retail operating earnings were a first-quarter record of $1.3 million, up 55% compared to $828,000 last year. This increase was primarily due to higher sales and improved profitability in our e-commerce businesses. Brick and mortar operating earnings were also up for the majority of otherquarter. Other Other net sales were down 2% for both the first quarter and first nine months of 2017, as2023 totaled $7.5 million, up 17% compared to the same periods of 2016.$6.4 million in 2022. In local currency, Florsheim Australia’sAustralia’s net sales were down 6% for the quarter and 5% for the year-to-date period, compared to the same periods last year,up 24% with sales downup in both its retail and wholesale businesses. Last year’s sales volumes in Asia were negatively impacted by COVID lockdowns imposed in Hong Kong during the quarter. Collectively, theOther gross earnings were 60.5% of net sales compared to 59.6% of net sales in last year’s first quarter. Other operating earnings recovered to $275,000 in 2023, up from operationsoperating losses of the Company’s other businesses were $369,000 in the third quarter of 2017 and $731,000 in the same period$243,000 last year. For the nine months ended September 30, earnings from operations of the Company’s other businesses were $1.0 million in 2017 and $1.3 million in 2016. The decreases for the quarter and year-to-date periods were primarily due to lower operating earnings in Florsheim Australia’s retail businesses, mainly due to the decrease in retail sales.
Other income and expense and taxes Interest income was $193,000$139,000 and $190,000$91,000 in the thirdfirst quarters of 20172023 and 2016,2022, respectively. For the nine months ended September 30, interest income was $572,000 in 2017 and $584,000 in 2016. Interest expense increased to $385,000 for the three and nine months ended September 30, 2017, decreased $61,000 and $221,000, respectively, compared to the same periodsquarter, up from $1,000 in 2016,last year’s first quarter, due to lower averageinterest incurred on the higher debt balances this year comparedyear. Other expense, net, increased to last year. The Company adopted ASU 2017-07$130,000 for the quarter, up from $6,000 in the first quarter of 2017 and retrospectively applied it2022, due largely to all periods presented. This required the Company to reclassify 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 2017 was mainly due to decreases of $316,000 and $949,000, respectively,an increase in the non-service cost components of pension expense. Pension expense decreased in 2017 as a result
Our effective income tax rates for the three months ended March 31, 2023 and 2022 were 25.6% and 26.5%, respectively. The 2023 and 2022 effective tax rates differed from the federal rate of freezing benefits under the pension plan, effective December 31, 2016.21% primarily because of state and foreign taxes. LIQUIDITY AND CAPITAL RESOURCES The Company’sOur primary sources of liquidity are its cash, short-term investments, short-term marketable securities, and itsour revolving line of credit. During the first nine months of 2017, the CompanyWe generated $16.4$23.0 million of cash from operating activities during the first three months of 2023, compared to $27.8 million$231,000 in the same period of 2016.one year ago. The decrease between yearsincrease in 2023 was primarily due to higher net earnings and changes in operating assets and liabilities, principally inventory.inventory and accounts payable. Our overall inventory as of March 31, 2023 was $106.7 million, down from $128.0 million at December 31, 2022. As expected, our inventory levels have come down now that the supply chain has normalized, and we can plan our receipts closer to when we need to ship shoes to our customers.
The CompanyWe paid cash dividends of $9.1totaling $4.6 million and $8.8$2.3 million duringin the nine months ended Septemberfirst quarters of 2023 and 2022, respectively. The increase in 2023 was due to a shift in timing of our quarterly dividend payment schedule; first quarter 2023 includes two quarterly dividend payments, as our fourth quarter 2022 dividend was paid in early January 2023. First quarter 2022 included one quarterly dividend payment, as our fourth quarter 2021 dividend was paid in December 2021. On May 2, 2023, our Board of Directors declared a cash dividend of $0.25 per share to all shareholders of record on May 26, 2023, payable June 30, 2017 and 2016, respectively.2023. This represents an increase of 4% above the previous quarterly dividend rate of $0.24.
The Company continues toWe repurchase itsour common stock under itsour share repurchase program when the Company believeswe believe market conditions are favorable. During the first ninethree months of 2017, the Company2023, we repurchased 420,71162,352 shares atfor a total cost of $11.6$1.5 million. As of September 30, 2017,March 31, 2023, we had the Company hadauthority to repurchase approximately 144,000977,000 shares available under itsour 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“Unregistered Sales of Equity Securities and Use of Proceeds”Proceeds” below for more information.
Capital expenditures totaled $1.4 millionapproximately $660,000 in the first ninethree months of 2017.2023. Management estimates that annual capital expenditures for 20162023 will be between $1.5$2.0 million and $2.0$4.0 million. At September 30, 2017, the CompanyMarch 31, 2023, we had a $60$50.0 million unsecured revolving line of credit with a bank expiring November 3, 2017. The line of credit bears interest at LIBOR plus 0.75%. The Company borrowedthat is secured by a net of $0.5 millionlien against our general business assets, and expires on September 28, 2023. Outstanding advances on the line of credit duringbear interest at the first nine monthsone-month term secured overnight financing rate (“SOFR”) plus 145 basis points. Our line of 2017.credit agreement contains representations, warranties and covenants (including a minimum tangible net worth financial covenant) that are customary for a facility of this type. At September 30, 2017,March 31, 2023, outstanding borrowings were $4.8on the line of credit totaled approximately $20.6 million at an interest rate of 2.0%. The highest balance on the6.26%, and we were in compliance with all financial covenants. We expect to renew this line of credit during the quarter was $4.8 million. Subsequent to September 30, 2017, the linelater this year, but cannot provide any assurances. As of credit agreement was renewed on the same terms for another one-year period, expiring November 4, 2018. At September 30, 2017,March 31, 2023, approximately $1.6$4.1 million of cash and cash equivalents was held by the Company’sour foreign subsidiaries.
We will continue to evaluate the best uses for itsour available liquidity, including, among other uses, capital expenditures, continued stock repurchases and additional acquisitions. The Company believes We believe 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
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.
Item 4. Controls and Procedures. The Company maintainsWe maintain disclosure controls and procedures designed to ensure that the information the Companywe must disclose in itsour filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The Company’sOur Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the Company’sour 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”“Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”“Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’sour 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’sour periodic filings under the Exchange Act. Such officers have also concluded that, as of the Evaluation Date, the Company’sour 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’sCompany’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company’sour most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’sCompany’s internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings. None. 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 Report on Form 10-K for the year ended December 31, 2016.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. In 1998, our stock repurchase program was established. On several occasions since the program’s inception, our Board of Directors has increased the number of shares authorized for repurchase under the program. In total, 8.5 million shares have been authorized for repurchase. The table below presents information pursuant to Item 703(a)regarding our repurchases of Regulation S-K regarding the purchase of the Company’sour common stock by the Company in the three-month period ended September 30, 2017.March 31, 2023. | | | | | | | | 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 | 01/01/2023 - 01/31/2023 | | 18,072 | | $ | 23.99 | | 18,072 | | 1,021,107 | 02/01/2023 - 02/28/2023 | | 20,643 | | $ | 26.31 | | 20,643 | | 1,000,464 | 03/01/2023 - 03/31/2023 | | 23,637 | | $ | 23.38 | | 23,637 | | 976,827 | Total | | 62,352 | | $ | 24.70 | | 62,352 | | |
| (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.
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’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017March 31, 2023 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 March 31, 2023 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: May 10, 2023 | | /s/ Judy Anderson | | | Judy Anderson | | | Vice President and Chief Financial Officer |
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