UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to _____________________________

Commission File Number: 000-09068

WEYCO GROUP, INC.

(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.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “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 ☐

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 ☐ No ☒

As of ~~April 24,~~October 27, 2023, there were ~~9,509,356~~9,497,622 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. (“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 we believe that the disclosures made are adequate to make the information not misleading. Please read these consolidated condensed financial statements in conjunction with the financial statements and notes thereto included in our latest ~~annual report~~Annual Report on Form 10-K.

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)


	March 31,		December 31,		September 30,		December 31,
	2023		2022		2023		2022

	(Dollars in thousands)				(Dollars in thousands)
ASSETS:
Cash and cash equivalents	$	22,565	$	16,876	$	33,397	$	16,876
Investments, at fair value		108		107		110		107
Marketable securities, at amortized cost		1,098		1,385		1,096		1,385
Accounts receivable, net		52,791		53,298		53,209		53,298
Income tax receivable		—		945		250		945
Inventories		106,677		127,976		79,567		127,976
Prepaid expenses and other current assets		3,833		5,870		3,060		5,870
Total current assets		187,072		206,457		170,689		206,457

Marketable securities, at amortized cost		6,903		7,123		6,412		7,123
Deferred income tax benefits		1,021		1,038		979		1,038
Property, plant and equipment, net		28,794		28,812		29,337		28,812
Operating lease right-of-use assets		14,032		13,428		11,546		13,428
Goodwill		12,317		12,317		12,317		12,317
Trademarks		33,618		33,618		33,618		33,618
Other assets		23,952		23,827		23,962		23,827
Total assets	$	307,709	$	326,620	$	288,860	$	326,620

LIABILITIES AND EQUITY:
Short-term borrowings	$	20,640	$	31,136	$	—	$	31,136
Accounts payable		6,540		14,946		4,831		14,946
Dividend payable		—		2,290		—		2,290
Operating lease liabilities		4,270		4,026		3,840		4,026
Accrued liabilities		11,751		15,137		11,389		15,137
Accrued income tax payable		1,245		—
Total current liabilities		44,446		67,535		20,060		67,535

Deferred income tax liabilities		8,524		8,530		8,485		8,530
Long-term pension liability		15,651		15,523		15,866		15,523
Operating lease liabilities		10,897		10,661		8,640		10,661
Other long-term liabilities		523		466		426		466
Total liabilities		80,041		102,715		53,477		102,715

Common stock		9,523		9,584		9,511		9,584
Capital in excess of par value		70,828		70,475		71,269		70,475
Reinvested earnings		167,717		164,039		175,338		164,039
Accumulated other comprehensive loss		(20,400)		(20,193)		(20,735)		(20,193)
Total equity		227,668		223,905		235,383		223,905
Total liabilities and equity	$	307,709	$	326,620	$	288,860	$	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 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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(In thousands, except per share amounts)

Net sales	$	84,150	$	96,971	$	237,458	$	252,690
Cost of sales		47,997		57,583		135,136		154,404
Gross earnings		36,153		39,388		102,322		98,286

Selling and administrative expenses		23,720		25,181		72,803		72,983
Earnings from operations		12,433		14,207		29,519		25,303

Interest income		269		86		598		266
Interest expense		(5)		(197)		(522)		(209)
Other (expense) income, net		(133)		141		(431)		316

Earnings before provision for income taxes		12,564		14,237		29,164		25,676

Provision for income taxes		3,227		3,467		7,518		6,358

Net earnings	$	9,337	$	10,770	$	21,646	$	19,318

Weighted average shares outstanding
Basic		9,451		9,535		9,458		9,560
Diluted		9,530		9,605		9,539		9,638

Earnings per share
Basic	$	0.99	$	1.13	$	2.29	$	2.02
Diluted	$	0.98	$	1.12	$	2.27	$	2.01

Cash dividends declared (per share)	$	0.25	$	0.24	$	0.74	$	0.72

Comprehensive income	$	8,656	$	9,248	$	21,104	$	17,406

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)

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


	Nine Months Ended September 30,
	2023		2022

	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	21,646	$	19,318
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities -
Depreciation		1,930		1,840
Amortization		204		213
Bad debt expense		107		135
Deferred income taxes		(82)		(215)
Net foreign currency transaction gains		(9)		(233)
Share-based compensation expense		996		1,157
Pension expense		970		53
Impairment of trademark		—		350
Net gain on remeasurement of contingent consideration		—		(407)
Increase in cash surrender value of life insurance		(315)		(450)
Changes in operating assets and liabilities -
Accounts receivable		(6)		(11,188)
Inventories		48,442		(41,134)
Prepaid expenses and other assets		2,775		1,319
Accounts payable		(10,164)		(10,116)
Accrued liabilities and other		(4,331)		(2,571)
Accrued income taxes		775		(139)
Net cash provided by (used for) operating activities		62,938		(42,068)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of marketable securities		1,015		1,495
Proceeds from sale of investment securities		—		8,050
Purchases of property, plant and equipment		(2,565)		(1,515)
Net cash (used for) provided by investing activities		(1,550)		8,030

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid		(9,285)		(6,878)
Shares purchased and retired		(3,439)		(3,264)
Net proceeds from stock options exercised		33		276
Payment of contingent consideration		(500)		—
Taxes paid related to the net share settlement of equity awards		(173)		(12)
Proceeds from bank borrowings		70,060		71,833
Repayments of bank borrowings		(101,196)		(37,168)
Net cash (used for) provided by financing activities		(44,500)		24,787

Effect of exchange rate changes on cash and cash equivalents		(367)		(612)

Net increase (decrease) in cash and cash equivalents	$	16,521	$	(9,863)

CASH AND CASH EQUIVALENTS at beginning of period		16,876		19,711

CASH AND CASH EQUIVALENTS at end of period	$	33,397	$	9,848

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid, net of refunds	$	6,462	$	6,729
Interest paid	$	971	$	209

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~~our 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-month period~~three and nine months ended ~~March 31,~~September 30, 2023, may not necessarily be indicative of the results for the full year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and 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, trademarks, and ~~trademarks~~sales allowances 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 June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurements of Credit Losses on Financial Instruments. This ASU modifies the measurement of expected credit losses of certain financial instruments, based on historical experience, current conditions, and reasonable forecasts, and applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to reinvested earnings in the period of adoption. We adopted this standard in first quarter of 2023. The adoption of this standard did not have a material impact on our consolidated financial statements or related disclosures.

3. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022

	(In thousands, except per share amounts)				(In thousands, except per share amounts)
Numerator:
Net earnings	$	7,445	$	4,053	$	9,337	$	10,770	$	21,646	$	19,318

Denominator:
Basic weighted average shares outstanding		9,483		9,596		9,451		9,535		9,458		9,560
Effect of dilutive securities:
Employee share-based awards		62		51		79		70		81		78
Diluted weighted average shares outstanding		9,545		9,647		9,530		9,605		9,539		9,638

Basic earnings per share	$	0.79	$	0.42	$	0.99	$	1.13	$	2.29	$	2.02

Diluted earnings per share	$	0.78	$	0.42	$	0.98	$	1.12	$	2.27	$	2.01

Diluted weighted average shares outstanding for the three months ended ~~March 31,~~September 30, 2023, ~~excludes~~excluded anti-dilutive stock options totaling ~~1,042,000~~606,000 shares of common stock at a weighted average exercise price of ~~$26.79.~~$28.13. Diluted weighted average shares outstanding for the ~~three~~nine months ended ~~March 31, 2022 excludes~~September 30, 2023, excluded anti-dilutive stock options totaling ~~928,000~~692,000 shares of common stock at a weighted average exercise price of ~~$27.24.~~

$28.56. Diluted weighted average shares outstanding for the three months ended September 30, 2022, excluded anti-dilutive stock options totaling 1,046,000 shares of common stock at a weighted average exercise price of $26.80. Diluted weighted average shares outstanding for the nine months ended September 30, 2022, excluded anti-dilutive stock options totaling 819,000 shares of common stock at a weighted average exercise price of $27.59.

4. Investments

Investments, at fair value

At both ~~March 31,~~September 30, 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 ~~first quarters of~~three or nine months ended September 30, 2023 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 amortized cost

We also invest in marketable securities. As noted in our Annual Report on Form 10-K for the year ended December 31, 2022, all of our marketable securities are classified as held-to-maturity securities and reported at amortized cost pursuant to ASC 320, Investments – Debt and Equity Securities, as we 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's~~our marketable securities as of ~~March 31,~~September 30, 2023, and December 31, 2022.


	March 31, 2023				December 31, 2022				September 30, 2023				December 31, 2022
	Amortized		Market		Amortized		Market		Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value		Cost		Value		Cost		Value

	(Dollars in thousands)								(Dollars in thousands)
Marketable securities:
Marketable Securities:
Current	$	1,098	$	1,098	$	1,385	$	1,381	$	1,096	$	1,093	$	1,385	$	1,381
Due from one through five years		3,757		3,758		3,977		3,950		3,264		3,127		3,977		3,950
Due from six through ten years		2,347		2,492		2,347		2,455		3,148		3,069		2,347		2,455
Due from eleven through twenty years		799		796		799		773		—		—		799		773
Total	$	8,001	$	8,144	$	8,508	$	8,559	$	7,508	$	7,289	$	8,508	$	8,559

The unrealized gains and losses on marketable securities at ~~March 31,~~September 30, 2023, and at December 31, 2022, were as follows:


	March 31, 2023				December 31, 2022				September 30, 2023				December 31, 2022
	Unrealized		Unrealized		Unrealized		Unrealized		Unrealized		Unrealized		Unrealized		Unrealized
	Gains		Losses		Gains		Losses		Gains		Losses		Gains		Losses

	(Dollars in thousands)								(Dollars in thousands)
Marketable securities	$	181	$	(38)	$	145	$	(94)
Marketable Securities									$	160	$	(379)	$	145	$	(94)

The estimated market values provided are Level 2 valuations as defined by ASC 820. We reviewed our portfolio of investments as of ~~March 31,~~September 30, 2023, and determined that no other-than-temporary market value impairment exists.

5. Intangible Assets

During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, there were no changes in the carrying value of our indefinite-lived intangible assets (goodwill and trademarks). Our amortizable intangible assets, which were included within other assets in the Consolidated Condensed Balance Sheets (unaudited), consisted of the following:


			March 31, 2023						December 31, 2022								September 30, 2023						December 31, 2022
	Weighted		Gross						Gross						Weighted		Gross						Gross
	Average		Carrying		Accumulated				Carrying		Accumulated				Average		Carrying		Accumulated				Carrying		Accumulated
	Life (Years)		Amount		Amortization		Net		Amount		Amortization		Net		Life (Years)		Amount		Amortization		Net		Amount		Amortization		Net

			(Dollars in thousands)						(Dollars in thousands)								(Dollars in thousands)						(Dollars in thousands)
Amortizable intangible assets
Customer relationships		15	$	3,500	$	(2,819)	$	681	$	3,500	$	(2,761)	$	739		15	$	3,500	$	(2,936)	$	564	$	3,500	$	(2,761)	$	739
Total amortizable intangible assets			$	3,500	$	(2,819)	$	681	$	3,500	$	(2,761)	$	739			$	3,500	$	(2,936)	$	564	$	3,500	$	(2,761)	$	739

Amortization expense related to the intangible assets was approximately $58,000 in both the ~~first~~third quarters of 2023 and 2022.

For both the nine-month periods ended September 30, 2023 and September 30, 2022, amortization expense related to the intangible assets was approximately $175,000.

6. Segment Information

We have two reportable segments: North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”). Our Chief Executive Officer evaluates the performance of our 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 table below includes our wholesale and retail operations in Australia, South Africa, and Asia Pacific, which do not meet the criteria for separate reportable segment classification. Summarized segment data for the three ~~month~~and nine-month periods ended ~~March 31,~~September 30, 2023 and 2022, ~~was~~were as follows:


Three Months Ended
March 31,	Wholesale		Retail		Other		Total
September 30,									Wholesale		Retail		Other		Total

	(Dollars in thousands)								(Dollars in thousands)
2023
Product sales	$	69,281	$	8,930	$	7,467	$	85,678	$	68,927	$	7,584	$	7,094	$	83,605
Licensing revenues		616		—		—		616		545		—		—		545
Net sales	$	69,897	$	8,930	$	7,467	$	86,294	$	69,472	$	7,584	$	7,094	$	84,150
Earnings from operations	$	8,829	$	1,282	$	275	$	10,386	$	11,251	$	926	$	256	$	12,433

2022
Product sales	$	66,668	$	7,860	$	6,400	$	80,928	$	81,183	$	7,129	$	8,205	$	96,517
Licensing revenues		432		—		—		432		454		—		—		454
Net sales	$	67,100	$	7,860	$	6,400	$	81,360	$	81,637	$	7,129	$	8,205	$	96,971
Earnings (loss) from operations	$	4,846	$	828	$	(243)	$	5,431
Earnings from operations									$	12,906	$	825	$	476	$	14,207


Nine Months Ended
September 30,	Wholesale		Retail		Other		Total

	(Dollars in thousands)
2023
Product sales	$	189,118	$	24,141	$	22,484	$	235,743
Licensing revenues		1,715		—		—		1,715
Net sales	$	190,833	$	24,141	$	22,484	$	237,458
Earnings from operations	$	25,435	$	3,277	$	807	$	29,519

2022
Product sales	$	206,435	$	22,409	$	22,562	$	251,406
Licensing revenues		1,284		—		—		1,284
Net sales	$	207,719	$	22,409	$	22,562	$	252,690
Earnings from operations	$	21,939	$	2,766	$	598	$	25,303

7. Employee Retirement Plans

The components of our pension expense were as follows:


	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022

	(Dollars in thousands)				(Dollars in thousands)
Service cost	$	118	$	112	$	116	$	111	$	350	$	334
Interest cost		672		432		658		438		1,974		1,315
Expected return on plan assets		(577)		(752)		(575)		(751)		(1,726)		(2,253)
Net amortization and deferral		134		208		124		219		372		657
Pension expense	$	347	$	—	$	323	$	17	$	970	$	53

The components of pension expense other than the service cost component were included in “other ~~expense,~~(expense) income, 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~~These 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 components of our operating lease costs were as follows:


	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022

	(Dollars in thousands)				(Dollars in thousands)
Operating lease costs	$	1,362	$	1,264	$	1,119	$	1,283	$	3,744	$	3,855
Variable lease costs ⁽¹⁾		2		—		40		—		91		10
Total lease costs	$	1,364	$	1,264	$	1,159	$	1,283	$	3,835	$	3,865

⁽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 schedule of maturities of operating lease liabilities as of ~~March 31,~~September 30, 2023:


	Operating Leases		Operating Leases
	(Dollars in thousands)		(Dollars in thousands)
2023, excluding the quarter ended March 31, 2023	$	3,697
2023, excluding the nine months ended September 30, 2023			$	1,129
2024		4,215		4,054
2025		3,213		3,169
2026		2,754		2,736
2027		1,628		1,599
Thereafter		1,084		1,061
Total lease payments		16,591		13,748
Less imputed interest		(1,424)		(1,268)
Present value of lease liabilities	$	15,167	$	12,480

The operating lease liabilities are classified in the consolidated condensed balance sheets (unaudited) as follows:


	March 31, 2023		December 31, 2022		September 30, 2023		December 31, 2022

	(Dollars in thousands)				(Dollars in thousands)
Operating lease liabilities - current	$	4,270	$	4,026	$	3,840	$	4,026
Operating lease liabilities - non-current		10,897		10,661		8,640		10,661
Total	$	15,167	$	14,687	$	12,480	$	14,687

We determined the present value of our lease liabilities using a weighted-average discount rate of 4.25%. As of ~~March 31,~~September 30, 2023, our leases ~~have~~had a weighted-average remaining lease term of ~~3.9~~3.8 years.

Supplemental cash flow information related to our operating leases is as follows:


	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022

	(Dollars in thousands)				(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	1,286	$	1,128	$	1,204	$	1,160	$	3,728	$	3,444
Right-of-use assets obtained in exchange for new lease liabilities (noncash)	$	1,739	$	—	$	99	$	3,710	$	1,571	$	5,870

9. Income Taxes

The effective income tax rates for the three months ended ~~March 31,~~September 30, 2023 and 2022 were ~~25.6%~~25.7% and ~~26.5%~~24.4%, respectively. The effective income tax rates for the nine months ended September 30, 2023 and 2022 ~~effective tax rates differed from the federal rate of 21% primarily because of state taxes.~~were 25.8% and 24.8%, respectively. The 2023 and 2022 effective tax rates differed from the federal rate of 21% primarily because of state and foreign taxes.

~~10.~~~~Share-Based Compensation Plans~~

During the three months ended March 31, 2023, we recognized $338,000 of compensation expense associated with stock option and restricted stock awards granted in years 2018 through 2022. During the three months ended March 31, 2022, we recognized $350,000 of compensation expense associated with stock option and restricted stock awards granted in years 2017 through 2021.

10.Share-Based Compensation Plans

During the three and nine months ended September 30, 2023, we recognized $321,000 and $996,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 2018 through 2023. During the three and nine months ended September 30, 2022, we recognized $339,000 and $1,157,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 2017 through 2022.

The following table summarizes our stock option activity for the ~~three-month~~nine-month period ended ~~March 31,~~September 30, 2023:


				Weighted						Weighted
		Weighted		Average				Weighted		Average
		Average		Remaining	Aggregate			Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic			Exercise		Contractual	Intrinsic
	Shares	Price		Term (Years)	Value*		Shares	Price		Term (Years)	Value*
Outstanding at December 31, 2022	1,345,369	$	25.83				1,345,369	$	25.83
Granted	—		—				149,200	$	25.79
Exercised	(2,100)		18.00				(404,564)	$	25.36
Forfeited or expired	(1,020)		29.65				(31,890)	$	25.59
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
Outstanding at September 30, 2023							1,058,115	$	26.02	6.9	$	1,682,000
Exercisable at September 30, 2023							609,387	$	26.82	5.7	$	1,041,000

^*The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of our ~~Company’s~~ common stock on ~~March 31,~~September 29, 2023 of ~~$25.30~~$25.35 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options.

The following table summarizes our restricted stock award activity for the ~~three-month~~nine-month period ended ~~March 31,~~September 30, 2023:


				Weighted						Weighted
		Weighted		Average				Weighted		Average
	Shares of	Average		Remaining	Aggregate		Shares of	Average		Remaining	Aggregate
	Restricted	Grant Date		Contractual	Intrinsic		Restricted	Grant Date		Contractual	Intrinsic
	Stock	Fair Value		Term (Years)	Value*		Stock	Fair Value		Term (Years)	Value*
Non-vested at December 31, 2022	71,808	$	24.67				71,808	$	24.67
Issued	—		—				27,700		25.79
Vested	(150)		28.77				(28,243)		25.65
Forfeited	-		—				(2,175)		25.13
Non-vested at March 31, 2023	71,658	$	24.66	2.4	$	1,813,000
Non-vested at September 30, 2023							69,090	$	25.54	2.9	$	1,751,000

*The aggregate intrinsic value of non-vested restricted stock was calculated using the market value of our ~~Company’s~~ common stock on ~~March 31,~~September 29, 2023 of ~~$25.30~~$25.35 multiplied by the number of non-vested restricted shares outstanding.

11. Short-Term Borrowings

~~At March 31,~~On September 28, 2023, we ~~had a $50.0 million revolving~~amended our line of credit ~~with a bank that is secured by a lien against~~agreement. The amendment (“Amended Credit Agreement”) extended the maturity of our ~~general business assets, and expires on~~credit facility to September 28, ~~2023. Outstanding advances on~~2024 and has a maximum available borrowing limit of $40.0 million. Under the ~~line~~terms of ~~credit~~the Amended Credit Agreement, amounts outstanding bear interest at the one-month term secured overnight financing rate (“SOFR”) plus ~~145~~125 basis points. ~~Our line of credit agreement~~The Amended Credit Agreement is secured by a security interest in our general business assets, and contains customary representations, warranties, and covenants (including a minimum tangible net worth financial covenant) ~~that are customary~~ for a facility of this type. At ~~March 31,~~September 30, 2023, there were no outstanding borrowings on the line of credit, ~~totaled approximately $20.6 million at an interest rate of 6.26%,~~ and we were in compliance with all financial covenants.

12. Financial Instruments

At ~~March 31,~~September 30, 2023, our wholly-owned subsidiary, Florsheim Australia, had foreign exchange contracts outstanding to buy ~~$3.2~~$1.2 million U.S. dollars at a price of approximately ~~$4.5~~$1.7 million Australian dollars. These contracts all expire in 2023. Based on quarter-end exchange rates, there were no significant unrealized gains or losses on the outstanding contracts.

We 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 Level 2 valuation as defined by ASC 820.

13.Comprehensive Income

Comprehensive income for the three and nine months ended September 30, 2023 and 2022, was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(Dollars in thousands)
Net earnings	$	9,337	$	10,770	$	21,646	$	19,318
Foreign currency translation adjustments		(773)		(1,684)		(817)		(2,398)
Pension liability adjustment, net of tax of $32, $57, $97, and $171, respectively		92		162		275		486
Total comprehensive income	$	8,656	$	9,248	$	21,104	$	17,406

The components of accumulated other comprehensive loss as recorded in the Consolidated Condensed Balance Sheets (Unaudited) were as follows:


	September 30,		December 31,
	2023		2022

	(Dollars in thousands)
Foreign currency translation adjustments	$	(9,413)	$	(8,596)
Pension liability, net of tax		(11,322)		(11,597)
Total accumulated other comprehensive loss	$	(20,735)	$	(20,193)

~~13.~~~~Comprehensive Income~~

~~Comprehensive income for the three months ended March 31, 2023 and 2022, was as follows:~~

Three Months Ended March 31,

2023

2022

(Dollars in thousands)
Net earnings

$
7,445

$
4,053
Foreign currency translation adjustments

(306)

521
Pension liability, net of tax of $35 and $54, respectively

99

154
Total comprehensive income

$
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

(Dollars in thousands)
Foreign currency translation adjustments

$
(8,902)

$
(8,596)
Pension liability, net of tax

(11,498)

(11,597)
Total accumulated other comprehensive loss

$
(20,400)

$
(20,193)

The following tables show changes in accumulated other comprehensive loss during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022:


	Foreign		Defined				Foreign		Defined
	Currency		Benefit				Currency		Benefit
	Translation		Pension				Translation		Pension
	Adjustments		Items		Total		Adjustments		Items		Total
Beginning balance, December 31, 2022	$	(8,596)	$	(11,597)	$	(20,193)	$	(8,596)	$	(11,597)	$	(20,193)
Other comprehensive loss before reclassifications		(306)		—		(306)		(817)		—		(817)
Amounts reclassified from accumulated other comprehensive loss		—		99		99		—		275		275
Net current period other comprehensive (loss) income		(306)		99		(207)		(817)		275		(542)
Ending balance, March 31, 2023	$	(8,902)	$	(11,498)	$	(20,400)
Ending balance, September 30, 2023							$	(9,413)	$	(11,322)	$	(20,735)


	Foreign		Defined				Foreign		Defined
	Currency		Benefit				Currency		Benefit
	Translation		Pension				Translation		Pension
	Adjustments		Items		Total		Adjustments		Items		Total
Beginning balance, December 31, 2021	$	(6,783)	$	(18,011)	$	(24,794)	$	(6,783)	$	(18,011)	$	(24,794)
Other comprehensive income before reclassifications		521		—		521
Other comprehensive loss before reclassifications								(2,398)		—		(2,398)
Amounts reclassified from accumulated other comprehensive loss		—		154		154		—		486		486
Net current period other comprehensive income		521		154		675
Ending balance, March 31, 2022	$	(6,262)	$	(17,857)	$	(24,119)
Net current period other comprehensive (loss) income								(2,398)		486		(1,912)
Ending balance, September 30, 2022							$	(9,181)	$	(17,525)	$	(26,706)

The following table shows reclassification adjustments out of accumulated other comprehensive loss during the three ~~months~~and nine month periods ended ~~March 31,~~September 30, 2023 and 2022:


	Amounts reclassified from
	accumulated other
	comprehensive loss for					Affected line item in the	Amounts Reclassified from Accumulated Other Comprehensive Loss									Affected line item in the
	the three months ended					statement where net income is	Three Months Ended September 30,				Nine Months Ended September 30,					statement where net income is
	March 31, 2023		March 31, 2022			presented	2023		2022		2023		2022			presented
Amortization of defined benefit pension items
Prior service cost	$	5	$	2	⁽¹⁾	Other expense, net	$	5	$	2	$	15	$	5	⁽¹⁾	Other (expense) income, net
Actuarial losses		129		206	⁽¹⁾	Other expense, net		119		217		357		652	⁽¹⁾	Other (expense) income, net
Total before tax		134		208				124		219		372		657
Tax benefit		(35)		(54)				(32)		(57)		(97)		(171)
Net of tax	$	99	$	154			$	92	$	162	$	275	$	486

(1)

These amounts were included in pension expense. See Note 7 for additional details.

14. Equity

The following table reconciles our equity for the ~~three~~nine months ended ~~March 31,~~September 30, 2023:


							Accumulated								Accumulated
			Capital in				Other				Capital in				Other
	Common		Excess of		Reinvested		Comprehensive		Common		Excess of		Reinvested		Comprehensive
	Stock		Par Value		Earnings		Loss		Stock		Par Value		Earnings		Loss

	(Dollars in thousands)								(Dollars in thousands)
Balance, December 31, 2022	$	9,584	$	70,475	$	164,039	$	(20,193)	$	9,584	$	70,475	$	164,039	$	(20,193)
Net earnings		—		—		7,445		—		—		—		7,445		—
Foreign currency translation adjustments		—		—		—		(306)		—		—		—		(306)
Pension liability adjustment, net of tax		—		—		—		99		—		—		—		99
Cash dividends declared		—		—		(2,289)		—		—		—		(2,289)		—
Stock options exercised, net of shares withheld for employee taxes and strike price		1		15		—		—		1		15		—		—
Share-based compensation expense		—		338		—		—		—		338		—		—
Shares purchased and retired		(62)		—		(1,478)		—		(62)		—		(1,478)		—
Balance, March 31, 2023	$	9,523	$	70,828	$	167,717	$	(20,400)	$	9,523	$	70,828	$	167,717	$	(20,400)
Net earnings										—		—		4,864		—
Foreign currency translation adjustments										—		—		—		262
Pension liability adjustment, net of tax										—		—		—		84
Cash dividends declared										—		—		(2,377)		—
Stock options exercised, net of shares withheld for employee taxes and strike price										29		(194)		—		—
Share-based compensation expense										—		337		—		—
Shares purchased and retired										(23)		—		(571)		—
Balance, June 30, 2023									$	9,529	$	70,971	$	169,633	$	(20,054)
Net earnings										—		—		9,337		—
Foreign currency translation adjustments										—		—		—		(773)
Pension liability adjustment, net of tax										—		—		—		92
Cash dividends declared										—		—		(2,377)		—
Stock options exercised, net of shares withheld for employee taxes and strike price										6		3		—		—
Issuance of restricted stock										28		(28)		—		—
Restricted stock forfeited										(2)		2		—		—
Share-based compensation expense										—		321		—		—
Shares purchased and retired										(50)		—		(1,255)		—
Balance, September 30, 2023									$	9,511	$	71,269	$	175,338	$	(20,735)

~~The following table reconciles our equity for the three months ended March 31, 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)

The following table reconciles our equity for the nine months ended September 30, 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 emloyee 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)
Net earnings		—		—		4,495		—
Foreign currency translation adjustments		—		—		—		(1,235)
Pension liability adjustment, net of tax		—		—		—		170
Cash dividends declared		—		—		(2,307)		—
Stock options exercised, net of shares withheld for emloyee taxes and strike price		15		193		—		—
Share-based compensation expense		—		468		—		—
Shares purchased and retired		(29)		—		(701)		—
Balance, June 30, 2022	$	9,620	$	69,737	$	149,264	$	(25,184)
Net earnings		—		—		10,770		—
Foreign currency translation adjustments		—		—		—		(1,684)
Pension liability adjustment, net of tax		—		—		—		162
Cash dividends declared		—		—		(2,310)		—
Stock options exercised, net of shares withheld for emloyee taxes and strike price		3		45		—		—
Issuance of restricted stock		28		(28)		—		—
Share-based compensation expense		—		339		—		—
Shares purchased and retired		(30)		—		(707)		—
Balance, September 30, 2022	$	9,621	$	70,093	$	157,017	$	(26,706)

Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements represent our 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,” “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 our Annual Report on Form 10-K for the ~~year ended~~year-ended December 31, 2022, filed on March 13, ~~2023.~~2023, which information is incorporated herein by reference. 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~~including: Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters, and Forsake. Inventory is purchased from third-party overseas manufacturers. Almost all of these foreign-sourced purchases are denominated in U.S. dollars.

We have two reportable segments, North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”). In the Wholesale segment, our products are sold to leading footwear, department, and specialty stores, as well as e-commerce retailers, primarily in the United States and Canada. We also have licensing agreements with third parties who sell our branded apparel, accessories, and specialty footwear in the United States, as well as our footwear in Mexico and certain markets overseas. Licensing revenues are included in our Wholesale segment. Our Retail segment consists of e-commerce businesses and four brick and mortar retail stores in the United States. Retail sales are made directly to consumers on our websites, or by our ~~employees.~~employees in our stores. Our “other” operations include our wholesale and retail businesses in Australia, South Africa, and Asia Pacific (collectively, “Florsheim Australia”). The majority of our operations are in the United States and our results are primarily affected by the economic conditions and 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~~Sales in ~~both~~ our ~~Wholesale and Retail segments.~~

~~Net sales of our Wholesale~~North American wholesale segment were ~~up 4%~~down 15% for the quarter, ~~led~~compared to a record third quarter last year. Wholesale sales in 2022 reflected strong consumer demand, but also significant pipeline fill as many accounts were replenishing stock depleted due to pandemic-related supply chain delays. This quarter was our second most profitable third quarter in terms of wholesale operating earnings, second only to last year. This year, the retail environment is more challenging due to macro-economic pressures, and consumers are being cautious in terms of expenditures on footwear and apparel. With demand softening, retailers are being conservative with at-once and future orders at the wholesale level.

The change in retail dynamics is most apparent in the outdoor market. Given the spike in demand in 2021 and the first half of last year, retailers placed heavy orders with the expectation of strong consumer sell-throughs. Sales did not keep pace in the back half of last year, and the outdoor trade channel entered 2023 with an inventory glut. The situation has been exacerbated by unseasonably warm weather in early Fall. As a result, sales of the BOGS brand declined 42%, compared to record sales last year, with retailers placing fewer orders due to the current saturation of product in the market. While the majority of our BOGS’ inventory is in core product that remains valid from year to year, we are also taking steps to reduce inventory of slower moving styles. We anticipate that the inventory backlog in the outdoor footwear category will not normalize until the second half of 2024. While the market is challenging, we are optimistic about the brand’s long-term growth prospects given BOGS’ strong consumer loyalty. We continue to develop new BOGS product with a special focus on less insulated footwear with a longer selling season.

In our legacy ~~business. Wholesale~~business, Florsheim net sales ~~increased due~~were down 7%, compared to ~~higher unit selling prices, while pairs shipped decreased 5%. Florsheim had another~~ record ~~quarter with a 15% increase, as~~sales for the brand ~~continues~~in last year’s third quarter. Sales of Stacy Adams were down 1%, and sales of the Nunn Bush brand were up 11%, with the increase driven in part by incremental sales in the casual and hybrid categories, and sales of new programs to ~~pick up market share~~a few large retailers. All three brands maintained solid retail sell-throughs during the quarter despite a general slowdown in the more 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 madeWe are encouraged by our 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 evergreenselling

1314

~~styles. Overall,~~hybrid footwear that is more casual in nature but can be worn across a variety of settings from office to social occasions. Consumers are gravitating towards this category of footwear, and we see this as an important growth area for our Legacy business. From a product development perspective, we are expanding our range of hybrid footwear while selectively adding to our true casual and refined footwear assortment.

Retail sales were up 6% for the ~~BOGS brand~~quarter with the increase driven primarily by our e-commerce business. Footwear industry statistics indicate the e-commerce sales channel is ~~healthy~~down year-to-date, so it is encouraging that we continue to grow our e-commerce platform in a very competitive environment.

Sales at Florsheim Australia were down 14%, and ~~maintains~~in local currency, were down 10%. The Australian market is facing some of the same challenges as in the U.S. regarding softness in the footwear and apparel category. We also lost a ~~leadership position within~~sizeable wholesale account that impacted our wholesale shipments for the ~~weather boot category,~~quarter. Going forward, we believe that we will make up some of this deficit in the Australian market through other accounts 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~~transfer of the ~~increase was driven by internet sales; brick-and-mortar sales also increased for~~Asia-Pacific wholesale business to 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. office.

~~Consolidated Sales and Earnings~~Third Quarter Highlights

Consolidated net sales were ~~a first-quarter record of $86.3~~$84.2 million, ~~up 6%~~down 13% compared to ~~our previous~~ record third-quarter sales of ~~$81.4~~$97.0 million in 2022. Consolidated gross earnings increased to ~~43.1%~~43.0% of net sales compared to ~~35.8%~~40.6% of net sales in last year’s ~~first~~third quarter, due mainly to higher gross margins in our Wholesale segment. ~~Operating earnings~~Earnings from operations were ~~a first-quarter~~$12.4 million, down 12% compared to record ~~of $10.4 million, up more than 90% over last year~~’~~s first quarter~~ operating earnings of ~~$5.4 million. Net~~$14.2 million in 2022. Quarterly net earnings ~~were a first-quarter record of $7.4~~totaled $9.3 million, or ~~$0.78~~$0.98 per diluted share, ~~up 84%~~ compared to ~~$4.1~~record net earnings of $10.8 million, or ~~$0.42~~$1.12 per diluted share, last year.

Year-to-Date Highlights

Consolidated net sales for the first nine months of 2023 were $237.5 million, down 6% compared to record sales of $252.7 million in the first nine months of 2022. Consolidated gross earnings were 43.1% of net sales in the first nine months of 2023 versus 38.9% of net sales in the same period one year ago. The increase was primarily due to higher gross margins in our Wholesale segment. Year-to-date consolidated operating earnings were a record $29.5 million in 2023, up 17% over our previous record of $25.3 million in 2022. Our net earnings reached a record $21.6 million, or $2.27 per diluted share, in the first nine months of 2023, up 12% over our previous record of $19.3 million, or $2.01 per diluted share, in 2022.

Financial Position Highlights

At ~~March 31,~~September 30, 2023, our cash, short-term investments, and marketable securities totaled ~~$30.7~~$41.0 million and we had ~~$20.6 million~~no debt outstanding on our ~~$50.0~~$40.0 million revolving line of credit. During the first ~~three~~nine months of 2023, we generated ~~$23.0~~$62.9 million of cash from ~~operations.~~operations, due mainly to reductions in inventory levels. We ~~used funds to pay down $10.5~~paid off $31.1 million on our line of credit, ~~to pay $4.6~~paid $9.3 million in dividends, ~~and to repurchase $1.5~~repurchased $3.4 million of our common ~~stock. We also~~stock, and we had ~~approximately $660,000~~$2.6 million of capital ~~expenditures.~~expenditures during the period.

SEGMENT ANALYSIS

Net sales and earnings from operations for our segments for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, were as follows:


	Three Months Ended March 31,				%		Three Months Ended September 30,				%		Nine Months Ended September 30,				%
	2023		2022		Change		2023		2022		Change		2023		2022		Change

	(Dollars in thousands)						(Dollars in thousands)
Net Sales
North American Wholesale	$	69,897	$	67,100	4	%	$	69,472	$	81,637	-15	%	$	190,833	$	207,719	-8	%
North American Retail		8,930		7,860	14	%		7,584		7,129	6	%		24,141		22,409	8	%
Other		7,467		6,400	17	%		7,094		8,205	-14	%		22,484		22,562	0	%
Total	$	86,294	$	81,360	6	%	$	84,150	$	96,971	-13	%	$	237,458	$	252,690	-6	%

Earnings from Operations
North American Wholesale	$	8,829	$	4,846	82	%	$	11,251	$	12,906	-13	%	$	25,435	$	21,939	16	%
North American Retail		1,282		828	55	%		926		825	12	%		3,277		2,766	18	%
Other		275		(243)	213	%		256		476	-46	%		807		598	35	%
Total	$	10,386	$	5,431	91	%	$	12,433	$	14,207	-12	%	$	29,519	$	25,303	17	%

1415

North American Wholesale Segment

Net Sales

Net sales in our Wholesale segment for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, were as follows:


	Three Months Ended March 31,				%		Three Months Ended September 30,				%		Nine Months Ended September 30,				%
	2023		2022		Change		2023		2022		Change		2023		2022		Change

	(Dollars in thousands)						(Dollars in thousands)
North American Wholesale Segment Net Sales
Stacy Adams	$	16,300	$	16,797	(3)	%	$	14,348	$	14,544	-1	%	$	43,750	$	47,131	-7	%
Nunn Bush		14,546		14,374	1	%		15,401		13,824	11	%		41,681		40,001	4	%
Florsheim		25,209		22,012	15	%		22,638		24,463	-7	%		69,303		70,505	-2	%
BOGS/Rafters		12,820		13,099	(2)	%		16,057		27,735	-42	%		33,298		47,607	-30	%
Forsake		406		386	5	%		483		617	-22	%		1,086		1,191	-9	%
Total North American Wholesale	$	69,281	$	66,668	4	%	$	68,927	$	81,183	-15	%	$	189,118	$	206,435	-8	%
Licensing		616		432	43	%		545		454	20	%		1,715		1,284	34	%
Total North American Wholesale Segment	$	69,897	$	67,100	4	%	$	69,472	$	81,637	-15	%	$	190,833	$	207,719	-8	%

~~Net sales in our Wholesale segment 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~~year-to-date periods were down across most of our ~~other~~ major brands ~~Nunn Bush, Stacy~~(Stacy Adams, Florsheim, and ~~BOGS, remained relatively steady with last~~BOGS/Rafters) due to reduced demand in 2023 following record growth in 2022. Last year’s ~~robust first~~sales were up significantly due to post-pandemic retailer pipeline fill and strong consumer demand. So far in 2023, most of our brands experienced decreases in pairs sold, as the footwear industry returned to its normal cycle, and as many retailers in the U.S. and Canada continue to pare back higher levels of inventory. BOGS has been particularly impacted by this slowdown due to the current saturation of product in the outdoor footwear market, and due to the mild start to Fall. Nunn Bush sales rose 11% and 4% for the quarter ~~results.~~and year-to-date periods, respectively, due mainly to new programs with a few large retailers that performed well in the third quarter.

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 ~~38.2% of net sales compared to 30.0%~~38.6% of net sales in the ~~first~~third quarter of ~~2022. Gross~~2023 compared to 36.3% of net sales last year. Quarterly gross margins improved as a result of lower inventory costs compared to last year, primarily related to inbound freight costs. For the nine months ended September 30, wholesale gross earnings were 38.0% of net sales in 2023 and 33.5% of net sales in 2022. The increase in gross margins for the year-to-date period was due ~~mainly~~ to higher selling ~~price increases implemented in 2022 to address higher~~prices and lower inbound freight costs. ~~Last~~In the first half of last year,’~~s first quarter~~ gross margins were negatively impacted by ~~higher~~inflated inbound freight costs as a result of the global supply chain issues ~~ongoing~~ at that time, which have since eased.

Wholesale 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 ~~$17.9~~$15.6 million ~~or 26% of net sales,~~ for the quarter compared to ~~$15.3~~$16.7 million last year. The decrease was primarily due to lower employee costs, mainly commission-based compensation. As a percent of net sales, wholesale selling and administrative expenses were 22% and 21% of net sales in the third quarters of 2023 and 2022, respectively. For the nine months ended September 30, wholesale selling and administrative expenses were $47.1 million, or 25% of net sales, in 2023 versus $47.7 million, or 23% of net sales, in 2022.

Wholesale operating earnings totaled $11.3 million for the quarter, down 13% from $12.9 million in last year’s ~~first quarter. This year~~’~~s expenses included higher employee costs. Wholesale~~third quarter, due primarily to lower sales. For the nine months ended September 30, wholesale operating earnings reached a ~~first-quarter~~record $25.4 million in 2023, up 16% over our previous record of ~~$8.8 million, up 82% compared to $4.8~~$21.9 million in ~~2022, driven by the~~2022. The year-to-date earnings increase was primarily due to higher ~~sales and~~ gross ~~margins this year.~~margins.

Our cost of sales does not include distribution costs (e.g., receiving, inspection, warehousing, shipping, and handling ~~costs,~~costs) which are included in selling and administrative ~~expenses).~~expenses. Wholesale distribution costs were ~~$4.2~~$3.8 million in the ~~first~~third quarter of 2023 and ~~$3.6~~$4.1 million in the ~~first quarter~~same period of 2022. ~~Our gross earnings may not be comparable to other companies, as some companies may include~~For the nine-month periods ended September 30, wholesale distribution costs were $11.5 million in ~~cost of sales.~~2023 and $11.3 million in 2022.

North American Retail Segment

Net Sales

Net sales in our ~~Retail~~retail segment were a ~~first-quarter~~third-quarter record of ~~$8.9~~$7.6 million in 2023, up ~~14%~~6% compared to our previous record of ~~$7.9~~$7.1 million last year. The quarterly increase was due to higher sales across all our domestic e-commerce websites, with the largest increases at BOGS and Florsheim. For the nine months ended September 30, retail net sales reached a record $24.1 million in 2023, up 8% over our previous record of $22.4 million in 2022. The year-to-date increase was ~~primarily~~ due to higher sales onvolumes across all our e-commerce websites, with the ~~Florsheim and Stacy Adams websites.~~largest increase at Florsheim. Brick-and-mortar sales ~~also increased~~ for the ~~quarter.~~first nine months of 2023 were relatively flat compared to last year.

Earnings from Operations

Retail gross earnings as a percent of net sales were ~~66.3%~~65.4% and ~~65.9%~~66.3% in the ~~first~~third quarters of 2023 and 2022, respectively. For the nine months ended September 30, 2023, retail gross earnings were 66.0% of net sales, compared to 66.5% of net sales in the same period of 2022.

Selling and administrative expenses for the retail segment consist primarily of freight, advertising expense, employee costs, and rent and occupancy costs. Retail selling and administrative expenses were ~~$4.6~~$4.0 million, ~~compared to $4.4 million last year. As a percent~~or 53% of net sales, in the third quarter of 2023 versus $3.9 million, or 55% of net sales, in the third quarter of 2022. For the nine months ended September 30, retail selling and administrative expenses were $12.6 million, or 52% of net sales, in 2023 and ~~55%~~$12.1 million, or 54% of net sales, in 2022. This decrease was primarily due to lower e-commerce expenses relative to net sales, primarily 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,~~rose to $926,000 for the quarter, up ~~55%~~12% compared to ~~$828,000~~$825,000 in last ~~year. This increase was~~year’s third quarter. For the nine months ended September 30, retail operating earnings were $3.3 million in 2023, up 18% over $2.8 million in 2022. The increases for the quarter and year-to-date periods were primarily due to higher ~~sales and improved profitability in~~earnings from our e-commerce ~~businesses. Brick and mortar operating earnings were also up for the quarter.~~businesses, driven by higher web sales.

Other

~~Other~~Operating results reported in the “other” category consist entirely of the operating results at Florsheim Australia. Third quarter 2023 net sales ~~for~~of Florsheim Australia totaled $7.1 million, down 14% compared to $8.2 million in the ~~first~~third quarter of 2022. In local currency, its net sales were down 10%, primarily in its wholesale businesses. For the nine months ended September 30, 2023, ~~totaled $7.5~~other net sales were $22.5 million, ~~up 17%~~down slightly compared to ~~$6.4~~$22.6 million in ~~2022.~~the same period one year ago. In local currency, Florsheim Australia’s net sales were up ~~24% with~~5% for the year-to-date period, due to higher sales up in ~~both~~ its retail ~~and~~businesses partially offset by lower sales in its wholesale businesses. ~~Last year~~The weakening of the Australian dollar relative to the U.S. dollar led to the lower sales growth in U.S. dollars this year.

Florsheim Australia’s ~~sales volumes in Asia were negatively impacted by COVID lockdowns imposed in Hong Kong during the quarter.~~

~~Other~~ gross earnings were ~~60.5%~~61.6% of net sales for the quarter compared to ~~59.6%~~61.4% of net sales in last year’s ~~first~~third quarter. For the nine months ended September 30, its gross earnings as a percent of net sales were 61.5% and 60.9% in 2023 and 2022, respectively.

Other operating earnings ~~recovered~~totaled $256,000 for the quarter versus $476,000 last year. The decrease was primarily due to ~~$275,000~~lower earnings in Australia’s wholesale businesses, as a result of lower sales. For the nine-months ended September 30, 2023, ~~up from~~other operating ~~losses of $243,000~~earnings totaled $807,000, compared to $598,000 in the same period last year. The year-to-date earnings increase was largely due to improved results of the retail businesses in Australia.

Other income and expense ~~and taxes~~

Interest income was ~~$139,000~~$269,000 and ~~$91,000 in~~$86,000 for the ~~first quarters of~~three months ended September 30, 2023 and 2022, respectively. For the nine months ended September 30, interest income was $598,000 in 2023 and $266,000 in 2022. The increases in 2023 were due to more interest earned on the higher cash balances this year. Interest expense ~~increased~~decreased $192,000 in the three months ended September 30, 2023, compared to ~~$385,000~~the same period of 2022, due to less interest incurred as we paid off our debt in the 2023 quarter. Interest expense for the ~~quarter,~~nine months ended September 30, 2023 was up ~~from $1,000 in last year~~’~~s first quarter,~~$313,000 over the same period of 2022, due to interest incurred on the higher average debt balances earlier this year.

Other ~~expense,~~(expense) income, net, ~~increased to $130,000~~totaled ($133,000) for the quarter ~~up from $6,000~~compared to $141,000 in last year’s third quarter. For the ~~first~~year-to-date period, other (expense) income, net, totaled ($431,000) in 2023 and $316,000 in 2022. The increases in expense for both the quarter ~~of 2022,~~and year-to-date periods was primarily due ~~largely~~ to an increase in the non-service ~~cost~~costs components of pension ~~expense.~~expense this year. See Note 7 in the Notes to Consolidated Condensed Financial Statements (Unaudited) for additional details.

~~Our~~17

The effective income tax rates for the three months ended ~~March 31,~~September 30, 2023 and 2022 were ~~25.6%~~25.7% and ~~26.5%~~24.4%, respectively. The effective income tax rates for the nine months ended September 30, 2023 and 2022 were 25.8% and 24.8%, respectively. The 2023 and 2022 effective tax rates differed from the federal rate of 21% primarily because of state and foreign taxes.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash, short-term investments, short-term marketable securities, and our revolving line of credit. WeDuring the first nine months of 2023, we generated ~~$23.0~~$62.9 million of cash from ~~operating activities during the first three months of 2023,~~operations compared to ~~$231,000~~a use of cash totaling $42.1 million in the same period one year ago. The increase in 2023 was primarily due to ~~higher net earnings and~~ changes in operating assets and liabilities, principally inventory. Our inventory ~~and accounts payable. Our overall inventory~~level was $79.6 million as of ~~March 31,~~September 30, 2023 ~~was $106.7 million, down from~~compared to $128.0 million at December 31, 2022. ~~As expected,~~We believe our inventory ~~levels have come down~~is now ~~that the supply chain has~~at a normalized level, and we ~~can plan our receipts closer~~continue to ~~when we need to ship shoes to our customers.~~review areas of slow-moving product.

We paid dividends totaling ~~$4.6~~$9.3 million and ~~$2.3~~$6.9 million in the first ~~quarters~~nine months of 2023 and 2022, respectively. The increase in 2023 was due to a shift in timing of our quarterly dividend payment schedule; the first ~~quarter~~nine months of 2023 ~~includes two~~included four quarterly dividend payments, as our fourth quarter 2022 dividend was paid in early January 2023. ~~First quarter~~Conversely, the first nine months of 2022 only included ~~one quarterly~~three dividend ~~payment,~~payments, as our fourth quarter 2021 dividend was paid in December 2021. On ~~May 2,~~November 7, 2023, our Board of Directors declared a cash dividend of $0.25 per share to all shareholders of record on ~~May 26,~~November 27, 2023, payable ~~June 30, 2023. This represents an increase of 4% above the previous quarterly dividend rate of $0.24.~~ on January 2, 2024.

We repurchase our common stock under our share repurchase program when we believe market conditions are favorable. During the first ~~three months~~nine of 2023, we repurchased ~~62,352~~135,513 shares for a total cost of ~~$1.5~~$3.4 million. As of ~~March 31,~~September 30, 2023, we had the authority to repurchase approximately ~~977,000~~904,000 shares under our previously announced stock repurchase program. See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” below for more information.

Capital expenditures totaled ~~approximately $660,000~~$2.6 million in the first ~~three~~nine months of 2023. Management estimates that ~~annual~~total capital expenditures for 2023 will be between ~~$2.0~~$3.0 million and $4.0 million.

As of ~~March 31,~~September 30, 2023, approximately ~~$4.1~~$4.5 million of cash and cash equivalents was held by our foreign subsidiaries.

We will continue to evaluate the best uses for our available liquidity, including, among other uses, capital expenditures, continued stock repurchases and acquisitions. ~~We believe~~The Company believes that available cash, short-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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures designed to ensure that the information we must disclose in our filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our 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 our periodic filings under the Exchange Act. Such officers have also concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in accumulating and communicating information in a timely manner, allowing timely decisions regarding required disclosures.

There have been no significant changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

1719

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

~~None.~~From time to time, we are engaged in legal proceedings in the ordinary course of business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, financial condition, operating results or cash flows.

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 regarding our repurchases of our common stock in the three-month period ~~March 31,~~ended September 30, 2023.


					Maximum Number					Maximum Number
	Total	Average		Total Number of	of Shares	Total	Average		Total Number of	of Shares
	Number	Price		Shares Purchased as	that May Yet Be	Number	Price		Shares Purchased as	that May Yet Be
	of Shares	Paid		Part of the Publicly	Purchased Under	of Shares	Paid		Part of the Publicly	Purchased Under
Period	Purchased	Per Share		Announced Program	the Program	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
07/01/2023 - 07/31/2023						7,931	$	26.29	7,931	946,091
08/01/2023 - 08/31/2023						30,144		25.75	30,144	915,947
09/01/2023 - 09/30/2023						12,281		26.08	12,281	903,666
Total	62,352	$	24.70	62,352		50,356	$	25.92	50,356

1820

Item 6. Exhibits.

Exhibit	Description	Incorporation Herein By Reference To	Filed Herewith

10.1	Third Amendment to Credit Agreement, dated as of September 28, 2023	Exhibit 10.9 to Form 8-K filed September 29, 2023

10.2	Third Amended and Restated Revolving Loan Note, dated September 28, 2023	Exhibit 10.10 to Form 8-K filed September 29, 2023

31.1	Certification of Chief Executive Officer		X

31.2	Certification of Chief Financial Officer		X

32	Section 906 Certification of Chief Executive Officer and Chief Financial Officer		X

101	The following financial information from Weyco Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2023 formatted in iXBRL (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,~~September 30, 2023, formatted in iXBRL (included in Exhibit 101).		X

1921

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.

		WEYCO GROUP, INC.

Dated: ~~May 10,~~November 9, 2023		/s/ Judy Anderson
		Judy Anderson
		Vice President, ~~and~~ Chief Financial Officer and Secretary

2022