-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AoORYjUJgUE56bBoMrOy8xe5qUKu/0ki/X8fCvQKIQIWzt8kOqj3tqNvIMhch2kr Ssn1vlhy8E19a4rHqecTzA== 0000950124-96-001301.txt : 19960327 0000950124-96-001301.hdr.sgml : 19960327 ACCESSION NUMBER: 0000950124-96-001301 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEYCO GROUP INC CENTRAL INDEX KEY: 0000106532 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 390702200 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-09068 FILM NUMBER: 96538393 BUSINESS ADDRESS: STREET 1: 234 E RESERVOIR AVE STREET 2: PO BOX 1188 CITY: MILWAUKEE STATE: WI ZIP: 53201 BUSINESS PHONE: 4142638800 MAIL ADDRESS: STREET 1: 234 EAST RESERVOIR AVENUE STREET 2: 234 EAST RESERVOIR AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53212 FORMER COMPANY: FORMER CONFORMED NAME: WEYENBERG SHOE MANUFACTURING CO DATE OF NAME CHANGE: 19900514 10-K405 1 10-K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - --- ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1995 . OR - --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For transition period from to ---------------- ----------------------- Commission file number 0-9068 ------------------- Weyco Group, Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0702200 - ------------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 234 E. Reservoir Avenue, P. O. Box 1188, Milwaukee, WI 53201 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, include area code (414) 263-8800 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered None - ---------------------------------------- ---------------------------------- - ---------------------------------------- ---------------------------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock - $1.00 par value per share - ------------------------------------------------------------------------------ (Title of Class) - ------------------------------------------------------------------------------ (Title of Class) 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 X No_____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in any definitive proxy of information statements incorporated by reference or in any amendment to this Form 10-K. (X) As of March 5, 1996, there were outstanding 1,296,313 shares of Common Stock and 334,482 shares of Class B Common Stock. At the same date, the aggregate market value (based upon the average of the high and low trades for that day) of all common stock held by non-affiliates was approximately $41,534,700. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Corporation's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated by reference in Parts I, II and IV of this report. Portions of the Corporation's Proxy Statement, dated March 25, 1996, prepared for the Annual Meeting of Shareholders scheduled for April 23, 1996, are incorporated by reference in Part III of this report. Exhibit Index Pages 9-10 2 PART I Item 1. Business The Company is a Wisconsin corporation incorporated in the year 1906 as Weyenberg Shoe Manufacturing Company. Effective April 25, 1990, the name of the corporation was changed to Weyco Group, Inc. The Company and its subsidiaries engage in one line of business, the manufacture, purchase and distribution of men's footwear. The Company does not sell women's or children's shoes because these markets differ significantly from the men's market. The principal brands of shoes sold are "Nunn Bush," "Brass Boot," "Stacy Adams," and "Weyenberg" and trademarks maintained by the Company on these names are important to the business. The Company's products consist of both mid-priced quality leather dress shoes which would be worn as a part of more formal and traditional attire and lower priced quality casual footwear of man-made materials or leather which would be appropriate for leisure or less formal occasions. The Company's footwear, and that of the industry in general, is available in a broad range of sizes and widths, primarily produced or purchased to meet the needs and desires of the American male population. The Company assembles footwear at one manufacturing plant in Wisconsin. Shoe components, referred to as "uppers," are purchased from outside sources, generally foreign, and turned into complete shoes by attaching the sole, either leather or man-made, applying appropriate "finishes" and packing the shoes into individual cartons, ready for sale. The Company purchases raw materials and shoe components from many suppliers and is not dependent on any one of them. The supply of these items is generally plentiful and there are no long-term purchase commitments. Over the past five years, production at the Company's plant has accounted for approximately 14% of the value of the Company's wholesale footwear sales. In addition to the production of footwear at the Company's own manufacturing plants, complete shoes are also purchased from many sources worldwide, generally at U. S. dollar prices. These purchases account for the balance of the Company's wholesale footwear sales. In recent years, domestic production of men's shoes by the Company and the industry has declined, while imports to the United States have increased. The Company's business is separated into two divisions - wholesale and retail. Wholesale sales constituted approximately 87% of total sales in 1995, 79% in 1994, and 68% in 1993. At wholesale, shoes are marketed nationwide through more than 8,000 shoe, clothing and department stores. The loss of any one or a few of these retail customers would not have a material adverse effect on the wholesale division sales. The Company employs traveling salesmen who sell the Company's products to the retail outlets. Shoes are shipped to these retailers primarily from warehouses maintained in Milwaukee and Beaver Dam, Wisconsin. Although there is no clearly identifiable seasonality in the men's footwear business, new styles are historically developed and shown twice each year, in spring and fall. In accordance with the industry practices, the Company is required to carry significant amounts of inventory to meet customer delivery requirements and periodically provides extended payment terms to customers. -1- 3 Retail sales constituted approximately 13% of total sales in 1995, 21% in 1994 and 32% in 1993. In the retail division there are 18 company-operated stores in principal cities of the United States and 13 leased departments in department stores throughout the country. The decrease in retail sales in recent years is a result of the termination of leased departments and company-operated stores. In 1995, 10 company-operated stores were closed due to unprofitable operations or unattractive lease renewal terms. In 1994, the Company closed 45 leased departments as a result of the termination of a lease agreement with a department store and 7 company-operated stores due to unprofitable operations or unattractive lease renewal terms. In 1993, the Company closed 71 leased shoe departments because of a restructuring at a lessor department store chain and closed 12 company-operated stores because of unprofitable operations or unattractive lease renewal terms. Sales in retail outlets are made directly to the consumer by company employees. In addition to the sale of the Company's brands of footwear in these retail outlets, other branded footwear and accessories are also sold in order to provide the consumer with as complete a selection as practically possible. In dollar sales, the Company is about eighth largest among approximately 900 domestic men's shoe distributors. During 1995 it sold approximately 3% of the total men's non-rubber dress and casual shoes sold in the United States. Price, quality and service are all important competitive factors in the shoe industry and the Company has been recognized as a leader in all of them. Although the Company engages in no specific research and development activities, new products and new processes are continually being tested by the Company and used where appropriate, in order to produce the best value for the consumer, consistent with reasonable price. Compliance with environmental regulations historically has not had, and is not expected to have, a material adverse effect on the Company's results of operations or cash flows. Approximately 525 persons are employed by the Company and its subsidiaries. Item 2. Properties The following facilities are operated by the Company and its subsidiaries:
Location Character Owned/Leased -------- --------- ------------ Milwaukee, Wisconsin Multistory office Owned and warehouse Milwaukee, Wisconsin Multistory warehouse Owned Beaver Dam, Wisconsin Multistory warehouse Owned Beaver Dam, Wisconsin Multistory factory Leased (1)
(1) Not a material lease. All of the above-named facilities are adequately equipped, well maintained and suitable for foreseeable needs. If all available manufacturing space were utilized and significant additional shoe making equipment were acquired, production could be increased about 25%. In addition to the above-described manufacturing and warehouse facilities, the Company operates 18 retail stores and 13 leased departments throughout the United States under various rental agreements. See Note 9 to Consolidated Financial Statements and Item 1. Business above. -2- 4 Item 3. Legal Proceedings On December 6, 1993, a shareholder of the Company, on behalf of herself and all others similarly situated, filed an action in the Circuit Court of Milwaukee County, Wisconsin against the Company and certain of its officers in connection with the (then proposed) merger agreement subsequently signed by the Company under which the Company would have been acquired by a management group, including the principal shareholders of the Company, for $34.00 per share in cash. (Kahn v. Weyco Group, et. al, Case No. 93-CV-019022). Plaintiff alleged that the $34.00 per share price was grossly inadequate, that the Company's intrinsic value exceeded $60.00 per share, that the acquiring group controlled and dominated the Board of Directors, that the Special Committee of the Board of Directors failed to adequately explore all alternatives that might lead to maximizing shareholder values, that the merger agreement was not the result of arm's-length negotiations or an independent valuation of shares and that the defendants failed to have a disinterested third party negotiate on behalf of shareholders. Plaintiff sought an injunction, rescission, unspecified damages and fees and expenses. The defendants filed an answer denying all material allegations. Following the withdrawal of the proposed merger, the plaintiff amended the complaint in December 1994 to seek a declaration that the defendants, in proposing and pursuing the proposed merger, "committed or aided and abetted a gross abuse of trust and have breached their fiduciary and other duties" and also to seek to recover certain costs and expenses related to the action, "including reasonable attorneys' and professional fees incurred with the solicitation of proxies." On June 2, 1995, the lawsuit was dismissed by the Circuit Court of Milwaukee County, Wisconsin. On September 25, 1995, the plaintiffs gave notice of their appeal to the Wisconsin Court of Appeals. The appeal was dismissed on December 29, 1995 and the Company is not aware of any further action by the plaintiff. The Company has been identified as a potentially responsible party ("PRP") in two separate actions in connection with an alleged hazardous substance discharge in the State of Wisconsin. The Company is contesting these actions and denies liability in the matter. It is anticipated that the resolution of this matter will not have a material effect on the Consolidated Financial Statements of the Company. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable -3- 5 Executive Officers of the Registrant
Served Officer Age Office(s) Since Business Experience - --------------------- --- ----------------------------- ------- ------------------------------------------- Thomas W. Florsheim 65 Chairman of the Board and 1968 Chairman of the Company -- Chief Executive Officer 1968 to present Robert Feitler 65 President and Chief 1968 President of the Company -- Operating Officer & Director 1968 to present David N. Couper 47 Vice President 1981 Vice President of the Company -- 1981 to present John W. Florsheim 32 Vice President 1994 Vice President of the Company -- 1994 to present; Branch Manager, M & M/Mars, Inc. 1990 to 1994 Thomas W. Florsheim, Jr. 38 Vice President 1988 Vice President of the Company -- 1988 to present James F. Gorman 52 Vice President 1975 Vice President of the Company -- 1975 to present Peter S. Grossman 52 Vice President 1971 Vice President of the Company -- 1971 to present John F. Wittkowske 36 Secretary/Treasurer 1993 Audit Manager, Arthur Andersen LLP, Independent Public Accountants -- 1986 to 1993
Thomas W. Florsheim is the father of John W. Florsheim and Thomas W. Florsheim, Jr. -4- 6 PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters Information required by this Item is set forth on page 11 of the Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference. Item 6. Selected Financial Data Information required by this Item is set forth on page 2 of the Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information required by this Item is set forth on page 12 of the Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data Information required by this Item is set forth on pages 2 through 11 of the Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures Not applicable. -5- 7 PART III Item 10. Directors and Executive Officers of the Registrant Information required by this Item is set forth on pages 1, 2 and 3 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 23, 1996, and is incorporated herein by reference. Item 11. Executive Compensation Information required by this Item is set forth on pages 4, 5, 6 and 7 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 23, 1996, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners of Management Information required by this Item is set forth on pages 1 and 2 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 23, 1996, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information required by this Item is set forth on page 7 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 23, 1996, and is incorporated herein by reference. -6- 8 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as a part of this report:
Page Reference to Annual Report ----------------- 1. Financial Statements - Consolidated Statements of Earnings for the years ended December 31 1995, 1994 and 1993 3 Consolidated Balance Sheets - December 31, 1995 and 1994 4 - 5 Consolidated Statements of Shareholders' Investment for the years ended December 31, 1995, 1994 and 1993 6 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 7 Notes to Consolidated Financial Statements - December 31, 1995, 1994 and 1993 8 - 11 Report of Independent Public Accountants 11
-7- 9 Item 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K (Continued)
Page Reference to Form 10-K ------------------ 2. Financial Statement Schedules for the years ended December 31, 1995, 1994 and 1993 - Schedule II - Valuation and Qualifying Accounts 11 All other schedules have been omitted because of the absence of the conditions under which they are required.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Weyco Group, Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 19, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index above is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Milwaukee, Wisconsin, February 19, 1996 -8- 10 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Continued) 3. Exhibits
Incorporated Herein Filed Exhibit Description By Reference To Herewith - ------- -------------------------------------------------- ----------------------- -------- 3.1 Articles of Incorporation as Restated Exhibit 3.1 to Form August 29, 1961, and Last Amended 10-K for Year Ended April 25, 1990 December 31, 1990 3.2 Bylaws as Revised January 21, 1991 Exhibit 3.2 to Form and Amended November 3, 1992 10-K for Year Ended December 31, 1992 10.1* Employment Agreement - Thomas W. Exhibit 10.1 to Form Florsheim, dated January 1, 1992 10-K for Year Ended December 31, 1992 10.2* Employment Agreement - Robert Feitler, Exhibit 10.2 to Form dated January 1, 1992 10-K for Year Ended December 31, 1992 10.3* Restated and Amended Deferred X Compensation Agreement - Thomas W. Florsheim, dated December 1, 1995 10.4* Restated and Amended Deferred X Compensation Agreement - Robert Feitler, dated December 1, 1995 10.5* 1988 Nonqualified Stock Option Plan Exhibit 10.5 to Form 10-K for Year Ended December 31, 1988 10.6* Excess Benefits Plan - Restated Effective Exhibit 10.6 to Form as of January 1, 1989 10-K for Year Ended December 31, 1991 10.7* Pension Plan - Amended and Restated Exhibit 10.7 to Form Effective January 1, 1989 10-K for Year Ended December 31, 1991 10.8* Deferred Compensation Plan - Effective Exhibit 10.8 to Form as of January 1, 1989 10-K for Year Ended December 31, 1991 10.9* 1992 Nonqualified Stock Option Plan Exhibit 10.9 to Form 10-K for Year Ended December 31, 1991
-9- 11 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued) 3. Exhibits (Continued)
Incorporated Herein Filed Exhibit Description By Reference To Herewith - ------- -------------------------------------------------- ----------------------- -------- 10.10* Death Benefit Plan Agreement - Exhibit 10.10 to Form Thomas W. Florsheim, dated 10-K for Year Ended November 8, 1993 December 31, 1993 10.11* Death Benefit Plan Agreement - Exhibit 10.11 to Form Robert Feitler, dated 10-K for Year Ended November 8, 1993 December 31, 1993 10.12* 1996 Nonqualified Stock Option Plan X 21 Subsidiaries of the Registrant X 23.1 Consent of Independent Public X Accountants Dated March 20, 1996 *Management contract or compensatory plan or arrangement (b) Reports on Form 8-K None
-10- 12 SCHEDULE II WEYCO GROUP, INC. VALUATION AND QUALIFYING ACCOUNTS
Deducted from Assets ----------------------------------------------------------- Doubtful Cash Returns and Accounts Discounts Allowances Total -------- ---------- ----------- --------------- BALANCE, DECEMBER 31, 1992 $700,000 $104,000 $720,000 $1,524,000 Add - Additions charged to earnings 65,502 516,711 3,856,208 4,437,881 Deduct - Charges for purposes for which reserves were established (65,502) (502,171) (3,856,208) (4,423,881) ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1993 700,000 118,000 720,000 1,538,000 Add - Additions charged to earnings 505,324 384,925 3,559,427 4,449,676 Deduct - Charges for purposes for which reserves were established (307,144) (447,925) (3,559,427) (4,314,496) --------- -------- ---------- ---------- BALANCE, DECEMBER 31, 1994 898,180 55,000 720,000 1,673,180 Add - Additions charged to earnings 486,549 275,694 4,692,992 5,455,235 Deduct - Charges for purposes for which reserves were established (361,549) (264,694) (4,452,992) (5,079,235) -------- -------- ---------- ---------- BALANCE, DECEMBER 31, 1995 $1,023,180 $66,000 $960,000 $2,049,180 ========== ======= ======== ==========
-11- 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WEYCO GROUP, INC. (Registrant) By /s/ John Wittkowske March 25, 1996 -------------------------------------- -------------- John Wittkowske, Secretary/Treasurer ______________ Power of Attorney KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas W. Florsheim, Robert Feitler, and John Wittkowske, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue thereof. ______________ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures and Titles Date --------------------- ---- /s/ Thomas W. Florsheim March 25 , 1996 - ----------------------------------------------------- ---------------------------- Thomas W. Florsheim, Chairman of the Board and Chief Executive Officer (Principal Executive Officer) /s/ Robert Feitler March 25 , 1996 - ------------------------------------------------------ ---------------------------- Robert Feitler, President and Chief Operating Officer (Principal Financial Officer) and Director /s/ John Wittkowske March 25 , 1996 - ------------------------------------------------------ ---------------------------- John Wittkowske, Secretary/Treasurer (Principal Accounting Officer) /s/ John W. Florsheim March 25 , 1996 - ------------------------------------------------------ ---------------------------- John W. Florsheim, Director /s/ Thomas W. Florsheim, Jr. March 25 , 1996 - ------------------------------------------------------ ---------------------------- Thomas W. Florsheim, Jr., Director /s/ Leonard J. Goldstein March 25 , 1996 - ------------------------------------------------------ ---------------------------- Leonard J. Goldstein, Director /s/ Frank W. Norris March 25 , 1996 - ------------------------------------------------------ ---------------------------- Frank W. Norris, Director /s/ Frederick P. Stratton, Jr. March 25 , 1996 - ------------------------------------------------------ ---------------------------- Frederick P. Stratton, Jr., Director
-12 EX-10.3 2 COMPENSATION AGREEMENT - THOMAS FLORSHEIM 1 EXHIBIT 10.3 RESTATED AND AMENDED DEFERRED COMPENSATION AGREEMENT This Restated and Amended Deferred Compensation Agreement, effective as of December 1, 1995, is made by and between Weyco Group, Inc. (the "Company") and Thomas Florsheim ("Employee"). RECITALS 1. The parties hereto entered into an Amended Deferred Compensation Agreement dated January 1, 1989; and 2. The parties hereto desire to restate and amend the Amended Deferred Compensation Agreement dated January 1, 1989 as provided herein. NOW, THEREFORE, Company and Employee hereby agree as follows: 1. Deferred Compensation. The deferred compensation provided for in this Agreement shall be supplemental and in addition to any other benefits to be paid to Employee by the Company pursuant to any employment agreement, pension or profit sharing plan, insurance or other fringe benefit program. 2. Payments. (a) During Employee's Lifetime. The Company shall, regardless of whether Employee remains in Company's employment or has retired or otherwise terminated employment, pay deferred compensation in the amounts and at the times shown below:
Date of Payment Amount of Payment --------------- ----------------- 12/1/95 $575,000 02/1/96 $575,000 02/1/97 $575,000 02/1/98 $423,751
2 Such payments represent an acceleration of the payments which would have been made under the January 1, 1989 Amended Deferred Compensation Agreement had that agreement not been amended and restated by this agreement. The payments called for by this agreement have the same present value as of Employee's 65th birthday as the payments called for by the January 1, 1989 agreement when discounted using an interest rate of 7%. (b) Benefits Following Death. If Employee shall die before the payments called for by paragraph (a) above are made, the payments shall instead be paid to his designated beneficiary. 3. Designation of Beneficiary. Employee may designate one or more beneficiaries to receive all or any portion of the payments under this Agreement. Each beneficiary designated shall be in writing and filed with the Company. Employee may change any beneficiary designation at any time, and from time to time. If, or to the extent that, Employee shall not designate a beneficiary hereunder, or if the beneficiary shall be deceased at the time payments to the beneficiary are to commence, then Employee's estate shall be deemed the beneficiary. If any payment is required to be made under this Agreement to a beneficiary who shall die after having commenced receiving payments hereunder, such payment shall be made to the personal representative of said beneficiary's estate. 4. Vesting. Employee shall be fully vested in the benefits provided in this Agreement. - 2 - 3 5. No Trust or Separate Fund. Nothing in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be deemed to create a trust of any kind or a fiduciary relationship between the Company and Employee, his designated beneficiary or any other person. Any funds or insurance policies which may be acquired, held or invested in connection with the provisions of this Agreement shall continue for all purposes to be a part of the general funds of the Company, and neither Employee nor any other person other than the Company shall have any interest in such funds or policies by virtue of the provisions of this Agreement. To the extent that the Employee or any other person acquires a right to receive payments from the Company under this Agreement, such right shall be of no greater priority than the right of any unsecured general creditor of the Company. 6. Successors. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and Employee, and his successors and assigns, including his heirs, executors, administrators and legal representatives. 7. No Assignment. Except as provided herein, the right of Employee or any other person to the payment of deferred compensation or other benefits under this Agreement shall not be assigned, transferred, pledged, disposed or encumbered except by will or by the laws of descent and distribution, and no payments of benefits hereunder shall be subject to execution, garnishment, attachment or to any other judicial process. - 3 - 4 8. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Wisconsin. 9. Not Deemed Compensation for Other Benefits. Any deferred compensation payable under this Agreement shall not be deemed salary or other compensation to Employee for the purpose of computing benefits to which he may be entitled under any pension, profit sharing or other plan or arrangement of the Company for the benefit of its employees. 10. No Right of Employment. Nothing contained in this Agreement shall be construed as conferring upon Employee the right to continue in the employ of the Company as an executive or in any other capacity. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. EMPLOYEE: /s/ Thomas Florsheim ---------------------------------------- Thomas Florsheim WEYCO GROUP, INC. By: /s/ Robert Feitler ------------------------------------- President Attest: /s/ John Wittkowske ---------------------------------------- Secretary - 4 - EX-10.4 3 COMPENSATION AGREEMENT - ROBERT FEITLER 1 EXHIBIT 10.4 RESTATED AND AMENDED DEFERRED COMPENSATION AGREEMENT This Restated and Amended Deferred Compensation Agreement, effective as of December 1, 1995, is made by and between Weyco Group, Inc. (the "Company") and Robert Feitler ("Employee"). RECITALS 1. The parties hereto entered into an Amended Deferred Compensation Agreement dated January 1, 1989; and 2. The parties hereto desire to restate and amend the Amended Deferred Compensation Agreement dated January 1, 1989 as provided herein. NOW, THEREFORE, Company and Employee hereby agree as follows: 1. Deferred Compensation. The deferred compensation provided for in this Agreement shall be supplemental and in addition to any other benefits to be paid to Employee by the Company pursuant to any employment agreement, pension or profit sharing plan, insurance or other fringe benefit program. 2. Payments. (a) During Employee's Lifetime. The Company shall, regardless of whether Employee remains in Company's employment or has retired or otherwise terminated employment, pay deferred compensation in the amounts and at the times shown below:
Date of Payment Amount of Payment --------------- ----------------- 12/1/95 $600,000 02/1/96 $600,000 02/1/97 $700,000 02/1/98 $232,422
2 Such payments represent an acceleration of the payments which would have been made under the January 1, 1989 Amended Deferred Compensation Agreement had that agreement not been amended and restated by this agreement. The payments called for by this agreement have the same present value as of Employee's 65th birthday as the payments called for by the January 1, 1989 agreement when discounted using an interest rate of 7%. (b) Benefits Following Death. If Employee shall die before the payments called for by paragraph (a) above are made, such payments shall instead be paid to his designated beneficiary. 3. Designation of Beneficiary. Employee may designate one or more beneficiaries to receive all or any portion of the payments under this Agreement. Each beneficiary designated shall be in writing and filed with the Company. Employee may change any beneficiary designation at any time, and from time to time. If, or to the extent that, Employee shall not designate a beneficiary hereunder, or if the beneficiary shall be deceased at the time payments to the beneficiary are to commence, then Employee's estate shall be deemed the beneficiary. If any payment is required to be made under this Agreement to a beneficiary who shall die after having commenced receiving payments hereunder, such payment shall be made to the personal representative of said beneficiary's estate. 4. Vesting. Employee shall be fully vested in the benefits provided in this Agreement. - 2 - 3 5. No Trust or Separate Fund. Nothing in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be deemed to create a trust of any kind or a fiduciary relationship between the Company and Employee, his designated beneficiary or any other person. Any funds or insurance policies which may be acquired, held or invested in connection with the provisions of this Agreement shall continue for all purposes to be a part of the general funds of the Company, and neither Employee nor any other person other than the Company shall have any interest in such funds or policies by virtue of the provisions of this Agreement. To the extent that the Employee or any other person acquires a right to receive payments from the Company under this Agreement, such right shall be of no greater priority than the right of any unsecured general creditor of the Company. 6. Successors. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and Employee, and his successors and assigns, including his heirs, executors, administrators and legal representatives. 7. No Assignment. Except as provided herein, the right of Employee or any other person to the payment of deferred compensation or other benefits under this Agreement shall not be assigned, transferred, pledged, disposed or encumbered except by will or by the laws of descent and distribution, and no payments of benefits hereunder shall be subject to execution, garnishment, attachment or to any other judicial process. - 3 - 4 8. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Wisconsin. 9. Not Deemed Compensation for Other Benefits. Any deferred compensation payable under this Agreement shall not be deemed salary or other compensation to Employee for the purpose of computing benefits to which he may be entitled under any pension, profit sharing or other plan or arrangement of the Company for the benefit of its employees. 10. No Right of Employment. Nothing contained in this Agreement shall be construed as conferring upon Employee the right to continue in the employ of the Company as an executive or in any other capacity. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. EMPLOYEE: /s/ Robert Feitler ---------------------------------------- Robert Feitler WEYCO GROUP, INC. By: /s/ Thomas Florsheim ------------------------------------- Chairman of the Board Attest: /s/ John Wittkowske ------------------------------------- Secretary - 4 - EX-10.12 4 STOCK OPTION PLAN 1 EXHIBIT 10.12 WEYCO GROUP, INC. 1996 NONQUALIFIED STOCK OPTION PLAN 1. PURPOSE. The purpose of this Nonqualified Stock Option Plan (the "Plan") is to promote the growth and development of Weyco Group, Inc. (the "Company") and to increase shareholder value by providing incentives for key salaried employees of the Company and of any present or future Subsidiary and by facilitating the efforts of the Company and its Subsidiaries to obtain and retain employees of outstanding ability. This Plan provides for the granting of nonqualified stock options which are not intended to qualify for the treatment provided under Section 422A of the Internal Revenue Code (the "Code"). 2. ADMINISTRATION. (a) The Plan shall be administered by the Stock Option Committee (the "Committee") of the Board of Directors of the Company. The Committee shall be constituted to permit the Plan to comply with (i) the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 (or its successor) and (ii) the provisions of IRS Regulation Section 1.162-27(e)(3) (or its successor). A majority of the members of the Committee shall constitute a quorum. The approval of such a quorum, expressed by vote at a meeting, or in writing without a meeting, shall constitute the action of the Committee and shall be valid and effective for all purposes of the Plan. (b) The Committee is authorized, subject to the provisions of the Plan, to adopt, amend and rescind such rules and regulations as it may deem appropriate for the administration of the Plan, and to make determinations and interpretations which it deems consistent with the Plan's provisions. The Committee's determinations and interpretations shall be final and conclusive. 3. ELIGIBILITY. Key salaried employees, including officers, of the Company and of its Subsidiaries, as designated by the Committee, shall be eligible to receive options under the Plan. 4. SHARES SUBJECT TO OPTIONS. (a) The shares subject to issuance upon the exercise of options granted pursuant to the Plan shall be shares of the Company's Common Stock, $1.00 par value, subject to adjustment under Paragraph 12 hereof, and may be authorized but unissued stock or stock issued and reacquired by the Company. 2 (b) The aggregate number of shares which may be issued pursuant to exercises of options granted under the Plan shall not exceed 100,000 shares, subject to adjustment under Paragraph 12 hereof. (c) Shares subject to and not issued under an option which expires or terminates or is canceled for any reason during the term of the Plan, except when settled pursuant to Paragraph 16, shall again be available for the granting of options under the Plan. 5. GRANTING OF OPTIONS. (a) The Committee may from time to time at its discretion, subject to the provisions of the Plan, determine when options shall be granted and at the time of each grant determine those eligible employees to whom options shall be granted, the number of shares subject to such options the expiration date of such options, and the date or dates on which the options become exercisable, either in whole or in part; provided, however, that the earliest that any option granted pursuant to this Plan may become exercisable is six months after the date of grant. No eligible employee shall be granted in any calendar year an option or options covering more than 15,000 shares. If an option is canceled, such canceled option shall continue to be counted against the maximum number of shares for which options may be granted to the employee. (b) Each option shall be evidenced by a written agreement containing terms and conditions established by the Committee consistent with the provisions of the Plan. 6. TERM OF PLAN. Options may be granted under the Plan up to December 31, 2005, on which date the Plan shall expire except as to options outstanding, which options shall remain in effect until they have been exercised or have expired. 7. EXERCISE PRICE OF OPTIONS. (a) The exercise price at which shares may be purchased under each option shall be 100 percent of the Fair Market Value of the shares on the date on which the option is granted. For all purposes of this Plan, the term "Fair Market Value" shall be the average of the highest and lowest sale prices of the stock, on the date of grant, as reported by NASDAQ (the National Association of Securities Dealers, Inc. Automatic Quotation System) or, in the absence of reported sales on NASDAQ on said date, the average of the closing bid and asked prices for the stock on NASDAQ on said date. However, if at any -2- 3 time the Common Stock is listed on any exchange, the "Fair Market Value" shall be the average of the reported highest and lowest prices at which shares are sold on such exchange on the date the option is granted or, in the absence of reported sales on the exchange on the date the option is granted, the "Fair Market Value" shall be the average of the closing bid and asked prices for the shares on such exchange on the date the option is granted. (b) The cash proceeds of the sale of stock subject to an option are to be added to the general funds of the Company available for its corporate purposes. 8. EXERCISE OF OPTIONS. (a) Except as provided in Paragraphs 10 and 11, options granted under the Plan may be exercised only by the optionee and then only if (i) the optionee has been continuously employed by the Company or a Subsidiary since the date of grant, and (ii) such exercise is in accordance with the terms established by the Committee, including any additional requirement as to the initial exercise date or dates when options shall first become exercisable in whole or in part. Unless otherwise determined by the Committee at the time of grant each option granted hereunder shall expire on a date which is five years after the date on which the option was granted. (b) Although the Company intends to exert its best efforts so that the shares purchasable upon the exercise of an option, when it first comes exercisable, will be registered under, or exempt from the registration requirements of, the federal Securities Act of 1933 (the "Act") and any applicable state securities laws, if the exercise of an option would otherwise result in the violation by the Company of any provision of the Act or of any state securities law, the Company may require that such exercise be deferred until the Company has taken appropriate action to avoid any such violation. (c) The exercise price for shares purchased shall be paid in full at the time of exercise and no shares shall be issued until such payment is made therefor. Such payment may be made either (i) in cash or (ii) at the discretion of the Committee, by delivering shares of the Company's Common Stock which have been beneficially owned by the optionee, the optionee's spouse, or both of them for a period of at least six months prior to the time of exercise ("Delivered Stock") or a combination of cash and Delivered Stock. Delivered Stock shall be -3- 4 valued at its Fair Market Value determined as of the date of exercise of the option. (d) An employee to whom an option is granted shall not be deemed the holder of any shares subject to the option until the shares are fully paid and issued to him upon exercise of such option. (e) To the extent that the exercise price for shares purchased upon the exercise of an option granted under this Plan is paid with shares of Delivered Stock as provided in Paragraph 8(c), then, at the discretion of the Committee but only if the option was exercised at least six months in advance of its expiration date, the optionee may be granted a replacement option under the Plan to purchase a number of shares of the Company's Common Stock equal to the number of shares of Delivered Stock, with an exercise price equal to the current Fair Market Value of such shares and with a term extending to the expiration date of the original stock option. 9. TRANSFERABILITY OF OPTIONS. An option granted under the Plan may be exercised during the lifetime of an employee (to the extent exercisable) only by him and may not be transferred except by will or the laws of descent and distribution. Subject to the above, the option and any rights and privileges pertaining thereto shall not be transferred, assigned, pledged or hypothecated by him in any way whether by operation of law or otherwise and shall not be subject to execution, attachment or similar process. 10. TERMINATION OF EMPLOYMENT. (a) Upon termination of employment with the Company or a Subsidiary for any reason except death, an employee to whom an option is granted may, at any time within 90 days after the date of such termination, but in no event later than the date of expiration of the option, exercise the option to the extent he was entitled to do so on the date of such termination; provided, however, that if such employee is dismissed for cause, of which the Committee shall be the sole judge, his option shall immediately expire. Any options or portions of options of terminated employees not so exercised shall terminate. Any option or portions of options not exercisable at the time of termination shall immediately expire. (b) The Committee may determine that, for the purposes of the Plan, an employee who is on a leave of absence will be considered a full-time salaried employee of the Company or a Subsidiary. -4- 5 (c) Transfer of an employee from the Company to a Subsidiary or from a Subsidiary to the Company or another Subsidiary shall not be a termination of employment or an interruption of continuous employment for the purposes of the Plan. (d) Nothing in the Plan or in any option granted under the Plan shall confer on any employee any right to continue in the employ of the Company or its Subsidiaries, or affect the right of the Company or its Subsidiaries to terminate his employment at any time. 11. DEATH. If an employee to whom an option is granted dies while in the employ of the Company or a Subsidiary or within 90 days after termination of such employment, the person or persons to whom the option is transferred by will or the laws of descent and distribution may, at any time within one year after the date of death but not later than the date of expiration of the option, exercise the option to the extent the employee was entitled to do so on the date of death or termination of employment, whichever was earlier. Any options or portions of options of deceased employees not so exercised shall terminate. 12. CHANGES IN COMMON STOCK. In the event of a stock split, stock dividend, combination or exchange of shares, or similar change affecting the Common Stock of the Company, the Committee shall make, subject to approval of the Board of Directors, such changes in the aggregate number and kind of shares available under the Plan and in the number, price and shares covered by options granted or to be granted under the Plan as are appropriate and equitable to prevent any diminution or enlargement of the rights of participants in the Plan. 13. AMENDMENT OR DISCONTINUANCE. The Board of Directors may, at any time, without the approval of the shareholders of the Company, alter, amend, modify, suspend or discontinue the Plan; provided, however, that the Board of Directors may not, without the consent of the holder of an option, make any alteration which would adversely affect an option previously granted under the Plan or, without the approval of the shareholders of the Company, make any alteration for which shareholder approval would be required as a condition of compliance with Rule 16b-3 (or its successor) or IRS Regulation Section 1.162-27(e) (or its successor). 14. LIABILITY. No member of the Board of Directors or the Committee, or any officer or employee of the Company or its Subsidiaries shall be personally liable for any action, omission or determination made in good faith in connection with the Plan. -5- 6 15. EFFECTIVE DATE. The effective date of the Plan shall be March 18, 1996, subject to the approval of the Plan by the Company's shareholders. No options shall be granted pursuant to this Plan prior to such shareholder approval. 16. DISSOLUTION OR MERGER. Upon the dissolution or liquidation of the Company or upon any merger in which the Company is not the surviving corporation and which is approved by the Company's non-insider shareholders (a "triggering event"), the Company shall settle all outstanding options exercisable by their terms for cash. The amount of cash to be paid to the employee for any such option shall be equal to the difference between the option exercise price and the Fair Market Value of the Company's Common Stock on the effective date of the triggering event. 17. MISCELLANEOUS. (a) The term "Board of Directors" herein shall mean the Board of Directors of the Company and, to the extent that any powers and discretion vested in the Board of Directors are delegated to any committee of the Board, the term "Board of Directors" shall also mean such committee. (b) The term "Subsidiary" used herein shall mean any corporation more than 50 percent of whose total combined voting stock of all classes is held by the Company or by another corporation qualifying as a Subsidiary within this definition. 18. OPTIONS IN SUBSTITUTION FOR OTHER OPTIONS. The Committee may, in its sole discretion, at any time during the term of the Plan, grant new options to an employee under this Plan who is also a holder of unexercised outstanding options previously granted under this Plan or any other stock option plan of the Company on the condition that such employee shall, prior to the date on which the new option first becomes exercisable, surrender for cancellation each outstanding option in an amount in relation to the number of shares to be covered by the new conditional grant hereunder to him, determined by the Committee, and if the Committee shall have so determined to grant such new options on such a conditional basis ("New Conditional Options"), no such New Conditional Option shall become exercisable in the absence of such employee's consent to the condition and surrender and cancellation as appropriate. New Conditional Options shall be treated in all respects under this Plan as newly granted options. Options may be granted under this Plan from time to time in substitution for similar rights held by employees of other corporations who are about to become employees of the Company or a Subsidiary as a result of the merger or consolidation of the employing corporation with the Company or a Subsidiary, or the acquisition by the Company or a Subsidiary of the assets of the employing corporation, or the -6- 7 acquisition by the Company or a Subsidiary of stock of the employing corporation as a result of which it becomes a Subsidiary. 19. WITHHOLDING TAXES. Pursuant to applicable federal and state laws, the Company may be required to collect withholding taxes upon the exercise of an option. The Company may require, as a condition to the exercise of an option, that the optionee concurrently pay to the Company the entire amount or a portion of any taxes which the Company is required to withhold by reason of such exercise, in such amount as the Committee or the Company in its discretion may determine. -7- EX-13 5 1995 ANNUAL REPORT 1 EXHIBIT 13 To Our Shareholders: 1995 was a record year for our Company. Net earnings were $6,807,000, or $3.62 per share, up from 1994 net earnings of $6,179,000, or $2.98 per share. Net sales for the Company increased to $120,643,000 from $114,719,000. The net increase in earnings was substantial since 1994 earnings included $2,748,000, or $1.32 per share as a result of significant reductions of LIFO inventories. There were also $976,000 ($.47 per share) of other one-time charges offsetting the LIFO gain in 1994. Our sales growth was driven by a 17% increase in wholesale sales, which resulted in record wholesale sales and shipments for our Company. Retail sales decreased 37% as we continue to reduce the number of retail units. Our Retail Division now consists of ten Brass Boot stores and twenty-one other Company stores and leased departments. By focusing on our wholesale brands, we have strengthened the overall position of our Company. Stacy Adams, a leading marketeer of men's fashion footwear, expanded its presence with major department and specialty stores throughout the country. As a result, Stacy Adams enjoyed record sales in both dress and casual footwear. Our Nunn Bush division's growth reflected the continued strength of its casual and dress footwear. This year marked the third straight year of record shipments for the Nunn Bush division. We believe our Company's commitment to providing the best values in men's branded footwear will enable us to meet the challenges of an extremely difficult retail environment. Our order backlog is up in both wholesale divisions, which we expect will get us off to a strong start in 1996. We look forward to continued growth in 1996, and we will strive to make Weyco as responsive as it can be to its customers, employees, vendors and shareholders. Thomas W. Florsheim Chairman of the Board and Chief Executive Officer Robert Feitler President and Chief Operating Officer 2 MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL REPORTING The management of Weyco Group, Inc. is responsible for the preparation and integrity of all financial statements and other information contained in this Annual Report. The financial statements have been prepared in conformity with generally accepted accounting principles and necessarily include amounts based on judgments and estimates by management giving due consideration to materiality. The Company maintains internal control systems designed to provide reasonable assurance that the Company's financial records reflect the transactions of the Company and that its assets are protected from loss or unauthorized use. The Company's financial statements have been audited by Arthur Andersen LLP, independent public accountants, whose report thereon appears on page 11 of this Annual Report. Management has made available to Arthur Andersen LLP the Company's financial records and related data to allow them to evaluate the Company's system of accounting controls and provide an independent assessment as to the financial statements. The Audit Committee of the Board of Directors is responsible for reviewing and evaluating the overall performance of the Company's financial reporting and accounting practices. To ensure independence, Arthur Andersen LLP has full and free access to the Audit Committee to discuss the results of their audits, their opinions on the adequacy of internal controls, and the quality of financial reporting. SELECTED FINANCIAL DATA
Years Ended December 31 --------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Net sales . . . . . . . . . . . . $120,643,000 $114,719,000 $122,144,000 $139,462,000 $140,495,000 Net earnings before cumulative effect of accounting change. . . 6,807,000 6,179,000 4,908,000 6,569,000 5,110,000 Cumulative effect of accounting change. . . . . . . . -- -- 880,000 -- -- ------------ ------------ ------------ ------------ ------------ Net earnings . . . . . . . . . . $ 6,807,000 $ 6,179,000 $ 5,788,000 $ 6,569,000 $ 5,110,000 Net earnings per share before cumulative effect of accounting change . . . . . . . $3.62 $2.98 $2.32 $3.10 $2.37 Cumulative effect of accounting change . . . . . . . -- -- .42 -- -- ----- ----- ----- ----- ----- Net earnings per share . . . . . $3.62 $2.98 $2.74 $3.10 $2.37 Total assets . . . . . . . . . . $ 79,328,000 $ 72,827,000 $ 74,915,000 $ 71,848,000 $ 71,660,000 Weighted average shares and equivalent shares outstanding . . . . . . . . . . 1,880,191 2,076,874 2,117,255 2,120,342 2,157,715 Cash dividends per share . . . . $.83 $.80 $.78 $.70 $.63 Working capital . . . . . . . . . $ 45,997,000 $ 52,968,000 $ 55,864,000 $ 51,714,000 $ 49,856,000
3 CONSOLIDATED STATEMENTS OF EARNINGS For the years ended December 31, 1995, 1994 and 1993
Years Ended December 31 ----------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ NET SALES . . . . . . . . . . . . . . . . . . . . . $120,642,617 $114,718,526 $122,143,702 COST OF SALES . . . . . . . . . . . . . . . . . . . 88,093,991 76,282,844 82,773,870 ------------ ------------ ------------ Gross earnings . . . . . . . . . . . . . . . . . 32,548,626 38,435,682 39,369,832 SELLING AND ADMINISTRATIVE EXPENSES . . . . . . . 23,946,940 29,043,678 32,238,337 ------------ ------------ ------------ Earnings from operations . . . . . . . . . . . . 8,601,686 9,392,004 7,131,495 INTEREST AND OTHER INCOME, net . . . . . . . . . . 2,208,305 674,482 584,696 ------------ ------------ ------------ Earnings before provision for income taxes and cumulative effect of accounting change. . . 10,809,991 10,066,486 7,716,191 PROVISION FOR INCOME TAXES . . . . . . . . . . . . 4,003,000 3,887,000 2,808,000 ------------ ------------ ------------ Net earnings before cumulative effect of accounting change . . . . . . . . . . . . . . . 6,806,991 6,179,486 4,908,191 CUMULATIVE EFFECT OF ACCOUNTING CHANGE . . . . . . -- -- 880,000 ------------ ------------ ------------ Net earnings . . . . . . . . . . . . . . . . . . $ 6,806,991 $ 6,179,486 $ 5,788,191 ============ ============ ============ NET EARNINGS PER SHARE: Before cumulative effect of accounting change . . $3.62 $2.98 $2.32 Cumulative effect of accounting change . . . . . -- -- .42 ----- ----- ----- Net earnings per share . . . . . . . . . . . . . $3.62 $2.98 $2.74 ===== ===== =====
The accompanying notes to consolidated financial statements are an integral part of these statements. 4 CONSOLIDATED BALANCE SHEETS December 31, 1995 and 1994
1995 1994 ----------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,247,137 $ 3,648,361 Marketable securities, at amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,677,712 29,045,578 Accounts receivable, less reserves of $2,049,180 and $1,673,180, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,867,506 17,551,346 Inventories - Finished shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,188,733 9,981,796 Shoes in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 618,671 257,820 Raw material and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,303 497,851 ----------- ----------- Total inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,945,707 10,737,467 ----------- ----------- Deferred income tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,746,000 1,407,000 Prepaids and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,211 64,589 ----------- ----------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,494,273 62,454,341 ----------- ----------- MARKETABLE SECURITIES, AT AMORTIZED COST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,470,262 -- DEFERRED INCOME TAX BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519,000 1,035,000 OTHER ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,331,314 4,764,303 PLANT AND EQUIPMENT: Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,821 210,821 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,905,759 1,837,251 Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,948,309 3,840,656 Retail fixtures and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,717,917 3,343,038 ----------- ----------- 8,782,806 9,231,766 Less - Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,269,369 4,658,046 ----------- ----------- Net plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,513,437 4,573,720 ----------- ----------- $79,328,286 $72,827,364 =========== =========== LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,181,933 $ 5,246,754 Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397,113 380,223 Accrued Liabilities - Wages, salaries and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,170,647 1,012,777 Taxes other than income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,608 177,243 Retail expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,576 332,584 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,444,282 990,953 Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,366 1,345,363 ----------- ----------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,497,525 9,485,897 ----------- ----------- DEFERRED COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,747,764 3,914,004 SHAREHOLDERS' INVESTMENT: Common Stock, $1.00 par value, authorized 4,000,000 shares, issued and outstanding 1,442,787 shares in 1995 and 1,441,802 shares in 1994 . . . . . . . . . . . . . . . . 1,442,787 1,441,802 Class B Common Stock, $1.00 par value, authorized 2,000,000 shares, issued and outstanding 441,228 shares in 1995 and 452,211 shares in 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,228 452,211 Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,772,530 1,669,737 Reinvested earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,426,452 55,863,713 Total shareholders' investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,082,997 59,427,463 ----------- ----------- $79,328,286 $72,827,364 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT For the years ended December 31, 1995, 1994 and 1993
Class B Capital Common Common in Excess of Reinvested Stock Stock Par Value Earnings ------ ------- ------------ ---------- Balance, December 31, 1992 . . . . . . . . . . . . . . . . $1,633,587 $480,318 $1,265,900 $54,365,634 Add (Deduct) - Net earnings . . . . . . . . . . . . . . . . . . . . -- -- -- 5,788,191 Cash dividends declared ($.78 per share) . . . . . . -- -- -- (1,652,190) Conversions of Class B Common Stock to Common Stock . . . . . . . . . . . . . . . . . . . 6,785 (6,785) -- -- Stock options exercised . . . . . . . . . . . . . . 17,900 -- 365,850 -- Income tax benefit from stock options exercised . . . . . . . . . . . . . -- -- 75,438 -- Shares purchased and retired . . . . . . . . . . . (200) -- -- (5,800) ---------- -------- ---------- ----------- Balance, December 31, 1993 . . . . . . . . . . . . . . . 1,658,072 473,533 1,707,188 58,495,835 Add (Deduct) - Net earnings . . . . . . . . . . . . . . . . . . . -- -- -- 6,179,486 Cash dividends declared ($.80 per share) . . . . . -- -- -- (1,658,986) Conversions of Class B Common Stock to Common Stock . . . . . . . . . . . . . . . . . . 9,208 (9,208) -- -- Stock options exercised . . . . . . . . . . . . . . 27,600 -- 655,300 -- Income tax benefit from stock options exercised . . . . . . . . . . . . . -- -- 77,849 -- Shares purchased and retired . . . . . . . . . . . (253,078) (12,114) (770,600) (7,152,622) ---------- -------- ---------- ----------- Balance, December 31, 1994 . . . . . . . . . . . . . . . 1,441,802 452,211 1,669,737 55,863,713 Add (Deduct) - Net earnings . . . . . . . . . . . . . . . . . . . -- -- -- 6,806,991 Cash dividends declared ($.83 per share) . . . . . -- -- -- (1,562,808) Conversions of Class B Common Stock to Common Stock . . . . . . . . . . . . . . . . . . 5,733 (5,733) -- -- Stock options exercised . . . . . . . . . . . . . 41,500 -- 1,081,500 -- Income tax benefit from stock options exercised . . . . . . . . . . . . . -- -- 156,293 -- Shares purchased and retired . . . . . . . . . . . (46,248) (5,250) (135,000) (1,681,444) ---------- -------- ---------- ----------- Balance, December 31, 1995 . . . . . . . . . . . . . . . $1,442,787 $441,228 $2,772,530 $59,426,452 ========== ======== ========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements. 6 CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993 ---------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,806,991 $ 6,179,486 $ 5,788,191 Cumulative effect of accounting change . . . . . . . . . . . . . . -- -- (880,000) Adjustments to reconcile net earnings to net cash provided by operating activities - Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 1,133,921 1,226,237 1,203,394 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 177,000 (417,000) 286,000 Deferred compensation . . . . . . . . . . . . . . . . . . . . . 183,760 465,960 439,584 Pension income . . . . . . . . . . . . . . . . . . . . . . . . . (77,241) (217,133) (112,010) Loss on retirement of assets . . . . . . . . . . . . . . . . . . 121,789 48,518 133,427 Changes in operating assets and liabilities - Accounts receivable . . . . . . . . . . . . . . . . . . . . . (1,316,160) 2,182,007 168,685 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . (4,208,240) 6,312,844 (554,689) Prepaids and other current assets . . . . . . . . . . . . . . 54,378 491,724 (535,840) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 3,935,179 (696,852) 329,874 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . 139,556 (56,795) (563,097) Accrued income taxes . . . . . . . . . . . . . . . . . . . . . (1,098,704) 1,231,405 (1,618,162) ------------ ------------ ------------ Net cash provided by operating activities . . . . . . . . . 5,852,229 16,750,401 4,085,357 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities . . . . . . . . . . . . . . . . (33,521,343) (65,076,331) (40,103,588) Proceeds from sale of marketable securities . . . . . . . . . . . 39,339,872 53,418,324 39,092,056 Purchase of plant and equipment . . . . . . . . . . . . . . . . . (195,427) (1,123,799) (1,879,842) Investment in officers' life insurance . . . . . . . . . . . . . . (410,695) (393,064) (363,547) Proceeds from sales of plant and equipment . . . . . . . . . . . . -- 135,119 264,478 ------------ ------------ ------------ Net cash (used for) provided by investing activities . . . 5,212,407 (13,039,751) (2,990,443) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payment of deferred compensation . . . . . . . . . . . . . . . . . (1,175,000) -- -- Proceeds from issuance of debt . . . . . . . . . . . . . . . . . . -- 3,500,000 -- Payments of notes payable . . . . . . . . . . . . . . . . . . . . -- (3,500,000) -- Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . (1,545,918) (1,704,884) (1,607,607) Shares purchased and retired . . . . . . . . . . . . . . . . . . . (1,867,942) (8,188,414) (6,000) Proceeds from stock options exercised . . . . . . . . . . . . . . 1,123,000 682,900 383,750 ------------ ------------ ------------ Net cash used for financing activities . . . . . . . . . . (3,465,860) (9,210,398) (1,229,857) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents . . . . . . . 7,598,776 (5,499,748) (134,943) CASH AND CASH EQUIVALENTS, at beginning of year . . . . . . . . . . . . 3,648,361 9,148,109 9,283,052 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, at end of year . . . . . . . . . . . . . . . $ 11,247,137 $ 3,648,361 $ 9,148,109 ============ ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . $ 4,942,309 $ 2,672,304 $ 4,499,764 Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 30,000 $ --
The accompanying notes to consolidated financial statements are an integral part of these statements. 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 1. SUMMARY OF ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of Weyco Group, Inc. and all subsidiaries. All significant intercompany items are eliminated in the consolidated financial statements. Translation of Foreign Currencies - The Company's foreign currency financial statements are translated in accordance with the provisions of the Financial Accounting Standards Board Statement on Foreign Currency Translation. Revenue Recognition - Sales to independent dealers are recorded at the time of shipment to those dealers. Sales through company-owned retail outlets are recorded at the time of delivery to retail customers. Inventories - Inventories are valued at cost, which is not in excess of market, determined on a last-in, first-out (LIFO) basis. Inventory costs include material, labor and factory overhead. Plant and Equipment and Depreciation - Plant and equipment are stated at cost and depreciated over their estimated useful lives using primarily the straight-line method. Fully depreciated machinery and equipment are eliminated from the accounts. Expenditures for lasts, dies and patterns are charged to earnings as incurred. Income Taxes - Deferred income taxes are provided on temporary differences arising from differences in the bases of assets and liabilities for tax and financial reporting purposes. See Note 7. Deferred federal and state income taxes are provided on the unremitted earnings of foreign subsidiaries. Earnings Per Share - Earnings per share are computed based upon the weighted average number of common and common equivalent shares outstanding. Common equivalent shares consist of stock options which have a dilutive effect when applying the treasury stock method and are considered when material. Cash Flows - For purposes of the Statement of Cash Flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. 8 Long Lived Assets - In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The Company intends to adopt this statement during the first quarter of 1996. The adoption of this standard is not expected to have a material effect on the Company's financial position or results of operations. Stock-Based Compensation - In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The Company intends to adopt this statement in 1996 by making the required footnote disclosures only. Therefore, the adoption of this standard is not expected to have an effect on the Company's financial position or results of operations. Advertising Costs - Advertising costs are expensed as incurred. Advertising costs were $2,757,000, $2,720,000 and $2,973,000 in 1995, 1994 and 1993, respectively. 2. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of all financial instruments, except marketable securities, approximate fair values due to the short-term nature of those instruments. The fair value of marketable securities is estimated based upon quoted market rates. 3. INVENTORIES The excess of current cost over LIFO cost of inventories as of December 31, 1995 and 1994 was $15,549,000 and $15,965,000, respectively. During 1994 and 1993, inventory reductions resulted in liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years compared with the current cost of purchases, the effect of which increased net earnings by $4,505,000 or $1.32 per share in 1994 and $465,000 or $.22 per share in 1993. 4. INVESTMENTS Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and all investments in debt securities. Under this statement, all of the Company's investments are classified as held-to-maturity securities and reported at amortized cost as the Company has the intent and ability to hold all security investments to maturity. The adoption of this statement had no impact on the Company's Consolidated Statement of Earnings. 9 A summary of the amortized cost and estimated market values of investment securities at December 31, 1995 and 1994 are as follows:
1995 1994 ------------------------ ------------------------ Amortized Market Amortized Market Cost Value Cost Value ----------- ----------- ----------- ----------- Municipality and revenue bonds . . . . . $23,147,974 $23,234,971 $26,045,578 $25,917,914 U. S. Government securities . . . . . . -- -- 3,000,000 2,955,701 ----------- ----------- ----------- ----------- Total marketable securities. . . . . . 23,147,974 23,234,971 29,045,578 28,873,615 Less: Current marketable securities. . 12,677,712 12,690,832 29,045,578 28,873,615 ----------- ----------- ----------- ----------- Marketable securities due from one through five years. . . . . . . . $10,470,262 $10,544,139 $ -- $ -- =========== =========== =========== ===========
The unrealized gains and losses on investment securities at December 31, 1995 and 1994 were:
1995 1994 -------------------------- -------------------------- Unrealized Unrealized Unrealized Unrealized Gains Losses Gains Losses ------------ ------------ ------------ ------------ Municipality and revenue bonds . . . . . . . . . . . $98,574 $11,577 $38,321 $165,985 U. S. government securities. . . . . . . . . . . . . -- -- -- 44,299 ------- ------- ------- -------- Total . . . . . . . . . . . . . . . . . . . . . . $98,574 $11,577 $38,321 $210,284 ======= ======= ======= ========
5. BANK LINES OF CREDIT The Company has a short-term line of credit of $7,500,000 with a domestic bank and has broker acceptance loan facilities. There were no borrowings outstanding at December 31, 1995 and 1994 and no bank balances are required in support of these lines of credit. During 1994, the Company borrowed $3,500,000 under the line at an interest rate of 6% for a period of 60 days. The average amount outstanding was $3,000,000. 6. EMPLOYEE RETIREMENT PLANS The Company and its subsidiaries have defined benefit retirement plans covering substantially all employees. Retirement benefits are provided based on employees' years of credited service and average earnings or stated amounts for years of service. Normal retirement age is 65 with provisions for earlier retirement. The plans also have provisions for disability and death benefits. The Company's funding policy is to make contributions to the plans such that all employees' benefits will be fully provided by the time they retire. Plan assets are stated at market value and consist primarily of U. S. government securities, corporate obligations and corporate equities. 10 On January 1, 1995, the Company started a defined contribution plan covering substantially all employees not covered by a collective bargaining agreement. During 1995 the Company contributed $85,000 to the Plan. The following summarizes the Company's pension income under the defined benefit plans:
1995 1994 1993 ------------------------------------ Benefits earned during the period. . . . . . . . . . . . . . . . . . . . $ 327,000 $ 383,000 $ 397,000 Interest cost on projected benefit obligation. . . . . . . . . . . . . . 1,031,000 958,000 1,003,000 Actual loss (return) on plan assets. . . . . . . . . . . . . . . . . . . (3,202,000) 500,000 (1,953,000) Net amortization and deferral 1,767,000 (2,058,000) 441,000 ---------- ---------- ---------- Net pension income . . . . . . . . . . . . . . . . . . . . . . . . . . $ (77,000) $ (217,000) $ (112,000) ========== ========== ==========
The actuarial assumptions used as of December 31, 1995, 1994 and 1993 for determining the present value of the projected benefit obligation were as follows:
1995 1994 1993 ----------------- Discount rate 7% 7% 7% Rate of compensation increase 5% 5% 5% Long-term rate of return on plan assets 8.5% 8.5% 8.5%
The funded status of the Company's defined benefit retirement plans at December 31, is as follows:
Plans for Which Assets Plan for Which Exceed Accumulated Accumulated Benefits Benefits Exceed Assets ------------------------- ------------------------ 1995 1994 1995 1994 ------------------------- ------------------------ Actuarial present value of benefit obligations: Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,750,000 $11,171,000 $ 1,887,000 $ 1,638,000 Nonvested . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,000 226,000 18,000 32,000 ----------- ----------- ----------- ----------- Accumulated benefit obligation. . . . . . . . . . . . . . . . . . 10,884,000 11,397,000 1,905,000 1,670,000 Effect of projected future salary increases . . . . . . . . . . . . 1,385,000 1,165,000 285,000 399,000 ----------- ----------- ----------- ----------- Projected benefit obligation. . . . . . . . . . . . . . . . . . . 12,269,000 12,562,000 2,190,000 2,069,000 Plan assets at market value . . . . . . . . . . . . . . . . . . 17,924,000 15,827,000 -- -- ----------- ----------- ----------- ----------- Plan assets in excess of (less than) projected benefit obligation. . . . . . . . . . . . . . . . . . 5,655,000 3,265,000 (2,190,000) (2,069,000) Unrecognized prior service cost (benefit) . . . . . . . . . . . . . (591,000) (787,000) 651,000 749,000 Unrecognized net (gain) loss. . . . . . . . . . . . . . . . . . . . (259,000) 2,164,000 16,000 40,000 Unrecognized net transition (asset) obligation. . . . . . . . . . . (1,258,000) (1,478,000) -- 57,000 Additional minimum liability. . . . . . . . . . . . . . . . . . . . -- -- (382,000) (447,000) ----------- ----------- ----------- ----------- Net recorded pension asset (liability) included in other assets . . . . . . . . . . . . . $ 3,547,000 $ 3,164,000 $(1,905,000) $(1,670,000) =========== =========== =========== ============
11 7. INCOME TAXES The Company adopted the Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes," effective January 1, 1993, by means of a cumulative catch-up adjustment which increased net earnings by $880,000 ($.42 per share). Prior to the adoption of Statement No. 109, the Company accounted for income taxes using Accounting Principles Board Opinion No. 11. The effect of this change on net earnings before cumulative effect for the year ended December 31, 1993 was not material. The provision for income taxes includes the following components:
1995 1994 1993 ----------- ------------ ------------ Current - Federal . . . . . . . . . . . . . . . . . . . . $2,939,000 $3,310,000 $2,056,000 State . . . . . . . . . . . . . . . . . . . . . 887,000 994,000 466,000 ---------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . . 3,826,000 4,304,000 2,522,000 ---------- ---------- ---------- Deferred - Federal . . . . . . . . . . . . . . . . . . . . 114,000 (331,000) 227,000 State . . . . . . . . . . . . . . . . . . . . . 63,000 (86,000) 59,000 ---------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . . 177,000 (417,000) 286,000 ---------- ---------- ---------- Total provision. . . . . . . . . . . . . . $4,003,000 $3,887,000 $2,808,000 ========== ========== ========== Effective tax rate . . . . . . . . . . . . 37.0% 38.6% 36.5% ========== ========== ==========
The difference between the effective tax rate and the Federal income tax rate of 34% is due to state income taxes, net of Federal tax benefit, of 4.3% in 1995, 5.3% in 1994 and 4.0% in 1993, the effect of municipal bond interest, and other miscellaneous items. The components of the net deferred tax asset as of December 31, 1995 and 1994, are as follows:
1995 1994 ----------- ------------ Deferred tax assets: Accounts receivable and inventory reserves . . . . . . . . . . $ 983,000 $ 922,000 Deferred compensation . . . . . . . . . . . 1,140,000 1,526,000 Depreciation . . . . . . . . . . . . . . . . 441,000 400,000 Other . . . . . . . . . . . . . . . . . . . 792,000 649,000 ---------- ---------- 3,356,000 3,497,000 ---------- ---------- Deferred tax liabilities: Prepaid pension . . . . . . . . . . . . . . (789,000) (757,000) Unrepatriated foreign earnings . . . . . . . (15,000) (143,000) Cash value of life insurance . . . . . . . . (287,000) (155,000) ---------- ---------- (1,091,000) (1,055,000) ---------- ---------- Net deferred tax asset . . . . . . . . . . . $2,265,000 $2,442,000 ========== ==========
The net deferred tax asset is classified in the Consolidated Balance Sheets as follows:
1995 1994 ---------- ---------- Current deferred income tax benefits . . . . . $1,746,000 $1,407,000 Noncurrent deferred income tax benefits . . . 519,000 1,035,000 ---------- ---------- $2,265,000 $2,442,000 ========== ==========
12 8. DEFERRED COMPENSATION The Company has deferred compensation agreements with two of its executives. The Company has accrued and expensed $184,000 in 1995, $466,000 in 1994 and $440,000 in 1993 in connection with these agreements. On December 1, 1995, the Company amended each of these agreements to allow for the acceleration of payments under such agreements, regardless of whether the executive has retired, remains in the Company's employ or otherwise terminates his employment. Accordingly, the Company paid $1,175,000 under these amended agreements in 1995. The remaining amounts owed under the agreements are expected to be paid as follows: 1996 $1,175,000 1997 1,275,000 1998 656,000
9. OPERATING LEASES A subsidiary of the Company operates retail shoe stores and departments under both short-term and long-term leases. Some leases provide for a minimum rental plus percentage rentals based upon sales in excess of a specified amount, and other leases provide for rentals based solely on a percentage of sales. Total minimum rents were $1,181,000 in 1995, $1,240,000 in 1994 and $1,300,000 in 1993. Percentage rentals were $865,000 in 1995, $1,910,000 in 1994 and $3,690,000 in 1993. Future fixed and minimum rental commitments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 1995, are shown below. Renewal options exist for many long-term leases. 1996. . . . . . . . . . . . . . . . . . $1,087,000 1997. . . . . . . . . . . . . . . . . . 1,036,000 1998. . . . . . . . . . . . . . . . . . 871,000 1999. . . . . . . . . . . . . . . . . . 517,000 2000 through 2004 . . . . . . . . . . . 835,000 ---------- Total . . . . . . . . . . . . . . . . . $4,346,000 ==========
10. SHAREHOLDERS' INVESTMENT The Class B Common Stock has 10 votes per share, may only be transferred to certain permitted transferees, is convertible to Common Stock and shares equally with the Common Stock in cash dividends and liquidation rights. The Company has one nonqualified stock option plan under which 22,500 shares of Common Stock have been reserved for issuance. During the past three years, the following options have been exercised:
Options Exercised Total Option Proceeds ----------------- --------------------- 1995. . . . . . . . . . . . . . 41,500 $1,123,000 1994. . . . . . . . . . . . . . 27,600 682,900 1993. . . . . . . . . . . . . . 17,900 383,750
During 1995, 500 options expired. 13 At December 31, 1995, the following options were outstanding under the plan, all of which are exercisable and expire five years from date of grant.
Option Number Date of Grant Price of Shares -------------- ------- ---------- January 20, 1993. . . . . . . . . . . . . . . . $29.00 19,900 November 7, 1994. . . . . . . . . . . . . . . . 34.63 24,000 November 20, 1995 . . . . . . . . . . . . . . . 39.25 29,500
During 1995, the Company entered into a contract to purchase 146,860 shares of Common Stock and 106,360 shares of Class B Common Stock for $39.25 per share, to be paid on January 3, 1996. On January 3, 1996, the total purchase price of $9,938,885 was paid and the transaction completed. 11. INDUSTRY SEGMENT INFORMATION The Company and its subsidiaries engage in one line of business - the manufacture, purchase and distribution of men's footwear. All sales are to unaffiliated customers from North America. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Weyco Group, Inc.: We have audited the accompanying consolidated balance sheets of Weyco Group, Inc. (a Wisconsin corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings, shareholders' investment and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion of these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Weyco Group, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. 14 As discussed in Note 7 to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for income taxes. ARTHUR ANDERSEN LLP Milwaukee, Wisconsin February 19, 1996 15 COMMON STOCK DATA
1995 1994 ---------------------------------------------------------------------------- Price Range Cash Price Range Cash ----------- Dividends ------------ Dividends Quarter High Low Declared High Low Declared ---------------------------------------------------------------------------- First . . . . . . . . . . . . . . . . 37 33 $.20 35 3/4 32 3/4 $.20 Second . . . . . . . . . . . . . . . . 37 3/4 34 .21 36 3/4 32 3/4 .20 Third . . . . . . . . . . . . . . . . 40 35 1/2 .21 37 29 1/4 .20 Fourth . . . . . . . . . . . . . . . . 41 36 1/2 .21 36 1/4 30 .20 ---- ---- $.83 $.80 ==== ====
There are approximately 500 holders of record of the Company's common stock as of March 5, 1996. The Company's Common Stock is listed on the NASDAQ National Market System (NMS) (symbol WEYS). The stock prices shown above are the high and low actual trades for the calendar periods indicated. The Class B Common Stock is not listed nor does it trade publicly because of its limited transferability. See Note 10 to the Consolidated Financial Statements for additional information. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS LIQUIDITY The Company's primary source of liquidity is its cash and marketable securities which aggregated approximately $34,395,000 at December 31, 1995, up from $32,694,000 at December 31, 1994. In addition, the Company maintains a $7,500,000 bank line of credit and has banker acceptance loan facilities to provide funds on a short-term basis when necessary. There were no draws on the line of credit during 1995. On January 3, 1996, the Company paid $9,938,885 for the purchase of 146,860 shares of Common Stock and 106,360 shares of Class B Common Stock. The Company's capital expenditures were $195,000, $1,124,000 and $1,880,000 in 1995, 1994 and 1993, respectively. The Company currently expects that the 1996 capital expenditures will not exceed $1,000,000. The Company believes that available cash and marketable securities, cash provided from operations and available borrowing facilities will provide adequate support for the cash needs of the business. RESULTS OF OPERATIONS Total net sales of the Company increased approximately 5% from $114,719,000 in 1994 to $120,643,000 in 1995. Net sales in the wholesale division increased 17% from $90,235,000 in 1994 to $105,149,000 in 1995. The increase in sales resulted from an increase of 17% in the number of pairs of shoes shipped, with the average selling price per pair remaining flat in 1995. Retail net sales decreased 37% in 1995 from $24,484,000 in 1994 to $15,494,000 in 1995. Retail sales declined due to the closing of 45 leased shoe departments and 7 company-operated units during 1994, and the close of 10 retail units in 1995. "Same store" net sales decreased 1% in 1995. 17 Gross earnings as a percent of net sales was approximately 27% in 1995 compared with 33.5% in 1994. Inventory reductions in 1994 resulted in the liquidation of LIFO inventories, which decreased cost of sales $4,505,000 ($2,748,000 after tax or $1.32 per share). Additionally, the Company incurred a loss of approximately $375,000 ($.11 per share), primarily due to the sales of inventory from closing certain leased departments. Excluding the effect of the LIFO liquidation and closing costs, 1994 gross earnings as a percent of net sales was 30%. The decrease in overall gross earnings as a percent of sales from 1994 to 1995 was due to a mix change to a higher percentage of wholesale sales as compared with total sales. The overall decrease in selling and administrative expenses can be principally attributed to the retail store closings in 1994 and 1995. Additionally, 1994 expenses include one-time charges totaling $1,225,000 ($.36 per share). Retail expenses, excluding any nonrecurring charges, decreased $4,056,000, principally due to decreases in store salaries ($1,898,000) and rent and occupancy costs ($1,406,000). Excluding 1994 nonrecurring charges, wholesale selling and administrative expenses increased 2% from $16,009,000 in 1994 to $16,365,000 in 1995, but as a percent of wholesale sales decreased from 17.7% in 1994 to 15.6% in 1995. Interest income from fixed rate short-term investments, principally federal tax-exempt municipal securities, comprised the majority of interest and other income during each of the years 1995, 1994 and 1993. The increase in 1995 is due principally to increased interest income of $451,000 and $850,000 realized from a lease assignment. The Company continues to purchase finished shoes and components from outside suppliers around the world. The majority of these foreign sourced purchases are denominated in U. S. dollars. The Company presently operates one shoe manufacturing plant in Wisconsin. Production in this factory has changed little during the past three years. There have been few inflationary pressures in the shoe industry in recent years and leather and other component prices have been stable. It is anticipated that, when necessary, selling price increases could be initiated to offset periodic increases in costs of purchased shoes, components, materials, labor and other expenses. Nunn Bush Shoe Company ("Nunn Bush"), a subsidiary of the Company, has been identified as a potentially responsible party ("PRP") in two separate actions in connection with an alleged hazardous substance discharge in the State of Wisconsin. Nunn Bush is contesting these actions and denies liability in the matter. It is anticipated that the resolution of this matter will not have a material effect on the Consolidated Financial Statements. During 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The Company intends to adopt these Statements in 1996. The adoption of these statements is not expected to have a material effect on the Company's financial position or results of operations. 18 DIRECTORS Robert Feitler President and Chief Operating Officer Thomas W. Florsheim Chairman and Chief Executive Officer Leonard J. Goldstein Retired, Former Chairman, president and Chief Executive Officer, Miller Brewing Company Frank W. Norris Director Associated Bank Milwaukee Frederick P. Stratton, Jr. Chairman and Chief Executive Officer, Briggs & Stratton Corporation, Manufacturer of Gasoline Engines OFFICERS Thomas W. Florsheim Chairman and Chief Executive Officer Robert Feitler President and Chief Operating Officer David N. Couper Vice President John W. Florsheim Vice President Thomas W. Florsheim, Jr. Vice President James F. Gorman Vice President Peter S. Grossman Vice President John F. Wittkowske Secretary and Treasurer TRANSFER AGENT & REGISTRAR American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 EX-21 6 SUBSIDIARIES 1 EXHIBIT 21 WEYCO GROUP, INC. SUBSIDIARIES OF THE REGISTRANT
Incorporated Name of Company In Subsidiary Of - ---------------------------------------------------- ------------------ ----------------------- House of Advertising, Inc. Wisconsin Weyco Group, Inc.
EX-23.1 7 CONSENT OF ARTHUR ANDERSEN 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included or incorporated by reference in this Form 10-K into the Company's previously filed Registration Statement File Nos. 33-26013 and 33-48549. ARTHUR ANDERSEN LLP Milwaukee, Wisconsin March 20, 1996 -----END PRIVACY-ENHANCED MESSAGE-----