<PAGE> 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
<PAGE> 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-
<PAGE> 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:
<TABLE>
<CAPTION>
Location Character Owned/Leased
-------- --------- ------------
<S> <C> <C>
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)
</TABLE>
(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-
<PAGE> 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-
<PAGE> 5
Executive Officers of the Registrant
<TABLE>
<CAPTION>
Served
Officer Age Office(s) Since Business Experience
- --------------------- --- ----------------------------- ------- -------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
Thomas W. Florsheim is the father of John W. Florsheim and Thomas W. Florsheim,
Jr.
-4-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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:
<TABLE>
<CAPTION>
Page Reference
to
Annual Report
-----------------
<S> <C> <C>
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
</TABLE>
-7-
<PAGE> 9
Item 14. Exhibits, Financial Statement Schedules,
and Report on Form 8-K (Continued)
<TABLE>
<CAPTION>
Page Reference
to
Form 10-K
------------------
<S> <C> <C>
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.
</TABLE>
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-
<PAGE> 10
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K (Continued)
3. Exhibits
<TABLE>
<CAPTION>
Incorporated Herein Filed
Exhibit Description By Reference To Herewith
- ------- -------------------------------------------------- ----------------------- --------
<S> <C> <C> <C>
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
</TABLE>
-9-
<PAGE> 11
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K (Continued)
3. Exhibits (Continued)
<TABLE>
<CAPTION>
Incorporated Herein Filed
Exhibit Description By Reference To Herewith
- ------- -------------------------------------------------- ----------------------- --------
<S> <C> <C> <C>
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
</TABLE>
-10-
<PAGE> 12
SCHEDULE II
WEYCO GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Deducted from Assets
-----------------------------------------------------------
Doubtful Cash Returns and
Accounts Discounts Allowances Total
-------- ---------- ----------- ---------------
<S> <C> <C> <C> <C>
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
========== ======= ======== ==========
</TABLE>
-11-
<PAGE> 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.
<TABLE>
<CAPTION>
Signatures and Titles Date
--------------------- ----
<S> <C>
/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
</TABLE>
-12
<PAGE> 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:
<TABLE>
<CAPTION>
Date of Payment Amount of Payment
--------------- -----------------
<S> <C>
12/1/95 $575,000
02/1/96 $575,000
02/1/97 $575,000
02/1/98 $423,751
</TABLE>
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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:
<TABLE>
<CAPTION>
Date of Payment Amount of Payment
--------------- -----------------
<S> <C>
12/1/95 $600,000
02/1/96 $600,000
02/1/97 $700,000
02/1/98 $232,422
</TABLE>
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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.
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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
<PAGE> 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
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
<PAGE> 3
CONSOLIDATED
STATEMENTS OF EARNINGS
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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
===== ===== =====
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
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
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE> 5
CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' INVESTMENT
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Class B Capital
Common Common in Excess of Reinvested
Stock Stock Par Value Earnings
------ ------- ------------ ----------
<S> <C> <C> <C> <C>
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
========== ======== ========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE> 6
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ------------ ------------
<S> <C> <C> <C>
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 $ --
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE> 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.
<PAGE> 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.
<PAGE> 9
A summary of the amortized cost and estimated market values of investment
securities at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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 $ -- $ --
=========== =========== =========== ===========
</TABLE>
The unrealized gains and losses on investment securities at December 31, 1995
and 1994 were:
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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
======= ======= ======= ========
</TABLE>
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.
<PAGE> 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:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------
<S> <C> <C> <C>
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)
========== ========== ==========
</TABLE>
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:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------
<S> <C> <C> <C>
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%
</TABLE>
The funded status of the Company's defined benefit retirement plans at
December 31, is as follows:
<TABLE>
<CAPTION>
Plans for Which Assets Plan for Which
Exceed Accumulated Accumulated Benefits
Benefits Exceed Assets
------------------------- ------------------------
1995 1994 1995 1994
------------------------- ------------------------
<S> <C> <C> <C> <C>
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)
=========== =========== =========== ============
</TABLE>
<PAGE> 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:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
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%
========== ========== ==========
</TABLE>
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:
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
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
========== ==========
</TABLE>
The net deferred tax asset is classified in the Consolidated Balance Sheets as
follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
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
========== ==========
</TABLE>
<PAGE> 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:
<TABLE>
<S> <C>
1996 $1,175,000
1997 1,275,000
1998 656,000
</TABLE>
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.
<TABLE>
<S> <C>
1996. . . . . . . . . . . . . . . . . . $1,087,000
1997. . . . . . . . . . . . . . . . . . 1,036,000
1998. . . . . . . . . . . . . . . . . . 871,000
1999. . . . . . . . . . . . . . . . . . 517,000
2000 through 2004 . . . . . . . . . . . 835,000
----------
Total . . . . . . . . . . . . . . . . . $4,346,000
==========
</TABLE>
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:
<TABLE>
<CAPTION>
Options Exercised Total Option Proceeds
----------------- ---------------------
<S> <C> <C>
1995. . . . . . . . . . . . . . 41,500 $1,123,000
1994. . . . . . . . . . . . . . 27,600 682,900
1993. . . . . . . . . . . . . . 17,900 383,750
</TABLE>
During 1995, 500 options expired.
<PAGE> 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.
<TABLE>
<CAPTION>
Option Number
Date of Grant Price of Shares
-------------- ------- ----------
<S> <C> <C>
January 20, 1993. . . . . . . . . . . . . . . . $29.00 19,900
November 7, 1994. . . . . . . . . . . . . . . . 34.63 24,000
November 20, 1995 . . . . . . . . . . . . . . . 39.25 29,500
</TABLE>
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.
<PAGE> 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
<PAGE> 15
COMMON STOCK DATA
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------------------------------------
Price Range Cash Price Range Cash
----------- Dividends ------------ Dividends
Quarter High Low Declared High Low Declared
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
==== ====
</TABLE>
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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 1
EXHIBIT 21
WEYCO GROUP, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Incorporated
Name of Company In Subsidiary Of
- ---------------------------------------------------- ------------------ -----------------------
<S> <C> <C>
House of Advertising, Inc. Wisconsin Weyco Group, Inc.
</TABLE>
<PAGE> 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
