<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, 1996 .
--------------------------------
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.)
<TABLE>
<S> <C>
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
- ------------------------------------------- -------------------------------------------
- ------------------------------------------- -------------------------------------------
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $1.00 par value per share
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
(Title of Class)
- ----------------------------------------------------------------------------------------
(Title of Class)
</TABLE>
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 4, 1997, there were outstanding 1,259,116 shares of Common Stock
and 328,359 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 $48,889,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's Annual Report to Shareholders for the year ended
December 31, 1996, are incorporated by reference in Parts I, II and IV of this
report.
Portions of the Corporation's Proxy Statement, dated March 24, 1997, prepared
for the Annual Meeting of Shareholders scheduled for April 22, 1997, 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 15% 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 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 92% of total sales in 1996,
87% in 1995, and 79% in 1994. At wholesale, shoes are marketed nationwide
through more than 8,000 shoe, clothing and department stores. All sales are to
unaffiliated customers from North America. Sales to the Company's largest
customer were 13%, 15% and 11% of total sales for 1996, 1995 and 1994,
respectively. Sales to another customer were 10% of total sales for 1996.
There are no other individually significant customers. 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.
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<PAGE> 3
Retail sales constituted approximately 8% of total sales in 1996, 13% in
1995 and 21% in 1994. In the retail division there are 17 company-operated
stores in principal cities of the United States. The decrease in retail sales
in recent years is a result of the termination of leased departments and
company-operated stores. In 1996, 1 company-operated store and 13 leased
departments were closed. 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. 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 1996 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 450 persons are employed by the Company.
Item 2. Properties
- ------- -------------------------
The following facilities are operated by the Company and its
subsidiaries:
Location Character Owned/Leased
------------------------- ------------------------- -----------------
Milwaukee, Wisconsin Multistory office Owned
and warehouse
Milwaukee, Wisconsin Multistory warehouse Owned
Beaver Dam, Wisconsin Multistory warehouse Owned
Beaver Dam, Wisconsin Multistory factory Leased (1)
(1) Not a material lease.
All of the above-named facilities are adequately equipped, well maintained
and suitable for foreseeable needs. If all available manufacturing space were
utilized and significant additional shoe making equipment were acquired,
production could be increased about 25%.
In addition to the above-described manufacturing and warehouse facilities,
the Company operates 17 retail stores throughout the United States under
various rental agreements. See Note 10 to Consolidated Financial Statements and
Item 1. Business above.
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<PAGE> 4
Item 3. Legal Proceedings
Previously, the Company had 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 actions were settled during
1996. The Company paid a cash settlement which was not material in relation to
the Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
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<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 66 Chairman of the Board and 1968 Chairman of the Company --
Chief Executive Officer 1968 to present
Thomas W. Florsheim, Jr. 39 President and Chief 1995 President of the Company --
Operating Officer & Director 1995 to present; Vice President
of the Company -- 1988 to 1995
John W. Florsheim 33 Executive Vice President & Director 1995 Executive Vice President of the
Company --1995 to present;
Vice President of the Company --
1994 to 1995; Brand Manager,
M & M/Mars, Inc. 1990 to 1994
David N. Couper 48 Vice President 1981 Vice President of the Company --
1981 to present
James F. Gorman 53 Vice President 1975 Vice President of the Company --
1975 to present
Peter S. Grossman 53 Vice President 1971 Vice President of the Company --
1971 to present
John F. Wittkowske 37 Vice President-Finance & 1993 Vice President-Finance of the Company
Secretary 1995 to present; Secretary/Treasurer of
the company --1993 to 1995; 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.
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<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 pages 2 and 17 of the
Annual Report to Shareholders for the year ended December 31, 1996,
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, 1996, 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 pages 3 and 4 of the
Annual Report to Shareholders for the year ended December 31, 1996,
and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Information required by this Item is set forth on pages 5 through 15
of the Annual Report to Shareholders for the year ended December
31, 1996, and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
Not applicable.
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<PAGE> 7
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this Item is set forth on pages 1 through 3
of the Company's proxy statement for the Annual Meeting of
Shareholders to be held on April 22, 1997, and is incorporated
herein by reference.
Item 11. Executive Compensation
Information required by this Item is set forth on pages 4 through 8
of the Company's proxy statement for the Annual Meeting of
Shareholders to be held on April 22, 1997, 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 22, 1997, and is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
Information required by this Item is set forth on pages 6 through 8
of the Company's proxy statement for the Annual Meeting of
Shareholders to be held on April 22, 1997, and is incorporated
herein by reference.
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<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:
Page Reference
to
Annual Report
--------------
1. Financial Statements -
Consolidated Statements of Earnings
for the years ended December 31
1996, 1995 and 1994 5
Consolidated Balance Sheets -
December 31, 1996 and 1995 6-7
Consolidated Statements of Shareholders'
Investment for the years ended
December 31, 1996, 1995 and 1994 8
Consolidated Statements of Cash Flows
for the years ended December 31,
1996, 1995 and 1994 9
Notes to Consolidated Financial
Statements - December 31, 1996, 1995
and 1994 10-15
Report of Independent Public Accountants 16
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<PAGE> 9
Item 14. Exhibits, Financial Statement Schedules,
and Report on Form 8-K (Continued)
Page Reference
to
Form 10-K
--------------
2. Financial Statement Schedules for the
years ended December 31, 1996,
1995 and 1994 -
Schedule II - Valuation and Qualifying
Accounts 11
All other schedules have been omitted because of the
absence of the conditions under which they are
required.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Weyco Group, Inc.'s Annual
Report to Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 17, 1997. 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 17, 1997.
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<PAGE> 10
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K (Continued)
3. Exhibits
Incorporated Herein Filed
Exhibit Description By Reference To Herewith
- ------- ------------------------------------- ------------------- --------
3.1 Articles of Incorporation as Restated Exhibit 3.1 to Form
August 29, 1961, and Last Amended 10-K for Year Ended
April 25, 1990 December 31, 1990
3.2 Bylaws as Revised January 21, 1991 Exhibit 3.2 to Form
and Amended November 3, 1992 10-K for Year Ended
December 31, 1992
10.1* Employment Agreement - Thomas W. X
Florsheim, dated January 1, 1997
10.2* Employment Agreement - Thomas W. X
Florsheim, Jr., dated January 1, 1997
10.3* Employment Agreement - John W. X
Florsheim, dated January 1, 1997
10.4* Restated and Amended Deferred Exhibit 10.3 to Form
Compensation Agreement - Thomas W. 10-K for Year Ended
Florsheim, dated December 1, 1995 December 31, 1995
10.5* Restated and Amended Deferred Exhibit 10.4 to Form
Compensation Agreement - Robert 10-K for Year Ended
Feitler, dated December 1, 1995 December 31, 1995
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
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<PAGE> 11
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K (Continued)
3. Exhibits (Continued)
Incorporated Herein Filed
Exhibit Description By Reference To Herewith
------------------------------------ ------------------- --------
10.10* Death Benefit Plan Agreement - Exhibit 10.10 to Form
Thomas W. Florsheim, dated 10-K for Year Ended
November 8, 1993 December 31, 1993
10.11* Death Benefit Plan Agreement - Exhibit 10.11 to Form
Robert Feitler, dated 10-K for Year Ended
November 8, 1993 December 31, 1993
10.12* 1996 Nonqualified Stock Option Plan Exhibit 10.12 to Form
10-K for Year Ended
December 31, 1995
21 Subsidiaries of the Registrant X
23.1 Consent of Independent Public X
Accountants Dated March 21, 1997
27 Financial Data Schedule X
*Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
None
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<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, 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
Add - Additions charged to
earnings 438,938 454,241 4,314,617 5,207,796
Deduct - Charges for purposes for
which reserves were
established (313,938) (456,241) (4,194,617) (4,964,796)
------------- ------------- --------------- ---------------
BALANCE, DECEMBER 31, 1996 $ 1,148,180 $ 64,000 $ 1,080,000 $ 2,292,180
============= ============= =============== ===============
</TABLE>
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<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 24, 1997
John Wittkowske, Vice President-Finance
_________________
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas W. Florsheim, Sr., Thomas W. Florsheim,
Jr., and John Wittkowske, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this report, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitutes, may lawfully
do or cause to be done by virtue thereof.
______________
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures and Titles Date
/s/ Thomas W. Florsheim March 24, 1997
------------------------------------------------
Thomas W. Florsheim, Chairman of the Board
and Chief Executive Officer (Principal
Executive Officer)
/s/ Thomas W. Florsheim, Jr. March 24, 1997
------------------------------------------------
Thomas W. Florsheim, Jr., President and Chief
Operating Officer and Director
/s/ John W. Florsheim March 24, 1997
------------------------------------------------
John W. Florsheim, Executive Vice President
and Director
/s/ John Wittkowske March 24, 1997
------------------------------------------------
John Wittkowske, Vice President-Finance
(Principal Accounting Officer)
/s/ Robert Feitler March 24, 1997
------------------------------------------------
Robert Feitler, Director
/s/ Leonard J. Goldstein March 24, 1997
------------------------------------------------
Leonard J. Goldstein, Director
/s/ Frank W. Norris March 24, 1997
------------------------------------------------
Frank W. Norris, Director
/s/ Frederick P. Stratton, Jr. March 24, 1997
------------------------------------------------
Frederick P. Stratton, Jr., Director
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<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of January 1, 1997,
by and between WEYCO GROUP INC., a Wisconsin corporation (the "Company"), and
THOMAS W. FLORSHEIM of Milwaukee, Wisconsin ("Florsheim").
W I T N E S S E T H
WHEREAS, Florsheim is the chief executive officer of the Company, has
successfully managed the business of the Company, and is familiar with the
methods developed by the Company and the products supplied by the Company to
its customers, and
WHEREAS, Florsheim and the Company are parties to an employment
agreement dated January 1, 1992 (the "1992 Agreement"), providing for
Florsheim's continued employment through December 31, 1996; and
WHEREAS, the Company desires to extend the period of its exclusive
right to Florsheim's services for the period commencing with the date hereof
and ending on December 31, 2001, in order to assure to itself the successful
management of its business, and
WHEREAS, Florsheim is willing to so extend the period of his
employment, all on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Florsheim, during the
terms of this Agreement, in an executive and managerial capacity, to supervise
and direct the operations of the Company as they are now or may hereafter be
constituted. Florsheim shall have such title and responsibilities as the
Company's Board of Directors shall from time to time assign to him, but the
duties which he shall be called upon to render hereunder shall not be of a
nature substantially inconsistent with those he has rendered and is currently
rendering to the Company as its chief executive officer. He shall have such
powers as may be from time to time prescribed by the Company's Board of
<PAGE> 2
Directors or as are contained in the By-Laws of the Company. During the term
of this Agreement, Florsheim shall serve also, without additional
compensation, in such offices of the Company to which he may be elected or
appointed by the Company's Board of Directors. The Company shall not require
Florsheim, without his consent, to serve principally at a place other than
Milwaukee, Wisconsin or its immediate suburban area, and shall exert its best
efforts so as not to require him in the performance of his duties hereunder to
be absent, without his consent, from said city or its immediate suburban area
during any weekend or legal holiday nor for more than ten (10) days in any
calendar month. Florsheim hereby accepts such employment and agrees to devote
his full time, attention, knowledge and skill to the business and interest of
the Company throughout the period of his employment hereunder.
2. Compensation. As compensation for his services to the Company
during the term of this Agreement in whatever capacity or capacities rendered,
the Company shall, subject to the provisions of paragraph 3 hereof, pay
Florsheim a salary of Four Hundred Thousand Dollars ($400,000) per annum, or
such greater amount per annum as the Board of Directors of the Company may, in
its discretion, fix; said salary is to be payable in equal, or approximately
equal, bi-weekly installments. Nothing herein shall preclude Florsheim from
receiving any additional compensation, whether in the form of bonus or
otherwise, or from participating in any present or future profit-sharing,
pension or retirement plan, insurance, sickness or disability plan, stock
option plan or other plan for the benefits of Florsheim or the employees of the
Company, in each case to the extent and in the manner approved or determined by
the Company's Board of Directors. The Company shall continue to provide
Florsheim the use of an automobile, and other benefits at least equal to those
provided to him under his previous contract of employment. These benefits are
set forth in Schedule A hereto.
3. Term. The term of this Agreement shall be from the date
hereof to and including December 31, 2001. Florsheim's employment hereunder
shall be subject to the following:
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<PAGE> 3
(a) If, during the period of his employment hereunder,
Florsheim is dismissed by the Company for cause, thereupon his employment shall
terminate. "Cause", for purposes of this subparagraph, shall mean conduct or
activities that cause a substantial demonstrable detriment to the Company.
(b) If Florsheim's employment terminates pursuant to
subparagraph 3(a) above, the Company shall be obligated to pay him his salary
and other payments due to be paid hereunder, on or prior to the date of
termination; provided, that nothing herein shall be deemed to entitle Florsheim
to amounts accrued but not due to be paid, or to accelerate the date on which
any payment of salary or bonus is due.
(c) If, during the term of this Agreement, the Company
for any reason other than that contained in subparagraph 3(a) terminates the
employment of Florsheim, or in the event that he terminates his employment
following an event described in paragraph 6 hereof, the Company shall pay to
Florsheim as severance pay, within 30 days of such termination, a lump sum
amount that, when added to any other payments or benefits which constitute
"parachute payments", will be equal to 299% of Florsheim's "base amount", as
those terms are defined in Section 280G of the Internal Revenue Code of 1986
(the "Code") and regulations promulgated by the Internal Revenue Service
thereunder. The determination of Florsheim's base amount shall be made by the
Company's independent auditors. Notwithstanding the foregoing, the amount due
under this paragraph may be deferred, but only if and to the extent that the
payments would not be deductible by the Company under Section 162 of the Code.
If, pursuant to the foregoing sentence, any amounts are not paid immediately,
such amounts shall be paid at the beginning of the immediately following
taxable year or years to the extent that such payments would then be deductible
under Section 162 of the Code. Any deferred amounts shall earn interest at the
rate of 7% per annum until paid.
(d) In the event Florsheim is prevented from performing
his duties by reason of permanent disability, the salary provided by paragraph
2 of this Agreement shall cease as of the date he becomes permanently disabled,
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<PAGE> 4
except that the Company shall pay to Florsheim or as designated by Florsheim
pursuant to written direction given to the Company by him, as the case may be,
from the date such salary ceases to December 31, 2003, inclusive, a salary at
the rate equal to 75% of his then current salary, less any amount received by
Florsheim pursuant to a salary continuation insurance plan, the premiums for
which are paid in whole or in part by the Company. "Permanent disability", for
purposes of this subparagraph, shall refer to physical or mental condition
resulting from bodily injury, disease, or mental disorder which results in
Florsheim's absence from his employment duties for a period of three (3) or
more consecutive months and which renders him, upon the basis of expert medical
opinion, permanently incapable of performing his employment duties hereunder;
such disability shall be deemed to have begun when such determination is made
and notice given to Florsheim by the Company after the period of three (3)
consecutive months or more of his absence from his employment. During any such
period of permanent disability in which the aforesaid payments are being made
to him or his designee, Florsheim, while and to the extent he is physically and
mentally able to do so, shall hold himself available to render such consulting,
advisory and appropriate special services as the Company shall from time to
time reasonably request of him.
(e) In the event Florsheim dies prior to the termination
of his employment hereunder (for purposes of this subparagraph, such employment
shall not be deemed terminated if, at the time of his death, the Company was
making payments pursuant to subparagraph 3(d) above), the salary provided by
paragraph 2 (or subparagraph 3(d), as the case may be) shall cease as of the
date of his death (prorated for part of any month), and the Company shall pay
to the beneficiary or beneficiaries of Florsheim, as designated by him pursuant
to written direction given by him to the Company (or in the absence of such
writing or in the event the last such writing filed by him shall designate one
or more persons who are not living at the time of his death or shall for any
other reason be wholly or partially ineffective, to the personal
representatives of his estate) a death benefit equal to his salary hereunder
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<PAGE> 5
(at the annual rate which was being paid to him at the date of his death) for a
three-year period. Such death benefits shall be payable in thirty-six equal
monthly installments, the first of which shall be paid within sixty days next
following the date of his death and the remaining of which shall be made on the
date during each of the thirty-five next succeeding calendar months
corresponding to the date of such first payment. If any payments are required
to be made under this subparagraph (e) to a beneficiary of Florsheim who shall
have died after having commenced receiving payments hereunder, such payment
shall be made to the personal representative of said beneficiary's estate.
4. Restrictive Covenants. During the term of this Agreement,
Florsheim shall not, without the prior written consent of the Company, be
engaged in or connected or concerned with any business or activity which
directly or indirectly competes with the business conducted by the Company; nor
will he take part in any activities detrimental to the best interest of the
Company.
5. Remedy for Breach. In the event of the breach by Florsheim of
any of the terms and conditions of this Agreement to be performed by him
(including, but not limited to, leaving the Company's employment or performing
services for any person, firm or corporation engaged in a competing or similar
line of business with the Company without the written consent of the Company),
the Company shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either at law or in equity,
to obtain damages for any breach of this Agreement, and to enjoin him (without
the necessity of proving actual damage to the Company) from performing services
for any such other person, firm or corporation in violation of the terms of
this Agreement, or both. The Company shall not be so entitled, however, in the
event Florsheim should voluntarily leave the Company's employment after the
happening of any of the events specified in paragraph 6 hereof during the term
of this Agreement. The remedies provided herein shall be cumulative and in
addition to any and all other remedies which the Company may have at law or in
equity.
-5-
<PAGE> 6
6. Specific Events. The following specific events will affect
the rights and obligations of the parties in the event of Florsheim's leaving
the employ of the Company as set forth at paragraphs 3(c) and 5.
(a) The replacement of two or more of the existing
members of the Company's Board of Directors by persons not nominated by the
Board of Directors; or
(b) Any amendment to Section 2 of Article III of the
Company's By-Laws to enlarge the number of directors of the Company if the
change was not supported by the existing Board of Directors; or
(c) Any change in Florsheim's duties or powers such that
his duties or powers, as changed, would be of a nature substantially
inconsistent with those he has rendered in the past and is currently rendering
to the Company as its chief executive officer; or
(d) A successful tender offer for 15% or more of the
shares or merger or consolidation or transfer of assets of the Company; or
(e) A change in control of more than 15% of the shares in
the Company, such that Florsheim decides in good faith that he can no longer
effectively discharge his duties.
7. Non-Disclosure of Secret or Confidential Information, etc.
Anything herein to the contrary notwithstanding, Florsheim, shall hold in a
fiduciary capacity for the benefit of the Company all knowledge of customer or
trade lists and all other secret or confidential information, knowledge or data
of the Company obtained by him during his employment by the Company, which
shall not be generally known to the public or to the Company's industry
(whether or not developed by Florsheim) and shall not, during his employment
hereunder or after the termination of such employment, communicate or divulge
any such information, knowledge or data to any person, firm or corporation
other than the Company or persons, firms or corporation designated by the
Company.
8. Reimbursement for Expenses. Florsheim shall be reimbursed by
the Company, upon his submission of appropriate vouchers, for all items of
-6-
<PAGE> 7
traveling, entertainment and miscellaneous expenses, including membership dues
at clubs used primarily for business purposes, reasonably incurred by him on
behalf of the Company within the scope of and during his employment hereunder.
9. Assignment. This Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of the Company, including any
company or corporation with which the Company may merge or consolidate or to
which the Company may transfer substantially all of its assets. Florsheim
shall have no power, without the prior written consent of the Company, to
transfer, assign, anticipate, mortgage or otherwise encumber in advance any of
the payments provided for herein nor shall said payments be subject to levy,
seizure, or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by Florsheim nor shall they be transferable by
operation of law in the event of bankruptcy, insolvency or otherwise.
10. Notices. Any notice required or permitted hereunder shall be
sufficiently given if sent by registered mail, with postage and registration
fee prepaid, to the party to be notified at his or its last known address as
determined by due diligence by the party sending such notice.
11. Severability. Nothing in this Agreement shall be construed so
as to require the commission of any act contrary to law, and wherever there may
be any conflict between any provision of this Agreement and any contrary
material statute, ordinance, regulation, or other rule of law pursuant to which
the parties have no legal right to contract, the latter shall prevail; but in
such event the provision of this Agreement so affected shall be curtailed and
limited only to the extent necessary to bring it within the requirements of
such law. In no event shall such illegality or invalidity affect the remaining
parts of this Agreement.
12. Prior Employment Agreements. This Agreement supersedes all
oral or written employment agreements heretofore made by and between the
parties with respect to the subject matter hereof, including the 1989
Agreement, and any and all such agreements are hereby canceled and terminated
in their entirety.
-7-
<PAGE> 8
13. Applicable Law. This Agreement, executed in the State of
Wisconsin, shall be construed in accordance with and governed in all respects
by the laws of the State of Wisconsin.
14. Waiver, etc. No amendment or modification of this Agreement
shall be valid or binding on the Company unless made in writing and signed by a
duly authorized officer of the Company or upon Florsheim unless made in writing
and signed by him. The waiver of a breach of any provision of this Agreement
by either party or the failure of either party to otherwise insist upon strict
performance of any provision hereof shall not constitute a waiver of any
subsequent breach of any subsequent failure to strictly perform.
15. Headings, etc. Paragraph headings and numbers herein are
included for convenience of reference only, and this Agreement is not to be
construed with reference thereto. If there shall be any conflict between such
numbers and headings and the text of this Agreement, the text shall control.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Florsheim has duly executed this Agreement and the
Company has caused this Agreement to be executed by its duly authorized
officers and its corporate seal to be affixed hereunto, all as of the day and
year first above written.
WEYCO GROUP, INC.
a Wisconsin corporation,
By /s/ Thomas W. Florsheim, Jr.
-------------------------------
Its President
Attest:
/s/ John Wittkowske
- --------------------------------
Its Secretary
/s/ Thomas W. Florsheim
--------------------------------
Thomas W. Florsheim
(SEAL)
-8-
<PAGE> 9
SCHEDULE A
Life and Accidental Death and Dismemberment Insurance
Health Insurance
Weyco Group, Inc. Pension
Plan
Deferred Compensation Agreement
Weyco Group, Inc. Deferred Compensation Plan
Weyco Group, Inc. Excess Benefits Plan
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<PAGE> 10
February 17, 1997
TO: WEYCO GROUP, INC.
Pursuant to paragraph 3(e) of the Employment Agreement dated as of January 1,
1997, by and between Weyco Group, Inc., a Wisconsin corporation, and Thomas W.
Florsheim of Milwaukee, Wisconsin, I hereby designate Nancy Florsheim as
beneficiary of the death benefits equal to my salary hereunder for a three-year
period.
/s/ Thomas W. Florsheim
--------------------------------
Thomas W. Florsheim
-11-
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of January 1, 1997,
by and between WEYCO GROUP INC., a Wisconsin corporation (the "Company"), and
THOMAS W. FLORSHEIM, JR. of Milwaukee, Wisconsin ("Florsheim").
W I T N E S S E T H
WHEREAS, Florsheim is the president and chief operating officer of the
Company, and is familiar with the methods developed by the Company and the
products supplied by the Company to its customers; and
WHEREAS, the Company desires to extend the period of its exclusive
right to Florsheim's services for the period commencing with the date hereof
and ending on December 31, 2001, in order to assure to itself the successful
management of its business, and
WHEREAS, Florsheim is willing to so extend the period of his
employment, all on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Florsheim, during the
terms of this Agreement, in an executive and managerial capacity, to supervise
and direct the operations of the Company as they are now or may hereafter be
constituted. Florsheim shall have such title and responsibilities as the
Company's Board of Directors shall from time to time assign to him, but the
duties which he shall be called upon to render hereunder shall not be of a
nature substantially inconsistent with those he has rendered and is currently
rendering to the Company as its president and chief operating officer. He
shall have such powers as may be from time to time prescribed by the Company's
Board of Directors or as are contained in the By-Laws of the Company. During
the term of this Agreement, Florsheim shall serve also, without additional
compensation, in such offices of the Company to which he may be elected or
appointed by the Company's Board of Directors. The Company shall not require
<PAGE> 2
Florsheim, without his consent, to serve principally at a place other than
Milwaukee, Wisconsin or its immediate suburban area, and shall exert its best
efforts so as not to require him in the performance of his duties hereunder to
be absent, without his consent, from said city or its immediate suburban area
during any weekend or legal holiday nor for more than ten (10) days in any
calendar month. Florsheim hereby accepts such employment and agrees to devote
his full time, attention, knowledge and skill to the business and interest of
the Company throughout the period of his employment hereunder. Florsheim shall
be entitled to take vacations in the same manner and for the same periods of
time as has been his custom during the previous three years.
2. Compensation. As compensation for his services to the Company
during the term of this Agreement in whatever capacity or capacities rendered,
the Company shall, subject to the provisions of paragraph 3 hereof, pay
Florsheim a salary of Two Hundred Eighty Thousand Dollars ($280,000) per annum,
or such greater amount per annum as the Board of Directors of the Company may,
in its discretion, fix; said salary is to be payable in equal, or approximately
equal, bi-weekly installments. Nothing herein shall preclude Florsheim from
receiving any additional compensation, whether in the form of bonus or
otherwise, or from participating in any present or future profit-sharing,
pension or retirement plan, insurance, sickness or disability plan, stock
option plan or other plan for the benefits of Florsheim or the employees of the
Company, in each case to the extent and in the manner approved or determined by
the Company's Board of Directors. The Company shall continue to provide
Florsheim the use of an automobile, and other benefits at least equal to those
provided to him under his previous contract of employment. These benefits are
set forth in Schedule A hereto.
3. Term. The term of this Agreement shall be from the date
hereof to and including December 31, 2001. Florsheim's employment hereunder
shall be subject to the following:
(a) If, during the period of his employment hereunder,
Florsheim is dismissed by the Company for cause, thereupon his employment shall
-2-
<PAGE> 3
terminate. "Cause", for purposes of this subparagraph, shall mean conduct or
activities that cause a substantial demonstrable detriment to the Company.
(b) If Florsheim's employment terminates pursuant to
subparagraph 3(a) above, the Company shall be obligated to pay him his salary
and other payments due to be paid hereunder, on or prior to the date of
termination; provided, that nothing herein shall be deemed to entitle Florsheim
to amounts accrued but not due to be paid, or to accelerate the date on which
any payment of salary or bonus is due.
(c) If, during the term of this Agreement, the Company
for any reason other than that contained in subparagraph 3(a) terminates the
employment of Florsheim, or in the event that he terminates his employment
following an event described in paragraph 6 hereof, the Company shall pay to
Florsheim as severance pay, within 30 days of such termination, a lump sum
amount that, when added to any other payments or benefits which constitute
"parachute payments", will be equal to 299% of Florsheim's "base amount", as
those terms are defined in Section 280G of the Internal Revenue Code of 1986
(the "Code") and regulations promulgated by the Internal Revenue Service
thereunder. The determination of Florsheim's base amount shall be made by the
Company's independent auditors. Notwithstanding the foregoing, the amount due
under this paragraph may be deferred, but only if and to the extent that the
payments would not be deductible by the Company under Section 162 of the Code.
If, pursuant to the foregoing sentence, any amounts are not paid immediately,
such amounts shall be paid at the beginning of the immediately following
taxable year or years to the extent that such payments would then be deductible
under Section 162 of the Code. Any deferred amounts shall earn interest at the
rate of 7% per annum until paid.
(d) In the event Florsheim is prevented from performing
his duties by reason of permanent disability, the salary provided by paragraph
2 of this Agreement shall cease as of the date he becomes permanently disabled,
except that the Company shall pay to Florsheim or as designated by Florsheim
pursuant to written direction given to the Company by him, as the case may be,
-3-
<PAGE> 4
from the date such salary ceases to December 31, 2003, inclusive, a salary at
the rate equal to 75% of his then current salary, less any amount received by
Florsheim pursuant to a salary continuation insurance plan, the premiums for
which are paid in whole or in part by the Company. "Permanent disability", for
purposes of this subparagraph, shall refer to physical or mental condition
resulting from bodily injury, disease, or mental disorder which results in
Florsheim's absence from his employment duties for a period of three (3) or
more consecutive months and which renders him, upon the basis of expert medical
opinion, permanently incapable of performing his employment duties hereunder;
such disability shall be deemed to have begun when such determination is made
and notice given to Florsheim by the Company after the period of three (3)
consecutive months or more of his absence from his employment. During any such
period of permanent disability in which the aforesaid payments are being made
to him or his designee, Florsheim, while and to the extent he is physically and
mentally able to do so, shall hold himself available to render such consulting,
advisory and appropriate special services as the Company shall from time to
time reasonably request of him.
(e) In the event Florsheim dies prior to the termination
of his employment hereunder (for purposes of this subparagraph, such employment
shall not be deemed terminated if, at the time of his death, the Company was
making payments pursuant to subparagraph 3(d) above), the salary provided by
paragraph 2 (or subparagraph 3(d), as the case may be) shall cease as of the
date of his death (prorated for part of any month), and the Company shall pay
to the beneficiary or beneficiaries of Florsheim, as designated by him pursuant
to written direction given by him to the Company (or in the absence of such
writing or in the event the last such writing filed by him shall designate one
or more persons who are not living at the time of his death or shall for any
other reason be wholly or partially ineffective, to the personal
representatives of his estate) a death benefit equal to his salary hereunder
(at the annual rate which was being paid to him at the date of his death) for a
three-year period. Such death benefits shall be payable in thirty-six equal
-4-
<PAGE> 5
monthly installments, the first of which shall be paid within sixty days next
following the date of his death and the remaining of which shall be made on the
date during each of the thirty-five next succeeding calendar months
corresponding to the date of such first payment. If any payments are required
to be made under this subparagraph (e) to a beneficiary of Florsheim who shall
have died after having commenced receiving payments hereunder, such payment
shall be made to the personal representative of said beneficiary's estate.
4. Restrictive Covenants. During the term of this Agreement,
Florsheim shall not, without the prior written consent of the Company, be
engaged in or connected or concerned with any business or activity which
directly or indirectly competes with the business conducted by the Company; nor
will he take part in any activities detrimental to the best interest of the
Company.
5. Remedy for Breach. In the event of the breach by Florsheim of
any of the terms and conditions of this Agreement to be performed by him
(including, but not limited to, leaving the Company's employment or performing
services for any person, firm or corporation engaged in a competing or similar
line of business with the Company without the written consent of the Company),
the Company shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either at law or in equity,
to obtain damages for any breach of this Agreement, and to enjoin him (without
the necessity of proving actual damage to the Company) from performing services
for any such other person, firm or corporation in violation of the terms of
this Agreement, or both. The Company shall not be so entitled, however, in the
event Florsheim should voluntarily leave the Company's employment after the
happening of any of the events specified in paragraph 6 hereof during the term
of this Agreement. The remedies provided herein shall be cumulative and in
addition to any and all other remedies which the Company may have at law or in
equity.
6. Specific Events. The following specific events will affect
the rights and obligations of the parties in the event of Florsheim's leaving
the
-5-
<PAGE> 6
employ of the Company as set forth at paragraphs 3(c) and 5.
(a) The replacement of two or more of the existing
members of the Company's Board of Directors by persons not nominated by the
Board of Directors; or
(b) Any amendment to Section 2 of Article III of the
Company's By-Laws to enlarge the number of directors of the Company if the
change was not supported by the existing Board of Directors; or
(c) Any change in Florsheim's duties or powers such that
his duties or powers, as changed, would be of a nature substantially
inconsistent with those he has rendered in the past and is currently rendering
to the Company as its chief executive officer; or
(d) A successful tender offer for 15% or more of the
shares or merger or consolidation or transfer of assets of the Company; or
(e) A change in control of more than 15% of the shares in
the Company, such that Florsheim decides in good faith that he can no longer
effectively discharge his duties.
7. Non-Disclosure of Secret or Confidential Information, etc.
Anything herein to the contrary notwithstanding, Florsheim, shall hold in a
fiduciary capacity for the benefit of the Company all knowledge of customer or
trade lists and all other secret or confidential information, knowledge or data
of the Company obtained by him during his employment by the Company, which
shall not be generally known to the public or to the Company's industry
(whether or not developed by Florsheim) and shall not, during his employment
hereunder or after the termination of such employment, communicate or divulge
any such information, knowledge or data to any person, firm or corporation
other than the Company or persons, firms or corporation designated by the
Company.
8. Reimbursement for Expenses. Florsheim shall be reimbursed by
the Company, upon his submission of appropriate vouchers, for all items of
traveling, entertainment and miscellaneous expenses, including membership dues
at clubs used primarily for business purposes, reasonably incurred by him on
-6-
<PAGE> 7
behalf of the Company within the scope of and during his employment hereunder.
9. Assignment. This Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of the Company, including any
company or corporation with which the Company may merge or consolidate or to
which the Company may transfer substantially all of its assets. Florsheim
shall have no power, without the prior written consent of the Company, to
transfer, assign, anticipate, mortgage or otherwise encumber in advance any of
the payments provided for herein nor shall said payments be subject to levy,
seizure, or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by Florsheim nor shall they be transferable by
operation of law in the event of bankruptcy, insolvency or otherwise.
10. Notices. Any notice required or permitted hereunder shall be
sufficiently given if sent by registered mail, with postage and registration
fee prepaid, to the party to be notified at his or its last known address as
determined by due diligence by the party sending such notice.
11. Severability. Nothing in this Agreement shall be construed so
as to require the commission of any act contrary to law, and wherever there may
be any conflict between any provision of this Agreement and any contrary
material statute, ordinance, regulation, or other rule of law pursuant to which
the parties have no legal right to contract, the latter shall prevail; but in
such event the provision of this Agreement so affected shall be curtailed and
limited only to the extent necessary to bring it within the requirements of
such law. In no event shall such illegality or invalidity affect the remaining
parts of this Agreement.
12. Prior Employment Agreements. This Agreement supersedes all
oral or written employment agreements heretofore made by and between the
parties with respect to the subject matter hereof, including the 1989
Agreement, and any and all such agreements are hereby canceled and terminated
in their entirety.
13. Applicable Law. This Agreement, executed in the State of
Wisconsin, shall be construed in accordance with and governed in all respects
-7-
<PAGE> 8
by the laws of the State of Wisconsin.
14. Waiver, etc. No amendment or modification of this Agreement
shall be valid or binding on the Company unless made in writing and signed by a
duly authorized officer of the Company or upon Florsheim unless made in writing
and signed by him. The waiver of a breach of any provision of this Agreement
by either party or the failure of either party to otherwise insist upon strict
performance of any provision hereof shall not constitute a waiver of any
subsequent breach of any subsequent failure to strictly perform.
15. Headings, etc. Paragraph headings and numbers herein are
included for convenience of reference only, and this Agreement is not to be
construed with reference thereto. If there shall be any conflict between such
numbers and headings and the text of this Agreement, the text shall control.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Florsheim has duly executed this Agreement and the
Company has caused this Agreement to be executed by its duly authorized
officers and its corporate seal to be affixed hereunto, all as of the day and
year first above written.
WEYCO GROUP, INC.
a Wisconsin corporation,
By /s/ Thomas W. Florsheim
--------------------------------
Its Chairman of the Board
Attest:
/s/ John Wittkowske
- -----------------------------
Its Secretary
/s/ Thomas W. Florsheim, Jr.
---------------------------------
Thomas W. Florsheim, Jr.
(SEAL)
-8-
<PAGE> 9
SCHEDULE A
Life and Accidental Death and Dismemberment Insurance
Health Insurance
Weyco Group, Inc. Pension
Plan
Deferred Compensation Agreement
Weyco Group, Inc. Deferred Compensation Plan
Weyco Group, Inc. Excess Benefits Plan
-9-
<PAGE> 10
February 17, 1997
TO: WEYCO GROUP, INC.
Pursuant to paragraph 3(e) of the Employment Agreement dated as of January 1,
1997, by and between Weyco Group, Inc., a Wisconsin corporation, and Thomas W.
Florsheim, Jr of Milwaukee, Wisconsin, I hereby designate Jennifer Florsheim as
beneficiary of the death benefits equal to my salary hereunder for a three-year
period.
/s/ Thomas W. Florsheim, Jr.
---------------------------------
Thomas W. Florsheim, Jr.
-10-
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of January 1, 1997,
by and between WEYCO GROUP INC., a Wisconsin corporation (the "Company"), and
JOHN W. FLORSHEIM of Milwaukee, Wisconsin ("Florsheim").
W I T N E S S E T H
WHEREAS, Florsheim is the executive vice president of the Company, and
is familiar with the methods developed by the Company and the products supplied
by the Company to its customers; and
WHEREAS, the Company desires to extend the period of its exclusive
right to Florsheim's services for the period commencing with the date hereof
and ending on December 31, 2001, in order to assure to itself the successful
management of its business, and
WHEREAS, Florsheim is willing to so extend the period of his
employment, all on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Florsheim, during the
terms of this Agreement, in an executive and managerial capacity, to help
supervise and direct the operations of the Company as they are now or may
hereafter be constituted. Florsheim shall have such title and responsibilities
as the Company's Board of Directors shall from time to time assign to him, but
the duties which he shall be called upon to render hereunder shall not be of a
nature substantially inconsistent with those he has rendered and is currently
rendering to the Company as its executive vice president. He shall have such
powers as may be from time to time prescribed by the Company's Board of
Directors or as are contained in the By-Laws of the Company. During the term of
this Agreement, Florsheim shall serve also, without additional compensation, in
such offices of the Company to which he may be elected or appointed by the
Company's Board of Directors. The Company shall not require
<PAGE> 2
Florsheim, without his consent, to serve principally at a place other than
Milwaukee, Wisconsin or its immediate suburban area, and shall exert its best
efforts so as not to require him in the performance of his duties hereunder to
be absent, without his consent, from said city or its immediate suburban area
during any weekend or legal holiday nor for more than ten (10) days in any
calendar month. Florsheim hereby accepts such employment and agrees to devote
his full time, attention, knowledge and skill to the business and interest of
the Company throughout the period of his employment hereunder. Florsheim shall
be entitled to take vacations in the same manner and for the same periods of
time as has been his custom during the previous three years.
2. Compensation. As compensation for his services to the Company
during the term of this Agreement in whatever capacity or capacities rendered,
the Company shall, subject to the provisions of paragraph 3 hereof, pay
Florsheim a salary of Two Hundred Thousand Dollars ($200,000) per annum, or
such greater amount per annum as the Board of Directors of the Company may, in
its discretion, fix; said salary is to be payable in equal, or approximately
equal, bi-weekly installments. Nothing herein shall preclude Florsheim from
receiving any additional compensation, whether in the form of bonus or
otherwise, or from participating in any present or future profit-sharing,
pension or retirement plan, insurance, sickness or disability plan, stock
option plan or other plan for the benefits of Florsheim or the employees of the
Company, in each case to the extent and in the manner approved or determined by
the Company's Board of Directors. The current benefits are set forth in
Schedule A hereto.
3. Term. The term of this Agreement shall be from the date
hereof to and including December 31, 2001. Florsheim's employment hereunder
shall be subject to the following:
(a) If, during the period of his employment hereunder,
Florsheim is dismissed by the Company for cause, thereupon his employment shall
terminate. "Cause", for purposes of this subparagraph, shall mean conduct or
activities that cause a substantial demonstrable detriment to the Company.
-2-
<PAGE> 3
(b) If Florsheim's employment terminates pursuant to
subparagraph 3(a) above, the Company shall be obligated to pay him his salary
and other payments due to be paid hereunder, on or prior to the date of
termination; provided, that nothing herein shall be deemed to entitle Florsheim
to amounts accrued but not due to be paid, or to accelerate the date on which
any payment of salary or bonus is due.
(c) If, during the term of this Agreement, the Company
for any reason other than that contained in subparagraph 3(a) terminates the
employment of Florsheim, or in the event that he terminates his employment
following an event described in paragraph 6 hereof, the Company shall pay to
Florsheim as severance pay, within 30 days of such termination, a lump sum
amount that, when added to any other payments or benefits which constitute
"parachute payments", will be equal to 299% of Florsheim's "base amount", as
those terms are defined in Section 280G of the Internal Revenue Code of 1986
(the "Code") and regulations promulgated by the Internal Revenue Service
thereunder. The determination of Florsheim's base amount shall be made by the
Company's independent auditors. Notwithstanding the foregoing, the amount due
under this paragraph may be deferred, but only if and to the extent that the
payments would not be deductible by the Company under Section 162 of the Code.
If, pursuant to the foregoing sentence, any amounts are not paid immediately,
such amounts shall be paid at the beginning of the immediately following
taxable year or years to the extent that such payments would then be deductible
under Section 162 of the Code. Any deferred amounts shall earn interest at the
rate of 7% per annum until paid.
(d) In the event Florsheim is prevented from performing
his duties by reason of permanent disability, the salary provided by paragraph
2 of this Agreement shall cease as of the date he becomes permanently disabled,
except that the Company shall pay to Florsheim or as designated by Florsheim
pursuant to written direction given to the Company by him, as the case may be,
from the date such salary ceases to December 31, 2003, inclusive, a salary at
the rate equal to 75% of his then current salary, less any amount received by
-3-
<PAGE> 4
Florsheim pursuant to a salary continuation insurance plan, the premiums for
which are paid in whole or in part by the Company. "Permanent disability", for
purposes of this subparagraph, shall refer to physical or mental condition
resulting from bodily injury, disease, or mental disorder which results in
Florsheim's absence from his employment duties for a period of three (3) or
more consecutive months and which renders him, upon the basis of expert medical
opinion, permanently incapable of performing his employment duties hereunder;
such disability shall be deemed to have begun when such determination is made
and notice given to Florsheim by the Company after the period of three (3)
consecutive months or more of his absence from his employment. During any such
period of permanent disability in which the aforesaid payments are being made
to him or his designee, Florsheim, while and to the extent he is physically and
mentally able to do so, shall hold himself available to render such consulting,
advisory and appropriate special services as the Company shall from time to
time reasonably request of him.
(e) In the event Florsheim dies prior to the termination
of his employment hereunder (for purposes of this subparagraph, such employment
shall not be deemed terminated if, at the time of his death, the Company was
making payments pursuant to subparagraph 3(d) above), the salary provided by
paragraph 2 (or subparagraph 3(d), as the case may be) shall cease as of the
date of his death (prorated for part of any month), and the Company shall pay
to the beneficiary or beneficiaries of Florsheim, as designated by him pursuant
to written direction given by him to the Company (or in the absence of such
writing or in the event the last such writing filed by him shall designate one
or more persons who are not living at the time of his death or shall for any
other reason be wholly or partially ineffective, to the personal
representatives of his estate) a death benefit equal to his salary hereunder
(at the annual rate which was being paid to him at the date of his death) for a
three-year period. Such death benefits shall be payable in thirty-six equal
monthly installments, the first of which shall be paid within sixty days next
following the date of his death and the remaining of which shall be made on
-4-
<PAGE> 5
the date during each of the thirty-five next succeeding calendar months
corresponding to the date of such first payment. If any payments are required
to be made under this subparagraph (e) to a beneficiary of Florsheim who shall
have died after having commenced receiving payments hereunder, such payment
shall be made to the personal representative of said beneficiary's estate.
4. Restrictive Covenants. During the term of this Agreement,
Florsheim shall not, without the prior written consent of the Company, be
engaged in or connected or concerned with any business or activity which
directly or indirectly competes with the business conducted by the Company; nor
will he take part in any activities detrimental to the best interest of the
Company.
5. Remedy for Breach. In the event of the breach by Florsheim of
any of the terms and conditions of this Agreement to be performed by him
(including, but not limited to, leaving the Company's employment or performing
services for any person, firm or corporation engaged in a competing or similar
line of business with the Company without the written consent of the Company),
the Company shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either at law or in equity,
to obtain damages for any breach of this Agreement, and to enjoin him (without
the necessity of proving actual damage to the Company) from performing services
for any such other person, firm or corporation in violation of the terms of
this Agreement, or both. The Company shall not be so entitled, however, in the
event Florsheim should voluntarily leave the Company's employment after the
happening of any of the events specified in paragraph 6 hereof during the term
of this Agreement. The remedies provided herein shall be cumulative and in
addition to any and all other remedies which the Company may have at law or in
equity.
6. Specific Events. The following specific events will affect
the rights and obligations of the parties in the event of Florsheim's leaving
the employ of the Company as set forth at paragraphs 3(c) and 5.
-5-
<PAGE> 6
(a) The replacement of two or more of the existing
members of the Company's Board of Directors by persons not nominated by the
Board of Directors; or
(b) Any amendment to Section 2 of Article III of the
Company's By-Laws to enlarge the number of directors of the Company if the
change was not supported by the existing Board of Directors; or
(c) Any change in Florsheim's duties or powers such that
his duties or powers, as changed, would be of a nature substantially
inconsistent with those he has rendered in the past and is currently rendering
to the Company as its chief executive officer; or
(d) A successful tender offer for 15% or more of the
shares or merger or consolidation or transfer of assets of the Company; or
(e) A change in control of more than 15% of the shares in
the Company, such that Florsheim decides in good faith that he can no longer
effectively discharge his duties.
7. Non-Disclosure of Secret or Confidential Information, etc.
Anything herein to the contrary notwithstanding, Florsheim, shall hold in a
fiduciary capacity for the benefit of the Company all knowledge of customer or
trade lists and all other secret or confidential information, knowledge or data
of the Company obtained by him during his employment by the Company, which
shall not be generally known to the public or to the Company's industry
(whether or not developed by Florsheim) and shall not, during his employment
hereunder or after the termination of such employment, communicate or divulge
any such information, knowledge or data to any person, firm or corporation
other than the Company or persons, firms or corporation designated by the
Company.
8. Reimbursement for Expenses. Florsheim shall be reimbursed by
the Company, upon his submission of appropriate vouchers, for all items of
traveling, entertainment and miscellaneous expenses, including membership dues
at clubs used primarily for business purposes, reasonably incurred by him on
behalf of the Company within the scope of and during his employment hereunder.
-6-
<PAGE> 7
9. Assignment. This Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of the Company, including any
company or corporation with which the Company may merge or consolidate or to
which the Company may transfer substantially all of its assets. Florsheim
shall have no power, without the prior written consent of the Company, to
transfer, assign, anticipate, mortgage or otherwise encumber in advance any of
the payments provided for herein nor shall said payments be subject to levy,
seizure, or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by Florsheim nor shall they be transferable by
operation of law in the event of bankruptcy, insolvency or otherwise.
10. Notices. Any notice required or permitted hereunder shall be
sufficiently given if sent by registered mail, with postage and registration
fee prepaid, to the party to be notified at his or its last known address as
determined by due diligence by the party sending such notice.
11. Severability. Nothing in this Agreement shall be construed so
as to require the commission of any act contrary to law, and wherever there may
be any conflict between any provision of this Agreement and any contrary
material statute, ordinance, regulation, or other rule of law pursuant to which
the parties have no legal right to contract, the latter shall prevail; but in
such event the provision of this Agreement so affected shall be curtailed and
limited only to the extent necessary to bring it within the requirements of
such law. In no event shall such illegality or invalidity affect the remaining
parts of this Agreement.
12. Prior Employment Agreements. This Agreement supersedes all
oral or written employment agreements heretofore made by and between the
parties with respect to the subject matter hereof, including the 1989
Agreement, and any and all such agreements are hereby canceled and terminated
in their entirety.
13. Applicable Law. This Agreement, executed in the State of
Wisconsin, shall be construed in accordance with and governed in all respects
by the laws of the State of Wisconsin.
-7-
<PAGE> 8
14. Waiver, etc. No amendment or modification of this Agreement
shall be valid or binding on the Company unless made in writing and signed by a
duly authorized officer of the Company or upon Florsheim unless made in writing
and signed by him. The waiver of a breach of any provision of this Agreement
by either party or the failure of either party to otherwise insist upon strict
performance of any provision hereof shall not constitute a waiver of any
subsequent breach of any subsequent failure to strictly perform.
15. Headings, etc. Paragraph headings and numbers herein are
included for convenience of reference only, and this Agreement is not to be
construed with reference thereto. If there shall be any conflict between such
numbers and headings and the text of this Agreement, the text shall control.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Florsheim has duly executed this Agreement and the
Company has caused this Agreement to be executed by its duly authorized
officers and its corporate seal to be affixed hereunto, all as of the day and
year first above written.
WEYCO GROUP, INC.
a Wisconsin corporation,
By /s/ Thomas W. Florsheim, Jr.
--------------------------------
Its President
Attest:
/s/ John Wittkowske
- ---------------------------------
Its Secretary
/s/ John W. Florsheim
----------------------------------
John W. Florsheim
(SEAL)
-8-
<PAGE> 9
SCHEDULE A
Life and Accidental Death and Dismemberment Insurance
Health Insurance
Weyco Group, Inc. Pension
Plan
Deferred Compensation Agreement
Weyco Group, Inc. Deferred Compensation Plan
Weyco Group, Inc. Excess Benefits Plan
-9-
<PAGE> 10
February 17, 1997
TO: WEYCO GROUP, INC.
Pursuant to paragraph 3(e) of the Employment Agreement dated as of January 1,
1997, by and between Weyco Group, Inc., a Wisconsin corporation, and John W.
Florsheim of Milwaukee, Wisconsin, I hereby designate Linda Yeager as
beneficiary of the death benefits equal to my salary hereunder for a three-year
period.
/s/ John W. Florsheim
----------------------------------
John W. Florsheim
-10-
<PAGE> 1
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------
1996 was an outstanding year for our Company.
Net sales increased 7% to $129,314,000 from $120,643,000. Net earnings grew 18%
to a record $8,072,000, or $4.97 per share, from $6,807,000, or $3.62 per share.
Our mission is to provide the best value across the various footwear categories
in which we compete. Our commitment to this end has enabled us to strengthen our
position as a key player in men's branded footwear. In 1996, our Nunn Bush,
Stacy Adams and Brass Boot brands all registered significant increases. Overall,
our wholesale business grew 13%, resulting in a fourth straight year of record
wholesale shipments.
Nunn Bush's growth is driven by the brand's success in basic casual and dress
footwear, offering superior quality at moderate price points. Stacy Adams,
meanwhile, continues to benefit from its strong heritage in the fashion segment,
as more retailers target the fashion consumer as an opportunity for incremental
growth.
In 1996, we also made a strategic decision to enhance our penetration into the
better grade market with our Brass Boot brand, which is primarily designed and
manufactured in Italy. We have intensified our efforts around Brass Boot,
expanding the scope of the product line and increasing our investment in
marketing.
As we sharpen our focus on our wholesale business, we continue to reduce our
number of retail units. Our Retail Division now consists of nine Brass Boot
stores and seven other company stores. As a result, overall retail sales
decreased 29%. Same-store sales, however, increased 1%.
With the continuing consolidation of retailers, the current environment presents
unique challenges. We believe that we are taking the necessary steps to keep our
brands relevant and profitable. We look forward to a successful 1997, and we
will strive to make Weyco as responsive as it can be to its customers,
employees, vendors and shareholders.
Thomas W. Florsheim
Thomas W. Florsheim
Chairman of the Board and
Chief Executive Officer
Thomas W. Florsheim, Jr.
Thomas W. Florsheim, Jr.
President and
Chief Operating Officer
1
<PAGE> 2
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................... $129,314,000 $120,643,000 $114,719,000 $122,144,000 $139,462,000
Net earnings before
cumulative effect of
accounting change......... 8,072,000 6,807,000 6,179,000 4,908,000 6,569,000
Cumulative effect of
accounting change......... -- -- -- 880,000 --
------------ ------------ ------------ ------------ ------------
Net earnings................ $ 8,072,000 $ 6,807,000 $ 6,179,000 $ 5,788,000 $ 6,569,000
============ ============ ============ ============ ============
Net earnings per share
before cumulative effect
of accounting change...... $4.97 $3.62 $2.98 $2.32 $3.10
Cumulative effect of
accounting change......... -- -- -- .42 --
------------ ------------ ------------ ------------ ------------
Net earnings per share...... $4.97 $3.62 $2.98 $2.74 $3.10
============ ============ ============ ============ ============
Weighted average shares and
equivalent shares
outstanding............... 1,623,521 1,880,191 2,076,874 2,117,255 2,120,342
Cash dividends per share.... $.87 $.83 $.80 $.78 $.70
Working capital............. $ 33,840,000 $ 45,997,000 $ 52,968,000 $ 55,864,000 $ 51,714,000
Total assets................ $ 73,077,000 $ 79,328,000 $ 72,827,000 $ 74,915,000 $ 71,848,000
</TABLE>
COMMON STOCK DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------------------------------------------------------------------
Price Range Cash Price Range Cash
----------- Dividends ----------- Dividends
High Low Declared High Low Declared
Quarter: -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First..................... 41 37 1/2 $.21 37 33 $.20
Second.................... 42 38 .22 37 3/4 34 .21
Third..................... 42 1/2 39 1/2 .22 40 35 1/2 .21
Fourth.................... 43 39 1/2 .22 41 36 1/2 .21
---- ----
$.87 $.83
==== ====
</TABLE>
There are approximately 500 holders of record of the Company's common stock as
of March 4, 1997.
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 11 to the Consolidated Financial Statements
for additional information.
2
<PAGE> 3
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 $31,457,000 at December 31, 1996, and $34,395,000
at December 31, 1995. 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 1996.
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. Also, during
1996 and 1995, payments of $1,175,000 were made under deferred compensation
agreements.
The Company's capital expenditures were $251,000, $195,000 and $1,124,000 in
1996, 1995 and 1994, respectively. The Company currently expects that 1997
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
1996 VS. 1995
Total net sales of the Company increased 7% from $120,643,000 in 1995 to
$129,314,000 in 1996. Net sales in the wholesale division increased 13% from
$105,149,000 in 1995 to $118,362,000 in 1996. The increase in sales resulted
from an increase of 7% in the number of pairs of shoes shipped, as well as an
increase in the average selling price per pair of 5% from 1995 to 1996. The
increase in the selling price per pair was principally caused by a change in
product mix. Retail net sales decreased 29% in 1996 from $15,494,000 in 1995 to
$10,952,000 in 1996. Retail sales declined due to the closing of 13 leased shoe
departments and 1 retail store during 1996. "Same store" net sales increased 1%
in 1996. Gross earnings as a percent of net sales were flat between 1995 and
1996 at 27%.
Selling and administrative expenses decreased from $23,947,000 in 1995 to
$23,176,000 in 1996. The decrease can be principally attributed to the retail
store closings in 1995 and 1996. Consequently, retail selling and administrative
expenses decreased 31% from $7,754,000 in 1995 to $5,362,000 in 1996. Wholesale
selling and administrative expenses increased 9% from $16,365,000 in 1995 to
$17,814,000 in 1996. As a percentage of wholesale sales, these expenses
decreased from 15.5% in 1995 to 15.0% in 1996.
Interest and other income decreased from $2,208,000 in 1995 to $1,126,000 in
1996, primarily because 1995 included $850,000 of income realized from a lease
assignment. Interest income also decreased in 1996 due to lower marketable
securities balances during the year.
1995 VS. 1994
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.
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
3
<PAGE> 4
- --------------------------------------------------------------------------------
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 totalling $1,225,000 ($.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.
OVERALL ANALYSIS
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.
Previously, the Company had 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. During 1996, these actions were
settled. The Company paid a cash settlement, which was not material in relation
to the Consolidated Financial Statements.
4
<PAGE> 5
CONSOLIDATED
STATEMENTS OF EARNINGS
For the years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES............................................ $129,314,045 $120,642,617 $114,718,526
COST OF SALES........................................ 94,474,268 88,093,991 76,282,844
------------ ------------ ------------
Gross earnings..................................... 34,839,777 32,548,626 38,435,682
SELLING AND ADMINISTRATIVE EXPENSES.................. 23,175,555 23,946,940 29,043,678
------------ ------------ ------------
Earnings from operations........................... 11,664,222 8,601,686 9,392,004
INTEREST AND OTHER INCOME, net....................... 1,126,199 2,208,305 674,482
------------ ------------ ------------
Earnings before provision for income taxes......... 12,790,421 10,809,991 10,066,486
PROVISION FOR INCOME TAXES........................... 4,718,000 4,003,000 3,887,000
------------ ------------ ------------
Net earnings....................................... $ 8,072,421 $ 6,806,991 $ 6,179,486
============ ============ ============
NET EARNINGS PER SHARE............................... $4.97 $3.62 $2.98
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 6,837,765 $11,247,137
Marketable securities, at amortized cost.................. 8,179,263 12,677,712
Accounts receivable, less reserves of $2,292,180 and
$2,049,180, respectively............................... 18,235,404 18,867,506
Inventories............................................... 12,399,444 14,945,707
Deferred income tax benefits.............................. 2,161,000 1,746,000
Prepaid expenses and other current assets................. -- 10,211
----------- -----------
Total current assets................................. 47,812,876 59,494,273
----------- -----------
MARKETABLE SECURITIES, AT AMORTIZED COST.................... 16,440,201 10,470,262
DEFERRED INCOME TAX BENEFITS................................ 33,000 519,000
OTHER ASSETS................................................ 6,138,205 5,331,314
PLANT AND EQUIPMENT, NET.................................... 2,652,873 3,513,437
----------- -----------
$73,077,155 $79,328,286
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
6
<PAGE> 7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 6,793,555 $ 9,181,933
Dividend payable.......................................... 349,354 397,113
Accrued liabilities -
Wages, salaries and commissions........................ 2,689,200 2,170,647
Taxes other than income taxes.......................... 122,788 181,608
Other.................................................. 3,025,765 1,475,858
Accrued income taxes...................................... 992,241 90,366
----------- -----------
Total current liabilities............................ 13,972,903 13,497,525
----------- -----------
DEFERRED COMPENSATION....................................... -- 1,747,764
SHAREHOLDERS' INVESTMENT:
Common Stock, $1.00 par value, authorized 4,000,000
shares, issued and outstanding 1,259,053 shares in 1996
and 1,442,787 shares in 1995........................... 1,259,053 1,442,787
Class B Common Stock, $1.00 par value, authorized
2,000,000 shares, issued and outstanding 328,422 shares
in 1996 and 441,228 shares in 1995..................... 328,422 441,228
Capital in excess of par value............................ 1,666,065 2,772,530
Reinvested earnings....................................... 55,850,712 59,426,452
----------- -----------
Total shareholders' investment....................... 59,104,252 64,082,997
----------- -----------
$73,077,155 $79,328,286
=========== ===========
</TABLE>
7
<PAGE> 8
CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' INVESTMENT
For the years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Capital in
Common Common Excess of Reinvested
Stock Stock Par Value Earnings
---------- -------- ---------- -----------
<S> <C> <C> <C> <C>
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 ($.83 per share)... -- -- -- (1,562,808)
Conversions of Class B Common Stock to
Common Stock............................. 5,733 (5,733) -- --
Stock options exercised.................... 41,500 -- 1,081,500 --
Income tax benefit from stock options
exercised................................ -- -- 156,293 --
Shares purchased and retired............... (46,248) (5,250) (135,000) (1,681,444)
---------- -------- ---------- -----------
Balance, December 31, 1995...................... 1,442,787 441,228 2,772,530 59,426,452
Add (Deduct) -
Net earnings............................... -- -- -- 8,072,421
Cash dividends declared ($.87 per share)... -- -- -- (1,394,930)
Conversions of Class B Common Stock to
Common Stock............................. 6,446 (6,446) -- --
Stock options exercised.................... 2,500 -- 77,031 --
Shares purchased and retired............... (192,680) (106,360) (1,183,496) (10,253,231)
---------- -------- ---------- -----------
Balance, December 31, 1996...................... $1,259,053 $328,422 $1,666,065 $55,850,712
========== ======== ========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
8
<PAGE> 9
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................................ $ 8,072,421 $ 6,806,991 $ 6,179,486
Adjustments to reconcile net earnings to net cash
provided by operating activities -
Depreciation..................................... 1,044,559 1,133,921 1,226,237
Deferred income taxes............................ 71,000 177,000 (417,000)
Deferred compensation............................ 130,185 183,760 465,960
Pension income................................... (361,173) (77,241) (217,133)
Loss on retirement of assets..................... 62,468 121,789 48,518
Changes in operating assets and liabilities -
Accounts receivable............................. 632,102 (1,316,160) 2,182,007
Inventories..................................... 2,546,263 (4,208,240) 6,312,844
Prepaids and other current assets............... 10,211 54,378 491,724
Accounts payable................................ (2,388,378) 3,935,179 (696,852)
Accrued liabilities............................. 1,306,691 139,556 (56,795)
Accrued income taxes............................ 901,875 (1,098,704) 1,231,405
------------ ------------ ------------
Net cash provided by operating activities...... 12,028,224 5,852,229 16,750,401
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities................... (15,192,006) (33,521,343) (65,076,331)
Proceeds from sales of marketable securities........ 13,720,516 39,339,872 53,418,324
Purchase of plant and equipment..................... (250,893) (195,427) (1,123,799)
Investment in officers' life insurance.............. (445,718) (410,695) (393,064)
Proceeds from sales of plant and equipment.......... 4,430 -- 135,119
------------ ------------ ------------
Net cash provided by (used for) investing
activities.................................. (2,163,671) 5,212,407 (13,039,751)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deferred compensation.................... (1,175,000) (1,175,000) --
Proceeds from issuance of debt...................... -- -- 3,500,000
Payments of notes payable........................... -- -- (3,500,000)
Cash dividends paid................................. (1,442,689) (1,545,918) (1,704,884)
Shares purchased and retired........................ (11,735,767) (1,867,942) (8,188,414)
Proceeds from stock options exercised............... 79,531 1,123,000 682,900
------------ ------------ ------------
Net cash used for financing activities......... (14,273,925) (3,465,860) (9,210,398)
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents...................................... (4,409,372) 7,598,776 (5,499,748)
CASH AND CASH EQUIVALENTS, at beginning of year....... 11,247,137 3,648,361 9,148,109
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, at end of year............. $ 6,837,765 $ 11,247,137 $ 3,648,361
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid................................... $ 3,744,349 $ 4,942,309 $ 2,672,304
Interest paid....................................... $ -- $ -- $ 30,000
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
9
<PAGE> 10
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include the
accounts of Weyco Group, Inc. and all subsidiaries ("The Company"). All
significant intercompany items are eliminated in the consolidated financial
statements.
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 basis of assets and liabilities for tax and
financial reporting purposes. See Note 8.
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 and Cash Equivalents - For purposes of the Consolidated Statements of Cash
Flows, the Company considers all highly liquid investments with original
maturities of three months or less 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.
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 adoption of this statement in 1996 had no material effect on the
Consolidated Financial Statements.
Advertising Costs - Advertising costs are expensed as incurred. Advertising
costs were $2,951,000, $2,757,000 and $2,720,000 in 1996, 1995 and 1994,
respectively.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of all financial instruments, except marketable securities,
approximate fair value due to the short-term nature of those instruments. The
fair value of marketable securities is estimated based upon quoted market rates.
See Note 4.
3. INVENTORIES
At December 31, 1996 and 1995, inventories consist of:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Finished shoes........................................ $11,984,639 $14,188,733
Shoes in Process...................................... 331,718 618,671
Raw materials......................................... 83,087 138,303
----------- -----------
Total inventories..................................... $12,399,444 $14,945,707
</TABLE>
The excess of current cost over LIFO cost of inventories as of December 31, 1996
and 1995 was $16,597,000 and $15,549,000, respectively. During 1994, inventory
reductions resulted in liquidations of LIFO inventory quantities carried at
lower costs prevailing in prior years compared
10
<PAGE> 11
- --------------------------------------------------------------------------------
with the current cost of purchases, the effect of which increased net earnings
by $4,505,000 or $1.32 per share.
4. INVESTMENTS
All of the Company's investments are classified as held-to-maturity securities
and reported at amortized cost pursuant to SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," as the Company has the intent and
ability to hold all security investments to maturity.
A summary of the amortized cost and estimated market values of investment
securities at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------- --------------------------
Amortized Amortized
Cost Market Value Cost Market Value
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Municipality and revenue bonds............ $24,619,464 $24,713,354 $23,147,974 $23,234,971
Less: Current marketable securities....... 8,179,263 8,184,516 12,677,712 12,690,832
----------- ----------- ----------- -----------
Marketable securities due from one
through five years.................. $16,440,201 $16,528,838 $10,470,262 $10,544,139
=========== =========== =========== ===========
</TABLE>
The unrealized gains and losses on investment securities at December 31 are:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- -----------------------
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses Gains Losses
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Municipality and revenue bonds...... $127,490 $ 33,600 $ 98,574 $ 11,577 $ 38,321 $165,985
U. S. government securities......... -- -- -- -- -- 44,299
-------- -------- -------- -------- -------- --------
Total............................ $127,490 $ 33,600 $ 98,574 $ 11,577 $ 38,321 $210,284
</TABLE>
5. PLANT AND EQUIPMENT
At December 31, 1996 and 1995, plant and equipment consists of:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land........................................................ $ 210,821 $ 210,821
Buildings................................................... 1,858,423 1,905,759
Machinery and equipment..................................... 3,956,620 3,948,309
Retail fixtures and leasehold improvements.................. 2,653,653 2,717,917
---------- ----------
Plant and equipment...................................... $8,679,517 $8,782,806
Less: Accumulated depreciation.............................. 6,026,644 5,269,369
---------- ----------
Plant and equipment, net................................. $2,652,873 $3,513,437
</TABLE>
6. BANK LINES OF CREDIT
The Company has a short-term line of credit of $7,500,000 with a domestic bank
and has banker acceptance loan facilities. There were no borrowings outstanding
at December 31, 1996 and 1995 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.
7. EMPLOYEE RETIREMENT PLANS
The Company has 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
11
<PAGE> 12
- --------------------------------------------------------------------------------
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.
The following summarizes the Company's pension income under the defined benefit
plans:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Benefits earned during the period.......................... $ 349,000 $ 327,000 $ 383,000
Interest cost on projected benefit obligation.............. 1,025,000 1,031,000 958,000
Actual loss (return) on plan assets........................ (1,663,000) (3,202,000) 500,000
Net amortization and deferral.............................. (72,000) 1,767,000 (2,058,000)
----------- ----------- -----------
Net pension income...................................... $ (361,000) $ (77,000) $ (217,000)
=========== =========== ===========
</TABLE>
The funded status of the Company's defined benefit retirement plans at December
31, is as follows:
<TABLE>
<CAPTION>
Plan for Which Assets Exceed Plans for Which Accumulated
Accumulated Benefits Benefits Exceed Assets
---------------------------- ----------------------------
1996 1995 1996 1995
------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested.................................... $10,966,000 $10,750,000 $ 2,105,000 $ 1,887,000
Nonvested................................. 203,000 134,000 6,000 18,000
----------- ----------- ----------- -----------
Accumulated benefit obligation............. 11,169,000 10,884,000 2,111,000 1,905,000
Effect of projected future salary
increases.................................. 1,588,000 1,385,000 427,000 285,000
----------- ----------- ----------- -----------
Projected benefit obligation.............. 12,757,000 12,269,000 2,538,000 2,190,000
Plan assets at market value.................. 18,805,000 17,924,000 -- --
----------- ----------- ----------- -----------
Plan assets in excess of (less than)
projected benefit obligation........... 6,048,000 5,655,000 (2,538,000) (2,190,000)
Unrecognized prior service cost (benefit).... (530,000) (591,000) 552,000 651,000
Unrecognized net (gain) loss................. (331,000) (259,000) 195,000 16,000
Unrecognized net transition asset............ (1,039,000) (1,258,000) -- --
Additional minimum liability................. -- -- (320,000) (382,000)
----------- ----------- ----------- -----------
Net recorded pension asset (liability)
included in other assets............... $ 4,148,000 $ 3,547,000 $(2,111,000) $(1,905,000)
=========== =========== =========== ===========
</TABLE>
The actuarial assumptions used as of December 31, 1996 and 1995 for determining
the present value of the projected benefit obligation were as follows:
<TABLE>
<S> <C>
Discount rate............................................... 7%
Rate of compensation increase............................... 5%
Long-term rate of return on plan assets..................... 8.5%
</TABLE>
On January 1, 1995, the Company started a defined contribution plan covering
substantially all employees not covered by a collective bargaining agreement.
During both 1996 and 1995 the Company contributed $85,000 to the Plan.
12
<PAGE> 13
- --------------------------------------------------------------------------------
8. INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current -
Federal................................................... $3,854,000 $2,939,000 $3,310,000
State..................................................... 793,000 887,000 994,000
---------- ---------- ----------
Total.................................................. 4,647,000 3,826,000 4,304,000
Deferred.................................................... 71,000 177,000 (417,000)
---------- ---------- ----------
Total provision........................................ $4,718,000 $4,003,000 $3,887,000
========== ========== ==========
Effective tax rate.......................................... 36.9% 37.0% 38.6%
========== ========== ==========
</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 4.2% in 1996,
4.3% in 1995 and 5.3% in 1994, the effect of municipal bond interest, and other
miscellaneous items.
The components of the net deferred tax asset as of December 31, 1996 and 1995,
are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable and inventory reserves................ $ 1,104,000 $ 983,000
Deferred compensation..................................... 732,000 1,140,000
Depreciation.............................................. 572,000 441,000
Other..................................................... 1,088,000 792,000
----------- -----------
3,496,000 3,356,000
----------- -----------
Deferred tax liabilities:
Prepaid pension........................................... (930,000) (789,000)
Unrepatriated foreign earnings............................ -- (15,000)
Cash value of life insurance.............................. (372,000) (287,000)
----------- -----------
(1,302,000) (1,091,000)
----------- -----------
Net deferred tax asset................................. $ 2,194,000 $ 2,265,000
=========== ===========
</TABLE>
The net deferred tax asset is classified in the Consolidated Balance Sheets as
follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Current deferred income tax benefits........................ $ 2,161,000 $ 1,746,000
Noncurrent deferred income tax benefits..................... 33,000 519,000
----------- -----------
$ 2,194,000 $ 2,265,000
=========== ===========
</TABLE>
9. DEFERRED COMPENSATION
The Company has deferred compensation agreements with one current and one former
executive. The Company expensed $130,000 in 1996, $184,000 in 1995 and $466,000
in 1994 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 and in 1996. The
remaining amounts owed under the agreements as of December 31, 1996 are
available to be paid in 1997 and are included in accrued wages, salaries and
commissions on the Consolidated Balance Sheets.
10. OPERATING LEASES
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
13
<PAGE> 14
- --------------------------------------------------------------------------------
of sales. Total minimum rents were $1,160,000 in 1996, $1,181,000 in 1995 and
$1,240,000 in 1994. Percentage rentals were $401,000 in 1996, $865,000 in 1995
and $1,910,000 in 1994.
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, 1996, are shown below. Renewal options exist for many long-term
leases.
<TABLE>
<S> <C>
1997........................................................ $1,025,000
1998........................................................ 832,000
1999........................................................ 538,000
2000........................................................ 403,000
2001........................................................ 259,000
2002 and thereafter......................................... 225,000
----------
Total....................................................... $3,282,000
==========
</TABLE>
11. 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.
12. STOCK BASED COMPENSATION PLANS
The Company has two stock option plans, the 1992 Nonqualified Stock Option Plan
and the 1996 Nonqualified Stock Option Plan.
The Company accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for these plans
been determined consistent with FASB Statement No. 123, the Company's net
earnings and net earnings per share would have been reduced to the following pro
forma amounts:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net Earnings:
As Reported........................................ $8,072,421 $6,806,991
Pro Forma.......................................... $7,845,795 $6,663,729
Net Earnings Per Share:
As Reported........................................ $4.97 $3.62
Pro Forma.......................................... $4.83 $3.54
</TABLE>
Because the Statement No. 123 method of accounting has not been applied to
options prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The following table summarizes the stock option activity under the Company's
plans for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- -------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price Shares Ex. Price
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year...... 73,400 $34.96 85,900 $29.67 89,500 $26.79
Granted............................... 30,000 40.75 29,500 39.25 24,500 34.63
Exercised............................. (2,500) 31.25 (41,500) 27.06 (27,600) 24.74
Forfeited............................. -- -- -- -- -- --
Expired............................... -- -- (500) 34.63 (500) 29.00
------- ------ ------- ------ ------- ------
Outstanding at end of year............ 100,900 $36.77 73,400 $34.96 85,900 $29.67
Exercisable at end of year............ 70,900 $35.09 43,900 $32.08 61,400 $27.69
Weighted average fair market value of
options granted..................... $12.38 $8.39
</TABLE>
14
<PAGE> 15
- --------------------------------------------------------------------------------
The fair market value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Risk-free interest rate.................................... 6.05% 5.33%
Expected dividend yields................................... 2.2% 2.2%
Expected remaining life.................................... 9.0 yrs. 4.5 yrs.
Expected volatility........................................ 20% 20%
</TABLE>
The range of exercise prices for the 100,900 options outstanding at December 31,
1996 is $29.00 to $40.75. The weighted average remaining contractual life for
these shares is 5 years as of December 31, 1996.
At December 31, 1996, 70,000 shares of stock have been reserved for future
issuance under the plans.
13. INDUSTRY SEGMENT INFORMATION
The Company engages in one line of business - the manufacture, purchase and
distribution of men's footwear. All sales are to unaffiliated customers from
North America. Sales to the Company's largest customer were 13%, 15% and 11% of
total sales for 1996, 1995, and 1994, respectively. Sales to another customer
were 10% of total sales in 1996. There are no other individually significant
customers.
15
<PAGE> 16
- --------------------------------------------------------------------------------
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, 1996 and
1995, and the related consolidated statements of earnings, shareholders'
investment and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 17, 1997
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 above. 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.
16
<PAGE> 17
- --------------------------------------------------------------------------------
DIRECTORS
Robert Feitler
Chairman, Executive Committee
John W. Florsheim
Executive Vice President
Thomas W. Florsheim
Chairman and Chief Executive Officer
Thomas W. Florsheim, Jr.
President and Chief Operating 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
Thomas W. Florsheim, Jr.
President and Chief Operating Officer
John W. Florsheim
Executive Vice President
David N. Couper
Vice President
James F. Gorman
Vice President
Peter S. Grossman
Vice President
John F. Wittkowske
Vice President - Finance and Secretary
SUPPLEMENTAL INFORMATION
STOCK EXCHANGE
The Company's Common Stock (symbol WEYS) is listed on the NASDAQ Market System
(NMS).
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
OTHER INFORMATION
A copy of the Company's Annual Report to the Securities and Exchange Commission
(Form 10-K) will be furnished without charge to any stockholder upon written
request.
A copy of the Company's Quarterly Reports will be furnished without charge to
any stockholder upon written or telephone request.
All written requests should be sent to Investor Relations, Weyco Group, Inc., P.
O. Box 1188, Milwaukee, Wisconsin 53201. Telephone requests should be made to
(414) 263-8800.
17
<PAGE> 1
EXHIBIT 21
WEYCO GROUP, INC.
SUBSIDIARIES OF THE REGISTRANT
Incorporated
Name of Company In Subsidiary Of
-------------------------- ------------ -----------------
House of Advertising, Inc. Wisconsin Weyco Group, Inc.
Weyco Investments, Inc. Nevada Weyco Group, Inc.
<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 Statements on Form S-8 (File Nos.
33-26013 and 33-48549).
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,838
<SECURITIES> 8,179
<RECEIVABLES> 20,528
<ALLOWANCES> 2,292
<INVENTORY> 12,399
<CURRENT-ASSETS> 47,813
<PP&E> 8,680
<DEPRECIATION> 6,027
<TOTAL-ASSETS> 73,077
<CURRENT-LIABILITIES> 13,973
<BONDS> 0
0
0
<COMMON> 1,587
<OTHER-SE> 57,517
<TOTAL-LIABILITY-AND-EQUITY> 73,077
<SALES> 129,314
<TOTAL-REVENUES> 129,314
<CGS> 94,474
<TOTAL-COSTS> 117,650
<OTHER-EXPENSES> (1,126)
<LOSS-PROVISION> 439
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,790
<INCOME-TAX> 4,718
<INCOME-CONTINUING> 8,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,072
<EPS-PRIMARY> 4.97
<EPS-DILUTED> 4.97
</TABLE>
