EXHIBIT 99.1
FLORSHEIM SHOE
COMBINED FINANCIAL STATEMENTS
INDEX TO COMBINED FINANCIAL STATEMENTS
COMBINED FINANCIAL STATEMENTS: PAGE
----
Combined Balance Sheets at December 29, 2001 and December 30, 2000........................................4
Combined Statements of Operations for the Fiscal Years Ended December 29, 2001,
December 30, 2000 and January 1, 2000...................................................................5
Combined Statements of Cash Flows for the Fiscal Years Ended December 29, 2001,
December 30, 2000 and January 1, 2000...................................................................6
Notes to Combined Financial Statements....................................................................7
Independent Auditors' Report.............................................................................14
COMBINED FINANCIAL STATEMENT SCHEDULE:
Schedule II -- Valuation and qualifying accounts.........................................................15
CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED):
Condensed Combined Balance Sheets at March 30, 2002 and December 29, 2001 (unaudited)....................17
Condensed Combined Statements of Operations for the Three Months Ended
March 30, 2002 and March 31, 2001 (unaudited)..........................................................18
Condensed Combined Statements of Cash Flows for the Three Months Ended
March 30, 2002 and March 31, 2001 (unaudited)..........................................................19
Notes to Condensed Combined Financial Statements (unaudited).............................................20
2
FLORSHEIM SHOE
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2001 AND DECEMBER 30, 2000
AND FOR THE THREE FISCAL YEARS ENDED DECEMBER 29, 2001,
DECEMBER 30, 2000 AND JANUARY 1, 2000
3
FLORSHEIM SHOE
COMBINED BALANCE SHEETS
DECEMBER 29, 2001 AND DECEMBER 30, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
December 29, December 30,
2001 2000
--------------- ---------------
ASSETS
Current assets:
Receivables, less allowances of $1,177 at December 29, 2001
and $2,420 at December 30, 2000 $ 9,975 $ 9,874
Inventories 24,583 26,164
Prepaid expenses and other current assets 1,226 1,225
------------- -------------
Total current assets 35,784 37,263
Property, plant and equipment
Buildings and improvements 5,526 5,419
Machinery and equipment 25,331 25,600
------------- -------------
30,857 31,019
Less: accumulated depreciation (17,789) (13,427)
------------- -------------
Net property, plant and equipment 13,068 17,592
Other assets 1,687 1,628
------------- -------------
Total assets $ 50,539 $ 56,483
============= =============
LIABILITIES AND BUSINESS EQUITY
Current liabilities:
Accounts payable $ 12,729 $ 15,917
Accrued employee compensation 1,684 961
Other accrued expenses 1,511 2,052
------------- -------------
Total current liabilities 15,924 18,930
Long-term liabilities 513 645
------------- -------------
Total liabilities 16,437 19,575
------------- -------------
Business equity 34,102 36,908
------------- -------------
Total liabilities and business equity $ 50,539 $ 56,483
============= =============
See accompanying notes to combined financial statements.
4
FLORSHEIM SHOE
COMBINED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED DECEMBER 29, 2001, DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
Fiscal Year Ended
------------------------------------------------
December 29, December 30, January 1,
2001 2000 2000
------------- ------------- -------------
Net sales $ 90,904 $ 96,368 $ 113,466
Cost of sales 54,415 60,144 72,273
----------- ----------- -----------
Gross profit 36,489 36,224 41,193
Selling, general and administrative expenses 35,257 45,078 43,153
----------- ----------- -----------
Earnings (loss) from operations $ 1,232 $ (8,854) $ (1,960)
=========== =========== ===========
See accompanying notes to combined financial statements.
5
FLORSHEIM SHOE
COMBINED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED DECEMBER 29, 2001, DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
Fiscal Year Ended
------------------------------------------------
December 29, December 30, January 1,
2001 2000 2000
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings (loss) from operations $ 1,232 $ (8,854) $ (1,960)
Adjustments to reconcile earnings (loss) from operations
to net cash provided by operating activities:
Loss on disposal of assets 605 580 199
Depreciation and amortization 4,772 4,797 3,585
Changes in operating assets and liabilities:
Receivables (101) 11,066 2,277
Inventories 1,581 59 3,597
Prepaid expenses and other assets (138) 598 (135)
Accounts payable, accrued employee compensation
and other accrued expenses (3,016) 5,032 (5,046)
Long-term liabilities (132) (786) (355)
Currency translation adjustment (84) (194) (664)
----------- ----------- -----------
Net cash provided by operating activities 4,719 12,298 1,498
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets 14 63 469
Capital expenditures (779) (3,205) (6,975)
----------- ----------- -----------
Net cash used in investing activities (765) (3,142) (6,506)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES-
Net (distribution to) cash received
from Florsheim Group Inc. (3,954) (9,156) 5,008
----------- ----------- -----------
Net change in cash and cash equivalents - - -
Cash and cash equivalents at beginning of year - - -
----------- ----------- -----------
Cash and cash equivalents at end of year $ - $ - $ -
=========== =========== ===========
See accompanying notes to combined financial statements.
6
FLORSHEIM SHOE
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2001 AND DECEMBER 30, 2000
AND FOR THE FISCAL YEARS ENDED DECEMBER 29, 2001,
DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(1) BASIS OF PRESENTATION
Nature of Business
Florsheim Shoe (the "Business") represents the non-manufacturing portion
of the U.S. Wholesale division, 23 U.S. retail stores and the European
operations of Florsheim Group Inc. and its subsidiaries ("Florsheim" or
the "Company"). Florsheim is in the business of the design, marketing,
sourcing and distribution of products in the middle to upper price range
of the men's quality footwear market, sold primarily under the Florsheim
brand name.
On March 4, 2002, the Company voluntarily filed a petition for relief
under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy
Proceedings"). Concurrent with the Bankruptcy Proceedings, the Company
entered into an agreement with the Weyco Group Inc. ("Weyco") to sell the
assets of the Business, and Weyco agreed to assume certain trade and
lease liabilities (the "Agreement"), subject to approval by the
bankruptcy court. The sales of the U.S. operations and the European
operations were completed in May 2002 and August 2002, respectively. The
total sales price was $46,700.
The accompanying combined financial statements are being prepared to
comply with the rules and regulations of the Securities and Exchange
Commission. The combined financial statements have been derived from the
books and records of the Company and have been prepared by management
using the historical results of operations and assets and liabilities of
the Business determined on the basis of established accounting methods,
practices, procedures, and policies used by Florsheim. The combined
statements of operations include items of revenue generated by the
Business, items of expense directly incurred and estimates of certain
expenses charged or allocated to the Business by Florsheim in the normal
course of business. Certain U.S. retail net assets and operating expenses
were allocated based on revenues. In addition, certain corporate assets,
liabilities and expenses were allocated to the Business for the purpose
of preparing these combined financial statements. The expense allocations
and estimates are not necessarily indicative of the costs and expenses
that would have resulted if the Business had been operated by Weyco, or
of the costs that may be incurred in operating the Business in the
future. The combined balance sheets include assets and liabilities of the
Business, and do not necessarily represent the assets purchased and
liabilities assumed by Weyco.
The accompanying combined financial statements do not reflect the
allocation of : (1) corporate cash and general corporate debt or interest
expenses incurred by the Company in financing the operations and
activities of the Business; (2) corporate income taxes and related tax
assets and liabilities; (3) assets and the related earnings associated
with the Company's over funded defined benefit retirement plan; (4) costs
and expenses and the related liabilities associated with retiree health
and life insurance benefit plans; (5) costs and expenses associated with
operating the Business as a public company, including the costs of the
executive management of the Company and (6) all income and expenses from
non-operating activities and transactions because they are not related to
the purchased assets. During fiscal 2001, 2000 and 1999, the Company
recorded certain asset impairment and other restructuring costs. These
charges have not been included in the accompanying combined financial
statements. The net assets and results of operations of the Company's
Cape Girardeau, Missouri manufacturing facility, which was closed in
1999, and the net assets and results of operations of the Company's Golf
and John Deere product lines are not included in any periods presented in
the accompanying combined financial statements. The results of operations
of the Company's Abboud product line, which was discontinued in fiscal
2000, have not been included in the combined statements of operations for
all periods
7
FLORSHEIM SHOE
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2001 AND DECEMBER 30, 2000
AND FOR THE FISCAL YEARS ENDED DECEMBER 29, 2001,
DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
presented. Accounts receivable related to the Abboud product line, which
are not considered to be material, were not specifically identifiable and
could not be excluded from the combined balance sheets. Inventory related
to the Abboud product line was excluded from net assets. Additionally,
the net assets and results of operations of the Company's subsidiaries in
Australia, Hong Kong and Canada are not included in these combined
financial statements. However, the royalty income on sales arising from
the operations of these subsidiaries has been included and classified as
revenue of the Business. The royalty income for the periods ended
December 29, 2001, December 30, 2000 and January 1, 2000 was $623, $886
and $1,008, respectively.
Because of the special purpose for which these combined financial
statements have been prepared and the significance of the allocations and
estimates underlying their preparation, these combined financial
statements are not indicative of the financial position or results of
operations that would have resulted if the Business had been operated as
a separate entity. Management believes that the accounting judgments,
estimates and allocations made in preparing these combined financial
statements are reasonable.
(2) SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets 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 reporting period. Actual
results could differ from those estimates.
Basis of Combination
All significant intercompany transactions and balances have been
eliminated, except as discussed in Note 1.
Fiscal Year
The fiscal year end of the Business is the Saturday closest to December
31. For purposes of these combined financial statements, fiscal 2001
refers to the 52 week period ended December 29, 2001, fiscal 2000 refers
to the 52 week period ended December 30, 2000 and fiscal 1999 refers to
the 52 week period ended January 1, 2000.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method)
or market or net realizable value.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost when acquired.
Expenditures for improvements are capitalized, while normal repairs and
maintenance are expensed as incurred. For financial reporting purposes,
the Business generally utilizes the straight-line method of computing
depreciation and amortization. Such expense is computed based on the
estimated useful lives of the respective assets, which generally range
from 34 to 40 years for buildings, 5 to 11.5 years for leasehold
improvements, 10 years for machinery and equipment, 5 to 11.5 years for
furniture and fixtures, and 3 to 5 years for computer equipment and
software.
Revenue Recognition
The Business recognizes revenue to wholesale customers as products are
shipped. Retail stores record revenue at the point of sale. E-commerce
and catalog sales are also recognized as revenue at the time of
8
FLORSHEIM SHOE
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2001 AND DECEMBER 30, 2000
AND FOR THE FISCAL YEARS ENDED DECEMBER 29, 2001,
DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
shipment. Licensing revenue is recognized as revenue when the related
sales are reported.
Advertising
Advertising costs are expensed as incurred. These expenses were $1,585,
$2,072 and $3,982 in fiscal 2001, 2000, and 1999, respectively.
Foreign Currency Translation
The balance sheet accounts of the European operations have been
translated from their functional currencies to the U.S. dollar. Such
translation adjustments are not included in income, but are included in
business equity.
Comprehensive Loss
Statement of Financial Standards No. 130, Reporting Comprehensive Income
(SFAS No. 130) establishes standards for reporting of comprehensive
income, which includes foreign currency translation adjustments and
certain other types of changes in shareholders' equity that result from
non-owner sources. Comprehensive loss from foreign currency translation
was $84, $194 and $664, respectively, in fiscal 2001, 2000 and 1999.
Accounting for Computer Software
The Business accounts for computer software costs in accordance with the
provisions of AICPA Statement of Position No. 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use. This
statement provides guidance on the capitalization of certain internal
costs as they relate to software developed or implemented for internal
use. The Business capitalized approximately $2,186 and $1,100 of internal
software development costs in fiscal years 2000 and 1999, respectively.
No internal costs were capitalized in fiscal 2001.
(3) INVENTORIES
Inventories consisted of the following:
December 29, December 30,
2001 2000
------------- -------------
Retail merchandise $ 4,051 $ 3,484
Finished products 20,532 22,680
------------- -------------
$ 24,583 $ 26,164
============= =============
9
FLORSHEIM SHOE
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2001 AND DECEMBER 30, 2000
AND FOR THE FISCAL YEARS ENDED DECEMBER 29, 2001,
DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(4) BUSINESS EQUITY
Business equity represents the Florsheim ownership interest in the
recorded net assets of the Business. All cash transactions, including the
collection of accounts receivable, payment of accounts payable and
accrued expenses and other allocations are included as net (distribution
to) cash received from Florsheim Group Inc. in business equity due to the
Company's centralized cash management. A summary of the activity is as
follows:
Fiscal Year Ended
------------------------------------------------
December 29, December 30, January 1,
2001 2000 2000
--------------- --------------- -------------
ACCUMULATED OTHER COMPREHENSIVE LOSS --
CUMULATIVE TRANSLATION ADJUSTMENT
Balance at beginning of year $ (770) $ (576) $ 88
Cumulative translation adjustment (84) (194) (664)
--------------- --------------- -------------
Balance at end of year (854) (770) (576)
OTHER BUSINESS EQUITY
Balance at beginning of year 37,678 55,688 52,640
Earnings (loss) from operations 1,232 (8,854) (1,960)
Net (distribution to) cash received from
Florsheim Group Inc. (3,954) (9,156) 5,008
--------------- --------------- -------------
Balance at end of year 34,956 37,678 55,688
TOTAL BUSINESS EQUITY $ 34,102 $ 36,908 $ 55,112
=============== =============== =============
(5) JOINT VENTURE
Until July 2001, the Company had a 26.1% equity interest in a joint
venture in India ("Florind"). The Company sold its interest to the
Florind majority shareholders in July 2001. Florind manufactures finished
goods on an exclusive basis for Florsheim. The investment, equity
earnings and proceeds from the sale have been excluded from the combined
financial statements of the Business. Purchases from Florind by the
Business were $34,134, $41,824 and $37,072 in fiscal 2001, 2000 and 1999,
respectively, and are included in the combined financial statements. The
Business continued to purchase product under a supply agreement following
the sale of Florsheim's equity interest.
(6) EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) plan that allows employees to contribute a
portion of their pre-tax and/or after-tax income in accordance with
specified guidelines. Florsheim matches a percentage of employee
contributions up to certain limits. The cost of the matching contribution
for employees of the Business for fiscal 2001, 2000 and 1999 was $31, $45
and $63, respectively. As a result of the termination of Florsheim's
defined benefit pension plan, in fiscal 2000, the Company amended the
401(k) plan to enhance benefits. As a result of the amendment, the
Company made additional contributions of $661 in February 2002 for the
fiscal year ended December 29, 2001 for employees of the Business, which
is included in the combined statement of operations for the fiscal year
ended December 29, 2001.
10
FLORSHEIM SHOE
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2001 AND DECEMBER 30, 2000
AND FOR THE FISCAL YEARS ENDED DECEMBER 29, 2001,
DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(7) LEASE COMMITMENTS
Substantially all retail outlets and certain other real properties and
equipment of the Business are operated under lease agreements expiring at
various dates through the year 2008. Leases covering retail outlets and
equipment generally require, in addition to stated minimums, contingent
rentals based on retail sales and equipment usage. Certain of the leases
provide for renewal for various periods at stipulated rates. Rental
expenses under operating leases for fiscal 2001, 2000 and 1999 were
$2,715, $2,956 and $2,335, respectively.
Minimum future annual rental commitments under non-cancelable operating
leases in each of the five fiscal years 2002 through 2006 are $2,998,
$2,584, $2,211, $1,673 and $1,374, respectively, and in aggregate for all
lease agreements, $1,305 through the end of the lease terms.
(8) LITIGATION
Florsheim is involved in a number of pending or threatened legal
proceedings in the ordinary course of business. As discussed in Note 1,
Weyco did not assume liabilities related to Florsheim's litigation.
(9) BUSINESS SEGMENTS
The presentation of segment information reflects the manner in which
management organizes segments for making operating decisions and
assessing performance. The Business has three reportable segments: U.S.
Wholesale, U.S. Retail and Europe/Export. U.S. Wholesale distributes
footwear to large national retailers, department stores, independent shoe
stores and to Company specialty and outlet stores. U.S. Wholesale also
includes certain corporate expenses and assets, which are not charged to
other reportable segments. U.S. Retail consists of 23 U.S. specialty
retail shoe shops. Europe/Export consists of wholesale and retail
operations in Europe and Export business.
Sales of product from U.S. Wholesale to 23 U.S. Retail stores include a
standard mark-up, which is eliminated in combination as discussed in Note
1. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
11
FLORSHEIM SHOE
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2001 AND DECEMBER 30, 2000
AND FOR THE FISCAL YEARS ENDED DECEMBER 29, 2001,
DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
Business segment information is as follows:
Fiscal Year Ended Fiscal Year Ended
-------------------------------------------- -------------------------------------------
December 29, December 30, January 1, December 29, December 30, January 1,
2001 2000 2000 2001 2000 2000
------------- ------------- ------------- ------------- ------------- -------------
Net Sales Earnings (Loss) from Operations
-------------------------------------------- -------------------------------------------
U.S. Wholesale $ 65,305 $ 70,141 $ 86,513 $ 63 $ (11,114) $ (5,136)
U.S. Retail 19,872 19,306 19,038 898 1,443 1,792
Europe/Export 5,727 6,921 7,915 271 817 1,384
------------- ------------- ------------- ------------- ------------- -------------
$ 90,904 $ 96,368 $ 113,466 $ 1,232 $ (8,854) $ (1,960)
============= ============= ============= ============= ============= =============
Depreciation and Amortization Capital Expenditures
-------------------------------------------- -------------------------------------------
U.S. Wholesale $ 4,126 $ 4,182 $ 3,041 $ 156 $ 2,819 $ 6,522
U.S. Retail 586 542 457 623 358 442
Europe/Export 60 73 87 - 28 11
------------- ------------- ------------- ------------- ------------- -------------
$ 4,772 $ 4,797 $ 3,585 $ 779 $ 3,205 $ 6,975
============= ============= ============= ============= ============= =============
Total Assets
-----------------------------
U.S. Wholesale $ 42,445 $ 48,676
U.S. Retail 6,108 5,467
Europe/Export 1,986 2,340
------------- -------------
$ 50,539 $ 56,483
============= =============
Summary geographic information is as follows:
Fiscal Year Ended Fiscal Year Ended
-------------------------------------------- ----------------------------
December 29, December 30, January 1, December 29, December 30,
2001 2000 2000 2001 2000
------------- ------------- ------------- ------------- -------------
Net Sales Total Assets
-------------------------------------------- ----------------------------
United States $ 85,177 $ 89,447 $ 105,551 $ 48,553 $ 54,143
Europe/Export 5,727 6,921 7,915 1,986 2,340
------------- ------------- ------------- ------------- -------------
Total $ 90,904 $ 96,368 $ 113,466 $ 50,539 $ 56,483
============= ============= ============= ============= =============
12
FLORSHEIM SHOE
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2001 AND DECEMBER 30, 2000
AND FOR THE FISCAL YEARS ENDED DECEMBER 29, 2001,
DECEMBER 30, 2000 AND JANUARY 1, 2000
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------
FISCAL YEAR ENDED DECEMBER 29, 2001
Net sales $ 27,614 $ 21,862 $ 20,708 $ 20,720
Earnings (loss) from operations 1,239 (700) 921 (228)
FISCAL YEAR ENDED DECEMBER 30, 2000
Net sales $ 28,719 $ 24,109 $ 23,090 $ 20,450
Earnings (loss) from operations 839 (404) (5,347) (3,942)
13
Independent Auditors' Report
The Board of Directors and
Shareholders of Florsheim Group Inc.:
We have audited the accompanying combined balance sheets of Florsheim Shoe (the
"Business") as of December 29, 2001 and December 30, 2000, and the related
combined statements of operations and cash flows for the fiscal years ended
December 29, 2001, December 30, 2000, and January 1, 2000. These combined
financial statements are the responsibility of the management of the Business.
Our responsibility is to express an opinion on these combined financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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.
The accompanying combined financial statements were prepared to comply with the
rules and regulations of the Securities and Exchange Commission and on the basis
of presentation as described in Note 1. The combined financial statements
present the combined assets, liabilities and business equity and the related
combined revenues and expenses of the Business, and are not intended to be a
complete presentation of the financial position, results of operations or cash
flows of the Business. The combined financial statements include allocations as
discussed in Note 1 and present the earnings (loss) from operations and
therefore are not necessarily indicative of the financial position, results of
operations and cash flows that would be recorded by the Business on a
stand-alone basis.
In our opinion, the accompanying combined financial statements and financial
statement schedule present fairly, in all material respects, the combined
assets, liabilities and business equity of the Business as of December 29, 2001
and December 30, 2000, and the earnings (loss) from operations and their cash
flows for the fiscal years ended December 29, 2001, December 30, 2000, and
January 1, 2000, as prepared on the basis described in Note 1, in conformity
with accounting principles generally accepted in the United States of America.
KPMG LLP
Chicago, Illinois
July 31, 2002
14
FLORSHEIM SHOE SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
CHARGED
BALANCE AT TO COSTS OTHER BALANCE AT
FISCAL BEGINNING AND CHARGES YEAR
YEAR DESCRIPTION OF YEAR EXPENSES ADD (DEDUCT) (1) END
- ------- ------------------------------- ------------- ------------- ---------------- ----------
2001 Allowance for doubtful accounts
and cash discounts $ 2,420 357 (1,600) 1,177
2000 Allowance for doubtful accounts
and cash discounts $ 116 2,139 165 2,420
1999 Allowance for doubtful accounts
and cash discounts $ 790 1,240 (1,914) 116
(1) Includes write-offs for bad debts and cash discounts allowed.
15
FLORSHEIM SHOE
CONDENSED COMBINED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 30, 2002
16
FLORSHEIM SHOE
CONDENSED COMBINED BALANCE SHEETS
MARCH 30, 2002 AND DECEMBER 29, 2001
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(Unaudited)
March 30, December 29,
2002 2001
--------------- ---------------
ASSETS
Current assets:
Receivables, net $ 10,902 $ 9,975
Inventories 21,664 24,583
Prepaid expenses and other current assets 1,100 1,226
------------- -------------
Total current assets 33,666 35,784
Property, plant and equipment, net 13,060 13,068
Other assets 1,707 1,687
------------- -------------
Total assets $ 48,433 $ 50,539
============= =============
LIABILITIES AND BUSINESS EQUITY
Current liabilities:
Accounts payable $ 12,474 $ 12,729
Accrued employee compensation 1,177 1,684
Other accrued expenses 1,904 1,511
------------- -------------
Total current liabilities 15,555 15,924
Long-term liabilities 518 513
------------- -------------
Total liabilities 16,073 16,437
------------- -------------
Business equity 32,360 34,102
------------- -------------
Total liabilities and business equity $ 48,433 $ 50,539
============= =============
See accompanying notes to condensed combined financial statements.
17
FLORSHEIM SHOE
CONDENSED COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 2002 AND MARCH 31, 2001
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(Unaudited)
Three Months Ended
---------------------------------------
March 30, March 31,
2002 2001
----------------- ------------------
Net sales $ 20,454 $ 27,614
Cost of sales 11,893 16,172
----------------- ------------------
Gross profit 8,561 11,442
Selling, general and administrative expenses 6,904 10,203
----------------- ------------------
Earnings from operations $ 1,657 $ 1,239
================= ==================
See accompanying notes to condensed combined financial statements.
18
FLORSHEIM SHOE
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 30, 2002 AND MARCH 31, 2001
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(Unaudited)
Three Months Ended
---------------------------------------
March 30, March 31,
2002 2001
----------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings from operations $ 1,657 $ 1,239
Adjustments to reconcile earnings from operations
to net cash provided by (used in) operating activities:
Loss on disposal of assets - 616
Depreciation and amortization 27 1,191
Changes in operating assets and liabilities:
Receivables (927) (3,004)
Inventories 2,919 3,123
Prepaid expenses and other assets 93 46
Accounts payable, accrued employee compensation
and other accrued expenses (373) (7,544)
Long-term liabilities 5 18
Currency translation adjustment (31) (57)
----------------- ------------------
Net cash provided by (used in) operating activities 3,370 (4,372)
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2) (277)
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (distribution to) cash received
from Florsheim Group Inc. (3,368) 4,649
----------------- ------------------
Net change in cash and cash equivalents - -
Cash and cash equivalents at beginning of period - -
----------------- ------------------
Cash and cash equivalents at end of period $ - $ -
================= ==================
See accompanying notes to condensed combined financial statements.
19
FLORSHEIM SHOE
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
MARCH 31, 2002
(UNAUDITED)
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(1) BASIS OF PRESENTATION
Nature of Business
Florsheim Shoe (the "Business") represents the non-manufacturing portion
of the U.S. Wholesale division, 23 U.S. retail stores and the European
operations of Florsheim Group Inc. and its subsidiaries ("Florsheim" or
the "Company).
The accompanying unaudited condensed combined financial statements of the
Business have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and notes required by accounting
principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all
adjustments consisting of normal recurring adjustments, except as
otherwise disclosed, considered necessary for a fair presentation have
been included.
These unaudited interim condensed combined financial statements should be
read in conjunction with the Combined Financial Statements and notes as
of December 29, 2001 and December 31, 2000 and for each of the fiscal
years in the three year period ended December 29, 2001.
Business Transaction
On March 4, 2002, the Company voluntarily filed a petition for relief
under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy
Proceedings"). Concurrent with the Bankruptcy Proceedings, the Company
entered into an agreement with the Weyco Group Inc. ("Weyco") to sell the
assets of the Business, and Weyco agreed to assume certain trade and
lease liabilities (the "Agreement"), subject to approval by the
bankruptcy court. The sales of the U.S. operations and European
operations were completed in May 2002 and July 2002, respectively. The
total sales price was $46,700.
(2) INVENTORIES
Inventories consisted of the following:
March 30, December 29,
2002 2001
------------- -------------
Retail merchandise $ 3,854 $ 4,051
Finished products 17,810 20,532
------------- -------------
$ 21,664 $ 24,583
============= =============
20
FLORSHEIM SHOE
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
MARCH 30, 2002
(UNAUDITED)
(IN THOUSANDS)
- --------------------------------------------------------------------------------
(3) BUSINESS EQUITY
Business Equity represents the Florsheim Group Inc.'s ownership interest
in the recorded net assets of Florsheim Shoe. All cash transactions,
including the collection of accounts receivable, payment of accounts
payable and accrued expenses and other allocations are included as net
(distribution to) cash received from Florsheim Group Inc. in business
equity. A summary of the activity is as follows:
March 30, March 31,
2002 2001
------------- -------------
ACCUMULATED OTHER COMPREHENSIVE LOSS -
CURRENCY TRANSLATION ADJUSTMENT
Balance at beginning of period $ (854) $ (770)
cumulative translation adjustment (31) (57)
------------- -------------
Balance at end of period (885) (827)
OTHER BUSINESS EQUITY
Balance at beginning of period 34,956 37,678
Earnings from operations 1,657 1,239
Net (distribution to) cash received
from Florsheim Group, Inc. (3,368) 4,649
------------- -------------
Balance at end of period 33,245 43,566
TOTAL BUSINESS EQUITY $ 32,360 $ 42,739
============= =============
(4) BUSINESS SEGMENTS
Business segment information is as follows:
Three Months Ended Three Months Ended
----------------------------------- -----------------------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
---------------- --------------- --------------- ----------------
Net Sales Earnings from Operations
----------------------------------- -----------------------------------
U.S. Wholesale $ 13,914 $ 21,211 $ 865 527
U.S. Retail 4,888 4,664 615 515
Europe/Export 1,652 1,739 177 197
---------------- --------------- --------------- ----------------
$ 20,454 $ 27,614 $ 1,657 $ 1,239
================ =============== =============== ================
Depreciation and Amortization Capital Expenditures
----------------------------------- -----------------------------------
U.S. Wholesale $ 13 $ 1,037 $ - $ 4
U.S. Retail - 139 2 271
Europe/Export 14 15 - 2
---------------- --------------- --------------- ----------------
$ 27 $ 1,191 $ 2 $ 277
================ =============== =============== ================
21
FLORSHEIM SHOE
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
MARCH 30, 2002
(UNAUDITED)
(IN THOUSANDS)
- --------------------------------------------------------------------------------
March 30, December 29,
2002 2001
---------------- ---------------
Total Assets
-----------------------------------
U.S. Wholesale $ 40,106 $ 42,445
U.S. Retail 6,075 6,108
Europe/Export 2,252 1,986
---------------- ---------------
$ 48,433 $ 50,539
================ ===============
Summary geographic information is as follows:
Fiscal Year Ended Fiscal Year Ended
----------------------------------- -----------------------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
---------------- --------------- --------------- ----------------
Net Sales Total Assets
----------------------------------- -----------------------------------
United States $ 18,802 $ 25,875 $ 46,181 $ 48,553
Europe/Export 1,652 1,739 2,252 1,986
---------------- --------------- --------------- ----------------
Total $ 20,454 $ 27,614 $ 48,433 $ 50,539
================ =============== =============== ================
22