Exhibit 13
2003 ANNUAL REPORT
WEYCO GROUP, INC.
To Our Shareholders:
2003 was an exciting year of progress and change for our Company. Following our
May 2002 acquisition of the Florsheim brand, 2003 was a year of rolling up our
sleeves and completing the integration of Florsheim into our Company.
Our net sales for 2003 were a record $215.8 million, up 19% from $181.2 million
for 2002. Net earnings for 2003 were also a record $17.1 million, an increase of
30% over net earnings of $13.2 million for 2002. Diluted earnings per share were
$2.91, up from $2.29 for 2002, an increase of 27%. Our increases for the year
are directly related to our acquisition of the Florsheim brand.
Within the Florsheim brand, we worked through the excess inventory that we
acquired, pruned back the distribution that did not fit Florsheim's position in
the market, and retooled the product line to broaden the brand's appeal to a
more modern consumer. In addition, we invested in an advertising campaign for
the Florsheim brand, which we believe gives the brand a younger image and builds
upon the tremendous awareness that Florsheim already has in the marketplace. Our
focus for 2004 is on continuing to build the Florsheim brand for the long term,
with the right retail partners, emphasizing department stores and better
specialty stores.
Our other brands also continued to perform well in the marketplace. Our
Comfort-Gel construction continues to be well-received by retail customers and
consumers. This has driven our second straight year of wholesale sales growth
for the Nunn Bush division.
Our Stacy Adams dress shoe business was strong this year, with high-single-digit
sales increases. We fell short of last year in our SAO casual business, however,
as the preferences of the consumers of streetwear casual footwear shifted more
toward the athletic shoe market. We have been very busy putting together new
designs for this line, and are committed to maintaining SAO as a key component
of the Stacy Adams division.
Our licensing revenues more than doubled in 2003. Within the Stacy Adams
division, we have had licensing agreements with apparel and accessory
manufacturers for five years, with each year better than the last. We are
pleased with this progression and even more pleased with the exposure this has
provided for Stacy Adams. Florsheim royalties from footwear sales overseas also
increased in 2003, partially due to the fact that this has been the first full
year that we have owned the Florsheim brand, but also due to a new licensing
agreement for socks sold in the United States. We are excited about the
prospects for continued growth in this area of our business.
Our balance sheet continues to strengthen. Our cash flow from operations was up
over 80% in 2003. We are pleased that our cash and marketable securities
increased $2.1 million, while at the same time we paid down $9.9 million of our
outstanding debt, spent $8.5 million on the expansion of our distribution center
and repurchased $3.4 million of our common stock.
We are also proud to state that we continue to pay annually increasing dividends
to our shareholders, with a dividend increase of over 15% during 2003.
Operationally, we had initially made room for the additional Florsheim inventory
in 2002 by purchasing a new building adjacent to our existing distribution
facility. During 2003, we connected the two separate buildings with a 275,000
square foot expansion, and reconfigured our distribution systems to create an
efficient distribution flow for all products. The expansion project was
completed in the third quarter of 2003. The result was one contiguous state of
the art distribution center with room for future growth.
While we are pleased with our results for 2003, our work is far from over. We
are excited about the growth opportunities of our brands as we head into 2004.
We appreciate the support from all of our shareholders and are looking forward
to a great 2004.
Thomas W. Florsheim, Jr. John W. Florsheim
Chairman and Chief Executive Officer President and
Chief Operating Officer
Annual Report
SELECTED FINANCIAL DATA
Years Ended December 31
------------------------------------------------------------------------
2003(1) 2002 (1) 2001 2000 1999
------------ ------------ ------------ ------------ ------------
Net sales ............................. $215,761,000 $181,200,000 $131,693,000 $148,155,000 $132,905,000
Net earnings .......................... $17,135,000 $ 13,188,000 $ 9,501,000 $ 10,622,000 $ 11,058,000
Diluted earnings per share(2) ......... $ 2.91 $ 2.29 $ 1.64 $ 1.72 $ 1.70
Weighted average diluted shares
outstanding(2) ....................... 5,878,287 5,753,442 5,792,501 6,162,351 --
6,507,881
Cash dividends per share(2) .......... $ .38 $ .34 $ .31 $ .29 $ .26
Total assets .......................... $151,186,000 $149,239,000 $ 97,954,000 $ 91,943,000 $ 95,919,000
Bank borrowings ....................... $ 27,945,000 $ 37,802,000 $ -- $ -- $ --
(1) Includes the operating results of the acquired Florsheim business. See Note
3 to the Consolidated Financial Statements for additional information.
(2) Earnings per share, weighted average shares and cash dividends per share for
all years presented have been retroactively restated for the October
1, 2003, 50% stock dividend.
COMMON STOCK DATA
2003 2002
-------------------------- --------------------------
Price Range Cash Price Range Cash
-------------- Dividends --------------- Dividends
Quarter: High Low Declared Quarter: High Low Declared
- -------- ------ ------ --------- -------- ------ ------ ---------
First ............................. $29.02 $20.51 $ .09 First ............................. $21.67 $16.90 $ .08
Second ............................ 35.06 28.12 .09 Second ............................ 27.33 19.33 .08
Third ............................. 32.91 28.65 .10 Third ............................. 26.67 20.67 .09
Fourth ............................ 38.22 27.63 .10 Fourth ............................ 25.13 21.84 .09
----- -----
$ .38 $ .34
===== =====
Note: All stock price and dividend information has been adjusted to reflect the
October 1, 2003, 50% stock dividend.
There are 268 holders of record of the Company's common stock and 114 holders of
record of the Company's Class B common stock as of March 8, 2004.
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 14 to the Consolidated Financial Statements
for additional information.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a distributor of men's casual, dress and fashion shoes under the
Florsheim, Nunn Bush, Nunn Bush NXXT, Brass Boot, Stacy Adams and SAO by Stacy
Adams brand names. Inventory is purchased from third party overseas
manufacturers. The majority of foreign-sourced purchases are denominated in U.S.
dollars. The Company's products are sold to shoe specialty stores, department
stores and clothing retailers primarily in North America, with some distribution
in Europe. The Company also has a retail division, which consists of 30
Company-owned retail stores in the United States and three in Europe. Sales in
retail outlets are made directly to consumers by Company employees. The Company
also has licensing agreements with third parties who sell its branded shoes
overseas, as well as licensing agreements with apparel and accessory
manufacturers in the United States. As such, the Company's results are primarily
impacted by the economic conditions and the retail environment in the United
States.
The $48.5 million acquisition of the Florsheim brand and related assets in May
2002 had a significant impact on the operating results of the Company in 2002
and 2003. The largest impact of the acquisition is the overall increase in sales
and earnings in 2002 and 2003. Also, in 2002 the Company purchased a new
building adjacent to its current distribution center primarily to store the
Florsheim inventory, at a total cost of $6.3 million. In 2003, the Company
expanded its distribution center into one contiguous facility and reconfigured
its distribution systems to maximize efficiency, at a total cost of $8.5
million. These are the major events affecting the operating results of 2002 and
2003. A more detailed analysis of results follows.
ACQUISITION
On May 20, 2002, the Company acquired certain assets of Florsheim Group, Inc.'s
domestic wholesale and retail operations. On July 1 and July 27, 2002, the
Company acquired certain assets and assumed the operating liabilities of
Florsheim Europe S.r.l. and Florsheim France SARL, respectively. The total
purchase price was $48.5 million, and the Company entered into a two-year
revolving line of credit to fund the acquisition and related expenses. See Notes
3 and 9 of the Notes to Consolidated Financial Statements for further details of
the acquisition and borrowings under the line of credit.
LIQUIDITY & CAPITAL RESOURCES
The Company's primary source of liquidity is its cash and short-term marketable
securities, which aggregated $13,298,000 at December 31, 2003 and $9,400,000 as
of December 31, 2002. During 2003, the primary source of cash was operations,
while the primary uses of cash were purchases of plant and equipment, repayment
on borrowings, and the repurchase of shares of the Company's common stock.
The increase in net cash provided by operating activities this year reflects the
increase in net income for the year, which is largely the result of increased
sales volume since the 2002 acquisition. In addition, inventory, accounts
payable and accrued income tax receivable balances were at high levels at
December 31, 2002 due to the acquisition. By the end of 2003, they have returned
to more normalized levels. The changes in these account balances had a positive
impact on net cash provided by operating activities.
Capital expenditures included $8.5 million to expand and reconfigure the
distribution center to more efficiently handle the increased volumes resulting
from the acquisition. The project was completed in the third quarter of 2003,
and was financed by draws on the existing line of credit. As of December 31,
2003, there were no significant commitments for this or other capital projects.
Capital expenditures for 2004 are expected to return to normal levels of
approximately $1 to $2 million.
As of December 31, 2003, the Company had a total of $50 million available under
its existing borrowing facility, of which total borrowings were $27,945,000.
This facility includes certain financial covenants, including minimum net worth
levels, minimum levels of Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) and a maximum ratio of funded debt to EBITDA. As of
December 31, 2003 the Company was in compliance with all covenants.
In February 2004, the Company entered into an amended and restated loan
agreement. The total credit available remained at $50 million and financial
covenants remained the same. The major difference in the new facility is that it
is now a one-year credit agreement and allows the Company to finance more of its
debt at lower interest rates and reduces fees.
The Company believes that available cash and marketable securities, cash
provided by operations, and available borrowing facilities will provide adequate
support for the cash needs of the business in 2004.
RESULTS OF OPERATIONS
2003 vs. 2002
Overall net sales for the year ended December 31, 2003 of $215.8 million
increased 19% compared with $181.2 million for 2002. The increase resulted from
increases in both the wholesale and retail segments (See Note 16 of the Notes to
Consolidated Financial Statements for more information on operating segments).
Wholesale net sales for the current year were $187.3 million, as compared with
$163.6 million for 2002. Retail net sales for 2003 were $24.9 million, as
compared with $15.9 million in 2002. Also included in overall net sales are
licensing revenues of $3.6 million in 2003, as compared with $1.7 million in
2002.
For both the retail and wholesale segments, the primary reason for the increase
in net sales between 2002 and 2003 was due to 2003 including the Florsheim brand
for a full year as compared with roughly seven months in 2002. In the Company's
other brands, wholesale net sales for the Nunn Bush brand were up 1% while the
Stacy Adams brand was down 2%. The Nunn Bush brand held steady in a challenging
retail environment, while the Stacy Adams brand saw increases in its dress shoe
business, but decreases in its SAO casual business. Management believes that its
SAO casual business was down this year due to a shift by consumers from
streetwear casual shoes toward athletic shoes. The Company is responding to this
shift with new designs in the SAO line for 2004. In the retail division, the
Company closed one retail store and opened one new store during 2003. Same-store
sales increased 1.4% in 2003.
Gross earnings as a percent of net sales increased from 32.6% in 2002 to 35.4%
for 2003. Licensing revenues, which have no related cost of sales, had an effect
of increasing gross margins by .5% between 2002 and 2003. The remaining increase
was due to an increase in wholesale gross margins of 1.3%, from 29.2% in 2002 to
30.5% in 2003. This increase was due primarily to increased gross margins in the
Company's Florsheim division and was due to changes in product mix, as less
excess and closeout merchandise was sold in 2003. In addition, 1% of the
increase in overall gross margins is due to changes in the mix of wholesale and
retail sales as a percentage of total sales. Retail sales, which carry a higher
margin, comprised 11.5% of overall net sales in 2003 versus 8.8% in 2002.
Selling and administrative expenses as a percent of net sales were 22.8% in 2003
versus 20.8% in 2002. The increase is the result of increased wholesale selling
and administrative expenses as a percent of net sales, from 18.2% in 2002 to
19.6% in 2003, and due to the previously discussed changes in the mix of
wholesale and retail sales. Retail selling and administrative expenses as a
percent of retail net sales dropped from 48.0% in 2002 to 47.6% in 2003.
The increase in wholesale selling and administrative expenses is primarily due
to increased advertising expenses in 2003, as 2003 was the first year that the
Company put forth full promotional efforts for the Florsheim brand. Advertising,
net of co-op expenses, increased $1,843,000 in 2003. In addition, wholesale
selling and administrative expenses included $478,000 of expenses related to
eliminating manufacturing activities at the Company's plant in Beaver Dam,
Wisconsin, late in 2003. The product that was previously assembled in Beaver Dam
is now purchased from an overseas manufacturer.
Finally, wholesale selling and administrative expenses increased approximately
$980,000 in 2003 due to increased pension expense this year which resulted from
a curtailment loss due to the previously mentioned reduction in employees at
Beaver Dam, as well as higher amortization of actuarial losses caused by the
continued reduction in discount rates and lower than expected returns on prior
year plan assets.
Interest income for 2003 was $529,000 as compared with $853,000 for 2002. This
decrease was due to reductions in the average balance of marketable securities
outstanding between 2002 and 2003.
Interest expense for 2003 was $1,375,000 as compared with $1,289,000 for 2002.
The increase is primarily due to slightly higher average borrowings in 2003 due
to the acquisition occurring mid-year in 2002.
The effective tax rate for 2003 is 35.8% as compared with 37.2% in 2002. The
decrease in the rate is primarily due to the 2003 resolution of certain tax
matters related to an audit of the Company's 1996 Federal tax return. The
settlement had a favorable impact on the Company's 2003 tax provision, as the
Company had previously provided an amount in excess of the final settlement.
2002 vs. 2001
Overall net sales for the year ended December 31, 2002 of $181.2 million have
increased 38% compared with $131.7 million for 2001. The increase resulted from
increases in both the wholesale and retail segments (See Note 16 of the Notes to
Consolidated Financial Statements for more information on operating segments).
Wholesale net sales for 2002 were $163.6 million, as compared with $125.8
million for 2001. Retail net sales for 2002 were $15.9 million, as compared with
$5.1 million in 2001. Also included in overall net sales are licensing revenues
of $1.7 million in 2002, as compared with $0.8 million in 2001.
Net sales for 2002 relating to the Florsheim wholesale and retail operations
were $36.3 million and $11.7 million, respectively. Florsheim licensing revenues
were $0.8 million. The Nunn Bush division sales were up 7% while the Stacy Adams
division sales were down 3%. Excluding the acquisition of the Florsheim
wholesale business and related licensing revenue, sales for Weyco's existing
wholesale business were up $1.5 million in 2002. On the retail side, excluding
the 2002 Florsheim retail business, retail sales were down $900,000 between 2001
and 2002. This is primarily due to the closing of two retail stores in January
2002.
Gross earnings as a percent of net sales increased from 28.5% in 2001 to 32.6%
for 2002. Licensing revenues, which have no related cost of sales, had an effect
of increasing gross margins by 0.1% between 2001 and 2002. The remaining
increase is a result of increased gross earnings as a percent of net sales in
the wholesale segment, from 27.1% in 2001 to 29.2% in 2002, as well as in the
retail segment, from 52.5% in 2001 to 61.1% in 2002. In both segments, the
increases are due to changes in product mix between years. In addition, a part
of the increase in overall gross earnings as a percent of net sales is due to
changes in the mix of wholesale and retail sales as a percentage of total sales.
Retail sales, which carry a higher margin, comprised 8.8% of overall net sales
in 2002 versus 3.9% in 2001.
Selling and administrative expenses as a percent of net sales were 18.4% in 2001
versus 20.8% in 2002. This is the result of increased wholesale selling and
administrative expenses as a percent of net sales, from 17.0% in 2001 to 18.2%
in 2002, and decreased retail selling and administrative expenses as a percent
of net sales, from 52.3% in 2001 to 48.0% in 2002. The increase in wholesale
selling and administrative expenses is due to the ramp-up of operations in 2002
to accommodate the Florsheim acquisition. The decrease in retail selling and
administrative expenses as a percent of net sales is due to lower operating
costs at the stores that were acquired in the 2002 acquisition. Overall selling
and administrative expenses as a percent of net sales increased due to these
factors and also due to the previously discussed change in the mix of retail and
wholesale sales. The retail segment has significantly higher selling and
administrative expenses as a percent of net sales than the wholesale segment.
Interest income for 2002 was $853,000 as compared with $1,022,000 for 2001. This
decrease was due to reductions in the average balance of marketable securities
outstanding between 2001 and 2002.
Interest expense for 2002 was $1,289,000 as compared with $296,000 for 2001. The
increase is primarily due to borrowings under the line of credit during 2002 to
fund the acquisition and related expenses.
2001 other income and expense included a $504,000 gain on the sale of other
investments.
The effective tax rate for 2002 is 37.2% as compared with 35.4% in 2001. The
increase in the rate is primarily due to an increased federal statutory tax rate
of 35% for 2002, as compared with 34% for 2001. Also, municipal bond income
decreased for 2002 relative to pre-tax earnings, resulting in an increase in the
effective tax rate.
Off-Balance Sheet Arrangements
The Company does not utilize any special purpose entities or other off-balance
sheet arrangements.
Commitments
The Company's significant contractual obligations are its bank borrowings,
deferred compensation agreements, unfunded supplemental pension plan, and its
operating leases, which are discussed further in the notes to the financial
statements. The Company also has significant obligations to purchase inventory.
The bank borrowings, deferred compensation and supplemental pension obligations
are recorded on the Company's Consolidated Balance Sheets. Future obligations
under operating leases are disclosed in Note 13. The table below provides
summary information about these obligations.
Payments Due by Period (in 000's)
--------------------------------------------
Less More
Than a 1 - 3 3 - 5 Than 5
Total Year Years Years Years
------- ------- ------ ------ ------
Bank borrowings ................... $27,945 $27,945 -- -- --
Deferred compensation ............. 3,016 3,016 -- -- --
Supplemental pension plan ......... 3,077 172 344 344 2,217
Operating leases .................. 10,550 2,356 3,502 1,618 3,074
Purchase obligations .............. 41,960 41,960 -- -- --
------- ------- ------ ------ ------
Total ..................... $86,548 $75,449 $3,846 $1,962 $5,291
OTHER
Critical Accounting Policies
The Company's accounting policies are more fully described in Note 2 of the
Notes to Consolidated Financial Statements. As disclosed in Note 2, 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 about future events that affect the amounts reported
in the financial statements and accompanying notes. Future events and their
effects cannot be determined with absolute certainty. Therefore, the
determination of estimates requires the exercise of judgment. Actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements.
The most significant accounting estimates inherent in the preparation of the
Company's financial statements include estimates as to the recovery of accounts
receivable, as well as those used in the determination of liabilities related to
taxation and pension benefits. The allowances for sales returns and doubtful
accounts are fact-specific and take into account such factors as specific
customer situations, historical experience and current and expected economic
conditions. Changes in these allowances may be required if actual returns,
discounts and bad debt activity varies from the original estimates.
The effective income tax rate is based on estimates of taxable income in each
jurisdiction where income is earned. The Company also records a liability for
potential income tax assessments based on estimates of potential exposure.
Adjustments to the effective income tax rate may be required if actual taxable
income or actual income tax assessments vary from the original estimates.
The pension benefit obligation and pension expense are calculated in accordance
with SFAS No. 87, "Employers' Accounting for Pensions", and are impacted by
certain actuarial assumptions, including the discount rate and the expected rate
of return on plan assets. These rates are evaluated on an annual basis
considering such factors as market interest rates and historical asset
performance. Actuarial valuations at December 31, 2003 used a discount rate of
6.0% and an expected rate of return on plan assets of 8.5%. A 0.5% decrease in
the discount rate would increase annual pension expense by approximately
$15,000. A 0.5% decrease in expected return on plan assets would increase annual
pension expense by approximately $117,000.
Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk from changes in foreign exchange and
interest rates. To reduce the risk from changes in foreign exchange rates, the
Company selectively uses financial instruments. The Company does not hold or
issue financial instruments for trading purposes. The Company does not have
significant market risk on its marketable securities as those investments
consist of high-grade securities and are held to maturity.
Foreign Currency
The Company's earnings are affected by fluctuations in the value of the U.S.
dollar against foreign currencies, primarily as a result of purchasing inventory
from Italian suppliers and the sale of product to Canadian customers. Forward
exchange contracts are used to partially hedge against the earnings effects of
such fluctuations.
At December 31, 2003, the Company has forward exchange contracts outstanding to
sell 6,000,000 Canadian dollars at a total price of $4,355,000. Based on
December 31, 2003 exchange rates, there are no significant gains or losses on
these contracts. All contracts expire in less than one year. Assuming a 10%
appreciation in the U. S. dollar at December 31, 2003, there would be a loss on
forward exchange contracts of $544,000.
Interest Rates
The Company is exposed to interest rate fluctuations on borrowings under its
Revolving Line of Credit (the "Line of Credit"). As of December 31, 2003, $10
million of advances on the Line of Credit were outstanding at an average
interest rate of 2.7% and $17.9 million of commercial paper was outstanding at
an average interest rate of 1.4%. The interest expense for 2003 was $923,000.
Assuming a 10% increase in the Company's weighted average interest rate on
borrowings, interest expense in 2003 would have increased by $79,000.
Forward-Looking Statements
This report contains certain forward-looking statements with respect to the
Company's outlook for the future. These statements represent the Company's
reasonable judgment with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially. These
factors could include significant adverse changes in the economic conditions
affecting overseas suppliers or the men's footwear markets served by the
Company, as well as changes in interest rates, discount rates, or currency
exchange rates as discussed above.
CONSOLIDATED
STATEMENTS OF EARNINGS
For the years ended December 31, 2003, 2002 and 2001
2003 2002 2001
------------- ------------- -------------
NET SALES .............................................. $ 215,760,531 $ 181,200,118 $ 131,692,896
COST OF SALES .......................................... 139,315,498 122,062,238 94,107,329
------------- ------------- -------------
Gross earnings .................................. 76,445,033 59,137,880 37,585,567
SELLING AND ADMINISTRATIVE EXPENSES .................... 49,184,303 37,731,912 24,231,452
------------- ------------- -------------
Earnings from operations ........................ 27,260,730 21,405,968 13,354,115
INTEREST INCOME ....................................... 528,531 853,032 1,021,687
INTEREST EXPENSE ....................................... (1,374,682) (1,289,159) (296,178)
OTHER INCOME AND EXPENSE, net ......................... 275,222 18,077 621,618
------------- ------------- -------------
Earnings before provision for income taxes ...... 26,689,801 20,987,918 14,701,242
PROVISION FOR INCOME TAXES ............................. 9,555,000 7,800,000 5,200,000
------------- ------------- -------------
Net earnings .................................... $ 17,134,801 $ 13,187,918 $ 9,501,242
============= ============= =============
BASIC EARNINGS PER SHARE* .............................. $ 3.01 $ 2.34 $ 1.65
============= ============= =============
DILUTED EARNINGS PER SHARE* ............................ $ 2.91 $ 2.29 $ 1.64
============= ============= =============
*Earnings per share figures have been adjusted to reflect the October 1, 2003,
50% stock dividend.
The accompanying notes to consolidated financial statements are an integral part
of these statements.
CONSOLIDATED BALANCE SHEETS
December 31, 2003 and 2002
2003 2002
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................. $ 9,091,567 $ 7,301,104
Marketable securities, at amortized cost .............................. 4,206,100 2,099,140
Accounts receivable, less reserves of $3,722,634 and
$3,954,515 respectively ............................................ 29,900,197 32,170,795
Accrued income tax receivable ......................................... 228,074 1,008,079
Inventories ........................................................... 43,727,578 49,740,933
Deferred income tax benefits .......................................... 2,483,037 2,421,000
Prepaid expenses and other current assets ............................. 968,264 803,108
------------- -------------
Total current assets ................................................ 90,604,817 95,544,159
------------- -------------
MARKETABLE SECURITIES, at amortized cost ................................... 6,273,638 8,026,127
OTHER ASSETS ............................................................... 13,750,574 12,687,075
PLANT AND EQUIPMENT, net ................................................... 29,689,257 22,159,983
TRADEMARK .................................................................. 10,867,969 10,821,681
------------- -------------
$ 151,186,255 $ 149,239,025
============= =============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term borrowings ................................................. $ 27,944,830 $ --
Accounts payable ...................................................... 7,465,606 11,268,713
Dividend payable ...................................................... 563,642 490,810
Accrued liabilities -
Wages, salaries and commissions ................................... 4,335,408 4,615,368
Taxes other than income taxes ..................................... 376,773 88,385
Other ............................................................. 3,567,665 3,769,620
------------- -------------
Total current liabilities ............................................. 44,253,924 20,232,896
------------- -------------
LONG-TERM PENSION LIABILITY ................................................ 3,077,285 3,003,823
DEFERRED INCOME TAX LIABILITIES ............................................ 5,009,158 3,416,000
LONG TERM DEBT ............................................................. -- 37,801,992
SHAREHOLDERS' INVESTMENT:
Common Stock, $1.00 par value, authorized 10,000,000 shares, issued and
outstanding 4,324,983 shares in 2003 and 2,886,456 shares in 2002 . 4,324,983 2,886,456
Class B Common Stock, $1.00 par value, authorized 2,000,000 shares,
issued and outstanding 1,305,435 shares in 2003 and
902,608 shares in 2002 ............................................ 1,305,435 902,608
Capital in excess of par value ........................................ 4,189,138 4,999,047
Reinvested earnings ................................................... 88,917,253 77,092,150
Accumulated other comprehensive income (loss) ......................... 109,079 (1,095,947)
------------- -------------
Total shareholders' investment ..................................... 98,845,888 84,784,314
------------- -------------
$ 151,186,255 $ 149,239,025
============= =============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' INVESTMENT
For the years ended December 31, 2003, 2002 and 2001
Accumulated
Class B Capital Other
Common Common in Excess of Reinvested Comprehensive Comprehensive
Stock Stock Par Value Earnings Income/(Loss) Income
------------- ----------- ------------- ---------- ------------- ------------
Balance, December 31, 2000 .......................... 3,053,895 918,955 3,780,797 63,591,622 --
Net earnings.................................. -- -- -- 9,501,242 -- $ 9,501,242
===========
Cash dividends declared ($.31 per share)* ... -- -- -- (1,796,554) --
Conversions of Class B Common Stock to
Common Stock ............................ 2,620 (2,620) -- -- --
Stock options exercised ...................... 18,500 -- 236,875 -- --
Income tax benefit from
stock options exercised ................. -- -- 70,841 -- --
Shares purchased and retired ................. (235,228) (7,304) (199,125) (5,342,753) --
---------- ----------- ----------- ------------ -----------
Balance, December 31, 2001 .......................... 2,839,787 909,031 3,889,388 65,953,557 --
Comprehensive Income -
Net earnings ................................ -- -- -- 13,187,918 -- $13,187,918
Foreign currency translation adjustments .... -- -- -- -- (231,636) (231,636)
Additional minimum pension liability (net
of tax of $552,594) ..................... -- -- -- -- (864,311) (864,311)
-----------
Total Comprehensive Income ......................... -- -- -- -- -- $12,091,971
===========
Cash dividends declared ($.34 per share)* ... -- -- -- (1,917,816)
Conversions of Class B Common Stock to
Common Stock ............................ 6,423 (6,423) -- -- --
Stock options exercised ..................... 47,746 -- 1,016,409 -- --
Income tax benefit from
stock options exercised ................. -- -- 149,688 -- --
Shares purchased and retired ................ (7,500) -- (56,438) (131,509) --
---------- ----------- ----------- ------------ -----------
Balance, December 31, 2002 .......................... 2,886,456 902,608 4,999,047 77,092,150 (1,095,947)
Comprehensive Income -
Net earnings ................................ -- -- -- 17,134,801 -- 17,134,801
Foreign currency translation adjustments .... -- -- -- -- 340,715 340,715
Additional minimum pension liability
(net of tax of $552,594) .............. -- -- -- -- 864,311 864,311
-----------
Total Comprehensive Income ......................... -- -- -- -- -- $18,339,827
===========
Cash dividends declared ($.38 per share)* ... -- -- -- (2,158,520) --
Common stock dividend ....................... 1,463,354 437,269 (1,901,697) -- --
Conversions of Class B Common Stock to
Common Stock ............................ 34,442 (34,442) -- -- --
Stock options exercised ..................... 50,881 -- 962,061 -- --
Income tax benefit from
stock options exercised ................. -- -- 229,693 -- --
Shares purchased and retired ................ (110,150) -- (99,966) (3,151,178) --
---------- ----------- ----------- ------------ -----------
Balance, December 31, 2003 .......................... $4,324,983 $ 1,305,435 $ 4,189,138 $ 88,917,253 $ 109,079
========== =========== =========== ============ ===========
*Cash dividends declared have been adjusted to reflect the October 1, 2003, 50%
stock dividend.
The accompanying notes to consolidated financial statements are an integral part
of these statements.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the years ended December 31, 2003, 2002 and 2001
2003 2002 2001
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings .............................................. $ 17,134,801 $ 13,187,918 $ 9,501,242
Adjustments to reconcile net earnings to net cash
provided by operating activities -
Depreciation ........................................... 2,322,794 2,104,960 1,608,525
Amortization of debt issuance costs .................... 187,020 126,159 --
Deferred income taxes................................... 978,527 1,164,000 295,000
Deferred compensation .................................. 197,292 184,380 172,307
Pension expense (income)................................ 992,050 13,971 (241,850)
(Gain) loss on sale of assets .......................... (25,819) 5,694 (95,350)
Gain on sale of other investments....................... -- -- (504,427)
Increase in cash surrender value of life insurance...... (574,371) (551,394) (493,376)
Changes in operating assets and liabilities
(net of acquired business) -
Accounts receivable..................................... 2,270,598 852,193 2,997,233
Inventories ............................................ 6,013,355 (7,374,620) (3,788,440)
Prepaids and other current assets....................... (165,156) (39,647) 19,811
Accounts payable........................................ (3,803,107) 5,672,219 (638,056)
Accrued liabilities and other........................... (258,149) 1,439,578 34,937
Accrued income taxes.................................... 1,009,700 (2,468,382) 1,121,040
------------ ------------ ------------
Net cash provided by operating activities........ 26,279,535 14,317,029 9,988,596
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Florsheim assets........................... (46,288) (48,477,847) --
Purchase of marketable securities......................... (5,163,270) (6,004,234) --
Proceeds from maturities of marketable securities......... 4,808,799 9,899,355 8,334,637
Proceeds from sales of other investments.................. -- -- 603,807
Purchase of plant and equipment........................... (9,833,660) (8,194,532) (743,956)
Proceeds from sales of plant and equipment ............... 37,623 2,200 165,595
------------ ------------ ------------
Net cash (used for) provided by investing activities.. (10,196,796) (52,775,058) 8,360,083
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs....................................... -- (374,057) --
Cash dividends paid ...................................... (2,086,763) (1,878,604) (1,790,792)
Shares purchased and retired.............................. (3,361,294) (195,447) (5,784,410)
Proceeds from stock options exercised..................... 1,012,943 1,064,155 255,375
Net (repayments) borrowings under revolving credit
facilities............................................ (9,857,162) 30,292,088 2,302,956
------------ ------------ ------------
Net cash (used for) provided by financing activities.. (14,292,276) 28,908,135 (5,016,871)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents....... 1,790,463 (9,549,894) 13,331,808
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, at beginning of year................ $ 7,301,104 $ 16,850,998 $ 3,519,190
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, at end of year...................... $ 9,091,567 $ 7,301,104 $ 16,850,998
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid, net of refunds.......................... $ 7,543,171 $ 9,069,613 $ 3,787,203
Interest paid.............................................. $ 1,383,664 $ 893,957 $ 321,574
The accompanying notes to consolidated financial statements are an integral part
of these statements.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002 and 2001
1. NATURE OF OPERATIONS
Weyco Group, Inc. is a U.S. based distributor of men's branded footwear. The
Company's brands include Florsheim, Nunn Bush, Nunn Bush NXXT, Brass Boot, Stacy
Adams and SAO by Stacy Adams. The Company's products are primarily sold to
unaffiliated retailers throughout the United States. The Company also has a
wholesale operation in Europe and has licensing agreements with third parties to
sell its products internationally. In addition, the Company operates 30 retail
stores in the United States and three in Europe.
2. SUMMARY OF SIGNIFICANT 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.
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 reported periods. Actual results could differ
from those estimates.
Cash and Cash Equivalents - The Company considers all highly liquid investments
with maturities of three months or less at the date of purchase to be cash
equivalents. At December 31, 2003 and 2002, approximately $6.4 million and $5.5
million, respectively, of the Company's cash and cash equivalents were held at
two banks.
Inventories - Inventories are valued at cost, which is not in excess of market.
Substantially all inventories are determined on a last-in, first-out (LIFO)
basis. Inventory costs include the cost of shoes purchased from third party
manufacturers, as well as related freight and duty. See Note 6.
Plant and Equipment and Depreciation - Plant and equipment are stated at cost
and depreciated using primarily the straight-line method over their estimated
useful lives as follows: buildings and improvements, 10 to 39 years; machinery
and equipment, 5 to 10 years; furniture and fixtures, 5 to 7 years.
Impairment of Long-Lived Assets - Property, plant and equipment and other
long-term assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected undiscounted cash flows is less than the carrying value of
the related asset or group of assets, a loss is recognized for the difference
between the fair value and carrying value of the asset or group of assets. There
were no significant adjustments to the carrying value of long-lived assets in
fiscal 2003, 2002, or 2001.
Income Taxes - Deferred income taxes are provided on temporary differences
arising from differences in the basis of assets and liabilities for income tax
and financial reporting purposes. See Note 11.
Financial Instruments - The Company has entered into forward exchange contracts
designated as cash flow hedges in accordance with Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" for the purpose of hedging against foreign currency risk. At
December 31, 2003, the Company has financial contracts outstanding to sell
6,000,000 Canadian dollars at a total price of $4,355,000. These contracts all
expire in 2004. Based upon year-end exchange rates, there are no significant
gains or losses on outstanding contracts.
Revenue Recognition - Revenue from the sale of product is recognized when title
and risk of loss transfers to the customer and the customer is obligated to pay
the Company. 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. All product sales are recorded net of
estimated allowances for returns and discounts. Revenue from third party
licensing agreements is recognized in the period earned. For December 31, 2003,
2002 and 2001, licensing revenues were $3,576,000, $1,671,000 and $758,000,
respectively.
Shipping and Handling Fees - The Company classifies shipping and handling fees
billed to customers as revenues. The corresponding shipping and handling
expenses are included in selling and administrative expenses and totaled
$1,531,000, $1,284,000 and $774,000 for 2003, 2002 and 2001, respectively.
Advertising Costs - Advertising costs are expensed as incurred. Total
advertising costs were $9,265,000, $6,426,000 and $4,961,000 in 2003, 2002 and
2001, respectively. All advertising expenses are included in selling and
administrative expenses with the exception of co-op advertising expenses which
are recorded as a reduction of net sales. Co-op advertising expenses reduced net
sales by $3,838,000, $2,842,000 and $1,949,000 for 2003, 2002 and 2001,
respectively.
Foreign Currency Translation - Foreign currency balance sheet accounts are
translated into United States dollars at the rates of exchange in effect at
fiscal year end. Income and expenses are translated at the average rates of
exchange in effect during the year. The related translation adjustments are made
directly to a separate component of Shareholders' Investment.
Earnings Per Share - Basic earnings per share excludes any dilutive effects of
common stock options. Diluted earnings per share includes any dilutive effects
of common stock options. See Note 15.
Stock Dividend - Certain share and all per share figures in this report have
been adjusted to reflect the October 1, 2003, 50% stock dividend.
Comprehensive Income - Comprehensive Income includes net earnings and changes in
Accumulated Other Comprehensive Income (Loss). The Company has chosen to report
Comprehensive Income and Accumulated Other Comprehensive Income (Loss) in the
Consolidated Statements of Shareholders' Investment. At December 31, 2003,
Accumulated Other Comprehensive Income consists of $109,079 of cumulative
translation adjustment gains. At December 31, 2002, Accumulated Other
Comprehensive Loss consisted of the additional minimum pension liability of
$864,311 (net of tax) and cumulative translation adjustment losses of $231,636.
Stock-Based Compensation - In December 2002, The Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure". The
Company adopted the disclosure provisions of this statement in 2002. At December
31, 2003, the Company has two stock-based employee compensation plans, which are
described more fully in Note 17. The Company accounts for those plans under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations.
Reclassification - Certain amounts in the prior year financial statements have
been reclassified to conform to the current year presentation.
3. ACQUISITION
On May 20, 2002, the Company acquired from Florsheim Group, Inc. and its
subsidiaries (collectively, "Florsheim"), certain assets of Florsheim's U.S.
wholesale business, including its accounts receivable, trademarks, and other
information assets, wholesale inventory (with specified exceptions) and other
specified assets, as well as the leaseholds and associated assets for 23 retail
and outlet shoe stores.
As part of the asset purchase agreement, the Company also agreed to purchase
certain assets of Florsheim Europe S.r.l. and Florsheim France SARL, two
wholly-owned subsidiaries of Florsheim. The acquisition of Florsheim Europe
closed on July 1, 2002 for approximately $400,000 plus the assumption of
operating liabilities. The acquisition of Florsheim France closed on July 27,
2002, for approximately $10,000 plus the assumption of certain operating
liabilities. The domestic and foreign assets acquired and liabilities assumed
are collectively referred to as the "Acquired Business."
Florsheim had been an international distributor of men's dress and casual
footwear. As a result of the acquisition, the Company acquired a leading brand
name in the men's footwear industry with worldwide name recognition. Weyco
believes that the brand complements the Company's current brands, enhances the
Company's position as a leading distributor of men's casual and dress footwear,
and allows the Company to achieve certain economies of scale.
The total purchase price of the Acquired Business was $48.5 million, including
$1.7 million of acquisition costs. The acquisition has been accounted for using
the purchase method of accounting and accordingly, the purchase price was
allocated on a preliminary basis to identifiable assets acquired and liabilities
assumed based upon their estimated fair values. The purchase price was finalized
in 2003, resulting in a $46,000 net increase in the value of the trademark since
December 31, 2002. The results of operations of the Acquired Business have been
included in the consolidated financial statements since the respective dates of
acquisition.
The following table summarizes the estimated fair value of the assets acquired
and liabilities assumed at the respective dates of acquisition (in thousands):
Accounts receivable $ 12,156
Inventory 24,865
Other current assets 597
Fixed assets 734
Trademark 10,868
--------
49,220
Current liabilities (696)
--------
$ 48,524
========
In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," the
acquired Florsheim trademark of $10.9 million is not being amortized, as it has
an indefinite life. The Company completed an impairment test of the acquired
trademark as of December 31, 2003, and found that no impairment currently
exists.
The following table sets forth the unaudited proforma information for the
Company as if the acquisition of the Acquired Business had occurred as of the
beginning of each previous year shown (in thousands, except per share data):
2002 2001
-------- --------
Net sales $214,399 $222,597
Net earnings $ 15,056 $ 8,719
Basic earnings per share $ 2.67 $ 1.51
Diluted earnings per share $ 2.62 $ 1.51
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of all short-term financial instruments, except marketable
securities, approximate fair value due to the short-term nature of those
instruments. Marketable securities are carried at amortized cost. The fair value
of marketable securities is estimated based upon quoted market rates (See Note
5). The carrying amount of short-term borrowings and long-term debt approximates
fair value as it bears interest at current market rates.
5. 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, 2003 and 2002 are as follows:
2002 2003
--------------------------- -------------------------------
Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- -----------
Municipal bonds :
Current $ 4,206,100 $ 4,045,776 $ 2,099,140 $ 2,119,001
Due from one through five years 4,374,350 4,644,362 7,038,428 7,387,517
Due from five through ten years 880,000 880,000 823,614 877,078
Due from ten through twenty years 1,019,288 1,026,353 63,581 63,350
Due from twenty through thirty years -- -- 100,504 100,000
----------- ----------- ----------- -----------
Total $10,479,738 $10,596,491 $10,125,267 $10,546,946
=========== =========== =========== ===========
The unrealized gains and losses on investment securities at December 31 are:
2003 2002
--------------------------- -------------------------------
Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses
---------- ---------- ---------- ----------
Municipal bonds. . . . . . . . . . . $313,495 $196,742 $422,621 $942
6. INVENTORIES
At December 31, 2003 and 2002, inventories consist of:
2003 2002
----------- -----------
Finished goods $43,727,578 $48,951,574
Shoes in process -- 337,221
Raw materials -- 452,138
----------- -----------
Total inventories $43,727,578 $49,740,933
=========== ===========
The excess of current cost over LIFO cost of inventories as of December 31, 2003
and 2002 was $12,413,000 and $12,488,000, respectively.
7. PLANT AND EQUIPMENT
At December 31, 2003 and 2002, plant and equipment consists of:
2003 2002
------------ ------------
Land $ 2,645,566 $ 2,582,110
Buildings and improvements 19,526,186 13,843,291
Machinery and equipment 16,167,204 12,738,871
Retail fixtures and leasehold improvements 2,575,294 1,922,982
------------ ------------
Plant and equipment 40,914,250 31,087,254
Less: accumulated depreciation (11,224,993) (8,927,271)
------------ ------------
Plant and equipment, net $ 29,689,257 $ 22,159,983
============ ============
8. OTHER ASSETS
Other Assets include the following amounts at December 31:
2003 2002
------------ ------------
Pension asset (See Note 10) $ 6,837,669 $ 6,166,831
Cash surrender value of life insurance 6,813,957 6,239,586
Unamortized debt issuance costs 60,878 247,898
Other investments 38,070 32,760
------------ ------------
$ 13,750,574 $ 12,687,075
============ ============
9. LONG TERM DEBT
On May 17, 2002, the Company entered into a two-year $60 million unsecured
Revolving Line of Credit (the "Line of Credit") with a group of banks. The
Company borrowed under the Line of Credit to fund the 2002 acquisition and for
other capital needs. The Line of Credit allowed for the issuance of up to $20
million in non-rated commercial paper at market interest rates and additional
bank borrowings at an interest rate of LIBOR plus from 150 to 250 basis points.
In accordance with the original agreement, the Line of Credit was reduced to $50
million on April 30, 2003. On May 5, 2003, the Line of Credit agreement was
extended an additional year, to April 30, 2005. At December 31, 2003,
outstanding borrowings under the Line of Credit were $27.9 million, consisting
of $17.9 million of commercial paper with an average interest rate of 1.39% and
$10 million of bank borrowings with an average interest rate of 2.7%. The
Company also pays a fee of .4375% on the unused portion of the Line of Credit.
In 2002, the Company incurred $374,000 of debt issuance costs related to this
Line of Credit. These costs are included in Other Assets and are being amortized
over the term of the Line of Credit. At December 31, 2003, $61,000 of costs
remain in Other Assets. The Line of Credit includes certain financial covenants,
including a minimum net worth of $92.8 million at December 31, 2003, minimum
levels of Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA) and a maximum ratio of funded debt to EBITDA. As of December 31, 2003,
the Company is in compliance with all covenants.
In February 2004, the Company renegotiated its Line of Credit, consolidating it
into a $50 million, 364-day facility with a single bank. The Line of Credit now
allows for the issuance of up to $25 million in non-rated commercial paper at
market interest rates and additional bank borrowings at a rate of LIBOR plus 150
basis points. There are no fees on the unused portion of the Line of Credit.
Financial covenants remain the same.
10. EMPLOYEE RETIREMENT PLANS
The Company had two defined benefit retirement plans covering substantially all
employees which were combined into one plan as of December 31, 2003, as well as
an unfunded supplemental pension plan for key executives. 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 for the defined benefit
retirement plan is to make contributions to the plan such that all employees'
benefits will be fully provided by the time they retire. Plan assets are stated
at market value and consist primarily of equity securities and fixed income
securities, mainly U. S. government and corporate obligations.
The Company's pension plan weighted average asset allocation at December 31,
2003 and 2002, by asset category, is as follows:
Plan Assets at December 31
---------------------------
2003 2002
---- ----
Asset Category -
Equity Securities. . . . . . . . . . . . . . . . . . . . . 51% 45%
Fixed Income Securities . . . . . . . . . . . . . . . . . 48% 49%
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 1% 6%
--- ----
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100%
The Company has a Retirement Plan Committee, consisting of the Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer, to manage the
operations and administration of all benefit plans and related trusts. The
committee has an investment policy for the pension plan assets that establishes
target asset allocation ranges for the above listed asset classes as follows:
equity securities: 30% - 70%; fixed income securities: 70% - 30%; other,
principally cash: 0% - 20%. On a semi-annual basis, the committee reviews
progress towards achieving the pension plan's performance objectives.
To develop the expected long-term rate of return on assets assumption, the
Company considered the historical returns and the future expectations for
returns for each asset class, as well as the target asset allocation of the
pension portfolio. This resulted in the selection of the 8.5% long-term rate of
return on assets assumption.
Assumptions used in determining the funded status at December 31 are:
2003 2002
---- -----
Discount rate ................................................ 6.0% 6.75%
Rate of compensation increase ................................ 4.5% 5.0%
Long-term rate of return on plan assets ...................... 8.5% 8.5%
All plans have a measurement date of December 31. The following is a
reconciliation of the change in benefit obligation and plan assets for the years
ended December 31, 2003 and 2002:
CHANGE IN BENEFIT OBLIGATION
2003 2002
----------- -----------
Benefit obligation, beginning of year ................................ $22,283,000 $19,123,000
Service cost ......................................................... 571,000 498,000
Interest cost ........................................................ 1,463,000 1,339,000
Plan amendments ...................................................... 75,000 --
Actuarial loss ....................................................... 4,020,000 2,614,000
Benefits paid ........................................................ (1,316,000) (1,291,000)
----------- -----------
Benefit obligation, end of year ...................................... $27,096,000 $22,283,000
=========== ===========
CHANGE IN PLAN ASSETS
2003 2002
----------- -----------
Fair value of plan assets, beginning of year ......................... $20,295,000 $21,020,000
Actual return on plan assets ......................................... 4,870,000 394,000
Contributions ........................................................ 172,000 172,000
Benefits paid ........................................................ (1,316,000) (1,291,000)
----------- -----------
Fair value of plan assets, end of year ............................... $24,021,000 $20,295,000
=========== ===========
Funded status of plan ................................................ $(3,075,000) $(1,988,000)
Unrecognized net actuarial loss ...................................... 6,648,000 6,240,000
Unrecognized prior service cost ...................................... 187,000 328,000
----------- -----------
Net amount recognized ................................................ $ 3,760,000 $ 4,580,000
=========== ===========
AMOUNTS RECOGNIZED IN THE BALANCE SHEETS CONSIST OF:
2003 2002
----------- -----------
Other assets ......................................................... $ 6,837,000 $ 6,167,000
Long-term pension liability .......................................... (3,077,000) (3,004,000)
Accumulated other comprehensive income ............................... -- 1,417,000
----------- -----------
Net amount recognized ................................................ $ 3,760,000 $ 4,580,000
=========== ===========
The accumulated benefit obligation for the defined benefit pension plans was
$23,562,000 and $19,343,000 at December 31, 2003 and 2002, respectively.
Information for pension plans with an accumulated benefit obligation in excess
of plan assets:
2003 2002
---- ----
Projected benefit obligation ................................................ $ 3,887,000 $7,334,000
Accumulated benefit obligation .............................................. $ 2,977,000 $6,778,000
Fair value of pension assets ................................................ $ -- $3,956,000
Assumptions used in determining net periodic pension cost at December 31 are:
2003 2002 2001
---- ---- ----
Discount rate .......................................................... 6.75% 7.25% 7.5%
Rate of compensation increase .......................................... 5.0% 5.0% 5.0%
Long-term rate of return on plan assets ................................ 8.5% 8.5% 8.5%
The components of net periodic pension cost for the years ended December 31,
2003, 2002 and 2001, are:
2003 2002 2001
---------- ----------- -----------
Benefits earned during the period .............................. $ 571,000 $ 498,000 $ 393,000
Interest cost on projected benefit obligation .................. 1,463,000 1,339,000 1,310,000
Expected return on plan assets ................................. (1,674,000) (1,738,000) (1,822,000)
Net amortization and deferral .................................. 440,000 (85,000) (123,000)
Curtailment loss ............................................... 192,000 -- --
----------- ----------- -----------
Net pension expense (income) ................................... $ 992,000 $ 14,000 $ (242,000)
=========== =========== ===========
The Company does not expect to make any contributions to its defined benefit
pension plan in 2004
The Company also has a defined contribution plan covering substantially all
employees. During 2003, 2002 and 2001, the Company contributed $125,000,
$106,000 and $90,000, respectively, to the plan.
11. INCOME TAXES
The provision for income taxes includes the following components:
2003 2002 2001
---------- ---------- ----------
Current
Federal ................ $6,884,000 $5,434,000 $3,766,000
State .................. 1,426,000 1,023,000 860,000
Foreign ................ 266,000 179,000 279,000
---------- ---------- ----------
Total ............ 8,576,000 6,636,000 4,905,000
Deferred ................... 979,000 1,164,000 295,000
---------- ---------- ----------
Total provision $9,555,000 $7,800,000 $5,200,000
========== ========== ==========
Effective tax rate ......... 35.8% 37.2% 35.4%
========== ========== ==========
The differences between the U.S. federal statutory income tax rate and the
Company's effective tax rate were as follows for the years ended December 31,
2003, 2002 and 2001:
2003 2002 2001
---- ---- ----
U. S. federal statutory income tax rate ............ 35.0% 35.0% 34.0%
State income taxes, net of federal tax benefit...... 3.4 3.1 3.8
Non-taxable municipal bond interest ................ (0.6) (1.2) (2.2)
Resolution of prior period tax matters ............. (2.4) -- --
Other .............................................. 0.4 0.3 (0.2)
---- ---- ----
35.8% 37.2% 35.4%
==== ==== ====
During 2003, the Company resolved certain matters related to an audit of its
1996 Federal income tax return. The settlement had a favorable impact on the
Company's 2003 tax provision, as the Company had previously provided an amount
in excess of the final settlement.
The foreign component of pretax net earnings was $810,000, $664,000 and $699,000
for 2003, 2002 and 2001, respectively.
The components of deferred taxes as of December 31, 2003 and 2002, are as
follows:
2003 2002
----------- -------------
Deferred tax assets:
Accounts receivable and inventory reserves ....... $ 86,000 $ 307,000
Deferred compensation ............................ 1,176,000 1,099,000
Other ............................................ 1,221,000 1,015,000
----------- -------------
2,483,000 2,421,000
----------- -------------
Deferred tax liabilities:
Pension asset .................................... (1,536,000) (1,234,000)
Cash value of life insurance ..................... (1,332,000) (1,168,000)
Depreciation ..................................... (1,761,000) (1,014,000)
Other ............................................ (380,000) --
----------- -------------
(5,009,000) (3,416,000)
----------- -------------
Net deferred tax liability ................. $(2,526,000) $ (995,000)
=========== =============
The net deferred tax liability is classified in the consolidated balance sheets
as follows:
2003 2002
----------- -----------
Current deferred income tax benefits $ 2,483,000 $ 2,421,000
Noncurrent deferred income tax liabilities (5,009,000) ( 3,416,000)
---------- -----------
$(2,526,000) $ (995,000)
=========== ===========
12. DEFERRED COMPENSATION
The Company has deferred compensation agreements with certain former executives.
The Company expensed $197,000 in 2003, $184,000 in 2002 and $172,000 in 2001 in
connection with these agreements. Amounts owed under these agreements are
included in Accrued Wages, Salaries and Commissions on the Consolidated Balance
Sheets.
13. OPERATING LEASES
The Company operates retail shoe stores under both short-term and long-term
leases. Leases provide for a minimum rental plus percentage rentals based upon
sales in excess of a specified amount. Total minimum rents were $2,569,000 in
2003, $1,686,000 in 2002, and $600,000 in 2001. Percentage rentals were $16,000
in 2003, $36,000 in 2002, and $42,000 in 2001.
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, 2003, are shown below. Renewal options exist for many long-term
leases.
2004 . . . . . . . . . . . . . . . . . . . . . . $ 2,356,000
2005 . . . . . . . . . . . . . . . . . . . . . . 1,971,000
2006 . . . . . . . . . . . . . . . . . . . . . . 1,531,000
2007. . . . . . . . . . . . . . . . . . . . . . . 1,040,000
2008. . . . . . . . . . . . . . . . . . . . . . . 578,000
Thereafter. . . . . . . . . . . . . . . . . . . . . . . 3,074,000
-----------
Total $10,550,000
===========
14. SHAREHOLDERS' INVESTMENT
Each share of Class B common stock has 10 votes, may only be transferred to
certain permitted transferees, is convertible to one share of common stock at
the holder's option and shares equally with the common stock in cash dividends
and liquidation rights.
In April 1998, the Company's Board of Directors first authorized a stock
repurchase program to purchase shares of its common stock in open market
transactions at prevailing prices. The Company also buys back shares of its
common stock from time to time in private transactions at prevailing prices.
During 2001, the Company purchased 177,500 shares at a total cost of $4,158,000
under the program, and 65,000 shares at a total cost of $1,626,000 in private
transactions, and during 2002, the Company purchased 5,000 shares at a total
cost of $126,750 under the program, and 2,500 shares at a total cost of $68,697
in private transactions. During 2003, the Company purchased 95,300 shares at a
total cost of $2,862,992 under the program, and 14,850 shares at a total cost of
$498,302 in private transactions. At December 31, 2003, the Company is
authorized to buy an additional 813,100 shares under the program.
15. EARNINGS PER SHARE
The following table sets forth the computations of basic and diluted earnings
per share:
2003 2002 2001
---- ---- ----
Numerator:
Net earnings ................................... $ 17,134,801 $13,187,918 $ 9,501,242
============= =========== ===========
Denominator:
Basic weighted average shares outstanding ...... 5,693,716 5,640,291 5,753,004
Effect of dilutive securities :
Employee stock options ....................... 184,571 113,151 39,497
------------- ----------- -----------
Diluted weighted average shares outstanding .... 5,878,287 5,753,442 5,792,501
============= =========== ===========
Basic earnings per share ......................... $ 3.01 $ 2.34 $ 1.65
============= =========== ===========
Diluted earnings per share ....................... $ 2.91 $ 2.29 $ 1.64
------------- =========== ===========
Diluted weighted average shares outstanding for 2003 exclude outstanding options
to purchase 154,875 shares of common stock at a weighted average price of $33.70
because they are antidilutive. 2002 diluted weighted average shares outstanding
exclude outstanding options to purchase 143,850 shares of common stock at a
weighted average price of $24.21 because they were antidilutive. 2001 diluted
weighted average shares outstanding exclude outstanding options to purchase
234,354 shares of common stock at a weighted average price of $17.10 because
they were antidilutive.
16. SEGMENT INFORMATION
The Company determines its operating segments based on the information utilized
by the Chief Executive Officer to allocate resources and assess performance.
Based upon this criteria, the Company has determined that it operates in two
business segments: wholesale distribution and retail sales of men's footwear.
Wholesale shoes are marketed through more than 10,000 shoe, clothing and
department stores. Most sales are to unaffiliated customers in North America,
with some distribution in Europe. In 2003, sales to the Company's largest
customer were 12% of total sales. There were no customers that accounted for 10%
or more of total sales in 2002. In 2001, sales to the Company's largest customer
were 10% of total sales. There are no other individually significant customers.
In the retail division, the Company currently operates 30 company-owned stores
in principal cities in the United States, as well as three stores in Europe.
Twenty-three of the domestic retail stores, as well as the three in Europe, were
acquired in 2002 as part of the Florsheim acquisition. 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.
The accounting policies of the segments are the same as those described in the
Summary of Significant Accounting Policies. The Company evaluates performance
based on earnings from operations before income taxes. Summarized segment data
for 2003, 2002 and 2001 are as follows:
Wholesale
Distribution Retail Total
------------ ------------ ------------
2003
Product sales $187,327,000 $ 24,858,000 $212,185,000
Licensing revenues 3,576,000 -- 3,576,000
------------ ------------ ------------
Net sales 190,903,000 24,858,000 215,761,000
Depreciation 1,603,000 720,000 2,323,000
Earnings from operations 23,388,000 3,873,000 27,261,000
Total assets 144,380,000 6,806,000 151,186,000
Capital expenditures 9,241,000 593,000 9,834,000
2002
Product sales $163,644,000 $ 15,885,000 $179,529,000
Licensing revenues 1,671,000 -- 1,671,000
------------ ------------ ------------
Net sales 165,315,000 15,885,000 181,200,000
Depreciation 1,619,000 486,000 2,105,000
Earnings from operations 19,334,000 2,072,000 21,406,000
Total assets 142,955,000 6,284,000 149,239,000
Capital expenditures 8,113,000 82,000 8,195,000
2001
Product sales $125,839,000 $ 5,096,000 $130,935,000
Licensing revenues 758,000 -- 758,000
------------ ------------ ------------
Net sales 126,597,000 5,096,000 131,693,000
Depreciation 1,451,000 158,000 1,609,000
Earnings from operations 13,344,000 10,000 13,354,000
Total assets 96,139,000 1,815,000 97,954,000
Capital expenditures 317,000 427,000 744,000
All corporate assets are included in the wholesale distribution segment. Net
sales above exclude intersegment sales.
Annual Report
17. STOCK-BASED COMPENSATION PLANS
The Company has two stock option plans: the 1996 Nonqualified Stock Option Plan
and the 1997 Stock Option Plan. Under the plans, options to purchase common
stock are granted to officers and key employees at prices not less than the fair
market value of the common stock on the date of the grant. All options are fully
vested six months after the date of grant, and most expire ten years from the
grant date, with the exception of certain incentive stock options, which expire
five years from the grant date. No stock-based employee compensation expense has
been reflected in net income, as all options granted under those plans had an
exercise price equal to or greater than the market value of the underlying
common stock on the date of grant.
The following table summarizes the stock option activity under the Company's
plans for the years ended December 31:
2003 2002 2001
------------------------- ------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
-------- -------------- -------- -------------- -------- --------------
Outstanding at beginning of year 722,481 $ 16.76 650,250 $ 14.90 553,125 $ 14.41
Granted 154,125 33.70 143,850 24.21 124,875 15.81
Exercised (57,756) 17.49 (71,619) 14.86 (27,750) 9.20
Forfeited -- -- -- -- -- --
-------- ----------- -------- -------------- -------- --------------
Outstanding at end of year 818,850 $ 19.91 722,481 $ 16.76 650,250 $ 14.90
======== ======== ========
Exercisable at end of year 818,850 $ 19.91 578,631 $ 14.91 525,375 $ 14.69
Weighted average fair market
value of options granted $ 11.28 $ 7.58 $ 5.19
The following table summarizes information about stock options outstanding at
December 31, 2003:
Weighted Weighted
Average Average
Range of Options Remaining Weighted Average Options Exercise Price of
Exercise Price Outstanding Contractual Life Exercise Price Exercisable Exercisable Options
- ---------------------------------------- ----------- ---------------- ---------------- ----------- --------------------
$9.06 .................................. 87,750 2.93 $ 9.06 87,750 $ 9.06
$14.50 to $18.70 ....................... 442,125 5.61 15.93 442,125 15.93
$24.08 to $26.48 ....................... 134,100 8.29 24.23 134,100 24.23
$33.58 to $36.94 ....................... 154,875 9.21 33.70 154,875 33.70
--------- --------- -------- --------- -------
$ 9.06 to $36.94 ....................... 818,850 6.13 $ 19.91 818,850 $ 19.91
========= ========= ======== ========= =======
At December 31, 2003, 45,525 shares of common stock have been reserved for
future stock option grants under the plans.
The following table illustrates the effect on net income and earnings per share
as if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS
No. 148, to stock-based employee compensation.
2003 2002 2001
-------------- -------------- --------------
Net earnings, as reported $ 17,134,801 $ 13,187,918 $ 9,501,242
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects 1,141,734 721,857 418,352
-------------- -------------- --------------
Pro forma net income ..................... $ 15,993,067 $ 12,466,061 $ 9,082,890
============== ============== ==============
Earnings per share
Basic - as reported .................. $ 3.01 $ 2.34 $ 1.65
Basic - pro forma .................... $ 2.81 $ 2.21 $ 1.58
Diluted - as reported ................ $ 2.91 $ 2.29 $ 1.64
Diluted - pro forma .................. $ 2.72 $ 2.17 $ 1.57
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:
2003 2002 2001
----------- ----------- ----------
Risk-free interest rate ..................... 4.06% 3.69% 5.39%
Expected dividend yields .................... 1.30% 1.45% 1.75%
Expected remaining life ..................... 8.8 yrs. 8.8 yrs. 8.6 yrs.
Expected volatility ......................... 25.0% 25.0% 23.0%
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
2003 First Quarter(1) Second Quarter(1) Third Quarter(1) Fourth Quarter(1) Year(1)
---- ---------------- ----------------- ---------------- ----------------- -------------
Net sales $60,379,924 $51,000,284 $49,817,256 $54,563,067 $ 215,760,531
Gross earnings $20,184,824 $17,613,896 $17,042,947 $21,603,366 $ 76,445,033
Net earnings $ 4,671,194 $ 3,593,444 $ 3,508,974 $ 5,361,189 $ 17,134,801
Net earnings per share
- Basic $ .82 $ .63 $ .62 $ .94 $ 3.01
- Diluted $ .80 $ .61 $ .59 $ .91 $ 2.91
2002 First Quarter Second Quarter(1) Third Quarter(1) Fourth Quarter(1) Year(1)
---- ------------- ----------------- ---------------- ----------------- ------------
Net sales $35,722,349 $32,532,514 $58,762,489 $54,182,766 $181,200,118
Gross earnings $ 9,477,071 $10,088,474 $18,763,722 $20,808,613 $ 59,137,880
Net earnings $ 2,273,032 $ 1,648,988 $ 4,532,443 $ 4,733,455 $ 13,187,918
Net earnings per share
- - Basic $ .41 $ .29 $ .80 $ .84 $ 2.34
- - Diluted $ .40 $ .29 $ .78 $ .82 $ 2.29
(1)Includes the operating results of the acquired Florsheim business since the
dates of acquisition as discussed in Note 3.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Weyco Group, Inc.:
We have audited the accompanying consolidated balance sheets of Weyco Group,
Inc. and subsidiaries (the "Company") as of December 31, 2003 and 2002, and the
related consolidated statements of earnings, shareholders' investment and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the 2003 and 2002 financial statements based on our audits. The
financial statements for the year ended December 31, 2001, before the stock
dividend adjustments discussed in Note 2 to the financial statements, were
audited by other auditors who have ceased operations. Those auditors expressed
an unqualified opinion on those financial statements in their report dated
February 14, 2002, except for Note 15, as to which the date is March 3, 2002.
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.
In our opinion, such 2003 and 2002 consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of
December 31, 2003 and 2002, and the results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
As discussed above, the financial statements of the Company for the year ended
December 31, 2001 were audited by other auditors who have ceased operations. As
described in Note 2, those financial statements have been revised to give effect
to the stock dividend on October 1, 2003, discussed in Note 2. We audited the
adjustments described in Note 2 that were applied to revise the 2001 financial
statements for such stock dividend. Our audit procedures included (1) comparing
the amounts shown in the share and earnings per share disclosures for 2001 to
the Company's underlying accounting analysis obtained from management, (2)
comparing the previously reported shares outstanding and statement of earnings
amounts per the Company's accounting analysis to the previously issued financial
statements, and (3) recalculating the additional shares to give effect to the
stock dividend and testing the mathematical accuracy of the underlying analysis.
In our opinion, such adjustments have been properly applied. However, we were
not engaged to audit, review or apply any procedures to the 2001 financial
statements of the Company other than with respect to such stock dividend
adjustments and, accordingly, we do not express an opinion or other form of
assurance on the 2001 financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 20, 2004
THIS REPORT SET FORTH BELOW IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR
ANDERSEN LLP IN CONNECTION WITH THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 2001. THIS REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and 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, 2001 and
2000, and the related consolidated statements of earnings, shareholders'
investment and cash flows for each of the three years in the period ended
December 31, 2001. 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 auditing standards generally accepted
in the United States. 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, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 14, 2002, except for Note 15,
as to which the date is March 3, 2002
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
accounting principles generally accepted in the United States of America 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 2003 financial statements have been audited by Deloitte & Touche
LLP, independent auditors, whose report thereon appears above. Management has
made available to Deloitte & Touche 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 of the financial statements of
the Company.
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, Deloitte & Touche LLP has full and
free access to the Audit Committee to discuss the results of their audits, the
adequacy of the Company's internal controls, and the quality of the Company's
financial reporting.
DIRECTORS
Thomas W. Florsheim
Chairman Emeritus
Thomas W. Florsheim, Jr.
Chairman and Chief Executive Officer
John W. Florsheim
President and Chief Operating Officer
Virgis W. Colbert
Executive Vice President
Miller Brewing Company
Robert Feitler
Chairman, Executive Committee
Leonard J. Goldstein
Retired,
Former Chairman, President and Chief Executive Officer,
Miller Brewing Company
Frederick P. Stratton, Jr.
Chairman Emeritus
Briggs & Stratton Corporation,
Manufacturer of Gasoline Engines
OFFICERS
Thomas W. Florsheim, Jr.
Chairman and Chief Executive Officer
John W. Florsheim
President and Chief Operating Officer
James F. Gorman
Senior Vice President
Peter S. Grossman
Senior Vice President
John F. Wittkowske
Senior Vice President, Chief Financial Officer and Secretary
SUPPLEMENTAL INFORMATION
ANNUAL MEETING
Shareholders are invited to attend Weyco Group, Inc.'s 2004 Annual Meeting at
10:00 a.m. on April 27, 2004, at the general offices of the Company, 333 W.
Estabrook Boulevard, Glendale, Wisconsin.
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
59 Maiden Lane
New York, New York 10038
COMPANY HEADQUARTERS
Weyco Group, Inc.
333 W. Estabrook Boulevard
Glendale, WI 53212
414-908-1600
www.weycogroup.com
OTHER INFORMATION
COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
(FORM 10-K), ITS QUARTERLY REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION
(FORM 10-Q'S), OR ITS CODE OF BUSINESS ETHICS WILL BE FURNISHED WITHOUT CHARGE
TO ANY SHAREHOLDER (INCLUDING BENEFICIAL OWNERS) UPON WRITTEN OR TELEPHONE
REQUEST.
Written requests should be sent to Investor Relations, Weyco Group, Inc., P. O.
Box 1188, Milwaukee, Wisconsin 53201 or e-mailed to
Investor.Relations@weycogroup.com. Telephone inquires should be made to (414)
908-1600.