UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to _____________________________

Commission File Number: 000-09068

WEYCO GROUP, INC.

(Exact name of registrant as specified in its charter)

WISCONSIN		39-0702200
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

333 W. Estabrook Boulevard

Glendale, Wisconsin 53212

(Address of principal executive offices)

(Zip Code)

(414) 908-1600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock - $1.00 par value per share		WEYS		The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐

Accelerated Filer ☒

Non-Accelerated Filer ☐

Smaller Reporting Company ☒

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of October 28, 2024, there were 9,559,295 shares of common stock outstanding.

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)


	September 30,		December 31,
	2024		2023

		(Dollars in thousands)
ASSETS:
Cash and cash equivalents	$	75,455	$	69,312
Marketable securities, at amortized cost		365		215
Accounts receivable, net		46,804		39,275
Income tax receivable		—		245
Inventories		72,187		74,890
Prepaid expenses and other current assets		3,071		6,172
Total current assets		197,882		190,109

Marketable securities, at amortized cost		6,009		6,354
Deferred income tax benefits		1,116		1,096
Property, plant and equipment, net		28,540		29,504
Operating lease right-of-use assets		11,472		12,520
Goodwill		12,317		12,317
Trademarks		33,168		33,168
Other assets		24,184		24,274
Total assets	$	314,688	$	309,342

LIABILITIES AND EQUITY:
Accounts payable	$	6,049	$	8,845
Dividend payable		—		2,352
Operating lease liabilities		4,167		3,979
Accrued liabilities		12,053		14,446
Accrued income tax payable		693		—
Total current liabilities		22,962		29,622

Deferred income tax liabilities		11,566		11,819
Long-term pension liability		13,541		13,412
Operating lease liabilities		8,129		9,531
Other long-term liabilities		367		465
Total liabilities		56,565		64,849

Common stock		9,559		9,497
Capital in excess of par value		72,661		71,661
Reinvested earnings		193,107		180,646
Accumulated other comprehensive loss		(17,204)		(17,311)
Total equity		258,123		244,493
Total liabilities and equity	$	314,688	$	309,342

The accompanying notes to consolidated condensed financial statements (unaudited) are an integral part of these financial statements.

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(UNAUDITED)


		Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(In thousands, except per share amounts)

Net sales	$	74,329	$	84,150	$	209,819	$	237,458
Cost of sales		41,427		47,997		116,818		135,136
Gross earnings		32,902		36,153		93,001		102,322

Selling and administrative expenses		22,739		23,720		67,926		72,803
Earnings from operations		10,163		12,433		25,075		29,519

Interest income		894		269		2,763		598
Interest expense		(15)		(5)		(15)		(522)
Other expense, net		(185)		(133)		(423)		(431)

Earnings before provision for income taxes		10,857		12,564		27,400		29,164

Provision for income taxes		2,794		3,227		7,080		7,518

Net earnings	$	8,063	$	9,337	$	20,320	$	21,646

Weighted average shares outstanding
Basic		9,439		9,451		9,435		9,458
Diluted		9,599		9,530		9,576		9,539

Earnings per share
Basic	$	0.85	$	0.99	$	2.15	$	2.29
Diluted	$	0.84	$	0.98	$	2.12	$	2.27

Cash dividends declared (per share)	$	0.26	$	0.25	$	0.77	$	0.74

Comprehensive income	$	9,055	$	8,656	$	20,427	$	21,104

The accompanying notes to consolidated condensed financial statements (unaudited) are an integral part of these financial statements.

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine Months Ended September 30,
	2024		2023

	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	20,320	$	21,646
Adjustments to reconcile net earnings to net cash provided by operating activities -
Depreciation		1,848		1,930
Amortization		199		204
Bad debt expense		19		107
Deferred income taxes		(351)		(82)
Net foreign currency transaction losses (gains)		79		(9)
Share-based compensation expense		1,086		996
Pension expense		693		970
Loss on disposal of fixed assets		34		—
Increase in cash surrender value of life insurance		(315)		(315)
Changes in operating assets and liabilities -
Accounts receivable		(7,534)		(6)
Inventories		2,728		48,442
Prepaid expenses and other assets		3,277		2,775
Accounts payable		(2,792)		(10,164)
Accrued liabilities and other		(2,937)		(4,331)
Accrued income taxes		940		775
Net cash provided by operating activities		17,294		62,938

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of marketable securities		215		1,015
Purchases of property, plant and equipment		(900)		(2,565)
Net cash used for investing activities		(685)		(1,550)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid		(9,614)		(9,285)
Shares purchased and retired		(567)		(3,439)
Net proceeds from stock options exercised		—		33
Payment of contingent consideration		—		(500)
Taxes paid related to the net share settlement of equity awards		(4)		(173)
Proceeds from bank borrowings		—		70,060
Repayments of bank borrowings		—		(101,196)
Net cash used for financing activities		(10,185)		(44,500)

Effect of exchange rate changes on cash and cash equivalents		(281)		(367)

Net increase in cash and cash equivalents	$	6,143	$	16,521

CASH AND CASH EQUIVALENTS at beginning of period		69,312		16,876

CASH AND CASH EQUIVALENTS at end of period	$	75,455	$	33,397

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid, net of refunds	$	6,251	$	6,462
Interest paid	$	15	$	971

The accompanying notes to consolidated condensed financial statements (unaudited) are an integral part of these financial statements.

NOTES:

1. Financial Statements

In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly our financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended September 30, 2024, may not necessarily be indicative of the results for the full year.

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, liabilities, revenues and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results specifically related to inventory reserves, realizability of deferred tax assets, goodwill and trademarks could materially differ from those estimates, which would impact the reported amounts and disclosures in the consolidated financial statements and accompanying notes.

2. New Accounting Pronouncements

Not Yet Adopted

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The objective of ASU 2023-07 is to require entities to provide enhanced disclosures on significant segment expenses. ASU 2023-07 is effective for public companies in annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. We are currently evaluating the impact that ASU 2023-07 will have on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The objective of ASU 2023-09 is to enhance disclosures related to income taxes, including specific thresholds for inclusion within the tabular disclosure of income tax rate reconciliation and specified information about income taxes paid. ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15, 2024. We are currently evaluating the impact that ASU 2023-09 will have on our consolidated financial statements.

3. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:


		Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(In thousands, except per share amounts)
Numerator:
Net earnings	$	8,063	$	9,337	$	20,320	$	21,646

Denominator:
Basic weighted average shares outstanding		9,439		9,451		9,435		9,458
Effect of dilutive securities:
Employee share-based awards		160		79		141		81
Diluted weighted average shares outstanding		9,599		9,530		9,576		9,539

Basic earnings per share	$	0.85	$	0.99	$	2.15	$	2.29

Diluted earnings per share	$	0.84	$	0.98	$	2.12	$	2.27

Diluted weighted average shares outstanding for the three months ended September 30, 2024, excluded anti-dilutive stock options totaling 240,000 shares of common stock at a weighted average exercise price of $32.83. Diluted weighted average shares outstanding for the nine months ended September 30, 2024, excluded anti-dilutive stock options totaling 342,000 shares of common stock at a weighted average exercise price of $31.05. Diluted weighted average shares outstanding for the three months ended September 30, 2023, excluded anti-dilutive stock options totaling 606,000 shares of common stock at a weighted average exercise price of $28.13. Diluted weighted average shares outstanding for the nine months ended September 30, 2023, excluded anti-dilutive stock options totaling 692,000 shares of common stock at a weighted average exercise price of $28.56.

4. Investments

All our marketable securities are classified as held-to-maturity securities and reported at amortized cost pursuant to Accounting Standards Codification (“ASC”) 320, Investments – Debt and Equity Securities, as we have the intent and ability to hold all investments to maturity. Below is a summary of the amortized cost and estimated market values of our marketable securities as of September 30, 2024, and December 31, 2023.


	September 30, 2024				December 31, 2023
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value

	(Dollars in thousands)
Marketable securities:
Current	$	365	$	364	$	215	$	215
Due from one through five years		3,172		3,251		3,518		3,592
Due from six through ten years		2,837		2,802		2,836		2,830
Total	$	6,374	$	6,417	$	6,569	$	6,637

The unrealized gains and losses on marketable securities at September 30, 2024, and at December 31, 2023, were as follows:

September 30, 2024

December 31, 2023

Unrealized

Gains

Losses

Gains

Losses

(Dollars in thousands)

Marketable securities

103

(60)

118

(50)

The estimated market values provided are Level 2 valuations as defined by ASC 820, Fair Value Measurements and Disclosures. We reviewed our portfolio of investments as of September 30, 2024, and determined that no other-than-temporary market value impairment exists.

5. Intangible Assets

During the nine months ended September 30, 2024, there were no changes in the carrying value of our indefinite-lived intangible assets (goodwill and trademarks). Our amortizable intangible assets, which were included within other assets in the Consolidated Condensed Balance Sheets (unaudited), consisted of the following:


			September 30, 2024						December 31, 2023
	Weighted		Gross						Gross
	Average		Carrying		Accumulated				Carrying		Accumulated
	Life (Years)		Amount		Amortization		Net		Amount		Amortization		Net

			(Dollars in thousands)
Amortizable intangible assets
Customer relationships		15	$	3,500	$	(3,169)	$	331	$	3,500	$	(2,994)	$	506
Total amortizable intangible assets			$	3,500	$	(3,169)	$	331	$	3,500	$	(2,994)	$	506

Amortization expense related to the intangible assets was approximately $58,000 in both the third quarters of 2024 and 2023. For both the nine-month periods ended September 30, 2024 and September 30, 2023, amortization expense related to the intangible assets was approximately $175,000.

6. Segment Information

We have two reportable segments: North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”). Our Chief Executive Officer evaluates the performance of our segments based on earnings from operations. Therefore, interest income or expense, other income or expense, and income taxes are not allocated to the segments. As of September 30, 2024, the “other” category in the table below included our wholesale and retail operations in Australia, South Africa, and Asia Pacific, which do not meet the criteria for separate reportable segment classification. We ceased operations in the Asia Pacific region in 2023 and have substantially completed the wind down of that business. As a result, the third-quarter 2024 operating results of the “other” category only reflect that of Australia and South Africa. Summarized segment data for the three and nine-month periods ended September 30, 2024 and 2023, was as follows:


Three Months Ended
September 30,	Wholesale		Retail		Other		Total

	(Dollars in thousands)
2024
Product sales	$	60,673	$	7,225	$	6,029	$	73,927
Licensing revenues		402		—		—		402
Net sales	$	61,075	$	7,225	$	6,029	$	74,329
Earnings from operations	$	9,406	$	798	$	(41)	$	10,163

2023
Product sales	$	68,927	$	7,584	$	7,094	$	83,605
Licensing revenues		545		—		—		545
Net sales	$	69,472	$	7,584	$	7,094	$	84,150
Earnings from operations	$	11,251	$	926	$	256	$	12,433


Nine Months Ended
September 30,	Wholesale		Retail		Other		Total

	(Dollars in thousands)
2024
Product sales	$	166,137	$	24,647	$	17,599	$	208,383
Licensing revenues		1,436		—		—		1,436
Net sales	$	167,573	$	24,647	$	17,599	$	209,819
Earnings from operations	$	22,581	$	2,790	$	(296)	$	25,075

2023
Product sales	$	189,118	$	24,141	$	22,484	$	235,743
Licensing revenues		1,715		—		—		1,715
Net sales	$	190,833	$	24,141	$	22,484	$	237,458
Earnings from operations	$	25,435	$	3,277	$	807	$	29,519

7. Employee Retirement Plans

The components of our pension expense were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(Dollars in thousands)
Service cost	$	113	$	116	$	306	$	350
Interest cost		639		658		1,913		1,974
Expected return on plan assets		(607)		(575)		(1,831)		(1,726)
Net amortization and deferral		107		124		305		372
Pension expense	$	252	$	323	$	693	$	970

The components of pension expense other than the service cost component were included in “other expense, net” in the Consolidated Condensed Statements of Earnings and Comprehensive Income (Unaudited).

8. Leases

We lease retail shoe stores, as well as several office and distribution facilities worldwide. These leases have original lease periods expiring between 2024 and 2029. Many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of our operating lease costs were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(Dollars in thousands)
Operating lease costs	$	1,156	$	1,119	$	3,378	$	3,744
Variable lease costs ⁽¹⁾		—		40		—		91
Total lease costs	$	1,156	$	1,159	$	3,378	$	3,835

⁽¹⁾Variable lease costs primarily include percentage rentals based upon sales in excess of specified amounts.

Short-term lease costs, which were excluded from the above table, are not material to our financial statements.

The following is a schedule of maturities of operating lease liabilities as of September 30, 2024:


	Operating Leases
	(Dollars in thousands)
2024, excluding the nine months ended September 30, 2024	$	1,167
2025		4,482
2026		3,797
2027		2,078
2028		1,025
Thereafter		403
Total lease payments		12,952
Less: imputed interest		(656)
Present value of lease liabilities	$	12,296

The operating lease liabilities were classified in the consolidated condensed balance sheets (unaudited) as follows:


	September 30,		December 31,
		2024		2023

	(Dollars in thousands)
Operating lease liabilities - current	$	4,167	$	3,979
Operating lease liabilities - non-current		8,129		9,531
Total	$	12,296	$	13,510

We determined the present value of our lease liabilities using a weighted-average discount rate of 4.59%. As of September 30, 2024, our leases had a weighted-average remaining lease term of 3.2 years.

Supplemental cash flow information related to our operating leases is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	1,223	$	1,204	$	3,545	$	3,728
Right-of-use assets obtained in exchange for new lease liabilities (noncash)	$	1,616	$	99	$	1,875	$	1,571

9. Income Taxes

The effective income tax rate for the three months ended September 30, 2024 and 2023 was 25.7% in both periods. For the nine months ended September 30, 2024 and 2023, the effective tax rate was 25.8% in both periods. The 2024 and 2023 effective tax rates differed from the federal rate of 21% primarily because of state taxes.

10. Share-Based Compensation Plans

During the three and nine months ended September 30, 2024, we recognized $388,000 and $1,086,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 2019 through 2024. During the three and nine months ended September 30, 2023, we recognized $321,000 and $996,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 2018 through 2023.

The following table summarizes our stock option activity for the nine-month period ended September 30, 2024:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
	Shares	Price		Term (Years)	Value*
Outstanding at December 31, 2023	967,217	$	26.22
Granted	—		—
Exercised	(105,072)		24.64
Forfeited or expired	(11,680)		25.76
Outstanding at September 30, 2024	850,465	$	26.41	6.1	$	6,851,000
Exercisable at September 30, 2024	567,574	$	26.88	5.2	$	4,426,000

*The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of our common stock on September 30, 2024 of $34.04 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options.

The following table summarizes our restricted stock award activity for the nine-month period ended September 30, 2024:



				Weighted
		Weighted		Average
	Shares of	Average		Remaining		Aggregate
	Restricted	Grant Date		Contractual		Intrinsic
	Stock	Fair Value		Term (Years)		Value*
Non-vested - December 31, 2023	69,090	$	25.54
Issued	54,855		34.65
Vested	(30,255)		24.86
Forfeited	(625)		27.86
Non-vested - September 30, 2024	93,065	$	31.12	3.8	$	3,168,000

*The aggregate intrinsic value of non-vested restricted stock was calculated using the market value of our common stock on September 30, 2024 of $34.04 multiplied by the number of non-vested restricted shares outstanding.

11. Short-Term Borrowings

On September 27, 2024, we amended our line of credit agreement. The amendment (“Amended Credit Agreement”) extends the maturity of our credit facility to September 26, 2025. Under the terms of the Amended Credit Agreement, there is a maximum available borrowing limit of $40.0 million, and amounts outstanding bear interest at the one-month term secured overnight financing rate (“SOFR”) plus 125 basis points. The Amended Credit Agreement is secured by a lien against our general business assets, and contains representations, warranties and covenants (including a minimum tangible net worth financial covenant) that are customary for a facility of this type. At September 30, 2024, there were no outstanding borrowings on the line of credit, and we were in compliance with all financial covenants.

12. Financial Instruments

At September 30, 2024, our wholly-owned subsidiary, Florsheim Australia, had foreign exchange contracts outstanding to buy $1.0 million U.S. dollars at a price of approximately $1.5 million Australian dollars. These contracts expire in 2024. Based on quarter-end exchange rates, there were no significant unrealized gains or losses on the outstanding contracts.

We determine the fair value of foreign exchange contracts based on the difference between the foreign currency contract rates and the widely available foreign currency rates as of the measurement date. The fair value measurements are based on observable market transactions, and thus represent a Level 2 valuation as defined by ASC 820.

13. Comprehensive Income

Comprehensive income for the three and nine months ended September 30, 2024 and 2023, was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

	(Dollars in thousands)
Net earnings	$	8,063	$	9,337	$	20,320	$	21,646
Foreign currency translation adjustments		913		(773)		(118)		(817)
Pension liability adjustment, net of tax of $28, $32, $80, and $97, respectively		79		92		225		275
Total comprehensive income	$	9,055	$	8,656	$	20,427	$	21,104

The components of accumulated other comprehensive loss as recorded in the Consolidated Condensed Balance Sheets (Unaudited) were as follows:


	September 30,		December 31,
	2024		2023

	(Dollars in thousands)
Foreign currency translation adjustments	$	(8,072)	$	(7,954)
Pension liability, net of tax		(9,132)		(9,357)
Total accumulated other comprehensive loss	$	(17,204)	$	(17,311)

The following tables show changes in accumulated other comprehensive loss during the nine months ended September 30, 2024 and 2023:


	Foreign Currency
	Translation		Defined Benefit
	Adjustments		Pension Items		Total

	(Dollars in thousands)
Balance, December 31, 2023	$	(7,954)	$	(9,357)	$	(17,311)
Other comprehensive loss before reclassifications