Item 1. Business
The Company is a Wisconsin corporation incorporated in the year 1906 as Weyenberg Shoe Manufacturing Company. Effective April 25, 1990, the name of the corporation was changed to Weyco Group, Inc.
The Company and its subsidiaries engage in one line of business, the manufacture, purchase and distribution of men's footwear. The Company does not sell women's or children's shoes because these markets differ significantly from the men's market. The principal brands of shoes sold are "Nunn Bush," "Brass Boot," "Stacy Adams," and "Weyenberg" and trademarks maintained by the Company on these names are important to the business. The Company's products consist of both mid-priced quality leather dress shoes which would be worn as a part of more formal and traditional attire and lower priced quality casual footwear of man-made materials or leather which would be appropriate for leisure or less formal occasions. The Company's footwear, and that of the industry in general, is available in a broad range of sizes and widths, primarily produced or purchased to meet the needs and desires of the American male population.
The Company assembles footwear at one manufacturing plant in Wisconsin. Shoe components, referred to as "uppers," are purchased from outside sources, generally foreign, and turned into complete shoes by attaching the sole, either leather or man-made, applying appropriate "finishes" and packing the shoes into individual cartons, ready for sale. The Company purchases raw materials and shoe components from many suppliers and is not dependent on any one of them. The supply of these items is generally plentiful and there are no long-term purchase commitments. Over the past five years, production at the Company's plant has accounted for approximately 14% of the value of the Company's wholesale footwear sales.
In addition to the production of footwear at the Company's own manufacturing plants, complete shoes are also purchased from many sources worldwide, generally at U. S. dollar prices. These purchases account for the balance of the Company's wholesale footwear sales. In recent years, domestic production of men's shoes by the Company and the industry has declined, while imports to the United States have increased.
The Company's business is separated into two divisions - wholesale and retail. Wholesale sales constituted approximately 87% of total sales in 1995, 79% in 1994, and 68% in 1993. At wholesale, shoes are marketed nationwide through more than 8,000 shoe, clothing and department stores. The loss of any one or a few of these retail customers would not have a material adverse effect on the wholesale division sales. The Company employs traveling salesmen who sell the Company's products to the retail outlets. Shoes are shipped to these retailers primarily from warehouses maintained in Milwaukee and Beaver Dam, Wisconsin. Although there is no clearly identifiable seasonality in the men's footwear business, new styles are historically developed and shown twice each year, in spring and fall. In accordance with the industry practices, the Company is required to carry significant amounts of inventory to meet customer delivery requirements and periodically provides extended payment terms to customers.
Retail sales constituted approximately 13% of total sales in 1995, 21% in 1994 and 32% in 1993. In the retail division there are 18 company-operated stores in principal cities of the United States and 13 leased departments in department stores throughout the country. The decrease in retail sales in recent years is a result of the termination of leased departments and company-operated stores. In 1995, 10 company-operated stores were closed due to unprofitable operations or unattractive lease renewal terms. In 1994, the Company closed 45 leased departments as a result of the termination of a lease agreement with a department store and 7 company-operated stores due to unprofitable operations or unattractive lease renewal terms. In 1993, the Company closed 71 leased shoe departments because of a restructuring at a lessor department store chain and closed 12 company-operated stores because of unprofitable operations or unattractive lease renewal terms. Sales in retail outlets are made directly to the consumer by company employees. In addition to the sale of the Company's brands of footwear in these retail outlets, other branded footwear and accessories are also sold in order to provide the consumer with as complete a selection as practically possible.
In dollar sales, the Company is about eighth largest among approximately 900 domestic men's shoe distributors. During 1995 it sold approximately 3% of the total men's non-rubber dress and casual shoes sold in the United States.
Price, quality and service are all important competitive factors in the shoe industry and the Company has been recognized as a leader in all of them. Although the Company engages in no specific research and development activities, new products and new processes are continually being tested by the Company and used where appropriate, in order to produce the best value for the consumer, consistent with reasonable price. Compliance with environmental regulations historically has not had, and is not expected to have, a material adverse effect on the Company's results of operations or cash flows.
Approximately 525 persons are employed by the Company and its subsidiaries.
Item 2.
Item 2. Properties
The following facilities are operated by the Company and its subsidiaries:
(1) Not a material lease.
All of the above-named facilities are adequately equipped, well maintained and suitable for foreseeable needs. If all available manufacturing space were utilized and significant additional shoe making equipment were acquired, production could be increased about 25%.
In addition to the above-described manufacturing and warehouse facilities, the Company operates 18 retail stores and 13 leased departments throughout the United States under various rental agreements. See Note 9 to Consolidated Financial Statements and Item 1. Business above.
Item 3.
Item 3. Legal Proceedings
On December 6, 1993, a shareholder of the Company, on behalf of herself and all others similarly situated, filed an action in the Circuit Court of Milwaukee County, Wisconsin against the Company and certain of its officers in connection with the (then proposed) merger agreement subsequently signed by the Company under which the Company would have been acquired by a management group, including the principal shareholders of the Company, for $34.00 per share in cash. (Kahn v. Weyco Group, et. al, Case No. 93-CV-019022). Plaintiff alleged that the $34.00 per share price was grossly inadequate, that the Company's intrinsic value exceeded $60.00 per share, that the acquiring group controlled and dominated the Board of Directors, that the Special Committee of the Board of Directors failed to adequately explore all alternatives that might lead to maximizing shareholder values, that the merger agreement was not the result of arm's-length negotiations or an independent valuation of shares and that the defendants failed to have a disinterested third party negotiate on behalf of shareholders. Plaintiff sought an injunction, rescission, unspecified damages and fees and expenses. The defendants filed an answer denying all material allegations. Following the withdrawal of the proposed merger, the plaintiff amended the complaint in December 1994 to seek a declaration that the defendants, in proposing and pursuing the proposed merger, "committed or aided and abetted a gross abuse of trust and have breached their fiduciary and other duties" and also to seek to recover certain costs and expenses related to the action, "including reasonable attorneys' and professional fees incurred with the solicitation of proxies." On June 2, 1995, the lawsuit was dismissed by the Circuit Court of Milwaukee County, Wisconsin. On September 25, 1995, the plaintiffs gave notice of their appeal to the Wisconsin Court of Appeals. The appeal was dismissed on December 29, 1995 and the Company is not aware of any further action by the plaintiff.
The Company has been identified as a potentially responsible party ("PRP") in two separate actions in connection with an alleged hazardous substance discharge in the State of Wisconsin. The Company is contesting these actions and denies liability in the matter. It is anticipated that the resolution of this matter will not have a material effect on the Consolidated Financial Statements of the Company.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Executive Officers of the Registrant
Thomas W. Florsheim is the father of John W. Florsheim and Thomas W. Florsheim, Jr.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
Information required by this Item is set forth on page 11 of the Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data
Information required by this Item is set forth on page 2 of the Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Information required by this Item is set forth on page 12 of the Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data
Information required by this Item is set forth on pages 2 through 11 of the Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Information required by this Item is set forth on pages 1, 2 and 3 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 23, 1996, and is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation
Information required by this Item is set forth on pages 4, 5, 6 and 7 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 23, 1996, and is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners of Management
Information required by this Item is set forth on pages 1 and 2 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 23, 1996, and is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information required by this Item is set forth on page 7 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 23, 1996, and is incorporated herein by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
Item 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K (Continued)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Weyco Group, Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 19, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index above is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin, February 19, 1996
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Continued)
3. Exhibits
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (Continued)
3. Exhibits (Continued)
SCHEDULE II
WEYCO GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WEYCO GROUP, INC. (Registrant)
By /s/ John Wittkowske March 25, 1996 -------------------------------------- -------------- John Wittkowske, Secretary/Treasurer ______________ Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas W. Florsheim, Robert Feitler, and John Wittkowske, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue thereof. ______________
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.