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,"Nunn Bush NXXT," "Brass Boot," "Stacy Adams," and "SAO by Stacy Adams." 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 10% of the value of the Company's wholesale footwear sales.
In addition to the production of footwear at the Company's own manufacturing plant, complete shoes are purchased from many sources worldwide, generally in U.S. dollars. 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 96% of total sales in 2000 and 95% in 1999 and 1998. At wholesale, shoes are marketed nationwide through more than 8,000 shoe, clothing and department stores. Sales are to unaffiliated customers primarily in North America. Sales to the Company's largest customer, Brown Shoe Group, were 10%, 12% and 10% of total sales for 2000, 1999 and 1998, respectively. There are no other individually significant customers. The Company employs traveling salesmen who sell the Company's products to the retail outlets. Shoes are shipped to these retailers primarily from a warehouse maintained in Glendale, 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 4% of total sales in 2000 and 5% of total sales in 1999 and 1998. In the retail division, there are currently 9 company-operated stores in principal cities of the United States. The decrease in retail sales in recent years is a result of the Company closing its retail units. There were two store closings in 2000, zero in 1999, and two in 1998. These stores were closed primarily due to unprofitable operations or unattractive lease renewal terms. Management intends to continue to closely monitor retail operations and may close other retail units in the future if they are deemed unprofitable. 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, management estimates that the Company is about eighth largest among approximately 900 domestic men's shoe distributors. During 2000, it sold approximately 3% of the total men's non-rubber dress and casual shoes sold in the United States.
As of December 31, 2000, the Company employed approximately 355 persons. Of those 355 employees, approximately 110 were members of the United Food and Commercial Works Local 651 Union. The Company ratified a new contract with the Union during 1997, which will expire in March 2003. Future wage and benefit increases under the new contract are not expected to have a significant impact on the future operations or financial position of the Company.
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.
Item 2.
Item 2. Properties
The following facilities are operated by the Company and its subsidiaries:
The manufacturing facilities noted above 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 9 retail stores throughout the United States under various rental agreements. See Note 10 to Consolidated Financial Statements and Item 1. Business above.
Item 3.
Item 3. Legal Proceedings
Not Applicable
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 pages 5, 17 and 21 of the Annual Report to Shareholders for the year ended December 31, 2000, and is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data
Information required by this Item is set forth on page 5 of the Annual Report to Shareholders for the year ended December 31, 2000, 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 pages 6 through 8 of the Annual Report to Shareholders for the year ended December 31, 2000, and is incorporated herein by reference.
Item 7a.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Information required by this Item is set forth on page 8 of the Annual Report to Shareholders for the year ended December 31, 2000, 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 9 through 19 of the Annual Report to Shareholders for the year ended December 31, 2000, 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 through 4 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 24, 2001, and is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation
Information required by this Item is set forth on pages 6 through 8 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 24, 2001, 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 24, 2001, and is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information required by this Item is set forth on pages 8 and 9 of the Company's proxy statement for the Annual Meeting of Shareholders to be held on April 24, 2001, 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 auditing standards generally accepted in the United States, the consolidated financial statements included in Weyco Group, Inc.'s Annual Report to Shareholders included and incorporated by reference in this Form 10-K, and have issued our report thereon dated February 16, 2001. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index at item 14(a)(2) is the responsibility of the company's management and 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 16, 2001.
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)
(b) Reports on Form 8-K
None
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 23, 2001 ------------------------------------------ ----------------------- John Wittkowske, Vice President-Finance
----------------- Power of Attorney KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas W. Florsheim, Sr., Thomas W. Florsheim, Jr., and John Wittkowske, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue thereof. ______________ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.