Company Quick10K Filing
Weyco Group
Price22.69 EPS1
Shares10 P/E19
MCap227 P/FCF-55
Net Debt-9 EBIT18
TEV218 TEV/EBIT12
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-09
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-12
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-14
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-13
10-Q 2017-09-30 Filed 2017-11-06
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-04
10-K 2016-12-31 Filed 2017-03-09
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-03-10
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-03-11
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-12
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-07
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-14
10-Q 2012-09-30 Filed 2012-11-07
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-08
10-K 2011-12-31 Filed 2012-03-13
8-K 2020-11-03 Earnings, Exhibits
8-K 2020-08-04 Earnings, Exhibits
8-K 2020-08-04 Earnings, Exhibits
8-K 2020-05-15
8-K 2020-05-05
8-K 2020-05-05
8-K 2020-03-10
8-K 2019-11-05
8-K 2019-08-06
8-K 2019-05-07
8-K 2019-05-07
8-K 2019-03-05
8-K 2018-11-06
8-K 2018-08-07
8-K 2018-05-08
8-K 2018-05-04
8-K 2018-03-06

WEYS 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 5. Other Information
Item 6. Exhibits.
EX-10.1 weys-20200930xex10d1.htm
EX-10.2 weys-20200930xex10d2.htm
EX-10.3 weys-20200930xex10d3.htm
EX-31.1 weys-20200930xex31d1.htm
EX-31.2 weys-20200930xex31d2.htm
EX-32 weys-20200930xex32.htm

Weyco Group Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
3052441831226102012201420172020
Assets, Equity
1008060402002012201420172020
Rev, G Profit, Net Income
25167-2-11-202012201420172020
Ops, Inv, Fin

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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, 2020

Or

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

P. O. Box 1188

Milwaukee, Wisconsin 53201

(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 30, 2020, there were 9,820,516 shares of common stock outstanding.

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

The following consolidated condensed balance sheet as of December 31, 2019, which has been derived from audited financial statements, and the unaudited interim consolidated condensed financial statements have been prepared by Weyco Group, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s latest annual report on Form 10-K.

1

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

September 30,

December 31, 

    

2020

    

2019

(Dollars in thousands)

ASSETS:

 

  

 

  

Cash and cash equivalents

$

6,858

$

9,799

Marketable securities, at amortized cost

 

1,955

 

5,904

Accounts receivable, net

 

39,463

 

51,532

Income tax receivable

3,656

Inventories

 

76,178

 

86,713

Prepaid expenses and other current assets

 

3,284

 

6,047

Total current assets

 

131,394

 

159,995

 

 

  

Marketable securities, at amortized cost

 

13,703

 

15,814

Deferred income tax benefits

 

773

 

2,487

Property, plant and equipment, net

 

31,142

 

32,214

Operating lease right-of-use assets

 

11,929

 

18,753

Goodwill

 

11,112

 

11,112

Trademarks

 

32,868

 

32,868

Other assets

 

23,659

 

23,674

Total assets

$

256,580

$

296,917

 

 

  

LIABILITIES AND EQUITY:

 

 

  

Short-term borrowings

$

5,180

$

7,049

Accounts payable

 

6,312

 

12,455

Dividend payable

 

 

2,355

Operating lease liabilities

 

4,468

 

6,505

Accrued liabilities

 

10,865

 

13,422

Accrued income tax payable

 

 

90

Total current liabilities

 

26,825

 

41,876

 

 

  

Deferred income tax liabilities

 

3,226

 

3,085

Long-term pension liability

 

27,009

 

27,523

Operating lease liabilities

 

9,962

 

14,110

Other long-term liabilities

 

263

 

329

Total liabilities

 

67,285

 

86,923

 

 

  

Common stock

 

9,844

 

9,873

Capital in excess of par value

 

66,864

 

65,832

Reinvested earnings

 

136,916

 

158,825

Accumulated other comprehensive loss

 

(24,329)

 

(24,536)

Total equity

 

189,295

 

209,994

Total liabilities and equity

$

256,580

$

296,917

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

2

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2020

    

2019

    

2020

    

2019

(In thousands, except per share amounts)

Net sales

$

53,178

$

82,502

$

133,408

$

217,106

Cost of sales

32,841

 

50,196

 

82,403

 

131,633

Gross earnings

 

20,337

 

32,306

 

51,005

 

85,473

 

 

 

 

Selling and administrative expenses

 

24,177

 

23,817

 

66,517

 

69,974

Earnings (loss) from operations

 

(3,840)

 

8,489

 

(15,512)

 

15,499

 

 

 

 

Interest income

 

121

 

210

 

408

 

663

Interest expense

 

(6)

 

(96)

 

(59)

 

(162)

Other income (expense), net

 

(8)

 

11

 

147

 

(242)

 

 

 

 

Earnings (loss) before provision (benefit) for income taxes

 

(3,733)

 

8,614

 

(15,016)

 

15,758

 

 

 

 

Provision (benefit) for income taxes

 

2,136

 

2,029

 

(1,426)

 

3,691

 

 

 

 

Net earnings (loss)

(5,869)

6,585

(13,590)

12,067

 

  

 

  

 

  

 

  

Weighted average shares outstanding

 

  

 

  

 

  

 

  

Basic

 

9,756

 

9,912

 

9,760

 

9,933

Diluted

 

9,756

 

9,929

 

9,760

 

9,996

 

  

 

  

 

  

 

  

Earnings (loss) per share

 

  

 

  

 

  

 

  

Basic

$

(0.60)

$

0.66

$

(1.39)

$

1.21

Diluted

$

(0.60)

$

0.66

$

(1.39)

$

1.21

 

  

 

  

 

  

 

  

Cash dividends declared (per share)

$

0.24

$

0.24

$

0.72

$

0.71

 

  

 

  

 

  

 

  

Comprehensive income (loss)

$

(4,976)

$

5,990

$

(13,383)

$

11,933

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

3

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30, 

    

2020

    

2019

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings (loss)

$

(13,590)

$

12,067

Adjustments to reconcile net earnings (loss) to net cash provided by (used for) operating activities -

Depreciation

 

2,256

 

2,478

Amortization

 

234

 

133

Bad debt expense

 

5,102

 

100

Deferred income taxes

 

1,854

 

(209)

Net foreign currency transaction losses (gains)

 

37

 

(105)

Share-based compensation expense

 

1,063

 

1,102

Pension expense

 

345

 

785

Impairment of long-lived assets

3,055

Increase in cash surrender value of life insurance

 

(250)

 

(250)

Changes in operating assets and liabilities -

 

 

Accounts receivable

 

6,908

 

(5,413)

Inventories

 

10,528

 

(8,622)

Prepaid expenses and other assets

 

2,963

 

1,731

Accounts payable

 

(6,187)

 

(6,418)

Accrued liabilities and other

 

(3,494)

 

(1,873)

Accrued income taxes

 

(3,985)

 

338

Net cash provided by (used for) operating activities

 

6,839

 

(4,156)

 

  

 

  

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

Purchases of marketable securities

 

 

(14,641)

Proceeds from maturities of marketable securities

 

6,045

 

11,865

Life insurance premiums paid

(155)

(155)

Purchases of property, plant and equipment

 

(3,151)

 

(4,564)

Net cash provided by (used for) investing activities

 

2,739

 

(7,495)

 

  

 

  

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Cash dividends paid

 

(9,361)

 

(9,408)

Shares purchased and retired

 

(1,304)

 

(4,029)

Net proceeds from stock options exercised

 

 

161

Taxes paid related to the net share settlement of equity awards

(5)

Proceeds from bank borrowings

 

32,855

 

113,711

Repayments of bank borrowings

 

(34,724)

 

(102,689)

Net cash used for financing activities

 

(12,534)

 

(2,259)

 

  

 

  

Effect of exchange rate changes on cash and cash equivalents

 

15

 

(8)

 

  

 

  

Net decrease in cash and cash equivalents

$

(2,941)

$

(13,918)

 

  

 

  

CASH AND CASH EQUIVALENTS at beginning of period

 

9,799

 

22,973

 

  

 

  

CASH AND CASH EQUIVALENTS at end of period

$

6,858

$

9,055

 

  

 

  

SUPPLEMENTAL CASH FLOW INFORMATION:

 

  

 

  

Income taxes paid, net of refunds

$

638

$

3,385

Interest paid

$

52

$

162

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

4

NOTES:

1.    Financial Statements

In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary to present fairly the Company’s 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, 2020, 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 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 that impact the reported amounts and disclosures in the consolidated financial statements and accompanying notes.

2.    Accounts Receivable

Two of the Company's large customers filed for bankruptcy during 2020. J.C. Penney Company, Inc. and affiliated entities ("JCP") filed for bankruptcy in May 2020, and Tailored Brands, Inc. ("TB") filed for bankruptcy in August 2020. The Company had outstanding receivable balances with JCP and TB totaling $3.3 million and $1.1 million, respectively, at the time of the bankruptcy filings. While the ultimate resolution of the bankruptcy proceedings and collectability of the receivables are not known, it is likely the Company will incur losses with respect to all or a significant portion of these receivables. Therefore, the Company wrote-off the $3.3 million JCP receivable in the second quarter of 2020 and the $1.1 million TB receivable in the third quarter of 2020.

3.    Impairment of Long-Lived Assets

Property, plant, equipment and operating lease right-of-use assets, along with other long-lived assets, are evaluated for impairment periodically whenever triggering events or indicators exist that the carrying values may not be fully recoverable. As a result of the COVID-19 pandemic, the Company identified indicators of impairment for its retail stores worldwide. The Company performed undiscounted cash flow analyses over the long-lived assets of its retail stores and compared them to the carrying value of those assets. Based on these undiscounted cash flow analyses, the Company determined that certain long-lived assets had carrying values that exceeded their estimated undiscounted cash flows. As a result, the Company recognized $1.9 million for the impairment of retail store fixed assets and $1.2 million for the impairment of operating lease right-of-use assets. These charges were recorded within selling and administrative expenses within the Consolidated Statements of Earnings  and Comprehensive Income (Unaudited).

5

4.    Earnings (Loss) 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, 

    

2020

    

2019

    

2020

    

2019

(In thousands, except per share amounts)

Numerator:

 

  

 

  

  

 

  

Net earnings (loss)

$

(5,869)

$

6,585

$

(13,590)

$

12,067

 

  

 

  

 

  

 

  

Denominator:

 

  

 

  

 

  

 

  

Basic weighted average shares outstanding

 

9,756

 

9,912

 

9,760

 

9,933

Effect of dilutive securities:

 

  

 

  

 

  

 

  

Employee share-based awards

 

 

17

 

 

63

Diluted weighted average shares outstanding

 

9,756

 

9,929

 

9,760

 

9,996

 

  

 

  

 

  

 

  

Basic earnings (loss) per share

$

(0.60)

$

0.66

$

(1.39)

$

1.21

 

 

 

 

  

Diluted earnings (loss) per share

$

(0.60)

$

0.66

$

(1.39)

$

1.21

The three and nine months ended September 30, 2020, resulted in a net loss; therefore, there was no difference in the weighted average number of common shares for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive. Diluted weighted average shares outstanding for the three months ended September 30, 2020, excludes anti-dilutive share-based awards totaling 1,169,000 shares of common stock at a weighted average price of $24.71. Diluted weighted average shares outstanding for the nine months ended September 30, 2020, excludes anti-dilutive share-based awards totaling 1,181,000 shares of common stock at a weighted average price of $26.06. Diluted weighted average shares outstanding for the three months ended September 30, 2019, excludes anti-dilutive share-based awards totaling 1,382,000 shares of common stock at a weighted average price of $26.56. Diluted weighted average shares outstanding for the nine months ended September 30, 2019, excludes anti-dilutive share-based awards totaling 696,000 shares of common stock at a weighted average price of $28.51.

5.    Investments

As noted in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, all of the Company’s 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 the Company currently has the intent and ability to hold all investments to maturity.

Below is a summary of the amortized cost and estimated market values of the Company’s marketable securities as of September 30, 2020, and December 31, 2019:

September 30, 2020

December 31, 2019

Amortized

Market

    

Amortized

Market

    

Cost

    

Value

    

Cost

    

Value

(Dollars in thousands)

Municipal bonds:

 

  

 

  

 

  

 

  

Current

$

1,955

$

1,977

$

5,904

$

5,915

Due from one through five years

 

7,031

 

7,388

 

8,336

 

8,621

Due from six through ten years

 

4,149

 

4,756

 

4,255

 

4,618

Due from eleven through twenty years

 

2,523

 

2,741

 

3,223

 

3,430

Total

$

15,658

$

16,862

$

21,718

$

22,584

6

The unrealized gains and losses on marketable securities at September 30, 2020, and at December 31, 2019, were as follows:

September 30, 2020

December 31, 2019

Unrealized

Unrealized

Unrealized

Unrealized

    

Gains

    

Losses

    

Gains

    

Losses

(Dollars in thousands)

Municipal bonds

$

1,204

$

$

866

$

The estimated market values provided are level 2 valuations as defined by ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). The Company reviewed its portfolio of investments as of September 30, 2020 and determined that no other-than-temporary market value impairment exists.

6.    Intangible Assets

The Company evaluates its goodwill and trademarks for impairment annually during the fourth quarter, or more frequently if events occur or circumstances change that indicate impairment may be present. Given the substantial reduction in sales, reduced cash flow projections, and the decrease in the Company's market capitalization due to the impact of the COVID-19 pandemic on macroeconomic conditions, the Company determined that potential impairment indicators were present and that an impairment assessment was warranted for goodwill and trademarks in connection with the preparation of the financial statements for the third quarter of 2020. As a result, the Company performed an interim assessment of goodwill, all of which is assigned to its wholesale reporting unit, using a quantitative approach as of September 30, 2020, and an interim assessment of trademarks also using a quantitative approach as of September 30, 2020. In conducting the interim goodwill assessment, the estimated fair value of the Company's wholesale reporting unit was determined using discounted cash flows analysis. As of September 30, 2020, the fair value of the Company's wholesale reporting unit exceeded its carrying value by 21%; therefore no goodwill impairment was recorded. In evaluating trademarks, estimated fair values were determined using discounted cash flows and implied royalty rates. Based on the results of the trademark assessments, the Company concluded that the fair values of the trademarks substantially exceeded their respective carrying values. Therefore, no impairment was recorded on the Company's trademarks.

The Company can make no assurances that its goodwill or trademarks will not be impaired in the future. When preparing a discounted cash flow analysis, the Company makes a number of key estimates and assumptions regarding future cash flows and growth. The discount rate used is based on the Company's weighted average cost of capital, which includes assumptions such as market capital structure, market beta, risk-free rate of return, and estimated costs of borrowing. Changes in key estimates assumptions, and macroeconomic conditions, and/or continued deterioration of the Company's market capitalization and business, could lead to an impairment charge in a future period.

The Company's amortizable intangible assets, which were included within other assets in the Consolidated Condensed Balance Sheets (unaudited), consisted of the following:

September 30, 2020

December 31, 2019

Weighted

Gross

Gross

Average

Carrying

Accumulated

Carrying

Accumulated

    

Life (Years)

    

Amount

    

Amortization

    

Net

    

Amount

    

Amortization

    

Net

(Dollars in thousands)

(Dollars in thousands)

Amortizable intangible assets

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Customer relationships

 

15

$

3,500

 

$

(2,236)

$

1,264

$

3,500

$

(2,061)

$

1,439

Total amortizable intangible assets

 

  

$

3,500

 

$

(2,236)

$

1,264

$

3,500

$

(2,061)

$

1,439

Amortization expense related to the intangible assets was approximately $58,000 in both the third quarters of 2020 and 2019. For the nine months ended September 30, amortization expense related to the intangible assets was approximately $175,000 in both 2020 and 2019.

7

7.    Segment Information

The Company has two reportable segments: North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”).  The Company’s Chief Executive Officer evaluates the performance of the Company’s segments based on earnings (loss)from operations. Therefore, interest income or expense, other income or expense, and income taxes are not allocated to the segments.  The “other” category in the tables below includes the Company’s wholesale and retail operations in Australia, South Africa, Asia Pacific and Europe, which do not meet the criteria for separate reportable segment classification.  Summarized segment data for the three and nine months ended September 30, 2020 and 2019, was as follows:

Three Months Ended

September 30, 

    

Wholesale

    

Retail

    

Other

    

Total

(Dollars in thousands)

2020

 

  

 

  

 

  

 

Product sales

$

43,788

$

4,367

$

4,799

$

52,954

Licensing revenues

 

224

 

 

 

224

Net sales

$

44,012

$

4,367

$

4,799

$

53,178

Earnings (loss) from operations

$

2,752

(1)

$

(2,796)

(2)

$

(3,796)

(3)

$

(3,840)

 

  

 

  

 

  

 

  

2019

 

  

 

  

 

  

 

  

Product sales

$

67,193

$

5,158

$

9,521

$

81,872

Licensing revenues

 

630

 

 

 

630

Net sales

$

67,823

$

5,158

$

9,521

$

82,502

Earnings (loss) from operations

$

9,485

$

365

$

(1,361)

$

8,489

(1)Includes the write-off of a $1.1 million receivable related to TB due to its bankruptcy filed during the pandemic, $0.5 million in employee costs related to restructuring and temporary closures, $0.5 million in reserves for obsolete and slow-moving inventory due to COVID-19-related impacts, and $0.2 million in other related charges, partially offset by $0.3 million of income from government wage subsidies.
(2)Includes $1.5 million in early lease termination charges, $1.0 million for the impairment of retail store fixed assets, and $0.1 million in employee costs related to restructuring and temporary closures.
(3)Includes $2.1 million for the impairment of retail store fixed assets and operating lease right-of-use assets, $1.1 million in employee costs related to restructuring and temporary closures, $0.5 million in reserves for obsolete and slow-moving inventory due to COVID-19-related impacts, and $0.2 million in related charges, partially offset by $1.1 million of income from government wage and rent subsidies.

Nine Months Ended

September 30, 

    

Wholesale

    

Retail

    

Other

    

Total

(Dollars in thousands)

2020

 

  

 

  

 

  

 

  

Product sales

$

105,193

$

12,768

$

14,621

$

132,582

Licensing revenues

 

826

 

 

 

826

Net sales

$

106,019

$

12,768

$

14,621

$

133,408

Earnings (loss) from operations

$

(4,664)

(4)

$

(3,741)

(5)

$

(7,107)

(6)

$

(15,512)

 

  

 

  

 

  

 

2019

 

  

 

  

 

  

 

  

Product sales

$

171,383

$

16,124

$

27,626

$

215,133

Licensing revenues

 

1,973

 

 

 

1,973

Net sales

$

173,356

$

16,124

$

27,626

$

217,106

Earnings (loss) from operations

$

16,903

$

1,249

$

(2,653)

$

15,499

(4)Includes the write-off of $4.4 million in receivables due to two bankruptcies of large customers (JCP and TB) filed during the pandemic, $1.9 million in employee costs related to restructuring and temporary closures, $0.5 million in reserves for obsolete and slow-moving inventory due to COVID-19-related impacts, and $0.2 million in other related charges, partially offset by $1.6 million of income from government wage subsidies.
(5)Includes $1.5 million in early lease termination charges, $1.0 million for the impairment of retail store fixed assets, and $0.1 million in employee costs related to restructuring and temporary closures.

8

(6)Includes $2.1 million for the impairment of retai store fixed assets and operating lease right-of-use assets, $2.0 million in employee costs related to restructuring and temporary closures, $1.6 million in reserves for obsolete and slow-moving inventory due to COVID-19-related impacts, and $0.6 million in related charges, partially offset by $2.5 million of income from government wage and rent subsidies.

8.    Employee Retirement Plans

The components of the Company’s net periodic pension cost were as follows:

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2020

    

2019

    

2020

    

2019

(Dollars in thousands)

Service cost

$

115

$

116

$

345

$

347

Interest cost

 

502

 

615

 

1,508

 

1,845

Expected return on plan assets

 

(693)

 

(625)

 

(2,081)

 

(1,876)

Net amortization and deferral

 

191

 

156

 

573

 

469

Net periodic pension cost

$

115

$

262

$

345

$

785

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

9.    Leases

The Company leases retail shoe stores, as well as several office and distribution facilities worldwide. The leases have original lease periods expiring between the fourth quarter of 2020 and 2030. Many leases include one or more options to renew. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

During the third quarter of 2020, the Company recorded $1.2 million expense for the impairment of operating lease right-of-use assets related to its retail stores worldwide. This impairment was part of the overall $3.1 million impairment of long-lived assets charge recognized during the quarter.

The components of the Company’s operating lease costs were as follows (dollars in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

    

2020

2019

    

2020

2019

(Dollars in thousands)

Operating lease costs

$

1,652

$

2,198

$

5,237

$

6,590

Variable lease costs (1)

 

 

 

12

 

43

Total lease costs

$

1,652

$

2,198

$

5,249

$

6,633

(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 the Company's financial statements.

The following is a schedule of maturities of operating lease liabilities as of September 30, 2020 (dollars in thousands):

    

Operating Leases

2020, excluding the nine months ended September 30, 2020

$

1,301

2021

 

4,559

2022

 

3,309

2023

 

2,270

2024

 

1,505

Thereafter

 

2,830

Total lease payments

 

15,774

Less imputed interest

 

(1,344)

Present value of lease liabilities

$

14,430

9

The operating lease liabilities are classified in the consolidated condensed balance sheets as follows:

    

September 30, 2020

December 31, 2019

(Dollars in thousands)

Operating lease liabilities – current

$

4,468

    

$

6,505

Operating lease liabilities - non-current

 

9,962

14,110

Total

$

14,430

$

20,615

The Company determined the present value of its lease liabilities using a weighted-average discount rate of 4.25%. As of September 30, 2020, the Company’s leases have a weighted-average remaining lease term of 4.63 years. The decrease in lease liabilities in 2020 was primarily due to the early closing of three unprofitable retail stores in the U.S. and lease expirations at Florsheim Australia.

Supplemental cash flow information related to the Company’s operating leases is as follows:

    

Three Months Ended September 30,

    

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands)

Cash paid for amounts included in the measurement of lease liabilities

$

2,174

$

2,278

$

5,424

$

6,803

Right-of-use assets obtained in exchange for new lease liabilities (noncash)

$

72

$

$

216

$

27,002

10.    Income Taxes

The Company's provision (benefit) for income taxes and effective tax rates for the three and nine months ended September 30, 2020 and 2019 are presented in the following table:

    

Three Months Ended September 30,

    

Nine Months Ended September 30,

2020

2019

2020

2019

(Dollars in thousands)

Earnings (loss) before provision (benefit) for income taxes

$

(3,733)

$

8,614

$

(15,016)

$

15,758

Income tax provision (benefit)

$

2,136

$

2,029

$

(1,426)

$

3,691

Effective tax rate

(57.2)

%

23.6

%

9.5

%

23.4

%

The Company's third quarter and year-to-date 2020 income tax provisions included $2.0 million of tax expense related to deferred tax assets of the Company's foreign subsidiaries. The Company's 2020 effective tax rates were also impacted because it has not recorded an income tax benefit on foreign subsidiary losses, and, in the U.S., the Company has the ability to carry back current year losses to a tax year when the U.S. federal statutory tax rate was 35%, which is currently permitted under the U.S. Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

11.    Share-Based Compensation Plans

During the three and nine months ended September 30, 2020, the Company recognized $362,000 and $1,063,000 respectively, of compensation expense associated with stock option and restricted stock awards granted in years 2016 through 2020. During the three and nine months ended September 30, 2019, the Company recognized $371,000 and $1,102,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 2015 through 2019.

10

The following table summarizes the Company’s stock option activity for the nine-month period ended September 30, 2020:

Weighted

Weighted

Average

Average

Remaining

Aggregate

Exercise

Contractual