2024Q20000106532--12-31WIhttp://fasb.org/us-gaap/2024#SecuredOvernightFinancingRateSofrMemberfalsefalsefalsefalsefalse00001065322023-01-012023-12-310000106532us-gaap:CommonStockMember2024-04-012024-06-300000106532us-gaap:CommonStockMember2024-01-012024-03-310000106532us-gaap:CommonStockMember2023-04-012023-06-300000106532us-gaap:CommonStockMember2023-01-012023-03-310000106532weys:ReinvestedEarningsMember2024-06-300000106532weys:CapitalInExcessOfParValueMember2024-06-300000106532us-gaap:CommonStockMember2024-06-300000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300000106532weys:ReinvestedEarningsMember2024-03-310000106532weys:CapitalInExcessOfParValueMember2024-03-310000106532us-gaap:CommonStockMember2024-03-310000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310000106532weys:ReinvestedEarningsMember2023-12-310000106532weys:CapitalInExcessOfParValueMember2023-12-310000106532us-gaap:CommonStockMember2023-12-310000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000106532weys:ReinvestedEarningsMember2023-06-300000106532weys:CapitalInExcessOfParValueMember2023-06-300000106532us-gaap:CommonStockMember2023-06-300000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300000106532weys:ReinvestedEarningsMember2023-03-310000106532weys:CapitalInExcessOfParValueMember2023-03-310000106532us-gaap:CommonStockMember2023-03-310000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310000106532weys:ReinvestedEarningsMember2022-12-310000106532weys:CapitalInExcessOfParValueMember2022-12-310000106532us-gaap:CommonStockMember2022-12-310000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000106532us-gaap:LineOfCreditMember2024-06-3000001065322024-06-280000106532us-gaap:EmployeeStockOptionMember2023-12-310000106532us-gaap:EmployeeStockOptionMember2024-01-012024-06-300000106532us-gaap:EmployeeStockOptionMember2024-06-300000106532us-gaap:RestrictedStockMember2024-01-012024-06-300000106532us-gaap:RestrictedStockMember2023-12-310000106532us-gaap:RestrictedStockMember2024-06-300000106532us-gaap:ProductMemberweys:WholesaleMember2024-04-012024-06-300000106532us-gaap:ProductMemberweys:RetailSegmentMember2024-04-012024-06-300000106532us-gaap:ProductMemberweys:OtherSegmentMember2024-04-012024-06-300000106532us-gaap:LicenseMemberweys:WholesaleMember2024-04-012024-06-300000106532us-gaap:ProductMember2024-04-012024-06-300000106532us-gaap:LicenseMember2024-04-012024-06-300000106532us-gaap:ProductMemberweys:WholesaleMember2024-01-012024-06-300000106532us-gaap:ProductMemberweys:RetailSegmentMember2024-01-012024-06-300000106532us-gaap:ProductMemberweys:OtherSegmentMember2024-01-012024-06-300000106532us-gaap:LicenseMemberweys:WholesaleMember2024-01-012024-06-300000106532us-gaap:ProductMember2024-01-012024-06-300000106532us-gaap:LicenseMember2024-01-012024-06-300000106532us-gaap:ProductMemberweys:WholesaleMember2023-04-012023-06-300000106532us-gaap:ProductMemberweys:RetailSegmentMember2023-04-012023-06-300000106532us-gaap:ProductMemberweys:OtherSegmentMember2023-04-012023-06-300000106532us-gaap:LicenseMemberweys:WholesaleMember2023-04-012023-06-300000106532us-gaap:ProductMember2023-04-012023-06-300000106532us-gaap:LicenseMember2023-04-012023-06-300000106532us-gaap:ProductMemberweys:WholesaleMember2023-01-012023-06-300000106532us-gaap:ProductMemberweys:RetailSegmentMember2023-01-012023-06-300000106532us-gaap:ProductMemberweys:OtherSegmentMember2023-01-012023-06-300000106532us-gaap:LicenseMemberweys:WholesaleMember2023-01-012023-06-300000106532us-gaap:ProductMember2023-01-012023-06-300000106532us-gaap:LicenseMember2023-01-012023-06-300000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300000106532us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310000106532weys:WholesaleMember2024-04-012024-06-300000106532weys:RetailSegmentMember2024-04-012024-06-300000106532weys:OtherSegmentMember2024-04-012024-06-300000106532weys:WholesaleMember2024-01-012024-06-300000106532weys:RetailSegmentMember2024-01-012024-06-300000106532weys:OtherSegmentMember2024-01-012024-06-300000106532weys:WholesaleMember2023-04-012023-06-300000106532weys:RetailSegmentMember2023-04-012023-06-300000106532weys:OtherSegmentMember2023-04-012023-06-300000106532weys:WholesaleMember2023-01-012023-06-300000106532weys:RetailSegmentMember2023-01-012023-06-300000106532weys:OtherSegmentMember2023-01-012023-06-300000106532us-gaap:RevolvingCreditFacilityMember2024-06-300000106532us-gaap:RevolvingCreditFacilityMember2024-01-012024-06-300000106532weys:ForeignExchangeContractsAustralianMember2024-06-300000106532us-gaap:CustomerRelationshipsMember2024-06-300000106532us-gaap:CustomerRelationshipsMember2023-12-310000106532weys:ReinvestedEarningsMember2024-04-012024-06-300000106532weys:ReinvestedEarningsMember2024-01-012024-03-310000106532weys:ReinvestedEarningsMember2023-04-012023-06-300000106532weys:ReinvestedEarningsMember2023-01-012023-03-310000106532us-gaap:RevolvingCreditFacilityMember2024-01-012024-06-3000001065322024-01-012024-03-3100001065322023-01-012023-03-3100001065322023-04-012023-06-300000106532weys:CapitalInExcessOfParValueMember2024-04-012024-06-300000106532weys:CapitalInExcessOfParValueMember2024-01-012024-03-310000106532weys:CapitalInExcessOfParValueMember2023-04-012023-06-300000106532weys:CapitalInExcessOfParValueMember2023-01-012023-03-3100001065322023-01-012023-06-3000001065322023-06-3000001065322022-12-3100001065322024-06-3000001065322023-12-3100001065322024-04-012024-06-3000001065322024-07-3100001065322024-01-012024-06-30xbrli:sharesiso4217:USDiso4217:USDxbrli:sharesxbrli:pureiso4217:AUDweys:segment

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 June 30, 2024

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 July 31, 2024, there were 9,490,681 shares of common stock outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

The following consolidated condensed balance sheet as of December 31, 2023, which has been derived from audited financial statements, and the unaudited interim consolidated condensed financial statements have been prepared by Weyco Group, Inc. (“we,” “our,” “us,” and 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 we believe that the disclosures made are adequate to make the information not misleading. Please read these consolidated condensed financial statements in conjunction with the financial statements and notes thereto included in our latest Annual Report on Form 10-K.

1

WEYCO GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

    

June 30, 

    

December 31, 

2024

2023

(Dollars in thousands)

ASSETS:

 

  

 

  

Cash and cash equivalents

$

78,407

$

69,312

Marketable securities, at amortized cost

 

 

215

Accounts receivable, net

 

37,338

 

39,275

Income tax receivable

332

245

Inventories

 

67,944

 

74,890

Prepaid expenses and other current assets

 

3,506

 

6,172

Total current assets

 

187,527

 

190,109

Marketable securities, at amortized cost

 

6,367

 

6,354

Deferred income tax benefits

 

1,074

 

1,096

Property, plant and equipment, net

 

28,566

 

29,504

Operating lease right-of-use assets

10,597

12,520

Goodwill

 

12,317

 

12,317

Trademarks

 

33,168

 

33,168

Other assets

 

24,203

 

24,274

Total assets

$

303,819

$

309,342

LIABILITIES AND EQUITY:

 

Accounts payable

$

4,573

$

8,845

Dividend payable

2,352

Operating lease liabilities

3,514

3,979

Accrued liabilities

 

10,865

 

14,446

Total current liabilities

 

18,952

 

29,622

Deferred income tax liabilities

 

11,837

 

11,819

Long-term pension liability

 

13,482

 

13,412

Operating lease liabilities

7,958

9,531

Other long-term liabilities

 

386

 

465

Total liabilities

 

52,615

 

64,849

Common stock

 

9,491

 

9,497

Capital in excess of par value

72,346

71,661

Reinvested earnings

 

187,563

 

180,646

Accumulated other comprehensive loss

 

(18,196)

 

(17,311)

Total equity

 

251,204

 

244,493

Total liabilities and equity

$

303,819

$

309,342

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 June 30, 

Six Months Ended June 30, 

    

2024

    

2023

    

2024

    

2023

    

(In thousands, except per share amounts)

Net sales

$

63,932

$

67,014

$

135,490

$

153,308

Cost of sales

 

35,840

 

38,007

 

75,391

 

87,139

Gross earnings

 

28,092

 

29,007

 

60,099

 

66,169

Selling and administrative expenses

 

21,431

 

22,307

 

45,187

 

49,083

Earnings from operations

 

6,661

 

6,700

 

14,912

 

17,086

Interest income

 

964

 

190

 

1,869

 

329

Interest expense

 

 

(132)

 

 

(517)

Other expense, net

 

(143)

 

(168)

 

(238)

 

(298)

Earnings before provision for income taxes

 

7,482

 

6,590

 

16,543

 

16,600

Provision for income taxes

 

1,875

 

1,726

 

4,286

 

4,291

Net earnings

$

5,607

$

4,864

$

12,257

$

12,309

Weighted average shares outstanding

Basic

9,429

9,440

9,433

9,461

Diluted

9,548

9,542

9,564

9,625

Earnings per share

Basic

$

0.60

$

0.51

$

1.30

$

1.30

Diluted

$

0.59

$

0.50

$

1.28

$

1.28

Cash dividends declared (per share)

$

0.26

$

0.25

$

0.51

$

0.49

Comprehensive income

$

5,741

$

5,210

$

11,372

$

12,448

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)

    

Six Months Ended June 30, 

    

2024

2023

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

 

Net earnings

$

12,257

$

12,309

Adjustments to reconcile net earnings to net cash provided by operating activities -

 

 

Depreciation

 

1,204

 

1,279

Amortization

 

133

 

137

Bad debt (recovery) expense

 

(2)

 

88

Deferred income taxes

 

(11)

 

55

Net foreign currency transaction losses (gains)

 

28

 

(9)

Share-based compensation expense

 

698

 

675

Pension expense

 

441

 

647

Loss on disposal of fixed assets

20

Increase in cash surrender value of life insurance

 

(210)

 

(210)

Changes in operating assets and liabilities -

 

 

Accounts receivable

 

1,948

 

18,982

Inventories

 

6,941

 

24,115

Prepaid expenses and other assets

 

2,800

 

2,167

Accounts payable

 

(4,264)

 

(9,305)

Accrued liabilities and other

 

(4,225)

 

(5,273)

Accrued income taxes

 

(90)

 

(2,003)

Excess tax benefits from share-based compensation

 

 

(73)

Net cash provided by operating activities

 

17,668

 

43,581

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

Proceeds from maturities of marketable securities

 

215

 

1,010

Purchases of property, plant and equipment

 

(344)

 

(1,381)

Net cash used for investing activities

 

(129)

 

(371)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

Cash dividends paid

 

(7,162)

 

(6,920)

Shares purchased and retired

 

(514)

 

(2,134)

Net proceeds from stock options exercised

 

24

Payment of contingent consideration

 

 

(500)

Taxes paid related to the net share settlement of equity awards

 

(173)

Proceeds from bank borrowings

 

 

63,047

Repayments of bank borrowings

(91,613)

Net cash used for financing activities

 

(7,676)

 

(38,269)

Effect of exchange rate changes on cash and cash equivalents

 

(768)

 

145

Net increase in cash and cash equivalents

$

9,095

$

5,086

CASH AND CASH EQUIVALENTS at beginning of period

 

69,312

16,876

CASH AND CASH EQUIVALENTS at end of period

$

78,407

$

21,962

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

Income taxes paid, net of refunds

$

4,337

$

6,273

Interest paid

$

$

808

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 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 six months ended June 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 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 June 30, 

Six Months Ended June 30, 

2024

2023

2024

2023

(In thousands, except per share amounts)

Numerator:

 

  

 

  

 

  

 

  

 

Net earnings

$

5,607

$

4,864

$

12,257

$

12,309

Denominator:

 

  

 

  

 

  

 

  

Basic weighted average shares outstanding

 

9,429

 

9,440

 

9,433

 

9,461

Effect of dilutive securities:

 

  

 

  

 

  

 

  

Employee share-based awards

 

119

 

102

 

131

 

164

Diluted weighted average shares outstanding

 

9,548

 

9,542

 

9,564

 

9,625

Basic earnings per share

$

0.60

$

0.51

$

1.30

$

1.30

Diluted earnings per share

$

0.59

$

0.50

$

1.28

$

1.28

Diluted weighted average shares outstanding for the three months ended June 30, 2024, excluded anti-dilutive stock options totaling 393,000 shares of common stock at a weighted average exercise price of $30.15. Diluted weighted average shares outstanding for the six months ended June 30, 2024, excluded anti-dilutive stock options totaling 394,000 shares of common stock at a weighted average exercise price of $30.15.  Diluted weighted average shares outstanding for the three months ended June 30, 2023, excluded anti-dilutive stock options totaling 433,000 shares of common stock at a weighted average exercise price of $30.75. Diluted weighted average shares outstanding for the six months ended June 30, 2023, excluded anti-dilutive stock options totaling 735,000 shares of common stock at a weighted average exercise price of $28.78.

5

4.    Investments

All our marketable securities are classified as held-to-maturity securities and reported at amortized cost pursuant to 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 June 30, 2024, and December 31, 2023.

June 30, 2024

December 31, 2023

    

Amortized

    

Market

    

Amortized

    

Market

    

    

Cost

    

Value

    

Cost

    

Value

    

(Dollars in thousands)

Marketable securities:

 

  

 

  

 

  

 

  

 

Current

$

$

$

215

$

215

Due from one through five years

 

3,531

 

3,560

 

3,518

 

3,592

Due from six through ten years

 

2,836

 

2,748

 

2,836

 

2,830

Total

$

6,367

$

6,308

$

6,569

$

6,637

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

June 30, 2024

December 31, 2023

    

Unrealized

    

Unrealized

    

Unrealized

    

Unrealized

    

    

Gains

    

Losses

    

Gains

    

Losses

    

(Dollars in thousands)

Marketable securities

$

82

$

(141)

$

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 June 30, 2024, and determined that no other-than-temporary market value impairment exists.

5.    Intangible Assets

During the six months ended June 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:

    

    

June 30, 2024

December 31, 2023

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

$

(3,111)

$

389

$

3,500

$

(2,994)

$

506

Total amortizable intangible assets

$

3,500

$

(3,111)

$

389

$

3,500

$

(2,994)

$

506

Amortization expense related to the intangible assets was approximately $58,000 in both the second quarters of 2024 and 2023. For both the six-month periods ended June 30, 2024 and June 30, 2023, amortization expense related to the intangible assets was approximately $116,000.

6

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 June 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 Asia in 2023 and are in the final stages of winding down that business. Summarized segment data for the three and six-month periods ended June 30, 2024 and 2023, was as follows:

Three Months Ended

June 30, 

    

Wholesale

    

Retail

    

Other

    

Total

(Dollars in thousands)

2024

 

  

 

  

 

  

 

Product sales

$

49,741

$

7,603

$

6,081

$

63,425

Licensing revenues

 

507

 

 

 

507

Net sales

$

50,248

$

7,603

$

6,081

$

63,932

Earnings from operations

$

5,784

$

695

$

182

$

6,661

 

 

 

 

2023

 

 

 

 

Product sales

$

50,910

$

7,627

$

7,923

$

66,460

Licensing revenues

 

554

 

 

 

554

Net sales

$

51,464

$

7,627

$

7,923

$

67,014

Earnings from operations

$

5,355

$

1,069

$

276

$

6,700

Six Months Ended

June 30, 

    

Wholesale

    

Retail

    

Other

    

Total

(Dollars in thousands)

2024

 

  

 

  

 

  

 

  

Product sales

$

105,464

$

17,422

$

11,570

$

134,456

Licensing revenues

 

1,034

 

 

 

1,034

Net sales

$

106,498

$

17,422

$

11,570

$

135,490

Earnings from operations

$

13,175

$

1,992

$

(255)

$

14,912

 

 

 

 

2023

 

 

 

 

Product sales

$

120,191

$

16,557

$

15,390

$

152,138

Licensing revenues

 

1,170

 

 

 

1,170

Net sales

$

121,361

$

16,557

$

15,390

$

153,308

Earnings from operations

$

14,184

$

2,351

$

551

$

17,086

7.    Employee Retirement Plans

The components of our pension expense were as follows:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2024

    

2023

    

2024

    

2023

(Dollars in thousands)

Service cost

$

97

$

116

$

193

$

234

Interest cost

 

637

 

644

 

1,274

 

1,316

Expected return on plan assets

 

(612)

 

(574)

 

(1,224)

 

(1,151)

Net amortization and deferral

 

99

 

114

 

198

 

248

Pension expense

$

221

$

300

$

441

$

647

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).

7

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 June 30, 

    

Six Months Ended June 30, 

    

    

2024

2023

    

2024

2023

    

(Dollars in thousands)

Operating lease costs

 

$

1,116

$

1,298

 

$

2,222

$

2,660

 

Variable lease costs (1)

49

51

Total lease costs

 

$

1,116

$

1,347

 

$

2,222

$

2,711

 

(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 June 30, 2024:

    

Operating Leases

(Dollars in thousands)

2024, excluding the six months ended June 30, 2024

 

$

2,089

2025

 

 

3,591

2026

 

 

3,174

2027

 

 

2,051

2028

1,012

Thereafter

 

 

399

Total lease payments

 

 

12,316

Less: imputed interest

 

 

(844)

Present value of lease liabilities

 

$

11,472

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

    

June 30, 

December 31, 

2024

    

2023

(Dollars in thousands)

Operating lease liabilities - current

$

3,514

$

3,979

Operating lease liabilities - non-current

7,958

9,531

Total

 

$

11,472

$

13,510

We determined the present value of our lease liabilities using a weighted-average discount rate of 4.38%.  As of June 30, 2024, our leases had a weighted-average remaining lease term of 3.5 years.

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

    

Three Months Ended June 30, 

    

Six Months Ended June 30, 

    

    

2024

    

2023

    

2024

    

2023

    

(Dollars in thousands)

Cash paid for amounts included in the measurement of lease liabilities

 

$

1,181

$

1,273

 

$

2,322

$

2,559

 

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

$

259

$

$

259

$

1,739

8

9.    Income Taxes

The effective income tax rates for the three months ended June  30, 2024 and 2023 were 25.1% and 26.2%, respectively. For the six months ended June 30, 2024 and 2023, the effective tax rate was 25.9% 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 six months ended June 30, 2024, we recognized $331,000 and $698,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 2019 through 2023. During the three and six months ended June 30, 2023, we recognized $337,000 and $675,000, respectively, of compensation expense associated with stock option and restricted stock awards granted in years 2018 through 2022.

The following table summarizes our stock option activity for the six-month period ended June 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

 

(49,962)

24.44

 

  

 

  

Forfeited or expired

 

(5,880)

25.05

 

  

 

  

Outstanding at June 30, 2024

 

911,375

$

26.32

 

6.3

$

4,440,000

Exercisable at June 30, 2024

 

480,188

$

27.54

 

4.9

$

2,128,000

*The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of our common stock on June 28, 2024, the last trading day of the quarter, of $30.32 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 six-month period ended June 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

 

 

 

 

Vested

 

(1,425)

 

24.85

 

 

Forfeited

 

 

 

 

Non-vested - June 30, 2024

 

67,665

$

25.55

2.2

$

2,052,000

*The aggregate intrinsic value of non-vested restricted stock was calculated using the market value of our common stock on June 28, 2024, the last trading day of the quarter, of $30.32 multiplied by the number of non-vested restricted shares outstanding.

11.  Short-Term Borrowings

At June 30, 2024, we had a $40.0 million revolving line of credit with a bank that is secured by a lien against our general business assets, and expires on September 28, 2024. Outstanding advances on the line of credit bear interest at the one-month term secured overnight financing rate (“SOFR”) plus 125 basis points. Our line of credit agreement contains representations, warranties and covenants (including a minimum tangible net worth financial covenant) that are customary for a facility of this type. At June 30, 2024, there were no outstanding borrowings on the line of credit, and we were in compliance with all financial covenants.

9

12.  Financial Instruments

At June 30, 2024, our wholly-owned subsidiary, Florsheim Australia, had foreign exchange contracts outstanding to buy $1.8 million U.S. dollars at a price of approximately $2.7 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 six months ended June 30, 2024 and 2023, was as follows:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2024

    

2023

    

2024

    

2023

(Dollars in thousands)

Net earnings

$

5,607

$

4,864

$

12,257

$

12,309

Foreign currency translation adjustments

 

61

 

262

 

(1,031)

 

(44)

Pension liability adjustment, net of tax of $26, $30, $52, and $65, respectively

 

73

 

84

 

146

 

183