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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

☒ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2021, 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)

333 W. Estabrook Boulevard, P. O. Box 1188, Milwaukee, WI53201

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (414) 908-1600

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻No⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ◻No⌧

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, if any, 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.⌧

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ◻ No ⌧

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the close of business on June 30, 2021, was $131,643,000. This was based on the closing price of $22.37 per share as reported by Nasdaq on June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter.

As of March 1, 2022, there were 9,664,756 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders scheduled for May 3, 2022, are incorporated by reference in Part III of this report.

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WEYCO GROUP, INC.

Table of Contents to Annual Report on Form 10-K

Year Ended December 31, 2021

Page

CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION 1

PART I.

ITEM 1. BUSINESS 2

ITEM 1A. RISK FACTORS 3

ITEM 1B. UNRESOLVED STAFF COMMENTS 7

ITEM 2. PROPERTIES 7

ITEM 3. LEGAL PROCEEDINGS 7

ITEM 4. MINE SAFETY DISCLOSURES 7

INFORMATION ABOUT EXECUTIVE OFFICERS 8

PART II.

ITEM 6. RESERVED 9

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 17

ITEM 9A. CONTROLS AND PROCEDURES 48

ITEM 9B. OTHER INFORMATION 48

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 48

ITEM 11. EXECUTIVE COMPENSATION 49

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 49

PART IV.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 49

ITEM 16. FORM 10-K SUMMARY 51

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CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION

This report contains certain forward-looking statements with respect to Weyco Group, Inc.’s (the “Company”) outlook for the future. These statements represent the Company’s good faith judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially. Such statements can be identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” or variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Therefore, the reader is cautioned that these forward-looking statements are subject to a number of risks, uncertainties or other factors that may cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risk factors described in this report under Item 1A, “Risk Factors.”

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PART 1

ITEM 1BUSINESS

Weyco Group, Inc. and its subsidiaries (the “Company”) engage in one line of business: the design and distribution of quality and innovative footwear. The Company designs and markets footwear principally for men, but also for women and children, under a portfolio of well-recognized brand names including: Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters, and Forsake. Trademarks maintained by the Company on its brands are important to the business. The Company’s products consist primarily of mid-priced leather dress shoes and casual footwear composed of man-made materials or leather, as well as outdoor boots, shoes, and sandals. The Company’s footwear is available in a broad range of sizes and widths, primarily purchased to meet the needs and desires of the general American population.

On June 7, 2021, the Company acquired substantially all of the operating assets and certain liabilities of Forsake, Inc. Forsake will join BOGS as part of the Company's outdoor division. Forsake designs and markets modern outdoor footwear, including hiking shoes and sneakerboots, under the brand name "Forsake." Its products are sold primarily in outdoor specialty stores and on e-commerce websites throughout North America. Management believes that Forsake fits well into the Company's strategy to diversify its product mix and build its presence in the outdoor footwear market. See Note 3 in the Notes to Consolidated Financial Statements for more information regarding the acquisition.

The Company purchases finished shoes from outside suppliers, primarily located in China and India, but has also expanded into Cambodia, Vietnam, and the Dominican Republic. Almost all of these foreign-sourced purchases are denominated in U.S. dollars. While the Company sources from more than 60 suppliers, two individual suppliers each accounted for slightly more than 10% of its total inventory purchases in 2021. Costs from the Company’s suppliers have historically been relatively stable although, in recent years, there have been upward cost pressures due to higher freight, labor, and materials costs, as well as due to tariffs and other trade protection measures. In particular, during 2021 the Company experienced higher freight costs due to supply chain bottlenecks, which have not yet fully resolved.

The Company’s business is separated into two reportable segments – the North American wholesale segment (“Wholesale”) and the North American retail segment (“Retail”). The Company also has other wholesale and retail businesses overseas which include its businesses in Australia, South Africa and Asia Pacific (collectively, “Florsheim Australia”), and its wholesale and retail businesses in Europe (“Florsheim Europe”). In late 2020, the Company decided to close Florsheim Europe and management is in the final stages of winding down this business.

Sales of the Company’s wholesale segment, which include both wholesale sales and worldwide licensing revenues, constituted 77% and 78% of total net sales in 2021 and 2020, respectively. At wholesale, shoes are marketed throughout the United States and Canada in more than 10,000 shoe, clothing and department stores. In 2021 and 2020, no individual customer represented 10% or more of the Company’s total net sales. The Company employs traveling salespeople and independent sales representatives who sell the Company’s products to retail outlets. Shoes are shipped to these retailers primarily from the Company’s distribution center in Glendale, Wisconsin. In the men’s footwear business, there is generally no identifiable seasonality, although new styles are historically developed and shown twice each year, in spring and fall. With the BOGS brand, which mainly sells winter and outdoor boots, there is seasonality in its business due to the nature of the product; the majority of BOGS sales occur in the third and fourth quarters. Consistent with industry practices, the Company carries significant amounts of inventory to meet customer delivery requirements and periodically provides extended payment terms to customers. The Company also has licensing agreements with third parties who sell its branded shoes outside of the United States, as well as licensing agreements with specialty shoe, apparel and accessory manufacturers in the United States.

Sales of the Company’s retail segment constituted 12% and 11% of total net sales in 2021 and 2020, respectively. The retail segment consists of e-commerce businesses and four brick and mortar stores in the United States. Retail sales are made directly to consumers on the Company’s websites, or by Company employees. The Company believes that as a result of the reduction in brick and mortar stores, the future results of its U.S. retail segment will be driven by its more profitable e-commerce businesses. Management intends to continue to focus on investing in and growing the e-commerce businesses.

Sales of the Company’s other businesses constituted 11% of total net sales in both 2021 and 2020. These sales relate to the Company’s wholesale and retail operations in Australia, South Africa, Asia Pacific and Europe.

As of December 31, 2021, the Company employed 608 persons worldwide, of whom 439 were full-time employees.

Price, quality, service and brand recognition are all important competitive factors in the shoe industry. The Company has a design department that continually reviews and updates product designs. Compliance with environmental and other government regulations

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historically have not had, and are not expected to have, a material adverse effect on the Company’s results of operations, financial position or cash flows, although there can be no assurances.

The Company makes available, free of charge, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and all amendments to those reports upon written or telephone request. Investors can also access these reports through the Company’s website, www.weycogroup.com, as soon as reasonably practical after the Company files or furnishes those reports to the Securities and Exchange Commission (“SEC”). The contents of the Company’s website are not incorporated by reference and are not a part of this filing. Also available on the Company’s website are various documents relating to the corporate governance of the Company, including its Code of Business Ethics.

ITEM 1ARISK FACTORS

There are various factors that affect or might affect the Company’s business, results of operations and financial condition, many of which are beyond the Company’s control. The following is a description of some of the material factors that could materially and adversely affect the Company’s reputation, business, results of operations and financial condition.

Risk factors related to our operations

The Company relies on independent foreign sources of production and the availability of leather, rubber and other raw materials; a deterioration in the Company’s relationship with, or other issues affecting, such manufacturers and/or issues with the availability of raw materials could have unfavorable effects on the Company’s business.

The Company purchases all of its products from independent foreign manufacturers, primarily in China and India. Although the Company believes that it has good working relationships with its manufacturers, the Company does not have long-term contracts with them. Thus, the Company could experience increases in manufacturing costs, disruptions in the timely supply of products or unanticipated reductions in manufacturing capacity, any of which could negatively impact the Company’s business, results of operations and financial condition. The Company has the ability to move production to different suppliers; however, the transition may not occur smoothly or quickly, which could result in the Company missing customer delivery date requirements and, consequently, the Company could lose future orders and its reputation may be harmed.

The Company’s use of foreign sources of production results in relatively long production and delivery lead times. Therefore, the Company typically forecasts demand at least five months in advance. If the Company’s forecasts are wrong or there are significant changes in demand, it would result in a loss of sales if the Company does not have enough product on hand or in reduced margins if the Company has excess inventory that needs to be sold at discounted prices.

The Company’s ability to import products in a timely and cost-effective manner may be affected by disruptions at U.S. or foreign ports or other transportation facilities, such as those due to labor disputes and work stoppages, political unrest, trade protection measures or trade wars, severe weather (climate change may increase the frequency and severity of severe weather conditions or events), outbreaks of infectious diseases, or security requirements in the United States and other countries. These issues could delay importation of products or require the Company to locate alternative ports or warehousing providers to avoid disruption to its customers. These alternatives may not be available on short notice or could result in higher transportation costs, which could have a material adverse impact on the Company’s overall profitability.

The Company’s products depend on the availability of raw materials, especially leather and rubber. Any significant shortages of quantities or increases in the cost of leather or rubber would have an adverse effect on the Company’s business and results of operations, unless the Company was able to pass such costs along to its customers.

Additional risks associated with foreign sourcing that could negatively impact the Company’s business include adverse changes in foreign economic conditions, import regulations, restrictions on the transfer of funds, duties, tariffs, quotas and political or labor interruptions, foreign currency fluctuations, expropriation and nationalization. For example, beginning in 2019, an additional tariff was imposed on leather footwear imported from China, where the Company sources a significant portion of its products. Although this tariff did not have a material adverse effect on the Company’s results of operations due to various mitigation efforts, the imposition of additional tariffs on the Company’s products could have a material adverse effect on the Company’s future results of operations. It is difficult to predict the effects of current or future tariffs and other trade barriers and disputes, and the Company's efforts to reduce the effects of tariffs through pricing and other measures may not be effective.

A disruption in the Company's supply chain could adversely affect its profitability.

Most of the Company's products for North American distribution are shipped to the Company via ocean freight carriers to ports primarily on the west coast of North America. The Company’s reliance on ocean freight transportation for the delivery of its inventory exposes it

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to various inherent risks, including port congestion, severe weather conditions, natural disasters, and terrorism, any of which could result in delivery delays and inefficiencies, increased costs and disruption of business. In 2021, the Company's supply chain was disrupted by congestion throughout the supply chain, domestic port and warehousing delays, and container shortages, resulting in the Company incurring premium freight charges on a portion of its imports. In addition to these factors, global inflation has also contributed to already higher incremental freight costs. Severe disruptions of the supply chain may force the Company to use more expensive methods to ship its products, and it may not be able to meet its customers delivery requirements which may result in loss of sales.

Any severe and prolonged disruption to ocean freight transportation could force the Company to rely on alternate and more expensive transportation systems. Efficient and timely inventory deliveries and proper inventory management are important factors in the Company's operations. Extended delays and disruptions in shipments could result in negative impacts to the pricing of the Company's products due to changes in the availability of inventory, increased shipping costs, or missed sales that may materially adversely impact its business and results of operations.

Loss of the services of the Company’s top executives and an inability to effectively manage leadership transitions, could adversely affect the business.

Thomas W. Florsheim, Jr., the Company’s Chairman and Chief Executive Officer, and John W. Florsheim, the Company’s President, Chief Operating Officer and Assistant Secretary, each have a strong heritage within the Company and the footwear industry. They possess knowledge, relationships and reputations based on their lifetime exposure to and experience in the Company and the industry. The unexpected loss of either one or both of the Company’s top executives could have an adverse impact on the Company’s performance. A loss of the skills, industry knowledge, contacts and expertise of any of the Company's senior executives could cause a setback to its operating plan and strategy. In addition, transitions of important responsibilities to new individuals include the possibility of disruptions, which could negatively impact the Company’s business and results of operations.

The Company may not be able to successfully integrate new brands and businesses.

The Company continues to look for acquisition opportunities. Those search efforts could be unsuccessful and costs could be incurred in any failed efforts. Further, if and when an acquisition occurs, the Company cannot guarantee that it will be able to successfully integrate the brand into its current operations, or that any acquired brand would achieve results in line with the Company’s historical performance or its specific expectations for the brand.

Risk factors related to our business and industry

Decreases in disposable income and general market volatility in the U.S. and global economy may adversely affect the Company.

Spending patterns in the footwear market, particularly those in the moderate-priced market in which a majority of the Company’s products compete, have historically been correlated with consumers’ disposable income. As a result, the success of the Company is affected by changes in general economic conditions, especially in the United States. Factors affecting discretionary income for the moderate consumer include, among others, general business conditions, gas and energy costs, inflation rates, employment rates, consumer confidence, interest rates and taxation. Additionally, the economy and consumer behavior generally impact the financial strength and buying patterns of retailers, which can also affect the Company’s results. Volatile, unstable or weak economic conditions, or a worsening of conditions, could adversely affect the Company’s sales volume and overall performance.

The Company is subject to risks related to operating in the retail environment that could adversely impact the Company’s business.

The Company is subject to risks associated with doing business in the retail environment, primarily in the United States. The U.S. retail industry has experienced a growing trend toward consolidation of large retailers. The merger of additional major retailers could result in the Company losing sales volume or increasing its concentration of business with a few large accounts, resulting in reduced bargaining power, which could increase pricing pressures and lower the Company’s margins.

The Company regularly assesses its retail locations in the U.S. and overseas and, at times, including during fiscal 2021, has closed unprofitable retail locations and incurred costs related to such closures. Future closures could have a material adverse effect on results.

As the popularity of online shopping for consumer goods continues to increase, the Company’s retail partners in the U.S. and abroad may experience decreased foot traffic, which could negatively impact their businesses. In addition, the COVID-19 pandemic has caused, and is expected to continue to cause, a decrease in foot traffic; other significant health pandemic or outbreaks of infectious diseases could also lead to a similar decrease in foot traffic. Decreases in foot traffic have, and in the future may, in turn, negatively impact the Company’s sales to those customers, and adversely affect the Company’s results of operations.

The Company operates in a highly competitive environment, which may result in lower prices and reduced profits.

The footwear market is extremely competitive. The Company competes with numerous manufacturers, distributors and retailers of men’s, women’s and children’s shoes, some of which are larger and have substantially greater resources than the Company. The

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Company competes with these companies primarily on the basis of price, quality, service and brand recognition, all of which are important competitive factors in the shoe industry. The Company’s ability to maintain its competitive edge depends upon these factors, as well as its ability to deliver new products at the best value for the consumer, maintain positive brand recognition, and obtain sufficient retail floor space and effective product presentation at retail. If the Company does not remain competitive, future prospects, results of operations and financial condition could decline.

Changes in fashion trends and consumer preferences could negatively impact the Company.

The Company’s success is dependent upon its ability to accurately anticipate and respond to rapidly changing fashion trends and consumer preferences. For example, as a result of the COVID-19 pandemic, purchases of dress and other dress-casual footwear were negatively affected in 2020 and early 2021 as many consumers worked from home due to stay-at-home orders or otherwise, and social as well as other occasion-related events were cancelled. Failure to predict or effectively respond to trends or preferences could have an adverse impact on the Company’s sales volume and overall performance, as well as have a negative impact on the Company’s reputation.

The Company conducts business globally, which exposes it to the impact of foreign currency fluctuations as well as political, economic and social risks.

A portion of the Company’s revenues and expenses are denominated in currencies other than the U.S. dollar, with its primary exposures being to the Australian dollar and the Canadian dollar. The Company is therefore subject to foreign currency risks and foreign exchange exposure. Exchange rates can be volatile and could adversely impact the Company’s financial results.

The Company is exposed to other risks of doing business in foreign jurisdictions, including political, economic or social instability, armed conflicts, acts of terrorism, civil unrest, changes in government policies and regulations, outbreaks of infectious diseases (such as the COVID-19 pandemic), severe weather events, natural disasters, and exposure to liabilities under anti-corruption laws (such as the U.S. Foreign Corrupt Practices Act). The Company is also exposed to risks relating to U.S. policy with respect to companies doing business in foreign jurisdictions. Additional legislation or other changes in the U.S. tax laws or interpretations could increase the Company’s U.S. income tax liability and adversely affect the Company’s after-tax profitability. Changes in tax policy or trade regulations, such as the disallowance of tax deductions on imported merchandise or the imposition of new tariffs on imported products, could have a material adverse effect on the Company’s business and results of operations.

In connection with increasing tensions related to the ongoing conflict between Russia and Ukraine, governments in the U.S., U.K. and the EU have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. Further escalation of geopolitical tensions could have a broader impact that expands into other markets where the Company does business, which could adversely affect its business and/or supply chain, international subsidiaries, business partners or customers in the broader region. The Company’s business may be impacted as a result of various factors, including inflation, increased energy prices, a slowing U.S. economy, more ocean freight disruptions, increased cyber-attacks, and reduced consumer confidence.

Risk factors related to cybersecurity

The Company is dependent on information and communication systems to support its business and e-commerce sales. Significant interruptions could disrupt its business and damage its reputation.

The Company accepts and fills the majority of its larger customers’ orders through the use of Electronic Data Interchange (EDI), and it relies on its warehouse management system to efficiently process orders. The Company’s corporate office relies on computer systems to efficiently process and record transactions. Significant interruptions in the Company’s EDI, information and communication systems from power loss, telecommunications failure, malicious attacks, or computer system failure could significantly disrupt the Company’s business and operations, as well as damage its reputation. In addition, the Company sells footwear on its websites, and failures of the Company’s or other retailers’ websites could adversely affect the Company’s sales, results, and reputation.

The Company, particularly its retail segment and its e-commerce businesses, is subject to the risk of data loss and security breaches.

The Company sells footwear in its retail stores and on its websites, and therefore the Company and/or its third-party credit card processors must process, store, and transmit large amounts of data, including personal information of its customers. Failure to prevent or mitigate data loss or other security breaches, including breaches of Company technology and systems, could expose the Company or its customers to a risk of loss or misuse of such information, adversely affect the Company’s operating results, result in litigation or potential liability for the Company, and otherwise harm the Company’s business and/or reputation. The Company’s technology and systems, as well as those of its partners have, and in the future may, become the target of cyberattacks. To this point, the Company has not experienced a material breach; however, in order to address these risks, the Company has secured cyber insurance and it uses third party technology and systems to aid in safeguarding the Company’s data and systems, including, without limitation, encryption and authentication technology, content delivery to customers, back-office support, and other functions. Although the Company has developed systems and processes that are designed to protect customer information and prevent data loss and other security breaches,

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including systems and processes designed to reduce the impact of a security breach at a third-party vendor, such measures cannot provide absolute security.

Risk factors related to COVID-19 and other infectious diseases

The duration and scope of the impacts of the COVID-19 pandemic are uncertain and may continue to adversely affect the Company’s operations, supply chain, distribution, and demand for its products.

The global outbreak of COVID-19 and related variants has created significant uncertainty within the global markets that the Company serves. The Company has operations, customers and suppliers in countries significantly impacted by COVID-19. Governmental authorities around the world have taken a variety of measures to slow the spread of COVID-19, including travel bans and restrictions, increased border controls and closures, quarantines, shelter-in-place orders and business shutdowns, and such authorities may impose additional restrictions in the future. The Company has also taken actions to protect its employees and to mitigate the spread of COVID-19 within its business. There can be no assurance that the measures implemented by governmental authorities or the Company’s actions will be effective or achieve their desired results in a timely fashion.

The impact of COVID-19 has resulted in disruptions to the Company’s supply chain, and may continue to do so, which could negatively impact its ability to meet customer demand. In particular, the Company’s suppliers located in China are subject to a heightened risk of temporary or permanent shutdowns due to China’s zero-tolerance COVID-19 policy. The duration of the disruption to the Company’s supply chain, and the related financial impact, cannot be estimated at this time, although the Company expects these challenges to continue to impact it at least through the first part of 2022. Should such disruption continue for an extended period of time, or if the Company encounters significant work stoppages or outbreaks due to COVID-19 at one or more of its locations or suppliers in the future, the Company may not be able to satisfy customer demand for a period of time.

Furthermore, the impact of COVID-19 on the economy, demand for the Company’s products and impacts to its operations, including the measures taken by governmental authorities to address it, may precipitate or exacerbate other risks and/or uncertainties, including specifically many of the risk factors set forth in this Annual Report, including inflationary costs, disruptions due to labor shortages, and supply chain disruptions, which may have a significant impact on the Company's operating results and financial condition, although it is unable to predict the extent or nature of these impacts at this time.

Risks related to financing, investment and pension matters

Volatility and uncertainty in the U.S. and global credit markets could adversely affect the Company’s business.

U.S. and global financial markets have at times been unstable and unpredictable, which has generally resulted in tightened credit markets with heightened lending standards and terms. The ultimate impact on the U.S. and global financial markets of the Russian invasion of Ukraine cannot yet be predicted, and will depend on the severity and duration of the conflict and the sanctions imposed by the U.S. and other countries. Volatility and instability in the credit markets pose various risks to the Company, including, among others, a negative impact on retailer and consumer confidence, limits to the Company’s customers’ access to credit markets and interference with the normal commercial relationships between the Company and its customers. Increased credit risks associated with the financial condition of some customers in the retail industry affects their level of purchases from the Company and the collectability of amounts owed to the Company, and in some cases, causes the Company to reduce or cease shipments to certain customers who no longer meet the Company’s credit requirements.

In addition, weak economic conditions and unstable and volatile financial markets could lead to certain of the Company’s customers experiencing cash flow problems, which may force them into higher default rates or to file for bankruptcy protection which may increase the Company’s bad debt expense or further negatively impact the Company’s business.

Interest rate volatility may increase the cost of financing. The Company’s U.S. dollar variable rate debt currently uses London Interbank Offered Rate (“LIBOR”) as a benchmark for determining interest rates. In connection with the Company’s line of credit amendment in November 2021, language was added to the agreement to include a benchmark replacement rate, selected by the bank and the Company, as a replacement to LIBOR that would take affect at the time LIBOR ceases.

Deterioration of the municipal bond market in general or of specific municipal bonds held by the Company or its pension plan may result in a material adverse effect on the Company’s financial condition, results of operations, and liquidity.

The Company maintains an investment portfolio consisting primarily of investment-grade municipal bond investments. The Company’s investment policy only permits the purchase of investment-grade securities. The Company’s investment portfolio totaled $10.2 million as of December 31, 2021, or approximately 4% of total assets. If the value of municipal bonds in general or any of the Company’s municipal bond holdings deteriorate, the performance of the Company’s investment portfolio, financial condition, results of operations, and liquidity may be materially and adversely affected.

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Risk factors related to our capital structure

The limited public float and trading volume for the Company’s stock may have an adverse impact on the stock price or make it difficult to liquidate.

The Company’s common stock is held by a relatively small number of shareholders. The Florsheim family owns approximately 50% of the stock and one institutional shareholder holds a significant block. Other officers, directors, and members of management own stock or have the potential to own stock through previously granted stock options and restricted stock. Consequently, the Company has a relatively small public float and low average daily trading volume, which could affect a shareholder’s ability to sell stock or the price at which it can be sold. In addition, future sales of substantial amounts of the Company’s common stock in the public market by large shareholders, or the perception that these sales could occur, may adversely impact the market price of the stock and the stock could be difficult for the shareholder to liquidate.

ITEM 1BUNRESOLVED STAFF COMMENTS

None

ITEM 2PROPERTIES

The following facilities were operated by the Company or its subsidiaries as of December 31, 2021:

Owned/ Square

Location Character Leased Footage % Utilized

In addition to the above-described offices and distribution facilities, the Company also operates offices, distribution facilities, and retail shoe stores under various rental agreements. All of these facilities are suitable and adequate for the Company’s current operations. See Note 8 of the Notes to Consolidated Financial Statements and Item 1, “Business”, above.

ITEM 3LEGAL PROCEEDINGS

None

ITEM 4MINE SAFETY DISCLOSURES

Not Applicable

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INFORMATION ABOUT EXECUTIVE OFFICERS

The following individuals were executive officers of Company as of December 31, 2021:

Name Position Age

Thomas W. Florsheim, Jr. (1) Chairman and Chief Executive Officer 63

Judy Anderson (3) Vice President, Finance and Treasurer 54

Kate Destinon Vice President, and President of Nunn Bush Brand 46

Dustin Combs Vice President, and President of BOGS and Rafters Brands 39

Brian Flannery Vice President, and President of Stacy Adams Brand 60

Kevin Schiff Vice President, and President of Florsheim Brand 53

George Sotiros (2) Vice President, Information Technology and Distribution 55

Allison Woss Vice President, Supply Chain 49

(2) John F. Wittkowske and George Sotiros are brothers-in-law.

Thomas W. Florsheim, Jr. has served as Chairman and Chief Executive Officer for more than 5 years.

John W. Florsheim has served as President, Chief Operating Officer and Assistant Secretary for more than 5 years.

John F. Wittkowske has served as Senior Vice President, Chief Financial Officer and Secretary for more than 5 years.

Judy Anderson has served as Vice President of Finance and Treasurer for more than 5 years.

Kate Destinon has served as a Vice President of the Company and President of the Nunn Bush Brand since January 1, 2021. Prior to this role, Ms. Destinon served as Vice President of Nunn Bush from 2019 to 2020, and Strategic Account Analyst for the Florsheim Brand from 2015 – 2018.

Dustin Combs has served as a Vice President of the Company and President of the BOGS and Rafters Brands for 5 years.

Brian Flannery has served as a Vice President of the Company and President of the Stacy Adams Brand for more than 5 years.

Kevin Schiff has served as a Vice President of the Company and President of the Florsheim Brand for more than 5 years.

George Sotiros has served as Vice President of Information Technology and Distribution since 2017. Prior to this role, Mr. Sotiros served as Vice President of Information Technology for more than 5 years.

Allison Woss has served as Vice President of Supply Chain since 2016. Prior to this role, Ms. Woss served as Vice President of Purchasing for more than 5 years.

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PART II

ITEM 5MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The shares of the Company’s common stock are traded on the Nasdaq Stock Market (“Nasdaq”) under the symbol “WEYS.” There were 134 holders of record of the Company’s common stock as of March 1, 2022.

In 1998, the Company’s stock repurchase program was established and approved by the Board of Directors. On several occasions since the program’s inception, the Board of Directors has increased the number of shares authorized for repurchase under the program. In total, 7.5 million shares have been authorized for repurchase. The table below presents information regarding the repurchase of the Company’s common stock by the Company in the three-month period ended December 31, 2021.

Maximum Number

Total Average Total Number of of Shares

Number Price Shares Purchased as that May Yet Be

of Shares Paid Part of the Publicly Purchased Under

Period Purchased Per Share Announced Program the Program

ITEM 6RESERVED

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ITEM 7MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company designs and markets quality and innovative footwear principally for men, but also for women and children, under a portfolio of well-recognized brand names, including: Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters, and Forsake. Inventory is purchased from third-party overseas manufacturers. The majority of foreign-sourced purchases are denominated in U.S. dollars. The Company has two reportable segments, North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”). In the wholesale segment, the Company’s products are sold to leading footwear, department, and specialty stores, as well as e-commerce retailers, primarily in the United States and Canada. The Company also has licensing agreements with third parties who sell its branded apparel, accessories and specialty footwear in the United States, as well as its footwear in Mexico and certain markets overseas. Licensing revenues are included in the Company’s wholesale segment. The Company’s retail segment consisted of e-commerce businesses and four brick and mortar retail stores in the United States as of December 31, 2021. Retail sales are made directly to consumers on the Company’s websites, or by Company employees. The Company’s “other” operations include the Company’s wholesale and retail businesses in Australia, South Africa, Asia Pacific (collectively, “Florsheim Australia”), and Europe (“Florsheim Europe”). The majority of the Company’s operations are in the United States, and its results are primarily affected by the economic conditions and the retail environment in the United States.

This discussion summarizes the significant factors affecting the consolidated operating results, financial position and liquidity of the Company for the two-year period ended December 31, 2021. This discussion should be read in conjunction with Item 8, “Financial Statements and Supplementary Data” below.

EXECUTIVE OVERVIEW

The Company’s 2021 results were mixed. Business recovery was sluggish in early 2021 with the first quarter still being significantly impacted by the pandemic, but operations improved after Covid vaccinations were rolled out in the second quarter. Demand accelerated in the third quarter, although at wholesale, supply chain delays hindered the Company’s ability to fulfill orders timely. The Company ended the year strong, with record fourth quarter wholesale shipments and strong performances across all of its brands. The positive fourth quarter results reflected two underlying trends. First, the slow unwinding of the supply chain bottleneck, as the Company started to receive significant quantities of footwear in the final months of the year. The incoming shipments allowed the Company to fill a portion of the demand pipeline, as the Company is still in the process of getting retailers back to their natural inventory models. Second, the Company is seeing strong consumer response to its product offerings in both its outdoor and legacy brands.

The BOGS outdoor brand has been solid throughout the pandemic, and ended 2021 with a record fourth quarter. BOGS’ classic weather boot styles experienced elevated demand in multiple distribution channels, ranging from department stores in cities, to farm and agricultural stores in rural communities. In addition, BOGS greatly expanded sales of its casual and lifestyle footwear from a wholesale and direct-to-consumer perspective. Relative to 2019, BOGS’ e-commerce business in North America was up over 100% for both the fourth quarter and for all of 2021.

In June 2021, the Company acquired the Forsake brand, which joined BOGS as part of the Company’s outdoor division. Over the past few months, management has been working with Forsake’s founders to onboard the brand and determine opportunities to expand Forsake’s reach both in the wholesale and direct-to-consumer channels. Along with the Company’s other brands, Forsake faced certain supply chain constraints and delays during 2021, but management believes good progress is being made to put the right structure in place for future growth.

The Company’s legacy brands, Florsheim, Stacy Adams, and Nunn Bush, had a robust fourth quarter. Over the course of the year, these brands were impacted by fluctuating consumer demand for dress and dress-casual footwear, from very low demand early in the year, to strong interest a few months later, with that trend continuing through the end of 2021. The falloff in the refined footwear category early in the pandemic followed a long period where the category had already been under pressure due to the increased importance of athletic and athleisure-casual footwear in today’s lifestyle. As a result, at the onset of the pandemic, many competitors pulled back or exited from the dress-shoe business, which put the Company in a strong position to pick up market share when the business bounced back. While the Company remains committed to diversifying its legacy product mix, it also recognizes that it has a tremendous opportunity to be the leader in a still sizeable category in the footwear world.

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The legacy brands also experienced success in introducing new casual and athleisure footwear. For example, the number two collection in Florsheim’s e-commerce business in 2021 was a sneaker program, and four of the top fifteen shoes were true casuals. The Company had similar success with Nunn Bush, as its number two wholesale package in 2021 was a sneaker collection. Looking back over the last two years, management is pleased with how the Company has gained market share in its traditional business, while at the same time, has pushed into new categories and positioned itself for additional opportunities.

In the retail segment, the Company posted its highest ever quarterly sales in the fourth quarter of 2021, driven by a 52% increase in e-commerce sales. Online transactions account for the vast majority of the Company’s retail sales. The Company’s online businesses are trending well above industry e-commerce growth numbers, which speaks to both the strength of its brands as well as its execution in this space. The Company continues to invest resources in marketing and analytical tools to build its e-commerce platform.

Overseas, the Company experienced an increase in fourth quarter sales and profitability at Florsheim Australia, which includes the markets of New Zealand, South Africa and the Pacific Rim. Australia reopened retail in October 2021 after months of lockdowns, which put the Company in the position to end the year on a stronger note. Overall, 2021 was a turnaround year for the Company’s overseas businesses. The Company exited its European Florsheim business and signed a long-term licensing deal for the brand in that region. Management also reset its Australian business with more favorable retail leases, increased its wholesale sales for BOGS and Florsheim, and experienced solid growth in its e-commerce business.

The Company is continuing to see strong demand for its brands across the board, and expects that both pipeline fill and strong consumer demand will drive its business in 2022. Management expects first quarter 2022’s volume to be significantly better than 2021, not only because demand is up, but also because the first quarter of 2021 was still somewhat impacted by the pandemic. As of March 1, 2022, the Company’s North American wholesale backlog was the highest in the Company’s history. The Company has bought aggressively, especially on its core product, to ensure that it can fulfill this demand as well as build its “in stock” inventory back to normal levels.

Sales and Earnings Highlights

Consolidated net sales totaled $267.6 million in 2021 compared to $195.4 million in 2020. Consolidated gross earnings as a percent of net sales were 40.1% and 40.2% in 2021 and 2020, respectively, Operating earnings rose to $25.7 million, up from operating losses of $7.6 million last year. Net earnings were $20.6 million, or $2.12 per diluted share, in 2021, compared to net losses of $8.5 million, or $0.87 per diluted share, in 2020.

The Company’s 2020 results were significantly impacted by the pandemic, due to most brick-and-mortar retailers being closed for a majority of the second quarter and an overall decrease in consumer demand. Additionally, last year’s operating results included non-recurring charges totaling $11.9 million. As such, comparisons of 2021 financial performance to 2020 may have limited utility. Therefore, selected comparisons to 2019 are included as appropriate. Consolidated net sales for the year-ended December 31, 2021 recovered to 88% of 2019 levels and operating earnings reached 95% of 2019 levels.

Financial Position Highlights

At December 31, 2021, cash, short-term investments, and marketable securities totaled $38.0 million and there were no amounts outstanding on the Company’s line of credit. During 2021, the Company generated $6.4 million of cash from operations. The Company used funds to pay $9.3 million in dividends and repurchase $2.5 million of company stock. The Company also spent $2.6 million to acquire the Forsake brand and had $1.0 million of capital expenditures.

Recent Acquisitions

On June 7, 2021, the Company acquired substantially all of the operating assets and certain liabilities of Forsake, a distributor of outdoor footwear, under the brand name “Forsake.” The principal assets acquired were inventory, accounts receivable, and intellectual property, including the Forsake brand name. The aggregate purchase price was approximately $2.6 million, plus contingent payments to be paid annually over a period of five years, depending on Forsake achieving certain performance measures. The Company’s estimate of the discounted fair value of the contingent payments was approximately $1.3 million in total. The $2.6 million purchase price was funded with the Company’s available cash.

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SEGMENT ANALYSIS

Net sales and earnings (loss) from operations for the Company’s segments, as well as its “other” operations, in the years ended December 31, 2021 and 2020, were as follows:

Years ended December 31,

(Dollars in thousands)

Net Sales

Earnings (Loss) from Operations

North American Wholesale $ 19,455 $ 975 NM

North American Retail 6,651 (1,073) NM

*NM = Not Meaningful

North American Wholesale Segment

Wholesale Net Sales

Net sales in the Company’s North American wholesale segment for the years ended December 31, 2021 and 2020, were as follows:

Years ended December 31,

(Dollars in thousands)

North American Wholesale Net Sales

As discussed above in “Executive Overview,” 2021 net sales were up across all of the Company’s legacy brands (Stacy Adams, Nunn Bush, and Florsheim). Last year’s sales of the legacy brands were lower than normal because the pandemic significantly impacted sales of dress and dress-casual footwear. Sales of the BOGS outdoor brand, which were less affected by the pandemic in 2020, rose 17% for the year, with sales up across most distribution categories. Wholesale sales in 2021 recovered to 85% of 2019 levels.

Licensing revenues consist of royalties earned on sales of branded apparel, accessories and specialty footwear in the United States and on branded footwear in Mexico and certain overseas markets. Licensing revenues increased in 2021, compared to 2020, in line with increased licensees’ sales of branded products.

Wholesale Earnings from Operations

Wholesale gross earnings as a percent of net sales were 33.8% in 2021 versus 35.5% in 2020. The decrease in gross margins in 2021 was largely due to higher inbound freight costs, as the Company paid premium rates during the year. Management believes that gross margins will improve in mid to late 2022 as the supply chain stabilizes and as negotiated price increases with customers go into effect.

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Selling and administrative expenses for the wholesale segment consist primarily of distribution costs, salaries and commissions, advertising costs, employee benefit costs, and depreciation. Wholesale selling and administrative expenses were $49.9 million, or 24% of net sales, in 2021, versus $53.1 million, or 35% of net sales, in 2020. 2021 expenses included income of $5.5 million in wage subsidies received from the U.S. and Canadian governments, and expense of $1.1 million to write-off certain assets related to the closing of Florsheim Europe. 2020 expenses included the write-off of $4.3 million (net) in receivables related to the bankruptcy filings of two large customers, $2.0 million in employee costs related to restructuring and temporary closures, and $0.2 million in other related charges, partially offset by $1.7 million in wage subsidies received from the U.S. and Canadian governments.

Wholesale operating earnings rose to $19.5 million in 2021 from $975,000 in 2020, due mainly to higher sales. Wholesale operating earnings in 2021 reached 70% of 2019 levels.

The Company’s cost of sales does not include distribution costs (e.g., receiving, inspection, warehousing, shipping, and handling costs, which are included in selling and administrative expenses). Wholesale distribution costs were $10.8 million and $11.7 million for the years ended December 31, 2021 and 2020, respectively. 2021 and 2020 distribution costs were reduced by $1.5 million and $418,000, respectively, as a result of government wage subsidies. The Company’s gross earnings may not be comparable to other companies, as some companies may include distribution costs in cost of sales.

North American Retail Segment

Retail Net Sales

Net sales were $31.6 million in 2021, up 47% from $21.5 million in 2020. Same store sales rose 53% for the year, due to a 43% increase in e-commerce sales (with sales up on all brands’ websites) and higher brick-and-mortar same store sales. Last year’s brick-and-mortar sales were down significantly as a result of the pandemic. The Company closed three unprofitable retail stores in the third quarter of 2020 and one in the first quarter of 2021, and currently has just four active brick-and-mortar locations in North America. Retail sales in 2021 surpassed 2019 levels by 25%, due primarily to growth in e-commerce.

Retail Earnings (Loss) from Operations

Retail gross earnings as a percent of net sales were 66.4% in 2021 and 64.8% in 2020, with gross margins up at active brick-and-mortar locations and in e-commerce. Selling and administrative expenses for the retail segment consist primarily of freight, advertising expense, employee costs, and rent and occupancy costs. Retail selling and administrative expenses were $14.3 million in 2021 and $15.0 million in 2020. As a percent of net sales, retail selling and administrative expenses were 45% in 2021 and 70% in 2020. 2020 expenses included $1.5 million in early lease termination charges, $1.0 million for the impairment of retail store fixed assets, and $0.3 million in employee costs related to restructuring and temporary closures, partially offset by $0.2 million of income from government wage subsidies.

The retail segment had operating earnings of $6.7 million in 2021 compared to operating losses of $1.1 million in 2020. The improvement in 2021 was due to the benefit of closing unprofitable stores, higher e-commerce earnings, and improved performance at active brick-and-mortar locations. Retail operating earnings in 2021 exceeded 2019 levels by 138%.

Other

The Company’s other businesses include its wholesale and retail operations of Florsheim Australia and Florsheim Europe. Net sales of the Company’s other businesses were $30.7 million in 2021, up 41% from $21.7 million in 2020. The increase was at Florsheim Australia, with sales up in both its retail and wholesale businesses. For the year, other net sales amounted to 84% of 2019 levels, with Florsheim Australia reaching 93% of 2019 levels, offset by lower sales at Florsheim Europe, which is being wound down.

Gross earnings in the Company’s other businesses were 55.8% of net sales in 2021 versus 48.8% of net sales in 2020. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $404,000 in 2021 compared to operating losses of $7.5 million last year. Despite the lockdowns that existed throughout much of 2021, Florsheim Australia had operating earnings of $118,000 in 2021, resulting from improved gross margins and cost reductions. Last year’s losses included $3.6 million in employee costs related to restructuring and temporary closures, $2.1 million for the impairment of retail store fixed assets and operating lease right-of-use assets, $2.0 million in reserves for obsolete and slow moving inventory due to COVID-19-related impacts, and $0.3 million in related charges, partially offset by $3.5 million of income from government wage and rent subsidies. The improvement in 2021 was primarily due to the stronger results at Florsheim Australia.

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OTHER INCOME AND EXPENSE AND TAXES

The majority of the Company’s interest income is generated by investments in marketable securities and highly liquid fixed income funds. Interest income totaled $641,000 and $527,000 in 2021 and 2020, respectively. The increase in 2021 was primarily due to investment earnings on the new fixed income funds this year. Interest expense was $81,000 in 2021 and $79,000 in 2020. Other income totaled $1.1 million in 2021 versus $96,000 in 2020. The increase in 2021 was primarily due to a decrease in the non-service cost components of pension expense, resulting from lower interest expense and higher expected return on plan assets, and unrealized gains on foreign exchange contracts entered into by Florsheim Australia.

The Company’s effective tax rate was 24.8% in 2021 versus (20.3%) in 2020. The current tax rate differs from the U.S. federal statutory rate of 21% due to the impact of state income taxes. The Company’s 2020 tax rate was impacted by the write-off of $2.0 million in deferred tax assets of its foreign subsidiaries. Additionally, last year the Company did not record an income tax benefit on foreign losses, and, in the U.S., it carried back losses to a tax year when the U.S. federal statutory tax rate was 35%.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary sources of liquidity are its cash, short-term investments, and short-term marketable securities, which aggregated to $28.1 million and $34.7 million at December 31, 2021 and 2020, respectively, and its revolving line of credit. The Company generated $6.4 million and $40.0 million of cash from operations in 2021 and 2020, respectively. Fluctuations in net cash from operating activities mainly resulted from changes in net earnings (loss) and operating assets and liabilities, most significantly, the year-end accounts receivable and inventory balances. The Company’s inventory levels increased to $71.0 million at December 31, 2021 from $59.0 million at December 31, 2020. These figures include inventory that was both in-transit to the Company’s distribution facility and on-hand inventory. Before the supply chain issues experienced in 2021, typically about 10% to 20% of the Company’s inventory was in-transit. As of December 31, 2021, approximately 59% of the $71.0 million was in-transit, with the remaining 41% on-hand. In early 2022, the Company has continued to receive a much higher number of containers on a daily basis than normal, which has allowed it to maintain strong shipments to customers and start building back higher inventory levels on core product that is needed for at-once business.

The Company’s capital expenditures were $1.0 million and $3.4 million in 2021 and 2020, respectively. The Company’s 2020 capital expenditures included costs related to the expansion of office space within its corporate headquarters. In 2022, the Company plans to invest in its distribution center to enable it to process and ship more efficiently the large increase in e-commerce orders experienced over the past several years. Including these costs, the Company expects capital expenditures will be between $2.0 million and $3.0 million in 2022.

The Company paid cash dividends of $9.3 million and $11.8 million in 2021 and 2020, respectively. The decrease in 2021 was due to a shift in timing of the Company’s regular quarterly dividend payment schedule; 2021 included four dividend payments while 2020 included five dividend payments, as the Company accelerated the timing of its January 2021 dividend payment into 2020.

The Company repurchases its common stock under its share repurchase program when it believes market conditions are favorable. In 2021, the Company purchased 125,204 shares at a total cost of $2.5 million through its share repurchase program. In 2020, the Company purchased 106,490 shares at a total cost of $2.1 million through its share repurchase program. As of December 31, 2021, there were 210,576 authorized shares remaining under the program.

At December 31, 2021, the Company had a $40 million revolving line of credit with a bank that is secured by a lien against the Company’s general corporate assets. The line of credit bears interest at the LIBOR plus 1.35% and expires on November 4, 2022. The related credit agreement contains customary representations, warranties, and covenants (including a minimum tangible net worth financial covenant) for a facility of this type. At December 31, 2021 and 2020, there were no amounts outstanding on the Company’s line of credit and the Company was in compliance with all financial covenants. There were also no amounts outstanding on the line of credit during 2021.

As of December 31, 2021, approximately $3.5 million of cash and cash equivalents was held by the Company’s foreign subsidiaries.

The Company will continue to evaluate the best uses for its available liquidity, including, among other uses, capital expenditures, continued stock repurchases and acquisitions. The Company believes that available cash, short-term investments, marketable securities, cash provided by operations, and available borrowing facilities will provide adequate support for the cash needs of the business for at least one year, although there can be no assurances.

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Off-Balance Sheet Arrangements

The Company does not utilize any special purpose entities or other off-balance sheet arrangements.

Critical Accounting Policies

The Company’s accounting policies are more fully described in Note 2 of the Notes to Consolidated Financial Statements. As disclosed in Note 2, 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 about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the consolidated financial statements. The following policies are considered by management to be the most critical in understanding the significant accounting estimates inherent in the preparation of the Company’s consolidated financial statements and the uncertainties that could impact the Company’s results of operations, financial position and cash flows.

Sales Returns, Sales Allowances and Doubtful Accounts

The Company records reserves and allowances (“reserves”) for sales returns, sales allowances and discounts, cooperative advertising, and accounts receivable balances that it believes will ultimately not be collected. The reserves are based on such factors as specific customer situations, historical experience, a review of the current aging status of customer receivables and current and expected economic conditions. The reserve for doubtful accounts includes a specific reserve for accounts identified as potentially uncollectible, plus an additional reserve for the balance of accounts, determined based on historical trends. The Company evaluates the reserves and the estimation process and makes adjustments when appropriate. Prior to 2020, actual write-offs against the reserves had been within the Company’s expectations. However, in 2020, the Company wrote down $4.3 million (net) in receivables due to the bankruptcy filings of two large customers during the pandemic. Future changes in reserves may be required if actual returns, discounts and bad debt activity varies from the original estimates. These changes could impact the Company’s results of operations, financial position and cash flows.

Pension Plan Accounting

The Company’s pension (benefit) expense and corresponding obligation are determined on an actuarial basis and require certain actuarial assumptions. Management believes the two most critical of these assumptions are the discount rate and the expected rate of return on plan assets. The Company evaluates its actuarial assumptions annually on the measurement date (December 31) and makes modifications based on such factors as market interest rates and historical asset performance. Changes in these assumptions can result in different expense and liability amounts, and future actual experience can differ from these assumptions.

Discount Rate – Pension expense and projected benefit obligation both increase as the discount rate is reduced. See Note 12 of the Notes to Consolidated Financial Statements for discount rates used in determining pension (benefit) expense for the years ended December 31, 2021 and 2020, and the funded status of the plans at December 31, 2021 and 2020. The Company uses the spot-rate approach to determine the service and interest cost components of pension (benefit) expense. Under the spot-rate approach, the service and interest costs were calculated by applying specific spot rates along the yield curve to the relevant projected cash flows, to provide a better estimate of future service and interest costs. A 0.5% decrease in the discount rate would have a nominal impact on annual pension (benefit) expense, and would increase the projected benefit obligation by approximately $4.7 million.

Expected Rate of Return – Pension expense increases as the expected rate of return on pension plan assets decreases. In estimating the expected return on plan assets, the Company considers the historical returns on plan assets and future expectations of asset returns. The Company utilized an expected rate of return on plan assets of 7.00% for both 2021 and 2020. This rate was based on the Company’s long-term investment policy of equity securities: 20% - 80%; fixed income securities: 20% - 80%; and other, principally cash: 0% - 20%. A 0.5% decrease in the expected return on plan assets would increase annual pension expense by approximately $216,000.

The Company’s unfunded benefit obligation was $28.3 million and $34.0 million at December 31, 2021 and 2020, respectively.

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Goodwill and Trademarks

Goodwill represents the excess of the purchase price over fair value of identifiable net assets acquired from a business acquisition. Goodwill is not amortized, but is reviewed for impairment on an annual basis and between annual tests if indicators of impairment are present. The Company’s goodwill primarily resulted from the 2011 acquisition of the BOGS and Rafters brands, and, to a lesser extent, the 2021 acquisition of the Forsake brand. The applicable reporting units are the Company’s wholesale and retail segments.

The Company has the option to assess goodwill for impairment by performing either a qualitative assessment or quantitative test. The qualitative assessment is the first step and determines whether it is more likely than not that the fair values of the reporting units are less than the related carrying values. If the assessment indicates the fair values exceed the carrying values, then there is no impairment and the quantitative test is not required. However, if the assessment indicates the fair values are less than the carrying values, then the quantitative test is required. In the quantitative test, the fair value would be estimated based upon an evaluation of the reporting unit’s estimated future discounted cash flows as well as the valuation multiples for comparable companies. In 2021, the Company completed a qualitative assessment noting no indicators of impairment. In 2020, the Company performed a quantitative analysis which indicated a premium compared to the carrying value of net assets, including goodwill, at the reporting unit level. The Company did not record goodwill impairment charges for any of its reporting units in 2021 or 2020.

In evaluating trademarks, the Company completed a qualitative assessment in 2021 noting no indicators of impairment. In 2020, a quantitative analysis was used, in which 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 in 2021 or 2020.

The Company can make no assurances that the 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. The Company estimates the future cash flows based on historical and forecasted revenues and operating costs. This, in turn, involves further estimates such as estimates of future growth rates and inflation rates. The discount rate is based on the estimated weighted average cost of capital for the business and may change from year to year. Weighted average cost of capital includes certain assumptions such as market capital structures, market beta, risk-free rate of return and estimated costs of borrowing. Changes in these key estimates and assumptions, or in other assumptions used in this process, could materially affect the Company’s impairment analysis for a given year.

Recent Accounting Pronouncements

See Note 2 of the Notes to Consolidated Financial Statements.

ITEM 7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

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ITEM 8FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Page

Management’s Report on Internal Control Over Financial Reporting 18

Report of Independent Registered Public Accounting Firm (PCAOB ID 23) 19

Consolidated Statements of Earnings 22

Consolidated Statements of Comprehensive Income 23

Consolidated Balance Sheets 24

Consolidated Statements of Equity 25

Consolidated Statements of Cash Flows 26

Notes to Consolidated Financial Statements 27

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting for the Company. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on the assessment, the Company’s management has concluded that, as of December 31, 2021, the Company’s internal control over financial reporting was effective based on those criteria.

The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s independent registered public accounting firm has audited the Company’s consolidated financial statements and the effectiveness of internal controls over financial reporting as of December 31, 2021 as stated in its report below.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders, Audit Committee and the Board of Directors of Weyco Group, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Weyco Group, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of earnings, comprehensive income, equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control –Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of their operations and their cash flows for years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control –Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures, as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Evaluation – Wholesale Reporting Unit – Refer to Notes 2 and 9 to the Consolidated Financial Statements

Critical Audit Matter Description

As described in Notes 2 and 9 to the consolidated financial statements, the Company’s goodwill balance which is allocated to the Company’s wholesale reporting unit was $11.5 million at December 31, 2021. Goodwill is tested for impairment at least annually, or more frequently as events occur or circumstances change, at the reporting unit level. The Company performed a qualitative assessment to determine whether it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the reporting unit was less than the carrying value, including goodwill.

While the impairment test did not result in the recording of any impairment loss, the impairment analysis requires management to make significant judgments in performing its assessment including the evaluation of macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity-specific events, events affecting the reporting unit, and trends in the Company’s share price.

Auditing management’s impairment analysis is complex due to the judgments required to evaluate management’s assessment of those factors identified above.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter included:

o Management’s assessment of triggering events indicating potential impairment.

Trademark Impairment Assessment - Refer to Notes 2 and 9 to the Consolidated Financial Statements

Critical Audit Matter Description

As described in Notes 2 and 9 to the consolidated financial statements, the Company’s consolidated trademark balance was $34.8 million at December 31, 2021, which is allocated to the Company’s three trademarks. Trademarks are tested for impairment at least annually, or more frequently as events occur or circumstances change, at the brand level. The Company performed a qualitative assessment to determine where it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the trademark was less than the carrying value.

While the impairment test did not result in the recording of any impairment loss, the impairment analysis requires management to make significant judgments in performing its assessment including the evaluation of macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of each brand, other entity-specific events and events affecting the brands.

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Auditing management’s impairment analysis is complex due to the judgments required to evaluate management’s assessment of those factors identified above.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter included:

o Management’s assessment of triggering events indicating potential impairment.

/s/ Baker Tilly US, LLP

We have served as the Company's auditor since 2015.

Milwaukee, Wisconsin

March 11, 2022

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CONSOLIDATED STATEMENTS OF EARNINGS

For the years ended December 31, 2021 and 2020

(In thousands, except per share amounts)

Selling and administrative expenses 81,745 86,156

Earnings (loss) from operations 25,702 (7,598)

Interest expense (81) (79)

Earnings (loss) before provision for income taxes 27,345 (7,054)

Provision for income taxes 6,790 1,431

Basic earnings (loss) per share $ 2.13 $ (0.87)

Diluted earnings (loss) per share $ 2.12 $ (0.87)

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2021 and 2020

(Dollars in thousands)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments (733) 983

Pension liability adjustments 3,944 (4,452)

Other comprehensive income (loss) 3,211 (3,469)

Comprehensive income (loss) $ 23,766 $ (11,954)

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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CONSOLIDATED BALANCE SHEETS

At December 31, 2021 and 2020

(In thousands, except par value and share data)

ASSETS:

Investments, at fair value 8,122 —

Marketable securities, at amortized cost 219 2,215

Income tax receivable 495 1,374

Prepaid expenses and other current assets 4,317 4,610

Marketable securities, at amortized cost 9,996 12,800

Deferred income tax benefits 1,063 1,235

Property, plant and equipment, net 29,202 30,759

Operating lease right-of-use assets 9,543 9,613

LIABILITIES AND EQUITY:

Operating lease liabilities 3,593 4,245

Accrued liabilities:

Accrued compensation and employee benefits 5,948 4,019

Sales and advertising allowances 1,934 2,477

Taxes other than income taxes 991 1,123

Deferred income tax liabilities 5,026 2,914

Operating lease liabilities 7,520 7,734

Other long-term liabilities 1,442 267

Commitments and contingencies (Note 15)

Accumulated other comprehensive loss (24,794) (28,005)

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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CONSOLIDATED STATEMENTS OF EQUITY

For the years ended December 31, 2021 and 2020

(In thousands, except per share amounts)

Common Capital in Excess Reinvested Accumulated Other

Stock of Par Value Earnings Comprehensive Loss

Net loss — — (8,485) —

Foreign currency translation adjustments — — — 983

Pension liability adjustment (net of tax of $1,564) — — — (4,452)

Cash dividends declared ($0.96 per share) — — (9,429) —

Issuance of restricted stock 31 (31) — —

Share-based compensation expense - 1,377 — —

Shares purchased and retired (107) — (1,956) —

Net earnings — — 20,555 —

Foreign currency translation adjustments — — — (733)

Pension liability adjustment (net of tax of $1,387) — — — 3,944

Cash dividends declared ($0.96 per share) — — (9,348) —

Issuance of restricted stock 36 (36) — —

Share-based compensation expense — 1,575 — —

Shares purchased and retired (125) — (2,400) —

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2021 and 2020

(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net foreign currency transaction (gains) losses (233) 98

Share-based compensation expense 1,575 1,377

Pension (benefit) expense (26) 397

Impairment of long-lived assets 1,131 3,055

Loss on disposal of fixed assets 44 111

Increase in cash surrender value of life insurance (636) (611)

Prepaid expenses and other assets 71 1,281

Accrued liabilities and other (1,567) (1,773)

Accrued income taxes 884 (1,498)

Net cash provided by operating activities 6,392 39,981

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of business (2,550) —

Proceeds from maturities of marketable securities 4,791 6,680

Purchases of investment securities (35,000) —

Proceeds from sale of investment securities 26,878 —

Life insurance premiums paid (111) (155)

Purchases of property, plant and equipment (1,007) (3,368)

Net cash (used for) provided by investing activities (6,999) 3,157

CASH FLOWS FROM FINANCING ACTIVITIES:

Shares purchased and retired (2,525) (2,063)

Net proceeds from stock options exercised 2 —

Proceeds from bank borrowings — 33,947

Repayments of bank borrowings — (40,996)

Net cash used for financing activities (11,868) (20,888)

Effect of exchange rate changes on cash and cash equivalents (290) 427

Net (decrease) increase in cash and cash equivalents $ (12,765) $ 22,677

CASH AND CASH EQUIVALENTS at beginning of year 32,476 9,799

CASH AND CASH EQUIVALENTS at end of year $ 19,711 $ 32,476

SUPPLEMENTAL CASH FLOW INFORMATION:

Income taxes paid, net of refunds $ 5,806 $ 914

Interest paid $ 80 $ 72

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2021 and 2020

1. NATURE OF OPERATIONS

Weyco Group, Inc. (the “Company”) designs and markets quality and innovative footwear principally for men, but also for women and children, under a portfolio of well-recognized brand names including: Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters, and Forsake. Inventory is purchased from third-party overseas manufacturers. The majority of foreign-sourced purchases are denominated in U.S. dollars. The Company has two reportable segments, North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”). In the wholesale segment, the Company’s products are sold to leading footwear, department, and specialty stores, as well as e-commerce retailers, primarily in the United States and Canada. The Company also has licensing agreements with third parties who sell its branded apparel, accessories and specialty footwear in the United States, as well as its footwear in Mexico and certain markets overseas. Licensing revenues are included in the Company’s wholesale segment. The Company’s retail segment consisted of e-commerce businesses and four brick and mortar retail stores in the United States as of December 31, 2021. Retail sales are made directly to consumers on the Company’s websites, or by Company employees. The Company’s “other” operations include the Company’s wholesale and retail businesses in Australia, South Africa, Asia Pacific (collectively, “Florsheim Australia”) and Europe (“Florsheim Europe”). In late 2020, the Company decided to close Florsheim Europe and management is in the final stages of winding down this business. The majority of the Company’s operations are in the United States and its results are primarily driven by the economic conditions and retail environment in the United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation - The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, and include all of the Company’s majority-owned subsidiaries after elimination of intercompany accounts and transactions.

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.

Cash and Cash Equivalents - The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. At December 31, 2021 and 2020, the Company’s cash and cash equivalents included investments in U.S. treasury bills, money market accounts, and/or cash deposits at various banks. The Company periodically has cash balances in excess of insured amounts. The Company has not experienced any losses on deposits in excess of insured amounts.

Investments - At December 31, 2021, the Company held investments in highly liquid fixed income funds. The Company classified these investments as trading securities and reported them at fair value. The Company also invests in municipal bonds. All of the municipal bond investments are classified as held-to-maturity securities and reported at amortized cost pursuant to ASC 320, Investments – Debt and Equity Securities, as the Company has the intent and ability to hold all investments to maturity. See Note 5.

Accounts Receivable – Trade accounts receivable arise from the sale of products on unsecured trade credit terms. On a quarterly basis, the Company reviews all significant accounts with past due balances, as well as the collectability of other outstanding trade accounts receivable for possible write-off. It is the Company’s policy to write-off accounts receivable against the allowance account when receivables are deemed to be uncollectible. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses in the accounts receivable balances. The Company determines the allowance based on known troubled accounts, historical experience and other evidence currently available.

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 wrote off $4.3 million (net) in connection with these bankruptcy filings during 2020.

Inventories - The majority of inventories are determined on a last-in, first-out (“LIFO”) basis. LIFO inventory is valued at the lower of cost or market. All other inventories are determined on a first-in, first-out basis (“FIFO”) basis, and are valued at the lower of cost or net realizable value. Inventory costs include the cost of shoes purchased from third-party manufacturers, as well as related freight and duty costs. The Company generally takes title to product at the time of shipping. See Note 6.

WEYS US Equity

WEYS · 10-K · period ended 2021-12-31

ITEM 1. BUSINESS 2

ITEM 1A. RISK FACTORS 3

ITEM 1B. UNRESOLVED STAFF COMMENTS 7

ITEM 2. PROPERTIES 7

ITEM 3. LEGAL PROCEEDINGS 7

ITEM 4. MINE SAFETY DISCLOSURES 7

ITEM 6. RESERVED 9

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 17

ITEM 9A. CONTROLS AND PROCEDURES 48

ITEM 9B. OTHER INFORMATION 48

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 48

ITEM 11. EXECUTIVE COMPENSATION 49

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 49

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 49

ITEM 16. FORM 10-K SUMMARY 51

WEYS US Equity☆

WEYS · 10-K · period ended 2021-12-31

ITEM 1. BUSINESS ​ 2

ITEM 1A. RISK FACTORS ​ 3

ITEM 1B. UNRESOLVED STAFF COMMENTS ​ 7

ITEM 2. PROPERTIES ​ 7

ITEM 3. LEGAL PROCEEDINGS ​ 7

ITEM 4. MINE SAFETY DISCLOSURES ​ 7

ITEM 6. RESERVED ​ 9

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ 16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ 17

ITEM 9A. CONTROLS AND PROCEDURES ​ 48

ITEM 9B. OTHER INFORMATION ​ 48

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ​ 48

ITEM 11. EXECUTIVE COMPENSATION ​ 49

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES ​ 49

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ​ 49

ITEM 16. FORM 10-K SUMMARY ​ 51

WEYS US Equity

ITEM 1. BUSINESS 2

ITEM 1A. RISK FACTORS 3

ITEM 1B. UNRESOLVED STAFF COMMENTS 7

ITEM 2. PROPERTIES 7

ITEM 3. LEGAL PROCEEDINGS 7

ITEM 4. MINE SAFETY DISCLOSURES 7

ITEM 6. RESERVED 9

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 17

ITEM 9A. CONTROLS AND PROCEDURES 48

ITEM 9B. OTHER INFORMATION 48

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 48

ITEM 11. EXECUTIVE COMPENSATION 49

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 49

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 49

ITEM 16. FORM 10-K SUMMARY 51