WEYCO GROUP INC

Years Ended December 31, 2024 and 2023

1. NATURE OF OPERATIONS

Weyco Group, Inc. (“we,” “our,” “us” and the “Company”) designs, markets, and distributes 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, and Forsake. Inventory is purchased from third-party overseas manufacturers. The majority of foreign-sourced purchases are denominated in U.S. dollars. We havetwo reportable segments, North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”). In the wholesale segment, our products are sold to leading footwear, department, and specialty stores, as well as e-commerce retailers, primarily in the United States and Canada. We also have licensing agreements with third parties who sell our branded apparel, accessories and specialty footwear in the United States, as well as our footwear in Mexico and certain markets overseas. Licensing revenues are included in our wholesale segment. Our retail segment consists of e-commerce businesses andfour brick and mortar retail stores in the United States. Retail sales are made directly to consumers on our websites, or by our employees. Our “other” operations historically included our wholesale and retail businesses in Australia, South Africa, and Asia Pacific (collectively, “Florsheim Australia”). We ceased operations in the Asia Pacific region in 2023 and completed the wind down of that business in 2024. The majority of our operations are in the United States and our results are primarily affected 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 our 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 (“U.S. GAAP”) 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 - We consider all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. At December 31, 2024 and 2023, our cash and cash equivalents included investments in U.S. treasury bills, money market funds, and/or cash deposits at various banks. While we periodically have cash balances in excess of insured amounts, we have not experienced any losses on deposits in excess of insured amounts.

Investments- At December 31, 2024, we held investments in marketable securities (mainly tax-exempt municipal bonds). All of our marketable securities are classified as held-to-maturity securities and reported at amortized cost pursuant to Accounting Standards Codification (“ASC”) 320,Investments – Debt and Equity Securities, as we have the intent and ability to hold all investments to maturity. See Note 4.

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

Inventories - Most of our 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. We generally take title of product at the time of shipping. See Note 5.

Property, Plant and Equipment and Depreciation - Property, plant and equipment are stated at cost. Plant and equipment are depreciated using the straight-line method over their estimated useful lives as follows: buildings and improvements,10 to 39 years; machinery and equipment,3 to 15 years; furniture and fixtures,5 to 15 years. For income tax reporting purposes, depreciation is calculated using applicable methods.

Impairment of Long-Lived Assets - Property, plant, equipment and operating lease right-of-use assets, along with other long-lived assets, are evaluated for impairment periodically whenever triggering events or indicators exist that the carrying values may not be fully recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to its related estimated undiscounted future cash flows. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset, a loss is recognized for the difference between the fair value and carrying value of the asset. There wereno impairment losses recorded on our long-lived assets in 2024 or 2023.

Leases *-*We lease retail shoe stores, as well as several office and distribution facilities worldwide. We determine whether an arrangement is or contains a lease at contract inception. All of our leases are classified as operating leases, which are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. We have no finance leases.

ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement, as well as any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. Lease terms may include options to renew when it is reasonably certain that we will exercise that option.

As our leases generally do not provide an implicit rate, our incremental borrowing rate is used to determine the present value of lease payments. The incremental borrowing rate was a hypothetical rate based on an understanding of what we could borrow from a third-party lender, on a collateralized basis, over a similar term, and in an amount that approximates the value of the future lease payments at the lease commitment date.

Operating lease costs are recognized on a straight-line basis over the lease term and are included in selling and administrative expenses. Variable lease payments that do not depend on a rate or index, payments associated with non-lease components, and short-term rentals (leases with terms less than 12 months) are expensed as incurred. See Note 7.

Goodwill - 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. Our goodwill resulted from the 2011 acquisition of the BOGS and Rafters brands, and, to a lesser extent, the 2021 acquisition of the Forsake brand. See Note 8.

Intangible Assets (excluding Goodwill)- Other intangible assets consist of customer relationships and trademarks. Customer relationships are amortized over their estimated useful lives. Trademarks are not amortized, but are reviewed for impairment on an annual basis and between annual tests when an event occurs or circumstances change that indicates the carrying value may not be recoverable. During 2024 and 2023, we recorded impairment charges of $0.3 million and $0.5 million, respectively, to write-down the carrying value of the Forsake trademark. These charges were recorded within selling and administrative expenses in the Consolidated Statements of Earnings. See Note 8.

*Life Insurance –*Life insurance policies are recorded at the amount that could be realized under the insurance contracts as of the balance sheet date. These assets are included within other assets in the Consolidated Balance Sheets. See Note 9.

Income Taxes - Deferred income taxes are provided on temporary differences arising from differences in the bases of assets and liabilities for income tax and financial reporting purposes. Deferred tax assets and liabilities are measured using enacted income tax rates in effect. Tax rate changes affecting deferred tax assets and liabilities are recognized in income at the enactment date. We record interest and penalties associated with unrecognized tax benefits within interest expense and provision for income taxes, respectively. See Note 14.

Revenue Recognition – Our revenue contracts represent a single performance obligation to sell our products to our customers. Sales are recorded at the time control of the product is transferred to customers in an amount that reflects the consideration we expect to receive in exchange for our products. Wholesale revenue is generally recognized upon shipment of the product, as that is when the customer obtains control of the promised goods. Shipping and handling activities that occur after control of the product transfers to the customer are treated as fulfillment activities, not as a separate performance obligation. Retail revenue is generated primarily from the sale of footwear to customers through our websites and at retail locations. For sales made through our websites, revenue is recognized upon shipment to the customer. For in-store sales, we recognize revenue at the point of sale. Sales taxes collected from website or retail sales are excluded from our reported net sales. Revenue from third-party licensing agreements is recognized in the period earned. Licensing revenues were $2.0 million in 2024 and $2.5 million in 2023.

All revenue is recorded net of estimated allowances for returns and discounts; these revenue offsets are accrued for at the time of sale. Our estimates of allowances for returns and discounts are based on such factors as specific customer situations, historical experience, and current and expected economic conditions. We evaluate the reserves and the estimation process and adjust when appropriate.

Generally, payments from customers are received within 90 days following the sale. Our contracts with customers do not have significant financing components or significant prepayment terms, and there is no non-cash consideration. We do not have unbilled revenue, and there are no contract assets and liabilities.

Shipping and Handling Fees - We classify shipping and handling fees billed to customers as sales. Shipping and handling expenses incurred by the Company are included in selling and administrative expenses in the Consolidated Statements of Earnings. See “Selling and Administrative Expenses” below.

Cost of Sales - Our cost of sales includes the cost of products and inbound freight and duty costs.

Selling and Administrative Expenses**-**Selling and administrative expenses primarily include salaries and commissions, advertising costs, employee benefit costs, distribution costs (e.g., receiving, inspection, warehousing, shipping, and handling costs), rent and depreciation. Consolidated distribution costs were $21.5 million in 2024 and $21.9 million in 2023.

Advertising Costs - Advertising costs are expensed as incurred. Total advertising costs were $12.6 million and $12.8 million in 2024 and 2023, respectively. Advertising expenses are included in selling and administrative expenses.

Foreign Currency Translations - We account for currency translations in accordance with ASC 830,Foreign Currency Matters. Our non-U.S. subsidiaries’ local currencies are the functional currencies under which the balance sheet accounts are translated into U.S. dollars at the rates of exchange in effect at fiscal year-end and income and expense accounts are translated at the weighted average rates of exchange in effect during the year. Translation adjustments resulting from this process are recognized as a separate component of accumulated other comprehensive loss, which is a component of equity.

*Foreign Currency Transactions -*Gains and losses from foreign currency transactions are included in other expense, net, in the Consolidated Statements of Earnings. Net foreign currency transaction gains and losses were not material to our financial statements in 2024 and 2023.

Financial Instruments – From time to time, our wholly-owned subsidiary, Florsheim Australia, enters into foreign exchange contracts to buy U.S. dollars. All such contracts utilized in 2024 expired during the year, and there were no outstanding contracts at December 31, 2024.

Realized gains and losses on foreign exchange contracts are related to the purchase and sale of inventory and therefore are included in our net sales or cost of sales. In 2024 and 2023, realized gains and losses on foreign exchange contracts were not material to our financial statements.

Earnings Per Share - Basic earnings per share excludes any dilutive effects of restricted stock and options to purchase common stock. Diluted earnings per share includes any dilutive effects of restricted stock and options to purchase common stock. See Note 17.

*Comprehensive Income –*Comprehensive income includes net earnings and changes in accumulated other comprehensive loss. Comprehensive income is reported in the Consolidated Statements of Comprehensive Income. See Note 13 for more details regarding changes in accumulated other comprehensive loss.

*Share-Based Compensation -*At December 31, 2024, we had two share-based employee compensation plans which are described more fully in Note 19. We account for these plans under the recognition and measurement principles of ASC 718,Compensation – Stock Compensation. Our policy is to estimate the fair value of each restricted stock award based on the fair market value of our Company’s stock price on the grant date. We estimate the fair value of each option award granted on the date of grant using the Black-Scholes option pricing model. The resulting compensation cost for both restricted stock and option awards is amortized on a straight-line basis over the vesting period of the respective awards.

Concentration of Credit Risk– At December 31, 2024, one customer accounted for 18% of our gross accounts receivable balance. At December 31, 2023, one customer similarly accounted for 18% of our gross accounts receivable balance. No other customer accounted for or exceeded 10% of our gross accounts receivable balance at December 31, 2024 or 2023. Additionally, no single customer accounted for or exceeded 10% of our total sales in 2024 or 2023.

Reclassifications– Certain reclassifications have been made in the prior year’s Consolidated Balance Sheet to conform to the current year’s presentation. Such reclassifications had no effect on previously reported net income or equity.

For 2024, we changed the classification of our prefunded dividend from an operating to a financing activity in the Consolidated Statements of Cash Flows to better reflect the nature of the underlying transaction. The prior year prefunded dividend of $2.4 million was included in “Prepaid expenses and other assets” when funded in 2023 and “Cash dividends paid” when distributed to shareholders in 2024.

New Accounting Pronouncements

Recently Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures*,* which requires us to disclose segment expenses that are significant and regularly provided to the Company’s chief operating decision maker. In addition, this ASU requires the Company to disclose the title and position of its chief operating decision maker and how the chief operating decision maker uses segment profit or loss information in assessing segment performance and deciding how to allocate resources. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this standard in the fourth quarter of 2024 using a retrospective transition method. The adoption did not have a material impact on our consolidated financial statements or related disclosures. See Note 18.

Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which will require us to disclose specified additional information in our income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. This ASU will also require us to disaggregate our income taxes paid disclosure by federal, state, and foreign taxes, with further disaggregation required for significant individual jurisdictions. This ASU is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the potential impact of this standard on our consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03,Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) – Disaggregation of Income Statement Expenses, which will require us to disclose disaggregated information about certain income statement expense line items. This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. We are currently evaluating the potential impact of this standard on our consolidated financial statements and related disclosures.

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820,Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes the following three-level hierarchy for fair value measurements based upon the sources of data and assumptions used to develop the fair value measurements:

The carrying amounts of all short-term financial instruments, except marketable securities, approximate fair value due to the short-term nature of those instruments. Marketable securities are carried at amortized cost. The fair value disclosures of marketable securities are Level 2 valuations as defined by ASC 820, consisting of quoted prices for identical or similar assets in markets that are not active. See Note 4.

4**. INVESTMENTS**

Below is a summary of the amortized cost and estimated market values of our marketable securities as of December 31, 2024 and 2023. The estimated market values provided are Level 2 valuations as defined by ASC 820.

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

At each reporting date, we review our investments to determine whether a decline in fair value below the amortized cost basis is other-than-temporary. To determine whether a decline in value is other-than-temporary, we consider all available evidence, including our overall financial condition, the severity and duration of the decline in fair value, and our intent and ability to hold the investment for a reasonable period of time sufficient for any forecasted recovery. If a decline in value is deemed other-than-temporary, we record a reduction in the carrying value to the estimated fair value. We reviewed our portfolio of investments as of December 31, 2024 and 2023 and determined thatno other-than-temporary market value impairment exists.

5**. INVENTORIES**

At December 31, 2024 and 2023, inventories consisted of:

Finished shoes included inventory in-transit of $20.7 million and $16.7 million at December 31, 2024 and 2023, respectively. At both December 31, 2024 and 2023,91% of our inventories were valued by the LIFO method of accounting while 9% were valued by the FIFO method of accounting.

During 2024, there were liquidations of LIFO inventory quantities carried at higher costs prevailing in prior years compared to the cost of fiscal 2024 purchases; the effect of these liquidations increased cost of sales by $0.4 million. During 2023, there were liquidations of LIFO inventory quantities carried at higher costs prevailing in prior years compared to the cost of fiscal 2023 purchases; the effect of these liquidations increased cost of sales by $2.1 million.

6. PROPERTY, PLANT AND EQUIPMENT, NET

At December 31, 2024 and 2023, property, plant and equipment consisted of:

7. LEASES

We lease retail shoe stores, as well as several office and distribution facilities worldwide. The leases have original lease periods expiring between 2025 and 2029. Many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of our operating lease costs were as follows:

Short-term lease costs, which were excluded from the above table, are not material to our financial statements.

The following is a schedule of maturities of operating lease liabilities as of December 31, 2024:

The operating lease liabilities were classified in the Consolidated Balance Sheets as follows:

We determined the present value of our lease liabilities using a weighted-average discount rate of 4.67%. As of December 31, 2024, our leases had a weighted-average remaining lease term of 3.1 years.

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

8**. INTANGIBLE ASSETS**

Our indefinite-lived intangible assets as recorded in the Consolidated Balance Sheets were as follows:

We evaluate goodwill for impairment annually as of December 31 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. In 2024 and 2023, we completed qualitative assessments for goodwill noting no indicators of impairment. Accordingly, we did not record goodwill impairment charges for any of our reporting units in 2024 or 2023.

Our trademark balance is comprised of the Florsheim, BOGS and Forsake trademarks. For the Florsheim trademark, we performed qualitative assessments as of December 31, 2024 and 2023, noting no indicators of impairment. For the BOGS trademark, given the brand’s reduced sales during its key selling season (the third and fourth quarters), we determined potential impairment indicators were present and that a quantitative impairment test was warranted as of December 31, 2024. For this assessment, we estimated the fair value of the BOGS trademark based on an Income Approach using the Relief-from-Royalty Method. Based on the results of this assessment, we concluded that the fair value of the BOGS trademark exceeded its carrying value, andno impairment was recorded. We performed a qualitative assessment for the BOGS trademark as of December 31, 2023, noting no indicators of impairment.

For the Forsake trademark, given the brand’s reduced sales in 2024, we wrote-off the remaining value of its trademark of $0.3 million as of December 31, 2024. As of December 31, 2023, we performed a quantitative impairment test for the Forsake trademark and recorded an impairment of $0.5 million as of result of that assessment. The related impairment charges in both 2024 and 2023 were recorded within selling and administrative expenses in the Consolidated Statements of Earnings.

Our amortizable intangible assets, which were included within other assets in the Consolidated Balance Sheets, consisted of the following:

Amortization expense related to the intangible assets was $0.2 million in both 2024 and 2023. Excluding the impact of any future acquisitions, we anticipate future amortization expense will be $0.2 million in 2025 and $0.1 million in 2026.

9**. OTHER ASSETS**

Other assets included the following amounts at December 31, 2024 and 2023:

We have life insurance policies onfive current and former executives. Upon death of the insured executives, the approximate benefit we would receive is $22.5 million in aggregate as of December 31, 2024.

On May 1, 2013, we purchased a 50% interest in a building in Montreal, Canada for approximately $3.2 million. The remaining 50% interest is owned by a related party. The building, which is classified as an investment in real estate in the above table, serves as our Canadian office and distribution center. The purchase was accounted for as an equity-method investment under ASC 323,Investments – Equity Method and Joint Ventures, and continues to be accounted for under the equity method of accounting. Rent and occupancy costs paid by the Company to the joint venture totaled $0.7 million in both 2024 and 2023. Distributions received by the Company from the joint venture totaling $0.3 million and $0.4 million, in 2024 and 2023, respectively. There were nominal receivable balances due to the Company from the joint venture at both December 31, 2024 and 2023.

10. SHORT-TERM BORROWINGS

On September 27, 2024, we amended our line of credit agreement. The Amended Credit Agreement extended the maturity of our credit facility to September 26, 2025. Under the terms of the Amended Credit Agreement, there is a maximum available borrowing limit of $40.0 million, and amounts outstanding bear interest at the one-month term SOFR plus 125 basis points. The Amended Credit Agreement is secured by a lien against our general business assets, and contains representations, warranties, and covenants (including a minimum tangible net worth financial covenant) that are customary for a facility of this type. At December 31, 2024 and 2023, there wereno outstanding borrowings on the line of credit, and we were in compliance with all financial covenants.

11. CONTINGENT CONSIDERATION

The purchase price of our 2021 acquisition of Forsake included potential payments of future consideration that were contingent upon the achievement of certain milestones. As part of purchase accounting, a liability of $1.3 million was recorded for the estimated fair value of the contingent consideration on the acquisition date. In early 2023, we reached an agreement with the former owners of Forsake to settle the contingent consideration liability for $0.5 million, which was paid out in the first quarter of 2023.

12. EMPLOYEE RETIREMENT PLANS

We have a defined benefit pension plan which was frozen effective December 31, 2016. No benefits have been accrued under the plan subsequent to that date. We also have an unfunded supplemental pension plan for key executives. Retirement benefits are provided based on employees’ years of credited service and average earnings or stated amounts for years of service. Normal retirement age is 65 with provisions for earlier retirement. The plan also has provisions for disability and death benefits.

Our funding policy for the defined benefit pension plan is to make contributions to the plan such that all employees’ benefits will be fully provided by the time they retire. Plan assets are stated at fair value and consist primarily of equity securities and fixed income securities, mainly U.S. government and corporate obligations.

We follow ASC 715,Compensation – Retirement Benefits, which requires employers to recognize the funded status of defined benefit pension and other postretirement benefit plans as an asset or liability in their statements of financial position and to recognize changes in the funded status in the year in which the changes occur as a component of comprehensive income. In addition, ASC 715 requires employers to measure the funded status of their plans as of the date of their year-end statements of financial position. ASC 715 also requires additional disclosures regarding amounts included in accumulated other comprehensive loss.

Our pension plan’s weighted average asset allocation at December 31, 2024 and 2023, by asset category, was as follows:

We have a Retirement Plan Committee, consisting of our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, to manage the operations and administration of all benefit plans and related trusts. The committee has an investment policy for the pension plan assets that establishes target asset allocation ranges for the above listed asset classes as follows: equity securities:20% -80%; fixed income securities:20% -80%; and other, principally cash:0% -20%. On a semi-annual basis, the committee reviews progress towards achieving the pension plan’s performance objectives.

To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This resulted in the selection of 6.75% as the long-term rate of return on assets assumptions for both 2024 and 2023.

The following discount rates were used to determine the funded status of the pension plans as of December 31, 2024 and 2023:

The following is a reconciliation of the change in benefit obligation and plan assets of both the defined benefit pension plan and the unfunded supplemental pension plan for the years ended December 31, 2024 and 2023:

The accumulated benefit obligations of the defined benefit pension plan and supplemental pension plan were equal to the respective plans’ projected benefit obligations, as shown in the above table, at December 31, 2024 and 2023.

Assumptions used in determining pension expense for the years ended December 31, 2024 and 2023 were:

The components of pension expense for the years ended December 31, 2024 and 2023, were:

The components of pension expense other than the service cost component were included in “other expense, net” in the Consolidated Statements of Earnings.

It is our intention to satisfy the minimum funding requirements and maintain at least an 80% funding percentage in our defined benefit retirement plan in future years. At this time, we expect that any cash contributions necessary to satisfy these requirements in 2025 would not be material.

Projected benefit payments for the plans at December 31, 2024, were estimated as follows:

The following table summarizes the fair value of pension plan assets at December 31, 2024, by asset category within the fair value hierarchy (for further level information, see Note 3):

The following table summarizes the fair value of pension plan assets at December 31, 2023, by asset category within the fair value hierarchy (for further level information, see Note 3):

We also have a defined contribution plan covering substantially all employees. We contributed $1.1 million and $1.0 million to this plan in 2024 and 2023, respectively.

13. COMPREHENSIVE INCOME

The components of accumulated other comprehensive loss as recorded in the Consolidated Balance Sheets were as follows:

The following table shows changes in accumulated other comprehensive loss during the years ended December 31, 2024 and 2023:

The following table shows reclassification adjustments out of accumulated other comprehensive loss during the years ended December 31, 2024 and 2023:

14. INCOME TAXES

The provision for income taxes included the following components for the years ended December 31, 2024 and 2023:

The differences between the U.S. federal statutory income tax rate and our effective tax rate were as follows for the years ended December 31, 2024 and 2023:

The foreign component of pretax earnings was $0.9 million and $2.8 million in 2024 and 2023, respectively.

The components of deferred taxes at December 31, 2024 and 2023 were as follows:

The net deferred income tax liabilities are classified in the Consolidated Balance Sheets as follows:

Uncertain Tax Positions

We account for our uncertain tax positions in accordance with ASC 740,Income Taxes(“ASC 740”)*.*ASC 740 provides that the tax effects from an uncertain tax position can be recognized in our consolidated financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position.

The following table summarizes the activity related to our unrecognized tax benefits:

The unrecognized tax benefits at December 31, 2024 and 2023, included $90,000 and $30,000, respectively, of interest related to such positions. The unrecognized tax benefits, if ultimately recognized, would reduce our annual effective tax rate. The liabilities for potential interest are included in the Consolidated Balance Sheets at December 31, 2024 and 2023.

We file a U.S. federal income tax return, various U.S. state income tax returns and several foreign returns. In general, the 2020 through 2023 tax years remain subject to examination by those taxing authorities.

15. COMMITMENTS

At December 31, 2024, we had commitments to purchase $38.1 million of inventory, all of which were due in less than one year.

16. SHARE REPURCHASE PROGRAM

In 1998, our share repurchase program was established. On several occasions since the program’s inception, our Board of Directors increased the number of shares authorized for repurchase under the program. In total,8.5 million shares have been authorized for repurchase.

In 2024, we purchased 19,841 shares at a total cost of $0.6 million through our share repurchase program. In 2023, we purchased 170,422 shares at a total cost of $4.3 million through our share repurchase program. As of December 31, 2024, there were 848,916 authorized shares remaining under the program.

17. EARNINGS PER SHARE

The following table sets forth the computations of basic and diluted earnings per share for the years ended December 31, 2024 and 2023:

Diluted weighted average shares outstanding for 2024 exclude anti-dilutive share-based awards totaling 272,000 shares at a weighted average price of $32.60. Diluted weighted average shares outstanding for 2023 exclude anti-dilutive share-based awards totaling 618,000 shares at a weighted average price of $28.95.

Unvested restricted stock awards provide holders with dividend rights prior to vesting, however, such rights are forfeitable if the awards do not vest. As a result, unvested restricted stock awards are not participating securities and are excluded from the computation of earnings per share.

18. SEGMENT INFORMATION

We havetwo reportable segments: North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”). The “other” category in the table below included our wholesale and retail operations in Australia, South Africa, and Asia Pacific, which do not meet the criteria for separate reportable segment classification. We ceased operations in the Asia Pacific region in 2023 and completed the wind down of that business in 2024. The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies.

In the Wholesale segment, shoes are marketed through more than 10,000 footwear, department and specialty stores, primarily in the United States and Canada. Licensing revenues are also included in our Wholesale segment. We have licensing agreements with third

parties who sell our branded apparel, accessories, and specialty footwear in the United States, as well as our footwear in Mexico and certain markets overseas. In 2024 and 2023, there wasno single customer that accounted for or exceeded 10% of our total sales.

In the Retail segment, we operate e-commerce businesses andfour brick and mortar retail stores in the United States. Retail sales are made directly to consumers on our websites, or by our employees. Retail stores sell our branded footwear, primarily Florsheim, and accessories.

Our chief operating decision maker is Thomas W. Florsheim, Jr., Chief Executive Officer. Mr. Florsheim, Jr. regularly reviews and evaluates segment-level net sales, gross margins, and operating earnings to assess segment performance and to allocate capital and personnel resources to the segments. The following is a summary of certain key financial measures for the respective fiscal periods indicated. The significant expense categories and amounts align with the segment-level information that is regularly provided to Mr. Florsheim, Jr. Total assets and capital expenditures are not presented because Mr. Florsheim, Jr. does not review or allocate resources based on such information.

All North American corporate office assets are included in the Wholesale segment. Transactions between segments primarily consist of sales between the Wholesale and Retail segments. Intersegment sales are valued at the cost of inventory plus an estimated cost to ship the products. Intersegment sales have been eliminated and are excluded from net sales in the above table.

Geographic Segments

Financial information relating to our business by geographic area was as follows for the years ended December 31, 2024 and 2023:

Net sales attributed to geographic locations are based on the location of the assets producing the sales. Long-lived assets by geographic location consist of property, plant and equipment (net), operating lease ROU assets, goodwill, trademarks, investment in real estate and amortizable intangible assets.

19. SHARE-BASED COMPENSATION PLANS

At December 31, 2024 we hadtwo share-based compensation plans: the 2017 Incentive Plan (the “2017 Plan”) and the 2024 Incentive Plan (collectively, “the Plans”). On May 7, 2024, the shareholders of Weyco Group, Inc. approved the 2024 Incentive Plan (the “2024 Plan”) which allows for the grant of up to 1.5 million share-based awards to executives, directors, and other salaried employees. Awards available for grant under the 2024 Plan include restricted stock and options to purchase common stock of the Company, as well as other forms of share-based compensation. Awards areno longer granted under the 2017 Plan; however, awards previously granted under such plan continue in accordance with their terms.

Restricted stock awards were the only form of share-based compensation granted in 2024. Both stock options and restricted stock awards were granted in 2023. Restricted stock awards and stock options are valued at fair market value based on the Company’s closing stock price on the grant date. Restricted stock granted in 2024 vests ratably over five years, while restricted stock granted in 2023 vests ratably over four years. Stock options granted in 2023 vest ratably over five years and expire 10 years from the grant date. As of December 31, 2024, there were approximately 1.4 million shares remaining available for share-based awards under the 2024 Plan.

Stock option exercises can be net share settled such that we withhold shares with value equivalent to the exercise price of the stock option awards plus the employees’ minimum statutory obligation for the applicable income and other employment taxes. The net share settlement has the effect of share repurchases by the Company as they reduce the number of shares that would have otherwise been issued. In 2024, approximately 278,000 shares were withheld, and were based on the value of the stock on the exercise dates. Total payments made by the Company for the employees’ tax obligations to taxing authorities were $419,000 in 2024 and $186,000 in 2023; such payments are generally reflected as a financing activity within the consolidated statements of cash flows.

In accordance with ASC 718, share-based compensation expense of $1.5 million and $1.4 million was recognized in 2024 and 2023, respectively, for stock options and restricted stock awards granted since 2018. An estimate of forfeitures, based on historical data, was included in the calculation of share-based compensation.

At December 31, 2024, there was $1.4 million of total unrecognized compensation cost related to non-vested stock options granted in the years 2020 through 2023 which is expected to be recognized over the weighted-average remaining vesting period of 2.9 years. At December 31, 2023, there was $2.1 million of total unrecognized compensation cost related to non-vested stock options granted in the years 2019 through 2023 which was expected to be recognized over the weighted-average remaining vesting period of 3.7 years.

The following weighted-average assumptions were used to determine compensation expense related to stock options granted in 2023:

The risk-free interest rate was based on U.S. Treasury bonds with a remaining term equal to the expected term of the award. The expected dividend yield was based on our expected annual dividend as a percentage of the market value of our Company’s common stock in the year of grant. The expected term of the stock options was determined using historical experience. The expected volatility was based upon historical stock prices over the most recent period equal to the expected term of the award.

The following tables summarize our stock option activity during the years ended December 31, 2024 and 2023:

Stock Options

The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of our Company’s common stock on December 31, 2024 of $37.55 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options.

Non-vested Stock Options

The following table summarizes information about outstanding and exercisable stock options at December 31, 2024:

The following table summarizes our stock option activity for the years ended December 31:

Restricted Stock

The following table summarizes our restricted stock award activity during the years ended December 31, 2023 and 2024:

At December 31, 2024, we expected 92,965 shares of restricted stock to vest over a weighted-average remaining contractual term of 3.5 years. These shares had an aggregate intrinsic value of $3.5 million at December 31, 2024. The aggregate intrinsic value was calculated using the market value of our Company’s common stock on December 31, 2024 of $37.55 multiplied by the number of non-vested restricted shares outstanding. The income tax benefit from the vesting of restricted stock for the years ended December 31 was $0.3 million in 2024 and $0.2 million in 2023.

20. VALUATION AND QUALIFYING ACCOUNTS