FORWARD-LOOKING STATEMENTS


This report contains certain forward-looking statements with respect to the
Company's outlook for the future.  These statements represent the Company's
reasonable 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
under Item 1A, "Risk Factors," of the Company's Annual Report on Form 10-K for
the year ended December 31, 2019, and Part II, Item 1A, "Risk Factors," of this
Quarterly Report on Form 10-Q.



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, and Rafters.
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 8 brick and mortar retail stores and
e-commerce businesses in the United States as of March 31, 2020. Sales in retail
outlets are made directly to consumers 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 retail environment in the United States.



EXECUTIVE OVERVIEW



The Company's operations and business experienced significant disruptions
beginning in the second half of March 2020 due to the unprecedented conditions
surrounding the COVID-19 pandemic. Government-mandated shutdowns of
non-essential businesses resulted in the majority of retailers temporarily
closing their stores, which significantly affected the Company's wholesale
business. The Company's domestic retail locations closed on March 18, 2020, and
remain closed due to government orders. Overseas, the Company's wholesale and
retail businesses in Australia, Asia, South Africa, and Europe were similarly
impacted by retail store closures and lockdowns requiring consumers to stay at
home. These closings resulted in lower first quarter sales and earnings across
all of the Company's businesses.



The Company's distribution center and the majority of its supply chain continue
to operate, which enable the Company to continue to ship e-commerce orders.
However, it is unclear when the Company's retail partners will reopen their
stores, therefore the Company cannot presently estimate the impact of COVID-19
on its business, but the Company expects the pandemic and resulting global
economic slowdown to have an adverse effect on its businesses and operating
results in 2020.



In light of these challenges, the Company plans to prioritize managing its
liquidity, costs, and inventories in 2020. Collection of accounts receivable has
slowed, and the Company expects that to continue over the coming months. The
Company has already begun a dialog with many of its customers and will continue
to actively manage receivables to secure payments and mitigate risk. The Company
has reduced operating expenses where appropriate. In addition, the Company is
pursuing rent relief for its retail stores worldwide, and outside of the U.S.,
the Company has qualified for government subsidies in Canada and Australia. The
Company will continue to scrutinize its costs in light of an anticipated
decrease in demand.



The Company has reduced its 2020 planned inventory receipts in response to
reduced short-term demand for its products, and expects to closely manage its
inventory levels throughout the year. While there have been some disruptions in
the Company's supply chain as a result of the pandemic, such disruptions have
not had a significant impact on the Company's operations to this point.
Currently, the Company's third-party factories in China are operating, but
production in India has ceased due to a country-wide shut down and the Company
is not certain when that production will resume.

The Company's distribution system allows it to quickly adapt to changes in customer demand, and the Company believes its system is well-suited for adjusting to the future consumer landscape. The Company believes that its strong brands resonate well with consumers and that it is in a strong financial position to get through these challenges.





                                       11

Sales and Earnings Highlights





Consolidated net sales for the first quarter of 2020 were $63.6 million, down
14% compared to last year's first quarter net sales of $74.1 million.
Consolidated earnings from operations were $1.3 million this quarter, a decrease
of 74% compared to $5.1 million in the same period of 2019. Consolidated net
earnings were $1.2 million in the first quarter of 2020 and $4.0 million in last
year's first quarter. Diluted earnings per share were $0.12 per share this
quarter and $0.40 per share in the first quarter of 2019.

Financial Position Highlights


At March 31, 2020, cash and marketable securities totaled $31.4 million and
there was no debt outstanding on the Company's revolving line of credit. During
the first three months of 2020, the Company generated $15.0 million of cash from
operations. The Company paid dividends of $4.7 million, paid down $7.0 million
on the line of credit, repurchased $1.3 million of Company stock, and had $1.8
million of capital expenditures during the quarter.



SEGMENT ANALYSIS

Net sales and earnings from operations for the Company's segments for the three months ended March 31, 2020 and 2019, were as follows:





                                     Three Months Ended March 31,            %
                                       2020                 2019          Change
                                        (Dollars in thousands)
Net Sales
North American Wholesale          $       52,689       $       59,481         -11 %
North American Retail                      4,761                5,571         -15 %
Other                                      6,134                9,076         -32 %
Total                             $       63,584       $       74,128         -14 %

Earnings (loss) from Operations
North American Wholesale          $        2,760       $        5,206         -47 %
North American Retail                        (89 )                483        -118 %
Other                                     (1,330 )               (543 )      -145 %
Total                             $        1,341       $        5,146         -74 %

North American Wholesale Segment

Net Sales

Net sales in the Company's North American wholesale segment for the three months ended March 31, 2020 and 2019, were as follows:





                                                     Three Months Ended March 31,             %
                                                        2020                 2019            Change
                                                        (Dollars in thousands)
North American Wholesale Segment Net Sales
Stacy Adams                                       $       16,170       $       20,968            -23 %
Nunn Bush                                                 10,619               11,594             -8 %
Florsheim                                                 19,642               18,816              4 %
BOGS/Rafters                                               5,797                7,391            -22 %
Other                                                          -                    5           -100 %

Total North American Wholesale                    $       52,228       $       58,774            -11 %
Licensing                                                    461                  707            -35 %
Total North American Wholesale Segment            $       52,689       $   

   59,481            -11 %




                                       12





Net sales of the Stacy Adams, Nunn Bush, and BOGS brands declined in most major
categories as a result of the retail shutdowns caused by the COVID-19 pandemic.
These decreases were partially offset by an increase in net sales of the
Florsheim brand. Florsheim's increase stems from strong sales in January and
February before the retail shutdowns went into effect.

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 were down in the first quarter of 2020 due to the impact of the COVID-19 pandemic.





Earnings from Operations



Gross earnings for the North American wholesale segment were 31.8% of net sales
in the first quarter of 2020, compared to 34.3% of net sales in the first
quarter of 2019. The decrease in gross margins was largely due to the additional
costs of the tariff on certain footwear imported from China. The tariff of 15%
took effect on September 1, 2019, and was subsequently reduced to 7.5% on
February 14, 2020. The Company purchased a limited amount of inventory at the
higher tariff rate, and expects the tariff's negative impact on its gross
margins will lessen as it sells through its current inventory. Earnings from
operations in the North American wholesale segment were $2.8 million in the
first quarter of 2020, down 47% compared to $5.2 million in the same period

last
year.



The Company's cost of sales does not include distribution costs (e.g.,
receiving, inspection, warehousing, shipping and handling costs). Wholesale
distribution costs were $3.3 million in the first quarter of 2020 and $3.1
million in the first quarter of 2019. These costs were included in selling and
administrative expenses. 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 wholesale segment selling and administrative expenses include,
and are primarily related to, distribution costs, salaries and commissions,
advertising costs, employee benefit costs and depreciation. Wholesale selling
and administrative expenses were $14.0 million, or 27% of net sales, in the
first quarter of 2020, compared to $15.2 million, or 26% of net sales, in the
first quarter of 2019. The Company reduced its wholesale expenses for the
quarter, where appropriate, as a result of the sales decline due to the impact
of the COVID-19 pandemic.

North American Retail Segment

Net Sales
Net sales in the Company's North American retail segment were $4.8 million in
the first quarter of 2020, down 15% compared to $5.6 million in last year's
first quarter. Same store sales, which include U.S. e-commerce sales, were down
13% for the quarter, due primarily to the impact of the COVID-19 pandemic.




Earnings from Operations




Retail gross earnings were 65.3% of net sales in the first quarter of 2020
compared to 65.2% of net sales in the first quarter of 2019. Selling and
administrative expenses for the retail segment include, and are primarily
related to, rent and occupancy costs, employee costs, advertising expense and
freight. Retail selling and administrative expenses were $3.2 million, or 67% of
net sales, in the first quarter of 2020 versus $3.1 million, or 57% of net
sales, in last year's first quarter. The increase in retail expenses as a
percent of net sales was primarily due to the sales decline, as many retail
expenses are fixed in nature. The retail segment had operating losses totaling
$89,000 this quarter compared to operating earnings of $483,000 in last year's
first quarter.



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 $6.1 million in the first quarter of 2020, down 32% compared to
$9.1 million in last year's first quarter. The decrease was due to lower sales
at both Florsheim Australia and Florsheim Europe as a result of retail shutdowns
and government orders for consumers to stay at home. Collectively, Florsheim
Australia and Florsheim Europe had operating losses totaling $1.3 million in the
first quarter of 2020, compared to operating losses of $543,000 in the first
quarter of 2019.

Other income and expense and taxes


Interest income was $149,000 and $223,000 in the first quarters of 2020 and
2019, respectively. The decrease was largely due to less interest earned on the
lower investment balances this quarter. Interest expense was $51,000 and $32,000
for the three months ended March 31, 2020 and 2019, respectively.

Other income (expense), net, totaled $407,000 of income for the quarter, compared to $125,000 of expense in the first quarter of 2019. The increase in income was primarily due to unrealized gains on favorable foreign exchange contracts held by Florsheim Australia.





The Company's effective tax rate for the quarter ended March 31, 2020 was 37.0%
compared to 23.9% for the same period of 2019. The Company did not record an
income tax benefit on foreign losses this quarter, which raised the effective
tax rate as compared to last year.



                                       13

LIQUIDITY AND CAPITAL RESOURCES





The Company's primary sources of liquidity are its cash, short-term marketable
securities and its revolving line of credit. The Company generated $15.0 million
of cash from operating activities during the first three months of 2020,
compared to $4.5 million in the same period one year ago. The increase between
years was primarily due to changes in operating assets and liabilities,
principally inventory and accounts receivable.



The Company paid cash dividends of $4.7 million and $4.6 million in the first
quarters of 2020 and 2019, respectively. On May 5, 2020, the Company's Board of
Directors declared a cash dividend of $0.24 per share to all shareholders of
record on May 29, 2020, payable June 30, 2020.



The Company repurchases its common stock under its share repurchase program when
the Company believes market conditions are favorable. During the first three
months of 2020, the Company repurchased 59,523 shares for a total cost of $1.3
million. As of March 31, 2020, the Company had the authority to repurchase
382,747 shares under its previously announced stock repurchase program.

Capital expenditures were $1.8 million in the first three months of 2020. Management estimates that annual capital expenditures for 2020 will be between $3.0 million and $4.0 million.





At March 31, 2020, the Company had a $60 million unsecured revolving line of
credit with a bank expiring November 5, 2020. The line of credit bears interest
at LIBOR plus 0.75%. At March 31, 2020, there were no amounts outstanding on the
line of credit The highest balance on the line of credit during the quarter was
$8.5 million. The Company expects to renew this line of credit later this year,
but cannot provide any assurances.

As of March 31, 2020, approximately $1.5 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 additional acquisitions.



The Company believes that available cash and 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.



COMMITMENTS



Not applicable.

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