The Company’s business is separated into two segments - wholesale distribution and retail sales of men’s footwear. Wholesale distribution sales, which include both wholesale sales and licensing revenues, constituted approximately 87% of total sales in both 2006 and 2005 and 88% in 2004.  At wholesale, shoes are marketed nationwide through more than 10,000 shoe, clothing and department stores.  Sales are to unaffiliated customers, primarily in North America, with some distribution in Europe. In 2006 and 2004, sales to the Company’s largest customer, JCPenney, were 10% and 12%, respectively, of total sales.  There were no  customers with sales above 10% in 2005.  Net sales to foreign customers were $12.8 million, $11.8 million and $10.8 million in 2006, 2005 and 2004, respectively.  The Company employs traveling salespeople 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.  Although there is no clearly identifiable seasonality in the men’s footwear business, new styles are historically developed and shown twice each year, in spring and fall.  In accordance with industry practices, the Company is required to carry significant amounts of inventory to meet customer delivery requirements and periodically provides extended payment terms to customers.  The Company  has licensing agreements with third parties who sell its branded shoes overseas, as well as licensing agreements with apparel and accessory manufacturers in the United States and Canada.  Licensing revenues were approximately 2% of total net sales in 2006, 2005 and 2004.

                    Retail sales constituted approximately 13% of total sales in 2006 and 2005, and 12% in 2004.  In the retail division at December 31, 2006, there were 35 company-operated stores in the United States, four retail stores in major cities in Europe and an Internet business. Sales in retail stores are made directly to the consumer by Company employees. In addition to the sale of the Company’s brands of footwear in these retail stores, other branded footwear and accessories are also sold in order to provide the consumer with as complete a selection as practically possible.

                    As of December 31, 2006, the Company had a backlog of $28 million of confirmed orders compared with $23 million as of December 31, 2005.  This does not include unconfirmed blanket orders from customers.  All orders are expected to be filled within one year.

                    As of December 31, 2006, the Company employed 412 persons, of which 22 were members of collective bargaining units.  The Company ratified new contracts covering the majority of these employees during 2005 and in early 2006.  Future wage and benefit increases under the contracts are not expected to have a significant impact on the future operations or financial position of the Company.

                    Price, quality, service and brand recognition are all important competitive factors in the shoe industry and the Company has been recognized as a leader in all of them.  The Company does not engage in any specific research and development activities. However, the Company does have a design department that is continually reviewing and updating product designs.  Compliance with environmental regulations historically has not had, and is not expected to have, a material adverse effect on the Company’s results of operations or cash flows.

                    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 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 we file or furnish those reports to the SEC.   The information on the Company’s website is not a part of this filing.

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