What changed in this filing

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Item 1A. Risk Factors

2023-03-28 compared with 2022-03-28 · 70 added, 72 removed, 166 unchanged (46% of the section changed)

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MACROECONOMIC AND INDUSTRY RISKS

Supply chain disruptions and inflationary pressures may adversely impact our gross margin and earnings.

During 2021, we experienced supply chain disruptions and port congestion, which led to delays in the receipt of inventory and significantly higher freight costs.

Our in-transit inventory, which is not yet available to sell, has risen significantly as compared to historical levels.

Depending on the timing of receipt of this inventory, certain customers may request price concessions or choose to cancel their orders altogether, which may adversely impact sales or gross margins.

If we are unable to sell this in-transit inventory as planned, we may have to liquidate it through other less profitable channels, which may result in lower gross margins on those products.

We have also experienced inflationary pressures, including product and labor costs.

The extent and duration of these supply chain disruptions and inflationary cost pressures are uncertain and may limit our ability to meet incremental consumer demand, potentially impacting our net sales.

In addition, the existing union contract between the United States west coast port operators, Pacific Maritime Association and International Longshore and Warehouse Union, expires on June 30, 2022.

The vast majority of our products pass through the west coast ports and any slowdown or stoppage relating to these labor agreement negotiations may further delay the receipt of inventory or increase costs.

While we are actively working to mitigate the supply chain disruptions and cost pressures we are experiencing, including recovering our increased costs through price increases, there is no guarantee that we will be successful doing so.

The coronavirus pandemic continues to impact our business operations and financial condition.

The coronavirus (“COVID-19”) pandemic, both in the U.S.

and globally, continues to evolve and is unpredictable.

The pandemic has resulted in government and private sector responsive actions around the world, including restrictions on large gatherings of people, travel bans, border closings and restrictions, vaccine mandates, business closures or reduced hours, and delays in the workforce returning to the office.

While consumer demand rebounded in 2021 and we experienced significant growth in net sales and earnings, the COVID-19 pandemic continues to impact our business operations.

It is impossible to predict the effect and ultimate impact of COVID-19 and the impact on the economy, the retail industry and the Company.

The extent to which COVID-19 will continue to impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including the emergence of additional variants.

A continuation of the health crisis may have a material impact on the retail sector, consumer demand, and the Company’s results of operations and financial condition.

The long-term economic impact of the pandemic and changes in consumer demand for our products cannot be reasonably predicted.

Inflationary pressures may adversely impact our business operations and financial condition.

Inflationary pressures in the United States and the global economy such as rising interest rates, higher product and transportation costs and wage inflation, as well as fears of a recession, are creating a complex and challenging retail environment that may impact discretionary spending.

The extent and duration of these pressures are uncertain and may limit our ability to meet incremental consumer demand, potentially impacting our net sales.

In addition, declines in consumer spending may result in reduced demand for our products, increased inventories, reduced orders from retailers for our products, order cancellations, lower revenues, higher discounts, pricing pressure and lower gross margins.

Macroeconomic factors, such as inflationary pressures and volatility in interest rates, also impact a number of accounting estimates, including impairment calculations, the value of inventory measured using the last-in, first out (“LIFO”) method,

and other estimates that utilize fair value.

These macroeconomic factors could result in incremental volatility in certain valuations and provisions required in the Company’s financial statements.

Supply chain disruptions may adversely impact our gross margin and earnings.

A disruption within our logistics or supply chain network could adversely affect our ability to deliver inventory in a timely manner, which could impair our ability to meet customer demand for products and result in lost sales and increased supply chain costs.

The lingering effects of the coronavirus (“COVID-19”) pandemic have resulted in supply chain disruptions and labor instability.

Vessel, container and other transportation shortages, labor shortages and port congestion have in the past delayed inventory orders and, in turn, deliveries to our wholesale customers and availability in our retail stores and e-commerce sites.

In addition, the vast majority of our products pass through the United States west coast ports and any slowdown or stoppage relating to labor agreement negotiations may further delay the receipt of inventory or increase costs.

The extent to which COVID-19, including the emergence of additional variants, will continue to impact our supply chain and business operations will depend on future developments, which are highly uncertain and cannot be predicted.

Consumer demand for our products may be adversely impacted by economic conditions and other factors.

Worldwide economic conditions continue to be uncertain.

Consumer confidence and spending are strongly influenced by general economic conditions and other factors, including the pandemic, inflation, fiscal policy, the changing tax and regulatory environment, interest rates, minimum wage rates and regulations, consumer debt levels, the availability of consumer credit, the liquidity of consumers’ assets, health care costs, currency exchange rates, taxation, energy costs, real estate values, foreclosure rates, unemployment trends, weather conditions and the economic consequences of military action or terrorist activities, such as the current tensions in Eastern Europe and the potential impact of sanctions on the domestic and global economy.

Consumer confidence and spending are strongly influenced by general economic conditions and other factors, including inflation, concerns of a recession, rising interest rates, fiscal policy, the changing tax and regulatory environment, minimum wage rates and regulations, consumer debt levels, the availability of consumer credit, the liquidity of consumers’ assets, health care costs, currency exchange rates, taxation, energy costs, real estate values, foreclosure rates, unemployment trends, weather conditions and the economic consequences of military action or terrorist activities, such as the heightened geo-political tensions between China and Taiwan and the potential impact of sanctions on the domestic and global economy.

Consumer sentiment, including a preference for products made in the United States, may be impacted by the war in Eastern Europe, which may impact demand for our products that are sourced internationally.

In addition, with the majority of our supply originating in China, any significant negative development related to relations between United States and China may adversely impact the demand for our products sourced from China.

Negative economic conditions generally decrease disposable income and, consequently, consumer purchases of discretionary items like our products.

Negative trends in economic conditions, such as the supply chain disruptions and inflationary pressures experienced during 2021, could also drive up the cost of our products.

We began implementing price increases at the end of 2021 and additional inflationary pressures may require us to increase our product prices further.

These increases in our product costs and prices may not be offset by comparable increases in consumer disposable income.

As a result, our customers may choose to purchase fewer of our products or purchase the lower priced products of our competitors, and our business, results of operations, financial condition and cash flows could be adversely affected.

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Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change.

In addition, the continued consumer shift to online and mobile shopping has required retailers to lower shipping costs charged to customers, improve shipping speeds and optimize mobile platforms.

In addition, as consumers increasingly embrace online and mobile shopping, retailers have been required to lower shipping costs charged to customers, improve shipping speeds and optimize mobile platforms.

The trend toward online and mobile shopping has also increased the volume of smaller shipments, including single-pair shipments, from our warehouses.

The increased volume of smaller shipments has resulted in higher average distribution costs, including both shipping and processing costs incurred at our distribution centers.

In addition, an increase in e-commerce sales volume, which have higher return rates than in-store sales, may in turn lead to higher shipping and processing costs.

In addition, an increase in the volume of e-commerce sales, which have higher return rates than in-store sales, may in turn lead to higher shipping and processing costs.

The success of both our wholesale and retail operations depends largely on our ability to anticipate, understand and react to these changing consumer shopping patterns.

If we fail to respond to changes in consumer shopping patterns, demands and fashion trends, develop new products and designs, and implement effective, responsive merchandising and distribution strategies and programs, we could experience lower sales, excess inventories and lower gross margins, any of which could have an adverse effect on our results of operations and financial condition.

Certain branded suppliers are becoming more selective in their distribution channels.

The loss of one or more of our major branded suppliers may adversely impact our business, results of operations, financial condition and cash flows.

Our Famous Footwear segment purchases a substantial portion of its footwear products from major branded suppliers.

Products purchased from three key third-party suppliers (Nike, Skechers and adidas) represented approximately 23% of consolidated net sales in 2022.

As is common in the industry, we do not have any long-term contracts with our suppliers.

In addition, the success of our financial performance is dependent on the ability of our Famous Footwear segment to obtain products from our suppliers on a timely basis and on acceptable terms.

While we believe we have positive working relationships with our current suppliers, the loss of any of our major suppliers or product developed exclusively for our

Famous Footwear stores could have a material adverse effect on our business, financial condition and results of operations.

In addition, negative trends in global economic conditions, including the impact of the war in Eastern Europe, heightened tensions between China and Taiwan and the impact of COVID-19 in Southeast Asia, may adversely impact our suppliers.

If these third parties do not perform their obligations or are unable to provide us with the materials and services we need at prices and terms that are acceptable to us, our ability to meet our consumers’ demand could be adversely affected.

Customer concentration and other trends in customer behavior may lead to a reduction in or loss of sales.

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While we believe purchasing decisions in many cases are made independently by the buyers and merchandisers of each of the customers, a decision by a significant customer to decrease the amount of footwear products purchased from us could have a material adverse effect on our business, financial condition or results of operations.

In addition, with the growing trend toward retail trade consolidation, including store count reductions at major retail chains, and consumers’ continued shift to online shopping, we and our wholesale customers increasingly depend upon a reduced number of key retailers whose bargaining strength is growing.

In addition, with the growing trend toward retail trade consolidation, including store count reductions at major retail chains, and consumers’ preference for online shopping, we and our wholesale customers increasingly depend upon a reduced number of key retailers whose bargaining strength is growing.

This consolidation may result in the following adverse consequences:

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● Since we transact primarily in United States dollars, our international customers could purchase from competitors who will transact business in their local currency.

● Certain of our major wholesale customers have experienced a significant downturn or disruption in their business.

If our customers continue to experience significant downturns or disruptions in their business, or file for bankruptcy, they may reduce their purchases of our products.

● If our customers experience significant downturns or disruptions in their business, or file for bankruptcy, they may reduce their purchases of our products.

● Retailers are directly sourcing more of their products directly from international manufacturers and reducing their reliance on wholesalers, which could have a material adverse effect on our business and results of operations.

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There has also been consolidation of competitors in the industry, resulting in certain competitors that are larger and have greater financial, marketing and technological resources than we do.

addition, a move toward vertical integration by our competitors could create additional competitive pressures that may decrease our market share.

In addition, a move toward vertical integration by our competitors could create additional competitive pressures that may decrease our market share.

Other competitors are able to offer footwear on a lateral basis alongside their apparel products, or have successfully branded their trademarks as lifestyle brands, resulting in greater competitive advantages.

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We believe that our ability to compete successfully in the footwear industry depends on a number of factors, including style, price, performance, quality, location and service, as well as the strength of our brand names.

We remain competitive by increasing awareness of our brands, improving the efficiency of our supply chain and enhancing the style, comfort, fashion and perceived value of our products.

We remain competitive

by increasing awareness of our brands, improving the efficiency of our supply chain and enhancing the style, comfort, fashion and perceived value of our products.

However, our competitors may implement more effective marketing campaigns, adopt more aggressive pricing policies, make more attractive offers to potential employees, distribution partners and manufacturers, or respond more quickly to changes in consumer preferences than us.

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Our quarterly sales and earnings can vary due to a number of factors, many of which are beyond our control, including the following:

● The pandemic has impacted the global economy.

Sales and earnings may continue to be impacted, particularly as a result of the ongoing supply chain disruptions.

● Our Famous Footwear retail business is seasonally weighted to the back-to-school season, which primarily falls in our third fiscal quarter.

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● In our wholesale business, sales of footwear are dependent on orders from our major customers, and they may change delivery schedules, change the mix of products they order or cancel orders without penalty.

Our in-transit inventory in 2021 rose significantly as a result of the supply chain disruptions.

Depending on the timing of receipt of this inventory, certain customers may request price concessions or choose to cancel their orders.

● Our wholesale customers have been moving toward lower initial orders and more replenishment orders, which may result in shifts of sales between quarters.

● Our wholesale customers have increasingly shifted toward lower initial orders and more replenishment and drop ship orders, which may result in shifts of sales between quarters.

● Our estimated annual tax rate is based on projections of our domestic and international operating results for the year, which we review and revise as necessary each quarter.

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Any shortfall in sales or earnings from the levels expected by investors could cause a decrease in the trading price of our common stock.

Certain branded suppliers are becoming more selective.

The loss of one or more of our major branded suppliers may adversely impact our business, results of operations, financial condition and cash flows.

Our Famous Footwear segment purchases a substantial portion of its footwear products from major branded suppliers.

Products purchased from three key third-party suppliers (Nike, Skechers and adidas) represented approximately 26% of consolidated net sales.

As is common in the industry, we do not have any long-term contracts with our suppliers.

In addition, the success of our financial performance is dependent on the ability of our Famous Footwear segment to obtain products from our suppliers on a timely basis and on acceptable terms.

While we believe we have positive working

relationships with our current suppliers, the loss of any of our major suppliers or product developed exclusively for our Famous Footwear stores could have a material adverse effect on our business, financial condition and results of operations.

In addition, negative trends in global economic conditions, including the impact of political tensions and military action in Eastern Europe and Eastern Asia and the impact of COVID-19 in Southeast Asia, may adversely impact our suppliers.

Foreign currency fluctuations may result in higher costs and decreased gross profits.

Although we purchase most of our products from international manufacturers in United States dollars and otherwise may engage in foreign currency hedging transactions from time to time, we may experience cost variations with respect to exchange rate changes.

Currency exchange rate fluctuations may also adversely impact third parties who manufacture the Company’s products by making their purchases of raw materials or other production costs more expensive and more difficult to finance, resulting in higher prices and lower margins for the Company, its distributors and licensees.

OPERATIONAL RISKS

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International sourcing is subject to numerous risks, including trade relations, work stoppages, transportation delays (including delays at international and domestic ports) and costs (including customs duties, quotas, tariffs, anti-dumping duties, safeguard measures, cargo restrictions or other trade restrictions), domestic and international political instability, foreign currency fluctuations, variable economic conditions, expropriation, nationalization, natural disasters, terrorist acts and military conflict, changes in governmental regulations (including the U.S.

Foreign Corrupt Practices Act) and geo-political events, such as the current Russia-Ukraine crisis.

We have recently experienced supply chain disruptions and port congestion, leading to delayed receipt of inventory in 2021.

If supply chain disruptions continue, our financial results could be adversely impacted.

In addition, the imposition of tariffs or other costs on imported products may result in an increase in product prices, which may in turn adversely impact our gross margins if we are unable to mitigate the impact of the costs.

Foreign Corrupt Practices Act) and geo-political events, such as the current war between Russia and Ukraine and increased tensions between China and Taiwan.

Supply chain disruptions and port congestion have in the past delayed receipt of inventory and this could occur again in the future.

Delayed inventory receipt could delay deliveries to our wholesale customers, and reduce availability in our stores and e-commerce websites, which could adversely impact our financial results.

In addition, the imposition of tariffs or other costs on imported products may result in an increase in product prices, which may in turn

adversely impact our gross margins if we are unable to mitigate the impact of the costs.

At the same time, potential changes in manufacturing preferences, including, but not limited to the following, pose additional risk and uncertainty:

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As a result of these risks, there can be no assurance that we will not experience reductions in available production capacity, increases in our product costs, late deliveries or terminations of our supplier relationships.

Furthermore, these sourcing risks are compounded by the lack of diversification in the geographic location of our international sourcing and manufacturing.

Furthermore, these sourcing risks are compounded by limited diversification in the geographic location of our international sourcing and manufacturing.

Approximately 68% of the footwear we sourced in 2022 was from China.

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We are reliant upon our information technology systems, and any major disruption of these systems could adversely impact our ability to effectively operate our business.

Our computer network and systems are essential to all aspects of our operations, including design, pricing, production, accounting, reporting, forecasting, ordering, manufacturing, transportation, sales and distribution.

Our ability to manage and maintain our inventory and to deliver products in a timely manner depends on these systems.

With the continued growth in direct-to-consumer sales on our e-commerce sites, any system disruption may result in an adverse impact to our operations.

If any of these systems fails to operate as expected, we experience problems with transitioning to upgraded or replacement systems, a breach in security occurs or a natural disaster interrupts system functions, we may experience delays in product fulfillment, reduced efficiency in our operations, or delays in reporting our financial results to investors, or we may be required to expend significant capital to correct the problem, which may have an adverse effect on our results of operations and financial condition.

With the continued growth in e-commerce direct-to-consumer sales, any system disruption may result in an adverse impact to our operations.

If any of these systems fails to operate as expected, we experience problems with transitioning to upgraded or replacement systems, we fail to realize the expected return on our technology investment, a breach in security occurs or a natural disaster interrupts system functions, we may experience delays in product fulfillment, reduced efficiency in our operations, or delays in reporting our financial results to investors, or we may be required to expend significant capital to correct the problem, which may have an adverse effect on our results of operations and financial condition.

A cybersecurity breach may adversely affect our sales and reputation.

We routinely possess sensitive consumer and associate information and periodically provide it to third parties for analysis, benefit distribution or compliance purposes.

Additionally, as a result of the pandemic, a large portion of our Corporate employees have shifted to a hybrid work schedule and are working remotely, which may result in heightened cybersecurity risk.

Consumers are also increasingly using mobile devices and applications to shop online and do comparison shopping.

Additionally, following the pandemic, a large portion of our Corporate employees shifted to a hybrid work schedule and are working remotely, which may result in heightened cybersecurity risk.

Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts.

While we believe we have taken reasonable and appropriate steps to protect that information, hackers and data thieves operate sophisticated, large-scale attacks that could breach our information systems, despite ongoing security measures.

While we believe we have taken reasonable and appropriate steps to protect sensitive information, hackers and data thieves operate sophisticated, large-scale attacks that could breach our information systems, despite ongoing security measures.

In addition, we are required to comply with increasingly complex regulations designed to protect our business and personal data.

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Inventory shortages may delay shipments to customers (and possibly require us to offer discounts or costly expedited shipping), negatively impact retailer and distributor relationships, adversely impact our sales results and diminish brand awareness and loyalty.

The COVID-19 pandemic resulted in lower sales during 2020, and lower sales projections.

The future impact of the pandemic, including the emergence of any new variants, and its impact on consumer sentiment is difficult to estimate.

A disruption in the effective functioning of our distribution centers could adversely affect our ability to deliver inventory on a timely basis.

We currently use several leased distribution centers, which serve as the source of replenishment of inventory for our footwear stores and e-commerce websites operated by our Famous Footwear and Brand Portfolio segments and serve the wholesale operations of our Brand Portfolio segment.

Our success depends on our ability to handle the rapid consumer shift to online shopping and single pair shipments, which requires significant capital to operate with a greater level of sophistication and automation, as well as higher processing and distribution costs.

We may be unable to successfully manage, negotiate or renew our distribution center leases, or we may experience complications with respect to our distribution centers, such as substantial damage to, or destruction of, such facilities due to natural disasters or ineffective information technology systems.

distribution needs, resulting in an adverse effect on our ability to deliver inventory on a timely basis.

Our success depends on our ability to handle the high volume of e-commerce sales and single pair shipments, which requires significant capital to operate with a greater level of sophistication and automation, as well as higher processing and distribution costs.

In such an event, our other distribution centers may not be able to support the resulting additional distribution demands and we may be unable to locate alternative persons or entities capable of fulfilling our distribution needs, resulting in an adverse effect on our ability to deliver inventory on a timely basis.

The effective operation of our distribution centers may also be impacted by wage inflation, labor shortages and disruptions to the supply chain.

Our success depends on our ability to retain senior management and recruit and retain other key associates.

Our success depends on our ability to attract, retain and motivate qualified management, administrative, product development and sales personnel to support existing operations and future growth.

Our success depends on our ability to attract, retain and motivate qualified management, administrative, product development, marketing and sales personnel to support existing operations and future growth.

In addition, our ability to successfully integrate acquired businesses often depends on our ability to retain incumbent personnel, many of whom possess valuable institutional knowledge and operating experience.

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The loss of the services of any member of our senior management or key associates, the inability to attract and retain other qualified personnel or the inability to effectively transition positions could adversely affect the sales, design and production of our products as well as the implementation of our strategic initiatives.

Also, we have recently experienced changes in key senior management personnel, including our chief executive officer and chief financial officer.

Management transitions may create uncertainty, and if we do not successfully manage the transition, it could be disruptive to our daily operations or impact public or market perception, which could negatively impact our ability to operate effectively and have an adverse impact on our business.

Our retail business depends on our ability to secure affordable and desirable leased locations without creating a competitive concentration of stores.

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As a result, the number of consumers and financial performance of individual stores may decline and the average sales per square foot at our stores may be reduced.

Due to the changing retail landscape, we may want to reduce the number of retail store locations but may be unable to successfully exit lease agreements.

Due to the changing

retail landscape, we may want to reduce the number of retail store locations but may be unable to successfully exit lease agreements.

This may result in impairments or lease termination charges that adversely impact our financial results.

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Rewards is a customer loyalty program that drives sales and traffic for the Famous Footwear segment.

Rewards members earn points toward savings certificates for qualifying purchases.

Upon reaching specified point values, members are issued a savings certificate, which may be redeemed for purchases at Famous Footwear.

Rewards members earn points toward certificates for qualifying purchases.

Upon reaching specified point values, members are issued a Rewards certificate, which may be redeemed for purchases at Famous Footwear.

Approximately 77% of our 2022 sales within the Famous Footwear segment were generated by our Rewards members.

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Transitional challenges with acquisitions and divestitures could result in unexpected expenditures of time and resources.

As part of our business strategy, we periodically pursue acquisitions of other companies or businesses, as well as divestitures of our businesses, such as the exit of the vast majority of our Naturalizer retail locations in the first quarter of 2021.

Although we review the records of acquisition candidates, the review may not reveal all existing or potential problems.

As part of our business strategy, we periodically pursue acquisitions of other companies or businesses, as well as divestitures of our businesses.

Although we review the financial results and records of acquisition candidates, the review may not reveal all existing or potential problems.

As a result, we may not accurately assess the value of the business and may, accordingly, ultimately assume unknown adverse operating conditions and/or unanticipated expenses and liabilities related to the acquisition.

Acquisitions may also cause us to incur debt, write-offs of goodwill or intangible assets if the business does not perform as well as expected and substantial amortization expenses associated with other intangible assets.

We face the risk that the returns on acquisitions will not support the expenditures or indebtedness incurred to acquire or launch such businesses.

We face the risk that the returns on acquisitions will not support the expenditures or indebtedness incurred to acquire such businesses.

We also face the risk that we will not be able to integrate acquisitions into our existing operations or divest our businesses effectively without substantial expense, delay or other operational or financial problems.

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Other factors, such as changes in the mix of earnings in countries with differing statutory tax rates, changes in permitted deductions, interpretations, policies and treaties and the outcome of income tax audits in various jurisdictions, may result in higher taxes, lower profitability and increased volatility in our financial results.

Our commitments and shareholder expectations relating to environmental, social and governance ("ESG") considerations may expose us to liabilities, increased costs, reputational harm, and other adverse effects on our business.

We are increasingly focused on ESG considerations relating to our business, including greenhouse gas emissions, human and civil rights and diversity, equity and inclusion.

New laws and regulations in these areas have been proposed and may be required to be adopted, and the criteria used by regulators and other relevant stakeholders to evaluate our ESG practices, capabilities, and performance may change rapidly, which in each case could require us to undertake costly initiatives or operational changes.

Non-compliance with these emerging rules or standards or a failure to address regulator, stakeholder and societal expectations may result in potential cost increases, litigation, fines, penalties, production and sales restrictions, brand or reputational damage, loss of customers, suppliers and commercial partners, failure to retain and attract talent, lower valuation and higher investor activism activities.

Managing these considerations and implementing these goals and initiatives involves risks and uncertainties, including increased costs, and often depends on third-party performance or data that is outside our control.

We cannot guarantee that we will achieve our announced ESG goals and initiatives, satisfy all stakeholder expectations, or that the benefits of implementing or achieving these goals and initiatives will not surpass their projected costs.

Any failure, or perceived failure, to achieve ESG goals and initiatives, as well as to manage ESG risks, adhere to public statements, comply with federal, state or international ESG laws and regulations or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.

Our business, sales and brand value could be harmed by violations of labor, trade or other laws.

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Our license agreements are generally for an initial term of two to four years, subject to renewal, and there can be no assurance that we will be able to renew these licenses.

Even our longer-term or renewable licenses are typically dependent upon our ability to market and sell the licensed products at specified levels, and the failure to meet such levels may result in the termination or non-renewal of

such licenses.

Furthermore, many of our license agreements require minimum royalty payments, and if we are unable to generate sufficient sales and profitability to cover these minimum royalty requirements, we may be required to make additional payments to the licensors that could have a material adverse effect on our business and results of operations.

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In addition, although many of our license agreements prohibit the licensees from entering into licensing arrangements with certain of our competitors, they are generally not prohibited from offering, under other brands, the types of products covered by their license agreements with us.

We believe that our trademarks and trade names are important to our success and competitive position because our distinctive marks create a market for our products and distinguish our products from other products.

We believe that our trademarks and trade names are important to our success and competitive position because they create a market for our products and distinguish our products from other products.

We cannot, however, guarantee that we will be able to secure protection for our intellectual property in the future or that such protection will be adequate for future operations.

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Failure to meet our debt covenants under the Credit Agreement may require the Company to seek waivers or amendments of the debt covenants, alternative or additional sources of financing or reduce expenditures.

In addition, borrowings under our Credit Agreement bear interest at variable rates.

As a result, increases in interest rates, such as those we are currently experiencing in this rising interest rate environment, could require a greater portion of our cash flow to be used to pay interest, which will negatively impact our net income and cash flow from operations.

ITEM 1B UNRESOLVED STAFF COMMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors