rcky20220630_10q.htm
 
 
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number: 001-34382
 
 
ROCKY BRANDS, INC.
(Exact name of Registrant as specified in its charter)
 
Ohio
  No. 31-1364046
(State or other jurisdiction of incorporation or organization)
  (I.R.S. Employer Identification No.)
     
39 East Canal Street , Nelsonville , Ohio 45764
(Address of principal executive offices, including zip code)
     
Registrant's telephone number, including area code: ( 740 ) 753 ‑ 9100
 
Title of class
  Trading symbol
  Name of exchange on which registered
Common Stock – No Par Value
  RCKY
  Nasdaq
 
 
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes  ☒  No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒  No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in 12b-2 of the Exchange Act.
 
  ☐ Large accelerated filer ☒  Accelerated filer
     
  ☐ Non-accelerated filer ☐  Smaller reporting company
     
    ☐ Emerging growth company
 
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No ☒
 
There were 7,313,075  shares of the Registrant's Common Stock outstanding on July 31, 2022.
 
 
Table of Contents
 
 
 
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
Page
PART I
Financial Information
 
Item 1.
Financial Statements
 
 
Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited), December 31, 2021, and June 30, 2021 (Unaudited)
2
 
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)
3
 
Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)
4
 
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (Unaudited)
5
 
Notes to Unaudited Condensed Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
25
Item 4.
Controls and Procedures
25
 
 
 
PART   II
Other Information
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25
Item 6.
Exhibits
26
SIGNATURES  
27
 
1
Table of Contents
  
 
PART 1 – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
(Unaudited)
 
    June 30,
    December 31,
    June 30,
 
    2022
    2021
    2021
 
ASSETS:
                       
CURRENT ASSETS:
                       
Cash and cash equivalents
  $ 5,802     $ 5,909     $ 8,358  
Trade receivables – net
    115,794       126,807       79,963  
Contract receivables
    -       1,062       2,017  
Other receivables
    224       242       235  
Inventories – net
    287,817       232,464       143,516  
Income tax receivable
    6,360       4,294       2,290  
Prepaid expenses
    5,216       4,507       4,772  
Total current assets
    421,213       375,285       241,151  
LEASED ASSETS
    10,376       11,428       2,626  
PROPERTY, PLANT & EQUIPMENT – net
    61,352       59,989       55,956  
GOODWILL
    50,246       50,641       48,375  
IDENTIFIED INTANGIBLES – net
    124,740       126,315       127,904  
OTHER ASSETS
    911       917       879  
TOTAL ASSETS
  $ 668,838     $ 624,575     $ 476,891  
                         
LIABILITIES AND SHAREHOLDERS' EQUITY:
                       
CURRENT LIABILITIES:
                       
Accounts payable
  $ 130,246     $ 114,632     $ 67,224  
Contract liabilities
    -       1,062       2,017  
Current Portion of Long-Term Debt
    3,250       3,250       3,250  
Accrued expenses:
                       
Salaries and wages
    4,869       3,668       4,363  
Taxes - other
    1,674       849       536  
Accrued freight
    2,290       1,798       2,670  
Commissions
    1,428       2,447       1,068  
Accrued duty
    12,144       5,469       6,534  
Accrued interest
    2,705       2,133       2,197  
Other
    5,693       4,828       5,115  
Total current liabilities
    164,299       140,136       94,974  
LONG-TERM DEBT
    281,365       266,794       184,121  
LONG-TERM TAXES PAYABLE
    169       169       169  
LONG-TERM LEASE
    7,636       8,809       1,867  
DEFERRED INCOME TAXES
    10,293       10,293       8,272  
DEFERRED LIABILITIES
    609       519       392  
TOTAL LIABILITIES
    464,371       426,720       289,795  
SHAREHOLDERS' EQUITY:
                       
Common stock, no par value;
                       
25,000,000 shares authorized; issued and outstanding June 30, 2022 - 7,313,075 ; December 31, 2021 - 7,302,199 ; June 30, 2021 - 7,283,434
    68,680       68,061       67,210  
Retained earnings
    135,787       129,794       119,886  
Total shareholders' equity
    204,467       197,855       187,096  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  $ 668,838     $ 624,575     $ 476,891  
 
See Notes to Unaudited Condensed Consolidated Financial Statements
 
2
Table of Contents
 
 
 
Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended
 
 
Six Months Ended
 
 
 
June 30,
 
 
June 30,
 
 
 
2022
 
 
2021
 
 
2022
 
 
2021
 
NET SALES
 
$
162,039
 
 
$
131,602
 
 
$
329,063
 
 
$
219,268
 
COST OF GOODS SOLD
 
 
108,288
 
 
 
82,448
 
 
 
212,486
 
 
 
134,976
 
GROSS MARGIN
 
 
53,751
 
 
 
49,154
 
 
 
116,577
 
 
 
84,292
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
48,155
 
 
 
40,717
 
 
 
97,785
 
 
 
69,275
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME FROM OPERATIONS
 
 
5,596
 
 
 
8,437
 
 
 
18,792
 
 
 
15,017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INTEREST EXPENSE AND OTHER EXPENSES
 
 
( 4,323
)
 
 
( 3,378
)
 
 
( 8,230
)
 
 
( 4,125
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAX EXPENSE
 
 
1,273
 
 
 
5,059
 
 
 
10,562
 
 
 
10,892
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME TAX EXPENSE
 
 
353
 
 
 
1,164
 
 
 
2,304
 
 
 
2,506
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INCOME
 
$
920
 
 
$
3,895
 
 
$
8,258
 
 
$
8,386
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INCOME PER SHARE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.13
 
 
$
0.53
 
 
$
1.13
 
 
$
1.15
 
Diluted
 
$
0.12
 
 
$
0.52
 
 
$
1.12
 
 
$
1.13
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
7,313
 
 
 
7,283
 
 
 
7,310
 
 
 
7,271
 
Diluted
 
 
7,389
 
 
 
7,439
 
 
 
7,400
 
 
 
7,402
 
 
See Notes to Unaudited Condensed Consolidated Financial Statements
 
3
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Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders ’ Equity
(In thousands, except per share amounts)
(Unaudited)
 
    Common Stock and
    Accumulated
                 
    Additional Paid-in Capital
    Other
            Total
 
    Shares
            Comprehensive
    Retained
    Shareholders'
 
    Outstanding
    Amount
    Income
    Earnings
    Equity
 
                                         
BALANCE - December 31, 2020
    7,248     $ 65,971       -     $ 113,534     $ 179,505  
                                         
SIX MONTHS ENDED JUNE 30, 2021
                                       
Net income
                          $ 4,492     $ 4,492  
Dividends paid on common stock ($ 0.14 per share)
                            ( 1,015 )     ( 1,015 )
Repurchase of common stock
    -       -               -       -  
Stock issued for options exercised, including tax benefits
    31     $ 607               -       607  
Stock compensation expense
    2       278               -       278  
BALANCE - March 31, 2021
    7,281     $ 66,856     $ -     $ 117,011     $ 183,867  
                                         
Net income
                          $ 3,895     $ 3,895  
Dividends paid on common stock ($ 0.14 per share)
                            ( 1,020 )     ( 1,020 )
Repurchase of common stock
    -       -               -       -  
Stock issued for options exercised, including tax benefits
    1     $ 24               -       24  
Stock compensation expense
    1       330               -       330  
BALANCE - June 30, 2021
    7,283     $ 67,210     $ -     $ 119,886     $ 187,096  
                                         
BALANCE - December 31, 2021
    7,302     $ 68,061       -     $ 129,794     $ 197,855  
                                         
SIX MONTHS ENDED JUNE 30, 2022
                                       
Net income
                      $ 7,338     $ 7,338  
Dividends paid on common stock ($ 0.155 per share)
                        ( 1,133 )     ( 1,133 )
Repurchase of common stock
    -       -               -       -  
Stock issued for options exercised, including tax benefits
    7     $ 145             -       145  
Stock compensation expense
    2       248             -       248  
BALANCE - March 31, 2022
  $ 7,311     $ 68,454     $ -     $ 135,999     $ 204,453  
                                         
Net income
                      $ 920     $ 920  
Dividends paid on common stock ($ 0.155 per share)
                        ( 1,132 )     ( 1,132 )
Repurchase of common stock
    -       -               -       -  
Stock issued for options exercised, including tax benefits
    -       -             -       -  
Stock compensation expense
    2     $ 226             -       226  
BALANCE - June 30, 2022
    7,313     $ 68,680     $ -     $ 135,787     $ 204,467  
 
See Notes to Unaudited Condensed Consolidated Financial Statements
 
4
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Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
 
Six Months Ended
 
 
 
June 30,
 
 
 
2022
 
 
2021
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
Net income
 
$
8,258
 
 
$
8,386
 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
5,847
 
 
 
5,557
 
Amortization of debt issuance costs
 
 
427
 
 
 
249
 
Deferred income taxes
 
 
-
 
 
 
1
 
Loss on disposal of fixed assets
 
 
1
 
 
 
13
 
Stock compensation expense
 
 
474
 
 
 
608
 
Change in assets and liabilities:
 
 
 
 
 
 
 
 
Receivables
 
 
11,032
 
 
 
2,620
 
Contract receivables
 
 
1,062
 
 
 
3,153
 
Inventories
 
 
( 54,958
)
 
 
( 23,487
)
Other current assets
 
 
343
 
 
 
( 1,254
)
Other assets
 
 
6
 
 
 
( 430
)
Accounts payable
 
 
13,541
 
 
 
19,547
 
Accrued and other liabilities
 
 
8,528
 
 
 
( 1,019
)
Income taxes
 
 
( 2,066
)
 
 
636
 
Contract liabilities
 
 
( 1,062
)
 
 
( 3,565
)
Net cash (used in) provided by operating activities
 
 
( 8,567
)
 
 
11,015
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Purchase of fixed assets
 
 
( 3,565
)
 
 
( 9,757
)
Acquisition of business, net of cash acquired
 
 
-
 
 
 
( 206,970
)
Net cash used in investing activities
 
 
( 3,565
)
 
 
( 216,727
)
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Proceeds from revolving credit facility
 
 
20,820
 
 
 
92,700
 
Repayments on revolving credit facility
 
 
( 5,050
)
 
 
( 30,500
)
Proceeds from term loan
 
 
-
 
 
 
130,000
 
Repayments on term loan
 
 
( 1,625
)
 
 
( 813
)
Debt issuance costs
 
 
-
 
 
 
( 4,266
)
Proceeds from stock options
 
 
145
 
 
 
631
 
Dividends paid on common stock
 
 
( 2,265
)
 
 
( 2,035
)
Net cash provided by financing activities
 
 
12,025
 
 
 
185,717
 
 
 
 
 
 
 
 
 
 
DECREASE IN CASH AND CASH EQUIVALENTS
 
 
( 107
)
 
 
( 19,995
)
 
 
 
 
 
 
 
 
 
CASH AND CASH EQUIVALENTS:
 
 
 
 
 
 
 
 
BEGINNING OF PERIOD
 
 
5,909
 
 
 
28,353
 
END OF PERIOD
 
$
5,802
 
 
$
8,358
 
 
See Notes to Unaudited Condensed Consolidated Financial Statements
 
5
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Rocky Brands, Inc. and Subsidiaries
 
Notes to Unaudited Condensed Consolidated Financial Statements
 
 
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
 
We are a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky, Georgia Boot, Durango, Lehigh, The Original Muck Boot Company ("Muck"), XTRATUF, Servus, NEOS and Ranger. Our brands have a long history of representing high quality, comfortable, functional and durable footwear and our products are organized around six target markets: outdoor, work, duty, commercial military, military and western. In addition, as part of our strategy of outfitting consumers from head-to-toe, we market complementary branded apparel and accessories that we believe leverage the strength and positioning of each of our brands.
 
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the financial results. All such adjustments reflected in the unaudited condensed consolidated financial statements are considered to be of normal and recurring nature. The results of operations for the  three and six months ended June 30, 2022 and 2021 are not necessarily indicative of the results to be expected for the whole year. The  December 31, 2021 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). This Quarterly Report on Form 10 -Q should be read in connection with our Annual Report on Form 10 -K for the year ended  December 31, 2021 , which includes all disclosures required by GAAP.
 
We report our segment information in accordance with provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 280, Segment Reporting . We evaluate business performance based upon several metrics, using segment profit as the primary financial measure. During the three months ended June 30, 2021, we changed our reporting segments when compared to our Annual Report on Form 10 -K for the fiscal year ended December 31, 2020, to change our Military reporting segment to "Contract Manufacturing" and to change the composition thereof to continue to include sales to the U.S. Military ("Military Contracts") and to include sales under manufacturing contracts for private label or other specific footwear products sold through our Wholesale and Retail channels ("Private Contracts"). Previously, only Military Contracts were included in this segment. The Private Contract sales have characteristics more like Military Contracts, with similar sales, delivery processes and gross margins. This segment reporting change reflects a corresponding change in how our Chief Executive Officer and our Chief Financial Officer, our chief operating decision makers ("CODMs"), review financial information in order to allocate resources and assess performance. Previously, Private Contracts were included in the Wholesale segment, but with our acquisition of the lifestyle and performance footwear business of Honeywell International Inc., our Wholesale segment has substantially increased in size and our CODMs determined that the change in segment reporting was appropriate at this time to mirror how they evaluate and manage our business.
 
There has been no change in our total consolidated financial condition, results of operations, or segment information previously reported, as the result of the change in our reportable segments, as we had no Private Contract sales during the fiscal year ended December 31, 2020 or quarterly period ended March 31, 2021. Each of our reporting segments continue to employ consistent accounting policies. As a result of this assessment, we now report our activities in the following three reporting segments: Wholesale, Retail and Contract Manufacturing. Our Wholesale segment includes sales of footwear and accessories to several classifications of retailers, including sporting goods stores, outdoor specialty stores, online retailers, marine stores, independent retailers, mass merchants, retail uniform stores, and specialty safety shoe stores. Our Retail segment includes direct sales of our products to consumers through our e-commerce websites, marketplaces, our Rocky outlet store, and Lehigh businesses. Our Contract Manufacturing segment includes sales to the U.S. Military, private label sales and any sales to customers in which we are contracted to manufacture or source a specific footwear product for a customer. See Note 14 – Segment Information for further information.
 
 
2. ACCOUNTING STANDARDS UPDATES
 
Recently Issued Accounting Pronouncements
 
We are currently evaluating the impact of the following Accounting Standards Update (“ASU”) on our Unaudited Condensed Consolidated Financial Statements or Notes to the Unaudited Condensed Consolidated Financial Statements:
 
Standard
  Description
  Anticipated Adoption Period
  Effect on the financial statements or other significant matters
ASU 2016 - 13, Measurement of Credit Losses on Financial Instruments
  The pronouncement seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
  Q1 2023
  We are evaluating the impacts of the new standard on our existing financial instruments, including trade receivables.
 
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Accounting Standards Adopted in the Current Year
 
Standard
  Description
  Effect on the financial statements or other significant matters
ASU 2019 - 12, Income Taxes (Topic 740 ): Simplifying the Accounting for Income Taxes
  This pronouncement is intended to simplify various aspects related to accounting for income taxes. ASU 2019 - 12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.
  We adopted the new standard in Q1 2021 and the standard did not have a significant impact on our Consolidated Financial Statements.
 
 
3. FAIR VALUE
 
Generally accepted accounting standards establish a framework for measuring fair value. The fair value accounting standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This standard clarifies how to measure fair value as permitted under other accounting pronouncements.
 
The fair value accounting standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This standard also establishes a three -level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
 
  ●
Level 1 – Quoted prices in active markets for identical assets or liabilities.
 
  ●
Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
 
  ●
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
 
The fair values of cash and cash equivalents, receivables, and payables approximated their carrying values because of the short-term nature of these instruments. Receivables consist primarily of amounts due from our customers, net of allowances, amounts due from employees (sales persons’ advances in excess of commissions earned and employee travel advances), other customer receivables, net of allowances, and expected insurance recoveries. The carrying amounts of our long-term credit facility and other short-term financing obligations also approximate fair value, as they are comparable to the available financing in the marketplace during the year. The fair value of our credit facilities is categorized as Level 2.
 
We hold assets and liabilities in a separate trust in connection with deferred compensation plans. The fair value of these assets is based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1 ).
 
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4. ACQUISITION  
 
The Performance and Lifestyle Footwear Business of Honeywell International Inc.
 
On January 24, 2021, we entered into a Purchase Agreement (the "Purchase Agreement") with certain subsidiaries of Honeywell International Inc. (collectively, "Honeywell"), to purchase Honeywell's performance and lifestyle footwear business, including brand names, trademarks, assets and liabilities associated with Honeywell's performance and lifestyle footwear business (the "Acquisition") for an aggregate purchase price of $ 212  million.
 
On March 15, 2021 ( the "Acquisition Date"), pursuant to the terms and conditions set forth in the Purchase Agreement, we completed the Acquisition for an aggregate preliminary closing price of approximately $ 207 million, net of cash acquired, b ased on preliminary working capital and other adjustments.  Upon a final agreement of net working capital as of the Acquisition Date, we owed Honeywell an additional $ 5.4 million . The Acquisition was funded through cash on hand and borrowings under two new credit facilities. See Note 10 for information regarding the two new credit facilities.
 
The Acquisition expanded our brand portfolio to include Muck, XTRATUF, Servus, NEOS and Ranger brands (the "Acquired Brands"). We acquired 100 % of the voting interests of certain subsidiaries and additional assets comprising the performance and lifestyle footwear business of Honeywell with the Acquisition.
 
Through the Acquisition, we have greatly enhanced our portfolio of footwear brands and significantly increased our sales. We acquired a well-run business with a corporate culture and a customer base similar to ours, which provides meaningful growth opportunities within our existing product categories as well as an entry into new market segments. Its innovative and authentic product collections complement our existing offering with minimal overlap, which will allow us to strengthen our wholesale relationships and serve a wider consumer audience. At the same time, we plan to leverage our existing advanced fulfillment capabilities to improve distribution of the Acquired Brands to wholesale customers and accelerate direct-to-consumer penetration.
 
In connection with the Acquisition, we also entered into employment agreements with seven key employees from the performance and lifestyle footwear business of Honeywell, pursuant to which, among other things, we agreed to grant 25,000 non-qualified stock options in the aggregate to the seven employees as an inducement for continuing their employment with us.
 
We acquired multiple leases through the Acquisition including the lease of our Rock Island, Illinois and China manufacturing facilities and an office building in Westwood, Massachusetts.
 
The Acquisition contributed net sales of $ 66.7 million and $ 50.7 million, respectively, for the thre e months ended June 30, 2022 and 2021, and net sales of $ 131.1 milli on and $ 57.2 mil lion, respectively, to the unaudited condensed consolidated operating results for the   six months ended June 30, 2022 and 2021 . The Acquisition contributed net loss  of $ 0.1  million an d net income of $ 0.1 million, respectively, to the unaudited condensed consolidated operating results for the three months ended June 30, 2022 and 2021, and net income of $ 1.9  million and $ 0.7 million, respectively, to the unaudited condensed consolidated operating results for the six months ended June 30, 2022 and 2021.
 
Acquisition-related costs
 
Costs incurred to complete and integrate the Acquisition are expensed as incurred and included in "operating expenses" in the accompanying condensed consolidated statements of operations. During the  three months ended June 30, 2022 and 2021 , there were approximately $ 2.1 million and $ 2.3  million, respectively, of acquisition-related costs recognized. During the  six months ended June 30, 2022 and 2021 , there were approximately $ 3.2 million and $ 7.5  million, r espectively, of acquisition-related costs recognized. These costs represent investment banking fees, legal and professional fees, transaction fees, integration costs, amortization, consulting fees and restructuring costs associated with the Acquisition.
 
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Purchase Price Allocation
 
The Acquisition has been accounted for under the business combinations accounting guidance. As a result, we have applied acquisition accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the Acquisition Date. The aggregate closing price noted above was allocated to the major categories of assets acquired and liabilities assumed based on their fair values at the Acquisition Date using primarily Level 2 and Level 3 inputs. These Level 2 and Level 3 valuation inputs include an estimate of future cash flows and discount rates. Additionally, estimated fair values are based, in part, upon outside valuation for certain assets, including specifically identified intangible assets.
 
The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill is finalized and is no longer subject to adjustment as the final valuation related to assets acquired and liabilities assumed has been obtained.
 
The following table summarizes the consideration paid and estimated fair value of the assets acquired and liabilities assumed as of the Acquisition Date.
 
($ in thousands)
  Fair Value
 
Cash
  $ 2,655  
Accounts receivable (1)
    36,734  
Inventories (2)
    41,057  
Property, plant and equipment
    16,243  
Goodwill (3)
    50,246  
Intangible assets
    98,620  
Other assets
    1,250  
Accounts payable
    ( 18,108 )
Accrued expenses
    ( 13,634 )
Total identifiable net assets
    215,063  
Cash acquired
    ( 2,655 )
Total cash paid, net of cash acquired
  $ 212,408  
 
( 1 ) The recorded amount for accounts receivable considers expected uncollectible amounts of approximately $ 0.6   million in its determination of fair value.
 
( 2 ) Fair value of finished goods inventories included a preliminary step up value of approximately $ 3.5 million, of which approximately $ 2.3 million and $ 2.6 million, respectively, was expensed during the three months and six months ended June 30, 2021,  and are included in "Cost of Goods Sold" in the accompanying unaudited condensed consolidated statements of operations. The remaining $ 0.9  million was expensed during the year ended December 31, 2021 and as such there was no expense for the three or  six months ended June 30, 2022.
 
( 3 ) Goodwill consists largely of the acquired workforce, expected cost synergies and economies of scale resulting from the Acquisition.
 
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Unaudited Pro Forma Financial Information
 
The following unaudited pro forma results of operations assume that the Acquisition occurred at the beginning of the periods presented. These unaudited pro forma results are presented for information purposes only and are not necessarily indicative of what the results of operations would have been if the Acquisition had occurred at the beginning of the periods presented, nor are they indicative of the future results of operations. The pro forma results presented below are adjusted for the removal of acquisition-related costs of approximately $ 2.1  million and $ 2.3  million for t he three  months ended June 30, 2022  and 2021, respectively, and approximately $ 3.2 million and $ 7.5 million, respectively, for the three and six months ended June 30, 2022 and 2021.
 
    Three Months Ended June 30,
    Six Months Ended June 30,
 
($ in thousands, except per share amount)
  2022
    2021
    2022
    2021
 
Net sales
  $ 162,039     $ 131,602     $ 329,063     $ 257,947  
Net income
  $ 2,548     $ 7,400     $ 10,730     $ 16,144  
Diluted earnings per share
  $ 0.34     $ 0.99     $ 1.45     $ 2.18  
 
 
5. REVENUE
 
Nature of Performance Obligations
 
Our products are distributed through three distinct channels, which represent our business segments: Wholesale, Retail, and Contract Manufacturing. In our Wholesale business, we distribute our products through a wide range of distribution channels representing over ten thousand retail store locations in the U.S., Canada, and internationally. Our Wholesale channels vary by product line and include sporting goods stores, outdoor specialty stores, online retailers, marine stores, independent retailers, mass merchants, retail uniform stores, and specialty safety shoe stores. Our Retail business includes direct sales of our products to consumers through our e-commerce websites, marketplaces, our Rocky outlet store, and Lehigh businesses. Under our Contract Manufacturing segment, we sell footwear under the Rocky label to the U.S. Military and manufacture private label footwear and other footwear as contracted by a customer.
 
Significant Accounting Policies and Judgements
 
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; this generally occurs upon shipment of our product to our customer, which is when the transfer of control of our products passes to the customer. The duration of our arrangements with our customers are typically one year or less. Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of our products at a point in time and consists of either fixed or variable consideration or a combination of both.
 
Revenues from sales are recorded at the net sales price, which includes estimates of variable consideration for which reserves are established. Components of variable consideration include prompt payment discounts, volume rebates, and product returns. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer).
 
The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Our analyses also contemplated application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates detailed below as of  June 30, 2022 . Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net revenue and earnings in the period such variances become known.
 
When a customer has a right to a prompt payment discount, we estimate the likelihood that the customer will earn the discount using historical data and adjust our estimate when the estimate of the likelihood that a customer will earn the discount changes or the consideration becomes fixed, whichever occurs earlier. The estimated amount of variable consideration is recognized as a credit to trade receivables and a reduction in revenue until the uncertainty of the variable consideration is alleviated. Because most of our customers have payment terms of less than six months, there is not a significant financing component in our contracts with customers.
 
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When a customer is offered a rebate on purchases retroactively this is accounted for as variable consideration because the consideration for the current and past purchases is not fixed until it is known if the discount is earned. We estimate the expected discount the customer will earn at contract inception using historical data and projections and update our estimates when projections materially change or consideration becomes fixed. The estimated rebate is recognized as a credit to trade receivables and offset against revenue until the rebate is earned or the earning period has lapsed.
 
When a right of return is part of the arrangement with the customer, we estimate the expected returns based on an analysis using historical data. We adjust our estimate either when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed, whichever occurs earlier. See Note 6  and Note 7 for additional information.
 
Trade receivables represent our right to unconditional payment that only relies on the passage of time.
 
Contract receivables represent contractual minimum payments required under non-cancellable contracts with the U.S. Military and other customers with a duration of one year or less.
 
Contract liabilities are performance obligations that we expect to satisfy or relieve within the next twelve months, advance consideration obtained prior to satisfying a performance obligation, or unconditional obligations to provide goods or services under non-cancellable contracts before the transfer of goods or services to the customer has occurred. Our contract liability represents unconditional obligations to provide goods under non-cancellable contracts with the U.S. Military and other customers.
 
Items considered immaterial within the context of the contract are recognized as an expense.
 
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue producing transaction, that are collected from customers, are excluded from revenue.
 
Costs associated with our manufacturer’s warranty continue to be recognized as expense when the products are sold in accordance with guidance surrounding product warranties.
 
Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in operating expenses.
 
Costs associated with obtaining a contract are expensed as incurred in accordance with the practical expedient in ASC 340 - 40 in instances where the amortization period is one year or less. We anticipate substantially all of our costs incurred to obtain a contract would be subject to this practical expedient.
 
Contract Balances
 
The following table provides information about contract liabilities from contracts with our customers.
 
    June 30,
    December 31,
    June 30,
 
($ in thousands)
  2022
    2021
    2021
 
Contract liabilities
  $ -     $ 1,062     $ 2,017  
 
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Significant changes in the contract liabilities balance during the period are as follows:
 
($ in thousands)
  Contract liabilities
 
Balance, December 31, 2021
  $ 1,062  
Non-cancelable contracts with customers entered into during the period
    -  
Revenue recognized related to non-cancelable contracts with customers during the period
    ( 1,062 )
Balance, June 30, 2022
  $ -  
 
Disaggregation of Revenue
 
All revenues are recognized at a point in time when control of our products pass to the customer at point of shipment. Because all revenues are recognized at a point in time and are disaggregated by channel, our segment disclosures are consistent with ASC 606 disaggregation requirements. See Note 14 for segment disclosures.
 
 
6. TRADE RECEIVABLES
 
Trade receivables are presented net of the related allowance for uncollectible accounts of approximately $ 2,618,000 , $ 613,000 and $ 1,062,000 at June 30, 2022 ,  December 31, 2021 and  June 30, 2021 , respectively. We record the allowance based on historical experience, the age of the receivables, and identification of customer accounts that are likely to prove difficult to collect due to various criteria including pending bankruptcy. However, estimates of the allowance in any future period are inherently uncertain and actual allowances may differ from these estimates. If actual or expected future allowances were significantly greater or less than established reserves, a reduction or increase to bad debt expense would be recorded in the period this determination was made. Our credit policy generally provides that trade receivables will be deemed uncollectible and written-off once we have pursued all reasonable efforts to collect on the account.
 
In accordance with ASC 606, the return reserve liability netted against trade receivables was approximately $ 1,309,000 , $ 1,670,000  and $ 2,057,000 at  June 30, 2022 ,  December 31, 2021 and  June 30, 2021 , respectively.
 
 
7. INVENTORY
 
Inventories are comprised of the following:
 
    June 30,
    December 31,
    June 30,
 
($ in thousands)
  2022
    2021
    2021
 
Raw materials
  $ 22,214     $ 20,933     $ 22,105  
Work-in-process
    1,793       1,316       1,668  
Finished goods
    263,810       210,215       119,743  
Total
  $ 287,817     $ 232,464     $ 143,516  
 
In accordance with ASC 606, the return reserve asset included within inventories was approximately $ 729,000 , $ 902,000 and $ 955,000  at  June 30, 2022 ,  December 31, 2021 and  June 30, 2021 , respectively.
 
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8. GOODWILL
 
Goodwill represents the excess of the purchase price over the f air value of net tangible and identifiable intangible assets of acquired businesses. Goodwill arose from the Acquisition and largely consists of the workforce acquired, expected cost synergies and economies of scale resulting from the business combination. The amount of goodwill that is expected to be deductible for tax purposes is $ 49.4  million.
 
GAAP has established guidance for reporting information about a company's operating segments, including disclosures related to a company's products and services, geographic areas and major customers. We monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments, as well as our reporting units. As previously stated, our operations represent three reporting segments: Wholesale, Retail and Contract Manufacturing. Goodwill impairment analysis will be performed for our Wholesale and Retail reporting segments. There is no goodwill allocated to our Contract Manufacturing segment. Of total goodwill, $ 25.4  million was allocated to our Wholesale segment and $ 24.8  mil lion was allocated to our Retail segment.
 
Goodwill is subject to impairment tests at least annually. We review the carrying amounts of goodwill by reporting unit at least annually, or when indicators of impairment are present, to determine if goodwill may be impaired. We include assumptions about the expected future operating performance as part of a discounted cash flow analysis to estimate fair value. If the carrying value of these assets is not recoverable, based on the discounted cash flow analysis, management compares the fair value of the assets to the carrying value. Goodwill is considered impaired if the recorded value exceeds the fair value.
 
We may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill is less than its carrying value. We would not be required to quantitatively determine the fair value of goodwill unless we determine, based on the qualitative assessment, that it is more likely than not that its fair value is less than the carrying value. Future cash flows of the individual indefinite-lived intangible assets are used to measure their fair value after consideration of certain assumptions, such as forecasted growth rates and cost of capital, which are derived from internal projection and operating plans. We perform our annual testing for goodwill at the beginning of the fourth quarter of each fiscal year, starting with our fiscal year ended December 31, 2021.
 
 
9. IDENTIFIED INTANGIBLE ASSETS
 
A schedule of identified intangible assets is as follows:
 
    Gross
    Accumulated
    Carrying
 
($ in thousands)
  Amount
    Amortization
    Amount
 
June 30, 2022
                       
Trademarks
                       
Wholesale (1)
  $ 72,579       -     $ 72,579  
Retail (2)
    9,220       -       9,220  
Patents
    895     $ 815       80  
Customer relationships (3)
    46,900       4,039       42,861  
Total Intangibles
  $ 129,594     $ 4,854     $ 124,740  
 
( 1 ) $ 45.4 million of the total resulted from our Acquisition that occurred on March 15, 2021.
 
( 2 ) $ 6.3 million of the total resulted from our Acquisition that occurred on March 15, 2021.
 
( 3 ) Resulted from our Acquisition that occurred on March 15, 2021.
 
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    Gross
    Accumulated
    Carrying
 
($ in thousands)
  Amount     Amortization     Amount  
December 31, 2021
                       
Trademarks
                       
Wholesale (1)
  $ 72,579       -     $ 72,579  
Retail (2)
    9,220       -       9,220  
Patents
    895     $ 804       91  
Customer relationships (3)
    46,900       2,475       44,425  
Total Intangibles
  $ 129,594     $ 3,279     $ 126,315  
 
 
    Gross
    Accumulated
    Carrying
 
($ in thousands)
  Amount     Amortization     Amount  
June 30, 2021
                       
Trademarks
                       
Wholesale (1)
  $ 72,592       -     $ 72,592  
Retail (2)
    9,220       -       9,220  
Patents
    895     $ 791       104  
Customer relationships (3)
    46,900       912       45,988  
Total Intangibles
  $ 129,607     $ 1,703     $ 127,904  
 
 
( 1 ) $45.4 million of the total resulted from our Acquisition that occurred on March 15, 2021.
 
( 2 ) $6.3 million of the total resulted from our Acquisition that occurred on March 15, 2021.
 
( 3 ) Resulted from our Acquisition that occurred on March 15, 2021.
 
The weighted average life for our patents is 7.3  years.
 
A schedule of approximate amortization expense related to finite-lived intangible assets for the  three and six months ended June 30, 2022 and 2021 is as follows:
 
    Three Months Ended
    Six Months Ended
 
    June 30,
    June 30,
 
($ in thousands)
  2022
    2021
    2022
    2021
 
Amortization expense
  $ 788     $ 918     $ 1,575     $ 925  
 
A schedule of approximate expected remaining amortization expense related to finite-lived intangible assets for the years ending December 31, is as follows:
 
    Amortization
 
($ in thousands)
  Expense
 
2022
  $ 1,574  
2023
    3,147  
2024
    3,143  
2025
    3,139  
2026
    3,136  
2027
    3,134  
2028+
    25,668  
 
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10. LONG-TERM DEBT
 
On March 15, 2021, we entered into a senior secured term loan facility ("Term Facility") with TCW Asset Management Company, LLC (TCW), as agent, for the lenders party thereto in the amount of $ 130 million. The Term Facility provided for quarterly payments of principal and bore interest of LIBOR plus 7.00 % through June 30, 2021. After this date, interest will be assessed quarterly based on our total leverage ratio. The total leverage ratio is calculated as (a) Total Debt to (b) EBITDA. If our total leverage ratio is greater than or equal to 3.25, the effective interest rate will be SOFR plus 7.00 % (or at our option, Prime Rate plus 6.00 %). If our total leverage ratio is less than 3.25, the effective interest rate will be SOFR plus 6.50 % (or at our option, Prime Rate plus 5.50 %). The Term Facility also has a SOFR floor rate of 1.00 %. In December 2021, the Term Facility was amended to increase the effective interest rate to LIBOR plus 7.00 % until June 2022.  In June 2022, we entered into a second amendment with TCW to further amend our Term Facility to consent to the modifications in our borrowing capacity under the ABL Facility as described below, and to adjust certain pricing and prepayment terms, among other things. The second amendment also modified the interest index whereas SOFR will be used to calculate interest rather than LIBOR. The effective interest rate was increased to SOFR plus 7.5 % through November 2022.
 
Our Term Facility is collateralized by a second -lien on accounts receivable, inventory, cash and related assets and a first -lien on substantially all other assets. The Term Facility matures on March 15, 2026.
 
On March 15, 2021, we also entered into a senior secured asset-based credit facility ("ABL Facility") with Bank of America, N.A. ("Bank of America") as agent, for the lenders party thereto. The ABL Facility provides a new senior secured asset-based revolving credit facility up to a principal amount of $ 150 million, which includes a sub-limit for the issuance of letters of credit up to $ 5 million. The ABL Facility may be increased up to an additional $ 50 million at the Borrowers’ request and the Lenders’ option, subject to customary conditions. In December 2021, we amended our ABL Facility to temporarily increase our borrowing capacity from $ 150 million to $ 175 million through  June 10, 2022. In June 2022, we further amended our ABL Facility to temporarily increase our borrowing capacity by $ 25 million to $ 200 million through December 31, 2022, which thereafter will be reduced to $ 175 million. The A BL Facility includes a separate first in, last out (FILO) tranche, which allows the Company to borrow at higher advance rates on eligible accounts receivables and inventory balances. As of  June 30, 2022 , we had borrowing capacity of $ 38.2  million.
 
The ABL Facility is collateralized by a first -lien on accounts receivable, inventory, cash and related assets and a second -lien on substantially all other assets. The ABL Facility matures on March 15, 2026. Interest on the ABL Facility is based on the amount available to be borrowed as set forth on the following chart:
 
    Average Availability as a
                               
Revolver Pricing Level (1)
  Percentage of Commitments
  Base Rate
    Term SOFR Loan
    Base Rate for FILO
    Term SOFR FILO Loans
 
I
  > 66.7%
    0.00 %     1.25 %     0.50 %     1.75 %
II
  >33.3% and < or equal to 66.7%
    0.00 %     1.50 %     0.50 %     2.00 %
III
  < or equal to 33.3%
    0.25 %     1.75 %     0.75 %     2.25 %
 
( 1 ) Until June 30, 2021, Tier II applied.
 
In connection with the Term Facility and ABL Facility, we had to pay certain fees that were capitalized and will be amortized over the life of each respective loan. In addition, the ABL Facility requires us to pay an annual collateral management fee in the amount of $ 75,000 due on each anniversary of the ABL Facility issuance date, until it matures.
 
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Current and long-term debt consisted of the following:
 
    June 30,
    December 31,
    June 30,
 
($ in thousands)
  2022
    2021
    2021
 
Term Facility that matures in 2026 with an effective interest rate of 9.06 %, 8.00 % and 8.00 % as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively
  $ 125,938     $ 127,563     $ 129,188  
ABL Facility that matures in 2026:
                       
LIBOR borrowings with an effective interest rate of 3.88 %, 1.88 % and 1.63 % June 30, 2022, December 31, 2021 and June 30, 2021, respectively
    155,726       140,000       40,000  
Prime borrowings with an effective interest rate of 5.00 %, 3.50 % and 3.25 % as of June 30, 2022, December 31, 2021 and June 30, 2021, respectively
    6,115       6,072       22,200  
Total debt
    287,779       273,635       191,388  
Less: Unamortized debt issuance costs
    ( 3,164 )     ( 3,591 )     ( 4,017 )
Total debt, net of debt issuance costs
    284,615       270,044       187,371  
Less: Debt maturing within one year
    ( 3,250 )     ( 3,250 )     ( 3,250 )
Long-term debt
  $ 281,365     $ 266,794     $ 184,121  
 
Credit Facility Covenants
 
The Term Facility contains restrictive covenants which requires us to maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, as defined in the agreement. We are in compliance with all credit facility covenants as of June 30, 2022 , December 31, 2021 and  June 30, 2021 .
 
Our ABL Facility contains a restrictive covenant which requires us to maintain a fixed charge coverage ratio upon a triggering event taking place (as defined in the ABL Facility agreement). During the  three and six months ended June 30, 2022 and 2021 , there were no triggering events and the covenant was not in effect.
 
Both the Term Facility and the ABL Facility contain restrictions on the amount of dividend payments.
 
 
 
 
11. TAXES
 
We are subject to tax examinations in various taxing jurisdictions. The earliest years open for examination are as follows:
 
    Earliest Exam Year
Taxing Authority Jurisdiction:
   
U.S. Federal
  2018
Various U.S. States
  2017
Puerto Rico (U.S. Territory)
  2017
Canada
  2018
China   2019
Mexico   2021
United Kingdom   2021
Australia   2021
 
Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. No such expenses were recognized during the  three and six months ended June 30, 2022 and 2021 . We do not believe there will be any material changes in our uncertain tax positions over the next 12 months.
 
Accounting for uncertainty in income taxes requires financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements.  Under this guidance, income tax positions must meet a more-likely-than- not recognition threshold at the effective date to be recognized upon the adoption of the standard.  We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations.
 
Our estim ated effective tax rates for t he  three and six months ended June 30, 2022 and 2021  are as follows:
 
 
    Three Months Ended
    Six Months Ended
 
    June 30,
    June 30,
 
    2022
    2021
    2022
    2021
 
Effective Tax Rate
    27.7 %
    23.0 %
    21.8 %
    23.0 %
 
 
 
12. EARNINGS PER SHARE
 
Basic earnings per share (“EPS”) is computed by dividing net income applicable to common shareholders by the weighted average number of common shares outstanding during each period. The diluted earnings per share computation includes common share equivalents, when dilutive.
 
A reconciliation of the shares used in the basic and diluted income per common share computation for the  three and six months ended June 30, 2022 and 2021 is as follows:
 
    Three Months Ended
    Six Months Ended
 
    June 30,
    June 30,
 
(shares in thousands)
  2022
    2021
    2022
    2021
 
                                 
Basic - weighted average shares outstanding
    7,313       7,283       7,310       7,271  
Dilutive stock options
    76       156       90       131  
Diluted - weighted average shares outstanding
    7,389       7,439       7,400       7,402  
Anti-dilutive securities
    104       25       299       25  
 
 
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13. SUPPLEMENTAL CASH FLOW INFORMATION
 
Supplemental cash flow information for the six months ended June 30, 2022 and 2021 was as follows:
 
      Six Months Ended  
      June 30,  
($ in thousands)
  2022
    2021
 
                 
Interest paid
  $ 4,566     $ 1,625  
                 
Federal, state, and local income taxes paid, net
  $ 4,047     $ 5,771  
                 
Change in contract receivables, net
  $ 1,062     $ 3,153  
                 
Change in contract liabilities, net
  $ ( 1,062 )   $ ( 3,565 )
                 
Property, plant, and equipment purchases in accounts payable
  $ ( 2,073 )   $ 855  
                 
Working capital true-up related to acquired business
  $ -     $ 5,835  
 
 
14. SEGMENT INFORMATION
 
During the three months ended June 30, 2021, we changed our reporting segments when compared to our Annual Report on Form 10 -K for the fiscal year ended December 31, 2020, to change our Military reporting segment to "Contract Manufacturing" and to change the composition thereof to continue to include Military Contracts and to include sales under manufacturing contracts for private label or other Private Contracts. Previously, only Military Contracts were included in this segment. The Private Contract sales have characteristics more like Military Contracts, with similar sales, delivery processes and gross margins. This segment reporting change reflects a corresponding change in how our CODMs review financial information in order to allocate resources and assess performance. Previously, Private Contracts were included in the Wholesale segment, but with our Acquisition, our Wholesale segment has substantially increased in size and our CODMs determined that the change in segment reporting was appropriate at this time to mirror how they evaluate and manage our business.
 
There has been no change in our total consolidated financial condition, results of operations, or segment information previously reported, as the result of the change in our reportable segments, as we had no Private Contract sales during the fiscal year ended December 31, 2020 or quarterly period ended March 31, 2021.
 
We have identified three reportable segments: Wholesale, Retail and Contract Manufacturing. Our Wholesale segment includes sales of footwear and accessories to several classifications of retailers, including sporting goods stores, outdoor specialty stores, online retailers, marine stores, independent retailers, mass merchants, retail uniform stores, and specialty safety shoe stores. Our Retail segment includes direct sales of our products to consumers through our e-commerce websites, marketplaces, our Rocky outlet store, and Lehigh businesses. Our Contract Manufacturing segment includes sales to the U.S. Military, private label sales and any sales to customers in which we are contracted to manufacture or source a specific footwear product for a customer. The following is a summary of segment results for the Wholesale, Retail, and Contract Manufacturing segments for the  three and six months ended June 30, 2022 and 2021 .
 
    Three Months Ended
    Six Months Ended
 
    June 30,
    June 30,
 
($ in thousands)
  2022
    2021
    2022
    2021
 
NET SALES:
                               
Wholesale
  $ 131,155     $ 101,142     $ 265,116     $ 160,261  
Retail
    26,015       22,344       54,641       46,328  
Contract Manufacturing
    4,869       8,116       9,306       12,679  
Total Net Sales
  $ 162,039     $ 131,602     $ 329,063     $ 219,268  
                                 
GROSS MARGIN:
                               
Wholesale
  $ 40,509     $ 36,291     $ 88,768     $ 58,530  
Retail
    12,730       11,094       26,578       22,643  
Contract Manufacturing
    512       1,769       1,231       3,119  
Total Gross Margin
  $ 53,751     $ 49,154     $ 116,577     $ 84,292  
 
 
15. GAIN CONTINGENCY
 
In June 2022, we became aware of a misclassification of Harmonized Tariff Schedule (HTS) codes filed with the U.S. Customs and Border Protection (U.S. Customs) on certain products imported into the U.S. associated with the Acquired Brands during 2021 and 2022. As a result of the misclassification of HTS codes we have paid duties in excess of the required amount. We are in the process of filing multiple post summary corrections with U.S. Customs to seek refunds of duties paid in excess of the correct HTS codes. As of June 30, 2022, we have the potential to recover th e total amount of overp aid duties resulting in a potential refund of approximately $ 6.8  million. We are accounting for these post summary corrections as a gain contingency, and, as such have not recorded these potential refunds within the accompanying balance sheet due to uncertainty of collection. Any refunds received will be recognized as a reduction to the cost of goods sold when and if the refunds are received.
 
 
16. RESTRUCTURING CHARGES
 
In June 2022, we completed a cost savings review aimed at operating efficiencies to better position us for profitable growth. Following the integration of the Acquired Brands after the Acquisition, we identified a number of operational synergies and cost savings opportunities, including a reduction in workforce. We recorded restructuring costs of approximately $ 1.2 million included in operating expenses in the accompanying un audited condensed consolidated operating results for the three months ended June 30, 2022.
 
During the six months ended June 30, 2022, the following activity was recorded:
 
    Employee Severance, Benefits and
 
($ in thousands)
    Related Costs  
Accrued expenses, March 31, 2022
    -  
Restructuring charges
  $ 1,201  
Cash payments
    ( 100 )
Accrued expenses, June 30, 2022
  $ 1,101  
 
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
OVERVIEW
 
During the second quarter of 2022, we experienced strong demand for our brands which led to growth across our Wholesale and Retail segments and throughout our diverse mix of distribution channels including western, work, farm and ranch, outdoor, and family retail.  The combination of a healthy inventory position and additional fulfillment capacity allowed us to better capitalize on the market opportunities we are creating through our product and focus on operational excellence.
 
During the first quarter of 2021, we closed on the acquisition of the performance and lifestyle footwear business of Honeywell International Inc. We have incurred significant expenses associated with the Acquisition.
 
COVID-19- We are monitoring and responding to the evolving nature of the global novel coronavirus pandemic (“COVID-19” or “pandemic”) and its impact to our global business. The health and safety of our team members is our top priority and to protect our employees, we are implementing all measures recommended by the Centers for Disease Control and Prevention (“CDC”). We will continue to proactively manage the Company and its operations through the pandemic, however we cannot predict the ultimate impact that COVID-19 will have on our short-term and long-term demand at this time, as it will depend on, among other things, the severity and duration of the COVID-19 pandemic. The further spread of COVID-19, and the requirements to take action to help limit the spread of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business, results of operations and financial condition.
 
RESULTS OF OPERATIONS
 
The following tables set forth, for the periods indicated, information derived from our Unaudited Condensed Consolidated Financial Statements, expressed as a percentage of net sales. The discussion that follows each table should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements as well as our annual report on Form 10-K for the year ended December 31, 2021.
 
 
 
Three Months Ended
 
 
Six Months Ended
 
 
 
June 30,
 
 
June 30,
 
 
 
2022
 
 
2021
 
 
2022
 
 
2021
 
Net sales
 
 
100.0
%
 
 
100.0
%
 
 
100.0
%
 
 
100.0
%
Cost of goods sold
 
 
66.8
 
 
 
62.6
 
 
 
64.6
 
 
 
61.6
 
Gross margin
 
 
33.2
 
 
 
37.4
 
 
 
35.4
 
 
 
38.4
 
Operating expenses
 
 
29.7
 
 
 
30.9
 
 
 
29.7
 
 
 
31.6
 
Income from operations
 
 
3.5
%
 
 
6.5
%
 
 
5.7
%
 
 
6.8
%
 
 
Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021
 
 
 
Three Months Ended
 
 
 
June 30,
 
($ in thousands)
 
2022
 
 
2021
 
 
Inc./ (Dec.)
 
 
Inc./ (Dec.)
 
NET SALES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
 
$
131,155
 
 
$
101,142
 
 
$
30,013
 
 
 
29.7
%
Retail
 
 
26,015
 
 
 
22,344
 
 
 
3,671
 
 
 
16.4
 
Contract Manufacturing
 
 
4,869
 
 
 
8,116
 
 
 
(3,247
)
 
 
(40.0
)
Total Net Sales
 
$
162,039
 
 
$
131,602
 
 
$
30,437
 
 
 
23.1
%
 
Included in Wholesale net sales for the three months ended June 30, 2022 and 2021 were approx i mately $61.9 million and $46.9 milli on, respectively, o f net sales attributed to the Acquired Brands. The increases in both our legacy and Acquired Brands were due to increased demand supported by a healthy inventory position and additional fulfillment capacity which allowed us to better capitalize on the market opportunities we are creating through our product and marketing strategies.
 
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Table of Contents
 
Included in Retail net sales for the three months ended June 30, 2022 and 2021 were app r oximately $4.8 million and $3.8 million, respectively,  of net sales attributed to the Acquired Brands. The increases in Retail sales were attributable to a strong growth in our Lehigh business in the second quarter of 2022 as businesses continued to re-open and get back to full capacity in the wake of the COVID-19 pandemic. 
 
Contract Manufacturing sales decreased in the second quarter of 2022 due to expiring contracts with the U.S. Military. 
 
 
 
Three Months Ended
 
 
 
June 30,
 
($ in thousands)
 
2022
 
 
2021
 
 
Inc./ (Dec.)
 
GROSS MARGIN:
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale Margin $'s
 
$
40,509
 
 
$
36,291
 
 
$
4,218
 
Margin %
 
 
30.9
%
 
 
35.9
%
 
 
-5.0
%
Retail Margin $'s
 
$
12,730
 
 
$
11,094
 
 
$
1,636
 
Margin %
 
 
48.9
%
 
 
49.7
%
 
 
-0.7
%
Contract Manufacturing Margin $'s
 
$
512
 
 
$
1,769
 
 
$
(1,257
)
Margin %
 
 
10.5
%
 
 
21.8
%
 
 
-11.3
%
Total Margin $'s
 
$
53,751
 
 
$
49,154
 
 
$
4,597
 
Margin %
 
 
33.2
%
 
 
37.4
%
 
 
-4.2
%
 
Wholesale gross margin decreased in the second quarter of 2022 compared to the prior year period due to an increase in product costs, inbound freight costs and other shipping and logistics costs. Excluding $1.6 million of duties paid in excess of the correct HTS code for which we are seeking multiple post summary corrections (see Note 15), Wholesale gross margins would have been 32.1% for the three months ended June 30, 2022.
 
Retail gross margin decreased for the three months ended June 30, 2022 compared to the same period a year ago due to increased product costs and freight costs. 
 
Contract Manufacturing gross margin decreased in the second quarter of 2022 compared to the prior year period due to increased product costs, as well as increased labor costs at our Puerto Rico manufacturing facility.
 
 
 
Three Months Ended
 
 
 
June 30,
 
($ in thousands)
 
2022
 
 
2021
 
 
Inc./ (Dec.)
 
 
Inc./ (Dec.)
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
$
48,155
 
 
$
40,717
 
 
$
7,438
 
 
 
18.3
%
% of Net Sales
 
 
29.7
%
 
 
30.9
%
 
 
-1.2
%
 
 
 
 
 
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Table of Contents
 
The increase in operating expenses for the second quarter of 2022 compared to the second quarter 2021 was due to an increase in outbound freight and increased variable expenses tied to the sales increase.  Excluding Acquisition related costs, including restructuring costs  of $2.1 million and Acquisition related costs of $2.3 million, respectively , the adj usted operating expenses for the three months ended June 30, 2022 and 2021, were $46.0 million and $38.5 million. 
 
 
 
Three Months Ended
 
 
 
June 30,
 
($ in thousands)
 
2022
 
 
2021
 
 
Inc./ (Dec.)
 
 
Inc./ (Dec.)
 
INCOME TAXES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income Tax Expense
 
$
353
 
 
$
1,164
 
 
$
(811
)
 
 
-69.7
%
Effective Tax Rate
 
27.7
%
 
 
23.0
%
 
4.7
%
 
 
 
 
 
The effective tax rate increased in the second quarter of 2022 compared to the same year ago period due to an increase in our projected tax rate for the year ended December 31, 2022 which is estimated to be 21.8%
 
 
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
 
 
 
Six Months Ended
 
 
 
June 30,
 
($ in thousands)
 
2022
 
 
2021
 
 
Inc./ (Dec.)
 
 
Inc./ (Dec.)
 
NET SALES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
 
$
265,116
 
 
$
160,261
 
 
$
104,855
 
 
 
65.4
%
Retail
 
 
54,641
 
 
 
46,328
 
 
 
8,313
 
 
 
17.9
 
Contract Manufacturing
 
 
9,306
 
 
 
12,679
 
 
 
(3,373
)
 
 
(26.6
)
Total Net Sales
 
$
329,063
 
 
$
219,268
 
 
$
109,795
 
 
 
50.1
%
 
Included in Wholesale net sales for the six months ended June 30, 2022 and 2021 were app rox imately $122.0 million and $52.4 million, r e spectively, of net sales attributed to the Acquired Brands. The increase in both our legacy and Acquired Brands was due to increased demand supported by a healthy inventory position and additional fulfillment capacity which allowed us to better capitalize on the market opportunities we are creating through our product and marketing strategies.
 
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Table of Contents
 
Included in Retail net sales for the six months ended June 30, 2022 and 2021 were appr oximately $9.1 million and $4.8 million, respectively,  of net sales attributed to the Acquired Brands. The increase in Retail sales was partially attributable to a strong growth in our Lehigh business in the first half of 2022 as businesses continued to re-open and get back to full capacity in the wake of the COVID-19 pandemic. Our ecommerce business also increased sales in the first half of 2022.
 
Contract Manufacturing sales decreased in the first half of 2022 as contracts with the U.S. Military expired.
 
 
 
Six Months Ended
 
 
 
June 30,
 
($ in thousands)
 
2022
 
 
2021
 
 
Inc./ (Dec.)
 
GROSS MARGIN:
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale Margin $'s
 
$
88,768
 
 
$
58,530
 
 
$
30,238
 
Margin %
 
 
33.5
%
 
 
36.5
%
 
 
-3.0
%
Retail Margin $'s
 
$
26,578
 
 
$
22,643
 
 
$
3,935
 
Margin %
 
 
48.6
%
 
 
48.9
%
 
 
-0.3
%
Contract Manufacturing Margin $'s
 
$
1,231
 
 
$
3,119
 
 
$
(1,888
)
Margin %
 
 
13.2
%
 
 
24.6
%
 
 
-11.4
%
Total Margin $'s
 
$
116,577
 
 
$
84,292
 
 
$
32,285
 
Margin %
 
 
35.4
%
 
 
38.4
%
 
 
-3.0
%
 
Wholesale gross margin decreased in the first half of 2022 compared to the prior year period due to an increased capitalized manufacturing and sourcing costs including inbound freight costs and other shipping and logistics costs. Excluding $3.2 million of duties paid in excess of the correct HTS code for which we are seeking multiple post summary corrections (see Note 15), wholesale gross margins would have been 34.7% for the six months ended June 30, 2022.
 
Retail gross margin decreased for the six months ended June 30, 2022 compared to the same period a year ago due to increased product costs and freight costs. 
 
Contract Manufacturing gross margin decreased in the first half of 2022 compared to the prior year period due to increased product costs as well as increased labor costs in our Puerto Rico manufacturing facility.
 
 
 
Six Months Ended
 
 
 
June 30,
 
($ in thousands)
 
2022
 
 
2021
 
 
Inc./ (Dec.)
 
 
Inc./ (Dec.)
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
$
97,785
 
 
$
69,275
 
 
$
28,510
 
 
 
41.2
%
% of Net Sales
 
 
29.7
%
 
 
31.6
%
 
 
-1.9
%
 
 
 
 
 
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Table of Contents
 
The increase in operating expenses for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was due to an increase in variable expenses tied to the sales increase. We also experienced higher logistics and fulfillment costs including temporary spending associated with the opening of the new distribution center in Reno, Nevada.  Excluding A cquisition related costs  including re structuring costs of $3.2 million and Acquisition related expenses of $7.5 million, respectively, fo r the six months ended June 30, 2022 and 2021, on an adjusted basis, operating expenses were $94.6 million and $61.8 million.
 
 
 
Six Months Ended
 
 
 
June 30,
 
($ in thousands)
 
2022
 
 
2021
 
 
Inc./ (Dec.)
 
 
Inc./ (Dec.)
 
INCOME TAXES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income Tax Expense
 
$
2,304
 
 
$
2,506
 
 
$
(202
)
 
 
-8.1
%
Effective Tax Rate
 
 
21.8
%
 
 
23.0
%
 
 
-1.2
%
 
 
 
 
 
We estimate that our tax rate wil l decrease to 21.8% for the ye ar ended December 31, 2022 based on our actual results and additional foreign tax credits as a result of the Acquisition.
 
LIQUIDITY AND CAPITAL RESOURCES
 
Overview
 
Our principal sources of liquidity have been our income from operations and borrowings under our credit facilities and other indebtedness.
 
During the six months ended June 30, 2022 , our primary source of cash from borrowings under our credit facilities. Our working capital consists primarily of trade receivables and inventory, offset by debt and accounts payable. Our working capital fluctuates throughout the year as a result of our seasonal business cycle and business expansion and is generally lowest in the months of January through March of each year and highest during the months of May through October of each year. We typically utilize our revolving credit facility to fund our seasonal working capital requirements. As a result, balances on our revolving credit facility can fluctuate significantly throughout the year.
 
Our capital expenditures relate primarily to projects relating to our corporate offices, property, merchandising fixtures, molds and equipment associated with our manufacturing and distribution operations and for information technology. Capital expenditures were $5.5 million and $10.6 mill ion for the six months ended June 30, 2022 and 2021, respectively.
 
We lease certain machinery, one shoe center, distribution centers in Lancaster, Ohio, Reno, Nevada and manufacturing facilities under operating leases that generally provide for renewal options.
 
We believe that our ABL Facility, coupled with cash generated from operations will provide sufficient liquidity to fund our operations and debt obligations for at least the next twelve months. Our continued liquidity, however, is contingent upon future operating performance, cash flows and our ability to meet financial covenants under our credit facility. For more information regarding our credit facility see Note 10 .
 
Cash Flows
 
 
 
Six Months Ended
 
 
 
June 30,
 
($ in millions)
 
2022
 
 
2021
 
Operating activities
 
$
(8.6
)
 
$
11.0
 
Investing activities
 
 
(3.5
)
 
 
(216.7
)
Financing activities
 
 
12.0
 
 
 
185.7
 
Net change in cash and cash equivalents
 
$
(0.1
)
 
$
(20.0
)
 
Operating Activities. Cash used in operating activities for the six months ended June 30, 2022 was primarily used to purchase inventories. Cash provided by operations for the six months ended June 30, 2021 was primarily impacted by an increase in accounts payable and accrued liabilities, offset by an increase in inventory.
 
Investing Activities. Cash used in investing activities for the six months ended June 30, 2022 was primarily related the purchase of investments in molds and equipment associated with our manufacturing operations, for information technology and for improvements to our distribution facility. Cash used in investing activities for the six months ended June 30, 2021 was primarily to fund our Acquisition. See Note 4 for additional information regarding the Acquisition. 
 
Financing Activities.  Cash provided by financing activities for the six months ended June 30, 2022 was primarily related to proceeds on our revolving credit facility. Cash provided by financing activities for the six months ended June 30, 2021 was primarily related to proceeds from our revolving credit facility and term credit facility.
 
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Table of Contents
 
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
The preparation of the Company’s Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from the Company’s estimates. However, actual results may differ materially from these estimates under different assumptions or conditions.
 
We have identified the critical accounting policies used in determining estimates and assumptions in the amounts reported in our Management Discussion and Analysis of Financial Conditions and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.
 
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995
 
This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding our and management’s intent, belief, and expectations, such as statements concerning our future profitability and our operating and growth strategy. Words such as “believe,” “anticipate,” “expect,” “will,” “may,” “should,” “intend,” “plan,” “estimate,” “predict,” “potential,” “continue,” “likely,” “would,” “could” and similar expressions are intended to identify forward-looking statements. Investors are cautioned that forward-looking statements involve risk and uncertainties including, without limitations, dependence on sales forecasts, changes in consumer demand, seasonality, impact of weather, competition, reliance on suppliers, risks inherent to international trade, changing retail trends, the loss or disruption of our manufacturing and distribution operations, cybersecurity breaches or disruption of our digital systems, fluctuations in foreign currency exchange rates, economic changes, as well as other factors set forth under the caption “Item 1A, Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (filed March 15, 2022) and Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (filed May 9, 2022), and other factors detailed from time to time in our filings with the Securities and Exchange Commission. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We assume no obligation to update any forward-looking statements.
 
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Table of Contents
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
There have been no material changes to our market risk as disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2021.
 
ITEM 4. CONTROLS AND PROCEDURES.
 
Disclosure Controls and Procedures. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.
 
As of the end of the period covered by this report, our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 promulgated under the Exchange Act. Based upon this evaluation, our chief executive officer and our chief financial officer concluded that, as of June 30, 2022, our disclosure controls and procedures were (1) designed to ensure that material information relating to our Company is accumulated and made known to our management, including our chief executive officer and chief financial officer, in a timely manner, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
 
Management believes, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
 
Changes in Internal Controls There have been no material changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) during our fiscal quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have made the necessary and appropriate updates to our internal controls as it relates to financial reporting over our Acquired Brands, none of which were material. 
 
PART II -- OTHER INFORMATION
 
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Unregistered Sales of Equity Securities
 
None.
 
Use of Proceeds
 
Not applicable.
 
Our shareholder repurchase program expired on March 4, 2022.
 
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Table of Contents
 
ITEM 6. EXHIBITS
 
Exhibit
Number
Description
10.1***
Second Amendment to ABL Loan and Security Agreement, dated June 8, 2022, between the Company, Bank of America, N.A. and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated June 6, 2022 and filed on June 10, 2022).
 
 
10.2***
Second Amendment to Term Loan and Security Agreement, dated June 8, 2022, between the Company, TCW Asset Management Company, LLC and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated June 6, 2022 and filed on June 10, 2022).
 
 
31.1*
Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Principal Executive Officer.
 
 
31.2*
Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Principal Financial Officer.
 
 
32**
Section 1350 Certification of Principal Executive Officer/Principal Financial Officer.
 
 
101*
Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in Inline XBRL (“eXtensible Business Reporting Language”): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Shareholders' Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) related notes to these financial statements.
104*
Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101
 
 
* Filed with this Report.
** Furnished with this Report.
*** Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any omitted schedules or exhibits upon request of the U.S. Securities and Exchange Commission.
 
 
 
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Table of Contents
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
ROCKY BRANDS, INC.
 
 
 
Date: August 9, 2022
By:
/s/THOMAS D. ROBERTSON
 
 
Thomas D. Robertson
 
 
Executive Vice President, Chief Financial Officer and Treasurer
 
 
(Principal Financial and Accounting Officer and Duly Authorized Officer)
 
27
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.