Rocky Brands(RCKY) - 2022 Q4 - Annual Report

Financial Position - As of December 31, 2022, the company had total debt of $259.6 million, comprising$116.3 million under the senior term facility and $143.3 million under the revolving credit facility[193]. - Total current assets decreased from$375.3 million in 2021 to $341.0 million in 2022[208]. - Total liabilities decreased from$426.7 million in 2021 to $366.9 million in 2022[208]. - Shareholders' equity increased from$197.9 million in 2021 to $215.5 million in 2022[208]. - The company reported a decrease in cash and cash equivalents of$190, ending the period with $5.719 million[215]. - Total outstanding shares increased to 7.339 million by December 31, 2022, compared to 7.302 million in 2021[212]. - The company maintained compliance with all covenants of the Term Facility as of December 31, 2022[290]. - Operating lease liabilities totaled$11.3 million as of December 31, 2022, with a weighted-average remaining lease term of 2.8 years[293]. - The total liabilities under the Dominican Plan were approximately $187,000 as of December 31, 2022, compared to$107,000 in 2021[301]. Revenue and Sales Performance - Net sales for the year ended December 31, 2022, were $615.475 million, a 19.7$514.227 million in 2021[210]. - Wholesale segment sales increased to $484.779 million in 2022, up 24$391.070 million in 2021[340]. - Retail segment sales rose to $115.354 million, reflecting a 21.8$94.658 million in 2021[340]. - Contract Manufacturing segment sales decreased to $15.342 million, down 46.1$28.499 million in 2021[340]. - Work footwear accounted for 41.6% of total sales in 2022, generating $256.162 million, down from 54.5$183.121 million, representing 29.8% of total sales, compared to 14.8% in 2021[341]. Profitability - Gross margin increased to $225.219 million in 2022, up from$194.536 million in 2021, reflecting a gross margin percentage improvement[210]. - Net income for 2022 was $20.465 million, slightly down from$20.559 million in 2021, resulting in a diluted income per share of $2.78[210]. - Net income for 2022 was$23.250 million, a decrease of 42.5% compared to $40.248 million in 2021[265]. - The company incurred approximately$1.0 million in restructuring costs in 2022 as part of a cost savings review aimed at operational efficiencies[343]. Cash Flow - Cash flows from operating activities provided $19.123 million in 2022, a significant recovery from a cash outflow of$54.875 million in 2021[215]. Acquisitions - The acquisition of Honeywell's performance and lifestyle footwear business was completed for an adjusted purchase price of $212 million, with a preliminary closing price of approximately$207 million[250][251]. - The acquisition contributed net sales of $242.8 million and net income of$9.3 million to the consolidated operating results for the year ended December 31, 2022[256]. - Total identifiable net assets acquired in the acquisition amounted to $215.063 million[262]. - Goodwill allocated to the Wholesale and Retail reporting segments was$25.4 million and $24.8 million, respectively, as of December 31, 2022[230]. - Acquisition-related costs recognized were approximately$3.5 million, $11.9 million, and$0.7 million for the years ended December 31, 2022, 2021, and 2020, respectively[257]. - The company completed the sale of the NEOS brand for approximately $5.8 million, with$5.5 million received at closing[266]. Expenses - The company’s operating expenses rose to $181.181 million in 2022, compared to$158.564 million in 2021, indicating increased investment in operations[210]. - Advertising expenses for 2022 were approximately $15.4 million, a decrease from$17.9 million in 2021 due to reduced discretionary spending[239]. - Shipping costs totaled approximately $38.5 million in 2022, up from$25.1 million in 2021, attributed to increased freight rates and sales[240]. - The company incurred approximately $9.2 million in depreciation expense for the year 2022[269]. Market Risks - The company has established policies to mitigate market risks associated with interest rates, commodity pricing, and foreign exchange[191]. - The company does not hold any market risk sensitive instruments for trading purposes[194]. - The company has not entered into any interest rate management agreements as of December 31, 2022[195]. - A hypothetical increase of 1$2.6 million[193]. - Interest expense for the year ended December 31, 2022, was approximately $18.3 million, compared to$10.6 million in 2021 and $0.2 million in 2020[286]. - The effective interest rate for the Term Facility was 12.14$1.8 million in 2022, an increase from $1.3 million in 2021 and$0.961 million in 2020[296]. - The company recognized share-based compensation expense of $1,230,000 in 2022, slightly down from$1,265,000 in 2021[311]. - The total unrecognized compensation cost related to non-vested stock options and restricted stock units was approximately $148,000 as of December 31, 2022[316]. - The company has a total of 341,436 stock options outstanding as of December 31, 2022, with a weighted average exercise price of$28.87[314]. - The weighted average grant date fair value per share for stock options granted in 2022 was $12.85, compared to$12.16 in 2021[313]. - The expected option term for stock options granted in 2022 was 5.1 years[313]. Tax and Deferred Tax - Total deferred tax assets increased from $5,185,000 in 2021 to$10,371,000 in 2022, reflecting a significant rise in asset valuation allowances and accrued expenses[305]. - As of December 31, 2022, the net deferred tax liability was $8,006,000, down from$10,293,000 in 2021[305]. - The company is subject to tax examinations in various jurisdictions, with the earliest exam years open for examination being 2017 for Puerto Rico and Canada[306].