OVERVIEW

During the first 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 & 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 marketing strategies 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., which we refer to herein as the "Acquisition". 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
                                March 31,
                            2022          2021
Net sales                     100.0 %      100.0 %
Cost of goods sold             62.4         59.9
Gross margin                   37.6         40.1
Operating expenses             29.7         32.6
Income from operations          7.9 %        7.5 %

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021







                                             Three Months Ended
                                                  March 31,
($ in thousands)           2022          2021        Inc./ (Dec.)      Inc./ (Dec.)
NET SALES:
Wholesale                $ 133,961     $ 59,235     $       74,726             126.2 %
Retail                      28,626       23,986              4,640              19.3
Contract Manufacturing       4,438        4,446                 (8 )            (0.2 )
Total Net Sales          $ 167,025     $ 87,667     $       79,358              90.5 %

Included in Wholesale net sales for the three months ended March 31, 2022 and 2021 were approximately $60.1 million and $5.5 million, respectively, of net sales attributed to the Acquired Brands. The increase in both our legacy and acquired brands is due to having 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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Included in Retail net sales for the three months ended March 31, 2022 and 2021 were approximately $4.3 and $1.0 million, respectively, of net sales attributed to the Acquired Brands. The increase in retail sales can be attributed to a strong growth in our Lehigh business in the first 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 remained flat in the first quarter of 2022 as we continued to fulfill our military contracts.







                                               Three Months Ended
                                                   March 31,
($ in thousands)                      2022         2021        Inc./ (Dec.)
GROSS MARGIN:
Wholesale Margin $'s                $ 48,259     $ 22,261     $       25,998
Margin %                                36.0 %       37.6 %             -1.6 %
Retail Margin $'s                   $ 13,848     $ 11,549     $        2,299
Margin %                                48.4 %       48.1 %              0.3 %
Contract Manufacturing Margin $'s   $    720     $  1,329     $         (609 )
Margin %                                16.2 %       29.9 %            -13.7 %
Total Margin $'s                    $ 62,827     $ 35,139     $       27,688
Margin %                                37.6 %       40.1 %             -2.5 %

Wholesale gross margin decreased in the first quarter of 2022 compared to the prior year period due to increased capitalized manufacturing and sourcing costs, such as in-bound freight coupled with the delayed impact of our price increases.

Retail gross margin increased for the three months ended March 31, 2022 compared to the same period a year ago as our direct to consumer business accounted for a higher percentage of total retail sales, which carry higher margins.





Contract Manufacturing gross margin decreased in the first quarter of 2022
compared to the prior year period due to increased capitalized manufacturing
costs as well as certain inefficiencies in our Puerto Rico manufacturing
facility.





                                          Three Months Ended
                                               March 31,
($ in thousands)        2022         2021        Inc./ (Dec.)       Inc./ (Dec.)
OPERATING EXPENSES:
Operating Expenses    $ 49,630     $ 28,558     $       21,072               73.8 %
% of Net Sales            29.7 %       32.6 %             -2.9 %






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On an adjusted basis to exclude acquisition related expenses of $1.0 million and $5.2 million, respectively, for the three months ended March 31, 2022 and 2021, operating expenses were $48.6 million and $23.4 million. The increase in operating expenses for the first quarter of 2022 compared to the first quarter 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 getting the new distribution center in Reno, Nevada fully operational.







                                        Three Months Ended
                                             March 31,

($ in thousands) 2022 2021 Inc./ (Dec.) Inc./ (Dec.) INCOME TAXES: Income Tax Expense $ 1,951 $ 1,342 $ 609

               45.4 %
Effective Tax Rate      21.0 %      23.0 %             -2.0 %

Due to our Acquisition, we estimate that our tax rate will decrease to 21.0% for the year 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 three months ended March 31, 2022, our primary source of cash was from operations. During the three months ended March 31, 2021, our primary use of cash was to partly fund the Acquisition. 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 $3.3 million and $2.9 million for the three months ended March 31, 2022 and 2021, respectively.

We lease certain machinery, two shoe centers, distribution centers in Lancaster, Ohio, Reno, Nevada, Canada and Australia and manufacturing facilities under operating leases that generally provide for renewal options.

We believe that our ABL Facility, with the option to expand our borrowing capacity, 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



                                            Three Months Ended
                                                 March 31,
($ in millions)                             2022           2021
Operating activities                      $    13.8      $    2.9
Investing activities                           (1.2 )      (208.2 )
Financing activities                           (3.5 )       185.8

Net change in cash and cash equivalents $ 9.1 $ (19.5 )

Operating Activities. Cash provided by operating activities for the three months ended March 31, 2022 was primarily impacted by an increase in accounts payable and accrued liabilities, partially offset by an increase in inventory. Cash provided by operating activities for the three months ended March 31, 2021 was primarily impacted by an increase in accounts payable and decrease in accounts receivable, partially offset by an increase in inventory.

Investing Activities. Cash used in investing activities for the three months ended March 31, 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 three months ended March 31, 2021 was primarily to fund our Acquisition. See Note 4 for additional information regarding the Acquisition.

Financing Activities. Cash used in financing activities for three months ended March 31, 2022 was primarily related to payments on our revolving credit facility and dividends paid on common stock. Cash provided by financing activities for the three months ended March 31, 2021 was primarily related to proceeds from our term loan and revolving credit facility, partially offset by repayments on our revolving credit facility and debt issuance costs paid in connection with our recent Acquisition.





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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 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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