10-Q

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 March 31, 2023

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 7,354,060 shares of the Registrant's Common Stock outstanding on April 30, 2023.

TABLE OF CONTENTS

		Page
PART I	Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited), December 31, 2022, and March 31, 2022 (Unaudited)	2
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II	Other Information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 6.	Exhibits	20
SIGNATURES		21

1

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

(Unaudited)

	March 31,		December 31,		March 31,
	2023		2022		2022
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents	$	4,946	$	5,719	$	14,950
Trade receivables – net		73,650		94,953		123,387
Contract receivables		-		-		268
Other receivables		2,235		908		260
Inventories – net		224,124		235,400		289,230
Income tax receivable		-		-		2,338
Prepaid expenses		5,619		4,067		5,875
Total current assets		310,574		341,047		436,308
LEASED ASSETS		10,153		11,014		10,696
PROPERTY, PLANT & EQUIPMENT – net		54,666		57,359		60,958
GOODWILL		47,844		50,246		50,246
IDENTIFIED INTANGIBLES – net		114,716		121,782		125,528
OTHER ASSETS		1,028		942		938
TOTAL ASSETS	$	538,981	$	582,390	$	684,674
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable	$	66,783	$	69,686	$	156,890
Contract liabilities		-		-		268
Current Portion of Long-Term Debt		2,823		3,250		3,250
Accrued expenses:
Salaries and wages		1,816		1,253		3,715
Taxes – other		857		1,325		2,054
Accrued freight		2,098		2,413		1,735
Commissions		706		1,934		1,689
Accrued duty		6,642		6,764		18,873
Accrued interest		2,311		2,822		-
Income tax payable		1,052		1,172		-
Other		5,902		5,675		8,014
Total current liabilities		90,990		96,294		196,488
LONG-TERM DEBT		216,973		253,646		264,486
LONG-TERM TAXES PAYABLE		169		169		169
LONG-TERM LEASE		7,501		8,216		8,200
DEFERRED INCOME TAXES		8,006		8,006		10,293
DEFERRED LIABILITIES		1,053		586		584
TOTAL LIABILITIES		324,692		366,917		480,220
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and outstanding March 31, 2023 - 7,346,650; December 31, 2022 - 7,339,011; March 31, 2022 - 7,311,059		70,107		69,752		68,454
Retained earnings		144,182		145,721		136,000
Total shareholders' equity		214,289		215,473		204,454
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	538,981	$	582,390	$	684,674

See Notes to Unaudited Condensed Consolidated Financial Statements

2

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31,
	2023			2022
NET SALES	$	110,445		$	167,025
COST OF GOODS SOLD		66,686			104,198
GROSS MARGIN		43,759			62,827
OPERATING EXPENSES		39,604			49,630
INCOME FROM OPERATIONS		4,155			13,197
INTEREST EXPENSE AND OTHER INCOME – net		(4,664	)		(3,907	)
(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(509	)		9,290
INCOME TAX (BENEFIT) EXPENSE		(111	)		1,951
NET (LOSS) INCOME	$	(398	)	$	7,339
(LOSS) INCOME PER SHARE
Basic	$	(0.05	)	$	1.00
Diluted	$	(0.05	)	$	0.99
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic		7,346			7,306
Diluted		7,346			7,410

See Notes to Unaudited Condensed Consolidated Financial Statements

3

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, 2021		7,302	$	68,061		-	$	129,794		$	197,855
THREE MONTHS ENDED MARCH 31, 2022
Net income							$	7,339		$	7,339
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		-	$	136,000		$	204,454
BALANCE - December 31, 2022		7,339	$	69,752		-	$	145,721		$	215,473
THREE MONTHS ENDED MARCH 31, 2023
Net loss							$	(398	)	$	(398	)
Dividends paid on common stock ($0.155 per share)								(1,141	)		(1,141	)
Repurchase of common stock											-
Stock issued for options exercised, including tax benefits		1	$	8				-			8
Stock compensation expense		7		347				-			347
BALANCE - March 31, 2023		7,347	$	70,107	$	-	$	144,182		$	214,289

See Notes to Unaudited Condensed Consolidated Financial Statements

4

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(398	)	$	7,339
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		2,812			3,024
Amortization of debt issuance costs		213			213
Provision for bad debts		(194	)		1,165
Loss on disposal of assets		185			-
Gain on sale of business		(1,341	)		-
Stock compensation expense		347			248
Change in assets and liabilities:
Receivables		21,871			2,238
Contract receivables		-			794
Inventories		5,111			(56,371	)
Other current assets		(1,552	)		(635	)
Other assets		775			(21	)
Accounts payable		(4,390	)		40,296
Accrued and other liabilities		(2,594	)		14,342
Income taxes		(41	)		1,955
Contract liabilities		-			(794	)
Net cash provided by operating activities		20,804			13,793
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(431	)		(1,243	)
Proceeds from sale of business		17,300			-
Net cash provided by (used in) investing activities		16,869			(1,243	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility		4,213			3,342
Repayments on revolving credit facility		(21,000	)		(5,025	)
Repayments on term loan		(20,526	)		(838	)
Proceeds from stock options		8			145
Dividends paid on common stock		(1,141	)		(1,133	)
Net cash used in financing activities		(38,446	)		(3,509	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(773	)		9,041
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD		5,719			5,909
END OF PERIOD	$	4,946		$	14,950

See Notes to Unaudited Condensed Consolidated Financial Statements

5

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, 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 months ended March 31, 2023 and 2022 are not necessarily indicative of the results to be expected for the whole year. The  December 31, 2022 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, 2022, which includes all disclosures required by GAAP.

2. ACCOUNTING STANDARDS UPDATES

Accounting Standards Adopted in the Current Year

Standard	Description	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.	We adopted the new standard in Q1 2023 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).

6

 

4. SALE OF SERVUS BRAND AND RELATED ASSETS

On March 30, 2023, we completed the sale of the Servus brand and related assets to PQ Footwear, LLC and Pertoquim S.R.L. (collectively "the Buyer"). Total consideration for this transaction was approximately $19.0 million, of which $17.3 million was received at closing. The remaining $1.7 million will be paid out in accordance with the purchase agreement. The sale of the Servus brand included the sale of inventory, fixed assets, customer relationships, tradenames, and goodwill, all of which related to our Wholesale segment. In connection with the sale of the Servus brand we also are licensing the rights to certain proprietary processes to the Buyer. We recorded a gain on the sale of Servus of approximately $1.3 million which is recorded within Interest Expense and Other Income - net on the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2023.

5. SALE OF NEOS BRAND AND RELATED ASSETS

On September 30, 2022, we completed the sale of the NEOS brand and related assets to certain entities controlled by SureWerx pursuant to terms of an asset purchase agreement dated September 30, 2022. Total consideration for this transaction was approximately $5.8 million, of which $5.5 million was received at closing. The remaining $0.3 million was deposited in escrow and will be managed and paid out in accordance with the terms of the asset purchase agreement and the escrow agreement. The sale of NEOS brand included the sale of inventory, fixed assets, customer relationships, tradenames, all of which related to our Wholesale segment. 

6. 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 10,000 retail store locations in the U.S., Canada, and internationally, mainly Europe. 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, our Rocky Outdoor Gear Store, and Lehigh businesses. We also sell footwear under the Rocky Brands label to the U.S. Military.

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  March 31, 2023. 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.

7

 

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 7 and Note 8 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. There have been no significant changes to the contract liabilities for the periods presented. 

	March 31,		December 31,		March 31,
($ in thousands)	2023		2022		2022
Contract liabilities	$	-	$	-	$	268

8

 

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 15 for segment disclosures.

7. TRADE RECEIVABLES

Trade receivables are presented net of the related allowance for uncollectible accounts of approximately $3.0 million, $3.5 million and $1.7 million at March 31, 2023,  December 31, 2022 and  March 31, 2022, respectively. We record the allowance based on a data-driven approach, including historical experience, the age of the receivables, receivable insurance status, 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 $1.2 million, $2.1 million and $2.1 million at  March 31, 2023,  December 31, 2022 and  March 31, 2022, respectively.

8. INVENTORY

Inventories are comprised of the following:

	March 31,		December 31,		March 31,
($ in thousands)	2023		2022		2022
Raw materials	$	16,949	$	16,541	$	23,229
Work-in-process		1,231		933		1,872
Finished goods		205,944		217,926		264,129
Total	$	224,124	$	235,400	$	289,230

In accordance with ASC 606, the return reserve allowance included within inventories was approximately $0.7 million, $1.1 million and $1.1 million at March 31, 2023,  December 31, 2022 and  March 31, 2022, respectively.

9

 

9. GOODWILL

Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses. Goodwill arose from our acquisition of the performance and lifestyle footwear business of Honeywell International Inc. on March 15, 2021 (the "Acquisition"). The Acquisition expanded our brand portfolio to include the Muck, XTRATUF, Servus (see Note 4), NEOS (See Note 5) and Ranger brands (the "Acquired Brands"). Goodwill 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 $47.0 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, $23.0 million was allocated to our Wholesale segment and $24.8 million 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.

10. IDENTIFIED INTANGIBLE ASSETS

A schedule of identified intangible assets is as follows:

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
March 31, 2023
Trademarks
Wholesale (1)	$	69,439		-	$	69,439
Retail		9,220		-		9,220
Patents		895	$	831		64
Customer relationships (2)		41,659		5,666		35,993
Total Intangibles	$	121,213	$	6,497	$	114,716

⁽¹⁾ Servus tradenames were reduced from approximately $2.5 million to zero at March 30, 2023 as a result of the sale of the Servus brand (see Note 4).

⁽²⁾ Customer relationships relating to the Servus brand of approximately $4.3 million and related amortization of approximately $0.6 million was reduced to zero at  March 30, 2023 as a result of the sale of the Servus brand (see Note 4).

10

 

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
December 31, 2022
Trademarks
Wholesale (1)	$	71,979		-	$	71,979
Retail		9,220		-		9,220
Patents		895	$	826		69
Customer relationships (2)		46,006		5,492		40,514
Total Intangibles	$	128,100	$	6,318	$	121,782

(1) NEOS trademarks were reduced from approximately $0.6 million to zero at December 31, 2022 as a result of the sale of the NEOS brand (see Note 5).

(2)  Customer relationships relating to the NEOS brand of approximately $0.9 million and related amortization of approximately $0.1 million was reduced to zero at December 31, 2022 as a result of the sale of the NEOS brand (see Note 5).

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
March 31, 2022
Trademarks
Wholesale	$	72,579		-	$	72,579
Retail		9,220		-		9,220
Patents		895	$	810		85
Customer relationships		46,900		3,256		43,644
Total Intangibles	$	129,594	$	4,066	$	125,528

The weighted average life for our patents is 7.0 years.

A schedule of approximate amortization expense related to finite-lived intangible assets for the three months ended March 31, 2023 and 2022 is as follows:

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
Amortization expense	$	780	$	787

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
2023	$	2,091
2024		2,785
2025		2,781
2026		2,778
2027		2,776
2028		2,772
2029+		20,074

11

 

11.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 is 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 3.50, the effective interest rate will be SOFR plus 7.50% (or at our option, Prime Rate plus 6.50%). If our total leverage ratio is less than 3.50 but greater than 3.00, 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 3.00, 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 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 to provide the use of SOFR to calculate interest rather than LIBOR. The effective interest rate was increased to SOFR plus 7.50% through November 2022. In November 2022, the Term Facility was amended to increase the effective interest rate to SOFR plus 7.00% until June 2023 and to provide certain EBITDA adjustments with respect to financial covenants, among other things. In May 2023, we entered into a fourth amendment with TCW to further amend our Term Facility to provide certain EBITDA adjustments in respect of the financial covenants, adjust the method to calculate total debt, continue certain pricing terms, extend certain prepayment terms, and pay such lenders certain amendment fees, among other things.

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 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. In November 2022, we entered into a third amendment to our ABL Facility to provide certain EBITDA adjustments with respect to our financial covenants. The ABL 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  March 31, 2023, we had borrowing capacity of $37.4 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:

Revolver Pricing Level	Average Availability as a 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	%

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.

12

 

Current and long-term debt consisted of the following:

	March 31,			December 31,			March 31,
($ in thousands)	2023			2022			2022
Term Facility that matures in 2026 with an effective interest rate of 12.14%, 12.14% and 8.00% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively	$	95,806		$	116,332		$	126,750
ABL Facility that matures in 2026:
SOFR borrowings with an effective interest rate of 4.80%, 5.47% and 1.88% March 31, 2023, December 31, 2022 and March 31, 2022, respectively		113,008			140,000			140,257
Prime borrowings with an effective interest rate of 8.00%, 7.27% and 3.75% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively		13,506			3,301			4,106
Total debt		222,320			259,633			271,113
Less: Unamortized debt issuance costs		(2,524	)		(2,737	)		(3,377	)
Total debt, net of debt issuance costs		219,796			256,896			267,736
Less: Debt maturing within one year		(2,823	)		(3,250	)		(3,250	)
Long-term debt	$	216,973		$	253,646		$	264,486

Credit Facility Covenants

The Term Facility contains restrictive covenants which require us to maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, as defined in the Term Facility agreement. We are in compliance with all credit facility covenants as of March 31, 2023, December 31, 2021 and  March 31, 2022.

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 months ended March 31, 2023 and 2022, 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.

12. 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	2019
Various U.S. States	2018
Puerto Rico (U.S. Territory)	2018
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 months ended March 31, 2023 and 2022. 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 estimated effective tax rates for the three months ended March 31, 2023 and 2022 are as follows:

	Three Months Ended
	March 31,
	2023			2022
Effective Tax Rate		21.8	%		21.0	%

13. 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 months ended March 31, 2023 and 2022 is as follows:

	Three Months Ended
	March 31,
(shares in thousands)	2023		2022
Basic - weighted average shares outstanding		7,346		7,306
Dilutive stock options(1)		-		104
Diluted - weighted average shares outstanding(2)		7,346		7,410
Anti-dilutive securities		265		107

⁽¹⁾ Due to a loss for the three months ended March 31, 2023, zero dilutive stock options are included for the period because the effect would be antidilutive.

⁽²⁾ Due to a loss for the three months ended March 31, 2023, zero dilutive stock options are included for the period because the effect would be antidilutive.

13

   

14. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the three months ended March 31, 2023 and 2022 was as follows:

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
Interest paid	$	4,100	$	3,479
Change in contract receivables, net	$	-	$	794
Change in contract liabilities, net	$	-	$	(794	)
Property, plant, and equipment purchases in accounts payable	$	986	$	1,962

15. SEGMENT INFORMATION

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, our Rocky Outdoor Gear 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 months ended March 31, 2023 and 2022.

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
NET SALES:
Wholesale	$	80,050	$	133,961
Retail		29,510		28,626
Contract Manufacturing		885		4,438
Total Net Sales	$	110,445	$	167,025
GROSS MARGIN:
Wholesale	$	29,308	$	48,259
Retail		14,379		13,848
Contract Manufacturing		72		720
Total Gross Margin	$	43,759	$	62,827

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, we identified a number of operational synergies and cost savings opportunities, including a reduction in workforce.

During the three months ended March 31, 2023, the following activity was recorded:

	Employee Severance, Benefits and
($ in thousands)	Related Costs
Accrued expenses, December 31, 2022	$	381
Restructuring charges		-
Cash payments		(14	)
Accrued expenses, March 31, 2023	$	367

17. COMMITMENTS AND CONTINGENCIES 

Litigation

We are currently party to litigation with a manufacturing supplier of the Acquired Brands. While it is not possible to predict the outcome of this litigation with certainty, we do not anticipate the resolution will have a material, adverse impact on our financial position. We believe that the likelihood of the resolution being materially adverse to our financial statements is remote and as such have not recorded any contingent liabilities within the accompanying Consolidated Financial Statements. In addition, we have not recorded any potential favorable resolution to the litigation due in accordance with ASC 450- 30, Gain Contingencies.

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. We have the potential to recover th e total amount of overpaid duties resulting in a potential refund of approximately $7.7 million, of which we have received $3.2 million in refunds during year ended December 31, 2022 and $1.9 million in refunds during the three months ended March 31, 2023. We are accounting for these post summary corrections as a gain contingency, and as such have not recorded these potential refunds within the accompanying unaudited condensed consolidated balance sheet due to uncertainty of collection. Refunds received will be recognized as a reduction to the cost of goods sold when, and if, the refunds are received.

14

    

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

During the first quarter of 2023, we experienced a decline in sales for our brands and an increase in gross margin as a percentage of net sales. The increase in gross margin as a percentage of net sales was due to the realization of pricing actions taken in 2022, as well as decreases in in-bound logistics costs. We experienced an increased mix of Retail segment sales which carry higher gross margins than the Wholesale and Contract Manufacturing segments. We also experienced a decrease in operating expenses that was driven primarily by a decrease in variable expenses associated with lower sales and improved distribution center efficiencies compared with the year ago period.

We completed the sale of the Servus brand during the first quarter 2023. The gain of approximately $1.3 million on the sale of Servus is recorded in Interest Expense and Other Income - net within the unaudited condensed consolidated statement of operations for the three months ended March 31, 2023. The Servus brand was sold to allow us to focus on our more profitable core brands and allocate resources toward growth and development of additional opportunities with those brands moving forward.

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, 2022.

	Three Months Ended
	March 31,
	2023			2022
Net sales		100.0	%		100.0	%
Cost of goods sold		60.4			62.4
Gross margin		39.6			37.6
Operating expenses		35.9			29.7
Income from operations		3.7	%		7.9	%

Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022

	Three Months Ended
	March 31,
($ in thousands)	2023		2022		Inc./ (Dec.)			Inc./ (Dec.)
NET SALES:
Wholesale	$	80,050	$	133,961	$	(53,911	)		(40.24	)%
Retail		29,510		28,626		884			3.1
Contract Manufacturing		885		4,438		(3,553	)		(80.1	)
Total Net Sales	$	110,445	$	167,025	$	(56,580	)		(33.9	)%

The decrease in Wholesale sales in the first quarter of 2023 was due to inventory levels at our retail partners within our Wholesale channel and a softer demand environment compared to the year ago period. 

15

Retail net sales for the three months ended March 31, 2023 slightly increased compared to the three months ended March 31, 2022 due to growth in our Lehigh business as we continue to expand our customer base and product offerings.

The decrease in Contract Manufacturing sales for the first three months of 2023 compared to the first three months of 2022 was due to the expiration of certain contracts with the U.S. Military. 

	Three Months Ended
	March 31,
($ in thousands)	2023			2022			Inc./ (Dec.)
GROSS MARGIN:
Wholesale Margin $'s	$	29,308		$	48,259		$	(18,951	)
Margin %		36.6	%		36.0	%		0.6	%
Retail Margin $'s	$	14,379		$	13,848		$	531
Margin %		48.7	%		48.4	%		0.3	%
Contract Manufacturing Margin $'s	$	72		$	720		$	(648	)
Margin %		8.1	%		16.2	%		(8.1	)%
Total Margin $'s	$	43,759		$	62,827		$	(19,068	)
Margin %		39.6	%		37.6	%		2.0	%

The increase in Wholesale gross margin as a percentage of sales for the quarter ended March 31, 2023 compared to the year ago period was due to realization of pricing actions taken in 2022, as well as decreases in in-bound logistics costs.

Retail gross margin increased for the three months ended March 31, 2023 compared to the same period a year ago due to pricing actions and a decrease in in-bound logistics costs.

Contract Manufacturing gross margin decreased in the first quarter of 2023 compared to the first quarter of 2022 due to volume related inefficiencies due to the expiring military contracts.

	Three Months Ended
	March 31,
($ in thousands)	2023			2022			Inc./ (Dec.)			Inc./ (Dec.)
OPERATING EXPENSES:
Operating Expenses	$	39,604		$	49,630		$	(10,026	)		(20.2	)%
% of Net Sales		35.9	%		29.7	%		6.2	%

16

On an adjusted basis to exclude $0.8 million of Acquisition-related amortization in the first quarter of 2023 and $1.0 million in Acquisition-related amortization and integration expenses in the first quarter of 2022, operating expenses were $38.8 million in the current year period and $48.6 million in the year ago period. The decrease in operating expenses was driven by a decrease in variable expenses associated with lower sales and improved distribution center efficiencies compared with the year ago period.

	Three Months Ended
	March 31,
($ in thousands)	2023			2022			Inc./ (Dec.)			Inc./ (Dec.)
INCOME TAXES:
Income Tax Expense	$	(111	)	$	1,951		$	(2,062	)		(105.7	)%
Effective Tax Rate	21.8		%		21.0	%	0.8		%

The increase in our effective tax rate in the first quarter of 2023 compared to the same year ago period was due to changes in our projected income generated from our international business for fiscal year 2023 compared to fiscal year 2022.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal sources of liquidity have been our income from operations and borrowings under our credit facilities.

During the three months ended March 31, 2023, our primary use of cash was repayments on 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 $1.3 million and $3.3 million for the three months ended March 31, 2023 and 2022, respectively.

We lease certain machinery, one shoe center, distribution centers in Lancaster, Ohio and 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 11.

Cash Flows

	Three Months Ended
	March 31,
($ in millions)	2023			2022
Operating activities	$	20.8		$	13.8
Investing activities		16.9			(1.2	)
Financing activities		(38.4	)		(3.5	)
Net change in cash and cash equivalents	$	(0.7	)	$	9.1

Operating Activities. Cash provided by operating activities for the three months ended March 31, 2023 was primarily related to decreases in trade receivables and inventory. 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.

Investing Activities. Cash provided by investing activities for the three months ended March 31, 2023 was primarily related to the sale of Servus brand. See Note 4. 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.

Financing Activities. Cash used in financing activities for the three months ended March 31, 2023 was primarily related to payments on our revolving credit facility and term loan. Cash used in financing activities for the three months ended March 31, 2022 was primarily related to payments on our revolving credit facility and dividends paid on common stock.

17

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, 2022.

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, 2022 (filed March 10, 2023), 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.

18

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, 2022.

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 March 31, 2023, 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 March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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ITEM 6. EXHIBITS

Exhibit Number	Description
10.1***	Employment Agreement, dated March 13, 2023, by and between the Company and Sarah O'Connor (incorporated by reference to Exhibit 101 to the Company's Current Report on Form 8-K dated February 13, 2023 and filed on February 13, 2023.
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 March 31, 2023 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.

*** Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because such information (i) is not material and (ii) would likely be competitively harmful if publicly disclosed. The registrant hereby undertakes to furnish copies of any of the omitted schedules or exhibits upon request of the U.S. Securities and Exchange Commission.

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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: May 10, 2023	By:	/s/SARAH O'CONNOR
		Sarah E. O'Connor
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer and Duly Authorized Officer)

21

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a) OF THE PRINCIPAL EXECUTIVE OFFICER

I, Jason Brooks, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rocky Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2023

/s/ Jason Brooks

Jason Brooks

Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a) OF THE PRINCIPAL FINANCIAL OFFICER

I, Sarah O'Connor, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rocky Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2023

/s/ Sarah O'Connor

Sarah O'Connor

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO RULE 13a - 14(b) AND

SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE

UNITED STATES CODE AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Rocky Brands, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, pursuant to Section 1350 of Title 18 of the United States Code as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jason Brooks

Jason Brooks

Chief Executive Officer (Principal Executive Officer)

May 10, 2023

/s/ Sarah O'Connor

Sarah O'Connor

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

May 10, 2023

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2023	Apr. 30, 2023
Document Information [Line Items]
Entity Central Index Key	0000895456
Entity Registrant Name	ROCKY BRANDS, INC.
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-34382
Entity Incorporation, State or Country Code	OH
Entity Tax Identification Number	31-1364046
Entity Address, Address Line One	39 East Canal Street
Entity Address, City or Town	Nelsonville
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	45764
City Area Code	740
Local Phone Number	753‑9100
Title of 12(b) Security	Common Stock – No Par Value
Trading Symbol	RCKY
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		7,354,060

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
CURRENT ASSETS:
Cash and cash equivalents	$ 4,946	$ 5,719	$ 14,950
Trade receivables – net	73,650	94,953	123,387
Contract receivables	0	0	268
Other receivables	2,235	908	260
Inventories – net	224,124	235,400	289,230
Income tax receivable	0	0	2,338
Prepaid expenses	5,619	4,067	5,875
Total current assets	310,574	341,047	436,308
LEASED ASSETS	10,153	11,014	10,696
PROPERTY, PLANT & EQUIPMENT – net	54,666	57,359	60,958
GOODWILL	47,844	50,246	50,246
IDENTIFIED INTANGIBLES – net	114,716	121,782	125,528
OTHER ASSETS	1,028	942	938
TOTAL ASSETS	538,981	582,390	684,674
CURRENT LIABILITIES:
Accounts payable	66,783	69,686	156,890
Contract liabilities	0	0	268
Current Portion of Long-Term Debt	2,823	3,250	3,250
Accrued expenses:
Salaries and wages	1,816	1,253	3,715
Taxes – other	857	1,325	2,054
Accrued freight	2,098	2,413	1,735
Commissions	706	1,934	1,689
Accrued duty	6,642	6,764	18,873
Accrued interest	2,311	2,822	0
Income tax payable	1,052	1,172	0
Other	5,902	5,675	8,014
Total current liabilities	90,990	96,294	196,488
Long-term debt	216,973	253,646	264,486
LONG-TERM TAXES PAYABLE	169	169	169
LONG-TERM LEASE	7,501	8,216	8,200
DEFERRED INCOME TAXES	8,006	8,006	10,293
DEFERRED LIABILITIES	1,053	586	584
TOTAL LIABILITIES	324,692	366,917	480,220
SHAREHOLDERS' EQUITY:
Common stock, no par value; 25,000,000 shares authorized; issued and outstanding September 30, 2022 - 7,322,232; December 31, 2021 - 7,302,199; September 30, 2021 - 7,295,435	70,107	69,752	68,454
Retained earnings	144,182	145,721	136,000
Total shareholders' equity	214,289	215,473	204,454
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 538,981	$ 582,390	$ 684,674

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares $ / shares in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Common stock, par value (in dollars per share)	$ 0	$ 0	$ 0
Common stock, shares authorized (in shares)	25,000,000	25,000,000	25,000,000
Common stock, shares issued (in shares)	7,346,650	7,339,011	7,311,059
Common stock, shares outstanding (in shares)	7,346,650	7,339,011	7,311,059

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
NET SALES	$ 110,445	$ 167,025
COST OF GOODS SOLD	66,686	104,198
GROSS MARGIN	43,759	62,827
OPERATING EXPENSES	39,604	49,630
INCOME FROM OPERATIONS	4,155	13,197
INTEREST EXPENSE AND OTHER INCOME – net	(4,664)	(3,907)
(LOSS) INCOME BEFORE INCOME TAX EXPENSE	(509)	9,290
INCOME TAX (BENEFIT) EXPENSE	(111)	1,951
NET (LOSS) INCOME	$ (398)	$ 7,339
(LOSS) INCOME PER SHARE
Basic (in dollars per share)	$ (0.05)	$ 1.00
Diluted (in dollars per share)	$ (0.05)	$ 0.99
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic (in shares)	7,346	7,306
Diluted (in shares)	7,346	7,410

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Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock Including Additional Paid in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
BALANCE (in shares) at Dec. 31, 2021	7,302
BALANCE at Dec. 31, 2021	$ 68,061	$ 0	$ 129,794	$ 197,855
Net (loss) income			7,339	7,339
Dividends paid on common stock ($0.155 per share)			(1,133)	(1,133)
Repurchase of common stock				0
Stock issued for options exercised, including tax benefits (in shares)	7
Stock issued for options exercised, including tax benefits	$ 145			145
Stock compensation expense (in shares)	2
Stock compensation expense	$ 248			248
BALANCE (in shares) at Mar. 31, 2022	7,311
BALANCE at Mar. 31, 2022	$ 68,454	0	136,000	204,454
BALANCE (in shares) at Dec. 31, 2022	7,339
BALANCE at Dec. 31, 2022	$ 69,752	0	145,721	215,473
Net (loss) income			(398)	(398)
Dividends paid on common stock ($0.155 per share)			(1,141)	(1,141)
Repurchase of common stock				0
Stock issued for options exercised, including tax benefits (in shares)	1
Stock issued for options exercised, including tax benefits	$ 8			8
Stock compensation expense (in shares)	7
Stock compensation expense	$ 347			347
BALANCE (in shares) at Mar. 31, 2023	7,347
BALANCE at Mar. 31, 2023	$ 70,107	$ 0	$ 144,182	$ 214,289

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Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Dividends paid on common stock, per share (in dollars per share)	$ 0.155	$ 0.155

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$ (398)	$ 7,339
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	2,812	3,024
Amortization of debt issuance costs	213	213
Provision for bad debts	(194)	1,165
Loss on disposal of assets	185	0
Gain on sale of business	(1,341)	0
Stock compensation expense	347	248
Change in assets and liabilities:
Receivables	21,871	2,238
Contract receivables	0	794
Inventories	5,111	(56,371)
Other current assets	(1,552)	(635)
Other assets	775	(21)
Accounts payable	(4,390)	40,296
Accrued and other liabilities	(2,594)	14,342
Income taxes	(41)	1,955
Contract liabilities	0	(794)
Net cash provided by operating activities	20,804	13,793
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets	(431)	(1,243)
Proceeds from sale of business	17,300	0
Net cash provided by (used in) investing activities	16,869	(1,243)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility	4,213	3,342
Repayments on revolving credit facility	(21,000)	(5,025)
Repayments on term loan	(20,526)	(838)
Proceeds from stock options	8	145
Dividends paid on common stock	(1,141)	(1,133)
Net cash used in financing activities	(38,446)	(3,509)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(773)	9,041
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD	5,719	5,909
END OF PERIOD	$ 4,946	$ 14,950

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Note 1 - Nature of Operations and Basis of Presentation

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

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, 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 months ended March 31, 2023 and 2022 are not necessarily indicative of the results to be expected for the whole year. The  December 31, 2022 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, 2022, which includes all disclosures required by GAAP.

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Note 2 - Accounting Standards Updates

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Accounting Standards Update and Change in Accounting Principle [Text Block]

2. ACCOUNTING STANDARDS UPDATES

Accounting Standards Adopted in the Current Year

Standard	Description	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.	We adopted the new standard in Q1 2023 and the standard did not have a significant impact on our Consolidated Financial Statements.

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Note 3 - Fair Value

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

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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Note 4 - Sale of Business

3 Months Ended

Mar. 31, 2023

Servus Brand [Member]

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

4. SALE OF SERVUS BRAND AND RELATED ASSETS

On March 30, 2023, we completed the sale of the Servus brand and related assets to PQ Footwear, LLC and Pertoquim S.R.L. (collectively "the Buyer"). Total consideration for this transaction was approximately $19.0 million, of which $17.3 million was received at closing. The remaining $1.7 million will be paid out in accordance with the purchase agreement. The sale of the Servus brand included the sale of inventory, fixed assets, customer relationships, tradenames, and goodwill, all of which related to our Wholesale segment. In connection with the sale of the Servus brand we also are licensing the rights to certain proprietary processes to the Buyer. We recorded a gain on the sale of Servus of approximately $1.3 million which is recorded within Interest Expense and Other Income - net on the accompanying unaudited condensed consolidated statement of operations for the three months ended March 31, 2023.

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Note 5 - Asset Sale	3 Months Ended
	Mar. 31, 2023
NEOS Brand [Member]
Notes to Financial Statements
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]	5. SALE OF NEOS BRAND AND RELATED ASSETS On September 30, 2022, we completed the sale of the NEOS brand and related assets to certain entities controlled by SureWerx pursuant to terms of an asset purchase agreement dated September 30, 2022. Total consideration for this transaction was approximately $5.8 million, of which $5.5 million was received at closing. The remaining $0.3 million was deposited in escrow and will be managed and paid out in accordance with the terms of the asset purchase agreement and the escrow agreement. The sale of NEOS brand included the sale of inventory, fixed assets, customer relationships, tradenames, all of which related to our Wholesale segment.

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Note 6 - Revenue

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

6. 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 10,000 retail store locations in the U.S., Canada, and internationally, mainly Europe. 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, our Rocky Outdoor Gear Store, and Lehigh businesses. We also sell footwear under the Rocky Brands label to the U.S. Military.

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  March 31, 2023. 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.

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 7 and Note 8 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. There have been no significant changes to the contract liabilities for the periods presented. 

	March 31,		December 31,		March 31,
($ in thousands)	2023		2022		2022
Contract liabilities	$	-	$	-	$	268

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 15 for segment disclosures.

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Note 7 - Trade Receivables

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

7. TRADE RECEIVABLES

Trade receivables are presented net of the related allowance for uncollectible accounts of approximately $3.0 million, $3.5 million and $1.7 million at March 31, 2023,  December 31, 2022 and  March 31, 2022, respectively. We record the allowance based on a data-driven approach, including historical experience, the age of the receivables, receivable insurance status, 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 $1.2 million, $2.1 million and $2.1 million at  March 31, 2023,  December 31, 2022 and  March 31, 2022, respectively.

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Note 8 - Inventories

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Inventory Disclosure [Text Block]

8. INVENTORY

Inventories are comprised of the following:

	March 31,		December 31,		March 31,
($ in thousands)	2023		2022		2022
Raw materials	$	16,949	$	16,541	$	23,229
Work-in-process		1,231		933		1,872
Finished goods		205,944		217,926		264,129
Total	$	224,124	$	235,400	$	289,230

In accordance with ASC 606, the return reserve allowance included within inventories was approximately $0.7 million, $1.1 million and $1.1 million at March 31, 2023,  December 31, 2022 and  March 31, 2022, respectively.

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Note 9 - Goodwill

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Goodwill Disclosure [Text Block]

9. GOODWILL

Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses. Goodwill arose from our acquisition of the performance and lifestyle footwear business of Honeywell International Inc. on March 15, 2021 (the "Acquisition"). The Acquisition expanded our brand portfolio to include the Muck, XTRATUF, Servus (see Note 4), NEOS (See Note 5) and Ranger brands (the "Acquired Brands"). Goodwill 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 $47.0 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, $23.0 million was allocated to our Wholesale segment and $24.8 million 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.

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Note 10 - Identified Intangible Assets

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

10. IDENTIFIED INTANGIBLE ASSETS

A schedule of identified intangible assets is as follows:

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
March 31, 2023
Trademarks
Wholesale (1)	$	69,439		-	$	69,439
Retail		9,220		-		9,220
Patents		895	$	831		64
Customer relationships (2)		41,659		5,666		35,993
Total Intangibles	$	121,213	$	6,497	$	114,716

⁽¹⁾ Servus tradenames were reduced from approximately $2.5 million to zero at March 30, 2023 as a result of the sale of the Servus brand (see Note 4).

⁽²⁾ Customer relationships relating to the Servus brand of approximately $4.3 million and related amortization of approximately $0.6 million was reduced to zero at  March 30, 2023 as a result of the sale of the Servus brand (see Note 4).

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
December 31, 2022
Trademarks
Wholesale (1)	$	71,979		-	$	71,979
Retail		9,220		-		9,220
Patents		895	$	826		69
Customer relationships (2)		46,006		5,492		40,514
Total Intangibles	$	128,100	$	6,318	$	121,782

(1) NEOS trademarks were reduced from approximately $0.6 million to zero at December 31, 2022 as a result of the sale of the NEOS brand (see Note 5).

(2)  Customer relationships relating to the NEOS brand of approximately $0.9 million and related amortization of approximately $0.1 million was reduced to zero at December 31, 2022 as a result of the sale of the NEOS brand (see Note 5).

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
March 31, 2022
Trademarks
Wholesale	$	72,579		-	$	72,579
Retail		9,220		-		9,220
Patents		895	$	810		85
Customer relationships		46,900		3,256		43,644
Total Intangibles	$	129,594	$	4,066	$	125,528

The weighted average life for our patents is 7.0 years.

A schedule of approximate amortization expense related to finite-lived intangible assets for the three months ended March 31, 2023 and 2022 is as follows:

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
Amortization expense	$	780	$	787

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
2023	$	2,091
2024		2,785
2025		2,781
2026		2,778
2027		2,776
2028		2,772
2029+		20,074

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Note 11 - Long-term Debt

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

11.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 is 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 3.50, the effective interest rate will be SOFR plus 7.50% (or at our option, Prime Rate plus 6.50%). If our total leverage ratio is less than 3.50 but greater than 3.00, 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 3.00, 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 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 to provide the use of SOFR to calculate interest rather than LIBOR. The effective interest rate was increased to SOFR plus 7.50% through November 2022. In November 2022, the Term Facility was amended to increase the effective interest rate to SOFR plus 7.00% until June 2023 and to provide certain EBITDA adjustments with respect to financial covenants, among other things. In May 2023, we entered into a fourth amendment with TCW to further amend our Term Facility to provide certain EBITDA adjustments in respect of the financial covenants, adjust the method to calculate total debt, continue certain pricing terms, extend certain prepayment terms, and pay such lenders certain amendment fees, among other things.

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 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. In November 2022, we entered into a third amendment to our ABL Facility to provide certain EBITDA adjustments with respect to our financial covenants. The ABL 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  March 31, 2023, we had borrowing capacity of $37.4 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:

Revolver Pricing Level	Average Availability as a 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	%

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.

Current and long-term debt consisted of the following:

	March 31,			December 31,			March 31,
($ in thousands)	2023			2022			2022
Term Facility that matures in 2026 with an effective interest rate of 12.14%, 12.14% and 8.00% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively	$	95,806		$	116,332		$	126,750
ABL Facility that matures in 2026:
SOFR borrowings with an effective interest rate of 4.80%, 5.47% and 1.88% March 31, 2023, December 31, 2022 and March 31, 2022, respectively		113,008			140,000			140,257
Prime borrowings with an effective interest rate of 8.00%, 7.27% and 3.75% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively		13,506			3,301			4,106
Total debt		222,320			259,633			271,113
Less: Unamortized debt issuance costs		(2,524	)		(2,737	)		(3,377	)
Total debt, net of debt issuance costs		219,796			256,896			267,736
Less: Debt maturing within one year		(2,823	)		(3,250	)		(3,250	)
Long-term debt	$	216,973		$	253,646		$	264,486

Credit Facility Covenants

The Term Facility contains restrictive covenants which require us to maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, as defined in the Term Facility agreement. We are in compliance with all credit facility covenants as of March 31, 2023, December 31, 2021 and  March 31, 2022.

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 months ended March 31, 2023 and 2022, 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.

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Note 12 - Taxes

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12. 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	2019
Various U.S. States	2018
Puerto Rico (U.S. Territory)	2018
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 months ended March 31, 2023 and 2022. 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 estimated effective tax rates for the three months ended March 31, 2023 and 2022 are as follows:

	Three Months Ended
	March 31,
	2023			2022
Effective Tax Rate		21.8	%		21.0	%

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Note 13 - Earnings Per Share

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Earnings Per Share [Text Block]

13. 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 months ended March 31, 2023 and 2022 is as follows:

	Three Months Ended
	March 31,
(shares in thousands)	2023		2022
Basic - weighted average shares outstanding		7,346		7,306
Dilutive stock options(1)		-		104
Diluted - weighted average shares outstanding(2)		7,346		7,410
Anti-dilutive securities		265		107

⁽¹⁾ Due to a loss for the three months ended March 31, 2023, zero dilutive stock options are included for the period because the effect would be antidilutive.

⁽²⁾ Due to a loss for the three months ended March 31, 2023, zero dilutive stock options are included for the period because the effect would be antidilutive.

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Note 14 - Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

14. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the three months ended March 31, 2023 and 2022 was as follows:

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
Interest paid	$	4,100	$	3,479
Change in contract receivables, net	$	-	$	794
Change in contract liabilities, net	$	-	$	(794	)
Property, plant, and equipment purchases in accounts payable	$	986	$	1,962

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Note 15 - Segment Information

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

15. SEGMENT INFORMATION

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, our Rocky Outdoor Gear 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 months ended March 31, 2023 and 2022.

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
NET SALES:
Wholesale	$	80,050	$	133,961
Retail		29,510		28,626
Contract Manufacturing		885		4,438
Total Net Sales	$	110,445	$	167,025
GROSS MARGIN:
Wholesale	$	29,308	$	48,259
Retail		14,379		13,848
Contract Manufacturing		72		720
Total Gross Margin	$	43,759	$	62,827

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Note 16 - Restructuring Charges

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

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, we identified a number of operational synergies and cost savings opportunities, including a reduction in workforce.

During the three months ended March 31, 2023, the following activity was recorded:

	Employee Severance, Benefits and
($ in thousands)	Related Costs
Accrued expenses, December 31, 2022	$	381
Restructuring charges		-
Cash payments		(14	)
Accrued expenses, March 31, 2023	$	367

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Note 17 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

17. COMMITMENTS AND CONTINGENCIES 

Litigation

We are currently party to litigation with a manufacturing supplier of the Acquired Brands. While it is not possible to predict the outcome of this litigation with certainty, we do not anticipate the resolution will have a material, adverse impact on our financial position. We believe that the likelihood of the resolution being materially adverse to our financial statements is remote and as such have not recorded any contingent liabilities within the accompanying Consolidated Financial Statements. In addition, we have not recorded any potential favorable resolution to the litigation due in accordance with ASC 450- 30, Gain Contingencies.

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. We have the potential to recover th e total amount of overpaid duties resulting in a potential refund of approximately $7.7 million, of which we have received $3.2 million in refunds during year ended December 31, 2022 and $1.9 million in refunds during the three months ended March 31, 2023. We are accounting for these post summary corrections as a gain contingency, and as such have not recorded these potential refunds within the accompanying unaudited condensed consolidated balance sheet due to uncertainty of collection. Refunds received will be recognized as a reduction to the cost of goods sold when, and if, the refunds are received.

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Note 6 - Revenue (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

	March 31,		December 31,		March 31,
($ in thousands)	2023		2022		2022
Contract liabilities	$	-	$	-	$	268

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Note 8 - Inventories (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31,		December 31,		March 31,
($ in thousands)	2023		2022		2022
Raw materials	$	16,949	$	16,541	$	23,229
Work-in-process		1,231		933		1,872
Finished goods		205,944		217,926		264,129
Total	$	224,124	$	235,400	$	289,230

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Note 10 - Identified Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
March 31, 2023
Trademarks
Wholesale (1)	$	69,439		-	$	69,439
Retail		9,220		-		9,220
Patents		895	$	831		64
Customer relationships (2)		41,659		5,666		35,993
Total Intangibles	$	121,213	$	6,497	$	114,716

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
December 31, 2022
Trademarks
Wholesale (1)	$	71,979		-	$	71,979
Retail		9,220		-		9,220
Patents		895	$	826		69
Customer relationships (2)		46,006		5,492		40,514
Total Intangibles	$	128,100	$	6,318	$	121,782

	Gross		Accumulated		Carrying
($ in thousands)	Amount		Amortization		Amount
March 31, 2022
Trademarks
Wholesale	$	72,579		-	$	72,579
Retail		9,220		-		9,220
Patents		895	$	810		85
Customer relationships		46,900		3,256		43,644
Total Intangibles	$	129,594	$	4,066	$	125,528

Finite-Lived Intangible Assets Amortization Expense [Table Text Block]

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
Amortization expense	$	780	$	787

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Amortization
($ in thousands)	Expense
2023	$	2,091
2024		2,785
2025		2,781
2026		2,778
2027		2,776
2028		2,772
2029+		20,074

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Note 11 - Long-term Debt (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Qualitative Measure of Debt Facility [Table Text Block]

Revolver Pricing Level	Average Availability as a 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	%

Schedule of Debt [Table Text Block]

	March 31,			December 31,			March 31,
($ in thousands)	2023			2022			2022
Term Facility that matures in 2026 with an effective interest rate of 12.14%, 12.14% and 8.00% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively	$	95,806		$	116,332		$	126,750
ABL Facility that matures in 2026:
SOFR borrowings with an effective interest rate of 4.80%, 5.47% and 1.88% March 31, 2023, December 31, 2022 and March 31, 2022, respectively		113,008			140,000			140,257
Prime borrowings with an effective interest rate of 8.00%, 7.27% and 3.75% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively		13,506			3,301			4,106
Total debt		222,320			259,633			271,113
Less: Unamortized debt issuance costs		(2,524	)		(2,737	)		(3,377	)
Total debt, net of debt issuance costs		219,796			256,896			267,736
Less: Debt maturing within one year		(2,823	)		(3,250	)		(3,250	)
Long-term debt	$	216,973		$	253,646		$	264,486

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Note 12 - Taxes (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Summary of Income Tax Examinations [Table Text Block]

	Earliest Exam Year
Taxing Authority Jurisdiction:
U.S. Federal	2019
Various U.S. States	2018
Puerto Rico (U.S. Territory)	2018
Canada	2018
China	2019
Mexico	2021
United Kingdom	2021
Australia	2021

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Three Months Ended
	March 31,
	2023			2022
Effective Tax Rate		21.8	%		21.0	%

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Note 13 - Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended
	March 31,
(shares in thousands)	2023		2022
Basic - weighted average shares outstanding		7,346		7,306
Dilutive stock options(1)		-		104
Diluted - weighted average shares outstanding(2)		7,346		7,410
Anti-dilutive securities		265		107

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Note 14 - Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
Interest paid	$	4,100	$	3,479
Change in contract receivables, net	$	-	$	794
Change in contract liabilities, net	$	-	$	(794	)
Property, plant, and equipment purchases in accounts payable	$	986	$	1,962

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Note 15 - Segment Information (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended
	March 31,
($ in thousands)	2023		2022
NET SALES:
Wholesale	$	80,050	$	133,961
Retail		29,510		28,626
Contract Manufacturing		885		4,438
Total Net Sales	$	110,445	$	167,025
GROSS MARGIN:
Wholesale	$	29,308	$	48,259
Retail		14,379		13,848
Contract Manufacturing		72		720
Total Gross Margin	$	43,759	$	62,827

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Note 16 - Restructuring Charges (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Restructuring and Related Costs [Table Text Block]

	Employee Severance, Benefits and
($ in thousands)	Related Costs
Accrued expenses, December 31, 2022	$	381
Restructuring charges		-
Cash payments		(14	)
Accrued expenses, March 31, 2023	$	367

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Note 4 - Sale of Business (Details Textual) - USD ($) $ in Thousands		3 Months Ended
	Mar. 30, 2023	Mar. 31, 2023	Mar. 31, 2022
Proceeds from Divestiture of Businesses		$ 17,300	$ 0
Gain (Loss) on Disposition of Business		1,341	$ (0)
Servus Brand [Member] | Servus Brand [Member]
Disposal Group, Including Discontinued Operation, Consideration	$ 19,000
Proceeds from Divestiture of Businesses	17,300
Disposal Group, Including Discontinued Operation, Deferred Consideration	$ 1,700
Gain (Loss) on Disposition of Business		$ 1,300

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Note 5 - Asset Sale (Details Textual) - USD ($) $ in Thousands		3 Months Ended
	Sep. 30, 2022	Mar. 31, 2023	Mar. 31, 2022
Proceeds from Divestiture of Businesses		$ 17,300	$ 0
NEOS Brand [Member] | SureWerx [Member] | Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member]
Disposal Group, Including Discontinued Operation, Consideration	$ 5,800
Proceeds from Divestiture of Businesses	5,500
Disposal Group, Including Discontinued Operation, Consideration, Remaining Balance Deposited With Escrow Agent	$ 300

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Note 6 - Revenue (Details Textual)	3 Months Ended
	Mar. 31, 2023
Number of Operating Segments	3
Maximum [Member]
Contract with Customer, Period (Year)	1 year
Capitalized Contract Cost, Amortization Period (Year)	1 year

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Note 6 - Revenue - Contract Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Contract liabilities	$ 0	$ 0	$ 268

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Note 7 - Trade Receivables (Details Textual) - USD ($)	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Accounts Receivable, Allowance for Credit Loss, Current	$ 3.0	$ 3.5	$ 1.7
Contract with Customer, Refund Liability, Current	$ 1.2	$ 2.1	$ 2.1

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Note 8 - Inventories (Details Textual) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Contract with Customer, Returns Reserve Asset	$ 0.7	$ 1.1	$ 1.1

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Note 8 - Inventories - Schedule of Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Raw materials	$ 16,949	$ 16,541	$ 23,229
Work-in-process	1,231	933	1,872
Finished goods	205,944	217,926	264,129
Total	$ 224,124	$ 235,400	$ 289,230

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Note 9 - Goodwill (Details Textual) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Sep. 30, 2022 USD ($)	Mar. 31, 2022 USD ($)
Business Acquisition, Goodwill, Expected Tax Deductible Amount	$ 47,000
Number of Reportable Segments	3
Goodwill	$ 47,844	$ 50,246		$ 50,246
Contract Manufacturing [Member]
Goodwill	0
Wholesale [Member]
Goodwill	$ 23,000
Retail [Member]
Goodwill			$ 24,800

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Note 10 - Identified Intangible Assets (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2023	Mar. 30, 2023	Mar. 29, 2023	Dec. 31, 2022		Dec. 30, 2022	Mar. 31, 2022
Finite-Lived Intangible Assets, Accumulated Amortization	$ 6,497			$ 6,318			$ 4,066
Trademarks [Member] | NEOS Brand [Member]
Indefinite-Lived Intangible Assets (Excluding Goodwill)				0		$ 600
Customer Relationships [Member]
Finite-Lived Intangible Assets, Gross	41,659						46,900
Finite-Lived Intangible Assets, Accumulated Amortization	5,666			5,492	[1]		3,256
Customer Relationships [Member] | NEOS Brand [Member]
Finite-Lived Intangible Assets, Gross						900
Finite-Lived Intangible Assets, Accumulated Amortization						$ 100
Patents [Member]
Finite-Lived Intangible Assets, Gross	895						895
Finite-Lived Intangible Assets, Accumulated Amortization	$ 831			$ 826			$ 810
Finite-Lived Intangible Asset, Useful Life (Year)	7 years
Servus Brand [Member] | Disposal Group, Disposed of by Sale, Not Discontinued Operations [Member]
Indefinite-Lived Trade Names		$ 0	$ 2,500
Finite-Lived Intangible Assets, Gross			4,300
NEOS Brand [Member] | Customer Relationships [Member]
Finite-Lived Intangible Assets, Gross		0
Finite-Lived Intangible Assets, Accumulated Amortization		$ 0	$ 600

[1] $6.3 million of the total resulted from our Acquisition that occurred on March 15, 2021.

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Note 10 - Identified Intangible Assets - Identified Intangible Assets (Details) - USD ($) $ in Thousands		Mar. 31, 2023		Dec. 31, 2022		Mar. 31, 2022
Finite-Lived Intangible Assets, Accumulated Amortization		$ 6,497		$ 6,318		$ 4,066
Total Intangibles		121,213		128,100		129,594
Carrying amount		114,716		121,782		125,528
Carrying amount		114,716		121,782		125,528
Patents [Member]
Finite-Lived Intangible Assets, Gross		895				895
Finite-Lived Intangible Assets, Accumulated Amortization		831		826		810
Carrying amount, finite-lived intangible assets		64				85
Total Intangibles				895
Carrying amount				69
Customer Relationships [Member]
Finite-Lived Intangible Assets, Gross		41,659				46,900
Finite-Lived Intangible Assets, Accumulated Amortization		5,666		5,492	[1]	3,256
Carrying amount, finite-lived intangible assets		35,993				43,644
Total Intangibles	[1]			46,006
Carrying amount	[1]			40,514
Trademarks [Member] | Wholesale [Member]
Indefinite-Lived Intangible Assets (Excluding Goodwill)		69,439	[2]			72,579
Finite-Lived Intangible Assets, Accumulated Amortization				0
Total Intangibles	[3]			71,979
Carrying amount				71,979
Trademarks [Member] | Retail [Member]
Indefinite-Lived Intangible Assets (Excluding Goodwill)		$ 9,220	[4]			$ 9,220
Finite-Lived Intangible Assets, Accumulated Amortization				0
Total Intangibles				9,220
Carrying amount				$ 9,220

[1] $6.3 million of the total resulted from our Acquisition that occurred on March 15, 2021.

[2] Servus tradenames were reduced from approximately $2.5 million to zeo at March 30, 2023 as a result of the sale of the Servus brand (see Note 4).

[3] $45.4 million of the total resulted from our Acquisition that occurred on March 15, 2021. NEOS trademarks were reduced from approximately $0.6million to zero at December 31, 2022 as a result of the sale of the NEOS brand (see Note 5).

[4] Customer relationships relating to the Servus brand of approximately $4.3 million and related amortization of approximately $0.6 million was reduced to zero at March 30, 2023 as a result of the sale of the Servus brand (see Note 4).

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Note 10 - Identified Intangible Assets - Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Amortization expense	$ 780	$ 787

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Note 10 - Identified Intangible Assets - Expected Amortization Expense (Details) $ in Thousands	Mar. 31, 2023 USD ($)
2023	$ 2,091
2024	2,785
2025	2,781
2026	2,778
2027	2,776
2028	2,772
2029+	$ 20,074

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Note 11 - Long-term Debt (Details Textual) - USD ($)				1 Months Ended	3 Months Ended		12 Months Ended
	Nov. 01, 2022	Jul. 01, 2021	Mar. 15, 2021	Jun. 30, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Jan. 01, 2023
Term Facility [Member]
Debt Instrument, Face Amount			$ 130,000,000
Debt Instrument SOFR Floor			1.00%
Term Facility [Member] | Secured Overnight Financing Rate (SOFR) [Member]
Debt Instrument, Basis Spread on Variable Rate	7.00%		7.00%
Debt Instrument, Basis Spread on Variable Rate if Total Average Leverage Ratio is Greater or Equal to 3.50		7.50%
Debt Instrument, Basis Spread on Variable Rate if Total Average Leverage Ratio is Less Than 3.50 But Greater Than 3.00		7.00%
Debt Instrument, Basis Spread on Variable Rate if Total Average Leverage Ratio is Less Than 3.00		6.50%
Term Facility [Member] | Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate if Total Average Leverage Ratio is Greater or Equal to 3.50		6.50%
Debt Instrument, Basis Spread on Variable Rate if Total Average Leverage Ratio is Less Than 3.50 But Greater Than 3.00		6.00%
Debt Instrument, Basis Spread on Variable Rate if Total Average Leverage Ratio is Less Than 3.00		5.50%
Term Facility [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate				7.50%
The ABL Facility [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity			$ 150,000,000				$ 200,000,000	$ 175,000,000
Line of Credit Facility, Additional Borrowing Capacity upon Request			50,000,000
Line of Credit Facility, Increase in Maximum Borrowing Capacity				$ 25,000,000
Line of Credit Facility, Remaining Borrowing Capacity					$ 37.4
Debt Instrument, Collateral Fee			75,000
The ABL Facility [Member] | Letter of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity			$ 5,000,000
The ABL Facility [Member] | Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate					8.00%	3.75%	7.27%
The ABL Facility [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Debt Instrument, Basis Spread on Variable Rate					4.80%	1.88%	5.47%

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Note 11 - Long-term Debt - Debt Facility Information (Details) - Revolving Credit Facility [Member]	Mar. 15, 2021	[1]
Commitments Above 66.7% [Member] | Base Rate [Member] | The ABL Facility [Member]
Variable rate	0.00%
Commitments Above 66.7% [Member] | Base Rate [Member] | The ABL Facility FILO Borrowings [Member]
Variable rate	0.50%
Commitments Above 66.7% [Member] | London Interbank Offered Rate LIBOR 1 [Member] | The ABL Facility [Member]
Variable rate	1.25%
Commitments Above 66.7% [Member] | London Interbank Offered Rate LIBOR 1 [Member] | The ABL Facility FILO Borrowings [Member]
Variable rate	1.75%
Commitmeents Between 33.3% and 66.7% [Member] | Base Rate [Member] | The ABL Facility [Member]
Variable rate	0.00%
Commitmeents Between 33.3% and 66.7% [Member] | Base Rate [Member] | The ABL Facility FILO Borrowings [Member]
Variable rate	0.50%
Commitmeents Between 33.3% and 66.7% [Member] | London Interbank Offered Rate LIBOR 1 [Member] | The ABL Facility [Member]
Variable rate	1.50%
Commitmeents Between 33.3% and 66.7% [Member] | London Interbank Offered Rate LIBOR 1 [Member] | The ABL Facility FILO Borrowings [Member]
Variable rate	2.00%
Commitments Below 33.3% [Member] | Base Rate [Member] | The ABL Facility [Member]
Variable rate	0.25%
Commitments Below 33.3% [Member] | Base Rate [Member] | The ABL Facility FILO Borrowings [Member]
Variable rate	0.75%
Commitments Below 33.3% [Member] | London Interbank Offered Rate LIBOR 1 [Member] | The ABL Facility [Member]
Variable rate	1.75%
Commitments Below 33.3% [Member] | London Interbank Offered Rate LIBOR 1 [Member] | The ABL Facility FILO Borrowings [Member]
Variable rate	2.25%

[1] Until June 30, 2021, Tier II applied.

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Note 11 - Long-term Debt - Current and Long-term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Term Facility that matures in 2026 with an effective interest rate of 12.14%, 12.14% and 8.00% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively	$ 222,320	$ 259,633	$ 271,113
Less: Unamortized debt issuance costs	(2,524)	(2,737)	(3,377)
Total debt, net of debt issuance costs	219,796	256,896	267,736
Less: Debt maturing within one year	(2,823)	(3,250)	(3,250)
Long-term debt	216,973	253,646	264,486
Term Facility [Member]
Term Facility that matures in 2026 with an effective interest rate of 12.14%, 12.14% and 8.00% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively	95,806	116,332	126,750
The ABL Facility [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Term Facility that matures in 2026 with an effective interest rate of 12.14%, 12.14% and 8.00% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively	113,008	140,000	140,257
The ABL Facility [Member] | Prime Rate [Member]
Term Facility that matures in 2026 with an effective interest rate of 12.14%, 12.14% and 8.00% as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively	$ 13,506	$ 3,301	$ 4,106

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Note 11 - Long-term Debt - Current and Long-term Debt (Details) (Parentheticals)	1 Months Ended	3 Months Ended		12 Months Ended
	Jun. 30, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Term Facility [Member]
Interest rate		12.14%	8.00%	12.14%
Term Facility [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Variable rate	7.50%
The ABL Facility [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member]
Variable rate		4.80%	1.88%	5.47%
The ABL Facility [Member] | Prime Rate [Member]
Variable rate		8.00%	3.75%	7.27%

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Note 12 - Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense	$ 0	$ 0
Unrecognized Tax Benefits, Ending Balance	$ 0

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Note 12 - Taxes - Tax Examinations (Details)	3 Months Ended
	Mar. 31, 2023
Domestic Tax Authority [Member]
Open tax year	2019
State and Local Jurisdiction [Member]
Open tax year	2018
Foreign Tax Authority [Member] | Departamento de Hacienda de Puerto Rico [Member]
Open tax year	2018
Foreign Tax Authority [Member] | Canada Revenue Agency [Member]
Open tax year	2018
Foreign Tax Authority [Member] | State Administration of Taxation, China [Member]
Open tax year	2019
Foreign Tax Authority [Member] | Mexican Tax Authority [Member]
Open tax year	2021
Foreign Tax Authority [Member] | United Kingdom Tax Authority [Member]
Open tax year	2021
Foreign Tax Authority [Member] | Australian Taxation Office [Member]
Open tax year	2021

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Note 12 - Taxes - Effective Tax Rate (Details)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Effective Tax Rate	21.80%	21.00%

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Note 13 - Earnings Per Share (Details Textual) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Incremental Common Shares Attributable to Dilutive Effect of Share-Based Payment Arrangements (in shares)	0	104

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Note 13 - Earnings Per Share - Basic and Diluted Income Per Common Share (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Basic (in shares)	7,346	7,306
Dilutive stock options (in shares)	0	104
Diluted - weighted average shares outstanding(2) (in shares)	7,346	7,410
Anti-dilutive securities (in shares)	265	107

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Note 14 - Supplemental Cash Flow Information - Supplemental Cash Flow (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Interest paid	$ 4,100	$ 3,479
Change in contract receivables, net	0	794
Change in contract liabilities, net	0	(794)
Property, plant, and equipment purchases in accounts payable	$ 986	$ 1,962

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Note 15 - Segment Information (Details Textual)	3 Months Ended
	Mar. 31, 2023
Number of Reportable Segments	3

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Note 15 - Segment Information - Summary of Segment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
NET SALES	$ 110,445	$ 167,025
GROSS MARGIN	43,759	62,827
Wholesale [Member]
NET SALES	80,050	133,961
GROSS MARGIN	29,308	48,259
Retail [Member]
NET SALES	29,510	28,626
GROSS MARGIN	14,379	13,848
Contract Manufacturing [Member]
NET SALES	885	4,438
GROSS MARGIN	$ 72	$ 720

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Note 16 - Restructuring Charges - Restructuring Activities (Details) - Employee Severance [Member] $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Accrued expenses	$ 381
Restructuring charges	0
Cash payments	(14)
Accrued expenses	$ 367

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Note 17 - Commitments and Contingencies (Details Textual) - Overpaid Duties [Member] - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Gain Contingency, Unrecorded Amount		$ 7.7
Proceeds From Contingency	$ 1.9	$ 3.2