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Table of Contents

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

o    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 x  No o

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 x  No o

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

x  Accelerated filer

¨  Non-accelerated filer

x  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.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

There were 7,242,431 shares of the Registrant's Common Stock outstanding on October 31, 2020.


TABLE OF CONTENTS

Page

PART I

Financial Information

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited), December 31, 2019, and September 30, 2019 (Unaudited)

2

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)

3

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (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

21

Item 4.

Controls and Procedures

21

PART II

Other Information

Item 1A.

Risk Factors

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 6.

Exhibits

23

SIGNATURES

24

 

1


PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

(Unaudited)

September 30,

December 31,

September 30,

2020

2019

2019

ASSETS:

CURRENT ASSETS:

Cash and cash equivalents

$

19,947

$

15,518

$

6,440

Trade receivables – net

49,188

45,585

50,700

Contract receivables

-

4,746

2,036

Other receivables

364

366

310

Inventories – net

80,655

76,731

82,881

Income tax receivable

-

150

-

Prepaid expenses

3,611

3,030

2,656

Total current assets

153,765

146,126

145,023

LEASED ASSETS

1,399

1,743

1,781

PROPERTY, PLANT & EQUIPMENT – net

31,325

27,423

25,150

IDENTIFIED INTANGIBLES – net

30,216

30,240

30,248

OTHER ASSETS

355

294

293

TOTAL ASSETS

$

217,060

$

205,826

$

202,495

LIABILITIES AND SHAREHOLDERS' EQUITY:

CURRENT LIABILITIES:

Accounts payable

$

23,834

$

15,776

$

20,531

Contract liabilities

-

4,746

1,936

Accrued expenses:

Salaries and wages

3,813

3,044

2,791

Taxes - other

789

967

624

Accrued freight

729

867

495

Commissions

544

608

488

Accrued duty

4,586

3,824

2,597

Income tax payable

422

-

19

Other

1,563

1,702

1,766

Total current liabilities

36,280

31,534

31,247

LONG-TERM TAXES PAYABLE

169

169

169

LONG-TERM LEASE

833

1,158

1,188

DEFERRED INCOME TAXES

8,108

8,108

7,780

DEFERRED LIABILITIES

238

201

230

TOTAL LIABILITIES

45,628

41,170

40,614

SHAREHOLDERS' EQUITY:

Common stock, no par value;

25,000,000 shares authorized; issued and outstanding September 30, 2020 - 7,276,379; December 31, 2019 - 7,354,970 and September 30, 2019 - 7,403,219

66,604

67,993

69,273

Retained earnings

104,828

96,663

92,608

Total shareholders' equity

171,432

164,656

161,881

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

217,060

$

205,826

$

202,495

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

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

NET SALES

$

77,785

$

67,179

$

189,691

$

195,067

COST OF GOODS SOLD

47,952

42,165

121,077

125,633

GROSS MARGIN

29,833

25,014

68,614

69,434

OPERATING EXPENSES

20,175

18,027

54,344

54,004

INCOME FROM OPERATIONS

9,658

6,987

14,270

15,430

OTHER (EXPENSES) INCOME

(55)

43

(112)

160

INCOME BEFORE INCOME TAXES

9,603

7,030

14,158

15,590

INCOME TAX EXPENSE

1,992

1,414

2,917

3,212

NET INCOME

$

7,611

$

5,616

$

11,241

$

12,378

INCOME PER SHARE

Basic

$

1.04

$

0.76

$

1.54

$

1.67

Diluted

$

1.04

$

0.75

$

1.53

$

1.66

WEIGHTED AVERAGE NUMBER OF

COMMON SHARES OUTSTANDING

Basic

7,306

7,400

7,323

7,392

Diluted

7,336

7,455

7,352

7,443

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, 2018

7,368 

$

68,387 

$

-

$

83,188 

$

151,575 

NINE MONTHS ENDED SEPTEMBER 30, 2019

Net income

$

3,605 

$

3,605 

Dividends paid on common stock ($0.12 per share)

(886)

(886)

Repurchase of common stock

-

-

-

Stock issued for options exercised, including tax benefits

17 

$

294 

294 

Stock compensation expense

6 

168 

168 

BALANCE - March 31, 2019

7,391 

$

68,849 

$

-

$

85,907 

$

154,756 

Net income

$

3,156 

$

3,156 

Dividends paid on common stock ($0.14 per share)

(1,035)

(1,035)

Repurchase of common stock

-

-

-

Stock issued for options exercised, including tax benefits

-

-

-

Stock compensation expense

3 

$

164 

164 

BALANCE - June 30, 2019

7,394 

$

69,013 

$

-

$

88,028 

$

157,041 

Net income

$

5,616 

$

5,616 

Dividends paid on common stock ($0.14 per share)

(1,036)

(1,036)

Repurchase of common stock

-

-

-

Stock issued for options exercised, including tax benefits

7 

$

96 

96 

Stock compensation expense

2 

164 

164 

BALANCE - September 30, 2019

7,403 

$

69,273 

$

-

$

92,608 

$

161,881 

BALANCE - December 31, 2019

7,355 

$

67,993 

$

-

$

96,663 

$

164,656 

NINE MONTHS ENDED SEPT 30, 2020

Net income

$

1,188 

$

1,188 

Dividends paid on common stock ($0.14 per share)

(1,030)

(1,030)

Repurchase of common stock

(50)

$

(1,000)

(1,000)

Stock issued for options exercised, including tax benefits

-

-

-

Stock compensation expense

4 

202 

202 

BALANCE - March 31, 2020

7,309 

$

67,195 

$

-

$

96,821 

$

164,016 

Net income

$

2,442 

$

2,442 

Dividends paid on common stock ($0.14 per share)

(1,023)

(1,023)

Repurchase of common stock

-

-

-

Stock issued for options exercised, including tax benefits

-

-

-

Stock compensation expense

3 

$

194

194

BALANCE - June 30, 2020

7,312 

$

67,389

$

-

$

98,240 

$

165,629

Net income

$

7,611 

$

7,611 

Dividends paid on common stock ($0.14 per share)

(1,023)

(1,023)

Repurchase of common stock

(41)

$

(1,004)

(1,004)

Stock issued for options exercised, including tax benefits

2

29

29

Stock compensation expense

3

190

190

BALANCE - September 30, 2020

7,276

$

66,604

$

-

$

104,828 

$

171,432

See Notes to Unaudited Condensed Consolidated Financial Statements

4


Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine Months Ended

September 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

11,241

$

12,378

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

3,805

3,767

Deferred compensation

-

74

Loss on disposal of fixed assets

-

7

Stock compensation expense

586

496

Change in assets and liabilities:

Receivables

1,295

(6,747)

Inventories

(3,924)

(10,059)

Other current assets

(1,656)

(3,227)

Other assets

(62)

(115)

Accounts payable

8,989

7,201

Accrued and other liabilities

(2,600)

1,096

Income taxes payable

422

19

Net cash provided by operating activities

18,096

4,890

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets

(8,618)

(6,054)

Proceeds from sales of fixed assets

3

-

Net cash used in investing activities

(8,615)

(6,054)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from stock options

29

390

Repurchase of common stock

(2,004)

-

Dividends paid on common stock

(3,077)

(2,959)

Net cash (used in) financing activities

(5,052)

(2,569)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

4,429

(3,733)

CASH AND CASH EQUIVALENTS: