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ROCKY BRANDS, INC.

ROCKY BRANDS, INC.RCKYEarnings & Financial Report

Nasdaq · Consumer Discretionary · Footwear, (No Rubber)

Rocky Brands, Inc., formerly known as Rocky Shoes & Boots, Inc., is a company which designs, develops, manufactures, and markets outdoor, work, western and military footwear, and other outdoor and work apparel and accessories. The company was founded in 1932 in Nelsonville, Ohio, and still maintains its corporate headquarters there.

What changed in ROCKY BRANDS, INC.'s 10-K — 2022 vs 2023

Top changes in ROCKY BRANDS, INC.'s 2023 10-K

223 paragraphs added · 219 removed · 145 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

59 edited+9 added−28 removed59 unchanged
Through our dedicated in-house sales team we sell to wholesale accounts in the U.S. through the use of a dedicated in-house sales team, exclusive, as well as independent sales representatives who carry our branded products and other non-competing products.
We sell to wholesale accounts in the U.S. through the use of a dedicated in-house sales team, and exclusive, as well as independent, sales representatives who carry our branded products and other non-competing products.
Through widespread consumer validation in the farm, agriculture, hunt and equestrian segments, Muck has been able to expand to new segments such as outdoor, gardening, industrial and general work, as well as to new regions such as the U.K., Norway and Germany to reach new consumers who have adopted the brand and its offerings.
Through widespread consumer validation in the farm, agriculture, hunt and equestrian segments, Muck has been able to expand to new segments such as outdoor, gardening, industrial and general work, as well as to new international regions such as the U.K., Norway and Germany to reach new consumers who have adopted the brand and its offerings.
We believe the Rocky, Georgia Boot, Durango, Lehigh, Muck, XTRATUF, Servus, Ranger and Michelin brands are well recognized and established names that have a reputation for performance, quality and comfort in the markets they serve: outdoor, work, western, duty, commercial military and military.
We believe the Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and Michelin brands are well recognized and established names that have a reputation for performance, quality and comfort in the markets they serve: outdoor, work, western, duty, commercial military and military.
We are a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky, Georgia Boot, Durango, Lehigh, The Original Muck Boot Company ("Muck"), XTRATUF, Servus, Ranger and the licensed brand Michelin.
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, The Original Muck Boot Company ("Muck"), Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and the licensed brand Michelin.
We also produce Rocky duty and commercial military footwear targeting law enforcement professionals, military, security workers, fire industry professionals and postal service employees, and we have established leading market share positions in these categories.
We also produce Rocky duty and commercial military, public service footwear targeting law enforcement professionals, military, security workers, fire industry professionals and postal service employees, and we have established leading market share positions in these categories.
These products incorporate a range of technical features and designs such as Gore-Tex waterproof breathable fabric, 3M Thinsulate insulation, nylon Cordura fabric and camouflaged uppers featuring either Venator, Mossy Oak or Realtree patterns. We use rugged outsoles made by industry leaders like Vibram as well as our own proprietary design features to make the products durable and easy to wear.
These products incorporate a range of technical features and designs such waterproof breathable fabric, 3M Thinsulate insulation, nylon Cordura fabric and camouflaged uppers featuring either Venator, Mossy Oak or Realtree patterns. We use rugged outsoles made by industry leaders like Vibram, as well as our own proprietary design features, to make the products durable and easy to wear.
We believe that the strength of our brands, the quality of our products and our long-term relationships with a broad range of retailers allows us to compete effectively in the footwear and apparel markets that we serve. However, we compete with footwear and apparel companies that have greater financial, marketing, distribution and manufacturing resources than we do.
We believe that the strength of our brands, the quality of our products and our long-term relationships with a broad range of retailers allow us to compete effectively in the footwear and apparel markets that we serve. However, we compete with footwear and apparel companies that have greater financial, marketing, distribution and manufacturing resources than we do.
We intend to extend certain of our brands into international markets. We believe this is a significant opportunity because of the long history and authentic heritage of these brands. We intend on growing our business internationally through a network of distributors. ● Grow our e-commerce business .
We intend to extend certain of our brands into international markets. We believe this is a significant opportunity because of the long history and authentic heritage of these brands. We intend to grow our business internationally through a network of distributors. ● Grow our e-commerce business .
Our outdoor product lines consist of all-season sport/hunting and fishing footwear, apparel and accessories that are typically waterproof and insulated and are designed to keep outdoor enthusiasts comfortable on rugged terrain or in extreme weather conditions. ● Duty.
Our outdoor product lines consist of all-season sport/hunting and fishing footwear, apparel and accessories that are typically waterproof and insulated and are designed to keep outdoor enthusiasts comfortable on rugged terrain or in extreme weather conditions. ● Work.
We have a dedicated group of product design and development professionals, including well recognized experts in the footwear and apparel industries, who continually interact with consumers to better understand their needs and are committed to ensuring our products reflect the most advanced designs, features and materials available in the marketplace. 2 Table of Contents ● Long-term retailer relationships.
We have a dedicated group of product design and development professionals, including well recognized experts in the footwear and apparel industries, who continually interact with consumers to better understand their needs and are committed to ensuring our products reflect the most advanced designs, features and materials available in the marketplace. ● Long-term retailer relationships.
We intend to continue to source a higher proportion of our products from third-party manufacturers, which we believe will enable us to obtain high quality products at lower costs per unit. Growth Strategy We intend to increase our sales through the following strategies: ● Expand into new target markets under existing brands.
We intend to continue to source a higher proportion of our products from third-party manufacturers, which we believe will enable us to obtain high quality products at lower costs per unit. 5 Table of Contents Growth Strategy We intend to increase our sales through the following strategies: ● Expand into new target markets under existing brands.
Approximately 1,900 of our employees work in our manufacturing facilities in the Dominican Republic, Puerto Rico, Rock Island, Illinois and Chuzhou, China. We believe our relations with our employees are in good standing. Employee Well Being Founded from the humble beginnings of a small, family owned business, our employees have always been the key to making our Company successful.
Approximately 1,600 of our employees work in our manufacturing facilities in the Dominican Republic, Puerto Rico and Chuzhou, China. We believe our relations with our employees are in good standing. Employee Well Being Founded from the humble beginnings of a small, family owned business, our employees have always been the key to making our Company successful.
Our Wholesale channels vary by product line and include sporting goods stores, outdoor retailers, independent shoe retailers, hardware stores, catalogs, mass merchants, uniform stores, farm store chains, specialty safety stores, specialty retailers and online retailers.
O ur Wholesale channels vary by product line and include sporting goods stores, outdoor retailers, independent shoe retailers, hardware stores, catalogs, mass merchants, uniform stores, farm store chains, specialty safety stores, specialty retailers and online retailers.
Over the last 50 years, Durango has earned a reputation for building authentic western boots using exceptional materials and innovative constructions. Our current line of Durango products is offered at suggested U.S. retail price point s ranging from $79.00 to $480.00. Our brand portfolio categories include work-western, farm and ranch, western-performance, premium exotics, fashion-forward and casual wear.
Over the last 50 years, Durango has earned a reputation for building authentic western boots using exceptional materials and innovative constructions. Our current line of Durango products is offered at suggested U.S. retail price points ranging from $120.00 to $655.00 . Our brand portfolio categories include work-western, farm and ranch, western-performance, premium exotics, fashion-forward and casual wear.
Our inability or failure to do so could adversely affect consumer acceptance of these product lines and styles and could have a material adverse effect on our business, financial condition and results of operations. Human Capital At December 31, 2022 , we had approximately 2,500 employees of which approximately 2,490 are full time employees.
Our inability or failure to do so could adversely affect consumer acceptance of these product lines and styles and could have a material adverse effect on our business, financial condition and results of operations. Human Capital At December 31, 2023 , we had approximately 2,100 employees of which approximately 2,060 are full time employees.
In addition, we utilize a team of procurement, quality control and logistics employees in our China office to visit factories to conduct quality control reviews of raw materials, work in process inventory and finished goods.
In addition, we utilize a team of procurement, quality control and logistics employees in our China office and a third-party quality control service provider to visit factories to conduct quality control reviews of raw materials, work in process inventory and finished goods.
Our work product lines consist of footwear and apparel marketed to industrial and construction workers, as well as workers in the hospitality industry, such as restaurants or hotels and those who partake in farm and ranch work.
Our work product line consists of footwear and apparel marketed to industrial and construction workers, as well as workers in the hospitality industry, such as restaurants or hotels and those who partake in farm and ranch work.
Rocky Rocky, established in 1979, is our premium priced line of branded footwear, apparel and accessories. We currently design Rocky products for each of our six target markets and offer our products at a range of suggested U.S. retail price points: $38.00 to $405.00 for our footwear pro ducts; and $17.00 to $160.00 for our apparel and accessory lines.
Rocky Rocky, established in 1979, is our premium priced line of branded footwear, apparel and accessories. We currently design Rocky products for each of our six target markets and offer our products at a range of suggested U.S. retail price points: $92.00 to $405.00 for our footwear products; and $18.00 to $160.00 for our apparel and accessory lines.
Our Wholesale distribution channels vary by market: ● Our outdoor products are sold primarily through sporting goods stores, outdoor specialty stores, online retailers, catalogs and mass merchants. ● Our work-related products are sold primarily through work related retailers, farm and ranch stores, specialty safety stores, independent shoe stores, hardware stores and online retailers. ● Our duty products are sold primarily through uniform stores, catalog specialists and online retailers. ● Our commercial military products are sold primarily through base exchanges such as AAFES and consumer e-commerce websites. ● Our western products are sold through western stores, work stores, specialty farm and ranch stores, online retailers and more recently, fashion-oriented footwear retailers.
Our Wholesale distribution channels vary by market: ● Our outdoor products are sold primarily through sporting goods stores, outdoor specialty stores, online retailers, catalogs and mass merchants; ● Our work-related products are sold primarily through work-related retailers, farm and ranch stores, specialty safety stores, independent shoe stores, hardware stores and online retailers; ● Our duty products are sold primarily through uniform stores, catalog specialists and online retailers; ● Our commercial military products are sold primarily through base exchanges, such as the Army Air Force Exchange Store (AAFES), and consumer e-commerce websites; and ● Our western products are sold through western stores, work stores, specialty farm and ranch stores, online retailers, and fashion-oriented footwear retailers.
Our footwear products incorporate varying features and are positioned across a range of suggested retail price points from $26.00 for our value priced products to $520.00 for our premium products.
Our footwear products incorporate varying features and are positioned across a range of suggested retail price points from $45.00 for our value priced products to $655.00 for our premium products.
We do not have any long-term supply contracts for the purchase of our raw materials, except for limited blanket purchase orders on leather to protect wholesale selling prices for an extended period of time.
Resources and Suppliers We purchase raw materials from sources worldwide. We do not have any long-term supply contracts for the purchase of our raw materials, except for limited blanket purchase orders on leather to protect wholesale selling prices for an extended period of time.
We believe that our internet presence allows us to showcase the breadth and depth of our product lines in each of our target markets and enables us to educate our consumers about the unique technical features of our products.
We believe that our internet presence allows us to showcase the breadth and depth of our product lines in each of our target markets and enables us to educate our consumers about the unique technical features of our products. Outdoor Gear and Retail Store We operate the Rocky Outdoor Gear Store in Nelsonville, Ohio.
Duty footwear is generally designed to fit as part of a uniform and typically incorporates stylistic features, such as black leather uppers in addition to the comfort features that are incorporated in all of our footwear products. ● U.S. Military . Our U.S. military product line consists of footwear products designed specifically for U.S. military personnel.
Duty footwear is generally designed to fit as part of a uniform and typically incorporates stylistic features, such as black leather uppers in addition to the comfort features that are incorporated in all of our footwear products. ● Commercial Military.
We aim to foster an inclusive workplace through recruitment and development efforts, and through the retention of diverse talent with a goal of expanding representation across all dimensions of equality and inclusion.
We believe that the inclusion of diverse perspectives results in better outcomes and policies. We aim to foster an inclusive workplace through recruitment and development efforts, and through the retention of diverse talent with a goal of expanding representation across all dimensions of equality and inclusion.
XTRATUF XTRATUF is a leading outfitter in the commercial, sport and recreational fishing segment, having provided fishermen with capable, comfortable and reliable footwear for use in the harshest conditions for over 60 years.
XTRATUF Since the early 1950s, XTRATUF has been a leading outfitter in the commercial, sport, and recreational fishing segment, having provided fishermen with capable, comfortable and reliable footwear for use in the harshest conditions.
With roots in Alaska and continued widespread use by those who live there, the XTRATUF brand has been able to expand to other regions throughout North America and most recently in the U.K. and Japan. Fueled by the strong growth in the outdoor segment, the brand has been adopted by non-fishermen seeking quality, functional footwear.
With roots in Alaska and continued widespread use by those who live there, the XTRATUF brand has been able to expand to other regions throughout North America and most recently in the U.K. and Japan.
Our sales force is organized around major accounts, includi ng Boot Barn, Tractor Supply Company and Dick’s Sporting Goods, and around o ur target markets: outdoor, work, duty, commercial military, and western. Our sales force is organized around brands, regions and customers in order to target a broad range of distribution chan nels.
Our sales force is organized around major accounts, including Boot Barn, Tractor Supply Company and Amazon, and around our target markets: outdoor, work, duty, commercial military, and western. Our sales force is also organized around brands, regions and customers in order to target a broad range of distribution channels.
We own numerous design and utility patents for footwear and footwear components (such as insoles and outsoles) in the U.S. and in several countries where our products are sold or manufactured, including China. We own numerous U.S. and foreign registrations for the trademarks used in our business, including our major brands Rocky, Georgia Boot, Durango, and Lehigh.
We own numerous design and utility patents for footwear and footwear components (such as insoles and outsoles) in the U.S. and in several countries where our products are sold or manufactured, including China.
The Lehigh brand line of safety shoes has suggested U.S. retail pric e points ranging from $29.00 to $520.00. Michelin Michelin is a premier price point line of work footwear targeting specific industrial professions, primarily indoor professions. The license to design, develop and manufacture footwear under the Michelin name was secured in 2006.
Michelin Michelin is a premier price point line of work footwear targeting specific industrial professions, primarily indoor professions. The license to design, develop and manufacture footwear under the Michelin name was secured in 2006. Suggested U.S. retail prices for the Michelin brand are from $157.00 to $237.00 .
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. On January 24, 2021, we entered into a Purchase Agreement (the "Purchase Agreement") with certain subsidiaries of Honeywell International Inc.
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.
Both new and existing consumer groups have welcomed line extensions from the brand as the total catalog expands beyond its core offering into premium leather and other new footwear categories.
Both new and existing consumer groups have welcomed line extensions from the brand as the total catalog expands beyond its core offering into premium leather and other new footwear categories. Georgia Boot Georgia Boot was launched in 1937 and is our moderately priced, high quality line of work and rugged lifestyle footwear.
O ur products are primarily distributed in the U.S., Canada, U.K. and other international markets, mainly in Europe. We ship our products from our finished goods distribution facilities located in Ohio and Nevada. As a result of the Acquisition, we also utilize a third-party distribution center in Canada.
O ur products are primarily distributed in the U.S., Canada, U.K. and other international markets, mainly in Europe. We ship our products from our finished goods distribution facilities located in Ohio and Nevada. Certain of our retailers receive shipments directly from our manufacturing sources, including all of our U.S.
Sourcing products from offshore third-party facilities generally enables us to lower our costs per unit while maintaining high product quality and limits the capital investment required to establish and maintain company operated manufacturing facilities.
In addition, our Puerto Rico facility allows us to produce footwear for the U.S. Military and other commercial businesses that require production by a U.S. manufacturer. Sourcing products from offshore third-party facilities generally enables us to lower our costs per unit while maintaining high product quality and limits the capital investment required to establish and maintain company operated manufacturing facilities.
We also acquired various patents and trademark registrations through the Acquisition, including the brands Muck, XTRATUF, Servus and Ranger. In addition, we license the use of third party trademarks, including Gore-Tex and Michelin, in order to market our products. Our license with W. L. Gore & Associates, Inc.
We own numerous U.S. and foreign registrations for the patents and trademarks used in our business, including our major brands Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, and Ranger. In addition, we license the use of third-party trademarks, including Gore-Tex and Michelin, in order to market our products. Our license with W. L. Gore & Associates, Inc.
Manufacturing and Sourcing We manufacture footwear in facilities that we operate in the Dominican Republic, Puerto Rico, Chuzhou, China and Rock Island, Illinois, and source footwear, apparel and accessories from third-party facilities in China, Vietnam, Dominican Republic and Mexico. Our facilities in Chuzhou and Rock Island were acquired through the Acquisition.
Manufacturing and Sourcing We manufacture footwear in facilities that we own and operate in the Dominican Republic, Puerto Rico, and Chuzhou, China and source footwear, apparel and accessories from third-party facilities in China, Vietnam, India, Dominican Republic and Mexico. We do not have long-term contracts with any of our third-party manufacturers.
In addition to contracts with the U.S. military, we also bid on private label contracts. Our sales under such contracts are dependent on us winning the bids for these contracts. In 2022, we fulfilled several multiyear contracts for the U.S. military. We will continue to actively bid on U.S. military contracts.
Contract Manufacturing While we are focused on continuing to build our Wholesale and Retail business, we also actively bid, from time to time, on eligible footwear contracts with the U.S. Military. In addition to contracts with the U.S. Military, we bid on private label contracts. Our sales under such contracts are dependent on us winning the bids for these contracts.
Related products from other manufacturers are also sold in the store. Our outdoor gear store allows us to showcase the breadth of our product lines as well as to cost-effectively sell slow-moving inventory. Our outdoor gear store also provides an opportunity to interact with consumers to better understand their needs.
Our outdoor gear store primarily sells first quality current and discontinued products in addition to a limited amount of factory damaged goods. Related products from other manufacturers are also sold in the store. Our outdoor gear store allows us to showcase the breadth of our product lines as well as to cost-effectively sell slow-moving inventory.
These footwear products are designed and manufactured to meet rigorous specification requirements, which include lightweight, durable, waterproof footwear products manufactured in the U.S.A. The U.S. military products are marketed under the Rocky brand name. Our products are marketed under nine well-recognized, proprietary brands, Rocky, Georgia Boot, Durango, Lehigh, Muck, XTRATUF, Ranger and Servus, in addition to the licensed brand Michelin.
These footwear products are designed and manufactured to meet rigorous specification requirements, which include lightweight, durable, waterproof footwear products manufactured in the U.S. The U.S. Military products are marketed under the Rocky brand name. 4 Table of Contents Competitive Strengths Our competitive strengths include: ● Strong portfolio of brands.
Our western product line currently consists of authentic footwear products marketed to farmers and ranchers who generally live in rural communities in North America. ● Commercial Military. Our commercial military product line consists of footwear products marketed to military personnel as a substitute for the government issued military boots.
Our western product line currently consists of authentic footwear products marketed to farmers and ranchers who generally live in rural communities in North America. In addition, we have western styles that are marketed for fashion and casual wear. ● Duty.
Our commercial military boots are designed to be comfortable, lightweight, and durable and are marketed under the Rocky brand name. 3 Table of Contents ● Outdoor. Our outdoor product lines consist of footwear, apparel and accessory items marketed to outdoor enthusiasts who spend time actively engaged in activities such as hunting, fishing, camping and hiking.
Our outdoor product line consists of footwear, apparel and accessory items marketed to outdoor enthusiasts who spend time actively engaged in activities such as hunting, fishing, camping and hiking.
In addition, mild or dry weather conditions historically have had a material adverse effect on sales of our outdoor products, particularly if they occurred in broad geographical areas during late fall or early winter.
In addition, mild or dry weather conditions historically have had a material adverse effect on sales of our outdoor products, particularly if they occurred in broad geographical areas during late fall or early winter. 7 Table of Contents Backlog The dollar amount of our order backlog as of any date may not be indicative of actual future shipments and, accordingly, is not material to an understanding of the business taken as a whole.
Most of the footwear incorporates a protective toe and can include a metatarsal guard, puncture-resistant plate, slip-resistant outsole and special materials to combat caustic substances. Lehigh offers an extensive selection of styles to fit any work environment and has a wide range of customer accounts in the industrial, hospitality and healthcare industries.
Most of the footwear incorporates a protective toe and can include a metatarsal guard, puncture-resistant, slip-resistant outsole and special materials to combat caustic substances. Lehigh offers an extensive selection of styles to fit any work environment. Lehigh’s unique business model provides companies with customizations to fit their needs and digital tools for greater visibility and control of their program.
We actively enforce our trademarks and patents, and pursue those who infringe upon them, whether domestically or internationally, as we deem appropriate. 8 Table of Contents Competition We operate in a very competitive environment.
We actively enforce our trademarks and patents, and pursue those who infringe upon them, whether domestically or internationally, as we deem appropriate. Competition We operate in a very competitive environment. Product function, design, comfort, quality, technological and material improvements, brand awareness, timeliness of product delivery and pricing are all important elements of competition in the markets for our products.
Websites We sell our product lines on our websites at rockyboots.com , georgiaboot.com , durangoboot.com, muckbootcompany.com, xtratuf.com, lehighoutfitters.com , lehighsafetyshoes.com , and slipgrips.com , as well as through online marketplaces.
Our customers' employees order directly through their employers' established CustomFit website, and the footwear is delivered directly to the customer via a common freight carrier. Websites We sell our product lines on our websites at rockyboots.com , georgiaboot.com , durangoboot.com, muckbootcompany.com, xtratuf.com, lehighoutfitters.com, lehighsafetyshoes.com and slipgrips.com , as well as through online marketplaces.
We also rely on our management team to influence growth and develop a path for success with employees on each team within our organization. Quarterly, our CEO and CFO hold all-employee communication meetings to keep our employees apprised of recent happenings within our organization and to allow employees a forum for their voice to be heard.
We also rely on our management team to influence growth and develop a path for success with employees on each team within our organization.
Retail We market products directly to consumers through three retail strategies: ● Lehigh business-to-business including direct sales and through our Custom Fit websites; ● Consumer e-commerce websites and third-party marketplaces; and ● Our stores, which include our outdoor gear store and our retail store.
Retail We market products directly to consumers through three retail strategies: ● Lehigh business-to-business including direct sales and through our CustomFit websites; ● Consumer e-commerce websites (B2C) and third-party marketplaces; and ● Brick and Mortar Stores, which include our outdoor gear and retail store. 2 Table of Contents Lehigh We sell our Lehigh brand of safety shoes along with in-house and third-party branded work product to our business customers directly through our CustomFit websites, that are tailored to the specific needs of our customers.
Talent Recruitment, Retention and Development Our employee culture is built on our core values of integrity, responsibility and humility. The ability to attract, retain and develop talented employees is crucial to our long-term success. We focus on attracting, developing and retaining highly talented individuals through practices that promote inclusion, diversity and equality.
Nothing is more fundamental than providing our employees with an environment where they feel safe, secure and supported. Talent Recruitment, Retention and Development Our employee culture is built on our core values of integrity, responsibility and humility. The ability to attract, retain and develop talented employees is crucial to our long-term success.
Certain of our retailers receive shipments directly from our manufacturing sources, including all of our U.S. military sales, which are shipped directly from our manufacturing facility in Puerto R ico. Net sales to foreign countries represented approximately 6.2% of net sales in 2022 and 6.9% of ne t sales in 2021.
Military sales, which are shipped directly from our manufacturing facility in Puerto R ico. Net sales to foreign countries represented approximately 5.1% of net sales in 2023 and 6.2% of ne t sales in 2022. As previously mentioned, we maintain manufacturing facilities that we operate in the Dominican Republic and Chuzhou, China.
The net book value of fixed assets located outside of the U.S. totaled $12.6 million at December 31, 2022, of which approximatel y $4.6 million resides in the Dominican Republic and approximatel y $8.0 mil lion resides in China. 7 Table of Contents Resources and Suppliers We purchase raw materials from sources worldwide.
In addition, we utilize an office in China to support our contract manufacturers. The net book value of fixed assets located outside of the U.S. totaled $11.9 million at December 31, 2023, of which approximatel y $3.9 million resides i n the Dominican Republic and approximatel y $8.0 mil lion resides in China.
We recruit through a variety of outreach methods including our rockybrands.com/careers website and other online platforms, such as LinkedIn, college recruitment efforts, network relationships and direct communication with career centers. When new employment opportunities within our Company arise, we send out internal communications to inform all associates of new openings. We review internal applications for consideration before considering external applicants.
When new employment opportunities within our Company arise, we send out internal communications to inform all associates of new openings. We review internal applications for consideration before considering external applicants.
Our current line of Servus footwear products is offered at suggested U.S. retail price points ra nging from $26.00 to $145.00. Ranger Ranger serves two primary user segments: outdoor recreation and industrial/work.
Our current line of Muck footwear products is offered at suggested U.S. retail price points ranging from $55.00 to $265.00 .
On September 30, 2022, we completed the sale of the NEOS brand and related assets. See Note 4 of our Consolidated Financial Statements for additional information. We report our segment information in accordance with provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 280, Segment Reporting.
We report our segment information in accordance with provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 280, Segment Reporting and each of our reporting segments continue to employ consistent accounting policies. S ee Note 1 9 of our Consolidated Financial Statements fo r further information.
We have also introduced western influenced work boots for farmers and ranchers. Most of these products are waterproof, insulated and utilize our proprietary comfort systems. In addition, we have introduced men’s and women’s casual western footwear for consumers enamored with western influenced fashion.
We have also introduced western influenced work boots for farmers and ranchers. Most of these products are waterproof, insulated and utilize our proprietary comfort systems. Muck Muck was founded in 1999 and has pioneered the premium rubber and neoprene boot category by delivering high quality, innovative, weatherproof and comfortable products.
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. and Canada as well as in several international markets.
As of December 31, 2023 , our products were offered for sale at over 10,000 retail locations in the U.S. and Canada as well as several international markets, such as Europe.
We are committed to having a diverse and inclusive workforce which is reflected in a wide range of cultures, religions, ethnicities and nationalities as well as varied professional and educational backgrounds. We believe that the inclusion of diverse perspectives results in better outcomes and policies.
Quarterly, our CEO a nd COO hold all-employee communication meetings to keep our employees apprised of recent happenings within our organization and to allow employees a forum for their voice to be heard. 8 Table of Contents We are committed to having a diverse and inclusive workforce which is reflected in a wide range of cultures, religions, ethnicities and nationalities as well as varied professional and educational backgrounds.
Ranger products consist of a focused range of pac-boots, rubber boots, waders, hip-boots and over-boots that are built for wet and cold weather and provide exceptional comfort and function at a value price.
Ranger Ranger primarily serves the outdoor recreational market and offers a range of pac-boots that are built for wet and cold weather that provide exceptional comfort and function at a value price. Our current line of Ranger footwear products is offered at suggested U.S. retail price points ranging from $74.00 to $100.00 .
Wholesale In the U.S., we distribute Rocky, Georgia Boot, Durango, Muck, XTRATUF, Servus, Ranger and Michelin products through a wide range of wholesale distribution channels. As of December 31, 2022, our products were offered for sale at over 10,000 retail locations in the U.S. and Canada.
The Company's portfolio of brands is organized into the following reportable segments, in which our products are distributed: ● Wholesale ● Retail ● Contract Manufacturing Wholesale We distribute Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and Michelin products through a wide range of wholesale distribution channels throughout the world.
Georgia Boot Georgia Boot was launched in 1937 and is our moderately priced, high quality line of work footwear. Georgia Boot footwear is sold at suggested U.S. retail price points ranging from $76.00 to $292.00.
Georgia Boot footwear is sold at suggested U.S. retail price points ranging from $76.00 to $292.00 . This line of products primarily targets blue collar workers across various trades, including construction, logging, warehousing, landscaping and farming. Many of our boots incorporate safety toes and non-slip outsoles to prevent injuries in the workplace.
The Original Muck Boot Company The Original Muck Boot Company (Muck) was founded in 1999 and has pioneered the premium rubber and neoprene boot category by delivering high quality, innovative, weatherproof and comfortable products. Our current line of Muck footwear products is offered at suggested U.S. retail price points ranging from $55.00 to $270.00.
Fueled by the strong growth in the outdoor segment; particularly white boat lifestyle and sport fishing, the brand has been adopted by non-fishermen seeking quality, functional footwear. Our current line of XTRATUF footwear products is offered at suggested U.S. retail price points ranging from $45.00 to $195.00 .
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(collectively, "Honeywell"), to purchase Honeywell's performance and lifestyle footwear business, including brand names, trademarks, assets and liabilities associated with Honeywell's performance and lifestyle footwear business (the "Acquisition").
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Our outdoor gear store also provides an opportunity to interact with consumers to better understand their needs. Additionally, Lehigh has one retail store located at the Puget Sound Naval Base where we sell select product directly to customers.
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On March 15, 2021 (the "Acquisition Date"), pursuant to the terms and conditions set forth in the Purchase Agreement, we completed the Acquisition for an aggregate preliminary closing price of approximately $207 million, net of cash acquired, based on preliminary working capital and other adjustments.
Added
In 2023, we fulfilled two multi-year contracts for the U.S. Military. We expect to continue to actively bid on U.S. Military contracts. Brands and Product Lines Our products are marketed under eight well-recognized, proprietary brands: Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh and Ranger, in addition to the licensed brand Michelin.
Removed
Upon a final agreement of net working capital as of the Acquisition Date, we owed Honeywell an additional $5.4 million. The Acquisition was funded through cash on hand and borrowings under two new credit facilities . See Note 9 of our Consolidated Financial Statements of the Consolidated Financial Statements for information regarding the two new credit facilities.
Added
We also offer other more specialized protective features, such as puncture resistance, as well as metatarsal guards that protect wearers’ feet from heavy objects.
Removed
The Acquisition expanded our brand portfolio to include Muck, XTRATUF, Servus, Ranger, and NEOS brands (the "Acquired Brands"). We acquired 100% of the voting interests of certain subsidiaries and additional assets comprising the performance and lifestyle footwear business of Honeywell with the Acquisition. See Note 3 of the Consolidated Financial Statements for more information re garding the Acquisition.
Added
Each boot is designed to meet the demands of specific trades while also integrating cutting-edge technology and materials to create the most comfortable and durable footwear that is tough enough to handle the rigors found on job sites across America. 3 Table of Contents Durango Durango Boots was established in 1966 and manufactures premium western footwear for men, women and kids.
Removed
We evaluate business performance based upon several metrics, using segment profit as the primary financial measure. During the three months ended June 30, 2021, we changed our reporting segments when compared to our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Added
As the established leader in the industry, Lehigh introduced and utilizes 3DFit technology and wellness foot products as a way to elevate safety and improve productivity. By providing an accurate fit, body aligning orthotics and anti-fatigue compression, Lehigh helps companies go beyond accident protection to full body wellness protection.
Removed
The change included renaming our Military reporting segment to "Contract Manufacturing" and changing the composition thereof to continue to include sales to the U.S. military ("Military Contracts") and to include sales under manufacturing contracts for private label ("Private Contracts"). Previously, only Military Contracts were included in this segment.
Added
Lehigh provides and improves safety and health to a wide range of customer accounts in the industrial, distribution, hospitality and healthcare industries. The Lehigh brand line of safety shoes has suggested U.S. retail price points ranging from $91.00 to $274.00 .
Removed
The Private Contract sales have characteristics more like Military Contracts, with similar sales, delivery processes and gross margins. This segment reporting change reflects a corresponding change in how our Chief Executive Officer and our Chief Financial Officer, our chief operating decision makers ("CODMs"), review financial information in order to allocate resources and assess performance.
Added
The license agreement for the Michelin brand expires on December 31, 2025, with the option to renew. Product Lines Our brands are organized into six distinct product lines, which consist of high-quality products that target the following markets: ● Outdoor.
Removed
Previously, Private Contracts were included in the Wholesale segment, but with the Acquisition, our Wholesale segment has substantially increased in size and our CODMs determined that the change in segment reporting was appropriate at that time to mirror how they evaluate and manage the business. Each of our reporting segments continue to employ consistent accounting policies.
Added
Our commercial military product line consists of footwear products marketed to military personnel as a substitute for the government issued military boots. Our commercial military boots are designed to be comfortable, lightweight, and durable and are marketed under the Rocky brand name. ● Military. Our military product line consists of footwear products designed specifically for U.S. Military personnel.
Removed
Our Retail business includes direct sales of our products to consumers through our business-to-business web platform, e-commerce websites, third party marketplaces and our Outdoor Gear Store. Contract Manufacturing 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.
Added
We focus on attracting, developing and retaining highly talented individuals through practices that promote inclusion, diversity and equality. We recruit through a variety of outreach methods including our rockybrands.com/careers website and other online platforms, such as LinkedIn, college recruitment efforts, network relationships and direct communication with career centers.
Removed
S ee Note 18 of our Consolidated Financial Statements fo r further information. Competitive Strengths Our competitive strengths include: ● Strong portfolio of brands.
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In March 2021, we were able to execute this strategy through the Acquisition. Product Lines Our product lines consist of high-quality products that target the following markets: ● Work.
Removed
This line of prod ucts primarily targets construction workers and those who work in industrial plants where special safety features are required for hazardous work environments. Many of our boots incorporate safety toes or metatarsal guards to protect wearers’ feet from heavy objects and non-slip outsoles to prevent slip related injuries in the workplace.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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We own U.S. registrations for many our trademarks, trade names and designs, including such marks as Rocky, Georgia Boot, Durango, Lehigh, Muck, XTRATUF, Servus and Ranger. Additional trademarks, trade names and designs are the subject of pending federal applications for registration. We also use and have common law rights in certain trademarks.
We own U.S. registrations for many our trademarks, trade names and designs, including such marks as Rocky, Muck, Georgia Boot, Durango, XTRATUF, Lehigh and Ranger. Additional trademarks, trade names and designs are the subject of pending federal applications for registration. We also use and have common law rights in certain trademarks.
Compliance with data privacy and marketing laws may subject us to increased additional costs, and our ability to effectively engage customers via personalized marketing may be impacted, all of which may have a material adverse effect on our business operations. In addition, as data privacy and marketing laws change, we may incur additional costs to ensure we remain in compliance.
Compliance with data privacy and marketing laws may subject us to increased additional costs, and our ability to effectively engage customers via personalized marketing may be impacted, all of which may have a material adverse effect on our business operations. As data privacy and marketing laws change, we may incur additional costs to ensure we remain in compliance.
The development of our business has been, and will continue to be, dependent on execution at all levels of our organization which requires an experienced and talented executive team. The loss of service of any of the executive officers or key employees could have an adverse effect on our business and financial condition.
The development of our business has been, and will continue to be, dependent upon execution at all levels of our organization which requires an experienced and talented executive team. The loss of service of any of the executive officers or key employees could have an adverse effect on our business and financial condition.
Holders of our common stock are only entitled to receive such cash dividends as our Board of Directors may declare out of funds legally available for such payments. 13 Table of Contents Industry Risks Because the footwear market is sensitive to decreased consumer spending and slow economic cycles, if general economic conditions deteriorate, many of our customers may significantly reduce their purchases from us or may not be able to pay for our products in a timely manner.
Holders of our common stock are only entitled to receive such cash dividends as our Board of Directors may declare out of funds legally available for such payments. 12 Table of Contents Industry Risks Because the footwear market is sensitive to decreased consumer spending and slow economic cycles, if general economic conditions deteriorate, many of our customers may significantly reduce their purchases from us or may not be able to pay for our products in a timely manner.
Therefore, our business is subject to certain risks of doing business offshore including: ● the imposition of additional U.S. legislation and regulations relating to imports, including quotas, duties, taxes or other charges or restrictions; ● foreign governmental regulation and taxation, including tariffs, import and export controls and other non-tariff barriers; ● fluctuations in foreign exchange rates; ● changes in economic conditions, including expropriation and nationalization; ● transportation conditions and costs in the Pacific and Caribbean; ● changes in the political stability of these countries; ● labor disputes and other work stoppages or interruptions; ● changes in relationships between the U.S. and these countries; and ● the occurrence of contagious disease or illness.
Therefore, our business is subject to certain risks of doing business offshore including: ● the imposition of additional U.S. legislation and regulations relating to imports, including quotas, duties, taxes or other charges or restrictions; ● foreign governmental regulation and taxation, including tariffs, import and export controls and other non-tariff barriers; ● fluctuations in foreign exchange rates; ● changes in economic conditions, including expropriation and nationalization; ● transportation conditions and costs in the Pacific and Caribbean; ● changes in the political stability of these countries; ● labor disputes and other work stoppages or interruptions; 9 Table of Contents ● changes in relationships between the U.S. and these countries; and ● the occurrence of contagious disease or illness.
Some of our employees are working remotely which could strain our information technology systems and impact business continuity plans. Remote work could also introduce operational risk such as, but not limited to, cyber security risks. 14 Table of Contents A cyber-security breach could have a material adverse effect on our business and reputation .
Some of our employees are working remotely which could strain our information technology systems and impact business continuity plans. Remote work could also introduce operational risk such as, but not limited to, cyber security risks. 13 Table of Contents A cyber-security breach could have a material adverse effect on our business and reputation .
If we do not effectively respond to the trend of consumer shopping moving to online retailers , including third party marketplaces, it may negatively impact our business. The retail industry is rapidly changing, and we must ensure we are evolving both our own online e-commerce websites and third party marketplaces.
If we do not effectively respond to the shift of consumer shopping moving to online retailers , including third-party marketplaces, it may negatively impact our business. The retail industry is rapidly changing and we must ensure we are evolving both our own online e-commerce websites and third-party marketplaces.
We rely on our distribution centers located in Ohio and Nevada and our manufacturing facilities in the Dominican Republic, Puerto Rico, China and Illinois.
We rely on our distribution centers located in Ohio and Nevada and our manufacturing facilities in the Dominican Republic, Puerto Rico, and China.
As a result, GDPR and CCPA compliance increased our responsibility and potential liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the new data protection rules.
As a result, GDPR, CCPA and other state law compliance increased our responsibility and potential liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the new data protection rules.
Our credit facilities require us to comply with certain financial restrictive covenants that impose restrictions on our operations, including our ability to incur additional indebtedness, make investments of other restricted payments, sell or otherwise dispose of assets and engage in other activities.
We must comply with the restrictive covenants contained in our credit facilities. Our credit facilities require us to comply with certain financial restrictive covenants that impose restrictions on our operations, including our ability to incur additional indebtedness, make investments of other restricted payments, sell or otherwise dispose of assets and engage in other activities.
Mild or dry weather has in the past and may in the future have a material adverse effect on sales of our products, particularly if mild or dry weather conditions occur in broad geographical areas during late fall or early winter.
Mild or dry weather has in the past and may in the future have a material adverse effect on sales of our products, particularly if mild or dry weather conditions occur in broad geographical areas during late fall or early winter. Climate change may exacerbate these conditions.
The growth of our business will be dependent upon the availability of adequate capital. The growth of our business will depend on the availability of adequate capital, which in turn will depend largely on cash flow generated by our business and the availability of equity and debt financing.
The growth of our business will depend on the availability of adequate capital, which in turn will depend largely on cash flow generated by our business and the availability of equity and debt financing.
Certain of our larger wholesale customers may develop and manufacture competing products under their own brands and reduce purchases of our branded products . Certain of our larger wholesale customers may develop, and in certain cases have developed, products under their own brands that compete with our branded products.
Certain of our larger wholesale customers may develop, and in certain cases have developed, products under their own brands that compete with our branded products.
We are subject to certain environmental and other regulations. Some of our operations use substances regulated under various federal, state, local and international environmental and pollution laws, including those relating to the storage, use, discharge, disposal and labeling of, and human exposure to, hazardous and toxic materials.
Some of our operations use substances regulated under various federal, state, local and international environmental and pollution laws, including those relating to the storage, use, discharge, disposal and labeling of, and human exposure to, hazardous and toxic materials.
Any failure to comply with these rules and related national laws of European Union member states, could lead to government enforcement actions and significant penalties and fines against us, and could adversely affect our business, financial condition, cash flows and results of operations. Compliance with any of the foregoing laws and regulations can be costly.
Any failure to comply with these rules and related national laws of European Union member states, could lead to government enforcement actions and significant penalties and fines against us, and could adversely affect our business, financial condition, cash flows and results of operations.
In addition, we could incur costs, fines and civil or criminal sanctions, third-party property damage or personal injury claims or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under any environmental laws. Liability under environmental laws can be joint and several and without regard to comparative fault.
In addition, we could incur costs, fines and civil or criminal sanctions, or incur liability for third-party property damage or personal injury claims, or we could be required to incur substantial investigation or remediation costs if we were to violate or become liable under any environmental laws.
In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and will require that we devote substantial resources and executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run our business. Public health crises could harm our business.
In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and will require that we devote substantial resources and executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run our business. Loss of services of our key personnel could adversely affect our business.
We have entered into employment agreements with several executive officers and key employees, and also offer compensation packages designed to attract and retain talent. 15 Table of Contents
We have entered into employment agreements with several executive officers and key employees, and also offer compensation packages designed to attract and retain talent. 14 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
In addition, California adopted the California Consumer Privacy Act ("CCPA"), which became effective January 1, 2020 and limits how we may collect and use personal data.
In addition, California adopted the California Consumer Privacy Act ("CCPA"), which became effective January 1, 2020 and limits how we may collect and use personal data. Various other states have followed with similar laws governing the collection and use of personal data.
Any loss of one of these key customers, the financial collapse or bankruptcy of one of these customers, or a significant reduction in purchases from one of these customers could result in a significant decline in sales, write-downs of excess inventory, or increased discounts to our customers, any of which could have a material adverse effect on our financial condition or results of operations.
Any loss of one of these key customers, the financial collapse or bankruptcy of one of these customers, or a significant reduction in purchases from one of these customers could result in a significant decline in sales, write-downs of excess inventory, or increased discounts to our customers, any of which could have a material adverse effect on our financial condition or results of operations. 11 Table of Contents Certain of our larger wholesale customers may develop and manufacture competing products under their own brands and reduce purchases of our branded products .
There can be no assurance that the costs of products that continue to be manufactured by us can remain competitive with products sourced from third parties. 12 Table of Contents We rely on our distribution centers in Ohio and Nevada and manufacturing facilities in the Dominican Republic, Puerto Rico, China and Illinois, and if there is a natural disaster or other serious disruption at any of these facilit ies , we may be unable to deliver merchandise effectively to our retailers and consumers.
We rely on our distribution centers in Ohio and Nevada and manufacturing facilities in the Dominican Republic, Puerto Rico, and China and if there is a natural disaster or other serious disruption at any of these facilit ies , we may be unable to deliver merchandise effectively to our retailers and consumers.
We have debt outstanding under two credit facilities, which contain customary restrictive covenants imposing operating and financial restrictions, including restrictions that may limit our ability to engage in certain actions that may be in our long-term best interests. We must comply with the restrictive covenants contained in our credit facilities.
Our current level of indebtedness could adversely affect our business by increasing our borrowing costs and decreasing our overall business flexibility. We have debt outstanding under two credit facilities, which contain customary restrictive covenants imposing operating and financial restrictions, including restrictions that may limit our ability to engage in certain actions that may be in our long-term best interests.
Availability or change in the prices of our raw materials could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The principal raw materials used in the production of our footwear, in terms of dollar value, are leather, Gore-Tex waterproof breathable fabric, Cordura nylon fabric and soling materials. Availability or change in the prices of our raw materials could have a material adverse effect on our business, financial condition, results of operations and cash flows.
As a result, we may not be able to finance our current expansion plans. 11 Table of Contents Our current level of indebtedness could adversely affect our business by increasing our borrowing costs and decreasing our overall business flexibility. Our current level of indebtedness could adversely affect our business by increasing our borrowing costs and decreasing our overall business flexibility.
Accordingly, opportunities for increasing our cash on hand through sales of inventory would be partially offset by reduced availability under our credit facilities. As a result, we may not be able to finance our current expansion plans. Our current level of indebtedness could adversely affect our business by increasing our borrowing costs and decreasing our overall business flexibility.
There can be no assurance that additional sources or products would be available to us or, if available, that these sources could be relied on to provide product at terms favorable to us.
There can be no assurance that additional sources or products would be available to us or, if available, that these sources could be relied on to provide product at terms favorable to us. The occurrence of any of these developments could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our business, financial condition and results of operations.
An unfavorable outcome could have a material adverse impact on our business, financial condition and results of operations.
A majority of our products are produced in the D ominican Republic, Vietnam, and China.
A majority of our products are produced outside the U.S. where we are subject to the risks of international commerc e and other international conditions . A majority of our products are produced in China, the D ominican Republic, and Vietnam.
Similarly, if one or more of our third-party manufacturers violate applicable environmental or other laws and regulations, we could suffer an interruption in our product supply. In addition, such actions by a manufacturer could result in negative publicity and may damage our reputation and the value of our brand and discourage retail customers and consumers from buying our products.
Similarly, if one or more of our third-party manufacturers violate applicable environmental or other laws and regulations, we could suffer an interruption in our product supply.
We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources. We are a defendant from time to time in lawsuits and regulatory actions relating to our business and to our past operations.
We are a defendant from time to time in lawsuits and regulatory actions relating to our business and to our past operations. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings.
We do not have any long-term supply contracts for the purchase of our raw materials, except for limited blanket orders on leather. The principal raw materials used in the production of our footwear, in terms of dollar value, are leather, Gore-Tex waterproof breathable fabric, Cordura nylon fabric and soling materials.
We purchase raw materials from a number of domestic and foreign sources. We do not have any long-term supply contracts for the purchase of our raw materials, except for limited blanket orders on leather.
We depend on a limited number of suppliers for key production materials, and any disruption in the supply of such materials could interrupt product manufacturing and increase product costs. We purchase raw materials from a number of domestic and foreign sources.
The failure to adequately anticipate or respond to these changes could have a material adverse effect on our business, financial condition, results of operations and cash flows. We depend on a limited number of suppliers for key production materials, and any disruption in the supply of such materials could interrupt product manufacturing and increase product costs.
Failure to gain market acceptance for new products that we introduce could impede our growth, reduce our profits, adversely affect the image of our brands, erode our competitive position and result in long term harm to our business. 9 Table of Contents Our recent acquisition of the performance and lifestyle footwear business of certain subsidiaries of Honeywell International Inc. carries certain inherent risks, and we may not be able to successfully achieve anticipated synergies, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Failure to gain market acceptance for new products that we introduce could impede our growth, reduce our profits, adversely affect the image of our brands, erode our competitive position and result in long term harm to our business.
Our future success will depend upon our ability to anticipate and respond to changing consumer preferences and technical design or material developments in a timely manner. The failure to adequately anticipate or respond to these changes could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our success depends on our ability to anticipate consumer trends. Demand for our products may be adversely affected by changing consumer trends. Our future success will depend upon our ability to anticipate and respond to changing consumer preferences and technical design or material developments in a timely manner.
Removed
Our Acquisition that closed on March 15, 2021 involved inherent risks and we still face certain inherent risks such as: ● The potential loss of key personnel from the acquired business, our potential inability to achieve identified financial, operating and other synergies anticipated to result from the acquisition; ● changes in economic conditions; and ● potential unknown liabilities associated with the acquired business.
Added
The emergence or persistence of geopolitical instability may disrupt the global economy, the impacts of which may negatively impact our business, financial, condition and results of operations. The emergence or persistence of geopolitical instability creates risks for disruptions in the global economy which may negatively impact our business, financial condition, and results of operations.
Removed
While we conducted financial and other due diligence in connection with the Acquisition and obtained representations and warranties insurance coverage, the acquired business may have weaknesses or liabilities that were not accurately assessed or realized at the time of the acquisition and insurance coverage may not cover (or fully cover) such matters.
Added
Factors such as shipping disruptions in the Red Sea, uncertainties related to the political environment in China, and ongoing conflicts such as the war between Russia and Ukraine have adversely affected the global economy and contributed to geopolitical instability.
Removed
If we are not able to successfully navigate such risks with respect to the acquired business, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. A majority of our products are produced outside the U.S. where we are subject to the risks of international commerc e and other international conditions .
Added
While we have managed to navigate impacts from these conflicts thus far, the ongoing instability resulting from these disruptions or other future disruptions could potentially harm our business, financial condition, results of operations, supply chain, intangible assets, partners, customers, or employees, should tensions escalate.
Removed
The occurrence of any of these developments could have a material adverse effect on our business, financial condition, results of operations and cash flows. 10 Table of Contents We conduct a portion of our business pursuant to U.S. military contracts, which are subject to unique risks. Our contracts with the U.S. military subject our business to unique risks.
Added
Moreover, an escalation of geopolitical tensions may lead to broader impacts, including but not limited to cyberattacks, supply chain and logistics disruptions, lower consumer demand, and changes to foreign exchange rates and interest rates. Any of these factors may adversely affect our business and supply chain.
Removed
In 2022 , 2.3% of our revenues we re earned pursuant to U.S. military contracts. Business conducted pursuant to such contracts is subject to extensive procurement regulations and other unique risks. The U.S. military may modify, curtail or choose not to renew one or more of our contracts.
Added
In addition, such actions by a manufacturer could result in negative publicity and may damage our reputation and the value of our brand and discourage retail customers and consumers from buying our products. 10 Table of Contents The growth of our business will be dependent upon the availability of adequate capital.
Removed
In addition, funding pursuant to our U.S. military contracts may be reduced or withheld as part of the U.S. Congressional appropriations process due to fiscal constraints and/or changes in U.S. military strategy. Our contracts with the U.S. military are fixed-price contracts.
Added
There can be no assurance that the costs of products that continue to be manufactured by us can remain competitive with products sourced from third parties.
Removed
While fixed price contracts enable us to benefit from performance improvements, cost reductions and efficiencies, they also subject us to the risk of reduced margins or losses if we are unable to achieve estimated costs reductions.
Added
Continued compliance with the foregoing laws and regulations, as well as any new laws or regulations that may be enacted in the future, can be costly. We are subject to certain environmental and other regulations.
Removed
The U.S. military provides preference on contract bids to small businesses and our current company structure classifies us as a large business which could have an effect on our ability to be awarded new contracts in the future. Our success depends on our ability to anticipate consumer trends. Demand for our products may be adversely affected by changing consumer trends.
Added
Liability under environmental laws can be joint and several and without regard to comparative fault.
Removed
Accordingly, opportunities for increasing our cash on hand through sales of inventory would be partially offset by reduced availability under our credit facilities.
Added
Many governmental and regulatory bodies globally are implementing regulations to address the impacts of climate change. Compliance with these laws and regulations, whether mandated or voluntarily adopted by us, our suppliers, or third-party manufacturers, may lead to heightened costs across various aspects of our operations.
Removed
The COVID-19 outbreak has had, and may continue to have, an adverse impact on our business, financial condition and results of operations. The World Health Organization declared the novel coronavirus (COVID-19), a pandemic in March 2020. Our business, financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 outbreak.
Added
These increased costs may encompass energy, production, transportation, raw materials, capital expenditures, as well as insurance premiums and deductibles. Such financial impacts have the potential to adversely affect our business, financial condition and results of operations.
Removed
The COVID-19 outbreak has affected nearly all regions of the world, and preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, business slowdown or shutdown in affected areas. This has and could continue to negatively affect the global economy, including reduced consumer spending and disruption of manufacturing and global supply chains.
Added
We maintain an ongoing assessment and monitoring processes to gauge the impact that future climate change disclosures, regulations, or industry standards, and international treaties may have on our business and results of operations. We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources.
Removed
We cannot predict the degree to which our business, financial condition and results of operations will be affected by the COVID-19 pandemic, and the effects could be material.
Removed
Potential impacts to our business, financial condition and results of operations include: ● Disruption to our employees, suppliers, third party manufacturing partners, vendors and logistics providers, including through the effects of facility closures, reductions in operating hours, labor shortages, and changes in operating procedures; ● Closure or reduced operations of brick and mortar retail stores and reductions in customer traffic, which adversely affects our Wholesale segment; ● Lower performance of customers in our Wholesale segment, which may result in reduction or cancellation of future orders; ● Closure or reduced operations of manufacturing and other facilities and businesses served by our Lehigh CustomFit business, resulting in reductions in future orders, which adversely affects our retail channel; ● Reductions in consumer spending due to macroeconomic conditions caused by the COVID-19 pandemic, including decreased disposable income and increased unemployment, which may result in decreased sales; ● Additional expenses related to mitigating the pandemic's impact on regular operations; ● Supply chain disruption effecting our ability to receive and distribute product as well as increases in supply chain costs; and ● Continued volatility in the availability and prices for commodities and raw materials used in the Company's products and related inflationary pressures.
Removed
In addition, the disruption caused to the global economy and our business could lead to triggering events indicating that the carrying value or certain assets, such as long-lived assets, intangibles and goodwill, may not be recoverable. Any required non-cash impairment charges will adversely affect our results of operations.
Removed
The further spread of COVID-19 and the emergence of new variants, and the requirements to take action to help limit the spread of the illness, may impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business, results of operations and financial condition.
Removed
Public health crises, such as the outbreak of the coronavirus (COVID-19), could cause disruption to the Company’s manufacturers and suppliers located in China, Vietnam and elsewhere. If our manufacturers and suppliers are so affected, our supply chain could be disrupted causing our product shipments to be delayed.
Removed
In addition, a public health crises could negatively impact our consumer spending in impacted regions or globally, which could materially adversely affect our business, financial condition, and results of operation. The impact of COVID-19 and the related economic, business and market disruptions were wide-ranging.
Removed
These impacts have had and may continue to cause disruptions from both a manufacturing and distribution standpoint. As a result of COVID-19, we were required to temporarily close our manufacturing facilities in both the Dominican Republic and Puerto Rico for several weeks spanning through both the first and second quarters of 2020.
Removed
In response to COVID-19, we have incurred incremental costs associated with protecting the health and safety of our global workforce, enhanced sanitization of our global operating facilities, and information technology capabilities for employees operating remotely.
Removed
Beginning in March 2020, restrictions imposed by various governmental authorities on both domestic and international shipping and travel have caused a disruption to the timing of delivery of raw materials and finished goods resulting in negative impacts to our financial position, results of operations and cash flows.
Removed
The duration and severity of the outbreak and its long-term impact on our business are uncertain at this time. We are unable to predict the impact that COVID-19 will have on our future financial position, results of operations and cash flows. Loss of services of our key personnel could adversely affect our business.

Item 2. Properties

Properties — owned and leased real estate

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We own the following properties as of December 31, 2022: Purpose Location Square Footage Utilized Segments Executive Office Nelsonville, Ohio 24,400 Wholesale, Retail, Contract Manufacturing Executive Office and Outdoor Gear Store Nelsonville, Ohio 52,300 Wholesale and Retail Executive Office Nelsonville, Ohio 7,200 Wholesale and Retail Distribution Center Logan, Ohio 275,000 Wholesale, Retail, Contract Manufacturing Manufacturing Facility Chuzhou, China 576,000 Wholesale and Retail We lease the following properties as of December 31, 2022: Purpose Location Square Footage Utilized Segments Lease Expiration Office Building China 5,600 Wholesale and Retail 2024 Office Building Westwood, Massachusetts 16,500 Wholesale and Retail 2022 Distribution Center Reno, Nevada 355,680 Wholesale, Retail, Contract Manufacturing 2026 Distribution Center Lancaster, Ohio 60,100 Wholesale, Retail, Contract Manufacturing 2023 Manufacturing Facility Puerto Rico 84,600 Wholesale and Contract Manufacturing 2027 Manufacturing Facility Puerto Rico 22,700 Wholesale and Contract Manufacturing 2027 Manufacturing Facility Rock Island, Illinois 45,000 Wholesale and Retail 2026 Manufacturing Facility Dominican Republic 29,700 Wholesale and Contract Manufacturing 2023 Manufacturing Facility Dominican Republic 34,400 Wholesale and Contract Manufacturing 2023 Manufacturing Facility Dominican Republic 20,100 Wholesale and Contract Manufacturing 2023 Manufacturing Facility Dominican Republic 93,700 Wholesale and Contract Manufacturing 2024 Manufacturing Facility Dominican Republic 36,200 Wholesale and Contract Manufacturing 2024 Manufacturing Facility Dominican Republic 17,400 Wholesale and Contract Manufacturing 2026 Manufacturing Facility Dominican Republic 17,900 Wholesale and Contract Manufacturing 2026
We own the following properties as of December 31, 2023: Purpose Location Square Footage Utilized Segments Executive Office Nelsonville, Ohio 24,400 Wholesale, Retail, Contract Manufacturing Executive Office and Outlet Store Nelsonville, Ohio 52,300 Wholesale and Retail Executive Office Nelsonville, Ohio 8,800 Wholesale, Retail, Contract Manufacturing Storage Facility Nelsonville, Ohio 8,400 Wholesale, Retail, Contract Manufacturing Distribution Center Logan, Ohio 316,000 Wholesale, Retail, Contract Manufacturing Manufacturing Facility Chuzhou, China 576,000 Wholesale and Retail We lease the following properties as of December 31, 2023: Purpose Location Square Footage Utilized Segments Lease Expiration Office Building China 5,600 Wholesale and Retail 2024 Distribution Center Reno, Nevada 355,680 Wholesale, Retail, Contract Manufacturing 2026 Manufacturing Facility Puerto Rico 84,600 Wholesale and Contract Manufacturing 2027 Manufacturing Facility Puerto Rico 22,700 Wholesale and Contract Manufacturing 2027 Manufacturing Facility Dominican Republic 29,700 Wholesale and Contract Manufacturing 2023 (1) Manufacturing Facility Dominican Republic 34,400 Wholesale and Contract Manufacturing 2023 (1) Manufacturing Facility Dominican Republic 20,100 Wholesale and Contract Manufacturing 2023 (1) Manufacturing Facility Dominican Republic 93,700 Wholesale and Contract Manufacturing 2024 Manufacturing Facility Dominican Republic 36,200 Wholesale and Contract Manufacturing 2024 Manufacturing Facility Dominican Republic 16,800 Wholesale and Contract Manufacturing 2026 Manufacturing Facility Dominican Republic 30,200 Wholesale and Contract Manufacturing 2025 (1) These leases expired in 2023 and we are currently occupying the spaces on a month-to-month basis until a new agreement is reached.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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A disc ussion of legal matters is f ound in Note 20 of our Consolidated Financial Statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
A disc ussion of legal matters is f ound in Note 2 1 of our Consolidated Financial Statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The comparison of the cumulative total return to shareholders for each of the periods assumes that $100 was invested in our common stock on December 31, 2017 and in the NASDAQ Stock Market (U.S.) Index and the Standard & Poor's Footwear Index and that all dividends were reinvested.
The comparison of the cumulative total return to shareholders for each of the periods assumes that $100 was invested in our common stock on December 31, 2018 and in the NASDAQ Stock Market (U.S.) Index and the Standard & Poor's Footwear Index and that all dividends were reinvested.
Dividends In 2013, our Board of Directors approved a dividend policy pursuant to which the Company intends to continue paying comparable cash dividends on its common stock. Share Repurchases On March 8, 2021, we announced a $7,500,000 share repurchase program, which expired on March 4, 2022.
Dividends In 2013, our Board of Directors approved a dividend policy pursuant to which the Company intends to continue paying comparable cash dividends on its common stock. Share Repurchases Our previous $7,500,000 share repurchase program expired on March 4, 2022.
There has not been an announcement for a new repurchase program since the prior program’s expiration in March 2022, and there have been no purchases of common stock since the repurchase program was expired and not renewed. 18 Table of Contents Performance Graph The following performance graph compares our cumulative shareholder return on our common shares with the NASDAQ Composite Index and the Standard & Poor's Footwear Index, which is a published industry index.
We have not announced a new repurchase program since the prior program’s expiration and there have been no purchases of common stock since the repurchase program expired. 17 Table of Contents Performance Graph The following performance graph compares our cumulative shareholder return on our common shares with the NASDAQ Composite Index and the Standard & Poor's Footwear Index, which is a published industry index.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock trades on the NASDAQ Global Select Market under the symbol "RCKY." As of February 28, 2023, there were 70 sh areholders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock trades on the NASDAQ Global Select Market under the symbol "RCKY." As of February 29, 2024, there were 69 sha reholders of record of our common stock.
Removed
This comparison includes the period ended December 31, 2017 through the period ended December 31, 2022. ITEM 6. [RESERVED]
Added
This comparison includes the period ended December 31, 2018 through the period ended December 31, 2023. For information regarding Rocky Brands' equity compensation plans, see Part III, Item 12 of this Annual Report on Form 10-K. ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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We analyze the results of our operations for the last two years (including the trends in the overall business), followed by a discussion of our cash flows and liquidity, our credit facilities, and contractual commitments.
We analyze the results of our operations for the last two years (including trends in the overall business), followed by a discussion of our cash flows and liquidity, our credit facilities, and our contractual commitments.
Furthermore, achieving market acceptance for new products will likely require us to exert substantial product development and marketing efforts, which could result in a material increase in our operating expenses and there can be no assurance that we will have the resources necessary to undertake such efforts.
Furthermore, achieving market acceptance for new products will likely require us to exert substantial product development and marketing efforts, which could result in a material increase in our operating expenses to which there can be no assurance that we will have the resources necessary to undertake such efforts.
With respect to environmental matters, costs are incurred pertaining to regulatory compliance. Such costs have not been, and are not anticipated to become, material. We are contingently liable with respect to lawsuits, taxes and various other matters that routinely arise in the normal course of business. See Note 20 of our Consolidated Financial Statements for further discussion of legal matters.
With respect to environmental matters, costs are incurred pertaining to regulatory compliance. Such costs have not been, and are not anticipated to become, material. We are contingently liable with respect to lawsuits, taxes and various other matters that routinely arise in the normal course of business. See Note 21 of our Consolidated Financial Statements for further discussion of legal matters.
Any significant losses implicit in these contracts would be recognized in accordance with generally accepted accounting principles. At December 31, 2022, no such losses existed. Our ongoing business activities continue to be subject to compliance with various laws, rules and regulations as may be issued and enforced by various federal, state and local agencies.
Any significant losses implicit in these contracts would be recognized in accordance with generally accepted accounting principles. At December 31, 2023, no such losses existed. Our ongoing business activities continue to be subject to compliance with various laws, rules and regulations as may be issued and enforced by various federal, state and local agencies.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes the matters that we consider to be important to understanding the results of our operations for each of the two years in the period ended December 31, 2022 and 2021, and our capital resources and liquidity as of December 31, 2022 and 2021.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes the matters that we consider to be important to understanding the results of our operations for each of the two years in the period ended December 31, 2023 and 2022, and our capital resources and liquidity as of December 31, 2023 and 2022.
Should management encounter difficulties liquidating slow moving or obsolete inventories, additional provisions may be necessary. Management regularly reviews the adequacy of our inventory reserves and makes adjustments as required. See Note 5 of our Consolidated Financial Statements for additional information regarding inventories.
Should management encounter difficulties liquidating slow moving or obsolete inventories, additional provisions may be necessary. Management regularly reviews the adequacy of our inventory reserves and makes adjustments as required. See Note 6 of our Consolidated Financial Statements for additional information regarding inventories.
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 Our products are distributed through three distinct business segments: Wholesale, Retail and Contract Manufacturing.
As a 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. Our products are distributed through three distinct business segments: Wholesale, Retail and Contract Manufacturing.
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 historically utilize our revolving credit facility to fund our seasonal working capital requirements.
Our working capital fluctuates throughout the year as a result of our seasonal business cycle and business expansion, and is generally lowe st in the months of January through March of each year and highest during the months of May through October of each year. We historically utilize our revolving credit facility to fund our seasonal working capital requirements.
We conclude our MD&A with information on recent accounting pronouncements which we adopted during the year, as well as those not yet adopted that are expected to have an impact on our financial accounting practices. 19 Table of Contents The following discussion should be read in conjunction with our Consolidated Financial Statements and the notes thereto, included elsewhere herein.
We conclude our MD&A with information on recent accounting pronouncements which we adopted during the year, as well as those not yet adopted that are expected to have an impact on our financial accounting practices. The following discussion should be read in conjunction with our Consolidated Financial Statements and the notes thereto, included elsewhere herein.
We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities, also known as "Variable Interest Entities." Additionally, we do not have any related party transactions that materially affect the results of operations, cash flow or financial condition. OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements as of December 31, 2022.
We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities, also known as "Variable Interest Entities." Additionally, we do not have any related party transactions that materially affect the results of operations, cash flow or financial condition.
We then provide a review of the critical accounting judgments and estimates that we have made that we believe are most important to an understanding of our MD&A and our Consolidated Financial Statements.
We then provide a review of the critical accounting policies and estimates we have made that we believe are most important to the understanding of our MD&A and our Consolidated Financial Statements.
Failure to gain market acceptance for new products that we introduce could impede our growth, reduce our profits, adversely affect the image of our brands, erode our competitive position and result in long term harm to our business. 20 Table of Contents Net sales.
Failure to gain market acceptance for new products that we introduce could impede our growth, reduce our profits, adversely affect the image of our brands, erode our competitive position, and result in long term harm to our business.
Our footwear products incorporate varying features and are positioned across a range of suggested retail price points from $26.00 for our value priced products to $520.00 for our premium products.
Our footwear products incorporate varying features and are positioned across a range of suggested retail price points from $45.00 for our value priced products to $655.00 for our premium products.
LIQUIDITY AND CAPITAL RESOURCES Overview Our principal sources of liquidity have been our income from operations and borrowings under our credit facilities. Over the last several years, our principal uses of cash have been for working capital and capital expenditures to support our growth, as well as dividend payments and share repurchases.
LIQUIDITY AND CAPITAL RESOURCES Overview Our principal sources of liquidity have been our income from operations, cash provided by operating activities and borrowings under our credit facilities. Over the last several years, our principal uses of cash have been for working capital and capital expenditures to support our growth, as well as dividend payments.
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 $7.3 million for 2022 and $25.8 million in 2021. Capital expenditures f or 2023 a re anticipated t o be approximately $7.1 million.
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 $4.3 million for 2023 and $7.3 million in 2022. Capital expenditures f or 2024 a re anticipated t o be approximately $5.5 million.
The principal use of net cash in 2022 was related to investments in molds and equipment associated with our manufacturing operations, investments in information technology and improvements made to our distribution facility. The principal use of net cash in 2021 was to fund the Acquisition. 23 Table of Contents Financing Activities.
The principal use of net cash in 2022 was related to investments in molds and equipment associated with our manufacturing operations, investments in information technology and improvements made to our distribution facility. Financing Activities.
Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under the caption "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995" below. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of the Company.
Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under the caption "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995" below.
Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 15, 2022, which is available free of charge on the SEC's website at https://www.sec.gov/edgar/search/ and our corporate website ( www.rockybrands.com ).
For the discussion of the changes in our results of operations between the years ended December 31, 2022 and December 31, 2021, refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 10, 2023, which is available on the SEC's website at https://www.sec.gov/edgar/search/ and our corporate website at www.rockybrands.com .
The forward-looking statements in this section and other parts of this document involve risks and uncertainties including statements regarding our plans, objectives, goals, strategies, and financial performance.
The forward-looking statements in this section and other parts of this Annual Report on Form 10-K involve risks and uncertainties including statements regarding our plans, objectives, goals, strategies and financial performance.
For additional information see Note 12 of our Consolidated Financial Statements. RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS Note 2 to Consolidated Financial Statements discusses new accounting pronouncements adopted during 2021 and the expected impact of accounting pronouncements recently issued but not yet required to be adopted.
For additional information see Note 13 of our Consolidated Financial Statements. 24 Table of Contents RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS Refer to Note 2 to Consolidated Financial Statements for new accounting pronouncements adopted during the current year and the expected impact of accounting pronouncements recently issued but not yet required to be adopted.
Contractual Obligations at December 31, 2022: ($ in millions) Total Less than 1 Year 1-3 Years 3-5 Years Over 5 Years Long-term debt (Note 9) $ 259.6 $ 3.3 $ 6.5 $ 249.8 - Long-Term Taxes payable 0.2 - - 0.2 - Minimum operating lease commitments (Note 10) 14.3 3.2 6.0 5.1 - Contract Liabilities (Note 16) - - - - - Consulting commitments 0.5 0.5 - - - Total contractual obligations $ 274.6 $ 7.0 $ 12.5 $ 255.1 - From time to time, we enter into purchase commitments with our suppliers under customary purchase order terms.
Contractual Obligations at December 31, 2023: ($ in millions) Total Less than 1 Year 1-3 Years 3-5 Years Over 5 Years Long-term debt (Note 10) $ 175.0 $ 2.7 $ 5.4 $ 166.9 - Long-Term Taxes payable 0.2 - 0.2 - - Minimum operating lease commitments (Note 11) 8.5 2.8 5.6 0.1 - Contract Liabilities (Note 17) 0.9 0.9 - - - Total contractual obligations $ 184.6 $ 6.4 $ 11.2 $ 167.0 $ - From time to time, we enter into purchase commitments with our suppliers under customary purchase order terms.
To the extent the adoption of new accounting standards materially affect financial condition, results of operations, or liquidity, the impacts are discussed in the applicable section of this MD&A and the Notes to Consolidated Financial Statements. 25 Table of Contents SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report, including Management’s Discussion and Analysis of Financial Conditions 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.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report, including Management’s Discussion and Analysis of Financial Conditions 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.
The Acquisition expanded our brand portfolio to include Muck, XTRATUF, Servus, Ranger and NEOS brands (the "Acquired Brands"). 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.
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.
See Note 1 and Note 7 of our Consolidated Financial Statements for additional information regarding intangible assets and the annual impairment analysis. Income taxes Management records a valuation allowance to reduce its deferred tax assets for a portion of state and local income tax net operating losses that it believes may not be realized.
Income taxes Management records a valuation allowance to reduce its deferred tax assets for a portion of state and local income tax net operating losses that it believes may not be realized.
As a result, balances on our revolving credit facility could fluctuate significantly throughout the year. Our working capital increased to $244.8 million at December 31, 2022, compared to $235.1 million at the end of the prior year.
As a result, balances on our revolving credit facility could fluctuate significantly throughout the year. Our working capital decreased to $186.6 million at December 31, 2023 , compared to $244.8 million at the end of the prior year primarily due to a decrease in inventory and accounts receivable offset by a decrease in accounts payable.
New products that we introduce may not be successful with consumers or one or more of our brands may fall out of favor with consumers.
ECONOMIC CONDITIONS AND UNCERTAINTIES Our growth strategy is founded substantially on the expansion of our brands into new footwear and apparel markets. New products that we introduce may not be successful with consumers or one or more of our brands may fall out of favor with consumers.
If we determine that sales returns or allowances should be either increased or decreased, then the adjustment would be made to net sales in the period in which such a determination is made. Sales returns and allowances as a percentage of sales for the years ended December 31, 2022 and 2021 w ere 6.7% and 2.6%, r espectively.
The actual amount of sales returns and allowances realized may differ from our estimates. If we determine that sales returns or allowances should be either increased or decreased, then the adjustment would be made to net sales in the period in which such a determination is made.
Contractual Obligations and Commercial Commitments The following table summarizes our contractual obligations at December 31, 2022 resulting from financial contracts and commitments. These amounts are generally consistent from year to year, closely reflect our levels of production, and are not long-term in nature (less than three months).
These amounts are generally consistent from year to year, closely reflect our levels of production, and are not long-term in nature (less than three months). The following table does not include information on our recurring purchases of materials for use in our manufacturing operations.
Retail gross margins decreased due to increased product costs and freight costs for the year ended December 31, 2022. Contract Manufacturing gross margin decreased for the year ended 2022 compared to 2021 due to increased product costs. Gross margin also decreased due to the expiration of certain contracts with the U.S. military during the twelve months ended December 31, 2022.
The decrease in Contract Manufacturing sales for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 was due to the expiration of certain contracts with the U.S. Military.
Sales returns and allowances We record a reduction to gross sales based on estimated customer returns and allowances. These reductions are influenced by historical experience, based on customer returns and allowances. The actual amount of sales returns and allowances realized may differ from our estimates.
If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Sales returns and allowances We record a reduction to gross sales based on estimated customer returns and allowances. These reductions are influenced by historical experience based on customer returns and allowances.
Future minimum lease payments under non-cancelable operating leases are outlined in further detail in Note 10 of our Consolidated Financial Statements We believe that our credit facilities coupled with cash generated from operations will provide sufficient liquidity to fund our operations for at least the next twelve months.
We believe that our credit facilities coupled with cash generated from operations will provide sufficient liquidity to fund our operations 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.
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. Our growth strategy is founded substantially on the expansion of our brands into new footwear and apparel markets.
Our Retail business includes direct sales of our products to consumers through our business-to-business web platform, e-commerce websites, third-party marketplaces and our Rocky Outdoor Gear Store. 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.
We lease certain machinery, equipment, and manufacturing facilities under operating leases that generally provide for renewal options.
We lease certain machinery, equipment, and manufacturing facilities under operating leases that generally provide for renewal options. Future minimum lease payments under non-cancelable operating leases are outlined in further detail in Note 11 of our Consolidated Financial Statements.
Intangible assets Intangible assets, including goodwill, trademarks and patents, are reviewed for impairment annually, and more frequently, if necessary. We perform such testing of indefinite-lived intangible assets in the fourth quarter of each year or as events occur or circumstances change that would more likely than not reduce the fair value of the assets below their carrying amount.
Goodwill and Indefinite-Lived Intangibles Goodwill and intangible assets deemed to have indefinite lives are not amortized but are evaluated for impairment annually or whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value of the assets below their carrying amount.
Cash Flows and Material Cash Requirements Twelve Months Ended December 31, ($ in millions) 2022 2021 Operating activities $ 19.1 $ (54.9 ) Investing activities (1.2 ) (233.5 ) Financing activities (18.1 ) 265.9 Net change in cash and cash equivalents $ (0.2 ) $ (22.5 ) Operating Activities.
For more information regarding our credit facilities please se e No te 10 . 22 Table of Contents Cash Flows and Material Cash Requirements Twelve Months Ended December 31, ($ in millions) 2023 2022 Operating activities $ 73.6 $ 19.1 Investing activities 13.4 (1.2 ) Financing activities (88.2 ) (18.1 ) Net change in cash and cash equivalents $ (1.2 ) $ (0.2 ) Operating Activities.
EXECUTIVE OVERVIEW 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, Muck, XTRATUF, Servus, Ranger and the licensed brand Michelin. On January 24, 2021, we entered into a Purchase Agreement (the "Purchase Agreement") with certain subsidiaries of Honeywell International Inc.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of the Company. 18 Table of Contents BUSINESS OVERVIEW 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, Muck, Georgia Boot, Durango, XTRATUF, Lehigh, Ranger and the licensed brand Michelin.
On March 8, 2021, we announced a new $7,500,000 share repurchase program, which expired on March 4, 2022. F or additional information regarding this share repurchase p rogram, see Note 13 of our Consolidated Financial Statements. T here has not been an announcement for a new repurchase program since the expiration of the prior program in March 2022.
Cash used in financing activities for the twelve months ended December 31, 2023 and 2022 was primarily related to payments on our revolving credit facility and term loan. Our prior $7,500,000 share repurchase program expired on March 4, 2022. F or additional information regarding this share repurchase p rogram, see Note 1 4 of our Consolidated Financial Statements.
We determined the fair values of the indefinite-lived intangibles were in excess of their carrying values. There is no goodwill allocated to our Contract Manufacturing segment. As of December 31, 2022, goodwill allocated to our Wholesale and Retail reporting segments was $25.4 million and $24.8 million, respectively.
We test goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter each fiscal year by quantitatively comparing the fair values of the Wholesale and Retail reporting units and indefinite-lived intangibles to their carrying amounts. There was no goodwill allocated to our Contract Manufacturing reporting unit.
We have increased our targeted marketing efforts and brand awareness, which led to increased traffic on our branded websites. 21 Table of Contents Contract Manufacturing net sales decreased due to the expiring contracts with the U.S. military during the twelve months ended December 31, 2022.
Retail net sales for the twelve months ended December 31, 2023 increased due to strong growth in our direct-to-consumer e-commerce business. We have enhanced our targeted marketing efforts, primarily through digital marketing, allowing us to increase brand awareness and engage more directly with consumers, which led to increased traffic on our branded websites throughout the year.
The decrease in operating expenses as a percentage of net sales was driven primarily by a decrease in discretionary spending and improved distribution center efficiencies compared with the year ago period.
This was partially offset by lower variable costs associated with lower net sales. Additionally, operating expenses as a percentage of net sales decreased in the latter half of 2023 compared to the same period a year ago.
Twelve Months Ended December 31, ($ in thousands) 2022 2021 Inc./ (Dec.) GROSS MARGIN: Wholesale Margin $'s $ 165,059 $ 140,166 $ 24,893 Margin % 34.0 % 35.8 % -1.8 % Retail Margin $'s $ 57,817 $ 47,792 $ 10,025 Margin % 50.1 % 50.5 % -0.4 % Contract Manufacturing Margin $'s $ 2,343 $ 6,578 $ (4,235 ) Margin % 15.3 % 23.1 % -7.8 % Total Margin $'s $ 225,219 $ 194,536 $ 30,683 Margin % 36.6 % 37.8 % -1.2 % Excluding $1.1 million of gross margin and sales relating to the divestiture of the NEOS brand, Wholesale gross margins were 34.1% for the year ended December 31, 2022.
Twelve Months Ended December 31, ($ in thousands) 2023 2022 Inc./ (Dec.) GROSS MARGIN: Wholesale Margin $'s $ 119,485 $ 165,059 $ (45,574 ) Margin % 35.5 % 34.0 % 1.5 % Retail Margin $'s $ 58,391 $ 57,817 $ 574 Margin % 49.9 % 50.1 % (0.2 )% Contract Manufacturing Margin $'s $ 722 $ 2,343 $ (1,621 ) Margin % 9.2 % 15.3 % (6.1 )% Total Margin $'s $ 178,598 $ 225,219 $ (46,621 ) Margin % 38.7 % 36.6 % 2.1 % The increase in Wholesale gross margin as a percentage of net sales for the twelve months ended December 31, 2023 compared to the year ago period was due to realization of pricing actions taken in 2022, as well as lower in-bound logistics costs compared to the year ago period.
Percentage of Net Sales The following table sets forth consolidated statements of operations data as percentages of total net sales: Twelve Months Ended December 31, 2022 2021 Net sales 100.0 % 100.0 % Cost of goods sold 63.4 62.2 Gross margin 36.6 37.8 Operating expenses 29.4 30.8 Income from operations 7.2 % 7.0 % Results of Operations December 31, 2022 Compared to Year Ended December 31, 2021 Twelve Months Ended December 31, ($ in thousands) 2022 2021 Inc./ (Dec.) Inc./ (Dec.) NET SALES: Wholesale $ 484,779 $ 391,070 $ 93,709 24.0 % Retail 115,354 94,658 20,696 21.9 Contract Manufacturing 15,342 28,499 (13,157 ) (46.2 ) Total Net Sales $ 615,475 $ 514,227 $ 101,248 19.7 % Included in Wholesale net sales for the twelve months ended December 31, 2022 is $216.9 mill ion of net sales attributed to the Acquired Brands and $3.6 million of inventory net sales related to the divestiture of the NEOS brand during the third quarter of 2022.
Analysis of Results of Operations The following table sets forth consolidated statements of operations data as percentages of total net sales: Twelve Months Ended December 31, 2023 2022 NET SALES: 100.0 % 100.0 % Cost of goods sold 61.3 63.4 Gross margin 38.7 36.6 Operating expenses 31.0 29.4 Income from operations 7.7 % 7.2 % Gross margin in 2023 was $178.6 million, or 38.7% of net sales, compared to $225.2 million, or 36.6% of net sales, in 2022.
See Note 16 of our Consolidated Financial Statements for additional information regarding revenues. Accounts receivable allowances Management maintains allowances for uncollectible accounts and estimated losses resulting from the inability of our customers to make required payments.
Allowance for Credit Losses Management maintains allowances for uncollectible accounts and estimated losses resulting from the inability of our customers to make required payments. We evaluate the allowance for credit losses based on a review of current customer status and historical collection experience along with current and reasonable supportable forecasts of future economic conditions.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to establish accounting policies and make estimates that affect amounts reported in our Consolidated Financial Statements.
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.
Inventories Management identifies slow moving inventories and estimates appropriate loss provisions related to these inventories.
Sales returns and allowances as a percentage of sales for the years ended December 31, 2023 and 2022 w ere 8.4% and 6.7%, respe ctively. Inventories Management identifies slow moving inventories and estimates appropriate loss provisions related to these inventories.
Removed
A discussion of the changes in our results of operations between the years ended December 31, 2021 and December 31, 2020 has been omitted from this Annual Report on Form 10-K but may be found in Item 7.
Added
During the first quarter of 2023, we divested the Servus brand. The gain of approximately $1.3 million on the sale of the Servus brand during the first quarter was recorded within Interest Expense and Other - net in the Consolidated Statements of Operations for the year ended December 31, 2023.
Removed
Use of the terms "Rocky Brands," the "Company," "we," "us" and "our" in this discussion refer to Rocky Brands, Inc. and its subsidiaries. Our fiscal year begins on January 1 and ends on December 31.
Added
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. During the third quarter of 2023, we closed our manufacturing facility in Rock Island, Illinois.
Removed
(collectively, "Honeywell"), to purchase Honeywell's performance and lifestyle footwear business, including brand names, trademarks, assets and liabilities associated with Honeywell's performance and lifestyle footwear business (the "Acquisition") for an aggregate purchase price of $212 million.
Added
Acquired in March of 2021 as a part of our acquisition of the performance and lifestyle footwear business of Honeywell International Inc, this facility primarily manufactured product for the Servus brand.
Removed
We closed on the Acquisition on March 15, 2021 for preliminary aggregate closing price of approximately $207 million, net of cash acquired, based on preliminary working capital and other adjustments. Upon a final agreement of net working capital as of the Acquisition Date, we owed Honeywell an additional $5.4 million.
Added
Following the sale of the Servus brand in the first quarter of 2023, the Rock Island facility was underutilized, prompting our decision to close the facility during the third quarter of 2023. In 2023, we were also awarded a new multi-year contract with the U.S.
Removed
The Acquisition was funded through cash on hand and borrowings under two new credit facilities. See Note 9 for information regarding the two new credit facilities. O n September 30, 2022, we completed the sale of the NEOS brand and related assets. See Note 4 for additional information.
Added
Military pursuant to which we will produce and ship a minimum number of pairs to the U.S. Military through 2026, with an option to extend. The sales under this contract are included in our Contract Manufacturing segment. We completed the sale of the NEOS brand during the third quarter of 2022.
Removed
Our Retail business includes direct sales of our products to consumers through our business to business web platform, e-commerce websites, third party marketplaces and our Rocky Outdoor Gear Store.
Added
The sale of NEOS inventory was recorded within net sales and cost of goods sold within the Consolidated Statements of Operations for the year ended December 31, 2022. The gain on sale of the NEOS assets is recorded as a reduction of operating expenses within the Consolidated Statements of Operations for the year ended December 31, 2022.
Removed
Net sales and related cost of goods sold are recognized at the time products are shipped to the customer and title transfers. Net sales are recorded net of estimated sales discounts and returns based upon specific customer agreements and historical trends. Net sales include royalty income from licensing our brands. Cost of goods sold.
Added
As the macroeconomic environment is continuously evolving, we are aware that global trends, such as inflationary pressures, are weakening consumer sentiment, negatively impacting consumer spending, and creating differing traffic patterns across channels. These conditions have led to elevated inventory levels in certain markets and an increased promotional environment.
Removed
Our cost of goods sold represents our costs to manufacture products in our own facilities, including raw materials costs and all overhead expenses related to production, as well as the cost to purchase finished products from our third-party manufacturers. Cost of goods sold also includes the cost to transport these products to our distribution center. Operating expenses.
Added
We have also experienced higher interest rates which have resulted in increased borrowing costs. There is ongoing uncertainty surrounding the global economy and macroeconomic environment, which we expect to continue and could potentially cause disruption and near-term challenges for our business.
Removed
Our operating expenses consist primarily of selling, marketing, wages and related payroll and employee benefit costs, travel and insurance expenses, depreciation, amortization, professional fees, software licensing fees, facility expenses, bank charges, warehouse and outbound freight expenses. We also incurred significant operating expenses and acquisition amortization and restructuring costs associated with the Acquisition during the twelve months ended December 31, 2022.
Added
We continue to monitor pressures on the global supply chain, which have shifted the timing of shipments across our brands, resulting in increased inventory levels outpacing our sales growth.
Removed
Included in Wholesale net sales for the twelve months ended December 31, 2021 is $160.0 mill ion of net sales attributed to the Acquired Brands. Adjusted Wholesale net sales for the year ended December 31, 2022 to exclude the divestiture of the NEOS brand is $481.2 million.
Added
However, we have seen improvements in transit lead times and related freight costs compared to the prior period, which have had a positive impact on the results of our operations through 2023. 2023 FINANCIAL OVERVIEW ● Net sales decreased 25.0% to $461.8 million ● Gross margin increased 210 basis points to 38.7% ● Operating income decreased 19.7% to $35.4 million ● Net income decreased 49.1% to $10.4 million, or $1.41 per diluted share ● Total debt, net of debt issuance costs, decreased 32.6% to $173.1 million 19 Table of Contents ● Inventory decreased 28.1% to $169.2 million ● Cash provided by operating activities increased 285% to $54.5 million We experienced a decline in sales of 25.0% to $461.8 million for the year ending December 31, 2023 compared to the year ending December 31, 2022, primarily attributable to our Wholesale segment.
Removed
Wholesale sales increased due to strong demand for our products as consumers continued to respond favorably to our recent product introductions and we were able to capitalize on our strong inventory position which allowed us to gain additional market share and shelf space.
Added
The sales decline in our Wholesale segment was due to a challenging macroeconomic environment, coupled with our wholesale partners working through excess inventories. Additionally, distribution challenges in 2021 led to delayed delivery of Fall 2021 inventory into the first half of 2022, creating a difficult year-over-year comparison for the first nine months of 2023.
Removed
Included in Retail net sales for the twelve months ended December 31, 2022 and 2021 is $25.9 and $17.6 m illion, respectively, of net sales attributed to the Acquired Brands. Retail sales increased due to strong growth in our direct to consumer e-Commerce and marketplace businesses during the year as well as growth in our Lehigh business-to-business platform.
Added
While our 2023 performance was challenged by a difficult macroeconomic backdrop and a tough year-over-year comparison for our Wholesale segment, we experienced strong retail sell-through and increased performance of our own e-commerce websites, which partially offset the decrease in Wholesale sales. During the year ending December 31, 2023, our gross margin improved 210 basis points to 38.7%.
Removed
On an adjusted basis, excluding a one-time inventory fair value adjustment associated with the Acquisition of $3.5 million, Wholesale gross margins were 36.7% for the year ended December 31, 2021. The decrease in margin is mainly attributable to increased shipping and freight costs.
Added
The increase in gross margin for the year ending December 31, 2023 compared to the year ending December 31, 2022 was due to several factors. First, higher Wholesale segment gross margins resulted from the realization of pricing actions taken the second half of 2022 and a reduction in inbound logistics costs.
Removed
Twelve Months Ended December 31, ($ in thousands) 2022 2021 Inc./ (Dec.) Inc./ (Dec.) OPERATING EXPENSES: Operating Expenses $ 181,181 $ 158,564 $ 22,617 14.3 % % of Net Sales 29.4 % 30.8 % -1.4 % Excluding $5.7 million of Acquisition-related amortization and integration costs, restructuring costs and disposition of assets in 2022 and $11.9 million in Acquisition-related amortization and integration expenses in 2021, adjusted operating expenses were $175.5 million or 28.7% of adjusted net sales in the current year and $146.6 million or 28.5% of net sales in the prior year.
Added
Secondly, a greater proportion of Retail segment sales, which carry higher gross margins than our Wholesale and Contract Manufacturing segments, also contributed to the increase. Operating income decreased to $35.4 million in 2023. As a percentage of net sales, operating income was 7.7% in 2023 compared to 7.2% in 2022.
Removed
Twelve Months Ended December 31, ($ in thousands) 2022 2021 Inc./ (Dec.) Inc./ (Dec.) INTEREST AND OTHER EXPENSES: Other Expense $ (18,270 ) $ (10,603 ) $ (7,667 ) 72.3 % Other expenses increased due to higher interest rates on outstanding borrowings on both our senior term loan and credit facility. 22 Table of Contents Twelve Months Ended December 31, ($ in thousands) 2022 2021 Inc./ (Dec.) Inc./ (Dec.) INCOME TAXES: Income Tax Expense $ 5,303 $ 4,810 $ 493 10.2 % Effective Tax Rate 20.6 % 19.0 % 1.6 % The effective tax rate for the year ended December 31, 2022 increased primarily due to the one-time benefit received for the year ending December 31, 2021 arising from the release of valuation allowances on state net operating losses and an increase in foreign tax credits.
Added
The increase in operating income as a percentage of net sales was attributed to reorganization changes made during 2023 in an effort to leverage top-line sales and decrease operating expenses. As a percentage of net sales, our gross margin increased 210 basis points year over year while operating expenses only increased 160 basis points.
Removed
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 facilities please se e No te 9. Refer to Note 3 of our Consolidated Financial Statements fo r additional information regarding our recent Acquisition.
Added
The overall increase in operating expenses as a percentage of net sales for full year 2023, when compared to the year ago period, was attributable to costs incurred prior to realizing the benefits from cost-savings reviews and operational efficiencies implemented by management through strategic initiatives, particularly in the first half of 2023.
Removed
Our operating activities during 2022 mainly consisted of proceeds from operations offset by a decrease in accounts payable . The principal use of net cash in 2021 was increased inventories and accounts receivable, partially offset by increased accounts payable. Investing Activities.
Added
As of December 31, 2023 we held $4.5 million in cash and cash equivalents and our total indebtedness stood at $173.1 million, a reduction of $84.6 million or 32.6% when compared to December 31, 2022. Of total debt paydown, $40.8 million of this reduction in indebtedness occurred in the fourth quarter of 2023.
Removed
The principal use of our net cash during 2022 was payments on the term loan. During 2021, financing activities mainly consisted of proceeds from and payments on the revolving credit facility and term loan. Both debt facilities were incurred to fund the Acquisition and other working capital requirements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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We regularly assess these risks and have established policies and business practices that should mitigate a portion of the adverse effect of these and other potential exposures. 26 Table of Contents
Foreign Exchange Risk We face market risk to the extent that changes in foreign currency exchange rates affect our foreign assets, liabilities and inventory purchase commitments. We regularly assess these risks and have established policies and business practices that should mitigate a portion of the adverse effect of these and other potential exposures. 25 Table of Contents
For additional information about our credit facilities see Note 9 . We do not hold any market risk sensitive instruments for trading purposes. We do not have any interest rate management agreements as of December 31, 2022. Commodity Risk We are also exposed to changes in the price of commodities used in our manufacturing operations.
We do not have any interest rate management agreements as of December 31, 2023. Commodity Risk We are also exposed to changes in the price of commodities used in our manufacturing operations. However, commodity price risk related to our current commodities is not material as price changes in commodities can generally be passed along to the customer.
Removed
As of December 31, 2022, we had $259.6 million of debt consisting of $116.3 million under our senior term facility and $143.3 million under our revolving credit facility. A hypothetical increase of 1% in the interest rate on the borrowings under our credit facilities would have increased interest expense by approximately $2.6 million.
Added
As of December 31, 2023, we ha d $175.0 million of debt consisting of $77.9 million under our senior term facility and $97.1 m illion under our revolving credit facility. For additional information about our credit facilities see Note 10 . We do not hold any market risk sensitive instruments for trading purposes.
Removed
However, commodity price risk related to our current commodities is not material as price changes in commodities can generally be passed along to the customer. Foreign Exchange Risk We face market risk to the extent that changes in foreign currency exchange rates affect our foreign assets, liabilities and inventory purchase commitments.

Other RCKY 10-K year-over-year comparisons