RCKY 10-Q Quarterly Report Sept. 30, 2019

ROCKY BRANDS, INC.

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10-Q 1 rcky-20190930x10q.htm 10-Q 2019 Q3 10-Q 09302019 2018 Taxonomy

Table of Contents

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2019

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

Commission File Number: 001-34382

ROCKY BRANDS, INC.

(Exact name of Registrant as specified in its charter)


Ohio		No. 31 ‑1364046
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

39 East Canal Street, Nelsonville, Ohio 45764
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (740) 753 ‑9100



Title of class	Trading symbol	Name of exchange on which registered
Common Stock – No Par Value	RCKY	Nasdaq

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in 12b-2 of the Exchange Act.

☐ Large accelerated filer ☒ Accelerated filer

☐ Non-accelerated filer ☒ Smaller reporting company

☐ Emerging growth company

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

There were 7,374,969 shares of the Registrant's Common Stock outstanding on October 31, 2019 .

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TABLE OF CONTENTS



		Page
PART I	Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2019 (Unaudited), December 31, 2018, and September 30, 2018 (Unaudited)	2
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II	Other Information
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 6.	Exhibits	23
SIGNATURES		24

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PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

(Unaudited)



		September 30,		December 31,		September 30,
		2019		2018		2018
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents	$	6,440	$	10,173	$	4,210
Trade receivables, net		50,700		43,337		50,691
Contract receivables		2,036		2,602		4,849
Other receivables		310		331		282
Inventories – net		82,881		72,822		78,409
Income tax receivable		-		30		-
Prepaid expenses		2,656		1,890		2,122
Total current assets		145,023		131,185		140,563
LEASED ASSETS		1,781		-		-
PROPERTY, PLANT & EQUIPMENT – net		25,150		23,057		23,209
IDENTIFIED INTANGIBLES – net		30,248		30,273		30,283
OTHER ASSETS		293		148		163
TOTAL ASSETS	$	202,495	$	184,663	$	194,218

LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable	$	20,531	$	13,543	$	20,622
Contract liabilities		1,936		2,602		4,849
Accrued expenses:
Salaries and wages		2,791		3,339		3,661
Taxes - other		624		556		158
Accrued freight		495		668		465
Commissions		488		560		432
Accrued duty		2,597		2,334		2,727
Income tax payable		19		-		1,888
Other		1,766		1,416		1,308
Total current liabilities		31,247		25,018		36,110
LONG-TERM TAXES PAYABLE		169		169		169
LONG-TERM LEASE		1,188		-		-
DEFERRED INCOME TAXES		7,780		7,780		7,726
DEFERRED LIABILITIES		230		121		153
TOTAL LIABILITIES		40,614		33,088		44,158
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and outstanding September 30, 2019 - 7,403,219; December 31, 2018 - 7,368,494 and September 30, 2018 - 7,421,317		69,273		68,387		69,589
Retained earnings		92,608		83,188		80,471
Total shareholders' equity		161,881		151,575		150,060
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	202,495	$	184,663	$	194,218

See Notes to Unaudited Condensed Consolidated Financial Statements

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Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)



		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2019		2018		2019		2018
NET SALES	$	67,179	$	65,916	$	195,067	$	185,508
COST OF GOODS SOLD		42,165		43,516		125,633		122,610
GROSS MARGIN		25,014		22,400		69,434		62,898

OPERATING EXPENSES		18,027		16,791		54,004		49,688

INCOME FROM OPERATIONS		6,987		5,609		15,430		13,210

OTHER INCOME (EXPENSES)		43		31		160		(148)

INCOME BEFORE INCOME TAXES		7,030		5,640		15,590		13,062

INCOME TAX EXPENSE		1,414		595		3,212		2,117

NET INCOME	$	5,616	$	5,045	$	12,378	$	10,945

INCOME PER SHARE
Basic	$	0.76	$	0.68	$	1.67	$	1.48
Diluted	$	0.75	$	0.67	$	1.66	$	1.47
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic		7,400		7,418		7,392		7,412
Diluted		7,455		7,480		7,443		7,454

See Notes to Unaudited Condensed Consolidated Financial Statements

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Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands, except per share amounts)

(Unaudited)



	Common Stock and				Accumulated
	Additional Paid-in Capital				Other				Total
	Shares				Comprehensive		Retained		Shareholders'
	Outstanding		Amount		Income		Earnings		Equity

BALANCE - December 31, 2018	7,368	$	68,387	$	-	$	83,188	$	151,575

NINE MONTHS ENDED SEPTEMBER 30, 2019
Net income						$	3,605	$	3,605
Dividends paid on common stock ($0.12 per share)							(887)		(887)
Repurchase of common stock	-		-						-
Stock issued for options exercised, including tax benefits	17	$	294						294
Stock compensation expense	6		168						168
BALANCE - March 31, 2019	7,391	$	68,849		-	$	85,906	$	154,755

Net income						$	3,157	$	3,157
Dividends paid on common stock ($0.14 per share)							(1,036)		(1,036)
Repurchase of common stock	-		-						-
Stock issued for options exercised, including tax benefits	-		-						-
Stock compensation expense	3	$	164						164
BALANCE - June 30, 2019	7,394	$	69,013	$	-	$	88,027	$	157,040

Net income						$	5,616	$	5,616
Dividends paid on common stock ($0.14 per share)							(1,036)		(1,036)
Repurchase of common stock	-		-						-
Stock issued for options exercised, including tax benefits	7	$	96						96
Stock compensation expense	2		164						164
BALANCE - September 30, 2019	7,403	$	69,273	$	-	$	92,607	$	161,880

BALANCE - December 31, 2017	7,399	$	68,974	$	-	$	72,119	$	141,093

NINE MONTHS ENDED SEPTEMBER 30, 2018
Net income						$	3,251	$	3,251
Dividends paid on common stock ($0.11 per share)							(815)		(815)
Repurchase of common stock	-		-						-
Stock issued for options exercised, including tax benefits	-		-						-
Stock compensation expense	8	$	299						299
BALANCE - March 31, 2018	7,407	$	69,273	$	-	$	74,555	$	143,828

Net income						$	2,649	$	2,649
Dividends paid on common stock ($0.12 per share)							(888)		(888)
Repurchase of common stock	-		-						-
Stock issued for options exercised, including tax benefits	-		-						-
Stock compensation expense	8	$	164						164
BALANCE - June 30, 2018	7,415	$	69,437	$	-	$	76,316	$	145,753

Net income						$	5,045	$	5,045
Dividends paid on common stock ($0.12 per share)							(890)		(890)
Repurchase of common stock	-		-						-
Stock issued for options exercised, including tax benefits	4	$	54						54
Stock compensation expense	2		98						98
BALANCE - September 30, 2018	7,421	$	69,589	$	-	$	80,471	$	150,060

See Notes to Unaudited Condensed Consolidated Financial Statements

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Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


		Nine Months Ended
		September 30,
		2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,378	$	10,945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,767		4,074
Deferred compensation		74		-
(Gain) loss on disposal of fixed assets		7		(8)
Stock compensation expense		496		491
Change in assets and liabilities:
Receivables		(6,747)		(3,290)
Inventories		(10,059)		(12,786)
Other current assets		(3,227)		78
Other assets		(115)		34
Accounts payable		7,201		7,702
Accrued and other liabilities		1,096		1,712
Income taxes payable		19		1,888
Long term taxes payable		-		(2,117)
Net cash provided by operating activities		4,890		8,723

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(6,054)		(3,542)
Proceeds from sales of fixed assets		-		17
Net cash used in investing activities		(6,054)		(3,525)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility		-		4,248
Repayments on revolving credit facility		-		(6,448)
Proceeds from stock options		390		124
Dividends paid on common stock		(2,959)		(2,593)
Net cash used in financing activities		(2,569)		(4,669)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(3,733)		529

CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD		10,173		3,681
END OF PERIOD	$	6,440	$	4,210

See Notes to Unaudited Condensed Consolidated Financial Statements

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Rocky Brands, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

1 . NATURE OF OPERATIONS AND BASIS OF PRESENTATION

We are a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky, Georgia Boot, Durango and Lehigh. 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, western and lifestyle . In addition, as part of our strategy of outfitting consumers from head-to-toe, we market complementary branded apparel and accessories that we believe leverage the strength and positioning of each of our brands.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the financial results. All such adjustments reflected in the unaudited condensed consolidated financial statements are considered to be of a normal and recurring nature. The results of operations for the three and nine months ended September 30, 2019 and 2018 are not necessarily indicative of the results to be expected for the whole year. The December 31, 2018 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). This Quarterly Report on Form 10-Q should be read in connection with our Annual Report on Form 10-K for the year ended December 31, 2018 , which includes all disclosures required by GAAP.

2 . ACCOUNTING STANDARDS UPDATES

Recently Issued Accounting Pronouncements

Rocky Brands, Inc. is currently evaluating the impact of certain Accounting Standards Updates (“ASU”) on its Unaudited Condensed Consolidated Financial Statements or Notes to the Unaudited Condensed Consolidated Financial Statements:


Standard	Description	Anticipated Adoption Period	Effect on the financial statements or other significant matters
ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement	This pronouncement changes the fair value measurement disclosure requirements of ASC 820. The amendments in this ASU are the result of a broader disclosure project called FASB Concepts Statement, Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements.	Q1 2020	The Company is evaluating the impact of the new standard on its Unaudited Condensed Consolidated Financial Statements, but does not anticipate the standard will have a significant impact.
ASU 2016-13, Measurement of Credit Losses on Financial Instruments	The pronouncement seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.	Q1 2020	The Company is evaluating the impacts of the new standard on its existing financial instruments, including trade receivables.

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Accounting Standards Adopted in the Current Year


Standard	Description	Effect on the financial statements or other significant matters
ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-based Payment Accounting	The pronouncement simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees.	The Company adopted this ASU in the first quarter of 2019, which did not have a material effect on the Unaudited Condensed Consolidated Financial Statements.
ASU 2016-02, Leases (Topic 842)	The pronouncement introduces a lessee model that brings most leases on the balance sheet. The standard requires that lessees recognize the following for all leases (with the exception of short-term leases, as that term is defined in the standard) at the lease commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.	This standard was adopted on its effective date, January 1, 2019 using the modified retrospective approach. For additional information see Note 9.

3. FAIR VALUE

Generally accepted accounting standards establish a framework for measuring fair value. The fair value accounting standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This standard clarifies how to measure fair value as permitted under other accounting pronouncements.

The fair value accounting standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This standard also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The fair values of cash and cash equivalents, receivables, and payables approximated their carrying values because of the short-term nature of these instruments. Receivables consist primarily of amounts due from our customers, net of allowances, amounts due from employees (sales persons’ advances in excess of commissions earned and employee travel advances); other customer receivables, net of allowances; and expected insurance recoveries. The carrying amounts of our long-term credit facility and other short-term financing obligations also approximate fair value, as they are comparable to the available financing in the marketplace during the year. The fair value of our revolving line of credit is categorized as Level 2.

4. REVENUE

On January 1, 2018, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments (“New Revenue Standard”) for all contracts not yet completed as of January 1, 2018 using the modified retrospective method. This method requires a cumulative effect adjustment to reflect the impact of initially applying the New Revenue Standard as an adjustment to the opening balance of retained earnings. The New Revenue Standard did not result in a material impact to the opening balance of retained earnings, and therefore no adjustment was made.

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Nature of Performance Obligations

Our products are distributed through three distinct channels, which represent our reportable business segments: Wholesale, Retail, and Military. In our Wholesale business, we distribute our products through a wide range of distribution channels representing over ten thousand retail store locations in the U.S., Canada, and internationally. Our Wholesale channels vary by product line and include sporting goods stores, outdoor specialty stores, online retailers, independent retailers, mass merchants, retail uniform stores, and specialty safety shoe stores. Our Retail business includes direct sales of our products to consumers through our e-commerce websites, our Rocky outlet store, and Lehigh business. We also sell footwear under the Rocky label to the U.S. Military.

Significant Accounting Policies and Judgements

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; this generally occurs upon shipment of our product to our customer, which is when the transfer of control of our products passes to the customer. The duration of our arrangements with our customers are typically one year or less. Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of our products at a point in time and consists of either fixed or variable consideration or a combination of both.

Revenues from sales are recorded at the net sales price, which includes estimates of variable consideration for which reserves are established. Components of variable consideration include prompt payment discounts, volume rebates, and product returns. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer).

The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Our analyses also contemplated application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates detailed below as of September 30, 2019 . Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net revenue and earnings in the period such variances become known.

When a customer has a right to a prompt payment discount, we estimate the likelihood that the customer will earn the discount using historical data and adjust our estimate when the estimate of the likelihood that a customer will earn the discount changes or the consideration becomes fixed, whichever occurs earlier. The estimated amount of variable consideration is recognized as a credit to trade receivables and a reduction in revenue until the uncertainty of the variable consideration is alleviated. Because most of our customers have payment terms less than six months there is not a significant financing component in our contracts with customers.

When a customer is offered a rebate on purchases retroactively this is accounted for as variable consideration because the consideration for the current and past purchases is not fixed until it is known if the discount is earned. We estimate the expected discount the customer will earn at contract inception using historical data and projections and update our estimates when projections materially change or consideration becomes fixed. The estimated rebate is recognized as a credit to trade receivables and offset against revenue until the rebate is earned or the earning period has lapsed.

When a right of return is part of the arrangement with the customer, we estimate the expected returns based on an analysis using historical data. We adjust our estimate either when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed, whichever occurs earlier. Please see Notes 5 and 6 for additional information.

Trade receivables represent our right to unconditional payment that only relies on the passage of time.

Contract receivables primarily represent contractual minimum payments required under non-cancellable contracts with the U.S. Military with a duration of one year or less.

Contract liabilities are performance obligations that we expect to satisfy or relieve within the next twelve months, advance consideration obtained prior to satisfying a performance obligation, or unconditional obligations to provide goods or services under non-cancellable contracts before the transfer of goods or services to the customer has occurred. Our contract liability represents unconditional obligations to provide goods under non-cancellable contracts with the U.S. Military.

Items considered immaterial within the context of the contract are recognized as an expense.

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Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue producing transaction, that are collected from customers, are excluded from revenue.

Costs associated with our manufacturer’s warranty continue to be recognized as expense when the products are sold in accordance with guidance surrounding product warranties.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in included in operating expenses.

Costs associated with obtaining a contract are expensed as incurred in accordance with the practical expedient in ASC 340-40 in instances where the amortization period is one year or less. We anticipate substantially all of our costs incurred to obtain a contract would be subject to this practical expedient.

Contract Balances

The following table provides information about contract liabilities from contracts with our customers.


		September 30,		December 31,		September 30,
($ in thousands)		2019		2018		2018
Contract liabilities	$	1,936	$	2,602	$	4,849

Significant changes in the contract liabilities balance during the period are as follows:


($ in thousands)		Contract liabilities
Balance, December 31, 2018	$	2,602
Non-cancelable contracts with customers entered into during the period		2,458
Revenue recognized related to non-cancelable contracts with customers during the period		(3,124)
Balance, September 30, 2019	$	1,936

Disaggregation of Revenue

All revenues are recognized at a point in time when control of our products pass to the customer at point of shipment. Because all revenues are recognized at a point in time and are disaggregated by channel, our segment disclosures are consistent with ASC 606 disaggregation requirements. See Note 13 for segment disclosures.

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5 . TRADE RECEIVABLES

Trade receivables are presented net of the related allowance for uncollectible accounts of approximately $1,251,000, $1,268,000 and $1,357,000 at September 30, 2019, December 31, 2018 and September 30, 2018, respectively. We record the allowance based on historical experience, the age of the receivables, and identification of customer accounts that are likely to prove difficult to collect due to various criteria including pending bankruptcy. However, estimates of the allowance in any future period are inherently uncertain and actual allowances may differ from these estimates. If actual or expected future allowances were significantly greater or less than established reserves, a reduction or increase to bad debt expense would be recorded in the period this determination was made. Our credit policy generally provides that trade receivables will be deemed uncollectible and written-off once we have pursued all reasonable efforts to collect on the account.

In accordance wit h ASC 606, the return reserve liability netted against trade receivables was approximately $1,073,000, $1,154,000 and $908,000 for the periods ending September 30, 2019, December 31, 2018 and September 30, 2018, respectively.

6 . INVENTORY

Inventories are comprised of the following:


		September 30,		December 31,		September 30,
($ in thousands)		2019		2018		2018
Raw materials	$	11,909	$	12,986	$	14,311
Work-in-process		946		715		876
Finished goods		70,026		59,121		63,222
Total	$	82,881	$	72,822	$	78,409

In accordance with ASC 606, the return reserve asset netted against inventories was $649,000, $694,000 and $555,000 for the periods ending September 30, 2019, December 31, 2018 and September 30, 2018, respectively .

7. IDENTIFIED INTANGIBLE ASSETS

A schedule of identified intangible assets is as follows:


		Gross		Accumulated		Carrying
($ in thousands)		Amount		Amortization		Amount
September 30, 2019
Trademarks
Wholesale	$	27,192		-	$	27,192
Retail		2,900		-		2,900
Patents		895	$	739		156
Total Intangibles	$	30,987	$	739	$	30,248

		Gross		Accumulated		Carrying
December 31, 2018		Amount		Amortization		Amount
Trademarks
Wholesale	$	27,192		-	$	27,192
Retail		2,900		-		2,900
Patents		895	$	714		181
Total Intangibles	$	30,987	$	714	$	30,273

		Gross		Accumulated		Carrying
September 30, 2018		Amount		Amortization		Amount
Trademarks
Wholesale	$	27,192		-	$	27,192
Retail		2,900		-		2,900
Patents		895	$	704		191
Total Intangibles	$	30,987	$	704	$	30,283

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The weighted average life for our patents is 3.9 y ears.

A schedule of approximate amortization expense related to finite-lived intangible assets for the three and nine months ended September 30, 2019 and 2018 is as follows:


		Three Months Ended			Nine Months Ended
		September 30,			September 30,
($ in thousands)		2019		2018	2019		2018
Amortization expense	$	8	$	10	25	$	32

A schedule of approximate expected amortization expense related to finite-lived intangible assets for the years ending December 31, is as follows:


		Amortization
($ in thousands)		Expense
10/01/2019 - 12/31/2019		8
2020		31
2021		26
2022		22
2023		20
2024		17
2025+		33

8 . LONG-TERM DEBT

On February 13, 2019 , we entered into a Revolving Credit, Guaranty, and Security Agreement (“Credit Agreement”) with the Huntington National Bank (“Huntington”) as administrative agent. The Credit Agreement provides for a new senior secured asset-based revolving credit facility up to a principal amount of $75 million, which includes a sublimit for the issuance of letters of credit up to $7.5 million (the “Credit Facility”). The Credit Facility may be increased up to an additional $25 million at our request and the l enders’ option, subject to customary conditions. The Credit Agreement matures on February 13, 2024. This new Credit Agreement replaced our previous financing agreement with PNC Bank (“PNC”) .


Revolver Pricing Level		Average Excess Revolver Availability for Previous Quarter	Applicable Spread Rates for Eurodollar Rate Revolving Advances		Applicable Spread Rates for Domestic Rate Revolving Advances
I	$	25,000,000+	1.00	%	(0.50)	%
II	$	17,500,000 to < 25,000,000	1.25	%	(0.50)	%
III	$	10,000,000 to < 17,500,000	1.50	%	(0.25)	%
IV	$	< 10,000,000	1.75	%	0.00	%

The total amount available under our new Credit F acility is subject to a borrowing base calculation based on various percentages of accounts receivable and inventory. As of September 30, 2019 , we had total capacity of $74.9 million.

In December 2014, we amended and restated our financing agreement with PNC to increase the credit facility to $ 75.0 million and extend the term of the facility an additional five years to November 2019. The credit facility’s base interest rate was the current prime rate less 0.25% , however the credit facility provided us the option to borrow on up to eight fixed loans at LIBOR plus 1.25% in accordance with the 2014 amended and restated credit agreement. The LIBOR rate was determined based on the fixed loan maturities, which vary from 30, 60, 90, or 180 days.

As of September 30, 2019 we had no outstand ing borrowings against the new Credit F acility and as of December 31, 2018 and September 30, 2018 , respectively, we had no outstanding borrowings against our previously amended and restated credit facility.

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Credit Facility Covenants

Both o ur new Credit F acility and our previously amended and restated credit facility contain restrictive covenant s which require us to maintain a fixed charge coverage ratio. Th ese restrictive covenant s are only in effect upon a triggering event taking place (as defined in both agreement s ). Both o ur new Credit F acility and the previously amended and restated credit facility contain restriction s on the amount of dividends that may be paid. During the nine months ended September 30, 2019 , there w ere no triggering event s and the covenant was not in effect for the new C redit F acility .

9. LEASES

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. ASU 2016-02 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements (please see additional detail regarding these updates to Topic 842 below). The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the Unaudited Condensed Consolidated Statements of Operations.

The new standard was effective for us on January 1, 2019, with early adoption permitted. We adopted the new standard on its effective date. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We adopted the new standard on January 1, 2019 and used the effective date as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

The new standard provides several optional practical expedients in transition. We elected the ‘package of practical expedients’, which permits us not to reassess, under the new standard, our prior conclusions about lease identification, lease classification and initial direct costs. We did not elect the use-of-hindsight with respect to determining the lease term (i.e., considering the actual outcome and updated expectations of lease renewals, termination option and purchase options). We also did not elect the use of the practical expedient pertaining to land easements because we do not have any such easements.

The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components for our leases.

This standard had a material effect on our Unaudited Condensed Consolidated Balance Sheets, specifically, the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our factories in the Dominican Republic and Puerto Rico and various equipment leases, all currently accounted for as operating leases; and (2) providing significant new disclosures about our leasing activities. Adoption of the standard did not have a material impact on our Unaudited Condensed Consolidated Statements of Cash Flows. We do not expect a significant change in our leasing activities as a result of this standard. Many of our leases contain renewal options, most of which are not included in the measurement of the right-of-use asset as they are not considered reasonably certain of exercise (i.e. we do not currently have a significant economic incentive to exercise these options).

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The operating ROU asset and operating lease liabilities as of September 30, 2019 and upon adoption of ASC 842 are as follows:


				(Upon ASC 842 Adoption)
		September 30,		January 1,
($ in thousands)		2019		2019	Financial Statement Line Item
Assets:
Operating ROU Assets	$	1,781	$	1,136	Leased assets

Liabilities:
Current
Operating	$	601	$	626	Other current liabilities
Noncurrent
Operating		1,188		544	Long-term lease
Total leased liabilities	$	1,789	$	1,170

Maturity of our operating lease liabilities are as follows:


		Operating
($ in thousands)		Leases
10/01/2019 through 12/31/2019	$	223
2020		594
2021		474
2022		317
2023		255
2024		78
Total lease payments		1,941
Less: Interest		152
Present value of lease liabilities	$	1,789

For the nine months ended September 30, 2019 the weighted average remaining lease term and discount rate were as follows:


	September 30,
	2019
Weighted-average remaining lease term (years)
Operating leases	2.3

Weighted-average discount rate
Operating leases	4.7	%

For the nine months ended September 30, 2019 the supplemental cash flow information is as follows:


		September 30,
($ in thousands)		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	244

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	680

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The breakdown of rent expense for our operating leases for the three and nine months ended September 30, 2019 and 2018, respectively are as follows:


		Three Months Ended		Nine Months Ended
		September 30,		September 30,
($ in thousands)		2019		2019	Financial Statement Line Item
Operating lease expenses - Manufacturing & Sourcing (1)	$	150	$	324	Cost of goods sold
Operating lease expenses (1)		102		149	Operating expenses
Total lease expenses	$	252	$	473

(1) I ncludes short-term lease expenses of approximately $32,000 and $82,000 for the three and nine months ended September 30, 2019 .

10. TAXES

We are subject to tax examinations in various taxing jurisdictions. The earliest exam years open for examination are as follows:


		Earliest Exam Year
Taxing Authority Jurisdiction:
U.S. Federal		2015
Various U.S. States		2014
Puerto Rico (U.S. Territory)		2013
Canada		2013

Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. No such expenses were recognized during the three and nine months ended September 30, 2019 . We do not believe there will be any material changes in our uncertain tax positions over the next 12 months.

Accounting for uncertainty in income taxes requires financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements. Under this guidance, income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of the standard. We did not have any unrecognized tax benefits and there was no effect on its financial condition or results of operations.

Our estimated effective tax rate was 20.1% and 10.5%, 20.6%, and 16.2% for the three and nine months ended September 30, 2019 and 2018, respectively .

1 1 . EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income applicable to common shareholders by the weighted average number of common shares outstanding during each period. The diluted earnings per share computation includes common share equivalents, when dilutive.

A reconciliation of the shares used in the basic and diluted income per common share computation for the three and nine months ended September 30, 2019 and 2018 is as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(shares in thousands)	2019	2018	2019	2018

Basic - weighted average shares outstanding	7,400	7,418	7,392	7,412
Dilutive restricted share units	2	2	4	1
Dilutive stock options	53	60	47	41
Diluted - weighted average shares outstanding	7,455	7,480	7,443	7,454
Anti-dilutive securities	43	-	75	40

12 . SUPPLEMENTAL CASH FLOW INFORMATION

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Supplementa l cash flow information for the nine months ended September 30, 2019 and 2018 is as follows:


($ in thousands)		2019		2018

Interest paid	$	101	$	140

Federal, state, and local income taxes paid, net	$	5,360	$	497

Change in contract receivables, net	$	(2,036)	$	(4,849)

Change in contract liabilities, net	$	1,936	$	4,849

Property, plant, and equipment purchases in accounts payable	$	470	$	120

13. SEGMENT INFORMATION

We have identified three reportable segments: Wholesale, Retail and Military. Wholesale includes sales of footwear and accessories to several classifications of retailers, including sporting goods stores, outdoor specialty stores, online retailers, independent retailers, mass merchants, retail uniform stores, and specialty safety shoe stores. Our Retail business includes direct sales of our products to consumers through our e-commerce websites, our Rocky outlet store, and Lehigh business. Military includes sales to the U.S. Military. The following is a summary of segment results for the Wholesale, Retail, and Military segments for the three and nine months ended September 30, 2019 and 2018 .


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
($ in thousands)		2019		2018		2019		2018
NET SALES:
Wholesale	$	47,242	$	47,001	$	130,260	$	127,236
Retail		14,490		11,915		44,035		36,712
Military		5,447		7,000		20,772		21,560
Total Net Sales	$	67,179	$	65,916	$	195,067	$	185,508

GROSS MARGIN:
Wholesale	$	16,379	$	15,449	$	44,157	$	42,492
Retail		6,593		5,344		19,371		16,145
Military		2,042		1,607		5,906		4,261
Total Gross Margin	$	25,014	$	22,400	$	69,434	$	62,898

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

RESULTS OF OPERATIONS

The following tables set forth, for the periods indicated, information derived from our Unaudited Condensed Consolidated Financial Statements, expressed as a percentage of net sales. The discussion that follows each table should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements as well as our annual report on 10-K for the year ended December 31, 2018.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018


		Three Months Ended
		September 30,
($ in thousands)		2019		2018		Inc./ (Dec.)	Inc./ (Dec.)
NET SALES:
Wholesale	$	47,242	$	47,001	$	241	0.5	%
Retail		14,490		11,915		2,575	21.6
Military		5,447		7,000		(1,553)	(22.2)
Total Net Sales	$	67,179	$	65,916	$	1,263	1.9	%

Wholesale sales increased slightly as consumers continued to respond favorably to several recent product introductions across our brand portfolio, which we believe is being fueled by new innovations and enhanced marketing programs that are generating increased awareness and demand in our western, outdoor and commercial military categories.

Retail sales increased primarily due to both a strong growth in our Lehigh business, which was primarily attributed to an expansion in our CustomFit model which continued to add larger national accounts as well as increased the retention rate of our existing customers, and a low double digit increase in our direct to consumer e-commerce business which we believe is attributable to recent investments aimed at increasing traffic and conversion on our web sales .

Military sales decreased as expected as we recently concluded a multi-year contract with the Department of Defense.


		Three Months Ended
		September 30,
($ in thousands)		2019		2018		Inc./ (Dec.)
GROSS MARGIN:
Wholesale Margin $'s	$	16,379	$	15,449	$	930
Margin %		34.7	%	32.9	%	1.8	%
Retail Margin $'s	$	6,593	$	5,344	$	1,249
Margin %		45.5	%	44.9	%	0.6	%
Military Margin $'s	$	2,042	$	1,607	$	435
Margin %		37.5	%	23.0	%	14.5	%
Total Margin $'s	$	25,014	$	22,400	$	2,614
Margin %		37.2	%	34.0	%	3.2	%

Wholesale gross margin increased year over year due to stronger initial margins on some newer products, selling less discontinued product and a one-time reimbursement of expenses in the amount of $169,000 associated with the temporary closure of the Puerto Rican manufacturing facility as a result of Hurricane Maria in 2017.

Retail gross margin increased as we saw a strong increase in our e-commerce business which carries higher margins than our Lehigh Branded business.

Military gross margin increased significantly as we continued to see better efficiency at our Puerto Rico facility and a one-time reimbursement of expenses in the amount of $581,000 associated with the temporary closure of the Puerto Rican manufacturing facility as a result of Hurricane Maria in 2017.

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		Three Months Ended
		September 30,
($ in thousands)		2019		2018		Inc./ (Dec.)		Inc./ (Dec.)
OPERATING EXPENSES:
Operating Expenses	$	18,027	$	16,791	$	1,236		7.4	%
% of Net Sales		26.8	%	25.5	%	1.3	%

The increase in operating expenses was primarily related to the increased investments in our core brands to help initiate growth and expand within our respective markets and variable expenses tied to sales increases in our wholesale and retail channels.


		Three Months Ended
		September 30,
($ in thousands)		2019		2018		Inc./ (Dec.)		Inc./ (Dec.)
INCOME TAXES:
Income Tax Expense	$	1,414	$	595	$	819		137.7	%
Effective Tax Rate		20.1	%	10.5	%	9.6	%

The effective tax rate increased to 20.1% for the three months ended September 30, 2019 compared to 10.5% in the prior year period. This was due to a reduction made in the third quarter of 2018 related to the one-time transition tax on the deemed repatriation of undistributed foreign earnings as a result of further analysis of the provisions of the Tax Cuts and Jobs Act.

Nine months ended September 30, 2019 Compared to Nine months ended September 30, 2018


		Nine Months Ended
		September 30,
($ in thousands)		2019		2018		Inc./ (Dec.)	Inc./ (Dec.)
NET SALES:
Wholesale	$	130,260	$	127,236	$	3,024	2.4	%
Retail		44,035		36,712		7,323	19.9
Military		20,772		21,560		(788)	(3.7)
Total Net Sales	$	195,067	$	185,508	$	9,559	5.2	%

Wholesale sales increased as consumers continued to respond favorably to several recent product introductions across our brand portfolio, which we believe is being fueled by new innovations and enhanced marketing programs that are generating increased awareness and demand in our work, western, outdoor and commercial military categories.

Retail sales increased primarily due to both a strong growth in our Lehigh business, which was primarily attributed to an expansion in our CustomFit model which continued to add larger national accounts as well as increased the retention rate of our existing customers, and a significant increase in our direct to consumer e-commerce business which we believe is attributable to recent investments aimed at increasing traffic and conversions on our web sales.

Military sales decreased as expected as we recently concluded a multi-year contract with the Department of Defense.


		Nine Months Ended
		September 30,
($ in thousands)		2019		2018		Inc./ (Dec.)
GROSS MARGIN:
Wholesale Margin $'s	$	44,157	$	42,492	$	1,665
Margin %		33.9	%	33.4	%	0.5	%
Retail Margin $'s	$	19,371	$	16,145	$	3,226
Margin %		44.0	%	44.0	%	-	%
Military Margin $'s	$	5,906	$	4,261	$	1,645

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Margin %		28.4	%	19.8	%	8.6	%
Total Margin $'s	$	69,434	$	62,898	$	6,536
Margin %		35.6	%	33.9	%	1.7	%

Retail gross margin remained flat year over year.


		Nine Months Ended
		September 30,
($ in thousands)		2019		2018		Inc./ (Dec.)		Inc./ (Dec.)
OPERATING EXPENSES:
Operating Expenses	$	54,004	$	49,688	$	4,316		8.7	%
% of Net Sales		27.7	%	26.8	%	0.9	%


		Nine Months Ended
		September 30,
($ in thousands)		2019		2018		Inc./ (Dec.)		Inc./ (Dec.)
INCOME TAXES:
Income Tax Expense	$	3,212	$	2,117	$	1,095		51.7	%
Effective Tax Rate		20.6	%	16.2	%	4.4	%

The effective tax rate increased to 20.6% for the nine months ended September 30, 2019 compared to 16.2% in the prior year period. This was due to a reduction made in the third quarter of 2018 related to the one-time transition tax on the deemed repatriation of undistributed foreign earnings as a result of further analysis of the provisions of the Tax Cuts and Jobs Act.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

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

Over the last several years our principal uses of cash have been for working capital and capital expenditures to support our growth. Our working capital consists primarily of trade receivables and inventory, offset by accounts payable and accrued expenses. Our working capital fluctuates throughout the year as a result of our seasonal business cycle and business expansion and is generally lowest in the months of January through March of each year and highest during the months of May through October of each year. We typically utilize our revolving credit facility to fund our seasonal working capital requirements. As a result, balances on our revolving credit facility can fluctuate significantly throughout the year.

Our capital expenditures relate primarily to projects relating to our corporate offices, property, merchandising fixtures, molds and equipment associated with our manufacturing and distribution operations and for information technology. Capital expenditures were $5.8 million and $3.5 million for the nine months ended September 30, 2019 and 2018 , respectively.

We lease certain machinery, a shoe center, and manufacturing facilities under operating leases that generally provide for renewal options.

We believe that our credit facility 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. For more information regarding our credit facility please see Note 8 .

Cash Flows


		Nine Months Ended
		September 30,
($ in millions)		2019		2018
Operating activities	$	4.9	$	8.7
Investing activities		(6.1)		(3.5)
Financing activities		(2.6)		(4.7)
Net change in cash and cash equivalents	$	(3.8)	$	0.5

Operating Activities. Cash provided by operating activities was primarily impacted by an increase in inventory and accounts receivable , partially offset by a n in crease in a ccounts payable and accrued liabilities for the nine months ended September 30, 2019 . Cash provided by operating activities was primarily impacted by an increase in accounts payable, accrued liabilities, and income taxes payable, partially offset by an increase in accounts receivable and inventory for the nine months ended September 30, 2018 .

Investing Activities. Cash used in investing activities was primarily related to investments in molds and equipment associated with our manufacturing operations, for information technology and for improvements to our distribution facility for the nine months ended September 30, 2019 and 2018 .

Financing Activities. Cash used in financing activities was primarily related to payments of dividends on our common stock for the nine months ended September 30, 2019. For the nine months ended September 30, 2018, cash used in financing activities was primarily related to payments under the revolving credit facility and for the payment of dividends on our common stock.

Inflation

Our financial performance is influenced by factors such as higher raw material costs as well as higher salaries and employee benefits. Management attempts to minimize or offset the effects of inflation through increased selling prices, productivity improvements, and cost reductions. We were able to mitigate the effects of inflation during 2018 due to these factors. It is anticipated that any inflationary pressures during 2019 could be offset through possible price increases.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The pr eparation of the Company’s Unaudited Condensed Consolidated Financial S tatements, which have been prepared in accordance with U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from the Company’s estimates. However, actual results may differ materially from these estimates under different assumptions or conditions.

We have identified the critical accounting policies used in determining estimates and assumptions in the amounts reported in our Management Discussion and Analysis of Financial Conditions and Results of Operations in our 2018 Form 10-K.

On January 1, 201 9 , we adopted the new accounting standard ASC 842 , Leases, an d all the related amendments . For additional information regarding the adoption of ASC 842 see Note 9 .

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995

This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding our and management’s intent, belief, and expectations, such as statements concerning our future profitability and our operating and growth strategy. Words such as “believe,” “anticipate,” “expect,” “will,” “may,” “should,” “intend,” “plan,” “estimate,” “predict,” “potential,” “continue,” “strategy,” “future,” “likely,” “would,” “could” and similar expressions are intended to identify forward-looking statements. Investors are cautioned that forward-looking statements contained in this Quarterly Report on Form 10-Q and in other statements we make involve risk and uncertainties including, without limitations, dependence on sales forecasts, changes in consumer demand and expectations, seasonality, impact of weather, competition, reliance on suppliers, risks inherent to international trade, changing retail trends, the loss or disruption of our manufacturing and distribution operations, cybersecurity breaches or disruption of our digital systems, fluctuations in foreign currency exchange rates, economic changes, as well as other factors set forth under the caption “Item 1A, Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 (filed March 13, 2019), and other factors detailed from time to time in our filings with the Securities and Exchange Commission. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We assume no obligation to update any forward-looking statements.

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ITEM 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes to our market risk as disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2018 .

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, our management, with the participation of our chief executive officer and chief financial officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 promulgated under the Exchange Act. Based upon this evaluation, our chief executive officer and our chief financial officer concluded that , as of September 30, 2019 , our disclosure controls and procedures were (1) designed to ensure that material information relating to our Company is accumulated and made known to our management, including our chief executive officer and chief financial officer, in a timely manner, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management believes, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Controls . T here were no change s to our internal control s over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) during our fiscal quarter ended September 30, 2019 , that ha ve materially affected, or are reasonably likely to materially affect, our internal control s over financial reporting.

PART II -- OTHER INFORMATION

ITEM 1A - RISK FACTORS

There have been no material changes to our risk factors as disclosed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 .

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ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Use of Proceeds

Not applicable.

The following table sets forth information concerning the Company’s purchases of common stock for the periods indicated:


Period	Total number of shares (or units) purchased (1)	Average price paid per share (or units)		Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (2)

July 1, 2019 - July 31, 2019	-	-	$	7,500,000
August 1, 2019 - August 31, 2019	-	-		7,500,000
September 1, 2019 - September 30, 2019	-	-		7,500,000
Total	-	-	$	7,500,000

On March 4 , 201 9 , the Company announced a $7,500,000 share repurchase plan . The repurcha se program terminates on February 28, 2020 . This program is replacing the $7,500,000 share repurchase plan that was announced on March 1, 2018 that expired on March 1, 2019.

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ITEM 6. EXHIBITS


Exhibit Number	Description


31.1*	Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Principal Executive Officer .

31.2*	Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Principal Financial Officer .

32**	Section 1350 Certification of Principal Executive Officer/Principal Financial Officer .

101*	Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 formatted in XBRL (“eXtensible Business Reporting Language”): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (vi) related notes to these financial statements.

* Filed with this Report.

** Furnished with this Report.

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S IGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the unders igned thereunto duly authorized.


	ROCKY BRANDS, INC.

Date: November 5, 2019	By:	/s/THOMAS D. ROBERTSON
		Thomas D. Robertson Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer and Duly Authorized Officer)

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Part 1 Financial Information Item 1 Financial Statements Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II -- Other Information Item 1A - Risk Factors Item 2 - Unregistered Sales Of Equity Securities and Use Of Proceeds Item 6. Exhibits

Exhibits

31.1* Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Principal Executive Officer. 31.2* Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Principal Financial Officer. 32** Section 1350 Certification of Principal Executive Officer/Principal Financial Officer.

RCKY 10-Q Quarter ended Sept. 30, 2019

Exhibits