What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-08 · 97 added, 110 removed, 434 unchanged (32% of the section changed)

4 unchanged sentences

(In thousands, except share amounts)

September 30,

CURRENT ASSETS:

48 unchanged sentences

25,000,000 shares authorized;

issued and outstanding June 30, 2024 - 7,444,881 ;

issued and outstanding September 30, 2024 - 7,449,020 ;

December 31, 2023 - 7,412,480 ;

June 30, 2023 - 7,354,060

September 30, 2023 - 7,366,201

73,537 71,973 70,757

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

COST OF GOODS SOLD

2 unchanged sentences

INTEREST EXPENSE AND OTHER – net

(LOSS) INCOME BEFORE INCOME TAX EXPENSE

INCOME TAX (BENEFIT) EXPENSE

NET (LOSS) INCOME

(LOSS) INCOME PER SHARE

INCOME BEFORE INCOME TAX EXPENSE

INCOME TAX EXPENSE

INCOME PER SHARE

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

9 unchanged sentences

7,339 $ 69,752 $ 145,721 $ 215,473

SIX MONTHS ENDED JUNE 30, 2023

NINE MONTHS ENDED SEPTEMBER 30, 2023

$ ( 398 ) $ ( 398 )

12 unchanged sentences

7,354 $ 70,400 $ 140,328 $ 210,728

$ 6,827 $ 6,827

Dividends paid on common stock ($ 0.155 per share)

( 1,142 ) ( 1,142 )

Stock issued for options exercised, including tax benefits

Stock compensation expense

BALANCE - September 30, 2023

7,366 $ 70,757 $ 146,013 $ 216,770

BALANCE - December 31, 2023

7,412 $ 71,973 $ 151,582 $ 223,555

SIX MONTHS ENDED JUNE 30, 2024

NINE MONTHS ENDED SEPTEMBER 30, 2024

$ 2,550 $ 2,550

13 unchanged sentences

7,423 $ 73,223 $ 150,589 $ 223,812

$ 5,279 $ 5,279

Dividends paid on common stock ($ 0.155 per share)

( 1,155 ) ( 1,155 )

Stock compensation expense

26 $ 314 - 314

BALANCE - September 30, 2024

$ 7,449 $ 73,537 $ 154,713 $ 228,250

See Notes to Unaudited Condensed Consolidated Financial Statements

3 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

4 unchanged sentences

Stock compensation expense

Amortization of debt issuance costs

Amortization of debt issuance costs and loan fees

Loss on disposal of assets

17 unchanged sentences

Repayments of long-term debt

Debt issuance costs

Payment of debt issuance costs and loan fees

Proceeds from stock options

17 unchanged sentences

All such adjustments reflected in the Unaudited Condensed Consolidated Financial Statements are considered to be of normal and recurring nature.

The results of operations for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of the results to be expected for the whole year.

The results of operations for the three and nine months ended September 30, 2024 and 2023 are not necessarily indicative of the results to be expected for the whole year.

The December 31, 2023 Unaudited 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").

9 unchanged sentences

Anticipated Adoption Periods

Effect on Consolidated Financial Statements

ASU 2023 - 07, Segment Reporting (Topic 280 ):

2 unchanged sentences

Fiscal year ending December 31, 2024

The Company is still assessing the impact of the new accounting standard but does not expect the adoption of this standard to have a material impact on its financial statements.

ASU 2023 - 09, Income Taxes (Topic 740 ):

1 unchanged sentence

This pronouncement requires expanded income tax disclosures primarily related to an entity's effective tax rate reconciliation and income taxes paid.

In addition to the recently issued accounting pronouncements, the SEC recently issued its final rule regarded climate change disclosures.

The Company is still assessing the impact of the new accounting standard but does not expect the adoption of this standard to have a material impact on its financial statements.

In addition to the recently issued accounting pronouncements, the SEC recently issued its final rule regarding climate change disclosures.

We are evaluating the impact this final rule will have on our Unaudited Condensed Consolidated Financial Statements.

No other new accounting pronouncement issued or effective during the period had, or is expected to have, a material impact on our Unaudited Condensed Consolidated Financial Statements.

Accounting Standards Adopted in the Prior Year

ASU 2016 - 13, Measurement of Credit Losses on Financial Instruments

This pronouncement significantly changes how entities measure credit losses for most financial assets, including accounts receivable and held-to-maturity marketable securities, by replacing today’s “incurred loss” approach with an “expected loss” model under which allowances will be recognized based on expected rather than incurred losses.

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.

8 unchanged sentences

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.

The fair values of cash and cash equivalents, receivables, and payables approximate their carrying values because of the short-term nature of these instruments.

Receivables consist primarily of amounts due from our customers, net of allowances, and expected insurance recoveries.

1 unchanged sentence

The fair value of our credit facilities is categorized as Level 2.

The Company does not currently have any Level 3 assets or liabilities.

We hold assets and liabilities in a separate trust in connection with deferred compensation plans.

5 unchanged sentences

Total consideration for this transaction was approximately $ 19.0 million, of which $ 17.3 million was received at closin g.

The remaining $ 1.7 million was received during the quarter ended June 30, 2024.

The remaining $ 1.7 million was received during the nine months ended September 30, 2024 .

The s ale of the Servus brand included the sale of inventory, fixed assets, customer relationships and tradenames, all of which related to our Wholesale segment.

In connection with the sale of the Servus brand we also are licensing the rights to certain proprietary processes to the Buyer.

We recorded a gain on the sale of Servus of approximately $ 1.3 million which is recorded within Interest Expense and Other - net on the accompanying Unaudited Condensed Consolidated Statement of Operations for the six months ended June 30, 2023.

Nature of Performance Obligations

14 unchanged sentences

These reserves are based on the amounts earned, or to be claimed, on the related sales of our products.

Elements of variable consideration including discounts and allowances and rebates are determined at contract inception and are reassessed at each reporting date, at a minimum, to reflect any change in types of variable consideration offered to the customer.

We utilize the expected value method in determining estimates of variable consideration, based on evaluations of each type of variable considerable and customer contract, historical and anticipated trends, and current economic conditions.

Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts.

Elements of variable consideration including discounts and allowances and rebates are determined at contract inception and are reassessed at each reporting date, at a minimum, to reflect any change in the types of variable consideration offered to the customer.

We determine estimates of variable consideration based on evaluations of each type of variable consideration and customer contract, historical and anticipated trends, and current economic conditions.

Overall, these reserves reflect our best estimates of the amount of consideration to be earned on the related sales.

Actual amounts of consideration ultimately received may differ from our estimates.

6 unchanged sentences

Military and other customers.

As of June 30, 2024, there are no contract balances outstanding.

As of September 30, 2024 , there are no contract receivable or contract liability balances outstanding.

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

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

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

Costs associated with our manufacturer’s warranty are recognized as expense when the products are sold.

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

1 unchanged sentence

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

September 30,

($ in thousands)

Contract liabilities

$ - $ 927 $ 2,990

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

4 unchanged sentences

Revenue recognized related to non-cancelable contracts with customers during the period

Balance, June 30, 2024

Balance, September 30, 2024

Disaggregation of Revenue

1 unchanged sentence

Because all revenues are recognized at a point in time and are disaggregated by channel, our segment disclosures are consistent with disaggregation requirements.

See Note 14 - Segment Disclosures for segment disclosures.

See Note 14 - Segment Information for segment disclosures.

TRADE RECEIVABLES

Trade receivables are presented net of the related allowance for credit losses of approximately $ 0.9 million, $ 1.8 million and $ 3.2 million at June 30, 2024 , December 31, 2023 and June 30, 2023 , respectively.

Trade receivables are presented net of the related allowance for credit losses of approximately $ 1.1 million, $ 1.8 million and $ 2.1 million at September 30, 2024 , December 31, 2023 and September 30, 2023 , respectively.

We calculate the allowance based on historical experience, the age of the receivables, receivable insurance status, and identification of customer accounts that are likely to prove difficult to collect due to various criteria including pending bankruptcy.

3 unchanged sentences

Inventories are comprised of the following:

September 30,

($ in thousands)

Raw materials

$ 18,006 $ 16,774 $ 17,671

Work-in-process

924 912 1,427

Finished goods

156,043 151,515 199,229

$ 174,973 $ 169,201 $ 218,327

The return reserve allowance included within inventories was approximately $ 0.7 million, $ 0.8 million and $ 1.0 million at June 30, 2024, December 31, 2023 and June 30, 2023, respectively.

The asset associated with our returns reserve included within inventories was approximately $ 0.9 million, $ 0.8 million and $ 1.0 million at September 30, 2024 , December 31, 2023 and September 30, 2023 , respectively.

GOODWILL & IDENTIFIED INTANGIBLE ASSETS

There was no change in goodwill during the six months ended June 30, 2024.

There was no change in goodwill during the nine months ended September 30, 2024 .

Intangible assets other than goodwill at the respective balance sheet dates consisted of the following:

June 30, 2024

September 30, 2024

($ in thousands)

18 unchanged sentences

$ 121,208 $ ( 8,590 ) $ 112,618

June 30, 2023

September 30, 2023

($ in thousands)

1 unchanged sentence

Indefinite-lived intangible assets

Trademarks (1)

$ 78,659 $ 78,659

5 unchanged sentences

$ 121,213 $ ( 7,892 ) $ 113,321

( 1 ) Servus trademarks were reduced from approximately $ 2.5 million to zero at March 30, 2023 as a result of the sale of the Servus brand (see Note 4 - Sale of Servus Brand and Related Assets ).

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

The weighted average life of patents and customer relationships is 2.7 years and 11.5 years, respectively.

Amortization expense for intangible assets subject to amortization for each of the three months ended June 30, 2024 and 2023 was $ 0.7 million.

Amortization expense for intangible assets subject to amortization for the six months ended June 30, 2024 and 2023 was $ 1.4 million and $ 1.5 million, respectively.

As of June 30, 2024, a schedule of approximate expected remaining amortization expense related to intangible assets for the years ending December 31 is as follows:

Amortization expense for intangible assets subject to amortization for each of the three months ended September 30, 2024 and 2023 was $ 0.7 million.

Amortization expense for intangible assets subject to amortization for the nine months ended September 30, 2024 and 2023 was $ 2.1 million and $ 2.2 million, respectively.

As of September 30, 2024 , a schedule of approximate expected remaining amortization expense related to intangible assets for the years ending December 31 is as follows:

($ in thousands)

1 unchanged sentence

Amounts reported in "Accrued expenses and other liabilities" within the accompanying Unaudited Condensed Consolidated Balance Sheets were:

September 30,

($ in thousands)

Accrued Expenses and other liabilities:

$ 7,211 $ 5,440 $ 6,377

Accrued advertising

3,855 1,877 2,817

Accrued duties

Salaries and wages

3,145 1,204 2,791

Operating lease liability

Returns liability

Accrued freight

2,082 2,284 2,491

Accrued advertising

Income taxes payable

Taxes - other

Accrued interest

- 2,104 2,345

3,489 3,374 2,939

Total accrued expenses and other liabilities

$ 20,663 $ 18,112 $ 21,526

LONG-TERM DEBT

3 unchanged sentences

The ABL Facility includes a separate first in, last out (FILO) tranche, which allows the Company to borrow at higher advance rates on eligible accounts receivables and inventory balances.

As of June 30, 2024 , we had borrowing capacity of $ 38.5 million under the ABL Facility.

As of September 30, 2024 , we had borrowing capacity of $ 50.1 million under the ABL Facility.

The Term Facility provides for monthly principal payments until the date of maturity, at which date the remaining principal balance is due.

This transaction resulted in a $ 2.6 million expense within Interest Expense and Other - net in the accompanying Unaudited Combined Condensed Statements of Operations, consisting of a $ 1.1 million loss on term loan extinguishment and a $ 1.5 million term loan prepayment penalty.

The $ 1.1 million loss on term loan extinguishment is included as a noncash adjustment to net income and the $ 1.5 million prepayment penalty is included within Repayments of long-term debt in the accompanying Unaudited Combined Condensed Statements of Cash Flows for the three and six months ending June 30, 2024.

Loans under the ABL agreement bear interest at a variable rate equal to either (i) the Base Rate (as calculated in the ABL Agreement) or (ii) Term SOFR (as calculated in the ABL Agreement), plus in each case an interest margin determined by the Company's average daily availability as a percentage of the aggregate amount of revolving commitments for revolving loans and term loans, with a range of Base Rate margins and term SOFR margins, as set forth of the following chart:

7 unchanged sentences

Base Rate FILO Loan

2.75 % 1.50 % 1.25 % 0.00 % 1.75 % 0.50 %

>33.3% and < or equal to 66.7%

3.00 % 1.50 % 1.50 % 0.00 % 2.00 % 0.50 %

< or equal to 33.3%

3.25 % 1.75 % 1.75 % 0.25 % 2.25 % 0.75 %

( 1 ) Until June 30, 2024, Level III applied.

In connection with the ABL Agreement, we had to pay certain fees that were capitalized and will be amortized over the life of such agreement.

( 1 ) Until September 30, 2024 , Level III applied.

In connection with the ABL Agreement, we paid certain fees that were capitalized and will be amortized over the life of such agreement.

Current and long-term debt under the ABL Agreement consisted of the following:

September 30,

($ in thousands)

Term Facility that matures in 2029 with an effective interest rate of 8.93 % as of June 30, 2024

Term Facility that matures in 2029 with an effective interest rate of 8.82 %

ABL Facility that matures in 2029:

SOFR borrowings with an effective interest rate of 7.18 % as of June 30, 2024

Prime borrowings with an effective interest rate of 8.75 % as of June 30, 2024

SOFR borrowings with an effective interest rate of 6.76 %

Prime borrowings with an effective interest rate of 8.47 %

Unamortized debt issuance costs

6 unchanged sentences

Our ABL Facility and Term Facility require us to maintain a minimum fixed charge coverage ratio, as defined in the agreement.

As of June 30, 2024, we were in compliance with all credit facility covenants.

As of September 30, 2024 , we were in compliance with all credit facility covenants.

The ABL Facility and Term Facility also contain restrictions on the amount of dividend payments.

As of June 30, 2024, the Company was in compliance with the amounts paid on dividends in accordance with our debt facilities.

As of September 30, 2024 , the Company was in compliance with the amounts paid on dividends in accordance with our debt facilities.

Retired Term Debt

32 unchanged sentences

Term SOFR FILO Loans

0.00 % 1.25 % 0.50 % 1.75 %

>33.3% and < or equal to 66.7%

0.00 % 1.50 % 0.50 % 2.00 %

< or equal to 33.3%

0.25 % 1.75 % 0.75 % 2.25 %

In connection with the TCW Term Facility and the Original ABL Facility, we had to pay certain fees that were capitalized and amortized over the life of each respective loan.

1 unchanged sentence

Current and long-term debt under the Original ABL Facility and TCW Term Facility consisted of the following:

September 30,

($ in thousands)

TCW Term Facility refinanced in April 2024 with an effective interest rate of 13.20% as of December 31, 2023 and 12.77% as of June 30, 2023

$ 77,932 $ 91,100

TCW Term Facility refinanced in April 2024 with an effective interest rate of 13.20% as of December 31, 2023 and 12.77% as of September 30, 2023

Original ABL Facility amended and restated in April 2024:

SOFR borrowings with an effective interest rate of 7.31% and 5.06% as of December 31, 2023 and June 30, 2023, respectively

83,144 130,213

Prime borrowings with an effective interest rate of 8.75% as of and December 31, 2023 and 8.25% as of June 30, 2023

175,014 224,050

SOFR borrowings with an effective interest rate of 7.31% and 7.25% as of December 31, 2023 and September 30, 2023, respectively

Prime borrowings with an effective interest rate of 8.75% as of and December 31, 2023 and September 30, 2023

Unamortized debt issuance costs

( 1,884 ) ( 2,311 )

Total debt, net of debt issuance costs

173,130 221,739

Debt maturing within one year

( 2,650 ) ( 4,625 )

Long-term debt

$ 170,480 $ 217,114

Retired Credit Facility Covenants

1 unchanged sentence

The Original ABL Facility contained a restrictive covenant which required us to maintain a fixed charge coverage ratio upon a triggering event taking place (as defined in the Original ABL Facility).

During the three months ended June 30, 2024 and 2023, we were in compliance with all credit facility covenants.

During the three months ended September 30, 2023, we were in compliance with all credit facility covenants.

The TCW Term Facility and the Original ABL Facility also contained restrictions on the amount of dividend payments.

We were in compliance with all TCW Term Facility and Original ABL Facility Agreement covenants through April 26, 2024, the date on which we refinanced such debt.

The effective tax rate for the six months ended June 30, 2024 and 2023 was 23.4 % and 20.8 %, respectively.

The effective tax rate for the three and nine months ended September 30, 2024 and 2023 wa s 23.4 % and 20.9 %, r espectively.

The effective tax rate used for interim reporting purposes is based on management’s best estimate of factors impacting the effective tax rate for the full fiscal year and includes the impact of discrete items recognized in the quarter.

4 unchanged sentences

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 six months ended June 30, 2024 and 2023 .

No such expenses were recognized during the three and nine months ended September 30, 2024 and 2023 .

We do not believe there will be any material changes in our uncertain tax positions over the next 12 months.

2 unchanged sentences

The diluted EPS 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 six months ended June 30, 2024 and 2023 is as follows:

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, 2024 and 2023 is as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(shares in thousands)

Basic - weighted average shares outstanding

7,429 7,354 7,423 7,350

Dilutive restricted share units

1 unchanged sentence

Diluted - weighted average shares outstanding

7,429 7,354 7,466 7,350

Anti-dilutive securities

54 283 103 283

( 1 ) Due to a net loss for the three months ended June 30, 2024 and 2023, zero dilutive restricted share units and stock options are included for the period because the effect would be antidilutive.

( 2 ) Due to a net loss for the six months ended June 30, 2023, zero dilutive restricted share units and stock options are included for the period because the effect would be antidilutive.

SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the six months ended June 30, 2024 and 2023 is as follows:

Six Months Ended

Supplemental cash flow information for the nine months ended September 30, 2024 and 2023 is as follows:

Nine Months Ended

September 30,

($ in thousands)

Interest paid

$ 5,436 $ 4,244

Federal, state, and local income taxes paid, net

$ 219 $ 3,889

Property, plant, and equipment noncash purchases in accounts payable

$ 921 $ 1,114

Right-of-use assets obtained in exchange for operating lease liabilities, net of terminations

10 unchanged sentences

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.

Net sales to foreign countries represented approximately 2.7 % and 4.8 % of net sales for the three months ended June 30, 2024 and 2023, respectively.

Net sales to foreign countries represented approximately 2.4 % and 4.2 % of net sales for the six months ended June 30, 2024 and 2023, respectively.

Net sales to foreign countries represented approxima tely 4.8 % and 7.5 % of net sa les for the three months ended September 30, 2024 and 2023 , respectively.

Net sales to foreign countries represented approxim ately 3.2 % and 5.5 % of net sales for the nine months ended September 30, 2024 and 2023 , respectively.

For segment reporting purposes, management uses gross margin to evaluate segment performance and allocate resources.

2 unchanged sentences

The following is a summary of segment results for the Wholesale, Retail and Contract Manufacturing segments for the

three and six months ended June 30, 2024 and 2023

three and nine months ended September 30, 2024 and 2023

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

($ in thousands)

$ 68,258 $ 71,462 $ 148,050 $ 151,513

26,110 25,082 56,517 54,592

Contract Manufacturing

3,890 3,278 6,597 4,162

Total Net Sales

$ 98,258 $ 99,822 $ 211,164 $ 210,267

GROSS MARGIN:

$ 25,432 $ 25,176 $ 54,463 $ 54,485

12,234 12,219 27,036 26,598

Contract Manufacturing

372 177 688 248

Total Gross Margin

$ 38,038 $ 37,572 $ 82,187 $ 81,331

Segment asset information is not prepared or used to assess segment performance.

7 unchanged sentences

We have the potential to recover the total amount of overpaid duties resulting in an estimated potential refund of approximately $ 7.7 million, of which we have received $ 5.1 million to date.

No refunds were received for the six months ended June 30, 2024 and $ 1.9 million in refunds were received during the six months ended June 30, 2023.

No refunds were received for the nine months ended September 30, 2024 and $ 1.9 million in refunds were received during the nine months ended September 30, 2023 .

We are accounting for these post summary corrections as a gain contingency, and as such have not recorded these potential refunds within the accompanying Unaudited Condensed Consolidated Balance Sheet due to uncertainty of collection.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements