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Note 5 - Revenue
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

 

5. REVENUE

 

Nature of Performance Obligations

 

Our products are distributed through three distinct channels, which represent our business segments: Wholesale, Retail and Contract Manufacturing. In our Wholesale business, we distribute our products through a wide range of distribution channels representing over 10,000 retail store locations in the U.S., Canada, U.K. and other international markets such as Europe. 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. 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.

 

Significant Accounting Policies and Judgments

 

Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied; this generally occurs at a point in time when our product ships to the customer, which is when the transfer of control passes to the customer. Revenue is measured as the amount of consideration we expect to receive in exchange for the transfer of our products, which is the net sales price.

 

The net sales price includes estimates of variable consideration for which reserves are established. Components of variable consideration include discounts and allowances, customer rebates, markdowns, chargebacks, and product returns. 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. 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.

 

Trade receivables represent our right to unconditional payment.

 

Current contract receivables represent contractual minimum payments required under non-cancellable contracts with the U.S. Military and other customers with a duration of one year or less.

 

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

 

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

 

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.

 

Contract Balances

 

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

 

  

June 30,

  

December 31,

  

June 30,

 

($ in thousands)

 

2024

  

2023

  

2023

 

Contract liabilities

 $-  $927  $2,990 

 

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

 

($ in thousands)

 

Contract liabilities

 

Balance, December 31, 2023

 $927 

Non-cancelable contracts with customers entered into during the period

  - 

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

  (927)

Balance, June 30, 2024

 $- 

 

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 or point of sale for retail customers. 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.