Financial Performance - Net sales increased 7.0% to $122.5 million compared to $114.6 million in Q3 2024[5] - Net sales for the three months ended September 30, 2025, were $122.54 million, an increase of 6.4% compared to $114.55 million for the same period in 2024[21] - Income from operations rose 16.5% to $11.7 million, or 9.6% of net sales, compared to $10.1 million, or 8.8% of net sales, in Q3 2024[9] - Income from operations for the three months ended September 30, 2025, increased to $11.74 million, a 16.5% rise from $10.07 million in 2024[21] - Net income increased 36.6% to $7.2 million, or $0.96 per diluted share, compared to $5.3 million, or $0.70 per diluted share, in the prior year[11] - Net income for the three months ended September 30, 2025, was $7.21 million, compared to $5.28 million in 2024, reflecting a year-over-year growth of 36.6%[21] - Adjusted net income grew 33.4% to $7.8 million, or $1.03 per diluted share, compared to $5.8 million, or $0.77 per diluted share, in Q3 2024[11] - Adjusted net income for the three months ended September 30, 2025, was $7.75 million, up from $5.81 million in 2024, indicating a 33.5% increase[23] - Basic income per share for the three months ended September 30, 2025, was $0.96, compared to $0.71 for the same period in 2024, marking a 35.2% increase[23] Margins and Expenses - Gross margin improved by 210 basis points to 40.2% of net sales, up from 38.1% in the same quarter last year[8] - Gross margin for the three months ended September 30, 2025, was $49.28 million, representing a gross margin percentage of 40.2%, up from 38.1% in the same period of 2024[21] - Operating expenses were $37.6 million, or 30.6% of net sales, compared to $33.6 million, or 29.3% of net sales, in Q3 2024[7] - Operating expenses for the three months ended September 30, 2025, were $37.54 million, up from $33.58 million in 2024, reflecting an increase of 11.7%[21] Debt and Inventory - Total debt decreased 7.5% year-over-year to $139.0 million as of September 30, 2025[13] - Inventories increased 12.7% to $193.6 million compared to $171.8 million on the same date last year[14] Future Outlook - The company anticipates that price increases and diversified sourcing will help mitigate the impact of higher tariffs on margins in the coming quarters[4] - The strength of the brand portfolio and enhanced supply chain is expected to capture growth opportunities in 2026 and beyond[4] Non-GAAP Measures - Total non-GAAP adjustments for the three months ended September 30, 2025, amounted to $692,000, which impacted the comparability of financial results[24] - The company emphasizes the usefulness of non-GAAP measures for evaluating operating performance and trends in operations[24]

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[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [ITEM 1 – FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201%20%E2%80%93%20FINANCIAL%20STATEMENTS) This section presents unaudited condensed consolidated financial statements and notes, detailing operations, accounting policies, and financial items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------- | :------------ | :---------------- | :------------ | | Cash and cash equivalents | $2,779 | $3,719 | $4,107 | | Trade receivables – net | $66,367 | $71,983 | $62,968 | | Inventories – net | $186,836 | $166,701 | $174,973 | | Total current assets | $261,469 | $246,439 | $249,159 | | Total Assets | $471,020 | $457,300 | $467,874 | | Total current liabilities | $94,775 | $90,407 | $86,848 | | Long-term debt | $124,167 | $120,376 | $144,073 | | Total Liabilities | $231,955 | $225,076 | $244,062 | | Total Shareholders' Equity | $239,065 | $232,224 | $223,812 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $105,647 | $98,258 | $219,720 | $211,164 | | Cost of Goods Sold | $62,366 | $60,220 | $129,431 | $128,977 | | Gross Margin | $43,281 | $38,038 | $90,289 | $82,187 | | Operating Expenses | $36,125 | $33,530 | $74,427 | $69,695 | | Income from Operations | $7,156 | $4,508 | $15,862 | $12,492 | | Interest Expense and Other – net | $(2,519) | $(6,131) | $(4,874) | $(10,785) | | Net Income (Loss) | $3,608 | $(1,243) | $8,550 | $1,308 | | Basic EPS | $0.48 | $(0.17) | $1.15 | $0.18 | | Diluted EPS | $0.48 | $(0.17) | $1.14 | $0.18 | [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Metric (in thousands) | December 31, 2023 | June 30, 2024 | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | :---------------- | :------------ | | Total Shareholders' Equity | $223,555 | $223,812 | $232,224 | $239,065 | | Net Income (H1) | | $2,550 | | $8,550 | | Dividends Paid (H1) | | $(2,200) | | $(2,312) | | Stock Compensation Expense (H1) | | $651 | | $786 | | Repurchase of Common Stock (H1) | | - | | $(201) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $2,042 | $23,875 | | Net cash used in investing activities | $(3,872) | $(430) | | Net cash provided by (used in) financing activities | $890 | $(23,808) | | Decrease in cash and cash equivalents | $(940) | $(363) | | Cash and cash equivalents, End of Period | $2,779 | $4,107 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Nature of Operations and Basis of Presentation](index=7&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) - Rocky Brands, Inc. is a leading designer, manufacturer, and marketer of premium quality footwear and apparel under brands like Muck, Rocky, Georgia Boot, Durango, Lehigh, XTRATUF, Ranger, and Michelin[17](index=17&type=chunk) - Products are organized around six target markets: work, outdoor, western, commercial military, duty, and military, with complementary apparel and accessories[17](index=17&type=chunk) [2. Accounting Standards Updates](index=7&type=section&id=2.%20ACCOUNTING%20STANDARDS%20UPDATES) Accounting Standards Updates | Standard | Description | Anticipated Adoption Periods | Effect on Consolidated Financial Statements | | :------- | :---------- | :--------------------------- | :------------------------------------------ | | ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures | Requires expanded income tax disclosures, primarily related to effective tax rate reconciliation and income taxes paid | Q4 2025 | Not expected to have a material impact | | ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses | Requires expanded disclosures on comprehensive income to improve expenses and address requests for more detailed information about expense types | Q4 2027 (fiscal year) Q1 2028 (interim period) | Still assessing the impact | [3. Fair Value](index=8&type=section&id=3.%20FAIR%20VALUE) - The company uses a three-level fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[21](index=21&type=chunk)[28](index=28&type=chunk) - Fair values of cash, receivables, and payables approximate carrying values due to their short-term nature; long-term credit facilities and other short-term financing obligations also approximate fair value (Level 2)[22](index=22&type=chunk) - Deferred compensation assets are classified as trading securities (Level 1) and liabilities within deferred liabilities[23](index=23&type=chunk) [4. Revenue](index=8&type=section&id=4.%20REVENUE) - Products are distributed through three segments: Wholesale (over 10,000 retail locations globally), Retail (direct-to-consumer via web platforms, e-commerce, third-party marketplaces, and Rocky Outdoor Gear Store), and Contract Manufacturing (U.S. Military, private label)[25](index=25&type=chunk)[35](index=35&type=chunk) - Revenue is recognized when performance obligations are satisfied, generally upon shipment or at the point of sale for retail customers, measured as the net sales price[26](index=26&type=chunk) - Net sales price includes estimates for variable consideration such as discounts, allowances, customer rebates, markdowns, and product returns, based on historical and anticipated trends[27](index=27&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - As of June 30, 2025, December 31, 2024, and June 30, 2024, there were no contract receivable or contract liability balances outstanding[32](index=32&type=chunk) [5. Trade Receivables](index=10&type=section&id=5.%20TRADE%20RECEIVABLES) - The company maintains an allowance for credit losses based on historical experience, age of receivables, insurance status, and identification of difficult-to-collect accounts[36](index=36&type=chunk) Allowance for Credit Losses (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------- | :------------ | :---------------- | :------------ | | Allowance for credit losses | $0.8 | $1.0 | $0.9 | [6. Inventory](index=11&type=section&id=6.%20INVENTORY) Inventory Components (in thousands) | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--------------------------------- | :------------ | :---------------- | :------------ | | Finished goods | $169,710 | $149,328 | $156,043 | | Raw materials | $16,313 | $16,671 | $18,006 | | Work-in-process | $813 | $702 | $924 | | Total | $186,836 | $166,701 | $174,973 | - The asset associated with the returns reserve included within inventories was approximately **$0.9 million** at June 30, 2025, **$0.9 million** at December 31, 2024, and **$0.7 million** at June 30, 2024[37](index=37&type=chunk) [7. Goodwill & Identified Intangible Assets](index=11&type=section&id=7.%20GOODWILL%20%26%20IDENTIFIED%20INTANGIBLE%20ASSETS) - Goodwill remained unchanged during the six months ended June 30, 2025, at **$47,844 thousand**[9](index=9&type=chunk)[38](index=38&type=chunk) Intangible Assets (in thousands) | Intangible Assets (in thousands) | June 30, 2025 Carrying Amount | December 31, 2024 Carrying Amount | June 30, 2024 Carrying Amount | | :------------------------------- | :---------------------------- | :-------------------------------- | :---------------------------- | | Trademarks (indefinite-lived) | $74,654 | $74,654 | $78,654 | | Patents (subject to amortization) | $27 | $32 | $40 | | Customer relationships (subject to amortization) | $29,747 | $31,137 | $32,526 | | Total intangible assets other than goodwill | $104,428 | $105,823 | $111,220 | - The Muck brand impairment of **$4,000 thousand** relates to the year ended December 31, 2024[38](index=38&type=chunk)[39](index=39&type=chunk) - Amortization expense for intangible assets was **$0.7 million** for each of the three months ended June 30, 2025 and 2024, and **$1.4 million** for the six months ended June 30, 2025 and 2024[41](index=41&type=chunk) [8. Long-Term Debt](index=12&type=section&id=8.%20LONG-TERM%20DEBT) - On April 26, 2024, the company refinanced its debt, establishing a **$175.0 million** asset-based lending (ABL) facility and a **$50.0 million** term loan facility, collateralized by domestic assets[43](index=43&type=chunk) - As of June 30, 2025, borrowing capacity under the ABL Facility was **$45.7 million**[43](index=43&type=chunk) Debt Components (in thousands) | Debt Component (in thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :---------------------------- | :------------ | :---------------- | :------------ | | Term Facility outstanding | $30,942 | $35,123 | $49,303 | | ABL Facility (SOFR borrowings) | $103,300 | $91,300 | $100,278 | | ABL Facility (Prime borrowings) | $288 | $4,577 | $5,377 | | Total debt | $134,530 | $131,000 | $154,958 | | Long-term debt (net of current portion and issuance costs) | $124,167 | $120,376 | $144,073 | - The company was in compliance with all credit facility covenants, including minimum fixed charge coverage ratio and restrictions on dividends and share repurchases, as of June 30, 2025[47](index=47&type=chunk) [9. Taxes](index=13&type=section&id=9.%20TAXES) Effective Tax Rate | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :----------------------------- | :----------------------------- | | Effective Tax Rate | 22.2% | 23.4% | - The company's tax years 2019 through 2024 remain open to examination by most taxing authorities[50](index=50&type=chunk) - No interest and penalties on uncertain tax positions were recognized during the three and six months ended June 30, 2025 and 2024, and no material changes are expected in the next 12 months[51](index=51&type=chunk) [10. Earnings Per Share](index=15&type=section&id=10.%20EARNINGS%20PER%20SHARE) Weighted Average Shares Outstanding (in thousands) | Shares (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic - weighted average shares outstanding | 7,461 | 7,429 | 7,460 | 7,423 | | Diluted - weighted average shares outstanding | 7,493 | 7,429 | 7,493 | 7,466 | | Anti-dilutive securities | 179 | 54 | 179 | 103 | - Due to a net loss for the three months ended June 30, 2024, zero dilutive restricted share units and stock options were included as their effect would be anti-dilutive[52](index=52&type=chunk) [11. Supplemental Cash Flow Information](index=15&type=section&id=11.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Supplemental Cash Flow Information (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Interest paid | $4,593 | $5,436 | | Federal, state, and local income taxes paid, net | $1,639 | $219 | | Property, plant, and equipment purchases in accounts payable | $800 | $921 | | Right-of-use assets obtained in exchange for operating lease liabilities, net of terminations | $57 | $23 | [12. Segment Information](index=15&type=section&id=12.%20SEGMENT%20INFORMATION) - The company operates in three reportable segments: Wholesale, Retail, and Contract Manufacturing[54](index=54&type=chunk) - Net sales to foreign countries represented approximately **3.6%** and **2.7%** of net sales for the three months ended June 30, 2025 and 2024, respectively, and **2.8%** and **2.4%** for the six months ended June 30, 2025 and 2024, respectively[58](index=58&type=chunk) Segment Net Sales (in thousands) | Segment Net Sales (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Wholesale | $73,092 | $68,258 | $147,877 | $148,050 | | Retail | $29,746 | $26,110 | $66,386 | $56,517 | | Contract Manufacturing | $2,809 | $3,890 | $5,457 | $6,597 | | Total Net Sales | $105,647 | $98,258 | $219,720 | $211,164 | Segment Gross Margin (in thousands) | Segment Gross Margin (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Wholesale | $29,478 | $25,432 | $59,588 | $54,463 | | Retail | $13,455 | $12,234 | $30,200 | $27,036 | | Contract Manufacturing | $348 | $372 | $501 | $688 | | Total Gross Margin | $43,281 | $38,038 | $90,289 | $82,187 | [13. Commitments and Contingencies](index=17&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) - The company is involved in ordinary course legal proceedings, with no materially adverse financial impact expected[62](index=62&type=chunk) - A gain contingency exists for an estimated **$7.9 million** potential refund from overpaid duties due to HTS code misclassification in 2021-2022, of which **$5.1 million** has been received to date; no refunds were received in H1 2025 or H1 2024[63](index=63&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=18&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, condition, and operational results, highlighting key drivers, strategies, and liquidity [BUSINESS OVERVIEW](index=18&type=section&id=BUSINESS%20OVERVIEW) - The company is a leading designer, manufacturer, and marketer of premium footwear and apparel across Wholesale, Retail, and Contract Manufacturing segments, serving work, outdoor, western, duty, commercial military, and military markets[64](index=64&type=chunk) - Strategic sourcing shifts to manufacturing facilities in the Dominican Republic and Puerto Rico were implemented in H1 2025 to mitigate adverse impacts from additional tariffs[65](index=65&type=chunk) - Inventory purchases were accelerated in 2025 ahead of new tariffs to mitigate potential business impact[65](index=65&type=chunk)[70](index=70&type=chunk) - The Retail segment's growth outpaced Wholesale and Contract Manufacturing, driven by Lehigh CustomFit expansion, digital marketing emphasis, and increased e-commerce/third-party marketplace sales[66](index=66&type=chunk) - Q2 2025 saw increased net sales (**7.5%**) and gross margin (**230 bps to 41.0%**) compared to Q2 2024, with H1 2025 net sales up **4.1%** and gross margin up **220 bps to 41.1%**[67](index=67&type=chunk)[72](index=72&type=chunk) - Interest expense declined in Q2 and H1 2025 due to lower interest rates following the April 2024 debt refinancing and reduced outstanding principal balances[69](index=69&type=chunk) [RESULTS OF OPERATIONS](index=18&type=section&id=RESULTS%20OF%20OPERATIONS) [Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024](index=20&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) Results of Operations - Three Months Ended June 30 (in thousands, %) | Metric (in thousands) | Q2 2025 | Q2 2024 | Inc./(Dec.) $ | Inc./(Dec.) % | | :-------------------- | :------ | :------ | :------------ | :------------ | | **NET SALES:** | | | | | | Wholesale | $73,092 | $68,258 | $4,834 | 7.1% | | Retail | $29,746 | $26,110 | $3,636 | 13.9% | | Contract Manufacturing | $2,809 | $3,890 | $(1,081) | (27.8)% | | Total Net Sales | $105,647 | $98,258 | $7,389 | 7.5% | | **GROSS MARGIN:** | | | | | | Wholesale Margin % | 40.3% | 37.3% | 3.0% | | | Retail Margin % | 45.2% | 46.9% | (1.7)% | | | Contract Manufacturing Margin % | 12.4% | 9.6% | 2.8% | | | Total Margin % | 41.0% | 38.7% | 2.3% | | | **OPERATING EXPENSES:** | | | | | | Operating Expenses | $36,125 | $33,530 | $2,595 | 7.7% | | % of Net Sales | 34.2% | 34.1% | 0.1% | | | **INTEREST EXPENSE AND OTHER:** | | | | | | Interest expense | $2,496 | $6,131 | $(3,635) | (59.3)% | | **INCOME TAXES:** | | | | | | Effective Tax Rate | 22.2% | 23.4% | (1.3)% | | - Wholesale net sales increased due to increased demand across key styles and brands, favorable weather, and a stronger inventory position, supported by strategic expansion of the outdoor category's lifestyle component[82](index=82&type=chunk) - Retail net sales growth was driven by Lehigh CustomFit business expansion (due to sales organization realignment and increased consumer spending/subsidy utilization), increased third-party marketplace presence, and e-commerce promotions[83](index=83&type=chunk) - Contract Manufacturing net sales decreased primarily due to no new U.S. Military contracts in 2025[84](index=84&type=chunk) - Retail gross margin percentage decreased due to Lehigh representing a larger portion of sales (lower margin) and increased promotional activity/competitive pricing on e-commerce/third-party platforms[87](index=87&type=chunk) - The significant decrease in interest expense was largely due to a **$2.6 million** loan extinguishment charge in Q2 2024 and lower interest rates/debt levels post-refinancing[90](index=90&type=chunk) [Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024](index=23&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) Results of Operations - Six Months Ended June 30 (in thousands, %) | Metric (in thousands) | H1 2025 | H1 2024 | Inc./(Dec.) $ | Inc./(Dec.) % | | :-------------------- | :------ | :------ | :------------ | :------------ | | **NET SALES:** | | | | | | Wholesale | $147,877 | $148,050 | $(173) | (0.1)% | | Retail | $66,386 | $56,517 | $9,869 | 17.5% | | Contract Manufacturing | $5,457 | $6,597 | $(1,140) | (17.3)% | | Total Net Sales | $219,720 | $211,164 | $8,556 | 4.1% | | **GROSS MARGIN:** | | | | | | Wholesale Margin % | 40.3% | 36.8% | 3.5% | | | Retail Margin % | 45.5% | 47.8% | (2.3)% | | | Contract Manufacturing Margin % | 9.2% | 10.4% | (1.2)% | | | Total Margin % | 41.1% | 38.9% | 2.2% | | | **OPERATING EXPENSES:** | | | | | | Total Operating Expenses | $74,427 | $69,695 | $4,732 | 6.8% | | % of Net Sales | 33.9% | 33.0% | 0.9% | | | **INTEREST EXPENSE AND OTHER:** | | | | | | Interest expense | $4,896 | $10,642 | $(5,746) | (54.0)% | | **INCOME TAXES:** | | | | | | Income Tax Expense | $2,438 | $399 | $2,039 | 511.0% | | Effective Tax Rate | 22.2% | 23.4% | (1.2)% | | - Wholesale net sales slightly decreased due to a blanket commercial military order in Q1 2024 that elevated prior year sales, partially offset by increased demand in key styles and lifestyle expansion in Q2 2025[93](index=93&type=chunk) - Retail net sales increased due to growth in Lehigh CustomFit (sales organization realignment, increased consumer spending/subsidy utilization) and higher sales through third-party marketplaces and owned e-commerce websites[94](index=94&type=chunk) - Contract Manufacturing net sales decreased due to no new U.S. Military contracts and a general decrease in contract manufacturing sales[95](index=95&type=chunk) - Wholesale gross margin percentage increased due to a more favorable product mix, manufacturing efficiencies, strategic sourcing shifts, and the lower-margin commercial military order in the prior year[97](index=97&type=chunk) - Retail gross margin percentage decreased due to increased promotional activity and competitive pricing on e-commerce and third-party marketplace platforms[98](index=98&type=chunk) - Contract Manufacturing gross margin decreased due to reduced economies of scale at the Puerto Rico manufacturing facility[99](index=99&type=chunk) - Operating expenses as a percentage of net sales increased due to higher selling and outbound logistics costs associated with increased Retail sales and greater marketing investments[100](index=100&type=chunk) - Interest expense decreased significantly due to a **$2.6 million** loan extinguishment charge in H1 2024 and lower interest rates/debt levels post-refinancing[101](index=101&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=26&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - Principal liquidity sources are income from operations and access to the ABL Facility; as of June 30, 2025, cash and cash equivalents were **$2.8 million**, with **$45.7 million** available under the ABL Facility[104](index=104&type=chunk) - Working capital fluctuates seasonally, typically lowest in Q1 and highest in Q2/Q3, funded by operations or the ABL Facility[105](index=105&type=chunk) - Outstanding borrowings were **$103.6 million** under the ABL Facility and **$30.9 million** under the Term Facility as of June 30, 2025[106](index=106&type=chunk) - Net cash provided by operating activities decreased to **$2.0 million** in H1 2025 from **$23.9 million** in H1 2024, primarily due to increased cash used for inventory purchases (**$20.1 million** in H1 2025 vs **$5.8 million** in H1 2024) driven by tariffs and anticipated demand[109](index=109&type=chunk)[110](index=110&type=chunk) - Net cash used in investing activities increased to **$3.9 million** in H1 2025 from **$0.4 million** in H1 2024, mainly due to higher capital expenditures for manufacturing and IT[112](index=112&type=chunk) - Net cash provided by financing activities was **$0.9 million** in H1 2025, a shift from **$23.8 million** used in H1 2024, driven by proceeds from the revolving facility offset by term loan and dividend payments[113](index=113&type=chunk) - A share repurchase program of up to **$7.5 million** was announced on February 25, 2025, effective until February 24, 2026[114](index=114&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=27&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) - Financial statement preparation requires management estimates and assumptions, which are evaluated ongoingly and based on historical experience and reasonable assumptions[116](index=116&type=chunk) - Critical accounting policies and estimates are detailed in the Annual Report on Form 10-K for the year ended December 31, 2024[117](index=117&type=chunk) [SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995](index=27&type=section&id=SAFE%20HARBOR%20STATEMENT%20UNDER%20THE%20PRIVATE%20SECURITIES%20REFORM%20ACT%20OF%201995) - The report contains forward-looking statements subject to risks and uncertainties, including dependence on sales forecasts, changes in consumer demand, seasonality, competition, reliance on suppliers, international trade risks, and cybersecurity[118](index=118&type=chunk) - Investors are cautioned that assumptions underlying forward-looking statements may be inaccurate, and the company assumes no obligation to update them[118](index=118&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=28&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes to market risk disclosures have occurred since the Annual Report on Form 10-K for December 31, 2024 - No material changes to market risk disclosures as presented in the Annual Report on Form 10-K for the year ended December 31, 2024[119](index=119&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that material information is accumulated, processed, summarized, and reported timely[121](index=121&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[123](index=123&type=chunk) [PART II -- OTHER INFORMATION](index=28&type=section&id=PART%20II%20--%20OTHER%20INFORMATION) [ITEM 1A. RISK FACTORS](index=28&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section highlights new tariffs on imported products as a material risk, potentially impacting business, financial condition, and operations - Additional tariffs on products imported to the U.S. from countries like China, Vietnam, Dominican Republic, India, Cambodia, and Mexico pose a significant risk[125](index=125&type=chunk) - These tariffs may materially increase cost of goods sold, reduce gross margins, create consumer/economic uncertainty, reduce product demand, and negatively impact the carrying value of indefinite intangible assets[125](index=125&type=chunk)[127](index=127&type=chunk) - The company is implementing strategies like reevaluating sourcing countries, negotiating costs, and adjusting pricing, but there is no assurance these will fully offset the potential negative impact[126](index=126&type=chunk) [ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=29&type=section&id=ITEM%202%20-%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered equity sales occurred, and no shares were repurchased under the common stock repurchase program during Q2 2025 - No unregistered sales of equity securities occurred during the period[128](index=128&type=chunk) - The company announced a **$7,500,000** share repurchase plan on February 25, 2025, effective until February 24, 2026[114](index=114&type=chunk)[131](index=131&type=chunk) Common Stock Repurchase Program | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Maximum Shares that May Yet be Purchased Under Plans or Programs | | :----- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | - | - | $7,299,140 | | May 1, 2025 - May 31, 2025 | - | - | $7,299,140 | | June 1, 2025 - June 30, 2025 | - | - | $7,299,140 | | Total | - | - | $7,299,140 | [ITEM 5. OTHER INFORMATION](index=29&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[132](index=132&type=chunk) [ITEM 6. EXHIBITS](index=30&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with Form 10-Q, including officer certifications and XBRL financial statements - Exhibits include Certification Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Principal Financial Officer (31.2*) and Section 1350 Certification of Principal Executive Officer/Principal Financial Officer (32**)[135](index=135&type=chunk) - Financial statements from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, are attached as Exhibits 101 in Inline XBRL format[135](index=135&type=chunk) [SIGNATURES](index=31&type=section&id=SIGNATURES) The report is signed by Thomas D. Robertson, Chief Operating Officer, Chief Financial Officer, and Treasurer - The report was signed on August 7, 2025, by Thomas D. Robertson, Chief Operating Officer, Chief Financial Officer, and Treasurer (Principal Financial and Accounting Officer)[139](index=139&type=chunk)

Core Insights - Rocky Brands, Inc. (NASDAQ: RCKY) reported strong Q2 results, leading to a significant increase in stock price [1] - The company demonstrated robust sales momentum during the quarter, positively impacting earnings [1] - Rocky Brands raised its earnings guidance for 2025, indicating confidence in future performance [1] Financial Performance - The Q2 results showcased strong sales growth, contributing to improved earnings figures [1] - The company's ability to raise guidance for 2025 reflects a positive outlook based on current performance trends [1]

Market Performance - U.S. stocks showed mixed trading results, with the Nasdaq Composite gaining approximately 0.5% [1] - The Dow increased by 0.02% to 44,639.69, while the S&P 500 rose by 0.21% to 6,384.38 [1] - Utilities shares experienced a rise of 0.8%, while energy stocks fell by 1.2% [1] Commodities - Crude oil prices increased by 0.8% to $69.73, while gold rose by 1% to $3,356.50 [5] - Silver prices decreased by 1.3% to $37.775, and copper fell by 0.9% to $5.5750 [5] European Markets - European shares were mostly higher, with the eurozone's STOXX 600 gaining 0.01% and Spain's IBEX 35 Index rising by 0.21% [6] - London's FTSE 100 fell by 0.08%, while Germany's DAX 40 and France's CAC 40 rose by 0.20% and 0.26%, respectively [6] Asian Markets - Asian markets closed mixed, with Japan's Nikkei 225 down by 0.05% and Hong Kong's Hang Seng down by 1.36% [7] - China's Shanghai Composite rose by 0.17%, and India's BSE Sensex gained 0.18% [7] Company Earnings - Wingstop Inc. shares surged by 24% to $360.20 after reporting better-than-expected second-quarter EPS and sales [9] - FTAI Aviation Ltd. shares increased by 20% to $137.34 following strong quarterly EPS and sales [9] - Rocky Brands Inc. shares rose by 26% to $29.00 after announcing better-than-expected quarterly earnings [9] - Vyne Therapeutics Inc. shares plummeted by 74% to $0.3764 after failing to meet trial endpoints [9] - Sos Ltd. shares dropped by 55% to $2.7184 after announcing a $7.5 million registered direct offering [9] - Avis Budget Group, Inc. shares fell by 15% to $172.40 following worse-than-expected quarterly EPS and sales [9] Economic Indicators - The U.S. economy expanded at an annualized rate of 3% in the second quarter, recovering from a 0.5% contraction in the previous quarter [11] - Private businesses added 104,000 jobs in July, surpassing market estimates of a 75,000 increase [11] - Crude oil inventories in the U.S. rose by 7.698 million barrels, contrasting with market expectations of a 2 million barrel decline [11]

Financial Data and Key Metrics Changes - Reported net sales for Q2 increased by 7.5% to $105.6 million, with wholesale sales up 7.1% to $73.1 million and retail net sales up 13.9% to $29.7 million [19] - Adjusted EPS more than tripled to $0.55 per diluted share compared to $0.17 per diluted share a year ago [22] - Gross profit was $43.3 million, representing 41% of net sales, an increase from 38.7% in the same period last year [19][20] - Operating income increased by 58.7% to $7.2 million, or 6.8% of net sales [21] Business Line Data and Key Metrics Changes - The Outdoor category, led by Extra Tough and Muck, is emerging as a key growth engine alongside traditional work and Western strengths [6] - Extra Tough maintained its position as the fastest-growing brand, with strong demand and expanding distribution [7] - Muck delivered its best quarter-to-quarter comparison since 2023, with strong performance driven by improved inventory positions and favorable weather [9] - Durango achieved high single-digit growth, while Georgia Boot showed progressive improvement throughout the quarter [10][11] Market Data and Key Metrics Changes - U.S. Wholesale significantly outpaced last year with strong double-digit growth, and e-commerce growth was equally strong [8] - The Outdoor category made up about one-third of sales for Q2, indicating its growing importance [41] - The work category remains the largest segment, followed by outdoor, with growth primarily in Extra Tough and Muck [40] Company Strategy and Development Direction - The company is focused on shifting production to its Dominican Republic and Puerto Rican facilities to mitigate tariff impacts and improve cost competitiveness [60][61] - The strategic positioning and operational efficiencies are expected to drive continued growth and increased shareholder value [16] - The company is optimistic about military prospects, having earned a USMC hot weather boot certification [15] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding consumer demand, noting positive sell-through rates in key categories despite some volatility [46][47] - The company is increasing its 2025 revenue guidance to a growth of 45% compared to 2024 levels, up from previous low single-digit expectations [23] - Management highlighted the importance of maintaining competitive pricing while ensuring retailer margins are preserved [33] Other Important Information - The company has approximately $11 million of incremental tariffs on the balance sheet that will impact the P&L over the remainder of the year [22] - Inventory at the end of Q2 was $186.8 million, up 6.8% year-over-year, driven by higher tariffs [22] Q&A Session Summary Question: How have the supply chain shifts been going? - Management reported being ahead of schedule in shifting production to the Dominican Republic and Puerto Rico, with boots already inbound [28][29] Question: How is pricing flowing through to retail partners? - Management noted some pushback but overall positive reception, with price increases implemented in June [31][32] Question: What are the drivers behind the guidance raise? - The guidance increase is primarily driven by strong Q2 performance and positive order indications for the second half of the year [34][35] Question: How does the outdoor business compare to the work business? - The outdoor category is growing faster than the work category, which remains the largest segment [40][41] Question: What is the state of consumer demand? - Management indicated mixed signals, with positive sell-through in certain categories but caution due to market volatility [46][47] Question: What are the prospects for market share gains from in-house manufacturing? - Management believes in-house operations will provide a competitive advantage, with plans to increase in-house production to around 45% [61][62] Question: What is the breakdown between wholesale and direct-to-consumer sales? - Management disclosed that over half of retail sales come from the Lehigh business, with branded e-commerce growing [65][66] Question: How much debt is expected to be paid down in the second half of the year? - Management anticipates a debt reduction of 10% to 13% from the prior year, though not as significant as the previous year [70]

Financial Performance - Net sales increased 7.5% to $105.6 million compared to $98.3 million in Q2 2024[5] - Income from operations rose 58.7% to $7.2 million, up from $4.5 million in the same quarter last year[9] - Net income increased to $3.6 million or $0.48 per diluted share, compared to a net loss of $1.2 million or $0.17 per diluted share in Q2 2024[11] - Adjusted net income increased to $4.1 million or $0.55 per diluted share, compared to $1.3 million or $0.17 per diluted share in the prior year[11] - Net sales for the three months ended June 30, 2025, were $105,647 million, a 7.3% increase from $98,258 million in the same period of 2024[23] - Income from operations for the three months ended June 30, 2025, was $7,156 million, up 58.5% from $4,508 million in 2024[23] - Net income for the six months ended June 30, 2025, reached $8,550 million, significantly higher than $1,308 million in the same period of 2024[23] - Adjusted net income for the three months ended June 30, 2025, was $4,146 million, compared to $1,276 million in 2024, marking an increase of 225.5%[25] - Basic earnings per share for the three months ended June 30, 2025, were $0.48, compared to a loss of $0.17 per share in 2024[25] Sales and Revenue Breakdown - Wholesale net sales increased 7.1% to $73.1 million, while retail net sales rose 13.9% to $29.7 million[5] - Gross margin improved by 230 basis points to 41.0% of net sales, up from 38.7% in Q2 2024[6] - Gross margin for the six months ended June 30, 2025, improved to $90,289 million, compared to $82,187 million in 2024, reflecting a year-over-year increase of 9.5%[23] Expenses and Debt - Operating expenses were $36.1 million, or 34.2% of net sales, compared to $33.5 million, or 34.1% of net sales in Q2 2024[7] - Adjusted operating expenses for the three months ended June 30, 2025, were $35,433 million, a decrease from $32,838 million in the same period of 2024[25] - Total debt decreased 13.1% year-over-year to $132.5 million as of June 30, 2025[13] - The company reported a significant reduction in interest expense, with net interest expense for the three months ended June 30, 2025, at $(2,519) million, down from $(6,131) million in 2024[25] Inventory and Bookings - Inventories increased 6.8% to $186.8 million compared to $175.0 million a year ago[14] - Bookings for the U.S. Wholesale business for the second half of 2025 are solidly up year-over-year, indicating positive momentum[4] Non-GAAP Adjustments - Total non-GAAP adjustments for the six months ended June 30, 2025, amounted to $1,384 million, compared to $3,981 million in 2024, indicating a decrease in adjustments impacting comparability[25]

Sales Performance - Net sales increased by 1.1% to $114.1 million in Q1 2025 compared to $112.9 million in Q1 2024, driven by growth in the Retail segment [84]. - Retail net sales grew by 20.5% to $36.6 million, while Wholesale net sales decreased by 6.3% to $74.8 million due to a prior year commercial military order [89]. Gross Margin and Operating Income - Gross margin improved by 210 basis points to 41.2%, with Wholesale gross margin increasing to 40.3% and Retail gross margin at 45.7% [83][85]. - Income from operations rose to $8.7 million, or 7.6% of net sales, compared to $8.0 million, or 7.1% of net sales in the prior year [87]. Operating Expenses and Interest - Operating expenses rose to $38.3 million, or 33.6% of net sales, reflecting higher selling and logistics costs associated with increased Retail sales [86]. - Interest expense decreased by 46.8% to $2.4 million due to lower interest rates following debt refinancing in April 2024 [97]. Debt and Liquidity - Total debt decreased by 17.5% to $128.6 million, contributing to reduced interest expenses [83]. - As of March 31, 2025, the company maintained cash and cash equivalents of $2.6 million and had $53.0 million available under its ABL Facility [99]. - As of March 31, 2025, the company has outstanding borrowings of $97.7 million under its ABL Facility and $33.0 million under its Term Facility, maintaining compliance with covenants and restrictions [101]. - The company anticipates that cash generated from operations will provide sufficient liquidity to fund operations and debt obligations for the next twelve months and beyond [103]. Cash Flow and Investments - Net cash provided by operating activities for the three months ended March 31, 2025, was $1.2 million, a significant decrease from $17.4 million for the same period in 2024 [104]. - The increase in inventory resulted in a cash use of $8.8 million for the three months ended March 31, 2025, compared to a cash source of $4.1 million for the same period in 2024 [105]. - The company reported a net cash used in financing activities of $1.7 million for the three months ended March 31, 2025, down from $18.5 million in the same period of 2024 [108]. - Net cash used in investing activities was $0.7 million for the three months ended March 31, 2025, compared to $0.3 million for the same period in 2024, primarily due to capital expenditures [107]. Shareholder Actions - A share repurchase program of up to $7.5 million of the company's outstanding common stock was announced on February 25, 2025 [109]. Tax and Accounting - The effective tax rate decreased to 22.2% from 23.4% due to changes in projected income from international operations [98]. - The company is contingently liable for lawsuits, taxes, and other matters arising in the normal course of business, with no off-balance sheet arrangements or related party transactions affecting financial results [110]. - The company has identified critical accounting policies that may affect the reported financial statements, with historical results not materially differing from estimates [111]. Inventory and Accounts Receivable - Inventory increased by 6.3% to $175.5 million as a strategic move to prepare for the latter half of 2025 [83]. - An increase in accounts receivable resulted in a cash use of $1.9 million for the three months ended March 31, 2025, compared to a cash source of $6.0 million for the same period in 2024 [106].

Core Insights - The article discusses the investment strategies and achievements of Paul Franke, a seasoned investor with 38 years of trading experience, emphasizing his unique stock selection methods and performance metrics [1]. Group 1: Investment Strategies - Paul Franke employs a contrarian stock selection style, utilizing daily algorithm analysis of fundamental and technical data to identify investment opportunities [1]. - His system, named "Victory Formation," focuses on supply/demand imbalances indicated by specific stock price and volume movements [1]. - The "Bottom Fishing Club" articles highlight deep-value candidates or stocks showing significant upward technical momentum reversals [1]. - "Volume Breakout Report" articles analyze positive trend changes supported by strong price and volume trading actions [1]. Group 2: Performance Metrics - Franke was consistently ranked among the top investment advisors nationally during the 1990s, recognized for his macro views on stock markets and commodities [1]. - He achieved the 1 ranking in the Motley Fool® CAPS stock picking contest during parts of 2008 and 2009, out of over 60,000 portfolios [1]. - As of September 2024, he is ranked in the Top 3% of bloggers by TipRanks® for 12-month stock picking performance based on suggestions made over the last decade [1]. Group 3: Risk Management - Franke advises investors to implement stop-loss levels of 10% or 20% on individual stock choices and to maintain a diversified portfolio of at least 50 well-positioned stocks to enhance regular stock market outperformance [1].

Financial Data and Key Metrics Changes - Reported net sales for Q1 increased 1.1% year over year to $114.1 million, slightly ahead of expectations [17] - Retail sales increased 20.5% to $36.6 million, while wholesale sales decreased by 6.3% to $74.8 million [18] - Gross profit for Q1 was $47 million, representing 41.2% of sales, the highest gross margin reported in Q1 [18] - Adjusted net income for Q1 was $5.5 million or $0.73 per diluted share, compared to $3.1 million or $0.41 per diluted share a year ago [20] Business Line Data and Key Metrics Changes - The XTRA TUF brand experienced double-digit growth, with bookings up approximately 80% versus last year [8] - MUC brand saw better-than-expected growth, particularly in the women's segment, with double-digit increases [9] - Rocky work category delivered the strongest performance, while Rocky Outdoor returned to growth with a single-digit increase [12] Market Data and Key Metrics Changes - The retail segment showed healthy demand, particularly in the B2B Lehigh business, which saw high teens sales growth [14] - Direct-to-consumer business grew faster than Lehigh, driven by marketplace volumes [15] - Wholesale sales were impacted by a planned reduction in commercial military sales, contributing to the overall decline [17] Company Strategy and Development Direction - The company plans to implement price increases on most footwear styles in response to higher tariffs [6] - Efforts are being made to reduce sourcing from China, with a goal to have less than 20% of total volume from China by year-end [27] - The company is leveraging its manufacturing facilities in the Dominican Republic and Puerto Rico to mitigate tariff impacts [37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a higher degree of uncertainty for the remainder of the year but expressed confidence in maintaining financial targets [16] - The company is well-positioned to navigate current challenges due to its diversified sourcing structure and strong brand portfolio [6] - Management noted that consumer demand has not shown signs of panic despite economic uncertainties [34] Other Important Information - Interest expense decreased significantly to $2.4 million from $4.5 million year over year due to lower interest rates from refinancing [19] - Inventory levels increased by 6.3% year over year, reflecting proactive measures taken in anticipation of tariff impacts [21] Q&A Session Summary Question: Can you elaborate on the guidance and the migration out of China? - Management indicated a strong inventory position allowing them to navigate tariff impacts and transition sourcing out of China effectively [26][27] Question: What are wholesale partners saying about consumer ability to absorb price increases? - Management noted that retail partners are cautiously optimistic, with no significant panic from consumers regarding price increases [34] Question: How are pricing increases being planned? - The company is focused on preserving gross profit dollars while implementing price increases to offset higher costs [46][47] Question: What is the capacity shift to third-party manufacturers in Vietnam, India, and Cambodia? - Management confirmed that approximately 90-92% of products have found new homes, with ongoing efforts to transition remaining capacity [56]