PART I – FINANCIAL INFORMATION ITEM 1 – FINANCIAL STATEMENTS This section presents unaudited condensed consolidated financial statements and notes, detailing operations, accounting policies, and financial items Condensed Consolidated Balance Sheets 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 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 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 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 1. Nature of Operations and Basis of Presentation - 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 Michelin17 - Products are organized around six target markets: work, outdoor, western, commercial military, duty, and military, with complementary apparel and accessories17 2. Accounting Standards Updates 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 - 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)2128 - 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 - Deferred compensation assets are classified as trading securities (Level 1) and liabilities within deferred liabilities23 4. Revenue - 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)2535 - 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 price26 - Net sales price includes estimates for variable consideration such as discounts, allowances, customer rebates, markdowns, and product returns, based on historical and anticipated trends272930 - As of June 30, 2025, December 31, 2024, and June 30, 2024, there were no contract receivable or contract liability balances outstanding32 5. Trade Receivables - The company maintains an allowance for credit losses based on historical experience, age of receivables, insurance status, and identification of difficult-to-collect accounts36 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 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, 202437 7. Goodwill & Identified Intangible Assets - Goodwill remained unchanged during the six months ended June 30, 2025, at $47,844 thousand938 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, 20243839 - 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 202441 8. Long-Term Debt - 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 assets43 - As of June 30, 2025, borrowing capacity under the ABL Facility was $45.7 million43 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, 202547 9. Taxes 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 authorities50 - 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 months51 10. Earnings Per Share 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-dilutive52 11. Supplemental Cash Flow Information 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 - The company operates in three reportable segments: Wholesale, Retail, and Contract Manufacturing54 - 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, respectively58 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 - The company is involved in ordinary course legal proceedings, with no materially adverse financial impact expected62 - 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 202463 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses financial performance, condition, and operational results, highlighting key drivers, strategies, and liquidity BUSINESS OVERVIEW - 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 markets64 - Strategic sourcing shifts to manufacturing facilities in the Dominican Republic and Puerto Rico were implemented in H1 2025 to mitigate adverse impacts from additional tariffs65 - Inventory purchases were accelerated in 2025 ahead of new tariffs to mitigate potential business impact6570 - 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 sales66 - 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%6772 - Interest expense declined in Q2 and H1 2025 due to lower interest rates following the April 2024 debt refinancing and reduced outstanding principal balances69 RESULTS OF OPERATIONS Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024 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 component82 - 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 promotions83 - Contract Manufacturing net sales decreased primarily due to no new U.S. Military contracts in 202584 - 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 platforms87 - 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-refinancing90 Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024 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 202593 - 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 websites94 - Contract Manufacturing net sales decreased due to no new U.S. Military contracts and a general decrease in contract manufacturing sales95 - 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 year97 - Retail gross margin percentage decreased due to increased promotional activity and competitive pricing on e-commerce and third-party marketplace platforms98 - Contract Manufacturing gross margin decreased due to reduced economies of scale at the Puerto Rico manufacturing facility99 - 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 investments100 - Interest expense decreased significantly due to a $2.6 million loan extinguishment charge in H1 2024 and lower interest rates/debt levels post-refinancing101 LIQUIDITY AND CAPITAL RESOURCES - 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 Facility104 - Working capital fluctuates seasonally, typically lowest in Q1 and highest in Q2/Q3, funded by operations or the ABL Facility105 - Outstanding borrowings were $103.6 million under the ABL Facility and $30.9 million under the Term Facility as of June 30, 2025106 - 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 demand109110 - 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 IT112 - 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 payments113 - A share repurchase program of up to $7.5 million was announced on February 25, 2025, effective until February 24, 2026114 CRITICAL ACCOUNTING POLICIES AND ESTIMATES - Financial statement preparation requires management estimates and assumptions, which are evaluated ongoingly and based on historical experience and reasonable assumptions116 - Critical accounting policies and estimates are detailed in the Annual Report on Form 10-K for the year ended December 31, 2024117 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995 - 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 cybersecurity118 - Investors are cautioned that assumptions underlying forward-looking statements may be inaccurate, and the company assumes no obligation to update them118 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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, 2024119 ITEM 4. CONTROLS AND PROCEDURES 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 timely121 - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025123 PART II -- OTHER INFORMATION ITEM 1A. RISK FACTORS 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 risk125 - 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 assets125127 - 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 impact126 ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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 period128 - The company announced a $7,500,000 share repurchase plan on February 25, 2025, effective until February 24, 2026114131 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 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, 2025132 ITEM 6. EXHIBITS 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 - 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 format135 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
Rocky Brands(RCKY) - 2025 Q2 - Quarterly Report