Rocky Brands(RCKY) - 2025 Q4 - Annual Report

Financial Performance - Net sales increased by 6.2% to $482.0 million in 2025 compared to 2024[155] - Gross margin improved by 150 basis points to 40.9% of net sales in 2025, up from 39.4% in 2024[157] - Income from operations rose by 19.7% to $37.2 million in 2025, compared to $31.1 million in 2024[155] - Net income surged by 95.6% to $22.3 million, or $2.96 per diluted share, in 2025, compared to $11.4 million, or $1.52 per diluted share, in 2024[155] - Total net sales for the twelve months ended December 31, 2025, were $481.976 million, an increase of $28.204 million or 6.2% compared to 2024[166] Debt and Expenses - Total debt decreased by 4.7% to $122.6 million as of December 31, 2025, down from $128.7 million in 2024[156] - Operating expenses increased by $12.2 million to 33.2% of net sales in 2025 compared to 32.6% in 2024[165] - Operating expenses rose by $12.159 million or 8.2% to $160.103 million, representing 33.2% of net sales, due to increased logistics and discretionary spending[172] - Interest expense for 2025 was $10.0 million, a decrease from $17.0 million in 2024, driven by lower interest rates[159] - Interest expense decreased by $7.001 million or 41.2% to $10.007 million, attributed to lower interest rates and reduced debt levels[173] Inventory and Cash Flow - Total inventory increased by 8.7% to approximately $181.1 million as of December 31, 2025, primarily due to tariffs[161] - Cash flow from operating activities was approximately $16.3 million in 2025, down from $52.8 million in 2024[162] - Cash and cash equivalents as of December 31, 2025, were $2.9 million, with $39.5 million available under the ABL Facility[175] Sales Breakdown - Retail net sales increased by $26.0 million or 20.5% to $152.889 million, driven by growth in direct-to-consumer business and the Lehigh CustomFit Platform[167] - Wholesale net sales rose by $3.221 million or 1.0% to $316.561 million, attributed to increased demand and tariff-related price increases[166] - Contract Manufacturing net sales decreased by $1.038 million or 7.7% to $12.526 million, primarily due to a lack of new contracts with the U.S. Military[168] Tax and Accounting - Income tax expense increased by $2.235 million or 83.7% to $4.906 million, with an effective tax rate of 18.1%[174] - The company is subject to complex tax laws, with quarterly income tax provisions estimated based on projected annual rates, refined as actual events occur[200] - Recent accounting pronouncements may materially affect financial conditions and results, with impacts discussed in the applicable sections of the financial statements[202] Revenue Recognition - The company recognized revenue when performance obligations are satisfied, typically upon shipment or sale, with net sales price reflecting expected consideration[188] - Variable consideration includes discounts, allowances, customer rebates, markdowns, and product returns, with reserves based on historical data and anticipated trends[189] - Estimated sales returns are based on historical customer return data, with actual returns potentially differing from estimates, impacting net revenues[192] - Inventories are valued at the lower of cost or net realizable value, with adjustments made for excess and obsolete inventories based on future demand assumptions[193] - Goodwill and indefinite-lived intangible assets are tested for impairment annually, with no impairment charges recognized for fiscal years 2025 or 2024, except for a $4.0 million charge for Muck trademarks in Q4 2024[198] Future Outlook - Forward-looking statements regarding future profitability and growth strategies are subject to risks and uncertainties, including changes in consumer demand and economic conditions[203] - The company announced a new $7.5 million share repurchase program on February 24, 2026[185]